Litian Pictures Holdings Limited 力天影業控股有限公司 (The “Company”) (Incorporated in the Cayman Islands with Limited Liability) WARNING

The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contents of this Application Proof, 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 Application Proof. Application Proof of

Litian Pictures Holdings Limited 力天影業控股有限公司 (the “Company”) (Incorporated in the Cayman Islands with limited liability) WARNING

The publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the “Exchange”)/the Securities and Futures Commission (the “Commission”) solely for the purpose of providing information to the public in Hong Kong. This Application Proof is in draft form. The information contained in it is incomplete and is subject to change which can be material. By viewing this document, you acknowledge, accept and agree with the Company, its sponsor, advisers or members of the underwriting syndicate that: (a) this document is only for the purpose of providing information about the Company to the public in Hong Kong and not for any other purposes. No investment decision should be based on the information contained in this document; (b) the publication of this document or supplemental, revised or replacement pages on the Exchange’s website does not give rise to any obligation of the Company, its sponsor, advisers or members of the underwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction. There is no assurance that the Company will proceed with the offering; (c) the contents of this document or supplemental, revised or replacement pages may or may not be replicated in full or in part in the actual final listing document; (d) the Application Proof is not the final listing document and may be updated or revised by the Company from time to time in accordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited; (e) this document does not constitute a prospectus, offering circular, notice, circular, brochure or advertisement offering to sell any securities to the public in any jurisdiction, nor is it an invitation to the public to make offers to subscribe for or purchase any securities, nor is it calculated to invite offers by the public to subscribe for or purchase any securities; (f) this document must not be regarded as an inducement to subscribe for or purchase any securities, and no such inducement is intended; (g) neither the Company nor any of its affiliates, advisers or underwriters is offering, or is soliciting offers to buy, any securities in any jurisdiction through the publication of this document; (h) no application for the securities mentioned in this document should be made by any person nor would such application be accepted; (i) the Company has not and will not register the securities referred to in this document under the United States Securities Act of 1933, as amended, or any state securities laws of the United States; (j) as there may be legal restrictions on the distribution of this document or dissemination of any information contained in this document, you agree to inform yourself about and observe any such restrictions applicable to you; and (k) the application to which this document relates has not been approved for listing and the Exchange and the Commission may accept, return or reject the application for the subject public offering and/ or listing. If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors are reminded to make their investment decisions solely based on the Company’s prospectus registered with the Registrar of Companies in Hong Kong, copies of which will be distributed to the public during the offer period. THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. IMPORTANT

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

Litian Pictures Holdings Limited 力天影業控股有限公司 (Incorporated in the Cayman Islands with limited liability) [REDACTED] Total Number of [REDACTED] under : [REDACTED] Shares (subject to the the [REDACTED] [REDACTED]) Number of [REDACTED] : [REDACTED] Shares (subject to adjustment) Number of [REDACTED] : [REDACTED] Shares (subject to the [REDACTED] and adjustment) [REDACTED] : Not more than HK$[REDACTED] per Share and expected to be not less than HK$[REDACTED] per Share, plus brokerage of 1.0%, 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 : HK$0.01 per Share [REDACTED] : [REDACTED] Sole Sponsor

[REDACTED]

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 document, 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 document. A copy of this document, having attached thereto the documents specified in the section headed “Documents Delivered to the Registrar of Companies and Available for Inspection” in Appendix V to this document, has been registered with the Registrar of Companies in Hong Kong as required by section 342C of the Cap. 32 Companies (Winding up and Miscellaneous Provision) Ordinance. The Securities and Futures Commission of Hong Kong and the Registrar of Companies in Hong Kong take no responsibility for the contents of this document or any other documents referred to above. The [REDACTED] is expected to be determined by agreement between the [REDACTED], on behalf of the [REDACTED], and our Company on or before [REDACTED] or such later time as may be agreed between the parties, but in any event, no later than [REDACTED]. If, for any reason, the [REDACTED], on behalf of the [REDACTED], and our Company are unable to reach an agreement on the [REDACTED]by[REDACTED], the [REDACTED] will not proceed and will lapse immediately. The [REDACTED] will be not more than HK$[REDACTED] per Share and is expected to be not less than HK$[REDACTED] per Share, unless otherwise announced. Investors applying for the [REDACTED] must pay, on application, the maximum [REDACTED] of HK$[REDACTED] for each [REDACTED] together with brokerage of 1%, SFC transaction levy of 0.0027 % and Stock Exchange trading fee of 0.005% subject to refund if the [REDACTED] is lower than HK$[REDACTED]. The [REDACTED], on behalf of the [REDACTED], may, with the consent of our Company, reduce the number of [REDACTED] being offered under the [REDACTED] and/or the indicative [REDACTED] range below that stated in this document at any time prior to the morning of the last day for lodging applications under the [REDACTED]. In such a case, notices of such reduction will be published on the websites of the Stock Exchange at www.hkexnews.hk and the Company at www.litian.tv as soon as practicable but in any event not later than the morning of the last day for lodging applications under the [REDACTED]. Prior to making an investment decision, prospective investors should carefully consider all of the information set out in this document, in particular, the risk factors set out in the section headed “Risk Factors” in this document. Pursuant to the termination provisions contained in the [REDACTED] in respect of the [REDACTED], the [REDACTED], on behalf of the [REDACTED], have the right in certain circumstances, in its absolute discretion, to terminate the obligation of the [REDACTED] pursuant to the [REDACTED] at any time prior to 8:00 a.m. on the [REDACTED]. Further details of the terms of the termination provisions are set out in the section headed “[REDACTED]—[REDACTED]”. It is important that you refer to that section for further details. The [REDACTED] have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities law of the United States and may not be offered, sold, pledged or transferred within the United States, except in transactions exempt from, or not subject to, the registration requirements of the U.S. Securities Act. The [REDACTED]mayonlybe offered, sold or delivered outside the United States in offshore transactions in reliance on Regulation S under the U.S. Securities Act.

[REDACTED] THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. EXPECTED TIMETABLE (NOTE 1)

[REDACTED]

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[REDACTED]

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[REDACTED]

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IMPORTANT NOTICE TO INVESTORS

This document is issued by our Company solely in connection with the [REDACTED] and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the [REDACTED] offered by this document pursuant to the [REDACTED]. This document 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 [REDACTED] of the [REDACTED] or the distribution of this document in any jurisdiction other than Hong Kong.

You should rely only on the information contained in this document and the [REDACTED] to make your investment decision. Our Company has not authorised anyone to provide you with information that is different from what is contained in this document. Any information or representation not made in this document must not be relied on by you as having been authorised by our Company, the Sole Sponsor, the [REDACTED], [the [REDACTED], the [REDACTED], any of the [REDACTED], any of their respective directors, officers, representatives or advisors or any other person involved in the [REDACTED].

Expected Timetable ...... i

Contents ...... iv

Summary ...... 1

Definitions ...... 17

Glossary of Technical Terms ...... 30

Forward-looking Statements ...... 32

Risk Factors ...... 34

Waivers from Strict Compliance with the Listing Rules ...... 74

Information about this Document and the [REDACTED] ...... 76

Directors and Parties Involved in the [REDACTED] ...... 80

Corporate Information ...... 83

Industry Overview ...... 85

Regulatory Overview ...... 98

History and Corporate Structure ...... 114

Contractual Arrangements ...... 135

Business ...... 153

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Relationship with our Controlling Shareholders ...... 235

Continuing Connected Transactions ...... 238

Directors and Senior Management ...... 243

Substantial Shareholders ...... 260

Share Capital ...... 262

Financial Information ...... 266

Future Plans and [REDACTED] ...... 331

[REDACTED] ...... 337

Structure of the [REDACTED] ...... 348

How to Apply for [REDACTED] ...... 358

Appendices

Appendix I — Accountants’ 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

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This summary aims to give you an overview of the information contained in this document. Since it is a summary, it does not contain all the information that may be important to you. You should read the document in its entirety before you decide whether to [REDACTED] in the [REDACTED]. There are risks associated with any investment. Some of the particular risks in investing in our [REDACTED] are set out in the section headed “Risk Factors” in this document. You should read that section carefully before you decide to [REDACTED] in our [REDACTED].

OVERVIEW

We are a leading drama series distribution company in the PRC. Our Group ranked second among all drama series distribution groups in the PRC in terms of the number of TV series first broadcast (首發劇) on satellite TV channels in the PRC in 2018, according to the Frost & Sullivan Report. In addition, we ranked 16th among all drama series distribution groups in the PRC in terms of revenue generated from drama series market in 2018 with a market share of approximately 0.34%, according to the Frost & Sullivan Report. Our Group was established in 2013, and is primarily engaged in the business of licensing the broadcasting rights of self-produced and outright-purchased drama series. In addition, we are engaged in other businesses, which include (i) selling drama series scripts; (ii) acting as a distribution agent of the broadcasting rights of TV series; and (iii) investing in drama series in which we act as a non-executive producer. During the Track Record Period and up to the Latest Practicable Date, we have invested and produced seven TV series and one web series covering a wide range of genres in which we acted as the executive producer. We also distributed 32, 43 and 45 drama series (including both self-produced drama series and drama series we purchased outright from third-party copyright owners/licensors) for the years ended December 31, 2017, 2018 and 2019, respectively. The drama series we distributed were generally broadcast on well-known satellite TV channels and leading online media platforms in the PRC during the Track Record Period.

Our major businesses are as follows:

• Licensing the broadcasting rights of self-produced and outright-purchased drama series: We mainly license the broadcasting rights of drama series produced by us as the executive producer or drama series that we have outright-purchased from third-party copyright owners/licensors. For drama series that we invested and acted as the executive producer, we contribute an entirety or a portion of the investment, and take a leading role in the production and distribution of the drama series. For outright-purchased drama series, we purchased the relevant copyright (or broadcasting right) from the third-party copyright owners/licensors and in turn, license the broadcasting rights to our customers, which are mainly TV channels and online media platforms in the PRC;

• Selling script copyrights of drama series: We purchase certain scripts of potential drama series to be made from third-party script copyright owners, and subsequently sell such script copyrights to certain drama series production companies from time to time;

• Acting as a distribution agent of the broadcasting rights of TV Series: We mainly act as a distribution agent for the copyright owners/licensors of TV series and promote the relevant TV series to TV channels. We negotiate the terms and conditions in connection with the licensing of the broadcasting rights with the TV channels on behalf of such TV series copyright owners/licensors. We typically receive a distribution agency fee in relation to our services; and

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• Investing in drama series in which we act as a non-executive producer: We primarily act as a non-executive producer and enter into co-financing arrangements with the executive producers of the drama series. We generally make investments in the drama series and take a passive role with limited involvement in the production and distribution of the relevant drama series.

For details of our business, please refer to the section headed “Business — Our Business and Revenue Model” in this document.

The table below sets forth the total number of drama series, including both the self-produced drama series and outright-purchased drama series we distributed for the years indicated. Year ended December 31, 2017 2018 2019

Number of Drama Series Self-produced drama series ...... 3 4 5 Outright-purchased drama series ...... 29 39 40

Total ...... 32 43 45

We experienced significant growth during the Track Record Period. Our revenue increased from approximately RMB378.7 million for the year ended December 31, 2017 to approximately RMB385.9 million for the year ended December 31, 2018, and further to approximately RMB391.0 million for the year ended December 31, 2019. In particular, revenue generated from our licensing of the broadcasting rights of self-produced and outright-purchased drama series increased from approximately RMB359.0 million for the year ended December 31, 2017 to approximately RMB382.8 million for the year ended December 31, 2018. It decreased to approximately RMB367.6 million for the year ended December 31, 2019. Our net profit was approximately RMB56.8 million, RMB67.6 million and RMB77.0 million for the years ended December 31, 2017, 2018 and 2019, respectively.

The table below sets forth a breakdown of our revenue by business segment for the years indicated. Year ended December 31, 2017 2018 2019 RMB’000 % RMB’000 % RMB’000 %

Revenue from the licensing of the broadcasting rights of self-produced drama series .... 13,686 3.6 7,031 1.8 88,982 22.8 Revenue from the licensing of the broadcasting rights of outright-purchased drama series 345,363 91.2 375,724 97.4 278,588 71.3 Revenue from the sales of script copyright(1) ...... 19,689 5.2 –––– Revenue from the provision of distribution agency services(2) ..––––9,458 2.4 Revenue from the licensing of the broadcasting rights under co-financing arrangements(3) . . . – – 3,112 0.8 13,968 3.5

Total ...... 378,738 100.0 385,867 100.0 390,996 100.0

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Notes:

(1) Revenue from the sales of script copyright primarily represent the revenue generated from selling the copyrights of drama series scripts.

(2) Revenue from the provision of distribution agency services primarily represents the returns generated from distributing drama series to TV channels by acting as a distribution agent.

(3) Revenue from the licensing of the broadcasting rights under co-financing arrangements mainly includes the returns from our investment in drama series production as a non-executive producer.

BUSINESS MODEL

Licensing of the Broadcasting Rights of Self-produced Drama Series

Our self-produced drama series business mainly consists of three stages: (i) planning and projection; (ii) filming and production; and (iii) distribution and promotion. The following diagram illustrates our business model relating to the licensing of the broadcasting rights of self-produced drama series:

Suppliers Suppliers Suppliers (Assembling filming (Promotion and (Script/Screenwriter) crew, filming and marketing services) post-production)

Production Provide Promotion Purchase Provide Provide costs services and marketing scripts services services costs Transfer of the broadcasting rights of Our Group drama series Customers (Satellite TV channels, Planning and Filming and Distribution terrestrial TV channels, Projection Production and Promotion new media channels and Revenue from other platforms) licensing the broadcasting rights of Investment returns Make investment drama series (Proportional license fees)

Co-investors, if any

Licensing of the Broadcasting Rights of Outright-purchased Drama Series

In addition to licensing the broadcasting rights of our self-produced drama series, we also engage in licensing the broadcasting rights of drama series that we purchased outright from third-party copyright owners/licensors. We commenced distributing outright-purchased drama series in the second half of 2016.

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The following diagram illustrates our business model relating to the licensing of the broadcasting rights of outright-purchased drama series:

Revenue of licensing the broadcasting Customers rights of drama series (Satellite TV channels, terrestrial TV channels, new media channels and other platforms) Transfer of the broadcasting rights of Content drama series Demands Recommendation Feedback

Our Group Project Market Entering into Distribution and Evaluation and Research the Agreement Promotion Matching

Evaluation Feedback Promotion and Drama Costs of Provide marketing costs Series purchasing the services Suppliers/Licensors drama series (Other film and Suppliers TV production (Promotional and companies) marketing services) License of the broadcasting rights of drama series

Sales of Copyrights of Drama Series Scripts

During the Track Record Period, we purchased certain scripts of potential drama series to be made from third-party copyright owners who are generally creative professionals, including screenwriters, novelists and publishers. These professionals are either the parties that we had previously worked with in connection with our self-produced drama series business, or those whose scripts may have the substance or themes that we believe could potentially cater to the demands and preferences of the broadcasting platforms. In 2017, we sold the script copyrights we acquired to certain third-party drama series production companies.

Acting as a Distribution Agent of the Drama Series

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Investment in Drama Series as a Non-executive Producer

During the Track Record Period, we entered into co-financing arrangements with the executive producers of certain drama series under which we acted as a non-executive producer. As a non-executive producer, we usually make investments in the drama series and take a passive role with limited involvement in the production and distribution of the relevant drama series. We generate income for this business primarily by sharing the net license fee with the executive producers of the drama series and other non-executive producers, if any, in the proportion of the respective investments. We typically receive our portion of the net license fee from the executive producers by installments on specific milestone dates.

COMPETITIVE STRENGTHS

We believe the following competitive strengths of our Company have contributed to our past success and will have a profound impact on our future growth: (i) we are a leading and well-recognized drama series distribution company in the PRC; (ii) we have diversified and synergetic business operations to support our growth in the drama series industry in the PRC; (iii) we maintain strong and fruitful relationship with our business partners; and (iv) we have visionary and experienced management team with in-depth industry knowledge.

BUSINESS STRATEGIES

Our objective is to strengthen our leading position in the PRC drama series market and enhance our overall competitiveness. To achieve this objective, we plan to execute the following business strategies: (i) continue to strengthen our drama series production and distribution capabilities; (ii) strengthen our market research, project development and production management capabilities for our self-produced drama series; (iii) continue to develop web series and capitalize on the growth opportunities in the PRC web series market; and (iv) continue to attract and retain talented professionals.

RISK FACTORS

Our business operations and the [REDACTED] involve certain risks and uncertainties, some of which are beyond our control and may affect your decision to invest in us and/or the value of your investment. Please refer to the section headed “Risk Factors” in this document for details of our risk factors. We believe the most significant risks we face include, but not limit to, the following: (i) if the drama series we produce and/or distribute fail to satisfy the preferences of our customers, our business, results of operations and financial condition may be materially and adversely affected; (ii) if we fail to source high-quality drama series from their copyright owners/licensors upon the terms acceptable to us or if there is any loss or deterioration of relationships with such copyright owners/licensors, our business, results of operations and financial condition may be materially and adversely affected; (iii) if we fail to identify sufficient or suitable customers for our drama series, our business, results of operations and financial condition may be materially and adversely affected; (iv) certain of our business operations are capital-intensive, and we may not always be able to meet our planned funding needs in a cost-effective manner, or at all; (v) we are exposed to credit risks in relation to our trade and bills receivables; (vi) we are subject to risks in connection with impairment loss on drama series copyrights; (vii) we recorded negative operating cash flows in 2017 and 2018 and are subject to

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OUR CUSTOMERS AND SUPPLIERS

During the Track Record Period and up to the Latest Practicable Date, our Group’s major customers primarily included TV channels (including satellite TV channels and terrestrial TV channels) and online media platforms. For the years ended December 31, 2017, 2018 and 2019, the revenue attributable to our five largest customers accounted for approximately 73.6%, 82.3% and 73.8% of our total revenue, respectively. During the Track Record Period, our major suppliers primarily include (i) producers or copyrights owners of the drama series, who license the copyrights or broadcasting rights of the drama series to us; and (ii) third-party service providers relating to drama series production and promotional and marketing activities. We outsourced most of the production and filming work to third-party service providers during the Track Record Period. For the years ended December 31, 2017, 2018 and 2019, purchases from our five largest suppliers accounted for approximately 69.9%, 81.0% and 76.1% of our total purchases, respectively.

Due to the nature of our business, certain of our largest customers or suppliers during the Track Record Period were also our suppliers or customers, respectively, during the same periods. Our Directors confirm, and Frost & Sullivan concurs, that the terms of these transactions were in line with industry norm. Please see the section headed “Business — Our Customers” and “Business — Our Suppliers” in this document for further details.

During the Track Record Period and up to the Latest Practicable Date, none of our Directors, their respective close associates, or any Shareholder (who, to the knowledge of our Directors, owned more than 5% of our issued capital as of the Latest Practicable Date), held any interest in any of our five largest customers or five largest suppliers for the Track Record Period.

SUMMARY OF HISTORICAL FINANCIAL INFORMATION

The following tables set forth summary consolidated financial information as of and for the years ended December 31, 2017, 2018 and 2019. You should read this summary together with the consolidated financial information set forth in the Accountants’ Report in Appendix I to this document, including the related notes, as well as the information set forth in the “Financial Information” section in this document.

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Selected Data from Consolidated Statements of Profit or Loss

Year Ended December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

Revenue ...... 378,738 385,867 390,996 Cost of sales ...... (302,753) (286,362) (249,862)

Gross profit ...... 75,985 99,505 141,134 Otherincome...... 3,112 4,286 4,069 Selling and marketing expenses...... (827) (764) (543) Administrative expenses...... (11,197) (23,062) (60,522)

Profit from operations ...... 67,073 79,965 84,138 Financecosts...... (5,012) (10,122) (4,769)

Profit before taxation ...... 62,061 69,843 79,369 Income tax...... (5,301) (2,237) (2,335)

Profit and total comprehensive income attributable to equity shareholders of our Company for the year . . . 56,760 67,606 77,034

Our revenue increased from approximately RMB378.7 million for the year ended December 31, 2017 to approximately RMB385.9 million for the year ended December 31, 2018 primarily due to increases in revenue generated from licensing the broadcasting rights of outright-purchased drama series as we expanded this business segment. It further increased to approximately RMB391.0 million mainly as a result of the increase in the revenue generated from licensing the broadcasting rights of self-produced drama series as we licensed the first-run broadcasting rights of a drama series, “The Brothers” (義海), to three major satellite TV channels in the PRC, and successfully distributed another self-produced drama series, “A Gallant Army” (老虎隊), that had first-run broadcast on a state-owned TV channel in 2019. For further details, please refer to the section headed “Financial Information — Period to Period Comparison of Results of Operations” in this document.

The table below sets forth the breakdown of our gross profit and gross profit margin by business segments for the years indicated:

Year Ended December 31,

2017 2018 2019

Gross Profit Gross Profit Gross Profit Gross Profit Margin Gross Profit Margin Gross Profit Margin RMB’000 % RMB’000 % RMB’000 %

Self-produced drama series ...... 4,468 32.6 4,928 70.1 28,243 31.7 Outright-purchased drama series ...... 67,507 19.5 94,276 25.1 103,355 37.1 Sales of script copyrights ...... 4,010 20.4 – N/A – N/A Distribution agency services ...... – N/A – N/A 9,458 100.0 Income under co-financing arrangement .... – N/A 301 9.7 78 0.6

Total ...... 75,985 20.1 99,505 25.8 141,134 36.1

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Our gross profit margin increased from approximately 20.1% for the year ended December 31, 2017 to approximately 25.8% for the year ended December 31, 2018, mainly due to the increased gross profit margin of the business of licensing the broadcasting rights of self-produced drama series because the costs incurred in connection with of the drama series that was broadcast in 2018 had been fully accounted for by the end of 2017, and an increase in the revenue and gross profit of the business of licensing the broadcasting rights of outright-purchased drama series because of our improved selection and distribution capabilities in 2018. Moreover, our gross profit margin increased from approximately 25.8% for the year ended December 31, 2018 to approximately 36.1% for the year ended December 31, 2019, primarily because (i) we successfully licensed the first-run broadcasting rights of our self-produced drama series, “A Gallant Army” (老虎隊), which had a relatively higher gross profit margin; and (ii) we improved our content selection and distribution capabilities of drama series and optimized our customer network in connection with our business of licensing the broadcasting rights of outright-purchased drama series. For details of the fluctuations of our gross profit margin of our various business segments during the Track Record Period, please refer to the paragraphs under “Financial Information — Major Components of Our Results of Operations — Gross Profit and Gross Profit Margin” in this document.

Non-IFRS Measure

In order to supplement our consolidated financial statements, which are presented in accordance with IFRS, we also use adjusted profit and total comprehensive income attributable to equity shareholders of our Company for the year as an additional financial measure. We present this financial measure because it is used by our management to evaluate our financial performance by eliminating the impact of certain one-off or non-recurring items that we do not consider to be indicative of the performance of our business during the Track Record Period. We also believe that this non-IFRS measure provides additional information to investors and others in their understanding and evaluating our results of operations in the same manner as they help our management and in comparing financial results across accounting periods and to those of our peer companies. However, this non-IFRS measure does not have a standardized meaning prescribed by IFRS and therefore, it may not be comparable to similar measures presented by other companies listed on the Stock Exchange.

Year Ended December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

Profit and total comprehensive income attributable to equityshareholdersofourCompanyfortheyear.... 56,760 67,606 77,034 Add: [REDACTED]...... – 590 13,570

Adjusted profit and total comprehensive income attributable to equity shareholders of our Company for the year(1) ...... 56,760 68,196 90,604

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Note:

(1) The adjusted profit and total comprehensive income attributable to equity shareholders of our Company for the year (adding back [REDACTED]) represents the profit and total comprehensive income attributable to equity shareholders of our Company for the year excluding the effects of the [REDACTED] as it is non-recurring in nature. The adjusted profit and total comprehensive income attributable to equity shareholders of our Company for the year is not a measure of performance under IFRS. As a non-IFRS measure, the adjusted profit and total comprehensive income attributable to equity shareholders of our Company for the year is presented because our Directors believe such information will be helpful in assessing the level of our net profit by eliminating the effects of certain one-off or non-recurring items, namely, the [REDACTED]. There are no other significant non-recurring or one-off items during the Track Record Period. However, the use of the adjusted profit and total comprehensive income attributable to equity shareholders of our Company for the year has material limitations as an analytical tool, as it does not include all items that impact our profit for the relevant year.

RETAINED PROFITS/(LOSSES)

Our Group recorded accumulated losses prior to the Track Record Period in our consolidated statements of changes in equity primarily due to (i) a large amount of share-based compensation issued to certain members of our then-existing management in 2015, which was subsequently settled in July 2016; and (ii) an operating loss comprising our operating expenses incurred prior to the Track Record Period as we initiated our self-produced drama series business in the second half of 2014. We had accumulated losses of approximately RMB34.1 million as of January 1, 2017 primarily as a result of the net profit we generated in 2016. As we expanded the business of licensing the broadcasting rights of outright-purchased drama series in 2017, we had a net profit of approximately RMB56.8 million for the year ended December 31, 2017. Therefore, as of December 31, 2017, we became profitable and had retained profits of approximately RMB22.7 million. For details, please refer to the section headed “Financial Information — Retained Profits/(Losses)” in this document.

Selected Data from Consolidated Statements of Financial Position

As of December 31, 2017 2018 2019 RMB’000 RMB’000 RMB’000

Non-current assets ...... 6,073 8,273 14,241 Current assets ...... 367,905 613,811 835,346 Current liabilities ...... 202,031 365,509 516,210 Net current assets...... 165,874 248,302 319,136 Non-current liabilities ...... 1,415 437 115 Net assets...... 170,532 256,138 333,262

Our net current assets increased during the Track Record Period primarily due to the increases in (i) trade and bills receivables in connection with our businesses of licensing the broadcasting rights of both self-produced and outright-purchased drama series; and (ii) drama series copyrights due to the completion of production of certain self-produced drama series. For details, please see “Financial Information — Description of Certain Key Items From Our Consolidated Statement of Financial Position — Current Assets and Current Liabilities” in this document.

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Selected Data from Consolidated Cash Flow Statements Year ended December 31, 2017 2018 2019 RMB’000 RMB’000 RMB’000 Net cash from operating activities before movements in working capital………………... . . 67,922 79,134 85,260 Changes in working capital…… ...... (143,847) (104,501) 25,992 Income tax paid…………… ...... (6,529) (3,052) (3,041) Net cash (used in)/generated from operating activities ...... (82,454) (28,419) 108,211 Net cash (used in)/generated from investing activities ...... (16,010) (6,309) 23,778 Net cash generated from/(used in) financing activities ...... 108,905 26,721 (65,236) Net increase/(decrease) in cash and cash equivalents ...... 10,441 (8,007) 66,753 Cash and cash equivalents at beginning of year . . 12,553 22,994 14,987 Cash and cash equivalents at end of year ...... 22,994 14,987 81,740

Our net cash used in operating activities decreased from approximately RMB82.5 million for the year ended December 31, 2017 to approximately RMB28.4 million for the year ended December 31, 2018, primarily due to the increases in trade payables and other payables and accrued expenses as a result of the increase in proportional investment contributions we received from the co-investors of certain drama series under the co-financing arrangements. We had net cash generated from operating activities of approximately RMB108.2 million for the year ended December 31, 2019, compared to the net cash used in operating activities of approximately RMB28.4 million for the year ended December 31, 2018, primarily due to (i) an increase in profit before taxation; (ii) an increase in trade payables in line with the growth of our business; and (iii) an increase in other payables and accrued expenses due to the increase in payables to co-investors of drama series under the co-financing arrangements as a result of our distribution of certain drama series we produced, including “The Brothers” (義海), “A Gallant Army” (老虎隊) and “Glory of the Blood” (鐵血榮耀).

Key Financial Ratios(1)

Year ended/as of December 31

2017 2018 2019

Profitability ratios Gross profit margin ...... 20.1% 25.8% 36.1% Net profit margin ...... 15.0% 17.5% 19.7% Return on assets ...... 22.0% 13.6% 10.5% Return on equity ...... 50.4% 31.7% 26.1%

Liquidity ratio Current ratio ...... 1.8 1.7 1.6

Capital adequacy ratios Gearing ratio ...... 51.6% 41.8% 17.0% Net debt to equity ratio ...... 38.1% 35.9% N/A Interest coverage ratio ...... 13.4 7.9 17.6

Note:

(1) See “Financial Information — Key Financial Ratios” for the calculation methods.

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Our gearing ratio decreased from approximately 51.6% as of December 31, 2017 to approximately 41.8% as of December 31, 2018, primarily due to a substantial increase in our total equity from increased equity contributions and net profit. Our gearing ratio further decreased to approximately 17.0% as of December 31, 2019, primarily as a result of a decrease in bank and other loans as we made repayments and increased total equity.

CONTROLLING SHAREHOLDERS

Immediately after completion of the Capitalization Issue and the [REDACTED], the Controlling Shareholders, namely Mr. Yuan, Litian Century, Ms. Tian and Marshal Investment will together control the exercise of voting rights of [REDACTED]% of the Shares eligible to vote in the general meeting of our Company (assuming the [REDACTED] is not exercised and without taking into account any Shares which may be issued upon the exercise of options granted under the Share Option Scheme). Please refer to the section headed “Relationship with Controlling Shareholders” for further details.

CONTRACTUAL ARRANGEMENTS

We currently conduct our businesses through our Consolidated Affiliated Entities in the PRC. Pursuant to applicable PRC laws and regulations, foreign investors are prohibited from holding equity interest in any enterprise conducting the production and operation of drama series in the PRC. For details, see “Regulatory Overview — Regulations on Radio and Television Programs”. As advised by our PRC Legal Advisors, our principal business falls into the scope of production and operation of drama series. As a result, we entered into the Contractual Arrangements, through which we are able to exercise control over and derive the economic benefits from our Consolidated Affiliated Entities and consolidated their results of operations into those of our Group. For details, see “Contractual Arrangements.” The following simplified diagram illustrates the key aspects of the Contractual Arrangements:

Our Company

100%

(3)(4)(5) LiTian WFOE Registered Shareholders

(1) (2) 100% “ ” denotes direct legal and beneficial PRC Consolidated Affiliated Entities ownership in the equity interest “ ” denotes Contractual Arrangements

Notes:

(1) Payment of service fee. See “Contractual Arrangements — Operation of the Contractual Arrangements — Summary of the Material Terms of the Contractual Arrangements — (1) Exclusive Consultancy and Service Agreement” in this document for details.

(2) Provision of exclusive technical and management consultancy services. See “Contractual Arrangements — Operation of the Contractual Arrangements — Summary of the Material Terms of the Contractual Arrangements — (1) Exclusive Consultancy and Service Agreement” in this document for details.

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(3) Exclusive call option to acquire all or part of the Registered Shareholders’ interest in LiTian TV &Film. See “Contractual Arrangements — Operation of the Contractual Arrangements — Summary of the Material Terms of the Contractual Arrangements — (2) Exclusive Call Option Agreement” in this document for details.

(4) Pledge of equity interest by the Registered Shareholders of their equity interest in LiTian TV & Film. See “Contractual Arrangements — Operation of the Contractual Arrangements — Summary of the Material Terms of the Contractual Arrangements — (3) Equity Pledge Agreement” in this document for details.

(5) Entrustment of Registered Shareholders’ right including Registered Shareholders’ power of attorney. See “Contractual Arrangements — Operation of the Contractual Arrangements — Summary of the Material Terms of the Contractual Arrangements — (4) Shareholders’ Voting Rights Entrustment Agreement and (5) Shareholders’ Powers of Attorney” in this document for details.

The payment of the service fees pursuant to the Contractual Arrangements entered between LiTian TV & Film and LiTian WFOE would result in LiTian WFOE incurring additional income tax and VAT while the income tax and VAT to be paid by LiTian TV & Film will decrease by a corresponding amount to offset such increase. Therefore, the adoption of the Contractual Arrangements would not have any financial impact on the Group as if the Contractual Arrangements were adopted throughout the Track Record Period. For details, see “Contractual Arrangements.”

RECENT DEVELOPMENTS AND NO MATERIAL ADVERSE CHANGE

Subsequent to the Track Record Period and up to the Latest Practicable Date, our business model has remained unchanged and we continue to focus on the business of licensing the broadcasting rights of self-produced and outright-purchased drama series.

There has been an outbreak of the 2019 coronavirus disease (COVID-19) that was first reported in Wuhan, Hubei Province, in December 2019. The outbreak has endangered the health of many people residing in China and significantly disrupted travel and the local economy across the country. The development of such epidemic in China is beyond our control. While we currently do not have any self-produced drama series that is in production, the epidemic, if it is prolonged, may cause potential filming and production delays on our forthcoming self-produced drama series. In addition, the COVID-19 epidemic may significantly impact the timing of repayment by our customers and adversely affect their willingness to continue to procure the broadcasting rights of drama series from us, which, in turn, may result in additional impairment losses on our trade receivables and drama series copyrights in the upcoming financial years.

We do not expect the outbreak of COVID-19 to have a significant impact on our business operations and financial condition primarily because (i) the nature of our business activities is drama series production and the licensing of the broadcasting rights of drama series. Except for on-site filming of our self-produced drama series, our employees can work remotely and conduct communications through mobile phones, the Internet and other media tools to monitor the progress of each project in a timely manner; and (ii) our Group is operated under an “asset-light” business model. Except for the costs in association with drama series production and procurement of the broadcasting rights of outright-purchased drama series, our monthly fixed costs, such as staff costs and rental expenses are relatively low. On the other hand, to our knowledge, the operations of our customers and suppliers could be affected by the epidemic.

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For example, in light of the extended Chinese New Year holidays and the COVID-19 containment measures imposed by the PRC government, their employees were required to work from home during this period and all business travels were temporarily suspended. However, this did not affect the overall business operations of our Group.

With respect or our self-produced drama series, all of the drama series that we previously invested in had completed filming and production by the end of 2019. Our newly invested self-produced drama series is expected to commence filming in June 2020. We do not have any filming plan of our self-produced drama series before June 2020. Therefore, our Directors believe that the outbreak of COVID-19 will not delay the on-site filming and production of our self-produced drama series. With respect to outright-purchased drama series, although the outbreak of such epidemic has caused some suppliers to implement work-from-home arrangements and impose travel restrictions on their employees, the content review and inspection of the relevant outright-purchased drama series could be completed remotely through mobile phones and video conferences. As (i) the outright-purchased drama series that we procured from third-party copyright owners/licensors had completed filming and production prior to our procurement; and (ii) the delivery of broadcasting tapes of these outright-purchased drama series were conducted by third-party couriers and the courier services in China had not been suspended during this period, our procurement of outright-right purchased drama series had not been materially affected by the outbreak of COVID-19 as of the Latest Practicable Date.

As of the Latest Practicable Date, our Group had fully resumed operations and to the best of our Directors’ knowledge, our major customers and suppliers had also resumed full operations. As of the Latest Practicable Date, we did not experience any delay or default in payments by our customers.

According to statistics from the Big Data System for Comprehensive Evaluation of Radio and Television Program Ratings by NRTA (國家廣播電視總局廣播電視節目收視綜合評價大數據系統), from January 25 to February 9, 2020 (i) the average daily number of users of national cable television and Internet protocol television increased by approximately 23.5% compared to the number of users in December 2019; (ii) the total viewing hours increased by approximately 41.7% during this period compared to the same in December 2019; and (iii) the average daily household television watching time was approximately seven hours during this period. As a result, the epidemic had a positive impact on the distribution and scheduling of drama series. As of the Latest Practicable Date, we licensed the broadcasting rights of a total of 17 drama series in 2020, compared to 14 drama series that we distributed during the first three months of 2019. In addition, as of the Latest Practicable Date, we had not received any request or notice from our customers to adjust or suspend the broadcasting schedules of the drama series distributed by us. Our project department has conducted negotiations with our customers in accordance with the distribution plans and implemented our work with respect to the licensing of the broadcasting rights of drama series on time. Therefore, the outbreak of COVID-19 did not and will not have any substantial impact on our customers and our business operations.

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In addition, our overall financial position and cash flows have not been materially and adversely affected by the COVID-19 epidemic. For the period from January 1, 2020 to the Latest Practicable Date, the total trade receivables we collected from our customers were approximately RMB221.8 million, compared to approximately RMB36.9 million we collected from our customers in the first quarter of 2019. We also settled the payments with our suppliers according to the normal schedules. In the future, we will collect the trade receivables from our customers according to the terms in the relevant agreements. Since most of our customers are state-owned TV channels, whose internal administrative process for payment is relatively slow. However, none of the state-owned TV channel customers had defaulted on their payments to us during the Track Record Period and up to the Latest Practicable Date. In this regard, we believe that our customers will continue to make payments according to their funding plans.

Even if in the worst case scenario, (i) the COVID-19 outbreak continues to spread nationwide in the PRC; (ii) the PRC government prohibits drama series producers from conducting on-site filming for an extended period of time; (iii) we fail to raise sufficient [REDACTED]fromthe[REDACTED]; (iv) we are unable to obtain any investment in our self-produced drama series from third-party co-investors under the co-financing arrangements; (v) all investments we received from the co-investors falling due in 2020 cannot be extended and require repayment in full; and/or (vi) we can only license the broadcasting rights of our existing self-produced drama series, which have already completed production, and our procured outright-purchased drama series to our customers, our Directors believe that, taking into consideration the anticipated business operating expenses, we would have sufficient working capital to remain financially viable for 15 months from the date of this document based on (i) our existing cash at bank on hand; and (ii) expected cash flows generated from our business operations for the year ending December 31, 2020 and the six months ending June 30, 2021.

After performing sufficient due diligence work that our Directors consider appropriate and after due and careful consideration, our Directors confirm that, save for the above, there has been no material and adverse change in our financial, operational or trading positions or prospects since December 31, 2019, being the date our consolidated financial statements as set out in the Accountants’ Report of Appendix I to this document, and up to the date of this document.

DIVIDENDS

We are a holding company incorporated under the laws of the Cayman Islands. As a result, the payment and amount of any future dividend will depend on the availability of dividends received from our subsidiaries. PRC laws require a foreign-invested enterprise to make up for its accumulative losses out of its after-tax profits and allocate at least 10% of its remaining after-tax profits, if any, to fund its statutory reserves until the aggregate amount of its statutory reserves exceeds 50% of its registered capital.

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Any amount of dividend we pay will be at the discretion of our Directors and will depend on our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors which our Directors consider relevant. Any declaration and payment as well as the amount of dividend will be subject to our constitutional documents and the Cayman Companies Law. Our Shareholders in a general meeting may approve any declaration of dividends, which must not exceed the amount recommended by our Board. No dividend shall be declared or payable except out of our profits and reserves lawfully available for distribution. Our future declarations of dividends may or may not reflect our historical declarations of dividends and will be at the absolute discretion of the Board.

Historically, we have not declared or paid any dividend to our Shareholders and there is no assurance that dividends of any amount will be declared or be distributed in any year. Currently we do not have a formal dividend policy or a fixed dividend distribution ratio.

[REDACTED]

Based on an Based on an [REDACTED] of [REDACTED] of HK$[REDACTED] HK$[REDACTED] per Share per Share

[REDACTED] of our Shares(1) ...... HK$[REDACTED] HK$[REDACTED] Unaudited pro forma adjusted net tangible asset value per Share(2) ...... HK$[REDACTED] HK$[REDACTED]

Notes:

(1) All statistics in this table are based on the assumption that the [REDACTED] is not exercised. The calculation of market capitalization is based [REDACTED] Shares expected to be issued and outstanding following the completion of the Capitalization Issue and the [REDACTED].

(2) The unaudited pro forma adjusted consolidated net tangible asset value per Share is calculated after making the adjustments referred to Appendix II and based on [REDACTED] Shares expected to be issued and outstanding following the completion of the Capitalization Issue and the [REDACTED].

[REDACTED]

We expect to incur a total of RMB[REDACTED]of[REDACTED] (assuming an [REDACTED] of HK$[REDACTED], being the mid-point of the indicative [REDACTED] range between HK$[REDACTED] and HK$[REDACTED], and assuming that the [REDACTED]isnot exercised) until the completion of the [REDACTED]. During Track Record Period, we incurred RMB[18.2] million as [REDACTED], of which RMB[14.1] million was charged to the consolidated statements of profit or loss and other comprehensive income and RMB[4.1] million will be capitalized upon the [REDACTED]. Subsequent to the Track Record Period, we expect to incur additional [REDACTED] of RMB[28.4] million, of which RMB[15.0] million is expected to be charged to the consolidated statements of profit or loss and other comprehensive income and RMB[13.4] million will be capitalized upon the [REDACTED]. [REDACTED] represent professional fees and other fees incurred in connection with the [REDACTED], including [REDACTED]. The [REDACTED] above are the best estimate as of the Latest Practicable Date and for reference only and the actual amount may differ from this estimate. We do not expect these [REDACTED] to have a material impact on our results of operations for the year ending December 31, 2020.

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USE OF [REDACTED]

We estimate that we will receive [REDACTED] of approximately HK$[REDACTED]from the [REDACTED], assuming that the [REDACTED] is not exercised, after deducting the [REDACTED] and other estimated [REDACTED] payable by us and assuming the [REDACTED] of HK$[REDACTED] per Share, being the mid-point of the indicative [REDACTED] range set forth on the cover page of this document. We intend to apply the [REDACTED] for the following purposes: (i) approximately [REDACTED]%, or HK$[REDACTED] (equivalent to approximately RMB[REDACTED]), is expected to be used primarily to produce our own drama series, which is expected to be approximately [seven] drama series involving several major genres and [four] web series; (ii) approximately [REDACTED]%, or HK$[REDACTED] (equivalent to approximately RMB[REDACTED]), is expected to be used primarily to outright-purchase the copyrights (or broadcasting rights) associated with drama series from third-party copyright owners/licensors; (iii) approximately [REDACTED]%, or HK$[REDACTED] (equivalent to approximately RMB[REDACTED]), is expected to be used primarily to hire additional experienced professionals for production management, distribution, business development, copyright management, sales and marketing and post-production management, and to provide training to our staff; and (iv) approximately [REDACTED]%, or HK$[REDACTED] (equivalent to approximately RMB[REDACTED]), is expected to be used to fund our working capital and general corporate purposes. For details, see “Future Plans and [REDACTED]—[REDACTED]” in this document.

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In this document, unless the context otherwise requires, the following expressions have the following meanings.

“affiliate(s)” with respect to any specific person(s), any other person(s), directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified person(s)

[REDACTED]

“Articles” or “Articles of Association” the articles of association of our Company conditionally adopted on [●] which will become effective upon the [REDACTED], a summary of which is set out in Appendix III to this document, and as amended from time to time

“associate(s)” has the meaning ascribed to it under the Listing Rules

“Board” or “Board of Directors” the board of Directors

“Beijing LiTian” Beijing Litian Zhenzhi Film Co. Ltd.* (北京力天臻至影業有限公司), a limited liability company established under the laws of the PRC on May 9, 2019, which is wholly-owned by LiTian TV & Film

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

“CAGR” compound annual growth rate, a method of assessing the average growth of a value over a specified period of time, taking into account the effects of compounding

“Capitalization Issue” the issue of [REDACTED] Shares upon capitalization of certain sums standing to the credit of the share premium account of our Company referred to in the section headed “A. Further Information about our Company — 4. Written resolutions of the then shareholder of our Company passed on [●]” in Appendix IV to this document

[REDACTED]

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[REDACTED]

“China” or “PRC” the People’s Republic of China, for the purpose of this document, having not included the Hong Kong Special Administration Region, the Macau Special Administrative Region and Taiwan Region of China

“Companies Law” Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands

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

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

“Company” or “our Company” Litian Pictures Holdings Limited (力天影業控股有限公司), an exempted company incorporated in the Cayman Islands with limited liability on June 17, 2019

“connected person(s)” has the meaning ascribed to it under the Listing Rules

“Consolidated Affiliated Entities” namely, LiTian TV & Film, LiTian Media, Xinjiang LiTian, Horgos Tiantian Meimei, Horgos Haohao Xuexi, Tiantian Xiangshang and Beijing LiTian

“Contractual Arrangements” the series of contractual arrangements entered into by, among others, LiTian WFOE, LiTian TV & Film and the Registered Shareholders, details of which are described in the section headed “Contractual Arrangements”

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“Controlling Shareholder(s)” has the meaning ascribed to it in the Listing Rules and unless the context otherwise requires, refers to the controlling shareholders of our Company, namely Mr. Yuan, Litian Century, Ms. Tian and Marshal Investment

“core connected person(s)” has the meaning ascribed to it under the Listing Rules

“Corporate Reorganization” the corporate reorganization of our Group conducted in preparation for the [REDACTED], details of which are set out in the section headed “History and Corporate Structure — Corporate Reorganization” in this document

“Deed of Indemnity” a deed of indemnity dated [●] entered into by our Controlling Shareholders, namely, Mr. Yuan, Litian Century, Ms. Tian and Marshal Investment, in favor of our Company (for ourselves and as trustee for our subsidiaries) in respect of, among other things, certain indemnities, further information of which is set out in the section headed “G. Other Information — 1. Deed of Indemnity” in Appendix IV to this document

“Deed of Non-competition” a deed of non-competition dated [●] entered into by our Controlling Shareholders, namely, Mr. Yuan, Litian Century, Ms. Tian and Marshal Investment, in favor of our Company (for ourselves and as trustee for each of our subsidiaries from time to time) with particulars set out in “Relationship with our Controlling Shareholders” in this document

“Director(s)” the director(s) of our Company

“EIT” the PRC Enterprise Income Tax* (中華人民共和國企業所得稅)

“EIT Law” the Law of the People’s Republic of China on EIT (《中華人民共和國企業所得稅法》) adopted by the National People’s Congress of the PRC on March 16, 2007, became effective on January 1, 2008, and amended on December 29, 2018

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“Foreign Investment Catalog” the Guidance Catalog of Industries for Foreign Investment (2017)《外商投資產業指導目錄 ( (2017)》), which was promulgated jointly by the MOFCOM and the NDRC on June 28, 2017 and became effective from July 28, 2017, which is amended from time to time

“Frost & Sullivan” Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., a market research and consulting company and Independent Third Party, which prepared the Frost & Sullivan Report

“Frost & Sullivan Report” the industry report prepared by Frost & Sullivan and commissioned by our Group regarding the drama series market in the PRC, as referred to in the section headed “Industry Overview” in this document

[REDACTED]

“Group”, “our Group”, “we” or “us” our Company, its subsidiaries and the Consolidated Affiliated Entities from time to time, or, where the context so requires in respect of the period before our Company became the holding company of our present subsidiaries, the entities which carried on the business of the present Group at the relevant time

“Haohao Xuexi Investment” Ningbo Meishan Bonded Port District Haohao Xuexi Investment Management Partnership (Limited Partnership)* (寧波梅山保稅港區好好學習投資管理合夥企業（有限合夥）), a limited partnership established under the laws of the PRC on May 30, 2016, which is a corporate shareholder of LiTian TV & Film

[REDACTED]

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“Horgos Haohao Xuexi” Horgos Haohao Xuexi Film Co., Ltd.* (霍爾果斯好好學習影業有限公司), a limited liability company established under the laws of the PRC on May 26, 2017, which is wholly-owned by LiTian TV & Film

“HK$”, “Hong Kong dollar(s)”, Hong Kong dollars and cents, respectively, the lawful “HKD” or “cents” currency for the time being of Hong Kong

[REDACTED]

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

[REDACTED]

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[REDACTED]

“Horgos Tiantian Meimei” Horgos Tiantian Meimei Film Co., Ltd.* (霍爾果斯甜甜美美影業有限公司), a limited liability company established under the laws of the PRC on January 24, 2017, which is wholly-owned by LiTian TV & Film

“IFRSs” the International Financial Reporting Standards

“Independent Third Party(ies)” an individual(s) or a company(ies) who or which is/are independent of and not connected with (within the meaning of the Listing Rules) any director, chief executive or substantial shareholder (within the meaning of the Listing Rules) of our Company, its subsidiaries or any of their respective associates

[REDACTED]

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[REDACTED]

“Junfeng Investment” Shenzhen Junfeng Huayi Xinxing Industrial Investment Partnership (Limited Partnership)* (深圳市君豐華益新興產業投資合夥企業（有限合夥）), a limited partnership established under the laws of the PRC on July 2, 2015, which is a corporate shareholder of LiTian TV & Film

“Kerui Chuangye” Hangzhou Kerui Chuangye Investment Partnership (Limited Partnership)* (杭州科銳創業投資合夥企業（有限合夥）), a limited partnership established under the laws of the PRC on December 10, 2015, which had once been a corporate shareholder of LiTian TV & Film

“Latest Practicable Date” [April 19], 2020, being the latest practicable date for the purpose of ascertaining certain information in this document prior to its publication

[REDACTED]

“Listing Committee” the Listing Committee of the Stock Exchange

“[REDACTED]” the date, expected to be on or about [REDACTED]on which our Shares are [REDACTED] and from which [REDACTED] in our Shares are permitted to take place on the Stock Exchange

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange, as amended, supplemented or otherwise modified from time to time

“LiTian BVI” LiTian TV & Film Group Limited (力天影視集團有限公司), a limited liability company established under the laws of BVI on June 28, 2019 and a wholly-owned subsidiary of our Company

“Litian Century” Litian Century Media Co. Ltd. (力天世紀傳媒有限公司), a company incorporated under the laws of the BVI on May 20, 2019, which is 100% owned by Mr. Yuan, and a Controlling Shareholder of our Company

–23– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“LiTian HK” LiTian TV & Film (Hong Kong) Limited (力天影視（香港）有限公司), a limited liability company incorporated in Hong Kong on July 22, 2019 and a wholly-owned subsidiary of our Company

“LiTian Media” Zhejiang LiTian Media Co., Ltd.* (浙江力天傳媒有限公司), a limited liability company established under the laws of the PRC on July 9, 2014, which is wholly-owned by LiTian TV & Film

“LiTian TV & Film” Zhejiang LiTian TV & Film Co., Ltd.* (浙江力天影視有限公司), a limited liability company established under the laws of the PRC on August 2, 2013, which is owned by the Registered Shareholders, and a Consolidated Affiliated Entity of our Company

“LiTian WFOE” Haining Marshal Films Planning Co., Ltd.* (海寧元帥影視策劃有限公司), a limited liability company established under the laws of the PRC on September 25, 2019 and a wholly-owned subsidiary of our Company

“Main Board” the stock exchange (excluding the option market) operated by the Stock Exchange which is independent from and operated in parallel with GEM of the Stock Exchange

“Marshal Investment” Marshal Investment Co. Ltd. (元帥投資有限公司), a company incorporated under the laws of BVI on May 20, 2019, which is 100% owned by Ms. Tian, and a Controlling Shareholder of our Company

“Memorandum of Association” or the memorandum of association of our Company “Memorandum” adopted on [●], and as amended from time to time

“MOF” the Ministry of Finance of the PRC* (中華人民共和國財政部)

“MOFCOM” Ministry of Commerce of the PRC* (中華人民共和國商務部)

“Mr. Yuan” Mr. Yuan Li (袁力), our chairman of the Board, an executive Director, a Controlling Shareholder and the spouse of Ms. Tian

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“Ms. Tian” Ms. Tian Tian (田甜), an executive Director, the chief executive officer of our Company, a Controlling Shareholder and the spouse of Mr. Yuan

“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)

“National People’s Congress” or the National People’s Congress of the PRC* (中華人民 “NPC” 共和國全國人民代表大會)

“Negative List” the Special Administrative Measures for Access of Foreign Investment (Negative List) (2019 Edition)《外商 ( 投資准入特別管理措施（負面清單）（2019年版）》), jointly promulgated by the MOFCOM and the NDRC on June 30, 2019 and became effective on July 30, 2019

“NRTA” the National Radio and Television Administration of the PRC* (中華人民共和國國家廣播電視總局), formerly known as the State Administration of Radio, Film and Television of the PRC* (國家新聞出版廣電總局)

[REDACTED]

“PRC government” or “State” the central government of the PRC, including all governmental sub-divisions (such as provincial, municipal and other regional or local government entities)

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“PRC Legal Advisors” or “PRC Legal Zhong Lun Law Firm, our Legal advisors as to PRC Advisers” laws

[REDACTED]

“Registered Shareholder(s)” the shareholder(s) of LiTian TV & Film, namely Mr. Yuan, Ms. Tian, Haohao Xuexi Investment, Zhihui Xinlong, Zhihui Lixiang, Junfeng Investment, Ms. Fu Jieyun (傅潔雲), Mr. Huang Weishu (黃衞書), Mr. Li Danjun (勵丹駿), Mr. Gong Yueliang (龔越亮), Mr. Zhu Huanghang (朱黃杭) and Ms. Si Houfang (斯厚芳)

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

“RMB” or “Renminbi” Renminbi, the lawful currency for the time being of the PRC

“Ruijiu Yushang” Ningbo Meishan Bonded Port District Ruijiu Yushang Investment Management Company Limited* (寧波梅山保稅港區睿久裕上投資管理有限公司), a limited liability company established under the laws of the PRC on December 13, 2016, which has once been a corporate shareholder of LiTian TV & Film

“SAFE” the State Administration of Foreign Exchange of the PRC* (中華人民共和國國家外匯管理局)

“SAT” the State Administration of Taxation of the PRC* (中華人民共和國國家稅務總局)

“SFC” or “Securities and Futures the Securities and Futures Commission of Hong Kong Commission”

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

–26– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“Share(s)” ordinary share(s) of our company with a nominal value of HK$0.01 each, in the share capital of our Company

“Shareholder(s)” holder(s) of the Share(s)

“Share Option Scheme” the share option scheme conditionally adopted by our Company on [●], the principal terms of which are summarized under the section headed “F. Share Option Scheme” in Appendix IV to this document

[REDACTED]

“Sole Sponsor” Founder Securities (Hong Kong) Capital Company Limited

[REDACTED]

“[REDACTED]” the [REDACTED] expected to be entered into between [Litian Century] and the [REDACTED] (or its agents) on or about [the [REDACTED]] pursuant to which [Litian Century] will agree to lend up to [REDACTED] Shares to the [REDACTED] on the terms set out therein

“Stock Exchange” or “Hong Kong Stock The Stock Exchange of Hong Kong Limited Exchange”

“subsidiary(ies)” has the meaning ascribed to it under the Listing Rules

“substantial Shareholder(s)” has the meaning ascribed to it under the Listing Rules

“Tiantian Meimei Investment” Ningbo Meishan Bonded Port District Tiantian Meimei Investment Management Partnership (Limited Partnership)* (寧波梅山保稅港區甜甜美美投資管理合夥企業（有限合夥）), a limited partnership established under the laws of the PRC on May 21, 2016, which was owned by Mr. Yuan and Ms. Tian, and has once been a corporate shareholder of LiTian TV & Film

“Tiantian Xiangshang” Horgos Tiantian Xiangshang Film Co., Ltd.* (霍爾果斯天天向上影業有限公司), a limited liability company established under the laws of the PRC on June 15, 2017, which is wholly-owned by LiTian TV & Film

“Track Record Period” the three years ended December 31, 2017, 2018 and 2019

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

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

[REDACTED]

“Xinjiang LiTian” Xinjiang Qingchun LiTian Film Co., Ltd.* (新疆青春力天影業有限公司), a limited liability company established under the laws of the PRC on June 22, 2018, which is wholly-owned by LiTian TV & Film

[REDACTED]

“Zhejiang Ruijiu” Zhejiang Ruijiu Equity Investment Company Limited* (浙江睿久股權投資有限公司), a limited liability company established under the laws of the PRC on 30 June 2010, which has once been the corporate shareholder of LiTian TV & Film

“Zhihui Lixiang” Ningbo Meishan Bonded Port District Zhihui Lixiang Equity Investment Fund Partnership (Limited Partnership)* (寧波梅山保稅港區智匯力象股權投資基金合夥企業（有限合夥）), a limited partnership established under the laws of the PRC on April 29, 2016, which is a corporate shareholder of LiTian TV & Film

“Zhihui Xinlong” Hangzhou Zhihui Xinlong Equity Investment Fund Partnership (Limited Partnership)* (杭州智匯欣隆股權投資基金合夥企業（有限合夥）), a limited partnership established under the laws of the PRC on January 12, 2015, which is a corporate shareholder of LiTian TV & Film

“%” percent

–28– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

Certain amounts and percentage figures included in this document have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them.

In this document, unless otherwise stated, certain amounts denominated in Renminbi have been translated into Hong Kong dollars at an exchange rate of RMB[0.90] = HK$1.00 or RMB[7.07] = US$1.00, respectively, for illustration purpose only. Such conversions shall not be construed as representations that amounts in Renminbi were or could have been or could be converted into Hong Kong dollars or U.S. dollars at such rates or any other exchange rates on such date or any other date.

If there is any inconsistency between the Chinese names of PRC nationals, entities, departments, facilities, certificates, titles, etc. and their English translations, the Chinese names shall prevail. The English translation of PRC nationals, entities, departments, facilities, certificates, titles, etc. which are marked with “*” is for identification purpose only.

Unless otherwise specified, all references to any shareholdings in our Company in this document assumes no exercise of the [REDACTED] and any options which may be granted under the Share Option Scheme.

–29– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. GLOSSARY OF TECHNICAL TERMS

This glossary of technical terms contains explanations of certain technical terms used in this document in connection with our Group and our business. As such, these terms and their meanings may not correspond to standard industry meanings or usage of these terms.

“drama series” refers to the content produced for broadcast via satellite and terrestrial TV channels or the Internet, which is usually released in episodes that follow a narrative, consisting of TV series and web series

“first broadcast” the first time a drama series is broadcast on the satellite channel of a TV station

“first-run broadcast” the first-round broadcasting of a drama series on one or more satellite TV channels (including prime time and non-prime time broadcasting) in the PRC, as well as the first-time broadcasting of a drama series on any terrestrial TV channels before being broadcast on satellite TV channels

“Fixed Return Investment” the investment made by a passive investor in drama series which allows the investor (who may or may not participate in the production and/or distribution of such drama series) to receive the fixed contractual cash flows regardless of the sales performance of such drama series

“Internet” a global computer network, which provides a variety of information and communication facilities, consisting of interconnected networks using standardized communication protocols

“IP(s)” refers to intellectual properties such as existing films, drama series or other literary or artistic works, concepts, stories and expressions that can be used or considered, entirely or partially, to create and/or produce new films or drama series

“rerun broadcast” rebroadcast of a drama series which has previously been broadcast on satellite TV channels in the PRC, including second-run broadcast and all subsequent broadcast on any channels

“second-run broadcast” the second-round broadcasting of a drama series which has previously been broadcast for the first time on satellite TV channels in the PRC

“TV” television

–30– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. GLOSSARY OF TECHNICAL TERMS

“TV series” a type of drama series with distribution license issued by NRTA. Normally, it can be distributed to both the TV channels and Internet media platforms

“web series” another type of drama series that is only broadcast on Internet media platforms. It is normally produced by third-party professional drama series production companies or Internet media platforms

–31– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FORWARD-LOOKING STATEMENTS

This document contains certain forward-looking statements and information relating to us 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 “anticipate”, “believe”, “could”, “estimate”, “expect”, “forecast”, “going forward”, “intend”, “may”, “ought to”, “plan”, “project”, “seek”, “should”, “will”, “would”, “wish” and similar expressions, as they relate to our Company or our management, are intended to identify forward-looking statements. Such statements reflect the current views of our Company’s management with respect to future events, operations, liquidity and capital resources, some of which may not materialise 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 our Company which could affect the accuracy of forward-looking statements include, but are not limited to, the following:

• our business operations and prospects;

• future developments, trends and conditions in the industry and markets in which we operate;

• our strategies, plans, objectives and goals and our ability to implement such strategies, plans, objectives and goals;

• general economic conditions;

• our capital expenditure programs and future capital requirements;

• changes to regulatory and operating conditions in the industry and markets in which we operate;

• our ability to control costs;

• our dividend policy;

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

• capital market developments;

• the actions and developments of our competitors; and

• all other risks and uncertainties described in the section headed “Risk Factors” in this document.

By their nature, certain disclosures relating to these and other risks are only estimates and should one or more of these uncertainties or risks materialize or should the underlying assumptions prove to be incorrect, our financial condition and actual results of operations may be materially and adversely affected and may vary significantly from those estimated, anticipated or projected, as well as from historical results.

–32– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FORWARD-LOOKING STATEMENTS

Subject to the requirements of the applicable laws, rules and regulations, we do not have any and undertake no obligation to 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, the forward-looking statements are not a guarantee of future performance and you should not place undue reliance on any forward looking information. Moreover, the inclusion of forward-looking statements should not be regarded as representations by us that our plans and objectives will be achieved or realized. All forward-looking statements in this document are qualified by reference to the cautionary statements in this section.

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

–33– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

Potential investors should carefully consider all of the information set out in this document and, in particular, should evaluate the following risks and uncertainties associated with an investment in our Company before making any investment decision regarding our Company. These risks could materially and adversely affect our business, financial condition and results of operations. The [REDACTED] of our Shares could significantly decrease due to any of these risks, and you may lose all or part of your investment. You should pay particular attention to the fact that most of our operations are conducted in the PRC, whose legal and regulatory environment may differ significantly from that of other jurisdictions. For more information concerning the PRC and certain related matters discussed below, please refer to the sections headed “Regulatory Overview” and “Appendix III — Summary of the Constitution of the Company and Cayman Islands Company Law.” in this document.

These factors are contingencies that may or may not occur and we are not in a position to express a view on the likelihood of any such contingency occurring. The information given is as of the Latest Practicable Date unless otherwise stated, will not be updated after the date hereof and is subject to the cautionary statements in “Forward-looking Statements.”

We believe there are certain risks and uncertainties involved in our operations, some of which are beyond our control. We have categorized these risks and uncertainties into: (i) risks relating to our business; (ii) risks relating to our industry; (iii) risks relating to contractual arrangement; (iv) risks relating to conducting business in the PRC; and (v) risks relating to the [REDACTED].

RISKS RELATING TO OUR BUSINESS

If the drama series we produce and/or distribute fail to satisfy the preferences of our customers, our business, results of operations and financial condition may be materially and adversely affected.

Audience preferences on drama series are subject to constant changes and different genres capture different audience demographics. The production and distribution of high-quality drama series require us to continuously identify the industry trends and preferences of our customers. Our growth depends, in part, on our ability to produce and/or distribute high-quality drama series which adapt to their ever-changing preferences.

While we have strived to satisfy our customers, there is no assurance that we will be able to continue to accurately define the target audiences, promptly respond to the changes in their viewing preferences or efficiently adapt to the market trends and industry development. The drama series we produce and/or distribute may not be receptive to the audiences as other drama series released or distributed by our competitors. Among the drama series we distributed during the Track Record Period, a large number of them were war-, history- or romance-themed drama series. Any change in our target audiences’ preferences towards these and other drama series genres, such as mystery, urban and youth, could materially and adversely affect our market share and financial performance if we cannot timely and proactively react and adapt to such change.

–34– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

In addition, any market perception that the competing drama series are of higher quality than or of similar themes or genres as the drama series we distribute may reduce the popularity of our drama series. Any of the aforementioned circumstances may have a negative impact on our customers’ interest in them, which may materially and adversely affect our business, results of operations and financial condition.

If we fail to source high-quality drama series from their copyright owners/licensors upon the terms acceptable to us or if there is any loss or deterioration of relationships with such copyright owners/licensors, our business, results of operations and financial condition may be materially and adversely affected.

We derive a substantial portion of our revenue from licensing of the broadcasting rights of drama series purchased from third-party copyright owners/licensors. As such, our ability to provide high-quality and popular drama series to our customers depends heavily on our ability to source them. We typically enter into content distribution agreements with the copyright owners/licensors of the drama series on a project-by-project basis. The licensing periods and the terms and conditions of such licenses vary. If the copyright owners/licensors of the drama series are no longer willing or able to license the relevant drama series to us based on the terms acceptable to us or due to deteriorating business relationships, our ability to offer high-quality drama series to our customers will be adversely affected and/or our cost could substantially increase.

In addition, according to the Frost & Sullivan Report, the drama series market in the PRC is highly competitive and fragmented. The top 20 market players accounted for approximately 15.6% of the overall market size in terms of revenue in 2018. The competition in the PRC drama series market continue to intensify as more players enter the market. Moreover, our competitors may devote greater resources than us, including managerial and financial resources, and respond more quickly than we can to the changes in the customer preferences and market trends. In the event that we are not able to successfully compete against new or existing competitors to source high-quality drama series or at terms favorable to us, our business, results of operations and financial condition could be materially and adversely affected.

Our revenue depends on the number of drama series we distribute, and our historical financial results may not be indicative of our future financial performance.

Our revenue mainly depends on the number of drama series we distribute in a particular financial year, which is subject to a number of factors, including the general economic conditions in China and our ability to source high-quality and popular drama series and expand our distribution platforms. Please see “Financial information — Key Factors Affecting Our Results of Operations” for further details. Revenue generated from our businesses of licensing the broadcasting rights of self-produced and outright-purchased drama series was non-recurring in nature and accounted for a substantial portion of our revenue during the Track Record Period.

–35– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

For the years ended December 31, 2017, 2018 and 2019, we had distributed a total of 32, 43 and 45 drama series, respectively. For the years ended December 31, 2017, 2018 and 2019, our revenue from licensing the broadcasting rights of self-produced and outright-purchased drama series amounted to approximately RMB359.0 million, RMB382.8 million and RMB367.6 million, respectively, representing approximately 94.8%, 99.2% and 94.1% of our total revenue, respectively. Our profit for the year was approximately RMB56.8 million, RMB67.6 million and RMB77.0 million, respectively.

Our business model primarily involves charging customers license fees for the drama series that they have purchased the related broadcasting rights from us. Accordingly, there is no assurance that we will be able to continue to source new customers or that our existing customers will continue to purchase such broadcasting rights from us in the future under increasingly intensified market competition. Furthermore, our results of operations and financial condition may fluctuate based on a number of factors, some of which are beyond our control, including, but not limited to, (i) intensified competition in the PRC drama series market; (ii) failure to develop business relationships with new customers and maintain relationships with existing customers; (iii) failure to control the costs of production and distribution; (iv) inability to successfully execute our business strategies and future plans; (v) material enforcement action taken against us for non-compliance incident(s); (vi) unpredictable liabilities and risks which may exceed our insurance coverage; (vii) general political and economic policies that are applicable to the industry in which we operate; and (viii) other unforeseeable factors. There is also no assurance that we will be able to distribute similar number of drama series in the future as we did during the Track Record Period. Furthermore, there is no assurance that the drama series licensed to us for distribution will be released on schedule or at all. Any delay in the release of our licensed drama series or any decrease in the number of drama series we distribute in the future may materially and adversely affect our business performance, results of operations and financial condition. Accordingly, there is a certain degree of uncertainty as to our future revenue and financial results, and our financial performance during the Track Record Period may not be indicative of our future financial performance.

If we fail to identify sufficient or suitable customers for our drama series, our business, results of operations and financial condition may be materially and adversely affected.

Apart from existing drama series distribution channels, such as satellite TV and terrestrial TV channels and online media platforms, other distribution channels, such as over-the-top streaming media services and mobile applications, are developing rapidly and becoming increasingly popular in the PRC. As drama series consumption patterns continues to evolve, our existing customers may be supplanted and/or replaced by newer distribution channels. There is no assurance that we will be able to identify new customers for these new drama series distribution channels or we will be successful in our negotiation with them. If we fail to identify and build business relationships with a sufficient number of distribution channels on commercially acceptable terms, we may not be able to maximize our licensing income from the drama series we distribute. If this occurs, our business, results of operations and financial condition could be materially and adversely affected.

–36– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

We generated a substantial portion of our revenue from our five largest customers during the Track Record Period.

Our success largely depends on our ability to retain existing customers and build business relationships with new customers. Our relationships with customers depend on a number of factors, including our ability to recognize and adapt to industry trends and audience preferences to deliver high-quality drama series. For the years ended December 31, 2017, 2018 and 2019, the percentage of our aggregate revenue attributable to our five largest customers in aggregate was approximately 73.6%, 82.3% and 73.8%, respectively. Please see “Business — Our Customers” in this document for further details.

There is no guarantee that we will be able to maintain our existing relationships with our customers or develop relationships with new customers on commercially acceptable terms. We also cannot assure you that the revenue generated from dealing with our customers can be maintained or increased in the future. In the event that the existing major customers experience financial difficulties, cease doing business with us or significantly reduce their amounts of purchase from us, and we are unable to identify their replacements in a timely manner and on commercially acceptable terms, or at all, our business, results of operations and financial condition could be materially and adversely affected.

Furthermore, we do not have long-term or exclusive contracts with our major customers and we usually enter into agreements with them on a project-by-project basis. We cannot assure you that our customers would continue to purchase the broadcasting rights from us at the current level or at all. If our competitors succeed in marketing their drama series to these customers by, for example, offering more favorable terms or more appealing themes or genres, we may lose our customers and may not be able to find new customers who will purchase the broadcasting rights of drama series from us at similar terms. Any termination or discontinuation of the existing business relationship with, or significant decrease in purchases from, our customers could have a material and adverse effect on us.

We expect that our future performance will depend on the success of our major customers as well. In turn, the success of our major customers depends on several factors, including, but not limited to, the audience preferences and market acceptance of our licensed drama series as well as their distribution channels and arrangements, which are beyond our control. Any adverse development, including, but not limited to, the reduction in viewership of our customers for any reason, could affect the success of our customers, which may in turn materially and adversely affect our business, financial condition and operating results.

We have limited experience in the production and distribution of web series, and we may not be successful in the implementation of our business strategies to tap into the growing web series market.

We have begun to expand and diversify our business in 2019 by producing web series. For details of such strategy, please refer to the section headed “Business — Business Strategies” in this document.

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China’s Internet landscape is fast evolving through ongoing innovation, applications and content development. According to the Frost & Sullivan Report, China has the largest Internet and mobile Internet user base in the world. In 2019, the number of Internet video users in China reached approximately 646.6 million, accounting for approximately 73.8% of the Internet users in China. The number of subscribers to online media platforms increased at a CAGR of approximately 38.4% from approximately 85.7 million in 2015 to approximately 314.8 million in 2019, which accounted for approximately 48.7% of Internet video viewers in 2019. This number is forecasted to reach approximately 518.2 million by 2024, which is estimated to account for approximately 62.2% of Internet video viewers in 2024. According to the Frost & Sullivan Report, the total revenue of the web series market in the PRC is expected to increase from approximately RMB22.9 billion in 2019 to approximately RMB43.0 billion in 2024, representing a CAGR of approximately 13.4%.

Based on this market trend, we believe it is important for us to extend the reach of our business to the web series market in order to maintain our business growth and overall competitiveness. However, we have very limited experience in producing and/or distributing web series. As of the Latest Practicable Date, we had only participated in the production of one web series. Furthermore, our business strategies are based on prevailing circumstances and the development of the web series market currently known to us. There is no assurance that we will be able to successfully produce and/or distribute web series, or that our existing strategies will be able to help us achieve our business objectives in the event there are changes to the existing circumstances. In order to grow our web series business, it is essential for us to develop closer relationships with online media platforms, which could be time-consuming and costly. To manage and support our business expansion, it is also necessary to recruit, retain, train and develop additional management personnel who possess the necessary skills and knowledge in the web series market that will be helpful to the implementation of our business objectives. There is no assurance we will be able to identify and recruit such personnel on a timely basis, or at all. All of such endeavors require substantial management time and resources, which could be detrimental to our existing drama series business and other day-to-day operations of our Group. If we fail to effectively manage and capitalize on new business opportunities, our business and results of operations could be materially and adversely affected.

Our business, results of operations and financial condition depend on the market recognition and perception of our reputation.

The PRC drama series market has become increasingly competitive. In order to remain competitive, we need to maintain our reputation by continuously producing and/or distributing high-quality drama series that satisfy the ever-changing preferences of our customers. The quality and popularity of the drama series produced and/or distributed by us could be subject to a number of factors that are beyond our control. For instance, the levels of audiences’ satisfaction with our drama series could be adversely affected if there exist any accident on filming sites, artist scandals, negative press, disruption to our production and/or distribution due to failure to obtain approval from the NRTA. Any negative publicity concerning our Group, our Directors or artists of the drama series we produced and/or licensed, even if untrue, could adversely affect our reputation and brand image, business and growth prospects, and take up substantial amount of time and resources from our management. If our reputation is damaged in any way, our customers’ interest in the drama series we produced and/or distributed could diminish, which could adversely affect our business, results of operations and financial condition.

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During the Track Record Period, the public perception of our drama series was largely driven by word-of-mouth referrals of our viewers and our marketing efforts. We mainly engage other marketing service providers, who are Independent Third Parties, to conduct promotional activities for the drama series we distribute. However, if we are unable to increase the market awareness of the drama series we produce and/or distribute, we may be unable to maintain or increase viewership. We may also be required to incur excessive marketing and promotion expenses in order to maintain and/or enhance the market recognition of our brand, our business, results of operations and financial condition may be materially and adversely affected.

Our business operations are subject to extensive government regulations and compliance requirements. Any promulgation of additional or more stringent laws or regulations on the distribution of drama series by the PRC government may result in an adverse effect on our business and results of operations.

Our business operations are subject to a variety of PRC laws, rules and regulations, which affect various aspects of our operations, including, among others, ownership structure, requisite licenses and permits, marketing strategy, media content, customer relationship and intellectual property. For example, we are required to obtain the TV Series Production License (電視劇製作許可證) (either Class A (甲種) or Class B (乙種)) and TV Series Distribution License (電視劇發行許可證) for the production and distribution of drama series, respectively. During the Track Record Period and up to the Latest Practicable Date, most of our Consolidated Affiliated Entities had Radio and Television Program Production and Operation Permits (廣播電視節目製作經營許可證). Please see “Regulatory Overview” and “Business — Licenses and Permits” in this document for further details.

If any of our licenses and permits are revoked due in part, to our serious violation of the applicable rules and regulations in respect to our business operations, or if we are unable to renew any of the required licenses and permits upon their expiration, we may not be able to continue to produce and/or distribute the drama series. Our failure to comply with these laws and regulations could result in fines and/or proceedings against us by the regulatory authorities and/or affected parties, which, if material, could materially and adversely affect our business, prospects, financial condition and results of operations.

In addition, the promulgation of new laws, rules and regulations that restrict or otherwise unfavorably affect the ability or manner in which we operate would require us to adopt certain changes to ensure compliance, and could decrease the demand for our products and services, reduce our revenue, increase costs, limit profitability and/or subject us to additional liabilities. There is no assurance that the PRC government will not impose additional or more stringent laws or regulations on the distribution of drama series in the future. Any such additional or more stringent laws or regulations may result in an adverse effect on our results of operations.

Moreover, the SAT issued the Notice of the State Administration of Taxation on Further Regulating the Taxation Order in the Film and Television Industry (國家稅務總局關於進一步規範影視行業稅收秩序有關工作的通知) on October 2, 2018, which demands that starting from October 2018 and ending by the end of July 2019, the work of regulating the tax order of the film and television industry in the PRC would be gradually promoted in accordance with the steps of self-examination and self-correction, supervision and correction, key inspection, summary and improvement. After our self-examination and the declaration with taxation authorities, the amount of approximately RMB189,480.2 of tax in arrears has been paid in full as of the Latest

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Practicable Date. The overdue tax primarily comprised of value-added tax, construction tax, education surcharges and stamp tax. We did not timely make requisite tax payments due mainly because our financial personnel did not assess a small amount of tax payables in a timely manner during the process of making reimbursements to employees and making input deductions for daily consumables. Accordingly, the work of regulating the tax order of the film and television industry has no material or adverse effect on our business, results of operations and financial condition. Nevertheless, if any of the actors in our self-produced drama series was involved in the tax evasion activities or any of our third-party drama series copyright owners/licensors was subject to tax inspections or penalties, we may not be able to distribute the drama series that meet the content needs or preferences of our customers. Additionally, the long-term mechanism of tax administration in the film and TV industry that was mentioned in the regulating notice has yet to be announced. With the new regulation announced, the tax costs of the film and TV entities and the relevant personnel with irregular tax payment will be increased, and the industry-wide tax inspection campaign may result in a slowdown in the filming and production progress of the drama series in the PRC. If any of these circumstances occurs, our business, results of operations and financial condition may be materially and adversely affected.

Any change in or discontinuation of the preferential tax treatment that we have enjoyed during the Track Record Period may have a material and adverse impact on our results of operations.

According to the Notice of the Preferential EIT Policies in relation to Kashgar and Horgos as Two Special Economic Development Zones in Xinjiang《關於新疆喀什霍爾果斯兩個特殊經濟 ( 開發區企業所得稅優惠政策的通知》) and our preferential filing records of EIT (企業所得稅優惠事項備案表), our Consolidated Affiliated Entities, Horgos Tiantian Meimei, Horgos Haohao Xuexi and Tiantian Xiangshang, enjoy an exemption from EIT during the period from 2017 to 2020, and Xinjiang Litian is entitled to EIT exemption from 2018 to 2020. After the expiry of the respective tax exemption, Horgos Tiantian Meimei, Horgos Haohao Xuexi, Tiantian Xiangshang and Xinjiang Litian will be subject to an EIT rate of 25.0%, pursuant to the applicable PRC laws and regulations. For the years ended December 31, 2017, 2018 and 2019, the amount of tax effect on preferential tax rate was approximately RMB10.2 million, RMB15.5 million and RMB21.2 million, respectively. Please see note 7(b) of the Accountants’ Report of our Group in Appendix I to this document. There is no assurance that the PRC policies on preferential tax treatment will not change in the future or that the current preferential tax treatment we have enjoyed will not be revoked. Any change in or discontinuation of such favorable tax treatment may materially or adversely affect our profitability and operating cash flows.

We are exposed to credit risks in relation to our trade and bills receivables.

As of December 31, 2017, 2018 and 2019, our trade and bills receivables were approximately RMB194.1 million, RMB376.2 million and RMB530.9 million, respectively. As of the same dates, our average trade and bills receivables turnover days were approximately 120.1 days, 276.8 days and 447.3 days, respectively. For details, please see “Financial Information — Description of Certain Key Items from Our Consolidated Statement of Financial Position — Current Assets and Current Liabilities — Trade and Bills Receivables” in this document.

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Our trade receivables primarily consist of license fee due from customers in connection with the distribution of drama series. We cannot assure you that we will be able to collect all or any of our trade receivables on time, or at all. Moreover, we generate revenue primarily from licensing the broadcasting rights of our self-produced and outright-purchased drama series to numerous TV channels. These TV channels are primarily state-owned institutions, which afford them more bargaining power over the drama series copyright owners/licensors for a longer credit period. Their ability to make timely payments to us also depends on whether they are able to collect advertising fees from their customers that purchase airtime for advertisements. Our customers may also face unexpected circumstances, including, but not limited to, financial difficulties caused by fiscal constraints or changes in fiscal policy of the central government. As a result, we may not be able to receive payments of uncollected debts from such customers on a timely basis, or at all, and we may need to make provisions for trade receivables. For the years ended December 31, 2017, 2018 and 2019, our impairment loss allowance of trade and bills receivables recognized were RMB2.2 million, RMB8.0 million and RMB28.2 million, respectively. Although we have adopted stringent credit control procedures, including initiating proactive and periodic communications with our customers for payments, such measures may not be adequate to safeguard against material credit risks nor to guarantee that our customers will settle payment when it comes due. The occurrence of such event could materially and adversely affect our financial condition and results of operations.

We rely on certain suppliers for the provision of services required to complete our drama series production process and we have limited control over the quality of the drama series we produce.

As an executive producer of certain of our drama series, we rely on various third-party service providers, to provide various services required for the completion of our production process. Since the production of drama series takes a long period of time to complete and can be costly, during the Track Record Period, we had outsourced most of the production and filming work to certain third-party service providers that are normally equipped with the appropriate experience and resources we believe that are necessary in carrying out their obligations. While we maintain close and stable relationships with our suppliers, we may not be able to effectively control the quality and safety standards of the services they provide, compared with the services supplied by our employees.

Any failure by our suppliers to meet our quality and safety standards may result in our liabilities to third parties, and have a material and adverse effect on our business, results of operations and financial condition, as well as our reputation and growth prospects. Moreover, as we have engaged a multitude of suppliers for our business operations, there is no assurance that there will be a stable supply of such suppliers and that the services rendered will always be able to meet our expectations or that of our customers, especially in light of the changing audience preferences and industry trends. Moreover, as there are no objective standards to assess the quality of a particular drama series, there is no assurance that the quality and aesthetic value of such drama series will meet our requirements and expectations or appeal to the viewers. If the quality of the drama series, of which we participate in the production and/or distribution activities, does not satisfy our requirements or fails to meet market expectations, which could materially and adversely affect our business performance and results of operations.

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Our business depends, to a large extent, on our ability to maintain our existing relationships with third-party marketing service providers to promote our outright-purchased drama series.

During the Track Record Period, we mainly relied on certain marketing service providers, who are Independent Third Parties, to execute the marketing plans and conduct various marketing and advertising activities to promote our outright-purchased drama series, including devising posters, setting up billboards and promoting the drama series on new media and/or online social platforms. Please refer to the section headed “Business — Sales and Marketing” in this document for further information on our marketing approach. For the years ended December 31, 2017, 2018 and 2019, promotion and marketing expenses we incurred for engaging third-party marketing service providers amounted to approximately RMB152.0 million, RMB132.6 million and RMB63.3 million, respectively.

Our ability to continue to grow our revenue and profit will depend in large part on providing quality drama series that meet our customers’ demands and preferences. We rely on our reputation and track record in the PRC drama series industry as well as continued performance and services provided by such third-party marketing service providers to promote our outright-purchased drama series. We generally do not enter into long-term marketing services contracts with such service providers. Accordingly, we cannot guarantee that such third-party marketing service provider will continue to cooperate with us in the future. If we are not able to maintain or grow our relationships with such third-party service providers with strong advertising and marketing capabilities, it may be difficult for us to successfully distribute our outright-purchased drama series. Meanwhile, we cannot assure you that the marketing services provided by such third-party service providers will always be effective since the marketing approaches and tools in the PRC drama series market are evolving, which may further require us to enhance our marketing approaches and experiment with new marketing methods to keep pace with industry developments and customer preferences. Failure to engage qualified third-party marketing service providers or failure to refine our existing marketing approaches or to introduce new marketing approaches in a cost-effective manner could reduce our market share and materially and adversely affect our business, results of operations, financial condition and profitability.

Certain of our business operations are capital-intensive, and we may not always be able to meet our planned funding needs in a cost-effective manner, or at all.

Certain of our business operations, such as our investment in the production and distribution of drama series, are capital-intensive. The costs of production and distribution may increase in the future. Cash from internal resources, including our working capital, may not be adequate to fund all these demands and we may seek external funding. For the years ended December 31, 2017, 2018 and 2019, our cash conversion cycle was approximately 153.2 days, 276.9 days and 356.1 days, respectively. Our ability to obtain external financing in the future is subject to a variety of uncertainties, including our future financial condition, results of operations, cash flows, share price performance, liquidity of international capital and lending markets and PRC governmental regulations concerning foreign investment and the media industry. In addition, indebtedness would subject us to increased debt service obligations and could result in operating and financing covenants that would restrict our operations. Consequently, external financing may not be adequate for us to continue to make substantial investments or may be available only on terms that are disadvantageous to us, either of which may materially and adversely affect the growth of our business and results of operations.

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We may not be able to identify suitable co-investors for the drama series that we participate in and such co-investors may withdraw their investments in our drama series.

Some of the drama series we produced during the Track Record Period involved the participation of co-investors. Whether we can identify suitable co-investors with sufficient resources to participate in the drama series in which we invest depends on various factors, such as the attractiveness of the investment, the estimated investment budget, the copyright licensing income, the market conditions and the overall economic and political environment. There is no assurance that we will be able to identify suitable co-investors on commercially acceptable terms or at all in the future. If we are unable to identify suitable co-investors to invest in our drama series, we may be forced to curtail the number of our drama series projects are undertake, and our results of operations and financial condition may be materially and adversely affected.

In addition, co-investors may withdraw their investments in our self-produced drama series for reasons that are beyond our control. Under such circumstances, we may need to supplement the required capital with our own funds or find other suitable investors in a short period of time. If we are not able to make up the shortfall, the filming and production schedule of the drama series may be delayed, which will adversely impact our business, financial condition and results of operations.

We recorded negative operating cash flows in 2017 and 2018 and are subject to liquidity risks arising from cash flow mismatch and long cash conversion cycle.

We recorded negative net cash flows from operating activities of approximately RMB82.5 million and RMB28.4 million for the years ended December 31, 2017 and 2018, respectively, which were mainly attributable to the increases in the trade and bills receivables and the copyrights of the drama series we held. For further details of the changes in cash flows from our operating activities, please refer to the section headed “Financial Information — Liquidity and Capital Resources — Cash Flows Analysis — Net Cash Generated from/(Used in) Operating Activities” in this document.

For the years ended December 31, 2017, 2018 and 2019, our average trade and bills receivables turnover days were approximately 120.1 days, 276.8 days and 447.3 days, respectively. We had long average trade receivables turnover days mainly because the payment terms varied among the agreements we entered into with our customers, which were generally negotiated on a case-by-case basis. For licensing the broadcasting rights of drama series, the total consideration of each agreement is settled in installments with reference to the point in time when the drama series materials are delivered and/or the commencement of the broadcasting of the drama series. Generally, the full payment cycle spans over a period of approximately six months to two years. With the expansion of our business, we granted some new customers a relatively longer payment cycle, which led to a slow-down in our collection of trade receivables. For details, please see “Financial Information — Description of Certain Key Items from Our Consolidated Statement of Financial Position — Current Assets and Current Liabilities — Trade and Bills Receivables” in this document. Accordingly, time lags often exist between receiving payments from our customers and making payments to our suppliers. If we fail to manage the timing and amount of cash to be received from our customers and the timing and amount of cash to be paid to our suppliers in an effective manner, we may be subject to tightened liquidity and may fail to maintain sufficient working capital to support our daily

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For the years ended December 31, 2017, 2018 and 2019, our average drama series copyrights turnover days were approximately 202.8 days, 322.4 days and 341.3 days, respectively. The long drama series copyrights turnover days were mainly due to the long production and distribution life cycle of our self-produced drama series. In view of the intense capital requirement for producing and licensing the broadcasting rights of drama series, the increased drama series copyrights turnover days from 2017 to 2018 was mainly because certain of our self-produced drama series were under production. For further details of our drama series copyrights, please refer to the section headed “Financial Information — Description of Certain Key Items from Our Consolidated Statement of Financial Position — Current Assets and Current Liabilities — Drama Series Copyrights” in this document.

The abovementioned slow recovery of trade receivables and long drama series copyrights turnover days may slow down the overall cash conversion cycle of our business and tighten our liquidity. We cannot assure you that we will not experience net cash outflows from operating activities in the future. Net cash outflow from operating activities could impair our ability to make necessary capital expenditures and constrain our operational flexibility as well as adversely affect our ability to meet our liquidity requirements. If we do not have sufficient cash to fund our future capital requirements, settle our trade payables and outstanding debt obligations when they become due, we may need to significantly increase our external borrowings. If adequate funds are not available from external sources, on satisfactory terms to us or at all, we may be forced to delay or curtail our business expansion plans. As a result, our business, financial conditions and results of operations may be materially and adversely affected.

We recorded accumulated losses as of January 1, 2017.

We had accumulated losses prior to the Track Record Period primarily due to (i) a large amount of share-based compensation issued to certain members of our then-existing management in 2015, which was subsequently settled in July 2016; and (ii) an operating loss comprising our operating expenses incurred prior to the Track Record Period as we initiated our self-produced drama series business in the second half of 2014. We had accumulated losses of approximately RMB34.1 million as of January 1, 2017 primarily as a result of the net profit we generated in 2016. We cannot assure you that we will not issue any share-based compensation in the future. If we recorded accumulated losses, our business, financial condition and results of operations may be materially and adversely affected.

We are subject to risks in connection with impairment losses on drama series copyrights.

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Drama series copyrights are tested for impairment periodically or whenever the events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced to the recoverable amount. The recoverable amount is the greater of the fair value less costs of disposal and value in use. In determining the value in use, expected future cash flows generated by the drama series copyright are discounted to their present value, which requires significant judgement relating to the level of revenue to be generated over the life cycle of the drama series copyright. We use all readily available information in determining an amount that is a reasonable approximation of the recoverable amount, including estimates based on reasonable and supportable assumptions and projections of the level of revenue to be generated over the life cycle of the drama series copyright. Changes in these estimates could have a significant impact on the recoverable amount of drama series copyrights and could result in additional impairment charge or reversal of impairment in future periods. In the event we experience impairment losses on our drama series copyrights, our results of operations and financial condition could be adversely affected.

Distribution of our licensed web series on the Internet may be found objectionable by the PRC regulatory authorities.

The distribution of our licensed web series to our online media platform customers is subject to the PRC regulations governing Internet access and the distribution of videos and other forms of information over the Internet. Under such regulations, Internet content providers and Internet publishers are prohibited from posting or displaying over the Internet any content that, among other things, violates the PRC laws and regulations, impairs the national dignity of China or the public interest, or is obscene, superstitious, frightening, gruesome, offensive, fraudulent or defamatory. Failure to comply with these requirements may result in monetary penalties, revocation of licenses to provide Internet content or other licenses, suspension of the concerned platforms and reputational harm. In addition, these laws and regulations are subject to interpretation by the relevant authorities, and it may not be possible to determine in all cases the types of content that could cause our customers to be held liable as an Internet content provider. Online media platform operators may also be held liable for the content displayed on or linked to its platform that is subject to certain restrictions. Our online media platform customers may be subject to such restrictions. If we fail to identify and prevent illegal or inappropriate content from being distributed to our customers, we may be subject our customers to liability, government sanctions or loss of licenses and/or permits, which may in turn materially and adversely affect our business performance, results of operations and financial condition.

To the extent that the PRC regulatory authorities find any web series displayed on our customers’ platforms objectionable, they may require our customers to limit or eliminate the dissemination of such content on their platform in the form of take-down orders or otherwise. We may, from time to time, receive our customers’ requests to re-edit, re-shoot or delete certain content that the Internet audio-visual program service providers or the competent administrative department of radio, film and television in the PRC deemed not to satisfy the applicable laws, administrative regulations and State provisions. In the event that the PRC regulatory authorities find our web series on our customers’ platform objectionable and impose penalties on our customers or take other actions against our customers in the future, our business, results of operations and reputation may be materially and adversely affected.

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There is no assurance that our business strategies and future plans will be successfully implemented.

The successful implementation of our business strategies and future plans may be hindered by risks set out in this section and is subject to numerous factors, including, but not limited to, the following:

• our ability to manage our business operations and financial resources;

• our ability to adapt to changing industry and market trends and audience preferences;

• our ability to retain our existing customers or cooperation partners and recruit new ones;

• our ability to negotiate favorable terms with our suppliers, customers, co-investors and cooperation partners;

• our ability to recruit, train and retain skilled personnel to manage and operate our business; and

• the popularity of the drama series we invest in and/or distribute.

There is no assurance that we will be able to successfully implement our business strategies or future plans. Even if our business strategies or future plans are implemented, there is no assurance that they will enable us to successfully increase our market share or enhance our market position.

Uncertainties involving the production of drama series and their relatively long revenue cycle may materially and adversely affect our results of operations and financial condition.

We intend to continue to strengthen our capabilities in producing drama series and expand our business of licensing the broadcasting rights of self-produced drama series. Please see “Business — Business Strategies” in this document for further information. However, the production process of drama series is subject to many uncertainties, some of which are beyond our control. For example, there are uncertainties at the planning and projecting stage involving sudden changes in market preferences and/or applicable rules and regulations, which may prevent us from successfully developing and monetizing our acquired IPs or scripts as we anticipated. In addition, at the filming and production stage, we may not always be able to finish the production as scheduled or within our pre-determined budget due to various factors, such as insufficient funding, actors’ unsatisfactory performance or unexpected changes of filming sites. If we are unable to adhere to the planned production schedules and promotion plans, our production cost may increase and production schedules may be delayed, which will adversely affect our results of operations. Our failure to produce and distribute the drama series in accordance with our expectation may result in the write-off of intangible assets. There is no assurance that the production process of drama series will be on schedule as we expected, and any uncertainty could result in prolonged production time, which may increase the production cost and delay the distribution of such drama series. If this occurs, we will not be able to realize income on a timely basis, which may materially and adversely affect our business, financial condition and results of operations.

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Moreover, the production of drama series generally require a relatively long time to complete, leading to a prolonged revenue cycle for this business, which may adversely impact our operating cash flows. While we have mainly relied on the licensing of the broadcasting rights of outright-purchased drama series during the Track Record Period to maintain our market position and generate stable revenue, there is no guarantee we will be able to continue to do so in the future. If we are not able to effectively shorten our revenue cycle, our business, financial condition and results of operations could be materially and adversely affected.

We may grant employee share options and other share-based compensation, which may materially and adversely affect our results of operations and the [REDACTED] of our Shares in the future.

We adopted a series of employee incentive schemes in [●], under which we may grant options and issue shares from time to time to our Directors, senior management and employees as rewards for their contributions and to attract and retain key personnel. The fair value of the services received in exchange for the grant of these share options will be recognized as share-based compensation expenses, which will have a material adverse effect on our profits. Moreover, exercise of the share options we have granted or plan to grant will increase the number of our Shares in issue. Any actual or perceived sales of additional Shares acquired upon the exercise of the share options we have granted or plan to grant may materially and adversely affect the [REDACTED] of our Shares.

We depend on our senior management and other key personnel, and our business and growth prospects may be severely disrupted if we lose their services and are unable to attract new employees to replace them.

We depend on the continued contributions of our senior management. In particular, we rely on the expertise, experience and leadership ability of Mr. Yuan, the chairman of the Board and one of our executive Directors, and Ms. Tian, our chief executive officer and another one of our executive Directors, who have been critical to the strategic direction and overall management of our Company.

If one or more of our key personnel are unable or unwilling to continue to work with us, we may not be able to replace them easily or at all, which may cause a significant disruption to our business operations, strategic plan and strategy implementation, and materially and adversely affect our financial condition and results of operations. We may also have to incur additional and potentially significant expenses to recruit and train new personnel. In addition, if any of our key employees joins a competitor or forms a competing company, we may lose knowhow, trade secrets, business partners and key professionals and staff. Furthermore, since the demand and competition for talent is intense in our industry, we may need to offer higher compensation and other benefits in order to attract and retain key personnel in the future, which could increase our compensation expenses. We may not be able to recruit sufficient talent to support the growth of our business, which in turn may materially and adversely affect our business, financial condition and results of operations.

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Any acts of bribery, money laundering, corrupt practices or other misconduct of our employees or cooperation partners may materially and adversely affect our business, reputation, results of operations and financial condition.

In recent years, the PRC State Council and various PRC government authorities have intensified and stepped up their efforts to combat bribery, money laundering, corrupt practices and other improper conducts in the PRC. We cannot assure you that our employees or cooperation partners, including, among others, our suppliers, customers and co-investors, will not be engaged in acts of bribery, money laundering, corruption or other misconduct. There is also no assurance that our internal control and risk management systems will prevent or detect any improper or illegal acts of our employees or cooperation partners. The failure of our employees to comply with the PRC anti-bribery, anti-corruption and other related laws and regulations may subject us to substantial financial losses and may have a negative impact on our reputation. In addition, if our cooperation partners are subject to investigations, claims or legal proceedings as a result of such improper or illegal acts, they may be subject to fines and penalties and thus may not be able to contribute their portion of investment funds to our drama series projects on schedule or at all, thereby delaying the project progress. Any of the abovementioned circumstances may materially and adversely affect our business, reputation, results of operations and financial condition.

We have not purchased any insurance to cover our main assets, properties and business, and our limited insurance coverage could expose us to significant costs and business disruption.

Insurance companies in the PRC generally do not offer as extensive an array of insurance products as insurance companies do in countries with more developed economies. In line with general industry practice in China, we have not purchased any insurance to cover our main assets, properties and business. Furthermore, we do not maintain business interruption insurance or key man life insurance. Any disruption in our network infrastructure or business operations, litigation or natural disasters may result in our incurring substantial costs and the diversion of our resources and we have no insurance to cover such losses. As a result, our business, financial condition and results of operations could be materially and adversely affected.

Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.

We have devoted substantial resources to the development of our self-produced drama series and treat them as trade secrets. In order to protect the content of our self-produced drama series, we rely significantly on confidentiality provisions in the agreements with our employees and third parties. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover trade secrets and proprietary information, frustrating our ability to assert any trade secret rights against such parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection may materially and adversely affect our competitive position.

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We may be subject to fines for our failures to contribute to social insurance and housing provident funds for our employees in full.

In accordance with the applicable PRC laws and regulations, we are obliged to complete registrations for social insurance and housing provident fund and contribute to social insurance and housing provident funds for our employees. During the Track Record Period, certain of our subsidiaries did not complete registrations for social insurance and housing provident fund, open housing provident fund accounts for their employees and fully contribute to social insurance and housing provident funds for our employees. For the years ended December 31, 2017, 2018 and 2019, the amount of unpaid contribution to social insurance and housing provident fund for certain of our PRC subsidiaries was approximately RMB0.4 million, RMB0.7 million and RMB0.8 million, respectively. The above-mentioned amounts have been included in our financial statements for the Track Record Period and disclosed as payables for staff-related costs in Note 17 to the Accountants’ Report in Appendix I to this document. We have obtained confirmation certificates from the competent government authorities confirming that no violation of labor security laws and regulations has been identified against our PRC subsidiaries during the Track Record Period. For more details of such non-compliance incidents, please see ‘‘Business — Legal Proceedings and Compliance — Systemic Non-compliance Incidents” in this document.

According to the Social Insurance Law of the PRC《中華人民共和國社會保險法》 ( ), for outstanding social insurance contributions that we did not fully pay for our employees, the relevant PRC authorities may demand that we pay such contributions within a stipulated deadline, and we may be liable for a late payment fee equal to 0.05% of the outstanding contribution amount for each day of delay. If we fail to make such payment within the stipulated deadline upon receiving the demand notice from the relevant PRC authorities, we may be liable to a fine of one to three times of the outstanding contribution amount. Under the Regulations on Administration of Housing Provident Fund《住房公積金管理條例》 ( ), (i) for housing provident fund registrations that we fail to complete before the prescribed deadlines, we may be subject to a fine ranging from RMB10,000 to RMB50,000 for each non-compliant subsidiary or branch and (ii) for housing provident fund contributions that we fail to pay within the prescribed deadlines, we may be subject to any order by the relevant people’s court to enforce such payments. Based on the relevant PRC laws and regulations, we may be subject a maximum amount of late payment fees of approximately RMB375,000 for failing to timely make the social insurance contributions for our employees, and the maximum penalty we may be subject to for failing to make full social insurance and housing provident fund contributions during the Track Record Period would be approximately RMB3.9 million.

We leased several buildings in connection with our operations. We may not be able to find suitable buildings to replace our existing buildings in the event our landlords refuse to renew the relevant lease agreements upon the expiry of their terms, and our legal right to lease these properties could be challenged by property owners or other third parties.

As of the Latest Practicable Date, we leased eight properties from third parties in China, with an aggregate gross floor area of approximately 1,403.87 square meters. Our leased properties in China are primarily used as offices. See “Business — Properties” in this document for details. Such properties were generally maintained by our landlords. Accordingly, we are not in a position to effectively control the quality, maintenance and management of these buildings.

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In the event the quality of the buildings deteriorates, or if any or all of our landlords fail to properly maintain and renovate such buildings in a timely manner or at all, the operation of our business could be materially and adversely affected. In addition, if any of our landlords terminates the existing lease agreements, refuses to continue to lease the buildings to us for use when such lease agreements expire, or increase rent to the level not acceptable to us, we will be forced to look for alternative locations. We may not be able to find suitable buildings for such relocation without incurring significant time and costs, or at all. If this occurs, our business, results of operations and financial condition could be materially and adversely affected.

Furthermore, we have not registered certain of our lease agreements with the relevant government authorities. Under the applicable PRC laws and regulations, we may be required to register and file with the relevant government authorities executed leases. According to our PRC Legal Advisors, while the lack of registration will not affect the validity and enforceability of the lease agreements under the PRC Law, a fine ranging from RMB1,000 to RMB10,000 may be imposed on the parties for each non-registered lease.

Legal disputes or proceedings may expose us to liabilities, divert our management’s attention and adversely affect our reputation.

During the ordinary course of our business operations, we may be involved in legal disputes or proceedings relating to, among other things, contractual disputes and labor disputes. Such legal disputes or proceedings may subject us to substantial liabilities and may have a material and adverse effect on our reputation, business operations and financial condition.

If we become involved in material or protracted legal proceedings or other legal disputes in the future, we may need to incur substantial legal expenses and our management may need to devote significant time and attention to handle such proceedings and disputes, diverting their attention from our business operations. In addition, the outcome of such proceedings or disputes may be uncertain and could result in settlement or outcomes which may adversely affect our financial condition and results of operations.

Our filming crew, especially the artists engaged in our self-produced drama series, may suffer accidents or injuries, which could adversely affect our reputation and subject us to potential liabilities.

We could be held liable for the accidents, injuries or other harm the filming crew may suffer, including the artists engaged in our self-produced drama series, during their production. These accidents may include those caused by or otherwise arising in connection with our employees or facilities at the filming sites.

A liability claim against us or any of our employees could adversely affect our reputation. Even if unsuccessful, such a claim could create unfavorable publicity, cause us to incur substantial expenses and divert the time and attention of our management, all of which may have a material adverse effect on our business, prospects, financial condition and results of operations.

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Any occurrence of force majeure events, natural disasters or outbreaks of contagious diseases, such as COVID-19, in the PRC may have a material adverse effect on our business performance and results of operations.

Our business could be adversely affected by natural disasters or outbreaks of epidemics, which may affect the production schedule of the drama series we produce or purchase from third-party copyright owners/licensors. Epidemics, pandemics or outbreaks or escalation of diseases (including, among others, Severe Acute Respiratory Syndromes (SARS), avian influenza, swine flu (H1N1), coronavirus disease in 2019 (COVID-19) and other diseases) may affect the livelihood of people in the PRC. These natural disasters, outbreaks of contagious diseases, and other adverse public health developments in the PRC could severely disrupt our business operations by restricting travel and damaging our network infrastructure or information technology systems, impact the productivity of our workforce, or reduce the demand for our licensed drama series, which may materially adversely affect our business, financial condition and results of operations. For example, the recent outbreak of the COVID-19 epidemic has endangered the health of many people residing in China and significantly disrupted travel and the local economy across the country. These events may also materially impact our industry and cause temporary closures of many businesses, including our suppliers and customers, which would severely disrupt our business operations. The COVID-19 epidemic, if it is prolonged, may cause potential filming and production delays on our forthcoming self-produced drama series, and may significantly impact the timing of repayment by our customers and adversely affect their willingness to continue to procure the broadcasting rights of drama series from us, which, in turn, may result in additional impairment losses on our trade receivables and drama series copyrights in the upcoming financial years. Our operations could be further disrupted if any of our employees were suspected of contracting a contagious disease, since this could require us to quarantine some or all of our employees and disinfect the facilities used in our business operations. The development of this epidemic is beyond our control and we expect that if such epidemic continues for a prolonged period of time, our business, results of operations and financial condition may be materially and adversely affected.

RISKS RELATING TO OUR INDUSTRY

Increasingly competitive drama series market in the PRC may result in the reduction of our market share.

The drama series market in the PRC is highly competitive and fragmented, with the top 20 market players accounting for approximately 15.6% of the overall market size in terms of revenue in 2018, according to the Frost & Sullivan Report. We primarily face competition with respect to drama series from other market players with strong sourcing and distribution capabilities. Our competitors may reduce distribution fees or increase production capabilities to obtain market share. Some of our competitors may have greater and broader operational experience and longer relationships with TV channels and other online media platforms than we do. In addition, our competitors may respond more quickly than we can to changes in market demands and preferences. If the content of the drama series we produced and/or distributed to our customers does not meet their expectations, they may engage our competitors and discontinue cooperation with us. We cannot assure you that we will be able to successfully compete against new or existing competitors and failure to do so may cause our market share to decline, and our business, results of operations, financial condition and prospects may be materially and adversely affected.

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We are subject to the inherent risks of investment in the PRC drama series industry and may experience losses in our investments.

Investment in the PRC drama series industry is speculative and inherently risky. There is no assurance that the cost of production of drama series can be kept within budget. We, as an investor, face the challenge to minimize the cost of production of the drama series while maximizing the revenue.

Unforeseen circumstances during production, such as accidents, cast injuries and health issues, equipment damage or malfunction, damages of films (or digital files thereof), unavailability of filming locations, delay in obtaining the requisite permits, natural disasters and unavailability of actors due to other engagement or a ban from the media industry as a result of their personal behavior such as drug abuse and poor public image, may disrupt the production progress. Any delay or adjustment in production schedule may increase the cost of production, thus reducing our investment revenue. Furthermore, a delay in production schedule may have an impact on the distribution and broadcasting schedule, which may prevent us from maximizing the investment revenue of our drama series, thereby materially and adversely affecting our profitability, business performance and results of operations.

In circumstances where the production cost of the drama series significantly exceeds their budget, we, and other investors in the case of co-investment arrangement, may be required to contribute additional capital. There is no assurance that all of the investors will make such contribution. Failure to obtain additional financial resources for a particular drama series project may result in substantial delay in production progress. There is also the risk that we may not be able to complete the production of the drama series due to the factors that are beyond our control. Any of the above circumstances may result in a loss in our investment and may materially and adversely affect our profitability, business performance and results of operations.

Furthermore, there is no assurance that the drama series will achieve commercial success since the revenue primarily depends on, among others, the popularity, audience preferences and market acceptance of such drama series. The commercial success of a drama series also depends on the quality and market acceptance of other competing drama series released to the audiences during the same period and other factors, all of which cannot be accurately predicted and may be beyond our control. If the drama series we invest in fail to achieve commercial success, our profitability, business performance and results of operations may be materially and adversely affected.

Our business is subject to a number of laws, regulations and government actions in the PRC.

The drama series market is regulated extensively in China, and our development, marketing, production and distribution of drama series are subject to various PRC laws and regulations. Pursuant to the Administrative Provisions on the Production and Operation of Radio and Television Programs《廣播電視節目製作經營管理規定》 ( promulgated by the State Administration of Radio, Film and Television (中華人民共和國國家廣播電影電視總局) on July 19, 2004, which became effective on August 20, 2004, our Consolidated Affiliated Entities are required to obtain the Radio and Television Program Production and Operation Permit (the “Permit”)《廣播電視節目製作經營許可證》 ( ) in order to produce and distribute drama series

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According to the Administrative Regulations on Radio and Television《廣播電視管理條 ( 例》) promulgated by the State Council on August 11, 1997 and last amended on March 1, 2017, radio and television broadcasting institutions shall not broadcast drama series produced by institutions that did not obtain the Permit. Establishment of a broadcasting and television program production and marketing unit without authorization shall be prohibited by the department of broadcasting and television administration of the government at or above the county level, its special-purpose tools, equipment and program carriers for illegal activities will be confiscated, and it will be subject to a fine of more than RMB10,000 and less than RMB50,000. Production, broadcasting and providing to users abroad of any program containing prohibited contents shall be directed to terminate the production, broadcasting and provision to users abroad, and its program carriers shall be surrendered and taken over, and be subject to a fine of more than RMB10,000 and less than RMB50,000. Where the circumstances are serious, the original approval authority shall revoke its license, and violators of public security provisions shall be penalized for public security violations by the public security authority according to law. Where the offense constitutes a crime, criminal responsibilities shall be investigated according to law. As a result, violation of these laws or regulations may result in penalties, including fines, cancelation of permit and even criminal responsibility.

