Transmit Entertainment Limited 傳遞娛樂有限

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Transmit Entertainment Limited, you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for onward transmission to the purchaser or the transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

Transmit Entertainment Limited 傳遞娛樂有限公司 (Formerly Pegasus Entertainment Holdings Limited (天馬影視文化控股有限公司)) (Incorporated in the Cayman Islands with limited liability) (Stock code: 1326)

MAJOR TRANSACTION IN RELATION TO THE VIE ACQUISITION AGREEMENT

Financial Adviser to the Company

Capitalised terms used on this cover page have the same meaning as defined in the section headed ‘‘Definitions’’ in this circular, unless the context requires otherwise.

A letter from the Board is set out on pages 6 to 40 of this circular.

The Investment has been approved by written Shareholder’s approval obtained from Nice Rich, the controlling Shareholder of the Company, pursuant to Rule 14.44 of the Listing Rules in lieu of a general meeting of the Company. This circular is being despatched to the Shareholders for information only.

26 July 2018 CONTENTS

Page

Definitions ...... 1

Letter from the Board ...... 6

Appendix I — Financial information of the Group ...... 41

Appendix II — Financial information of the Target Group ...... 44

Appendix III — Management discussion and analysis of the Target Group ...... 73

Appendix IV — Unaudited pro forma financial information of the Enlarged Group ... 82

Appendix V — Valuation report of the Target Group ...... 91

Appendix VI — General information ...... 103

– i – DEFINITIONS

In this circular, the following expressions shall have the meanings set out below unless the context requires otherwise:

‘‘associate(s)’’ has the meaning ascribed to it under the Listing Rules

‘‘Announcement’’ the announcement of the Company dated 27 May 2018

‘‘Audited Profit’’ Net profit after taxation (excluding gain or loss arising from valuations, mergers and acquisitions and activities other than ordinary course of business) on the annual consolidated financial statements of the Target Group to be prepared in accordance with HKFRS and audited by the auditor of the Company

‘‘Board’’ the board of Directors of the Company

‘‘Company’’ Transmit Entertainment Limited (formerly known as Pegasus Entertainment Holdings Limited), an exempted company incorporated in the Cayman Islands with limited liability, whose Shares are listed on the Stock Exchange

‘‘Completion’’ completion of the transactions contemplated under the VIE Acquisition Agreement

‘‘connected person(s)’’ has the meaning ascribed to it under the Listing Rules

‘‘Consideration’’ the aggregate consideration for the entire equity interests in the Target Company payable by Guangzhou Daide to the Vendors pursuant to the Equity Transfer Agreement

‘‘Director(s)’’ the director(s) of the Company

‘‘Enlarged Group’’ the Group after the Completion of the Investment

‘‘Entrustment Agreements and the entrustment agreements and powers of attorney details of Powers of Attorney’’ which are set out in ‘‘Details of the VIE Agreements — the VIE Operating Agreements’’ in this circular

‘‘Equity Pledge Agreements’’ the equity pledge agreement details of which are set out in ‘‘Details of the VIE Agreements — the VIE Operating Agreements’’ in this circular

‘‘Equity Transfer Agreement’’ the equity transfer agreement details of which are set out in ‘‘Details of the VIE Agreements — the Equity Transfer Agreement’’ in this circular

– 1 – DEFINITIONS

‘‘Exclusive Operation Service the exclusive operation service agreement details of which are Agreement’’ set out in ‘‘Details of the VIE Agreements — the VIE Operating Agreements’’ in this circular

‘‘Exclusive Option Agreements’’ the exclusive option agreements details of which are set out in ‘‘Details of the VIE Agreements — the VIE Operating Agreements’’ in this circular

‘‘Group’’ the Company and its subsidiaries

‘‘Guangzhou Daide’’ 廣州戴德管理諮詢有限公司 (Guangzhou Daide Management Consultancy Company Limited*), a company established in the PRC with limited liability, which is owned as to 1% by Ms. Wang and 99% by Mr. Tang

‘‘Guangzhou Huohua’’ 廣州火花投資有限公司 (Guangzhou Huohua Investment Company Limited*), a company established in the PRC with limited liability, a wholly owned subsidiary of the Company