Our business may also be adversely affected by the changes in national or local policies, as well as the laws, regulations and restrictions relating to our industry, and there can be no assurance that the PRC government will not change the existing laws or regulations, adopt additional or more stringent laws or regulations or impose restrictions applicable to us and our business operations. Any changes to such laws and regulations or their interpretation or enforcement may expose us to the risk of non-compliance and may require us to conform our activities and operations to comply with such laws and regulations. For instance, beginning in the third quarter of 2019 and until early December 2019 (the “Mandatory Celebration Period”), the PRC government has requested that all levels of the media in the PRC, including drama series producers and distributors, shall participate in the nationwide celebration of the 70th anniversary of the founding of the People’s Republic of China. During this period, the TV channels at all levels in the PRC were requested to broadcast similar-themed drama series and TV programs. Since most of our drama series involve different themes, such as history, romance, urban and family, some of them had not matched the content preferences of the relevant TV channels during this period. As such, we had not entered into any new broadcasting rights transfer agreement during the Mandatory Celebration Period, which may adversely affect our business and results of operations. We cannot predict the nature of such future laws, regulations, interpretations or applications, nor can we predict their impact on our business.

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The drama series we produce and distribute are also subject to content censorship imposed by the PRC government.

Pursuant to the applicable laws and regulations in the PRC, the content examination and licensing system and the record-filing and announcing system shall be implemented for drama series by the drama series distribution companies. Please see “Regulatory Overview” in this document for further details. Pursuant to the Provisions on the Administration of Contents of TV Plays (Provisions on Contents)《電視劇內容管理規定》 ( ) and the Administration Measures of Record-filing and Announcement for Filming and Production of Drama Series《電視劇拍攝製作 ( 備案公示管理辦法》), certain content is prohibited from being contained in any drama series in the PRC, such as the content that advocates obscenity, gambling, violence, terrorism, drug-taking, abetting the commission of a crime or imparting methods for committing crimes. The administrative department of radio, film and television, which performs the function of examining the drama series, shall announce that the content of the drama series on which an application has been filed for record-filing and announcement violates any of the provisions mentioned above. In such event, we shall re-apply for censorship after making modifications when the content is deemed not to be in compliance with the related provisions. Furthermore, the TV channels usually examine the content of a drama series before broadcasting and re-broadcasting. In order to obtain censorship approval, we may have to incur additional costs and expenses to revise or re-edit the content of our drama series, which may adversely affect the distribution or broadcasting schedule. In addition, if our drama series fail to obtain censorship approval, we may have to discard the drama series and could incur a complete loss of our investment. If any of the aforesaid situations were to occur, our business, results of operations and financial condition could be materially and adversely affected.

Inability to renew our qualifications, licenses and permits could materially affect our operations and financial performance.

We are required to obtain a number of qualifications, licenses and permits for our business operations in the PRC, especially in relation to our licensing of the broadcasting rights of self-produced and outright-purchased drama series. For example, in accordance with the requirements under applicable PRC laws and regulations, most of our Consolidated Affiliated Entities, LiTian TV & Film, LiTian Media, Horgos Tiantian Meimei, Horgos Haohao Xuexi, Tiantian Xiangshang and Xinjiang LiTian, have obtained the Permit during the Track Record Period and up to the Latest Practicable Date. Please see “Business – Licenses and Permits” for further details. If any of our qualifications, licenses or permits are revoked due to our violation of applicable laws, regulations and rules in respect of the production and content of our drama series, or if we fail to renew any of the qualifications, licenses and permits necessary for our business upon their expiration, we may not be able to continue to produce and distribute drama series and our business and results of operations could be materially and adversely affected.

We are subject to risks of piracy and copyright infringement.

Due to technological advances and upgrades, acts of piracy and copyright infringement are prevalent in many parts of the world, in particular the PRC. In many instances, as soon as the media content, including drama series and films, were officially released, pirated copies were available in the market. Because of their relatively low prices and the ease of purchase, pirated copies may become the preferred choice of some viewers. Furthermore, illegal downloading of

–54– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS the drama series and films on the Internet is common in the PRC due to (i) the ease of conversion of such media content into digital formats; (ii) the availability of unauthorized copies of such media content on the Internet; and (iii) the difficulty in enforcing intellectual property rights in the PRC. The creation, transmission and sharing of unauthorized copies of drama series and films on the Internet, whether prior to, during or after official release, may materially and adversely affect our business performance and results of operations.

There is no assurance that we will not experience acts of piracy or copyright infringement in the future. As we operate in an industry that relies heavily on creativity and artistic talents to stay competitive, many, if not all, of our work products are subject to intellectual property rights. As such, the use or reproduction of any of our intellectual property without due authorization and the unauthorized broadcast and distribution of our drama series by third parties could result in the loss of viewers and diminish the value of our work products, which, in turn, affect our reputation, competitive advantages or good will and reduce our revenue. While we may, from time to time, rely on a combination of copyright and trademark laws and contractual language to protect our intellectual property rights. They nevertheless afford only limited protection as the intellectual property rights in the PRC are still evolving and preventing of and policing unauthorized use of proprietary information can be difficult and expensive. We may also resort to litigation and other legal proceedings to enforce our intellectual property rights. Any such action could require substantial costs and diversion of our management’s attention and resources, and could create disruptions for our business operations. In order to minimize the risks of piracy and infringement, we may also have to incur significant amount of financial resources and manpower to implement security and anti-piracy measures. We cannot assure you that we will be able to effectively enforce our intellectual property rights or otherwise prevent third parties from unauthorized use and/or reproduction and dissemination of our work products. Failure to detect and adequately protect our intellectual property rights could materially and adversely affect our business and results of operations.

In addition, particularly for the drama series, of which we participate in the production, we are vulnerable to disputes relating to the infringement of intellectual property rights. There is no assurance that we will not face intellectual property claims relating to the creative content of our drama series or disputes over entitlements to intellectual property rights in the future. Any such disputes may result in prolonged legal proceedings, which may divert our management’s attention from our business and cause us to incur substantial costs. If we fail to obtain a favorable outcome in these proceedings, we may be liable for compensation, which may materially and adversely affect our results of operations and financial condition. Although we have not encountered any material claims of intellectual property infringement during the Track Record Period and up to the Latest Practicable Date, there is no assurance that third parties will not make claims against us for infringement of their proprietary rights with regards to the creative content such as scripts and music used in our drama series in the future. Even if we vigorously defend ourselves against such claims and legal proceedings, there is no guarantee that we will be able to prevail. Such legal proceedings may also be accompanied by court orders, which prevent us, temporarily or permanently, from using such creative content. In the event this occurs, our business operations may be disrupted and our results of operations and financial condition could be materially and adversely affected.

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RISKS RELATING TO CONTRACTUAL ARRANGEMENT

If the PRC government finds that the Contractual Arrangements do not comply with applicable PRC laws and regulations, or if the regulations or their interpretations change in the future, we could be subject to severe consequences, including penalties, the nullification of the Contractual Arrangements and the relinquishment of our interest in our Consolidated Affiliated Entities.

We are a company incorporated under the laws of the Cayman Islands, and LiTian WFOE, which is our PRC subsidiary, is considered a foreign-invested enterprise under the PRC laws. To comply with the PRC laws and regulations, we conduct our businesses in the PRC through our Consolidated Affiliated Entities, based on the Contractual Arrangements entered into by among others, LiTian WFOE, our Consolidated Affiliated Entities and the Registered Shareholders. Such Contractual Arrangements enable us to: (i) receive substantial all of the economic benefits from the consideration for the service provided by LiTian WFOE; (ii) have the power to appoint directors and vote on behalf of the Registered Shareholders on all matters of our Consolidated Affiliated Entities that require shareholder’s approval; (iii) hold pledge of all of the equity interest in our Consolidated Affiliated Entities; and (iv) have an exclusive option to purchase or designate a third party to purchase all or part of the equity interest in our Consolidated Affiliated Entities when and to the extent permitted by the PRC laws. The Contractual Arrangements allow the results of operations and assets and liabilities of LiTian TV & Film and its subsidiaries to be consolidated into our results of operations and assets and liabilities under IFRS as if they were wholly-owned subsidiaries of our Group. Please see “Contractual Arrangements — Operation of the Contractual Arrangements” in this document for details.

Our PRC Legal Advisors are of the opinion that (i) the ownership structure of LiTian WFOE and our Consolidated Affiliated Entities does not violate prevailing PRC laws and regulations, (ii) except for certain clauses regarding the remedies that may be awarded by the arbitration tribunal and the power of courts in Hong Kong and the Cayman Islands to grant interim remedies in support of the arbitration and liquidation arrangement of our Consolidated Affiliated Entities, the Contractual Arrangements, taken individually or collectively, are valid, legally binding and enforceable against each party of such agreements in accordance with their terms, and (iii) the Contractual Arrangements do not fall within any of the circumstances (including, without limitation, “concealing illegal intentions with a lawful form”) under Article 52 of the Contract Law of the People’s Republic of China《中華人民共和國合同法》 ( ), promulgated by the NPC on March 15, 1999 and implemented on October 1, 1999 (the “Contract Law”), pursuant to which the contracts would be determined to be invalid. However, there can be no assurance that the PRC government authorities will take a view in the future that is not contrary to or otherwise different from the opinion of our PRC Legal Advisors stated above, and there is also the possibility that the PRC government authorities may adopt new laws and regulations in the future which may invalidate the Contractual Arrangements. If the PRC government determines that we are in violation of PRC laws or regulations or lack the necessary permits or licenses to operate our business, the relevant PRC regulatory authorities, including the MOFCOM, the Ministry of Industry and Information Technology, the Ministry of Culture and Tourism, the NDRC, State Administration for Industry and Commerce, SAFE and NRTA, would have broad discretion in dealing with such violations or failures, including, but not limited to:

• revoking our business and operating licenses;

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• discontinuing or restricting our operations;

• imposing fines or confiscating any of our income that they deem to have been obtained through illegal operations;

• imposing conditions or requirements with which we or LiTian WFOE and our Consolidated Affiliated Entities may not be able to comply;

• requiring us or LiTian WFOE and our Consolidated Affiliated Entities to restructure the relevant ownership structure or operations;

• restricting or prohibiting our use of the [REDACTED] from the [REDACTED]or other of our financing activities to finance the business and operations of our Consolidated Affiliated Entities and their respective subsidiaries; or

• taking other regulatory or enforcement actions that could be harmful to our business.

Any of these actions could cause significant disruption to our business operations, and may materially and adversely affect our business, financial condition and results of operations. In addition, it is unclear what impact the PRC government actions would have on us and on our ability to consolidate the financial results of LiTian TV & Film and its subsidiaries in our consolidated financial statements, if the PRC governmental authorities find our legal structure and contractual arrangements to be in violation of PRC laws, rules and regulations. If any of these penalties results in our inability to direct the activities of LiTian TV & Film and its subsidiaries that most significantly impact their economic performance and/or our failure to receive the economic benefits from LiTian TV & Film and its subsidiaries, we may not be able to consolidate LiTian TV & Film and its subsidiaries into our consolidated financial statements in accordance with IFRS.

Substantial uncertainties exist with the PRC foreign investment legal regime may have a significant impact on our Group’s corporate structure and business operations.

On March 15, 2019, the NPC adopted the Foreign Investment Law, which will come into effect on January 1, 2020. Upon its coming into effect, the Foreign Investment Law will replace the Chinese Foreign Equity Joint Ventures Law《中華人民共和國中外合資經營企業法》 ( ), the Chinese Foreign Contractual Joint Ventures Law《中華人民共和國中外合作經營企業法》 ( ) and the Wholly Foreign-Owned Enterprises Law《中華人民共和國外資企業法》 ( ) to become the legal foundation for foreign investment in the PRC. The Foreign Investment Law stipulates three forms of foreign investment. However, the Foreign Investment Law does not explicitly stipulate the contractual arrangements as a form of foreign investment.

Notwithstanding the above, the Foreign Investment Law stipulates that foreign investment includes ‘‘foreign investors invest through any other methods under laws, administrative regulations or provisions prescribed by the PRC State Council’’. Therefore, there are possibilities that future laws, administrative regulations or provisions prescribed by the PRC State Council may regard contractual arrangements as a form of foreign investment, and

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In the extreme case, we may be required to unwind the Contractual Arrangements and/or dispose of our Consolidated Affiliated Entities, which could have a material and adverse effect on our business, financial conditions and result of operations. In the event that our Company no longer has a sustainable business after the aforementioned terminating of our Contractual Arrangements or disposal or such measures are not complied with, the Stock Exchange may take enforcement actions against us which may have a material adverse effect on the [REDACTED] of our Shares or even result in [REDACTED] of our Company.

For details of the Foreign Investment Law and its potential impact on our Group’s operation, please see “Contractual Arrangements — Development in the PRC Legislation on Foreign Investment” in this document.

Our Contractual Arrangements may not be as effective in providing operational control as direct ownership. LiTian TV & Film or the Registered Shareholders may fail to perform their obligations under our Contractual Arrangements.

Due to the PRC restrictions or prohibitions on foreign ownership of certain businesses in the PRC, we operate our businesses in the PRC through our Consolidated Affiliated Entities, in which we have no ownership interest. We rely on the Contractual Arrangements with LiTian TV & Film and the Registered Shareholders to control and operate the businesses of our Consolidated Affiliated Entities. These Contractual Arrangements are intended to provide us with effective control over our Consolidated Affiliated Entities and allow us to obtain economic benefits from them. Please see “Contractual Arrangements — Operation of the Contractual Arrangements” in this document for details.

We have been advised by our PRC Legal Advisors that, except for certain clauses regarding remedies that may be awarded by the arbitration tribunal and the power of courts in Hong Kong and the PRC to grant interim remedies in support of the arbitration and liquidation arrangement of our Consolidated Affiliated Entities, the Contractual Arrangements, taken individually or collectively, are valid, legally binding and enforceable against each party of such agreements in accordance with their terms. However, there can be no assurance that the PRC governmental authorities will take a view in the future that is not contrary to or otherwise different from the opinion of our PRC Legal Advisors stated above, and there is also the possibility that the PRC governmental authorities may adopt new laws and regulations in the future which may invalidate the Contractual Arrangements. These Contractual Arrangements may not be as effective in providing control over LiTian TV & Film as direct ownership. For example, if we had direct ownership of LiTian TV & Film, we, as a shareholder, would be able to exercise our rights to change the composition of the board of directors of LiTian TV & Film, which in turn would allow us to effect changes, subject to any applicable fiduciary duties, at the management level. However, under the Contractual Arrangements, if LiTian TV & Film or the Registered Shareholders fail to perform their respective obligations under the Contractual Arrangements, we are not able to exercise shareholders’ rights to direct the corporate actions as

–58– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS the director ownership would otherwise entail, as a result of which we may be unable to maintain effective control over the operations of LiTian TV & Film and its subsidiaries. We may also incur substantial costs and expend substantial resources to enforce our rights. All of the Contractual Arrangements are governed by and interpreted in accordance with PRC laws, and disputes arising from the Contractual Arrangements will be resolved through arbitration or litigation in China. However, the legal system in China is not as developed as in other jurisdictions, such as the United States. There are very few precedents and little official guidance as to how contractual arrangements in the context of a variable interest entity should be interpreted or enforced under PRC laws. There remain significant uncertainties regarding the outcome of arbitration or litigation. Such uncertainties could limit our ability to enforce these Contractual Arrangements. In the event we are unable to enforce the Contractual Arrangements or we experience significant delays or other obstacles in the process of enforcing the Contractual Arrangements, we may not be able to exert effective control over our Consolidated Affiliated Entities and may lose control over the assets owned by our Consolidated Affiliated Entities. As a result, we may be unable to consolidate the financial results of the Consolidated Affiliated Entities in our consolidated financial statements, and our ability to conduct our business may be adversely affected.

We may lose the ability to use and enjoy assets held by our Consolidated Affiliated Entities that are material to our business operations if our Consolidated Affiliated Entities declare bankruptcy or become subject to a dissolution or liquidation proceeding.

We do not have priority pledges and liens against the assets of our Consolidated Affiliated Entities. If LiTian TV & Film undergoes an involuntary liquidation proceeding, third-party creditors may claim rights to some or all of its assets and we may not have priority against such third-party creditors on the assets of our Consolidated Affiliated Entities. If our Consolidated Affiliated Entities liquidate, we may take part in the liquidation procedures as a general creditor under the PRC Enterprise Bankruptcy Law and recover any outstanding liabilities owed by LiTian TV & Film to LiTian WFOE under the applicable service agreement.

Under the Contractual Arrangements, the Registered Shareholders covenanted that they shall not sell, transfer, pledge or dispose of in any other manner the legal or beneficial interest in LiTian TV & Film, or allow the encumbrance thereon of any security interest, except for the Equity Pledge Agreement, without the written consent of LiTian WFOE. In addition, the Registered Shareholders covenanted that they relinquish the right of collecting dividends or profits from LiTian TV & Film, including the undistributed after-tax profits, without the prior written consent of LiTian WFOE. In the event that they receive any income, profit distribution or dividend, except as otherwise determined by us, they shall promptly transfer or pay, as part of the services fee under the Exclusive Consultation and Service Agreement, such income, profit distribution or dividend to us or any other person designated by us to the extent permitted under applicable PRC laws. In the event that the Registered Shareholders breach the relevant covenants, we may need to resort to legal proceedings to enforce the terms of the Contractual Arrangements. Any such legal proceeding may be costly and may divert our management’s time and attention away from the operation of our business, and the outcome of such legal proceeding is uncertain.

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The Registered Shareholders and directors of LiTian TV & Film may have conflicts of interest with us, which may materially and adversely affect our business.

The Registered Shareholders and directors of LiTian TV & Film may have conflicts of interest with us. We rely on these individuals to abide by the laws of the Cayman Islands which impose fiduciary duties upon directors and officers of our Company. Such duties include the duty to act bona fide in what they consider to be in the best interest of our Company as a whole and not to place them in a position in which there is a conflict between their duties to our Company and their personal interests. On the other hand, PRC laws also provide that a director or a senior manager owes a loyalty and fiduciary duty to the company in which he or she holds such position. We cannot assure you that when conflicts arise, the Registered Shareholders or directors of LiTian TV & Film will act in the best interest of our Company or that conflicts will be resolved in our favor. These individuals may breach or cause LiTian TV & Film to breach the existing Contractual Arrangements. If we cannot resolve any conflicts of interest or disputes between us and these shareholders or directors, we would have to rely on legal proceedings, which may be expensive, time-consuming and disruptive to our operations. There is also substantial uncertainty as to the outcome of any such legal proceedings.

If we exercise the option to acquire equity ownership or assets of the Consolidated Affiliated Entities, the ownership or asset transfer may subject us to certain limitations and substantial costs.

Pursuant to the Contractual Arrangements, LiTian WFOE or its designated third party has the irrevocable and exclusive right to purchase all or any part of the equity interests in LiTian TV & Film from the Registered Shareholders at any time and from time to time in the LiTian WFOE’s absolute discretion to the extent permitted by PRC laws for free or at the lowest price as permitted under applicable PRC laws. The equity transfer may be subject to the approvals from, or filings with, the MOFCOM, the Ministry of Industry and Information Technology, the SAIC and/or their local competent counterparts. In addition, in the event that the relevant PRC authorities determine that the purchase price for acquiring the equity interest in LiTian TV & Film is below the market value, LiTian WFOE or its designated third party may be required to pay EIT with reference to the market value. Such amount of tax may be substantial and could materially and adversely affect our business, financial condition and results of operations.

Our Contractual Arrangements may be subject to scrutiny by the PRC tax authorities, and a finding that we owe additional taxes could substantially reduce our profit and the value of your investment.

Under PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. We could face material and adverse tax consequences if the PRC tax authorities determine that the Contractual Arrangements among LiTian WFOE and our Consolidated Affiliated Entities do not represent an arms-length price and adjust our Consolidated Affiliated Entities’ income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction, for PRC tax purposes, of expense deductions recorded by our Consolidated Affiliated Entities, which could in turn increase their tax liabilities. In addition, the PRC tax authorities may impose late payment fees and other penalties to our PRC variable interest entities for under-paid taxes. Our results of operations may be materially and adversely affected if our tax liabilities increase or if we are found to be subject to late payment fees or other penalties.

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Certain terms of our Contractual Arrangements may not be enforceable under PRC laws.

Our Contractual Arrangements provide for dispute resolution by way of arbitration in accordance with the arbitration rules of the South China International Economic and Trade Arbitration Commission (Shenzhen Court of International Arbitration) in Hangzhou, Zhejiang Province, the PRC. Our Contractual Arrangements provide that the arbitral body may award remedies over the equity interests, property interests and/or assets of our Consolidated Affiliated Entities, injunctive relief or order of winding up of our Consolidated Affiliated Entities. In addition, our Contractual Arrangements stipulate that the courts in Hong Kong and the PRC are empowered to grant interim remedies in support of the arbitration pending the formation of an arbitral tribunal. However, we have been advised by our PRC Legal Advisors that the above-mentioned provisions contained in the Contractual Arrangements may not be enforceable. Under the PRC laws, an arbitral body does not have the power to grant any injunctive relief or provisional or final winding-up order to preserve the assets of or any equity interest in our Consolidated Affiliated Entities in case of disputes. Therefore, such remedies may not be available to us, notwithstanding the relevant contractual provisions contained in our Contractual Arrangements. The PRC laws allow an arbitral body to award the transfer of assets of or equity interest in our Consolidated Affiliated Entities in favor of an aggrieved party. In the event of non-compliance with such award, enforcement measures may be sought from the court. However, the court may or may not support the award of an arbitral body when deciding whether to take enforcement measures. Under the PRC laws, courts of judicial authorities in the PRC generally would not grant injunctive relief or the winding-up order against our Consolidated Affiliated Entities as interim remedies to preserve the assets or equity interests in favor of any aggrieved party. Our PRC Legal Advisors are also of the view that, notwithstanding the relevant dispute resolution provisions contained in our Contractual Arrangements, which do not violate any mandatory provisions of the PRC laws and regulations, the arbitration or the interim remedies by relative arbitral body or overseas regional courts may not be recognized or enforced by the PRC courts in practice. As a result, in the event that our Consolidated Affiliated Entities or any of the Registered Shareholders breaches any of our Contractual Arrangements, we may not be able to obtain sufficient remedies in a timely manner, and our ability to exert effective control over our Consolidated Affiliated Entities and conduct our business could be materially and adversely affected. Please see “Contractual Arrangements — Dispute Resolution” in this document for details regarding the enforceability of the dispute resolution provisions in our Contractual Arrangements as opined by our PRC Legal Advisors.

RISKS RELATING TO CONDUCTING BUSINESS IN THE PRC

Adverse changes in PRC economic, political and social conditions as well as government policies could materially and adversely affect our business and prospects.

All of our operations are located in China. Accordingly, our business, prospects, financial condition and results of operations may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole.

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The Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.

While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implemented certain measures, including interest rate increases, to control the pace of economic growth. These measures may cause decreased economic activity in China and, since 2012, the Chinese economy has slowed down. Any prolonged slowdown in the Chinese economy may reduce the demand for our services and may materially and adversely affect our business and results of operations.

Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.

The PRC legal system is based on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as precedents. In the late 1970s, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly increased the protections afforded to various forms of foreign or private-sector investment in China. Our subsidiaries are subject to various PRC laws and regulations generally applicable to companies in China. However, since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties.

In particular, PRC laws and regulations concerning the film and television industry and Internet-related industries are developing and evolving. Although we have taken measures to comply with the laws and regulations that are applicable to our business operations and avoid conducting any non-compliant activities under the applicable laws and regulations, the PRC governmental authorities may promulgate new laws and regulations regulating the media industry and Internet-related industries in the future. We cannot assure you that our practice would not be deemed to violate any new PRC laws or regulations relating to the media industry and Internet-related industries. Moreover, developments in the media industry and Internet-related industries may lead to changes in PRC laws, regulations and policies or in the interpretation and application of existing laws, regulations and policies that may limit or restrict us, which could materially and adversely affect our business and results of operations.

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From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely affect our business and impede our ability to continue our operations.

We may be classified as a “PRC resident enterprise” for PRC enterprise income tax purposes, which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment.

Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a “de facto management body” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control over and overall management of the business, production, personnel, accounts and properties of an enterprise. In April 2009, the SAT issued a circular, known as Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises. According to Circular 82, an offshore-incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals and board and shareholder resolutions are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.

We believe none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” As substantially all of our management members are based in China, it remains unclear how the tax residency rule will apply to our case. If the PRC tax authorities determine that we or any of our subsidiaries outside of China is a PRC resident enterprise for PRC enterprise income tax purposes, then we or such subsidiary could be subject to PRC tax at a rate of 25% on its world-wide income, which could materially reduce our net income. In

–63– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS addition, we will also be subject to EIT reporting obligations. Furthermore, if the PRC tax authorities determine that we are a PRC resident enterprise for EIT purposes, gains realized on the sale or other disposition of our ordinary Shares may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be from PRC sources. It is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in our Shares.

The heightened scrutiny over acquisition transactions by the PRC tax authorities may have an adverse impact on our business operations, our acquisition or restructuring strategies, or the value of your investment in us.

The SAT issued a Public Notice Regarding Certain Enterprise Income Tax Matters on Indirect Transfer of Properties by Non-tax 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 SAT Circular 7, on February 3, 2015. The Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly Listed Companies, or SAFE Circular 7, extends its tax jurisdiction not only indirect transfers, but also transactions involving transfers of other taxable assets, through the offshore transfers of a foreign intermediate holding company. In addition, SAT Circular 7 provides the criteria regarding how to assess reasonable commercial purposes, and has introduced safe harbors for internal group restructurings as well as the purchase and sale of equity through a public securities market. SAT Circular 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the transfer) of the taxable assets. Where a non-resident enterprise conducts an “indirect transfer” by transferring the taxable assets indirectly through disposition of the equity interest of an overseas holding company, the non-resident enterprise, being the transferor or the transferee, or the PRC entity which directly owns the taxable assets, may report such transfer to the relevant tax authority. Using the “substance over form” principle, the PRC tax authority may re-characterize such indirect transfer as a direct transfer of the equity interests in the PRC tax resident enterprise and other properties in the PRC. As a result, the gains derived from such indirect transfer may be subject to the EIT, and the transferee or other person who is obligated to pay for the transfer is required to withhold the applicable taxes, currently at a rate of up to 10.0% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under the PRC tax laws if the transferee fails to without the taxes and the transferor fails to pay the taxes.

On October 17, 2017, the SAT issued the Circular on the Source of Deduction of Income Tax for Non-resident Enterprises《國家稅務總局關於非居民企業所得稅源泉扣繳有關問題的公告》 ( ), or SAT Circular 37, which became effective on December 1, 2017, and abolished certain provisions in SAT Circular 7. Pursuant to SAT Circular 37, where the party responsible to deduct such income tax did not or was unable to make such deduction, the non-resident enterprise receiving such income should declare and pay the taxes that should have been deducted to the relevant tax authority. The taxable gains is calculated as the income from such transfer, net of the net book value of the equity interest.

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We face uncertainties with respect to the reporting and consequences of private equity financing transactions, share exchanges or other transactions involving the transfers of the shares in our company by investors that are non-resident enterprises, or the sale or purchase of shares in other non-resident enterprises or other taxable assets by us. Under SAT Circular 7, the non-resident enterprises of our Group may be subject to filing or tax obligations if they are the transferor in such transactions, and may be subject to withholding obligations if they are the transferees in such transactions. For the transfer of the shares in our Company by investors that are non-resident enterprises, our PRC subsidiaries may be requested to assist in the filing under SAT Circular 7. As a result, we may be required to expend valuable resources to comply with SAT Circular 7 or to request the relevant transferor from whom we purchase the taxable assets to comply with these circulars, or to establish that the non-resident enterprises of our Group should not be taxed under these circulars. The PRC tax authorities have the discretion under SAT Circular 7 to make adjustments to the taxable capital gains based on the difference between the fair value of the taxable assets transferred and the cost of investment. If the PRC tax authorities make adjusted to the taxable income of the transactions under SAT Circular 7, our income tax costs associated with such transactions will likely increase, which may materially and adversely affect our results of operations and financial condition. We may conduct acquisitions in the future. Heightened scrutiny over the acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may consider and pursue going forward.

We face foreign exchange risk, and fluctuations in exchange rates could have an adverse effect on our business and investors’ investments.

The value of the Renminbi has been under pressure of appreciation in recent years. Due to international pressure on the PRC to allow more flexible exchange rates for the Renminbi, the economic situation and financial market developments in the PRC and abroad and the balance of payments situation in the PRC, the PRC government has decided to proceed further with reform of the Renminbi exchange rate regime and to enhance the Renminbi exchange rate flexibility.

A majority of our revenue and our expenses are denominated in Renminbi. We rely entirely on dividends and other fees paid to us by our PRC subsidiary and Consolidated Affiliated Entities. Any appreciation or depreciation in the value of the Renminbi or other foreign currencies that our operations are exposed to will affect our business in different ways. Any significant change in the exchange rates of the Hong Kong dollar against Renminbi may materially and adversely affect the value of, and any dividends payable on, our Shares in Hong Kong dollar. An appreciation of Renminbi against the Hong Kong dollar would also result in foreign currency translation losses for financial reporting purposes when we translate our Hong Kong dollar denominated financial assets into Renminbi, as Renminbi is the functional currency of our subsidiaries and Consolidated Affiliated Entities inside China. Conversely, if we decide convert our Renminbi into Hong Kong dollar for the purpose of making payments for dividends on our Shares or for other business purposes, appreciation of the Hong Kong dollar against Renminbi would have a negative effect on the Hong Kong dollar amount available to us. In such events, our business, financial condition, results of operations and growth prospects may be materially and adversely affected.

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PRC governmental control and restrictions on the convertibility of Renminbi may affect the value of your investment.

The PRC government imposes controls and restrictions on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of the PRC. The majority of our income is received in Renminbi and shortages in the availability of foreign currencies may restrict our ability to pay dividends or other payments, or otherwise satisfy their foreign currency denominated obligations, if any. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from SAFE, by complying with certain procedural requirements. Approval from appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of the PRC to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may, at its discretion, impose restrictions on access to foreign currencies for current account transactions and if this occurs in the future, we may not be able to pay dividends in foreign currencies to our Shareholders.

Inflation in the PRC could materially and adversely affect our profitability and growth.

The economy of China has been experiencing significant growth, leading to inflation and increased labor costs. According to the National Bureau of Statistics of China, the year-on-year percentage change in the consumer price index in China was 2.9% from 2018 to 2019. China’s overall economy and the average wage in the PRC are expected to continue to grow. Future increases in China’s inflation and material increases in the cost of labor may materially and adversely affect our profitability and results of operations.

PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from using the [REDACTED] of the [REDACTED] to make loans or additional capital contributions to our subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

Any funds we transfer to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration with relevant governmental authorities in China. According to the relevant PRC regulations on foreign-invested enterprises in China, the increasing of capital contributions to our PRC subsidiaries is subject to the approval of or filing with the MOFCOM or its local branches and registration with other governmental authorities in China. In addition, (i) any foreign loan procured by our PRC subsidiaries is required to be registered with the SAFE or its local branches, and (ii) our PRC subsidiaries may not procure loans which exceed a statutory limit. We may not be able to complete such recording or registrations on a timely basis, if at all, with respect to future capital contributions or foreign loans by us directly to our PRC subsidiaries. If we fail to complete such recording or registration, our ability to use the [REDACTED]ofthe [REDACTED] and to capitalize our PRC operations may be adversely affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

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We may be subject to penalties, including restriction on our ability to inject capital into our PRC subsidiaries and our PRC subsidiaries’ ability to distribute profits to us, if our PRC resident shareholders or beneficial owners fail to comply with relevant PRC foreign exchange regulations.

The SAFE has promulgated several regulations that require PRC residents and PRC corporate entities to register with and obtain approval from local branches of the SAFE in connection with their direct or indirect offshore investment activities. The Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, was promulgated by the SAFE in July 2014 which requires PRC residents or entities to register with the SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. These regulations apply to our shareholders who are PRC residents and may apply to any offshore acquisitions that we make in the future.

Under these foreign exchange regulations, PRC residents who make, or have previously made, prior to the implementation of these foreign exchange regulations, direct or indirect investments in offshore companies are required to register those investments. In addition, any PRC resident who is a direct or indirect shareholder of an offshore company is required to update the previously filed registration with the local branch of the SAFE, with respect to that offshore company, to reflect any material change involving its round-trip investment, capital variation, such as an increase or decrease in capital, transfer or swap of shares, merger or division. If any PRC shareholder fails to make the required registration or update the previously filed registration, the PRC subsidiary of that offshore parent company may be restricted from distributing its profits and the proceeds from any reduction in capital, share transfer or liquidation to its offshore parent company, and the offshore parent company may also be restricted from injecting additional capital into its PRC subsidiary. Moreover, failure to comply with the various foreign exchange registration requirements described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.

We have requested PRC residents holding direct or indirect interest in our Company to our knowledge to make the necessary applications, filings and amendments as required by applicable foreign exchange regulations. However, we may not be fully informed of the identities of all our shareholders or beneficial owners who are PRC residents and, therefore, we may not be able to identify all our shareholders or beneficial owners who are PRC residents to ensure their compliance with Circular 37 or other related regulations. In addition, we cannot provide any assurance that all of our shareholders and beneficial owners who are PRC residents will comply with our request to make, obtain or update any applicable registrations or comply with other requirements required by Circular 37 or other related regulations in a timely manner. Failure by any such Shareholders to comply with Circular 37 or other related regulations could subject us to fines or legal sanctions, restrict our investment activities in the PRC and overseas or cross-border investment activities, limit our subsidiaries’ ability to make distributions, pay dividends or other payments to us or affect our ownership structure, which could materially and adversely affect our business and prospects.

–67– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

Failure to comply with PRC regulations regarding the registration requirements for employee share ownership plans or share option plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

In February 2012, the SAFE promulgated SAFE Circular 7 replacing the previous rules issued by the SAFE in March 2007. Under SAFE Circular 7 and other relevant rules and regulations, PRC residents who participate in a stock incentive plan in an overseas publicly listed company are required to register with the 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 the overseas publicly listed company or another qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. The 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 the 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. In addition, SAFE Circular 37 stipulates that PRC residents who participate in a share incentive plan of an overseas non-publicly listed special purpose company may register with the SAFE or its local branches before they exercise the share options. We and our PRC employees who have been granted share options and restricted shares are subject to these regulations. Failure of our PRC share option holders or restricted shareholders to complete their SAFE registrations may subject these PRC residents to fines of up to RMB300,000 for entities and up to RMB50,000 for individuals and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiary, limit our PRC subsidiary’s ability to distribute dividends to us, or otherwise materially adversely affect our business.

The SAT has also issued relevant rules and regulations concerning employee share incentives. Under these rules and regulations, our employees working in the PRC will be subject to PRC individual income tax upon exercise of the share options or grant of the restricted shares. Our PRC subsidiaries have obligations to file documents with respect to the granted share options or restricted shares with relevant tax authorities and to withhold individual income taxes for their employees upon exercise of the share options or grant of the restricted shares. If our employees fail to pay or we fail to withhold their individual income taxes according to relevant rules and regulations, we may face sanctions imposed by the competent governmental authorities.

Certain judgments obtained against us by our shareholders may not be enforceable.

We are an exempted company incorporated in the Cayman Islands and substantially all of our assets are located in China and substantially all of our current operations are conducted in China as well. In addition, a majority of our current directors and officers are nationals and residents of China and substantially all of the assets of these persons are located in China. As a result, it may be difficult or impossible for you to effect service of process within Hong Kong upon us or these persons, or to bring an action in Hong Kong against us or against these individuals in the event that you believe that your rights have been infringed under the applicable securities laws or otherwise. In addition, because there are no clear statutory and judicial interpretations or guidance on a PRC court’s jurisdiction over cases brought under

–68– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS foreign securities laws, it may be difficult for you to bring an original action against us or our PRC resident officers and directors in a PRC court based on the liability provisions of non-PRC securities laws. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers.

RISKS RELATING TO THE [REDACTED]

There has not been any prior public market for our Shares and there can be no assurance that an active market would develop.

Prior to the [REDACTED], no public market for our Shares existed. Following the completion of the [REDACTED], the [REDACTED] will be the only market on which the Shares are publicly [REDACTED]. We cannot assure you that an active [REDACTED] market for our Shares will develop or be sustained after the [REDACTED].

In addition, we cannot assure you that our Shares will be [REDACTED]inthe [REDACTED] market subsequent to the [REDACTED] at or above the [REDACTED]. The [REDACTED] for the Shares is expected to be fixed by agreement between the [REDACTED] (on behalf of the [REDACTED]) and us, and may not be indicative of the [REDACTED]ofthe Shares following the completion of the [REDACTED]. If an active [REDACTED] market for our Shares does not develop or is not sustained after the [REDACTED], the [REDACTED] and liquidity of Shares could be materially and adversely affected.

The liquidity, [REDACTED] volume and [REDACTED] of our Shares following the [REDACTED] may be volatile.

The [REDACTED] at which our Shares will [REDACTED] after the [REDACTED] will be determined by the marketplace, which may be influenced by many factors, some of which are beyond our control, including:

• our financial results;

• changes in securities analysts’ estimates, if any, of our financial performance;

• the history of, and the prospects for, us and the industry in which we compete;

• an assessment of our management, our past and present operations, and the prospects for, and timing of, our future revenues and cost structures such as the views of independent research analysts, if any;

• the present state of our development;

• the valuation of publicly [REDACTED] companies that are engaged in business activities similar to ours;

• general market sentiment regarding media industry and companies;

–69– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

• changes in laws and regulations in the PRC and the United Kingdom affecting us, our industry or our Contractual Arrangements;

• our inability to compete effectively in the market; and

• political, economic, financial and social developments in the PRC and worldwide.

In addition, the [REDACTED] has from time to time experienced significant price and volume fluctuations that have affected the [REDACTED] for the securities of companies quoted on the [REDACTED]. As a result, investors in our Shares may experience volatility in the [REDACTED] of their Shares and a decrease in the value of their Shares regardless of our operating performance or prospects.

Because the initial public [REDACTED] per Share is higher than the net tangible book value per Share, purchasers of our Shares in the [REDACTED] will experience immediate dilution.

The [REDACTED] of our Shares is higher than the net tangible book value per Share immediately prior to the [REDACTED]. Therefore, purchasers of our Shares in the [REDACTED] will experience an immediate dilution in pro forma adjusted consolidated net tangible asset value and existing Shareholders will receive an increase in the pro forma adjusted consolidated net tangible asset value per Share of their Shares. If the [REDACTED], on behalf of the [REDACTED], exercises the [REDACTED] or if we obtain additional capital in the future through equity offerings, purchasers of our [REDACTED] may experience further dilution.

Substantial future sales or the expectation of substantial [REDACTED] of our Shares in the [REDACTED] could cause the [REDACTED] of our Shares to decline.

[REDACTED] of substantial amounts of Shares in the [REDACTED] after the completion of the [REDACTED], or the perception that these sales could occur, could adversely affect the [REDACTED] of our Shares and could materially impair our future ability to raise capital through [REDACTED] of our Shares. The Shares owned by our Controlling Shareholders are subject to certain [REDACTED] periods. There can be no assurance that they will not dispose of these Shares following the expiration of the [REDACTED] periods, or any Shares they may come to own in the future. We cannot predict what effect, if any, significant future sale will have on the [REDACTED] of our Shares.

The interest of our Controlling Shareholders may differ from your interests and they may exercise their vote to the disadvantage of our minority Shareholders.

Immediately after the completion of the [REDACTED] and the Capitalization Issue (without taking into account of the Shares which may be allotted and issued upon the exercise of the [REDACTED] or any options which may be granted under the Share Option Scheme), our Controlling Shareholders will own approximately [REDACTED]% of our Shares. As such, our Controlling Shareholders will have substantial influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of Directors and other significant corporate actions. This concentration of ownership may

–70– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS discourage, delay or prevent a change in control of our Company, which could deprive our Shareholders of an opportunity to receive a premium for their Shares in a sale of our Company or may reduce the [REDACTED] of our Shares. These actions may be taken even if they are opposed by our other Shareholders, including those who purchased Shares in the [REDACTED]. In addition, the interests of our Controlling Shareholders may differ from the interests of our other Shareholders.

Since there will be a gap of several days between [REDACTED] and [REDACTED] of our Shares, holders of our Shares are subject to the risk that the [REDACTED] of our Shares could fall during the period before [REDACTED] of our Shares begins.

The [REDACTED]ofour[REDACTED] is expected to be determined on the [REDACTED]. However, our Shares will not commence [REDACTED]onthe[REDACTED] until they are delivered, which is expected to be four business days after the pricing date. As a result, investors may not be able to [REDACTED]or[REDACTED] in our Shares during that period. Accordingly, holders of our Shares are subject to the risk that the price of our Shares could fall before [REDACTED] begins as a result of adverse market conditions or other adverse developments, that could occur between the time of sale and the time [REDACTED] begins.

Past dividend payments may not be indicative of our future dividend policy.

During the Track Record Period and up to the Latest Practicable Date, no dividend has been proposed, paid or declared by our Company or by any of the subsidiaries of our Group. Any future dividend declaration and distribution by our Company will be at the discretion of our Directors and will depend on our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our Directors deem relevant. Any declaration and payment as well as the amount of dividends will also be subject to our Articles of Association and the PRC laws/Cayman Islands laws, including (where required) the approvals from our shareholders and our Directors. In addition, our future dividend payments will depend upon the availability of dividends received from our subsidiary. As a result of the above, we cannot assure you that we will make any dividend payments on our Shares in the future with reference to our historical dividends. For details on the dividend policy of our Company, please see “Financial Information — Dividends” in this document.

Waivers have been granted from compliance with certain requirements of the [REDACTED] by the [REDACTED]. Shareholders will not have the benefit of the [REDACTED] Rules that are so waived. These waivers could be revoked, exposing us and our Shareholders to additional legal and compliance obligations.

We have applied for, and the [REDACTED] [has granted] to us, a number of waivers from strict compliance with the [REDACTED] Rules. For details, please see “Waivers from Strict Compliance with the [REDACTED] Rules” in this document. There is no assurance that the [REDACTED] will not revoke any of these waivers granted or impose certain conditions on any of these waivers. If any of these waivers were to be revoked or to be subject to certain conditions, we may be subject to additional compliance obligations, incur additional compliance costs and face uncertainties arising from issues of multijurisdictional compliance, all of which could adversely affect us and our Shareholders.

–71– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

We cannot guarantee the accuracy of facts and other statistics with respect to certain information obtained from the Frost & Sullivan Report contained in this document.

Certain facts and statistics in this document, including, but not limited to, the information and statistics relating to the drama series market in the PRC, are based on the Frost & Sullivan Report or are derived from various publicly available publications, which our Directors believe to be reliable.

We cannot guarantee the quality or reliability of such facts and statistics. We have taken reasonable care to ensure that the facts and statistics presented are accurately extracted and reproduced from such publications and the Frost & Sullivan Report. However, these facts and statistics have not been independently verified by us, the Sole Sponsor, the [REDACTED], the [REDACTED] or any other party involved in the [REDACTED] (excluding Frost & Sullivan in respect of the Frost & Sullivan Report and the information therein) and no representation is given as to its accuracy. We, therefore, make no representation as to the accuracy of such facts and statistics which may not be consistent with other information complied by other sources and prospective investors should not place undue reliance on any facts and statistics derived from public sources or the Frost & Sullivan Report contained in this document.

Forward-looking statements contained in this document are subject to risks and uncertainties.

This document contains certain statements and information that are forward-looking and uses forward-looking terminology such as “anticipate”, “believe”, “could”, “going forward”, “intend”, “plan”, “project”, “seek”, “expect”, “may”, “ought to”, “should”, “would” or “will” and similar expressions. You are cautioned that reliance on any forward-looking statement involves risks and uncertainties and that any or all of those assumptions could prove to be inaccurate and as a result, the forward-looking statements based on those assumptions could also be incorrect. In light of these and other risks and uncertainties, the inclusion of forward-looking statements in this document should not be regarded as representations or warranties by us that our plans and objectives will be achieved and these forward-looking statements should be considered in light of various important factors, including those set forth in this section. Subject to the requirements of the Listing Rules, we do not intend to update or otherwise revise the forward-looking statements in this document to the public, whether as a result of new information, future events or otherwise. 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 may face difficulties in protecting your interests under the laws of the Cayman Islands.

Our corporate affairs are governed by, among other things, our Memorandum and Articles and the Companies Law and common law of the Cayman Islands. The rights of Shareholders to take action against 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 limited judicial precedent in the Cayman Islands as well as that from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The laws of the Cayman Islands relating to the protection of the interests of minority shareholders differ in some respects from those in other jurisdictions.

–72– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

You should read the entire document carefully, and we strongly caution you not to place any reliance on any information contained in press articles or other media regarding us or the [REDACTED].

There may be, subsequent to the Latest Practicable Date but prior to the completion of the [REDACTED], press and media coverage regarding us and the [REDACTED], which contained, among other things, certain financial information, projections, valuations and other forward-looking information about us and the [REDACTED]. We have not authorized the disclosure of any such information in the press or other media and do not accept responsibility for the accuracy or completeness of such press articles or other media coverage. We make no representation as to the appropriateness, accuracy, completeness or reliability of any of the projections, valuations or other forward-looking information about us. To the extent such statements are inconsistent with, or conflict with, the information contained in this document, we disclaim responsibility for them. Accordingly, prospective investors are cautioned to make their investment decisions on the basis of the information contained in this document only and should not rely on any other information.

You should rely solely upon the information contained in this document, the [REDACTED] and any formal announcements made by us in Hong Kong in making your investment decision regarding our Shares. We do not accept any responsibility for the accuracy or completeness of any information reported by the press or other media, nor the fairness or appropriateness of any forecasts, views or opinions expressed by the press or other media regarding our Shares, the [REDACTED] or us. We make no representation as to the appropriateness, accuracy, completeness or reliability of any such data or publication. Accordingly, prospective investors should not rely on any such information, reports or publications in making their decisions as to whether to invest in our [REDACTED]. By applying to purchase our Shares in the [REDACTED], you will be deemed to have agreed that you will not rely on any information other than that contained in this document and the [REDACTED].

–73– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

In preparation for the [REDACTED], we have sought the following waivers from strict compliance with the relevant provisions of the Listing Rules:

MANAGEMENT PRESENCE

Rule 8.12 of the Listing Rules requires that a new applicant applying for a [REDACTED] on the Stock Exchange must have a sufficient management presence in Hong Kong. This normally means that at least two of its executive directors must be ordinarily resident in Hong Kong. Since our principal business operations are primarily located in the PRC and will continue to be based in the PRC, our executive Directors and senior management members are and will continue to be based in the PRC. At present, none of our executive Directors is ordinarily resident in Hong Kong. We have applied to the Stock Exchange for, and [have obtained], a waiver from strict compliance with the requirements set out in Rule 8.12 of the Listing Rules subject to the following conditions:

(a) we have appointed two authorized representatives pursuant to Rule 3.05 of the Listing Rules who will act as our principal channel of communication with the Stock Exchange. The two authorized representatives are Ms. Tian, our executive Director, and Ms. Lau Suk Ching (劉淑貞), one of our joint company secretaries, respectively. Each of the authorized representatives will be available to meet with the Stock Exchange in Hong Kong within a reasonable period of time upon request and will be readily contactable by office and mobile phone numbers, email address and correspondence address, facsimile numbers, and any other contact details (if available) prescribed by the Stock Exchange from time to time. Each of the authorized representatives has been duly authorized to communicate on our behalf with the Stock Exchange. Ms. Tian confirmed that she possesses valid travel documents to Hong Kong and Ms. Lau is ordinarily resident in Hong Kong, and they will be able to meet with the Stock Exchange within a reasonable period of time, when required;

(b) our authorized representatives have means of contacting all Directors promptly at all times as and when the Stock Exchange wishes to contact our Directors on any matters. To enhance communication between the Stock Exchange, the authorized representatives and our Directors, our Company has implemented a policy whereby (a) each Director will provide his/her office phone number, mobile phone number, facsimile office facsimile number and email address (if available) to the authorized representatives; (b) each Director will provide valid phone numbers or means of communication to the authorized representatives when he/she travels; and (c) all Directors will provide their mobile phone numbers, office phone numbers, email addresses and facsimile numbers (if available) to the Stock Exchange;

(c) our Company has, in accordance with Rule 3A.19 of the Listing Rules, also appointed [Founder Securities (Hong Kong) Capital Company Limited] as its compliance adviser, who will act as an additional channel of communication with the Stock Exchange.

–74– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

(d) meetings between the Stock Exchange and our Directors could be arranged through our authorized representatives or our Company’s compliance adviser, or directly with our Directors within a reasonable time frame. Our Company will inform the Stock Exchange promptly in respect of any change in our Company’s authorized representatives and compliance adviser; and

(e) each Director who is not ordinarily resident in Hong Kong has confirmed that he/she either possesses or can apply for valid travel documents to visit Hong Kong and will be able to meet with the Stock Exchange in Hong Kong within a reasonable period of time, when required.

CONTINUING CONNECTED TRANSACTIONS

We have entered into, and are expected to continue, certain transactions which will constitute non-exempt continuing connected transactions of our Company under the Listing Rules upon [REDACTED].

Accordingly, we have applied to the Stock Exchange for, and the Stock Exchange [has granted], waivers in relation to certain continuing connected transactions between us and certain connected persons under Chapter 14A of the Listing Rules. For further details in this respect, see “Connected Transactions — Continuing Connected Transactions” in this document.

–75– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

–76– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

–77– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

–78– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

–79– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

DIRECTORS

Name Address Nationality

Executive Directors

Mr. Yuan Li (袁力) Room 2002, No. 2 Building, Chinese Fanhairongjun, No. 6 Courtyard, Xinghuo West Road, Chaoyang District, Beijing, China

Ms. Tian Tian (田甜) Room 2002, No. 2 Building, Chinese Fanhairongjun, No. 6 Courtyard, Xinghuo West Road, Chaoyang District, Beijing, China

Ms. Fu Jieyun (傅潔雲) Zi Jing Court, Bei Jing Yuan, Xiacheng Chinese District, Hangzhou, Zhejiang Province, 17-1102

Non-executive Directors

Mr. Yu Yang (余楊) Apartment 13C, Guoji Huayuan, No. 160 Chinese Tianmushan Road, Xihu District, Hangzhou, Zhejiang Province, PRC

Mr. Tang Zhiwei (唐志偉) Flat 24C, Xinyinge, Zhonggangcheng, Chinese Fuqiang Road, Futian District, Shenzhen, Guangdong, PRC

Mr. Luo Jianxing (羅建幸) Qiu Yue Court, Gui Hua City, Xihu Chinese District, Hangzhou, Zhejiang Province, 11-1-201

Independent non-executive Directors

Mr. Teng Bing Sheng (滕斌聖) No.19-701, Lane 1085, Dongxiu Road, American Pudong New District, Shanghai, 200127

Mr. Liu Hanlin (劉翰林) Hushu Jiayuan, No. 78 Hushu North [Chinese] Road, Gongshu District, Hangzhou, Zhejiang Province 10-1-701

Mr. Gan Weimin (甘為民) Shuguang Quarter, Xihu District, Chinese Hangzhou, 16-43-501(310013)

–80– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

See also “Directors and Senior Management” for more information.

PARTIES INVOLVED IN THE [REDACTED]

Sole Sponsor Founder Securities (Hong Kong) Capital Company Limited Suites 1710-1719 Jardine House 1 Connaught Place Central, Hong Kong

[REDACTED]

Legal advisers to our Company As to Hong Kong law: Luk & Partners in Association with Morgan, Lewis & Bockius Suites 1902-09, 19/F Edinburgh Tower The Landmark 15 Queen’s Road Central Hong Kong

As to PRC law: Zhong Lun Law Firm 8-10/F, Tower A Rongchao Tower 6003 Yitian Road Futian District Shenzhen 518026, PRC

As to Cayman Islands law: Conyers Dill & Pearman Cricket Square Hutchins Drive PO Box 2681 Grand Cayman KY1-1111 Cayman Islands

–81– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

Legal advisors to the Sole Sponsor As to Hong Kong law: and the [REDACTED] William Ji & Co. LLP in Association with Tian Yuan Law Firm Hong Kong Office Suite 702, 7/F Two Chinachem Central 26 Des Voeux Road Central Central, Hong Kong

As to PRC law: Zhejiang T&C Law Firm 11/F Block A Dragon Century Square No.1 Hangda Road Hangzhou, 310007 PRC

Independent auditors and reporting KPMG accountant Certified Public Accountants 8th Floor Prince’s Building 10 Chater Road Central Hong Kong

Independent industry consultant Frost & Sullivan (Beijing) Inc., Shanghai Branch Co. 1014-1018 Tower B 500 Yunjin Road Xuhui District Shanghai, 200232 PRC

[REDACTED]

Compliance adviser [Founder Securities (Hong Kong) Capital Company Limited Suites 1710-1719 Jardine House 1 Connaught Place Central, Hong Kong]

–82– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. CORPORATE INFORMATION

Registered office in Cayman Islands PO Box 309 Ugland House Grand Cayman KY1-1104 Cayman Islands

Headquarters and principal place of No. 5A, Tongniu Dianying Industrial Park business in PRC Chaoyang District Beijing, PRC

Principal place of business in 40/F, Sunlight Tower Hong Kong 248 Queen’s Road East Wanchai, Hong Kong

Company’s website www.litian.tv (information contained in this website does not form part of the document)

Joint company secretaries Ms. Lau Suk Ching (劉淑貞) (HKICPA, ACCA) Flat F, 20th Floor, Tower 4 Metro City, Phase II 8 Yan King Road Tseung Kwan O, Sai Kung New Territories, Hong Kong

Mr. Lee Leong Yin (李亮賢) (HKICS) 40/F, Sunlight Tower 248 Queen’s Road East Wanchai, Hong Kong

Authorised representatives Ms. Tian Tian (田甜) Flat 2002, 2/F, Court 6 Fanhai Rongjun, Xinghuo West Road Chaoyang District, Beijing, PRC

Ms. Lau Suk Ching (劉淑貞) Flat F, 20th Floor, Tower 4 Metro City, Phase II 8 Yan King Road Tseung Kwan O, Sai Kung New Territories, Hong Kong

Audit committee Mr. Liu Hanlin (劉翰林) (Chairman) Mr. Gan Weimin (甘為民) Mr. Yu Yang (余楊)

–83– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. CORPORATE INFORMATION

Remuneration committee Mr. Gan Weimin (甘為民) (Chairman) Mr. Liu Hanlin (劉翰林) Mr. Teng Bing Sheng (滕斌聖)

Nomination committee Mr. Teng Bing Sheng (滕斌聖) (Chairman) Mr. Liu Hanlin (劉翰林) Ms. Fu Jieyun (傅潔雲)

Principal Banks China Merchants Bank Hangzhou Science and Technology City Branch 1/F, Building 4 Chuangxin Shidai Square No. 84 Longyuan Road Hangzhou, Yuhang District Zhejiang, PRC

China Minsheng Bank Hangzhou Jiefang Branch No. 60 Qingxie Road Hangzhou Zhejiang, PRC

[REDACTED]

–84– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INDUSTRY OVERVIEW

The information set forth in this section is derived from the Frost & Sullivan Report, which is based on information obtained from Frost & Sullivan’s database, publicly available sources, industry reports, as well as data obtained from interviews and other sources. We believe that the sources of such information and statistics in this section are appropriate sources and have taken reasonable care in extracting and reproducing such information and statistics. We have no reason to believe that such information is false or misleading or that any fact has been omitted that would render such information false or misleading in any material respect. However, except for Frost & Sullivan, neither we nor any other party involved in the [REDACTED] have carried out any independent verification or have given any representation as to the accuracy, completeness or fairness of such information and statistics set forth in this section or similar information included elsewhere in this document. The information and statistics contained in this section may not be consistent with information available from other sources within or outside the PRC and Hong Kong. Accordingly, the information and statistics as presented herein shall not be unduly relied upon. Our Directors confirm that after due and reasonable consideration, there is no adverse change in the market information since the date of the Frost & Sullivan Report up to the date of this document, which may qualify, conflict, or have a material impact on the information in this section. For a discussion of risks relating to our industry, please see “Risk Factors — Risks Relating to Our Industry” in this document.

INTRODUCTION

We commissioned Frost & Sullivan, an independent market research and consulting company, to conduct research and analysis on, and to produce a report on, the drama series market in the PRC at a fee of RMB670,000, which we believe reflects the market rates for reports of this type. The Frost & Sullivan Report commissioned has been prepared by Frost & Sullivan independently without any influence from us or other interested parties. Frost & Sullivan is an independent global consulting firm founded in 1961 in New York and its services include, among others, industry consulting, market strategic consulting and corporate training. Its consulting team has been tracking the latest market trends in automotive and transportation, chemicals, materials and food, commercial aviation, consumer products, energy and power systems, environment and building technologies, healthcare, industrial automation and electronics, industrial and machinery, and technology, media and telecom.

SOURCE OF INFORMATION

Frost & Sullivan conducts both detailed primary research which involves discussion regarding the status of the industry with certain leading industry participants, and secondary research which includes reviewing company reports, independent research reports and data based on its own research database.

The market projections in the Frost & Sullivan Report are based on the following key assumptions: (i) global social, economic and political environment is likely to remain stable in the forecast period; (ii) purchasing power is expected to continue to rise rapidly in emerging regions and to grow steadily in developed regions; and (iii) related industry key drivers are likely to drive the market in the forecast period.

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All statistics are based on information available as of the date of this report. Other sources of information, including government, industry associations or market participants, have provided some of the information on which the analysis or data is based. All the information about our Company is obtained from our Company’s management interview. The information of our Company has not been independently verified by Frost & Sullivan.

OVERVIEW OF THE DRAMA SERIES MARKET IN CHINA

Definition and Segmentation of the Drama Series Market in China

The drama series market in China consists of two sub-segments, namely, TV series market and web series market. According to the Frost & Sullivan Report, TV series is a type of drama series for which the distribution license is issued by the NRTA. Normally, TV series can be distributed to both the TV channels and online media platforms. Web series, on the other hand, is another type of drama series that is only broadcast on the Internet media platforms. It is normally produced by third-party professional drama series production companies or the Internet media platforms.

Operation Process of Drama Series

According to the Frost & Sullivan Report, the operation process of the drama series typically comprises investment, production, distribution and broadcasting.

Operation Process of Drama Series

Investment Production Distribution Broadcast

Project development The producers will take charge It refers to the delivery of the The drama series could be of the whole drama series broadcasting rights of drama series broadcasted on TV channels The investors regularly production process, which to broadcasting channels, so that and Internet media platforms, conduct: mainly include director recruiting, the drama series could be exhibited such as YOUKU, iQIYIand • market research to keep actors/selecting, budget to end audience. QQTV, which help diversify track of the market planning, shooting and post- the broadcasting channel as evolving, including trendy production works etc. The professional distribution well as the drama series of drama series, viewing companies or the in-house content. points and the popular distribution departments of drama broadcasting platforms; series companies will play Meanwhile, along with the significant role at this stage. They further development of • script planning based on usually established the long-term Internet technologies, the the market research. business relationship with different viewing of drama series broadcasting channels and also become increasingly Capital funding interactive and engaging by thoroughly understand the demands bullet screen and multi- and budget of these broadcasting • Funding sources range screen interaction as well. from commercial banks to channels. Meanwhile, solid market drama series research regarding to the audience entertainment companies. preferences lead to the formulation of customized marketing and • Increasing number of distribution plan. broadcasting channels cooperate with the production companies to invest in drama series contents.

Value Chain Analysis of the Drama Series Market

According to the Frost & Sullivan Report, the value chain of drama series market in the PRC is divided into (i) upstream – IP reservation and transaction, and production capital preparation; (ii) midstream – production and distribution; and (iii) downstream – broadcasting.

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Initiated by the producers or investors who purchase the copyrights of the stories or IPs, drama series production starts from IP reservation and transaction, as well as project fund-raising. Producers play a crucial role in coordinating with multiple parties, including filming crew, directors, actors, as well as various potential distribution channels. Large drama series production companies usually have their own distribution teams and have built long-term relationships with TV channels and online media platforms to ensure that the produced drama series can be delivered to the audience via diverse channels. The chart below illustrates the value chain analysis of the drama series market in the PRC:

Copyright buyout or licensing fee Upstream IP Owner Investor Copyright licensing Production Production Copyright licensing Copyright buyout or licensing fee budgeting funding Remunerat Filming Crew Midstream Screen Writer ion Remuneration Actor Director Recruit Producer ment De Recruitmentrivative products Licensing of Buyout Purchasing ordevelopment Licensing of the broadcasting fee or licensing fees rights royalties the broadcastingBuyout rightsroyalties fee Copyrightor New media Channels licensing Traditional Channels Derivative Products (online media platforms) (TV Channels) Developers Advertising Advertising Broadcast Broadcast Downstream Payments fee fee fee fee Series Series Service Service Products TV & Web TV & Web TV & Marketing Marketing Advertiser Audience Advertiser Audience Consumer Capital Stream; Business Stream

Source: Frost & Sullivan Report

Revenue and Cost Structure

Revenue of drama series is mainly generated from copyright licensing and advertising. Copyright licensing revenue is largely generated from the first series and second/third series run of licensed drama series to the TV channels and online media platforms. According to the Frost & Sullivan Report, during recent years, licensing revenue witnessed a rapid growth due to the improvement in the quality and diversification of the content of the drama series, which further encouraged the creation of content-centric scripts. Revenue generated from drama series may vary based on the broadcasting channels and the actual broadcasting time. Normally, drama series broadcast on satellite TV channels during prime time could generate higher revenue due to the higher popularity. Revenue per episode of drama series that are licensed to the satellite TV channels is generally higher than that licensed to terrestrial TV channels, primarily because the satellite TV channels can reach nationwide viewers and enable the advertising sponsors to gain more exposure. Besides, for the same drama series, revenue per episode generated from the first-run broadcast is usually higher than that from rerun broadcast.

According to the Frost & Sullivan Report, the costs incurred in connection with drama series cover the entire production process, which generally consists of three stages, namely, the planning stage, production stage and post-production stage. In the planning stage, the costs incurred mainly relate to the purchase of scripts or payment to script writers. In the production stage, the costs incurred primarily include the remuneration paid to actors and expenses associated with filming venues, props, costumes and equipment. According to the Opinions on the Production Costs Allocation of Drama Series《關於電視劇網絡劇製作成本配置比例的意見》 ( ), which was jointly issued by China Alliance of Radio, Film and Television (中國廣播電影電視社會

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組職聯會), China Television Drama Production Industry Association (中國電視劇製作產業協會) and China Net-casting Services Association (中國網絡視聽節目服務協會) in July 2017, the remuneration of casts in each drama series shall not exceed 40.0% of the total investment of the drama series. In addition, the remuneration of major actors shall not exceed 70.0% of the total remuneration allocated for casts, while the remuneration of other actors shall not less than 30.0% of the total cast remuneration. Costs incurred in the post-production stage mainly represent the payment for post-production and marketing services. In addition, the cost allocation varies depending on the genres of different drama series. For example, the expenses on venues, props, costumes and post-production for history/war-related drama series are generally higher than those for modern/contemporary-related drama series. With the promulgation of the relevant regulations on tax payment and remuneration of actors in the drama series industry and the increase of investments in high-quality drama series, the cost allocation of the drama series will be more rationalized in the future.

The costs of drama series have significantly increased over the past several years and are expected to continue to rise, particularly as the investment in the production process is expected to rise to pursue higher-quality drama series. Professional and experienced distribution companies or in-house distribution department of drama series companies will help to distribute licensed drama series to numerous broadcasting channels to maximize the commercial value. Third-party service providers with proven collaborating track record and abundant industry resources will also be engaged for marketing and advertising activities.

Market Size of Drama Series Market in China

As a result of the rising income levels and upgrades to consumer consumption, the consumption pattern in China is currently undergoing profound changes. Chinese consumers have begun to pay more attention to spirit-oriented consumption products, which naturally led to the sustainable growth of the demand for entertainment activities, including drama series. The market size of the drama series market in China, as measured by the sum of licensing revenue and advertising revenue, experienced rapid growth at a CAGR of approximately 12.6% from approximately RMB78.8 billion in 2015 to approximately RMB126.5 billion in 2019. With the increasing penetration of Internet, particularly on mobile terminal, the favorable nature of Internet effectively diversifies the broadcasting channels of drama series, which allows the audiences to enjoy drama series in their spare time. The market size of drama series market in China is expected to reach approximately RMB182.8 billion by 2024, representing a CAGR of approximately 7.6% from 2019 to 2024. The chart below illustrates the market size of drama series market in China from 2015 to 2024:

Market Size of Drama Series Market (China), 2015-2024E RMB Billion 200 CAGR: 7.6% 182.8 170.2 157.6 150 145.1 CAGR: 12.6% 126.5 133.3 114.1 99.9 100 88.1 78.8

2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

Source: Frost & Sullivan Report

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TV SERIES MARKET IN CHINA

Market Size of TV Series Market in China

Revenue generated from TV series mainly consist of licensing revenue generated from the distribution of TV series to TV channels and online media platforms, and advertising revenue generated by TV channels and online media platforms. TV channels generally served as the major distribution and broadcasting platform for TV series in the past as a result of a large and stable audience base. A new policy promulgated by NRTA in 2015 required that the same TV series cannot be broadcast by more than two satellite TV channels during the prime time each night, and each TV channel can only broadcast not more than two episodes per night. Such policy intensified the competition among investment and production companies in the TV series market. As a result, both the number of TV series and the number of episodes approved to broadcast declined in the past five years, according to the Frost & Sullivan Report. Meanwhile, the online media platforms have rapidly accumulated large user base and become an indispensable broadcasting channel for TV series in recent years. The chart below illustrates TV series market size in the PRC in terms of revenues from licensing and advertising of TV series through TV channels and online media platforms from 2015 to 2024:

Market Size of TV Series Market (China) as Measured by the Revenue Generated from TV Series, Classified by Revenue Type, 2015-2024E

CAGR 2015-2019 2019-2024E Licensing Revenue RMB Billion Licensing Revenue 8.6% 4.0% Advertising Revenue 160.0 Advertising Revenue 10.1% 7.2% 139.9 140.0 132.1 124.1 120.0 116.0 42.0 103.6 108.3 40.8 100.0 94.9 39.3 88.1 37.8 80.0 77.6 34.6 36.2 71.9 32.7 60.0 33.3 24.8 29.4 91.3 97.9 40.0 78.1 84.7 62.2 69.1 72.0 20.0 47.0 48.2 54.8 0

2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

Source: Frost & Sullivan Report

The market size of TV series as measured by total revenue increased from approximately RMB71.9 billion in 2015 to approximately RMB103.6 billion in 2019, representing a CAGR of approximately 9.6% from 2015 to 2019. It is expected to continue to grow and reach approximately RMB139.9 billion by 2024, representing a CAGR of approximately 6.2% between 2019 and 2024. As the PRC government continues to encourage the development of the entertainment industry in China under the current policy, it is expected that the number of TV series that are approved to be broadcast on TV channels will steadily increase from approximately 254 in 2019 to approximately 276 by 2024.

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The licensing revenue is generated from the distribution of TV series to TV channels and online media platforms. Benefitting from the improving copyright awareness and protective polices, the licensing revenue of TV series experienced rapid growth from approximately RMB24.8 billion in 2015 to approximately RMB34.6 billion in 2019 with a CAGR of approximately 8.6%, accounting for approximately 33.4% of total TV series market in 2019. Over the same period, the advertising revenue of TV series generated from TV channels and online media platforms increased from approximately RMB47.0 billion in 2015 to approximately RMB69.1 billion in 2019 with a CAGR of approximately 10.1%. With the improvement of quality and adjustment of budge allocation during the production of TV series, the licensing revenue and advertising revenue are forecasted to reach approximately RMB42.0 billion and RMB97.9 billion in 2024, respectively, representing CAGRs of approximately 4.0% and 7.2%, respectively.

While TV channels have been the primary distribution platform for TV series for a long time, online media platforms have emerged and developed into a strong alternative broadcasting channel for TV series based on the proliferation of the Internet, especially via mobile terminal, in recent years. According to the Frost & Sullivan Report, the licensing revenue of TV series generated from the distribution of TV series to online media platforms increased from approximately RMB11.7 billion in 2015 to approximately RMB16.8 billion in 2019, representing a CAGR of approximately 9.6%. It is forecasted to reach approximately RMB21.2 billion by 2024, representing a CAGR of approximately 4.8% between 2019 and 2024.

The chart below illustrates the market size of TV series in the PRC in terms of revenue generated from TV series by channels:

Market Size of TV Series Market (China) as Measured by the Revenue Generated from TV Series by Channels, 2015-2024E

CAGR 2015-2019 2019-2024E Online Media Platforms Total 9.6% 6.2% TV Channels Online Media Platforms 23.3% 11.4% RMB Billion TV Channel 2.4% 1.0% 139.9 140.0 132.1 124.1 120.0 116.0 103.6 108.3 100.0 95.0 88.1 80.2 58.6 65.9 73.2 80.0 71.9 77.6 46.8 51.8 34.4 39.4 60.0 20.2 26.2 40.0 20.0 51.7 51.5 53.6 55.6 56.9 56.5 57.4 58.1 58.9 59.7 0.0

2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

Source: Frost & Sullivan Report

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The chart below illustrates the breakdown of the market size of TV series in the PRC in terms of revenue generated from TV series by the type of TV channels:

Market Size Breakdown of TV Series by Type of TV Channel (China), 2015-2024E

CAGR 2015-2019 2019-2024E Satellite TV Channel Total 2.4% 1.0% Terrestrial TV Channel Satellite TV Channel 2.8% 1.1% RMB Billion Terrestrial TV Channel 1.3% 0.5% 58.9 59.7 60.0 55.6 56.9 56.5 57.4 58.1 51.7 51.5 51.6 50.0

40.0 42.6 43.3 44.0 44.6 45.2 30.0 38.3 38.3 40.1 41.7 42.8

20.0

10.0 13.4 13.2 13.5 13.9 14.0 13.9 14.1 14.2 14.3 14.4 0.0

2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

Source: Frost & Sullivan Report

According to the Frost & Sullivan Report, the market size of TV series in terms of revenue generated from satellite TV channels increased from approximately RMB38.3 billion in 2015 to approximately RMB42.8 billion in 2019, representing a CAGR of approximately 2.8% from 2015 to 2019. It is expected to continue to grow and reach approximately RMB45.2 billion in 2024, representing a CAGR of approximately 1.1% between 2019 and 2024. In addition, the market size of TV series in terms of revenue generated from terrestrial TV channels increased from approximately RMB13.4 billion in 2015 to approximately RMB14.0 billion in 2019, representing a CAGR of approximately 1.3% from 2015 to 2019 and is expected to continue to grow and reach approximately RMB14.4 billion in 2024, representing a CAGR of approximately 0.5% between 2019 and 2024.

The licensing revenue of TV series per episode has also increased significantly in the past few years, which was attributable to the increased competition among TV channels in China and the development of TV series distribution to online media platforms. The implementation of “One TV Series, Two Satellite TV Channels” policy has limited the capability of TV stations to broadcast the TV series. As a result, the fierce competitions for the superior TV series resources directly drives up the licensing revenue of TV series per episode received from TV channels.

According to the Frost & Sullivan Report, the superior TV series resources primarily refer to the type of TV series that are sophisticatedly produced by experienced production teams and could gain high popularity among the audience. The rigorous script writing, powerful cast, professional filming and post-production teams and appropriate marketing strategies jointly serve as the critical underlying factors to facilitate the quality and profitability of the superior TV series. According to the Frost & Sullivan Report, the licensing revenue of TV series per episode received from TV channels increased from approximately RMB1.0 million in 2015 to approximately RMB1.8 million in 2019, representing a CAGR of approximately 16.3%, and is estimated to reach approximately RMB2.3 million by 2024, representing a CAGR of approximately 4.8% from 2019 to 2024. The licensing revenue of TV series per episode received

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Licensing Revenue of TV Series Per Episode by Channel (China), 2015-2024E

CAGR 2015-2019 2019-2024E Generated from TV channels TV Channel 16.3% 4.8% Generated from online media platforms RMB Million Online Media Platforms 16.9% 5.4% 3 2.6 2.3 2.4 2.3 2.1 2.2 2.2 2.0 2.0 2.1 2 1.9 1.8 1.9 1.7 1.8 1.5 1.3 1.4 1.1 1 1.0

2015 2016 2017 2018 2019 2020E 2021E 2022E2023E 2024E

Source: Frost & Sullivan Report

The anticipated slow-down of the growth of licensing revenue per episode of TV series from 2020 to 2024 primarily reflects the positive feedback from the market regarding the restrictions on the remuneration of actors. Pursuant to the Opinions on the Production Costs Allocation of Drama Series jointly issued by China Alliance of Radio, Film and Television, China Television Drama Production Industry Association and China Net-casting Services Association in July 2017, the remuneration for casts shall not exceed 40.0% of the total costs in producing a drama series. According to the Frost & Sullivan Report, the implementation of this guidance effectively reduced the production costs of TV series and thereby released the financial pressure on TV channels or online media platforms to license the broadcasting rights of drama series. Meanwhile, in order to improve competitiveness, online media platforms gradually focus their attention on enhancing their capability of creating high-quality original drama series content and consequently, reduce their investments in licensing the broadcasting rights of TV series from other third-party copyright owners/licensors.

WEB SERIES MARKET IN CHINA

Market Size of Web Series Market in China

Web series represents a type of drama series that is only broadcast on online media platforms, including the licensed web series and original web series content. The Internet landscape in China is fast evolving that the ongoing innovation in business models, applications and content leads to intense competition in the web series market in China, according to the Frost & Sullivan Report. Online media platforms, such as YouKu, iQIYI and QQTV have actively participated in the web series market, which involve serving as the key web series distribution channels, purchasing the licensed web series from third-party professional content producers and investing in original media content.

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According to the Frost & Sullivan Report, China has the largest Internet and mobile Internet user base in the world. In 2019, the number of online video users in China reached approximately 646.6 million, accounting for 73.8% of the Internet users in China. The number of subscribers to online media platforms increased at a CAGR of approximately 38.4% from approximately 85.7 million in 2015 to approximately 314.8 million in 2019, which accounted for approximately 48.7% of the online video viewers in 2019. The number of such subscribers is forecasted to reach approximately 518.2 million by 2024, which is estimated to account for approximately 62.2% of the online video viewers in 2024.

In terms of the number of web series broadcast on online media platforms, the web series market experienced fluctuation during the past few years. The number of web series, including the licensed web series and original web series, surged from 205 in 2014 to 379 in 2015. However, due to the lack of content production experience and limited budget, the market recorded a decrease in the number of web series to 275 in 2019. Recently, the online media platforms have increased their investments and provided resources to encourage the creation of original web series and actively cooperated with professional web series production companies. In light of the recent market trend, the number of web series broadcast via online media platforms is estimated to reach 285 by 2024, according to the Frost & Sullivan Report.

According to the Frost & Sullivan Report, the number of TV series broadcast on online media platforms decreased from 264 in 2015 to 204 in 2019. This decrease was largely affected by the strict government policies regulating the web series industry. It is expected that under the current policies and in light of the strengthened review of the drama series production in the web series industry, the number of web series licensed to be broadcast via online media platforms in China is expected to decline in the next five years.

The chart below illustrates the market size of the web series market in China in terms of the total revenue generated from licensing, advertising and paid content subscription of web series from 2015 to 2024:

Market Size of Web Series Market (China), 2015-2024E RMB Billion

45 CAGR: 13.4% 43.0 40 38.1 35 33.5 30 29.1 CAGR: 34.9% 25.0 25 22.9 20 19.1 15 10.5 11.8 10 6.9 5 0

2015 2016 2017 2018 2019 2020E 2021E 2022E2023E 2024E

Source: Frost & Sullivan Report

The market size of web series surged from approximately RMB6.9 billion in 2015 to approximately RMB22.9 billion in 2019, representing a CAGR of approximately 34.9%. In light of the business expansion of online media platforms, the market size is estimated to continue to grow and reach approximately RMB43.0 billion by 2024, representing a CAGR of approximately 13.4% between 2019 and 2024.

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COMPETITIVE LANDSCAPE OF DRAMA SERIES MARKET IN CHINA

Competitive Landscape

According to the Frost & Sullivan Report, the drama series market in China is highly competitive and fragmented with a number of competitive participants with differentiated capabilities. We primarily compete with the active market players with strong drama series distribution capabilities. These companies have established long-term cooperative business relationships with TV channels and online media platforms and actively kept track of the development trends of the types of drama series and viewers’ preferences. In terms of revenue generated from the drama series market in 2018, among all drama series groups, we ranked the 16th with revenue of approximately RMB385.9 million and a market share of approximately 0.34%. The following table sets forth the top 20 drama series groups in China in terms of revenue generated from the drama series market in 2018:

Top 20 Drama Series Group in China in Terms of Revenue Generated from Drama Series Market (2018) Revenue Generated from Drama Series Ranking Group Name (RMB Billion) Market Share

1 GroupA ...... 4.50 3.94% 2 GroupB ...... 1.75 1.53% 3 GroupC ...... 1.27 1.11% 4 GroupD...... 1.16 1.01% 5 GroupE ...... 1.13 0.99%

Groups ranked from 6-15...... 6.91 6.05%

16 Our Group ...... 0.39 0.34% 17 GroupF ...... 0.27 0.23% 18 GroupG ...... 0.22 0.19% 19 GroupH...... 0.14 0.13% 20 GroupI...... 0.08 0.07% Top 20 17.81 15.62%

Source: Frost & Sullivan Report

In terms of the number of drama series first broadcast on satellite TV channels in 2018, we ranked second among all drama series groups with nine TV series first broadcast on satellite TV channels in 2018. The following table sets forth the top 15 drama series groups in China by the number of drama series first broadcast on satellite TV channels in 2018:

Top 15 Drama Series Groups in China by the Number of Drama Series First Broadcast on Satellite TV Channels (2018) Number of Drama Series Ranking Group Name First Broadcast in 2018 Market Share

1 GroupJ ...... 12 5.13% 2 Our Group ...... 9 3.85% 3 GroupB ...... 7 2.99% 4 GroupA ...... 7 2.99% 5 GroupC ...... 5 2.14% Groups ranked from 6 to 15 ...... 26 11.09% Top 15 66 28.20%

Source: Frost & Sullivan Report

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Market Drivers of Drama Series Market in China

According to the Frost & Sullivan Report, the drama series market in China is primarily driven by the following factors:

• Growth of consumers’ entertainment demand. China has entered into a new era as its economic growth model has begun to shift from investment-driven to consumption-driven. Meanwhile, the increasing disposable income and living standards in the past several decades have encouraged Chinese consumers to seek high-quality entertainment services and products, which brings great development opportunities for the drama series industry in China.

• Prevalence of Internet and mobile Internet. The unlimited geography coverage, inclusivity and promptness of the Internet bring new business opportunities for the drama series industry. Many online platforms broadcast a large number of TV series and invest in or produce web series to attract viewers and traffic. Given the interactivity and mobility of Internet, online media platforms have gradually overtaken TV channels’ leading status in broadcasting and become an alternative choice of the viewers. In light of the market trend, the drama series market in China is expected to accelerate its development.

• Innovation in the drama series market. Drama series producers and online media platforms have devoted their efforts on innovation to better fulfil audience’ rising expectations. Some production companies and online media platforms have established in-house research teams to adopt content creation and audience behavior analysis to enhance the quality of the drama series. In addition, technologies such as big data analytics have been widely utilized in the process of drama series content design, marketing and distribution. These efforts made by various market players have stimulated the further development of the market.

• Massive and targeted investment. The players in the PRC drama series market have generally adopted a “high concept” business model, which is to make a large amount of investments, particularly in production, distribution and marketing campaigns in light of the increasingly intensified competition in the industry. The “high concept” business model, to some extent, helps enhance the quality of drama series and increase the competition threshold, which helps online media platforms with strong capabilities to further enhance its business performance by increasing revenue based on their improved audience ratings and market share.

Future Trends of Drama Series Market in China

• Acceleration of the export of Chinese drama series: With the promotion of Chinese culture around the world and improved production capabilities of drama series, the overseas distribution channels of Chinese drama series particularly the overseas online platforms continue to expand in terms of the quantity and transaction value. Considering the promotion of drama series production technology and the establishment of localized Chinese TV channels abroad, the export of Chinese drama series is expected to accelerate in the next few years.

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• Increasingly diversified content and business models of drama series: Online literatures, Internet games and comics are the major sources of drama series content. In addition, leveraging the extensive experience in content operation and audience analysis on the Internet, the market players are able to produce quality drama series to satisfy different preferences of viewers. To diversify the business models, traditional media has adopted new advertising modes, such as flexible advertisement placement, multi-screen interaction and data-based marketing solution to generate advertising income. Apart from the advertising income, with the intellectual property protection, online media companies tend to generate income from paid users.

• Further cooperation between TV channels and online media platforms: In the past, TV stations were the major distribution channels of drama series. With the increasing Internet penetration rate, especially on mobile terminal, online media platforms have become more competitive in respect to the content distribution in China. In addition, the broadcasting schedule of drama series on the Internet is almost synchronized with the TV channels. In the future, TV channels and online media platforms are likely to have strategic cooperation in sharing resources to improve efficiency and effectiveness on content distribution.

Entry Barriers of Drama Series Market in China

According to the Frost & Sullivan Report, the entry barriers of drama series market in China are relatively high and primarily consist of the following factors:

• Capital and resources barrier. Drama series business generally involves a great amount of working capital for overhead expenditures across the entire production, distribution and post-production process. High capital investment usually positively correlates with high quality and considerable profit income. The lack of sufficient budget and abundant resources are likely to pose challenges to the new market entrants.

• Industry expertise barrier. Industry expertise and experience, which mainly include the capability to effectively coordinate all parties and ability to keep abreast of the latest market trends and satisfy the audience’s ever-changing preferences are critical for drama series producers to distinguish themselves from their competitors. In addition, experienced production companies generally have well-recognized image, which is more likely for them to access talented script writers, directors and casts for the production of the drama series.

• Broadcasting channel barrier. Drama series are generally distributed through TV channels and online media platforms. Online media platforms have become a mainstream for distributing and broadcasting drama series. Therefore, it has become increasingly important to maintain stable business relationships with different distribution channels. However, it is acknowledged that communication and cooperation with major distribution channels is time-consuming and difficult for new entrants.

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• Distribution capability barrier. The capability of effectively distributing drama series through different broadcasting channels is considered to be a critical competitive edge for drama series companies. Experienced drama series distributors are required to keep track of the market trends and thoroughly understand the preferences of the target audience to ensure that high-quality drama series are distributed through appropriate channels with befitting timing. Meanwhile, the broadcasting channels tend to cooperate with proficient distributors to ensure the quality of distributed drama series, which can positively contribute to the audience rating and increase related advertising revenue, according to the Frost & Sullivan Report. Therefore, the lack of strong distribution capabilities and cooperation with broadcasting channels may pose challenges to new market entrants.

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This section sets forth the most important laws and regulations that govern our Group’s current major business operation in China.

FOREIGN INVESTMENT IN RADIO AND TELEVISION PROGRAMS

Restriction on Foreign Investment in Radio and Television Programs in PRC

On February 11, 2002, the State Council promulgated the Provisions Guiding Foreign Investment Direction《指導外商投資方向規定》 ( ) (the “Direction”), which became effective on April 1, 2002. The Direction divided foreign investment projects into four categories, namely, encouraged, permitted, restricted, and prohibited. Foreign investment projects categorized as encouraged, restricted, and prohibited are listed under the Foreign Investment Catalog.

The special administrative measures for access of foreign investment (also known as the negative list on access of foreign investment), as provided in the Foreign Investment Catalog were simultaneously repealed by the Negative List. Foreign investment in radio and television program production and operating (including import business) companies is prohibited pursuant to the Negative List.

Regulations on Foreign Investment

The establishment procedures, examination and approval procedures, foreign exchange restriction, accounting practices, taxation and labor matters of a wholly foreign-owned enterprise are governed by the Wholly Foreign-owned Enterprise Law of the PRC《中華人民共 ( 和國外資企業法》)(the “Wholly Foreign-owned Enterprise Law”), which was promulgated on April 12, 1986 and amended on September 3, 2016. The implementation regulations under the Wholly Foreign-owned Enterprise Law was promulgated on December 12, 1990 and newly amended on February 19, 2014, which became effective on March 1, 2014.

Pursuant to the Provisional Measures on Administration of Filing for Establishment and Change of Foreign-Invested Enterprises(《外商投資企業設立及變更備案管理暫行辦法》) promulgated by the MOFCOM on October 8, 2016 and revised on July 30, 2017 and 30 June, 2018, the establishment and modifications of foreign-invested enterprises, which is not subject to the special market entry administrative measures prescribed by the PRC government, shall be filed with the commerce authorities without prior approval of the MOFCOM. The establishment and modifications of foreign-invested enterprises still need the approval of the MOFCOM or its local branch, as long as the special market entry management measures prescribed by the PRC government are involved. The MOFCOM promulgated the Announcement on Matters Relating to the Record-filing Administration over Establishment and Change of Foreign-invested Enterprises《關於外商投資企業設立及變更備案管理有關事項的公告》 ( ) on July 30, 2017.

Foreign Investment Law of the People’s Republic of China《中華人民共和國外商 ( 投資法》) (the “Foreign Investment Law”) was adopted at the Second Session of the Thirteenth National People’s Congress on March 15, 2019 and will come into force as of January 1,2020, by which time, the Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures (《中華人民共和國中外合資經營企業法》) (the “Chinese-Foreign Equity Joint Ventures Law”), the Law of the People’s Republic of China on Chinese-Foreign Contractual Joint Ventures《中華人 ( 民共和國中外合作經營企業法》) (the “Chinese-Foreign Contractual Joint Ventures Law”) and the

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Wholly Foreign-Owned Enterprises Law shall be repealed by the Foreign Investment Law simultaneously. The Foreign Investment Law specifies that the “Foreign Investment” refers to the investment activity directly or indirectly conducted by the foreign natural person, enterprise or other organization (hereinafter referred to as the “foreign investors”), including the following circumstances: (i) A foreign investor establishes a foreign-invested enterprise within the territory of China, independently or jointly with any other investor; (ii) a foreign investor acquires shares, equities, property shares or any other similar rights and interests of an enterprise within the territory of China; (iii) a foreign investor makes investment to initiate a new project within the territory of China, independently or jointly with any other investor; and (iv) a foreign investor makes investment in any other way stipulated by laws, administrative regulations or provisions of the State Council. The state applies the administrative system of pre-establishment national treatment plus negative list to foreign investment. Foreign Investors shall not invest in any field prohibited by the Negative List and shall meet the investment conditions stipulated for any field restricted by the Negative List, while for foreign investments outside the Negative List, national treatment will be given. The business forms, structures, and rules of activities of foreign-funded enterprises shall be governed by the Company Law of the People’s Republic of China《中華人民共和國公司法》 ( ) (the “PRC Company Law”), the Partnership Law of the People’s Republic of China《中華人民共和國合夥企業法》 ( ) and other laws. In conducting production and distribution activities, foreign-funded enterprises shall comply with the provisions of laws and administrative regulations pertaining to labour protection and social insurance, conduct taxation, accounting, foreign exchange, and other affairs according to laws, administrative regulations, and the relevant provisions issued by the state, and accept the supervisory inspection legally conducted by the appropriate departments.

REGULATIONS ON RADIO AND TELEVISION PROGRAMS

Regulations on Production and Operation of Radio and Television Programs

On August 11, 1997, State Council promulgated the Administrative Regulations on Radio and Television《廣播電視管理條例》 ( ), which became effective on September 1,1997, as revised on December 7, 2013, and further amended on March 1, 2017. The Administrative Regulations on Radio and Television apply to such activities as establishing radio and television stations, and collecting, editing, producing, broadcasting and transmitting radio and television programs within the territory of the PRC. The administrative department for radio and television of the State Council is responsible for radio and television administration throughout the country. The departments or agencies which are responsible for radio and television administration (hereinafter referred to as the administrative departments for radio and television) under the local governments at or above the county level shall be responsible for radio and television administration within their respective administrative regions. Radio and television programs shall be produced by radio or television stations or the units for the production and management of radio and television programs, which are established upon the approval of the administrative departments for radio and television under the governments at or above the provincial level. No radio and television broadcasting institutions shall broadcast broadcasting and television programs produced by units that did not obtain the permit for the radio and television program production and operation. Establishment of a television series production unit shall be subject to the approval of the administrative departments for radio and television under the State Council and a television series production license obtained before it may produce television series.

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Establishment of a broadcasting and television program production and marketing unit without authorization or producing television series and other broadcasting and television programs without authorization shall be banned by the administrative departments for radio and television of the government at or above the county level with its special-purpose tools, equipment and program carriers for illegal activities confiscated, and be concurrently imposed a fine more than RMB10,000 and less than RMB50,000. Production, broadcasting and providing to users abroad of any programs containing prohibited contents shall be directed to terminate the production, broadcasting and providing to users abroad with its program carriers surrendered and taken over, and be concurrently imposed a fine more than RMB10,000 and less than RMB50,000. Where the circumstances are serious, the original approval organ shall revoke its permit or license, and violators of public security provisions shall be penalized for public security violations by the public security organ according to law; where the offence constitutes a crime, criminal responsibilities shall be investigated according to law.

In accordance with the Administrative Provisions on the Production and Operation of Radio and Television Programs《廣播電視節目製作經營管理規定》 ( ), promulgated by the NRTA on July 19,2004, revised on August 28,2015 and October 31,2018, the NRTA is responsible for formulating the development plan, layout and structure of the national radio and television program production industry, managing, guiding and supervising the production and operation activities of national radio and television programs. The administrative departments for radio and television under the local governments at or above the county level shall be responsible for managing the production and operation activities of radio and television programs within their respective administrative regions. Establishment of a radio and television programs production institution or entities that produce and operate radio and television programs must first obtain a Radio and Television Program Production and Operation Permit (the “Permit”) (廣播電視節目製作經營許可證), which is subject to the licensing system applied by the PRC Government. Central organizations in Beijing and the agencies directly subordinate thereto shall directly file the application with the NRTA while the other organization shall file an application to the relevant administrative department of radio and television at the domicile of the organization. The application shall be verified and approved level by level and finally be submitted to the provincial radio and TV administrative department for examination and approval. The approving authority will decide whether to grant the approval or not within 20 working days of its receipt of the complete set of documents. In the case of approval which is accorded with the Administrative Provisions on the Production and Operation of Radio and Television Programs, the NRTA will issue the Permit; in the case of disapproval, it will state the reasons. The decision of granting the approval or not shall be record-filed with the NRTA by provincial radio and TV administrative department within a week after the decisions are made. The Permit uniformly printed by the NRTA has an effective term of two years. Enterprises that have obtained the Permit upon approval may apply with the Permit to the industrial and commercial administrative department for the formalities of registration or business addition. The TV series producers must obtain either a TV Series Production License (Class A) (電視劇製作許可證（甲種） ) or a TV Series Production License (Class B) (電視劇製作許可證（乙種）) before the shooting and production of TV series. TV Series Production License (Class B), issued by the administrative department of radio and television at or above province level, only applies to the television play it indicates with the validity of 180 days and may be extended appropriately when approved by the licence issuing authority under exceptional circumstance. Applicants that have produced six or more single-episode TV shows or three or more TV series (three episodes or more per series) for two consecutive years may apply to the NRTA for TV Series Production License (Class A),

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In accordance with the Administrative Regulations on Sino-Foreign Cooperation in TV Series《中外合作製作電視劇管理規定》 ( ), promulgated by the NRTA on September 21, 2004 and became effective on October 21, 2004, the NRTA shall be responsible for administration of Sino-foreign cooperation in TV series (inclusive of television animation) and control the foreign parties, quantity and subjects thereof co-productions. Provincial radio and television administrative authorities shall be responsible for administration of Sino-foreign cooperation in TV series (inclusive of television animation) within their respective jurisdictions. The PRC government shall implement a license system for Sino-foreign cooperation in TV series (inclusive of television animation). No organization or individual shall engage in Sino-foreign TV series (inclusive of television animation) without approval, and no distribution or broadcast of finished Sino-foreign cooperative TV series (inclusive of television animation) shall be allowed prior to examination and clearance.

Pursuant to the Provisions on the Administration of Contents of TV Series (Provisions on Contents)《電視劇內容管理規定》 ( ), promulgated by the NRTA on May 14, 2010, revised on May 4, 2015 and October 31, 2018, the radio, film, and television administrative authority under the State Council is responsible for nationwide management and supervision on content of the TV series while the radio, film and television administrative authorities of the governments of provinces, autonomous regions, and municipalities directly under the Central Government are responsible for management and supervision on content of the TV series within their respective administrative regions. The system of record-filing and announcement shall be applied to filming and production of the domestic TV series and co-produced TV series. The censorship and licensing system are adopted for the domestic TV series, co-produced TV series, and imported TV series. No TV series shall be allowed to distribute, broadcast, and award without of a distribution license. The TV channels shall censor content of the TV series before broadcasting or re-broadcasting in accordance with criteria of censoring set forth in Provisions on Contents.

In accordance with the Administrative Measures of Record-filing and Announcement for Filming and Production of TV Series《電視劇拍攝製作備案公示管理辦法》 ( ), promulgated by the NRTA on September 22, 2013 and became effective on December 1, 2013, the filing content for filming and production of TV series shall satisfy the following conditions: (i) Complying with the content requirements of the Provisions on Contents; and (ii) If the content involves sensitive items concerning to politics, military, diplomacy, national security, united front, nations, religions, judiciary, public security, etc., written opinions from relevant parties or relevant authorities at or above the level of the province, autonomous region or municipality directly under the central government of the PRC shall be obtained prior to declaration of the record-filing and announcement for filming and production.

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Regulations on Production and Operation of Web Series

Pursuant to the Circular on Further Strengthening the Administration of Online Audio-visual Programs Including Web Series and Micro Films《關於進一步加強網絡劇、微電影 ( 等網絡視聽節目管理的通知》) promulgated by the NRTA and Cyberspace Administration of China on July 6, 2012, the state encourages radio, television, Internet radio and television stations, internet audio-visual program service entities, film and television production units and other organizations to produce web series and micro films that are suitable for online communication, reflect the spirit of The Times, promote the true, the good and the beautiful, and are loved by the masses.

The NRTA promulgated Supplemental Notice of Circular on Further Strengthening the Administration of Online Audio-visual Programs Including Online Dramas and Micro Films (《關於進一步完善網絡劇、微電影等網絡視聽節目管理的補充通知》) on January 2, 2014, which requires that enterprises engaged in production of web series and micro films shall obtain the Permit. Internet audio-visual program service institutions shall not broadcast web series or micro films produced by enterprises without the Permit.

The NRTA promulgated the Notice of Further Strengthening Administration of Radio, TV, and Network Audio-visual Entertainment Programs《關於進一步加強廣播電視和網絡視聽文藝 ( 節目管理的通知》) on October 31, 2018, which requires that the issued self-regulatory rules of cost structure of TV series and web series (including online motion pictures) shall be strictly implemented. The total pay for all performers of a television series or web series (or online motion picture) shall not exceed 40% of the total cost of production, and the principal performer pay shall not exceed 70% of the total performer pay. If the total pay for all performers exceeds 40% of the total production cost, the production institution shall file the pay with and give justification to the association (the Production Committee of the China Alliance of Radio, Film and Television, the China TV Series Production Industry Association, or the China Net casting Services Association) of which it is a member and the Performer Committee of the China Alliance of Radio, Film and Television. If there is no justification or concealment is conducted, the association of which it is a member shall, upon verification, make a report to the NRTA and, according to the circumstances, adopt punitive measures according to the law such as suspension and cancellation of broadcast of the series, or production qualifications.

The NRTA promulgated the Notice about Upgrading the Information Recording Filing System of the Internet Audio-visual Program《關於網絡視聽節目信息備案系統升級的通知》 ( )on December 27, 2018, notifying that since February 15, 2019, the production institutions shall, before the production of major online series (cartoons), of which the investment amount of which exceeds RMB5.0 million, register the planning information through the information recording filing system of major online dramas. Upon the completion of production, the production institutions shall register through the system as well and submit the completed dramas to the NRTA or its provincial counterpart. Only the reviewed web series with the record-filing numbers can be broadcast and popularized on audio-visual website.

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Regulations on Radio and Television Advertising

According to the Measures for the Administration of Radio and Television Advertising (《廣播電視廣告播出管理辦法》), promulgated by the NRTA on September 8, 2009 and became effective on January 1, 2010, and the Supplementary Provisions of the Measures for the Administration of Radio and Television Advertising《廣播電視廣告播出管理辦法的補充規定》 ( ), promulgated by the NRTA on November 25, 2011 and became effective on January 1, 2012, broadcasting agencies must ensure that the duration of commercial advertisements per broadcasting hour in each set of their programs does not exceed 12 minutes. The total duration of commercial advertisements must not exceed 18 minutes between 11:00 and 13:00 in the case of radio or between 19:00 and 21:00 in the case of television. Commercial advertisements can be put on hold and aired afterwards under special circumstances. In addition, no advertisement shall be inserted and broadcasted in whatever form in the middle of an episode (calculated as 45 minutes) of a TV Series.

REGULATIONS ON INTELLECTUAL PROPERTY

China is a signatory to certain major international conventions on protection of copyright and became a member of the Berne Convention for the Protection of Literary and Artistic Works in October 1992, the Universal Copyright Convention in October, 1992, and the Agreement on Trade-Related Aspects of Intellectual Property Rights upon its accession to the World Trade Organization in December 2001.

The Copyright Law of People’s Republic of China《中國人民共和國著作權法》 ( ) (the “Copyright Law”), which was promulgated by the Standing Committee of the National People’s Congress (“SCNPC”) on September 7, 1990, as amended on February 26, 2010 and became effective on April 1, 2010, provides that Chinese citizens, legal persons, or other organizations shall, whether published or not, enjoy copyright in their works, which include written works, oral works, musical, dramatic, quyi, choreographic, and acrobatic works, fine arts and architectural works, photographic works, cinematographic works and works created by a process analogous cinematography, graphic works such as drawings of engineering design, product design, maps, schematic, etc., as well as model works, computer software, and other works specified in laws and administrative regulations.

Copyright shall include but are not limited to the following types of personal rights and property rights: Right of publication, right of authorship, right of alteration, right of integrity, right of reproduction, right of distribution, right of rental, right of exhibition, right of performance, right of projection, right of broadcasting, right of dissemination through information network, right of cinematography, right of adaptation, right of translation, right of compilation. With respect to a cinematographic work, a work created by a process analogous cinematography, or a photographic work, the term of protection of the right of publication and the rights under Items (5) to (17) in Paragraph 1 of Article 10 hereof to that work shall be 50 years, and shall end on 31 December of the 50th year after the work’s first publication. If any such work remains unpublished in 50 years after its creation is completed, it shall no longer be protected hereunder. Reproducing, distributing, performing, projecting, broadcasting or compiling a work or disseminating to the public via an information network without permission

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Pursuant to the Regulations for the Implementation of the Copyright Law (Revised in 2013) (《中華人民共和國著作權法實施條例（2013年修訂）》), which was promulgated by State Council on August 2, 2002, revised on January 30, 2013, and came into effect on March 1, 2013, copyright shall be generated on the date when the creation of a work is completed. Where a joint work cannot be used separately, the copyright shall be jointly enjoyed by, and exercised through consultation between or among, the co-authors. Where they fail to reach an agreement and have no justified reasons for the failure, no party may hinder any of the other parties from exercising all the rights, except the right of assignment. However, the income generated from the joint work shall be fairly distributed between or among the co-authors.

Trademark

China has enacted various laws and regulations relating to the protection of trademark, including but not limited to the Trademark Law of the People’s Republic of China《中華人民共 ( 和國商標法》) (the “Trademark Law “) which was promulgated by the SCNPC on August 23, 1982,last amended on August 30, 2013 and took effective as from May 1,2014, and the Implementation Regulations of the PRC Trademark Law《中華人民共和國商標法實施條例》 ( ) (the “Trademark Law Implementation Regulation”) adopted by the State Council on August 3, 2002 and last revised on April 29, 2014, which took effective as from May 1,2014.

Pursuant to the Trade Law and the Trademark Law Implementation Regulation, the Trademark Office of the State Council’s administrative department for industry and commerce shall be in charge of the trademark registration and administration throughout the country. Trademarks that are registered upon verification and approval of the Trademark Bureau are registered trademarks, including goods trademarks, service marks, collective marks, and certification marks. A registered trademark shall be valid for ten years, where a trademark registrant intends to continue using the registered trademark upon expiry of its validity period, the trademark registrant shall go through renewal procedures within 12 months prior to the date of expiry in accordance with relevant provisions, failing which a grace period of six months may be granted.

The assignee shall be entitled to the exclusive right to use the trademark as from the date of publication. A licensor who licenses others to use its registered trademark by entering into a trademark license contract shall submit the trademark licensing to the Trademark Bureau for record-filing and announcement. The licensor shall supervise the assurance of the quality of the licensees’ goods bearing the licensor’s registered trademark. The licensee shall ensure the quality of their goods on which the registered trademark is used. The Trademark Law has adopted a “first-to-file” principle with respect to trademark registration. Where a trademark for which a registration has been made is identical or similar to another trademark that has already been registered or been subject to a preliminary examination and approval for use on the same kind of or similar commodities or services, the application for registration of such trademark may be rejected. An application for trademark registration shall not prejudice any pre-existing right of others. It is prohibited to forestall the registration, through any improper means, of a trademark that is already used by another party and has produced a certain influence.

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Patents

According to the Patent Law of the People’s Republic of China《中華人民共和國專利法》 ( ) (the “Patent Law”), promulgated by the SCNPC on March 12, 1984, last amended on December 27, 2008, then became effective on October 1, 2009, and its Implementation Rules《中華人民共和國專利法 ( 實施細則》) promulgated by the State Council on June 15, 2001, last amended on January 9, 2010, then became effective on February 1, 2010, the National Intellectual Property Administration of the PRC is responsible for administering patents in the PRC. The patent administration departments of provincial or autonomous regions or municipal governments are responsible for administering patents within their administrative regions. The Patent Law and its implementation rules provide three types of patents, “invention”, “utility model” and “design”. Invention patents are valid for twenty years, while design patents and utility model patents are valid for ten years, from the date of application. The PRC patent system adopts a “first-to-file” principle, which means that where two or more applicants file their respective patent application for the same invention, a patent will be granted to the person who files the application first. To be patentable, invention or utility models must meet three criteria: novelty, inventiveness and usefulness. A third-party player must obtain consent or a proper license from the patent owner to use the patent. Otherwise, the use constitutes an infringement of the patent rights. Where the infringement of patent is decided, the infringer shall, in accordance with the regulations, undertake to cease the infringement and pay compensation for damages, etc.

Domain Name

The Ministry of Industry and Information Technology (the “MIIT”) promulgated the Administrative Measures on Internet Domain Names《互聯網域名管理辦法》 ( ) (the “Domain Name Measures”) on August 24, 2017, which became effective on November 1, 2017. According to the Domain Name Measures, domain name owners are required to register their domain names and the MIIT is in charge of the administration of PRC internet domain names. The domain name services follow a “first-to-file” principle. Applicants for registration of domain names shall provide their true, accurate and complete information of such domain names to and enter into registration agreements with domain name registration service institutions. The applicants will become the holders of such domain names upon the completion of the registration procedure. According to the Measures of China Internet Network Information Centre for Domain Name Disputes Resolution《中國互聯網絡信息中心域名爭議解決辦法》 ( ), promulgated by China Internet Network Information Centre on September 1, 2014 and became effective on the same day, the domain name disputes shall be accepted and resolved by the dispute resolution service providers as accredited by China Internet Network Information Centre.

REGULATIONS ON EMPLOYMENT AND SOCIAL WELFARE

Labor

According to the Labor Law of the People’s Republic of China《中華人民共和國勞動法》 ( ) promulgated by the SCNPC on July 5, 1994, as amended and became effective on December 29, 2018, the Labor Contract Law of the People’s Republic of China《中華人民共和國勞動合同法》 ( ) promulgated by the SCNPC on June 29,2007,which was last revised on December 28, 2012 and came into effect on July 1, 2013, the Regulations on Implementation of the Labor Contract Law of the People’s Republic of China《中華人民共和國勞動合同法實施條例》 ( ) promulgated by the State Council

– 105 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. REGULATORY OVERVIEW on September 18, 2008 and became effective on the same day, the labor administrative department under the State Council shall be responsible for labor administration in the country while Labor administration departments of local governments at or above the county level shall be responsible for labor administration in their respective administrative areas. Enterprises and institutions shall establish and improve their system of workplace safety and sanitation, strictly abide by state rules and standards on workplace safety, educate laborers in labor safety and sanitation in China. Labor safety and sanitation facilities shall comply with state-fixed standards. Enterprises and institutions shall provide laborers with a safe workplace and sanitation conditions which are in compliance with state stipulations and the relevant articles of labor protection, and carry out regular health examination for laborers engaged in work with occupational hazards. A written labor contract shall be concluded to establish a labor relationship. Labor contracts consist of fixed-term labor contracts, open-ended labor contracts and labor contracts that expire upon completion of given jobs. An open-ended labor contract shall be concluded if a worker who has been working for the employing unit for a consecutive period of 10 or more years proposes or has consecutively concluded a fixed-term labor contract with the employing unit twice. A collective contract shall be concluded by the trade union or the representatives of the workers without the presence of the trade union on behalf of the employees of the enterprise with the employing unit, including labor remuneration, working hours, rest and vocation, work safety and hygiene, insurance and benefits, among other things. The standards of working conditions and labor remuneration specified in labor contracts concluded by workers with the enterprise shall not be lower than those specified in the collective contract. Wages paid by employers to laborers shall not be lower than the local standards of minimum wages. The employer may cancel the labor contract when comply with the conditions as set forth in laws or administrative regulations. Employment by concluding labor contracts shall be the basic form of employment. Employment by labor dispatching is only a supplementary form, and shall apply only to temporary, auxiliary or back-up jobs.

Social Insurance and Housing Provident Fund

As required under the Social Insurance Law of the People’s Republic of China《中華人民 ( 共和國社會保險法》) promulgated on October 28, 2010, and amended and became effective on December 29, 2018, and the Decisions on the Establishment of a Unified Program for Basic Old-Aged Pension Insurance of the State Council《國務院關於建立統一的企業職工基本養老保險 ( 制度的決定》) promulgated on, and became effective as of, July 16, 1997, the Decisions on the Establishment of the Medical Insurance Program for Urban Workers of the State Council《國務 ( 院關於建立城鎮職工基本醫療保險制度的決定》) promulgated on, and effective as of, December 14, 1998, the Regulation of Insurance for Work-Related Injury《工傷保險條例》 ( ) implemented in 2004 and amended in 2010, which became into effect on January 1, 2011, the Unemployment Insurance Measures《失業保險條例》 ( ) promulgated on, and became effective as of, January 22, 1999, the Provisional Measures for Maternity Insurance of Employees of Corporations《企業職 ( 工生育保險試行辦法》) implemented on January 1, 1995, China has established a social insurance system covering endowment insurance, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance. Enterprises are obliged to provide their employees in China with welfare schemes and pay social insurance premiums. Any employer that fails to contribute would be ordered to make the payment or make up the difference within the stipulated period, and employer may be fined If payment is not made within the stipulated period.

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In accordance with the Regulations on the Management of Housing Funds《住房公積金管 ( 理條例》), which was promulgated by the State Council on April 3, 1999, amended and became effective on March 24, 2002, enterprises must register at the competent managing centre for housing funds and upon the examination by such managing centre of housing funds, these enterprises shall complete procedures for opening an account at the relevant bank for the deposit of employees’ housing funds. Enterprises are also required to pay and deposit housing funds on behalf of their employees in full and in a timely manner. With respect to enterprises who violate the above regulations and fail to process housing provident fund payment and deposit registrations or open housing provident fund accounts for their employees, such enterprises shall be ordered by the housing provident fund administration centre to complete such procedures within a designated period. Those who fail to process their registrations within the designated period shall be subject to a fine ranging from RMB10,000 to RMB50,000. When enterprises breach the regulations and fail to pay up housing provident fund contributions in full amount as due, the housing provident fund administration centre shall order such companies to pay up within a designated period and may further apply to the People’s Court for mandatory enforcement against those who still fail to comply after the expiry of such period.

REGULATIONS ON TAXATION

Enterprise Income Tax

On March 16, 2007, the National People’s Congress promulgated the EIT Law and the State Council enacted The Regulations for the Implementation of the Law on Enterprise Income Tax (《中華人民共和國企業所得稅法實施條例》) (collectively, the “EIT Law and Regulation”), both of which came into effect on January 1, 2008. According to the EIT Law and Regulation, taxpayers consist of resident enterprises and non-resident enterprises. Resident enterprises are defined as enterprises that are established in China in accordance with PRC laws, or that are established in accordance with the laws of foreign countries but whose actual or de facto control is administered from within China. Non-resident enterprises are defined as enterprises that are set up in accordance with the laws of foreign countries and whose actual administration is conducted outside China, but have established institutions or premises in China, or have no such established institutions or premises but have income generated from inside China. Under the EIT Law and Regulation, a uniform corporate income tax rate of 25% is applicable. However, if non-resident enterprises have not formed permanent establishments or premises in China, or if they have formed permanent establishment institutions or premises in China but there is no actual relationship between the relevant income derived in China and the established institutions or premises set up by them, the EIT is, in that case, set at the rate of 10% for their income sourced from inside China. In the event the tax treaty provides preferential tax rate, such tax treaty shall prevail.

Pursuant to the Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Tax on Income《內地和香港特別行政區關於對所得稅避免雙重徵稅和防 ( 止偷漏稅的安排》) (the “Double Tax Avoidance Arrangement”) and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements under such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5% upon

– 107 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. REGULATORY OVERVIEW receiving approval from competent tax authority. However, based on the Notice on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties《關於執行稅收協 ( 議股息條款有關問題的通知》) issued by the SAT on February 20, 2009, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment. If a company is not recognized as beneficial owners according to the Announcement of the State Administration of Taxation on Issues concerning “Beneficial Owners” in Tax Treaties《關於稅收協定中「受益所有人」有關問題的公告》 ( ), which was issued by the SAT on February 3, 2018 and became effective on April 1, 2018, and thus will not be entitled to the above-mentioned reduced income tax rate of 5% under the Double Tax Avoidance Arrangement. The Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as People’s Republic of China Tax Resident Enterprises on the Basis of De Facto Management Bodies《關於境外註冊中資控股企業依據實際管理機構標準實 ( 施居民企業認定有關問題的通知》) promulgated by the SAT on April 22, 2009 and became effective on January 1, 2008, sets out the standards and procedures for determining whether the “de facto management body” of an enterprise registered outside of China and controlled by PRC enterprises or PRC enterprise groups is located within China.

According to the Several Opinions of the State Council on Supporting the Construction of Kashgar and Horgos Economic Development Zones《關於支持喀什霍爾果斯經濟開發區建設的若 ( 干意見》) promulgated by the State Council on September 30 2011, and the Notice of the Preferential EIT Policies in relation to Kashgar and Horgos as Two Special Economic Development Zones in Xinjiang《關於新疆喀什霍爾果斯兩個特殊經濟開發區企業所得稅優惠政策 ( 的通知》) promulgated by the MOF and the SAT on November 29, 2011, from the January 1, 2010 to December 31, 2020, the enterprises newly established in Kashgar and Horgos within the Catalogue of EIT Incentives for Industries Particularly Encouraged in Underprivileged Areas of Xinjiang for Development《新疆困難地區重點鼓勵發展產業企業所得稅優惠目錄》 ( ) shall be granted the preferential treatment of five-year EIT exemption since the taxable year when the first business income is obtained. Based on the Notice of Further Strengthening the Catalogue of EIT Incentives for Industries Particularly Encouraged in Underprivileged Areas of Xinjiang for Development《關於完善新疆困難地區重點鼓勵發展產業企業所得稅優惠目錄的通知》 ( ) issued by the MOF, the SAT, the NDRC and the MIIT, radio, film and television production, distribution, transaction, projection, publication and creation of derivative production industries are included in the Catalogue of EIT Incentives for Industries Particularly Encouraged in Underprivileged Areas of Xinjiang for Development (2016 Edition)《新疆困難地區重點鼓勵發展 ( 產業企業所得稅優惠目錄》(2016年版)), which enjoy the above-mentioned preferential income tax policies.

Value-added Tax

The Interim Regulations of the People’s Republic of China on Value-added Tax《中華人民 ( 共和國增值稅暫行條例》) were promulgated on December 13, 1993 and last amended on November 19, 2017. The Detailed Rules for the Implementation of the Interim Regulations of the People’s Republic of China on Value-added Tax《中華人民共和國增值稅暫行條例實施細則》 ( ) were promulgated on December 15, 2008 and amended on October 28, 2011 (collectively, the “VAT Laws “). According to the VAT Laws, all enterprises and individuals engaged in the sale of goods, the provision of processing, repair and replacement services and the importation of goods within the territory of the PRC must pay value-added tax. According to the VAT Laws, a VAT tax rate at 6%, 11% or 17% applies

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The MOF and the SAT have been implementing the Pilot Plan for Replacing Business Tax with Value Added Tax《營業稅改徵增值稅試點方案》 ( ) (the “Pilot Plan”) on November 16, 2011. Since January 1, 2012, the Pilot Plan has been phased in several provinces by Chinese government, imposing of value-added tax to replace business tax in productive service industries.

On May 24, 2013, MOF and SAT jointly issued the Circular on the Tax Policies for Implementing across the Country the Pilot Program of Levying Value-Added Tax in Lieu of Business Tax on the Transportation Industry and Some Modern Service Industries《關於在全國 ( 開展交通運輸業和部分現代服務業營業稅改徵增值稅試點稅收政策的通知》), expanded the scope of service industries in levying value-added tax in lieu of business tax program which then include the radio, film and television services industries and the value-added tax rates shall be 6%.

The MOF and the SAT promulgated the Circular of Taxation on Overall Implementation of the Pilot Program of Replacing Business Tax with Value-added Tax《關於全面推開營業稅改徵增 ( 值稅試點的通知》) on March 23, 2016. Since May 1, 2016, all business tax payers, including radio, film and television services, shall pay value-added tax instead of business tax with the tax rate of 6%.

According to the Announcement on Relevant Policies for Deepening the Value-Added Tax Reform《關於深化增值稅改革有關政策的公告》 ( ) promulgated by the MOF, the STA and the General Administration of Customs, which was promulgated on March 20, 2019 and became effective on April 1, 2019, a taxpayer engages in a taxable sales activity for the VAT purpose or imports goods, the previous applicable 16% and 10% tax rates are adjusted to 13% and 9%, respectively.

REGULATIONS ON LEASE

Pursuant to the Law of the People’s Republic of China on the Administration of the Urban Real Estate《中華人民共和國城市房地產管理法》 ( ), promulgated by the SCNPC on July 5, 1994, revised on August 30, 2007 and further revised and implemented on August 27, 2009, in the lease of a house, the leaser and the lessee shall conclude a written lease contract defining such matters as the term, purpose and price of the lease, liability for repair, as well as other rights and obligations of both parties, and shall register the lease contract with the department of housing administration for the record. Pursuant to the Administrative Measures Commodity Housing Leasing《商品房屋租賃管理辦法》 ( ), issued by Ministry of Housing and Urban-Rural Development on December 1, 2010 and became effective in February 1, 2011, without the mentioned registration above, the leaser and the lessee may be imposed a fine by the development (real estate) department.

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In accordance with the Contract Law, the lessee may, with consent of the lessor, sub-let the leased item to a third party. The leasing contract between the lessee and the lessor shall continue to be valid if the lessee sub-lets the leased item. In the event that the lessee sub-lets the leased item without consent of the lessor, the lessor may terminate the lease contract. In addition, any change of ownership to the lease item does not affect the validity of the lease contract.

REGULATIONS ON FOREIGN EXCHANGE

China’s main regulations governing foreign exchange is the Regulation of the People’s Republic of China on Foreign Exchange Administration《中華人民共和國外匯管理條例》 ( ) (the “Foreign Currency Administration Rules”), promulgated by the State Council on January 29, 1996 and subsequently amended on January 14, 1997 and August 5, 2008. In accordance with the Foreign Currency Administration Rules and various regulations issued by the SAFE and other relevant PRC governmental authorities, subject to certain procedural provisions (such as offering materials evidencing foreign exchange incomes), RMB is convertible into other currencies for the purpose of current account items, such as trade related receipts and payments, payment of interest and dividends. The conversion of RMB into other currencies and remittance of the converted foreign currency outside the PRC for the purpose of capital account items, such as direct equity investments, loans and repatriation of investment, requires the prior approval or registration from relevant governmental authorities.

On August 29, 2008, SAFE promulgated the Circular of Foreign Exchange on the Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-invested 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》) (the “SAFE Circular 142”). According to the SAFE Circular 142, the RMB fund from the settlement of foreign currency capital of a foreign-funded enterprise shall be used within the business scope as approved by the examination and approval authorities, and shall not be used for domestic equity investment unless otherwise provided. Furthermore, the SAFE conduct extended inspection on the direction and use of RMB fund from settlement of foreign currency capital of foreign-funded enterprises. Without prior approval from the SAFE, changing the purpose of the RMB fund from settlement of foreign currency capital or repaying an RMB loan with an RMB fund from settlement of foreign currency capital, whereas the RMB loan has not been utilized, is prohibited.

Pursuant to the Circular of the SAFE on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment《國家外匯管理局關於進一步改進和調整 ( 直接投資外匯管理政策的通知》) (the “SAFE Circular 59”) which was promulgated by the SAFE on November 19, 2012, and became effective on December 17, 2012 and was amended on May 4, 2015, the SAFE remove or adjust some administrative licensing items with regard to foreign exchange administration over direct investments. According to the SAFE Circular 59, the opening of foreign exchange accounts of upfront expenses, accounts of foreign exchange capital, accounts of assets realization or accounts of security deposits, or reinvestment with legal income of foreign investors in China, such as domestic profits, equity transfer, capital reduction, liquidation, early recovery of investment, as well as purchase and external payment of foreign exchange by foreign-funded enterprises for paying the earnings of foreign investors from reduction of capital, liquidation, early recovery of investment or equity transfer is no longer subject to approval by the SAFE, and the quota for existing single capital accounts for the same entity shall be cancelled, none of which is allowed before.

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On May 11, 2013, the SAFE promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration of Domestic Direct Investment Made by Foreign Investors and the Supporting Documents《關於印發 ( 〈外國投資者境內直接投資外匯管理規定〉及配套文件的通知》), regulating that the SAFE and its branches shall manage direct investment in China by registration and banks shall process business relating to the direct investment in China based on the registration information provided by the SAFE.

On February 13, 2015, the SAFE promulgated the Circular on Simplifying and Improving the Foreign Currency Management Policy on Direct Investment《國家外匯管理局關於進一步簡 ( 化和改進直接投資外匯管理政策的通知》) (the “SAFA Circular 13”), which authorized the banks, in accordance with the regulations of the SAFE, to directly examine and handle foreign exchange registration of direct investment and simplified the procedures for handling certain foreign exchange services under direct investment.

The Circular of the SAFE on Reforming the Management Approach regarding the Settlement of Foreign Capital of Foreign-invested Enterprise《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》) (the “SAFE Circular 19”) was promulgated on March 30, 2015 and became effective on June 1, 2015 by the SAFE, simultaneously repealing the SAFE Circular 142. According to the SAFE Circular 19, foreign-invested enterprises shall be allowed to settle their foreign exchange capitals on a discretionary basis (the “Discretionary Settlement”). The discretionary settlement by a foreign-invested enterprise of its foreign exchange capital shall mean that the foreign-invested enterprise may, according to its actual business needs, settle with a bank the portion of the foreign exchange capital in its capital account for which the relevant foreign exchange bureau has confirmed monetary contribution rights and interests (or for which the bank has registered the account-crediting of monetary contribution). For the time being, foreign-invested enterprises are allowed to settle 100% of their foreign exchange capitals on a discretionary basis. The SAFE may adjust the foregoing percentage as appropriate according to balance of payments situations. The RMB funds obtained from the discretionary settlement shall be managed under the accounts for foreign exchange settlement pending payment, in which further payment by foreign-invested enterprises shall be reviewed by the bank with documentary evidences. The use of RMB funds obtained from exchange settlement in domestic equity investment is no more prohibited according to SAFE Circular 19. Nevertheless, according to the SAFE Circular 19, together with the Notice of the SAFE on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts (《國家外匯管理局關於改革和規範資本項目結匯管理政策的通知》) (the “SAFE Circular 16”), using the foregoing funds for expenditure beyond its business scope or expenditure prohibited by State laws and regulations or using the foregoing funds for disbursing loans to non-affiliated enterprises, is still prohibited. Violation of the SAFE Circular 19 or the SAFE Circular 16 may result in administrative penalties.

On January 26, 2017, the SAFE promulgated the Circular of the State Administration of Foreign Exchange on Further Promoting the Reform of Foreign Exchange Administration and Improving Authenticity and Compliance Review《關於進一步推進外匯管理改革完善真實合規性審核 ( 的通知》), stipulating several capital control measures with respect to the outbound remittance of profit from domestic to offshore entities, including (i) under the principle of genuine transaction, banks must check board resolution regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domestic entities must hold income to account for previous years’ losses before remitting profits. Moreover, domestic entities must make detailed

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REGULATIONS RELATING TO OFFSHORE INVESTMENT

On July 4, 2014, the SAFE promulgated the Circular Concerning Relevant Issues on the Foreign Exchange Administration of Overseas Investing and Financing and Round-Tripping Investing Made by Domestic Residents through 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》) (the “SAFE Circular 37”),which supersedes the Circular Concerning Relevant Issues on the Foreign Exchange Administration of the Financing and the Round-Tripping Investment Made by Domestic Residents through Overseas Special-Purposes Companies by Domestic Residents《關於境內居民通過境外特殊目的 ( 公司融資及返程投資外匯管理有關問題的通知》) (the “SAFA Circular 75”). Under the SAFE Circular 37, a domestic resident must register with the local SAFE branch before he or she contributes assets or equity interests in an overseas special purpose vehicle (the “SPV”). The SPV refers to the overseas enterprises that are directly established or indirectly controlled for the purpose of investment and financing by Mainland residents (including Mainland institutions and resident individuals) with their legitimate holdings of the assets or interests in Mainland enterprises, or their legitimate holdings of overseas assets or interests. In addition, in the event of any change of basic information of the overseas SPV, such as the individual shareholder, name and operation term, among other things, or if there is a capital increase, decrease, equity transfer or swap, merge, spin-off or other amendment of the material items, the domestic resident shall complete the change of foreign exchange registration procedures for offshore investment. Failure to comply with the registration procedures set forth in the SAFE Circular 37 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its offshore parent or affiliate, and acceptance of loans from domestic resident shareholders, or may also effect the ownership structure as well as limit cross-border investment activities. The SAFE Circular 13 has further revised SAFE Circular 37 by requiring domestic residents to register with qualified banks rather than the SAFE or its local counterparts in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.

REGULATIONS RELATING TO DIVIDEND DISTRIBUTION

The major laws and regulations governing the distribution of dividends by foreign invested enterprises in China include the PRC Company Law, the Wholly Foreign-Owned Enterprises Law and its Detailed Rules for the Implementation (Revised in 2014) (《中華人民共和國外資企業法實施細則》(2014年修訂), the Chinese-Foreign Equity Joint Ventures Law and its Implementation Regulations (Revised in 2014)《中華人民共和國中外合資經營企業法 ( 實施條例》(2014年修訂)), the Chinese-Foreign Contractual Joint Ventures Law and its Detailed Rules for the Implementation (Revised in 2017)《中華人民共和國中外合作經營企業法實施細則》 ( (2017年修訂)). According to these laws and regulations, Chinese foreign investment shall only distribute dividend from the accumulated profits (if any) calculated in accordance with Chinese accounting standards and regulations. A PRC company is required to set aside as statutory reserves at least 10% of its after-tax profit, until the cumulative amount of such reserves reaches 50% of its registered capital unless the provisions of laws regarding foreign investment

–112– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. REGULATORY OVERVIEW otherwise provided. The statutory reserve fund shall not be used for cash dividend distribution. Foreign investment enterprise may withdraw rewards and welfare funds for the employees from after-tax profit according to the circumstances. A PRC company may not distribute any profits until any losses from prior fiscal years have been offset. In addition, profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.

M&A Rules

According to the Regulations on Merger and Acquisition of Domestic Enterprises by Foreign Investors《關於外國投資者併購境內企業的規定》 ( ) (the “M&A Rules”) jointly issued by the MOFCOM, the State-owned Assets Supervision and Administration Commission of the State Council, the SAT, the CSRC, the SAIC and the SAFE on August 8, 2006, effective as of September 8, 2006 and amended on June 22, 2009 by the MOFCOM, supervising foreign investors’ purchase and subscription of equity capital of domestic companies and the purchase and operation of assets of domestic enterprises. In accordance with the M&A Rules and the Provisional Measures on Administration of Filing for Establishment and Change of Foreign Invested Enterprises, when not subject to the special market entry administrative measures prescribed by the PRC government, a foreign investor’s merger with and acquisition of a domestic enterprise shall be filed with the commerce authorities without approval of the MOFCOM beforehand. In the event of merger and acquisition by a company, enterprise, or natural person in China, in the name of a company that it has legitimately established or controls outside China, of a domestic company with a related party relationship, the M&A shall be submitted to the MOFCOM for examination and approval. The parties concerned shall not evade the aforesaid requirements through domestic investment by a foreign investment enterprise or any other means.

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OUR HISTORY AND DEVELOPMENT

Overview

Our Company was incorporated in the Cayman Islands under the Companies Law as an exempted company with limited liability on June 17, 2019. As part of the Corporate Reorganization, our Company became the holding company of our Group for the purpose of the [REDACTED] with our businesses conducted through our subsidiaries and Consolidated Affiliated Entities. See the section headed “History and Corporate Structure — Corporate Reorganization” in this document.

The history of our Group can be tracked back to 2013 when our founder, Mr. Yuan, together with his business partners, established LiTian TV & Film using their respective personal funds. Mr. Yuan has participated in film and TV production and distribution since 1998. During his tenure in Great Wall Movie and Television Co., Ltd.* (長城影視股份有限公司), the shares of which are listed on the Shenzhen Stock Exchange (stock code: 002071), he accumulated relevant industry knowledge and experience. See the section headed “Directors and Senior Management” in this document for more details on the experience and qualifications of Mr. Yuan. Leveraging his expertise, industry resources and business connection, in 2013, Mr. Yuan and his business partners established LiTian TV & Film to engage in the investment, production, marketing and distribution of drama series in the PRC.

Key Milestones

The following sets out our Group’s major development milestones:

Year Business Milestones

2013 • LiTian TV & Film was established

2016 • Produced “Guerrilla Heroes” (游擊英雄) which was broadcast on nine TV channels

• Outright-purchased “Double Thorn” (雙刺) which was broadcast on a satellite TV channel

• Adopted the dual business model to concurrently distribute drama series purchased from third parties and our self-produced drama series

2017 • Produced three drama series as the executive producer, including “Double Guns” (雙槍), “The Brothers” (義海) and “Glory of the Blood” (鐵血榮耀)

• Licensed the broadcasting rights of a total of 32 drama series (including both our self-produced drama series and outright-purchased drama series)

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Year Business Milestones

• Mr. Yuan was named the Excellent Distributor by the Shanghai East Film Channel

2018 • Produced a drama series named “A Gallant Army” (老虎隊) as the executive producer, which was broadcast on a state-owned TV channel in June 2019

• Licensed the broadcasting rights of a total of 43 drama series (including both self-produced drama series and outright-purchased drama series), ranking second among all drama series groups with nine TV series first broadcast on satellite TV channels

• Received various awards, including 2018 Best Cooperative Company Award, “Bright Star” — 2017 Rating Contribution Gold Award and 2017 First Prize of Excellent Enterprise by Comprehensive Assessment

2019 • Produced three drama series as the executive producer including “Mr. Fox and Miss Rose” (酋長的男人), “Mom with Smile” (微笑媽媽) and “Great Days with Green Mountains and Clear Waters” (綠水青山紅日子), and licensed the broadcasting rights of a total of 45 drama series (including both self-produced drama series and outright-purchased drama series)

• Commenced cooperation with a leading online media platform in the PRC to produce web series

• Received the award 2019 Best Cooperative Company Award of the Year by Guangxi satellite TV channels

See also the section headed “Business — Awards, Recognition and Memberships in Industry Organizations” in this document for details on the awards and recognitions received by our Group.

OUR CONSOLIDATED AFFILIATED ENTITIES

As of the Latest Practicable Date, we had the following Consolidated Affiliated Entities that principally affected the results, assets, liabilities or businesses of our Group:

LiTian TV & Film

LiTian TV & Film was established as a limited liability company in the PRC on August 2, 2013. It holds a Radio and Television Program Production and Operation Permit《廣播電視節目 ( 製作經營許可證》) for drama series production, promotion, copy and distribution businesses. The principal business activity of LiTian TV & Film is drama series production and distribution. As of the Latest Practicable Date, LiTian TV & Film was the holding company of all the other Consolidated Affiliate Entities of our Group and was controlled by LiTian WFOE through the Contractual Arrangements.

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LiTian Media

LiTian Media was established as a limited liability company in the PRC on July 9, 2014. It holds a Radio and Television Program Production and Operation Permit《廣播電視節目製作經 ( 營許可證》) for drama series production, promotion, copy and distribution businesses. The principal business activity of LiTian Media is drama series production and distribution. Since its incorporation and as of the Latest Practicable Date, LiTian Media was a wholly-owned subsidiary of LiTian TV & Film.

Horgos Tiantian Meimei

Horgos Tiantian Meimei was established as a limited liability company in the PRC on January 24, 2017. It holds a Radio and Television Program Production and Operation Permit (《廣播電視節目製作經營許可證》) for drama series production, promotion, copy and distribution businesses. The principal business activity of Horgos Tiantian Meimei is drama series distribution. Since its incorporation and as of the Latest Practicable Date, Horgos Tiantian Meimei was a wholly-owned subsidiary of LiTian TV & Film.

Horgos Haohao Xuexi

Horgos Haohao Xuexi was established as a limited liability company in the PRC on May 26, 2017. It holds a Radio and Television Program Production and Operation Permit《廣播電視 ( 節目製作經營許可證》) for drama series production, promotion, copy and distribution businesses. The principal business activity of Horgos Haohao Xuexi is drama series distribution. From the date of establishment up to June 9, 2017, Horgos Haohao Xuexi was wholly owned by Mr. Yuan. On June 9, 2017, Mr. Yuan entered into an equity transfer agreement, pursuant to which Mr. Yuan transferred 100% shareholding in Horgos Haohao Xuexi to LiTian TV & Film. Since June 9, 2017 and as of the Latest Practicable Date, Horgos Haohao Xuexi was a wholly-owned subsidiary of LiTian TV & Film.

Tiantian Xiangshang

Tiantian Xiangshang was established as a limited liability company in the PRC on June 15, 2017. It holds a Radio and Television Program Production and Operation Permit《廣播電視節目 ( 製作經營許可證》) for drama series production, promotion, copy and distribution businesses. The principal business activity of Tiantian Xiangshang is drama series distribution. Since its incorporation and as of the Latest Practicable Date, Tiantian Xiangshang was a wholly-owned subsidiary of LiTian TV & Film.

Xinjiang LiTian

Xinjiang LiTian was established as a limited liability company in the PRC on June 22, 2018. It holds a Radio and Television Program Production and Operation Permit《廣播電視節目製作 ( 經營許可證》) for drama series production, promotion, copy and distribution businesses. The principal business activity of Xinjiang LiTian is drama series distribution. Since its incorporation and as of the Latest Practicable Date, Xinjiang LiTian was a wholly-owned subsidiary of LiTian TV & Film.

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Beijing LiTian

Beijing LiTian was established as a limited liability company in the PRC on May 9, 2019. The principal business activity of Beijing LiTian includes drama series production and distribution. Since its incorporation and as of the Latest Practicable Date, Beijing LiTian was a wholly-owned subsidiary of LiTian TV & Film.

CORPORATE HISTORY AND MATERIAL SHAREHOLDING CHANGES OF OUR GROUP COMPANIES

Our Company

Our Company was incorporated in the Cayman Islands as an exempted company with limited liability on June 17, 2019 with an initial authorised share capital of HK$380,000 divided into 38,000,000 Shares of HK$0.01 each. On the date of its incorporation, one Share of HK$0.01 each was issued to an Independent Third Party subscriber. On the same date, the one subscriber share was transferred to Litian Century at par value. On September 30, 2019 and October 17, 2019, an additional 999,999 Shares and 9,000,000 Shares were allotted and issued at par respectively to 13 offshore holding companies beneficially owned by Mr. Yuan and 42 other individuals. See paragraph headed “— Corporate Reorganization” in this section for details.

LiTian BVI

LiTian BVI was incorporated under the laws of the BVI with limited liability on June 28, 2019 as an investment holding company with an authorised share capital of US$50,000 divided into 50,000 shares of US$1 each. On July 5, 2019, one share was allotted and issued to our Company. Since then and up to the Latest Practicable Date, LiTian BVI was wholly-owned by our Company.

LiTian HK

LiTian HK was incorporated under the laws of Hong Kong with limited liability on July 22, 2019 with an initial issued share capital of HK$1 divided into one share which was held by LiTian BVI. Since its incorporation and up to the Latest Practicable Date, LiTian HK was wholly-owned by LiTian BVI.

LiTian WFOE

LiTian WFOE was established under the laws of the PRC as a wholly foreign owned enterprise with limited liability on September 25, 2019, with a registered capital of HK$200,000,000. Since its establishment and up to the Latest Practicable Date, LiTian WFOE was wholly-owned by LiTian HK.

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LiTian TV & Film

LiTian TV & Film was incorporated as a limited liability company in the PRC on August 2, 2013 with an initial registered capital of RMB10,000,000. At the time of incorporation, LiTian TV & Film was held as to 31% by Ms. Han Shuang (韓霜), Mr. Yuan’s ex-spouse, as to 30% by Mr. Sun Ganping (孫淦平), as to 15% by Mr. Ding Peng (丁鵬), as to 14% by Mr. Yuan and as to 10% by Ms. Si Houfang (斯厚芳), respectively. Ms. Si Houfang (斯厚芳) is a cousin of Mr. Yuan. Thereafter LiTian TV & Film underwent several rounds of changes in shareholdings. The tables below summarize the material changes occurred during the Track Record Period and up to the Latest Practicable Date:

Changes in 2016

(i) First change in 2016

Consideration Date of settlement agreement Nature of change Transferor Transferee Consideration(1) date

(RMB)

May 5, 2016 . . Transfer of 24.108% Ms. Han Shuang (韓霜) Mr. Yuan 7,500,000 N/A(2) equity interest Transfer of 12.8576% Mr. Chen Zhu (陳鑄) Mr. Yuan 4,000,000 May 17, 2016 equity interest Transfer of 30.3761% Mr. Ding Peng (丁鵬) Mr. Yuan 9,450,000 June 29, 2017 equity interest

Notes:

(1) Considerations were determined with reference to the registered capital of LiTian TV & Film.

(2) Consideration was not paid as the subject equity interest formed part of the marital property of Mr. Yuan and Ms. Han, who mutually agreed to transfer such equity interest from Ms. Han to Mr. Yuan at nil consideration at the time of their divorce.

On May 12, 2016, upon completion of the registration of the above equity transfers with competent authority, 87.271%, 5.7859% and 3.4716% of the equity interests in LiTian TV & Film were held by Mr. Yuan, Mr. Li Danjun (勵丹駿) and Ms. Si Houfang (斯厚芳) respectively. While Ms. He Lixia (何麗霞), Ms. Li Fuyan (李富艷) and Mr. Zhou Hejian (周何建) each held 0.6429% of the equity interest. Mr. Guo Tiejun (郭鐵君), Mr. Zhao Weikai (趙威愷) and Mr. Zhao Bin (趙斌) each held 0.3214% of the equity interest. Ms. Zhu Lvbin (朱呂斌) and Ms. Ye Ni (葉旎) each held 0.5143% and 0.0643% of equity interest respectively.

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(ii) Second change in 2016

Date of Transferor/ Consideration agreement Nature of change Contributor of capital Transferee Consideration(1) settlement date

(RMB)

June 6, 2016 . . Transfer of 2.1858% Ms. Si Houfang (斯厚芳) Mr. Yuan 680,000 July 21, 2016 equity interest Transfer of 0.6429% Ms. He Lixia (何麗霞) Mr. Yuan 200,000 December 27, equity interest 2016 Transfer of 0.6429% Ms. Li Fuyan (李富艷) Mr. Yuan 200,000 July 21, 2016 equity interest Transfer of 0.5143% Ms. Zhu Lvbin (朱呂斌) Mr. Yuan 160,000 July 21, 2016 equity interest Transfer of 0.3214% Mr. Guo Tiejun (郭鐵君) Mr. Yuan 100,000 July 21, 2016(2) equity interest Transfer of 0.0643% Ms.YeNi(葉旎) Mr. Yuan 20,000 July 21, 2016 equity interest

Transfer of 0.3214% Mr. Zhao Weikai (趙威愷) Mr. Yuan 100,000 July 21, 2016 equity interest Transfer of 0.6429% Mr. Zhou Hejian (周何建) Mr. Yuan 200,000 N/A(3) equity interest Transfer of 0.3214% Mr. Zhao Bin (趙斌) Mr. Yuan 100,000 N/A(3) equity interest Increase in Mr. Yuan N/A 8,090,000 June 14, 2016(4) registered capital Ms. Wei Gewen (韋戈文) N/A 400,000 July 11, 2016(4) Ms. Fu Jieyun (傅潔雲) N/A 400,000 July 12, 2016(4)

Notes:

(1) Considerations for equity transfers were determined with reference to the registered capital of LiTian TV & Film.

(2) RMB89,950 was settled on such date while the remaining was offset by borrowing due to Mr. Yuan from the transferor.

(3) Considerations were offset by borrowings due to Mr. Yuan from relevant transferors.

(4) Considerations for the capital increases were determined based on the face value of the registered capital. The registered capital of LiTian TV & Film was increased to RMB40 million upon completion of the capital increases.

On June 8, 2016, upon completion of the registration of the above equity transfers and capital increases with competent authority, 92.5% and 4.5% of the equity interests in LiTian TV & Film were held by Mr. Yuan and Mr. Li Danjun (勵丹駿) respectively, while Ms. Si Houfang (斯厚芳), Ms. Wei Gewen (韋戈文) and Ms. Fu Jieyun (傅潔雲) each held 1% of the equity interest. Ms. He Lixia (何麗霞), Ms. Li Fuyan (李富艷), Ms. Zhu Lvbin (朱呂斌), Mr. Guo Tiejun (郭鐵君), Ms. Ye Ni (葉旎), Mr. Zhao Weikai (趙威愷), Mr. Zhou Hejian (周何建) and Mr. Zhao Bin (趙斌) ceased to hold any equity interest.

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(iii) Third change in 2016

Consideration Date of settlement agreement Nature of change Transferor Transferee Consideration(1) date

(RMB)

June 14, 2016 . . Transfer of 33% equity Mr. Yuan Ms. Tian 13,200,000 N/A(2) interest Transfer of 15% equity Mr. Yuan Tiantian Meimei 6,000,000 June 28, 2016 interest Investment Transfer of 10.5% equity Mr. Yuan Haohao Xuexi 4,200,000 July 6, 2016 interest Investment

Notes:

(1) Considerations were determined with reference to the registered capital of LiTian TV & Film.

(2) Consideration was not paid as the subject equity interest was a gift from Mr. Yuan to Ms. Tian, the spouse of Mr. Yuan.

On June 15, 2016, upon completion of the registration of the above equity transfers with competent authority in connection with the above equity transfer, LiTian TV & Film was held as to 34% by Mr. Yuan, 33% by Ms. Tian, 15% by Tiantian Meimei Investment, 10.5% by Haohao Xuexi Investment, 4.5% by Mr. Li Danjun (勵丹駿), 1% by Ms. Fu Jieyun (傅潔雲), 1% by Ms. Si Houfang (斯厚芳) and 1% by Ms. Wei Gewen (韋戈文), respectively. Tiantian Meimei Investment is a limited partnership established by Mr. Yuan and Ms. Tian as an investment holding vehicle for the purposes of inviting new investors to invest into LiTian TV & Film. Please refer to the paragraph headed “— [REDACTED]” in this section for details of the investment of Haohao Xuexi Investment, which constitutes a [REDACTED].

(iv) Fourth change in 2016

Consideration Date of settlement agreement Nature of change Transferor Transferee Consideration(1) date

(RMB)

June 27, 2016 . . Transfer of 3% equity Tiantian Meimei Zhihui Xinlong 6,000,000 July 18, 2016 interest Investment Transfer of 7% equity Tiantian Meimei Zhihui Lixiang 14,000,000 July 18, 2016 interest Investment Transfer of 5% equity Tiantian Meimei Zhejiang Ruijiu 10,000,000 July 18, 2016 interest Investment

Note:

(1) Considerations were determined after arm’s length negotiation between the investors and the transferor after taking into consideration the timing of acquisition and the business value of LiTian TV & Film and its subsidiaries at the time of the investment, which was determined with reference to the asset value of the entities.

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On July 13, 2016, upon completion of the registration of the above equity transfers with competent authority, Tiantian Meimei Investment ceased to hold any equity interest in LiTian TV & Film, and 3%, 7% and 5% of the equity interests in LiTian TV & Film were held by Zhihui Xinlong, Zhihui Lixiang and Zhejiang Ruijiu, respectively. The identity of other shareholders and their shareholding percentages remained the same. Please refer to the paragraph headed “— [REDACTED]” in this section for details of the investments of Zhihui Xinlong, Zhihui Lixiang and Zhejiang Ruijiu, which constitute [REDACTED].

Changes in 2017

(i) First change in 2017

On January 4, 2017, upon completion of the registration at competent authority, Ms. Wei Gewen (韋戈文) transferred her 1% equity interest in LiTian TV & Film to Mr. Yuan pursuant to an equity transfer agreement dated December 25, 2016, at a consideration of RMB400,000. Such consideration was determined with reference to the estimated asset value of our Group and was fully settled on January 19, 2017.

(ii) Second change in 2017

On March 2, 2017, upon completion of the registration at competent authority, Zhejiang Ruijiu transferred its 5% equity interest in LiTian TV & Film to Ruijiu Yushang pursuant to an equity transfer agreement dated February 27, 2017, at a consideration of RMB10,500,000. Please refer to the paragraph headed “— [REDACTED]” in this section for details of the investment of Ruijiu Yushang, which constitutes a [REDACTED].

(iii) Third change in 2017

In 2017, LiTian TV & Film underwent the following capital increases where the relevant [REDACTED] made their investments. Please refer to the paragraph headed “— [REDACTED]” in this section for details.

Amount of Date of Contributor of capital Consideration agreement Nature of change capital increase Consideration(1) settlement date

(RMB) (RMB)

June 27, 2017 . . Increase in registered Mr. Zhu 609,137 9,000,000 May 15, 2017 capital Huanghang (朱黃杭) August 8, 2017 Increase in registered Junfeng 4,060,914 50,000,000 August 15, 2017 capital Investment December 31, Increase in registered Kerui 1,461,929 18,000,000 January 5, 2018 2017 ...... capital Chuangye

Note:

(1) Considerations were determined after arm’s length negotiations between the investors and LiTian TV & Film and its then shareholders after taking into consideration the timing of the investments and the business value of LiTian TV & Film and its subsidiaries at the time of the investments, which were determined with reference to the asset values of the entities. Upon completion of the capital increases, the registered capital of LiTian TV & Film was increased to RMB46,131,980.

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Upon completion of the above equity transfers and capital increases and before the Corporate Reorganization, LiTian TV & Film was held as to 30.3477% by Mr. Yuan, 28.6136% by Ms. Tian, 9.1043% by Haohao Xuexi Investment, 8.8028% by Junfeng Investment, 6.0696% by Zhihui Lixiang, 4.3354% by Ruijiu Yushang, 3.9018% by Mr. Li Danjun (勵丹駿), 3.169% by Kerui Chuangye, 2.6012% by Zhihui Xinlong, 1.3204% by Mr. Zhu Huanghang (朱黃杭), 0.8671% by Ms. Fu Jieyun (傅潔雲) and 0.8671% by Ms. Si Houfang (斯厚芳), respectively.

Changes in 2019

Consideration Date of settlement agreement Nature of change Transferor Transferee Consideration(1) date

(RMB)

April 22, Transfer of 4.3354% Ruijiu Yushang Mr. Huang 19,075,760 April 30, 2019 . . . equity interest Weishu 2019 (黃衛書) Transfer of 3.169% Kerui Chuangye Mr. Gong 20,751,780 April 22, equity interest Yueliang 2019 (龔越亮)

On April 30, 2019, upon completion of the registration of the above equity transfers with the competent authority, Ruijiu Yushang and Kerui Chuangye ceased to hold any equity interest in LiTian TV & Film, and 4.3354% and 3.169% of the equity interests in LiTian TV & Film were held by Mr. Huang Weishu (黃衛書) and Mr. Gong Yueliang (龔越亮), respectively. The identity of other shareholders and their shareholding percentages remained the same. Please refer to the paragraph headed “— [REDACTED]” in this section for details of the investments of Mr. Huang Weishu (黃衛書) and Mr. Gong Yueliang (龔越亮), which constitute [REDACTED].

Horgos Haohao Xuexi

Horgos Haohao Xuexi was established as a limited liability company in the PRC on May 26, 2017 with an initial registered capital of RMB3,000,000. On the date of establishment, it was held by Mr. Yuan as to 100%.

On June 9, 2017, Mr. Yuan and LiTian TV & Film entered into an equity transfer agreement, pursuant to which Mr. Yuan agreed to sell his entire equity interest in Horgos Haohao Xuexi to LiTian TV & Film, and LiTian TV & Film agreed to purchase the same from Mr. Yuan, at a consideration of RMB3,000,000. The consideration was not settled because prior to the share transfer from Mr. Yuan to Litian TV & Film, no capital contribution had been made by Mr. Yuan to Horgos Haohao Xuexi. Since then and up to the Latest Practicable Date, Horgos Haohao Xuexi was wholly-owned by LiTian TV & Film.

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There were several [REDACTED] in our Group from 2016 to 2019, with the total amount of proceeds raised by our Company being RMB77,000,000. The following table sets forth key particulars of the [REDACTED]

Haohao Xuexi Mr. Zhu Junfeng Kerui Mr. Huang Mr. Gong Investment(1) (2) (3) (4) (5) Huanghang(6) Investment(7) Chuangye(8) Weishu(9) Yueliang(10) Zhihui XinlongZhihui LixiangZhejiang RuijiuRuijiu Yushang ITR N OPRT STRUCTURE CORPORATE AND HISTORY

Date of the Agreement ...... June14,2016 June 27, 2016 June 27, 2016 June 27, 2016 February 27, 2017 June 27, 2017 August 8, 2017 December 31, 2017 April 22, 2019 April 22, 2019 Equity interests then acquired ...... 10.5% 3% 7% 5% 5% 1.5% 9.0909% 3.169% 4.3354% 3.169%

Total consideration paid ...... RMB4,200,000 RMB6,000,000 RMB14,000,000 RMB10,000,000 RMB10,500,000 RMB9,000,000 RMB50,000,000 RMB18,000,000 RMB19,075,760 RMB20,751,780

Investment cost per share

(11) ...... RMB[REDACTED] RMB[REDACTED] RMB[REDACTED] N/A N/A RMB[REDACTED] RMB[REDACTED] N/A RMB[REDACTED] RMB[REDACTED]

Premium/Discount to the [REDACTED] [REDACTED]% [REDACTED]% [REDACTED]% N/A N/A [REDACTED]% [REDACTED]% N/A [REDACTED]% [REDACTED]% (12) ...... discount discount discount premium discount discount premium

Date when [REDACTED] was fully settled . . . July 6, 2016 July 18, 2016 July 18, 2016 July 18, 2016 March 7, 2017 May 15, 2017 August 15, 2017 January 5, 2018 April 30, 2019 April 22, 2019 2 – 123 –

Basis of determination of consideration ..... Arm’slength negotiations between the investors and the transferor(s) (in the case of equity transfers) and between the investors and LiTian TV & Film and its then shareholders (in the case of capital increases) after taking into consideration the timing of the investments and the business values of LiTian TV & Film and its subsidiaries at the time of the investments, which was determined with reference to the asset values of the entities.

Notes:

(1) On June 14, 2016, Haohao Xuexi Investment acquired RMB4.2 million registered capital in LiTian TV & Film from Mr. Yuan at a consideration of RMB4.2 million.

(2) On June 27, 2016, Zhihui Xinlong acquired RMB1.2 million registered capital in LiTian TV & Film from Tiantian Meimei Investment at a consideration of RMB6 million.

(3) On June 27, 2016, Zhihui Lixiang acquired RMB2.8 million registered capital in LiTian TV & Film from Tiantian Meimei Investment at a consideration of RMB14 million.

(4) On June 27, 2016, Zhejiang Ruijiu acquired RMB2 million registered capital in LiTian TV & Film from Tiantian Meimei Investment at a consideration of RMB10 million. Zhejiang Ruijiu ceased to have interest in LiTian TV & Film on March 2, 2017.

(5) On February 27, 2017, Ruijiu Yushang acquired RMB2 million registered capital in LiTian TV & Film from Zhejiang Ruijiu at a consideration of RMB10.5 million. Ruijiu Yushang ceased to have interest in LiTian TV & Film on April 30, 2019. (6) On June 27, 2017, Mr. Zhu Huanghan, entered into a capital increase agreement with LiTian TV & Film and its then shareholders, pursuant to which Mr. Zhu DOCUMENT THIS IN INFORMATION THE DOCUMENT. THIS CHANGE. OF COVER TO THE SUBJECT ON “WARNING” AND HEADED SECTION INCOMPLETE THE WITH FORM, CONJUNCTION IN DRAFT READ IN BE SHOULD IS DOCUMENT THIS agreed to invest RMB9 million in LiTian TV & Film, of which RMB609,137 was contributed to the registered capital of LiTian TV & Film and the remaining amount of RMB8,390,863 was recorded as the capital reserve of LiTian TV & Film.

(7) On August 8, 2017, Junfeng Investment entered into a capital increase agreement with LiTian TV & Film and its then shareholders, pursuant to which Junfeng Investment agreed to invest RMB50 million in LiTian TV & Film, of which.RMB4,060,914 was contributed to the registered capital of LiTian TV & Film and the remaining amount of RMB45,939,086 was recorded as the capital reserve of LiTian TV & Film.

(8) On December 31, 2017, Kerui Chuangye entered into a capital increase agreement with LiTian TV & Film and its then shareholders, pursuant to which Kerui STRUCTURE CORPORATE AND HISTORY Chuangye agreed to invest RMB18 million in LiTian TV & Film, of which RMB1,461,929 was contributed to the registered capital of LiTian TV & Film and the remaining amount of RMB16,538,071 was recorded as the capital reserve of LiTian TV & Film. Kerui Chuangye ceased to have interest in LiTian TV & Film on April 30, 2019.

(9) On April 22, 2019, Mr. Huang Weishu acquired RMB2 million registered capital in LiTian TV & Film from Ruijiu Yushang at a consideration of RMB19,075,760.

(10) On April 22, 2019, Mr. Gong Yueliang acquired RMB1,461,929 registered capital in LiTian TV & Film from Kerui Chuangye at a consideration of RMB20,751,780.

2 – 124 – (11) The investment cost per share is calculated based on dividing (a) total consideration paid, by (b) the number of Shares held upon [REDACTED].

(12) Assuming the [REDACTED]isHK$[REDACTED] per Share, being the mid-point of the indicative [REDACTED] range, and without taking into account any Shares which may be allotted and issued upon exercise of the [REDACTED] or any Shares to be issued upon exercise of the options which may be granted under the Share Option Scheme. THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. HISTORY AND CORPORATE STRUCTURE

Use of [REDACTED] of and Strategic Benefits from [REDACTED]

Some of the investors acquired equity interests from other shareholders and therefore no funds were raised by our Company for such investments. As of the Latest Practicable Date, 100% of the funds raised from the [REDACTED] had been utilized to supplement our Group’s working capital.

We are of the view that our Company can benefit from the [REDACTED] investments in our Company and their investments demonstrated their confidence in our Group’s operations and served as an endorsement of our Company’s performance, strengths and prospects. Our Company is also of the view that most of the [REDACTED] are professional strategic investors which can provide us with financial capital, as well as advice on our Group’s development through [REDACTED] knowledge and experience. For instance, Zhihui Xinlong and Zhihui Lixiang, and Junfeng Investment have brought in non-executive Directors to our Board, which we believed is beneficial to the enhancement of corporate governance standards of the Group. Please refer to the paragraph headed “Information about the [REDACTED]” in this section for details of their background information.

Special Rights of the [REDACTED]

No special right was granted to the [REDACTED] that will survive the [REDACTED].

[REDACTED] and [REDACTED]

There is no [REDACTED] obligation for any of the [REDACTED].

Upon completion of the Capitalization Issue and the [REDACTED] (assuming the [REDACTED] is not exercised and without taking into account any Shares which may be issued upon the exercise of options granted under the Share Option Scheme), each of the other [REDACTED] or their ultimate beneficial owners will hold less than 10% of our enlarged issued share capital. None of the [REDACTED] are connected person. Therefore, the Shares held by each of the [REDACTED] or their ultimate beneficial owners will count towards the public float of our Company according to Rule 8.08 of the Listing Rules.

Information about the [REDACTED]

Haohao Xuexi Investment is a PRC limited partnership established on May 30, 2016 with the primary purpose of investing in Litian TV & Film. As at the Latest Practicable Date, it was held by Ms. Fu Jieyun (傅潔雲), Mr. Yang Liren (楊立人) and Mr. Zhao Xiaofei (趙小斐)asto 11.90%, 47.62% and 40.48% respectively.

Zhihui Xinlong is a PRC limited partnership established on January 12, 2015, which has filed a record on May 22, 2015 with the Asset Management Association of China (“AMAC”) as a private equity fund and the registration number is S37284. Since its establishment, Zhihui Xinlong focuses primarily on companies in the film & television industry and currently manages approximately RMB80.6 million of assets. The manager of the fund is Hangzhou Zhihui Qianchao Equity Investment Management Co., Ltd.* (杭州智匯錢潮股權投資管理有限公司) which holds 0.12% shareholding in Zhihui Xinlong. The remaining equity interest of Zhihui Xinlong are

– 125 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. HISTORY AND CORPORATE STRUCTURE held as to 18.61% by Ms. Ren Shaoying (任少英); as to 12.41% by Mr. Wang Ping (王萍); as to 8.68% by Mr. Hu Xuegang (胡雪鋼) ; as to 6.20% by each of Mr. Liu Yifan (劉一帆), Mr. Xu Zhenxiao (徐振曉), Mr. Li Yuelun (李越倫), Mr. Du Guoshuai (杜國帥), Mr. Cheng Jianmin (程健敏) and Ms. Jiang Zheyin (江哲音); as to 4.96% by Mr. Wang Bin (王斌); as to 3.72% by Mr. Zhang Jian (張堅); as to 2.48% by each of Ms. Jin Li (金莉), Ms. Huang Qiong (黃瓊), Mr. Zhang Xiaowei (張小未) and Ms. Xu Meiyu (徐美玉); as to 1.86% by Mr. Wang Xuchen (王緒晨); and as to 1.24% by each of Ms. Wei Jiangying (魏江英) and Ms. Wang Lu (王璐).

Zhihui Lixiang is a PRC limited partnership established on April 29, 2016, which has filed a record on July 15, 2016 with the AMAC as a private equity fund and the registration number is SK7317. Since its establishment, Zhihui Lixiang focuses primarily on companies in the film & television industry and currently manages approximately RMB15.1 million of assets. The manager of the fund is Hangzhou Zhihui Qianchao Equity Investment Management Co., Ltd.* (杭州智匯錢潮股權投資管理有限公司), which holds 0.66% equity interest in Zhihui Lixiang. The remaining equity interest of Zhihui Lixiang are held as to 19.87% by Mr. Luo Jianxing (羅建幸); as to 13.25% by each of Mr. Xu Zhenxiao (徐振曉), Mr. Song Gonglv (宋恭律) and Hodin Industry Investment Co., Ltd. (浙江豪鼎實業投資有限公司); and as to 6.62% by each of Mr. Wang Ping (王萍), Ms. Ren Shaoying (任少英), Mr. Luo Zhaofeng (羅朝峰), Ms. Lin Xiaohong (林曉紅), Mr. Han Xin (韓新) and Ms. Zhang Yinan (張軼男).

Zhejiang Ruijiu is a limited liability company established under the laws of the PRC on 30 June 2010 with the primary purpose of investing in various business targets in the PRC. Zhejiang Ruijiu ceased to have any interest in LiTian TV & Film on March 2, 2017.

Ruijiu Yushang is a PRC limited liability company established on December 13, 2016 with the primary purpose of investing in various business targets in the PRC. Ruijiu Yushang ceased to have any interest in LiTian TV & Film on April 30, 2019.

Junfeng Investment is a PRC limited partnership established on July 2, 2015, which has filed a record on June 23, 2017 with the AMAC as a private equity fund and the registration number is ST9656. Since its establishment, Junfeng Investment focuses primarily on equity investment, in particular unlisted growth companies in the telecommunication, media and technology industry and currently manages approximately RMB481 million of assets. The manager of the fund is Junfeng Capital (Pingtan) Equity Investment Management Co., Ltd.* (君豐（資本平潭）股權投資管理有限公司) which holds 0.0002% equity interest in Junfeng Investment. The remaining equity interest of Junfeng Investment is held by Shenzhen Junfeng Entrepreneur Investment Fund Management Co., Ltd* (深圳市君豐創業投資基金管理有限公司).

Kerui Chuangye is a PRC limited partnership established on December 10, 2015 with the primary purpose of investing in various business targets in the PRC. Kerui Chuangye ceased to have any interest in LiTian TV & Film on April 30, 2019.

Ms. Fu Jieyun, our executive Director, holds 11.90% equity interest in Haohao Xuexi Investment, and Mr. Luo Jianxing, our non-executive Director, holds 19.87% equity interest in Zhihui Lixiang. Despite of the aforementioned relationships, all the corporate investors are not connected persons to our Company. Both Zhihui Lixiang and Zhihui Xinlong were introduced to Mr. Yuan through Mr. Yu Yang, our non-executive Director. Junfeng Investment was introduced to Mr. Yuan through an acquaintance.

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Mr. Zhu Huanghang (朱黃杭), Mr. Huang Weishu (黃衛書) and Mr. Gong Yueliang (龔越亮) are individual private investors, all of whom are Independent Third Parties. Mr. Zhu Huanghang has obtained MBA from Cheung Kong Graduate School of Business and has over 10 years working experience in IBM. He was introduced to Mr. Yuan through Mr. Yu Yang. Mr. Huang Weishu has been the independent director of Zhejiang Hailide New Material Co., Ltd.* (浙江海利得新材料股份有限公司), and was introduced to the Company through an acquaintance. Mr. Gong Yueliang operates and holds various private enterprises, and has over 9 years of experience investing in the property, chemical and financial industries. He has been introduced to our Company through Ms. Lau Suk Ching, our senior management.

Compliance with Interim Guidance and Guidance Letters

The Sole Sponsor has confirmed that the investments by the [REDACTED]arein compliance with the Interim Guidance on [REDACTED] (HKEx-GL29-12) and the Guidance on [REDACTED] (HKEx-GL43-12) issued by the Stock Exchange.

CORPORATE REORGANIZATION

In anticipation of our [REDACTED], we underwent Corporate Reorganization pursuant to which our Company became the holding company and [REDACTED] vehicle of our Group.

The following chart illustrates the shareholding and corporate structure of LiTian TV & Film immediately before the Corporate Reorganization:

Haohao Junfeng Gong Si Mr. Yuan Ms. Tian Zhihui Huang Zhihui Zhu Xuexi Li Danjun Yueliang Fu Jieyun Houfang Investment Investment Lixiang Weishu Xinlong Huanghang 30.35% 28.61% 9.10% 8.80% 6.07% 4.34% 3.90% 3.17% 2.60% 1.32% 0.87% 0.87%

LiTian TV & Film

100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

LiTian Horgos Horgos Tiantian Chengdu Xinjiang Tiantian Haohao Lvshui Media Meimei Xuexi Xiangshang Qingshan LiTian

The Corporate Reorganization involved the following steps:

1. Deregistration of Non-Core Business

Prior to the deregistration of Chengdu Lvshui Qingshan Film Co., Ltd.* (成都綠水青山影業有限公司), which was established in August 9, 2017, being a wholly-owned subsidiary of LiTian TV & Film, it was a company which has no business related to drama series production or distribution. Given that there was no favourable resources nor tax benefits in Chengdu to develop the Group’s business, which leads to low business efficiency, in order to streamline our corporate structure for business efficiency, steps were taken by LiTian TV & Film to deregister the said subsidiary. The deregistration process was completed on March 28, 2019 on which date Chengdu Lvshui Qingshan Film Co., Ltd. ceased to be part of our corporate structure. Our Directors and our PRC Legal Advisors have confirmed that there were no material non-compliances before the deregistration.

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2. Incorporation of Beijing LiTian

Beijing LiTian was established under the laws of the PRC with limited liability on May 9, 2019, with a registered capital of RMB10 million, as a wholly-owned subsidiary of Litian TV & Film. It is a company with the principal business of drama series production and distribution and was established for the purposes of facilitating our management efficiency and enhancing our corporate structure for business capacity. The incorporation process was completed on May 9, 2019 and Beijing LiTian has been part of our corporate structure since its establishment.

3. Incorporation of Our Company and the Offshore Group Companies

Our Company was incorporated as an exempted company with limited liability in the Cayman Islands on June 17, 2019 with an authorized share capital of HK$380,000 divided into 38,000,000 shares with par value of HK$0.01 each. On June 28, 2019, LiTian BVI was incorporated under the laws of British Virgin Islands as a wholly-owned subsidiary of our Company and further incorporated LiTian HK under the laws of Hong Kong on July 22, 2019 as its wholly-owned subsidiary, which further incorporated LiTian WFOE under the laws of PRC as its wholly-owned foreign enterprise in the PRC on September 25, 2019.

4. Issue Shares to the Offshore Investment Vehicles of LiTian TV & Film’s Shareholders to Substantially Reflect their Shareholding in LiTian TV & Film

On September 30, 2019, our Company allotted and issued an aggregate of 999,999 Shares at par to the below offshore investment vehicles of LiTian TV & Film’s shareholders, collectively, the “Offshore Shareholders”, and LiTian TV & Film’s shareholders collectively, the “Registered Shareholders” (for further details of the Registered Shareholders, see “— Corporate History and Material Shareholding Changes of Our Group Companies and [REDACTED]”) with reference to their shareholdings in LiTian TV & Film.

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On October 17, 2019, our Company further allotted and issued an aggregate of 9,000,000 Shares at par to the Offshore Shareholders with reference to the shareholding structure of the Registered Shareholders in LiTian TV & Film. Immediately following such share subscriptions, the shareholding of our Company as set forth below:

After allotment on After allotment on September 30, 2019 October 17, 2019

Shareholding Shareholding percentage percentage Shareholder(s) of the Number of in our Number of in our Offshore Shareholders Offshore Shareholders Shares held Company Shares held Company

(%) (%)

Litian Century (“BVI-1 Co”) . Mr. Yuan 303,477 30.3477 3,034,771 30.3477 Marshal Investment Ms. Tian 286,136 28.6136 2,861,356 28.6136 (“BVI-2Co”)...... Joint Fortune Huayi Ms. Li Yiwei (李逸微) and Mr. Xie 88,028 8.8028 880,282 8.8028 Emerging Industry Ailong (謝愛龍) Investment Co. Ltd. (“BVI-3Co”)...... Zhihui Lixiang Equity a total of 12 individuals(1) 60,695 6.0695 606,954 6.0695 Investment Co. Ltd. (“BVI-4Co”)...... Zeli Investment Group Co. Mr. Yang Liren (楊立人)(2) 44,196 4.4196 433,539 4.3354 Ltd.(“BVI-5Co”)...... China Orange Investment Co. Mr. Huang Weishu (黃衛書) 43,354 4.3354 433,539 4.3354 Ltd.(“BVI-6Co”)...... 9th Floor International Co. Mr.LiDanjun(勵丹駿) 39,018 3.9018 390,185 3.9019 Ltd.(“BVI-7Co”)...... Flysky Investment Co. Ltd. Mr. Zhao Xiaofei (趙小斐)(2) 35,799 3.5799 368,508 3.6851 (“BVI-8Co”)...... Zhongjiu International Co. Mr. Gong Yueliang (龔越亮) 31,690 3.1690 316,901 3.1690 Ltd.(“BVI-9Co”)...... Zhihui Xinlong Equity a total of 19 individuals(3) 26,012 2.6012 260,123 2.6012 Investment Co. Ltd. (“BVI-10 Co”) ...... Sky Development Investment Ms. Fu Jieyun (傅潔雲)(2) 19,720 1.9720 195,092 1.9509 Co. Ltd. (“BVI-11 Co”) . . . Kingfu Group Investment Co. Mr. Zhu Huanghang (朱黃杭) 13,204 1.3204 132,042 1.3204 Ltd. (“BVI-12 Co”) ...... Nine En Investment Co. Ltd. Ms.SiHoufang(斯厚芳) 8,671 0.8671 86,708 0.8671 (“BVI-13 Co”) ......

Total ...... 1,000,000 100 10,000,000 100

Notes:

(1) namely, the following individuals, all being Independent Third Parties except for Mr. Luo Jianxing who is a non-executive Director, with equity interest held as to 0.66% by Ms. Teng Baixin (滕百欣); as to 19.87% by Mr. Luo Jianxing (羅建幸); as to 13.25% by each of Mr. Xu Zhenxiao (徐振曉) and Mr. Song Gonglv (宋恭律); as to 11.92% by Mr. Cheng Jianmin (程健敏); as to 1.32% by Ms. Yu Aihua (于愛華); and as to 6.62% by each of Mr. Wang Ping (王萍), Ms. Ren Shaoying (任少英), Mr. Luo Zhaofeng (羅朝峰), Ms. Lin Xiaohong (林曉紅), Mr. Han Xin (韓新) and Ms. Zhang Yinan (張軼男).

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(2) each Offshore Shareholder’s shareholding percentage in our Company was substantially the same as the Registered Shareholders’ shareholding percentage in LiTian TV & Film except that the Company issued shares to BVI-11 Co, BVI-8 Co and BVI-5 Co, the offshore investment vehicles of Ms. Fu Jieyun (傅潔雲), Mr. Zhao Xiaofei (趙小斐) and Mr. Yang Liren (楊立人) (who are the shareholders of Haohao Xuexi Investment) respectively, instead of issuing Shares to Haohao Xuexi Investment directly. Other than Ms. Fu Jieyun, who is an executive Director, each of Mr. Zhao Xiaofei and Mr. Yang Liren is an Independent Third Party.

(3) namely, the following individuals, all being Independent Third Parties, with equity interest held as to 18.61% by Ms. Ren Shaoying (任少英); as to 12.41% by Mr. Wang Ping (王萍); as to 8.68% by Mr. Hu Xuegang (胡雪鋼); as to 6.20% by each of Mr. Liu Yifan (劉一帆), Mr. Xu Zhenxiao (徐振曉), Mr. Li Yuelun (李越倫), Mr. Du Guoshuai (杜國帥), Mr. Cheng Jianmin (程健敏) and Ms. Jiang Zheyin (江哲音); as to 4.96% by Mr. Wang Bin (王斌); as to 3.72% by Mr. Zhang Jian (張堅); as to 2.48% by each of Ms. Jin Li (金莉), Ms. Huang Qiong (黃瓊), Mr. Zhang Xiaowei (張小未) and Ms. Xu Meiyu (徐美玉); as to 1.86% by Mr. Wang Xuchen (王緒晨); as to 1.24% by each Ms. Wei Jiangying (魏江英) and Ms. Wang Lu (王璐); and as to 0.12% by Ms. Teng Baixin (滕百欣).

The following chart illustrates the shareholding and corporate structure of our Group immediately after completion of the above steps:

Shareholders Shareholders Shareholders Yang Huang Zhao Gong Zhu Si Mr. Yuan Ms. Tian of Junfeng of Zhihui Li Danjun of Zhihui Fu Jieyun Liren Weishu Xiaofei Yueliang Huanghang Houfang Investment Lixiang Xinlong 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

BVI-1 Co BVI-2 Co BVI-3 Co BVI-4 Co BVI-5 Co BVI-6 Co BVI-7 Co BVI-8 Co BVI-9 Co BVI-10 Co BVI-11 Co BVI-12 Co BVI-13 Co

30.35% 28.61% 8.80% 6.07% 4.34% 4.34% 3.90% 3.68% 3.17% 2.60% 1.95% 1.32% 0.87%

Our Company

100.0%

LiTian BVI

100.0%

LiTian HK Offshore

100.0% Onshore

LiTian WFOE Registered Shareholders

100.0%

LiTian TV & Film

100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

LiTian Horgos Horgos Tiantian Xinjiang Beijing Tiantian Haohao Xiangshang Media Meimei Xuexi LiTian LiTian

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5. Entering into the Contractual Arrangements

On October 14, 2019, LiTian WFOE entered into various agreements that constitute the Contractual Arrangements with, among others, LiTian TV & Film and its Registered Shareholders, which allows our Company to exercise control over the business operation of our Consolidated Affiliate Entities, as well as enjoy all economic benefits arising therefrom. See the section headed “Contractual Arrangements” in this document for further details.

The following chart illustrates the shareholding and corporate structure of our Group immediately after the adoption of the Contractual Arrangements:

Shareholders Shareholders Shareholders Yang Huang Zhao Gong Zhu Si Mr. Yuan Ms. Tian of Zhihui Li Danjun of Zhihui Fu Jieyun of Junfeng Liren Weishu Xiaofei Yueliang Huanghang Houfang Investment Lixiang Xinlong 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

BVI-1 Co BVI-2 Co BVI-3 Co BVI-4 Co BVI-5 Co BVI-6 Co BVI-7 Co BVI-8 Co BVI-9 Co BVI-10 Co BVI-11 Co BVI-12 Co BVI-13 Co

30.35% 28.61% 8.80% 6.07% 4.34% 4.34% 3.90% 3.68% 3.17% 2.60% 1.95% 1.32% 0.87%

Our Company

100.0%

LiTian BVI

100.0%

LiTian HK Offshore

Onshore 100.0% Registered Shareholders

100.0%

LiTian WFOE LiTian TV & Film

100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Direct Ownership Contractual Arrangements LiTian Horgos Horgos Xinjiang Beijing Tiantian Haohao Tiantian Media Meimei Xuexi Xiangshang LiTian LiTian

CORPORATE AND SHAREHOLDING STRUCTURE IMMEDIATELY AFTER THE CORPORATE REORGANIZATION

The following charts illustrates our corporate and shareholding structure (i) immediately after the completion of Corporate Reorganization and prior to the [REDACTED] and (ii) immediately after the completion of the [REDACTED] (assuming that the [REDACTED] has not been exercised) and (iii) immediately after the completion of the [REDACTED] (assuming that the [REDACTED] has been exercised in full).

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(1) After the completion of Corporate Reorganization and prior to the [REDACTED]

BVI-1 Co BVI-2 Co BVI-3 Co BVI-4 Co BVI-5 Co BVI-6 Co BVI-7 Co BVI-8 Co BVI-9 Co BVI-10 Co BVI-11 Co BVI-12 Co BVI-13 Co

30.35% 28.61% 8.80% 6.07% 4.34% 4.34% 3.90% 3.68% 3.17% 2.60% 1.95% 1.32% 0.87%

Our Company

100.0%

LiTian BVI

100.0%

LiTian HK Offshore

Onshore 100.0% Registered Shareholders

100.0% LiTian WFOE LiTian TV & Film

Direct Ownership 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Contractual Arrangements. LiTian Horgos Horgos Xinjiang Beijing Tiantian Haohao Tiantian Media Meimei Xuexi Xiangshang LiTian LiTian

(2) After the completion of the [REDACTED] (assuming that the [REDACTED] has not been exercised)

Shareholders Shareholders Shareholders Yang Huang Zhao Gong Zhu Si [REDACTED] Mr. Yuan Ms. Tian of Zhihui Li Danjun of Zhihui Fu Jieyun of Junfeng Liren Weishu Xiaofei Yueliang Huanghang Houfang Shareholders Investment Lixiang Xinlong 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% [REDACTED]%

BVI-1 Co BVI-2 Co BVI-3 Co BVI-4 Co BVI-5 Co BVI-6 Co BVI-7 Co BVI-8 Co BVI-9 Co BVI-10 Co BVI-11 Co BVI-12 Co BVI-13 Co

[REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]%

Our Company

100.0%

LiTian BVI

100.0%

LiTian HK Offshore

Onshore 100.0% Registered Shareholders

100.0% LiTian WFOE LiTian TV & Film

Direct Ownership 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Contractual Arrangements. LiTian Horgos Horgos Xinjiang Beijing Tiantian Haohao Tiantian Media Meimei Xuexi Xiangshang LiTian LiTian

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(3) After the completion of the [REDACTED] (assuming that the [REDACTED] has been exercised in full)

BVI-1 Co BVI-2 Co BVI-3 Co BVI-4 Co BVI-5 Co BVI-6 Co BVI-7 Co BVI-8 Co BVI-9 Co BVI-10 Co BVI-11 Co BVI-12 Co BVI-13 Co

[REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]%

Our Company

100.0%

LiTian BVI

100.0%

LiTian HK Offshore

Onshore 100.0% Registered Shareholders

100.0%

LiTian WFOE LiTian TV & Film

Direct Ownership 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Contractual Arrangements LiTian Horgos Horgos Tiantian Xinjiang Beijing Tiantian Haohao Xiangshang Media Meimei Xuexi LiTian LiTian

PRC LEGAL COMPLIANCE

Our PRC Legal Advisors have confirmed that all relevant approvals and permits (as applicable) in respect of the reorganization of our PRC companies as described above have been obtained and the procedures and steps involved are in compliance with relevant PRC laws and regulations.

PRC REGULATORY ISSUES RELATING TO THE CORPORATE REORGANIZATION

SAFE Registration

Pursuant to the Circular of the SAFE on Foreign Exchange Administration of Overseas Investment, Financing and Round-trip Investments Conducted by Domestic Residents through Special Purpose Vehicles (關於境內居民通過特殊目的公司境外融資及返程投資外匯管理有關問題的通知) (the “SAFE Circular 37”), promulgated by SAFE and became effective on July 4, 2014, (a) a PRC resident must register with the local SAFE branch before he or she contributes assets or equity interests in an overseas special purpose vehicle (the “Overseas SPV”) that is directly established or indirectly controlled by the PRC resident for the purpose of conducting investment or financing, and (b) following the initial registration, the PRC resident is also required to register with the local SAFE branch for any major change, in respect of the Overseas SPV, including, among other things, a change of Overseas SPV’s PRC resident shareholder(s), the name of the Overseas SPV, terms of operation, or any increase or reduction of the Overseas SPV’s capital, share transfer or swap, and merger or division. Pursuant to SAFE Circular No. 37, failure to comply with these registration procedures may result in penalties.

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Pursuant to the Circular of the SAFE on Further Simplification and Improvement in Foreign Exchange Administration on Director Investment (關於進一步簡化和改進直接投資外匯管理政策的通知) (the “SAFE Circular 13”), promulgated by SAFE and became effective on June 1, 2015, the power to accept SAFE registration was delegated from local SAFE to local banks where the assets or interest in the domestic entity was located.

As advised by our PRC Legal Advisors, each of the beneficial shareholders of the Offshore Shareholders, being a total of 43 individuals, have completed the registration under the SAFE Circular 13 and SAFE Circular 37 on August 29, 2019.

M&A Rules

On August 8, 2006, six PRC regulatory agencies, including the MOFCOM, the State Assets Supervision and Administration Commission, the State Administration of Taxation, SAIC, CSRC and SAFE, jointly issued the Provisions on the Merger and Acquisition of Domestic Enterprises by Foreign Investors (the “M&A Rules”), which became effective on September 8, 2006, and was amended on June 22, 2009. Pursuant to the M&A Rules, a foreign investor is required to obtain necessary approvals when (i) a foreign investor acquires equity in a domestic non-foreign invested enterprise thereby converting it into a foreign-invested enterprise, or subscribes for new equity in a domestic enterprise through an increase of registered capital thereby converting it into a foreign-invested enterprise; or (ii) a foreign investor establishes a foreign-invested enterprise which purchases and operates the assets of a domestic enterprise, or which purchases the assets of a domestic enterprise and use those assets to establish a foreign-invested enterprise (the “Regulated Activities”).

The M&A Rules, among other things, further purport to require that an offshore special vehicle, or a special purpose vehicle, formed for listing purposes and controlled directly or indirectly by PRC companies or individuals, shall obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an oversea stock exchange, especially in the event that the special purpose vehicle acquires shares of or equity interests in the PRC companies in exchange for the shares of offshore companies.

Given that (i) LiTian WFOE was established as a wholly foreign-owned enterprise by means of direct investment rather than by merger or acquisition by our Company under the M&A Rules, and (ii) no Regulated Activities were involved in the Corporate Reorganization under the M&A Rules, and (iii) no provision in the M&A Rules clearly classified contractual arrangements as a type of transaction subject to the M&A Rules, as advised by our PRC Legal Advisors, the establishment of LiTian WFOE and the Corporate Reorganization are not subject to the M&A Rules, and the [REDACTED] of our Company does not require approvals from CSRC and MOFCOM under the M&A Rules.

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BACKGROUND OF THE CONTRACTUAL ARRANGEMENTS

Our Group is primarily engaged in the business of licensing the broadcasting rights of self-produced and outright-purchased drama series. In addition, we are also engaged in other businesses which include (i) acting as a distribution agent of the broadcasting rights of TV series; (ii) selling drama series scripts; and (iii) investing in drama series in which we act as a non-executive producer (collectively as “Other Businesses”). We conduct our businesses through our Consolidated Affiliated Entities, which hold the requisite permit and approval required for our business, including the TV Series Distribution License and the Radio and Television Program Production and Operation Permit.

Foreign investment activities in the PRC are mainly governed by the Foreign Investment Catalog and the Negative List, which have been promulgated and amended from time to time jointly by the MOFCOM and the NDRC. The Foreign Investment Catalog demonstrates the Catalog of Encouraged Foreign Investment Industries and the Negative List for the foreign investment.

Under the applicable PRC laws and regulations, foreign investors are prohibited from holding equity interest in any enterprise conducting the production and operation of drama series. As advised by our PRC Legal Advisors, except for Other Businesses, our primary business of licensing the broadcasting rights of self-produced and outright-purchased drama series falls within the Negative List. For the three years ended December 31, 2017, 2018 and 2019, the revenue attributable to our business of licensing the broadcasting rights of self-produced and outright-purchased drama series represented approximately 94.8%, 99.2% and 94.1% of our total revenue. As a result, we are not able to acquire and hold the equity interest in our Consolidated Affiliated Entities under the applicable PRC laws and regulations.

Our PRC Legal Advisors advised that the Other Businesses does not fall within the restricted or prohibited foreign investment business. However, having considered the following factors, the Contractual Arrangements have covered our Other Businesses in respect of the aforementioned TV series and film:

(1). for the three years ended December 31, 2017, 2018 and 2019, the revenue attributable to the Other Businesses, which was not material, amounted to RMB19.7 million, RMB3.1 million and RMB23.4 million, representing approximately 5.2%, 0.8% and 5.9% of our total revenue, respectively. Our Company has entered into 13 contracts under the Other Businesses during Track Record Period, among which, two co‐financing agreements for the drama series and a distribution agent agreement are expected to be completed by 2020 . The amount of revenue to be generated from the two outstanding co-financing agreements is expected to be approximately RMB34.08 million in 2020 and we do not expect to make any further contribution to such co-financing agreements. The revenue for the outstanding distribution agent agreement has been recognized in 2019 and the receivables is expected to be fully settled in 2020;

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(2). when the agreements in relation to Other Businesses were entered into, the LiTian WFOE entity had not yet been established. Our Company has approached the other contractual parties of the three agreements that have not been fully performed, but such other contractual parties refused to enter into new agreements or supplemental agreements to novate the obligations of our Consolidated Affiliated Entities under the relevant investment agreements to LiTian WFOE; and

(3). we undertake that any new business that does not fall within the restricted or prohibited industry pursuant to the Foreign Investment Catalog and the Negative List will be conducted by LiTian WFOE or its subsidiaries and our Consolidated Affiliated Entities undertake that they will not conduct any such new business.

After considering that (i) the Contractual Arrangements enable our Group to conduct business in industries that are subject to foreign investment restrictions in the PRC; and (ii) the above reasons for our Other Businesses under the Contractual Arrangements, our Directors are of the view that the Contractual Arrangements are narrowly tailored for the purpose of foreign ownership restrictions requirement.

With the assistance of our PRC Legal Advisors, on October 12, 2019, we consulted the Radio and Television Administration of Zhejiang Province, being the competent authority as advised by our PRC Legal Advisors, and we were advised that (i) the Contractual Arrangements do not violate any applicable laws, regulations or provisions relating to radio and television program production and operating, and would not subject our Group to any administrative penalty; and (ii) the execution of the Contractual Arrangements does not require approval from or filing at the Radio and Television Administration of Zhejiang Province.

As of the date of this document, we have not encountered any interference or encumbrance from any governing bodies in our plan to adopt the Contractual Arrangements and the consolidated financial results of our Consolidated Affiliated Entities are consolidated to those of our Group. Our PRC Legal Advisors have opined that each of our Consolidated Affiliated Entities has been legally established and except for those disclosed under “— Legality of the Contractual Arrangements — PRC Legal Opinions” under this section and the section headed “Risk Factors — Risks relating to our Contractual Arrangements” of this document, the Contractual Arrangements in relation to the operation of our business are valid, legal and binding and do not contravene PRC laws and regulations.

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Circumstances in which We Will Unwind the Contractual Arrangements

Under the Foreign Investment Catalog and the Negative List, foreign investment in radio and television program production and operating business in the PRC is subject to foreign investment prohibition. If the PRC regulatory environment changes and the foreign investment prohibition on radio and television program production and operating business is removed (and assuming there are no other changes in the relevant PRC laws and regulations), LiTian WFOE will exercise the call option in full to hold all of the interest in the Consolidated Affiliated Entities and unwind the contractual arrangements accordingly. See “Termination of the Contractual Arrangements” in this section of this document for further details.

OPERATION OF THE CONTRACTUAL ARRANGEMENTS

In order to comply with the PRC laws and regulations as set out above while availing ourselves of international capital markets and maintaining effective control over all of our operations, on October 14, 2019, our wholly-owned subsidiary, LiTian WFOE, entered into various agreements that constitute the Contractual Arrangements with, among others, LiTian TV & Film, under which all economic benefits arising from the business of our Consolidated Affiliated Entities are transferred to LiTian WFOE to the extent permitted under the PRC laws and regulations by means of service fees payable by our Consolidated Affiliated Entities to LiTian WFOE. The Registered Shareholders are parties to certain agreements which constitute the Contractual Arrangements to ensure that the relevant interests of our Consolidated Affiliated Entities are actually controlled by LiTian WFOE.

The following simplified diagram illustrates the flow of economic benefits from our Consolidated Affiliated Entities to our Group stipulated under the Contractual Arrangements:

Our Company

100%

(3)(4)(5) LiTian WFOE Registered Shareholders

(1) (2) 100% “ ” denotes direct legal and beneficial PRC Consolidated Affiliated Entities ownership in the equity interest “ ” denotes Contractual Arrangements

Notes:

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Summary of the Material Terms of the Contractual Arrangements

A description of each of the specific agreements that comprise the Contractual Arrangements is set out below.

(1) Exclusive Consultancy and Service Agreement

Pursuant to the exclusive consultancy and service agreement (the “Exclusive Consultancy and Service Agreement”) dated October 14, 2019, entered into between LiTian WFOE and LiTian TV & Film, LiTian TV & Film agreed to engage LiTian WFOE as its exclusive provider of technical support, consultation and other services, including

(a) to provide technical support and professional training of relevant personnel;

(b) to assist in consulting, collection of and research in technical and market information related to the principal business (except those market research that wholly foreign-owned enterprises are prohibited from engaging in by the PRC laws (including any laws, regulations, rules, notices, explanations or other binding documents issued by the central or local legislative, administrative or judicial authorities before or after the agreement));

(d) to provide marketing and promotion services; including formulating marketing plans and establishing marketing network;

(e) to provide customer order management and customer service and assist in maintaining relationships with customers;

(f) to license use of relevant intellectual property rights belonging to LiTian WFOE or other designated lP owner to LiTian TV & Film; and

(g) other relevant services reasonably requested by LiTian TV & Film from time to time that are permitted by PRC laws.

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Under the Exclusive Consultation and Service Agreement, the service fee shall consist of 100% of the total consolidated profit of LiTian TV & Film together with dividends received from its subsidiaries, after offsetting the prior-year loss (if any), operating costs, expenses, taxes and other statutory contributions. Notwithstanding the foregoing, LiTian WFOE shall have the right to adjust the amount of service fees based on the service scope. LiTian TV & Film shall make payment to the bank account designated by LiTian WFOE upon the written request of LiTian WFOE, quarterly or annually within the specified time.

In addition, absent the prior written consent of LiTian WFOE, during the term of the Exclusive Consultation and Service Agreement, with respect to the services subject to the Exclusive Consultation and Service Agreement and other matters, LiTian TV & Film shall not, and shall procure the Consolidated Affiliated Entities not to, directly or indirectly accept the same or any similar services provided by any third party, establish cooperation relationships similar to that formed by the Exclusive Consultation and Service Agreement with any third party, or in its own initiative perform any acts which might affect the confidentiality of the technology and secrets involved in the service provided by LiTian WFOE or the effectiveness and efficiency of the technical supports or allow any third party to do the same.

The Exclusive Consultation and Service Agreement also provides that LiTian WFOE has the sole exclusive proprietary rights to and interests in any and all intellectual property rights generated, developed or created by LiTian TV & Film during the performance of the Exclusive Consultation and Service Agreement.

The validity period of the Exclusive Consultation and Service Agreement shall start from the execution date and shall remain effective unless (a) terminated by written agreement between LiTian WFOE and LiTian TV & Film; or (b) all the equity interest of LiTian TV & Film have been legally transferred to LiTian WFOE or nominee(s) designated by LiTian WFOE; or (c) terminated in accordance with the provisions of the Exclusive Consultation and Service Agreement. Additionally, LiTian WFOE shall have the right to terminate the agreement by giving written notice of termination.

(2) Exclusive Call Option Agreement

Pursuant to the exclusive call option agreement (the “Exclusive Call Option Agreement”) dated October 14, 2019, entered into among LiTian WFOE, the Registered Shareholders and LiTian TV & Film, LiTian WFOE has been granted an irrevocable, unconditional and exclusive right to require the Registered Shareholders to transfer any or all of their equity interests in LiTian TV & Film to LiTian WFOE and/or its designated third party (excluding non-independent persons or persons who may give rise to conflicts of interests), in whole or in part at any time and from time to time (the “Exclusive Call Option”). LiTian TV & Film and the Registered Shareholders have covenanted, among other things, that:

(i) without the prior written consent of LiTian WFOE, they shall not in any manner supplement, change or amend the constitutional documents of LiTian TV & Film, increase or decrease their registered capital, or change the structure of their registered capital in other manner, divide, dissolve or change the structure of the corporate form in other manner;

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(ii) they shall maintain LiTian TV & Film’s corporate existence and prudently and effectively operate its business and handle its affairs in accordance with good financial and business standards, practices and legal requirements;

(iii) without the prior written consent of LiTian WFOE, they shall not, at any time after execution of the Exclusive Call Option Agreement, sell, transfer, pledge or dispose of in any manner any assets, business, operation rights, legal or beneficial interest in the income of LiTian TV & Film and/or its subsidiaries or allow any guarantee or security to be created upon them;

(iv) without the prior written consent of LiTian WFOE, LiTian TV & Film shall not incur, inherit, guarantee or assume any debt, except for payables (a) incurred in the ordinary or usual course of business not generated by way of borrowing loans or (b) that has been previously disclosed to and consented by LiTian WFOE in writing;

(v) LiTian TV & Film shall conduct its businesses in the ordinary course of business to maintain asset value and refrain from any action/omission that may adversely affect operating status and asset value of LiTian TV & Film and/or its subsidiaries;

(vi) without the prior written consent of LiTian WFOE, LiTian TV & Film and/or its subsidiaries shall not enter into any material contract with a value of more than RMB20,000,000, except for contracts executed in the ordinary course of business;

(vii) without the prior written consent of LiTian WFOE, LiTian TV & Film and/or its subsidiaries shall not provide any loan, credit or any form of guarantee to any person;

(viii) they shall provide LiTian WFOE with information on business operations and financial condition of LiTian TV & Film and/or its subsidiaries upon the request of LiTian WFOE;

(ix) if requested by LiTian WFOE, they shall procure and maintain insurance in respect of the assets and business of LiTian TV & Film and/or its subsidiaries from an insurance carrier acceptable to LiTian WFOE, for an amount and type of coverage typical for companies that operate similar businesses;

(x) without the prior written consent of LiTian WFOE, LiTian TV & Film and/or its subsidiaries shall not merge, consolidate, partner, joint venture with, acquire or invest in, any person;

(xi) they shall immediately notify LiTian WFOE of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to the assets, business or revenue of LiTian TV & Film and/or its subsidiaries, and shall not settle without the prior written consent of LiTian WFOE;

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(xii) they shall sign all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate claims or raise necessary and appropriate defences against all claims to maintain LiTian TV & Film and/or its subsidiaries’ ownership of all their assets;

(xiii) without the prior written consent of LiTian WFOE, LiTian TV & Film shall not in any manner distribute dividends (including any undistributed profit after tax generated prior to the commencement of the Exclusive Call Option Agreement) to its shareholders;

(xiv) at the request of LiTian WFOE, they shall appoint any persons designated by LiTian WFOE as the directors, supervisors and senior management of LiTian TV & Film; without the prior written consent or request of LiTian WFOE, no replacement or removal of any directors, supervisors and senior management of LiTian TV & Film shall be made;

(xv) at the request of LiTian WFOE, LiTian TV & Film and/or its subsidiaries shall submit their respective company chops to the custody of person(s) designated by LiTian WFOE; and consent from LiTian WFOE is required for external use of such chops; and

(xvi) they shall not terminate or procure the management team of LiTian TV & Film and/or its subsidiaries to terminate any of the Contractual Arrangements entered into with LiTian WFOE, or enter into any agreements that contradict with the Contractual Arrangements; and shall terminate immediately any other material contracts that would are in conflict with the Contractual Arrangements.

In addition to the above, the Registered Shareholders have also covenanted, among other things, that:

• without the prior written consent of LiTian WFOE, they shall procure the board meeting and/or the shareholders’ meeting of LiTian TV & Film not to approve the matters set out in paragraphs (i), (iii), (iv), (x), (xiii) and (xiv) immediately above;

• at the request of LiTian WFOE, they shall procure the board meeting and/or the shareholders’ meeting of LiTian TV & Film to approve the transfer of equity interests in LiTian TV & Film pursuant to the Exclusive Call Option Agreement to person(s) designated by LiTian WFOE and shall transfer the proceeds received from such equity transfer to LiTian WFOE within ten business days;

• the undistributed profits after tax shall be kept at LiTian TV & Film as its operating or reserve funds; and unless decided otherwise by LiTian WFOE, if any Registered Shareholder receives any dividends from LiTian TV & Film subsequent to the commencement of the Exclusive Call Option Agreement, they shall transfer the received dividends to LiTian WFOE or any party designated by LiTian WFOE to the extent allowed by the PRC laws; and

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• they shall strictly comply with the provisions of the Exclusive Call Option Agreement among the Registered Shareholders, LiTian TV & Film and LiTian WFOE, and shall faithfully perform the obligations under such agreement and shall not conduct any act and/or omission which shall affect the validity and enforceability of such agreement. If any Registered Shareholder retains any rights on the equities as in the Equity Pledge Agreement or the Shareholders’ Voting Rights Entrustment Agreement or the Shareholders’ Powers of Attorney, it shall not exercise such rights unless instructed in writing by LiTian WFOE.

The validity period of the Exclusive Call Option Agreement shall take effect upon the execution date and shall remain effective unless terminated (a) when the entire equity interests held by the Registered Shareholders or their successors or the transferees in LiTian TV & Film have been transferred to LiTian WFOE or nominee(s) designated by LiTian WFOE; or (b) by written notice from LiTian WFOE or any of the Registered Shareholders.

(3) Equity Pledge Agreement

Pursuant to the equity pledge agreement (the “Equity Pledge Agreement”) dated October 14, 2019, entered into among LiTian WFOE, the Registered Shareholders and LiTian TV & Film, the Registered Shareholders agreed to unconditionally and irrevocably pledge all their respective equity interests in LiTian TV & Film, including any interest or dividend paid arising therefrom, to LiTian WFOE as a security interest to guarantee the performance of contractual obligations and other payment obligations under the Equity Pledge Agreement, including but not limited to liquidated damages, compensations and relevant expense (the “Secured Indebtedness”).

Under the Equity Pledge Agreement, the Registered Shareholders represent and warrant to LiTian WFOE that appropriate arrangements have been made to protect LiTian WFOE’s interests in the event of death, bankruptcy, divorce or other circumstances relating to the Registered Shareholders which may affect the exercise of its/his/her direct or indirect equity interest in LiTian TV & Film.

If LiTian TV & Film declares any dividend during the term of the pledge, LiTian WFOE is entitled to receive all such dividends, bonus issue or other income arising from the pledged equity interests, if any. If any of the Registered Shareholders or LiTian TV & Film breaches or fails to fulfill the obligations under the agreements underlying the Contractual Arrangements (other than the Spouse Undertaking), LiTian WFOE, as the pledgee, has the priority to be indemnified from the proceeds from the disposal of pledged equity interests. In addition, pursuant to the Equity Pledge Agreement, each of the Registered Shareholders and LiTian TV & Film has undertaken to LiTian WFOE, among other things, not to increase or reduce the registered capital of LiTian TV & Film, transfer the interest in his/her/its equity interests in LiTian TV & Film or create or allow any pledge thereon that may affect the rights and interest of LiTian WFOE without its prior written consent.

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The equity pledge shall remain valid until all the contractual obligations of LiTian TV & Film and the Registered Shareholders are satisfied and all Secured Indebtedness are settled in full under the Contractual Arrangements, or the nullification or termination of the Contractual Arrangements, whichever is later.

Upon the occurrence and during the continuance of an event of default (as defined in the Equity Pledge Agreement), unless such default is cured within ten business days following the Registered Shareholders or LiTian TV & Film’s receipt of the written notice which requests for the cure of such default, LiTian WFOE shall have the right to exercise all such rights as a secured party under the Equity Pledge Agreement and in compliance with applicable PRC law, including but not limited to (i) require the Registered Shareholders and/or LiTian TV & Firm to settle all outstanding debts and other payables in full under the Contractual Arrangements immediately; (ii) being paid in priority with the equity interests based on the monetary valuation that such equity interest would convert into or from the proceeds from auction or sale of such equity interest; or (iii) dispose in any manner the pledged equity upon written notice to the Registered Shareholders under any applicable PRC law.

The equity pledge is required to be registered under the relevant laws and regulations. The equity pledge registration of LiTian TV & Film with the Haining Administration for Market Regulation was completed on February 13, 2020.

(4) Shareholders’ Voting Rights Entrustment Agreement

Pursuant to the shareholders’ voting rights entrustment agreement (the “Shareholders’ Voting Rights Entrustment Agreement”) dated October 14, 2019, entered into among LiTian WFOE, the Registered Shareholders and LiTian TV & Film, each of the Registered Shareholders irrevocably, unconditionally and exclusively appointed the persons designated by LiTian WFOE as its attorneys-in-fact to exercise on his/her/its behalf, any and all shareholder’s right that he/she/it has in respect of its equity interests in LiTian TV & Film, including without limitation:

(a) to propose to convene and to attend shareholders’ meetings of LiTian TV & Film;

(b) to transfer or dispose in any form of any or all of the equity interests in LiTian TV & Film and, for the purpose of the foregoing, sign all required documents and perform all required procedures on behalf of the Registered Shareholders;

(c) to exercise voting rights and execute any and all written resolutions and meeting minutes in the name and on behalf of such shareholder, including without limitation, to nominate, elect, appoint or remove the directors, supervisors or senior management of LiTian TV & Film;

(d) to increase or decrease the registered capital, approve merger, reorganization, dissolution, liquidation or amendments on the articles of association of LiTian TV & Film;

(e) to form a liquidation group on behalf of the Registered Shareholders and exercise the authority of the liquidation group during the liquidation period according to law;

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(f) to authorise or resolve on the disposal of assets of LiTian TV & Firm on behalf of the Registered Shareholders;

(g) to inspect or by other means review all documents and information of LiTian TV & Film, including without limitation, business, operation, customers, financial position or employees;

(h) to receive notice for shareholders’ meetings, execute written resolutions and meeting minutes, and to file any registration documents related to the operations of LiTian TV & Film to relevant governmental authorities and/or with administrative registration departments;

(i) to exercise any other rights granted to shareholders pursuant to LiTian TV & Film’s articles of association (including rights granted subsequent to amendments of such articles) or relevant laws and regulations.

The Shareholders’ Voting Rights Entrustment Agreement has an indefinite term and will only be terminated when (i) all the equity interest or assets have been legally and effectively transferred to LiTian WFOE or its appointed representative in accordance with the Exclusive Option Agreement; (ii) LiTian WFOE terminates this Shareholders’ Voting Rights Entrustment Agreement in accordance with the provisions herein; or (iii) this agreement is terminated pursuant to the operation of laws of the PRC. In addition, LiTian WFOE shall have the right to terminate this agreement by giving written notice to the Registered Shareholders and LiTian TV & Film.

(5) Shareholders’ Powers of Attorney

Pursuant to the Shareholders’ Powers of Attorney dated October 14, 2019 and executed by the Registered Shareholder in favor of LiTian WFOE, each of the Registered Shareholder irrevocably authorized and appointed LiTian WFOE, as his/her/its agent to act on his/her/its behalf to exercise or delegate the exercise of all his/her/its rights as shareholders of LiTian TV & Film. For details of the rights granted, see “Contractual Arrangements — Operation of the Contractual Arrangements — Summary of the Material Terms of the Contractual Arrangements — (4) Shareholders’ Voting Rights & Entrustment Agreement” in this document.

LiTian WFOE shall have the right to further delegate its power to other designated person(s), including but not limited to (i) the director(s) of LiTian WFOE and/or its holding company, and (ii) any person as successor of or liquidator to replace such director(s). Each of the Registered Shareholders irrevocably agreed that the authorization and appointment pursuant to the Shareholders’ Powers of Attorney shall not be invalid, prejudiced or otherwise adversely affected by reason of his/her/its loss of or restriction on capacity, death or other similar events.

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(6) Spouse Undertakings

Pursuant to the Spouse Undertakings, the spouse of each of the individual Registered Shareholders has irrevocably undertaken and acknowledged that:

(a) he/she has full knowledge of the entering into of the Contractual Arrangements by LiTian WFOE, the Registered Shareholders and LiTian TV & Film;

(b) the Registered Shareholder is the only beneficial owner of the equity interests in LiTian TV & Film; the rights and obligations under the Contractual Arrangements do not apply to the spouse; the performance, amendment or termination of the Contractual Arrangements by the Registered Shareholder does not require consent from the spouse; and at any time, the spouse shall not take any actions against the disposal of any equity interest in LiTian TV & Film and shall not make any claim relating to such equity interest;

(c) he/she has consented that the equity interest of LiTian TV & Film held and to be held by the Registered Shareholder (together with any other interests therein) do not fall within the scope of communal properties in case of divorce;

(d) he/she will execute all necessary documents and perform all necessary procedures from time to time to ensure the performance of the Contractual Arrangements; and

(e) any undertaking, confirmation, consent and authorization under the Spouse Undertakings shall not be revoked, prejudiced, invalidated or otherwise adversely affected by death, loss of or restriction on capacity of the spouse, divorce or other similar events.

DISPUTE RESOLUTION

Each of the Contractual Arrangements provides that:

(a) any dispute arising out of or in connection with the Contractual Arrangements shall be resolved through negotiation;

(b) if the parties are unable to settle the dispute within 30 days, any party shall have the right to refer the dispute to and have the dispute finally resolved by arbitration administered by the South China International Economic and Trade Arbitration Commission (Shenzhen Court of International Arbitration) in Hangzhou under the prevailing effective arbitration rules thereof and the language to be used during the arbitration shall be Chinese. The results of the arbitration shall be final and binding on all relevant parties;

(c) the arbitration commission shall have the right to award remedies over the assets of LiTian TV & Film, injunctive relief (for the conduct of business or to compel the transfer of assets); and

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(d) upon request by any party, the courts of competent jurisdictions shall have the power to grant interim remedies in support of the arbitration pending formation of the arbitral tribunal or in appropriate cases. The courts of PRC, Hong Kong, the Cayman Islands (being the place of incorporation of our Company) and the places where the principal assets of LiTian WFOE and LiTian TV & Film are located, shall be considered as having jurisdiction for the above purposes.

In connection with the dispute resolution mechanisms as set out in the Contractual Arrangements and the practical consequences, we are advised by our PRC Legal Advisors that:

(a) under the PRC laws, an arbitral body does not have the power to grant any injunctive relief or provisional or final liquidation order for the purpose of protecting assets of or equity interest in LiTian TV & Film. As such, these remedies may not be available to our Group under the PRC laws;

(b) further, under the PRC laws, courts or judicial authorities in the PRC generally would not award injunctive relief over the equity interest and/or assets of LiTian TV & Film, as interim remedies before there is any final outcome of arbitration;

(c) however, the PRC laws do not disallow the arbitral body to give award of transfer of assets of or an equity interest in LiTian TV & Film at the request of arbitration applicant. In the event of non-compliance with such award, enforcement measures may be sought from the court. However, the court may or may not support such award of the arbitral body when deciding whether to take enforcement measures;

(d) in addition, interim remedies or enforcement orders granted by courts of other jurisdictions such as that of Hong Kong may not be recognizable or enforceable in the PRC; therefore, in the event we are unable to enforce the Contractual Arrangements, we may not be able to exert effective control over each of our Consolidated Affiliated Entities, and our ability to conduct our business may be negatively affected; and

(e) even if the above-mentioned provisions may not be enforceable under the PRC laws, the remaining provisions of the dispute resolution clauses are legal, valid and binding on the parties to the agreement under the Contractual Arrangements.

As a result of the above, in the event that our Consolidated Affiliated Entities or the Registered Shareholders breach any of the Contractual Arrangements, we may not be able to obtain sufficient remedies in a timely manner, and our ability to exert effective control over our Consolidated Affiliated Entities and conduct our business could be materially and adversely affected. See the section headed “Risk Factors — Risks Relating to our Contractual Arrangements” in this document for details.

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PROTECTION IN THE EVENT OF DEATH, BANKRUPTCY OR DIVORCE OF THE REGISTERED SHAREHOLDERS OR DISSOLUTION OR LIQUIDATION OF LITIAN TV & FILM

Each of Mr. Yuan, Ms. Tian, Mr. Huang Weishu (黃衛書), Mr. Li Danjun (勵丹駿), Mr. Gong Yueliang (龔越亮), Mr. Zhu Huanghang (朱黃杭), Ms. Si Houfang (斯厚芳) and Ms. Fu Jieyun (傅潔雲) has irrevocably undertaken to LiTian WFOE that, (i) in the event of death, loss of or restriction on capacity or other circumstances which may affect the exercise of his/her direct or indirect equity interest in LiTian TV & Film, he/she shall transfer his/her direct or indirect equity interest in LiTian TV & Film to LiTian WFOE or its designated entity, as permitted by the applicable PRC laws and regulations at relevant time; and (ii) in the event of divorce, he/she shall not take any actions that are in conflict with purpose and intention of the Contractual Arrangements and shall sign all necessary documents and make all necessary arrangements to ensure the properly enforcement of the Contractual Arrangements from time to time.

In the event of the dissolution or liquidation of LiTian TV & Film, the Registered Shareholders undertake that, among others, LiTian WFOE and/or its designee shall have the right to exercise all shareholders’ rights on behalf of the Registered Shareholders, as the case may be, and shall instruct LiTian TV & Film to transfer assets received under PRC laws directly to LiTian WFOE and/or our designee. See the section headed “Contractual Arrangements — Operation of the Contractual Arrangements — Summary of the Material Terms of the Contractual Arrangements — (4) Shareholders’ Voting Rights Entrustment Agreement” in this document for details.

LOSS SHARING

In the event that our Consolidated Affiliated Entities incur any loss or encounter any operational crisis, LiTian WFOE may, but is not obliged to, provide financial support to our Consolidated Affiliated Entities. None of the agreements constituting the Contractual Arrangements provide that our Company or its wholly-owned PRC subsidiary, LiTian WFOE, is obligated to share the losses of our Consolidated Affiliated Entities or provide financial support to our Consolidated Affiliated Entities. Further, our Consolidated Affiliated Entities shall be solely liable for its own debts and losses with assets and properties owned by it.

Under the PRC laws and regulations, our Company or LiTian WFOE, is not expressly required to share the losses of our Consolidated Affiliated Entities or provide financial support to our Consolidated Affiliated Entities. Despite the foregoing, given that our Consolidated Affiliated Entities’ financial condition and results of operations are consolidated into our Group’s financial condition and results of operations under the applicable accounting principles, our Company’s business, financial condition and results of operations would be adversely affected if our Consolidated Affiliated Entities suffer losses. However, due to the restrictive provisions contained in the Contractual Arrangements as set out in the paragraphs immediately above, the potential adverse effect on LiTian WFOE and our Company in the event of any loss suffered from our Consolidated Affiliated Entities can be limited to a certain extent.

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TERMINATION OF THE CONTRACTUAL ARRANGEMENTS

Each of the Contractual Arrangements provides that: (a) each of the Contractual Arrangements shall be terminated upon the completion of the purchase of all the equity interest that the Registered Shareholders (directly and indirectly) hold in LiTian TV & Film by LiTian WFOE or another party designated by LiTian WFOE pursuant to the terms of the Exclusive Call Option Agreements, save for the Equity Pledge Agreement which shall continue to be in force until all obligations thereunder have been performed or all Secured Indebtedness has been repaid in full; (b) LiTian WFOE shall have the right to terminate the Contractual Arrangements by serving 30-day prior notice in writing; and (c) each of LiTian TV & Film and the Registered Shareholders shall not be entitled to unilaterally terminate the Contractual Arrangements in any situation other than prescribed by the PRC laws.

In the event that the PRC laws and regulations allow LiTian WFOE or us to directly hold all or part of the interest of LiTian TV & Film and/or in our Consolidated Affiliated Entities and/or all as part of the equity interest in LiTian TV & Film and operate drama series production and distribution business in the PRC, LiTian WFOE shall exercise the Equity Call Option as soon as practicable and LiTian WFOE or its designated party shall purchase such amount of equity interest to the extent permissible under the PRC laws and regulations, and upon exercise in full of the Equity Call Option and the acquisition of all the equity interest that the Registered Shareholders (directly and indirectly) hold in LiTian TV & Film by LiTian WFOE or another party designated by LiTian WFOE pursuant to the terms of the Exclusive Call Option Agreements, each of the Contractual Arrangements shall be automatically terminated.

INSURANCE

Our Company does not maintain any insurance policy to cover the risks relating to the Contractual Arrangements.

ARRANGEMENT TO ADDRESS POTENTIAL CONFLICT OF INTEREST

We have in place arrangements to address the potential conflicts of interest between the Registered Shareholders and our Company. Pursuant to the Exclusive Call Option Agreement, LiTian WFOE has the right to require the Registered Shareholders to transfer any or all of their equity interests in LiTian TV & Film to LiTian WFOE or its designated third party. Under the Shareholders’ Voting Rights Entrustment Agreement, each of the Registered Shareholders agreed to appoint the persons designated by LiTian WFOE (excluding non-independent persons or persons who may give rise to conflicts of interests) as their attorney-in-fact to exercise its rights in respect of its equity interests in LiTian TV & Film. Furthermore, under the undertakings given by each of the spouses of the respective individual Registered Shareholders, respectively, each of them unconditionally and irrevocably (i) acknowledged the entry into the Contractual Arrangements by his/her spouses; (ii) confirmed that any equity interests of his/her spouse in LiTian TV & Film do not fall within the scope of the community properties; and (iii) undertook that he or she shall not make any claim on any of the equity interest or assets of LiTian TV & Film. Based on the foregoing, our Directors are of the view that the measures we have adopted are sufficient to mitigate the risks associated with potential conflicts of interest between our Group and the Registered Shareholders and that these measures are sufficient to protect our Group’s interest in our Consolidated Affiliated Entities.

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LEGALITY OF THE CONTRACTUAL ARRANGEMENTS

PRC Legal Opinions

Based on the above, our PRC Legal Advisors are of the opinion that the Contractual Arrangements are narrowly tailored to minimize the potential conflict with relevant PRC laws and regulations and that:

(a) each of our Consolidated Affiliated Entities was duly incorporated and is validly existing and their respective establishment is valid, effective and complies with the relevant PRC laws and regulations, each of the Registered Shareholders is a natural person with full civil and legal capacity or a legally established and validly subsisting entity. Each of our Consolidated Affiliated Entities has also obtained all material approvals and finished all registration as required by PRC laws and regulations and has the capacity to carry out business operations in accordance with its licenses and approvals;

(b) the Contractual Arrangements as a whole and each of the agreements comprising the Contractual Arrangements are legal, valid and binding on the parties thereto, enforceable under PRC laws and regulations, except that the Contractual Arrangements provide that the arbitral body may award remedies over the shares and/or assets of our Consolidated Affiliated Entities, injunctive relief and/or winding up of our Consolidated Affiliated Entities, and that courts of competent jurisdictions are empowered to grant interim remedies in support of the arbitration pending the formation of an arbitral tribunal, while under PRC laws, an arbitral body has no power to grant injunctive relief and may not directly issue a provisional or final liquidation order for the purpose of protecting the assets of or equity interest in our Consolidated Affiliated Entities in case of disputes. In addition, interim remedies or enforcement orders granted by overseas courts such as the courts of Hong Kong may not be recognizable or enforceable in China, and do not, individually or collectively, constitute a breach of any PRC laws and regulations and will not be deemed invalid or ineffective under those laws and regulations; in particular, the Contractual Arrangements do not violate the provisions of the PRC Contract Law including “concealing illegal intentions with a lawful form,” the General Principles of the PRC Civil Law and other applicable PRC laws and regulations;

(c) each of the Contractual Arrangements is not in violation of provisions of the articles of association of our Consolidated Affiliated Entities and LiTian WFOE;

(d) each of the Contractual Arrangements is enforceable under PRC laws and regulations, the entering into and the performance of each of the Contractual Arrangements do not require any approvals or authorizations from the PRC governmental authorities, except that: (i) the pledge of any equity interest in LiTian TV & Film in favor of LiTian WFOE is subject to registration requirements with relevant Administration of Industry and Commerce; and (ii) the transfer of equity interest in LiTian TV & Film contemplated under the Contractual Arrangements is subject to applicable approval and/or registration requirements under the then applicable PRC laws;

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(e) neither LiTian WFOE nor our Company is obligated to share the losses of our Consolidated Affiliated Entities or provide financial support to our Consolidated Affiliated Entities. Each of our Consolidated Affiliated Entities is solely liable for its own debts and losses with assets and properties owned by it; and

(f) the consummation of the contemplated [REDACTED] of our Shares on the Stock Exchange does not violate the M&A Rules.

For details in relation to the risks involved in the Contractual Arrangements, see “Risk Factors — Risks Relating to Our Contractual Arrangements” in this document.

Directors’ Views on the Contractual Arrangements

We believe that the Contractual Arrangements are narrowly tailored because the Contractual Arrangements are only used to enable our Group to consolidate the financial results of our Consolidated Affiliated Entities which engage or will engage in the operation of drama series production and distribution business, where the PRC laws and regulations currently prohibit foreign investment.

As of the date of this document, we have not encountered any interference or encumbrance from any governing bodies in our plan to adopt the Contractual Arrangements so that the financial results of the operation of our Consolidated Affiliated Entities can be consolidated to those of our Group, and based on the advice of our PRC Legal Advisors, the Directors are of the view that the Contractual Arrangements are enforceable under the PRC laws and regulations, except for relevant arbitration provisions, as disclosed in the paragraph headed “Dispute Resolution” in this section.

The transactions contemplated under the Contractual Arrangements constitute continuing connected transactions of our Company under the Listing Rules upon the [REDACTED] and it is impracticable and unduly burdensome for them to be subject to the relevant requirements under the Listing Rules as our Directors are of the view that the transactions contemplated under the Contractual Arrangements are fundamental to our Group’s legal structure and business operations, that such transactions have been and shall be entered into in the ordinary and usual course of business of our Group, are on normal commercial terms and are fair and reasonable and in the interests of our Company and our Shareholders as a whole. Please also refer to “Continuing Connected Transactions” in this document.

CONSOLIDATED FINANCIAL RESULTS OF OUR CONSOLIDATED AFFILIATED ENTITIES

According to IFRS 10 — Consolidated Financial Statements, a subsidiary is an entity that is controlled by another entity (known as the parent). An investor controls an investee when it is exposed, or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Although our Company does not directly or indirectly own our Consolidated Affiliated Entities, the Contractual Arrangements as mentioned above enable our Company to exercise control over our Consolidated Affiliated Entities. Accordingly, the Consolidated Affiliated Entities are treated as subsidiaries of our Group and consolidated by our Group in the consolidated financial statements of our Group.

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DEVELOPMENT IN THE PRC LEGISLATION ON FOREIGN INVESTMENT

Background of the Foreign Investment Law

On January 1, 2020, the Foreign Investment Law passed by the second session of the thirteenth National People’s Congress became effect. The Foreign Investment Law has replaced the Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures《中華人民 ( 共和國中外合資經營企業法》), the Law of the People’s Republic of China on Chinese-Foreign Contractual Joint Ventures《中華人民共和國中外合作經營企業法》 ( ) and the Law of the People’s Republic of China on Wholly Foreign-Owned Enterprises《中華人民共和國外資企業法》 ( )to become the legal foundation for foreign investment in the PRC. The Implementation Regulations for the Foreign Investment Law of the People’s Republic of China《中華人民共和國 ( 外商投資法實施條例》) (the “Implementation Regulations for the Foreign Investment Law”) was passed by the 74th Executive Session of the State Council on December 12, 2019 and was implemented with effect from January 1, 2020.