‘‘Hangzhou Yikai’’ 杭州毅凱鯨誠投資合夥企業(有限合夥) (Hangzhou Yikai Jing Cheng Investment Management Partnership (Limited Partnership)*), a limited partnership established in the PRC

‘‘HK$’’ Hong Kong Dollar, the lawful currency of Hong Kong

‘‘HKFRS’’ the Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants from time to time

‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the PRC

‘‘Hong Kong Transmit’’ Hong Kong Transmit Entertainment Limited a company incorporated in Hong Kong with limited liability, a wholly owned subsidiary of the Company

‘‘Hope Sound’’ Hope Sound Limited, a company incorporated in the British Virgin Islands with limited liability, a wholly owned subsidiary of the Company

‘‘Huzhou Shengyi’’ 湖州盛毅投資管理合夥企業 ( 有限合夥 ) (Huzhou Shengyi Investment Management Partnership (Limited Partnership)*), a limited partnership established in the PRC

‘‘Huzhou Yiqianyan’’ 湖州毅前沿投資管理合夥企業(有限合夥) (Huzhou Yiqianyan Investment Management Partnership (Limited Partnership)*), a limited partnership established in the PRC

– 2 – DEFINITIONS

‘‘Independent Third party(ies)’’ the independent third party(ies) who is/are, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, independent of the Company and the connected person(s) (as defined in the Listing Rules) of the Company

‘‘Investment’’ the acquisition of the entire economic interests and benefits generated by Guangzhou Daide and the Target Group through the VIE Agreements

‘‘Latest Practicable Date’’ 24 July 2018, being the latest practicable date for the purpose of ascertaining certain information for inclusion in this circular

‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited

‘‘Loan Agreement’’ the loan agreement details of which are set out in ‘‘Details of the VIE Agreements — the VIE Operating Agreements’’ in this circular

‘‘Long Stop Date’’ 31 December 2018 or such other date as the parties to the VIE Acquisition Agreement or Equity Transfer Agreement (as the case may be) may agree in writing

‘‘Mr. Tang’’ 唐繼敏 (Tang Jimin*), one of the PRC Equity Owners

‘‘Ms. Wang’’ 王青陽 (Wang Qinyang*), one of the PRC Equity Owners

‘‘Nice Rich’’ Nice Rich Group Limited, a company incorporated in the British Virgin Islands with limited liability, the controlling shareholder of the Company

‘‘Ningbo Meishan’’ 寧波梅山保稅港區合海觀鼎投資管理合夥企業(有限合夥) (Ningbo Meishan Baoshuigangqu He Hai Guan Ding Investment Management Partnership (limited partnership)*), a limited partnership established in the PRC

‘‘PRC’’ the People’s Republic of China, for the purpose of this circular, excludes Hong Kong, Macau Special Administrative Region of the People’s Republic of China and Taiwan

‘‘PRC Equity Owners’’ Mr. Tang and Ms. Wang, who in aggregate own the entire equity interest in Guangzhou Daide

‘‘PRC Legal Advisers’’ Jingtian & Gongcheng, legal advisers to the Company as to PRC laws

– 3 – DEFINITIONS

‘‘Profit Guarantee Agreement’’ the profit guarantee agreement details of which are set out in ‘‘Details of the VIE Agreements — the Profit Guarantee Agreement’’ in this circular

‘‘RMB’’ Renminbi, the lawful currency of the PRC

‘‘SFO’’ Securities and Future Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

‘‘Shanghai Yuantong’’ 上海緣通文化發展事務所 (Shanghai Yuantong Culture Development Firm*), a sole proprietorship enterprise established in the PRC

‘‘Share(s)’’ ordinary share(s) having a par value of HK$0.0025 each in the capital of the Company

‘‘Shareholder(s)’’ the holder(s) of Shares

‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited

‘‘subsidiary(ies)’’ has the meaning ascribed to it under the Listing Rules

‘‘Target Company’’ 霍爾果斯厚海文化傳媒有限公司 (Khorgas Houhai Culture Media Company Limited*), a company established in the PRC with limited liability

‘‘Target Group’’ the Target Company and the Target Subsidiary

‘‘Target Subsidiary’’ 北京聚海文化傳媒有限公司 (Beijing Juhai Culture Media Company Limited*), a company established in the PRC with limited liability, a wholly-owned subsidiary of the Target Company