Impact and Potential Consequences of the Foreign Investment Law on our Contractual Arrangements

Conducting operations through contractual arrangements has been adopted by many PRC-based companies, including us, to obtain and maintain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions or prohibitions in China. The Foreign Investment Law does not explicitly stipulate the contractual arrangements as a form of foreign investment. As advised by our PRC Legal Advisors, since contractual arrangements are not specified as foreign investment under the Foreign Investment Law or the Implementation Regulations for the Foreign Investment Law, and if the future laws, regulations and rules do not incorporate contractual arrangements as a form of foreign investment, the Contractual Arrangements as a whole and each of the agreements comprising the Contractual Arrangements will not be affected and will continue to be legal, valid and binding on the parties.

For details of risks relating to the Foreign Investment Law, please see “Risk Factors — Risks relating to our Contractual Arrangements — Substantial uncertainties exist with respect to the interpretation and implementation of the Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations” in this document.

However, there are possibilities that future laws, administrative regulations and provisions prescribed by the State Council may regard the Contractual Arrangements as a form of foreign investment, at which time it will be uncertain whether the Contractual Arrangements will be deemed to be in violation of the then effective foreign investment access requirements and how the above-mentioned Contractual Arrangements will be handled. In addition, the specific review standards by the relevant authorities determining the Contractual Arrangements as a form of the foreign investment is unpredictable, and the interpretation or implementation ultimately adopted by the relevant authorities of the Foreign Investment Law or the Implementation Regulations for the Foreign Investment Law may be inconsistent with our PRC Legal Advisers’ understanding.

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The Potential Impact to Our Company in the Worst Scenario pursuant to the Foreign Investment Law that the Contractual Arrangements Are Treated as a Foreign Investment

If the radio and television program production and operation is no longer in the Negative List and our Group can legally operate the radio and television program production and operating business under PRC Laws, LiTian WFOE will exercise the Equity Call Option under the Exclusive Call Option Agreement to acquire the equity interest in LiTian TV & Film and unwind the Contractual Arrangements subject to re-approval by the relevant authorities.

If the radio and television program production and operation is in the Negative List, the Contractual Arrangements may be viewed as restricted foreign investment. Although contractual arrangements are not specified as foreign investment under the Foreign Investment Law, the Contractual Arrangements may be regarded as invalid and illegal if the future laws, administrative regulations or provisions prescribed by the State Council define contractual arrangements as a form of foreign investment and the operation of radio and television program production is still in the Negative List. As a result, our Group would not be able to operate our Consolidated Affiliated Entities through the Contractual Arrangements and we would lose our rights to receive the economic benefits of our Consolidated Affiliated Entities. Accordingly, the financial results of our Consolidated Affiliated Entities would no longer be consolidated into our Group’s financial results and we would have to derecognize their assets and liabilities according to the relevant accounting standards. An investment loss would be recognized as a result of such derecognition.

Nevertheless, considering that a number of existing conglomerates are operating under contractual arrangements and some of which have obtained [REDACTED] status abroad and contractual arrangements are not specified as foreign investment under the Foreign Investment Law, our Directors are of the view that it is unlikely that the relevant regulations will take retrospective effect to require the relevant enterprises to remove the contractual arrangements.

COMPLIANCE WITH THE CONTRACTUAL ARRANGEMENTS

Our Group has adopted the following measures to ensure the effective operation of our Group with the implementation of the Contractual Arrangements and our compliance with the Contractual Arrangements:

(a) major issues arising from the implementation and compliance with the Contractual Arrangements or any regulatory enquiries from government authorities will be submitted to our Board, if necessary, for review and discussion on an occurrence basis;

(b) our Board will review the overall performance of and compliance with the Contractual Arrangements at least once a year;

(c) our Company will disclose the overall performance and compliance with the Contractual Arrangements in its annual reports to update the Shareholders and potential investors; and

(d) our Company will engage external legal advisors or other professional advisors, if necessary, to assist the Board to review the implementation of the Contractual Arrangements, review the legal compliance of LiTian WFOE and our Consolidated Affiliated Entities to deal with specific issues or matters arising from the Contractual Arrangements.

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OVERVIEW

We are a leading drama series distribution company in the PRC. Our Group ranked second among all drama series distribution groups in the PRC in terms of the number of TV series first broadcast (首發劇) on satellite TV channels the PRC in 2018, according to the Frost & Sullivan Report. Our Group was established in 2013, and is primarily engaged in the business of licensing the broadcasting rights of self-produced and outright-purchased drama series. In addition, we are engaged in other businesses, which include (i) selling drama series scripts; (ii) acting as a distribution agent of the broadcasting rights of TV series; and (iii) investing in drama series in which we act as a non-executive producer. During the Track Record Period and up to the Latest Practicable Date, we have invested and produced seven TV series and one web series covering a wide range of genres in which we acted as the executive producer. We also distributed 32, 43 and 45 drama series (including both self-produced drama series and drama series we purchased outright from third-party copyright owners/licensors) for the years ended December 31, 2017, 2018 and 2019, respectively. The drama series we distributed were generally broadcast on well-known satellite TV channels and leading online media platforms in the PRC during the Track Record Period.

Our business of licensing the broadcasting rights of drama series mainly involves the licensing of the broadcasting rights of drama series produced by us as the executive producer and drama series that we have outright-purchased the copyrights or broadcasting rights, as the case may be, from third-party copyright owners/licensors. With respect to our business of selling drama series script copyrights, we purchase certain scripts of potential drama series to be made from third-party copyright owners, and in turn, sell such script copyrights to certain drama series production companies from time to time. For our business of acting as a distribution agent of the broadcasting rights of TV series, we promote the relevant TV series to TV channels and negotiate the terms and conditions in connection with the licensing of the relevant broadcasting rights with them on behalf of the TV series copyright owners/licensors. In addition, with respect to our business of investing in drama series that we act as a non-executive producer, we enter into co-financing arrangements with the executive producers of the drama series and make investments therein. We generally take a passive role with limited involvement in the production and distribution of the relevant drama series. For details of our business, please refer to the section headed “— Our Business and Revenue Model” in this document.

In recognition of our achievements, we have garnered acclaim and received numerous awards and recognition during the Track Record Period. For example, in 2019, we received the 2018 Best Cooperative Drama Series Distribution Company Award (2018年度最佳合作影視發行公司獎) from Guangxi Satellite Television (廣西衛視). In 2018, we received the 2017 First Prize of Excellent Enterprise by Comprehensive Assessment (2017年度綜合考核優秀企業一等獎)from Haining Base Management Committee (海寧基地管理委員會). Furthermore, in 2018, “The Brothers” (義海), one of the TV series we produced, received the Television Series Rating Contribution Award (電視劇收視貢獻獎) by Guangdong Radio and Television (廣東廣播電視台) and Sichuan Province Network Rating Contribution Award (四川省網收視貢獻獎) by Sichuan Radio and Television (四川廣播電視台), and in 2017, another one of the TV series we produced, “Double Gun” (雙槍), received the Excellent Television Series Award (優秀電視劇獎)from Shanghai East Film Channel (上海東方電影頻道). For details of our awards and recognition, please refer to the section headed “— Awards, Recognition and Memberships in Industry Organizations” in this document.

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COMPETITIVE STRENGTHS

We believe the following competitive strengths of our Company have contributed to our past success and will have a profound impact on our future growth:

We are a leading and well-recognized drama series distribution company in the PRC

We are a leading drama series distribution company in the PRC. According to the Frost & Sullivan Report, we ranked second among all drama series distribution groups in China in term of the number of TV series first broadcast (首發劇) on satellite TV channels in the PRC in 2018, and 16th among all drama series distribution groups in China in term of revenue in the same year.

Since the establishment of LiTian TV & Film in 2013, we have been positioning ourselves as a drama series producer and distributor that strives to provide popular drama series to our customers. During the Track Record Period, we have been well-recognized in the industry. For example:

(i) in 2017, one of the TV series we produced, “Double Guns” (雙槍), received the Excellent Television Series Award (優秀電視劇獎) from the Shanghai East Film Channel (上海東方電影頻道);

(ii) in 2018, “The Brothers” (義海), another one of the TV series we produced, received the Television Series Rating Contribution Award (電視劇收視貢獻獎)from Guangdong Radio and Television (廣東廣播電視台), and Sichuan Province Network Rating Contribution Award (四川省網收視貢獻獎) from Sichuan Radio and Television (四川廣播電視台); and

(iii) in 2019, we received the 2018 Best Cooperative Drama Series Distribution Company (2018年度最佳合作影視發行公司獎) from Guangxi Satellite Television (廣西衛視)in 2019.

For further information of the awards we have received throughout the years, please see the paragraph headed “Awards, Recognition and Memberships in Industry Organizations” in this section.

Benefiting from the increase in the consumer demand for entertainment in the PRC, the market size of drama series in the PRC experienced substantial growth from approximately RMB78.8 billion in 2015 to approximately RMB126.5 billion in 2019, representing a CAGR of approximately 12.6% during the period, according to the Frost & Sullivan Report. During the Track Record Period, we have experienced revenue growth from approximately RMB378.7 million in 2017 to approximately RMB391.0 million in 2019. It is expected that the market size of drama series in the PRC will further increase to approximately RMB182.8 billion by 2024, representing a CAGR of approximately 7.6% from 2019 to 2024, according to the Frost & Sullivan Report.

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Furthermore, according to the Frost & Sullivan Report, online media platforms have attracted a massive user base with substantial growth and monetization potential, which became an indispensable broadcasting platform for drama series. The market size of the web series market is estimated to grow and reach approximately RMB43.0 billion by 2024, representing a CAGR of approximately 13.4% from 2019 to 2024. To leverage on the business expansion of online media platforms, apart from the production and distribution of drama series, we have cooperated with a leading online media platform in the PRC to produce a web series called “Mr. Fox and Miss Rose” (酋長的男人) in 2019. We believe that the market recognition of our Group and our efforts to produce and distribute web series will enable us to capture the significant market opportunities in the PRC.

We have diversified and synergetic business operations to support our growth in the drama series industry in the PRC

We initially began to operate our business by primarily focusing on investing in and producing our own drama series and licensing the broadcasting rights thereof to our customers. Since the production of a drama series usually takes relatively long time to complete, we believe outright-purchasing drama series can shorten our revenue cycle and improve our operating cash flows. Therefore, during the Track Record Period, we have mainly relied on the licensing of the broadcasting rights of outright-purchased drama series to maintain our market position and have generated stable revenue by utilizing our relationships with upstream third-party drama series copyright owners/licensors and our extensive downstream customer network in the PRC. Through this business, we are able to optimize our supplier and customer network and provide a stable supply of high-quality drama series to our customers. Furthermore, by acquiring the broadcasting rights of the drama series with diverse content from a large group of copyright owners/licensors, we are able to satisfy the varying demands from our customers. For the years ended December 31, 2017, 2018 and 2019, we have distributed a total of 32, 43 and 45 drama series, respectively (including self-produced drama series and outright-purchased drama series).

In order to further enhance our market recognition, we continuously invest and produce our own drama series and license the related broadcasting rights to major TV channels and online media platforms during the Track Record Period. We cooperate with various partners, including writers, production studios and directors in the production of our own drama series. Based on our proven track record and management expertise, we have insights into the evolving market trends of the PRC drama series industry, and are capable of identifying appropriate materials for drama series development and timely responding to the changes in viewers’ preferences. Such insights enable us to internally develop drama series that we anticipate will likely achieve commercial success. We have established a comprehensive and systematic project assessment system that allows us to identify quality story concepts and themes, and objectively determine whether to invest in a drama series. By producing our own drama series, we are able to exert more influence on the creativity, quality and content of the drama series and manage our overall cost more effectively to achieve higher profitability. During the Track Record Period and up to the Latest Practicable Date, we invested and produced seven TV series and one web series in which we acted as the executive producer. We will continue to invest, produce and license self-produced drama series by leveraging on our expertise and knowledge of the industry value chain in order to further enhance our market recognition.

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We believe our diverse and synergetic business operations enable us to effectively leverage our resources, including our comprehensive customer network and enjoy the benefits of different cost structures to relieve the pressure of operating cash flows while maximizing the efficiency of our available capital resources.

We maintain strong and fruitful relationships with our business partners

We have established a broad and extensive customer network to capture a large number of drama series viewers in the PRC. Leveraging on our management’s experience and expertise in the PRC drama series industry, our customer network covers all major provinces, municipalities and autonomous regions in the PRC. During the Track Record Period, we had entered into broadcasting rights transfer agreements with over 90 provincial and municipal TV channels and online media platforms for the distribution of our self-produced and outright-purchased drama series. Our major customers during the Track Record Period comprised some of the largest satellite TV channels in the PRC and leading online media platforms. We maintained business relationships with some of them for over four years. During the Track Record Period, we have continuously improved the quality of our customers. For example, in 2017, only two of our top five customers were ranked in the top 10 leading satellite TV channels by audience rating for the respective years, according to the Frost & Sullivan Report. In 2018, three of our top five customers were ranked in the top 10 leading satellite TV channels by audience rating for the year. In addition, in 2019, we added another one of the 2018 top 10 leading Satellite TV channels in terms of audience rating as our major customer.

We have also entered into strategic cooperation arrangements with a few of our customers. We believe we are able to enhance customer loyalty and foster business relationships with a growing number of customers mainly due to our ability to efficiently source in-demand drama series from the copyright owners/licensors and produce drama series on our own that cater to the prevalent viewers’ preferences. We are committed to deliver high-quality drama series and provide proactive customer services by making frequent visits to our customers as part of our approach to achieving customer satisfaction.

In addition, we have developed and maintained strong relationships with numerous suppliers. Our suppliers primarily include copyrights owners/licensors of the drama series and other reputable film and television related service providers. Some of our major suppliers have worked with us for over three years. We believe that our suppliers are attracted to work with us because of our experience and expertise in production and distribution of drama series in the PRC. Our Directors are of the view that our strong relationship with suppliers allows us to source the drama series that cater to the preferences of our customers, ensure the overall quality of the drama series, and execute our production work on a timely basis.

We have visionary and experienced management team with in-depth industry knowledge

We believe that a substantial part of our success can be attributable to our experienced and proven senior management team. Most of our executive Directors and senior management possess extensive industry experience and in-depth knowledge.

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Our key management team members include:

(i) Mr. Yuan, our chairman of the Board and executive Director, has over 21 years’ experience in the PRC film and TV industry. Prior to founding LiTian TV & Film in 2013, Mr. Yuan served as the deputy general manager at Great Wall Movie and Television Co., Ltd.* (長城影視股份有限公司), a company listed on the Shenzhen Stock Exchange, since 1998. In addition, Mr. Yuan was awarded the Outstanding Distributor Award (優秀發行人) by the Shanghai Eastern Television Channel* (上海東方電影頻道) in 2017; and

(ii) Ms. Tian, our executive Director and chief executive officer, has over 15 years of experience in the PRC film and TV industry. Ms. Tian previously served in numerous management and operational capacities for reputable film and TV companies in the PRC, such as Perfect World Pictures Limited Liability Company* (北京完美影視傳媒有限責任公司) and Beijing Enlight Media Co., Ltd* (北京光線傳媒有限公司), both of which are companies listed on the Shenzhen Stock Exchange.

For details of our Directors and senior management, please refer to the section headed “Directors and Senior Management” in this document.

Our senior management’s invaluable experience, expertise and knowledge, as well as substantial industry resources and market connections have enabled us to maintain sustainable growth of our business and seize suitable business opportunities in a timely manner. Their industry insight and strategic vision have also allowed us to timely respond to the changing market trends and viewers’ preferences, which we believe have contributed to our past success. During the Track Record Period, we distributed a number of market recognized and awarded drama series, such as “Bright Star” (星光燦爛), “The Brothers” (義海), “Guerrilla Heroes” (游擊英雄) and “Double Guns” (雙槍).

We are confident that the leadership of our senior management team will continue to enhance our market position and reputation, and bring business growth and profitability to our Group. We believe that our senior management team will continue to be our Group’s invaluable assets and steer us towards greater success in the future.

BUSINESS STRATEGIES

Continue to strengthen our drama series production and distribution capabilities

According to the Frost & Sullivan Report, the PRC drama series market will continue to experience steady growth in the next few years. We expect that the market size of the PRC drama series industry will grow at a CAGR of 7.6% from 2019 to 2024. To capture the opportunities created by such growth potential, we intend to continue to (i) expand our businesses of licensing the broadcasting rights of both self-produced drama series and outright-purchased drama series; and (ii) further solidify our relationships with third-party copyright owners/licensors, broaden our customer base and improve our distribution capability.

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Specifically, we intend to invest and produce additional drama series covering a wide range of genres, such as family/urban, romance and history, either as the sole investor or through a co-financing arrangement. To achieve this, we plan to strengthen our existing cooperation with third-party creative professionals, such as writers, novelists and publishers, and copyright owners of scripts and/or IPs by entering into strategic cooperation arrangements with them, pursuant to which we will be able to identify and obtain suitable scripts and/or IPs for drama series development early on in the process. We believe this arrangement will provide us with the timing advantage in bringing appropriate drama series to the intended audiences over our competitors. We also aim to expand our sourcing network by establishing business relationships with new third-party screenwriters, novelists, creative writers and publishers by participating in additional entertainment festivals, promotional meetings and other drama series industry activities. We believe a broader network of script copyright owners will enable us to more efficiently identify appropriate drama series for production. In particular, we intend to invest and produce an estimated 11 additional drama series in the next three years. We plan to fund our production of additional drama series through our cash generated from our operations, investments from third parties under the co-financing arrangements and [REDACTED]fromthe[REDACTED]. For further details of the intended use of the [REDACTED]ofthe[REDACTED] for the drama series we plan to self-produce, please see “Future Plans and [REDACTED]” in this document.

In addition, we will continue to expand our business of licensing the broadcasting rights of outright-purchased drama series. We plan to purchase more copyrights (or broadcasting rights) of drama series from third-party copyright owners/licensors. We intend to foster closer relationships with the downstream distribution channels, such as large, reputable satellite TV channels and popular online media platforms, which will allow the drama series we distribute to reach a larger audience. In particular, we plan to continue to participate in industry trade fairs, festivals and conventions on a regular basis, through which we will showcase our purchased drama series and self-produced drama series to existing and potential customers, expand our customer base, enhance the portfolio of our drama series offerings and raise our profile in the industry. In addition, we intend to enter into strategic cooperation agreements with certain of our customers, which will allow us to enjoy priority consideration from our cooperation partners to broadcast a predetermined number of the drama series from us. We believe this arrangement will enable us to secure revenue sources by ensuring that there will be stable demand for the drama series we purchase or produce. It will also allow us to receive payments from our cooperation partners in priority to our peers, which we believe will shorten our revenue cycle. In particular, we intend to purchase the copyrights (or broadcasting rights) of approximately 75 drama series from third-party copyright owners/licensors in the next three years in connection with a variety of genres, including history/war, modern/contemporary, urban/romance, family and mainstream. We expect to utilize cash generated from our operations and the [REDACTED]fromthe[REDACTED] to purchase the copyrights (or broadcasting rights) of the aforesaid drama series. For details of the intended use of the [REDACTED]ofthe[REDACTED] for this business, please refer to the section headed “Future Plans and [REDACTED]” in this document.

We believe that the strategic cooperation arrangements we plan to enter into with the upstream third-party drama series copyright owners/licensors and the downstream broadcasting platforms will foster our business integration and create further synergy for our business operations, which will enhance our operating efficiency and lower related costs.

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We historically distributed more outright-purchased drama series than self-produced drama series and therefore, our business of licensing the broadcasting rights of outright-purchased drama series was a more significant source of our revenue during the Track Record Period. Our revenue generated from the business of licensing the broadcasting rights of self-produced drama series represented a relatively small portion of our total revenue during the Track Record Period mainly because (i) there were limited number of scripts and/or IPs that the Company believed could meet the customers’ preferences or audience’s expectations and were suitable for the production of drama series; and (ii) the production and distribution of self-produced drama series generally require relatively longer time to complete and thus, have a longer revenue cycle, which may adversely impact our operating cash flows. On the other hand, the business of licensing the broadcasting rights of outright-purchased drama series can shorten our revenue cycle and improve our operating cash flows. However, beginning in late 2018 and early 2019, we had been in touch with additional third-party copyright owners/licensors to obtain more content information about the literary and artistic creations. In addition, we had recruited several screenwriters to create drama stories or adapt literary works, such as novels, stories and scripts of which we procured copyrights from other copyright owners/licensors to increase our reserves of suitable genres of drama series for production. This enabled us to expand our business of licensing the broadcasting rights of self-produced drama series, while continuing to maintain our market position in business of licensing the broadcasting rights of outright-purchased drama series.

The production cycle of a self-produced drama series, which primarily represents the period from filming to obtaining the TV Series Distribution License, typically ranges from 12 to 18 months. The revenue cycle of a self-produced drama series is approximately 36 months, compared to the revenue cycle of approximately 12 months for licensing the broadcasting rights of outright-purchased drama series. Despite the relatively longer production cycle and revenue cycle of self-produced drama series, we are committed to expanding our business of licensing the broadcasting rights of self-produced drama series primarily because (i) we can better manage and control the production quality of self-produced drama series. As the executive producer of self-produced drama series, we have the dominant rights to make decisions on scripts, casts, directors and post-production, which will enable us to control the overall quality of the drama series to meet the needs of the leading satellite TV channels and online medial platforms in the PRC. We believe superior quality of the drama series will likely command higher licensing fees from our customers; (ii) self-produced drama series can generate longer-term economic benefits compared with outright-purchased drama series. For our outright-purchased drama series, we generally have broadcasting rights ownership for a term ranging between one and 10 years. However, we typically have 50-year copyright ownership of self-produced drama series upon completion of the production, which allows us to have more flexibility in the distribution process, particularly the priority arrangement in broadcasting rounds and TV platforms selections; and (iii) producing our own drama series will enhance our brand awareness and improve our reputation and market recognition, which we believe will further stimulate the growth of our business. Going forward, we will consider a number of factors, including market demand, changes in customer preferences, availability of qualified drama series IPs and our financial condition and working capital requirements to determine which business segment will have more focus. It is not our current intention to shift our business strategy entirely from the business of licensing the broadcasting rights of outright-purchased drama series to the business of licensing the broadcasting rights of self-produced drama series.

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Strengthen our market research, project development and production management capabilities for our self-produced drama series

As part of our dedicated efforts to refine our project development capabilities, we plan to continue to conduct market research to keep us with the latest trends and industry developments. Specifically, we intend to continue to participate in film and TV industry festivals, promotional meetings and other industry activities to obtain prevalent information about market demand, and at the same time, communicate with major customers and stakeholders in the PRC drama series industry, such as industry regulators, TV channels and online media platforms, to obtain the latest information about their content preferences and viewers’ demands. We believe these efforts will enable us to identify potentially popular stories, themes, ideas and concepts for script development that are likely to achieve market-wide acceptance and recognition.

Moreover, we intend to continue to identify and purchase the scripts and/or IPs that we believe are suitable for the development of our own drama series. This will enhance our reserve of the materials for potential drama series development. Our project department is generally responsible for making an initial assessment on the potential commercial success of the scripts and/or IPs. The creative writers of our project department frequently integrates existing resources, maintain constant contact with the publishers and writers, and learn about the literary creation trends from the major literary institutions and writers in order to obtain first-hand materials for drama series development. Based on the results of the market research we conduct and the key materials underlying the literary creation trends we identify, we intend to set the future development direction of a particular drama series and develop a viable business plan to execute the project. We will fund the production of additional drama series through cash generated from our operations, investments from third-parties under the co-financing arrangement and [REDACTED] from the [REDACTED]. For details of the intended use of the [REDACTED]ofthe[REDACTED] for the drama series we plan to self-produce, please see “Future Plans and [REDACTED]” in this document.

Producing a drama series generally takes a relatively long time to complete and requires a large amount of investment. Expanding the business of licensing the broadcasting rights of self-produced drama series will increase the proportion of costs incurred in connection with the drama series production, including the filming crew service fees, filming and production costs, procurement costs for scripts and post-production fees. As the production and distribution cycle of self-produced drama series is relatively long, it usually takes a longer period of time for us to receive income from self-produced drama series, which may put significant pressure on our profitability and operating cash flows. As a result, we will not be able to grow our self-produced drama series business without improving and strengthening our drama series production management capabilities. Accordingly, we intend to recruit more experienced production management personnel to supervise the relevant projects in which we are the executive producer of the drama series. Our recruitment criteria include, but not limited to, (i) having relevant work experience in the film and television industry; (ii) having excellent communication skills; (iii) being familiar with the entire production and distribution process of drama series; (iv) possessing the ability to develop projects independently; and (v) having a solid literacy and literary aesthetic skills to guide scriptwriting. In addition, we aim to provide more internal training to our staff, which will cover a broad spectrum of our business operations, including, among other things, background and development of the PRC drama series market and the major operation flows of our self-produced drama series business. We intend to encourage our staff to participate in industry events and activities to broaden their perspective. We believe these initiatives will help our team members develop their professional

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Continue to develop web series and capitalize on the growth opportunities in the PRC web series market

China’s Internet landscape is fast evolving through ongoing innovation, applications and content development. According to the Frost & Sullivan Report, China has the largest Internet and mobile Internet user base in the world. In 2019, the number of Internet video users in China reached approximately 646.6 million, accounting for 73.8% of the Internet users in China. The number of paying user/subscribers of the online media platforms increased at a CAGR of 38.4% from approximately 85.7 million in 2015 to approximately 314.8 million in 2019, and accounted for 85.7% of Internet video viewers in 2019. This number is expected to reach approximately 518.2 million by 2024, which is estimated to account for 62.2% of Internet video viewers in 2024.

Given that the web series market in the PRC is highly fragmented, and the revenue derived from the broadcasting of web series is expected to increase significantly, according to the Frost & Sullivan Report, our Directors are of the view that the web series market has substantial potential for growth. In light of this development, we have begun to dedicate substantial resources to develop and grow our self-produced drama series business focusing on the investment, creation, production and distribution of web series. We started to pay close attention to the development of web series since 2017. Before we tapped into this market, we conducted research with respect to various aspects of the web series market in China, including, among others, the market trend, content preferences of online media platforms and feedback from audiences. We analyzed a number of popular web series with solid reputation and audience ratings in this market and started to formulate our business plans for producing and distributing web series in early 2018. Based on our research, we discovered that romance, comedy, youth campus, mystery and fantasy are popular genres in web series market. Accordingly, we decided to first collect stories suitable for producing web series involving these genres. Our project department hired a number of screenwriters, and set up a planning and scripting team to develop the scripts of web series. At the same time, we also contacted different literary copyright companies to acquire the qualified IPs that we believe meet the content preferences and market demand of the online media platforms.

Based on the demographic characteristics and the market research we conduct on the Internet mobile users’ preferences regarding drama series, we plan to further increase our contact with reputable publishers and writers in order to source and identify suitable stories, themes and subjects that we believe will cater to Internet video viewers’ preferences. We also will engage more creative writers to join our project department who can help us frequently integrate existing resources, and discover literary creation trends in order to obtain first-hand materials for script development. Furthermore, we intend to strengthen communications with large online media platforms, which we identify to be major distribution channels for web series based on their user bases. Beginning in the first half of 2019, we collaborated with a leading online media platform in the PRC to produce our first web series, “Mr. Fox and Miss Rose” (酋長的男人), a fantasy-based web series. We currently anticipate that this web series will complete production in the fourth quarter of 2019 and be broadcast in 2020. We will leverage our experience in the production and distribution of this web series to continue our expansion into the web series market. In addition to “Mr. Fox and Miss. Rose” (酋長的男人), we currently have a number of fantasy-, costume fairy- and science fiction-related web series that are in the stage of scripts creation. In particular, we intend to produce approximately four web series in the next three years. We expect to utilize our cash generated from operations, investments from third

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Continue to attract and retain talented professionals

We believe our staff plays a crucial role in our business expansion and growth. In order to continue to maintain our competitive advantage in the PRC drama series market, we intend to recruit additional professional talents while retaining our existing staff. We plan to target experienced professionals in the PRC drama series market, in particular, those who have exposures to investment, production and distribution of drama series. We believe these relevant experiences will bring immediate value-add to our existing operational capabilities and help us expand our business more rapidly. Therefore, in the next three years, we intend to recruit approximately 22 additional staff who possess the necessary skills and knowledge in the drama series market to manage and support our business expansion. For details of the intended use of the [REDACTED]ofthe[REDACTED] for the recruitment of additional staff, please refer to the section headed “Future Plans and [REDACTED]” in this document. In addition to experienced staff, we will also recruit college graduates who are keen to pursue a career in the PRC film and TV industry. We intend to provide a variety of training programs to bring such individuals up to speed, including orientation and on-the-job training to employees to strengthen staff commitment and enhance their skills and technical knowledge at work. For our existing staff, we will continue to provide internal and external training opportunities to enable them to expand their knowledge base, gain more exposure to the industry value chain and keep abreast of the evolving market trends and viewer preferences.

OUR BUSINESS AND REVENUE MODEL

Overview

The table below sets forth the total number of drama series, including both the self-produced drama series and outright-purchased drama series we distributed for the years indicated.

Year ended December 31, 2017 2018 2019

Number of Drama Series Self-produced drama series ...... 3 4 5 Outright-purchased drama series ...... 29 39 40

Total ...... 32 43 45

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The table below sets forth a breakdown of our revenue by business segment for the years indicated.

Year ended December 31,

2017 2018 2019

RMB’000 % RMB’000 % RMB’000 %

Revenue from the licensing of the broadcasting rights of self-produced drama series ...... 13,686 3.6 7,031 1.8 88,982 22.8 Revenue from the licensing of the broadcasting rights of outright-purchased drama series .... 345,363 91.2 375,724 97.4 278,588 71.3 Revenue from the sales of script copyrights(1) ...... 19,689 5.2 –––– Revenue from the provision of distribution agency services(2) ...... ––––9,458 2.4 Revenue from the licensing of the broadcasting rights under co-financing arrangements(3) ...... – – 3,112 0.8 13,968 3.5

Total ...... 378,738 100.0 385,867 100.0 390,996 100.0

Notes:

(1) Revenue from the sales of script copyright primarily represent the revenue generated from selling the copyrights of drama series scripts.

(2) Revenue from the provision of distribution agency services primarily represents the returns generated from distributing drama series to TV channels by acting as a distribution agent.

(3) Revenue from the licensing of the broadcasting rights under co-financing arrangements mainly includes the returns from our investment in drama series production as a non-executive producer.

Licensing of the Broadcasting Rights of Self-Produced Drama Series

Overview

We commenced producing our own drama series and licensing the related broadcasting rights thereof to major TV channels in the PRC since our inception. We were inspired to explore the business opportunities associated with the distribution of self-produced drama series primarily by Mr. Yuan’s extensive experience and knowledge in the drama series industry.

For the years ended December 31, 2017, 2018 and 2019, we distributed three, four and five self-produced drama series, respectively. The revenue generated by our licensing of the broadcasting rights of self-produced drama series amounted to approximately RMB13.7 million, RMB7.0 million and RMB89.0 million, respectively, for the years ended December 31, 2017, 2018 and 2019, accounting for approximately 3.6%, 1.8% and 22.8% of our total revenue for the same periods, respectively.

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The table below sets forth a breakdown of our revenue from licensing the broadcasting rights of our self-produced drama series by the type of customers for the years indicated:

Year ended December 31,

2017 2018 2019

RMB’000 % RMB’000 % RMB’000 %

Customer Type Satellite TV channels...... – – 3,464 49.3 82,204 92.3 Terrestrial TV channels ...... 13,635 99.6 3,326 47.3 1,469 1.7 Other third-party customers (1) ...... 51 0.4 241 3.4 5,309 6.0

Total ...... 13,686 100.0 7,031 100.0 88,982 100.0

Note:

(1) Other third-party customers primarily include online media platforms and other third-party drama series distribution companies in the PRC.

Business Model

Suppliers Suppliers Suppliers (Assembling filming (Promotion and (Script/Screenwriter) crew, filming and marketing services) post-production)

Co-investors, if any

At the planning and projection stage, we search for potential scripts and/or IPs as the main sources to produce the relevant drama series. We either (i) act as the sole investor in such drama series, in which case we contribute all of the funding and are in charge of the entire production and distribution process. Accordingly, we are entitled to all of the copyrights of such drama series and bear all investment risks; or (ii) we cooperate with other investors in a co-financing arrangement, in which case we primarily act as the executive producer of the drama series.

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Under the co-financing arrangement, if we act as the executive producer, we would contribute all or a large portion of the investment amount and take a leading role in the production and distribution of such drama series. We are generally responsible for overseeing the entire production and distribution processes and managing the funds and budget in connection therewith, while the other minority investor(s) take a passive role with limited involvement in such process. We primarily target other co-investors who are institutional investors, such as TV channels and other drama series production companies. During the Track Record Period, we independently produced one drama series, and produced six drama series under the co-financing arrangement in which we acted as the executive producer.

At the filming and production stage and distribution and promotion stage, we work with third-party suppliers to procure a variety of services and products. Accordingly, for self-produced drama series, the costs incurred from planning to production of drama series mainly relate to, among other things, the creation, adaptation or procurement of scripts, casts, consumable items, such as costumes and props, rental expenses of various filming and shooting equipment, travel and accommodation expenses of the filming crew and post-production costs, including, among others, dubbing, editing and audio and video production. These services and products are generally provided by third-party service providers and suppliers. Our project department will formulate the budget for each project by taking into account the costs relating to the production and promotional and marketing activities. Upon receiving the approval from our management, we are primarily responsible for selecting the directors, actors and producers, and appointing third-party services providers to form the filming crew in connection with the production process. During such process, we actively manage different service suppliers and monitor the progress of the tasks of each of the parties involved to ensure we complete the production within the anticipated timetable in a cost-effective manner.

Once the production and post-production of the self-produced drama series are completed, we apply for and obtain the relevant approvals and distribution licenses from the government authorities. We subsequently license the broadcasting rights of the self-produced drama series to our customers, such as the major TV channels and online media platforms in the PRC. As the copyright owner/licensor of the drama series, we generally assist our customers in pre-broadcasting review and re-broadcasting review (if any) before the drama series are approved to be broadcast (or rebroadcast, as the case may be) on the TV channels. We also formulate marketing plans for the drama series and engage third-party service providers to undertake the promotional and marketing activities during the broadcasting stage of the drama series.

If there are minority co-investor(s) in the drama series for which we act as the executive producer, we either pay pre-determined fixed investment returns to such co-investor(s), or share the net license fee received by us from our customers with such co-investor(s) in the proportion of their respective investments.

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Operation Flow

The following diagram illustrates the operation flow of our self-produced drama series business:

Plannin g and Filmin g and Distribution and Projecting Production Promotion

(approx. two to 14 months) (approx. eight to 18 months) (on-going basis)

Project development Forming of filming crew Internal review

Script planning Filming Application for distribution

Project review Presale and promotion(1) Sales and distribution

Filing and public notice/obtaining Post-production Feedback summary production permit

Note:

(1) Presale can take place prior to the completion of filming.

Planning and Projecting. Our self-produced drama series business starts from the planning and projecting stage, which typically includes the following key processes:

• Project Development — Our project department regularly conducts market research to keep track of the trendy drama series and viewing hotspots, interesting topics and themes for drama series, popular broadcasting platforms and evolving market development. In addition, we regularly participate in entertainment festivals, promotional meetings and other industry activities to obtain relevant market demand information, and at the same time, communicate with major customers, such as TV channels, to obtain the latest information on viewer demand and initially gauge our customers’ intention to acquire the broadcasting rights. The creative writers of our project department frequently integrate existing resources, maintain constant contact with the publishers and writers, and learn about the literary creation trends from the major literary institutions and writers in order to obtain first-hand materials for drama series development. Based on the results of the market research we conduct and the key materials underlying the literary creation trends, our senior management generally sets the future development direction of a particular drama series and develop a viable business plan.

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• Script Planning — Our project department conducts the preliminary creative planning of drama series themes based on the relevant market research. There are usually three main creative sources for the themes of drama series scripts: (i) spontaneous creation based on a combination of viewer demand and market hotspots; (ii) adaptive work based on existing literary works; and (iii) scripts that are created as a result of a long-term relationships with well-known screenwriters. We either engage our in-house screenwriters or commission external screenwriters to write the scripts for the drama series to be produced. We may also purchase the copyrights of the scripts directly from Independent Third Parties.

• Project Review — After a script is ready, we typically organize a project planning team to review the project based on its theme and quality. In the meantime, our project planning team conducts a preliminary evaluation in relation to the feasibility of the new project based on the initial feedback from our distribution department. Once the new project receives favorable review results from our project planning team, our project investment committee will collectively review all aspects of the project for approval. We will advance to the project execution stage only after obtaining the approval of our project investment committee.

• Filing and Public Notice/Obtaining Project Permit — Subsequent to receiving our internal approval for the new project, our project department will make a filing with the relevant PRC government authorities and apply for the public notice of the new project in accordance with the Administrative Provisions on the Production and Management of Radio and Television Programs《廣播電視節目製作經營管理規定》 ( ) and the Administrative Measures of Record-filing and Announcement for Filming and Production of Drama Series《電視劇拍攝製作備案公示管理辦法》 ( ). We will commence filming and production of the drama series once the publication period is completed and the relevant production permit is obtained.

Filming and Production. The filming and production stage typically includes the following steps:

• Forming of Filming Crew — The filming crew is a unique production unit in the film and television industry. It is composed of a variety of professionals, including, among others, producer(s), director(s), actors, camera crew, makeup artists and sound recording and editing crew. Having taken into account the related costs, we generally appoint Independent Third Parties to be responsible for the operation of the filming crew. We usually designate a producer and an accountant to be responsible for effectively managing the budget and coordinating different working streams in the overall filming and production process.

• Filming — The time required to shoot a particular drama series is affected by a variety of factors, including, but not limited to, the length and scale of the drama series, the availability and schedules of the actors, the conditions of the natural environment and filming studios, and the availability of funds. The filming period is usually three to six months, and the filming crew is dissolved after the shooting is completed, except for the executive producer, director and a limited number of the remaining filming crew who will participate in the post-production work.

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• Presale and Promotion — The sales and marketing of a drama series typically comprise presale, which occurs prior to the completion of the filming, and distribution, which occurs after the drama series had completed the filming and post-production. Presale is an important step in the sales and marketing efforts because presale activities facilitate the TV channels’ determination of the relevant broadcast schedules ahead of time and enable them to arrange for the time slots of various TV program lineups in a more efficient manner. It is also beneficial for us to take this opportunity to seize the market share of the drama series to be broadcast.

• Post-production — Post-production is the recreation and deep processing of the drama series shooting material, which has an important impact on the quality of edited drama series. The main tasks of this stage include screen dialogue editing, music recording, sound imitating, re-recording of sound effects, supplementary shooting of scenes, production of the captions at the beginning and end of the film and sound mixing, among other things.

Distribution and Promotion. The distribution and promotion stage is the last stage of our self-produced drama series business, which generally includes the following procedures:

• Internal Review — Once the drama series completes its post-production work, our post-production department and distribution department will conduct an overall evaluation of the quality of the drama series and the embedded commercials based on the quality-control standards we have in place. Any quality-related issue discovered during this process will be rectified before the drama series is submitted to the relevant government authorities for review.

• Application for Distribution — After our internal review, we will submit the drama series to the relevant PRC government review organization for content review. During the review process, we will also adjust and modify the content of certain drama series according to the opinions of the relevant PRC government review organization. After the examination is completed and the approval is issued, we will be granted the relevant TV Series Distribution License.

• Sales and Distribution — After obtaining the relevant drama series distribution license, we will be permitted to conduct sales and distribution activities, and to fulfill our obligations under the broadcasting rights transfer agreements that we entered into with our customers. During the Track Record Period and up to the Latest Practicable Date, we mainly transferred the broadcasting rights to TV channels (including satellite TV channels and terrestrial TV channels), online media platforms, such as the online video streaming service providers, and other third-party companies engaged in the distribution of drama series.

• Feedback Summary — We have established an effective market summary, analysis and feedback mechanism. Recording the distribution information and related data throughout the entire process of producing the drama series not only helps us effectively maintain customer relations, but also provides important references for our planning, investment and distribution of new projects.

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Differences between the Production and Distribution Processes of TV Series and Web Series

The operation flow of producing a web series is generally identical to the production of a TV series. The key differences are as follows:

• With respect to the selection of story genres, web series generally has more flexibility compared to TV series. As the broadcasting of TV series typically covers larger audiences from different age groups, a TV station has to consider the preferences of the mass audiences when it comes to selecting the appropriate genres of TV series to broadcast. As a result, the content and genres of most TV series we distribute, such as mainstream, history, war and family ethics, are, to a large extent, limited by the preferences and demands of the TV channels in China. For web series, however, since the Internet users are generally of younger age and pay for the content they would like to watch according to their individual interests and preferences, online media platforms are more likely to tailor the content of web series to serve the niche market and satisfy the particular demands of the Internet users. Therefore, we are in position to be able to select or create more diversified web series to satisfy the differentiating preferences of the younger audiences.

• With respect to the distribution process, we generally undertake the planning and projection, acquisition of IPs and script adaptation of the web series in the early stage. Once the script is completed, we will communicate with the online media platform to obtain its feedback and discuss the feasibility of such web series. If the online media platform approves the project, it will either (i) buy out the copyrights and bear full investment risks of such web series, or (ii) make proportional investment and share the profits according to the proportion of its investment. We will generally act as the producer to complete the filming and production of such web series. If the copyright of the web series is purchased by the online media platform, it will pay us the production fees according to the agreement. If the web series is jointly funded by the online media platform and us, other than the production fees we will receive from the online media platform, we will also share the profits with such platform, which are usually determined based on the click volume of the viewers and advertising income received by the online media platform during the web series broadcasting period.

• During the distribution stage, before making a web series available to be broadcast on the online media platforms in the PRC, we are required to make a filing with the relevant authorities and obtain a filing number for such web series.

Broadcasting Rights Transfer Arrangements between Us and Our Customers

Once we complete the production of our own drama series, we generally enter into formal broadcasting rights transfer agreements with our customers. According to these agreements, we grant our customers various exclusive or non-exclusive rights to broadcast the relevant drama series.

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Salient Terms of the Broadcasting Rights Transfer Agreements with Our Customers

The following table sets forth the salient terms of the broadcasting rights transfer agreements we entered into with our customers during the Track Record Period:

Subjects Salient Terms

Licensed subject ...... Each broadcasting rights transfer agreement generally covers a particular drama series

License period ...... Generally a range between one and 10 years

Broadcasting rights Usually include (i) the type and length of the drama series, the broadcast rights transferred ...... subject to the transfer; (ii) the type of medium for broadcasting, such as satellite TV and/or terrestrial TV; (iii) the length of the license; and (iv) whether the customer has the right to broadcast the drama series via satellite TV channels. Certain of the agreements also include a clause designating the priority of broadcasting (i.e., the first-run broadcast (首輪), second-run broadcast (二輪)or rerun broadcast (重播)), the time slot during the day for broadcasting (i.e., prime time (黃金檔) (typically 20:00-22:00 of each day) or otherwise) and the number of times when the particular drama series can be broadcast

Territories and We granted the right to broadcast the drama series in certain provinces in the exclusivity ...... PRC to our customers. Such rights can be either exclusive or non-exclusive

Broadcasting rights We normally require our customers to pay us a fixed broadcasting rights transfer transfer fee ...... fee, which is calculated by multiplying the transfer fee per episode by the number of available episodes in a particular drama series. Such fee is generally payable in installments. The settlement period in each agreement varies. Pursuant to the broadcasting rights transfer agreements, our customers are generally required to (i) settle the first installment within a prescribed period as stipulated in the agreement after signing the contract; (ii) settle an additional percentage of the total amount within a prescribed period upon receiving all authorizations, licenses and a full set of broadcasting tapes of the drama series; and (iii) settle the remainder upon receipt of the invoice issued by us after the broadcasting of such drama series

Delivery of Some agreements contain provisions relating to the format and specifications of the materials ...... the drama series materials to be delivered to our customers and the proposed schedule of delivery

Termination ...... Theparties may, subject to mutual agreement, terminate the broadcasting rights transfer if and when (i) certain force majeure events or incidents that are beyond the control of either party occur that render the agreements unenforceable; (ii) there has been a change in the circumstances that led to parties entering into the agreements; and (iii) there have been changes in applicable legal requirements or other situations that render the agreement terminable

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Co-financing Arrangement in Drama Series in Which We Act as an Executive Producer

For certain drama series we produced, we entered into co-financing arrangements with third-party co-investors to jointly finance the production and distribution of the drama series. For the drama series under this arrangement, we generally contribute a significant portion of the investment and the co-investors contribute the remainder. We either pay pre-determined fixed investment return to such co-investors or share the net license fee received by us from our customers with such co-investors in the proportion of their respective investments. The interest rate under the co-financing arrangements generally ranges between 9.0% and 25.0%.

The following table sets forth the salient terms of our agreements with the co-investors under the co-financing arrangement for the drama series in which we acted as the executive producer during the Track Record Period.

Subjects Salient Terms

Investment amount ..... Theinvestment contributed by each co-investor normally represents 10% to 60% of the total estimated investment in the drama series as stipulated in the agreement.

Payment of investment We either pay fixed investment returns calculated by the interest rate agreed by returns ...... the parties for each project to other co-investors, or share the net license fees with them according to the proportion of the investments.

Copyright ownership . . . The copyrights of such drama series that we act as the executive producer either belong to us entirely or are jointly owned by us and other co-investors according to the proportion of the investment.

Termination ...... Intheevent any party is in breach of the agreement, the party in breach shall be liable for actual loss caused to the non-breaching party.

– 171 – During the Track Record Period and up to the Latest Practicable Date, we had invested and produced a total of seven TV series and DOCUMENT THIS IN INFORMATION THE DOCUMENT. THIS CHANGE. OF COVER TO THE SUBJECT ON “WARNING” AND HEADED SECTION INCOMPLETE THE WITH FORM, CONJUNCTION IN DRAFT READ IN BE SHOULD IS DOCUMENT THIS one web series. The following table sets forth the major TV series that have been produced and distributed as of the Latest Practicable Date, which have generated revenue during the Track Record Period:

Expected Revenue Expectedto be RevenueReceived for tothe be Year Revenue Received for DateValid of Period the Ending Recognized theDecember Year 31, TVof Series the TVInvestment During the Ending DistributionSeries 2021 Percentage of Track Record December 31, Major Media Platform on Which the Drama Series is Number of LicenseProductionOur Group Period 2020 Drama Series Genre Episodes(1) License(2) (3) (3) Broadcast During the Track Record Period % (RMB’000) (RMB’000) (RMB’000)

Guerrilla Heroes History 36 April 1, 2013 April 29, 2015 100.0 4,296 78 – • First-run broadcast by the satellite channels of (游擊英雄)...... to April 1, Liaoning Television Station (遼寧電視台) and Guizhou 2015 Television Station (貴州電視台)

• Second-run broadcast by the satellite channel of Shanxi Television Station (山西電視台) BUSINESS • Third-run broadcast by the satellite channel of Gansu

7 – 172 – Television Station (甘肅電視台)

• Rerun broadcast by the satellite channel of Heilongjiang Television Station (黑龍江電視台)

• Non-prime time broadcast by the satellite channels of Hubei Television Station (湖北電視台) and Fujian Television Station (福建電視台)

• Various terrestrial TV channels in the PRC

• Online media platforms: iQIYI (愛奇藝), Tencent Video (騰訊視頻), Sohu Video (搜狐視頻) and PPTV HSDCMN SI RF OM NOPEEADSBETT HNE H NOMTO NTI DOCUMENT THIS IN INFORMATION THE DOCUMENT. THIS CHANGE. OF COVER TO THE SUBJECT ON “WARNING” AND HEADED SECTION INCOMPLETE THE WITH FORM, CONJUNCTION IN DRAFT READ IN BE SHOULD IS DOCUMENT THIS Expected Revenue Expectedto be RevenueReceived for tothe be Year Revenue Received for DateValid of Period the Ending Recognized theDecember Year 31, TVof Series the TVInvestment During the Ending DistributionSeries 2021 Percentage of Track Record December 31, Major Media Platform on Which the Drama Series is Number of LicenseProductionOur Group Period 2020 Drama Series Genre Episodes(1) License(2) (3) (3) Broadcast During the Track Record Period % (RMB’000) (RMB’000) (RMB’000)

Double Guns History 40 September December 20, 55.0 8,700 26,145 108 • First-run broadcast by the terrestrial TV channels of (雙槍) ...... 26, 2016 to 2016 the following TV stations: Beijing Television Station March 25, (北京電視台), East Movie Channel (東方電影頻道), 2017 Jiangsu Television Station (江蘇電視台), Hunan Television Station (湖南電視台), Sichuan Television Station (四川電視台) and Jilin Television Station (吉林電視台)

The Brothers History 41 April 15, 2016 July 3, 2017 65.0 47,497 – – • First-run prime time broadcast by the satellite (義海) ...... to April 1, channels of Anhui Television Station (安徽電視台) and 2017 Hubei Television Station (湖北電視台)

• First-run non-prime time broadcast by satellite BUSINESS channels of Tianjin Television Station (天津電視台) and Shandong Television Station (山東電視台) 7 – 173 –

• Second-run broadcast by the satellite channel of Chongqing Television Station (重慶電視台)

• Third-run prime time broadcast by the satellite channel of Henan Television Station (河南電視台)

• First-run broadcast by terrestrial channels of the following TV stations: Hunan Television Station (湖南電視台), Jilin Television Station (吉林電視台) and Jiangsu Television Station (江蘇電視台)

• Online media platforms: iQiYi (愛奇藝), Tencent Video ( 騰訊視頻), YouKu (優酷) and Mango TV (芒果TV) HSDCMN SI RF OM NOPEEADSBETT HNE H NOMTO NTI DOCUMENT THIS IN INFORMATION THE DOCUMENT. THIS CHANGE. OF COVER TO THE SUBJECT ON “WARNING” AND HEADED SECTION INCOMPLETE THE WITH FORM, CONJUNCTION IN DRAFT READ IN BE SHOULD IS DOCUMENT THIS Expected Revenue Expectedto be RevenueReceived for tothe be Year Revenue Received for DateValid of Period the Ending Recognized theDecember Year 31, TVof Series the TVInvestment During the Ending DistributionSeries 2021 Percentage of Track Record December 31, Major Media Platform on Which the Drama Series is Number of LicenseProductionOur Group Period 2020 Drama Series Genre Episodes(1) License(2) (3) (3) Broadcast During the Track Record Period % (RMB’000) (RMB’000) (RMB’000)

A Gallant Army History 50 April 1, 2017 November 40.0 39,657 1,744 – • First-run prime time broadcast by a state-owned TV (老虎隊) ...... to April 1, 23, 2018 channel 2019 • Second-run prime time broadcast by the satellite channels of Hubei Television Station (湖北電視台)and Anhui Television Station (安徽電視台)

• Second-run non-prime time broadcast by the satellite channel of Tianjin Television Station (天津電視台)

• First-run broadcast by terrestrial channels of Jiangsu Television Station (江蘇電視台) and Shanghai Television Station (上海電視台) BUSINESS

• Rerun broadcast by terrestrial channels of Yunnan 7 – 174 – Television Station (雲南電視台), Xinjiang Television Station (新疆電視台) and Guangdong Television Station (廣東電視台)

Glory of the Blood History 52 December 26, August 11, 45.0 9,549 16,341 3,912 • First-run prime time broadcast by the satellite TV (鐵血榮耀)...... 2016 to 2017 channel of Hubei TV Station (湖北電視台) June 25, 2017

Note:

(1) The TV Series Production License is generally issued by the Department of Radio and Television at the provincial level or above in the PRC to producers before filming and production of a drama series.

(2) The date of the TV series distribution license represents the date on which a particular drama series is approved by the relevant bureaus of radio and television in the PRC for distribution.

(3) The expected revenue to be received for the years ending December 31, 2020 and 2021 is the amount estimated by our management based on the distribution plans of each drama series. THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. BUSINESS

The following table sets forth the major drama series that were in production or have completed production and were subject to distribution as of the Latest Practicable Date, which have not yet generated any revenue for our Group during the Track Record Period.

Expected Expected Revenue Revenue to be to be Received Received Valid Actual or for the for the Period of Estimated Estimated Investment Year Year the TV First-Run Number Total Percentage Ending Ending Series Broadcast Name of the of Investment of Our December December Production Status as of the Latest Time and Drama Series Episodes Genre Amount Group 31, 2020(1) 31, 2021(1) License(2) Practicable Date Platform(3)

(RMB’000) % (RMB’000) (RMB’000)

Great Days with 42 Countryside 60,000 30.0 22,924 8,406 July 13, Obtained the N/A(4) Green 2018 to distribution license Mountains and January and in the process of Clear Waters 9, 2019 distribution (綠水青山紅日子)

Mom with Smile 58 Family/ 65,000 25.0 35,228 9,347 April 1 , Obtained the N/A(4) (微笑媽媽).... Inspiration 2017 to distribution license April 1, and in the process of 2019 distribution

Mr. Fox and Miss 30 Romance 50,000 40.0 23,585 2,830 N/A(6) Obtained the online 2020/an Rose record number and online (酋長的男人)(5) . in the process of media distribution platform in the PRC

Notes:

(1) The expected revenue to be received for the years ending December 31, 2020 and 2021 is the amount estimated by our management based on the distribution plans of each drama series.

(2) The TV Series Production License is issued by the Department of Radio and Television at the provincial level or above in the PRC to producers before filming and production of a drama series.

(3) Estimated first-run broadcast time and platform are formulated based on our management’s reasonable anticipation based on the prevalent market conditions as of the Latest Practicable Date. Actual broadcast time and platform may be subject to change.

(4) The estimated first-run broadcast time and platform for such drama series is not available as no broadcasting rights transfer agreement had been entered into as of the Latest Practicable Date.

(5) This is a web series produced by us in collaboration with a leading online media platform in the PRC. The leading online media platform is a Chinese video streaming website owned by a leading technology company in China.

(6) The TV Series Production License is not available for “Mr. Fox and Miss Rose” (酋長的男人) because it is a web series. According to the applicable laws and regulations in the PRC, we have obtained the requisite Program Planning Record Number (節目規劃備案號) on April 27, 2019 and Program Online Record Number (節目上線備案號) on January 20, 2020 for this web series, which are in compliance with the relevant PRC laws and regulations as advised by our PRC Legal Advisors.

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As of December 31, 2017 2018 2019 Amount of Interests Paid Amount of Interests Paid Amount of Interests Paid Production Fixed Return for Fixed Production Fixed Return for Fixed Production Fixed Return for Fixed Costs Investment Principal Return Costs Investment Principal Return Costs Investment Principal Return Name of Drama Series Incurred Received Repaid Investment Incurred Received Repaid Investment Incurred Received Repaid Investment RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Double Guns (雙槍) ...... 41 – 1,000 146 – – – ––––– The Brothers (義海) ...... 1,914 – 13,100 353 26 – 2,000 368 102 – – – A Gallant Army

(老虎隊)...... 8,702 – – – 12,604 – – – 176 3,000 3,000BUSINESS – Glory of the Blood

7 – 176 – (鐵血榮耀) ...... 22,728 5,000 5,000 943 – – – ––––– Great Days with Green Mountains and Clear Waters (綠水青山紅日子) . . 4,104 – – – 14,159 22,000 – – 865 – 22,000 2,600 Mom with Smile (微笑媽媽)...... 3,160 – – – 19,791 20,000 – – 68 – 20,000 2,264 Mr. Fox and Miss Rose (酋長的男人) . – – – – 1,438 – – – 20,253 28,868 – – Fancy Meeting You Here (原來你也在這裏)

(1) ...... 6,943 32,200 – 494 – – 17,200 1,623 – – 15,000 2,057

Total ...... 47,592 37,200 19,100 1,936 48,018 42,000 19,200 1,991 21,464 31,868 60,000 6,921

Note:

* The figures in the table above are unaudited and primarily represent the transaction amounts we recorded each year during the Track Record Period based on our management accounts.

(1) As of the Latest Practicable Date, this drama series did not initiate filming. All principals received and interests accrued in connection with the Fixed Return Investments in this drama series had been repaid to the relevant third-party investors by the end of 2019. THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. BUSINESS

The following table sets forth the estimated principal and interests to be repaid by us subsequent to the Track Record Period in connection with the Fixed Return Investment of our self-produced drama series:

Interests of the Fixed Return Principal to be Investment to be Repaid After Paid After December 31, December 31, Name of Drama Series 2019 2019

RMB’000 RMB’000

The Brothers (義海) ...... – 1,297 A Gallant Army (老虎隊) ...... – 255 Mr. Fox and Miss Rose (酋長的男人) ...... 28,868 4,245

Total ...... 28,868 5,797

Licensing of the Broadcasting Rights of Outright-purchased Drama Series

Overview

In addition to licensing the broadcasting rights of our self-produced drama series, we also engage in licensing the broadcasting rights of drama series that we purchased from third-party copyright owners/licensors. We commenced distributing outright-purchased drama series in the second half of 2016, primarily because (i) the production period for self-produced drama series, which ranges from one to two years, is relatively long; and (ii) we intended to expand our business, especially to increase our distribution scale of purchased drama series to maintain our sales network and relationships with various customers. We believe the drama series copyright owners/licensors are inclined to sell us the right to use, and the right to transfer the broadcasting rights of, the particular drama series, rather than dealing directly with the TV channels primarily due to the following reasons:

• Our chairman, Mr. Yuan, has over 21 years of experience in the PRC film and TV industry. Before founding our Company, he had accumulated abundant professional knowledge of the production and distribution of drama series and established relationships with numerous TV channels, which enabled us to maintain a large distribution network and continue to explore cooperation opportunities with these customers;

• Given the fragmented nature of the PRC drama series production market, the long production cycle of drama series and the pressure on capital recovery, small and medium-sized drama series production companies, which generally do not have their own distribution departments or sales teams, usually prefer to license the broadcasting rights of drama series to experienced distribution companies to shorten the payback cycle and recover their investments quickly; and

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• During the Track Record Period, the production volume of drama series each year in the PRC was significantly higher than the number of drama series broadcast. Compared with companies with smaller distribution scales, we had a proven track record of successfully distributing drama series that satisfied the demands of TV channels who are our customers. Therefore, we believe that third-party copyright owners/licensors are inclined to engage us for the distribution of the broadcasting rights of the drama series because the drama series distributed by us are more likely to attract the attention of TV channels.

The transaction procedures involved in the distribution of drama series are complicated and time-consuming. When purchasing the drama series, we discuss many details with third-party copyright owners/licensors, including price negotiation, assessments on drama series for broadcasting on satellite TV channels, content adjustments, scheduling for broadcasting, promotion and distribution. To facilitate TV channels to procure drama series that meet their preferences and demands, we provide the following value-added services to our customers:

• we have established a distribution department with experienced personnel to maintain close communications with the drama series procurement departments of various TV channels and keep abreast of their preferences and demands of the drama series in various aspects, including genres, quality standard of production and casts. We then actively look for drama series from the third-party copyright owners/licensors that match the preferences of the TV channels and make proper recommendations, which we believe will improve their efficiency in selecting the appropriate TV series for broadcasting;

• we generally formulate a marketing plan for each of the drama series we distribute and engage third-party marketing service providers to promote the drama series on new media and/or online social platforms. We pay close attention to the feedback from the viewers and the ratings of each drama series, and timely report such information to the relevant TV channels; and

• we have abundant reserves of drama series copyrights, which enable us to provide TV channels with “a basket of solutions” for the scheduling and broadcasting of drama series during a specific time slot. Under such arrangement, we supply various rerun broadcasting contents to our customers and provide them with professional advice for drama series scheduling and planning, such as the drama series supply service agreement we entered into with Customer J. Please see “Strategic Cooperation Arrangements” in this section for details.

We believe that, as a professional drama series distribution company, we have deep insight into the drama series market, which enables us to effectively match the needs of downstream TV channels and online media platforms with the drama series from upstream copyright owners/licensor, and helps us enhance the distribution efficiency of drama series in terms of content matching, price negotiation and promotion.

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For the years ended December 31, 2017, 2018 and 2019, we distributed 29, 39 and 40 of outright-purchased drama series, respectively. The revenue generated by our licensing of the broadcasting rights of outright-purchased drama series amounted to approximately RMB345.4 million, RMB375.7 million and RMB278.6 million, respectively, for the years ended December 31, 2017, 2018 and 2019 accounting for approximately 91.2%, 97.4% and 71.3% of our total revenue for the same periods, respectively.

The table below sets forth a breakdown of our revenue by type of customers from licensing the broadcasting rights of our purchased drama series for the years indicated:

Year ended December 31,

2017 2018 2019

RMB’000 % RMB’000 % RMB’000 %

Customer Type Satellite TV channels...... 315,925 91.5 337,688 89.9 249,268 89.5 Terrestrial TV channels ...... 3,668 1.0 1,152 0.3 1,145 0.4 Other third-party customers (1) ...... 25,770 7.5 36,884 9.8 28,175 10.1

Total ...... 345,363 100.0 375,724 100.0 278,588 100.0

Note:

(1) Other third-party customers primarily include online media platforms and other third-party drama series distribution companies in the PRC.

Business Model

The following diagram illustrates our business model relating to the licensing of the broadcasting rights of outright-purchased drama series:

Our Group Project Market Entering into Distribution and Evaluation and Research the Agreement Promotion Matching

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Under this business segment, we procure the copyrights of the drama series primarily from third-party copyright owners/licensors based on the particular needs of our customers. We either purchase the entire copyright of the drama series (in which case, we are entitled to license the broadcasting rights to our customers in any region in the PRC for any period of time), or we only purchase the rights to use, or the rights to transfer the broadcasting rights of, the drama series in certain designated regions of the PRC for a specific period of time. We generally enter into the content distribution agreements with the copyright owners/licensors to obtain the rights to use, or the rights to license the broadcasting rights of, the particular drama series. Subsequently, we distribute the relevant drama series to our customers, who are generally major TV channels in the PRC. We have also distributed certain of the drama series to various leading online media platforms.

Operation Flow

Conduct Market Research to Assess the Potential of the Drama Series. Our project department and distribution department conduct market research on a regular basis to monitor evolving market trends, viewing hotspots, and interesting topics and themes for drama series. In addition, we keep regular contact with various TV channels and online media platforms to stay informed about their demands, especially their broadcasting schedules and specific drama series content requirements or preferences. Our customers will determine the broadcasting round based on their procurement budget.

With several years of development in the business of licensing the broadcasting rights of outright-purchased drama series, our project department and distribution department have established stable cooperative relationships with our suppliers. Generally, other drama production agencies proactively approach us for our provision of distribution services. They usually will recommend to us the drama series they are producing or have produced.

Project Evaluation and Matching the Demands of Customers. When we become aware of the demands and content preferences of the TV channels, our distribution department staff will then actively look for the relevant drama series that meet the requirements of these customers. Once we determine that the drama series copyright owners/licensors are inclined to sell the rights to transfer the broadcasting rights of a drama series to us, we will set up a dedicated project team internally to follow up on the business opportunities. We will comprehensively evaluate the drama series that we intend to purchase to ensure that such drama series match the demands of our customers. Our assessments mainly cover (i) policy evaluation, which ensures that the content of our purchased drama series comply with the relevant PRC regulations and that they do not contain any racial or discriminatory languages; (ii) quality evaluation, which involves the assessment of the content of a drama series, including the structure of plot, shaping of characters and actors’ lines; and (iii) commercial evaluation, including the assessment of investment value, our available funds, relevant marketing budget and estimated profitability analysis.

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Entering into Content Distribution Agreements with the Drama Series Copyright Owners/Licensors. Before entering into the content distribution agreements with the relevant drama series copyrights owners/licensors, we usually approach and communicate with our target TV channels to obtain their feedback on such drama series. If a preliminary understanding is reached between the target TV channel and us, we will obtain the distribution approval from our management, and subsequently enter into a formal content distribution agreement with the relevant drama series copyright owners/licensor, pursuant to which it will grant us an exclusive or non-exclusive right to use, or the right to transfer the broadcasting rights of, the particular drama series in the specified markets or platforms for an agreed period of time. The duration of the content distribution agreements typically varies from one to 10 years. For more information, see “— Salient Terms of the Content Distribution Agreements with Drama Series Copyright Owners/Licensors” in this section. We generally determine the licensing fees for the copyrights or broadcasting rights to be paid to third-party drama series copyright owners/licensors based on our reasonable estimate of the gross profit margin for the particular drama series in light of the budget, content and quality requirements and the desired broadcasting time slots of our customers, as well as the prevailing market price of similar drama series.

Entering into Broadcasting Rights Transfer Agreements with Our Customers. Under the broadcasting rights transfer agreements we entered into with our customers, we granted the right to use, or the right to license the broadcasting rights of the drama series to our customers. The duration of the broadcasting rights of the drama series we licensed to our customers generally matches or does not exceed the duration of the broadcasting rights we acquired from the respective drama series copyright owners/licensors. We have the discretion to negotiate the terms of the broadcasting rights transfer agreements and set the amount of the license fees. See “— Broadcasting Rights Transfer Arrangements between Us and Our Customers” for details. During the Track Record Period, we primarily licensed the broadcasting rights of the drama series to third-party TV channels, broadcasting companies and online media platforms, which released such drama series to viewers across the PRC.

Content Distribution Arrangements between the Drama Series Copyright Owners/Licensors and Us

We generally enter into content distribution agreements with the drama series copyright owners/licensors pursuant to which various exclusive or non-exclusive rights to use, or the rights to license the broadcasting rights of, the drama series are granted to our Group in certain territories in the PRC and/or online. Such rights may include the rights to broadcast the drama series through satellite TV channels and/or terrestrial TV channels, as well as the Internet distribution rights.

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Salient Terms of the Content Distribution Agreements with Drama Series Copyright Owners/Licensors

The following table sets forth the salient terms of our content distribution agreements with third-party drama series copyright owners/licensors during the Track Record Period:

Subjects Salient Terms

Licensed subject ...... Each content distribution agreement generally covers a particular drama series

License period ...... Generally a range between one and 10 years

Right to use content/rights to Usually include TV broadcasting rights, such as the rights to broadcast transfer broadcasting rights. . . via satellite TV channels and terrestrial TV channels. In certain agreements, we are also granted online distribution rights relating to the relevant drama series. The agreements will typically include a clause designating the priority of broadcasting (i.e., the first-run broadcast (首輪), second-run broadcast (二輪) or rerun broadcast (重播)), the time slot during the day for broadcasting (i.e., prime time (黃金檔) (typically 20:00-22:00 of each day) or otherwise), and the number of times when the particular drama series can be broadcast

Territories and exclusivity ..... Wearegenerally granted the right to use the content and/or the rights to transfer the broadcasting rights in certain provinces in the PRC. Such rights can be either exclusive or non-exclusive

License fee ...... Wearenormally required to pay our drama series copyright owners/licensors a fixed amount of the license fee, calculated by multiplying the distribution fee per episode by the number of available episodes in a particular drama series. Such fee is generally payable by us in separate installments. The settlement period in each agreement varies. Pursuant to the content distribution agreements, we generally (i) settle the first installment of the license fees after receiving, confirming and examining all authorizations, licenses and a full set of broadcasting tapes from the copyright owners/licensors; (ii) settle an additional amount of the license fees within a prescribed period as stipulated in the agreement; and (iii) settle the remainder within an agreed period after the broadcasting of such drama series.

Delivery of the materials ...... Thecopyright owners/licensors are required to deliver to us the drama series materials according to the specifications and schedules set out in the agreements

Termination...... Theparties may, subject to mutual agreement, terminate the content distribution agreements if and when (i) certain force majeure events or incidents that are beyond the control of either party occur that render the agreements unenforceable; (ii) there has been a change in the circumstances that led to parties entering into the agreements; and (iii) there have been changes in applicable legal requirements or other situations that render the agreement terminable

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Broadcasting Rights Transfer Arrangements between Us and Our Customers

Once we have entered into content distribution agreements with the drama series copyright owners/licensors and purchased the relevant distribution rights to broadcast the drama series in certain regions of the PRC and/or online, we will subsequently enter into broadcasting rights transfer agreements with our customers, pursuant to which we will grant them various exclusive or non-exclusive rights to broadcast the relevant drama series.

As a market practice, the drama series copyright owners/licensors will generally not be involved in the negotiation of the terms of the broadcasting rights transfer agreements between our Group and our customers. We have the discretion to determine the specific terms of the broadcasting rights transfer agreements, including, among other things, the license fees or royalty payable to us by our customers, the broadcasting scope and term of the licensing arrangement. Leveraging our Chairman’s extensive experience in the drama series market and our stable relationships with various TV channels in China, we are able to identify the differentiating needs of our customers in respect of their preferences for the content of the drama series to be broadcast and the different broadcasting time slots. Accordingly, we are able to license the broadcasting rights of the purchased drama series to particular TV channels based on their needs. In addition, by licensing the rights to use, or the rights to transfer the broadcasting of, the particular drama series to our Group, the drama series copyright owners/licensors will be able to avoid direct negotiations with the TV channels, which could be complicated and time consuming, and achieve quick returns on their investment. As a result, a large number of drama series copyright owners/licensors prefer to sell the right to use, or the right to transfer the broadcasting rights of, the particular drama series to us, instead of dealing directly with the TV channels.

The major terms of the broadcasting rights transfer agreements we enter into with our customers for the drama series we purchased from third-party copyright owners/licensors are generally similar to those we enter into for our self-produced drama series. Please see “— Licensing of the Broadcasting Rights of Self-Produced Drama Series — Broadcasting Rights Transfer Arrangements between Us and Our Customers — Salient Terms of the Broadcasting Rights Transfer Agreements with Our Customers” in this section for further details.

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Strategic Cooperation Arrangements

During the Track Record Period, we also entered into strategic cooperation arrangements with certain of our major customers. Pursuant to such arrangement, we enjoy priority consideration from our cooperation partners in broadcasting a predetermined number of drama series from us within a specified period of time. We believe this arrangement help us secure revenue sources by ensuring that there will be stable demand for the drama series we purchase or produce.

For instance, in June 2018, we entered into a strategic cooperation agreement with Customer C, for a term of five years. Pursuant to this agreement, (i) we agree to give Customer C priority to purchase the drama series produced or distributed by us; (ii) Customer C agrees to give us priority for purchasing the drama series produced or distributed by us and arrange for such drama series to be broadcast on the satellite TV channel operated by Customer C; (iii) Customer C agrees to give us priority to be paid when purchasing drama series from us; and (iv) Customers C has priority to make investment in the drama series that we plan to produce or invest in. The table below sets forth the salient terms of the strategic cooperation agreement we entered into with Customer C:

Subjects Salient Terms

Strategic cooperation period . . . Five years from the date of the agreement

Scope of cooperation ...... • When we intend to introduce strategic or financial investors, we agree to transfer not more than 5% equity interest of LiTian TV & Film to Customer C or its designated party at market value at the time of the investment;

• Customer C has priority to invest in the drama series produced by us under the co-financing arrangements;

• Customer C has priority to purchase the drama series produced or distributed by us;

• Customer C has priority to purchase drama series distributed by us each year and arrange for such drama series to be broadcast on the satellite TV channel operated by Customer C;

• We should be given priority to be paid by Customer C when the payment comes due

Termination ...... Ifanychange or termination is required, consensus should be reached between the parties and a written agreement is required

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In addition, in April 2019, we entered into a drama series supply service agreement with Customer J, for a term of one year, which was effective from April 1, 2019 to March 31, 2020. Pursuant to this agreement, (i) we agree to supply Customer J with the drama series we purchased from copyright owners/licensors to be broadcast on its satellite TV channel during each afternoon at 13:30 (in particular, five episodes each afternoon from Monday to Saturday and three episodes on Sunday); (ii) we are required to license the broadcasting rights of the drama series to Customer J for afternoon broadcasting with an aggregate episodes of no less than 1,030, or at least 60% of the total number of episodes estimated to be broadcast on Customer J’s satellite TV channel during the year; (iii) we agree to jointly formulate the broadcasting schedules/plans with Customer J; and (iv) Customer J is required to pay cooperation fees to us on a monthly basis only if the monthly average ratings of the drama series reach 0.1 or above and the drama series broadcasted ranks tenth or above during the same broadcasting time slot. The table below sets forth the salient terms of the drama series supply service agreement we entered into with Customer J:

Subjects Salient Terms

Cooperation period ...... FromApril 1, 2019 to March 31, 2020

Scope of cooperation ...... Weprovide TV series supply and scheduling consultation services to Customers J. We supply Customer J with drama series we purchased from copyright owners/licensors to be broadcast on its satellite TV channel each afternoon from 13:30

Payment method and credit Customer J is required to pay cooperation fees to us, which are calculated period ...... based on the average ratings of the drama series broadcast, on a monthly basis. The cooperation fee shall be settled within 30 working days by way of bank transfer after the issuance of invoice

Undertaking ...... Weundertake that the drama series supplied by us will not infringe the legal rights of any other parties. We are responsible for any dispute arising out of or in connection with the drama series we supply

Termination ...... Intheevent any party is in breach of the agreement, which renders the agreement unenforceable, the non-breaching party is entitled to terminate the agreement

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Our Outright-purchased Drama Series

During the Track Record Period, we had distributed 79 outright-purchased drama series, the broadcasting rights of which were licensed to us by the third-party copyright owners/licensors of the drama series to be distributed to our customers in designated regions in the PRC as specified in the relevant content distribution agreements.

The table below sets forth the outright-purchased drama series for which we had licensed the related broadcasting rights to customers and for which we had recognized revenue exceeding RMB10.0 million during the Track Record Period.

Revenue Date of the Recognized TV Series During the Name of Number of Distribution Track Record Major Media Platforms on Which the Drama Series Drama Series Genre Episodes License (1) Period is Broadcast During the Track Record Period

(RMB’000)

Dream on the Side Contemporary 44 November 11, 95,501 • First-run prime time broadcast by the satellite of the Sea (夢在海 2019 channel of Zhejiang Television Station (浙江電視台) 這邊)(2) ......

Bright Star Urban romance 40 September 9, 75,566 • First-run broadcast by the satellite channels of (星光燦爛) .... 2015 Tianjin Television Station (天津電視台), Shandong Television Station (山東電視台) and Heilongjiang Television Station (黑龍江電視台)

• Second-run broadcast by the satellite channels of Hubei Television Station (湖北電視台) and Hebei Television Station (河北電視台)

Road to Rebirth Contemporary 46 December 25, 65,125 • First-run prime time broadcast by the satellite channel (愛在星空下).... 2017 of Zhejiang Television Station (浙江電視台)

Undercover Crime 43 January 10, 2017 53,479 • First-run broadcast by the satellite channels of (臥底歸來)..... Shandong Television Station (山東電視台) and Tianjin Television Station (天津電視台)

• Second-run broadcast by the satellite channels of Henan Television Station (河南電視台) and Guizhou Television Station (貴州電視台)

• Third-run broadcast by the satellite channel of Hebei Television Station (河北電視台)

• Rerun broadcast by the satellite channel of Guangxi Television Station (廣西電視台)

• Terrestrial channels of the following TV stations: Anhui Television Station (安徽電視台), Fujian Television Station (褔建電視台), Jilin Television Station (吉林電視台) and Liaoning Television Station (遼寧電視台)

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(RMB’000)

Love the Courier Romance 44 April 14, 2016 44,237 • First-run broadcast by the satellite channel of Anhui (功夫之愛的速遞) Television Station (安徽電視台)

• Online media platforms: Funshion Network (風行網), iQiYi (愛奇藝), Tencent Video (騰訊視頻), Sohu Video (搜狐視頻), Youku (優酷) and Mango TV (芒果 TV)

Across The Ocean Urban romance 44 December 22, 40,626 • Second-run broadcast by the satellite channels of To See You 2016 Shandong Television Station (山東電視台) and (漂洋過海來看你) Jiangxi Television Station (江西電視台)

• Third-run broadcast by the satellite channel of Hebei Television Station (河北電視台)

• Rerun broadcast by the satellite channel of Yunnan Television Station (雲南電視台)

• Non-prime time broadcast by the satellite channels of Hubei Television Station (湖北電視台)

• Terrestrial channel of Anhui Television Station (安徽電視台)

Born in the 70s Romance 32 May 18, 2016 40,487 • First-run broadcast by the satellite channel of Anhui (生於70年代) ... Television Station (安徽電視台)

• Second-run broadcast by the satellite channels of Hubei Television Station (湖北電視台) and Liaoning Television Station (遼寧電視台)

• Rerun non-prime time broadcast by the satellite channel of Shenzhen Television Station (深圳電視台)

• Rerun broadcast by the terrestrial channels of Sichuan Television Station (四川電視台) and Xinjiang Television Station (新疆電視台)

• Online media platforms: iQIYI (愛奇藝), YouKu (優酷) and Mango TV (芒果TV)

Patriot War 50 December 30, 37,309 • Second-run broadcast by the satellite channels of (愛國者)...... 2017 Shenzhen Television Station (深圳電視台) and Tianjin Television Station (天津電視台)

• Third-run broadcast by the satellite channels of Southeast Television Station (東南電視台) and Tianjin Television Station (天津電視台)

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(RMB’000)

Ordinary Days Romance 44 July 21, 2017 41,447 • Second-run broadcast by the satellite channel of (平凡歲月) .... Tianjin Television Station (天津電視台)

• Third-run broadcast by the satellite channel of Heilongjiang Television Station (黑龍江電視台)

• Rerun prime time broadcast by the satellite channels of the following TV stations: Qinghai Television Station (青海電視台), Liaoning Television Station (遼寧電視台), Guangxi Television Station (廣西電視台), Henan Television Station (河南電視台) and Xinjiang Television Station (新疆電視台)

• Rerun non-prime time broadcast by the satellite channel of Sichuan Television Station (四川電視台)

• Non-prime time broadcast by the satellite channel of China Central Television Station (中國中央電視台)

• Terrestrial channels of Sichuan Television Station (四川電視台) , Shandong Television Station (山東電視台), Fujian Television Station (褔建電視台) and Xinjiang Television Station (新疆電視台)

Marital Distress Romance 41 September 26, 34,153 • First-run broadcast by the satellite channel of Anhui (婚姻遇險記) ... 2016 Television Station (安徽電視台)

• Third-run broadcast by the satellite channel of Shenzhen Television Station (深圳電視台)

• Online media platforms: Funshion Network (風行網), iQIYI (愛奇藝), Tencent Video (騰訊視頻), Sohu Video (搜狐視頻), YouKu (優酷) and Mango TV (芒果 TV)

Marital Adventures Romance 39 September 5, 29,794 • First-run broadcast by the satellite channel of Anhui (婚姻歷險記) ... 2016 Television Station (安徽電視台)

• Third-run broadcast by the satellite channel of Shenzhen Television Station (深圳電視台)

• Online media platforms: iQIYI (愛奇藝), Tencent Video (騰訊視頻), Sohu Video (搜狐視頻), YouKu (優酷) and Mango TV (芒果 TV)

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(RMB’000)

A Splendid Life in Comedy 47 April 1, 2017 29,199 • Third-run broadcast by the satellite channels of Beijing Henan Television Station (河南電視台) and (生逢燦爛的 Heilongjiang Television Station (黑龍江電視台) 日子)...... • Rerun prime time broadcast by the satellite channel of the following TV stations: Ningxia Television Station (寧夏電視台), Guangxi Television Station (廣西電視台), Gansu Television Station (甘肅電視台), Xinjiang Television Station (新疆電視台), Jilin Television Station (吉林電視台), Shaanxi Television Station (陝西電視台) and Qinghai Television Station (青海電視台)

• Rerun non-prime time broadcast by the satellite channels of Shenzhen Television Station (深圳電視台), Hubei Television Station (湖北電視台) and Inner Mongolia Television Station (內蒙古電視台)

Happy Home Family 45 January 14, 2015 26,053 • First-run broadcast by the satellite channels of (幸福滿院)..... Heilongjiang Television Station (黑龍江電視台) and Hebei Television Station (河北電視台)

• Rerun broadcast by the terrestrial channels of Gansu Television Station (甘肅電視台) and Xinjiang Television Station (新疆電視台)

Flesh and Spirit History 49 September 5, 24,995 • Second-run broadcast by the satellite channel of Anhui (靈與肉) ...... 2016 Television Station (安徽電視台)

The Peach Blossom Urban romance 42 December 2, 24,467 • First-run broadcast by the satellite channel of (一樹桃花開) ... 2016 Tianjin Television Station (天津電視台)

Happy Family 40 June 27, 2017 22,668 • First-run broadcast by the satellite channel of Anhui Photographic Television Station (安徽電視台) Studio (幸福照相館) ...

Next Time, Romance, 40 December 9, 20,036 • Second-run broadcast by the satellite channels of Together Forever family 2016 Shenzhen Television Station (深圳電視台) (下一站，別離).. • Third-run broadcast by the satellite channel of Southeast Television Station (東南電視台)

My Story for You Romance, 48 December 7, 19,568 • First-run broadcast by the satellite channel of (為了你我願意熱 family 2017 Shenzhen Television Station (深圳電視台) 愛整個世界)....

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(RMB’000)

Jiu Dan (九丹).... Period drama 37 January 15, 2013 15,383 • First-run prime-time broadcast on the satellite channel of Jiangxi Television Station (江西電視台)

• Second-run prime-time broadcast on the satellite channel of Sichuan Television Station (四川電視台)

Entrepreneurial Urban romance 54 December 21, 15,189 • Second-run prime time broadcast by the satellite Age 2017 channel of Guangdong Television Station (廣東電視 (創業時代)..... 台)

• Third-run prime time broadcast by the satellite channel of Southeast Television Station (東南電視台)

• Rerun prime time broadcast by the satellite channel of Ningxia Television Station (寧夏電視台)

• Rerun non-prime time broadcast by the satellite channel of Shenzhen Television Station (深圳電視台)

Age of Legends Urban crime 47 August 20, 2018 13,288 • Second-run prime time broadcast by the satellite (橙紅年代)..... channel of Shenzhen Television Station (深圳電視台)

• Third-run prime time broadcast by the satellite channel of Guangxi Television Station (廣西電視台)

The City of the Family 44 November 26, 12,453 • Second-run prime time broadcast by the satellite Family 2018 channel of Tianjin Television Station (天津電視台) (那座城這家人)..

God of Artillery War 43 September 7, 12,547 • Third-run prime time broadcast by the satellite (炮神) ...... 2015 channel of Tianjin Television Station (天津電視台)

Impossible Mission Modern legend 46 February 18, 10,875 • Third-run prime time broadcast by the satellite (不可能完成的 2016 channel of Hebei Television Station (河北電視台) 任務)......

War Flowers War and 50 April 26, 2016 10,870 • Second-run prime time broadcast by the satellite (亂世麗人行) ... romance channel of Guizhou Television Station (貴州電視台)

Dang Kou War 40 November 15, 10,566 • First-run broadcast by the satellite channel of (蕩寇) ...... 2016 Guizhou Television Station (貴州電視台)

• Online media platform: PP Live (PP視頻)

Double Happiness Countryside 43 October 13, 10,166 • Second-run prime time broadcast by the satellite (雙喜盈門) .... 2016 channel of Hebei Television Station (河北電視台)

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Notes:

(1) The date of the TV Series Distribution License represents the date on which a particular drama series is approved by the relevant bureaus of radio and television in the PRC for distribution.

(2) Pursuant to the joint investment agreement we entered into with the third-party executive producer of this drama series, we are responsible for licensing the broadcasting rights of “Dream on the Side of the Sea” (夢在海這邊) to the satellite channel of Zhejiang Television Station (浙江衛視), while the executive producer is responsible for licensing the broadcasting rights of this drama series to other customers. The satellite channel of Zhejiang Television Station is required to pay us license fees, which shall be subsequently shared by us with the executive producer based on the proportion of our investment. As a result, the license fees we received from the satellite channel of Zhejiang Television Station during the Track Record Period were recognized as revenue from the licensing of the broadcasting rights of outright-purchased drama series. Please refer to the paragraphs headed “— Investment in Drama Series as a Non-executive Producer” in this section for more details of the co-financing arrangement of this drama series.

We do not expect to generate revenue from these outright-purchase drama series disclosed in the table above for the year ending December 31, 2020.

Other Businesses

Other than licensing the broadcasting rights of self-produced and outright-purchased drama series, we also generated revenue during the Track Record Period from (i) selling the drama series script copyrights; (ii) acting as an agent for the drama series copyright owner/licensor in connection with the distribution of such drama series; and (iii) making investments in the production of drama series as a non-executive producer.

Sales of Drama Series Script Copyrights

During the Track Record Period, we purchased certain scripts of potential drama series to be made from third-party copyright owners. We were able to acquire the script copyrights by capitalizing on the relationships we maintained with numerous creative professionals, including screenwriters, novelists and publishers. These professionals are either the parties that we had previously worked with in connection with our self-produced drama series business, or those whose scripts may have the substance or themes that we believe could potentially cater to the demands and preferences of the broadcasting platforms. In 2017, we sold the script copyrights we acquired to certain third-party production companies from time to time. For the years ended December 31, 2017, 2018 and 2019, the revenue generated from the sales of the script copyrights was approximately RMB19.7 million, nil and nil, respectively, accounting for approximately 5.2%, nil and nil of our total revenue, respectively, for the same periods.

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The agreement that we enter into for sales of copyrights of drama series scripts generally contain the following salient terms:

Subjects Salient Terms

Subject to be delivered ...... Thecopyrights of drama series scripts.

Script copyrights transfer fee . . . The script copyrights transfer fee typically is a fixed amount agreed between our customer and us in the drama series script copyrights transfer agreement.

Payment method and The script copyrights transfer fee shall be settled with a lump-sum credit period ...... payment within 30 days upon entering into the agreement.

Exclusivity ...... Thescript copyrights shall be transferred to the customer exclusively without any legal defect or dispute.

Copyright ownership ...... Thecopyrights of such scripts, the rights to film drama series and all copyrights resulting from the drama series belong to the customer.

Termination ...... Intheevent that we resell the copyrights of such script to other third parties after entering into the agreement, the customer is entitled to terminate the agreement.

Acting as a Distribution Agent of the Drama Series

Beginning in the first half of 2019, we acted as a distribution agent for the copyright owners/licensors of the drama series who approach us from time to time given our well-established relationships with our customers. As a distribution agent, we promote the relevant drama series to the TV channels and negotiate the terms and conditions in connection with the licensing of the broadcasting rights of such drama series with them on behalf of the drama series copyright owners/licensors. Upon agreeing to the terms and conditions, the relevant copyright owners/licensors of the drama series will enter into a contract with the TV channels and license the broadcasting rights to them directly. We generally charge the relevant copyright owner/licensor of the drama series a distribution agency fee for our services, which is calculated based on a fixed percentage of the license fee to be received by the copyright owner from the TV channels. The rate of the distribution agency fee we typically receive is approximately 15.0% of the license fee. We collect distribution agency fee after the copyright owner/licensors of the drama series has received the relevant license fee from the TV channels. The revenue we received from this business for the year ended December 31, 2019 was approximately RMB9.5 million, accounting for approximately 2.4% of our total revenue.

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We usually enter into agreements for acting as a distribution agent of the drama series with the copyright owners/licensors on a project-by-project basis. The agreements typically contain the following salient terms:

Subjects Salient Terms

Service to be provided ...... Weactasadistribution agent to assist the copyright owners/licensors of the drama series in licensing the broadcasting rights to various TV channels.

Period of service ...... Theagreements do not specify the term of the services.

Distribution fee ...... Thedistribution fee we receive is normally 15% of the license fee agreed between the copyright owner of the drama series and the relevant TV channels in the broadcasting rights transfer agreement.

Copyright ownership ...... Thecopyrights of such drama series belong to the drama series copyright owners/licensors, who engage us as to act as the distribution agent.

Termination ...... Theobligations of either party will be suspended if and when certain force majeure events or incidents that are beyond the control of either party occur that render the agreements unenforceable.

Investment in Drama Series as a Non-executive Producer

During the Track Record Period, we entered into co-financing arrangements with the executive producers of certain drama series under which we acted as a non-executive producer. As a non-executive producer, we usually make investments in the drama series and take a passive role with limited involvement in the production and distribution of the relevant drama series. By leveraging on our industry expertise and extensive experience in producing and distributing drama series, we collaborate with the executive producers and offer valuable insights and advice to them in various stages of drama series production, such as casting, filming, post-production and quality control, as well as the distribution of the drama series.

We usually generate income from our investment by sharing the net license fee with the executive producers of the drama series and other non-executive producers, if any, in the proportion of the respective investments. We typically receive our portion of the net license fee from the executive producers by installments on specific milestone dates. For the years ended December 31, 2017, 2018 and 2019, income we received from licensing of the broadcasting rights under co-financing arrangement amounted to nil, RMB3.1 million and RMB14.0 million, respectively, accounting for nil, 0.8% and 3.5%, respectively, of our total revenue.

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We normally enter into agreements with the executive producers of the drama series on a project-by-project basis. These agreements typically contain the following salient terms:

Subjects Salient Terms

Investment amount ...... Ourinvestment in a drama series normally represents not more than 50% of the total estimated investment in the drama series.

Payment of investment returns . We usually share the net license fees received by the executive producer according to the proportion of our investment. We generally receive investment income in installments.

Copyright ownership ...... Thecopyrights of such drama series we invest in either belong to the executive producer or are jointly owned by us and other investors according to our investment ratio.

Termination ...... Intheevent any party is in breach of the agreement, the party in breach shall be liable for actual loss caused to the non-breaching party.

During the Track Record Period, we made investments in the following drama series as a non-executive producer, for which we shared the net license fee with other co-investors in the proportion of the respective investments. As of the Latest Practicable Date, the drama series “The God of Blaze” (火神) had not yet generated any revenue.

Actual or Revenue Estimated Investment Recognized Status as of the Total Percentage during the Latest First-Run Name of the Number of Investment of Our Track Record Practicable Broadcast Time and Drama Series Episodes Genre Amount Group Period Date Platform

(RMB’000) % (RMB’000)

24 Hours 48 Science 56,000 30.0% 3,112 Distributed and July 2018/ (限定24小時). fiction broadcast an online media platform

The God of 40 Mystery 46,000 10.0% N/A Subject to April 2019/ Blaze (火神). distribution a terrestrial channel of Shanghai Television Station (上海電視台)

Dream on the 44 Contemporary 148,000 20.0% 13,968 Distributed and December Sideofthe broadcast 2019/first-run Sea (夢在海 broadcast by the 這邊)(1) .... satellite channels of Zhejiang Television Station (浙江電視台)and Jiangsu Television Station (江蘇電視台)

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Note:

(1) Revenue generated from “Dream on the Side of the Sea” (夢在海這邊) during the Track Record Period primarily represented the proportional license fees we received from the executive producer for licensing the broadcasting rights of this dramas series to customers other than the satellite channel of Zhejiang Television Station.

FIXED RETURN INVESTMENT

Fixed Return Investment in Drama Series as an Investor

In addition to our principal businesses, we also make Fixed Return Investment in the drama series in which we do not act as the executive producer. We enter into investment agreements with the executive producers of the drama series and receive fixed return on our investment.

Our business of Fixed Return Investment in drama series and the related business model are summarized below:

Investment in drama series

Executive Our Group producers of the drama series

Receive fixed returns on investment

During the Track Record Period and up to the Latest Practicable Date, we made Fixed Return Investment in three drama series as a non-executive producer, including “Mr. Nanny” (月嫂先生), “Hunting Actions” (獵金行動) and “Unexpected Life” (不期而遇的人生). As of the Latest Practicable Date, the Fixed Return Investments made by us had been fully settled.

Under this arrangement, we only make capital investment in such drama series and receive fixed investment returns based on the annual interest rate, which typically range between 10.0% and 20.0% as specified in the relevant agreement regardless of the sales performance of the relevant drama series. The fixed interest rate is generally determined by market conditions and negotiated at arm’s length between us and the executive producers of the relevant drama series by taking into account the market rate of return. During the Track Record Period, our investment period was usually a year.

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Our Fixed Return Investment of the drama series is generally made on a project-by-project basis and the amount of committed investments to be made by us at the end of each year during the Track Record period was nil. The following table sets forth details of the Fixed Return Investment we made for the years ended December 31, 2017, 2018 and 2019 and the estimated amount of principal and interests we expect to be received after December 31, 2019:

As of December 31, Amount to be Received 2017 2018 2019 After December 31, 2019 Amounts of Interests Amounts of Interests Amounts of Interests Fixed Received Fixed Received Fixed Received Return from Fixed Return from Fixed Return from Fixed Name of Investment Return Principal Investment Return Principal Investment Return Principal Interests to Principal to Drama Series Made by Us Investment Received Made by Us Investment Received Made by Us Investment Received be Received be Received RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Mr. Nanny (月嫂先生) .... 10,000 ––––––2,009 10,000 – – Hunting Actions (獵金行動) .... 5,000 ––––5,000 – 1,000 – – – Unexpected Life (不期而遇的人生) . – – – 10,000 – – – 1,000 10,000 – –

Total ...... 15,000 – – 10,000 – 5,000 – 4,009(1) 20,000 – –

Note:

* The figures in the table above are unaudited and primarily represent the transaction amounts we recorded each year during the Track Record Period based on our management accounts.

(1) Including total interest income from loans to third parties for the three years ended December 31, 2019 of approximately RMB3.8 million (which equals to the sum of RMB503,000, RMB2.4 million and RMB837,000 of interest income from loans to third parties for the years ended December 31, 2017, 2018 and 2019, respectively) plus the total VAT of RMB227,000 for the three years ended December 31, 2019.

Fixed Return Investment in Drama Series as an Investee

During the Track Record Period, we also entered into investment agreements with third-party investors who made Fixed Return Investment in our self-produced drama series. We paid fixed returns to these third-party investors based on the annual interest rate, which usually ranged between 9.0% and 25.0% regardless of the sales performance of the relevant drama series. The fixed interest rate was negotiated at arm’s length between us and the third-party investors by taking into account the market rate of return. During the Track Record Period, the investment period for each of the third-party investors is generally a year.

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Salient Terms of Fixed Return Investment Agreements

We normally enter into Fixed Return Investment agreements on a project-by-project basis (regardless of whether we act as an investor or investee). These agreements typically contain the following salient terms:

Subjects Salient Terms

Investment amount ...... Theinvestment in a drama series is a fixed amount, typically ranging from RMB1.0 million to RMB15.0 million, which represents a relatively small portion of the total estimated investment in such drama series.

Fixed annual interest rate ...... Theannual interest rate of Fixed Return Investment is stipulated in the agreement, usually ranging between 9.0% and 25.0% per annum.

Payment of investment returns ...... Regardless of whether the drama series is successfully distributed or whether it is profitable, the investment principal plus the fixed investment returns should be transferred to the investor’s designated bank account within an agreed period (normally one year after the payment of investment).

Copyright ownership ...... Investors of Fixed Return Investment generally do not have copyright ownership of such drama series but are entitled to share the right of authorship.

Default clause ...... • If the investor fails to make investment according to the time as stipulated in the agreement, the investor is subject penalties at a rate agree by the parties;

• If there is any overdue payment of the principal and interest on investment, the investee shall pay the investor penalties at a rate as stipulated in the agreement; and

• In the event any party is in breach of the agreement, the party in breach shall be liable for actual losses caused to the non-breaching party.

Termination ...... Theagreementmaybeterminated if the two parties have mutually agreed to terminate the agreement in writing.

For further details of our Group’s Fixed Return Investment, please refer to the sections headed “Financial Information — Major Components of Our Results of Operations — Other Income” and “Financial Information — Description of Certain Key Items from Our Consolidated Statement of Financial Position — Prepayments, Deposits and Other Receivables” in this document.

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Differences between Fixed Return Investment and Investment in Drama Series under Co-financing Arrangement as a Non-executive Producer

We either invest in drama series by (i) entering into the co-investment agreement with executive producers of the drama series; or (ii) making Fixed Return Investment. The differences between Fixed Return Investment and investment in drama series under co-financing arrangement as a non-executive producer generally include:

• Roles of the parties: Under Fixed Return Investment, the investor takes no risk in the distribution and sales performance of the drama series and receives fixed investment returns from the executive producer, whereas the non-executive producer under co-financing arrangement generally shares the license fees and investment risk with the executive producer based on the proportion of investment.

• Rights and responsibilities of the parties: Under Fixed Return Investment, the investee is responsible for the production and distribution of the drama series, and the investor typically does not participate in or only has limited involvement in the production and/or distribution process. However, under the co-financing arrangement, the executive producer takes a leading role in the production and distribution of the drama series, and the non-executive producer has limited involvement in the production and/or distribution process, the extent of which is generally larger than that of the investor under the Fixed Return Investment, including providing advice in relation to the production process to and determining certain crucial matters jointly with the executive producers.

• Investment returns: Under Fixed Return Investment, the investor is entitled to fixed investment return based on the principal, agreed interest rate and investment period of the drama series, whereas the investment return under the co-financing arrangement as a non-executive producer is based on the sales performance of the drama series and will be distributed in proportion based on the investment amount of each investor.

• Risk exposures: Fixed Return Investment provides a fixed return on investment to the investor according to the agreed rate of return. However, investment under the co-financing arrangement as a non-executive producer exposes the investor to the risk of variable returns.

According to the Frost & Sullivan Report, both Fixed Return Investment and investment in drama series under the co-financing arrangement as a non-executive producer are common in our industry.

PRICING POLICY

With respect to our pricing strategies, we generally price our products with reference to our cost-estimate of each drama series together with other commercial factors. We determine the license fee based on a variety of factors, including, among other things, the broadcasting platforms to be used by the potential customer for broadcasting the drama series (i.e., whether the drama series will be broadcast on satellite TV channels or terrestrial TV channels), the

– 198 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. BUSINESS broadcasting schedules (whether the drama series will be first-run broadcast or rerun broadcast) and related broadcasting time slots (whether the drama series will be broadcast during prime time or non-prime time), the cost of purchasing the relevant copyrights or broadcasting rights, prevailing market prices, estimated costs in connection with promotion and marketing of the drama series and our target profit margin.

Our price per episode of a drama series broadcast on satellite TV channels is usually higher than that for terrestrial TV channels because satellite TV channels are able to reach more viewers and are capable of obtaining market feedback to achieve meaningful scale more quickly. Additionally, our price per episode for rerun broadcast of a drama series is generally lower than that for first-run broadcast.

The following table sets forth the price range per episode for our drama series in terms of the broadcasting platforms and broadcasting schedules during the Track Record Period:

Platforms and Schedules for Broadcasting the Drama Series Price per Episode

First-run broadcast – Satellite TV channels...... RMB60,000 – RMB2.3 million – Terrestrial TV channels...... RMB1,500 – RMB53,000 – Online media platforms and other customers ...... N/A

Rerun broadcast – Satellite TV channels ...... RMB200 – RMB540,000 – Terrestrial TV channels...... RMB350 – RMB25,000 – Online media platforms and other customers ...... RMB6,050 – RMB170,000

SALES AND MARKETING

We generally distribute the drama series sourced from the drama series copyright owners/licensors directly to our customers. We have a strong on-the-ground business development team that is in charge of establishing and maintaining relationships with TV channels and media companies, as well as online media platforms we work with to provide access to our services. We strive to promote the relevant drama series to them as we believe our distribution capability is important to both of our business of licensing of the broadcasting rights and acting as the distribution agent. Considering the fierce competition in the market for distributing drama series, we adjust our sales and marketing strategy from time to time according to our performance. In addition, we actively participate and/or organize marketing booths at industry trade fairs and conventions on a regular basis each year to promote our drama series to our potential customers, including, among other things, Beijing Television Festival (北京電視節), Beijing Television Program Exchange Fair – Spring/Fall Sessions (北京春季╱秋季節目交流會) and Shanghai Television Festival (上海電視節). Through these trade fairs and conventions, we are able to showcase our drama series to existing and potential customers, expand our customer base, enhance our drama series offerings and raise our profile in the industry.

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In addition to attending trade fairs and conventions, we also visit our customers and drama series copyright owners/licensors on a regular basis to negotiate our distribution services with them as part of the presale activities during the filming and production of such drama series. We believe that these frequent opportunities to meet with our existing and potential suppliers and customers have provided us with abundant opportunities to maintain and foster fruitful business relationships, and in the meantime, closely monitor the market trends in different regions in China.

Moreover, in order to enhance the audience exposure of the drama series distributed by our Group, we usually formulate the relevant promotion and marketing strategies and engage specialized marketing service providers, who are Independent Third Parties, to implement such promotion and marketing plans. The marketing activities conducted by the third-party service providers generally include, among others, devising posters, setting up billboards and promoting the drama series on new media and/or online social platforms. We formulate the promotion and marketing strategy of each drama series based on a number of factors, including (i) the drama series content; (ii) TV channels on which the drama series to be broadcast; (iii) broadcasting rounds; and (iv) the competition from other drama series being broadcast during the same time slot. We generally discuss our marketing plans and budget with the third-party service providers, make payments to such service providers in installments and settle the marketing fees with them after the broadcasting of the drama series is completed.

During the time a particular drama series is being broadcast, we closely monitor public perception and audience feedback. After a drama series is broadcast, the third-party marketing service provider usually will prepare a summary report on the implementation of our marketing plan, analyze the effectiveness of the marketing strategy and provide us with important reference data, which we believe will continue to effectively improve and enhance our promotional and marketing ability.

We recorded the fees paid to the third-party marketing service providers as a part of our cost of sales in our consolidated statements of profit or loss and other comprehensive income during the Track Record Period. For the years ended December 31, 2017, 2018 and 2019, our promotion and marketing expenses amounted to approximately RMB152.0 million, RMB132.6 million and RMB63.3 million, respectively, which accounted for approximately 40.1%, 34.4% and 16.2% of our total revenue during the same period, respectively.

OUR CUSTOMERS

For the year ended December 31, 2017, 2018 and 2019, the revenue attributable to our five largest customers was approximately RMB278.7 million, RMB317.2 million and RMB288.2 million, respectively, which accounted for approximately 73.6%, 82.3% and 73.8% of our total revenue for the same periods, respectively. For the same periods, the revenue attributable to our largest customer was approximately RMB107.3 million, RMB148.2 million and RMB160.6 million, respectively, which accounted for approximately 28.3%, 38.4% and 41.1% of our total revenue, respectively. As we expanded our business during the Track Record Period, we have

– 200 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. BUSINESS established cooperation with more TV channels and new online media platforms, which led to further diversification of our customer base. According to the Frost & Sullivan Report, it is an industry practice for drama series production companies to rely on a limited number of important customers from year to year.

Except for Customer C and Customer N, none of our top five customers was also our suppliers during the Track Record Period.

Customer C is an indirect subsidiary of a television station in Tianjin, which is the same entity as Supplier L. In 2017, 2018 and 2019, we licensed the broadcasting rights of several drama series to Customer C for a total license fee of approximately RMB107.3 million, RMB86.3 million and RMB19.4 million, respectively, representing approximately 28.3%, 22.4% and 5.0%, respectively, of our total revenue. On the other hand, Customer C/Supplier L licensed the broadcasting rights of various drama series to us for an amount of approximately RMB17.4 million during the Track Record Period, which allowed us to distribute the relevant drama series to other customers. For the years ended December 31, 2017, 2018 and 2019, the gross profit margin of Customer C was approximately 20.4%, 26.2% and 27.9%, respectively, compared to the gross profit margin of approximately 19.9%, 25.7% and 36.5% of other customers for the same periods, respectively. The relatively lower gross profit margin of Customer C compared to other customers for the year ended December 31, 2019 was primarily because we had several self-produced and outright-purchased drama series, including “A Gallant Army” (老虎隊), “Road to Rebirth” (愛在星空下) and “Dream on the Side of the Sea” (夢在海這邊), that were broadcast on various leading satellite TV channels in the PRC other than the satellite TV channel operated by Customer C during 2019. These leading satellite TV channels include a state-owned TV channel and the satellite channel of Zhejiang Television Station (浙江衛視), which had a higher rating than the satellite TV channel operated by Customer C, according to the Frost & Sullivan Report. Therefore, these drama series had relatively higher gross profit margins for the year ended December 31, 2019, resulting in a higher gross profit margin of our other customers compared to the gross profit margin of Customer C in 2019. In addition, the ultimate beneficial owner of Supplier J is Customer N. During the Track Record Period, Supplier J had also been one of our customers. For the years ended December 31, 2017, 2018 and 2019, Supplier J licensed the broadcasting rights of various drama series to us for an amount of nil, approximately RMB62.2 million and RMB0.6 million, respectively. On the other hand, we licensed the broadcasting rights of several drama series to Customer N and Supplier J and provided distribution agency services to Supplier J for an aggregate license fee and distribution agency fee of approximately RMB15.7 million, RMB8.5 million and RMB42.3 million, respectively, for the same years. For the years ended December 31, 2017, 2018 and 2019, the gross profit margin of Customer N and Supplier J was approximately 20.2%, 26.5% and 41.6%, respectively.

According to Frost & Sullivan Report, it is normal in the PRC drama series industry that certain TV channels engage drama series production companies that have marketing and distribution capabilities to distribute their drama series. Our Directors confirmed that our sales and purchases with Customer C and Customer N were conducted in the ordinary course of business under normal commercial terms during the Track Record Period.

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During the Track Record Period and up to the Latest Practicable Date, our Group has not received any material complaint from our customers.

The table below sets forth the details of our five largest customers during the Track Record Period.

For the Year Ended December 31, 2017

Principal As a Background and Services Year(s) of Percentage Principal Business Provided by Scale of Business Transaction of Our Total Rank Customer Activities Our Group Operations(2) Relationship(3) Typical Credit Term Amount Revenue RMB’000 RMB’000 (%)

1 Customer C/ A limited company Licensing the 200,000 3 (i) Settle the initial 20% of the full 107,290 28.3 Supplier L(1) owned by the TV broadcasting amount within 60 days upon entering station in Tianjin, rights of into the agreement; (ii) settle an which primarily drama series additional 30% of the full amount engages in the within 60 days upon the receipt of the production and invoice issued by us after receiving, distribution of TV confirming and examining all series and TV authorizations and license documents programs and a full set of broadcasting tapes; and (iii) settle the balance of the full amount after the broadcasting of such drama series.

2 Customer A A public institution Licensing the 1,223,340 3 (i) Settle the initial 20% to 30% of the full 59,823 15.8 operating the TV broadcasting amount within 15 to 30 days since the station in rights of broadcasting or signing contract of Heilongjiang drama series such drama series; (ii) settle an additional 20% of the full amount within 15 to 30 days upon receipt and confirmation of all authorizations and license documents and a full set of broadcasting tapes; and (iii) settle the balance of the full amount within 60 days after the broadcasting of such drama series.

3 Customer F A public institution Licensing the 4,245,096 3 (i) Settle the first 30% to 50% of the full 48,048 12.7 operating the TV broadcasting amount within 15 to 30 days upon the station in Shandong rights of receipt of the invoice issued by us and drama series after receiving and confirming all authorizations and license documents and a full set of broadcasting tapes of such drama series; and (ii) settle the balance of the full amount within 30 days upon the receipt of the invoice issued by us after the broadcasting of such drama series.

4 Customer G A limited company Licensing the 100,000 3 Settle the lump-sum payment of the full 42,678 11.3 primarily engaged broadcasting amount within 90 to 180 working days in advertising, rights of or one calendar year since the production and drama series broadcasting of the final episode of distribution of TV the particular drama series. programs in Hebei

5 Customer H A public institution Licensing the 1,514,886 2.5 Settle the payment in the amount of 20,849 5.5 operating the TV broadcasting RMB1.0 million each month after the station in Jiangxi rights of broadcasting of such drama series. drama series

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For the Year Ended December 31, 2018

RMB’000 RMB’000 (%)

1 Customer I A public institution Licensing the 2,067,940 3 (i) Settle the initial 20% of full amount 148,218 38.4 operating the TV broadcasting within one month after receiving and station in Anhui rights of confirming all authorizations and drama series license documents and a full set of broadcasting tapes; (ii) settle an additional 30% of the full amount within six months after the broadcasting of such drama series; and (iii) settle the balance of the full amount within one year after the broadcasting of such drama series.

2 Customer C/ A limited company Licensing the 200,000 3 (i) Settle an initial 20% of the full amount 86,292 22.4 Supplier L(1) owned by the TV broadcasting within 60 days upon entering into the station in Tianjin, rights of agreement; (ii) settle an additional which primarily drama series 30% of the full amount within 60 days engages in the upon the receipt of the invoice issued production and by us after receiving, confirming and distribution of TV examining all authorizations and series and TV license documents and a full set of programs broadcasting tapes; and (iii) settle the balance of the full amount after the broadcasting of such drama series.

3 Customer J A public institution Licensing the 3,267,330 2 Settle the full amount in two installments 51,766 13.4 operating the TV broadcasting respectively within 40 working days station in Shenzhen rights of and within another period upon drama series agreement.

4 Customer K A public institution Licensing the 1,700,000 2 Settle the full amount in two installments 17,934 4.7 operating the TV broadcasting within certain period as agreed in the station in Henan rights of agreement. drama series

5 Customer L An advertising, Licensing the 28,287 1.5 (i) Settle the initial 50% of the full 13,038 3.4 marketing and broadcasting amount within 10 working days upon technology rights of the receipt of the invoice issued by us; company and drama drama series and (ii) settle the balance of the full series solution amount within 10 working days upon services provider in the receipt of the invoice issued by us Beijing after the broadcasting of the final episode of such drama series.

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For the Year Ended December 31, 2019

RMB’000 RMB’000 (%)

1 Customer M A public institution Licensing the 1,092,775 2.5 (i) Settle 30% of the full amount within 160,625 41.1 operating the TV broadcasting 30 days upon receipt of the invoice station in Zhejiang rights of issued by us after confirming the drama series receipt of a full set of broadcasting tapes; and (ii) settle the balance of the full amount upon receipt of the invoice issued by us after the broadcasting of such drama series.

2 Customer J A public institution Licensing the 3,267,330 2 (i) Settle the full amount in two 42,526 10.9 operating the TV broadcasting installments respectively within 40 station in Shenzhen rights of working days and within another drama series period upon agreement; or (ii) settle the lump-sum payment within 30 working days upon receipt of invoice issued by us.

3 Customer N(1) A public institution Licensing the 50,000 3 Settle the payment in three installments 42,275 10.8 operating the TV broadcasting after the broadcasting of such drama station in Hubei rights of series. drama series

4 Customer I A public institution Licensing the 2,067,940 3 (i) Settle the initial 20% of full amount 23,299 6.0 operating the TV broadcasting within one month after receiving and station in Anhui rights of confirming all authorizations and drama series license documents and a full set of broadcasting tapes; (ii) settle an additional 30% of the full amount within six months after the broadcasting of such drama series; and (iii) settle the balance of the full amount within one year after the broadcasting of such drama series.

5 Customer C/ A limited company Licensing the 200,000 3 (i) Settle an initial 20% of the full amount 19,425 5.0 Supplier L(1) owned by the TV broadcasting within 60 days upon the receipt of the station in Tianjin, rights of invoice issued by us; (ii) settle an which primarily drama series additional 30% of the full amount engages in the within 60 days upon the receipt of the production and invoice issued by us after receiving, distribution of TV confirming and examining all series and TV authorizations and license documents programs and a full set of broadcasting tapes; and (iii) settle the balance of the full amount after the broadcasting of such drama series.

Notes:

(1) These customers were also our top five suppliers during the Track Record Period. We typically make payments to our customers who are also our suppliers in installments as stipulated by the terms of the relevant contract.

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(2) The scale of operations primarily represents the registered capital of the respective enterprise or public institution.

(3) The year(s) of business relationship with our five largest customers during the Track Record Period represents the period from the first year when we entered into a broadcasting rights transfer agreement with each of them to the date of this document.

CREDIT CONTROL

We have adopted stringent credit control procedures and we check our working capital on an on-going basis to minimize potential credit risks. We have established a record system to monitor the receivables and outstanding invoices. Our accounting staff reports regularly to our senior management and we analyze and formulate relevant procedures to collect outstanding fees. In general, we granted a credit period ranging from 60 days to one year from the date of billing to our customers. Please refer to the section headed “Financial Information — Description of Certain Key Items from Our Consolidated Statement of Financial Position — Trade and Bills Receivables” in this document.

DRAMA SERIES COPYRIGHTS

We produce or purchase drama series copyrights in connection with our operations. Therefore, the concept of inventory does not strictly apply to us. Instead, the drama series copyrights on our balance sheet represent the assets of which we can license the relevant broadcasting rights. As of December 31, 2017, 2018 and 2019, we had drama series copyrights on hand amounting to approximately RMB102.3 million, RMB169.4 million and RMB179.0 million, respectively.

Although we generally start the production of our drama series without receiving a purchase commitment from our customers, for the drama series we produced during the Track Record Period, we have been able to gauge customers’ interest before production was completed. We believe that is attributable to the popularity and quality of our drama series, our long-term close cooperation with our customers and our consistent efforts to seek customer’s feedbacks from the outset of the production process.

OUR SUPPLIERS

Our major suppliers primarily include (i) producers or copyrights owners of the drama series, who license the copyrights or broadcasting rights of the drama series to us; and (ii) third-party service providers relating to drama series production and promotional activities. As of the Latest Practicable Date, we had established relationships with our five largest suppliers for the Track Record Period for periods ranging from one to four years. For the three years ended December 31, 2017, 2018 and 2019, purchases from our five largest suppliers were approximately RMB253.4 million, RMB347.6 million and RMB216.0 million, respectively, which accounted for approximately 69.9%, 81.0% and 76.1% of our total purchases, respectively. During the same periods, purchases from our largest supplier were approximately RMB101.1 million, RMB180.7 million and RMB91.5 million, respectively, which accounted for approximately 27.9%, 42.1% and 32.2% of our total purchases, respectively.

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We generally engage suppliers through a variety of methods, including, but not limited to, television festivals, supplier publicity materials, peer recommendations and referrals from TV channels. We select suppliers based on their reputation, past experience, the scope of the task and the quality of services/products to be provided and their proposed prices.

During the Track Record Period and up to the Latest Practicable date, none of our Directors, their respective close associates, or any Shareholder (who, to the knowledge of our Directors, owned more than 5% of our issued capital as of the Latest Practicable Date), held any interest in any of our five largest suppliers for the Track Record Period. Our Directors confirmed that we had not encountered any material disputes with, and had not received any material complaint from, our suppliers during the Track Record Period and up to the Latest Practicable Date.

Arrangements with Our Suppliers

We generally enter into contracts with the suppliers on a project-by-project basis. The contracts usually set out the salient terms below:

Subjects Salient Terms

Supplier’s work scope ...... Thecontract sets out the scope and delivery timeline of the work involved

Suppliers’ fees ...... Supplier fees are usually settled by installments or by one lump sum payment, subject to the terms of the contract

Compliance ...... Thecontract sets forth the requirement that the supplier shall be in compliance with the relevant laws and regulations when providing their services/products

Termination ...... Intheevent any party is in breach of the contract, the breaching party shall be liable for actual loss caused

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For the Year Ended December 31, 2017

Principal Services/ Year(s) of As a Percentage Scale of Background and Principal Products Provided by the Business Transaction of Our Total (2) Operations(3) Rank Supplier Business Activities Supplier Method of Acquaintance TypicalRelationship Credit Term Amount Purchases RMB’000 RMB’000 (%)

1 Supplier E (1) A private company providing Drama series production The shareholder of this supplier 3 N/A Settle the payment in certain installments with 101,131 27.9 artist management, services and is Mr. Yuan’s ex-colleague at the progress of services provided. photography, fashion design, promotional and Great Wall Movie and advertising, drama series marketing services Television Co., Ltd.* (長城影 production and distribution 視股份有限公司) services in Zhejiang

2 Supplier F

(1) A sole proprietorship enterprise Promotional and Referred by mutual friends 3 N/A Settle the lump-sum payment upon reaching the 89,007 24.5 providing advertising, marketing services promotion target as stipulated in the photography and artist agreement. management services in

Zhejiang BUSINESS

0 – 207 – 3 Supplier G A private company providing Copyright owner/licensor Referred by mutual friends 3 30,000 (i) Settle an initial 20% of the full amount upon 26,415 7.3 advertising and event of outright-purchased receiving the full set of broadcasting tapes; organization services in drama series (ii) settle an additional 30% of the full Beijing amount within 15 working days after the broadcasting of such drama series; and (iii) settle the balance of the full amount within the period as stipulated in the agreement.

4 Supplier H

(1) A sole proprietorship enterprise Drama series production Referred by mutual friends 3 N/A Settle the lump-sum payment upon reaching the 21,014 5.8 providing advertising, services and promotion target as stipulated in the public relation and event promotional and agreement. management services in marketing services Zhejiang

5 Supplier I A sole proprietorship enterprise Copyright owner/licensor Referred by mutual friends 3 10,000 (i) Settle 40% of the service fees within 30 15,849 4.4 providing advertising, of outright-purchased working days after the broadcasting of the public relations and event drama series drama series; and (ii) settle the balance management services in within 90 working days after the Zhejiang broadcasting of the drama series. For the Year Ended December 31, 2018 DOCUMENT THIS IN INFORMATION THE DOCUMENT. THIS CHANGE. OF COVER TO THE SUBJECT ON “WARNING” AND HEADED SECTION INCOMPLETE THE WITH FORM, CONJUNCTION IN DRAFT READ IN BE SHOULD IS DOCUMENT THIS

Principal Year(s) of As a Percentage Scale of Background and Principal Services/Products Business Transaction of Our Total (2) Operations(3) Rank Supplier Business Activities Provided by the Supplier Method of Acquaintance TypicalRelationship Credit Term Amount Purchases RMB’000 RMB’000 (%)

1 Supplier F (1) A sole proprietorship enterprise Drama series production Referred by mutual friends 3 N/A Settle the lump-sum payment upon reaching the 180,748 42.1 providing advertising, services and promotion target as stipulated in the photography and artist promotional and agreement. management services in marketing services Zhejiang

2 Supplier J

(4) A private company providing Copyright owner/licensor Referred by mutual friends 2 50,000 Settle the license fees in four installments upon 62,166 14.5 artist management, of outright-purchased entering into the agreement. photography, fashion design, drama series advertising, media content production and distribution services in Xinjiang

3 Supplier H BUSINESS (1) A sole proprietorship enterprise Drama series production Referred by mutual friends 3 N/A Settle the payment in certain installments with 56,566 13.2 providing advertising, services the progress of services provided. 0 – 208 – public relation and event management services in Zhejiang

4 Supplier K A private company providing Copyright owner/licensor Referred by mutual friends 2 3,000 (i) Settle an initial 40% of the license fees after 30,716 7.2 advertising, photography of outright-purchased receiving, confirming and examining all and artist management drama series authorizations and license documents and a services in Xinjiang full set of broadcasting tapes; (ii) settle an additional 20% of the license fees within four months after the broadcasting of such drama series; and (iii) settle the balance of license fees within 10 months after the broadcasting of such drama series.

5 Customer C/ Supplier L

A limited company owned by Copyright owner/licensor Met in industry events 2 200,000 (i) Settle 50% of the license fees within one 17,366 4.0 (4) the TV station in Tianjin, of outright-purchased month upon signing the agreement; and (ii) which primarily engages in drama series settle the balance of license fees within three the production and months upon signing the agreement. distribution of TV series and TV programs For the Year Ended December 31, 2019 DOCUMENT THIS IN INFORMATION THE DOCUMENT. THIS CHANGE. OF COVER TO THE SUBJECT ON “WARNING” AND HEADED SECTION INCOMPLETE THE WITH FORM, CONJUNCTION IN DRAFT READ IN BE SHOULD IS DOCUMENT THIS

1 Supplier M (5) A company listed on the Stock Copyright owner/licensor Referred by a customer 2.5 372,608 Settle the payment within ten days after 91,463 32.2 Exchange of Shenzhen, of outright-purchased receiving the license fees from broadcasting providing drama series drama series channels. production and distribution services

2 Supplier O and Supplier F Supplier O is a sole Promotional and Referred by mutual friends Supplier O: 1 N/A Settle the lump-sum payment upon reaching the 43,450 15.3 (6) proprietorship enterprise marketing services and Supplier F: 3 promotion target as stipulated in the providing advertising, drama series agreement. photography, event production services planning, marketing and promotion services in Zhejiang ; Supplier F is a sole proprietorship enterprise providing advertising, photography and artist management services in Zhejiang

3 Supplier N and

Supplier H BUSINESS 0 – 209 –

SupplierNisasole Drama series production Referred by mutual friends Supplier N: N/A Settle the payment with the progress of services 35,529 12.5 (6) proprietorship enterprise services Less than provided. providing advertising, a year marketing and promotion Supplier and drama series production H: 3 services in Zhejiang ; Supplier H is A sole proprietorship enterprise providing advertising, public relation and event management services in Zhejiang

4 Supplier P A private company providing Copyright owner/licensor The management of our Group 1 20,000 Settle the license fees in three installments 23,868 8.4 drama series production, of outright-purchased and the supplier are friends within certain period as stipulated in the advertising and artist drama series agreement after the broadcasting of the TV management services in series. Beijing

5 Supplier Q A private company providing Copyright owner/licensor Referred by mutual friends 2.5 3,000 (i) Settle an initial 20% of the license fees within 21,698 7.6 drama series production, of outright-purchased 30 working days after receiving, confirming advertising and artist drama series and examining all authorizations and license management services in documents and a full set of broadcasting Beijing tapes; (ii) settle an additional 40% of the license fees within 60 working days after the broadcasting of such TV series; and (iii) settle the balance of license fees within 90 working days after the broadcasting of such TV series. HSDCMN SI RF OM NOPEEADSBETT HNE H NOMTO NTI DOCUMENT THIS IN INFORMATION THE DOCUMENT. THIS CHANGE. OF COVER TO THE SUBJECT ON “WARNING” AND HEADED SECTION INCOMPLETE THE WITH FORM, CONJUNCTION IN DRAFT READ IN BE SHOULD IS DOCUMENT THIS

Note:

(1) Supplier E, Supplier F and Supplier H had been deregistered as of the Latest Practicable Date.

(2) The year(s) of business relationship with our five largest suppliers during the Track Record Period represents the period from the first year when we entered into a relevant agreement with each of them to the date of this document.

(3) The scale of operations primarily represents the registered capital of the respective enterprises. However, the registered capital of the suppliers that are sole proprietorship enterprises are not available to the public.

(4) These suppliers were also our top five customers during the Track Record Period. For details of the payment arrangements involving suppliers who are also our customers, please see “— Our Customers” in this section.

(5) This supplier was also one of our customers in 2019. For the years ended December 31, 2017, 2018 and 2019, our revenue attributable to this customer was nil, nil and approximately RMB14.0 million, respectively, which primarily represented the proportional license fees we received from the executive producer for licensing the broadcasting rights of “Dream on the Side of the Sea” (夢在海這邊) under the co-financing arrangements.

(6) These two suppliers were controlled by the same individual, who is an Independent Third Party. BUSINESS 1 – 210 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. BUSINESS

All of our five largest suppliers during the Track Record Period are Independent Third Parties. Our Directors confirmed that there are no past or present relations, whether business, family, financing or otherwise, between each of our Group’s five largest suppliers and our Group, including our shareholders, directors, subsidiaries, senior management or any of their respective associates.

For the years ended December 31, 2017 and 2018, the aggregate amount of promotional and marketing expenses attributable to our five largest suppliers was approximately RMB0.5 million and RMB10.1 million, respectively, less than the amount specified in the relevant agreements that we entered into with such suppliers. When we enter into a relevant agreement with our suppliers for the promotional and marketing services, we usually formulate a preliminary promotional and marketing plan to improve the execution efficiency of the relevant suppliers. During the broadcasting period of our drama series, we will closely monitor the rating, popularity and audience’s feedback through various media websites. We may, under mutual consent, increase or reduce the previously agreed promotional and marketing fees based on the results and effects of the promotional and marketing campaigns conducted by such suppliers when we settle such fees with them in installments. The discrepancy in 2017 and 2018 was primarily attributable to the adjustments we made based on the actual results of the promotional and marketing services provided by certain of our five largest suppliers during such years.

The table below sets forth a breakdown of the discrepancy between the promotional and marketing fees we paid to our five largest suppliers during the Track Record Period and the amount specified in the relevant agreements for the years indicated:

Year Ended December, 31

2017 2018 2019

Percentage of the Percentage of the Percentage of the Amount of Amount of Amount of Discrepancy to Discrepancy to Discrepancy to Amount of the Agreement Amount of the Agreement Amount of the Agreement Discrepancy(1) Amount Discrepancy(1) Amount Discrepancy(1) Amount

RMB’000 % RMB’000 % RMB’000 %

Supplier E ...... 555 1.0 –––– Supplier F ...... (260) 0.3 (10,070) 7.0 – – Supplier H ...... (820) 7.7 ––––

Total ...... (525) (10,070) –

Note:

(1) The amount of discrepancy represents the amount of the promotional and marketing fees and applicable taxes we paid to our five largest suppliers during the Track Record Period. Due to the fierce competition in the drama series promotion market in 2018, the preliminary marketing fees we set with certain of our suppliers were relatively high. The discrepancy in the promotional and marketing fees was approximately RMB10.1 million for the year ended December 31, 2018 with respect to this supplier mainly because there were 27 drama series with promotional services provided by this supplier that did not achieve our expected marketing effects during that year. Accordingly, we, with the mutual consent from the supplier, adjusted the final settlement amount of the promotional and marketing fees.

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Save as disclosed above, our Directors confirmed that there was no other discrepancy between the promotional and marketing expenses payable to our five largest suppliers and the amount specified in the relevant agreements that we entered into with such suppliers during the Track Record Period.

QUALITY CONTROL

We have adopted internal examination and approval procedures and guidelines for our production process, which aims to serve both compliance and quality control purposes for the drama series produced by us. During the process of producing a drama series, we monitor the scope and progress of the services provided by our third-party suppliers on a regular basis and provide our feedback to them during the course of production. We also communicate with our customers regularly throughout the planning, preparation and execution stages of the production. Upon completion of the production of a drama series, we will review the content to ensure that (i) it is in compliance with regulatory requirements and applicable laws in the PRC; and (ii) it meets the specific content or technical requirements of our customers. Any content that promotes obscenity or violence or undermines social morality shall be strictly prohibited. We also keep constant contact and actively coordinate with responsible personnel of our target customers who in turn conduct examination of our work from compliance and technical perspective. Our head of production team will conduct a final review of the drama series before it is delivered to our customers.

Our Directors confirm that there had been no material dispute, lawsuit, or arbitration brought against us due to dissatisfaction of customers during the Track Record Period and up to the Latest Practicable Date.

RESEARCH AND DEVELOPMENT

Due to the nature of our business, we mainly focus on investment in, production and distribution of drama series and we do not have a research and development department during the Track Record Period and up to the Latest Practicable Date.

AWARDS, RECOGNITION AND MEMBERSHIPS IN INDUSTRY ORGANIZATIONS

Our long-standing relationship with our major suppliers and customers and our commitment to providing excellent drama series and related services are evidenced by the honors awarded to us. The table below sets forth some of the major awards and accreditation we received.

Award Award/Accreditation Year Issuing Institute

2018 Best Cooperative Drama Series Distribution 2019 Guangxi Satellite Television (廣西衛視) Company Award (2018年度最佳合作影視發行公司獎) ......

“Bright Star” — 2017 Rating Contribution Gold 2018 Tianjin Satellite Television (天津衛視) Award《星光燦爛》 ( 2017年度收視貢獻金獎) ......

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Award Award/Accreditation Year Issuing Institute

“The Brothers” — Television Series Rating 2018 Guangdong Radio and Television Contribution Company Award《義海》 ( 電視劇收視 (廣東廣播電視台) 貢獻公司獎) ......

“The Brothers” — Sichuan Province Network 2018 Sichuan Radio and Television — Rating Contribution Award)《義海》 ( 四川省網收視 Television Series Center 貢獻獎) ...... Entertainment Channel (四川廣播電視台影視劇中心影視文藝頻道)

“Guerrilla Heroes” — 2016-2017 Rating 2018 Shanxi Radio and Television Contribution Award《游擊英雄》 ( 2016年度-2017年 (山西廣播電視台) 度收視貢獻獎) ......

2017 First Prize of Excellent Enterprise by 2018 Haining Base Management Committee Comprehensive Assessment (海寧基地管理委員會) (2017年度綜合考核優秀企業一等獎)......

“Double Guns” — Excellent Television Series 2017 Shanghai East Film Channel Award-Seventh Place《雙槍》 ( 優秀電視劇獎第七名) (上海東方電影頻道)

Our Chairman, Mr. Yuan, had also received the following award for his services in the drama series production and distribution industry during the Track Record Period.

Award Award/Accreditation Year Issuing Institute

Excellent Distributor (優秀發行人稱號) ...... 2017 Shanghai East Film Channel (上海東方電影頻道)

We also held memberships in certain industry organizations to keep up with the latest market developments. The table below sets forth the membership we held in an industry organization as of the Latest Practicable Date.

Membership Expiry Name of the Entity Year Year Industry Organization

LiTian TV & Film ...... 2013 2020 China Television Drama Production Industry Association (中國電視劇製作產業協會)

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COMPETITION

According to the Frost & Sullivan Report, the drama series market in China is highly competitive and fragmented with a number of competitive participants with differentiated capabilities. The entry barriers of the drama series market in the PRC are relatively high as a result of strict supervision by the relevant government authorities, large capital requirement, demand for experience professionals and reputable brand name. According to the Frost & Sullivan Report, in terms of revenue, the top 20 players in the PRC drama series distribution market in the aggregate accounted for approximately 15.6% of the drama series distribution market in the PRC in 2018. Our Group ranked 16th among the drama series groups in the PRC in terms of revenue, with a market share of approximately 0.34%, and second in terms of the number of TV series first broadcast on satellite TV channels in the PRC in 2018. Please refer to the section headed “Industry Overview” in this document for further details.

We primarily compete with other market players on the service and content offerings, the size and engagement levels, the distribution capability, the understanding of customers’ needs, the availability of financial resources, and the ability to respond quickly and effectively to evolving market trends. We believe our competitive strengths lie in our scripts sourcing, experienced production team and close and stable relationships with our customers, which enable us to achieve a leading position in the market. Please refer to the paragraph headed “— Competitive Strengths” in this section for further details.

EMPLOYEES

As of December 31, 2017, 2018 and 2019, we had 26, 52 and 47 employees, all of whom were located in China. As of the Latest Practicable Date, we had a total of 48 employees. The following table sets forth a breakdown of our employees by business function as of the Latest Practicable Date.

Number of Function Employees % of Total

Management ...... 5 10.4

Project and post-production ...... 9 18.7

Distribution and promotion ...... 6 12.5

Finance and accounting ...... 14 29.2

Administration and other supporting staff ...... 14 29.2

Total ...... 48 100.0

We recruit our employees based on a number of factors, including their level of knowledge and relevant experience, education background and the vacancies within our workforce. We generally enter into a standard employment contract with all our employees, which set out the terms such as remuneration and relevant benefits.

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Our employees have not formed any employee union or association. We believe that we maintain a good working relationship with our employees and we did not experience any significant labor disputes or any difficulty in recruiting staff for our operations during the Track Record Period.

INSURANCE

We may be subject to compensation claims if there are injuries sustained by the filming crew, including artists engaged in our self-produced drama series during their production. Accordingly, we have taken out personal injury and medical insurance for the filming crew (including artists) of our self-produced drama series. Our Directors confirmed that, during the Track Record Period and up to the Latest Practicable Date, there had not been any material claims against our Group for any serious accident which caused severe injuries to the production crew, including artists engaged in our self-produced drama series. In line with the general market practices, we do not maintain any business interruption insurance or product liability insurance, which are not mandatory under the PRC laws. We also do not maintain key man life insurance, insurance policies covering damage to our network infrastructure or information technology systems, or any insurance policies for our properties. In addition, we do not maintain insurance policies against the risks relating to the Contractual Arrangements.

During the Track Record Period and up to the Latest Practicable Date, we did not make any material insurance claims in relation to our business. Please refer to the paragraph headed “Risk Factors — Risks Relating to Our Business — We have not purchased any insurance to cover our main assets, properties and business, and our limited insurance coverage could expose us to significant costs and business disruption” in this document for the details.

OCCUPATIONAL SAFETY AND HEALTH

Our business does not involve significant health and work safety matters, other than being compliant with applicable PRC laws and regulations. We have established relevant safety policies and provided training to our staff prior to the production of the drama series.

As an executive producer, we are responsible for the overall planning, command, control and coordination of the production process, including management of occupational safety and health of the production crew. In particular, we have devised procedural guidelines to supervise the drama series filming procedures and provided the production crew with a management measures handbook that is required to be adhered to by the production crew.

During the Track Record Period and up to the Latest Practicable Date, our Directors confirmed that we did not experience any material occupational, health and safety incidents that occurred due to our fault.

ENVIRONMENTAL PROTECTION

We are not subject to significant health, safety or environmental risks in our operations. As we do not carry out any manufacturing activity, our Directors consider that our business does not involve any environmental protection issue. We had not been subject to any fines or other penalties due to non-compliance with health, safety or environmental regulations during the Track Record Period and up to the Latest Practicable Date.

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SEASONALITY

Our Directors believe that the industry in which we operate does not exhibit any significant seasonality. As such, our business is not tied to any seasonal factors.

INTELLECTUAL PROPERTY

During the Track Record Period, our intellectual properties included:

• trademarks in names, domain names and logos, which are subject to the statutory terms; and

• copyrights of our drama series, scripts and purchased scripts, each subject to the statutory terms.

As of the Latest Practicable Date, we had full ownership of the copyrights (except for the shared right of authorship) for seven self-produced TV series and we had shared copyright of one web series (except for the information network transmission right, which had been permanently and exclusively licensed to the third-party co-investor) in the PRC. As of the Latest Practicable Date, we had registered two trademarks in Hong Kong and one domain name in the PRC. Please see “Appendix IV — Statutory and General Information — C. Further Information about Our Business — 2. Intellectual Property Rights of Our Group” for further information about our intellectual property.

Domain Name

As of the Latest Practicable Date, we owned the following domain name which we consider to be or may be material to our business:

Domain Name Expiry Date

litian.tv April 21, 2025

Copyrights

In general, the proprietary rights attached to the content of the drama series we produced belong to our Group. In case of jointly-produced drama series, the proprietary rights of such drama series will either be proportioned according to the investment ratios or belong entirely to the executive producer. As of the Latest Practicable Date, we had full ownership of the copyrights (except for the shared right of authorship) for seven self-produced TV series and we had shared copyright of one web series (except for the information network transmission right, which had been permanently and exclusively licensed to the third-party co-investor) in the PRC.

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We protect our intellectual property rights through a combination of copyright, trademark and other intellectual property laws, as well as confidentiality and license agreements with our employees, suppliers, customers and others. Our employees are required to enter into a standard confidentiality agreement with us, which provides that, among others, all confidential information developed or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties. We plan to engage external advisors to advise us on intellectual property protection issues as and when required. During the Track Record Period and up to the Latest Practicable Date, there was no breach of our intellectual property rights. However, unauthorized use of our intellectual property by third parties and the expenses incurred in protecting our intellectual property rights from such unauthorized use may adversely affect our business and results of operations. Please refer to the paragraph headed “Risk Factors — Risks Relating to Our Industry — We are subject to risks of piracy and copyright infringement” in this document for details.

Our Directors confirm that we did not have any material disputes or other pending legal proceedings of intellectual property rights with third parties during the Track Record Period and up to the Latest Practicable Date. As of the same date, our Directors are not aware of any material illegal distribution of the drama series sourced by us in the PRC or other countries.

LICENSES AND PERMITS

Companies that engage in providing television program production services in the PRC are required to possess the Radio and Television Program Production and Operation Permit (廣播電視節目製作經營許可證) in accordance with relevant regulations in the PRC. Please see “Regulatory Overview” in this document for details.

The table below sets out the key approvals, licenses, permits and certificates we obtained for our operations in the PRC:

Date of Holder License/Permit Date of Issue Expiration Issuing Authority

LiTian TV & Film ...... Radio and Television April 3, 2019 March 31, Zhejiang Provincial Program Production 2021 Radio and Television and Operation Permit Bureau (浙江省廣播電 (廣播電視節目製作經視局) 營許可證)

LiTian Media ...... Radio and Television April 1, 2019 March 31, Zhejiang Provincial Program Production 2021 Radio and Television and Operation Permit Bureau (浙江省廣播電 (廣播電視節目製作經視局) 營許可證)

Horgos Tiantian Meimei Radio and Television April 1, 2019 March 31, Xinjiang Uygur Program Production 2021 Autonomous Region and Operation Permit Radio and Television (廣播電視節目製作經 Bureau (新疆維吾爾自營許可證) 治區廣播電視局)

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Date of Holder License/Permit Date of Issue Expiration Issuing Authority

Horgos Haohao Xuexi . . Radio and Television April 1, 2019 March 31, Xinjiang Uygur Program Production 2021 Autonomous Region and Operation Permit Radio and Television (廣播電視節目製作經 Bureau (新疆維吾爾自營許可證) 治區廣播電視局)

Tiantian Xiangshang . . . Radio and Television April 1, 2019 March 31, Xinjiang Uygur Program Production 2021 Autonomous Region and Operation Permit Radio and Television (廣播電視節目製作經 Bureau (新疆維吾爾自營許可證) 治區廣播電視局)

Xinjiang LiTian...... Radio and Television September 17, September 17, The Culture, Sports, Program Production 2019 2021 Radio, Television and and Operation Permit Tourism Bureau of (廣播電視節目製作經 Xinjiang Production 營許可證) and Construction Corps (新疆生產建設兵團文化體育廣電和旅遊局)

As of the Latest Practicable Date, Beijing LiTian had not obtained the Radio and Television Program Production and Operation Permit (廣播電視節目製作經營許可證) because it was established in May 2019 and had not undertaken any business activity since its establishment and up to the Latest Practicable Date. Our PRC Legal Advisors have advised us that the Radio and Television Production and Operation Permit is only required when Beijing LiTian begins to have actual business operations. Therefore, as advised by our PRC Legal Advisors, during the Track Record Period and up to the Latest Practicable Date, we have obtained all licenses, permits, approvals and certificates that are material for our business operations in the PRC, and such licenses, permits, approvals and certificates are valid and subsisting.

Certain third-party co-investors of our self-produced drama series have obtained the TV Series Production License (Class A) (電視劇製作許可證（甲種）), which is valid for two years and is applicable to all TV series produced by the holder of such license during the period. Pursuant to the applicable laws and regulations in the PRC, drama series producers that have produced six or more single-episode TV shows, or three or more TV series with more than three episodes per series for two consecutive years are eligible to apply for the TV Series Production License (Class A) (電視劇製作許可證（甲種）). Please see “Regulatory Overview — Regulations on Radio and Television Programs — Regulations on Production and Operation of Radio and Television Program” for details. We do not satisfy the criteria for the application for the TV Series Production License (Class A) (電視劇製作許可證（甲種）) in China. If we choose to apply for the TV Series Production License (Class B) (電視劇製作許可證（乙種）), the license will be granted by the relevant government authorities on a drama series-by-drama series basis and valid for only 180 days, and the process of obtaining such approval is time-consuming and uncertain. In addition, the distribution license of a drama series is generally required to be applied by the production license holder of such drama series, according to the requirements of the relevant government authorities. To streamline the drama series production and distribution process, we work with certain third-party co-investors of seven of our self-produced drama series who have procured the relevant production and distribution licenses. These co-investors have issued

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With respect to the outright-purchased drama series, we obtained the rights to use or the rights to license the broadcasting rights of the outright-purchased drama series by entering into the content distribution agreements with third-party copyright owners/licensors. The copyright owners/licensors of these drama series have the full right, power and authority to enter into the content distribution agreements and the content distribution agreements were not made under the circumstances as set forth in Article 52 of the PRC Contract Law. As advised by the our PRC Legal Advisors, the content distribution agreements we entered into are valid and the fact that the licence holders of the outright-purchased drama series are not part of our Group does not violate the relevant laws and regulations in the PRC.

PROPERTIES

As of the Latest Practicable Date, we did not own any properties, but we leased eight properties in China, with an aggregate gross floor area of approximately 1,403.87 square meters. All of our leased properties in China are primarily used as offices.

Leased Properties

The following table sets forth the addresses, approximate gross floor areas and the lease terms of the properties leased by us as of the Latest Practicable Date:

No. Address Gross Floor Area Lease Term

(Square meters)

1. Room 1611-16, 16th Floor, Haining Film and 25.00 March 21, 2016 to Television Science and Technology Center, Film March 20, 2022 and Television Industry International Cooperation and Experimental Base, Haining, Zhejiang Province (中國（浙江）影視產業國際合作實驗區基地海寧市影視科創中心16樓1611-6室)

2. Building 5, No.85, Chaoyang Road, Chaoyang 480.00 July 1, 2016 to District, Beijing (北京朝陽區朝陽路85號院5號樓) December 31, 2020

3. Room 807-811, 8th Floor, Building 4, No.336, 429.00 September 13, 2019 to Changjiang Road, Binjiang District, Hangzhou, September 12, 2021 Zhejiang Province (浙江省杭州市濱江區長河街道長江路336號4幢8層807-811室)

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No. Address Gross Floor Area Lease Term

(Square meters)

4. Room 1711-20, 17th Floor, Science and Technology 25.00 August 25, 2019 to March 20, Center, No. 128 Shuanglian Road, Haining 2022 Economic Development Zone, Haining, Jiaxing, Zhejiang, China (浙江省嘉興市海寧市海寧經濟開發區雙聯路128號科創中心17樓1711-20室)

5. Room 804 and 808, Oriental Apartment, No.B4, 168.49 August 12, 2019 to Central Area, China-Kazakhstan Horgos August 11, 2020 International Frontier Cooperation Center, Khorgas Port, Ili Kazakh Autonomous Prefecture, Xinjiang, China (中國新疆伊犁州霍爾果斯口岸中哈霍爾果斯國際邊境中心中心區B4號東方公寓804及 808室)

6. Room 806 and 809, Oriental Apartment, No.B4, 168.49 August 12, 2019 to Central Area, China-Kazakhstan Horgos August 11, 2020 International Frontier Cooperation Center, Khorgas Port, Ili Kazakh Autonomous Prefecture, Xinjiang, China (新疆伊犁州霍爾果斯口岸中哈霍爾果斯國際邊境中心中心區B4號東方公寓806、 809室)

7. Room 802, Oriental Apartment, No.B4, Central 75.55 August 12, 2019 to Area, China-Kazakhstan Horgos International August 11, 2020 Frontier Cooperation Center, Khorgas Port, Ili Kazakh Autonomous Prefecture, Xinjiang, China (中國新疆伊犁州霍爾果斯口岸中哈霍爾果斯國際邊境中心中心區B4號東方公寓802室)

8. Room 916, Area B, Headquarter Building, Division 32.34 November 1, 2018 to of Xinjiang Production and Construction Corps, November 1, 2021 Economic Zone Headquarter, Shenka Avenue, Kashgar Economic Development Zone, Xinjiang (新疆喀什經濟開發區深喀大道總部經濟區兵團分區總部大廈B區916室)

For seven leased properties with an aggregate gross floor area of 1,371.53 square meters, our lessors (including both landlords and sub-lessors) have obtained the relevant building ownership certificates. As advised by our PRC Legal Advisors, the landlords or sub-lessors of these leased properties are the owners of, or authorized persons to lease or sublease, the respective properties and that the leases we entered into are valid.

For one leased property located in Xinjiang with a gross floor area of 32.34 square meters, the landlord has not obtained the relevant building ownership certificate. We use this property primarily as an office. Our PRC Legal Advisors have advised us that if the lease involving a property with defective title is deemed to be invalid or the lessee is not able to continue to use the leased property, the lessee may seek damages from the landlord in accordance with the Contract Law of the PRC and/or the terms of the lease agreement. Our Directors are of the view that, as this property was leased for office purposes, which can be easily replaced by an alternative property, if and when necessary, and because such property had relatively small leasehold area, our results of operations and financial condition would not be materially and adversely affected due to the defective title that our landlord held with respect to this property.

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Furthermore, we did not register the relevant lease agreements with the local housing administration authorities for all of our leased properties as required by the Administrative Measures for Commodity Housing Leasing《商品房屋租賃管理辦法》 ( ). Our PRC Legal Advisors have advised us that we may be required by the relevant PRC authorities to register the relevant lease agreements within the prescribed period. If we fail to do so, we may be subject to fines ranging from RMB1,000 to RMB10,000 for each non-registered lease. Based on the number of our unregistered leases as of the Latest Practicable Date, we estimate that the maximum penalty we may be subject to would be approximately RMB80,000. However, as of the Latest Practicable Date, we have not been fined with the relevant PRC authorities with respect to the non-registered leases, and our PRC Legal Advisors have advised us that the non-registration of such lease agreement not affect their validity. The registration of the relevant lease agreements requires the cooperation of the relevant lessors, which is beyond our control. We endeavor to use reasonable efforts to communicate with the relevant lessors with a view to fulfilling the registration requirements. We will, to the extent practicable, request the relevant lessors to comply with the lease registration requirements. Our Directors are of the view that none of these leased properties for which the lease agreements have not yet been registered is material to our operations in the PRC as they were only used for office purposes and we would not have any difficulty in relocating to alternative premises if needed.

As of the Latest Practicable Date, the Beijing branch of LiTian TV & Film leased and occupied the property located in Building 5, No.85 Chaoyang Road, Chaoyang District, Beijing (“Building 5”) as the main operating office, while its registered office was Room 4A67, 4th Floor, Building 4, No.85 Chaoyang Road, Chaoyang District, Beijing (“Building 4”). Pursuant to the Regulations of the People’s Republic of China on Administration of Registration of Companies (《公司登記管理條例》) (the “Regulations of Registration”), the address of a company shall be the main office address and the only registration office of a company. Where the main office address is inconsistent with the registration office, a company shall file the application for change of registration office and submit a certificate of use for the new registration office before moving into the new registration office.

As of the Latest Practicable Date, we had not filed for the change of registration office of LiTian TV & Film. As advised by our PRC Legal Advisors, if a company fails to complete the registration procedures for a change of a company’s registration office, (i) the relevant authorities may order the company to make correction within a prescribed period; and (ii) a fine ranging from RMB10,000 to RMB100,000 may be imposed if the correction is not made within the prescribed period. We obtained a confirmation from the lessor on March 27, 2020 that (i) the relevant authorities had approved that those companies that leased offices in Building 5 may use the other available addresses in the same park as their registration offices, since Building 5 cannot be registered as the registration office due to its planned usage purpose; and (ii) the Beijing branch of LiTian TV & Film registered its office at Building 4 was mainly because Building 5 cannot be registered as the registration office.

Based on such confirmation and given that (i) the relevant authorities will stipulate a certain period when ordering us to complete the registration according to the Regulations of Registration; and (ii) we had not received any such request to complete the registration from the relevant authorities as of the Latest Practicable Date, our PRC Legal Advisors are of the view that the risk of us being fined or penalized by relevant authorities is low.

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Properties Used by Us for Free

As of the Latest Practicable Date, we occupied two buildings, which were provided to us for free use. One of the buildings was located at Room 4A67, 4th Floor, Building 4, No.85, Chaoyang Road, Chaoyang District, Beijing (北京朝陽區朝陽路85號院4號樓4層4A67室), which was provided to us for free use from April 9, 2019 to April 9, 2021, and another building was located at Room 4A05, 4th Floor, Building 4, No.85, Chaoyang Road, Chaoyang District, Beijing (北京朝陽區朝陽路85號院4號樓4層4A05室), which was provided to us for free use from May 9, 2019 to May 9, 2021. These buildings were used by us for office purposes and the landlord of these two properties are Independent Third Parties. Based on the certification of free use we obtained from the landlord, our PRC Legal Advisors are of the view that the commitment made by the landlord to provide these two buildings to our Group for free use is valid. Our Directors are of the view that, as (i) these two properties are leased for office use, they can be easily replaced by alternative properties, if and when necessary; and (ii) these properties have relatively small leasehold areas, therefore, the results of operations and financial condition would not be materially and adversely affected.

LEGAL PROCEEDINGS AND COMPLIANCE

During the Track Record Period and up to the Latest Practicable Date, we had not been and were not a party to any material legal, arbitral or administrative proceedings, and we were not aware of any pending or threatened legal, arbitral or administrative proceedings against us or our Directors that could, individually or in the aggregate, have a material adverse effect on our business, financial condition and results of operations.

During the same period, we had not committed and did not commit any material non-compliance of the applicable laws or regulations, and other than those non-compliance incidents relating to social insurance and housing provident fund disclosed below, we did not experience any other systemic non-compliance incidents against us or any of our subsidiaries which, in the opinion of the Directors, could have a material adverse effect on our financial conditions or results of operations. During the same periods, we also did not experience any non-compliance of the laws or regulations, which taken as a whole, in the opinion of the Directors, reflects negatively on the ability or tendency of our Company, the Directors or our senior management, to operate our business in a compliant manner. According to our PRC Legal Advisors, other than the information disclosed in this document, we have complied with all relevant PRC laws and regulations in all material respects during the Track Record Period and up to the Latest Practicable Date.

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The table below sets out a summary of our Group’s historical systemic non-compliance incidents during the Track Record Period and up to the Latest Practicable Date, as well as rectification actions and preventive measures that we have taken in respect of such matters:

Legal Consequences, Reason(s) for Potential Maximum Internal Control Measures Non-Compliance the Penalties and Other Adopted/ Enhanced to Particulars of Incidents and Person(s) Financial Liabilities Rectification Actions Potential Operational and Prevent Recurrence of non-compliance incidents Involved (If Any) Taken/To be Taken Latest Status Financial Impact on our Group Non-compliance Incident 1. During the Track Record Period The non-compliance incidents Our PRC Legal Advisors have As of the Latest Practicable Date, As of the Latest Practicable Date, Given that (i) the competent We have established internal and up to the Latest Practicable occurred mainly due to advised us that, under the Xinjiang LiTian was in the we had not received any authorities generally allow compliance guidelines and a Date, (i) Tiantian Xiangshang administrative oversight by the applicable PRC laws and process of completing the administrative order from employers to rectify the compliance checklist, which set and Xinjiang LiTian failed to handling personnel of our regulations, if an employer fails registration for housing relevant authorities to complete non-registration and forth our policies and complete registrations for human resources department to conduct registration of social provident fund. We undertake the registrations of social non-opening of housing procedures with respect to housing provident fund; and their lack of comprehensive insurance, the relevant social that if we are ordered by the insurance and housing provident provident accounts within a time compliance issues. We have (ii) Hongos Tiantian Meimei, understanding of the relevant insurance administrative competent authorities to rectify fund, nor did we receive any limit according to applicable reviewed our internal control Horgos Haohao Xuexi and local regulations. authorities may order it to make and complete the registrations of complaint from our employees PRC laws and regulations; (ii) policy and designated Ms. Fu Tiantian Xiangshang did not corrections within a specified housing provident fund for for our failure to open the we undertake to open the Jieyun, our executive Director open the housing provident fund time period. If it fails to make Tiantian Xiangshang or open the housing provident fund for housing provident accounts for and chief financial officer, to accounts for certain of their corrections within the prescribed housing provident fund accounts them. As of the Latest our employees and complete the closely monitor our on-going employees; and (iii) we failed to time limit, the employer will be for the employees of Horgos Practicable Date, no registrations for social insurance compliance with social insurance make full contributions of the subject to a fine ranging between Tiantian Meimei, Horgos administrative action had been and housing provident fund in a contribution regulations and social insurance and housing one to three times of the total Haohao Xuexi and Tiantian initiated against, and no fine or timely manner; and (iii) as of the oversee the implementation of provident fund for our amount of social insurance that Xiangshang within a prescribed penalty had been imposed Latest Practicable Date, we had any necessary measures. We employees in a timely manner as it is obligated to pay. time limit, we will fulfill the against us by the relevant PRC not received any administrative intend to make social insurance prescribed by the relevant PRC requirements in a timely manner. government authoritiesBUSINESS with penalty or notice to rectify or contributions in accordance with laws and regulations. Our PRC Legal Advisors have respect to the non-compliance complete the registrations of the applicable laws and also advised us that, pursuant to As of the Latest Practicable Date, incidents, nor has any order social insurance and housing regulations going forward. 2 – 223 – the applicable PRC laws and we had made full provision for been received by us to settle the provident fund from the relevant regulations, if an employer fails the outstanding balance of the outstanding amount of social authorities, our PRC Legal to make registration or open the social insurance payments and insurance payments and housing Advisors are of the view that the accounts for its employees of housing provident fund provident fund contributions. possibilities of us being fined or housing provident fund, the contributions, which amounted penalized by relevant authorities relevant housing provident fund to approximately RMB0.4 due to our failure to open the administrative authorities may million, RMB0.7 million and housing provident accounts and order it to complete the RMB0.8 million for the years make registrations of social registration or open the accounts ended December 31, 2017, 2018 insurance and housing provident within a specified time period. If and 2019, respectively. fund are remote. it fails to complete within the prescribed time limit, it shall be imposed a fine ranging between RMB10,000 and RMB50,000. HSDCMN SI RF OM NOPEEADSBETT HNE H NOMTO NTI DOCUMENT THIS IN INFORMATION THE DOCUMENT. THIS CHANGE. OF COVER TO THE SUBJECT ON “WARNING” AND HEADED SECTION INCOMPLETE THE WITH FORM, CONJUNCTION IN DRAFT READ IN BE SHOULD IS DOCUMENT THIS

Our PRC Legal Advisors have BUSINESS also advised us that, if any PRC competent government authority is of the view that the 2 – 225 – contributions for the housing provident fund do not satisfy the requirements under the relevant PRC laws and regulations, it can order us to pay the outstanding balance to the relevant PRC local authorities within a prescribed period. If we fail to do so within the time limit, it can apply to the people’s court for compulsory execution. HSDCMN SI RF OM NOPEEADSBETT HNE H NOMTO NTI DOCUMENT THIS IN INFORMATION THE DOCUMENT. THIS CHANGE. OF COVER TO THE SUBJECT ON “WARNING” AND HEADED SECTION INCOMPLETE THE WITH FORM, CONJUNCTION IN DRAFT READ IN BE SHOULD IS DOCUMENT THIS

Legal Consequences, Reason(s) for Potential Maximum Internal Control Measures Non-Compliance the Penalties and Other Adopted/ Enhanced to Particulars of Incidents and Person(s) Financial Liabilities Rectification Actions Potential Operational and Prevent Recurrence of non-compliance incidents Involved (If Any) Taken/To be Taken Latest Status Financial Impact on our Group Non-compliance Incident 2. During the Track Record Period, These non-compliance incidents Pursuant to the General Lending As of the Latest Practicable Date, As of the Latest Practicable Date, As the General Lending We have enhanced internal the Fixed Return Investments in occurred because it is a common Provisions, which was we had ceased all Fixed Return we did not cease all Fixed Provisions stipulate that the control measures to prevent such which we acted as an investor or practice in the industry, promulgated by the People’s Investments in which we acted Return Investments in which we PBOC and its branches shall be non-compliance incidents from investee were prohibited under according to the Frost & Sullivan Bank of China (the “PBOC”) on as an investor. acted as an investee because the the regulatory authorities for the occurring in the future, the General Lending Provisions Report, and we were unfamiliar June 28, 1996, lending and settlement of these investments implementation of the Lending including: (貸款通則) in the PRC. with the relevant PRC laws and borrowing, including those in had not fallen due. However, we General Provisions, the regulations for extending loans covert form, between enterprises currently do not expect to enterprise can seek advice of the • designating relevant to third parties. shall not violate the relevant engage in any Fixed Return implementation of the General personnel to be provisions in the PRC. Where Investment in which we will act Lending Provisions from the responsible for overseeing lending and borrowing, as an investor or investee in the local branches of PBOC. The any lending or borrowing including those in covert form, near future. As the total amount jurisdiction of the Jiaxing activities in violation of are conducted between of Fixed Return Investments we Central Branch of the PBOC (the General Lending enterprises without made or received was relatively “Jiaxing Branch”) listed on its Provisions and prepare authorization, the PBOC shall insignificant during the Track official website includes Haining written reports; impose a fine of not less than the Record Period, our Directors City, Zhejiang Province, where amount but not more than five believe that ceasing all Fixed LiTian TV & Film is located, and • providing regular training times the amount of illegal Return Investments would not the Monetary Credit to our management and income (being interests charged) have any material and adverse Management Department is employees to keep the on the lender, and such activities impact on our business, financial responsible for the abreast of the latest PRC shall be ceased. As advised by condition and results of implementation of monetary laws and regulations in our PRC Legal Advisors, the operations. credit policies within the connection with our aforementioned Fixed Return jurisdiction. Through the business operations; Investments in which we acted As of the Latest Practicable Date, instructed telephone number on as an investor or investee were no administrative action had its official website, our PRC • establishing internal prohibited under the General been initiated against, and no Legal Advisors conducted an authorization procedure Lending Provisions. fine or penalty had been anonymous telephone interview for any external imposed against us by the PBOC with the relevant officer in the loan-related payments and Based on the total amount of with respect to the Monetary Credit Management receipts;

approximately RMB4.0 million non-compliance incidents.BUSINESS Section on March 5, 2020, who interests charged by us as an did not reveal his identity and • expressly setting forth in investor in Fixed Return position. The Jiaxing Branch the relevant internal Investments for the year ended confirmed that (i) the lending control and risk 2 – 226 – December 31, 2019, the potential and borrowing activities management rules that any maximum penalty, representing between enterprises shall be borrowing and lending five times of the total interests regulated by the Contract Law will comply with charged, that the PBOC may after its implementation in 1999; applicable rules and impose on us amounts to (ii) the lending and borrowing regulations in the PRC;and approximately RMB20.0 million. agreements involving the Fixed Nevertheless, the General Return Investments shall not be • requiring our legal and Lending Provisions do not deemed invalid because of the audit departments to stipulate any penalty on the non-compliance with the conduct periodic review borrower. As advised by our General Lending Provisions, as and inspection to ensure PRC Legal Advisors, there is no long as they conform to the compliance with the risk that we will be penalized for conditions stipulated in the relevant rules and the Fixed Return Investments in Contract Law; and (iii) it has not regulations and our which we act as an investee. stipulated and imposed any fine internal control measures. or penalty regarding the lending and borrowing activities between enterprises. HSDCMN SI RF OM NOPEEADSBETT HNE H NOMTO NTI DOCUMENT THIS IN INFORMATION THE DOCUMENT. THIS CHANGE. OF COVER TO THE SUBJECT ON “WARNING” AND HEADED SECTION INCOMPLETE THE WITH FORM, CONJUNCTION IN DRAFT READ IN BE SHOULD IS DOCUMENT THIS

BUSINESS would not be punished or penalized by the government authorities for lending money to other enterprises. 2 – 227 – HSDCMN SI RF OM NOPEEADSBETT HNE H NOMTO NTI DOCUMENT THIS IN INFORMATION THE DOCUMENT. THIS CHANGE. OF COVER TO THE SUBJECT ON “WARNING” AND HEADED SECTION INCOMPLETE THE WITH FORM, CONJUNCTION IN DRAFT READ IN BE SHOULD IS DOCUMENT THIS

BUSINESS arising out of, any lending and borrowing activities between enterprises in which we were involved in that had been 2 – 228 – published or found on the official website of the PBOC; and (v) our main business is licensing the broadcasting rights of self-produced and outright-purchased drama series rather than lending, our PRC Legal Advisors are of the opinion that the likelihood that we will be penalized for this past non-compliance incident in the future is remote, and the risk of the confirmations obtained from the aforementioned competent authorities being challenged by higher authorities in the PRC is also remote. HSDCMN SI RF OM NOPEEADSBETT HNE H NOMTO NTI DOCUMENT THIS IN INFORMATION THE DOCUMENT. THIS CHANGE. OF COVER TO THE SUBJECT ON “WARNING” AND HEADED SECTION INCOMPLETE THE WITH FORM, CONJUNCTION IN DRAFT READ IN BE SHOULD IS DOCUMENT THIS

Save as disclosed above, we were not aware of any other material or systemic non-compliance incidents in respect of applicable laws and regulations during the Track Record Period and up to the Latest Practicable Date. We have also engaged an independent internal control consultant to conduct a review of our internal control policies and rectification measures and to put forward recommendations and suggestions for improvement, where applicable.

Taking into account the internal control measures implemented by us in connection with the non-compliance incidents disclosed under the paragraph headed “Legal Proceedings and Compliance” in this section, the on-going monitoring and supervision by our Board and with the assistance from professional external advisors where required, and the fact that, as confirmed by the Directors, the non-compliance incidents did not involve fraud or dishonesty, our Directors are of the view that our enhanced internal control measures are adequate and effective; the suitability of our Directors is compliant with the Listing Rules 3.08 and 3.09; and our Company is suitable for [REDACTED] under the Listing Rule 8.04.

INTERNAL CONTROL AND RISK MANAGEMENT

Internal Control

In preparation for the [REDACTED], we have engaged an independent consulting firm (the “Internal Control Consultant”) in January 2019 to conduct an independent review over selected areas of our internal control (the “Internal Control Review”), including (i) entity-level controls, such as senior management training, anti-corruption, anti-bribery and anti-money laundering measures; and (ii) business process-level controls, such as project management of self-produced and outright-purchased drama series, distribution and trade receivables, financial reporting management, treasury management and taxation management. The Internal Control Consultant provided recommendations in relation to strengthening the internal controls over the aforesaid major business processes to our management for consideration. We have considered the recommendations and have implemented relevant control measures. The Internal Control Consultant performed follow-up reviews on our rectified controls in September 2019 to review the status of the remedial actions taken by us to address the findings of the Internal Control Review (“Follow-up Review”). The Internal Control Consultant did not have any further recommendation in the Follow-up Review and no material internal control weakness has been identified. The Director confirm that all of the major recommendations provided by the Internal Control Consultant have been followed and corrective actions were taken accordingly to address our internal control deficiencies and weaknesses. The Directors are of the view that our Group’s internal control measures adopted are adequate and sufficient. The Internal Control Review and the Follow-up Review were conducted based on the information provided by us and no assurance or opinion on internal controls was expressed by the Internal Control Consultant.

We have designated responsible personnel at our Company to monitor the ongoing compliance with the relevant PRC laws and regulations that govern our business operations and oversee the implementation of any necessary measures. In order to manage our external and internal risks and to ensure the smooth operation of our business, we have established and maintained comprehensive risk management and internal control systems consisting of policies, procedures and risk management methods that we consider as appropriate for our business. We are dedicated to continuously improving these systems. In addition, we plan to provide our Directors and senior management and other relevant employees with continuing training

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In addition, we have adopted a set of internal rules and policies governing the conduct of our employees. We have set up a monitoring system to implement anti-corruption, anti-bribery and anti-money laundering measures to ensure that our employees comply with our internal rules and policies as well as the applicable laws and regulations.

Anti-corruption and Anti-bribery Measures

In order to comply with applicable anti-corruption and anti-bribery laws and regulations of the PRC, we have formulated and implemented an anti-corruption and anti-bribery policy. Our major anti-corruption and anti-bribery measures include the following:

• we provide anti-fraud and ethics training to our employees and distribute our written anti-corruption and anti-bribery policy to all employees through employee handbooks and announcements;

• as part of our recruitment process, we conduct background checks on all of our employees, including criminal records, credit records, employment and financial history;

• we conduct risk identification and assessment of fraud at both the Company level and business department level, and implement specific internal control mechanisms to reduce the occurrence of fraud. For high-risk areas of fraud, such as financial fraud, abuse of company assets and management override, we have formulated guidelines, including drawing business flowcharts, explicitly dividing responsibilities and implementing stringent management policies, to reinforce internal control and prevent any potential misconduct or fraudulent activity;

• we have a whistle-blowing and complaint handling process, pursuant to which employees may notify our senior management of certain criminal activities, unfair practices and fraudulent financial activities, among other things, through written submissions or telephone calls. Our senior management will conduct investigations for any suspected cases of bribery, corruption or other related misconduct or fraudulent activities. In cases where misconduct is found, we may take appropriate disciplinary actions as appropriate, report to the relevant regulatory authorities and/or initiate legal actions to recover any losses suffered by us as a result of such misconduct; and

• we designate internal auditing personnel to manage the hotline and email to collect the complaints from employees or external personnel and take written records for each reported incident. Our internal auditing personnel is required to report the incident of bribery, corruption or other misconduct to our senior management or the Board on a timely basis, investigate the incidents and put forward compliance advice.

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Our Directors confirm that, during the Track Record Period and up to the Latest Practicable Date, we were in compliance with PRC laws and regulations relating to anti-corruption, and had not been subject to any administrative penalties or investigations from any regulatory authorities in respect of such activities.

Anti-money Laundering Measures

In order to comply with the relevant PRC laws and regulations for the prevention of money laundering, we have formulated and implemented an anti-money laundering policy (the “AML Policy”). Major measures set out in the AML Policy to prevent and detect anti-money laundering activities include the following:

• we conduct due diligence to evaluate the identity, financial background, reputation and business operations of our customers. If we find any suspicious transactions and have reasonable grounds to suspect that our customers are engaged in money laundering activities, we may suspend or terminate our business relationships with such customers and report them to the relevant authorities for further action in accordance with applicable laws and regulations;

• we keep all records for the transactions for monitoring, including daily transaction records, receipts, copies of cheques, payment in books and other correspondence with customers;

• members of our audit committee are responsible for anti-money laundering matters. Their main duties are to formulate our anti-money laundering policy, conduct review of our anti-money laundering procedure, assess our anti-money laundering risks arising from our business operations, supervise the implementation of anti-money laundering policies by various departments of our Company and ensure our compliance with AML Policy and applicable laws and regulations;

• we provide our employees with regular anti-money laundering training, during which we introduce our Company’s anti-money laundering procedures to make them aware of the measures to identify and prevent money laundering activities and related reporting channels;

• we have a whistle-blowing mechanism, which allows our employees to report any money laundering activities involving any member of our senior management and/or employee to the audit committee of the Board; and

• we will report the suspected transaction to the relevant competent government authorities or investigating authorities where such report shall be made in compliance with the applicable anti-money laundering laws and regulations.

Our Directors confirm that, during the Track Record Period and up to the Latest Practicable Date, we were in compliance with PRC laws and regulations relating to anti-money laundering, and had not been subject to any administrative penalties or investigations from any regulatory authorities in respect of such activities.

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Risk Management

Our business is exposed to various risks and we believe that risk management is essential to our growth and success. Key operational risks faced by us include, among other things, the administration of daily operations, drama series management, financial reporting and recording, fund management, compliance with applicable laws and regulations, changes in general market conditions and perceptions of drama series production, investment and distribution, changes in the regulatory environment in the PRC. Please refer to the section headed “Risk Factors” in this document for the disclosures on various risks we face. In addition, we also face numerous market risks, such as interest rate, credit and liquidity risks that arise in the ordinary course of our business. For a discussion of these market risks, please refer to the section headed “Financial Information — Quantitative and Qualitative Disclosures about Market Risk” in this document.

During our course of business, we also make investment in drama series as non-executive producer. For this type of investment risk, each investment decision is made after considering various factors, such as risks involved, and will be approved by our investment committee. Our finance department is mainly responsible for monitoring our investment performance on a regular basis. Any material factors will be timely reported to the management for further discussion. We have implemented the following investment guidelines:

• we shall only invest in drama series that are produced by reputable executive producers and/or those with established relationships with us;

• we shall evaluate the marketability of the relevant drama series; and

• investment projects shall be reviewed and assessed on a continual basis after the initiation.

To ensure continuous implementation of the risk management policies and corporate governance measures after the [REDACTED], we have adopted or will continue to adopt, among other things, the following risk management measures:

• the Board is responsible for and has the general power to manage the operations of our business, and is in charge of managing the overall risks of our Group. It is also responsible for considering, reviewing and approving any significant business decision involving material risk exposures;

• we conduct risk identifications and assessments throughout the year. The Board will review the internal control system of our Group at least once a year. The review shall cover all important aspects of monitoring, including finance, business operations, regulatory compliance and risk management. We regularly test our risk management and response capabilities based on the established risk response strategies and specific management initiatives, and track the implementation of rectification measures;

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• we will establish an audit committee to review and supervise our financial reporting process and internal control system. Our audit committee will consist of Mr. Liu Hanlin, chairman of the committee, Mr. Gan Weimin and Mr. Yu Yang. For the qualifications and experiences of these members, see “Directors and Senior Management” in this document;

• we will adopt various policies to ensure the compliance with the Listing Rules, including, but not limited to, the policies in respect of risk management, connected transactions and information disclosure;

• we will provide regular anti-corruption and anti-bribery compliance training to senior management and employees in order to enhance their knowledge of and compliance with the applicable laws and regulations;

• we will arrange our Directors and senior management to attend training seminars on the Listing Rule requirements and the responsibilities as directors of a Hong Kong-[REDACTED] company; and

• we will engage external legal advisors to advise us on compliance with the Listing Rules and to ensure our compliance with relevant regulatory requirements and applicable laws, where necessary.

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CONTROLLING SHAREHOLDERS

Immediately after completion of the Capitalization Issue and the [REDACTED] (assuming the [REDACTED] is not exercised and without taking into account any Shares which may be issued upon the exercise of options granted under the Share Option Scheme), the Controlling Shareholders, namely Mr. Yuan, Litian Century, Ms. Tian and Marshal Investment, will together control the exercise of voting rights of [REDACTED]% of the Shares eligible to vote in the general meeting of our Company.

Mr. Yuan is the chairman of our Board and an executive Director, and Ms. Tian is our executive Director and the chief executive officer of our Company. Please refer to the section headed “Director and Senior Management” for details of their biographies. Other than their positions in our Group and as of the Latest Practicable Date, Ms. Tian was also engaged by Beijing Perfect World Pictures Limited Liability Company* (“Perfect World”, 北京完美影視傳媒有限責任公司) as a part-time consultant to provide consultancy services limited to the scope of the investment, production, promotion and distribution of film, which can be clearly delineated from our business of production and distribution of drama series. Therefore, Ms. Tian’s engagement by Perfect World as consultant does not and will not result in any conflict of interest, competition or potential competition with the business of our Group.

As at the Latest Practicable Date, none of our Controlling Shareholders nor our Directors had any interest in any other company or business that competes with or is likely to compete with our business, whether directly or indirectly, or would otherwise require disclosure under Rule 8.10 of the Listing Rules.

INDEPENDENCE FROM THE CONTROLLING SHAREHOLDERS

Having considered the matters described above and the following factors, we believe that we are capable of carrying on our business independently from our Controlling Shareholders and its/his respective associates after completion of the [REDACTED]:

Management Independence

Our Board comprises three executive Directors, three non-executive Directors and three independent non-executive Directors. Mr. Yuan, the chairman of the Board and an executive Director, is the sole director of Litian Century, a Controlling Shareholder. Ms. Tian, an executive Director and the chief executive officer of our Company, is the sole director of Marshal Investment, a Controlling Shareholder. Both Litian Century and Marshal Investment are investment holding vehicles with no actual business operation.

Save as disclosed above, no other Controlling Shareholder holds any directorship in our Company. Each of our Directors is aware of his or her fiduciary duties as a director of our Company which requires, among other things, that he or she acts for the benefit and in the best interests of our Company and does not allow any conflict between his or her duties as a Director and his or her personal interest. In the event that there is a potential conflict of interest arising out of any transaction to be entered into between our Group and our Directors 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 the quorum. In addition, we have an independent senior management team to carry out the business decisions of our Group independently.

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Having considered the above factors, our Directors are satisfied that they are able to perform their roles in our Company independently, and our Directors are of the view that we are capable of managing our business independently from our Controlling Shareholders following the completion of the [REDACTED].

Operational Independence

We have also established a set of internal control procedures to facilitate the effective operation of our business.

We believe that we are capable of carrying on our business independently of our Controlling Shareholders and its or his respective associates. Our Directors confirmed that our Group will be able to operate independently from our Controlling Shareholders and their associates upon the [REDACTED].

Financial Independence

Our Group has an independent financial system and makes financial decisions according to our Group’s own business needs.

During the Track Record Period, Mr. Yuan and Ms. Tian, our Controlling Shareholders, and companies controlled by them, provided certain advances to our Consolidated Affiliated Entities. See note 23 of the “Accountants’ Report” in Appendix I to this document for more information. As at the Latest Practicable Date, the advances have been fully repaid.

Other than the above, our source of funding was independent from our Controlling Shareholders and none of our Controlling Shareholders or their respective associates, financed our operations during the Track Record Period. Our Group’s accounting and finance functions are independent of our Controlling Shareholders. Our Directors confirm that our Group does not intend to obtain any borrowings, guarantees, pledges or mortgages from any of our Controlling Shareholders or entities controlled by our Controlling Shareholders. Therefore, we have no financial dependence on our Controlling Shareholders.

CORPORATE GOVERNANCE MEASURES

Our Company will adopt the following measures to avoid any conflict of interests arising from competing business and to safeguard the interests of our Shareholders:

(a) our independent non-executive Directors will review, on an annual basis, the compliance with the undertaking given by our Controlling Shareholders under the Contractual Arrangements;

(b) our Controlling Shareholders undertake to provide all information requested by our Company which is necessary for the annual review by our independent non-executive Directors and the enforcement of the undertaking under the Contractual Arrangements;

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(c) our Company will disclose decisions on matters reviewed by our independent non-executive Directors relating to compliance and enforcement of the non-competition undertaking of our Controlling Shareholders under the Contractual Arrangements in the annual reports of our Company; and

(d) our Controlling Shareholders will make annual declarations on compliance with their undertaking under the Contractual Arrangements in the annual report of our Company.

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CONTINUING CONNECTED TRANSACTIONS

We have entered into the Contractual Arrangements with our connected persons in our ordinary and usual course of business. Upon [REDACTED], the transactions disclosed in this section will constitute continuing connected transactions under the Listing Rules.

NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

(1) Contractual Arrangements

As disclosed in the paragraph headed “Contractual Arrangements — Background of the Contractual Arrangements” in this document, the PRC laws and regulations currently restrict our business of production and distribution of dramas series in PRC to foreign ownership. As a result, our Group, through our wholly-owned subsidiary, LiTian WFOE, our Consolidated Affiliated Entities and the Registered Shareholders have entered into the Contractual Arrangements such that we can conduct our business operations indirectly in the PRC through our Consolidated Affiliated Entities while complying with applicable PRC law and regulations. The Contractual Arrangements, as a whole, are designed to provide our Group with effective control over the financial and operational policies of our Consolidated Affiliated Entities, to the extent permitted by PRC law and regulations, the right to acquire the equity interest in and/or the assets of our Consolidated Affiliated Entities after the [REDACTED] through LiTian WFOE. As we operate our business through our Consolidated Affiliated Entities, which are controlled by LiTian TV & Film and we do not hold any direct equity interest in our Consolidated Affiliated Entities, the Contractual Arrangements were entered into on October 14, 2019 pursuant to which all material business activities of our Consolidated Affiliated Entities are instructed and supervised by our Group, through LiTian WFOE, and the relevant economic benefits arising from such business of the our Consolidated Affiliated Entities are transferred to our Group.

The Contractual Arrangements consist of a series of agreements. See “Contractual Arrangements” in this document for details of the relevant agreements.

Listing Rules Implications

The table below sets forth the connected persons of our Company involved in the Contractual Arrangements and the nature of their connection with our Group. The transactions contemplated under the Contractual Arrangements, as a whole, constitute continuing connected transactions of our Company under the Listing Rules upon the [REDACTED].

Name Connected Relationships

Mr. Yuan a Director and a Controlling Shareholder of our Company and therefore a connected person of our Company under the Listing Rules

Ms. Tian a Director and a Controlling Shareholder of our Company and therefore a connected person of our Company under the Listing Rules

Ms. Fu Jieyun a Director and therefore a connected person of our Company under the Listing Rules

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Our Directors (including the independent non-executive Directors) are of the view that the Contractual Arrangements and the transactions contemplated thereunder are fundamental to our Group’s legal structure and business operations, that such transactions have been and shall be entered into in the ordinary and usual course of business of our Group, are on normal commercial terms and are fair and reasonable and in the interests of our Company and our Shareholders as a whole. Accordingly, notwithstanding that the transactions contemplated under the Contractual Arrangements and any new transactions, contracts and agreements or renewal of existing agreements to be entered into between any of our Consolidated Affiliated Entities and any member of our Group technically constitute continuing connected transactions under Chapter 14A of the Listing Rules, our Directors consider that, given that our Group is placed in a special situation in relation to the connected transactions rules under the Contractual Arrangements, it would be unduly burdensome and impracticable, and would add unnecessary administrative costs to our Company if such transactions are subject to strict compliance with the requirements set out under Chapter 14A of the Listing Rules, including, among others, the announcement and independent shareholders’ approval requirements.

Application for Waiver

In view of the Contractual Arrangements, we have applied to the Stock Exchange for, and the Stock Exchange [has granted], a waiver from strict compliance with (i) the announcement, circular and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules in respect of the transactions contemplated under the Contractual Arrangements pursuant to Rule 14A.105 of the Listing Rules, (ii) the requirement of setting an annual cap for the transactions under the Contractual Arrangements under Rule 14A.53 of the Listing Rules, and (iii) the requirement of limiting the term of the Contractual Arrangements to three years or less under Rule 14A.52 of the Listing Rules, for so long as our Shares are [REDACTED] on the Stock Exchange subject however to the following conditions:

(a) No change without independent non-executive Directors’ approval

No change to the Contractual Arrangements will be made without the approval of the independent non-executive Directors.

(b) No change without independent Shareholders’ approval

Save as described in paragraph (d) below, no change to the agreements governing the Contractual Arrangements will be made without the approval of our Company’s independent shareholders.

Once independent shareholders’ approval of any change has been obtained, no further announcement or approval of the independent shareholders will be required under Chapter 14A of the Listing Rules unless and until further changes are proposed. The periodic reporting requirement regarding the Contractual Arrangements in the annual reports of our Company (as set out in paragraph (e) below) will however continue to be applicable.

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The Contractual Arrangements shall continue to enable our Group to receive the economic benefits derived by our Consolidated Affiliated Entities through (i) our Group’s option, to the extent permitted under PRC laws and regulations, to acquire all or part of the equity held by the Registered Shareholders, as the case may be, at the lowest possible amount permissible under the applicable PRC laws and regulations, (ii) the business structure under which the net profit generated by our Consolidated Affiliated Entities is substantially retained by our Group, such that no annual cap shall be set on the amount of service fees payable to LiTian WFOE by our Consolidated Affiliated Entities under the Contractual Arrangements, and (iii) our Group’s right to control the management and operation of, as well as, in substance, all of the voting rights of our Consolidated Affiliated Entities as appointed by the Registered Shareholders in our Consolidated Affiliated Entities, as the case may be.

(d) Renewal and reproduction

On the basis that the Contractual Arrangements provide an acceptable framework for the relationship between our Company and its subsidiaries in which our Company has direct shareholding, on one hand, and our Consolidated Affiliated Entities, on the other hand, that framework may be renewed and/or reproduced upon the expiry of the existing arrangements or in relation to any existing or new wholly foreign owned enterprise or operating company engaging in the same business as that of our Group which our Group might wish to establish when justified by business expediency, without obtaining the approval of the Shareholders, on substantially the same terms and conditions as the existing Contractual Arrangements. The directors, chief executives or substantial shareholders of any existing or new wholly-foreign owned enterprise or operating company (including branch company) engaging in the same business as that of our Group which our Group may establish will, upon renewal and/or reproduction of the Contractual Arrangements, however be treated as connected persons of our Company and transactions between these connected persons and our Company other than those under similar Contractual Arrangements shall comply with Chapter 14A of the Listing Rules. This condition is subject to relevant PRC laws, regulations and approvals.

(e) Ongoing reporting and approvals

Our Group will disclose details relating to the Contractual Arrangements on an ongoing basis as follows:

• The Contractual Arrangements in place during each financial period will be disclosed in our Company’s annual report in accordance with relevant provisions of the Listing Rules.

• Our independent non-executive Directors will review the Contractual Arrangements annually and confirm in our Company’s annual report for the relevant year that (i) the transactions carried out during such year have been entered into in accordance with the relevant provisions of the Contractual

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Arrangements, have been operated so that the profit generated by our Consolidated Affiliated Entities has been substantially retained by our Group, (ii) no dividends or other distributions have been made by our Consolidated Affiliated Entities to the respective holders of equity which are not otherwise subsequently assigned or transferred to our Group, and (iii) the Contractual Arrangements and if any, any new contracts entered into, renewed or reproduced between our Group and our Consolidated Affiliated Entities during the relevant financial period under paragraph (d) above are fair and reasonable, or advantageous, so far as our Group is concerned and in the interests of our Shareholders as a whole.

• Our Company’s auditors will carry out procedures annually on the transactions carried out pursuant to the Contractual Arrangements and will provide a letter to our Directors with a copy to the Stock Exchange, confirming that the transactions have received the approval of our Directors, have been entered into in accordance with the relevant Contractual Arrangements and that no dividends or other distributions have been made by our Consolidated Affiliated Entities to the respective holders of equity which are not otherwise subsequently assigned or transferred to our Group.

• For the purpose of Chapter 14A of the Listing Rules, and in particular the definition of “connected person”, each of our Consolidated Affiliated Entities will be treated as our Company’s wholly-owned subsidiary. At the same time, the directors, chief executives or substantial shareholders of each of our Consolidated Affiliated Entities and their respective associates will be treated as connected persons of our Company, and transactions between these connected persons and our Group, other than those under the Contractual Arrangements, will be subject to the requirements under Chapter 14A of the Listing Rules.

• Each of our Consolidated Affiliated Entities will undertake that, for so long as our Shares are [REDACTED] on the Stock Exchange, each of our Consolidated Affiliated Entities will provide our Group’s management and our Company’s auditors’ full access to its relevant records for the purpose of our Company’s auditors’ review of the continuing connected transactions.

New Transactions amongst Our Consolidated Affiliated Entities and Our Company

Given that the financial results of our Consolidated Affiliated Entities will be consolidated into our financial results and the relationship between our Consolidated Affiliated Entities and our Company under the Contractual Arrangements, all agreements other than the Contractual Arrangements that may be entered into between each of our Consolidated Affiliated Entities and our Company in the future will also be exempted from the “continuing connected transactions” provisions of the Listing Rules.

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Views of the Sole Sponsor and our Directors

Our Directors (including the independent non-executive Directors) are of the view and the Sole Sponsor concurs that the transactions contemplated under the Contractual Arrangements have been and will be entered into in the ordinary and usual course of business of our Group, are fundamental to our Group’s legal structure and business operations, are on normal commercial terms or better, and are fair and reasonable and in the interests of our Company and the Shareholders as a whole. With respect to the terms of the relevant agreements underlying the Contractual Arrangements which is of a duration longer than three years, it is a justifiable and normal business practice to ensure that (i) the financial and operational policies of our Consolidated Affiliated Entities can be effectively controlled by LiTian WFOE or its designee, (ii) LiTian WFOE or its designee can obtain the economic benefits derived from the Consolidated Affiliated Entities, and (iii) any possible leakages of assets and values of the Consolidated Affiliated Entities can be prevented, on an uninterrupted basis.

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OUR DIRECTORS AND SENIOR MANAGEMENT

Our Board is responsible for and has general power over the management and conduct of our business. As at the Latest Practicable Date, it consists of nine Directors. Three of them are executive Directors, three of them are non-executive Directors and three of them are independent non-executive Directors. Our senior management is responsible for the day-to-day management and operation of our business.

The table below sets forth certain information regarding members of our Board and our senior management:

Relationship with other Director(s) and the Date of joining our Date of senior Name Age Group appointment Position Roles and responsibilities management

Mr. Yuan Li 41 August 2, 2013 June 17, 2019 Chairman and Overall operational Spouse of (袁力) ...... executive management, business Ms. Tian Director and strategic development of our Group

Ms. Tian Tian 36 August 1, 2016 September 27, Executive Overall management and Spouse of (田甜) ...... 2019 Director business operations of Mr. Yuan and chief our Group executive officer

Ms. Fu Jieyun 37 September 8, 2015 September 27, Executive Overall financial planning None (傅潔雲)...... 2019 Director and management of our and chief Group financial officer

Mr. Yu Yang 38 September 27, 2019 September 27, Non-executive Participate in the None (余楊) ...... 2019 Director formulation of business and strategic plans, of ourGroupasamember of the Board

Mr. Tang Zhiwei 46 December 24, 2018 September 27, Non-executive Participate in the None (唐志偉)...... 2019 Director formulation of business and strategic plans, of ourGroupasamember of the Board

Mr. Luo Jianxing 46 August 1, 2016 September 27, Non-executive Participate in the None (羅建幸)...... 2019 Director formulation of business and strategic plans, of ourGroupasamember of the Board

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Relationship with other Director(s) and the Date of joining our Date of senior Name Age Group appointment Position Roles and responsibilities management

Mr.TengBing 49 [●][●] Independent Providing independent None Sheng non-executive opinion to our Board (滕斌聖)...... Director and supervise operations of our Group

Mr. Liu Hanlin 57 [●][●] Independent Providing independent None (劉翰林)...... non-executive opinion to our Board Director and supervise operations of our Group

Mr. Gan Weimin 53 [●][●] Independent Providing independent None (甘為民)...... non-executive opinion to our Board Director and supervise operations of our Group

Ms. Lau Suk Ching 45 October 14, 2019 [●] Deputy Oversee corporate None (劉淑貞)...... general financing activities and manager manage investor and joint relationships matters of company the Group secretary

Ms. Zhang Yijia 31 August 7, 2017 [●] Project Manage the production None (張憶佳)...... director and operation of drama series

Ms. Zhang Tianbi 31 February 12, 2017 [●] Distribution Manage the distributions None (張天碧)...... director of drama series

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BOARD OF DIRECTORS

Executive Directors

Mr. Yuan Li (袁力), aged 41, was appointed as a Director on June 17, 2019 and was re-designated to the chairman of our Board and an executive Director on September 27, 2019.

Mr. Yuan has over 21 years’ experience in the television and film industry. The following table shows the key working experience of Mr. Yuan:

Roles and Period Company Latest Position responsibilities

August 2013 to present ...... LiTianTV&Film Director and general Oversee management manager and operations of the company June 1998 to June 2013 ...... GreatWallMovie and Deputy general manager Oversee management Television Co., Ltd.* and operations of the (長城影視股份有限公司, distribution “Great Wall Movie and department Television”), a company listed on the Shenzhen Stock Exchange (stock code: 002071)

Mr. Yuan was an executive director, supervisor and/or legal representative of the below companies established in the PRC at the time of or within one year prior to its dissolution. Mr. Yuan confirmed that (i) these companies were solvent and not in operation immediately prior to their dissolution, (ii) there was no wrongful act on his part leading to the dissolution of these companies, (iii) he was not aware of any actual or potential claim which has been or will be made against him as a result of the dissolution of these companies, and (iv) that no misconduct or misfeasance has been involved in the dissolution of these companies.

Methods of Company Principle business dissolution Role(s)

Dongyang Changli Firm Services Co. Ltd.* Rental & sale of film Dissolved by Legal representative (東陽長立影視服務有限公司) ...... and television deregistration and supervisor equipments

Beijing Great Wall Huanyu International Design, production, Dissolved by Legal representative Film Advertising Co. Ltd.* agency and release deregistration and executive (北京長城環宇國際影視廣告有限公司).... of domestic and director foreign advertisements

Mr. Yuan has graduated from The Open University of China (中央廣播電視大學) in Beijing, the PRC in January 2016 with a diploma in administration management. Mr. Yuan was awarded the Outstanding Distributor Award (優秀發行人) by the Shanghai Eastern Television Channel (上海東方電影頻道) in 2017.

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Mr. Yuan did not hold any directorship in any listed companies during the last three years immediately preceding the Latest Practicable Date.

Ms. Tian Tian (田甜), aged 36, was appointed as an executive Director on September 27, 2019 and the chief executive officer of our Group on [●].

Ms. Tian has over 15 years’ experience in the television and film industry. The following table shows the key working experience of Ms. Tian:

Roles and Period Company Latest Position responsibilities

August 2016 to present ...... LiTianTV&Film Director Oversee operation of the company

August 2018 to Chongqing Wanmei Director and general Oversee management February 2019 ...... Zhenzhi Film Co., manager and operations of the Ltd.*(1) (重慶完美臻至 company 影視文化有限公司)

October 2017 to February 2019 . Beijing Perfect World Vice president Responsible for the Pictures Limited investment, Liability Company* production, promotion (北京完美影視傳媒有限 and distribution of 責任公司) film

February 2004 to Beijing Enlight Media General manager of Responsible for the November 2016 ...... Co., Ltd.* (北京光線傳 distribution investment, 媒股份有限公司), a department and production, promotion company listed on the producer and distribution of Shenzhen Stock film Exchange (stock code: 300251)

Note:

(1) Chongqing Wanmei Zhenzhi Film Co., Ltd is a subsidiary of Perfect World Joint Stock Company* (完美世界股份有限公司), a company listed on the Shenzhen Stock Exchange (stock code: 002624).

Ms. Tian has graduated from the Beijing Normal University (北京師範大學) in Beijing, the PRC in June 2004 with a diploma in music education. Ms. Tian is in the course of obtaining a degree in EMBA from the Cheung Kong Graduate School of Business (長江商學院) in Beijing, the PRC.

Ms. Tian did not hold any directorship in any listed companies during the last three years immediately preceding the Latest Practicable Date.

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Ms. Fu Jieyun (傅潔雲), aged 37, was appointed as an executive Director on September 27, 2019 and the chief financial officer of our Group on [●].

Ms. Fu has over 15 years’ experience in accounting. The following table shows the key working experience of Ms. Fu:

Roles and Period Company Latest Position responsibilities

September 2015 to present .... LiTianTV&Film Chief financial officer, Oversee financial deputy manager and operations of the secretary to the board company of directors

May 2011 to September 2015 . . Hangzhou Unimas Data Secretary to the board of Participate in Technology Co., Ltd.* directors and deputy management and (杭州合眾資料技術有限 general manager operations of the 公司) company and assisting the operations of the board of directors

September 2004 to April 2011 . . Zhejiang Dongfang Accountant – auditing Manage auditing Accounting Firm* manager projects (浙江東方會計師事務所) which was merged into Pan-China Certified Public Accountants LLP* (天健會計師事務所) in 2009

Ms. Fu received bachelor’s degrees in management and economics from the Zhejiang University of Finance & Economics (浙江財經大學) in Zhejiang, the PRC, majoring in accounting and finance, respectively, in June 2004. Ms. Fu has received her qualification in intermediate accounting in December 2008.

Ms. Fu did not hold any directorship in any listed companies during the last three years immediately preceding the Latest Practicable Date.

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Non-executive Directors

Mr. Yu Yang (余楊), aged 38, was appointed as a non-executive Director on September 27, 2019.

The following table shows the key working experience of Mr. Yu:

Roles and Period Company Latest Position responsibilities

May 2019 to present ...... Hangzhou Xiaoshan General manager Overall operation and Ansheng Asset management Management Co., Ltd.* (杭州蕭山安晟資產管理有限公司)

October 2018 to April 2019 .... AnYangAsset Managing director Oversee management Management and operations of the Hangzhou Co., Ltd.* company (安揚資產管理(杭州) 有限公司)

March 2011 to Zhejiang Yongle TV & Deputy general manager Participate in September 2018 ...... Film Production Co., and secretary to the management and Ltd.* (浙江永樂影視製 board of directors operations of the 作有限公司) company and the board of directors

November 2008 to Zhejiang Development Investment manager Participate in project February 2011 ...... Asset Operations Co., investment Ltd.* (浙江省發展資產經營有限公司)

March 2006 to February 2008 . . Tongyi Nengyuan Planning manager Participate in project (Hangzhou) planning Investment Management Consulting Co., Ltd.* (統一能源(杭州)投資管理諮詢有限公司)

Mr. Yu received a master’s degree in political economics from the School of Economics of the Zhejiang University (浙江大學) in Zhejiang, the PRC in March 2006.

Mr. Yu did not hold any directorship in any listed companies during the last three years immediately preceding the Latest Practicable Date.

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Mr. Tang Zhiwei (唐志偉), aged 46, was appointed as an non-executive Director on September 27, 2019.

Mr. Tang joined us as a director of LiTian TV & Film on December 24, 2018. The following table shows the other key working experience of Mr. Tang:

Roles and Period Company Latest Position responsibilities

June 2011 to present ...... Shenzhen Junfeng Director and general Oversee management Chuangye Investment manager and operations of the Management Co., company Ltd.* (深圳市君豐創業投資基金管理有限公司)

Mr. Tang graduated from Guizhou Industrial College (貴州工學院) (later known as Guizhou Industrial University (貴州工業大學) which has now merged into Guizhou University (貴州大學)) in Guizhou, the PRC in August 1994 with a diploma in architecture.

Mr. Tang did not hold any directorship in any listed companies during the last three years immediately preceding the Latest Practicable Date.

Mr. Luo Jianxing (羅建幸), aged 46, was appointed as an non-executive Director on September 27, 2019.

Mr. Luo joined us as a director of LiTian TV & Film since August 1, 2016. The following table shows the other key working experience of Mr. Luo:

Roles and Period Company Latest Position responsibilities

September 2005 to present .... Faculty of Creative Art Associate professor Teaching and Management of the Zhejiang Institute of Communications* (浙江傳媒學院文化創意與管理學院)

July 2001 to May 2004 ...... Beingmate Bady & Child Marketing director Development and Food Co., Ltd.* (貝因美 implementation of the 嬰童食品有限公司), a brand strategy company listed on the Shenzhen Stock Exchange, stock code: 002570

March 2000 to June 2001 ...... Guangdong Strong Market research Oversee market research Group Co., Ltd.* (廣東 manager department and 喜之郎集團有限公司) development of the marketing strategy

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Roles and Period Company Latest Position responsibilities

May 1998 to February 2000 .... Johnson & Johnson District sales manager Establish sales goals and (China) Co., Ltd.* implement sales (強生中國有限公司) strategy

July 1994 to May 1998 ...... Hangzhou Wahaha Secretary to general Management and Group Co., Ltd.* manager, market organisation of (杭州娃哈哈集團 supervisor projects and division 有限公司)

Mr. Luo graduated from the Shandong University (山東大學) in Shandong, the PRC in July 1994 with a bachelor’s degree in marketing. Mr. Luo also received a master’s degree in Management from Shanghai University of Finance and Economics (上海財經大學) in Shanghai, PRC in September 2005.

Mr. Luo has received his qualification as an associate professor in Management Science and Engineering from the Department of Personnel of Zhejiang Province in September 2011.

Mr. Luo was an executive director, supervisor and/or legal representative of the below companies established in the PRC at the time of or within one year prior to its dissolution. Mr. Luo confirmed that (i) these companies were solvent and not in operation immediately prior to their dissolution, (ii) there was no wrongful act on his part leading to the dissolution of these companies, (iii) he was not aware of any actual or potential claim which has been or will be made against him as a result of the dissolution of these companies, and (iv) that no misconduct or misfeasance has been involved in the dissolution of these companies:

Company Principle business Methods of dissolution Role(s)

Hangzhou Taolinqi Electronic business Dissolved by Legal representative, Network Technology technology, deregistration executive director and Co. Ltd.* consultancy general manager (杭州淘臨期網絡科技有限公司)......

(1) Hangzhou Youxianjia E-commerce Revoked Supervisor E-Commerce Co. Ltd.* (杭州悠閒家電子商務有限公司)......

Note:

(1) the license of Hangzhou Youxianjia E-Commerce Co. Ltd.* was revoked by the authority as the company did not complete the incorporation procedure.

Mr. Luo did not hold any directorship in any listed companies during the last three years immediately preceding the Latest Practicable Date.

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Independent Non-executive Directors

Mr. Teng Bing Sheng (滕斌聖), aged 49, was appointed as an independent non-executive Director on [●].

The following table shows the key working experience of Mr. Teng:

Roles and Period Company Latest Position responsibilities

January 2007 to present ...... Cheung Kong Graduate Professor of strategic Teaching strategic School of Business management and the management courses (CKGSB) associate dean for (長江商學院) CKGSB

August 1998 to February 2007 . George Washington Tenured associate Doctoral advisor and University professor of Strategic lead professor of the Management departmental doctoral program

Mr. Teng received a Doctor of Philosophy degree in business from the City University of New York in October 1998 in New York, the United States.

Mr. Teng concurrently served as an independent non-executive director of Wanda Hotel Development Company Limited (Stock Exchange, stock code: 169) since March 2019, and an independent director of each of Aoshikang Technology Company* (奧士康科技股份有限公司) (Shenzhen Stock Exchange stock code: 002913) since November 2018 and Haisco Pharmaceutical Group Co., Ltd.* (海思科醫藥集團股份有限公司) (Shenzhen Stock Exchange stock code: 002653) since January 2017. Mr. Teng served as an independent non-executive director of ZTE Corporation (中興通訊股份有限公司) (Stock Exchange, stock code: 763, and Shenzhen Stock Exchange stock code: 000063) from July 2015 to June 2018, and an independent director of Shandong Gold Mining Co., Ltd.* (山東黃金礦業股份有限公司) (Shanghai Stock Exchange stock code: 600547) from December 2014 to December 2017. Save as disclosed above, Mr. Teng did not hold any directorship in any listed companies during the last three years immediately preceding the Latest Practicable Date.

Mr. Liu Hanlin (劉翰林), aged 57, was appointed as an independent non-executive Director on [●].

The following table shows the key working experience of Mr. Liu:

Roles and Period Company Latest Position responsibilities

July 1984 to present ...... Hangzhou Dianzi Professor Teaching and University Researching (杭州電子科技大學)

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Mr. Liu graduated from the Hangzhou Dianzi University (杭州電子科技大學) in Hangzhou, the PRC in July 1984 with a bachelor’s degree in economics majoring in financial accounting. Mr. Liu also received a master’s degree in Management majoring in accounting from Xiamen University (廈門大學) in Xiamen, PRC in December 1999.

Mr. Liu has received his qualification as a professor in Accounting from the Department of Personnel of Zhejiang Province in December 2002. Mr. Liu became an associate member of the Chinese Institute of Certified Public Accounts since October 1997.

Mr. Liu concurrently served as an independent director of each of Zhejiang Changsheng Sliding Bearings Co.,Ltd.* (浙江長盛滑動軸承股份有限公司)(Shenzhen Stock Exchange stock code: 300718) since July 2016, Zhejiang Tiantai Xianghe Industrial Co., Ltd.* (浙江天台祥和實業股份有限公司) (Shanghai Stock Exchange stock code: 603500) since November 2016 and New East New Materials Co., Ltd* (新東方新材料股份有限公司) (Shanghai Stock Exchange stock code: 603110) since February 2017. Mr. Liu served an independent director of Zhejiang Shouxiangu Pharmaceutical Co., Ltd.* (浙江壽仙穀醫藥股份有限公司) (Shanghai Stock Exchange stock code: 603896) from May 2013 to March 2019. Save as disclosed above, Mr. Liu did not hold any directorship in any listed companies during the last three years immediately preceding the Latest Practicable Date.

Mr. Gan Weimin (甘為民), aged 53, was appointed as an independent non-executive Director on [●].

The following table shows the key working experience of Mr. Gan:

Roles and Period Company Latest Position responsibilities

January 2019 to present ...... Guantao Law Firm* Managing partner Oversee management (北京觀韜中茂 and operation 律師事務所) of the firm

November 2012 to Guantao Law Firm Lawyer Provide legal services December 2018 ...... (Shanghai)* (北京觀韜中茂（上海）律師事務所)

June 2003 to October 2012 .... Zhejiang High Mark Lawyer Provide legal services Law Firm* (浙江凱麥律師事務所)

January 2002 to May 2003 ..... Beijing Kaiyuan Lawyer Provide legal services Law Firm* (北京市凱源律師事務所)

April 1998 to January 2002 .... Zhejiang T&C Law Firm* Lawyer Provide legal services (浙江天冊律師事務所)

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Mr. Gan graduated from the Zhejiang University (浙江大學) in Zhejiang, the PRC in July 1986 with a bachelor’s degree in engineering awarded by the Department of Optical Instruments and Engineering (光學儀器工程學) and received from the same university a bachelor’s degree in law and a master’s degree in law respectively in June 1988 and April 1996. Mr. Gan has passed the national qualification examination in the PRC which accredited him as a qualified lawyer in the PRC in April 1991.

Mr. Gan concurrently serves as an independent non-executive director of Xin Point Holdings Limited (信邦控股有限公司) (Stock Exchange, stock code: 1571) since July 2017, and an independent director of each of Zhejiang Aishida Electric Co., Ltd.* (浙江愛仕達電器股份有限公司)(Small and Medium Enterprise Board of the Shenzhen Stock Exchange, stock code: 002403) since March 2017, Hangzhou Sunrise Technology Co., Ltd.* (杭州炬華科技股份有限公司) (ChiNext of the Shenzhen Stock Exchange, stock code: 300360) since January 2017, Shimge Pump Industry Group Co., Ltd.* (新界泵業集團股份有限公司) (Small and Medium Enterprise Board of the Shenzhen Stock Exchange, stock code: 002532) since May 2015, and Shanghai Huace Navigation Technology Ltd.* (上海華測導航技術股份有限公司) (ChiNext of the Shenzhen Stock Exchange, stock code: 300627) since January 2015. Save as disclosed above, Mr. Gan did not hold any directorship in any listed companies during the last three years immediately preceding the Latest Practicable Date.

Mr. Gan was an executive director, supervisor and/or legal representative of the below companies established in the PRC at the time of or within one year prior to its dissolution. Mr. Gan confirmed that (i) these companies were solvent and not in operation immediately prior to their dissolution, (ii) there was no wrongful act on his part leading to the dissolution of these companies, (iii) he was not aware of any actual or potential claim which has been or will be made against him as a result of the dissolution of these companies, and (iv) that no misconduct or misfeasance has been involved in the dissolution of these companies:

Name of the company Nature of business Methods of dissolution Role(s)

Zhejiang Zuanmu Technology Dissolved by Supervisor Electronic Technology development, deregistration Co. Ltd.* technical services (浙江鑽木電子科技有限公司)......

Hangzhou Yincan Info Technology Dissolved by Supervisor Tech Co. Ltd.* development, deregistration (杭州因餐信息科技 technical services 有限公司)......

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Our Directors and the Sole Sponsor have considered the concurrent service of Mr. Liu Hanlin and Mr. Gan Weimin as independent non-executive director of three and five other listed companies and are satisfied with their time commitments to the affairs of our Company and their capability and capacity to perform their duties having regard to all relevant factors including:

(a) notwithstanding their current engagements, they have demonstrated that they are capable of devoting sufficient time to discharge their duties owed to each of these listed companies. Based on the published annual reports and announcements of the listed companies during the Track Record Period, which they have directorships as at the Latest Practicable Date, they have attended all the board meetings during the two years ended December 31, 2018;

(b) Mr. Liu Hanlin and Mr. Gan Weimin have sufficient knowledge on corporate governance and experience in discharging the directors’ duties through their past working experience and their services as an independent non-executive director in different listed companies. They have sufficient understanding in their roles as the independent non-executive director of these companies and in estimating the time required for attending to the affairs of each listed company;

(c) Mr. Liu Hanlin and Mr. Gan Weimin have confirmed that they have not found any difficulty in devoting and managing their time to the numerous listed companies that they are involved in and none of the listed companies that they have directorship has questioned or complained about their time devoted to the listed companies;

(d) Mr. Liu Hanlin and Mr. Gan Weimin have confirmed and undertaken to our Company that they have the capability and committed to devote sufficient time to discharge their duties and responsibilities as an independent non-executive Director of our Group, taking into account their experience in acting as independent non-executive director of a number of listed companies and the time they are required to devote to each of these listed companies; and

(e) In addition, pursuant to the Corporate Governance Code as set out in Appendix 14 to the Listing Rules, the Board (and the nomination committee) will (i) regularly review whether each of the Directors is devoting sufficient time and attention to the affairs of our Group including but not limited to the review of the attendance record of the Board meetings or Board committee meetings. Should there be concerns on the time commitments by the relevant Director(s) to our Group, the Board (and the nomination committee) may request the relevant Director(s) to provide an update to the Board in relation to any changes to his significant commitments.

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SENIOR MANAGEMENT

Ms. Lau Suk Ching (劉淑貞), aged 45, was appointed as the deputy general manager of our Company on [●] and as the joint company secretary of our Company on October 14, 2019.

Ms. Lau has over 21 years’ experience in corporate financing and accounting. The following table shows the key working experience of Ms. Lau:

Roles and Period Company Latest Position responsibilities

June 2017 to present ...... Beijing Huicheng Asset Executive director Oversee the Management Co., Ltd* management and (北京惠承資產管理 operations of the 有限公司) company

April 2017 to present ...... YiAnCapital Director Oversee the Management management and Company Limited operations of the (溢安資本管理有限公司) company

November 2014 to Tianjin Plateau Equity Managing director of Manage and oversee November 2015 ...... Investment Fund investment bank private equity Management Ltd* department investments projects (天津普拓股權投資基金管理有限公司)

November 2013 to October 2014 Harbin Bank Co., Ltd.* Deputy general manager Manage corporate (哈爾濱銀行) of the planning & financing activities finance department and provide secretarial and deputy head to services to the board the board office office

March 2007 to China International Executive general Manage securities listing November 2013 ...... Capital Corporation manager projects and provide Limited (中國國際金融 corporate financing 有限公司) advisory services to customers

September 1997 to Ernst & Young Senior manager of Manage auditing March 2007 ...... assurance and projects advisory services department

Ms. Lau received a bachelor’s degree in business administration from the Chinese University of Hong Kong in December 1997. Ms. Lau has been an associate member of the Hong Kong Institute of Certified Public Accountants (formerly known as the Hong Kong Society of Accountants) since May 2003 and became a fellow member of the Association of Chartered Certified Accountants in January 2012.

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Ms. Lau did not hold any directorship in any listed companies during the last three years immediately preceding the Latest Practicable Date. Despite her concurrent role as executive directors of two other private companies, based on the small scale of operations of those companies, our Directors are of the view that Ms. Lau will be able to devote sufficient time to discharge her duties as a deputy general manager of our Company.

Ms. Zhang Yijia (張憶佳), aged 31, was appointed as the project director of our Company on [●].

Ms. Zhang has over six years’ experience in the television and film industry. The following table shows the key working experience of Ms. Zhang:

Roles and Period Company Latest Position responsibilities

August 2017 to present ...... LiTianTV&Film Project director Manage the production and operation of television drama and film

July 2016 to August 2017 ..... Beijing Deyi Jujia Film producer Oversee the production Culture Media Co. and development of Ltd.* (北京德藝巨佳文 TV and films 化傳媒有限公司)

April 2013 to June 2016 ...... Shanghai Juhe Film Assistant to general Oversee the operations Culture Co.,Ltd.* manager and director of the department and (上海劇合影視文化 of agents planning agent related works 有限公司) department

Ms. Zhang graduated from the Sichuan Normal University (四川師範大學)in Sichuan, the PRC in June 2011 with a bachelor’s degree in broadcasting and television director.

Ms. Zhang did not hold any directorship in any listed companies during the last three years immediately preceding the Latest Practicable Date.

Ms. Zhang Tianbi (張天碧), aged 31, was appointed as the distribution director of our Company on [●].

Ms. Zhang has over nine years’ experience in the television and film industry. The following table shows the key working experience of Ms. Zhang:

Roles and Period Company Latest Position responsibilities

February 2017 to present ..... LiTianTV&Film Distribution director Manage the distributions of drama series

June 2010 to February 2017 .... Beijing Enlight Media Director of new media Responsible for the Co., Ltd.* (北京光線傳 copyright distribution of drama 媒股份有限公司), a series and film company listed on the copyright Shenzhen Stock Exchange (stock code: 300251)

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Ms. Zhang graduated from the Minzu University of China (中央民族大學) in Beijing, the PRC in July 2012 with a diploma in human resources management.

Ms. Zhang did not hold any directorship in any listed companies during the last three years immediately preceding the Latest Practicable Date.

JOINT COMPANY SECRETARIES

Ms. Lau Suk Ching (劉淑貞), aged 45, was appointed as a joint company secretary on October 14, 2019. For the biography of Ms. Lau Suk Ching, please see the paragraph headed “— Senior Management” in this section.

Mr. Lee Leong Yin (李亮賢), aged 31, was appointed as a joint company secretary on October 14, 2019. He is primarily responsible for the overall company secretarial matters of our Group.

Mr. Lee is an assistant manager of Corporate Secretarial Department of SWCS Corporate Services Group (Hong Kong) Limited and is responsible for providing listed and private companies in corporate secretarial works. Mr. Lee has over nine years of experience in the corporate secretarial field. He obtained a bachelor’s degree of business administration in corporate administration from The Open University of Hong Kong in August 2010. He is an associate member of The Hong Kong institute of Chartered Secretaries and The Chartered Governance Institute (formerly The Institute of Chartered Secretaries and Administrators in the United Kingdom) in November 2018.

BOARD COMMITTEES

Audit Committee

We established an audit committee with written terms of reference in compliance with the Corporate Governance Code and Corporate Governance Report as set out in Appendix 14 to the Listing Rules. The primary duties of the audit committee are to review and supervise our financial reporting process and internal control system of the Group, oversee the audit process, risk management process and external audit functions. The audit committee consists of three members, namely, Mr. Liu Hanlin, Mr. Gan Weimin and Mr. Yu Yang. The chairman of the audit committee is Mr. Liu Hanlin.

Remuneration Committee

We established a remuneration committee with written terms of reference in compliance with the Corporate Governance Code and Corporate Governance Report as set out in Appendix 14 to the Listing Rules. The primary duties of the remuneration committee are to make recommendations to the Board on our Company’s policy and structure concerning the remuneration of our Directors and senior management and on the establishment of a formal and transparent procedure for developing remuneration policy, review and approve performance based remuneration by reference to corporate goals and objectives, to determine the terms of the specific remuneration package of each executive Director and senior management and to ensure none of our Directors determine their own remuneration. The remuneration committee consists of three members, namely Mr. Gan Weimin, Mr. Liu Hanlin and Mr. Teng Bing Sheng. The chairman of the remuneration committee is Mr. Gan Weimin.

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Nomination Committee

We established a nomination committee with written terms of reference in compliance with the Corporate Governance Code and Corporate Governance Report as set out in Appendix 14 to the Listing Rules. The primary duties of the nomination committee are to make recommendations to our Board on the appointment of members of the Board. The nomination committee consists of three members, namely, Mr. Teng Bing Sheng, Mr. Liu Hanlin and Ms. Fu Jieyun. The chairman of the nomination committee is Mr. Teng Bing Sheng.

REMUNERATION POLICY

For the three years ended December 31, 2017, 2018 and 2019, the aggregate of the remuneration paid and benefits in kind granted to our Directors by us and our subsidiaries was RMB904,000, RMB1,183,000 and RMB1,670,000, respectively.

For the three years ended December 31, 2017, 2018 and 2019, the aggregate of the remuneration paid and benefits in kind granted to the five highest paid individuals who are neither a director nor chief executive of our Group was RMB617,000, RMB924,000 and RMB715,000, respectively.

During the Track Record Period, no emoluments were paid by the Group to any Director or any of the five highest paid individuals as an inducement to join or upon joining the Group or as a compensation for loss of office. None of our Directors had waived any remuneration during the Track Record Period.

Under the arrangements currently in force, we estimate that the aggregate remuneration payable to, and benefits in kind receivable by, our Directors (excluding discretionary bonus) for the year ending December 31, 2020 will be approximately RMB[●].

In order to incentivize our Directors, senior management and other employees for their contribution to the Group and to retain suitable personnel in our Group, we adopted the Share Option Scheme on [●]. For further details, see “Appendix IV — Statutory and General Information — F. Share Option Scheme” to this document.

Save as disclosed in this document, no other payments had been made, or are payable, by any member of the Group to the Directors during the Track Record Period.

CORPORATE GOVERNANCE

Our Directors recognize the importance of good corporate governance in management and internal procedures so as to achieve effective accountability. Our Company will comply with the Corporate Governance Code as set out in Appendix 14 to the Listing Rules and the Listing Rules.

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Board Diversity

We embrace the benefits of diversity in our Board and [have adopted] a board diversity policy (the “Board Diversity Policy”) which sets out the objective and approach to achieve and maintain diversity on our Board in order to enhance the effectiveness of our Board and to maintain the high standards of corporate governance. The Board Diversity Policy provides that our Company should endeavor to ensure that our Board members have the appropriate balance of skills, experience and diversity of perspectives that are required to support the execution of its business strategy. Pursuant to the Board Diversity Policy, we seek to achieve Board diversity through the consideration of a number of factors, including but not limited to professional experience, gender, age, cultural background, educational background and length of service. The ultimate decision of the appointment will be based on merit and the contribution which the selected candidates will bring to our Board. Our Board believes that such merit-based appointments will best enable our Company to serve the Shareholders and other stakeholders going forward.

MANAGEMENT PRESENCE

We have applied for, and the Stock Exchange [has granted], a waiver from strict compliance with the requirement under Rule 8.12 of the Listing Rules in relation to the requirement of management presence in Hong Kong. For details of the waiver, see “Waivers from Strict Compliance with the Listing Rules — Management Presence” in this document.

COMPLIANCE ADVISER

Our Company has appointed [Founder Securities (Hong Kong) Capital Company Limited] as our compliance adviser pursuant to Rule 3A.19 of the Listing Rules. Pursuant to Rule 3A.23 of the Listing Rules, the compliance adviser will advise our Company on the following matters:

(i) before the publication of any regulatory announcement, circular or financial report;

(ii) where a transaction, which might be a notifiable or connected transaction, is contemplated, including share issues and share repurchases;

(iii) where we propose to use the [REDACTED]ofthe[REDACTED] in a manner different from that detailed in this document or where our business activities, developments or results materially deviate from any forecast, estimate, or other information in this document; and

(iv) where the Stock Exchange makes an inquiry of our Company regarding unusual movements in the price or [REDACTED] volume of our Shares.

The term of the appointment of [Founder Securities (Hong Kong) Capital Company Limited] will commence from (and including) the [REDACTED] and end on (and including) the date on which we comply with Rule 13.46 of the Listing Rules in respect of our financial results for the first full financial year commencing after the [REDACTED].

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As of the Latest Practicable Date and immediately following completion of the Capitalization Issue and the [REDACTED] (without taking into account any Shares which may be issued upon the exercise of the [REDACTED] or any options that may be granted under the Share Option Scheme), the following persons will have an interest or short position in Shares or underlying Shares which would be required to be disclosed to us and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, directly or indirectly, be 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:

Immediately after the [REDACTED] and the Capitalization Issue(1)

Approximate percentage of Number of shareholding in Name Capacity/ Nature of interest Shares our Company

Litian Century ...... Beneficial owner(2) [REDACTED][REDACTED]

Mr.Yuan...... Interest in a controlled corporation(2) [REDACTED][REDACTED] Spouse interest(3) [REDACTED][REDACTED]

Marshal Investment .... Beneficial owner(4) [REDACTED][REDACTED]

Ms.Tian...... Interest in a controlled corporation(4) [REDACTED][REDACTED] Spouse interest(5) [REDACTED][REDACTED]

Joint Fortune Huayi Beneficial owner(6) [REDACTED][REDACTED] Emerging Industry Investment Co. Ltd. (“Joint Fortune”) .....