‘‘Tianjin Juhai’’ 天津聚海文化傳媒中心(有限合夥) (Tianjin Juhai Culture Media Centre (limited partnership)*), a limited partnership established in the PRC

‘‘TV’’ television

‘‘Vendors’’ collectively the vendors under the Equity Transfer Agreement, namely Tianjin Juhai, Xizang Juanqifeng, Ningbo Meishan, Huzhou Yiqianyan, Huzhou Shengyi, Hangzhou Yikai, Shanghai Yuantong

– 4 – DEFINITIONS

‘‘VIE’’ Variable Interest Entity, being an entity (the investee) in which the investor holds a controlling interest that is not based on the majority of voting rights

‘‘VIE Acquisition Agreement’’ the VIE acquisition agreement details of which are set out in ‘‘Details of the VIE Agreements — the VIE Acquisition Agreement’’ in this circular

‘‘VIE Agreements’’ collectively the VIE Acquisition Agreement, the Equity Transfer Agreement and the VIE Operating Agreements

‘‘VIE Operating Agreements’’ collectively the Exclusive Operation Service Agreement, the Exclusive Option Agreements, the Entrustment Agreements and Powers of Attorney, the Equity Pledge Agreements and the Loan Agreement

‘‘Xizang Juanqifeng’’ 西藏卷旗風文化傳媒有限公司 (Xizang Juanqifeng Culture Media Company Limited*), a company established in the PRC with limited liability

‘‘%’’ per cent.

* In this circular, the English names of the PRC entities are translation of their Chinese names, and are included herein for identification purpose only. In the event of any inconsistency, the Chinese names shall prevail.

– 5 – LETTER FROM THE BOARD

Executive Directors: Registered Office: Mr. ZHANG Liang Johnson (Chairman) Cricket Square Mr. LEE Hin Kwong Patrick Hutchins Drive Mr. WONG Pak Ming P.O. Box 2681 Grand Cayman KY1-1111 Independent non-executive Directors: Cayman Islands Mr. WANG Bo Mr. XIANG Feng Head Office and Principal Place Mr. CHANG Eric Jackson of Business in Hong Kong: Flat B, 14/F Neich Tower 128 Gloucester Road Wanchai Hong Kong

26 July 2018

To the Shareholders

Dear Sir/Madam,

MAJOR TRANSACTION IN RELATION TO THE VIE ACQUISITION AGREEMENT

INTRODUCTION

Reference is made to the Announcement in relation to, among other matters, the Investment.

This circular is despatched to the Shareholders for information only. No general meeting will be convened to approve the Investment as the Company had obtained written approval for the Investment in accordance with Rule 14.44 of the Listing Rules from Nice Rich, the controlling Shareholder of the Company, which held approximately 70.75% of the issued share capital of the Company as at the date of such written approval. To the best of the Directors’ knowledge, information and belief, after having made all reasonable enquiries, none of the Shareholders had any material interest in the Investment and therefore no Shareholder would be required to abstain from voting if the Company were to convene a general meeting for the approval of the Investment.

– 6 – LETTER FROM THE BOARD

The Investment involved the Group’s acquisition of the entire economic interests and benefits generated by Guangzhou Daide and the Target Group through the VIE Agreements.

The purpose of this circular is to provide you with, among others, (i) further details of the Investment; (ii) the financial information of the Group; (iii) the financial information of the Target Group; (iv) the management discussion and analysis on the Target Group; (v) the unaudited pro forma financial information of the Enlarged Group; (vi) the valuation report of the Target Group and (vii) other information as required under the Listing Rules.

Details of the VIE Agreements are set out below.

BACKGROUND AND REASONS FOR USE OF THE VIE AGREEMENTS

The Target Company is principally engaged in TV entertainment show and TV program production and operation (including introduction business). Pursuant to the Catalogue of Industries for Guiding Foreign Investment (2017 revised version)《 ( 外商投資產業指導目錄(2017年修訂)》) (the ‘‘Catalogue’’) promulgated by the Ministry of Commerce, the principal business of the Target Company, falls within the prohibited industry for foreign investment. In light of the abovementioned foreign ownership restriction, in order to comply with applicable PRC laws and regulations and obtain the entire economic benefits attributable to the Target Group, Guangzhou Huohua (a wholly-owned subsidiary of the Company), Guangzhou Daide and PRC Equity Owners entered into the VIE Acquisition Agreement, pursuant to which the parties agree to enter into the VIE Operating Agreements upon Completion. Under the VIE Operating Agreements, Guangzhou Huohua will have effective control over the finance and operation of Guangzhou Daide and the Target Group and will enjoy the entire economic interests and benefits generated by Guangzhou Daide and the Target Group from Completion. No other approval is required to be obtained and no other additional eligibility standards is required to be fulfilled by the Target Group under the arrangements as contemplated under the VIE Operating Agreements.