Mr. Xie Ailong (謝愛龍) . . Interest in a controlled corporation(6) [REDACTED][REDACTED]

(6) Ms. Li Yiwei (李逸微).... Interest in a controlled corporation [REDACTED] [REDACTED]

Notes:

(1) Assuming the [REDACTED] is not exercised.

(2) Mr. Yuan is the sole shareholder of Litian Century and he is therefore deemed to be interested in the Shares held by Litian Century upon the [REDACTED].

(3) Ms. Tian is the spouse of Mr. Yuan. Therefore, Mr. Yuan is deemed to be interested in the Shares held by Marshal Investment under the SFO.

(4) Ms. Tian is the sole shareholder of Marshal Investment and she is therefore deemed to be interested in the Shares held by Marshal Investment upon the [REDACTED].

(5) Mr. Yuan is the spouse of Ms. Tian. Therefore, Ms. Tian is deemed to be interested in the Shares held by Litian Century under the SFO.

(6) Joint Fortune is owned by Ms. Li Yiwei and Mr. Xie Ailong as to 40% and 60%. Therefore, Ms. Li and Mr. Xie are deemed to be interested in the Shares held by Joint Fortune under the SFO.

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Except as disclosed above, our Directors are not aware of any person who will, immediately following the Capitalization Issue and the [REDACTED], have an interest or short position in Shares or underlying Shares which would be required to be disclosed to us and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, directly or indirectly, be 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 our Company.

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SHARE CAPITAL

The authorized and issued share capital of our Company is as follows:

Authorized Share Capital:

(HK$)

[500,000,000] Shares [5,000,000]

Assuming the [REDACTED] is not exercised at all, and without taking into account any Shares which may be issued upon the exercise of any options that may be granted under the Share Option Scheme, the issued share capital of our Company immediately following the completion of the Capitalization Issue and the [REDACTED] will be as follows:

Issued Share Capital:

Approximate percentage of issued share capital HK$ (%)

[10,000,000] Shares in issue as of the date of [100,000] [REDACTED] this document

[REDACTED] Shares to be issued under the [REDACTED][REDACTED] Capitalization Issue

[REDACTED] Shares to be issued under the [REDACTED][REDACTED] [REDACTED]

[REDACTED] Shares in total [REDACTED] 100.00

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Assuming the [REDACTED] is exercised in full, and without taking into account any Shares which may be issued upon the exercise of any options that may be granted under the Share Option Scheme, the issued share capital of our Company immediately following the completion of the Capitalization Issue and the [REDACTED] will be as follows:

Issued Share Capital:

Approximate percentage of issued share capital HK$ (%)

[10,000,000] Shares in issue as of the date of [100,000] [REDACTED] this document

[REDACTED] Shares to be issued under the [REDACTED][REDACTED] Capitalization Issue

[REDACTED] Shares to be issued under the [REDACTED][REDACTED] [REDACTED]

[REDACTED] Shares in total [REDACTED] 100.00

Notes:

(1) The Shares referred to in the above table have been or will be fully paid or credited as fully paid when issued.

(2) Assuming a total of [REDACTED] Shares will be issued upon exercise of the [REDACTED] in full.

RANKING

The [REDACTED] are ordinary Shares in the share capital of our Company and will rank equally in all respects with all Shares in issue or to be issued as set out in the above table, and will qualify and rank equally for all dividends or other distributions declared, made or paid after the date of this document.

ALTERATIONS OF SHARE CAPITAL

Our Company may from time to time by ordinary resolution or special resolution (as the case may be) of shareholders alter the share capital of our Company. For a summary of the provisions in the Article of Association regarding alterations of share capital, see “Appendix III — Summary of the Constitution of the Company and Cayman Islands Company Law and Taxation — 2. Articles of Association — (a) Shares — (iii) Alteration of capital” in this document.

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THE SHARE OPTION SCHEME

We have conditionally adopted the Share Option Scheme on [●]. The principal terms of the Share Option Scheme are summarized in the section headed “Appendix IV — Statutory and General Information — F. Share Option Scheme” in this document.

GENERAL MANDATE TO ISSUE SHARES

Our Directors have been granted a general unconditional mandate to allot, issue and deal with Shares with an aggregate nominal value of not more than the sum of:

(i) 20% of the total number of Shares in issue immediately following the completion of the Capitalisation Issue and the [REDACTED] (excluding any Shares which may fall to be issued pursuant to the [REDACTED]); and

(ii) the aggregate nominal value of share capital of our Company repurchased by our Company (if any) under the general mandate to repurchase Shares referred to below.

This mandate will expire at the earliest of:

(i) the conclusion of our Company’s next annual general meeting;

(ii) the expiration of the period within which our Company is required by law or the Articles of Association to hold its next annual general meeting; or

(iii) the time when such mandate is varied, revoked or renewed by an ordinary resolution of our Company’s Shareholders in a general meeting.

Further details of this general mandate are set out in the paragraph headed “Appendix IV — Statutory and General Information — A. Further information about our Company — 4. Written resolutions of the then shareholder of our Company passed on [●]” in this document.

GENERAL MANDATE TO REPURCHASE SHARES

Our Directors have been granted a general unconditional mandate to exercise all the powers of our Company to repurchase Shares with a total nominal value of not more than 10% of the aggregate nominal amount of the share capital of our Company in issue or to be issued immediately following the completion of the Capitalization Issue and the [REDACTED] (excluding any Shares which may fall to be issued upon the exercise of the [REDACTED]).

This mandate only relates to repurchases made on the Stock Exchange, or any other approved stock exchange(s) on which the Shares are [REDACTED] (and which is recognised by the SFC and the Stock Exchange for this purpose), and which are made in accordance with all applicable laws and/or requirements of the Listing Rules. A summary of the relevant Listing Rules is set out in the section headed “Appendix IV — Statutory and General Information — A. Further information about our Company — 5. Repurchase of our Shares” in this document.

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This mandate will expire at the earliest of:

(i) the conclusion of our Company’s next annual general meeting;

(ii) the expiration of the period within which our Company is required by law or the Articles of Association to hold its next annual general meeting; or

(iii) the time when such mandate is varied, revoked or renewed by an ordinary resolution of our Company’s Shareholders in a general meeting.

For further details of this share repurchase mandate, see the paragraph headed “Appendix IV — Statutory and General Information — A. Further Information about Our Company — 4. Written resolutions of the then shareholder of our Company passed on [●]” in this document.

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You should read the following discussion in conjunction with the consolidated financial statements and the notes thereto included in the Accountants’ Report in Appendix I to this document which has been prepared in accordance with IFRS, and the selected historical financial information and operating data included elsewhere in this document.

The following discussion and analysis contain forward-looking statements that reflect our current views with respect to future events and financial performance. These statements are based on our assumptions and analysis in light of our experience and perception of historical trends, current conditions and expected future development, as well as other factors we believe are appropriate under the circumstances. However, whether actual outcomes and developments will meet our expectations and predictions depends on a number of risks and uncertainties. In evaluating our business, you should carefully consider the information provided in the sections headed “Risk Factors”, “Business” and elsewhere in this document.

OVERVIEW

We are a leading drama series distribution company in the PRC in terms of the number of TV series first broadcast on satellite TV channels in the PRC in 2018, according to the Frost & Sullivan Report. Our business primarily consists of the following: (i) licensing of the broadcasting rights of self-produced drama series, through which we invest solely or jointly with our co-investors, and undertake the production, marketing and distribution of the drama series in the PRC; and (ii) licensing of the broadcasting rights of outright-purchased drama series, in which we, either as the exclusive distributor or one of the several distributors, obtain the right to use, and the right to transfer the broadcasting rights of, the drama series from the third-party copyright owners/licensors, and subsequently license such rights to various TV channels and online media platforms in the PRC. In addition to our two main businesses, we also sell script copyrights of drama series, act as a distribution agent of the broadcasting rights of TV series, and invest in drama series as a non-executive producer.

We experienced significant growth in our net profit during the Track Record Period. Our revenue increased from approximately RMB378.7 million for the year ended December 31, 2017 to approximately RMB385.9 million for the year ended December 31, 2018, and further to approximately RMB391.0 million for the year ended December 31, 2019. Our net profit was approximately RMB56.8 million, RMB67.6 million and RMB77.0 million for the years ended December 31, 2017, 2018 and 2019, respectively, representing a CAGR of approximately 16.5% from 2017 to 2019.

BASIS OF PREPARATION AND PRESENTATION OF HISTORICAL FINANCIAL INFORMATION

Pursuant to the Corporate Reorganization, as more fully explained in the section headed “History and Corporate Structure — Corporate Reorganization” in this document, our Company was incorporated in the Cayman Islands under the Companies Law as an exempted company with limited liability on June 17, 2019 and became the holding company of the companies now comprising our Group on October 14, 2019. The Corporate Reorganization only involved inserting of our Company, LiTian BVI, LiTian HK and LiTian WFOE, which were newly formed entities with no substantive operations, as holding companies of LiTian TV & Film and there was no change in the business and operation of LiTian TV & Film during the Track Record

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Period. The consolidated financial statements of our Group has been prepared and presented as a continuation of the consolidated financial statements of LiTian TV & Film and its subsidiaries with the assets and liabilities of LiTian TV & Film and its subsidiaries recognized and measured at their historical carrying amounts prior to the Corporate Reorganization. Intra-group balances, transactions and unrealised gains/losses on intra-group transactions are eliminated in full in preparing the consolidated financial statements of our Group.

The consolidated financial statements of our Group has been prepared in accordance with all applicable IFRSs which collective term includes all applicable individual IFRSs, International Accounting Standards and Interpretations issued by the International Accounting Standards Board (the “IASB”).

The IASB has issued a number of new and revised IFRSs. For the purpose of preparing the consolidated financial statements, our Group has adopted all applicable new and revised IFRSs during the Track Record Period, except for any new standards or interpretations that are not yet effective for the accounting period beginning January 1, 2019. For further details, please refer to the Accountants’ Report in Appendix I to this document.

The financial information contained herein is presented in Renminbi, or RMB, which is the functional currency of our Group. The measurement basis used in the preparation of the financial information is the historical cost basis.

KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Our results of operations have been, and are expected to continue to be, affected by a number of factors, which primarily include the following:

Quality of the drama series we source and/or produce and project-based nature of our revenue model

During the Track Record Period, our revenue was mainly derived from licensing the broadcasting rights of the drama series to TV channels. Our revenue was mainly driven by the quality of the relevant drama series we distributed and the number of distribution platforms we utilized for such distribution in the PRC. Our ability to distribute high-quality drama series to our customers depends in part on our abilities to accurately identify the content preferences of distribution platforms and viewers, and source appropriate drama series from the third-party copyright owners/licensors. If we fail to identify and keep up with their evolving preferences, or the copyright owners/licensors of our drama series are no longer willing or able to license the relevant drama series to us based on the terms acceptable to us for any reason, our ability to offer high-quality drama series to our customers will be adversely affected.

Furthermore, we charge our customers a license fee for each drama series that they purchase the broadcasting rights thereof from us. Accordingly, there is no assurance that we will be able to continue to secure new customers or that our existing customers will continue to purchase the broadcasting rights of the drama series from us in the future. In the event our drama series could not satisfy the TV channels’ internal requirements, they will not purchase from us, and we will not be able to generate sufficient projected revenue. In the event this occurs, our results of operations and financial condition will be adversely affected.

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Government policies and market trends

The distribution of drama series is generally subject to the government regulations and policies that affect the drama series market in the PRC and the evolving market trends, which can be uncertain during the drama series production and distribution stages. In the event that the market trends and government policies change so that we are not able to distribute the drama series according to our business plan, we may be required to defer distribution, distribute drama series at a lower price than we anticipated, or distribute alternative drama series that may be more costly than the original drama series under our plan. This may adversely affect our results of operations and financial condition.

Ability to control our cost of sales and operating expenses

Our results of operations are primarily affected by the cost of purchasing the broadcasting rights of the drama series from third-party copyright owners/licensors and the cost of producing the drama series ourselves, which mainly comprise our cost of sales. For the years ended December 31, 2017, 2018 and 2019 , our aggregate amount of cost of sales, which primarily consisted of the cost of purchasing the broadcasting rights of the drama series from third-party copyright owners/licensors and the cost of producing our drama series, amounted to approximately RMB302.8 million, RMB286.4 million and RMB249.9 million, respectively, representing approximately 79.9%, 74.2% and 63.9% of our total revenue, respectively. During the Track Record Period, we have implemented certain measures to control our cost of sales. For example, with respect to the business of licensing the broadcasting rights of our self-produced drama series, we possess sufficient management capabilities to systematically monitor, manage and coordinate the entire production process of the drama series. In order to ensure that our projects can be completed on a timely basis and within proposed budget, the staff from our project department regularly makes on-site visits to supervise the progress and maintain effective communication with the producers and filming crew. In addition, in order to avoid budget overruns, we also dispatch financial personnel to the production team to monitor the occurrences of project expenses and to assess whether the cost is in line with the progress of the production.

In addition, our results of operations are affected by our operating expenses, which mainly consist of our selling and marketing expenses and administrative expenses. For the years ended December 31, 2017, 2018 and 2019, our aggregate amount of selling and marketing expenses and administrative expenses were approximately RMB12.0 million, RMB23.8 million and RMB61.1 million, respectively, representing approximately 3.2%, 6.2%, and 15.6% of our total revenue, respectively. Our operating expenses may increase with the expansion of our business or due to other factors. Our ability to effectively control our cost of sales and operating expenses will be pivotal in maintaining our profitability.

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Capital sources and funding sufficiency

The drama series production and distribution business is capital-intensive in nature. Our cost of sales relating to drama series production and distribution primarily includes the purchase costs of the broadcasting rights of the drama series, the service fees of artists, scripts, production crew, and other miscellaneous materials and services required in the process of filming and post-production. Many of these costs need to be paid upfront to our suppliers before we receive any sales proceeds from our customers. Therefore, sufficient funding in a timely manner is crucial for our daily operations. During the Track Record Period, we mainly satisfied our working capital requirements from cash generated from our operations, bank and other borrowings and loans from our related parties. If we are unable to procure sufficient funding for our operations in the future, our production and distribution plans will be interrupted and our results of operations and financial condition will be adversely affected.

Relatively long trade receivable turnover days in the industry

We generate revenue primarily from licensing the broadcasting rights of drama series to TV channels. According to the Frost & Sullivan Report, the ability to pay for the licensing fee of the broadcasting rights of drama series by the TV channels and online media platforms primarily depends on the timely collection of their accounts receivables relating to advertising revenue and the complexity and timing of the internal approval procedures since many of such TV channels are state-owned enterprises. In some cases, the date of payment by the TV channels and online media platforms to drama series distribution companies may be later than the pre-agreed contract date, which may subsequently affect the time of the payment of drama series distribution companies to their suppliers. Therefore, it generally takes us a long time to collect the trade receivables from our customers, which could negatively affect our working capital status. For the years ended December 31, 2017, 2018 and 2019, average trade receivable turnover days were approximately 120.1 days, 276.8 days and 447.3 days, respectively. If we are not able to collect the trade and bills receivables on a timely basis, our results of operations and financial condition could be materially and adversely affected.

Inability to continue to enjoy preferential tax treatment by our Consolidated Affiliated Entities will adversely affect our financial condition

During the Track Record Period, certain of our Consolidated Affiliated Entities, namely, Xinjiang LiTian, Horgos Tiantian Meimei, Horgos Haohao Xuexi and Tiantian Xiangshang, enjoyed preferential tax treatment, including tax exemptions and tax refund. There is no assurance that we are able to continue to enjoy tax exemption and tax refund in the future due to changes in the tax policies to be adopted by the PRC government authorities. If there is any change in, or withdrawal of, any preferential tax treatment applicable to us, or an increase in the effective tax rate, our tax expenses will increase accordingly. Any occurrence of these changes will adversely affect our business, results of operations and financial condition.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We have identified certain accounting policies that we believe are most critical to the preparation of our consolidated financial statements. Set forth below are discussions of the accounting policies applied in preparing our financial information that we believe are most dependent on the application of these estimates and judgments and, in addition, certain other accounting policies that we believe are material to an understanding of our financial information. Some of our critical accounting policies involve subjective assumptions and estimates, as well as complex judgments by our management relating to accounting items, which affect the application of policies and reported amounts of assets, liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results of operations may differ from these estimates. Our critical accounting policies, estimates, assumptions and judgments, which are important for understanding our financial condition and operation results, are set forth in detail in notes 2 and 3 to the Accountants’ Report included in Appendix I to this document.

Revenue Recognition

Our Group classifies income as revenue when it arises from the sale of goods or the provision of services in the ordinary course of our Group’s business.

Revenue is recognized when control over a product or service is transferred to the customer, at the amount of promised consideration to which our Group is expected to be entitled, excluding those amounts collected on behalf of third parties. Revenue excludes value-added tax or other sales taxes and is after deduction of any trade discounts.

Revenue from Licensing the Broadcasting Rights of Drama Series

Revenue from licensing the broadcasting right of drama series to customers is recognized when the drama series materials are made available to the customer.

Sale of Script Copyrights

Revenue from the sale of script copyrights is recognized when the title and copy of the script copyrights are transferred to the customer.

Revenue from the Provision of Distribution Agency Services

Revenue from the provision distribution agency services is recognized when the service is rendered.

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Revenue from Licensing of the Broadcasting Rights under Co-financing Arrangement

Revenue from licensing of the broadcasting rights under co-financing arrangement relates to our investments in drama series as a non-executive producer. Revenue under such arrangement is recognized when the drama series materials are made available to the customer of the executive producer.

Interest Income

Interest income is recognised as it accrues using the effective interest method. For financial assets measured at amortised cost that are not credit-impaired, the effective interest rate is applied to the gross carrying amount of the asset. For credit-impaired financial assets, the effective interest rate is applied to the amortized cost (i.e., gross carrying amount net of loss allowance) of the asset.

Government Grants

Government grants are recognized in the consolidated statements of financial position initially when there is reasonable assurance that they will be received and that our Group will comply with the conditions attaching to them. Grants that compensate our Group for expenses incurred are recognized as other income in profit or loss on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate our Group for the cost of an asset are recognized as deferred income and subsequently recognized in profit or loss on a systematic basis over the useful life of the asset.

Drama Series Copyrights

Drama series copyrights comprise (i) the distribution rights and copyrights of the drama series; and (ii) script copyrights, either acquired or produced by our Group. They are stated at cost less accumulated amortization and impairment losses. Costs of drama series copyrights generally comprise consideration payable upon acquisition of drama series and/or costs/expenses incurred during the production of drama series. Script copyrights are stated at cost less impairment losses.

The amortization of drama series copyrights is determined using the drama series forecast computation method. Under this method, the amount of amortization is determined based on the proportion of the revenue recognized in the Track Record Period for each individual drama series to the estimated total revenue expected to be recognized throughout its life cycle of the drama series.

Our management reviews the estimated total revenue throughout the life cycle of the drama series regularly in order to determine the amount of amortization expenses to be recorded during any year. The determination of the estimated total revenue is based on historical experience with similar drama series. The amortization expenses for future periods are adjusted if there are significant changes from previous estimates.

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If circumstances indicated that the carrying amount of a drama series copyright may not be recoverable, the drama series copyright may be considered “impaired”, and an impairment loss may be recognised in accordance with accounting policy for impairment of drama series copyrights as described in note 2(f) to the Accountant’s Report included in Appendix I to this document. Drama series copyrights are tested for impairment periodically or whenever the events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced to recoverable amount. The recoverable amount is the greater of the fair value less costs of disposal and value in use. In determining the value in use, expected future cash flows generated by the drama series copyright are discounted to their present value, which requires significant judgement relating to the level of revenue to be generated over the life cycle of the drama series copyright. Our Group uses all readily available information in determining an amount that is a reasonable approximation of the recoverable amount, including estimates based on reasonable and supportable assumptions and projections of the level of revenue to be generated over the life cycle of the drama series copyright. Changes in these estimates could have a significant impact on the recoverable amount of drama series copyrights and could result in additional impairment charge or reversal of impairment in future periods.

Income Tax

Our income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognized in profit or loss except to the extent that they relate to items recognized in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognized in other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

Expected Credit Loss for Financial Assets

Our Group recognizes a loss allowance for expected credit losses (“ECLs”) on the financial assets measured at amortized cost, including cash and cash equivalents and trade and other receivables.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all expected cash shortfalls (i.e. the difference between the cash flows due to our Group in accordance with the contract and the cash flows that our Group expects to receive).

The expected cash shortfalls of fixed-rate financial assets, trade and other receivables and contract assets are discounted using the effective interest rate determined at initial recognition or an approximation thereof where the effect of discounting is material.

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The maximum period considered when estimating ECLs is the maximum contractual period over which our Group is exposed to credit risk.

In measuring ECLs, the Company and its subsidiaries take into account reasonable and supportable information that is available without undue cost or effort. This includes information about past events, current conditions and forecasts of future economic conditions.

ECLs are measured on either of the following bases:

• 12-month ECLs, which are losses that are expected to result from possible default events within the 12 months after the reporting date; and

• lifetime ECLs, which are losses that are expected to result from all possible default events over the expected lives of the items to which the ECL model applies.

Loss allowances for trade receivables are always measured at an amount equal to lifetime ECLs. ECLs on these financial assets are estimated using a provision matrix based on our Group’s historical credit loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast general economic conditions at the reporting date.

For all other financial instruments, our Group recognizes a loss allowance equal to 12-month ECLs unless there has been a significant increase in credit risk of the financial instrument since initial recognition, in which case the loss allowance is measured at an amount equal to lifetime ECLs.

Adoption of IFRS 9

Our historical financial information has been prepared based on our underlying financial statements, in which IFRS 9 “Financial Instruments” (“IFRS 9”) has been adopted and applied consistently since the beginning of, and throughout, the Track Record Period. We have adopted IFRS 9 instead of IAS 39 “Financial Instruments: Recognition and Measurement” (“IAS 39”) in the preparation of our underlying financial statements, such that our historical financial information prepared under IFRS 9 is comparable on a period-to-period basis.

We have assessed the effects of application of IFRS 9 on our financial position and performance. IFRS 9 requires the recognition of impairment provisions of financial assets measured at amortized cost based on expected credit losses. We assessed that the adoption of the impairment methodology under IFRS 9 would not result in a significant difference in bad debt provision as compared with IAS 39. The financial assets held by our Group include only financial instruments measured at amortized cost which meet the condition for classification as financial assets at amortized cost under IFRS 9. Accordingly, our Group does not expect the new guidance to affect the classification and measurement of these financial assets.

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Adoption of IFRS 15

Our historical financial information has been prepared based on our underlying financial statements, in which IFRS 15 “Revenue from contracts with customers” (“IFRS 15”) has been adopted and applied consistently since the beginning of, and throughout, the Track Record Period. We have assessed the effects of application of IFRS 15 on our financial position and performance. Our Directors consider that adoption of IFRS 15 would not have a significant impact on our Group’s financial position and performance compared to the requirements of IAS 18 “Revenue” for the Track Record Period.

Adoption of IFRS 16

IFRS 16 “Leases” (“IFRS 16”) is mandatorily effective for the annual periods beginning on or after 1 January 2019. Our Group decided to apply IFRS 16 in our underlying historical financial statements since the beginning of, and throughout, the Track Record Period. IFRS 16 superseded IAS 17 “Leases” (“IAS 17”) and the related interpretations.

Under IFRS 16, leases of a lessee are recognized as right-of-use assets and the corresponding liabilities at the date on which the respective leased asset is available for use by the lessee. Our Directors consider that the adoption of IFRS 16 does not have any significant impact on our Group’s financial position, financial performance and key financial ratios.

RESULTS OF OPERATIONS

The table below sets forth a summary of our consolidated statement of profit or loss and other comprehensive income for the years indicated:

Year Ended December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

Revenue ...... 378,738 385,867 390,996 Cost of sales ...... (302,753) (286,362) (249,862)

Gross profit ...... 75,985 99,505 141,134 Other income ...... 3,112 4,286 4,069 Selling and marketing expenses...... (827) (764) (543) Administrative expenses...... (11,197) (23,062) (60,522)

Profit from operations ...... 67,073 79,965 84,138 Finance costs ...... (5,012) (10,122) (4,769)

Profit before taxation ...... 62,061 69,843 79,369 Income tax...... (5,301) (2,237) (2,335)

Profit and total comprehensive income attributable to equity shareholders of our Company for the year ...... 56,760 67,606 77,034

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Non-IFRS Measure

Year Ended December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

Profit and total comprehensive income attributable to equity shareholders of our Company for the year ...... 56,760 67,606 77,034 Add: [REDACTED]...... – 590 13,570

Adjusted profit and total comprehensive income attributable to equity shareholders of our Company for the year(1) ...... 56,760 68,196 90,604

Note:

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MAJOR COMPONENTS OF OUR RESULTS OF OPERATIONS

Revenue

We generate revenue primarily from (i) licensing of the broadcasting rights of our self-produced drama series; and (ii) licensing of the broadcasting rights of outright-purchased drama series from third-party copyright owners/licensors. In addition to our two main businesses, we generate revenue from (i) sales of script copyrights of drama series; (ii) agency services under which we acted as a distribution agent of the broadcasting rights of drama series; and (iii) investment in drama series as a non-executive producer, during the Track Record Period. For the years ended December 31, 2017, 2018 and 2019, our total revenue was approximately RMB378.7 million, RMB385.9 million and RMB391.0 million, respectively. During the Track Record Period, all of our revenue was derived from the PRC.

The table below sets forth the breakdown of our revenue by business segment for the years indicated:

Year Ended December 31,

2017 2018 2019

RMB’000 % RMB’000 % RMB’000 %

Revenue from the licensing of the broadcasting rights of self-produced drama series ...... 13,686 3.6 7,031 1.8 88,982 22.8 Revenue from the licensing of the broadcasting rights of outright-purchased drama series ...... 345,363 91.2 375,724 97.4 278,588 71.3 Revenue from the sales of script copyrights(1) . 19,689 5.2 – – – – Revenue from the provision of distribution agency services(2) ...... – – – – 9,458 2.4 Revenue from the licensing of the broadcasting rights under co-financing arrangement(3) ...... – – 3,112 0.8 13,968 3.5

Total ...... 378,738 100.0 385,867 100.0 390,996 100.0

Notes:

(1) Revenue from the sales of script copyrights primarily represent revenue generated from selling the copyrights of drama series scripts.

(2) Revenue from the provision of distribution agency services primarily represents revenue generated from distributing drama series to TV channels by acting as a distribution agent.

(3) Revenue from the licensing of the broadcasting rights under co-financing arrangement mainly includes revenue from our investment in drama series production as a non-executive producer.

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Licensing of the Broadcasting Rights of Self-Produced Drama Series

Under this business, we either (i) act as the sole investor in such drama series, in which case we contribute all of the funding and are in charge of the entire production and distribution process. Accordingly, we enjoy all of the copyright benefits of such drama series and bear all investment risks; or (ii) we cooperate with other investors in a co-financing arrangement, in which case we act as the executive producer of the drama series. For details of the business model, please refer to the section headed “Business — Our Business Revenue Model — Licensing of the Broadcasting Rights of Self-produced Drama Services” in this document. Revenue generated by our licensing of the broadcasting rights of self-produced drama series amounted to approximately RMB13.7 million, RMB7.0 million and RMB89.0 million for the years ended December 31, 2017, 2018 and 2019, respectively, representing approximately 3.6%, 1.8% and 22.8%, respectively, of our total revenue for the same years.

The following table sets forth a breakdown of our revenue from licensing the broadcasting rights of self-produced drama series by customer types for the years indicated:

Year Ended December 31,

2017 2018 2019

#of #of #of Drama Drama Drama (1) Series(1) Revenue Series Revenue Series(1) Revenue

RMB’000 % RMB’000 % RMB’000 %

Self-produced drama series Satellite TV channels...... – First-run ...... – – – – – – 3 55,203 62.0 –Rerun...... – – – 1 3,464 49.3 2 27,001 30.3 Terrestrial TV channels ..... 3 13,635 99.6 4 3,326 47.3 3 1,469 1.7 Other third-party customers(2) . 1 51 0.4 1 241 3.4 4 5,309 6.0

Total(3) ...... 3 13,686 100.0 4 7,031 100.0 5 88,982 100.0

Notes:

(1) The number of drama series licensed takes into consideration that some drama series were licensed to both TV channels and other third-party customers in the same financial year, thus, the total number of drama series licensed shown in the table above may or may not equal to the sum of the drama series licensed to different customers.

(2) Other third-party customers primarily represent online media platforms and other third-party drama series distribution companies in the PRC.

(3) Represents the total number of drama series distributed, irrespective of the distribution platforms on which they are broadcast. A particular drama series can be broadcast on more than one distribution platforms.

Under this business segment, revenue generated from our customers that are TV channels accounted for approximately 99.6%, 96.6% and 94.0% of our revenue generated from licensing the broadcasting rights of self-produced drama series for the years ended December 31, 2017, 2018 and 2019, respectively, while the remainder of this segment revenue was attributable to other third party customers.

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Among revenue generated from licensing the broadcasting rights of self-produced drama series, approximately nil, nil and 62.0% was generated from first-run broadcast on satellite TV channels for the years ended December 31, 2017, 2018 and 2019, respectively. For the same periods, approximately nil, 49.3% and 30.3%, respectively, was generated from rerun broadcast on satellite TV channels, and approximately 99.6%, 47.3% and 1.7%, respectively, was generated from broadcast on terrestrial TV channels. The remainder was generated from licensing the broadcasting rights of self-produced drama series to other third-party customers. According to the Frost & Sullivan Report, because satellite TV channels are able to reach more viewers without any geographic restriction and are capable of achieving meaningful scale and obtain pertinent market feedback from the viewers, such as viewing hotspots and behavior and audiences’ preferences, more quickly than terrestrial TV channels, the price per episode of drama series broadcast on satellite TV channels is generally higher than that of the drama series broadcast on terrestrial TV channels. Additionally, the price per episode of drama series that have first-run broadcast on satellite TV channels is also higher compared to that of drama series that have rerun broadcast on satellite TV channels.

Therefore, revenue generated from licensing the broadcasting rights of self-produced drama series for the year ended December 31, 2019 was substantially higher than that for the years ended December 31, 2017 and 2018, primarily because (i) our self-produced drama series, “The Brothers” (義海), was licensed and had first-run broadcast on three satellite TV channels in 2019; (ii) our self-produced drama series, “Glory of the Blood” (鐵血榮耀), was licensed and had first-run broadcast on a satellite TV channel in 2019; and (iii) our self-produced drama series, “A Gallant Army” (老虎隊), was licensed and had first-run broadcast on a state-owned TV channel and second-run broadcast on three satellite TV channels during that year, while for the years ended December 31, 2017 and 2018, our self-produced drama series were licensed and primarily had rerun broadcast on satellite TV channels and terrestrial TV channels.

Licensing of the Broadcasting Rights of Outright-purchased Drama Series

In addition to licensing the broadcasting rights of our self-produced drama series, we are engaged in licensing the broadcasting rights of drama series that we purchased from third-party copyright owners/licensors. Under this business, we either purchase the entire copyrights of the drama series (in which case, we will be able to license the broadcasting rights to our customers in any region in the PRC for any period of time at our discretion), or we only purchase the rights to use, or the rights to transfer the broadcasting rights of, the drama series in certain designated regions of the PRC for a specific period of time. We generally enter into the content, distribution agreements with the copyright owners/licensors to obtain copyrights or the rights to use, or the rights to license the broadcasting rights of, the particular TV series, as the case may be. Subsequently, we distribute the relevant drama series to our customers. Our revenue generated by licensing of the broadcasting rights of outright-purchased drama series is typically recognized at the point in time when the drama series has been made available for our customers to use and there is no requirement for significant continued performance by our Group. Our customers are generally required to settle our invoices within 60 days to one year after receipt. Revenue generated by our licensing of the broadcasting rights of outright-purchased TV series amounted to approximately RMB345.4 million, RMB375.7 million and RMB278.6 million for the years ended December 31, 2017, 2018 and 2019, respectively, representing approximately 91.2%, 97.4% and 71.3%, respectively, of our total revenue for the same years.

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The following table sets forth a breakdown of our revenue from licensing the broadcasting rights of outright-purchased drama series by customer types for the years indicated:

Year Ended December 31,

2017 2018 2019

#of #of #of Drama Drama Drama Series(1) Revenue Series(1) Revenue Series(1) Revenue

RMB’000 % RMB’000 % RMB’000 %

Outright purchased drama series Satellite TV channels – First-run ...... 5 135,908 39.4 9 111,012 29.6 3 168,928 60.7 –Rerun...... 22 180,017 52.1 29 226,676 60.3 33 80,340 28.8 Terrestrial TV channels ..... 6 3,668 1.0 4 1,152 0.3 4 1,145 0.4 Other third-party customers(2) ...... 7 25,770 7.5 7 36,884 9.8 11 28,175 10.1

Total(3) ...... 29 345,363 100.0 39 375,724 100.0 40 278,588 100.0

Notes:

(2) Other third-party customers primarily represent online media platforms and other third-party drama series distribution companies in the PRC.

Under this business segment, revenue generated from our customers that are TV channels accounted for approximately 92.5%, 90.2% and 89.9% of our revenue generated from licensing the broadcasting rights of outright-purchased drama series for the years ended December 31, 2017, 2018 and 2019, respectively, while the remainder of our segment revenue was attributable to other third-party customers.

In addition, for the years ended December 31, 2017, 2018 and 2019 among revenue generated from licensing the broadcasting rights of outright-purchased drama series, approximately 39.4%, 29.6% and 60.7% was generated from first-run broadcast on satellite TV channels. For the same periods, approximately 52.1%, 60.3% and 28.8% was generated from rerun broadcast on satellite TV channels, respectively, and the remainder was attributable to terrestrial TV channels and other third-party customers.

Revenue generated from the licensing of the broadcasting rights of outright-purchased drama series increased from 2017 to 2018 primarily because we licensed 39 outright-purchased drama series to our customers in 2018, compared with 29 in 2017, leading to a segment revenue growth of approximately 8.8% for the year. Revenue generated from the licensing of the

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Sales of Script Copyrights

During the Track Record Period, we purchased certain script copyrights of potential drama series to be made and sold some of these scripts and/or IPs to third-party drama series production companies. For the years ended December 31, 2017, 2018 and 2019, the revenue from the sales of the script copyrights amounted to approximately RMB19.7 million, nil and nil, accounting for approximately 5.2%, nil and nil of our total revenue, respectively, for the same periods.

Acting as a Distribution Agent of the Drama Series

Beginning in the first half of 2019, we acted as a distribution agent for the copyright owner/licensor of the drama series, through which we promoted the relevant TV series to the TV channels and negotiated the terms and conditions in connection with the licensing of the broadcasting rights of such TV series with the TV channels on behalf of the TV series copyright owners/licensors. We generally charge the relevant copyright owner/licensor of the TV series a distribution agent fee, which is calculated based on a fixed percentage (typically 15.0%) of the license fee to be received by the copyright owner/licensor from the TV channels. We settle distribution agent fee after the copyright owner of the drama series has received the relevant license fee from the TV channels. For the year ended December 31, 2019, the revenue from this business was approximately RMB9.5 million, which accounted for approximately 2.4% of our total revenue for the year.

Income under Co-financing Arrangement

Our income under co-financing arrangement relates to our investment in drama series as a non-executive producer. We usually generate investment income under co-financing arrangement by sharing the net license fee with the executive producer(s) of the drama series and other non-executive producer(s), if any, in accordance with the proportion of our investment. We typically receive payments of our investment income from the executive producers in installments on specific milestone dates. For the years ended December 31, 2017, 2018 and 2019, revenue derived from co-financing arrangement amounted to nil, approximately RMB3.1 million and RMB14.0 million, respectively, accounting for nil, approximately 0.8% and 3.5%, respectively, of our total revenue for the same years.

Cost of Sales

Our cost of sales primarily represents the cost we incurred in our operations. For the years ended December 31, 2017, 2018 and 2019, our cost of sales was approximately RMB302.8 million, RMB286.4 million and RMB249.9 million, respectively.

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The table below sets forth the breakdown of our cost of sales by nature for the years indicated: Year Ended December 31, 2017 2018 2019 RMB’000 % RMB’000 % RMB’000 %

Filming crew service fees...... 4,043 1.3 973 0.3 26,037 10.4 Filming and production costs ...... 2,880 1.0 663 0.2 22,028 8.8 Procurement costs for scripts ...... 16,880 5.6 268 0.1 6,957 2.8 Post-production costs...... 864 0.3 146 0.1 4,530 1.8 Costs of purchasing the broadcasting rights of drama series...... 125,843 41.6 148,895 52.0 111,907 44.8 Costs under co-financing arrangements...... – – 2,811 1.0 13,890 5.6 Promotion and marketing expenses ...... 152,013 50.1 132,553 46.3 63,326 25.3 Capitalized interests ...... 230 0.1 53 * 1,187 0.5

Total ...... 302,753 100.0 286,362 100.0 249,862 100.0

Note:

* Less than 0.1%.

The table below sets forth the breakdown of our cost of sales by nature for each business segment for the years indicated: Year Ended December 31, 2017 2018 2019 RMB’000 RMB’000 RMB’000

Cost of sales of licensing of the broadcasting rights: Self-produced drama series Filming crew service fees ...... 4,043 973 26,037 Filming and production costs ...... 2,880 663 22,028 Procurement costs for scripts ...... 1,201 268 6,957 Post-production costs ...... 864 146 4,530 Capitalized interests ...... 230 53 1,187

Subtotal ...... 9,218 2,103 60,739

Outright-purchased drama series Costs of purchasing the broadcasting rights of drama series ...... 125,843 148,895 111,907 Promotion and marketing expenses ...... 152,013 132,553 63,326

Subtotal ...... 277,856 281,448 175,233

Cost of sales of other businesses: Procurement costs for scripts ...... 15,679 – – Costs under co-financing arrangements ...... – 2,811 13,890

Subtotal ...... 15,679 2,811 13,890

Total ...... 302,753 286,362 249,862

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Our cost of sales primarily consists of (i) service fees for filming crew, including producers, directors, casts and other staff and professionals working in the filming crew; (ii) filming and production costs, which primarily represent various expenses we incur in the process of filming and production of the drama series, including, among others, expenses in connection with costumes, make-ups, vehicles, catering, accommodation, insurance and rental fees for filming sites and equipment; (iii) procurement costs for scripts, which mainly include costs for purchasing the copyrights of scripts and service fees for adapting the scripts for production; (iv) post-production costs, which primarily represent expenses in connection with editing, music production, dubbing, special effects and other expenses for the post-production of drama series; (v) costs in connection with purchasing the broadcasting rights of drama series from third-party copyright owners/licensors; (vi) costs under co-financing arrangements, which primarily represent the costs in connection with our investment in drama series as a non-executive producer; (vii) promotion and marketing expenses, which mainly represent the expenses we incurred for engaging third-party marketing service providers to promote our outright-purchased drama series; and (viii) capitalized interests, which mainly refer to the interest accrued to the Fixed Return Investment made by third-party co-investors that act as non-executive producers of our self-produced drama series.

For the years ended December 31, 2017, 2018 and 2019, our cost of sales principally comprised of costs of purchasing the broadcasting rights of drama series and the promotion and marketing expenses for engaging third-party marketing service providers to promote and advertise our outright-purchased drama series, which in aggregate accounted for approximately 91.7%, 98.3% and 70.1% of our total cost of sales for the year, respectively.

No cost of sales is presented for our distribution agency services business as the revenue from the provision of such services was presented on a net basis.

Our management generally formulates a distribution plan for each self-produced drama series with the estimation of the total revenue to be generated by such drama series during its life cycle (the “Total Estimated Revenue”).

We start to formulate a draft distribution plan during the preparation stage by actively communicating with potential customers, such as TV channels, and obtain their feedback on the content of our proposed drama series. During the filming stage, we invite potential customers to evaluate the quality of the drama series and modify the draft distribution plan accordingly. At the post production stage, we promote the clips of such drama series to potential customers and make further communication with the TV channels who express their intention to purchase the broadcasting rights of the relevant drama series. Before obtaining the distribution license, we adopt the distribution plan based on these communication results.

With the consideration of the general market conditions of the drama series as well as our past distribution experience, we usually estimate a drama series to have approximately three years of broadcasting life cycle, beginning from the time the TV Series Distribution License is obtained. We estimate the number of successive runs of a drama series based on the following factors: (i) the genres and characteristics of the drama series; (ii) the demands and content preferences among various TV channels; (iii) the preliminary agreed distribution schedules with the TV channels; and (iv) the historical distribution structure of similar drama series that are sold to different broadcasting platforms.

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With respect to the Total Estimated Revenue, we estimate the sales prices of the drama series based on the historical prices, together with the consideration of the potential distribution platforms and the broadcasting rounds. In making such price estimates, the key factors we consider include: (i) total investment of each drama series; (ii) the historical financial performance of similar drama series; (iii) the historical prices and proportion of revenue that are usually generated from satellite TV channels, terrestrial TV channels and online media platforms; (iv) the sales contracts entered into between our Group and its customers; and (v) the sales contracts under active negotiation between our Group and its potential customers and the probability that such contracts will ultimately be signed.

We subsequently compare the actual distribution results with the adopted distribution plan semi-annually, identify whether there is any event that may affect the execution of the distribution plan, and adjust the distribution plan accordingly. At the end of each year in the Track Record Period, we assess if there are significant changes in the assumptions that require a revision of the Total Estimated Revenue based on the latest available information. During the Track Record Period, we did not record any material change in the Total Estimated Revenue.

On the other hand, the cost of drama series is initially accrued to drama series copyrights at the amount of the total cost of production, purchase or investment. The cost of sales is recognized based on the proportion of a drama series’ revenue recognized for the relevant financial year to the Total Estimated Revenue (the “Proportion of Revenue”). The calculation of our cost of sales for a particular year is equal to the Proportion of Revenue multiplied by the total cost accrued to drama series copyrights.

The table below sets forth (i) the Total Estimated Revenue at the time of formulating the preliminary distribution plan and as of the end of the reporting year; and (ii) the total revenue recognized during the Track Record Period, for our self-produced drama series, which have generated revenue during the Track Record Period:

As of December 31,

Preliminary Distribution Plan 2017 2018 2019

Revenue Recognized Date of the During the Drama Series Total Total Total Total Track Distribution Estimated Estimated Adjustment Estimated Adjustment Estimated Adjustment Record Name of Drama Series License Revenue Revenue =R1-R0 Revenue =R2-R0 Revenue =R3-R0 Period

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Guerrilla Heroes (游擊英雄)...... April 29, 2015 58,930 N/A(1) N/A(1) N/A(1) N/A(1) N/A(1) N/A(1) 4,296 Double Guns December 20, (雙槍)(2) ...... 2016 34,953 34,953 – 34,953 – 34,953 – 8,700 The Brothers (義海). . . July 3, 2017 49,705 49,705 – 49,705 – 47,717 (1,988) 47,497 Glory of the Blood (鐵血榮耀)...... August11,2017 29,802 N/A(1) N/A(1) 29,802 – 29,802 – 9,549 A Gallant Army November 23, (老虎隊)...... 2018 39,292 N/A (1) N/A (1) 39,292 – 39,292 – 39,657

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Notes:

(1) No preliminary distribution plan was formulated for the financial year and thus, no corresponding adjustment is made to such preliminary plan.

(2) “Double Guns” (雙槍) was originally scheduled to broadcast on satellite TV channels in 2019. However, beginning in the third quarter of 2019 and until early December 2019 (the “Mandatory Celebration Period”), the PRC government has requested that all levels of the media in the PRC, including drama series producers and distributors, shall participate in the nationwide celebration of the 70th anniversary of the founding of the People’s Republic of China. Accordingly, the TV channels at all levels in the PRC were requested to broadcast similar-themed drama series and TV programs. Since “Double Guns” (雙槍) had not matched the content preferences of the relevant TV channels during the Mandatory Celebration Period, the broadcasting schedule of this drama series was postponed to 2020.

During the Track Record Period, the Total Estimated Revenue of “The Brothers” (義海) was adjusted downward by approximately RMB2.0 million, 4.0% as compared to its preliminary distribution plan. Other than this drama series, we did not make material adjustment to the Total Estimated Revenue of our self-produced drama series during the Track Record Period and up to the Latest Practicable Date, which had and/or are expected to have a material impact on the financial performance of our Group.

In preparing the consolidated financial statements of our Group for each financial year after the [REDACTED], our management will continue to regularly review the basis of estimation of the Total Estimated Revenue of each licensed drama series during its life cycle based on the realized revenue and latest negotiation results with our potential customers at the end of each financial year. We will recognize the corresponding cost of sales in the financial statements by applying the Proportion of Revenue based on the adjusted Total Estimated Revenue.

For the avoidance of doubt, changes in Total Estimated Revenue will not cause retrospective adjustments of cost of sales recognized in previous financial years in preparation of regular financial reports after the [REDACTED].

With respect to our outright-purchased drama series, the broadcasting rights of outright-purchased drama series that we licensed from the third-party copyright owners/licensors generally include (i) single-run broadcasting rights; and (ii) multiple-run broadcasting rights. Since most of the broadcasting rights of our outright-purchased drama series are licensed on a single-run basis, we generally do not need to formulate a detailed three-year distribution plan for each such drama series to estimate the Total Estimated Revenue as we do for our self-produced drama series. We usually license the broadcasting rights of outright-purchased drama series based on the market conditions and the demands of our customers. For outright-purchased drama series that we had acquired the single-run broadcasting rights, the entire economic benefit of the broadcasting rights was consumed and the costs of purchasing the broadcasting rights of drama series were fully recognized in the cost of sales when the revenue was recognized. Once the single-run broadcasting rights of these outright-purchased drama series have been licensed under specified conditions, they cannot be licensed again.

During the Track Record Period, we had obtained the multiple-run broadcasting rights of 14 outright-purchased drama series, which did not designate any broadcasting platform. The license period for these outright-purchased drama series ranges from three to six years. We usually formulate a short-term distribution plan for these outright-purchased drama series with multiple-run broadcasting rights. The costs of purchasing the broadcasting rights of these outright-purchased drama series were accounted for as cost of sales by applying the Proportion

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As of the Last Practicable Date, except for “Hunting Actions” (獵金行動), for which we had acquired the multiple-run broadcasting rights from the third-party copyright owner/licensor, that we expected to generate revenue of approximately RMB49.5 million in 2020, the costs of purchasing the broadcasting rights of other outright-purchased drama series that had been distributed were fully accounted for during the Track Record Period. Therefore, we do not expect to generate revenue in the future from the other outright-purchased drama series which had already been distributed.

Our self-produced drama series and outright-purchased drama series have the same customer base and pricing terms. Please refer to the sections headed “Business — Pricing Policy” and “Business Our Customers” in this document for further details.

Sensitivity Analysis

The following sensitivity analysis is for illustrative purpose only, which indicates the potential impact on our profitability during the Track Record Period if the relevant variables increased or decreased to the extent illustrated. Since the costs of purchasing the broadcasting rights of drama series and promotion and marketing expenses accounted for the largest portion of our Group’s cost of sales during the Track Record Period, a sensitivity analysis on the fluctuations in the costs of purchasing the broadcasting rights of drama series and promotion and marketing expenses during the same period is set out below to illustrate the impact of hypothetical fluctuations on our profit before taxation for the Track Record Period, assuming all other variables remained constant. To illustrate the potential effect on our financial performance, the sensitivity analysis below shows the potential impact on our profit before taxation for the year/period with a 5% and 10% decrease or increase in the costs of purchasing the broadcasting rights of drama series and promotion and marketing expenses. While none of the hypothetical fluctuation ratios applied in the sensitivity analysis equals the historical fluctuations of the costs of purchasing the broadcasting rights of drama series and promotion and marketing expenses, we believe that the application of hypothetical fluctuations of 5% and 10% in the costs of purchasing the broadcasting rights of drama series and promotion and marketing expenses presents a meaningful analysis of the potential impact of changes in the costs of purchasing the broadcasting rights of drama series and promotion and marketing expenses on our profitability.

Year Ended December 31, 2017 2018 2019 RMB’000 RMB’000 RMB’000

Changes in the costs of purchasing the broadcasting rights of drama series (10)% ...... 12,584 14,890 11,191 (5)% ...... 6,292 7,445 5,595 5%...... (6,292) (7,445) (5,595) 10%...... (12,584) (14,890) (11,191)

Changes in promotion and marketing expenses (10)% ...... 15,201 13,255 6,333 (5)% ...... 7,601 6,628 3,166 5%...... (7,601) (6,628) (3,166) 10%...... (15,201) (13,255) (6,333)

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Gross Profit and Gross Profit Margin

For the years ended December 31, 2017, 2018 and 2019, our gross profit was approximately RMB76.0 million, RMB99.5 million and RMB141.1 million, respectively, while the respective gross profit margin was approximately 20.1%, 25.8% and 36.1%, respectively.

The table below sets forth the breakdown of our gross profit and gross profit margin by business segments for the years indicated:

Year Ended December 31,

2017 2018 2019

Gross Gross Gross Gross Profit Gross Profit Gross Profit Profit Margin Profit Margin Profit Margin

RMB’000 % RMB’000 % RMB’000 %

Total ...... 75,985 20.1 99,505 25.8 141,134 36.1

Our gross profit margin of licensing the broadcasting rights of self-produced drama series was approximately 32.6%, 70.1% and 31.7%, respectively, for the years ended December 31, 2017, 2018 and 2019. Our gross profit margin of licensing the broadcasting rights of self-produced drama series for the year ended December 31, 2018 was relatively higher than that for 2017 and 2019, primarily because “Guerrilla Heroes” (游擊英雄) had rerun broadcast in 2018, while the costs incurred in connection therewith had been fully accounted for in 2017.

Our gross profit margin of licensing the broadcasting rights of outright-purchased drama series increased from approximately 19.5% for the year ended December 31, 2017 to approximately 25.1% for the year ended December 31, 2018, primarily because we incurred less promotion and marketing expenses relating to our outright-purchased drama series as we became more mature in this business, which enabled us to enjoy economies of scale, leading to an increase in our gross profit margin for this business segment in 2018. Our gross profit margin of licensing the broadcasting rights of outright-purchased drama series increased from approximately 25.1% for the year ended December 31, 2018 to approximately 37.1% for the year ended December 31, 2019, primarily due to (i) our optimized customer network; (ii) less promotion and marketing expenses we incurred in relation to our outright-purchased drama series in 2019 as we became more mature in this business, which enabled us to enjoy economies of scale; and (iii) our improved capabilities in selecting the content of drama series for distribution in connection with the business of licensing the broadcasting rights of outright-purchased drama series.

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Other Income

Other income primarily includes (i) government grants received in the PRC; (ii) interest from cash at bank; and (iii) interest income from loans to third parties, which primarily represents the fixed investment returns we received from the drama series we invested in during the Track Record Period. The government grants primarily represent the relevant financial reward we received from the government authorities of Haining City, Zhejiang Province, pursuant to the relevant local policies. The amounts and timing of our government grants are determined solely at the discretion of the relevant government authorities, and there is no assurance that we will continue to receive these government grants in the future. We recognize government grants at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with.

In accordance with paragraph 11 of IAS 32, an equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. During the Track Record Period, the Fixed Return Investments made by our Group and third-party investors were in substance, lending and borrowing arrangements. Under this arrangement, the investors lend a fixed amount of money (i.e. the principal) to the investees to produce drama series and receive a fixed amount of return based on the interest rates and the maturity period set out in the investment agreements. Generally, non-executive producers of the drama series have no discretion in establishing the prices of the drama series and have no control over the returns from the distributions of the drama series and therefore, these investments do not meet the definition of an equity instrument. The assets under the Fixed Return Investments are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and the contractual terms of the assets give rise on specified dates to the cash flows that are solely payments of principal and interest on the principal amount outstanding. These investments are borrowing/lending in nature, since the investors are entitled to the payments of principal and interest, which are in cash, at the agreed interest rate and repayment dates. During the Track Record Period, we made Fixed Return Investments in three drama series as a non-executive producer. For further details, please see “Business — Our Business and Revenue Model — Other Businesses — Investment in Drama Series as Non-executive Producer” in this document.

According to the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Private Lending Cases《關於審理民間借貸案件適用法律若 ( 干問題的規定》) (the “Interpretation No. 18, 2015”) promulgated by the Supreme People’s Court on June 23, 2015, lending contracts between non-financial institutions are valid if they are made for the purposes of supporting production or business operations, except under the circumstances as set forth in Article 52 of the Contract Law or Article 14 of the Interpretation No. 18, 2015. The PRC courts will support the claim for interest in respect of such loans as long as the annual interest rate does not exceed 24%, and loans with annual interest rate exceeding 36% shall be null and void. Moreover, in accordance with the Interpretation I of the Supreme People’s Court of Several Issues concerning the Application of the Contract Law of the People’s Republic of China《最高人民法院關於 ( 〈中華人民共和國合同法〉若干問題的解釋（一）》), when confirming the invalidity of a contract, the People’s Court shall determine based on the laws enacted by the NPC and SCNPC and the administrative regulations formulated by the State Council, rather than local regulations or administrative rules.

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Based on our confirmation that (i) the relevant Fixed Return Investments were not made under the circumstances as set forth in Article 52 of the Contract Law or Article 14 of the Interpretation No. 18, 2015; (ii) the annual interest rate of the Fixed Return Investments was within the limit permitted by the applicable PRC laws and court interpretations; and (iii) the Fixed Return Investments were made based on particular commercial reasons, our PRC Legal Advisors are of the opinion that the lending and borrowing agreements involving the Fixed Return Investments are legally binding on the parties and shall be deemed valid.

Please refer to the section headed “Business Legal Proceedings and Compliance Systemic Non-compliance Incidents” in this document for detailed discussions in relation to the non-compliance of Fixed Return Investments.

Having considered the opinions from our PRC Legal Advisors, our Directors are of the view that the non-compliance of our Fixed Return Investments with the General Lending Provisions does not have any material or adverse impact on our business, financial condition and results of operations.

The table below sets forth the breakdown of our other income for the years indicated:

Year Ended December 31, 2017 2018 2019 RMB’000 RMB’000 RMB’000

Government grants ...... 2,553 1,790 3,163 Interest income from: — Cash at bank ...... 56 54 49 — Loans to third parties ...... 503 2,442 837 Others ...... – – 20

Total ...... 3,112 4,286 4,069

Selling and Marketing Expenses

Selling and marketing expenses primarily consist of (i) staff costs relating to our sales and marketing employees; (ii) travel and transportation expenses of our marketing staff; and (iii) conference expenses relating to booth displays for television conferences and festivals we attended. For the years ended December 31, 2017, 2018 and 2019, our selling and marketing expenses amounted to approximately RMB0.8 million, RMB0.8 million and RMB0.5 million, respectively. The table below sets forth the breakdown of our selling and marketing expenses for the years indicated:

Year Ended December 31, 2017 2018 2019 RMB’000 % RMB’000 % RMB’000 %

Staff costs ...... 449 54.4 628 82.3 416 76.6 Travel and transportation expenses ..... 70 8.5 80 10.5 57 10.5 Conference expenses ...... 254 30.7 56 7.2 69 12.7 Others(1)...... 54 6.4 – – 1 0.2

Total ...... 827 100.0 764 100.0 543 100.0

Note:

(1) Others mainly represent office expenses and marketing expenses, which represent expenses relating to promotional and advertising activities undertaken by our Group.

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Administrative Expenses

Administrative expenses primarily consist of (i) staff costs relating to our administrative; (ii) rental fee, which includes the rental expenses and property management fees in connection with our leased properties; (iii) depreciation and amortization; (iv) office expenses; (v) consultancy fee, which mainly represents professional services fees in connection with obtaining financing and [REDACTED]; (vi) transportation fee; (vii) travel expenses; (viii) entertainment expenses; (ix) taxes and surcharges, which primarily consist of construction tax, stamp duty and other education surcharges; (x) impairment loss; and (xi) bank charges , which primarily represent bank transaction fees. The table below sets forth the breakdown of our administrative expenses for the years indicated:

Year Ended December 31,

2017 2018 2019

RMB’000 % RMB’000 % RMB’000 %

Staff costs ...... 3,442 30.7 5,402 23.4 8,148 13.5 Rental fee ...... 138 1.2 307 1.3 432 0.7 Depreciation and amortization ...... 1,408 12.6 1,664 7.2 2,008 3.3 Office expenses...... 197 1.8 236 1.0 324 0.5 Consultancy fee ...... 655 5.8 1,043 4.5 14,309 23.6 Transportation fee ...... 52 0.5 101 0.4 213 0.4 Travel expense ...... 208 1.9 678 2.9 1,258 2.1 Entertainment expenses ...... 39 0.3 1,399 6.1 1,670 2.8 Taxes and surcharges ...... 1,248 11.1 2,379 10.3 3,269 5.4 Impairment loss ...... 2,212 19.8 8,015 34.8 28,287 46.7 Bank charges ...... 1,064 9.5 918 4.0 404 0.7 Others ...... 534 4.8 920 4.1 200 0.3

Total ...... 11,197 100.0 23,062 100.0 60,522 100.0

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Finance Costs

Finance costs primarily consist of (i) interest on bank and other loans, which primarily includes interest on Fixed Return Investments, which is partially capitalized, and interest on other loans; and (ii) interest on lease liabilities. For the years ended December 31, 2017, 2018 and 2019, our finance costs were approximately RMB5.0 million, RMB10.1 million and RMB4.8 million, respectively. The table below sets forth our finance costs for the years indicated:

Year Ended December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

Interest expenses on: – Bank and other loans ...... 6,266 12,817 7,761 – Lease liabilities ...... 130 99 62

6,396 12,916 7,823

Less: interest expenses capitalized into drama series copyrights(1) ...... (1,384) (2,794) (3,054)

Total ...... 5,012 10,122 4,769

Note:

(1) Interest expenses capitalized into drama series copyrights primarily represented the interest accrued on the Fixed Return Investment from the commencement of filming of the drama series to obtaining the TV Series Distribution License. The borrowing costs have been capitalized at a rate of 22.9%, 11.0% and 12.9% for the years ended December 31, 2017, 2018 and 2019, respectively.

According to IAS 23 “borrowing costs” (“IAS 23”), borrowing costs that are directly attributable to the acquisition, construction or production of an asset, which necessarily takes a substantial period of time to be ready for its intended use or sale are capitalized as part of the cost of that asset. Other borrowing costs are expensed in the period that they incurred. The capitalization of borrowing costs, as part of the cost of a qualifying asset, commences when expenditure for the asset incurred, borrowing costs being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalization of borrowing costs suspends or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete.

The filming of drama series, adjustment and modification of the content for drama series in the process of distribution are necessary activities to prepare the drama series for its intended use or sale. Interest expenses accrued on the Fixed Return Investment, which cover the period from the commencement of filming of the drama series to obtaining the TV Series Distribution License are capitalized. The remaining interest expenses on the Fixed Return Investment, which fall out of this period are expensed. Therefore, the fluctuations of the interests on Fixed Return Investments have impact on the fluctuations of finance costs.

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Income Tax

Income tax expenses represent the tax expenses arising from the assessable profit generated by our Group in the PRC. Our Company and subsidiaries are incorporated in different jurisdictions with different taxation requirements.

Our Company was 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. Our Group entities established under the International Business Companies Acts of BVI are exempted from BVI income taxes. Pursuant to the PRC Income Tax Law and respective regulations, our Group operating are subject to EIT at a rate of 25% on the taxable income. No provision for Hong Kong Profits Tax was made as our Group had no assessable profit subject to Hong Kong Profits Tax during the Track Record Period.

In addition, according to the Notice on Preferential EIT Policies in Relation to Kashgar and Horgos as Two Special Economic Development Zones in Xinjiang《關於新疆喀什霍爾果斯兩個特 ( 殊經濟開發區企業所得稅優惠政策的通知》) promulgated by MOF and SAT on November 29, 2011, an enterprise established in Horgos between January 1, 2010 to December 31, 2020 and falling within the scope of the Catalog of EIT Incentives for Industries Particularly Encouraged in Underprivileged Areas of Xinjiang for Development《新疆困難地區重點鼓勵發展產業企業所得 ( 稅優惠目錄》) shall be exempted from the enterprise income tax entirely for five years beginning from the first year in which operational income is earned. According to the preferential filing record of EIT (企業所得稅優惠事項備案表) of our Consolidated Affiliated Entities, (i) Horgos Tiantian Meimei, Horgos Haohao Xuexi, Tiantian Xiangshang obtained the approval from the relevant PRC tax bureaus for entitlement of EIT exemption from January 2017 to December 2020; and (ii) Xinjiang LiTian is entitled to EIT exemption from January 2018 to December 2020.

Our income tax comprises current and deferred tax. The table below sets forth the income tax expense for the years indicated:

Year Ended December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

Current taxation ...... 5,989 4,157 9,590 Deferred taxation ...... (688) (1,920) (7,255)

Total ...... 5,301 2,237 2,335

Our income tax expense was approximately RMB5.3 million, RMB2.2 million and RMB2.3 million for the years ended December 31, 2017, 2018 and 2019, respectively. Our effective income tax rate was approximately 8.5%, 3.2% and 2.9% for the years ended December 31, 2017, 2018 and 2019, respectively. Our effective income tax rate was lower than the EIT rate since 2017, primarily due to the fact that three of our Consolidated Affiliated Entities were exempted from EIT from 2017 to 2020, and we generate most of our revenue through these Consolidated Affiliated Entities during the Track Record Period.

Our Directors confirm that, during the Track Record Period and up to the Latest Practicable Date, we had paid all relevant taxes and there were no disputes or unsolved tax issues with the relevant tax authorities.

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PERIOD TO PERIOD COMPARISON OF RESULTS OF OPERATIONS

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Revenue

Our revenue increased by approximately 1.3% from approximately RMB385.9 million for the year ended December 31, 2018 to approximately RMB391.0 million for the year ended December 31, 2019. This increase was primarily due to (i) an increase of approximately RMB82.0 million in the revenue generated by our licensing of the broadcasting rights of self-produced drama series as (a) we licensed the first-run broadcasting rights of “The Brothers” (義海) to three major satellite TV channels in the PRC; (b) we licensed the first-run broadcasting rights of “Glory of the Blood” (鐵血榮耀) to a satellite TV channel in the PRC; and (c) successfully distributed “A Gallant Army” (老虎隊), which had first-run broadcast on a state-owned TV channel and second-run broadcast on three satellite TV channels in 2019; (ii) an increase of approximately RMB10.9 million in revenue from the licensing of the broadcasting rights under co-financing arrangement, primarily reflecting the net license fees we received from “Dream on the Side of the Sea” (夢在海這邊), for which we acted as a non-executive producer; and (iii) we recorded revenue of approximately RMB9.5 million from our agency services as we commenced acting as a distribution agent of the broadcasting rights of TV series in 2019.

Cost of Sales

Our cost of sales decreased by approximately 12.7% from approximately RMB286.4 million for the year ended December 31, 2018 to approximately RMB249.9 million for the year ended December 31, 2019. The decrease was primarily attributable to (i) a decrease of approximately RMB69.2 million in promotion and marketing expenses; and (ii) a decrease of approximately RMB37.0 million in costs of purchasing the broadcasting rights of drama series, both of which were due to the fact that we strategically focused on expanding our business of licensing the broadcasting rights of our self-produced drama series in 2019, resulting in a decrease in cost of sales of licensing the broadcasting rights of outright-purchased drama series during that year, partially offset by an increase of approximately RMB58.6 million in the cost of sales of licensing the broadcasting rights of self-produced drama series.

Gross Profit and Gross Profit Margin

Gross profit increased by approximately 41.8% from approximately RMB99.5 million for the year ended December 31, 2018 to approximately RMB141.1 million for the year ended December 31, 2019, and our gross profit margin increased from approximately 25.8% for the year ended December 31, 2018 to approximately 36.1% for the year ended December 31, 2019, primarily because (i) we successfully licensed the first-run broadcasting rights of our self-produced drama series, “A Gallant Army” (老虎隊), which had a relatively higher gross profit margin; and (ii) we improved our content selection and distribution capabilities of drama series and optimized our customer network in connection with our business of licensing the broadcasting rights of outright-purchased drama series. For details of the fluctuations of our gross profit margin of our various business segments during the Track Record Period, please refer to the paragraphs under “— Major Components of Our Results of Operations — Gross Profit and Gross Profit Margin” in this section.

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Other Income

Other income decreased by approximately 5.1% from approximately RMB4.3 million for the year ended December 31, 2018 to approximately RMB4.1 million for the year ended December 31, 2019. This decrease was mainly attributable to a decrease of approximately RMB1.6 million in interest income from loans to third parties as a result of the decrease in the fixed investment returns we received from third parties in connection with the drama series we invested in.

Selling and Marketing Expenses

Selling and marketing expenses decreased by approximately 28.9% for the year ended December 31, 2019 compared to the year ended December 31, 2018, primarily due to a decrease in staff costs as a result of a decrease in the number of our distribution department staff.

Administrative Expenses

Administrative expenses significantly increased by approximately 162.4% from approximately RMB23.1 million for the year ended December 31, 2018 to RMB60.5 million for the year ended December 31, 2019. This increase was primarily due to (i) an increase in staff costs as we recruited more administrative staff; (ii) an increase in impairment loss due to the increase in trade receivables, which was in line with the growth of our business; and (iii) incurrence of the [REDACTED] of approximately RMB13.6 million during the year.

Finance Costs

Finance costs decreased by approximately 52.9% from approximately RMB10.1 million for the year ended December 31, 2018 to approximately RMB4.8 million for the year ended December 31, 2019. This decrease was primarily due to a decrease of approximately RMB5.1 million in interest on bank and other loans as a result of the decrease in interest on borrowings from banks and other financial institutions as we paid off certain loans when they became due and borrowed less amount of loans in 2019 compared to 2018.

Profit before Taxation

As a result of the foregoing, our profit before taxation increased by approximately 13.6% from approximately RMB69.8 million for the year ended December 31, 2018 to approximately RMB79.4 million for the year ended December 31, 2019.

Income Tax

Income tax increased slightly by approximately 4.4% for the year ended December 31, 2019 compared to the year ended December 31, 2018. The increase in income tax was primarily because the proportion of taxable income generated by LiTian TV & Film, which did not enjoyed EIT exemption, for the year ended December 31, 2019 was higher than that for the years ended December 31, 2018. Our effective tax rate was approximately 3.2% and 2.9% for the years ended December 31, 2018, and 2019, respectively, which remained relatively stable.

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Profit for the Year

As a result of the foregoing, our profit for the year increased by approximately 13.9%, from approximately RMB67.6 million for the year ended December 31, 2018 to approximately RMB77.0 million for the year ended December 31, 2019. Our net profit margin increased from approximately 17.5% for the year ended December 31, 2018 to approximately 19.7% for the year ended December 31, 2019. Excluding the [REDACTED], our net profit would have been approximately RMB90.6 million for the year ended December 31, 2019.

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017

Revenue

Our revenue increased by approximately 1.9%, from approximately RMB378.7 million for the year ended December 31, 2017 to approximately RMB385.9 million for the year ended December 31, 2018. This increase was primarily due to (i) an increase of approximately RMB30.4 million in revenue generated from licensing the broadcasting rights of outright-purchased drama series as we distributed 39 such drama series in 2018 compared to 29 in 2017; and (ii) we recorded investment returns of approximately RMB3.1 million from a web series, “24 Hours” (限定 24小時), for which we acted as a non-executive producer under the co-financing arrangement, partially offset by (i) a decrease of approximately RMB19.7 million in sales of script copyrights as we did not undertake such business in 2018; and (ii) a decrease of approximately RMB6.7 million in revenue generated from licensing the broadcasting rights of our self-produced drama series as we licensed the first-run broadcasting rights of “Double Guns” (雙槍) and “The Brothers” (義海) to terrestrial TV channels in 2017 whereas they were only rebroadcast in 2018.

Cost of Sales

Cost of sales decreased by approximately 5.4% from approximately RMB302.8 million for the year ended December 31, 2017 to approximately RMB286.4 million for the year ended December 31, 2018. Such decrease was primarily attributable to (i) a decrease in our promotion and marketing expenses by approximately RMB19.5 million as a result of an increase in the number of first-run broadcast of outright-purchased drama series during prime time on satellite TV channels in 2018, which had a wider coverage of viewers compared to terrestrial TV channels, resulting in lower promotion and marketing expenses required for such drama series; and (ii) a decrease in our procurement cost for scripts by approximately RMB16.6 million because we did not undertake the business of sales of script copyrights in 2018, partially offset by (i) an increase of approximately RMB23.1 million in the costs of purchasing the broadcasting rights of drama series in line with the expansion of our business in licensing the broadcasting rights of outright-purchased drama series; and (ii) an increase of approximately RMB2.8 million in costs under co-financing arrangements.

Gross Profit and Gross Profit Margin

Gross profit increased by approximately 31.0% from approximately RMB76.0 million for the year ended December 31, 2017 to approximately RMB99.5 million for the year ended December 31, 2018 while our gross profit margin increased from approximately 20.1% for the year ended December 31, 2017 to approximately 25.8% for the year ended December 31, 2018.

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Such increase in our gross profit and gross profit margin was mainly attributable to (i) the increased gross profit margin of the business of licensing the broadcasting rights of self-produced drama series because the costs incurred in connection with “Guerrilla Heroes” (游擊英雄) that was broadcast in 2018 had been fully accounted for by the end of 2017; (ii) an increase in the revenue and gross profit of the business of licensing the broadcasting rights of outright-purchased drama series because of our improved selection and distribution capabilities in 2018 through the establishment of three of our subsidiaries dedicated to this business in 2017; and (iii) a decrease in promotion and marketing expenses in 2018 compared to 2017 as our business of licensing the broadcasting rights of outright-purchased drama series became more mature and enjoyed economies of scale, which enabled us to incur less promotion and marketing expenses.

Other Income

Other income increased by approximately 37.7% from approximately RMB3.1 million for the year ended December 31, 2017 to approximately RMB4.3 million for the year ended December 31, 2018, primarily because the fixed investment returns we recorded in 2018 from the drama series we had invested in was higher than that in 2017, which were partially offset by a decrease in government grants due to a decrease in the financial reward we received in 2018.

Selling and Marketing Expenses

Selling and marketing expenses decreased by approximately 7.6% from approximately RMB827,000 for the year ended December 31, 2017 to approximately RMB764,000 for the year ended December 31, 2018. This decrease was primarily due to the decrease in conference expenses we incurred for participating in the relevant television conferences and festivals.

Administrative Expenses

Administrative expenses recorded an increase by approximately 106.0% from approximately RMB11.2 million for the year ended December 31, 2017 to approximately RMB23.1 million for the year ended December 31, 2018. This increase was primarily due to (i) an increase of approximately RMB5.8 million in impairment loss as a result of the increase in trade receivables in line with the growth of our business, which had relatively higher expected credit loss rates; (ii) an increase in staff costs by approximately RMB2.0 million as a result of the increase in the number of our administrative staff; and (iii) an increase of approximately RMB1.4 million in entertainment expenses, primarily due to the expansion of our business.

Finance Costs

Finance costs recorded an increase by approximately 102.0% from approximately RMB5.0 million for the year ended December 31, 2017 to approximately RMB10.1 million for the year ended December 31, 2018. This increase was primarily due to an increase of approximately RMB6.6 million in interest on bank and other loans, which, in turn, was due to the increase in interest on the Fixed Return Investments as a result of the increase in the amount of third-party loans in the drama series in which we acted as the executive producer in 2018 in connection with the co-financing arrangements.

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Profit before Taxation

As a result of the foregoing, our profit before taxation increased by approximately 12.5% from approximately RMB62.1 million for the year ended December 31, 2017 to approximately RMB69.8 million for the year ended December 31, 2018.

Income Tax

Income tax decreased by approximately 57.8% from approximately RMB5.3 million for the year ended December 31, 2017 to RMB2.2 million for the year ended December 31, 2018. This decrease was primarily due to EIT exemption enjoyed by certain of our Consolidated Affiliated Entities. Our effective tax rate was approximately 8.5% for the year ended December 31, 2017, compared with approximately 3.2% for the year ended December 31, 2018. The decrease in effective tax rate was primarily due to the increase in the proportion of taxable income generated from our Consolidated Affiliated Entities, which enjoyed EIT exemption.

Profit for the Year

As a result of the foregoing, our profit for the year increased by approximately 19.1% from approximately RMB56.8 million for the year ended December 31, 2017 to approximately RMB67.6 million for the year ended December 31, 2018. Our net profit margin increased from approximately 15.0% for the year ended December 31, 2017 to approximately 17.5% for the year ended December 31, 2018. Excluding the [REDACTED], our net profit would have been approximately RMB68.2 million for the year ended December 31, 2018.

RETAINED PROFITS/(LOSSES)

Our Group recorded accumulated losses prior to the Track Record Period and retained profits as of December 31, 2017, 2018 and 2019 in our consolidated statements of changes in equity. The following table sets forth our accumulated losses/retained profits as of the dates indicated:

As of January 1, As of December 31,

2017 2017 2018 2019

RMB’000 RMB’000 RMB’000 RMB’000

Retained profits/(losses) ...... (34,098) 22,662 90,268 167,302

We had accumulated losses prior to the Track Record Period primarily due to (i) a large amount of share-based compensation issued to certain members of our then-existing management in 2015, which was subsequently settled in July 2016; and (ii) an operating loss comprising our operating expenses incurred prior to the Track Record Period as we initiated our self-produced drama series business in the second half of 2014. We had accumulated losses of approximately RMB34.1 million as of January 1, 2017 primarily as a result of the net profit we generated in 2016. As we expanded the businesses of licensing the broadcasting rights of both self-produced and outright-purchased drama series during the Track Record Period, we had a net profit of approximately RMB56.8 million, RMB67.6 million and RMB77.0 million for the years ended December 31, 2017, 2018 and 2019, respectively, which resulted in our retained profits of approximately RMB22.7 million, RMB90.3 million and RMB167.3 million as of December 31, 2017, 2018 and 2019, respectively.

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DESCRIPTION OF CERTAIN KEY ITEMS FROM OUR CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Current Assets and Current Liabilities

The table below sets forth details of our current assets and liabilities as of the dates indicated:

As of As of December 31, February 29,

2017 2018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Current Assets Drama series copyrights ...... 102,263 169,398 179,013 204,310 Trade and bills receivables ...... 194,064 376,244 530,944 564,660 Prepayments, deposits and other receivables ...... 48,524 53,182 35,688 79,869 Cash at bank and on hand ...... 23,054 14,987 89,701 36,278

367,905 613,811 835,346 885,117

Current Liabilities Trade payables ...... 93,111 178,267 294,975 322,042 Other payables and accrued expenses ...... 13,907 72,125 150,236 136,241 Bank and other loans ...... 87,997 107,000 56,661 54,591 Lease liabilities...... 982 978 650 656 Current taxation ...... 6,034 7,139 13,688 14,284

202,031 365,509 516,210 527,814

Net current assets ...... 165,874 248,302 319,136 357,303

Our net current assets increased from approximately RMB319.1 million as of December 31, 2019 to approximately RMB357.3 million as of February 29, 2020, primarily due to (i) an increase of approximately RMB44.2 million in prepayments, deposits and other receivables as a result of the increased prepayments to third-party service providers for the promotion and marketing services in relation to our outright-purchased drama series; (ii) an increase of approximately RMB33.7 million in trade and bills receivables as we licensed the broadcasting rights of an outright-purchased drama series, “Waiting for You in Beijing” (我在北京等你), to a customer; and (iii) an increase of approximately RMB25.3 million in drama series copyrights primarily because we procured the broadcasting rights of two outright-purchased drama series, namely, “Skate into Love” (冰糖炖雪梨) and “Searching for Mr. Right” (我為出嫁狂), which were partially offset by an increase in trade payables in relation to the outright-purchased drama series, “Waiting for You in Beijing” (我在北京等你), and a decrease in cash at bank and on hand.

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Our net current assets increased from approximately RMB248.3 million as of December 31, 2018 to approximately RMB319.1 million as of December 31, 2019, mainly due to (i) an increase of approximately RMB154.7 million in trade and bills receivables, primarily because we recorded significant trade receivables for the distribution of our self-produced drama series; (ii) an increase of approximately RMB74.7 million in cash at bank and on hand; and (iii) a decrease of approximately RMB50.3 million in bank and other loans as we repaid certain bank loans in 2019, partially offset by (i) an increase of approximately RMB116.7 million in trade payables as we extended the payment schedules involving certain suppliers due to late payments from certain of our customers; (ii) an increase of approximately RMB78.1 million in other payables and accrued expenses due to an increase in payables to co-investors of drama series under co-financing arrangements, which was a result of our distribution of certain drama series we produced, including “The Brothers” (義海), “A Gallant Army” (老虎隊) and “Glory of the Blood” (鐵血榮耀); and (iii) a decrease of approximately RMB17.5 million in prepayments, deposits and other receivables primarily due to a decrease in loans to third-party executive producers as we received the fixed investment return from two drama series that we invested in, namely, “Mr. Nanny” (月嫂先生) and “Unexpected Life” (不期而遇的人生).

Our net current assets increased from approximately RMB165.9 million as of December 31, 2017 to approximately RMB248.3 million as of December 31, 2018, primarily due to (i) an increase of approximately RMB182.2 million in trade and bills receivables, primarily because we recognized revenue from licensing the broadcasting rights of outright-purchased drama series, certain of which were not yet settled by the end of 2018; and (ii) an increase of approximately RMB67.1 million in drama series copyrights, primarily because “A Gallant Army” (老虎隊) had obtained the relevant TV Series Distribution License during the year, partially offset by (i) an increase of approximately RMB85.2 million in trade payables as we extended our payment schedules involving certain suppliers due to late payments from certain of our customers; and (ii) an increase of RMB58.2 million in other payables and accrued expenses, primarily due to an increase in the amount received under co-financing arrangements from other co-investors of the drama series for which we acted as the executive producer.

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Drama Series Copyrights

Our drama series copyrights mainly represent (i) the copyrights of our self-produced drama series that were under production or for which the production had been completed; (ii) the copyrights for outright-purchased drama series; (iii) co-financed drama series for which the production had been completed; and (iv) script copyrights. We had drama series copyrights of approximately RMB102.3 million, RMB169.4 million and RMB179.0 million as of December 31, 2017, 2018 and 2019, respectively. The table below sets forth the breakdown of our drama series copyrights by type of copyright as of the dates indicated:

As of December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

Self-produced drama series: – Under production...... 8,703 41,215 21,691 – With production completed ...... 73,614 92,883 74,784

82,317 134,098 96,475 Outright-purchased drama series ...... 78 5,123 24,024 Co-financed drama series: – With production completed ...... – 13,988 32,363 Script copyrights ...... 19,868 16,189 26,151

Total ...... 102,263 169,398 179,013

Drama series copyrights turnover days(1) ...... 202.8 322.4 341.3

Note:

(1) Average drama series copyrights turnover days are calculated by dividing the average of beginning and ending drama series copyrights balances by drama series copyrights recognized in cost of sales for the relevant years multiplied by 365 days for 2017, 2018 and 2019.

Our drama series copyrights increased by approximately 65.6% from approximately RMB102.3 million as of December 31, 2017 to approximately RMB169.4 million as of December 31, 2018, primarily because we completed the production of and obtained the TV Series Distribution License for “A Gallant Army” (老虎隊). Our drama series copyrights increased by approximately 5.7% from approximately RMB169.4 million as of December 31, 2018 to approximately RMB179.0 million as of December 31, 2019, primarily due to (i) an increase in the number of co-financed drama series, mainly including “The God of Blaze ” (火神) and “Dream on the Side of the Sea” (愛在海這邊), the production of which were completed; and (ii) an increase in the copyrights of outright-purchased drama series, partially offset by a decrease in the number of completed self-produced drama series in 2019, primarily because we completed the productions of, and obtained the TV Series Distribution Licenses for, “Great Days with Green Mountains and Clear Waters” (綠水青山紅日子) and “Mom with Smile” (微笑媽媽) during that year.

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The turnover days of drama series copyrights for the year ended December 31, 2018 was approximately 322.4 days, compared to approximately 202.8 days for the year ended December 31, 2017. The increase was primarily because during 2018, (i) “A Gallant Army” (老虎隊) had completed production; and (ii) “Great Days with Green Mountains and Clear Waters” (綠水青山紅日子) and “Mom with Smile” (微笑媽媽) were under production. These self-produced drama series were not broadcast on satellite TV channels in the year ended December 31, 2018, which resulted in an increase in the turnover days of drama series copyrights for that year. The turnover days of drama series copyrights were approximately 341.3 days for the year ended December 31, 2019, which remained relatively stable.

The investment amounts paid to executive producers on co-financed drama series that were under production were recognized as prepayments for drama series production. As soon as the production was completed, the amount of our investment was accounted for as drama series copyrights.

The table below sets forth the aging analysis of drama series copyrights as of the dates indicated:

As of December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

Within 1 year ...... 53,131 69,277 74,982 1 to 2 years ...... 43,451 52,424 51,523 Over 2 years ...... 5,681 47,697 52,508

Total ...... 102,263 169,398 179,013

The table below sets forth the details of the movement of drama series copyrights for the years indicated:

Year Ended December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

Balance at the beginning of the year ...... 65,169 102,263 169,398 Additions ...... 187,786 220,905 195,935 Recognized in cost of sales ...... (150,692) (153,770) (186,320)

Balance at the end of the year ...... 102,263 169,398 179,013

Drama series copyrights are tested annually based on the recoverable amount of the cash generating unit (the “CGU”) to which the drama series is related to. Each drama series copyright can generate cash inflows that are largely independent of those from other drama series copyright, their appropriate CGU is separated by each drama series. As of December 31, 2017, 2018 and 2019, we had 11, 15 and 19 drama series copyrights, respectively.

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The recoverable amount of each CGU is determined based upon value-in-use. The value-in-use was estimated using the discounted cash flow approach. The revenue forecasts of drama series copyrights equal to the price per episode multiplied by the number of episodes and further multiplied by the investment percentage. The discount rates used are pre-tax and reflect the time value of money and specific risks relating to the drama series copyrights.

The key parameters used for value-in-use calculations for the top five carrying amounts of drama series copyrights of each year in the Track Record Period are as follows:

Year Ended December 31,

2017 2018 2019(1)

The Brothers (義海) ...... Price per Episode (RMB’000) ...... 0.2~1500 0.2~1500 – Pre-tax discount rate (%) ...... 19.1 24.8 – Recoverable amount of CGU (RMB’000) ...... 33,831 37,525 – Carrying amount of CGU (RMB’000) ...... 33,405 32,158 – Headroom (RMB’000) ...... 426 5,367 –

Note:

(1) The carrying amount of drama series copyrights of “The Brothers” (義海) is fully recognized in cost of sales for the year ended December 31, 2019.

Year Ended December 31,

2017 2018 2019(1)

Glory of the Blood (鐵血榮耀) ...... Price per Episode (RMB’000) ...... 0.2~1500 0.2~1500 – Pre-tax discount rate (%) ...... 17.8 19.8 – Recoverable amount of CGU (RMB’000) ...... 23,200 26,680 – Carrying amount of CGU (RMB’000) ...... 22,887 22,887 – Headroom (RMB’000) ...... 313 3,793 –

Note:

(1) The carrying amount of drama series copyrights of “Glory of the Blood” (鐵血榮耀) was not among the top five for the year ended December 31, 2019.

Year Ended December 31,

2017 2018 2019

Double Guns (雙槍) ...... Price per Episode (RMB’000) ...... 0.2~1500 – 0.2~1500 Pre-tax discount rate (%) ...... 17.6 – 25.5 Recoverable amount of CGU (RMB’000) ...... 18,750 – 25,472 Carrying amount of CGU (RMB’000) ...... 17,322 – 17,084 Headroom (RMB’000) ...... 1,428 – 8,388

Note:

(1) The carrying amount of drama series copyrights of “Double Guns” (雙槍) was not among the top five for the year ended December 31, 2018.

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Year Ended December 31,

2017 2018 2019(1)

A Gallant Army (老虎隊) ...... Price per Episode (RMB’000) ...... 0.2~1500 0.2~1500 – Pre-tax discount rate (%) ...... 30.6 24.2 – Recoverable amount of CGU (RMB’000) ...... 12,116 30,584 – Carrying amount of CGU (RMB’000) ...... 8,702 20,677 – Headroom (RMB’000) ...... 3,414 9,907 –

Note:

(1) The carrying amount of drama series copyrights of “A Gallant Army” (老虎隊) is fully recognized in cost of sales for the year ended December 31, 2019.

Year Ended December 31,

2017 2018(1) 2019(1)

Fancy Meeting You Here (原來你也在這裡) ...... Price per Episode (RMB’000) ...... 0.2~1500 – – Pre-tax discount rate (%) ...... 36.5 – – Recoverable amount of CGU (RMB’000) ...... 6,959 – – Carrying amount of CGU (RMB’000) ...... 6,943 – – Headroom (RMB’000) ...... 16 – –

Note:

(1) The carrying amount of drama series copyrights of “Fancy Meeting You Here” (原來你也在這裡) was not among the top five for the years ended December 31, 2018 and 2019.

Year Ended December 31,

2017(1) 2018 2019

Mom with Smile (微笑媽媽) ...... Price per Episode (RMB’000) ...... – 0.2~1500 0.2~1500 Pre-tax discount rate (%) ...... – 20.2 23.6 Recoverable amount of CGU (RMB’000) ...... – 31,121 42,403 Carrying amount of CGU (RMB’000) ...... – 22,951 23,018 Headroom (RMB’000) ...... – 8,170 19,385

Note:

(1) The carrying amount of drama series copyrights of “Mom with Smile” (微笑媽媽) was not among the top five for the year ended December 31, 2017.

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Year Ended December 31,

2017(1) 2018 2019

Great Days with Green Mountains and Clear Waters (綠水青山紅日子) ...... Price per Episode (RMB’000) ...... – 0.2~1500 0.2~1500 Pre-tax discount rate (%) ...... – 20.0 21.8 Recoverable amount of CGU (RMB’000) ...... – 25,607 31,012 Carrying amount of CGU (RMB’000) ...... – 18,263 19,128 Headroom (RMB’000) ...... – 7,344 11,884

Note:

(1) The carrying amount of drama series copyrights of “Great Days with Green Mountains and Clear Waters” (綠水青山紅日子) was not among the top five for the year ended December 31, 2017.

Year Ended December 31,

2017(1) 2018 2019

Mr. Fox and Miss. Rose (酋長的男人) ...... Price per Episode (RMB’000) ...... – 0.2~1500 0.2~1500 Pre-tax discount rate (%) ...... – 39.8 27.6 Recoverable amount of CGU (RMB’000) ...... – 2,128 27,363 Carrying amount of CGU (RMB’000) ...... – 1,438 21,691 Headroom (RMB’000) ...... – 690 5,672

Note:

(1) We had not started the production of “Mr. Fox and Miss. Rose” (酋長的男人) in 2017 and thus, we did not record any drama series copyrights with respect to this web series for that year.

Year Ended December 31,

2017(1) 2018(1) 2019

Hunting Actions (獵金行動) ...... Price per Episode (RMB’000) ...... – – 0.2~1500 Pre-tax discount rate (%) ...... – – 24.5 Recoverable amount of CGU (RMB’000) ...... – – 50,024 Carrying amount of CGU (RMB’000) ...... – – 21,297 Headroom (RMB’000) ...... – – 28,727

Note:

(1) We procured the copyrights of “Hunting Actions” (獵金行動) in 2019 and began to record drama series copyrights with respect to this drama series since 2019.

The recoverable amount of the CGUs of all the drama series is estimated to exceed the carrying amount of the CGU as of December 31, 2017, 2018 and 2019 by approximately RMB9.0 million, RMB45.3 million and RMB92.1 million, respectively.

Our Directors believe that any reasonably possible change in any of these assumptions would not cause the aggregate carrying amount of the CGUs exceed its respective recoverable amount.

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The subsequent consumption of drama series copyrights from December 31, 2019 up to the Latest Practicable Date was RMB387,000.

The following tables set forth the aging analysis of drama series copyrights by type of copyrights as of the dates indicated:

As of December 31, 2017

Within 1 year 1 to 2 years Over 2 years Total

RMB’000 RMB’000 RMB’000 RMB’000

Self-produced drama series: – under production ...... 8,703 – – 8,703 – with production completed..... 24,683 43,250 5,681 73,614

33,386 43,250 5,681 82,317 Outright-purchased drama series . . . 78 – – 78 Co-financed drama series: – with production completed .... –––– Script copyrights ...... 19,667 201 – 19,868

53,131 43,451 5,681 102,263

As of December 31, 2018

Within 1 year 1 to 2 years Over 2 years Total

RMB’000 RMB’000 RMB’000 RMB’000

Self-produced drama series: – under production ...... 33,951 7,264 – 41,215 – with production completed..... 12,631 32,756 47,496 92,883

46,582 40,020 47,496 134,098

Outright-purchased drama series . . . 5,123 – – 5,123 Co-financed drama series: – with production completed..... 13,988 – – 13,988 Script copyrights ...... 3,584 12,404 201 16,189

69,277 52,424 47,697 169,398

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As of December 31, 2019 Within 1 year 1 to 2 years Over 2 years Total RMB’000 RMB’000 RMB’000 RMB’000

Self-produced drama series: – under production…………….... 20,253 1,438 – 21,691 – with production completed…. . . 932 33,949 39,903 74,784

21,185 35,387 39,903 96,475

Outright-purchased drama series… . 24,024 – – 24,024 Co-financed drama series: – with production completed….. . . 18,375 13,988 – 32,363 Script copyrights…………………. . . . 11,398 2,148 12,605 26,151

74,982 51,523 52,508 179,013

The long-aged copyrights balances for over one year as of December 31, 2019 mainly because (i) four self-produced TV series, namely “Double Guns” (雙槍), “Glory of the Blood” (鐵血榮耀), “Great Days with Green Mountains and Clear Waters” (綠水青山紅日子) and “Mom with Smile” (微笑媽媽); (ii) one web series, namely “Mr. Fox and Miss Rose” (酋長的男人); and (iii) a co-financed drama series, namely 24 Hours (限定24小時) had completed production and are expected to be distributed in 2020 and 2021.

Trade and Bills Receivables

Our trade and bills receivables primarily represent outstanding drama series license fees from our customers. During the Track Record Period, for the licensing of the broadcasting rights of our self-produced and outright-purchased drama series, the full payment cycle generally spans over a period of six months to two years. For other businesses, a credit term of 60 days is generally granted to our customers. However, the collection period of certain customers, particularly TV channels, may be significantly longer than the credit period stated in our agreements. According to the Frost & Sullivan Report, the long payment period is not uncommon in the industry where we operate. As of December 31, 2017, 2018 and 2019, we had trade and bills receivables of approximately RMB194.1 million, RMB376.2 million and RMB530.9 million, respectively. The table below sets forth the details of trade and bills receivables as of the dates indicated:

As of December 31, 2017 2018 2019 RMB’000 RMB’000 RMB’000

Trade receivables ...... 196,196 386,473 552,462 Including: Trade receivables collected on behalf of third-party co-investors...... 2,970 2,088 64,150 Less: Loss allowance ...... (3,465) (11,481) (39,713) 192,731 374,992 512,749 Bills receivables ...... 1,333 1,252 18,195 Total ...... 194,064 376,244 530,944

Trade and bills receivable turnover days(1) ...... 120.1 276.8 447.3

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Note:

(1) Average trade and bills receivable turnover days are calculated by dividing the average of beginning and ending trade and bills receivable balances by revenue for the relevant periods and multiplied by 365 days for 2017, 2018 and 2019.

Our trade and bills receivables increased by approximately 93.9% from approximately RMB194.1 million as of December 31, 2017 to approximately RMB376.2 million as of December 31, 2018, primarily due to the longer collection periods for such balances as a result of a time-consuming settlement process involving prolonged internal administrative procedures of certain of our major customers. Our trade and bills receivables increased by approximately 41.1% from approximately RMB376.2 million as of December 31, 2018 to approximately RMB530.9 million as of December 31, 2019, primarily because we recorded significant trade receivables for the distribution of our self-produced drama series in line with the growth of this business in 2019 and the increase in trade and bills receivable turnover days.

As of December 31, 2017, 2018 and 2019, we made provision for impairment of trade receivables of approximately RMB2.2 million, RMB8.0 million and RMB28.2 million, respectively. Our Group measures loss allowances for trade receivables at an amount equal to lifetime ECLs, which is measured using a provision matrix. Expected loss rates are based on actual loss experience over the past several years and adjusted to reflect differences between economic conditions during the period over which the historic data has been collected, current conditions and our view of economic conditions over the expected lives of the receivables. For further details, please see note 22(a) to the Accountants’ Report in Appendix I to this document.

The turnover days of our trade and bills receivables increased during the Track Record Period, primarily because the payment terms varied among the agreements we entered into with our customers, which were generally negotiated on a case-by-case basis. For licensing the broadcasting rights of drama series, the total consideration of each agreement is settled in installments with reference to the point in time when the drama series materials are delivered and/or the commencement of the broadcasting of the drama series. Generally, the full payment cycle spans over a period of approximately six months to two years. With the expansion of our business, we granted some new customers a relatively longer payment cycle, which led to a slow-down in our collection of trade receivables.

In addition, our revenue is recognized at the amount of promised consideration to which we expect to be entitled, excluding those amounts collected on behalf of third-party co-investors, who made investments in our self-produced drama series. However, the amounts collected on behalf of these third-party co-investors were included in trade and bills receivables. If we add back the amounts collected on behalf of co-investors, our gross revenue would be approximately RMB386.0 million, RMB387.9 million and RMB480.3 million for the years ended December 31, 2017, 2018 and 2019, respectively. If we consider removing the effect of this mismatch between revenue and trade and bills receivables, and recalculate the turnover days of trade and bills receivables, the turnover days of trade and bills receivables would be approximately 117.8 days, 275.3 days and 372.0 days for the years ended December 31, 2017, 2018 and 2019, respectively.

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The amount of trade receivables collected by our Group on behalf of the third-party co-investors was approximately RMB3.0 million, RMB2.1 million and RMB64.2 million as of December 31, 2017, 2018 and 2019, respectively.

The following table sets forth an aging analysis of our trade and bills receivables based on the date revenue is recognized, net of loss allowance, as of the dates indicated:

As of December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

Within 3 months ...... 76,604 55,588 141,613 3 to 6 months ...... 38,721 126,937 14,427 6 months to 12 months ...... 52,724 102,014 167,570 1 to 2 years...... 25,713 79,347 148,129 2 to 3 years...... 302 12,358 59,205

Total ...... 194,064 376,244 530,944

Our trade and bills receivables had long aging periods are mainly attributable to TV channels, which are state-owned with low credit and default risks. The longer collection period for such balances, to our knowledge, was principally due to factors such as relative bargaining power and a generally long settlement process as a result of their lengthy internal administrative procedures.

The tables below set forth the aging analysis of our trade and bills receivables by customer type as of the dates indicated:

As of December 31, 2017

Other Satellite TV Terrestrial TV Third-party Channels Channels Customers Total

RMB’000 RMB’000 RMB’000 RMB’000

Within 3 months ...... 66,703 4,705 5,196 76,604 3 to 6 months ...... 32,472 5,308 941 38,721 6 to 12 months ...... 50,464 2,260 – 52,724 1 to 2 years ...... 25,713 – – 25,713 2 to 3 years ...... – 302 – 302

Total...... 175,352 12,575 6,137 194,064

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As of December 31, 2018

Other Satellite TV Terrestrial TV Third-party Channels Channels Customers Total

RMB’000 RMB’000 RMB’000 RMB’000

Within 3 months ...... 49,104 2,518 3,966 55,588 3 to 6 months ...... 123,273 – 3,664 126,937 6 to 12 months ...... 98,216 201 3,597 102,014 1 to 2 years ...... 75,986 2,457 904 79,347 2 to 3 years ...... 12,358 – – 12,358

Total...... 358,937 5,176 12,131 376,244

As of December 31, 2019

Other Satellite TV Terrestrial TV Third-party Channels Channels Customers Total

RMB’000 RMB’000 RMB’000 RMB’000

Within 3 months ...... 116,752 336 24,525 141,613 3 to 6 months ...... 13,793 – 634 14,427 6 months to 12 months ...... 164,701 282 2,587 167,570 1 to 2 years ...... 147,845 161 123 148,129 2 to 3 years ...... 57,262 1,011 932 59,205

Total...... 500,353 1,790 28,801 530,944

The following table sets forth the movements in the loss allowance account in respect of trade receivables for the years indicated:

Years ended December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

At January 1 ...... 1,253 3,465 11,481 Impairment losses recognized ...... 2,212 8,016 28,232

At December 31 ...... 3,465 11,481 39,713

As of the Latest Practicable Date, the amount of subsequent settlement of the outstanding balance of trade receivables as of December 31, 2017 and 2018 was approximately RMB114.9 million and RMB160.9 million, respectively, representing approximately 58.6% and 41.6%, respectively, of the outstanding balance of trade receivables as of the same dates. As of the Latest Practicable Date, the subsequent settlement of our trade receivables as of December 31, 2019 was approximately RMB116.7 million, accounting for approximately 21.1% of our total trade receivables as of December 31, 2019.

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The increase in impairment losses of trade receivables in 2019 was primarily due to the increase in past due days of the trade receivable balances as of December 31, 2019, which resulted in higher expected loss rates in our assessment of the loss allowance. For further details, please see note 22(a) of the Accountants’ Report of our Group in Appendix I to this document.

Our Directors do not believe there is any material recoverability issues for trade receivables aged over six months as of December 31, 2019 primarily because (i) most of our customers are state-owned entities or public institutions, which normally have a good credit with us; (ii) we usually check the balance of our trade receivables on a regular basis and will issue payment reminder notices to our customers to collect the trade receivables; and (iii) there are no obstacles that have come to our attention that may adversely affect the recovery of our trade receivables. Our Directors confirmed that there had not been any default in the payments by the stated-owned TV channels during the Track Record Period and up to the Latest Practicable Date.

We recorded a relatively low subsequent settlement rate of trade and bills receivables primarily because most of our customers are TV channels, which are primarily state-owned institutions, and they usually have more bargaining power over the drama series distribution companies for a longer credit period.

Internal Control Measures on Trade Receivables

We have a set of internal policies and procedures in place to monitor our trade receivable balances and collect payments from our customers. According to our trade receivable management policy (應收賬款管理政策) under our financial control system (財務管理制度), our distribution department is primarily responsible for collecting payments from our customers. We generally designate the distribution manager who negotiated the relevant broadcasting rights transfer agreement with a customer as the first responsible party to monitor and recover payments from such customer, and our distribution director as the second responsible party to follow up on the status of payment collection (in the event the particular sales manager had left the post or had otherwise become unavailable). Once enter into the broadcasting rights transfer agreements, our distribution managers are usually tasked to closely monitor the customer accounts, maintain regularly contact with them and respond to their inquiries and requests on a timely basis in order to ensure we are able to collect outstanding payments. In addition, our finance department is responsible for managing our trade receivables and supervising their recovery. According to the applicable accounting standards, our finance department recognizes and records the trade receivables on a timely basis, keeps track of customer payments, conducts aging analysis of our trade receivables, and requests the responsible department and/or persons to take corresponding measures to reduce the impairment risk associated with past due trade receivables.

In order to improve our trade receivables and enhance our recovery efforts, we have adopted a distribution and payment collection management policy (發行與收款管理制度), pursuant to which our finance department will prepare a monthly report containing customer trade receivable recovery targets and provide such report to our distribution department for action. For the balances that are past due for more than six months, the distribution department is required to provide reasons for the past-due trade receivables and formulate an initial recovery plan. We will designate the trade receivable balance that is outstanding for more than

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Prepayments, Deposits and Other Receivables

Our prepayments, deposits and other receivables primarily consist of (i) prepayments for drama series production, which primarily represents the production fees we prepaid to third-party service providers and the amounts we prepaid to co-investors who are executive producers; (ii) loans to third parties, which represent the Fixed Return Investment we paid to the third-party executive producers; (iii) VAT recoverable, primarily comprise input tax incurred when we purchased the broadcasting rights of drama series from their copyright owners/licensors and the relevant promotion and marketing services from third-party service providers, which had not yet issued invoices; (iv) prepayments for costs incurred in connection with the proposed [REDACTED], the balance of which will be charged to profit or loss or transferred to the share premium account within equity upon the [REDACTED]; and (v) others, which consist of prepaid script copyrights transfer fees and interest receivables relating to the investment returns from the drama series we invested in.

The following table sets forth the components of our prepayments, deposits and other receivables as of the dates indicated:

As of December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

Prepayments for production of drama series .... 28,032 16,459 13,654 Loans to third parties(1) ...... 15,000 20,000 – VAT recoverable ...... 4,212 12,866 17,523 Prepayments for costs incurred in connection with the proposed [REDACTED] ...... – 150 4,076 Others ...... 1,283 3,709 492

48,527 53,184 35,745 Less: Loss allowance ...... (3) (2) (57)

Total ...... 48,524 53,182 35,688

Note:

(1) The balance of loans to third parties bore interest at rates ranging from 10.0% to 20.0% per annum. These loans to third parties were “Fixed Return Investments” we made to third-party co-investors of drama series, which were, in substance, lending and borrowing arrangements between the investors and investees and accordingly, they were accounted for as financial assets (i.e. loans provided to third parties) or, in the case where third-party co-investors make “Fixed Return Investments” in us, as financial liabilities (i.e. other loans from third parties), as the case may be under IFRS 9 “Financial Instruments” (“IFRS 9”). Please see “— Major Components of Our Results of Operations — Other Income” in this section for further details.

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Our prepayments, deposits and other receivables increased by approximately 9.6% from approximately RMB48.5 million as of December 31, 2017 to RMB53.2 million as of December 31, 2018, primarily due to (i) an increase of RMB8.7 million in VAT recoverable as a result of an increase in input tax in connection with our procurement of the broadcasting rights of drama series and the relevant promotion and marketing services from third-party service providers, which have not issued invoices to us; and (ii) an increase of RMB5.0 million in loans to third parties due to our Fixed Return Investment in a drama series named “Unexpected Life” (不期而遇的人生), partially offset by a decrease of RMB11.6 million in prepayment for drama series production, primarily because our investment in “24 Hours” (24小時) was accounted for as drama series copyrights as it completed filming.

Our prepayments, deposits and other receivables decreased by approximately 32.9% from approximately RMB53.2 million as of December 31, 2018 to approximately RMB35.7 million as of December 31, 2019, primarily due to (i) a decrease of approximately RMB20.0 million in loans to third parties, primarily reflecting the principals we received in connection with our Fixed Return Investment in “Mr. Nanny” (月嫂先生) and “Unexpected Life” (不期而遇的人生); and (ii) a decrease of approximately RMB2.8 million in prepayments for production of drama series as our investment in “The God of Blaze” (火神) was accounted for as drama series copyrights after obtaining the relevant TV Series Distribution License, partially offset by an increase of approximately RMB4.7 million in VAT recoverable as a result of an increase in input tax in connection with our procurement of the broadcasting rights of the drama series and the relevant promotion and marketing services from third-party service providers, which have not issued invoices to us.

Cash at Bank and on Hand

Our cash at bank and on hand consist of deposits we had in bank accounts and cash on hand. As of December 31, 2017, 2018 and 2019, our cash at bank and on hand amounted to approximately RMB23.1 million, RMB15.0 million and RMB89.7 million, respectively. The following table sets forth the breakdown of our cash at bank and cash on hand of the dates indicated:

As of December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

Cash at bank ...... 22,655 14,956 89,677 Cash on hand...... 399 31 24

Total ...... 23,054 14,987 89,701

For the years ended December 31, 2017, 2018 and 2019, our cash conversion cycle was approximately 153.2 days, 276.9 days and 356.1 days, respectively.

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Trade Payables

Our trade payables primarily relate to (i) payables for the production and acquisition of drama series; and (ii) payables for acquisition of script copyrights. We had trade payables of approximately RMB93.1 million, RMB178.3 million and RMB295.0 million as of December 31, 2017, 2018 and 2019, respectively. The table below sets forth the details of trade payables as of the dates indicated:

As of December 31, 2017 2018 2019 RMB’000 RMB’000 RMB’000

Payables for production and acquisition of drama series ...... 93,111 178,267 294,975 Total ...... 93,111 178,267 294,975

Trade payable turnover days(1)...... 67.8 173.0 345.7

Note:

(1) Average trade payable turnover days are calculated by dividing the average of beginning and ending trade payable balances by cost of sales for the relevant period and multiplied by 365 days for 2017, 2018 and 2019.

Our trade payables increased by approximately 91.5% from approximately RMB93.1 million as of December 31, 2017 to approximately RMB178.3 million as of December 31, 2018, primarily due to an increase in payables for the production and acquisition of drama series, reflecting the increase in trade payables for outright-purchased drama series, which was in line with the growth of this business. Our trade payables increased from approximately RMB178.3 million as of December 31, 2018 to approximately RMB295.0 million as of December 31, 2019, mainly due to an increase in payables for the production and acquisition of drama series, as a result of an increase in trade payables for outright-purchased drama series as certain of major suppliers granted longer credit terms to us.

The turnover days of our trade payables increased during the Track Record Period primarily due to the slow-down in our collection of trade and bills receivables, which had prolonged the settlement period of our trade payables.

Time lags often exist between receiving payments from our customers and making payments to our suppliers. If our customers delay their payments, which could affect our timely settlement with the relevant suppliers, we will communicate with such suppliers in advance and postpone our payments under mutual consent. During the Track Record Period and up to the Latest Practicable Date, our Directors confirmed that we had not been involved in or subject to any dispute with our suppliers due to any delayed payment.

Trade payables include (i) the amount of consideration payable upon acquisition of drama series and/or costs/expenses incurred during the production; and (ii) the amount payable to suppliers on behalf of co-investors of drama series under co-financing arrangements. However, the amount payable to suppliers on behalf of co-investors of drama series under co-financing arrangements is not included in cost of sales. If we consider to remove the effect of this mismatch between cost of sales and trade payables, and recalculate the turnover days of trade payables, the turnover days of trade payables will be approximately 66.8 days, 172.1 days and 292.3 days for the years ended December 31, 2017, 2018 and 2019, respectively.

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The following table sets forth the aging analysis of our trade payables as of the dates indicated:

As of December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

Within 3 months ...... 80,590 114,426 134,820 3 to 6 months ...... – 43,536 2,260 6 months to 12 months ...... 12,521 4,243 45,010 1 to 2 years...... – 16,062 103,925 More than 2 years...... – – 8,960

Total ...... 93,111 178,267 294,975

As of the Latest Practicable Date, the subsequent settlement of our trade payables as of December 31, 2019 was approximately RMB66.0 million, accounting for approximately 22.4% of our total trade payables as of December 31, 2019.

Other Payables and Accrued Expenses

Our other payables and accrued expenses primarily consist of (i) amount due to co-investors, which represents investment return payables to other co-investors of the drama series for which we acted as the executive producer; (ii) interest payables; (iii) payables for staff-related costs; (iv) payables for other taxes; (v) payables for costs incurred in connection with the proposed [REDACTED]; and (vi) receipts in advance , which represent amounts relating to the advances received from the customers of our business of licensing the broadcasting rights of outright-purchased drama series. We recorded other payables and accrued expenses of approximately RMB13.9 million, RMB72.1 million and RMB150.2 million as of December 31, 2017, 2018 and 2019, respectively. The table below sets forth the details of other payables and accrued expenses as of the dates indicated:

As of December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

Payables to co-investors of drama series under co-financing arrangements ...... 7,829 47,926 122,558 Interest payables ...... 3,685 7,451 5,394 Payables for staff related costs ...... 760 1,597 2,473 Payables for other taxes ...... 1,400 13,103 19,566 Payables for costs incurred in connection with the proposed [REDACTED] ...... – 448 245

Financial liabilities measured at amortized cost . . 13,674 70,525 150,236 Receipts in advance ...... 233 1,600 –

Total ...... 13,907 72,125 150,236

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Our other payables and accrued expenses increased by approximately 418.6% from approximately RMB13.9 million as of December 31, 2017 to approximately RMB72.1 million as of December 31, 2018, primarily due to (i) an increase of approximately RMB40.1 million in payables to co-producers of drama series under co-financing arrangements , mainly due to the increased proportional investment contributions from the co-investors of certain drama series we produced; and (ii) an increase of approximately RMB11.7 million in other taxes payables, primarily due to an increase in the number of drama series we distributed in 2018.