– 7 – LETTER FROM THE BOARD

DETAILS OF THE VIE AGREEMENTS

The following diagram illustrates the flow of economic benefits from the Target Group to Guangzhou Huohua under the VIE Agreements:

The Company

100% Ms. Wang Mr. Tang Hope Sound

100% 1% 99%

Hong Kong Transmit Guangzhou Daide

VIE 100% Operating 100% Agreements Guangzhou Huohua Target Company

100%

Target Subsidiary

THE VIE ACQUISITION AGREEMENT

On 27 May 2018, Guangzhou Huohua, Guangzhou Daide and PRC Equity Owners entered into the VIE Acquisition Agreement, pursuant to which the parties shall upon Completion enter into the VIE Operating Agreements. Under the VIE Operating Agreements, Guangzhou Huohua will have effective control over the finance and operation of Guangzhou Daide and the Target Group and will enjoy the entire economic interests and benefits generated by Guangzhou Daide and the Target Group from Completion, for a cash consideration of RMB450,000,000 (subject to any downward adjustment as contemplated by the Profit Guarantee Agreement).

The principal terms and conditions of the VIE Acquisition Agreement are as follows:

Date:

27 May 2018

Parties:

(1) Guangzhou Huohua, an indirect wholly-owned subsidiary of the Company which is an investment holding company;

(2) Guangzhou Daide, a company established in the PRC with limited liability and is an investment holding company; and

– 8 – LETTER FROM THE BOARD

(3) PRC Equity Owners, holders of the entire equity interest of Guangzhou Daide and residents in the PRC.

To the best knowledge, information and belief of the Directors having made all reasonable enquiries, Guangzhou Daide and its ultimate beneficial owners, namely the PRC Equity Owners, are Independent Third Parties.

Subject matter of the VIE Acquisition Agreement

Pursuant to the VIE Acquisition Agreement, each of Guangzhou Huohua, Guangzhou Daide and PRC Equity Owners agreed to enter into the VIE Operating Agreements upon Completion. Pursuant to the VIE Operating Agreements, Guangzhou Huohua will, as permitted under the PRC laws, have effective control over the finance and operation of Guangzhou Daide and the Target Group and will enjoy the entire economic interests and benefits generated by Guangzhou Daide and the Target Group from Completion.

Under the VIE Acquisition Agreement, Guangzhou Huohua shall, upon Completion, enter into the Loan Agreement with Guangzhou Daide, pursuant to which, it shall grant a loan facility of RMB450,000,000 (subject to any downward adjustment as contemplated by the Profit Guarantee Agreement) to Guangzhou Daide by installments corresponding to the payment schedule of Guangzhou Daide under the Equity Transfer Agreement to facilitate the acquisition of the Target Group by Guangzhou Daide under the Equity Transfer Agreement.

Upon Completion, the financial results of Guangzhou Daide and the Target Group will be consolidated into the financial results of the Company and Guangzhou Daide and the Target Group will become subsidiaries of the Company. The Directors have discussed with the auditors of the Company and it has confirmed that the financial results of Guangzhou Daide and the Target Group will be consolidated into the accounts of the Group as long as all the contractual arrangements pursuant to the VIE Operating Agreements have been executed.

Conditions Precedent

Completion is conditional upon the fulfilment or waiver (as the case may be) of the following conditions:

(1) the Company having completed its due diligence investigation on Guangzhou Daide and the Target Group in respect of but without limitation to its business prospects, financial, legal, tax, intellectual properties and other matters and conditions, and the Company being satisfied with the results of the due diligence investigation at its absolute discretion;

– 9 – LETTER FROM THE BOARD

(2) the Company having obtained a valuation report issued by an independent qualified valuer reflecting a valuation of the Target Group of not less than the amount of the Consideration in a form and substance satisfactory to Guangzhou Huohua at its absolute discretion. Based on the final valuation report, the Target Group is valued at RMB530,000,000 as at 30 April 2018;

(3) the parties to the VIE Acquisition Agreement having obtained all the necessary approvals and consents for the transactions contemplated under the VIE Acquisition Agreement;

(4) the Company having obtained the approval of the Shareholders of the VIE Acquisition Agreement and the transactions contemplated thereunder in accordance with the Listing Rules;

(5) the Company having received a legal opinion issued by the PRC Legal Advisers which confirms certain PRC contractual matters in respect of the transactions under the VIE Agreements and the Company being satisfied with the form and substance of such legal opinion at its absolute discretion;

(6) nothing having happened that has caused or will cause any material adverse change to the transactions under the VIE Acquisition Agreement and the financial condition, business, assets, sales performance, or business prospects of Guangzhou Daide and the Target Group;

(7) all the representations, warranties and undertakings made in the VIE Acquisition Agreement remaining true and accurate up to the date of Completion; and

(8) the conditions precedent in the Equity Transfer Agreement having become fulfilled (or waived, if applicable).

Under the VIE Acquisition Agreement, save for conditions precedent (4) and (8) above, Guangzhou Huohua may at its absolute discretion waive the conditions precedent. If any of the conditions precedent is not fulfilled (or if applicable, waived) on or before the Long Stop Date, the VIE Acquisition Agreement shall lapse and be of no further effect.

Based on information available to the Company, conditions (2), (3), (4), (6) and (7) above have been satisfied as at the Latest Practicable Date.

Consideration

The Consideration of RMB450,000,000 for acquisition of the entire equity interest of the Target Company under the Equity Transfer Agreement (subject to any downward adjustment as contemplated by the Profit Guarantee Agreement) to be paid by Guangzhou Daide under the VIE Acquisition Agreement shall be funded by way of a loan facility granted to Guangzhou Daide by Guangzhou Huohua under the Loan Agreement.

– 10 – LETTER FROM THE BOARD

Completion

Completion of the VIE Acquisition Agreement shall take place on the date of completion of the Equity Transfer Agreement or such other date as the parties to the VIE Acquisition Agreement may agree in writing.

Upon Completion, the relevant parties shall enter into the VIE Operating Agreements.

THE EQUITY TRANSFER AGREEMENT

Guangzhou Daide and the Vendors entered into the Equity Transfer Agreement on 27 May 2018, pursuant to which Guangzhou Daide conditionally agreed to acquire, and the Vendors conditionally agreed to sell the entire equity interest of the Target Company as at completion of the Equity Transfer Agreement for the Consideration of RMB450,000,000 (subject to any downward adjustment as contemplated by the Profit Guarantee Agreement).

The principal terms and conditions of the Equity Transfer Agreement are as follows:

Date:

27 May 2018

Parties:

Purchaser: Guangzhou Daide

Vendors: (1) Tianjin Juhai, a limited partnership established in the PRC which is principally engaged in the production of movies, TV drama and animations. To the best knowledge, information and belief of the Directors having made all reasonable enquiries, Tianjin Juhai and its ultimate beneficial owner are Independent Third Parties. The ultimate beneficial owners of Tianjin Juhai are Zhao Wenzhu and Wang Jun.

(2) Xizang Juanqifeng, a company established in the PRC with limited liability which is principally engaged in the provision of artist agency services. To the best knowledge, information and belief of the Directors having made all reasonable enquiries, Xizang Juanqifeng and its ultimate beneficial owner are Independent Third Parties. The ultimate beneficial owner of Xizang Juanqifeng is Zhu Weiming.

(3) Ningbo Meishan, a limited partnership established in the PRC which is principally engaged in movie distribution. To the best knowledge, information and belief of the Directors having made all reasonable enquiries, Ningbo Meishan and its ultimate beneficial owner are Independent Third Parties. The ultimate beneficial owners of Ningbo Meishan are Zhao Wenzhu and He Xian.

– 11 – LETTER FROM THE BOARD

(4) Huzhou Yiqianyan, a limited partnership established in the PRC which is principally engaged in film and TV shows investment. To the best knowledge, information and belief of the Directors having made all reasonable enquiries, Huzhou Yiqianyan and its ultimate beneficial owner are Independent Third Parties. The ultimate beneficial owner of Huzhou Yiqianyan is Gao Na.