Our other payables and accrued expenses increased by approximately 114.2% from approximately RMB72.1 million as of December 31, 2018 to approximately RMB150.2 million as of December 31, 2019. The increase was primarily due to an increase of approximately RMB74.6 million in payables to co-investors of drama series under the co-financing arrangements, as a result of our distribution of certain drama series we produced, including “The Brothers” (義海), “A Gallant Army” (老虎隊) and “Glory of the Blood” (鐵血榮耀).

Current Taxation

Our current taxation increased from approximately RMB6.0 million as of December 31, 2017 to approximately RMB7.1 million as of December 31, 2018, and further increased to approximately RMB13.7 million as of December 31, 2019, primarily reflecting increases in our income tax expenses as a result of the increases in our taxable income for the relevant years and our underpayment of income tax for the tax assessment years of 2017 and 2018 amounted to approximately RMB3.0 million and RMB4.1 million as of December 31, 2018 and 2019, respectively.

The table below sets forth the movement of current taxation in the consolidated statement of financial position for the years indicated:

Year Ended December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000 Net balance of income tax payable as of January 1, ...... 6,574 6,034 7,139 Provision for the year...... 5,989 4,157 9,590 Income tax paid ...... (6,529) (3,052) (3,041)

Net balance of income tax payable as of December 31,...... 6,034 7,139 13,688

Our historical income tax was accrued in accordance with the relevant income tax regulations. Income generated from the licensing of the broadcasting rights of drama series is taxable and the relevant expenses are deductible when the revenue and cost of sales are recognized in accordance with the applicable accounting standards. The difference of approximately RMB4.1 million between our tax payable in 2018 and its subsequent settlement was mainly because in 2017, the broadcasting rights of a drama series purchased by Horgos Tiantian Meimei was paid by LiTian TV & Film on behalf of Horgos Tiantian Meimei. LiTian TV & Film was subject to an EIT rate of 25.0%, while Horgos Tiantian Meimei was exempted from EIT during the year. We inadvertently deducted the amount as costs in 2017 annual tax filing of LiTian TV & Film, resulting in the underpayment of income tax of approximately RMB3.3 million for the tax assessment year of 2018.

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We recognized revenue, cost of sales and income tax of licensing the broadcasting rights of one of our outright-purchased drama series, “Flesh and Spirit” (靈與肉), which was released on November 13, 2018, during the year ended December 31, 2018. However, the profits generated from this drama series were not reported in our annual tax filing in 2018 as the original signed agreement with our customer was not passed to us until 2019 after closing the 2018 financial year, which resulted in the underpayment of approximately RMB2.2 million in income tax for the tax assessment year of 2018.

On the other hand, we reported revenue and cost of sales of “The Brothers” (義海), one of our self-produced drama series, which was released on February 25, 2019, in the annual tax filing of 2018 as we delivered the drama series materials to our customer in December 2018. The profits generated from the licensing of the broadcasting rights of this drama series were recognized and assessable for income tax in 2019 when the agreement was concluded and became effective in early 2019. This resulted in an advanced payment of income tax in the amount of approximately RMB0.3 million for the tax assessment year of 2018.

In addition, the deduction of accrued interest expenses on the Fixed Return Investments was omitted in our 2018 annual tax filing as the invoice of interest payment was not issued to us until its payment in 2019, which resulted in an advanced tax payment of approximately RMB0.7 million for the tax assessment year of 2018.

The difference between the tax payment of approximately RMB3.0 million for the year ended December 31, 2019 and tax payables of approximately RMB7.1 million as of January 1, 2019 was identified by us after conducting the income tax calculation and review in May 2019 for the annual tax assessment for 2018. Under normal circumstances, such difference will be settled in the next annual tax assessment. We will settle the underpayment of tax when conducting the income tax calculation and review for the annual tax assessment for 2019 in May 2020.

We undertake that we will make retrospective adjustments on the additional tax payables and settle the underpayment of tax when we conduct the income tax calculation and review for the tax assessment of 2019 in May 2020. We have adopted a series of internal control measures to avoid reoccurrence of similar incident. Specifically, we require our financial personnel to conduct self-inspections of our accounts and tax payments on a regular basis to ensure that our tax payment is in accordance with the latest accounting policies and tax regulations. For any discrepancies identified, we will make adjustments and corrections in a timely manner.

WORKING CAPITAL

Our future working capital requirements will depend on a number of factors, including, but not limited to, our operating income, the cost of purchasing drama series and TV script copyrights from third parties, the cost of hiring additional personnel and staff. We intend to continue to finance our working capital with cash generated from our operations, bank loans and other borrowings, the [REDACTED]fromthe[REDACTED] and other funds raised from the capital markets from time to time.

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Taking into account the financial resources available to our Group, including our cash balance, cash flow from operating activities, bank loans and other borrowings and the estimated [REDACTED]fromthe[REDACTED], our Directors are of the view that, after due and careful inquiry, our Group has sufficient available working capital for our present requirements for at least the next 12 months from the date of this document.

Other than those disclosed under the section headed “— Key Factors Affecting Our Results of Operations” in this document, our Directors are not aware of any other factors that would have a material impact on our liquidity. See “— Future Plans and [REDACTED]” in this document for details of the funds necessary to meet our existing operations and to fund our future plans.

LIQUIDITY AND CAPITAL RESOURCES

We operated in a capital-intensive industry and our primary uses of cash are to fund our working capital requirements, the cost of licensing the broadcasting rights of drama series and script copyrights, and to repay bank loans and related interest expenses. During the Track Record Period, we have funded our operations principally with cash generated from our operations and bank loans. In the future, we believe that our liquidity requirements will be satisfied with a combination of cash flows generated from our operating activities, bank loans and other borrowings, [REDACTED]fromthe[REDACTED] and other funds raised from the capital markets from time to time.

Cash Flows Analysis

The table below sets forth our cash flows for the years indicated:

Year ended December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

Net cash from operating activities before movements in working capital………………... . . 67,922 79,134 85,260 Changes in working capital…… ...... (143,847) (104,501) 25,992 Income tax paid…………… ...... (6,529) (3,052) (3,041) Net cash (used in)/generated from operating activities ...... (82,454) (28,419) 108,211 Net cash (used in)/generated from investing activities ...... (16,010) (6,309) 23,778 Net cash generated from/(used in) financing activities ...... 108,905 26,721 (65,236) Net increase/(decrease) in cash and cash equivalents ...... 10,441 (8,007) 66,753 Cash and cash equivalents at beginning of year . . 12,553 22,994 14,987 Cash and cash equivalents at end of year ...... 22,994 14,987 81,740

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Net Cash Generated from/(Used in) Operating Activities

Cash flows from operating activities reflects (i) profit before taxation adjusted for non-cash and non-operating items, such as depreciation expenses of items of property, plant and equipment, finance costs and interest income; (ii) movements in working capital, such as increase/decrease in drama series copyrights, increase in trade and bills receivables, increase/decrease in prepayments, deposits and other receivables, increase/decrease in restricted deposits, increase in trade payables and increase/decrease in other payables and accrued expenses; and (iii) other cash items consisting of income tax paid.

For the year ended December 31, 2019, our net cash generated from operating activities was approximately RMB108.2 million, primarily reflecting (i) profit before taxation of approximately RMB79.4 million; (ii) positive total adjustments before movements in working capital of approximately RMB5.9 million, mainly as a result of approximately RMB4.8 million positive adjustment for finance costs; and (iii) positive movements of approximately RMB26.0 million in working capital, primarily due to (i) an increase of approximately RMB116.7 million in trade payables as a result of the expansion of our business; and (ii) an increase of approximately RMB83.2 million in other payables and accrued expenses as a result of the increase in proportional investment contributions from the co-investors of certain drama series under the co-financing arrangements, partially offset by (i) an increase of approximately RMB154.7 million in trade and bills receivables due to the growth of our business; and (ii) an increase of approximately RMB9.6 million in drama series copyrights due to an increase in the number of co-financed drama series, mainly including “The God of Blaze ” (火神) and “Dream on the Side of the Sea” (愛在海這邊), the production of which were completed and an increase in the copyrights of outright-purchased drama series.

For the year ended December 31, 2018, our net cash used in operating activities was approximately RMB28.4 million, which was primarily attributable to (i) our profit before taxation of approximately RMB69.8 million; (ii) positive total adjustments before movements in working capital of approximately RMB9.3 million mainly as a result of approximately RMB10.1 million positive adjustment for finance costs and approximately RMB1.7 million for depreciation expenses, partially offset by a decrease in interest income of approximately RMB2.5 million; and (iii) negative movements of approximately RMB104.5 million in working capital, primarily reflecting an increase of approximately RMB182.2 million in trade and bills receivables, primarily due to the expansion of our business, an increase of approximately RMB67.1 million in drama series copyrights primarily because “Great Days with Green Mountains and Clear Waters” (綠水青山紅日子) and “Mom with Smile” (微笑媽媽) had commenced filming, which resulted in an increase in our drama series copyrights, partially offset by (i) an increase of approximately RMB85.2 million in trade payables mainly because we experienced growth in our business; and (ii) an increase of approximately RMB57.2 million in other payables and accrued expenses as a result of the increase in proportional investment contributions we received from the co-investors of certain drama series under the co-financing arrangements.

For the year ended December 31, 2017, our net cash used in operating activities were approximately RMB82.5 million, which was primarily attributable to (i) our profit before taxation of approximately RMB62.1 million; (ii) positive total adjustments before movements in working capital of approximately RMB5.9 million primarily as a result of approximately RMB5.0 million positive adjustment for finance costs and RMB1.4 million positive adjustment

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Net Cash (Used in)/Generated from Investing Activities

During the Track Record Period, our investing activities primarily consisted of (i) purchase of property, plant and equipment; (ii) loans to third parties; (iii) settlements received from loans to third parties; and (iv) interest received.

For the six months ended December 31, 2019, our net cash generated from investing activities was approximately RMB23.8 million. It was primarily attributable to settlements received from loans to third parties, which represented the fixed investment returns we received from the drama series in which we acted as a non-executive producer.

For the year ended December 31, 2018, our net cash used in investing activities was approximately RMB6.3 million. It was mainly attributable to (i) loans to third parties, which represented the investments we made in the drama series in which we acted as a non-executive producer; and (ii) the purchase of office furniture and office space renovation expenses.

For the year ended December 31, 2017, our net cash used in investing activities was approximately RMB16.0 million. It was mainly attributable to (i) loans to third parties, which represented the investments we made in the drama series in which we acted as a non-executive producer; and (ii) the purchase of office furniture and office space renovation expenses.

Net Cash Generated from/(Used in) Financing Activities

During the Track Record Period, our financing activities primarily related to (i) capital contributions; (ii) proceeds from bank and other loans; (iii) repayment of bank and other loans; (iv) interest paid; (v) capital element of lease rentals paid; and (vi) interest element of lease rentals paid.

For the year ended December 31, 2019, our net cash used in financing activities was approximately RMB65.2 million, which was primarily attributable to (i) approximately RMB152.2 million of repayment of bank and other loans; and (ii) approximately RMB9.8 million of interest paid, partially offset by approximately RMB101.9 million of proceeds from bank and other loans.

For the year ended December 31, 2018, our net cash generated from financing activities was approximately RMB26.7 million, which was primarily attributable to (i) approximately RMB99.0 million of proceeds from bank and other loans we borrowed; and (ii) approximately RMB18.0 million of proceeds from capital contributions from Kerui Chuangye, partially offset by approximately RMB80.0 million of repayment of bank and other loans and approximately RMB9.1 million of interest paid.

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For the year ended December 31, 2017, our net cash generated from financing activities was approximately RMB108.9 million, which was primarily attributable to (i) approximately RMB59.0 million of proceeds from capital contributions from an Independent Third Party and Junfeng Investment; and (ii) approximately RMB93.4 million of proceeds from bank and other loans we borrowed, partially offset by approximately RMB37.8 million of repayment of bank and other loans and approximately RMB4.7 million of interest paid.

CAPITAL EXPENDITURES

For the years ended December 31, 2017, 2018 and 2019, our capital expenditure was approximately RMB1.1 million, RMB1.4 million and RMB0.3 million, respectively. Our capital expenditure during the Track Record Period primarily related to our improvements to leased properties and purchase of office furniture and other equipment. We expect that our capital expenditure for 2020 and 2021 to continue to be relatively insignificant, and plan to finance such expenditure through cash flow from operating activities.

INDEBTEDNESS

Bank and Other Loans

Our Group primarily obtains borrowings from banks, financial institutions and other third parties to finance our business operations and to fulfil working capital requirements. Our outstanding bank loans and other borrowings as of December 31, 2017, 2018 and 2019 and February 29, 2020, being the latest practicable date for determining our indebtedness, were as follows:

As of As of December 31, February 29, 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Bank loans: – Guaranteed by a subsidiary of our Group...... 8,740 – – – – Guaranteed by a subsidiary of our Group and related parties ..... 15,000 20,000 – – – Secured by our Group’s trade and bills receivables and restricted deposits ...... 57 – 27,793 25,723 23,797 20,000 27,793 25,723 Other loans from third parties: – Secured by our Group’s trade and bills receivables ...... 30,000 30,000 – – – Unsecured and unguaranteed (1) . . 34,200 57,000 28,868 28,868 64,200 87,000 28,868 28,868

Total ...... 87,997 107,000 56,661 54,591

Note:

(1) The balance of these loans represent the Fixed Return Investment from the third-party co-producers of the drama series. These loans bore interest at rates ranging from 9.0% to 25.0% per annum.

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As of December 31, 2017, 2018 and 2019, we had a total of approximately RMB23.8 million, RMB20.0 million and RMB27.8 million of short-term interest-bearing bank loans, respectively. As of December 31, 2017, the loan of approximately RMB8.7 million was guaranteed by Horgos Tiantian Meimei and the loan of RMB15.0 million was guaranteed by LiTian Media, Mr. Yuan Li and Ms. Tian Tian. As of December 31, 2018, the loan of approximately RMB20.0 million was guaranteed by LiTian Media, Mr. Yuan Li and Ms. Tian Tian. As of December 31, 2019, the loan of approximately RMB27.8 million was secured by approximately RMB51.2 million of deposits and trade and bills receivables.

As of December 31, 2017, 2018 and 2019, we had a total of approximately RMB64.2 million, RMB87.0 million and RMB28.9 million of our other loans, respectively. Other loans during the Track Record Period mainly consisted of (i) loan amounts from third-party financial institutions secured by our Group’s trade and bills receivables; (ii) unsecured and unguaranteed loan amounts from related parties; and (iii) unsecured and unguaranteed loan amounts received from certain third-party co-producers under our co-financing arrangements. As of December 31, 2017, 2018 and 2019, the amount of deposits and bills receivables pledged was approximately RMB60,000, nil and RMB14.2 million, respectively.

Our bank and other loans bore effective interest rate ranging from 10.0% to 25.0% per annum as of December 31, 2017, ranging from 11.5% to 25.0% per annum as of December 31, 2018, and ranging from 4.05% to 15.0% per annum as of December 31, 2019. Our loans from third parties bore effective interest rate of 11.0% per annum as of December 31, 2017, 11.5% per annum as of December 31, 2018, and nil as of December 31, 2019. Unsecured loan amounts received from certain co-investors under the co-financing arrangements for effective interest rate ranging from 9.0% to 25.0% per annum during the Track Record Period.

Our Directors confirm that, as of the Latest Practicable Date, there was no material covenant on any of our outstanding debt and there was no breach of any covenants during the Track Record Period and up to the Latest Practicable Date. Our Directors further confirm that we did not experience any unusual difficulty in obtaining bank loans and other borrowings, default in payment of bank loans and other borrowings or breach of covenants during the Track Record Period and up to the Latest Practicable Date.

As of the Latest Practicable Date, we did not have any unutilized banking facilities.

Lease Liabilities

We entered into office lease agreements during the Track Record Period. As of December 31 2017, 2018 and 2019, our lease liabilities were approximately RMB2.4 million, RMB1.4 million and RMB0.8 million, respectively. As of February 29, 2020, being the latest practicable date for determining our indebtedness, we had lease liabilities of approximately RMB0.8 million.

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Statement of Indebtedness

Except as disclosed above, during the Track Record Period and up to the close of business on February 29, 2020, being the latest practicable date for the purpose of the indebtedness statement, we did not have any material mortgages, charges, debentures, loan capital, debt securities, loans, bank overdrafts or other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptances (other than normal trade bills), acceptance credits, which are either guaranteed, unguaranteed, secured or unsecured, or guarantees. Our Directors confirm that there has not been any material change in our indebtedness since February 29, 2020.

CONTINGENT LIABILITIES

During the Track Record Period, we did not have any significant contingent liabilities. As of the Latest Practicable Date, we did not have any unrecorded significant contingent liabilities, guarantees or any material litigation against us.

OFF-BALANCE SHEET ARRANGEMENTS

As of the Latest Practicable Date, we had not entered into any off-balance sheet transactions.

MATERIAL RELATED PARTY TRANSACTIONS

Transactions with Related Parties

During the Track Record Period, we had conducted transactions with certain of our related parties. The table below sets forth information relating to the nature and amount of the transactions with our related parties for the years indicated:

Year Ended December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

Loans received from Mr. Yuan Li ...... 255 – 4,000 Loans repaid to Mr. Yuan Li ...... 655 – 4,000 Loans received from Ms. Fu Jieyun...... 2,100 1,000 13,230 Loans repaid to Ms. Fu Jieyun ...... 2,200 1,000 13,230 Loans received from Ms. Tian Tian ...... – – 5,000 Loans repaid to Ms. Tian Tian...... – – 5,000 Interest expenses on loans from Mr .Yuan Li..... 21 – 219 Interest expenses on loans from Ms. Fu Jieyun . . . 13 1 384 Interest expenses on loans from Ms. Tian Tian . . . – – 268 Guarantees provided by related parties on our Group’s bank loans as of the end of the year . . . 15,000 20,000 –

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For the years ended December 31, 2017, 2018 and 2019, we obtained loans from certain of our key management personnel and their close family members in the amount of approximately RMB2.4 million, RMB1.0 million and RMB22.2 million, respectively, to supplement our working capital. These loans bore an average interest rate of 9.0% per annum for each of the years ended December 31, 2017, 2018 and 2019. We repaid the loans of RMB2.9 million, RMB1.0 million and RMB22.2 million, respectively, to our related parties for the years ended December 31, 2017, 2018 and 2019.

Balances with Related Parties

The table below sets forth our outstanding balances with our related parties as of the dates indicated:

As of December 31,

2017 2018 2019

RMB’000 RMB’000 RMB’000

Interest payable to: –Mr.YuanLi...... 868 868 1,087 – Ms. Fu Jieyun ...... 31 32 416 –Ms.TianTian...... – – 268

Total...... 899 900 1,771

The outstanding balances with related parties were non-trade in nature and were unsecured and had a fixed repayment term of one year.

Our Directors are of the view that the transactions described above were conducted in the ordinary course of our business on terms comparable to those offered by the Independent Third Parties and did not distort our results of operations or make our historical results not reflective of our future performance. All amounts due to the related parties had been fully settled as of the Latest Practicable Date.

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KEY FINANCIAL RATIOS

The following table sets forth certain of our key financial ratios as of the dates and for the years indicated:

Year ended/as of December 31

2017 2018 2019

Profitability ratios Gross profit margin(1) ...... 20.1% 25.8% 36.1% Net profit margin(2) ...... 15.0% 17.5% 19.7% Return on assets(3) ...... 22.0% 13.6% 10.5% Return on equity(4) ...... 50.4% 31.7% 26.1%

Liquidity ratio Current ratio(5) ...... 1.8 1.7 1.6

Capital adequacy ratios Gearing ratio(6) ...... 51.6% 41.8% 17.0% Net debt to equity ratio(7) ...... 38.1% 35.9% N/A Interest coverage ratio(8) ...... 13.4 7.9 17.6

Notes:

(1) Gross profit margin equals our gross profit divided by revenue for the year.

(2) Net profit margin equals our net profit after tax divided by revenue for the year.

(3) Return on assets equals net profit for the year divided by the average of beginning and ending balances of total assets of the relevant year.

(4) Return on equity equals net profit for the year divided by the average of beginning and ending balances of total equity of the relevant year.

(5) Current ratio equals our current assets divided by current liabilities as of the end of the year.

(6) Gearing ratio equals total debt as of the end of the year divided by total equity as of the end of the year. Total debt includes all interest-bearing bank loans and other borrowings.

(7) Net debt to equity ratio equals total interest-bearing bank loans and other borrowings net of cash and cash equivalents at the end of the year divided by total equity at the end of the year.

(8) Interest coverage ratio equals profit before interest and tax for the year divided by finance costs for the respective year.

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Analysis of Key Financial Ratios

Return on Assets

Our return on assets decreased from approximately 22.0% for the year ended December 31, 2017 to approximately 13.6% for the year ended December 31, 2018, primarily due to our net profit increasing at a slower pace than our total assets as a result of increased administrative expenses and finance costs. Our return on assets decreased from approximately 13.6% for the year ended December 31, 2018 to approximately 10.5% for the year ended December 31, 2019, primarily due to our net profit increasing at a slower pace than our total assets as a result of increased administrative expenses.

Return on Equity

Our return on equity was approximately 50.4%, 31.7% and 26.1% for the years ended December 31, 2017, 2018 and 2019, respectively. Our return on equity decreased during the Track Record Period, primarily due to our total equity increasing at a faster pace than our net profit as a result of additional paid-in capital from our shareholders, which contributed to increased total equity.

Current Ratio

Our current ratio decreased from approximately 1.8 as of December 31, 2017 to approximately 1.7 as of December 31, 2018, and further decreased to approximately 1.6 as of December 31, 2019, primarily due to our current liabilities increasing at a faster pace than our current assets as a result of the increase in our trade payables and other payables and accrued expenses.

Gearing Ratio

Net Debt to Equity Ratio

Our net debt to equity ratio decreased from approximately 38.1% as of December 31, 2017 to approximately 35.9% as of December 31, 2018, primarily due to a substantial increase in our total equity while our bank and other loans remained relatively stable. We had more cash at bank and on hand than interest-bearing bank and other loans as of December 31, 2019.

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Interest Coverage Ratio

Our interest coverage ratio decreased from approximately 13.4 for the year ended December 31, 2017 to approximately 7.9 for the year ended December 31, 2018, primarily due to (i) an increase in the interest on bank and other loans; and (ii) an increase in the interest on Fixed Return Investments as a result of the increases in the amount of the third-party loans in the drama series in which we acted as the executive producer in connection with the co-financing arrangements. Our interest coverage ratio increased to approximately 17.6 for the year ended December 31, 2019, primarily due to a decrease in bank and other loans as we made loan repayments in 2019.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to a variety of financial risks, including credit risk, liquidity risk and interest rate risk in the normal course of our Group’s business. Our Group’s exposure to these risks and financial risk management policies and practices used by our Group to manage these risks are described below. For further details of these risks, please see note 22 to the Accountants’ Report in Appendix I in this document.

Credit Risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the group. Our Group’s credit risk is primarily attributable to trade receivables. Our Group’s exposure to credit risk arising from cash at bank and bills receivables is limited because the counterparties are banks and financial institutions with good credit standing, for which we consider to have low credit risk. Our Group does not provide any other guarantees, which would expose it to credit risk.

Our exposure to credit risk is influenced mainly by the individual characteristics of each customer rather than the industry or country in which the customers operate and therefore significant concentrations of credit risk primarily arise when we have significant exposure to individual customers. As of December 31, 2017, 2018 and 2019, approximately 75%, 78% and 64% of the total trade receivables was due from our five largest trade debtors, respectively. As of the same dates, approximately 22%, 32%, and 20% of the total trade receivables was due from our Group’s largest trade debtor, respectively.

Individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customer’s past history of making payments when due and current ability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. Payment terms varies under our Group’s contracts with each customer, and are negotiated on an individual contract basis. For the licensing of the broadcasting rights of drama series, the total consideration of each contract is settled by installments with reference to the point in time when the drama series materials are delivered and/or the commencement of the broadcasting of the drama series. Generally, the full payment cycle will span over a period of six months to two years. For our other sources of revenue, a credit term of 60 days is generally granted to customers. Normally, our Group does not obtain collateral from customers.

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We measure loss allowances for trade receivables at an amount equal to lifetime ECLs, which are calculated using a provision matrix. As our historical credit loss experience does not indicate significantly different loss patterns for different customer segments, the loss allowance based on past due status is not further distinguished between our different customer bases.

Expected loss rates are based on actual loss experience over the past few year. These rates are adjusted to reflect differences between economic conditions during the period over which the historic data has been collected, current conditions and our Group’s view of economic conditions over the expected lives of the receivables.

Liquidity Risk

Our Group’s policy is to regularly monitor our liquidity requirements and our compliance with lending covenants to ensure that we maintain sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet our liquidity requirements in the short and longer term.

The following tables set forth the remaining contractual maturities at the end of the reporting period of our Group’s non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the end of the reporting period) and the earliest dates our Group can be required to pay:

As of December 31, 2017

Contractual undiscounted cash outflow

Over Within Over 1 2 Years 1 Year or Year but but on Within 2 Within Carrying Demand Years 5 Years Total Amount

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables ...... 93,111 – – 93,111 93,111 Other payables and accrued expenses measured at amortized cost ...... 13,674 – – 13,674 13,674 Bank and other loans ...... 98,897 – – 98,897 87,997 Lease liabilities...... 1,081 1,032 449 2,562 2,397

206,763 1,032 449 208,244 197,179

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As of December 31, 2018

Contractual undiscounted cash outflow

Over Within Over 2 Years 1 Year or 1 Year but but on Within Within Carrying Demand 2 Years 5 Years Total Amount

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables ...... 178,267 – – 178,267 178,267 Other payables and accrued expenses measured at amortized cost ...... 70,525 – – 70,525 70,525 Bank and other loans ...... 118,377 – – 118,377 107,000 Lease liabilities ...... 1,032 449 – 1,481 1,415

368,201 449 – 368,650 357,207

As of December 31, 2019

Contractual undiscounted cash outflow

Within Over Over 2 1 Year or 1 Year but Years but on Within Within 5 Carrying Demand 2 Years Years Total Amount

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables ...... 294,975 – – 294,975 294,975 Other payables and accrued expenses measured at amortized cost ...... 150,236 – – 150,236 150,236 Bank and other loans ...... 65,154 – – 65,154 56,661 Lease liabilities ...... 681 117 – 798 765

511,046 117 – 511,163 502,637

We intend to use the receivables we collect from our customers, proceeds from bank loans and cash generated from our operations to settle the liabilities as of December 31, 2019, which fall due within a year or on demand, and our Directors are of the view that these funds would be sufficient to settle such liabilities.

We had approximately RMB511.0 million liabilities falling due within one year or on demand as of December 31, 2019, among which (i) approximately RMB295.0 million trade payables to suppliers are expected to be settled according to the terms of the agreements. Since most of our customers are state-owned TV channels, which normally have a good credit with us, we can enter into factoring arrangements with them to settle the payments due to the relevant suppliers if we experience a tight liquidity situation; (ii) with respect to other payables and accrued expenses measured at amortized cost, (A) approximately RMB80.0 million license fees to be paid to co-investors who invested in our self-produced drama series will be settled after receiving the payments from our customers; (B) approximately RMB43.0 million investment

– 327 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION funds we received from co-investors under the co-financing arrangement will be gradually accounted to the relevant drama series based on their filming and production progress; and (C) approximately RMB20.0 million VAT tax and other surcharge payables had been fully settled by the end of February 2020; (iii) with respect to our bank and other loans of approximately RMB65.0 million, (A) the bank loans primarily represented (a) the discounted bills, which had been settled before their expiry on February 1, 2020; and (b) the factoring arrangements for trade receivables from one of our customers, which are expected to be repaid by the customer in accordance with the relevant factoring agreement; and (B) other loans, which will be due in or after June 2020, primarily represented the Fixed Return Investments from third-party co-investors with fixed repayment terms. We will negotiate with such co-investors to extend the payment period if we experience a tight liquidity situation.

Interest Rate Risk

Interest rate risk is the risk that arises primarily from interest-bearing borrowings. Borrowings issued at variable rate and fixed rates expose our Group to cash flow interest rate risk and fair value interest rate risk, respectively.

Sensitivity Analyses

As of December 31, 2017, 2018 and 2019, it was estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would have decreased/increased our Group’s profit after tax and retained profits by approximately RMB178,000, RMB150,000 and nil, respectively.

The sensitivity analyses above indicate the instantaneous change in our Group’s profit after tax and retained profits that would arise assuming that the change in interest rates had occurred at the end of each year during the Track Record Period. The impact is estimated as an annualized impact on interest exposure of such a change in interest rates. The sensitivity analyses are performed on the same basis during the Track Record Period.

DIVIDENDS

– 328 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION

Historically we have not declared or paid any dividend to our Shareholders and there is no assurance that dividends of any amount will be declared or be distributed in any year. Currently we do not have a formal dividend policy or a fixed dividend distribution ratio.

[REDACTED]

We expect to incur a total of RMB[REDACTED]of[REDACTED] (assuming an [REDACTED] of HK$[REDACTED], being the mid-point of the indicative [REDACTED] range between HK$[REDACTED] and HK$[REDACTED], and assuming that the [REDACTED]isnot exercised) until the completion of the [REDACTED], which represented approximately [REDACTED]ofthe[REDACTED]ofthe[REDACTED]. During Track Record Period, we incurred RMB[18.2] million as [REDACTED], of which RMB[14.1] million was charged to the consolidated statements of profit or loss and other comprehensive income and RMB[4.1] million will be capitalized upon the [REDACTED]. Subsequent to the Track Record Period, we expect to incur additional [REDACTED] of RMB[REDACTED], of which RMB[15.0] million is expected to be charged to the consolidated statements of profit or loss and other comprehensive income and RMB[REDACTED] will be capitalized upon the [REDACTED]. [REDACTED] represent professional fees and other fees incurred in connection with the [REDACTED], including [REDACTED]. The [REDACTED] above are the best estimate as of the Latest Practicable Date and for reference only and the actual amount may differ from this estimate. We do not expect these [REDACTED] to have a material impact on our results of operations for the year ending December 31, 2020.

DISTRIBUTABLE RESERVES

Our Company had no reserve available for distribution to the Shareholders as of December 31, 2019 and up to the Latest Practicable Date.

DISCLOSURE REQUIRED UNDER THE [REDACTED] RULES

Our Directors confirm that, as of the Latest Practicable Date, there was no circumstance that would give rise to a disclosure requirement under Rules 13.13 to 13.19 of the [REDACTED] Rules.

NO MATERIAL ADVERSE CHANGE

After performing sufficient due diligence work which our Directors consider appropriate and after due and careful consideration, our Directors confirm that, up to the Latest Practicable Date, there has been no material adverse change in our financial or [REDACTED] position or prospects since December 31, 2019, being the date on which our latest audited consolidated financial statements were prepared, and there is no event since December 31, 2019 which would materially affect the information as set out in the Accountants’ Report in Appendix I to this document.

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UNAUDITED PRO FORMA STATEMENT OF [REDACTED]

The following unaudited pro forma statement of adjusted consolidated net tangible assets of our Group is prepared in accordance with Rule 4.29 of the [REDACTED] Rules and is set out below to illustrate the effect of the [REDACTED] on the consolidated net tangible assets of our Group attributable to the equity shareholders of our Company as of December 31, 2019 as if the [REDACTED] had taken place on December 31, 2019.

This unaudited pro forma statement of adjusted consolidated 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 [REDACTED] been completed as of December 31, 2019 or any future date.

Consolidated net Unaudited pro forma tangible assets adjusted attributable to the consolidated net equity shareholders Estimated tangible assets Unaudited pro forma adjusted consolidated of the Company as [REDACTED] attributable to the net tangible assets attributable to of December 31, from the equity shareholders the equity shareholders of (2)(3) (4) 2019(1) [REDACTED] of the Company the Company per Share(3)(4)(5) RMB’000 RMB’000 RMB’000 RMB HK$

Based on a minimum [REDACTED]of HK$[REDACTED]per Share ...... 15,249 [REDACTED][REDACTED][REDACTED][REDACTED] Based on a maximum [REDACTED]of HK$[REDACTED]per Share ...... 15,249 [REDACTED][REDACTED][REDACTED][REDACTED]

Notes:

(1) The consolidated net tangible assets attributable to the equity shareholders of our Company as of December 31, 2019 is arrived at after deducting drama series copyrights of approximately RMB[REDACTED] from our consolidated net assets of approximately RMB[REDACTED] attributable to equity shareholders of our Company as of December 31, 2019, as extracted from the Accountants’ Report set out in Appendix I to this Document.

(2) The estimated [REDACTED]fromthe[REDACTED] are based on the [REDACTED]of HK$[REDACTED] and HK$[REDACTED] per Share, respectively, and [REDACTED] Shares expected to be issued under the [REDACTED], after deduction of the [REDACTED] and other related expenses paid or payable by our Group (excluding the expenses that have been charged to profit or loss during the Track Record Period) and does not take into account any shares which may be issued upon the exercise of the [REDACTED] or options granted under the Share Option Scheme. The estimated [REDACTED]ofthe [REDACTED] have been converted to Renminbi at the PBOC rate of HK$[1.12] to RMB[1.00] prevailing on December 31, 2019. No representation is made that Hong Kong dollars amount have been, could have been or may be converted to Renminbi, or vice versa, at that rate or at any other rate.

(3) The unaudited pro forma adjusted net tangible assets per Share is arrived at by dividing the unaudited pro forma adjusted net tangible assets by [REDACTED] Shares, being the number of shares expected to be in issue immediately following the completion of the Capitalisation Issue and the [REDACTED], and does not take into account any shares which may be issued upon the exercise of the [REDACTED]or options granted under the Share Option Scheme.

(4) The unaudited pro forma adjusted net tangible assets per Share amounts in Renminbi are converted to Hong Kong dollar with the PBOC rate of RMB1.00 to HK$[1.12] prevailing on December 31, 2019. No representation is made that Renminbi amount have been, could have been or may be converted to Hong Kong dollars, or vice versa, at that rate or at any other rate.

(5) No adjustment has been made to reflect any trading result or other transactions of the Group entered into subsequent to December 31, 2019.

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FUTURE PLANS

See “Business — Business Strategies” in this document for a detailed discussion of our future plans.

[REDACTED]

We intend to use the [REDACTED]fromthe[REDACTED] for the purposes and in the amounts set out below:

• approximately [REDACTED]%, or HK$[REDACTED] (equivalent to approximately RMB[REDACTED]), is expected to be used primarily to produce the following drama series:

Estimated Estimated Estimated Estimated Investment Production Genre of the Number of Total Investment Amount from Commencement Drama Series Drama Series Amount the [REDACTED] Date(s)

Family...... [2] HK$[517.0] million HK$[REDACTED] 2020/2022 (equivalent to (equivalent to RMB[470.0] million) RMB[REDACTED]) Urban/Romance ...... [3] HK$[539.0] million HK$[REDACTED] 2020/2021 (equivalent to (equivalent to RMB[490.0] million) RMB[REDACTED]) Modern/Contemporary . . [1] HK$[88.0] million HK$[REDACTED] 2022 (equivalent to (equivalent to RMB[80.0] million RMB[REDACTED]) History/War ...... [1] HK$[55.0] million HK$[REDACTED] 2021 (equivalent to (equivalent to RMB[50.0] million) RMB[REDACTED]) (1) Web series ...... [4] HK$[275.0] million HK$[REDACTED] 2020/2021 (equivalent to (equivalent to RMB[250.0] million) RMB[REDACTED])

Note:

(1) These four web series include three romance-based and one science fiction-based web series. They are expected to be co-invested by the relevant online media platforms on which the respective web series will be broadcast.

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While we have dedicated substantial resources to expand our business of licensing the broadcasting rights of outright-purchased drama series during the Track Record Period, in order to further enhance the market recognition of our Group as a comprehensive drama series production and distribution company, we have continued to invest and produce our own drama series and license the related broadcasting rights to our customers during the Track Record Period. We intend to further develop and grow this business segment going forward.

According to our past experience, we produced an average of approximately one to two drama series each year during the Track Record Period. In the next three years, we plan to produce approximately 11 drama series (which is equivalent to approximately three to four drama series per year). We believe that we are capable of producing these additional drama series primarily due to (i) the increase in our reserves of IPs for self-produced drama series; (ii) our enhanced profile and market recognition; (iii) the extensive experience our staff accumulated in drama series production and distribution; and (iv) additional professionals we intend to hire to support the expansion of our business, which will enable us to monitor the production progress of each drama series more effectively.

We generally estimate the total investment amount of each genre of drama series to be produced by taking into account a number of factors, including (i) the past experience of our management regarding the production cost of similar genres of self-produced drama series; and (ii) our preliminary research on the quotation from the relevant suppliers regarding the production costs of drama series. We determine the proportion of our investment in each self-produced drama series primarily based on our operating cash flows, while the proportion of investments from third parties is determined by various factors, including (i) the prospects and the estimated investment return of each drama series; and (ii) the brand awareness and reputation of third-party investors.

During the Track Record Period, we received third-party investments in six of our self-produced drama series. The proportion of investment from co-investors in such self-produced drama series ranged from 35.0% to 75.0%. Given the past experience and our operating conditions, we anticipate that cash generated from our operations, investments from third-party investors and [REDACTED]fromthe[REDACTED] will account for approximately 43.5%, 50.0% and 6.5%, respectively, of the total investments in the 11 additional drama series that we plan to self-produce in the next three years. However, the proportion of third-party investments may be adjusted, which mainly depends on the attractiveness of such drama series to the potential investors, the negotiation results with them and the estimated investment budget that we formulate before the production.

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• approximately [REDACTED]%, or HK$[REDACTED] (equivalent to approximately RMB[REDACTED]), is expected to be used primarily to outright-purchase the copyrights (or broadcasting rights) associated with approximately [75] drama series in the next three years (including approximately [four] history/war-related drama series, [22] family-related drama series, [25] urban/romance-related drama series, [18] modern/contemporary-related drama series and [six] mainstream-related drama series).

We usually determine the total number of drama series we intend to purchase based on the number of drama series we purchased from third-party copyright owners/licensors each year during the Track Record Period. In the next three years, we will mainly purchase family-related, urban/romance-related and modern/contemporary-related drama series, primarily because: (i) these genres of drama series have a large audience and generally represent a substantial portion of purchases from satellite and terrestrial TV channels, according to our past experience. These genres of drama series also accounted for more than 50.0% of our outright-purchased drama series during the Track Record Period; and (ii) with the growth of our business, we have more opportunities to deal with the leading satellite TV channels in the PRC (which usually refer to the top ten satellite TV channels in terms of rating) from 2017 to 2019. We intend to invest more resources in the future to develop our business relationships with these leading satellite TV channels and provide them with more quality drama series to broadcast. According to our market research, the major viewers of the leading satellite TV channels in the PRC are mainly of younger generation, who prefer to watch modern drama series.

In addition, the estimated amount of each genre we intend to invest is determined by taking into account numerous factors, including (i) our preliminary assessment and estimation on the procurement amount, preferred genres and budget of our target customers based on the average costs of the outright-purchased drama series, which were broadcast or purchased by us in the previous year; (ii) the past experience of our management in estimating the costs of purchasing similar genres of drama series; and (iii) our preliminary research on the quotation from the relevant third-party copyright owners/licensors.

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• approximately [REDACTED]%, or HK$[REDACTED] (equivalent to approximately RMB[REDACTED]), is expected to be used primarily to hire up to [22] additional experienced professionals in the next three years. The following table sets forth the details of the additional staff we plan to hire from 2020 to 2022:

Estimated Number of Monthly Estimated Estimated Stafftobe Qualifications and Years of Salary Per Salary for Salary for Position Recruited Work Experience Required Employee Three Years Three Years

RMB (RMB’000) (HK$’000)

Regional distribution director . . 5 Bachelor degree or above with 30,000 5,400 5,900 five to ten-year work experience Copyright manager...... 5 Bachelor degree or above with 8,000 1,400 1,500 three to five-year work experience Production manager ...... 4 Bachelor degree or above with 10,000 1,400 1,500 over five-year work experience Business development director. . 3 Bachelor degree or above with 30,000 3,200 3,500 five to ten-year work experience Business director...... 2 Bachelor degree or above with 15,000 1,100 1,200 five to ten-year work experience Sales and marketing manager . . 2 Bachelor degree or above with 8,000 600 660 three to five-year work experience Post-production manager...... 1 Bachelor degree or above with 15,000 500 550 five to ten-year work experience

Total ...... 22 – – 13,600 14,810

• approximately [REDACTED]%, or HK$[REDACTED] (equivalent to approximately RMB[REDACTED]), is expected to be used to fund our working capital and general corporate purposes.

To the extent that the [REDACTED] from the [REDACTED] are not immediately applied to the above purposes, we intend to deposit the [REDACTED] into interest-bearing bank accounts, such as demand deposit accounts, with licensed commercial banks and/or authorized financial institutions in Hong Kong.

In the event that the [REDACTED] is set at the [REDACTED]or[REDACTED]ofthe proposed [REDACTED] range and the [REDACTED] is not exercised at all, we will receive [REDACTED] of approximately HK$[REDACTED]. Under such circumstances, our intended [REDACTED] will be increased or decreased on a pro-rata basis.

If the [REDACTED] is exercised in full, the [REDACTED]fromthe[REDACTED] will increase to approximately HK$[REDACTED], assuming an [REDACTED] of HK$[REDACTED] per Share, being the mid-point of the proposed [REDACTED] range. If the [REDACTED]isset at the [REDACTED]or[REDACTED] of the proposed [REDACTED] range, the [REDACTED] of the [REDACTED] (including the [REDACTED] from the exercise of the [REDACTED]) will increase or decrease by approximately HK$[REDACTED], respectively. We intend to apply the additional [REDACTED] to the above uses in the proportions stated above.

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BASES AND KEY ASSUMPTIONS

In light of the business objectives and future plans of our Group, we will seek to attain the milestones contained in this section. Investors should note that the milestones and their scheduled times for attainment are formulated on the bases and assumptions set out in this paragraph. These bases and assumptions are inherently subject to many uncertainties, variables and unpredictable factors, in particular, the risk factors set out in the section headed ‘‘Risk Factors’’ in this document. Our Group’s actual course of business may vary from the business objectives set out in this document. There is no assurance that the plans of our Group will materialize in accordance with the expected time frame or that the objectives of our Group will be accomplished at all. In the event of any material modifications to the use of [REDACTED]as described in this document, we will issue announcement in accordance with the [REDACTED] Rules and disclose in our annual report for the relevant year as required by the Stock Exchange.

We have adopted the following principal assumptions in the preparation of the above future plans:

• there will be no material adverse change in the existing government policies or political, legal, fiscal, market or economic conditions in the PRC and Hong Kong;

• there will be no material changes in legislation or regulations or rules in the regions where we operate which will adversely affect our business;

• there will be no material change in the bases (such as inflation, interest rate and foreign exchange rate) or rates of taxation and duties in the PRC and Hong Kong or in any other places in which any member of our Group operates or will operate or is incorporated;

• we will have sufficient financial resources to meet the planned capital and business development requirements during the period to which our business objective relates;

• there will be no material change in the interest rate of our borrowings;

• there will be no change to the existing accounting policies from those stated in the consolidated audited financial statements of our Group for the Track Record Period;

• the [REDACTED] will be completed in accordance with and as described in the section headed ‘‘Structure of the [REDACTED]’’ in this document;

• our Directors and key senior management will continue to be involved in our existing and future development and we will be able to retain our key management personnel;

• there will be no change in the effectiveness of the certifications, licenses, permits or approvals obtained by us;

• there will be no change in the funding requirement for the business strategies described in this document from the amounts as estimated by our Directors;

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• we will not be materially and adversely affected by the risk factors as set out in the section headed ‘‘Risk Factors’’ in this document;

• there be no disasters, natural, political or otherwise, which would materially disrupt our business or operations, affect the health of our personnel or cause substantial loss, damage or destruction to our properties or facilities;

• there will not be material changes in the market demand and the competitive landscape of drama series market in the PRC; and

• we will be able to continue our operations in substantially the same manner as we have been operating during the Track Record Period.

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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The following is the text of a report set out on pages I-1 to I-46, received from the Company’s reporting accountants, KPMG, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this document.

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF LITIAN PICTURES HOLDINGS LIMITED AND FOUNDER SECURITIES (HONG KONG) CAPITAL COMPANY LIMITED

INTRODUCTION

We report on the historical financial information of Litian Pictures Holdings Limited (the “Company”) and its subsidiaries (together, the “Group”) set out on pages I-4 to I-46, which comprises the consolidated statements of financial position of the Group as at 31 December 2017, 2018 and 2019 and the statement of financial position of the Company as at 31 December 2019, and the consolidated statements of profit or loss and other comprehensive income, the consolidated statements of changes in equity and the consolidated cash flow statements for each of the years ended 31 December 2017, 2018 and 2019 (the “Track Record Period”), and a summary of significant accounting policies and other explanatory information (together, the “Historical Financial Information”). The Historical Financial Information set out on pages I-4 to I-46 forms an integral part of this report, which has been prepared for inclusion in the document of the Company dated [●] (the “Document”) in connection with the [REDACTED] of shares of the Company on the Main Board of The Stock Exchange of Hong Kong Limited.

DIRECTORS’ RESPONSIBILITY FOR THE HISTORICAL FINANCIAL INFORMATION

The directors of the Company are responsible for the preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information, and for such internal control as the directors of the Company determine is necessary to enable the preparation of the Historical Financial Information that is free from material misstatement, whether due to fraud or error.

REPORTING ACCOUNTANTS’ RESPONSIBILITY

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

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Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountants’ judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountants consider internal control relevant to the entity’s preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical Financial Information.

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

OPINION

In our opinion, the Historical Financial Information gives, for the purpose of the accountants’ report, a true and fair view of the Group’s financial position as at 31 December 2017, 2018 and 2019 and the Company’s financial position as at 31 December 2019, and of the Group’s financial performance and cash flows for the Track Record Period in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information.

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REPORT ON MATTERS UNDER THE RULES GOVERNING THE LISTING OF SECURITIES ON THE STOCK EXCHANGE OF HONG KONG LIMITED AND THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page I-4 have been made.

Dividends

We refer to Note 21(d) to the Historical Financial Information which states that no dividends have been paid by the Company in respect of the Track Record Period.

[●] Certified Public Accountants 8th Floor, Prince’s Building 10 Chater Road Central, Hong Kong

[●]

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HISTORICAL FINANCIAL INFORMATION

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

The consolidated financial statements of the Group for the Track Record Period, on which the Historical Financial Information is based, were audited by KPMG Huazhen LLP in accordance with Hong Kong Standards on Auditing issued by the HKICPA (the “Underlying Financial Statements”).

Consolidated statements of profit or loss and other comprehensive income (Expressed in Renminbi (“RMB”))

Years ended 31 December

Note 2017 2018 2019

RMB’000 RMB’000 RMB’000

Revenue ...... 4 378,738 385,867 390,996 Cost of sales ...... (302,753) (286,362) (249,862)

Gross profit ...... 4(b) 75,985 99,505 141,134

Other income ...... 5 3,112 4,286 4,069 Selling and marketing expenses ...... (827) (764) (543) Administrative expenses ...... (11,197) (23,062) (60,522)

Profit from operations ...... 67,073 79,965 84,138

Finance costs ...... 6(a) (5,012) (10,122) (4,769)

Profit before taxation ...... 6 62,061 69,843 79,369

Income tax ...... 7 (5,301) (2,237) (2,335)

Profit and total comprehensive income attributable to equity shareholders of the Company for the year ...... 56,760 67,606 77,034

Earnings per share 10 Basic and diluted ...... N/A N/A N/A

The accompanying notes form part of the Historical Financial Information.

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Consolidated statements of financial position (Expressed in RMB)

At 31 December

Note 2017 2018 2019

RMB’000 RMB’000 RMB’000

Non-current assets Property, plant and equipment ...... 11 4,794 5,074 3,787 Deferred tax assets ...... 20(b) 1,279 3,199 10,454

6,073 8,273 14,241 ------Current assets Drama series copyrights ...... 12 102,263 169,398 179,013 Trade and bills receivables ...... 13 194,064 376,244 530,944 Prepayments, deposits and other receivables 14 48,524 53,182 35,688 Cash at bank and on hand ...... 15 23,054 14,987 89,701

367,905 613,811 835,346 ------Current liabilities Trade payables ...... 16 93,111 178,267 294,975 Other payables and accrued expenses...... 17 13,907 72,125 150,236 Bank and other loans ...... 18 87,997 107,000 56,661 Lease liabilities ...... 19 982 978 650 Current taxation ...... 20(a) 6,034 7,139 13,688

202,031 365,509 516,210 ------

Net current assets ...... 165,874 248,302 319,136 ------

Total assets less current liabilities ...... 171,947 256,575 333,377

Non-current liabilities Lease liabilities ...... 19 1,415 437 115

NET ASSETS ...... 170,532 256,138 333,262

CAPITAL AND RESERVES 21 Share capital ...... – – 90 Reserves ...... 170,532 256,138 333,172

TOTAL EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF THE COMPANY ...... 170,532 256,138 333,262

The accompanying notes form part of the Historical Financial Information.

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Statement of financial position of the Company (Expressed in RMB)

At 31 December

Note 2019

RMB’000

Non-current assets Investment in a subsidiary ...... * ------Current assets Amounts due from equity shareholders of the Company ...... 90

Current liabilities Amount due to a subsidiary ...... *

Net current assets ...... 90 ------

NET ASSETS 90

CAPITAL AND RESERVES Share capital ...... 21 90

* Amount less than RMB1,000

The accompanying notes form part of the Historical Financial Information.

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Consolidated statements of changes in equity (Expressed in RMB)

(Accumulated losses)/ retained Share capital Other reserve profits Total equity

RMB’000 RMB’000 RMB’000 RMB’000 Note 21(b) Note 21(c)

At 1 January 2017 ...... – 88,870 (34,098) 54,772

Changes in equity for the year ended 31 December 2017: Profit and total comprehensive income for the year ...... – – 56,760 56,760 Capital contributions ...... – 59,000 – 59,000

At 31 December 2017 and 1 January 2018 – 147,870 22,662 170,532

Changes in equity for the year ended 31 December 2018: Profit and total comprehensive income for the year ...... – – 67,606 67,606 Capital contributions ...... – 18,000 – 18,000

At 31 December 2018 and 1 January 2019 . . – 165,870 90,268 256,138

Changes in equity for the year ended 31 December 2019: Profit and total comprehensive income for the year ...... – – 77,034 77,034 Issuance of shares (Note 21(b)) ...... 90 – – 90

At 31 December 2019 ...... 90 165,870 167,302 333,262

The accompanying notes form part of the Historical Financial Information.

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Consolidated cash flow statements (Expressed in RMB)

Years ended 31 December

Note 2017 2018 2019

RMB’000 RMB’000 RMB’000

Cash flows from operating activities Profit before taxation ...... 62,061 69,843 79,369 Adjustments for: Depreciation expenses...... 6(c) 1,408 1,665 2,008 Finance costs ...... 6(a) 5,012 10,122 4,769 Interest income ...... 5 (559) (2,496) (886) Changes in working capital: Increase in drama series copyrights ..... 12 (37,094) (67,135) (9,615) Increase in trade and bills receivables .... (143,628) (182,180) (154,700) (Increase)/decrease in prepayments, deposits and other receivables ...... (25,689) 2,402 (1,613) (Increase)/decrease in restricted deposits . 15(a) (60) 60 (7,961) Increase in trade payables ...... 73,673 85,156 116,708 (Decrease)/increase in other payables and accrued expenses ...... (11,049) 57,196 83,173

Cash (used in)/generated from operations ...... (75,925) (25,367) 111,252

Income tax paid ...... 20(a) (6,529) (3,052) (3,041)

Net cash (used in)/generated from operating activities ...... (82,454) (28,419) 108,211 ------Cash flows from investing activities Payments for purchase of property, plant and equipment ...... (1,066) (1,363) (280) Loans to third parties ...... (15,000) (10,000) – Settlements received from loans to third parties...... – 5,000 20,000 Interest received...... 56 54 4,058

Net cash (used in)/generated from investing activities ...... (16,010) (6,309) 23,778 ------

The accompanying notes form part of the Historical Financial Information.

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Consolidated cash flow statements (continued) (Expressed in RMB)

Years ended 31 December

Note 2017 2018 2019

RMB’000 RMB’000 RMB’000

Cash flows from financing activities Proceeds from capital contributions ..... 59,000 18,000 – Proceeds from bank and other loans ..... 15(b) 93,352 99,020 101,891 Repayment of bank and other loans ..... 15(b) (37,755) (80,017) (152,230) Prepayments for costs incurred in connection with the proposed [REDACTED] of the Company’s shares . 15(b) – (150) (3,926) Capital element of lease rentals paid ...... 15(b) (817) (982) (1,091) Interest element of lease rentals paid ...... 15(b) (130) (99) (62) Interest paid ...... 15(b) (4,745) (9,051) (9,818)

Net cash generated from/ (used in) financing activities ...... 108,905 26,721 (65,236) ------

Net increase/(decrease) in cash and cash equivalents ...... 10,441 (8,007) 66,753

Cash and cash equivalents at the beginning of the year ...... 15(a) 12,553 22,994 14,987

Cash and cash equivalents at the end of the year ...... 15(a) 22,994 14,987 81,740

The accompanying notes form part of the Historical Financial Information.

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NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Expressed in RMB unless otherwise indicated)

1 BASIS OF PREPARATION AND PRESENTATION OF THE HISTORICAL FINANCIAL INFORMATION

Litian Pictures Holdings Limited (the “Company”) was incorporated in the Cayman Islands on 17 June 2019 as an exempted company with limited liability under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands.

The Company is an investment holding company and has not carried out any business operations since the date of its incorporation save for the corporate reorganisation mentioned below. The Company and its subsidiaries (together, the “Group”) are principally engaged in the production, distribution and licensing of broadcasting rights of drama series.

Prior to the incorporation of the Company and completion of the corporate reorganisation as described below, the principal business of the Group was carried out by Zhejiang LiTian TV & Film Co., Ltd. (浙江力天影視有限公司, “LiTian TV & Film”), which was established as a limited liability company on 2 August 2013 in the People’s Republic of China (the “PRC”), and its subsidiaries.

To rationalise the corporate structure in preparation of the [REDACTED] of the Company’s shares on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”), the Group underwent a corporate reorganisation (the “Corporate Reorganisation”), as detailed in the section headed “History and Corporate Structure” in the Document.

Since the business conducted by LiTian TV & Film and its subsidiaries is subject to foreign investment restrictions under the relevant laws and regulations in the PRC, as part of the Corporate Reorganisation, Haining Marshal Films Planning Co., Ltd. (海寧元帥影視策劃有限公司, “LiTian WFOE”), a wholly-owned subsidiary of the Company, entered into a series of agreements (the “Contractual Arrangements”) with LiTian TV & Film and its equity holders which became effective on 14 October 2019. Details of the Contractual Arrangements are set out in section headed “Contractual Arrangements” in the Document. As a result of the Contractual Arrangements, the Group has rights to exercise power over LiTian TV & Film and its subsidiaries, receives variable returns from its involvement in LiTian TV & Film and its subsidiaries, has the ability to affect those returns through its power over LiTian TV & Film and its subsidiaries, and hence, the control over LiTian TV & Film and its subsidiaries. Consequently, the Group regards LiTian TV & Film and its subsidiaries as controlled entities. The directors of the Company have determined that the Contractual Arrangements are in compliance with PRC laws and are legally enforceable.

Upon completion of the Corporate Reorganisation on 14 October 2019, the Company became the holding company of the companies now comprising the Group. The Corporate Reorganisation only involved inserting the Company, LiTian TV & Film Group Limited (“LiTian BVI”), LiTian TV & Film (Hong Kong) Limited (“LiTian HK”) and LiTian WFOE, which are newly formed entities with no substantive operations, as holding companies of LiTian TV & Film and its subsidiaries.

There were no changes in the economic substance of the ownership and business carried out by LiTian TV & Film and its subsidiaries before and after the Corporate Reorganisation. Accordingly, the Historical Financial Information has been prepared and presented as a continuation of the consolidated financial statements of LiTian TV & Film and its subsidiaries with the assets and liabilities of LiTian TV & Film and its subsidiaries recognised and measured at their historical carrying amounts prior to the Corporate Reorganisation. Intra-group balances, transactions and unrealised gains/losses on intra-group transactions are eliminated in full in preparing the Historical Financial Information.

The consolidated statements of profit or loss and other comprehensive income, the consolidated statements of changes in equity and the consolidated cash flow statements of the Group for the Track Record Period as set out in this report include the financial performance and cash flows of the companies now comprising the Group as if the current group structure had been in existence and remained unchanged throughout the Track Record Period, or since their respective dates of incorporation or establishment, where this is a shorter period. The consolidated statements of financial position of the Group as at 31 December 2017, 2018 and 2019 as set out in this report have been prepared to present the financial position of the companies now comprising the Group as of those dates as if the current group structure had been in existence as of the respective dates taking into account the respective dates of incorporation or establishment, where applicable.

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As at the date of this report, no audited statutory financial statements have been prepared for the Company, LiTian BVI, LiTian HK, LiTian WFOE, Zhejiang LiTian Media Co., Ltd. (“LiTian Media”), Horgos Tiantian Meimei Film Co., Ltd. (“Horgos Tiantian Meimei”), Horgos Haohao Xuexi Film Co., Ltd. (“Horgos Haohao Xuexi”), Horgos Tiantian Xiangshang Film Co., Ltd. (“Tiantian Xiangshang”), Xinjiang Qingchun LiTian Film Co., Ltd. (“Xinjiang LiTian”) and Beijing Litian Zhenzhi Film Co., Ltd. (“Beijing LiTian”), as they either have not carried on any business since their respective dates of incorporation/establishment or are investment holding companies or are not subject to statutory audit requirements under the relevant rules and regulations in their respective jurisdictions of incorporation/establishment. The statutory financial statements of LiTian TV & Film were prepared in accordance with the Accounting Standards for Business Enterprises issued by the Ministry of Finance of the PRC.

As at the date of this report, the Company has direct or indirect interests in the following subsidiaries:

Proportion of ownership interest Particulars of Held by Place and date of registered and the Held by Name of Statutory Company name establishment/incorporation paid-up capital Company subsidiaries Principal activities auditor

LiTian TV & Film The PRC RMB46,131,980 – 100% Production, distribution and Ruihua Certified Public 浙江力天影視有限公司 2 August 2013 licensing of broadcasting Accountants LLP (Notes (i) and (ii)) ...... rights of drama series 瑞華會計師事務所 (特殊普通合夥) LiTian Media The PRC RMB10,000,000 – 100% Production, distribution and N/A 浙江力天傳媒有限公司 9 July 2014 licensing of broadcasting (Notes (i) and (ii)) ...... rights of drama series Horgos Tiantian Meimei The PRC RMB30,000,000 – 100% Production, distribution and N/A 霍爾果斯甜甜美美影業有限公司 24 January 2017 licensing of broadcasting (Notes (i) and (ii)) ...... rights of drama series Horgos Haohao Xuexi The PRC RMB30,000,000 – 100% Production, distribution and N/A 霍爾果斯好好學習影業有限公司 26 May 2017 licensing of broadcasting (Notes (i) and (ii)) ...... rights of drama series Tiantian Xiangshang The PRC RMB30,000,000 – 100% Production, distribution and N/A 霍爾果斯天天向上影業有限公司 15 June 2017 licensing of broadcasting (Notes (i) and (ii)) ...... rights of drama series Xinjiang LiTian The PRC RMB10,000,000 – 100% Production, distribution and N/A 新疆青春力天影業有限公司 22 June 2018 licensing of broadcasting (Notes (i) and (ii)) ...... rights of drama series Beijing LiTian The PRC RMB10,000,000 – 100% Production of broadcasting N/A 北京力天臻至影業有限公司 9 May 2019 rights of drama series (Notes (i) and (ii)) ...... LiTianBVI...... TheBritish Virgin Islands (Note (iii)) 100% – Investment holding N/A (the “BVI”) 28 June 2019 LiTianHK...... HongKong (Note (iv)) – 100% Investment holding N/A 22 July 2019 LiTian WFOE The PRC (Note (v)) – 100% Investment holding N/A 海寧元帥影視策劃有限公司 25 September 2019 (Note (i)) ......

(i) The official names of these entities are in Chinese. The English translations are for identification only.

(ii) These entities were registered as limited liability companies under the laws and regulations in the PRC.

(iii) As at the date of this report, the issued share capital is 1 share with a par value of United States Dollar (“US$”)1 and paid-up capital is US$Nil.

(iv) As at the date of this report, the issued share capital is 1 share.

(v) This entity was registered as a wholly foreign-owned enterprise under the laws and regulations in the PRC. As at the date of this report, the registered capital is Hong Kong Dollar (“HK$”)200,000,000 and paid-up capital is HK$Nil.

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All companies now comprising the Group have adopted 31 December as their financial year end date.

The Historical Financial Information has been prepared in accordance with all applicable International Financial Reporting Standards (“IFRSs”) which collective term includes all applicable individual International Financial Reporting Standards, International Accounting Standards (“IASs”) and Interpretations issued by the International Accounting Standards Board (the “IASB”). Further details of the significant accounting policies adopted by the Group are set out in Note 2.

The IASB has issued a number of new and revised IFRSs. For the purpose of preparing this Historical Financial Information, the Group has adopted all applicable new and revised IFRSs to the Track Record Period, except for any new standards or interpretations that are not yet effective for the accounting period beginning on 1 January 2019. The new and revised accounting standards and interpretations issued but not yet effective for the accounting period beginning on 1 January 2019 are set out in Note 24.

The Historical Financial Information also complies with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange.

The accounting policies set out below have been applied consistently to all periods presented in the Historical Financial Information.

2 SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of measurement

The Historical Financial Information is presented in RMB, rounded to the nearest thousand. The measurement basis used in the preparation of the Historical Financial Information is the historical cost basis.

(b) Use of estimates and judgements

The preparation of Historical Financial Information in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of IFRSs that have significant effect on the Historical Financial Information and major sources of estimation uncertainty are discussed in Note 3.

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, 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. When assessing whether the Group has power, only substantive rights (held by the Group and other parties) are considered.

An investment in a subsidiary is consolidated into the Historical Financial Information from the date that control commences until the date that control ceases. Intra-group balances, transactions and cash flows and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the Historical Financial Information. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

In the Company’s statement of financial position, an investment in a subsidiary is stated at cost less impairment losses (see Note 2(f)).

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(d) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see Note 2(f)).

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal.

Depreciation is calculated to write off the cost of items of property, plant and equipment, less their estimated residual values, if any, using the straight line method over their estimated useful lives as follows:

Estimated useful lives – Office equipment and others...... 2–5years – Right-of-use assets ...... Over the term of lease

Where parts of an item of property, plant and equipment have different useful lives, the cost of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

(e) Leased assets

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control is conveyed where the Group has both the right to direct the use of the identified asset and to obtain substantially all of the economic benefits from that use.

As a lessee

Where the contract contains lease component(s) and non-lease component(s), the Group has elected not to separate non-lease components and accounts for each lease component and any associated non-lease components as a single lease component for all leases.

At the lease commencement date, the Group recognises a right-of-use asset and a lease liability, except for short-term leases that have a lease term of 12 months or less and leases of low-value assets. When the Group enters into a lease in respect of a low-value asset, the Group decides whether to capitalise the lease on a lease-by-lease basis. The lease payments associated with those leases which are not capitalised are recognised as an expense on a systematic basis over the lease term.

Where the lease is capitalised, the lease liability is initially recognised at the present value of the lease payments payable over the lease term, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, using a relevant incremental borrowing rate. After initial recognition, the lease liability is measured at amortised cost and interest expense is calculated using the effective interest method. Variable lease payments that do not depend on an index or rate are not included in the measurement of the lease liability and hence are charged to profit or loss in the accounting period in which they are incurred.

The right-of-use asset recognised when a lease is capitalised is initially measured at cost, which comprises the initial amount of the lease liability plus any lease payments made at or before the commencement date, and any initial direct costs incurred. Where applicable, the cost of the right-of-use assets also includes an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, discounted to their present value, less any lease incentives received. The right-of-use asset is subsequently stated at cost less accumulated depreciation and impairment losses (see Notes 2(d) and 2(f)).

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The lease liability is remeasured when there is a change in future lease payments arising from a change in an index or rate, or there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or there is a change arising from the reassessment of whether the Group will be reasonably certain to exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group presents right-of-use assets in ‘property, plant and equipment’ and presents lease liabilities separately in the statement of financial position.

(f) Credit losses and impairment of assets

(i) Credit loss from financial instruments and contract assets

The Group recognises a loss allowance for expected credit losses (“ECLs”) on financial assets measured at amortised cost (including cash and cash equivalents and trade and other receivables).

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all expected cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

In measuring ECLs, the Group takes into account reasonable and supportable information that is available without undue cost or effort. This includes information about past events, current conditions and forecasts of future economic conditions.

ECLs are measured on either of the following bases:

– 12-month ECLs: these are losses that are expected to result from possible default events within the 12 months after the reporting date; and

– lifetime ECLs: these are losses that are expected to result from all possible default events over the expected lives of the items to which the ECL model applies.

Loss allowances for trade receivables and contract assets are always measured at an amount equal to lifetime ECLs. ECLs on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast general economic conditions at the reporting date.

For all other financial instruments, the Group recognises a loss allowance equal to 12-month ECLs unless there has been a significant increase in credit risk of the financial instrument since initial recognition, in which case the loss allowance is measured at an amount equal to lifetime ECLs.

Significant increases in credit risk

In assessing whether the credit risk of a financial instrument has increased significantly since initial recognition, the Group compares the risk of default occurring on the financial instrument assessed at the reporting date with that assessed at the date of initial recognition. In making this reassessment, the Group considers that a default event occurs when the borrower is

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unlikely to pay its credit obligation to the Group in full, without resource by the Group to action such as realising security (if any is held). The Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.

In particular, the following information is taken into account when assessing whether credit risk has increased significantly since initial recognition:

– failure to make payments on their contractually due dates;

– an actual or expected significant deterioration in a financial instrument’s external or internal credit rating (if available);

– an actual or expected significant deterioration in the operating results of the debtor; and

– existing or forecast changes in the market, economic or legal environment that have a significant adverse effect on the debtor’s ability to meet its obligation to the Group.

Depending on the nature of the financial instruments, the assessment of a significant increase in credit risk is performed on either an individual basis or a collective basis. When the assessment is performed on a collective basis, the financial instruments are grouped based on shared credit risk characteristics, such as past due status and credit risk ratings.

ECLs are remeasured at each reporting date to reflect changes in the financial instrument’s credit risk since initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profit or loss. The Group recognises an impairment gain or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

Basis of calculation of interest income

Interest income recognised in accordance with Note 2(p) is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit-impaired, in which case interest income is calculated based on the amortised cost (i.e. the gross carrying amount less loss allowance) of the financial asset.

At each reporting date, the Group assesses whether a financial asset is credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable events:

– significant financial difficulties of the debtor;

– a breach of contract, such as a default or delinquency in payments;

– it becoming probable that the borrower will enter into bankruptcy or other financial reorganisation; or

– significant changes in the market, economic or legal environment that have an adverse effect on the debtor.

Write-off policy

The gross carrying amount of a financial asset or contract asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.

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Subsequent recoveries of an asset that was previously written off are recognised as a reversal of impairment in profit or loss in the period in which the recovery occurs.

(ii) Impairment of other assets

Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired or, an impairment loss previously recognised no longer exists or may have decreased:

– drama series copyrights;

– property, plant and equipment; and

– an investment in a subsidiary in the Company’s statement of financial position.

If any such indication exists, the asset’s recoverable amount is estimated.

– Calculation of recoverable amount

The recoverable amount of an asset is the greater of its fair value less costs of disposal 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 assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

– Recognition of impairment losses

An impairment loss is recognised in profit or loss if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs of disposal (if measurable) or value in use (if determinable).

– Reversals of impairment losses

An impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior periods. Reversals of impairment losses are credited to profit or loss in the period in which the reversals are recognised.

(g) Drama series copyrights

Drama series copyrights comprise the (i) distribution rights and copyrights of drama series and (ii) script copyrights, either acquired or produced by the Group. Drama series copyrights are stated at cost less accumulated amortisation and impairment losses (see Note 2(f)). Costs of drama series copyrights comprise consideration payable upon acquisition of drama series and/or costs/expenses incurred during the production of drama series. Script copyrights are stated at cost less impairment losses (see Note 2(f)).

The amortisation of drama series copyrights is determined using the drama series forecast computation method. Under this method, the amount of amortisation is determined based on the proportion of the revenue recognised in the reporting period for each individual drama series to the estimated total revenue expected to be recognised throughout the life cycle of the drama series.

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(h) Contract assets and contract liabilities

A contract asset is recognised when the Group recognises revenue (see Note 2(p)) before being unconditionally entitled to the consideration under the payment terms set out in the contract. Contract assets are assessed for ECLs in accordance with the policy set out in Note 2(f) and are reclassified to receivables when the right to the consideration has become unconditional (see Note 2(i)).

A contract liability is recognised when the customer pays consideration before the Group recognises the related revenue (see Note 2(p)). A contract liability would also be recognised if the Group has an unconditional right to receive consideration before the Group recognises the related revenue. In such cases, a corresponding receivable would also be recognised (see Note 2(i)).

For a single contract with the customer, either a net contract asset or a net contract liability is presented. For multiple contracts, contract assets and contract liabilities of unrelated contracts are not presented on a net basis.

When the contract includes a significant financing component, the contract balance includes interest accrued under the effective interest method (see Note 2(p)).

(i) Trade and other receivables

A receivable is recognised when the Group has an unconditional right to receive consideration. A right to receive consideration is unconditional if only the passage of time is required before payment of that consideration is due. If revenue has been recognised before the Group has an unconditional right to receive consideration, the amount is presented as a contract asset (see Note 2(h)).

Receivables are stated at amortised cost using the effective interest method less allowance for credit losses (see Note 2(f)).

(j) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. Cash and cash equivalents are assessed for ECL in accordance with the policy set out in Note 2(f).

(k) Trade and other payables

Trade and other payables are initially recognised at fair value. Trade and other payables are subsequently stated at amortised cost using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost.

(l) Interest-bearing borrowings

Interest-bearing borrowings are measured initially at fair value less transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method. Interest expense is recognised in accordance with the Group’s accounting policy for borrowing costs (see Note 2(r)).

(m) Employee benefits

(i) Short-term employee benefits and contributions to defined contribution retirement plans

Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the period in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

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(ii) Share-based payments

The fair value of shares granted to employees is recognised as an employee cost with a corresponding increase in equity. The fair value is measured at grant date.

(iii) Termination benefits

Termination benefits are recognised at the earlier of when the Group can no longer withdraw the offer of those benefits and when it recognises restructuring costs involving the payment of termination benefits.

(n) Income tax

Income tax for the period comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in profit or loss except to the extent that they relate to business combinations, items recognised in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognised in other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous periods.

Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised.

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

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Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

– in the case of current tax assets and liabilities, the Group intends either to settle on a net basis, or to realises the asset and settle the liability simultaneously; or

– in the case of deferred tax assets and liabilities, if they relate to income tax levied by the same taxation authority on either:

– the same taxable entity; or

– different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net basis or realise and settle simultaneously.

(o) Provisions and contingent liabilities

Provisions are recognised when the Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate 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.

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 events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(p) Revenue and other income

Income is classified by the Group as revenue when it arises from the sale of goods or the provision of services in the ordinary course of the Group’s business.

Revenue is recognised when control over a product or service is transferred to the customer at the amount of promised consideration to which the Group is expected to be entitled, excluding those amounts collected on behalf of third parties. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.

Further details of the Group’s revenue and other income recognition policies are as follows:

(i) Revenue from distribution and licensing of broadcasting rights of drama series

Revenue from distribution and licensing of broadcasting right of drama series to the customer is recognised when the drama series materials are made available to the customer.

(ii) Sale of script copyrights

Revenue from the sale of script copyright is recognised when the title and copy of script copyright are transferred to the customer.

(iii) Revenue from distribution agency services

Revenue from distribution agency service is recognised when the service is rendered.

(iv) Revenue from distribution and licensing of broadcasting rights under co-financing arrangements

Revenue from distribution and licensing of broadcasting right under co-financing arrangement relates to investment in drama series as non-executive producer. Revenue under such arrangement is recognised when the drama series materials are made available to the customer of the executive producer.

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(v) Interest income

Interest income is recognised as it accrues using the effective interest method. For financial assets measured at amortised cost that are not credit-impaired, the effective interest rate is applied to the gross carrying amount of the asset. For credit-impaired financial assets, the effective interest rate is applied to the amortised cost (i.e. gross carrying amount net of loss allowance) of the asset (see Note 2(f)).

(vi) Government grants

Government grants are recognised in the statement of financial position initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognised as other income in profit or loss on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are recognised as deferred income and subsequently recognised in profit or loss on a systematic basis over the useful life of the asset.

(q) Translation of foreign currencies

Foreign currency transactions during the period are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the end of the reporting period. Exchange gains and losses are recognised in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. The transaction date is the date on which the Group initially recognises such non-monetary assets or liabilities.

The results of foreign operations are translated into RMB, the Group’s presentation currency, at the exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Statement of financial position items are translated into RMB at the closing foreign exchange rates at the end of the reporting period. The resulting exchange differences are recognised in other comprehensive income and accumulated separately in equity in the exchange reserve.

(r) Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of that asset. Other borrowing costs are expensed in the period in which they are incurred.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete.

(s) 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.

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(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.

(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 party.

(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).

(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the Group’s parent.

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.

(t) Segment reporting

Operating segments, and the amounts of each segment item reported in the Historical Financial Information, are identified from the financial information provided regularly to the Group’s most senior executive management for the purposes of allocating resources to, and assessing the performance of, the Group’s various lines of business and geographical locations.

Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

3 ACCOUNTING JUDGEMENTS AND ESTIMATES

Key sources of estimation uncertainty are as follows:

(a) Expected credit losses for receivables

The credit losses for trade and other receivables are based on assumptions about the expected loss rates. The Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. For details of the key assumptions and inputs used, see Note 22(a). Changes in these assumptions and estimates could materially affect the result of the assessment and the Group may make additional loss allowances in future periods.

(b) Amortisation of drama series copyrights

Drama series copyrights are amortised by using the drama series forecast computation method, of which the amount is determined based on the proportion of the revenue recognised in the reporting period for each individual drama series to the estimated total revenue expected to be recognised throughout the life cycle of the drama series.

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The management of the Group reviews the estimated total revenue throughout the life cycle of the drama series regularly in order to determine the amount of amortisation expenses to be recorded during any reporting period. The determination of the estimated total revenue is based on historical experience with similar drama series. The amortisation expenses for future periods are adjusted if there are significant changes from previous estimates.

If circumstances indicated that the carrying amount of a drama series copyright may not be recoverable, the drama series copyright may be considered “impaired”, and an impairment loss may be recognised in accordance with accounting policy for impairment of drama series copyrights as described in Note 2(f). Drama series copyrights are tested for impairment periodically or whenever the events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced to the recoverable amount. The recoverable amount is the greater of the fair value less costs of disposal and value in use. In determining the value in use, expected future cash flows generated by the drama series copyright are discounted to their present value, which requires significant judgement relating to the level of revenue to be generated over the life cycle of the drama series copyright. The Group uses all readily available information in determining an amount that is a reasonable approximation of the recoverable amount, including estimates based on reasonable and supportable assumptions and projections of the level of revenue to be generated over the life cycle of the drama series copyright. Changes in these estimates could have a significant impact on the recoverable amount of drama series copyrights and could result in additional impairment charge or reversal of impairment in future periods.

(d) Recognition of deferred tax assets

Deferred tax assets in respect of deductible temporary differences are recognised and measured based on the expected manner of realisation or settlement of the carrying amount of the assets, using tax rates enacted or substantively enacted at the end of the reporting period. In determining the carrying amounts of deferred tax assets, expected taxable profits are estimated which involves a number of assumptions relating to the future operating performance of the Group and requires a significant level of judgement exercised by the management. Any change in such assumptions and judgement would affect the carrying amounts of deferred tax assets to be recognised in future periods.

4 REVENUE AND SEGMENT REPORTING

(a) Revenue

The Group is principally engaged in the production, distribution and licensing of broadcasting rights of drama series. All of the Group’s revenue was recognised at a point in time during the Track Record Period.

Disaggregation of revenue

Disaggregation of revenue from contracts with customers by major products or service lines are as follows: Years ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Revenue from the distribution and licensing of broadcasting rights for self-produced drama series . 13,686 7,031 88,982 Revenue from the distribution and licensing of broadcasting rights for outright-purchased drama series ...... 345,363 375,724 278,588 Revenue from the distribution and licensing of broadcasting rights under co-financing arrangements ...... – 3,112 13,968 Revenue from the provision of distribution agency services ...... – – 9,458 Revenue from the sales of script copyrights ...... 19,689 – –

378,738 385,867 390,996

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During the Track Record Period, the Group’s customers with whom transactions have exceeded 10% of the Group’s revenue in the respective years are set out below:

Years ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Customer A ...... 59,823 * * Customer C ...... 107,290 86,292 * Customer F...... 48,048 * * Customer G ...... 42,678 * * Customer I ...... * 148,218 * Customer J ...... * 51,766 42,526 Customer M ...... * * 160,625 Customer N ...... * * 42,275

* Transactions with these customers did not exceed 10% of the Group’s revenue in the respective years.

Details of credit risks of the Group are set out in Note 22(a).

(b) Segment reporting

The Group manages its businesses by products and services. In a manner consistent with the way in which information is reported internally to the Group’s most senior executive management for the purposes of resource allocation and performance assessment, the Group has presented the following three reportable segments.

• Self-produced drama series: this segment includes primarily the production, distribution and licensing of broadcasting rights of self-production drama series.

• Outright-purchased drama series: this segment includes primarily the acquisition, distribution and licensing of broadcasting rights of outright-purchased drama series.

• Others: this segment includes miscellaneous revenue streams such as distribution and licensing of broadcasting rights of drama series under co-financing arrangements, acquisition and sale of script copyrights, and provision of distribution agency services.

(i) Segment results

For the purposes of assessing segment performance and allocating resources, the Group’s most senior executive management monitors the results attributable to each reportable segment on the following bases:

Revenue and expenses are allocated to the reportable segments with reference to revenue generated by those segments and the expenses incurred by those segments. The measure used for reporting segment result is gross profit. No inter-segment sales have occurred during the Track Record Period. Assistance provided by one segment to another, including sharing of assets and technical know-how, is not measured.

The Group’s other operating income and expenses, such as other income, selling and marketing expenses, administrative expenses, and finance costs, and assets and liabilities are not measured under individual segments. Accordingly, neither information on segment assets and liabilities nor information concerning capital expenditure, interest income and interest expenses is presented.

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Information regarding the Group’s reportable segments as provided to the Group’s most senior executive management for the purposes of resource allocation and assessment of segment performance during the Track Record Period is set out below.

Year ended 31 December 2017 Self- Outright- produced purchased drama drama series series Others Total RMB’000 RMB’000 RMB’000 RMB’000

Revenue from external customers . . 13,686 345,363 19,689 378,738

Reportable segment gross profit . . . 4,468 67,507 4,010 75,985

Year ended 31 December 2018 Self- Outright- produced purchased drama drama series series Others Total RMB’000 RMB’000 RMB’000 RMB’000

Revenue from external customers . . 7,031 375,724 3,112 385,867

Reportable segment gross profit . . . 4,928 94,276 301 99,505

Year ended 31 December 2019 Self- Outright- produced purchased drama drama series series Others Total RMB’000 RMB’000 RMB’000 RMB’000

Revenue from external customers . . 88,982 278,588 23,426 390,996

Reportable segment gross profit . . . 28,243 103,355 9,536 141,134

(ii) Geographic information

The Group generated all revenue in the PRC and its non-current assets are substantially located in the PRC, and accordingly, no analysis of geographic information is presented.

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5 OTHER INCOME

Years ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Government grants ...... 2,553 1,790 3,163 Interest income from: – cash at bank ...... 56 54 49 – loans to third parties ...... 503 2,442 837 Others ...... – – 20

3,112 4,286 4,069

6 PROFIT BEFORE TAXATION

Profit before taxation is arrived at after charging/(crediting):

(a) Finance costs

Years ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Interest expenses on: – bank and other loans ...... 6,266 12,817 7,761 – lease liabilities...... 130 99 62

6,396 12,916 7,823 Less: interest expenses capitalised into drama series copyrights* ...... (1,384) (2,794) (3,054)

5,012 10,122 4,769

* The borrowing costs have been capitalised at rates of 22.9%, 11.0% and 12.9% for each of the years ended 31 December 2017, 2018 and 2019 respectively.

(b) Staff costs

Years ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Salaries, wages and other benefits ...... 3,484 5,407 7,752 Contributions to defined contribution retirement plans ...... 407 623 812

3,891 6,030 8,564

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The employees of the subsidiaries of the Group established in the PRC (other than Hong Kong) participate in defined contribution retirement benefit plans managed by the local government authorities. Employees of these subsidiaries are entitled to retirement benefits, calculated based on a percentage of the average salaries level in the PRC (other than Hong Kong), from the above mentioned retirement plans at their normal retirement age.

The Group has no further material obligation for payment of other retirement benefits beyond the above contributions.

Years ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Depreciation expenses (Note 11): – owned property, plant and equipment ...... 592 717 1,049 – right-of-use assets ...... 816 948 959 Impairment losses on trade and other receivables (Notes 13 and 14) ...... 2,212 8,015 28,287 Operating lease expenses relating to short-term leases and leases of low-value assets ...... 86 247 377 Auditors’ remuneration: – statutory audit services ...... 144 145 145 – services in connection with the proposed initial [REDACTED] of the Company’s shares ...... – – 2,342

Cost of drama series copyrights (Note 12) ...... 150,692 153,770 186,320

7 INCOME TAX IN THE CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

(a) Taxation in the consolidated statements of profit or loss and other comprehensive income represent:

Years ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Current taxation (Note 20(a)) Provision for the year ...... 5,989 4,157 9,590

Deferred taxation (Note 20(b)) Origination and reversal of temporary differences . . . (688) (1,920) (7,255)

5,301 2,237 2,335

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(b) Reconciliations between tax expenses and accounting profits at applicable tax rates:

Years ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Profit before taxation ...... 62,061 69,843 79,369

Expected tax on profit before taxation, calculated at the rates applicable to profits in the jurisdictions concerned (Notes (i), (ii) and (iii)) ...... 15,515 17,461 19,842 Tax effect of non-deductible expenses ...... 14 181 3,607 Tax effect on preferential tax rate (Note (iv)) ...... (10,239) (15,464) (21,190) Tax effect of unused tax losses not recognised ...... 11 59 76

Income tax ...... 5,301 2,237 2,335

Notes:

(i) The Company and the subsidiaries of the Group incorporated in the BVI are not subject to any income tax pursuant to the rules and regulations of their respective countries of incorporation.

(ii) No provision for Hong Kong Profits Tax has been made, as the subsidiary of the Group incorporated in Hong Kong did not have assessable profits which are subject to Hong Kong Profits Tax during the Track Record Period.

(iii) The subsidiaries of the Group established in the PRC (excluding Hong Kong) are subject to PRC Corporate Income Tax rate of 25% during the Track Record Period.

(iv) In accordance with the income tax rules and regulations in the PRC, entities newly established in the Xinjiang Kashi/Horgos special economic areas during the years from 2010 to 2020 can enjoy full exemption on PRC Corporate Income Tax for five years starting from the year in which revenue was generated. The Group has established subsidiaries in the Xinjiang Kashi/Horgos special economic areas in 2017 and 2018, and accordingly, these subsidiaries are entitled to full exemption on PRC Corporate Income Tax from the calendar year of their respective establishments to the calendar year of 2020.

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8 DIRECTORS’ EMOLUMENTS

Details of emoluments of the directors of the Company during the Track Record Period are as follows:

Year ended 31 December 2017 Salaries, allowances Retirement Directors’ and benefits Discretionary scheme fees in kind bonuses contributions Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Executive directors MrYuanLi...... – 573 – 51 624 MsTianTian...... ––––– Ms Fu Jieyun ...... – 224 40 16 280

Non-executive director Mr Luo Jianxing ...... –––––

– 797 40 67 904

Year ended 31 December 2018 Salaries, allowances Retirement Directors’ and benefits Discretionary scheme fees in kind bonuses contributions Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Executive directors MrYuanLi...... – 841 – 55 896 MsTianTian...... ––––– Ms Fu Jieyun ...... – 211 50 26 287

Non-executive directors Mr Tang Zhiwei...... ––––– Mr Luo Jianxing ...... –––––

– 1,052 50 81 1,183

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Year ended 31 December 2019 Salaries, allowances Retirement Directors’ and benefits Discretionary scheme fees in kind bonuses contributions Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Executive directors MrYuanLi...... – 841 50 52 943 MsTianTian...... – 221 41 24 286 Ms Fu Jieyun ...... – 354 50 37 441

Non-executive directors MrYuYang...... ––––– Mr Tang Zhiwei...... ––––– Mr Luo Jianxing ...... –––––

– 1,416 141 113 1,670

On 17 June 2019, Mr Yuan Li was appointed as an executive director of the Company. On 27 September 2019, Ms Tian Tian and Ms Fu Jieyun were appointed as executive directors of the Company, and Mr Yu Yang, Mr. Tang Zhiwei and Mr Luo Jianxing were appointed as non-executive directors of the Company. On [●], Mr Teng Bingsheng, Mr. Liu Hanlin and Mr Gan Weimin were appointed as independent non-executive directors of the Company.

During the Track Record Period, no emoluments were paid by the Group to the directors as an inducement to join or upon joining the Group or as compensation for loss of office. No remuneration was paid to the independent non-executive directors during the Track Record Period.

9 INDIVIDUALS WITH HIGHEST EMOLUMENTS

During the Track Record Period, of the five individuals with the highest emoluments, two, two and three are directors for each of the years ended 31 December 2017, 2018 and 2019 respectively, whose emoluments are disclosed in Note 8. The aggregate of the emoluments in respect of the remaining individuals during the Track Record Period are as follows:

Years ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Salaries and other emoluments ...... 465 686 534 Discretionary bonus ...... 66 115 90 Retirement scheme contributions ...... 86 123 91

617 924 715

The emoluments of the individuals who are not directors and who are amongst the five highest paid individuals of the Group are within the following band:

Years ended 31 December 2017 2018 2019 Number of Number of Number of individuals individuals individuals

HK$Nil to HK$1,000,000 ...... 3 3 2

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During the Track Record Period, no emoluments were paid by the Group to the above individuals as an inducement to join or upon joining the Group or as compensation for loss of office.

10 EARNINGS PER SHARE

No earnings per share information is presented as its inclusion, for the purpose of this report, is not considered meaningful due to the Corporate Reorganisation and the preparation of the financial performance for the Track Record Period using the basis of preparation as disclosed in Note 1 above.

11 PROPERTY, PLANT AND EQUIPMENT

Office equipment Right-of- and others use assets Total RMB’000 RMB’000 RMB’000

Cost: At 1 January 2017 ...... 2,872 3,605 6,477 Additions ...... 346 351 697

At 31 December 2017 ...... 3,218 3,956 7,174 Additions ...... 1,945 – 1,945

At 31 December 2018 ...... 5,163 3,956 9,119 Additions...... 280 441 721 Disposals ...... – (351) (351)

At 31 December 2019 ...... 5,443 4,046 9,489 ------

Accumulated depreciation: At 1 January 2017 ...... (457) (515) (972) Charge for the year ...... (592) (816) (1,408)

At 31 December 2017 ...... (1,049) (1,331) (2,380) Charge for the year ...... (717) (948) (1,665)

At 31 December 2018 ...... (1,766) (2,279) (4,045) Charge for the year ...... (1,049) (959) (2,008) Written back on disposals ...... – 351 351

At 31 December 2019 ...... (2,815) (2,887) (5,702) ------

Carrying amount: At 31 December 2017 ...... 2,169 2,625 4,794

At 31 December 2018 ...... 3,397 1,677 5,074

At 31 December 2019 ...... 2,628 1,159 3,787

Property, plant and equipment of the Group are located in the PRC.

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The carrying amounts of the Group’s right-of-use assets represented leases entered into by the Group for office premises for its own use, where the lease terms are ranged from two to five years. Further details on lease liabilities are set out in Note 19.

12 DRAMA SERIES COPYRIGHTS

At 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Self-produced drama series: – under production ...... 8,703 41,215 21,691 – with production completed ...... 73,614 92,883 74,784 82,317 134,098 96,475 Outright-purchased drama series ...... 78 5,123 24,024 Co-financed drama series: – with production completed ...... – 13,988 32,363 Script copyrights ...... 19,868 16,189 26,151

102,263 169,398 179,013

At 31 December 2017, 2018 and 2019, the amounts of drama series copyrights that are expected to be recognised in profit or loss after more than one year are RMB44,600,000, RMB35,400,000 and RMB38,289,000, respectively. Other than the above, the remaining drama series copyrights are expected to be recognised in profit or loss within one year.

Movements of drama series copyrights are set out below:

Years ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Balance at the beginning of the year ...... 65,169 102,263 169,398 Additions ...... 187,786 220,905 195,935 Recognised in cost of sales (Note 6(c)) ...... (150,692) (153,770) (186,320)

Balance at the end of the year ...... 102,263 169,398 179,013

13 TRADE AND BILLS RECEIVABLES

At 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Trade receivables ...... 196,196 386,473 552,462 Less: loss allowance (Note 13(b)) ...... (3,465) (11,481) (39,713)

192,731 374,992 512,749 Bills receivables ...... 1,333 1,252 18,195

194,064 376,244 530,944

All of the trade and bills receivables are expected to be recovered within one year.

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(a) Ageing analyses

The ageing analyses of trade and bills receivables, based on the date revenue is recognised and net of loss allowance, of the Group are as follows:

At 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Within 3 months ...... 76,604 55,588 141,613 3 to 6 months ...... 38,721 126,937 14,427 6 to 12 months ...... 52,724 102,014 167,570 1 to 2 years ...... 25,713 79,347 148,129 2 to 3 years ...... 302 12,358 59,205

194,064 376,244 530,944

Further details on the Group’s credit policy and credit risk are set out in Note 22(a).

(b) Impairment of trade and bills receivables

The movements in the loss allowance account during the Track Record Period are as follows:

Years ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

At 1 January ...... 1,253 3,465 11,481 Impairment losses recognised ...... 2,212 8,016 28,232

At 31 December ...... 3,465 11,481 39,713

(c) At 31 December 2017, 2018 and 2019, the Group has pledged RMB68,379,000, RMB63,249,000 and RMB36,965,000 of trade receivables, respectively, for loans from banks and third parties (see Note 18).

(d) At 31 December 2017, 2018 and 2019, the Group has discounted certain bills it received at banks, and endorsed certain bills it received to its suppliers and other creditors for settlement of the Group’s trade payables on a full recourse basis. Upon the above discounting or endorsement, the Group has not derecognised the bills receivables as the Group remains to have a significant exposure to the credit risk of these bills receivables. The carrying amounts of the associated bank loans and trade payables amounted to RMBNil, RMB100,000 and RMB6,714,000 at 31 December 2017, 2018 and 2019, respectively.

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14 PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

At 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Prepayments for productions of drama series ...... 28,032 16,459 13,654 Loans to third parties (Note (ii))...... 15,000 20,000 – VAT recoverable ...... 4,212 12,866 17,523 Prepayments for costs incurred in connection with the proposed [REDACTED] of the Company’s shares (Note (i)) – 150 4,076 Others ...... 1,283 3,709 492

48,527 53,184 35,745 Less: loss allowance ...... (3) (2) (57)

48,524 53,182 35,688

All of the prepayments, deposits and other receivables are expected to be recovered and recognised as expenses within one year.

Notes:

(i) The balance will be transferred to the share premium account within equity upon the [REDACTED]of the Company’s shares on the Stock Exchange.

(ii) The balances represent loans granted by the Group to third-party executive producers with fixed repayment terms and bear interest at rates ranged from 10% to 20% per annum.

15 CASH AT BANK AND ON HAND

(a) Cash at bank and on hand in the consolidated statements of financial position comprise:

At 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Cash at bank ...... 22,655 14,956 89,677 Cash on hand ...... 399 31 24

Cash at bank and on hand included in the consolidated statements of financial position . . 23,054 14,987 89,701 Less: restricted deposits (Note (i))...... (60) – (7,961)

Cash and cash equivalents included in the consolidated cash flow statements ...... 22,994 14,987 81,740

The Group’s operations in the PRC (excluding Hong Kong) conducted its business in RMB. RMB is not a freely convertible currency and the remittance of funds out of the PRC (excluding Hong Kong) is subject to the exchange restrictions imposed by the PRC government.

Note:

(i) Restricted deposits represent deposits placed at banks as collaterals for bank and other loans (see Note 18) of the Group.

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(b) Reconciliations of liabilities/(assets) arising from financing activities

The tables below detail changes in the Group’s liabilities/(assets) from financing activities, including both cash and non-cash changes. Liabilities/(assets) arising from financing activities are liabilities/(assets) for which cash flows were, or future cash flows will be, classified in the Group’s consolidated cash flow statements as cash flows from financing activities. Prepayments for costs incurred in connection with the proposed [REDACTED] of the Bank and Interest Lease Company’s other loans payables liabilities shares Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 18) (Note 17) (Note 19) (Note 14)

At 1 January 2017...... 32,400 2,164 2,863 – 37,427 ------Changes from financing cash flows: Proceeds from bank and other loans...... 93,352 – – – 93,352 Repayment of bank and other loans ...... (37,755) – – – (37,755) Interest paid ...... – (4,745) – – (4,745) Capital element of lease rentals paid ...... – – (817) – (817) Interest element of lease rentals paid ...... – – (130) – (130)

Total changes from financing cash flows . . . 55,597 (4,745) (947) – 49,905 ------Other changes: Net increase in lease liabilities ...... – – 351 – 351 Interest expenses (Note 6(a))...... – 6,266 130 – 6,396

Total other changes ...... – 6,266 481 – 6,747 ------At 31 December 2017 ...... 87,997 3,685 2,397 – 94,079

At 1 January 2018...... 87,997 3,685 2,397 – 94,079 ------Changes from financing cash flows: Proceeds from bank and other loans...... 99,020 – – – 99,020 Repayment of bank and other loans ...... (80,017) – – – (80,017) Prepayments for costs incurred in connection with the proposed [REDACTED] of the Company’s shares . . – – – (150) (150) Interest paid ...... – (9,051) – – (9,051) Capital element of lease rentals paid ...... – – (982) – (982) Interest element of lease rentals paid ...... – – (99) – (99)

Total changes from financing cash flows . . . 19,003 (9,051) (1,081) (150) 8,721 ------Other changes: Interest expenses (Note 6(a))...... – 12,817 99 – 12,916 ------At 31 December 2018 ...... 107,000 7,451 1,415 (150) 115,716

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Prepayments for costs incurred in connection with the proposed [REDACTED] of the Bank and Interest Lease Company’s other loans payables liabilities shares Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 18) (Note 17) (Note 19) (Note 14)

At 1 January 2019...... 107,000 7,451 1,415 (150) 115,716 ------Changes from financing cash flows: Proceeds from bank and other loans...... 101,891 – – – 101,891 Repayment of bank and other loans ...... (152,230) – – – (152,230) Prepayments for costs incurred in connection with the proposed [REDACTED] of the Company’s shares . . – – – (3,926) (3,926) Interest paid ...... – (9,818) – – (9,818) Capital element of lease rentals paid ...... – – (1,091) – (1,091) Interest element of lease rentals paid ...... – – (62) – (62)

Total changes from financing cash flows . . . (50,339) (9,818) (1,153) (3,926) (65,236) ------Other changes: Net increase in lease liabilities ...... – – 441 – 441 Interest expenses (Note 6(a))...... – 7,761 62 – 7,823

Total other changes ...... – 7,761 503 – 8,264 ------At 31 December 2019 ...... 56,661 5,394 765 (4,076) 58,744

16 TRADE PAYABLES At 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Payables for productions and acquisitions of drama series ...... 93,111 178,267 294,975

All of the trade payables are expected to be settled within one year or are repayable on demand.

The ageing analyses of trade payables, based on the transaction date, are as follows: At 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Within 3 months ...... 80,590 114,426 134,820 3 to 6 months ...... – 43,536 2,260 6 to 12 months ...... 12,521 4,243 45,010 1 to 2 years ...... – 16,062 103,925 more than 2 years ...... – – 8,960

93,111 178,267 294,975

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17 OTHER PAYABLES AND ACCRUED EXPENSES At 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Payables to co-investors of drama series under co-financing arrangements ...... 7,829 47,926 122,558 Interest payables ...... 3,685 7,451 5,394 Payables for staff related costs...... 760 1,597 2,473 Payables for other taxes ...... 1,400 13,103 19,566 Payables for costs incurred in connection with the proposed [REDACTED] of the Company’s shares ...... – 448 245

Financial liabilities measured at amortised cost ...... 13,674 70,525 150,236 Receipts in advance ...... 233 1,600 –

13,907 72,125 150,236

All of the other payables and accrued expenses are expected to be settled or recognised as income within one year or are repayable on demand.

18 BANK AND OTHER LOANS

The Group’s short-term bank and other loans are analysed as follows: At 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Bank loans: – Guaranteed by a subsidiary of the Group ...... 8,740 – – – Guaranteed by a subsidiary of the Group and related parties (Note (i)) ...... 15,000 20,000 – – Secured by the Group’s trade and bills receivables and restricted deposits (Note (ii)) ...... 57 – 27,793

23,797 20,000 27,793 ------Other loans from third parties: – Secured by the Group’s trade and bills receivables (Note (ii)) ...... 30,000 30,000 – – Unsecured and unguaranteed (Note (iii)) ...... 34,200 57,000 28,868

------64,200------87,000------28,868

87,997 107,000 56,661

Notes:

(i) These bank loans were guaranteed by LiTian Media, Mr Yuan Li and Ms Tian Tian. These guarantees had been released upon the repayment of the related bank loans.

(ii) At 31 December 2017, 2018 and 2019, the aggregate amounts of deposits and trade and bills receivables pledged are RMB68,439,000, RMB63,249,000 and RMB51,166,000, respectively.

(iii) The balances represent loans from third-party non-executive producers with fixed repayment terms and bear interest at rates ranged from 9% to 25% per annum.

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19 LEASE LIABILITIES

The following tables show the remaining contractual maturities of the Group’s lease liabilities at the end of each reporting period:

At 31 December 2017 2018 2019 Present Present Present value of the Total value of the Total valueofthe Total minimum minimum minimum minimum minimum minimum lease lease lease lease lease lease payments payments payments payments payments payments RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Within1year...... 982 1,081 978 1,032 650 681 ------

After 1 year but within 2 years ...... 978 1,032 437 449 115 117 After 2 years but within 5 years ...... 437 449 ––––

1,415 1,481 437 449 115 117 ------

2,397 2,562 1,415 1,481 765 798

Less: total future interest expenses...... (165) (66) (33)

Present value of lease liabilities ...... 2,397 1,415 765

20 INCOME TAX IN THE CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(a) Current taxation in the consolidated statements of financial position represent:

Years ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Net balance of income tax payable at 1 January .... 6,574 6,034 7,139 Provision for the year (Note 7(a)) ...... 5,989 4,157 9,590 Income tax paid ...... (6,529) (3,052) (3,041)

Net balance of income tax payable at 31 December . 6,034 7,139 13,688

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(b) Deferred tax assets recognised

The deferred tax assets recognised in the consolidated statements of financial position and the movements during the Track Record Period are as follows:

Credit loss Deferred tax assets arising from: allowance Accruals Total RMB’000 RMB’000 RMB’000

At 1 January 2017 ...... 315 276 591

Credited to the consolidated statement of profit or loss (Note 7(a))...... 553 135 688

At 31 December 2017 and 1 January 2018 ...... 868 411 1,279

Credited/(charged) to the consolidated statement of profit or loss (Note 7(a)) ...... 2,004 (84) 1,920

At 31 December 2018 and 1 January 2019 ...... 2,872 327 3,199

Credited to the consolidated statement of profit or loss (Note 7(a))...... 7,072 183 7,255

At 31 December 2019 ...... 9,944 510 10,454

In accordance with the accounting policy set out in Note 2(n), certain subsidiaries of the Group have not recognised deferred tax assets in respect of cumulative tax losses of RMB2,579,000, RMB2,816,000 and RMB3,120,000 at 31 December 2017, 2018 and 2019, respectively, as it is not probable that future taxable profits against which the losses can be utilised will be available in the relevant entities. The cumulative tax losses comprised tax losses arose from various years, and each year’s tax loss can only be carried forward for five years.

(d) Deferred tax liabilities not recognised

At 31 December 2017, 2018 and 2019, taxable temporary differences relating to the retained profits of the Group’s subsidiaries established in the PRC (excluding Hong Kong) amounted to RMB42,162,000, RMB100,595,000 and RMB172,282,000, respectively, where no deferred tax liabilities in respect of the PRC withholding tax that would be payable on the distributions of these profits were recognised as the Company controls the dividend policy of these subsidiaries and it has been determined that it is probable that such profits will not be distributed in the foreseeable future.

21 CAPITAL, RESERVES AND DIVIDENDS

(a) Movements in components of equity

The reconciliations between the opening and closing balances of each component of the Group’s consolidated equity during the Track Record Period are set out in the consolidated statements of changes in equity.

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Details of the changes of the Company’s individual component of equity are set out below:

Share capital RMB’000 (Note 21(b))

At 17 June 2019 (date of incorporation) ...... –

Issuance of shares (Note 21(b)) ...... 90

At 31 December 2019 ...... 90

(b) Share capital

The share capital at 31 December 2019 represented the issued share capital of the Company, comprising 10,000,000 shares at HK$0.01 each.

The Company was incorporated in the Cayman Islands as an exempted company with limited liability on 17 June 2019. Its initial authorised share capital was HK$380,000 divided into 38,000,000 shares with a par value of HK$0.01 each. Upon incorporation, one share was allotted and issued. On 30 September 2019 and 17 October 2019, additional 999,999 shares and 9,000,000 shares were allotted and issued at par value.

Other reserve mainly comprised (i) the paid-in capital and other reserves of a PRC subsidiary of the Group, LiTian TV & Film, and (ii) the portion of the grant date fair value of equity interests in LiTian TV & Film granted to employees of the Group in excess of the proportion of paid-in capital of LiTian TV & Film these employees entitled to which had been recognised in 2015.

(d) Dividends

No dividends were paid by the Group during the Track Record Period. The Company did not declare and pay any dividends since its incorporation. The directors of the Company consider that the dividends made, if any, during the Track Record Period is not indicative of the future dividend policy of the Group.

(e) Capital management

The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost.

The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholders returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.

22 FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS

Exposure to credit, liquidity and interest rate risks arises in the normal course of the Group’s business.

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The Group’s exposure to these risks and the financial risk management policies and practices used by the Group to manage these risks are described below:

(a) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. The Group’s credit risk is primarily attributable to trade receivables. The Group’s exposure to credit risk arising from cash at bank and bills receivables is limited because the counterparties are banks and financial institutions with good credit standing, for which the Group considers to have low credit risk. The Group does not provide any other guarantees which would expose the Group to credit risk.

Trade receivables

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer rather than the industry in which the customers operate and therefore significant concentrations of credit risk primarily arise when the Group has significant exposure to individual customers. At 31 December 2017, 2018 and 2019, 22%, 32% and 20% of the total trade receivables was due from the Group’s largest trade debtor. At 31 December 2017, 2018 and 2019, 75%, 78% and 64% of the total trade receivables was due from the Group’s five largest trade debtors.

Individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customer’s past history of making payments when due and current ability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. Payment terms varies under the Group’s contracts with each customer, and are negotiated on an individual contract basis. For the distribution and licensing of the broadcasting rights of drama series, the total consideration of each contract is settled by instalments with reference to the point in time when the drama series materials are delivered and/or the commencement of the broadcasting of the drama series. Generally, the full payment cycle will span over a period of six months to two years. For the Group’s other sources of revenue, credit term of 60 days is generally granted to customers. Normally, the Group does not obtain collateral from customers.

The Group measures loss allowances for trade receivables at an amount equal to lifetime ECLs, which is calculated using a provision matrix. As the Group’s historical credit loss experience does not indicate significantly different loss patterns for different customer segments, the loss allowance based on past due status is not further distinguished between the Group’s different customer bases.

The following tables provide information about the Group’s exposure to credit risk and ECLs for trade receivables at 31 December 2017, 2018 and 2019:

At 31 December 2017 Gross Expected carrying Loss loss rate amount allowance % RMB’000 RMB’000

Current (not past due) ...... 0.2% 119,268 260 Less than 3 months past due ...... 0.5% 41,209 209 More than 3 months but less than 6 months past due ..... 1.4% 3,291 45 More than 6 months but less than 9 months past due ..... 4.2% 7,385 309 More than 9 months but less than 12 months past due .... 9.3% 1,332 124 More than 12 months but less than 24 months past due . . . 10.3% 23,280 2,389 More than 24 months but less than 36 months past due . . . 30.0% 431 129

196,196 3,465

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At 31 December 2018 Gross Expected carrying Loss loss rate amount allowance % RMB’000 RMB’000

Current (not past due) ...... 0.7% 101,619 761 Less than 3 months past due ...... 0.8% 54,283 408 More than 3 months but less than 6 months past due ..... 0.9% 120,569 1,086 More than 6 months but less than 9 months past due ..... 2.3% 41,325 942 More than 9 months but less than 12 months past due .... 4.2% 39,956 1,680 More than 12 months but less than 24 months past due . . . 14.1% 12,621 1,774 More than 24 months but less than 36 months past due . . . 30.0% 16,100 4,830

386,473 11,481

At 31 December 2019 Gross Expected carrying Loss loss rate amount allowance % RMB’000 RMB’000

Current (not past due) ...... 1.0% 141,157 1,369 Less than 3 months past due ...... 1.2% 35,155 428 More than 3 months but less than 6 months past due ..... 1.6% 104,374 1,634 More than 6 months but less than 9 months past due ..... 2.4% 32,098 778 More than 9 months but less than 12 months past due .... 4.4% 62,595 2,770 More than 12 months but less than 24 months past due . . . 12.0% 157,727 18,974 More than 24 months but less than 36 months past due . . . 40.0% 9,331 3,735 More than 36 months past due ...... 100.0% 10,025 10,025

552,462 39,713

Expected loss rates are based on actual loss experience over the recent past years. These rates are adjusted to reflect differences between economic conditions during the period over which the historic data has been collected, current conditions and the Group’s view of economic conditions over the expected lives of the receivables.

(b) Liquidity risk

The Group’s policy is to regularly monitor its liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.