(5) Huzhou Shengyi, a limited partnership established in the PRC which is principally engaged in film and TV shows investment. To the best knowledge, information and belief of the Directors having made all reasonable enquiries, Huzhou Shengyi and its ultimate beneficial owner are Independent Third Parties. The ultimate beneficial owner of Huzhou Shengyi is Huacheng Group (浙江華成控股集團).

(6) Hangzhou Yikai, a limited partnership established in the PRC which is principally engaged in investment management. To the best knowledge, information and belief of the Directors having made all reasonable enquiries, Hangzhou Yikai and its ultimate beneficial owner are Independent Third Parties. The ultimate beneficial owner of Hangzhou Yikai is Hangzhou Jujing Financial Management Company (杭州巨鯨財務管理有限公司).

(7) Shanghai Yuantong, a company established in the PRC which is principally engaged in public relations event management. To the best knowledge, information and belief of the Directors having made all reasonable enquiries, Shanghai Yuantong and its ultimate beneficial owner are Independent Third Parties. The ultimate beneficial owner of Shanghai Yuantong is Pan Lingdi.

All Vendors are independent with each other. To the best knowledge, information and belief of the Directors having made all reasonable enquiries, no relationship (business or family) exists among the Vendors. Further, as at the Latest Practicable Date, the Vendors have not entered into any agreement, arrangements, understanding or undertaking (whether formal or informal and whether expressed or implied) with the Company’s connected persons or their respective associates in respect of the VIE Agreements.

Assets to be acquired

Under the Equity Transfer Agreement, Guangzhou Daide will acquire the entire equity interests of the Target Company for a consideration of RMB450,000,000 (subject to any downward adjustment as contemplated by the Profit Guarantee Agreement) and will become the registered owner of the Target Company upon completion of the Equity Transfer Agreement. The Target Company in turn owns the entire equity interest of the Target Subsidiary.

– 12 – LETTER FROM THE BOARD

Under the VIE Agreements, despite the fact that Guangzhou Daide will be the registered owner of the Target Company, Guangzhou Huohua will have effective control over the finance and operation of the Target Group and will enjoy the entire economic interests and benefits generated by the Target Group.

Consideration

The Consideration is RMB450,000,000 (subject to any downward adjustment as contemplated by the Profit Guarantee Agreement) which shall besatisfiedbyGuangzhouDaideincashpayable to the designated bank accounts of the Vendors in the following manner:

(a) RMB135,000,000, being 30% of the Consideration, shall be paid by Guangzhou Daide to the Vendors according to their respective shareholding proportions within three (3) months from the date of Completion;

(b) RMB135,000,000 (the ‘‘Second Consideration’’), being 30% of the Consideration, minus any deduction to be made pursuant to the 2018 Profit Guarantee (as defined below under the section headed ‘‘The Profit Guarantee Agreement’’), shall be paid by Guangzhou Daide to the Vendors according to their respective shareholding proportions within five (5) days upon the receipt by Guangzhou Huohua of the consolidated audited accounts of the Target Group in respect of the financial year ending on 31 December 2018; and

(c) RMB180,000,000 (the ‘‘Third Consideration’’), being 40% of the Consideration, minus any deduction to be made pursuant to the 2019 Profit Guarantee (as defined below under the section headed ‘‘The Profit Guarantee Agreement’’), shall be paid by Guangzhou Daide to the Vendors according to their respective shareholding proportions within five (5) days upon receipt by Guangzhou Huohua of the consolidated audited accounts of the Target Group in respect of the financial year ending on 31 December 2019.

Basis of the Consideration

The Consideration was arrived after arm’s length negotiations amongst Guangzhou Huohua and the Vendors with reference to the unaudited total asset value of the Target Group of approximately RMB83.7 million for the financial year ended 31 December 2017 and considering the benefits that the Target Group may bring to the Group taking into account of:

(a) the profit guarantee provided by the Vendors to Guangzhou Daide under the Profit Guarantee Agreement; and

(b) the business development and future prospect of the Target Group.

Accordingly, the Board is of the view that the Consideration is fair and reasonable and in the interest of the Company and its shareholders as a whole.