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The following tables show the remaining contractual maturities at the end of each reporting period of the Group’s non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the end of each reporting period) and the earliest dates the Group can be required to pay: At 31 December 2017 Contractual undiscounted cash outflow Within Over Over 1 year or 1 year but 2 years on within but within Carrying demand 2 years 5 years Total amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables ...... 93,111 – – 93,111 93,111 Other payables and accrued expenses measured at amortised cost ...... 13,674 – – 13,674 13,674 Bank and other loans ...... 98,897 – – 98,897 87,997 Lease liabilities ...... 1,081 1,032 449 2,562 2,397

206,763 1,032 449 208,244 197,179

At 31 December 2018 Contractual undiscounted cash outflow Within Over Over 1 year or 1 year but 2 years on within but within Carrying demand 2 years 5 years Total amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables ...... 178,267 – – 178,267 178,267 Other payables and accrued expenses measured at amortised cost ...... 70,525 – – 70,525 70,525 Bank and other loans ...... 118,377 – – 118,377 107,000 Lease liabilities ...... 1,032 449 – 1,481 1,415

368,201 449 – 368,650 357,207

At 31 December 2019 Contractual undiscounted cash outflow Within Over Over 1 year or 1 year but 2 years on within but within Carrying demand 2 years 5 years Total amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables ...... 294,975 – – 294,975 294,975 Other payables and accrued expenses measured at amortised cost ...... 150,236 – – 150,236 150,236 Bank and other loans ...... 65,154 – – 65,154 56,661 Lease liabilities ...... 681 117 – 798 765

511,046 117 – 511,163 502,637

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The Group’s interest rate risk arises primarily from interest-bearing borrowings. Borrowings issued at variable rates and at fixed rates expose the Group to cash flow interest rate risk and fair value interest rate risk respectively.

(i) Interest rate profile

The following tables detail the interest rate profile of the Group’s total borrowings at the end of each reporting period:

At 31 December 2017 At 31 December 2018 Effective Effective interest rate interest rate % RMB’000 % RMB’000

Fixed rate borrowings: – Bank and other loans . . . 10.00%-25.00% 64,200 11.50%-25.00% 87,000 – Lease liabilities ...... 4.75% 2,397 4.75% 1,415

66,597 88,415 Variable rate borrowings: – Bank and other loans . . . 5.22%-8.00% 23,797 9.00% 20,000

90,394 108,415

Fixed rate borrowings as a percentage of total borrowings ...... 74% 82%

At 31 December 2019 Effective interest rate % RMB’000

Fixed rate borrowings: – Bank and other loans . . . 4.05%-15.00% 56,661 – Lease liabilities ...... 4.75% 765

57,426 Variable rate borrowings: – Bank and other loans . . . –

57,426

Fixed rate borrowings as a percentage of total borrowings ...... 100%

(ii) Sensitivity analyses

At 31 December 2017, 2018 and 2019, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would have decreased/increased the Group’s profit after tax and retained profits by approximately RMB178,000, RMB150,000 and RMBNil, respectively.

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The sensitivity analyses above indicate the instantaneous change in the Group’s profit after tax and retained profits that would arise assuming that the change in interest rates had occurred at the end of each reporting period. The impact is estimated as an annualised impact on interest exposure of such a change in interest rates. The sensitivity analyses are performed on the same basis during the Track Record Period.

(d) Fair value measurement

Fair value of financial instruments carried at other than fair value

The carrying amounts of the Group’s financial instruments carried at cost or amortised cost are not materially different from their fair values at 31 December 2017, 2018 and 2019.

23 MATERIAL RELATED PARTY TRANSACTIONS

(a) Names and relationships of the related parties that had material transactions with the Group during the Track Record Period and balances with the Group at the end of each reporting period Name of related party Relationship

Mr Yuan Li (袁力) Controlling shareholder and director of the Company Ms Tian Tian (田甜) Controlling shareholder and director of the Company Ms Fu Jieyun (傅潔雲) Equity shareholder and director of the Company

(b) Transactions with related parties during the Track Record Period: Years ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Loans received from Mr Yuan Li...... 255 – 4,000 Loans repaid to Mr Yuan Li ...... 655 – 4,000 Loans received from Ms Fu Jieyun ...... 2,100 1,000 13,230 Loans repaid to Ms Fu Jieyun...... 2,200 1,000 13,230 Loans received from Ms Tian Tian ...... – – 5,000 Loans repaid to Ms Tian Tian ...... – – 5,000 Interest expenses on loans from Mr Yuan Li ...... 21 – 219 Interest expenses on loans from Ms Fu Jieyun ...... 13 1 384 Interest expenses on loans from Ms Tian Tian...... – – 268 Guarantees provided by related parties on the Group’s bank loans at the end of the reporting period (Note (18)) ...... 15,000 20,000 –

The above transactions will not continue after the [REDACTED] of the Company’s shares.

(c) Balances with related parties at the end of the reporting period At 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Included in other payables and accrued expenses (Note 17): Interest payable to: –MrYuanLi ...... 868 868 1,087 – Ms Fu Jieyun ...... 31 32 416 –MsTianTian...... – – 268

899 900 1,771

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The loans from related parties are non-trade purpose, which are unsecured and bear interest at 9% per annum, and are repayable within one year. The Group has repaid the loans from related parties and undertaken to repay the related interests prior to the [REDACTED] of the Company’s shares.

(d) Key management personnel remuneration

Remuneration for key management personnel of the Group, including amounts paid to the Company’s directors as disclosed in Note 8 and certain of the highest paid employees as disclosed in Note 9 during the Track Record Period, is as follows:

Years ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000

Short-term employee benefits ...... 837 1,102 1,557 Contributions to defined contribution retirement plans ...... 67 81 113

904 1,183 1,670

Total remuneration is included in “staff costs” (see Note 6(b)).

24 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE ACCOUNTING PERIOD BEGINNING ON 1 JANUARY 2019

Up to the date of issue of the Historical Financial Information, the IASB has issued a number of amendments, new standards and interpretations which are not yet effective for the accounting period beginning on 1 January 2019 and which have not been adopted in the Historical Financial Information.

Effective for accounting periods beginning on or after

Revised Conceptual Framework for Financial Reporting 2018 ...... 1January 2020 Amendments to IFRS 9, Financial instruments, IAS 39, Financial instruments: recognition and measurement, and IFRS 7, Financial instruments: disclosures, Interest rate benchmark reform ...... 1January 2020 Amendments to IFRS 3, Business Combination, Definition of a business ...... 1January 2020 Amendments to IAS 1, Presentation of financial statements, and IAS 8, Accounting policies, changes in accounting estimates and errors, Definition of a material ...... 1January 2020 IFRS 17, Insurance contracts ...... 1January 2021 Amendments to IAS 1, Presentation of financial statements, Classification of liabilities as current or non-current ...... 1January 2022 Amendments to IFRS 10 and IAS 28, Sale or contribution of assets between an investor and its associate or joint venture ...... Tobedetermined

The Group is in the process of making an assessment of what the impact of these developments is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the consolidated financial statements of the Group.

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25 IMMEDIATE AND ULTIMATE CONTROLLING PARTIES

The directors of the Company consider the immediate holding companies of the Company at 31 December 2019 to be Litian Century Media Co., Ltd., a company wholly-owned by Mr Yuan Li, and Marshal Investment Co. Ltd., a company wholly-owned by Ms Tian Tian, and the ultimate controlling parties to be Mr Yuan Li and Ms Tian Tian.

26 SUBSEQUENT EVENTS

(a) Capitalisation issue

Pursuant to the resolutions of the equity shareholders of the Company passed on [●] as detailed in the section headed “Appendix IV — Statutory and General Information” set out in the Document, conditional on the share premium account of the Company being credited as a result of the [REDACTED] of the Company, the sum of HK$[●] be capitalised and applied in paying up in full at par value [REDACTED] shares for allotment and issue to holders of shares whose names were on the register of members of the Company immediately prior to the [REDACTED] and such shares (or as they may direct) to be allotted and issued pursuant to this resolution shall rank pari passu in all respect with the existing issued shares.

(b) Impacts from the COVID-19 Pandemic

The COVID-19 Pandemic since early 2020 has brought about additional uncertainties in the Group’s operating environment and may impact the Group’s operations and financial position.

The Group has been closely monitoring the impact from the COVID-19 Pandemic on the Group’s businesses and has commenced to put in place various contingency measures. The directors of the Company confirm that these contingency measures include but not limited to reassessing changes (if any) to the customers’ preferences on the types of drama series to be broadcasted, assessing the readiness of the production units and revisiting the progress of self-produced drama series, reassessing the adequacy and suitability of the Group’s existing suppliers inventory of drama series, expanding the Group’s supplier base in a view to procure suitable drama series to be broadcasted, negotiating with customers on possible delay in delivery timetables, increasing monitoring of the business environment of the Group’s customers, and improving the Group’s cash position by expediting debtor settlements and negotiating with suppliers on payment extensions. The Group will keep the contingency measures under review as the COVID-19 Pandemic situation evolves.

As far as the Group’s businesses are concerned, the COVID-19 Pandemic may cause production and delivery delays on self-produced drama series, but the directors of the Company consider that such impact could be reduced by the Group’s expedition of the production process upon the cessation of the COVID-19 Pandemic and/or the identification of suitable replacement from outright-purchased drama series. In addition, the COVID-19 Pandemic may also significantly impact the repayment abilities of the Group’s debtors and the willingness of the customers to procure the Group’s inventory of drama series, which in turn may result in additional impairment losses on trade receivables and drama series copyrights in future periods. These possible impacts have not been reflected in the Historical Financial Information, and the actual impacts may differ from estimates adopted in the Historical Financial Information as the COVID-19 Pandemic situation continues to evolve and when further information may become available.

SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company and its subsidiaries in respect of any period subsequent to 31 December 2019.

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The following information does not form part of the Accountants’ Report received from the Company’s reporting accountants, KPMG, Certified Public Accountants, Hong Kong, as set out in Appendix I to this document, and is included herein for illustrative purposes only. The unaudited pro forma financial information should be read in conjunction with the section headed “Financial information” in this document and the historical financial information included in the Accountants’ Report set out in Appendix I to this document.

A. UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS

The following unaudited pro forma statement of adjusted net tangible assets of our Group is prepared in accordance with Rule 4.29 of the Listing Rules and is set out below to illustrate the effect of the [REDACTED] on the consolidated net tangible assets of the Group attributable to equity shareholders of the Company as at 31 December 2019 as if the [REDACTED] had taken place on 31 December 2019.

The 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 the Group had the [REDACTED] been completed as at 31 December 2019 or at any future date.

Consolidated net tangible assets attributable to equity shareholders of the Company Estimated Unaudited pro as at 31 [REDACTED] forma adjusted December from the net tangible Unaudited pro forma adjusted net 2019(1) [REDACTED](2) assets tangible assets per Share(3)

RMB’000 RMB’000 RMB’000 RMB(3) HK$(4)

Based on an [REDACTED]of HK$[REDACTED] per Share . . 154,249 [REDACTED][REDACTED][REDACTED][REDACTED] Based on an [REDACTED]of HK$[REDACTED] per Share . . 154,249 [REDACTED][REDACTED][REDACTED][REDACTED]

Notes:

(1) The consolidated net tangible assets attributable to the equity shareholders of the Company as at 31 December 2019 is arrived at after deducting drama copyrights of RMB179,013,000 from the consolidated net assets of RMB333,262,000 attributable to equity shareholders of the Company as at 31 December 2019, as extracted from “Appendix I — Accountants’ Report”.

(2) The estimated [REDACTED]fromthe[REDACTED] are based on the indicative [REDACTED]of HK$[REDACTED] and HK$[REDACTED] per Share and [REDACTED] Shares expected to be issued under [REDACTED], after deduction of the [REDACTED] and other related expenses paid or payable by the Group (excluding the expenses that have been charged to profit or loss during the Track Record Period) and does not take into account any shares which may be issued upon the exercise of the [REDACTED] or options granted under the Share Option Scheme. The estimated [REDACTED]ofthe [REDACTED] have been converted to Renminbi at the PBOC rate prevailing on 31 December 2019 of HK$1.12 to RMB1.00. No representation is made that Hong Kong dollars amount have been, could have been or may be converted to Renminbi, or vice versa, at that rate or at any other rate.

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(4) The unaudited pro forma adjusted net tangible assets per Share amounts in Renminbi are converted to Hong Kong dollars with the PBOC rate prevailing on 31 December 2019 of RMB1.00 to HK$[1.12]. No representation is made that Renminbi amount have been, could have been or may be converted to Hong Kong dollars, or vice versa, at that rate or at any other rate.

(5) No adjustment has been made to reflect any trading result or other transactions of the Group entered into subsequent to 31 December 2019.

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[REDACTED]

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[REDACTED]

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[REDACTED]

[●] Certified Public Accountants Hong Kong

[Date]

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Set out below is a summary of certain provisions of the Memorandum and Articles of Association of the Company and of certain aspects of Cayman company law.

The Company was incorporated in the Cayman Islands as an exempted company with limited liability on 17 June, 2019 under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands (the “Companies Law”). The Company’s constitutional documents consist of its Memorandum of Association (the “Memorandum”) and its Articles of Association (the “Articles”).

1. MEMORANDUM OF ASSOCIATION

(a) The Memorandum states, inter alia, that the liability of members of the Company is limited to the amount, if any, for the time being unpaid on the shares respectively held by them and that the objects for which the Company is established are unrestricted (including acting as an investment company), and that the Company shall have and be capable of exercising all the functions of a natural person of full capacity irrespective of any question of corporate benefit, as provided in section 27(2) of the Companies Law and in view of the fact that the Company is an exempted company that the Company will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Company carried on outside the Cayman Islands.

(b) The Company may by special resolution alter its Memorandum with respect to any objects, powers or other matters specified therein.

2. ARTICLES OF ASSOCIATION

The Articles were [conditionally] adopted on [●] [with effect from the [REDACTED]]. The following is a summary of certain provisions of the Articles:

(a) Shares

(i) Classes of shares

The share capital of the Company consists of ordinary shares.

(ii) Variation of rights of existing shares or classes of shares

Subject to the Companies Law, if at any time the share capital of the Company is divided into different classes of shares, all or any of the special rights attached to the shares or any class of shares may (unless otherwise provided for by the terms of issue of that class) be varied, modified 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 general meeting of the holders of the shares of that class. To every such separate general meeting the provisions of the Articles relating to general meetings will mutatis mutandis apply, but so that the necessary quorum (other than at an

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adjourned meeting) shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class and at any adjourned meeting two holders present in person or by proxy (whatever the number of shares held by them) shall be a quorum. Every holder of shares of the class shall be entitled to one vote for every such share held by him.

Any special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to 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) Alteration of capital

The Company may by ordinary resolution of its members:

(i) increase its share capital by the creation of new shares;

(ii) consolidate all or any of its capital into shares of larger amount than its existing shares;

(iii) divide its shares into several classes and attach to such shares any preferential, deferred, qualified or special rights, privileges, conditions or restrictions as the Company in general meeting or as the directors may determine;

(iv) subdivide its shares or any of them into shares of smaller amount than is fixed by the Memorandum; or

(v) cancel any shares which, at the date of passing of the resolution, have not been taken and diminish the amount of its capital by the amount of the shares so cancelled.

The Company may reduce its share capital or any capital redemption reserve or other undistributable reserve in any way by special resolution.

(iv) Transfer of shares

All transfers of shares may be effected by an instrument of transfer in the usual or common form or in a form prescribed by The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) or in such other form as the board may approve and which may be under hand or, if the transferor or transferee is a clearing house or its nominee(s), by hand or by machine imprinted signature or by such other manner of execution as the board may approve from time to time.

Notwithstanding the foregoing, for so long as any shares are [REDACTED]on the Stock Exchange, titles to such [REDACTED] shares may be evidenced and transferred in accordance with the laws applicable to and the rules and regulations

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of the Stock Exchange that are or shall be applicable to such [REDACTED] shares. The register of members in respect of its [REDACTED] shares (whether the principal register or a branch register) may be kept by recording the particulars required by Section 40 of the Companies Law in a form otherwise than legible if such recording otherwise complies with the laws applicable to and the rules and regulations of the Stock Exchange that are or shall be applicable to such [REDACTED] shares.

The instrument of transfer shall be executed by or on behalf of the transferor and the transferee provided that the board may dispense with the execution of the instrument of transfer by the transferee. 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 in respect of that share.

The board may, in its absolute discretion, at any time transfer any share upon the principal register to any branch register or any share on any branch register to the principal register or any other branch register.

The board may decline to recognise any instrument of transfer unless a fee (not exceeding the maximum sum as the Stock Exchange may determine to be payable) determined by the Directors is paid to the Company, the instrument of transfer is properly stamped (if applicable), it is in respect of only one class of share and is lodged at the relevant registration office or registered office or such other place at which the principal register is kept accompanied by the relevant share certificate(s) and such other evidence as the board may reasonably require to show the right of the transferor to make the transfer (and if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do).

The registration of transfers may be suspended and the register closed on giving notice by advertisement in any newspaper or by any other means in accordance with the requirements of the Stock Exchange, at such times and for such periods as the board may determine. The register of members must not be closed for periods exceeding in the whole thirty (30) days in any year.

Subject to the above, fully paid shares are free from any restriction on transfer and free of all liens in favour of the Company.

(v) Power of the Company to purchase its own shares

The Company is empowered by the Companies Law and the Articles to purchase its own shares subject to certain restrictions and the board may only exercise this power on behalf of the Company subject to any applicable requirements imposed from time to time by the Stock Exchange.

Where the Company purchases for redemption a redeemable share, purchases not made through the market or by tender must be limited to a maximum price determined by the Company in general meeting. If purchases are by tender, tenders must be made available to all members alike.

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The board may accept the surrender for no consideration of any fully paid share.

(vi) Power of any subsidiary of the Company to own shares in the Company

There are no provisions in the Articles relating to ownership of shares in the Company by a subsidiary.

(vii) Calls on shares and forfeiture of shares

The board may from time to time make such calls upon the members in respect of any monies unpaid on the shares held by them respectively (whether on account of the nominal value of the shares or by way of premium). A call may be made payable either in one lump sum or by installments. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for payment thereof, the person or persons from whom the sum is due shall pay interest on the same at such rate not exceeding twenty per cent. (20%) per annum as the board may agree to accept from the day appointed for the payment thereof to the time of actual payment, but the board may waive payment of such interest wholly or in part. The board may, if it thinks fit, receive from any member willing to advance the same, either in money or money’s worth, all or any part of the monies uncalled and unpaid or installments payable upon any shares held by him, and upon all or any of the monies so advanced the Company may pay interest at such rate (if any) as the board may decide.

If a member fails to pay any call on the day appointed for payment thereof, the board may serve not less than fourteen (14) clear days’ notice on him requiring payment of so much of the call as is unpaid, together with any interest which may have accrued and which may still accrue up to the date of actual payment and stating that, in the event of non-payment at or before the time appointed, the shares in respect of which the call was made will be liable to be forfeited.

If the requirements of any such notice are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the board to that effect. Such forfeiture will include all dividends and bonuses declared in respect of the forfeited share and not actually paid before the forfeiture.

A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall, notwithstanding, 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 board shall in its discretion so require) interest thereon from the date of forfeiture until the date of actual payment at such rate not exceeding twenty per cent. (20%) per annum as the board determines.

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(b) Directors

(i) Appointment, retirement and removal

At each annual general meeting, one third of the Directors for the time being (or if their number is not 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 shall be subject to retirement at an annual general meeting at least once every three years. The Directors to retire by rotation shall include any Director who wishes to retire and not offer himself for re-election. Any further Directors so to retire shall be those who have been longest in office since their last re-election or appointment but as between persons who became or were last re-elected Directors on the same day those to retire will (unless they otherwise agree among themselves) be determined by lot.

Neither a Director nor an alternate Director is required to hold any shares in the Company by way of qualification. Further, there are no provisions in the Articles relating to retirement of Directors upon reaching any age limit.

The Directors have the power to appoint any person as a Director either to fill a casual vacancy on the board or as an addition to the existing board. Any Director appointed to fill a casual vacancy shall hold office until the first general meeting of members after his appointment and be subject to re-election at such meeting and any Director appointed as an addition to the existing board shall hold office only until the next following annual general meeting of the Company and shall then be eligible for re-election. A Director may be removed by an ordinary resolution of the Company before the expiration of his period of office (but without prejudice to any claim which such Director may have for damages for any breach of any contract between him and the Company) and members of the Company may by ordinary resolution appoint another in his place. Unless otherwise determined by the Company in general meeting, the number of Directors shall not be less than two. There is no maximum number of Directors.

The office of director shall be vacated if:

(aa) he resigns by notice in writing delivered to the Company;

(bb) he becomes of unsound mind or dies;

(cc) without special leave, he is absent from meetings of the board for six (6) consecutive months, and the board resolves that his office is vacated;

(dd) he becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors;

(ee) he is prohibited from being a director by law; or

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(ff) he ceases to be a director by virtue of any provision of law or is removed from office pursuant to the Articles.

The board may appoint one or more of its body to be managing director, joint managing director, or deputy managing director or to hold any other employment or executive office with the Company for such period and upon such terms as the board may determine and the board may revoke or terminate any of such appointments. The board may delegate any of its powers, authorities and discretions to committees consisting of such Director or Directors and other persons as the board thinks fit, and it may from time to time revoke such delegation or revoke the appointment of and discharge any such committees either wholly or in part, and either as to persons or purposes, but every committee so formed must, in the exercise of the powers, authorities and discretions so delegated, conform to any regulations that may from time to time be imposed upon it by the board.

(ii) Power to allot and issue shares and warrants

Subject to the provisions of the Companies Law and the Memorandum and Articles and to any special rights conferred on the holders of any shares or class of shares, any share may be issued (a) with or have attached thereto such rights, or such restrictions, whether with regard to dividend, voting, return of capital, or otherwise, as the Directors may determine, or (b) on terms that, at the option of the Company or the holder thereof, it is liable to be redeemed.

The board may issue warrants or convertible securities or securities of similar nature conferring the right upon the holders thereof to subscribe for any class of shares or securities in the capital of the Company on such terms as it may determine.

Subject to the provisions of the Companies Law and the Articles and, where applicable, the rules of the Stock Exchange and without prejudice to any special rights or restrictions for the time being attached to any shares or any class of shares, all unissued shares in the Company are at the disposal of the board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times, for such consideration and on such terms and conditions as it in its absolute discretion thinks fit, but so that no shares shall be issued at a discount to their nominal value.

Neither the Company nor the board is obliged, when making or granting any allotment of, offer of, option over or disposal of shares, to make, or make available, any such allotment, offer, option or shares to members or others with registered addresses in any particular territory or territories being a territory or territories where, in the absence of a registration statement or other special formalities, this would or might, in the opinion of the board, be unlawful or impracticable. Members affected as a result of the foregoing sentence shall not be, or be deemed to be, a separate class of members for any purpose whatsoever.

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(iii) Power to dispose of the assets of the Company or any of its subsidiaries

There are no specific provisions in the Articles relating to the disposal of the assets of the Company or any of its subsidiaries. The Directors may, however, exercise all powers and do all acts and things which may be exercised or done or approved by the Company and which are not required by the Articles or the Companies Law to be exercised or done by the Company in general meeting.

(iv) Borrowing powers

The board may exercise all the powers of the Company to raise or borrow money, to mortgage or charge all or any part of the undertaking, property and assets and uncalled capital of the Company and, subject to the Companies Law, to issue debentures, bonds and other securities of the Company, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

(v) Remuneration

The ordinary remuneration of the Directors is to be determined by the Company in general meeting, such sum (unless otherwise directed by the resolution by which it is voted) to be divided amongst the Directors in such proportions and in such manner as the board may agree or, failing agreement, equally, except that any Director holding office for part only of the period in respect of which the remuneration is payable shall only rank in such division in proportion to the time during such period for which he held office. The Directors are also entitled to be prepaid or repaid all travelling, hotel and incidental expenses reasonably expected to be incurred or incurred by them in attending any board meetings, committee meetings or general meetings or separate meetings of any class of shares or of debentures of the Company or otherwise in connection with the discharge of their duties as Directors.

Any Director who, by request, goes or resides abroad for any purpose of the Company or who performs services which in the opinion of the board go beyond the ordinary duties of a Director may be paid such extra remuneration as the board may determine and such extra remuneration shall be in addition to or in substitution for any ordinary remuneration as a Director. An executive Director appointed to be a managing director, joint managing director, deputy managing director or other executive officer shall receive such remuneration and such other benefits and allowances as the board may from time to time decide. Such remuneration may be either in addition to or in lieu of his remuneration as a Director.

The board may establish or concur or join with other companies (being subsidiary companies of the Company or companies with which it is associated in business) in establishing and making contributions out of the Company’s monies to any schemes or funds for providing pensions, sickness or compassionate

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allowances, life assurance or other benefits for employees (which expression as used in this and the following paragraph shall include any Director or past Director who may hold or have held any executive office or any office of profit with the Company or any of its subsidiaries) and ex-employees of the Company and their dependents or any class or classes of such persons.

The board may pay, enter into agreements to pay or make grants of revocable or irrevocable, and either subject or not subject to any terms or conditions, pensions or other benefits to employees and ex-employees and their dependents, or to any of such persons, including pensions or benefits additional to those, if any, to which such employees or ex-employees or their dependents are or may become entitled under any such scheme or fund as is mentioned in the previous paragraph. Any such pension or benefit may, as the board considers desirable, be granted to an employee either before and in anticipation of, or upon or at any time after, his actual retirement.

The board may resolve to capitalise all or any part of any amount for the time being standing to the credit of any reserve or fund (including a share premium account and the profit and loss account) whether or not the same is available for distribution by applying such sum in paying up unissued shares to be allotted to (i) employees (including directors) of the Company and/or its affiliates (meaning any individual, corporation, partnership, association, joint-stock company, trust, unincorporated association or other entity (other than the Company) that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, the Company) upon exercise or vesting of any options or awards granted under any share incentive scheme or employee benefit scheme or other arrangement which relates to such persons that has been adopted or approved by the members in general meeting, or (ii) any trustee of any trust to whom shares are to be allotted and issued by the Company in connection with the operation of any share incentive scheme or employee benefit scheme or other arrangement which relates to such persons that has been adopted or approved by the members in general meeting.

(vi) Compensation or payments for loss of office

Pursuant to the Articles, payments 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 be approved by the Company in general meeting.

(vii) Loans and provision of security for loans to Directors

The Company must not make any loan, directly or indirectly, to a Director or his close associate(s) if and to the extent it would be prohibited by the Companies Ordinance (Chapter 622 of the laws of Hong Kong) as if the Company were a company incorporated in Hong Kong.

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(viii) Disclosure of interests in contracts with the Company or any of its subsidiaries

A Director may hold any other office or place of profit with the Company (except that of the auditor of the Company) in conjunction with his office of Director for such period and upon such terms as the board may determine, and may be paid such extra remuneration therefor in addition to any remuneration provided for by or pursuant to the Articles. A Director may be or become a director or other officer of, or otherwise interested in, any company promoted by the Company or any other company in which the Company may be interested, and shall not be liable to account to the Company or the members for any remuneration, profits or other benefits received by him as a director, officer or member of, or from his interest in, such other company. The board may also cause the voting power conferred by the shares in any other company held or owned by the Company to be exercised in such manner in all respects as it thinks fit, including the exercise thereof in favour of any resolution appointing the Directors or any of them to be directors or officers of such other company, or voting or providing for the payment of remuneration to the directors or officers of such other company.

No Director or proposed or intended Director shall be disqualified by his office from contracting with the Company, either with regard to his tenure of any office or place of profit or as vendor, purchaser or in any other manner whatsoever, nor shall any such contract or any other contract or arrangement in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company or the members for any remuneration, profit or other benefits realised by any such contract or arrangement by reason of such Director holding that office or the fiduciary relationship thereby established. A Director who to his knowledge is in any way, whether directly or indirectly, interested in a contract or arrangement or proposed contract or arrangement with the Company must declare the nature of his interest at the meeting of the board at which the question of entering into the contract or arrangement is first taken into consideration, if he knows his interest then exists, or in any other case, at the first meeting of the board after he knows that he is or has become so interested.

A Director shall not vote (nor be counted in the quorum) on any resolution of the board approving any contract or arrangement or other proposal in which he or any of his close associates is materially interested, but this prohibition does not apply to any of the following matters, namely:

(aa) any contract or arrangement for giving to such Director or his close associate(s) any security or indemnity in respect of money lent by him or any of his close associates or obligations incurred or undertaken by him or any of his close associates at the request of or for the benefit of the Company or any of its subsidiaries;

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(bb) any contract or arrangement for 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 his close associate(s) has himself/themselves assumed responsibility in whole or in part whether alone or jointly under a guarantee or indemnity or by the giving of security;

(cc) any contract or arrangement concerning an offer of shares or 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 his close associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer;

(dd) any contract or arrangement in which the Director or his close associate(s) 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; or

(ee) any proposal or arrangement concerning the adoption, modification or operation of a share option scheme, a pension fund or retirement, death, or disability benefits scheme or other arrangement which relates both to Directors, his close associates and employees of the Company or of any of its subsidiaries and does not provide in respect of any Director, or his close associate(s), as such any privilege or advantage not accorded generally to the class of persons to which such scheme or fund relates.

The board may meet for the dispatch of business, adjourn and otherwise regulate its meetings as it considers appropriate. Questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes, the chairman of the meeting shall have an additional or casting vote.

(d) Alterations to constitutional documents and the Company’s name

The Articles may be rescinded, altered or amended by the Company in general meeting by special resolution. The Articles state that a special resolution shall be required to alter the provisions of the Memorandum, to amend the Articles or to change the name of the Company.

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(e) Meetings of members

(i) Special and ordinary resolutions

A special resolution of the Company must be passed by a majority of not less than three-fourths of the votes cast by such members as, being entitled so to do, vote in person or, in the case of such members as are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which notice has been duly given in accordance with the Articles.

Under the Companies Law, a copy of any special resolution must be forwarded to the Registrar of Companies in the Cayman Islands within fifteen (15) days of being passed.

An ordinary resolution is defined in the Articles 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 authorised representatives or, where proxies are allowed, by proxy at a general meeting of which notice has been duly given in accordance with the Articles.

(ii) Voting rights and right to demand a poll

Subject to any special rights or restrictions as to voting for the time being attached to any shares, at any general meeting on a poll every member present in person or by proxy or, in the case of a member being a corporation, by its duly authorised representative shall have one vote for every fully paid share of which he is the holder but so that no amount paid up or credited as paid up on a share in advance of calls or installments is treated for the foregoing purposes as paid up on the share. A member entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.

At any general meeting a resolution put to the vote of the meeting is to be decided by way of a poll save that the chairman of the meeting may in good faith, allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands in which case every member present in person (or being a corporation, is present by a duly authorized representative), or by proxy(ies) shall have one vote provided that where more than one proxy is appointed by a member which is a clearing house (or its nominee(s)), each such proxy shall have one vote on a show of hands.

If a recognised clearing house (or its nominee(s)) is a member of the Company it may authorise such person or persons as it thinks fit to act as its representative(s) at any meeting of the Company or at any meeting of any class of members of the Company provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such person is so authorised. A person authorised pursuant to this provision shall be deemed to

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have been duly authorised without further evidence of the facts and be entitled to exercise the same powers on behalf of the recognised clearing house (or its nominee(s)) as if such person was the registered holder of the shares of the Company held by that clearing house (or its nominee(s)) including, where a show of hands is allowed, the right to vote individually on a show of hands.

Where the Company has any knowledge that any shareholder is, under the rules of the Stock Exchange, required to abstain from voting on any particular resolution of the Company or restricted to voting only for or only against any particular resolution of the Company, any votes cast by or on behalf of such shareholder in contravention of such requirement or restriction shall not be counted.

(iii) Annual general meetings and extraordinary general meetings

The Company must hold an annual general meeting of the Company every year within a period of not more than fifteen (15) months after the holding of the last preceding annual general meeting or a period of not more than eighteen (18) months from the date of adoption of the Articles, unless a longer period would not infringe the rules of the Stock Exchange.

Extraordinary general meetings may be convened on the requisition of one or more shareholders holding, at the date of deposit of the requisition, not less than one-tenth of the paid up capital of the Company having the right of voting at general meetings. Such requisition shall be made in writing to the board or the secretary for the purpose of requiring an extraordinary general meeting to be called by the board for the transaction of any business specified in such requisition. Such meeting shall be held within 2 months after the deposit of such requisition. If within 21 days of such deposit, the board fails to proceed to convene such meeting, the requisitionist(s) himself/herself (themselves) may do so in the same manner, and all reasonable expenses incurred by the requisitionist(s) as a result of the failure of the board shall be reimbursed to the requisitionist(s) by the Company.

(iv) Notices of meetings and business to be conducted

An annual general meeting must be called by notice of not less than twenty-one (21) clear days and not less than twenty (20) clear business days. All other general meetings must be called by notice of at least fourteen (14) clear days and not less than ten (10) clear business days. The notice is exclusive of the day on which it is served or deemed to be served and of the day for which it is given, and must specify the time and place of the meeting and particulars of resolutions to be considered at the meeting and, in the case of special business, the general nature of that business.

In addition, notice of every general meeting must be given to all members of the Company other than to such members as, under the provisions of the Articles or the terms of issue of the shares they hold, are not entitled to receive such notices from the Company, and also to, among others, the auditors for the time being of the Company.

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Any notice to be given to or by any person pursuant to the Articles may be served on or delivered to any member of the Company personally, by post to such member’s registered address or by advertisement in newspapers in accordance with the requirements of the Stock Exchange. Subject to compliance with Cayman Islands law and the rules of the Stock Exchange, notice may also be served or delivered by the Company to any member by electronic means.

All business that is transacted at an extraordinary general meeting and at an annual general meeting is deemed special, save that in the case of an annual general meeting, each of the following business is deemed an ordinary business:

(aa) the declaration and sanctioning of dividends;

(bb) the consideration and adoption of the accounts and balance sheet and the reports of the directors and the auditors;

(cc) the election of directors in place of those retiring;

(dd) the appointment of auditors and other officers; and

(ee) the fixing of the remuneration of the directors and of the auditors.

(v) 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 of a chairman.

The quorum for a general meeting shall be two members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy and entitled to vote. In respect of a separate class meeting (other than an adjourned meeting) convened to sanction the modification of class rights the necessary quorum shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class.

(vi) Proxies

Any member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting of the Company or at a class meeting. A proxy need not be a member of the Company and is entitled to exercise the same powers on behalf of a member who is an individual and for whom he acts as proxy as such member could exercise. In addition, a proxy is entitled to exercise the same powers on behalf of a member which is a corporation and for which he acts as proxy as such member could exercise as if it were an individual member. Votes may be given either personally (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy.

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(f) Accounts and audit

The board shall cause true accounts to be kept of the sums of money received and expended by the Company, and the matters in respect of which such receipt and expenditure take place, and of the property, assets, credits and liabilities of the Company and of all other matters required by the Companies Law or necessary to give a true and fair view of the Company’s affairs and to explain its transactions.

The accounting records must be kept at the registered office or at such other place or places as the board decides and shall always be open to inspection by any Director. No member (other than a Director) shall have any right to inspect any accounting record or book or document of the Company except as conferred by law or authorised by the board or the Company in general meeting. However, an exempted company must make available at its registered office in electronic form or any other medium, copies of its books of account or parts thereof as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Law of the Cayman Islands.

A copy of every balance sheet and profit and loss account (including every document required by law to be annexed thereto) which is to be laid before the Company at its general meeting, together with a printed copy of the Directors’ report and a copy of the auditors’ report, shall not less than twenty-one (21) days before the date of the meeting and at the same time as the notice of annual general meeting be sent to every person entitled to receive notices of general meetings of the Company under the provisions of the Articles; however, subject to compliance with all applicable laws, including the rules of the Stock Exchange, the Company may send to such persons summarised financial statements derived from the Company’s annual accounts and the directors’ report instead provided that any such person may by notice in writing served on the Company, demand that the Company sends to him, in addition to summarised financial statements, a complete printed copy of the Company’s annual financial statement and the directors’ report thereon.

At the annual general meeting or at a subsequent extraordinary general meeting in each year, the members shall appoint an auditor to audit the accounts of the Company and such auditor shall hold office until the next annual general meeting. Moreover, the members may, at any general meeting, by special resolution remove the auditor at any time before the expiration of his terms of office and shall by ordinary resolution at that meeting appoint another auditor for the remainder of his term. The remuneration of the auditors shall be fixed by the Company in general meeting or in such manner as the members may determine.

The financial statements of the Company shall be audited by the auditor in accordance with generally accepted auditing standards which may be those of a country or jurisdiction other than the Cayman Islands. The auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the auditor must be submitted to the members in general meeting.

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(g) Dividends and other methods of distribution

The Company in general meeting may declare dividends in any currency to be paid to the members but no dividend shall be declared in excess of the amount recommended by the board.

The Articles provide dividends may be declared and paid out of the profits of the Company, realised or unrealised, or from any reserve set aside from profits which the directors determine is no longer needed. With the sanction of an ordinary resolution dividends may also be declared and paid out of share premium account or any other fund or account which can be authorised for this purpose in accordance with the Companies Law.

Except in so far as the rights attaching to, or the terms of issue of, any share may otherwise provide, (i) all dividends shall be declared and paid according to the amounts paid up on the shares in respect whereof the dividend is paid but no amount paid up on a share in advance of calls shall for this purpose be treated as paid up on the share and (ii) all dividends shall be apportioned and paid pro rata according to the amount paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. The Directors may deduct from any dividend or other monies payable to any member or in respect of any shares all sums of money (if any) presently payable by him to the Company on account of calls or otherwise.

Whenever the board or the Company in general meeting has resolved that a dividend be paid or declared on the share capital of the Company, the board may further resolve either (a) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the shareholders entitled thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment, or (b) that shareholders 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 board may think fit.

The Company may also upon the recommendation of the board by an ordinary resolution resolve in respect of any one particular dividend of the Company that it may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to shareholders to elect to receive such dividend in cash in lieu of such allotment.

Any dividend, interest or other sum payable in cash to the holder of shares may be paid by cheque or warrant sent through the post addressed to the holder at his registered address, or in the case of joint holders, addressed to the holder whose name stands first in the register of the Company in respect of the shares at his address as appearing in the register or addressed to such person and at such addresses as the holder or joint holders may in writing direct. Every such cheque or warrant shall, unless the holder or joint holders otherwise direct, 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 in respect of

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such shares, and shall be sent at his or their risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to the Company. Any one of two or more joint holders may give effectual receipts for any dividends or other moneys payable or property distributable in respect of the shares held by such joint holders.

Whenever the board or the Company in general meeting has resolved that a dividend be paid or declared the board may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind.

All dividends or bonuses unclaimed for one year after having been declared may be invested or otherwise made use of by the board for the benefit of the Company until claimed and the Company shall not be constituted a trustee in respect thereof. All dividends or bonuses unclaimed for six years after having been declared may be forfeited by the board and shall revert to the Company.

No dividend or other monies payable by the Company on or in respect of any share shall bear interest against the Company.

(h) Inspection of corporate records

Pursuant to the Articles, the register and branch register of members shall be open to inspection for at least two (2) hours during business hours by members without charge, or by any other person upon a maximum payment of HK$2.50 or such lesser sum specified by the board, at the registered office or such other place at which the register is kept in accordance with the Companies Law or, upon a maximum payment of HK$1.00 or such lesser sum specified by the board, at the office where the branch register of members is kept, unless the register is closed in accordance with the Articles.

(i) Rights of minorities in relation to fraud or oppression

There are no provisions in the Articles relating to rights of minority shareholders in relation to fraud or oppression. However, certain remedies are available to shareholders of the Company under Cayman Islands law, as summarised in paragraph 3(f) of this Appendix.

(j) Procedures on liquidation

A resolution that the Company be wound up by the court or be wound up voluntarily shall be a special resolution.

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Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation for the time being attached to any class or classes of shares:

(i) if the Company is wound up and the assets available for distribution amongst the members of the Company shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed pari passu amongst such members in proportion to the amount paid up on the shares held by them respectively; and

(ii) if the Company is wound up and the assets available for distribution amongst the members 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 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 the Company is wound up (whether the liquidation is voluntary or by the court) the liquidator may, with the authority of a special resolution and any other sanction required by the Companies Law divide among the members in specie or kind the whole or any part of the assets of the Company whether the assets shall consist of property of one kind or shall consist of properties of different kinds and the liquidator may, for such purpose, set such value as he deems fair upon any one or more class or classes of 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. The liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator, with the like authority, shall think fit, but so that no contributory shall be compelled to accept any shares or other property in respect of which there is a liability.

(k) Subscription rights reserve

The Articles provide that to the extent that it is not prohibited by and is in compliance with the Companies Law, if warrants to subscribe for shares have been issued by the Company and the Company does any act or engages in any transaction which would result in the subscription price of such warrants being reduced below the par value of a share, a subscription rights reserve shall be established and applied in paying up the difference between the subscription price and the par value of a share on any exercise of the warrants.

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3. CAYMAN ISLANDS COMPANY LAW

The Company is incorporated in the Cayman Islands subject to the Companies Law and, therefore, operates subject to Cayman Islands law. Set out below is a summary of certain provisions of Cayman company law, although this does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of Cayman company law and taxation, which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar:

(a) Company operations

As an exempted company, the Company’s 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 amount of its authorised share capital.

(b) Share capital

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 premiums on those shares shall be transferred to an account, to be called the “share premium account”. At the option of a company, these provisions may not apply to premiums 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 the company subject to the provisions, if any, of its memorandum and articles of association in (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; (c) the redemption and repurchase of shares (subject to the provisions of section 37 of the Companies Law); (d) writing-off the preliminary expenses of the company; and (e) writing-off the expenses of, or the commission paid or discount allowed on, any issue of 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 (the “Court”), a company limited by shares or a company limited by guarantee and having a share capital may, if so authorised by its articles of association, by special resolution reduce its share capital in any way.

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There is no statutory restriction in the Cayman Islands on the provision of financial assistance by a company to another person 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 acting 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.

(d) Purchase of shares and warrants by a company and its subsidiaries

A company limited by shares or a company limited by guarantee and having a share capital may, if so authorised 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 and the Companies Law expressly provides that it shall be lawful for the rights attaching to any shares to be varied, subject to the provisions of the company’s articles of association, so as to provide that such shares are to be or are liable to be so redeemed. In addition, such a company may, if authorised to do so by its articles of association, purchase its own shares, including any redeemable shares. However, if the articles of association do not authorise the manner and terms of purchase, a company cannot purchase any of its own shares unless the manner and terms of purchase have first been authorised by an ordinary resolution 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 issued shares of the company other than shares held as treasury 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.

Shares purchased by a company is to be treated as cancelled unless, subject to the memorandum and articles of association of the company, the directors of the company resolve to hold such shares in the name of the company as treasury shares prior to the purchase. Where shares of a company are held as treasury shares, the company shall be entered in the register of members as holding those shares, however, notwithstanding the foregoing, the company is not be treated as a member for any purpose and must not exercise any right in respect of the treasury shares, and any purported exercise of such a right shall be void, and a treasury share must not be voted, directly or indirectly, at any meeting of the company and must not be counted in determining the total number of issued shares at any given time, whether for the purposes of the company’s articles of association or the Companies Law.

A company is not prohibited from purchasing and may purchase its own warrants subject to and in accordance with the terms and conditions of the relevant warrant instrument or certificate. There is no requirement under Cayman Islands law that a company’s memorandum or articles of association contain a specific provision enabling

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such purchases and the directors of a company may rely upon the general power contained in its memorandum of association to buy and sell and deal in personal property of all kinds.

Under Cayman Islands law, a subsidiary may hold shares in its holding company and, in certain circumstances, may acquire such shares.

(e) Dividends and distributions

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. With the exception of the foregoing, there are no statutory provisions relating to the payment of dividends. Based upon English case law, which is regarded as persuasive in the Cayman Islands, dividends may be paid only out of profits.

No dividend may be declared or paid, and no other distribution (whether in cash or otherwise) of the company’s assets (including any distribution of assets to members on a winding up) may be made to the company, in respect of a treasury share.

(f) Protection of minorities and shareholders’ suits

The Courts ordinarily would be expected to follow English case law precedents which permit a minority shareholder to commence a representative 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 and the wrongdoers are themselves in control of the company, and (c) an irregularity in the passing of a resolution which requires a qualified (or special) majority.

In the case of a company (not being a bank) having a share capital divided into shares, the Court 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 Court shall direct.

Any shareholder of a company may petition the Court 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 or, as an alternative to a winding up order, (a) an order regulating the conduct of the company’s affairs in the future, (b) an order requiring the company to refrain from doing or continuing an act complained of by the shareholder petitioner or to do an act which the shareholder petitioner has complained it has omitted to do, (c) an order authorising civil proceedings to be brought in the name and on behalf of the company by the shareholder petitioner on such terms as the Court may direct, or (d) an order providing for the purchase of the shares of any shareholders of the company by other shareholders or by the company itself and, in the case of a purchase by the company itself, a reduction of the company’s capital accordingly.

Generally claims against a company by its shareholders must 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.

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(g) Disposal of assets

The Companies Law contains no specific restrictions on the power of directors to dispose of assets of a company. However, as a matter of general law, every officer of a company, which includes a director, managing director and secretary, in exercising his powers and discharging his duties must do so honestly and in good faith with a view to the best interests of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

(h) Accounting and auditing requirements

A company must cause proper books of account to be kept with respect to (i) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place; (ii) all sales and purchases of goods by the company; and (iii) the assets and liabilities of the company.

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.

An exempted company must make available at its registered office in electronic form or any other medium, copies of its books of account or parts thereof as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Law of the Cayman Islands.

(i) Exchange control

There are no exchange control regulations or currency restrictions in the Cayman Islands.

(j) Taxation

Pursuant to the Tax Concessions Law of the Cayman Islands, the Company has obtained an undertaking:

(1) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciation shall apply to the Company or its operations; and

(2) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not be payable on or in respect of the shares, debentures or other obligations of the Company.

The undertaking for the Company is for a period of twenty years from 26 June 2019.

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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 for 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 a party to a double tax treaty entered into with the United Kingdom in 2010 but otherwise is not party to any double tax treaties.

(k) 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.

(l) Loans to directors

There is no express provision in the Companies Law prohibiting the making of loans by a company to any of its directors.

(m) Inspection of corporate records

Members of the Company 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.

(n) Register of members

An exempted company may maintain its principal register of members and any branch registers at such locations, whether within or without the Cayman Islands, as the directors may, from time to time, think fit. The register of members shall contain such particulars as required by Section 40 of the Companies Law. A branch register must be kept in the same manner in which a principal register is by the Companies Law required or permitted to be kept. The company shall cause to be kept at the place where the company’s principal register is kept a duplicate of any branch register duly entered up from time to time.

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. However, an exempted company shall make available at its registered office, in electronic form or any other medium, such register of members, including any branch register of members, as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Law of the Cayman Islands.

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(o) Register of Directors and Officers

The Company is required to maintain at its registered office a register of directors and officers which is not available for inspection by the public. A copy of such register must be filed with the Registrar of Companies in the Cayman Islands and any change must be notified to the Registrar within thirty (30) days of any change in such directors or officers.

(p) Beneficial Ownership Register

An exempted company is required to maintain a beneficial ownership register at its registered office that records details of the persons who ultimately own or control, directly or indirectly, more than 25% of the equity interests or voting rights of the company or have rights to appoint or remove a majority of the directors of the company. The beneficial ownership register is not a public document and is only accessible by a designated competent authority of the Cayman Islands. Such requirement does not, however, apply to an exempted company with its shares [REDACTED] on an approved stock exchange, which includes the Stock Exchange. Accordingly, for so long as the shares of the Company are [REDACTED] on the Stock Exchange, the Company is not required to maintain a beneficial ownership register.

(q) Winding up

A company may be wound up (a) compulsorily by order of the Court, (b) voluntarily, or (c) under the supervision of the Court.

The Court has authority to order winding up in a number of specified circumstances including where the members of the company have passed a special resolution requiring the company to be wound up by the Court, or where the company is unable to pay its debts, or where it is, in the opinion of the Court, just and equitable to do so. Where a petition is presented by members of the company as contributories on the ground that it is just and equitable that the company should be wound up, the Court has the jurisdiction to make certain other orders as an alternative to a winding-up order, such as making an order regulating the conduct of the company’s affairs in the future, making an order authorising civil proceedings to be brought in the name and on behalf of the company by the petitioner on such terms as the Court may direct, or making an order providing for the purchase of the shares of any of the members of the company by other members or by the company itself.

A company (save with respect to a limited duration company) may be wound up voluntarily when the company so resolves by special resolution or when the company in general meeting resolves by ordinary resolution that it be wound up voluntarily because it is unable to pay its debts as they fall due. In the case of a voluntary winding up, such company is obliged to cease to carry on its business (except so far as it may be beneficial for its winding up) from the time of passing the resolution for voluntary winding up or upon the expiry of the period or the occurrence of the event referred to above.

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For the purpose of conducting the proceedings in winding up a company and assisting the Court therein, there may be appointed an official liquidator or official liquidators; and the court may appoint to such office such person, either provisionally or otherwise, as it thinks fit, and if more persons than one are appointed to such office, the Court must declare whether any act required or authorised to be done by the official liquidator is to be done by all or any one or more of such persons. The Court may also determine whether any and what security is to be given by an official liquidator on his appointment; if no official liquidator is appointed, or during any vacancy in such office, all the property of the company shall be in the custody of the Court.

As soon as the affairs of the company are fully wound up, the liquidator must make a report and an account of the winding up, showing how the winding up has been conducted and how the property of the company has been disposed of, and thereupon call a general meeting of the company for the purposes of laying before it the account and giving an explanation thereof. This final general meeting must be called by at least 21 days’ notice to each contributory in any manner authorised by the company’s articles of association and published in the Gazette.

(r) Reconstructions

There are statutory provisions which facilitate reconstructions and amalgamations approved by a majority in number representing seventy-five per cent. (75%) in value of shareholders or class of shareholders or creditors, as the case may be, as are present at a meeting called for such purpose and thereafter sanctioned by the Court. Whilst a dissenting shareholder would have the right to express to the Court his view that the transaction for which approval is sought would not provide the shareholders with a fair value for their shares, the 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.

(s) Take-overs

Where an offer is made by a company for the shares of another company and, within four (4) months of the offer, the holders of not less than ninety per cent. (90%) of the shares which are the subject of the offer accept, the offeror may at any time within two (2) months after the expiration of the said four (4) months, by notice in the prescribed manner require the dissenting shareholders to transfer their shares on the terms of the offer. A dissenting shareholder may apply to the Court within one (1) month of the notice objecting to the transfer. The burden is on the dissenting shareholder to show that the 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.

(t) 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 Court to be contrary to public policy (e.g. for purporting to provide indemnification against the consequences of committing a crime).

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(u) Economic Substance Requirements

Pursuant to the International Tax Cooperation (Economic Substance) Law, 2018 of the Cayman Islands (“ES Law”) that came into force on 1 January 2019, a “relevant entity” is required to satisfy the economic substance test set out in the ES Law. A “relevant entity” includes an exempted company incorporated in the Cayman Islands as is the Company; however, it does not include an entity that is tax resident outside the Cayman Islands. Accordingly, for so long as the Company is a tax resident outside the Cayman Islands, including in Hong Kong, it is not required to satisfy the economic substance test set out in the ES Law.

4. GENERAL

Conyers Dill & Pearman, the Company’s special legal counsel on Cayman Islands law, have sent to the Company a letter of advice summarising certain 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 paragraph headed “Documents available for inspection” in Appendix V to this document. 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 is more familiar is recommended to seek independent legal advice.

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A. FURTHER INFORMATION ABOUT OUR COMPANY

1. Incorporation

Our Company was incorporated in the Cayman Islands under the Companies Law as an exempted company with limited liability on June 17, 2019. Our Company has been registered as a non-Hong Kong company under Part 16 of the Companies Ordinance on October 21, 2019 and our Company’s principal place of business in Hong Kong is at 40/F, Sunlight Tower, 248 Queen’s Road East, Wanchai, Hong Kong. Mr. Lee Leong Yin of 40/F, Sunlight Tower, 248 Queen’s Road East, Wanchai, Hong Kong, a Hong Kong resident, has been appointed as the authorized representative of our Company for the acceptance of service of process and notices in Hong Kong.

As our Company was incorporated in the Cayman Islands, we operate subject to the relevant law of the Cayman Islands and its constitution which comprises a memorandum of association and the articles of association. A summary of the relevant aspects of the Cayman Islands Company Law and certain provisions of Articles of Association is set out in Appendix III to this document.

2. Changes in share capital of our Company

As at the date of the incorporation of our Company, the authorized share capital of our Company was HK$380,000 divided into 38,000,000 Shares of HK$0.01 each. At the time of incorporation the initial subscriber subscribed for, and our Company issued and allotted, the one subscriber Share. On the same date, the one initial Share was transferred from the initial subscriber to Litian Century, which is wholly-owned by Mr. Yuan, for a consideration at par value.

On September 30, 2019 and October 17, 2019, our Company issued and allotted an aggregate of 999,999 Shares and 9,000,000 Shares at par to the below offshore investment vehicles of the Registered Shareholders:

No. of Share issued and allotted Name of shareholder September 30, 2019 October 17, 2019

Litian Century Media Co., Limited ...... 303,476 2,731,294 Marshal Investment Co. Ltd...... 286,136 2,575,220 Joint Fortune Huayi Emerging Industry Investment Co. Ltd...... 88,028 792,254 Zhihui Lixiang Equity Investment Co. Ltd...... 60,695 546,259 Zeli Investment Group Co. Ltd...... 44,196 389,343 China Orange Investment Co. Ltd...... 43,354 390,185 9th Floor International Co. Ltd...... 39,018 351,167 Flysky Investment Co. Ltd...... 35,799 332,709 Zhongjiu International Co. Ltd...... 31,690 285,211 Zhihui Xinlong Equity Investment Co. Ltd...... 26,012 234,111 Sky Development Investment Co. Ltd...... 19,720 175,372 Kingfu Group Investment Co. Ltd...... 13,204 118,838 Nine En Investment Co. Ltd...... 8,671 78,037

Total...... 999,999 9,000,000

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Immediately following completion of the Capitalization Issue and the [REDACTED] and assuming that the [REDACTED] is not exercised, the authorized share capital of our Company will be HK$[5,000,000] divided into [500,000,000] Shares, of which [REDACTED] Shares will be issued fully paid or credited as fully paid, and [REDACTED] Shares will remain unissued. Other than pursuant to the general mandate to issue Shares referred to in the paragraph headed “A. Further Information about our Company — 4. Written resolutions of the then shareholder of our Company passed on [●]” in this Appendix, the Directors do not have any present intention to issue any of the authorized but unissued share capital of our Company and, without prior approval of our Shareholders in general meetings, no issue of Shares will be made which would effectively alter the control of our Company.

3. Changes in share capital of our subsidiaries and Consolidated Affiliated Entities

The following alterations in the share capital or registered capital of our subsidiaries and Consolidated Affiliated Entities took place within the two years immediately preceding the date of this document:

(a) LiTian TV & Film

On January 10, 2018, the registered capital of LiTian TV & Film was increased from RMB44,670,051 to RMB46,131,980 upon completion of the registration at the competent authority.

(b) Horgos Tiantian Meimei

On April 19, 2018, the registered capital of Horgos Tiantian Meimei was increased from RMB10,000,000 to RMB30,000,000 upon completion of the registration at the competent authority.

On April 19, 2018, the registered capital of Horgos Haohao Xuexi was increased from RMB3,000,000 to RMB30,000,000 upon completion of the registration at the competent authority.

(d) Tiantian Xiangshang

On April 19, 2018, the registered capital of Tiantian Xiangshang was increased from RMB3,000,000 to RMB30,000,000 upon completion of the registration at the competent authority.

Save as disclosed above, there has been no alteration in the share capital or registered capital of our subsidiaries and Consolidated Affiliated Entities within the two years preceding the date of this document.

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4. Written resolutions of the then shareholder of our Company passed on [●]

Pursuant to the written resolutions of the then shareholder of our Company entitled to vote at general meetings of our Company, which were passed on [●]:

(a) our Company approved and adopted the Memorandum of Association with immediate effect;

(b) the authorized share capital of our Company was increased from HK$380,000 divided into 38,000,000 Shares of HK$0.01 each to HK$[5,000,000] divided into [500,000,000] Shares of HK$0.01 each by the creation of [462,000,000] Shares of HK$0.01 each, which shall rank pari passu in all respects with the Shares in issue as at the date of the resolution;

(c) conditional upon (i) the Listing Committee of the Stock Exchange granting the [REDACTED] of, and [REDACTED] in, on the Main Board, our Shares in issue and to be issued (pursuant to the Capitalization Issue, the [REDACTED], the [REDACTED] and the Share Option Scheme) as mentioned in this document; and (ii) the obligations of the [REDACTED] under the [REDACTED] becoming unconditional (including, if relevant, as a result of the waiver of any condition(s)) by the [REDACTED] (on behalf of the [REDACTED]) and not being terminated in accordance with the terms of the [REDACTED] or otherwise:

(i) our Company approved and adopted the Articles of Association;

(ii) conditional on the share premium account of our Company being credited as a result of the [REDACTED], the sum of HK$[REDACTED] be capitalized and applied in paying up in full at par value [REDACTED] Shares for allotment and issue to our Shareholders whose names were on the register of members of our Company immediately prior to the [REDACTED] and such Shares (or as they may direct) to be allotted and issued pursuant to this resolution shall rank pari passu in all respect with the existing issued Shares;

(iii) the [REDACTED] and the [REDACTED] were approved and our Directors were authorized to allot and issue the [REDACTED] and the Shares as may be required to be allotted and issued upon the exercise of the [REDACTED]on and subject to the terms and conditions stated in this document and in the relevant [REDACTED];

(iv) the rules of the Share Option Scheme were approved and adopted, and our Directors or any committee thereof established by the Board were authorized, at their sole discretion, to: (i) administer the Share Option Scheme; (ii) modify/amend the Share Option Scheme from time to time as requested by the Stock Exchange; (iii) grant options to subscribe for Shares under the Share Option Scheme up to the limits referred to in the Share Option Scheme; (iv) allot, issue and deal with Shares pursuant to the exercise of any option which

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may be granted under the Share Option Scheme; (v) make application at the appropriate time or times to the Stock Exchange for the [REDACTED] of, and permission to deal in, any Shares or any part thereof that may hereafter from time to time be issued and allotted pursuant to the exercise of the options granted under the Share Option Scheme; and (vi) take all such actions as they consider necessary, desirable or expedient to implement or give effect to the Share Option Scheme;

(v) a general unconditional mandate was given to our Directors to exercise all the powers of our Company to allot, issue and deal with (including the power to make an offer or agreement, or grant securities which would or might require Shares to be allotted and issued), otherwise than by way of Rights Issue, or pursuant to any scrip dividend schemes or similar arrangements providing for the allotment and issue of Shares in lieu of the whole or part of a dividend on Shares in accordance with the Articles or pursuant to the issue of Shares upon the exercise of any subscription rights attached to any warrants of our Company or pursuant to the exercise of options granted under the Share Option Scheme or any other option scheme(s) or similar arrangement for the time being adopted for the grant or issue to Directors and/or officers and/or employees of our Group or rights to acquire Shares or pursuant to a specific authority granted by our Shareholders in general meeting, the Shares with an aggregate nominal amount not exceeding 20% of the total number of Shares in issue immediately following completion of the Capitalization Issue and the [REDACTED] but before any exercise of the [REDACTED] and any options which may be granted under the Share Option Scheme, until the conclusion of the next annual general meeting of our Company, unless renewed by an ordinary resolution of our Shareholders in a general meeting, either unconditionally or subject to conditions or the expiration of the period within the next annual general meeting of our Company is required by the Articles of Association or any applicable law of the Cayman Islands to be held or the passing of an ordinary resolution by our Shareholders in general meetings of our Company varying or revoking the authority given to the Directors, whichever occurs first;

For the purpose of this paragraph, “Rights Issue” means an offer of shares in our Company, or offer or issue of warrants, options or other securities giving rights to subscribe for shares open for a period fixed by our Directors to holders of shares in our Company on the register on a fixed record date in proportion to their holdings of shares (subject to such exclusion or other arrangements as our Directors may deem necessary or expedient in relation to fractional entitlements, or having regard to any restrictions or obligations under the laws of, or the requirements of, or the expense or delay which may be involved in determining the existence or extent of any restrictions or obligations under the laws of, or the requirements of, any jurisdiction applicable to our Company, or any recognized regulatory body or any stock exchange applicable to our Company);

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(vi) a general unconditional mandate be and is hereby given to our Directors to exercise all powers of our Company to repurchase on the Stock Exchange, or on any other stock exchange on which the securities of our Company may be listed and which is recognized by the SFC and the Stock Exchange for this purpose, such number of Shares with an aggregate nominal value not exceeding 10% of the total number of Shares in issue immediately following completion of the Capitalization Issue and the [REDACTED] but before the exercise of the [REDACTED] and any options which may be granted under the Share Option Scheme, until the conclusion of the next annual general meeting of our Company, unless renewed by an ordinary resolution of our Shareholders in a general meeting, either unconditionally or subject to conditions or the expiration of the period within which the next annual general meeting of our Company is required by the Article of Association of our Company or any applicable law of the Cayman Islands to be held or the passing of an ordinary resolution by our Shareholders in a general meeting of our Company varying or revoking the authority given to the Directors, whichever occurs first;

(vii) the extension of the general mandate to allot, issue and deal with Shares as mentioned in paragraph (c)(iv) above by the addition to the aggregate nominal value of the share capital of our Company which may be allotted or agreed conditionally or unconditionally to be allotted by our Directors pursuant to such general mandate of an amount representing the aggregate nominal value of the share capital of our Company repurchased by our Company pursuant to paragraph (c)(vi) above, provided that such extended amount shall not exceed 10% of the total number of Shares in issue immediately following completion of the Capitalization Issue and the [REDACTED] but before the exercise of the [REDACTED] and any options which may be granted under the Share Option Scheme be and is approved; and

Each of the general mandates referred to in paragraphs (c)(v), (c)(vi) and (c)(vii) above will remain in effect until whichever is the earliest of:

(1) the conclusion of our next annual general meeting, unless renewed by an ordinary resolution of our Shareholders in a general meeting, either unconditionally or subject to conditions;

(2) the expiration of the period within which our Company is required by any applicable law or the Articles of Association to hold our next annual general meeting; or

(3) the time when such mandate is varied or revoked by an ordinary resolution of our Shareholders in a general meeting.

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5. Repurchase of our Shares

This section includes information relating to the repurchases of securities, including information required by the Stock Exchange to be included in this document concerning such repurchase.

(a) Provisions of the Listing Rules

The Listing Rules permit companies whose primary listing is on the Stock Exchange to repurchase their securities on the Stock Exchange subject to certain restrictions, the most important restrictions are summarized below:

(i) Shareholders’ approval

All proposed repurchases of Shares must be approved in advance by an ordinary resolution of our Shareholders in a general meeting, either by way of general mandate or by specific approval in relation to a particular transaction.

Pursuant to the written resolutions of the then shareholder of our Company passed on [●], a general unconditional mandate (the “Repurchase Mandate”) was given to our Directors to exercise all powers of our Company to repurchase Shares (Shares which may be [REDACTED] on the Stock Exchange) with a total nominal value of not more than 10% of the total number of Shares in issue or to be issued immediately following completion of the [REDACTED] (excluding Shares which may be issued pursuant to the exercise of the [REDACTED] and any options which may be granted under the Share Option Scheme), further details of which have been described above in the paragraph headed “A. Further information about our Company — 4. Written resolutions of the then shareholder of our Company passed on [●]” in this Appendix.

(ii) Source of funds

Any repurchases of Shares by us must be paid out of funds legally available for the purpose in accordance with our Articles of Association, the Listing Rules and the Companies Law. We are not permitted to repurchase our Shares 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.

(iii) Shares to be repurchased

The Listing Rules provide that the Shares which are proposed to be repurchased by us must be fully-paid up.

(b) Reasons for repurchases

Our Directors believe that it is in the best interests of our Company and our Shareholders for our Directors to have general authority from our Shareholders to enable them to repurchase Shares in the market. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value per Share and/or earnings per Share and will only be made where our Directors believe that such repurchases will benefit our Company and our Shareholders.

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In repurchasing Shares, we may only apply funds legally available for such purpose in accordance with the Articles of Association, the Listing Rules and the applicable laws and regulations of the Cayman Islands.

On the basis of our Company’s current financial position as disclosed in this document and taking into account its current working capital position, our Directors consider that, if the Repurchase Mandate is exercised in full, it might have a material adverse effect on our working capital and/or gearing position as compared with the position disclosed in this document. However, our Directors do not propose to exercise the Repurchase Mandate to such an extent as it 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.

(d) General

None of our Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their close associates currently intends to sell any Shares to us.

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 Listing Rules and the applicable laws and regulations of the Cayman Islands.

If, as a result of any repurchase of Shares, a shareholder’s proportionate interest in the voting rights is increased, 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 could obtain or consolidate control of us and become obliged to make a mandatory offer in accordance with rule 26 of the Takeovers Code. Save as aforesaid, our Directors are not aware of any consequences which would arise under the Takeovers Code as a consequence of any repurchases pursuant to the Repurchase Mandate.

We have not made any repurchases of our own securities in the past six months.

No core connected person has notified us that he/she has a present intention to sell Shares to us, or has undertaken not to do so, if the Repurchase Mandate is exercised.

B. CORPORATE REORGANIZATION

In order to streamline the corporate structure and rationalize our corporate structure for the [REDACTED], our Group underwent the Corporate Reorganization. Please see the sub-section headed “History and Corporate Structure — Corporate Reorganization” in this document for details.

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C. FURTHER INFORMATION ABOUT OUR BUSINESS

1. Summary of the material contract

The following contracts (not being contracts entered into in the ordinary course of business) were entered into by our Group within the two years preceding the date of this document and are or may be material:

(1) an equity transfer agreement dated April 22, 2019 entered into by and among Ruijiu Yushang as transferor and Huang Weishu (黃衛書) as transferee, pursuant to which Ruijiu Yushang agreed to transfer, and Huang Weishu (黃衛書) agreed to purchase shareholding in LiTian TV & Film amounting to RMB2 million of its registered share capital, representing 4.3354% the then shareholding, in the consideration of RMB19.07576 million;

(2) an equity transfer agreement dated April 22, 2019 entered into by and among Kerui Chuangye as transferor and Gong Yueliang (龔越亮) as transferee, pursuant to which Kerui Chuangye agreed to transfer, and Gong Yueliang (龔越亮) agreed to purchase shareholding in LiTian TV & Film amounting to RMB1.461929 million of its registered share capital, representing 3.17% the then shareholding, in the consideration of RMB20.75178 million;

(3) an exclusive consultancy and service agreement dated October 14, 2019 entered into between LiTian WFOE and LiTian TV & Film, pursuant to which LiTian TV & Film agreed to engage the LiTian WFOE as its exclusive provider of technical support, consultation and other services in return for service fees;

(4) an exclusive call option agreement dated October 14, 2019 entered into among LiTian WFOE, the Registered Shareholders and LiTian TV & Film, pursuant to which LiTian WFOE was granted an irrevocable, unconditional and exclusive right to require the Registered Shareholders to transfer any or all their equity interests in LiTian TV & Film to LiTian WFOE and/or its designated third party, in whole or in part at any time and from time to time, for considerations equivalent to the proportionate registered capital amount of the equity interests to be transferred offset by outstanding loans owed by the Registered Shareholders to LiTian WFOE;

(5) an equity pledge agreement dated October 14, 2019 entered into among LiTian WFOE, the Registered Shareholders and LiTian TV & Film, pursuant to which the Registered Shareholders agreed to unconditionally and irrevocably pledge all their respective equity interests in LiTian TV & Film to LiTian WFOE;

(6) a shareholders’ voting rights entrustment agreement dated October 14, 2019 entered into among LiTian WFOE, the Registered Shareholders and LiTian TV & Film, pursuant to which each of the Registered Shareholders agreed to, among other things, irrevocably and exclusively appoint the persons designated by LiTian WFOE as its attorneys-in-fact to exercise on its behalf, any and all shareholder’s right that it has in respect of its equity interests in LiTian TV & Film;

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(7) a shareholder’s power of attorney executed by each of Mr. Yuan, Ms. Tian, Ms. Fu Jieyun (傅潔雲), Mr. Li Danjun (勵丹駿), Mr. Zhu Huanghang (朱黃杭), Ms. Si Houfang (斯厚芳), Haohao Xuexi Investment, Junfeng Investment, Zhihui Lixiang, Zhihui Xinlong, Mr. Huang Weishu (黃衛書) and Mr. Gong Yueliang (龔越亮) dated October 14, 2019 appointing LiTian WFOE as his/her/its appointee to exercise all his/her/its shareholder’s rights in LiTian TV & Film;

(8) a spouse undertaking dated October 14, 2019 executed by Ms. Tian, the spouse of Mr. Yuan, in favor of LiTian WFOE, irrevocably acknowledging and consenting the signing of the Contractual Arrangements by Mr. Yuan;

(9) a spouse undertaking dated October 14, 2019 executed by Mr. Yuan, the spouse of Ms. Tian, in favor of LiTian WFOE, irrevocably acknowledging and consenting the signing of the Contractual Arrangements by Ms. Tian;

(10) a spouse undertaking dated October 14, 2019 executed by Mr. Han Bo (韓波), the spouse of Ms. Fu Jieyun (傅潔雲), in favor of LiTian WFOE, irrevocably acknowledging and consenting the signing of the Contractual Arrangements by Ms. Fu Jieyun (傅潔雲);

(11) a spouse undertaking dated October 14, 2019 executed by Ms. Zhong Yanhua (鍾彥華), the spouse of Mr. Li Danjun (勵丹駿), in favor of LiTian WFOE, irrevocably acknowledging and consenting the signing of the Contractual Arrangements by Mr. Li Danjun (勵丹駿);

(12) a spouse undertaking dated October 14, 2019 executed by Ms. Zhang Jifang (張霽芳), the spouse of Mr. Zhu Huanghang (朱黃杭), in favor of LiTian WFOE, irrevocably acknowledging and consenting the signing of the Contractual Arrangements by Mr. Zhu Huanghang (朱黃杭);

(13) a spouse undertaking dated October 14, 2019 executed by Mr. Tang Jin (唐晉), the spouse of Ms. Si Houfang (斯厚芳), in favor of LiTian WFOE, irrevocably acknowledging and consenting the signing of the Contractual Arrangements by Ms. Si Houfang (斯厚芳);

(14) a spouse undertaking dated October 14, 2019 executed by Ms. Cao Zhendi (曹震滌), the spouse of Mr. Huang Weishu (黃衛書), in favor of LiTian WFOE, irrevocably acknowledging and consenting the signing of the Contractual Arrangements by Mr. Huang Weishu (黃衛書);

(15) a spouse undertaking dated October 14, 2019 executed by Ms. Feng Lijuan (馮麗娟), the spouse of Mr. Gong Yueliang (龔越亮), in favor of LiTian WFOE, irrevocably acknowledging and consenting the signing of the Contractual Arrangements by Mr. Gong Yueliang (龔越亮);

(16) the Deed of Non-competition;

(17) the Deed of Indemnity; and

(18) the [REDACTED].

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2. Intellectual property rights of our Group

Trademarks

As at the date of this document, our Group had respectively registered and applied for the registrations of the following trademarks which are material to our business:

Registered Place of Application Application Registration Expiration No. Trademark Owner registration Class number date date date

1. LiTian TV Hong Kong 41 305017806 August 6, December 9, August 5, & Film 2019 2019 2029

2. LiTian TV Hong Kong 41 305084226 October 15, March 30, October 14, & Film 2019 2020 2029

Domain Names

As at the Latest Practicable Date, we have registered the following domain name:

Registrant Domain name Date of registration Expiration date

LiTian TV & Film litian.tv ...... April 21, 2015 April 21, 2025

Copyrights

As at the Latest Practicable Date, we have owned the following TV series copyrights which are material to our business:

No. Owner of the Copyright Name of the Copyright Ownership of Copyright

1. LiTianTV&Film..... Guerrilla Heroes《游擊英雄》 Wholly-owned copyright (except for shared right of authorship) 2. LiTianTV&Film..... DoubleGuns《雙槍》 Wholly-owned copyright (except for shared right of authorship) 3. LiTianTV&Film..... TheBrothers《義海》 Wholly-owned copyright (except for shared right of authorship) 4. LiTianTV&Film..... Glory of the Blood《鐵血榮耀》 Wholly-owned copyright (except for shared right of authorship) 5. LiTianTV&Film..... AGallant Army《老虎隊》 Wholly-owned copyright (except for shared right of authorship) 6. LiTianTV&Film..... GreenMountains and Clear Waters Wholly-owned copyright 《綠水青山紅日子》 (except for shared right of authorship) 7. LiTianTV&Film..... MomwithSmile《微笑媽媽》 Wholly-owned copyright (except for shared right of authorship) 8. LiTianTV&Film..... Mr.FoxandMissRose《酋長的男人》 Shared copyright (except for the information network transmission right, which had been permanently and exclusively licensed to the third-party co-investor)

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D. FURTHER INFORMATION ABOUT OUR DIRECTORS

1. Directors’ service contracts and letters of appointment

Each of our executive Directors and non-executive Directors [has] entered into a service contract with us for an initial fixed term of three years commencing from the [REDACTED] and will continue thereafter until terminated by not less than three months’ notice in writing served by either party on the other, which notice shall not expire until after the fixed term.

Each of our independent non-executive Directors [has] entered into a letter of appointment with us for an initial fixed term of one year commencing from the [REDACTED] and will continue thereafter until terminated by not less than three months’ notice in writing by served by the independent non-executive Director to our Company or with immediate effect following the notice in writing served by our Company to the non-executive Director.

The current basic annual salaries of our Directors are as follows:

Mr.YuanLi...... RMB[●] Ms.TianTian...... RMB[●] Ms. Fu Jieyun ...... RMB[●] Mr.YuYang...... RMB0 Mr. Tang Zhiwei ...... RMB0 Mr. Luo Jianxing ...... RMB0 Mr. Teng Bing Sheng ...... RMB[●] Mr. Liu Hanlin ...... RMB[●] Mr.GanWeimin...... RMB [●]

Save as aforesaid, none of our Directors has or is proposed to have a service contract with us or any of our subsidiaries (other than contracts expiring or determinable by the employer within one year without the payment of compensation (other than statutory compensation)).

2. Directors’ remuneration during the Track Record Period

Save as disclosed in this document, no other emoluments have been paid or are payable, in respect of the three years ended December 31, 2017, 2018 and 2019 by us to our Directors.

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E. DISCLOSURE OF INTERESTS

1. Disclosure of interests

Interests and short positions of our Directors in our share capital and our associated corporations as of the Latest Practicable Date and following the Capitalization Issue and the [REDACTED]

As of the Latest Practicable Date and immediately following completion of the Capitalization Issue and the [REDACTED] and taking no account of any Shares which may be allotted and issued pursuant to the Share Option Scheme or the exercise of the [REDACTED], the interests or short positions of our Directors and the chief executive of our Company in our Shares, underlying Shares and debentures of our 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 interests and short positions which he is 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 recorded in the register referred to therein or which will be required to be notified to us and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules, will be as follows:

Interests and short positions in the shares, underlying shares and debentures and associated corporations:

(i) Long position in our Company

Immediately after the [REDACTED] and the Capitalization Issue (1)

Approximate number of percentage Number of share Name Capacity/ Nature of interest of Shares shareholding

Mr.Yuan ...... Interest in a controlled corporation(2) [REDACTED][REDACTED] Spouse interest(3) [REDACTED][REDACTED]

Ms.Tian...... Interest in a controlled corporation(4) [REDACTED][REDACTED] Spouse interest(5) [REDACTED][REDACTED]

(6) Ms. Fu Jieyun (傅潔雲) . . Interest in a controlled corporation [REDACTED] [REDACTED]

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Notes:

(1) Assuming the [REDACTED] is not exercised.

(2) Mr. Yuan is the sole shareholder of Litian Century and he is therefore deemed to be interested in the Shares held by Litian Century under the SFO.

(3) Ms. Tian is the spouse of Mr. Yuan. Therefore, Mr. Yuan is deemed to be interested in the Shares held by Marshal Investment under the SFO.

(4) Ms. Tian is the sole shareholder of Marshal Investment and he is therefore deemed to be interested in the Shares held by Marshal Investment under the SFO.

(5) Mr. Yuan is the spouse of Ms. Tian. Therefore, Ms. Tian is deemed to be interested in the Shares held by Litian Century under the SFO.

(6) Ms. Fu Jieyun is the sole shareholder of Sky Development Investment Co. Ltd. and she is therefore deeded to be interested in the Shares held by Sky Development Investment Co. Ltd. under the SFO.

(ii) Long position in associated corporations

LiTian TV & Film

Immediately after the [REDACTED] and the Capitalization Issue (1)

Approximate Capacity/ Nature Amount of percentage of Name of interest registered capital shareholding

Mr.Yuan...... Beneficial owner RMB14.0 million 30.35% Ms.Tian...... Beneficial owner RMB13.2 million 28.61% Ms. Fu Jieyun (傅潔雲) ..... Beneficial owner RMB0.4 million 0.87%

Note:

(1) Assuming the [REDACTED] is not exercised.

2. Disclaimers

Save as disclosed in this document:

(a) our Directors are not aware of any person (not being our Director or chief executive) who will, immediately after completion of the Capitalization Issue and the [REDACTED] (without taking into account Shares which may be issued upon the exercise of the [REDACTED] or the Shares which may be issued upon the exercise of options granted under the Share Option Scheme), have an interest or a short position in Shares or underlying Shares which would fall to be disclosed to us under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who will, directly or indirectly, be 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 members of the Group;

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(b) none of our Directors has any interest or short position in any of our Shares, underlying Shares or debentures or any shares, underlying shares or debentures of any associated corporation within the meaning of Part XV of the SFO, which will have to be notified to us and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he 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 us and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, in each case once our Shares are [REDACTED];

(c) none of our Directors nor any of the parties listed in the section headed “G. Other Information — 10. Consents of experts” in this Appendix is interested in the promotion of our Company, or in any assets which have been, within the two years immediately preceding the date of this document, acquired or disposed of by or leased to our Company or any of our subsidiaries, or are proposed to be acquired or disposed of by or leased to our Company or any of our subsidiaries;

(d) none of our Directors nor any of the parties listed in the section headed “G. Other Information — 10. Consents of experts” in this Appendix is materially interested in any contract or arrangement subsisting at the date of this document which is significant in relation to our business;

(e) save in connection with the [REDACTED], none of the parties listed in the section headed “G. Other Information — 10. Consents of experts” in this Appendix:

(i) is interested legally or beneficially in any securities of our Company or any of our subsidiaries; or

(ii) has any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities of our Company or any of our subsidiaries;

(f) none of our Directors or their close associates (as defined in the Listing Rules) or the existing Shareholders (who, to the knowledge of our Directors, owns more than 5% of our issued share capital) has any interest in any of the five largest customers or the five largest suppliers of our Group.

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F. SHARE OPTION SCHEME

The following is a summary of principal terms of the Share Option Scheme conditionally approved by a resolution of the then shareholder of our Company passed on [●] and adopted by a resolution of the Board on [●] (the “Adoption Date”). The terms of the Share Option Scheme are in compliance with the provisions of Chapter 17 of the Listing Rules.

1. Purpose

The purpose of the Share Option Scheme is to give the Eligible Persons (as defined in the following paragraph) an opportunity to have a personal stake in our Company and help motivate them to optimize their future contributions to our Group and/or to reward them for their past contributions, to attract and retain or otherwise maintain on-going relationships with such Eligible Persons who are significant to and/or whose contributions are or will be beneficial to the performance, growth or success of our Group, and additionally in the case of Executives (as defined below), to enable our Group to attract and retain individuals with experience and ability and/or to reward them for their past contributions.

2. Who may join

The Board may, at its absolute discretion, offer options (“Options”) to subscribe for such number of Shares in accordance with the terms set out in the Share Option Scheme to:

(a) any executive director of, manager of, or other employee holding an executive, managerial, supervisory or similar position in any member of our Group (“Executive”), any proposed employee, any full-time or part-time employee, or a person for the time being seconded to work full-time or part-time for any member of our Group (“Employee”);

(b) a director or proposed director (including an independent non-executive director) of any member of our Group;

(d) a supplier of goods or services to any member of our Group;

(e) a customer, consultant, business or joint venture partner, franchisee, contractor, agent or representative of any member of our Group;

(f) a person or entity that provides design, research, development or other support or any advisory, consultancy, professional or other services to any member of our Group;

(g) an associate of any of the persons referred to in paragraphs (a) to (f) above; and

(h) any person involved in the business affairs of the Company whom our Board determines to be appropriate to participate in the Share Option Scheme (the person referred above are the “Eligible Persons”).

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3. Maximum number of Shares

The maximum number of Shares which may be issued upon exercise of all options to be granted under the Share Option Scheme and any other schemes of our Group shall not in aggregate exceed 10% of the Shares in issue as at the [REDACTED] (such 10% limit representing [REDACTED] Shares) excluding Shares which may fall to be issued upon the exercise of the [REDACTED] granted by our Company (the “Scheme Mandate Limit”) provided that:

(a) our Company may at any time as our Board may think fit seek approval from our Shareholders to refresh the Scheme Mandate Limit, save that the maximum number of Shares which may be issued upon exercise of all options to be granted under the Share Option Scheme and any other schemes of our Company shall not exceed 10% of our Shares in issue as at the date of approval by our Shareholders in general meeting where the Scheme Mandate Limit is refreshed. Options previously granted under the Share Option Scheme and any other schemes of our Company (including those outstanding, cancelled, lapsed or exercised in accordance with the terms of the Share Option Scheme or any other schemes of our Company) shall not be counted for the purpose of calculating the Scheme Mandate Limit as refreshed. Our Company shall send to our Shareholders a circular containing the details and information required under the Listing Rules;

(b) our Company may seek separate approval from our Shareholders in general meeting for granting Options beyond the Scheme Mandate Limit, provided that the Options in excess of the Scheme Mandate Limit are granted only to the Eligible Person specified by our Company before such approval is obtained. Our Company shall issue a circular to our Shareholders containing the details and information required under the Listing Rules; and

(c) the maximum number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other schemes of our Group shall not exceed 30% of our Company’s issued share capital from time to time. No Options may be granted under the Share Option Scheme and any other share option scheme of our Company if this will result in such limit being exceeded.

4. Maximum entitlement of each participants

No Option may be granted to any one person such that the total number of Shares issued and to be issued upon exercise of Options granted and to be granted to that person in any 12-month period exceeds 1% of our Company’s issued share capital from time to time. Where any further grant of Options to such an Eligible Person would result in our Shares issued and to be issued upon exercise of all Options granted and to be granted to such Eligible Person (including exercised, cancelled and outstanding Options) in the 12-month period up to and including the date of such further grant representing in aggregate over 1% of our Shares in issue, such further grant shall be separately approved by our Shareholders in general meeting with such Eligible Person and his close associates (or his associates if such Eligible Person is a connected person) abstaining from voting. Our Company shall send a circular to our

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Shareholders disclosing the identity of the Eligible Person, the number and terms of the Options to be granted (and Options previously granted) to such Eligible Person, and containing the details and information required under the Listing Rules. The number and terms (including the subscription price) of the Options to be granted to such Eligible Person must be fixed before the approval of our Shareholders and the date of the Board meeting proposing such grant shall be taken as the offer date for the purpose of calculating the subscription price of those Options.

5. Offer and grant of Options

Subject to the terms of the Share Option Scheme, the Board shall be entitled at any time within 10 years from the Adoption Date to offer the grant of an Option to any Eligible Person as the Board may in its absolute discretion select to subscribe at the subscription price for such number of Shares as the Board may (subject to the terms of the Share Option Scheme) determine (provided the same shall be a board lot for dealing in the Shares on the Stock Exchange or an integral multiple thereof).

6. Granting Options to connected persons

Subject to the terms in the Share Option Scheme, only insofar as and for so long as the Listing Rules require, where any offer of an Option is proposed to be made to a director, chief executive or a substantial shareholder (as defined in the Listing Rules) of our Company or any of their respective associates, such offer must first be approved by the independent non-executive Directors of our Company (excluding the independent non-executive Director who or whose associates is the grantee of an Option).

Where any grant of Options to a substantial shareholder (as defined in the Listing Rules) or an independent non-executive Director of our Company, or any of their respective associates, would result in the securities issued and to be issued upon exercise of all Options already granted and to be granted (including Options exercised, cancelled and outstanding) to such person in the 12-month period up to and including the date of such grant:

(a) representing in aggregate over 0.1% of the relevant class of securities in issue; and

(b) (where the securities are listed on the Stock Exchange), having an aggregate value, based on the closing price of the securities at the date of each grant, in excess of HK$5.0 million,

such further grant of Options must be approved by our Shareholders (voting by way of a poll). Our Company shall send a circular to our Shareholders containing the information required under the Listing Rules. The grantee, his associates and all core connected persons of our Company must abstain from voting in favor at such general meeting.

Approval from our Shareholders is required for any change in the terms of Options granted to a participant who is a substantial shareholder or an independent non-executive Director of our Company, or any of their respective associates. The grantee, his associates and all core connected persons of our Company must abstain from voting in favour at such general meeting.

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7. Restriction on the time of grant of Options

The Board shall not grant any Option under the Share Option Scheme after inside information has come to its knowledge until such inside information has been announced pursuant to the requirements of the Listing Rules. In particular, no Option shall be granted during the period commencing one month immediately preceding the earlier of the date of the Board meeting (as such date is first notified to the Stock Exchange in accordance with the 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 Listing Rules) and the deadline for our Company to publish an announcement of its results for any year, half-year, quarterly or any other interim period (whether or not required under the Listing Rules), and ending on the date of the results announcements.

8. Minimum holding period, vesting and performance target

Subject to the provisions of the Listing Rules, the Board may in its absolute discretion when offering the grant of an Option impose any conditions, restrictions or limitations in relation thereto in addition to those set forth in the Share Option Scheme as the Board may think fit (to be stated in the letter containing the offer of the grant of the Option) including (without prejudice to the generality of the foregoing) qualifying and/or continuing eligibility criteria, conditions, restrictions or limitations relating to the achievement of performance, operating or financial targets by our Company and/or the grantee, the satisfactory performance or maintenance by the grantee of certain conditions or obligations or the time or period before the right to exercise the Option in respect of any of the Shares shall vest provided that such terms or conditions shall not be inconsistent with any other terms or conditions of the Share Option Scheme. For the avoidance of doubt, subject to such terms and conditions as the Board may determine as aforesaid (including such terms and conditions in relation to their vesting, exercise or otherwise) there is no minimum period for which an Option must be held before it can be exercised and no performance target which need to be achieved by the grantee before the Option can be exercised.

9. Amount payable for Options and offer period

An offer of the grant of an Option shall remain open for acceptance by the Eligible Person concerned for a period of 28 days from the offer date provided that no such grant of an Option may be accepted after the expiry of the effective period of the Share Option Scheme. An Option shall be deemed to have been granted and accepted by the Eligible Person and to have taken effect when the duplicate offer letter comprising acceptance of the offer of the Option duly signed by the grantee together with a remittance in favor of our Company of HK$1.00 by way of consideration for the grant thereof is received by our Company on or before the date upon which an offer of an Option must be accepted by the relevant Eligible Person, being a date no later than 28 days after the offer date (the “Acceptance Date”). Such remittance shall in no circumstances be refundable.

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Any offer of the grant of an Option may be accepted in respect of less than the number of Shares in respect of which it is offered provided that it is accepted in respect of board lots for dealing in Shares on the Stock Exchange or an integral multiple thereof and such number is clearly stated in the duplicate offer letter comprising acceptance of the offer of the Option. To the extent that the offer of the grant of an Option is not accepted by the Acceptance Date, it will be deemed to have been irrevocably declined.

10. Subscription price

The subscription price in respect of any particular Option shall be such price as the Board may in its absolute discretion determine at the time of grant of the relevant Option (and shall be stated in the letter containing the offer of the grant of the Option) but the subscription price shall not be less than whichever is the highest of:

(a) the nominal value of a Share;

(b) the closing price of a Share as stated in the Stock Exchange’s daily quotations sheet on the offer date; and

(c) the average closing price of a Share as stated in the Stock Exchange’s daily quotations sheets for the 5 Business Days (as defined in the Listing Rules) immediately preceding the offer date.

11. Exercise of Option

(a) An Option shall be exercised in whole or in part (but if in part only, in respect of a board lot or any integral multiple thereof) within the Option period in the manner as set out in this Share Option Scheme by the grantee (or his or her legal personal representative(s)) by giving notice in writing to our Company stating that the Option is thereby exercised and specifying the number of Shares in respect of which it is exercised. Each such notice must be accompanied by a remittance for the full amount of the aggregate subscription price for the Shares in respect of which the notice is given. Within 28 days after receipt of the notice and, where appropriate, receipt of a certificate from our auditors pursuant to the Share Option Scheme, our Company shall accordingly allot and issue the relevant number of Shares to the grantee (or his or her legal personal representative(s)) credited as fully paid with effect from (but excluding) the relevant exercise date and issue to the grantee (or his or her legal personal representative(s)) share certificate(s) in respect of the Shares so allotted.

(b) The exercise of any Option may be subject to a vesting schedule to be determined by the Board in its absolute discretion, which shall be specified in the offer letter.

(c) The exercise of any Option shall be subject to the members of our Company in general meeting approving any necessary increase in the authorized share capital of our Company.

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(d) Subject as hereinafter provided and subject to the terms and conditions upon which the Option was granted, an Option may be exercised by the Grantee at any time during the Option Period, provided that:

(i) in the event that the grantee dies or becomes permanently disabled before exercising an Option (or exercising it in full) and none of the events for termination of employment or engagement pursuant to the terms of the Share Option Scheme exists with respect to such grantee, he or she (or his or her legal representative(s)) may exercise the Option up to the grantee’s entitlement immediately prior to the death or permanently disability (to the extent not already exercised) within a period of 12 months following his or her death or permanent disability or such longer period as the Board may determine;

(ii) in the event that the grantee ceases to be an Executive for any reason (including his or her employing company ceasing to be a member of our Group) other than his or her death, permanent disability, retirement pursuant to such retirement scheme applicable to our Group at the relevant time or the transfer of his or her employment to an affiliate company or the termination of his or her employment with the relevant member of our Group by resignation or culpable termination, the Option (to the extent not already exercised) shall lapse on the date of cessation of such employment and not be exercisable unless the Board otherwise determines in which event the Option (or such remaining part thereof) shall be exercisable within such period as the Board may in its absolute discretion determine following the date of such cessation;

(iii) if a general offer is made to all holders of Shares and such offer becomes or is declared unconditional (in the case of a takeover offer) or is approved by the requisite majorities at the relevant meetings of our Shareholders (in the case of a scheme of arrangement), the grantee shall be entitled to exercise the Option (to the extent not already exercised) at any time (in the case of a takeover offer) within one month after the date on which the offer becomes or is declared unconditional or (in the case of a scheme of arrangement) prior to such time and date as shall be notified by our Company;

(iv) if a compromise or arrangement between our Company and its members or creditors is proposed for the purpose of or in connection with a scheme for the reconstruction of our Company or its amalgamation with any other company, our Company shall give notice thereof to the grantees who have Options unexercised at the same time as it dispatches notices to all members or creditors of our Company summoning the meeting to consider such a compromise or arrangement and thereupon each grantee (or his or her legal representatives or receiver) may until the expiry of the earlier of:

(1) the Option period;

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(2) the period of two months from the date of such notice; or

(3) the date on which such compromise or arrangement is sanctioned by the court, exercise in whole or in part his or her Option.

(v) in the event a notice is given by our Company to its members to convene a general meeting for the purposes of considering, and if thought fit, approving a resolution to voluntarily wind-up our Company, our Company shall on the same date as or soon after it dispatches such notice to each member of our Company give notice thereof to all grantees and thereupon, each grantee (or his or her legal personal representative(s)) shall be entitled to exercise all or any of his or her options at any time not later than two Business Days (as defined in the Listing Rules) prior to the proposed general meeting of our Company by giving notice in writing to our Company, accompanied by a remittance for the full amount of the aggregate subscription price for the Shares in respect of which the notice is given whereupon our Company shall as soon as possible and, in any event, no later than the business day (as defined in the Listing Rules) immediately prior to the date of the proposed general meeting referred to above, allot the relevant Shares to the grantee credited as fully paid.

12. Life of Share Option Scheme

Subject to the terms of this Share Option Scheme, the Scheme shall be valid and effective for a period of 10 years from the date on which it becomes unconditional, after which no further options will be granted or offered but the provisions of the Share Option Scheme shall remain in force and effect in all other respects. All Options granted prior to such expiry and not then exercised shall continue to be valid and exercisable subject to and in accordance with the Share Option Scheme.

13. Lapse of Share Option Scheme

An Option shall lapse automatically and not be exercisable, to the extent not already exercised, on the earliest of:

(a) the expiry of the Option period;

(b) the expiry of any of the period referred to paragraphs related to exercise of the Option;

(c) subject to the terms of the period mentioned in the paragraph headed “F. Share Option Scheme — 11. Exercise of Option” in this Appendix, the date of the commencement of the winding-up of our Company;

(d) there is an unsatisfied judgment, order or award outstanding against the grantee or the Board has reason to believe that the grantee is unable to pay or to have no reasonable prospect of being able to pay his/her/its debts;

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(e) there are circumstances which entitle any person to take any action, appoint any person, commence proceedings or obtain any order of the type mentioned in this Share Option Scheme with respect to the exercise of the Option;

(f) a bankruptcy order has been made against any director or shareholder of the grantee (being a corporation) in any jurisdiction.

No compensation shall be payable upon the lapse of any Option, provided that the Board shall be entitled in its discretion to pay such compensation to the grantee in such manner as it may consider appropriate in any particular case.

14. Adjustment

In the event of any alteration to the capital structure of our Company while any Option remains exercisable, whether by way of capitalization of profits or reserves, right issue, consolidations, reclassification, reconstruction, sub-division or reduction of the share capital of our Company, the Board may, if it considers the same to be appropriate, direct that adjustments be made to:

(a) the maximum number of Shares subject to the Share Option Scheme; and/or

(b) the aggregate number of Shares subject to the Option so far as unexercised; and/or

Where the Board determines that such adjustments are appropriate (other than an adjustment arising from a capitalization issue), the auditors appointed by our Company shall certify in writing to the Board that any such adjustments are in their opinion fair and reasonable, provided that:

(a) any such adjustments shall give the Eligible Persons the same proportion of equity capital as they were previously entitled to. In respect of any such adjustments, other than any made on a capitalization issue, the auditors shall confirm to the Board in writing that the adjustments satisfy this requirement;

(b) any such adjustments shall be made on the basis that the aggregate subscription price payable by the grantee on the full exercise of any Option shall remain as nearly as practicable same as (but shall not be greater than) it was before such event;

(c) no such adjustments shall be made the effect of which would be to enable a Share to be issued at less than its nominal value;

(d) any such adjustments shall be made to in accordance with the provisions as stipulated under Chapter 17 of the Listing Rules and supplementary guidance on the interpretation of the Listing Rules issued by the Stock Exchange from time to time; and

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(e) the issue of securities as consideration in a transaction shall not be regarded as a circumstance requiring any such adjustments.

15. Offer and grant of Options

The Board shall be entitled for the following causes to cancel any Option in whole or in part by giving notice in writing to the grantee stating that such Option is thereby cancelled with effect from the date specified in such notice (the “Cancellation Date”):

(a) the grantee commits or permits or attempts to commit or permit a breach of restriction on transferability of Option or any terms or conditions attached to the grant of the Option;

(b) the grantee makes a written request to the Board for the Option to be cancelled; or

(c) if the grantee has, in the opinion of the Board, conducted himself in any manner whatsoever to the detriment of or prejudicial to the interests of our Company or its subsidiary.

16. Ranking of Shares

The Shares to be allotted upon the exercise of an Option will be subject to all the provisions of the Articles of Association and the laws of the Cayman Islands from time to time and shall rank pari passu in all respects with the then existing fully paid Shares in issue commencing from (i) the allotment date or, (ii) if that date falls on a day when the register of members of our Company is closed, the first date of the re-opening of the register of members. Accordingly, it will entitle the holders to participate in all dividends or other distributions paid or made on or after (i) the allotment date or, (ii) if that date falls on a day when the register of members of our Company is closed, the first day of the re-opening of the register of members, other than any dividend or other distribution previously declared or recommended or resolved to be paid or made if the record date therefore shall be before the allotment date.

Share issued upon the exercise of an Option shall not carry rights until the registration of the grantee (or any other person) as the holder thereof.

17. Termination

Our Company may by resolution in general meeting at any time terminate the operation of the Share Option Scheme. Upon termination of the Share Option Scheme as aforesaid, no further Options shall be offered but the provisions of the Share Option Scheme shall remain in force and effect in all other respects. All Options granted prior to such termination and not then exercised shall continue to be valid and exercisable subject to and in accordance with the Share Option Scheme.

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18. Transferability

The Option shall be personal to the grantee and shall not be assignable and no grantee shall in any way sell, transfer, charge, mortgage, encumber or create any interest (legal or beneficial) in favor of any third party over or in relation to any Option or attempt to do so (save that the grantee may nominate a nominee in whose name the Shares issued pursuant to the Share Option Scheme may be registered). Any breach of the foregoing shall entitle our Company to cancel any outstanding Option or part thereof granted to such grantee.

19. Alteration of Share Option Scheme

The Share Option Scheme may be altered in any respect by a resolution of the Board except that the following shall not be carried out except with the prior sanction of an ordinary resolution of our Shareholders in general meeting:

(a) any material alteration to its terms and conditions or any change to the terms of Options granted (except where the alterations take effect under the existing terms of the Share Option Scheme);

(b) any alteration to the provisions of the Share Option Scheme in relation to the matters set out in Rule 17.03 of the Listing Rules to the advantage of grantee;

(c) any change to the authority of the Board or any person or committee delegated by the Board pursuant to the Share Option Scheme to administer the day-to-day running of the Scheme; and

(d) any alteration to the aforesaid alteration provisions provided always that the amended terms of the Share Option Scheme shall comply with the applicable requirements of the Listing Rules.

20. Conditions of the Share Option Scheme

The Share Option Scheme shall come into effect on the date on which the following conditions are fulfilled:

(a) the approval of our Shareholders for the adoption of the Share Option Scheme;

(b) the approval of the Stock Exchange for the [REDACTED] of and permission to deal in, a maximum of [REDACTED] Shares to be allotted and issued pursuant to the exercise of the Share Option Scheme in accordance with the terms and conditions of the Share Option Scheme;

(d) the obligations of the [REDACTED] under the [REDACTED] becoming unconditional and not being terminated in accordance with the terms thereof or otherwise.

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If the permission referred to in paragraph (b) above is not granted within two calendar months after the Adoption Date:

(i) the Share Option Scheme will forthwith terminate;

(ii) any Option granted or agreed to be granted pursuant to the Share Option Scheme and any offer of such a grant shall be of no effect;

(iii) no person shall be entitled to any rights or benefits or be under any obligations under or in respect of the Share Option Scheme or any Option; and

(iv) the Board may further discuss and devise another share option scheme that is applicable to a private company for adoption by our Company.

Application has been made to the Stock Exchange for the [REDACTED]of[REDACTED] Shares which may be issued pursuant to the exercise of Options under the Share Option Scheme.

G. OTHER INFORMATION

1. Deed of Indemnity

Our Controlling Shareholders have entered into the Deed of Indemnity with and in favor of our Company for itself and as trustee for its subsidiaries, to provide indemnities in respect of, among other things:

(a) certain estate duty which might be payable by any companies in our Group by virtue of or under the provisions of the Estate Duty Ordinance (Chapter 111 of Laws of Hong Kong); and

(b) any liability of any or all of the members of our Group to any form of taxation and duty whenever created or imposed, whether of Hong Kong, the PRC or of any other part of the world, and without prejudice to the generality of the foregoing includes profits tax, provisional profits tax, business tax on gross income, income tax, value added tax, interest tax, salaries tax, property tax, land appreciation tax, lease registration tax, estate duty, capital gains tax, death duty, capital duty, stamp duty, payroll tax, withholding tax, rates, import, customs and excise duties and generally any tax duty, impost, levy or rate or any amount payable to the revenue, customs or fiscal authorities of local, municipal, provincial, national, state or federal level whether of Hong Kong, the PRC or of any other part of the world falling on any of the members of our Group resulting from or by reference to any income, profits or gains earned, accrued or received on or before the [REDACTED] or any event on transaction on or before [REDACTED] 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.

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The Deed of Indemnity does not cover any claim and our Controlling Shareholders shall be under no liability under this Deed of Indemnity in respect of above:

(a) to the extent that provision or allowance has been made for such taxation in the consolidated financial statements of our Group as set out in Appendix I to this document or in the audited accounts of the relevant members of our Group for the three years ended December 31, 2017, 2018 and 2019 (the “Accounts”); or

(b) for which any company 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 December 31, 2019 up to and including the [REDACTED] or consisting of any company of our Group ceasing, or being deemed to cease, to be a company in our Group for the purposes of any matter of the taxation; or

(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 by the Hong Kong Inland Revenue Department or the tax authorities or any other authority in any part of the world coming into force after the [REDACTED] or to the extent such claim arises or is increased by an increase in the rates of taxation after the [REDACTED] with retrospective effect; or

(d) to the extent that any provision or reserve made for such taxation in the Accounts is finally established to be an over-provision or an excessive reserve as certified by a firm of accountants acceptable to our Company then the liability of our Controlling Shareholders (if any) in respect of such taxation shall be reduced by an amount not exceeding such over-provision or excess reserve.

Under the Deed of Indemnity, our Controlling Shareholders have also undertaken to indemnify, on a joint and several bases, from any depletion in or reduction in value of its assets or any loss (including all legal costs and suspension of operation), cost, expenses, damages, penalties, fines or other liabilities which any member of our Group may incur or suffer arising from the non-compliances as disclosed in the section headed “Business — Legal Proceedings and Compliance” in this document.

2. Litigation

As at the Latest Practicable Date, neither we nor any of our subsidiaries were/was engaged in any litigation, arbitration or claim of material importance, and no litigation, arbitration or claim of material importance is known to our Directors to be pending or threatened by or against us, that would have a material adverse effect on its results of operations or financial condition.

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3. Preliminary expenses

Our estimated preliminary expenses are approximately HK$206,700 and have been paid by us.

4. Promoter

There are no promoters of our Company.

5. Sole Sponsor

The Sole Sponsor made an application on our behalf to the [REDACTED] Committee of the Stock Exchange for [REDACTED] of, and permission [REDACTED], the Shares in issue as mentioned herein, the Shares to be issued pursuant to the Capitalization Issue and any Shares falling to be issued pursuant to the exercise of the [REDACTED], and the Shares that may be issued upon the exercise of options that may be granted under the Share Option Scheme. All necessary arrangements have been made to enable such Shares to be admitted into [REDACTED]. The Sole Sponsor confirms that it satisfies the independence criteria applicable to sponsors set out in Rule 3A.07 of the Listing Rules.

Our Company has entered into an engagement agreement with the Sole Sponsor, pursuant to which our Company agreed to pay the Sole Sponsor a fee of HK$5.5 million to act as sponsor to our Company in the [REDACTED].

6. No material adverse change

Our Directors confirm that there has been no material adverse change in our Company’s financial or trading position or prospects since December 31, 2019 (being the date to which our latest audited consolidated financial statements were made up).

7. Binding effect

This document shall have the effect, if an application is made in pursuance hereof, of rendering all persons concerned bound by all the provisions (other than the penal provisions) of sections 44A and 44B of the Companies (WUMP) Ordinance (Chapter 32 of the Laws of Hong Kong) so far as applicable.

8. Miscellaneous

(1) Save as disclosed in this document:

(a) within the two years immediately preceding the date of this document, 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;

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(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;

(c) neither our Company nor any of our subsidiaries have issued or agreed to issue any founder shares, management shares or deferred shares;

(d) within the two years immediately preceding the date of this document, 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 any member of our Group;

(e) within the two years preceding the date of this document, no commission has been paid or payable (except [REDACTED]tothe[REDACTED]) for subscription, agreeing to subscribe, procuring subscription or agreeing to procure subscription of any Shares in our Company;

(f) none of the equity and debt securities of our Company is [REDACTED]or dealt with in any other stock exchange nor is any [REDACTED] or permission to [REDACTED] being or proposed to be sought; and

(g) we have no outstanding convertible debt securities.

(2) There has not been any interruption in the business of our Group which may have or have had a significant effect on the financial position of our Group in the twelve (12) months immediately preceding the date of this document.

9. Qualifications of experts

The following are the qualifications of the experts who have given opinion or advice which are contained in this document:

Name Qualification

Founder Securities A corporation licensed to conduct type 6 (advising on (Hong Kong) Capital corporate finance) regulated activities under the SFO Company Limited

KPMG Certified Public Accountants, Hong Kong Public Interest Entity Auditor registered in accordance with the Financial Reporting Council Ordinance

Conyers Dill & Pearman Cayman Islands attorneys-at-law

Zhong Lun Law Firm PRC legal advisors to our Company

Frost & Sullivan Independent industry consultant

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10. Consents of experts

Each of the experts named in paragraph 9 of this Appendix has given and has not withdrawn their respective consent to the issue of this document with the inclusion of its report and/or letter 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.

None of the experts named above has any shareholding interests in our Company or any of our subsidiaries or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in our Company or any of our subsidiaries.

11. Bilingual document

The English language and the Chinese language versions of this document are being published separately, in reliance upon the exemption provided by section 4 of the Companies (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong).

– IV-29 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION

DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES

The documents attached to the copy of this document delivered to the Registrar of Companies in Hong Kong for registration were copies of the WHITE, YELLOW and [REDACTED], the written consents referred to in the paragraph headed “G. Other Information — 10. Consents of experts” in Appendix IV and copies of the material contracts referred to in the paragraph headed “C. Further Information about Our Business — 1. Summary of the Material Contracts” in Appendix IV to this document.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of Luk & Partners in Association with Morgan, Lewis & Bockius at Suites 1902-09, 19/F, Edinburgh Tower, The Landmark, 15 Queen’s Road Central, Hong Kong during normal business hours from 9:00 a.m. to 5:00 p.m. up to and including the date that is 14 days from the date of this document:

(1) our Memorandum and the Articles of Association;

(2) the Accountants’ Report of our Group prepared by KPMG, the text of which is set out in Appendix I to this document;

(3) the audited consolidated financial statements of our Group for each of the years ended December 31, 2017, 2018 and 2019;

(4) the reports received from KPMG on unaudited pro forma financial information, the texts of which are set out in Appendix II to this document;

(5) the material contracts referred to in the paragraph headed “C. Further Information about Our Business — 1. Summary of the Material Contracts” in Appendix IV to this document;

(6) the service contracts and letters of appointment with Directors, referred to in the paragraph headed “D. Further Information about our Directors — 1. Directors’ service contracts and letters of appointment” in Appendix IV to this document;

(7) the written consents referred to in the paragraph headed “Consents of experts” in Appendix IV to this document;

(8) the PRC legal opinions prepared by Zhong Lun Law Firm, our legal advisors as to the PRC law, in respect of certain aspects of our Group and our property interests;

(9) the letter of advice prepared by Conyers Dill & Pearman summarizing certain aspects of Cayman Islands Company Law referred to in Appendix III to this document;

(10) the industry report prepared by Frost & Sullivan;

(11) the Cayman Islands Company Law; and

(12) the rules of the Share Option Scheme.

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