– 13 – LETTER FROM THE BOARD

Further, the Consideration is also reflective of the preliminary valuation result of the Target Group as evaluated by an independent qualified valuer, which shall not be less than RMB450,000,000. Based on the final valuation report, the Target Group is valued at RMB530,000,000 as at 30 April 2018. Details of which are set out in Appendix V of this circular.

In performing the valuation of the Target Group, the valuer have considered three generally accepted approaches: (i) market approach; (ii) cost approach; and (ii) income approach. In the valuation of the Target Group, the cost approach is not appropriate as it ignores the economic benefits of ownership of the business. The income approach is also not appropriate as the Target Group and the Company cannot provide relative long-term profit forecast. The valuer have therefore relied solely on the market approach in the valuation. In arriving at the assessed value, the valuer have adopted market approach in their valuation, the market approach provides an indication of value by comparing the subject asset with identical or similar assets for which price information is available. The valuer have estimated the forward price-to-earnings multiple from the forecast earning of the comparable companies with similar business nature and whose ownership interests are publicly trades. Further details of the valuation method and key assumption adopted by the valuer is set forth in Appendix V of this circular.

After reviewing and discussing with the valuer of the appropriateness of the various valuation method, it is understood by the Board that the market approach provides an indication of value by comparing subject asset with identical or similar assets as the Target Group, which introduces objectivity in application as publicly available inputs are used. Therefore, the market approach is considered to be an appropriate valuation approach in valuing the Target Group. It is further noted by the Board that for the purpose of valuing the Target Group under the market approach, the independent valuer has identified suitable comparable companies which (i) engage in the business in relation to the production of movies and TV drama; (ii) information is publicly available; and (iii) other qualitative factors. Accordingly, having taken into account the above, the Board considers that the valuation method adopted by the independent valuer is a fair and reasonable method adopted in assessing the fairness and reasonableness of the fair value of the Target Group.

The Consideration will be financed by Guangzhou Daide through a loan facility provided by Guangzhou Huohua to Guangzhou Daide under the Loan Agreement, details of which are set out below under the section headed ‘‘Loan Agreement’’.

Conditions Precedent

Completion of the Equity Transfer Agreement is conditional upon the fulfilment or waiver (as the case may be) of the following conditions:

(1) the Vendors having provided a written declaration to relinquish their pre-emptive rights of the equity interests of the Target Company;

(2) the shareholders of the Target Company having approved the transfer of the entire equity interests of the Target Company to Guangzhou Daide pursuant to the Equity Transfer Agreement;

– 14 – LETTER FROM THE BOARD

(3) the conditions precedent in the VIE Acquisition Agreement (except for item (8) as set out in the paragraph headed ‘‘The VIE Acquisition Agreement — Conditions Precedent’’ above) having become fulfilled (or waived, if applicable);

(4) the registered capital of the Target Company having been fully paid up;

(5) all parties to the Equity Transfer Agreement having obtained all the necessary approvals and consents for the transactions contemplated under the Equity Transfer Agreement;

(6) nothing having happened that has caused or will cause any material adverse change to the financial condition, business, assets, sales performance, or business prospects of the Target Group; and

(7) all the representations, warranties and undertakings made in the Equity Transfer Agreement remaining true and accurate up to the date of Completion.

Under the Equity Transfer Agreement, save for condition precedent (3) above, Guangzhou Daide at the direction of Guangzhou Huohua may at its absolute discretion waive the conditions precedent. If any of the conditions precedent is not fulfilled (or if applicable, waived) on or before the Long Stop Date, the Equity Transfer Agreement shall lapse and be of no further effect.

Based on information available to the Company, conditions (5), (6) and (7) above have been satisfied as at the Latest Practicable Date.

Completion

Within 30 business days upon the Equity Transfer Agreement becomes unconditional, the Vendors shall assist Guangzhou Daide to complete the change of business registration of the Target Company. Completion of the Equity Transfer Agreement shall take place upon completion of the change of business registration of the Target Company.Basedontheinformationcurrently available to the Company, it is expected that the completion of the Equity Transfer Agreement shall take place on or before 31 August 2018. Upon which, completion of the VIE Acquisition Agreement shall also take place.

– 15 – LETTER FROM THE BOARD

THE PROFIT GUARANTEE AGREEMENT

Date:

27 May 2018

Parties:

Beneficiary: Guangzhou Daide

Guarantor: (1) Tianjin Juhai

(2) Xizang Juanqifeng

(3) Ningbo Meishan

(4) Huzhou Yiqianyan

(5) Huzhou Shengyi

(6) Hangzhou Yikai

(7) Shanghai Yuantong

Subject matter of the Profit Guarantee Agreement

Pursuant to the Profit Guarantee Agreement, subject to completion of the Equity Transfer Agreement, the Vendors have jointly and severally guaranteed to Guangzhou Daide that the consolidated Audited Profit of the Target Group in respect of the financial years ending 31 December 2018 and 31 December 2019 will not be less than RMB40,000,000 (‘‘2018 Profit Guarantee’’) and RMB60,000,000 (‘‘2019 Profit Guarantee’’), respectively.

The profit guarantee amounts for FY2018 and FY2019 were decided on the basis of the Target Group’s solid development plan.

As shown in the Appendix III, the Target Group’s profit is expected to come mainly from advertisement income from TV entertainment show Give Me Five (‘‘高能少年團’’)SeasonIIand copyright authorization income from TV series Hikaru no Go (‘‘棋魂’’) in 2018. And in 2019, the Target Group plans to produce Give Me Five Season III and three TV series of Redemptiononthe Blade (‘‘刀鋒上的救贖’’), Birth of the Drama Essence (‘‘戲精的誕生’’)andTribes and Empires: Mrs HuZhu (‘‘九州斛珠夫人’’).

– 16 – LETTER FROM THE BOARD

The Target Group recognizes revenue on project basis according to relevant accounting standards. There was no project finished or delivered for the three months ended 31 March 2018 and therefore little revenue was recorded in this period. However, the Target Group is confident to meet the profit guarantee for year 2018 and 2019 based on their solid business plan and the status of the different projects.

For year 2018, the projects ran smoothly as planned. Give Me Five Season II finished broadcasting in July 2018 with No. 1 audience rate for all TV entertainment shows in the PRC during the same period. The revenue would be received in one to three months. With the contract enter into between the Group and Aiqiyi (‘‘愛奇藝’’), Hikaru no Go would also expect to be delivered in September 2018.

For year 2019, the Target Group’s revenue is expected to come mainly from advertisement income from TV entertainment show Give Me Five Season III and production incomes from three TV series: Redemption on the Blade, Birth of the Drama Essence and Tribes and Empires: Mrs HuZhu. Considering the high popularity among the younger generation for Give Me Five Season I and II, the broadcasting platform intends to cooperate with the Target Group for producing Season III and IV. Revenue from Season III is expected to be higher than that from Season I or II. For project Redemption on the Blade, the contract with broadcasting platform was signed and is expected to be delivered in the first half year of 2019. For project Tribes and Empires: Mrs HuZhu, the contract with co-producer Jiaxing Media (‘‘嘉行傳媒’’), which is a listed company in mainland China, has been signed. Also considering the strong production team of the Target Group and the big success of TV series produced by the co-producer in recent years, project Tribes and Empires: Mrs HuZhu is expected to be very successful when delivered in the second half of 2019. Project Birth of the Drama Essence is also expected to be delivered in the first half year of 2019.

After reviewing the detailed business plan and understand the status of each project, the Board of Director does not see any material negative factor to prevent the Target Group from meeting the profit guarantee for year 2018 and 2019.

In the event that the consolidated Audited Profit of the Target Group for the financial year ending 31 December 2018 is not satisfied, the Second Consideration to be paid by Guangzhou Daide shall be deducted by the following amount:

Amount to be reduced =

(2018 Profit Guarantee – 2018 Audited Profit) Consideration × × 30% (2018 Profit Guarantee)

– 17 – LETTER FROM THE BOARD

In the event that the consolidated Audited Profit of the Target Group for the financial year ending 31 December 2019 is not satisfied, the Third Consideration to be paid by Guangzhou Daide shall be deducted by the following amount:

Amount to be reduced =

(2019 Profit Guarantee – 2019 Audited Profit) Consideration × × 40% (2019 Profit Guarantee)

In the event that the Target Group incurs net loss in each of the financial years ending 31 December 2018 and 31 December 2019, the Audited Profit of the Target Company for such financial year shall be deemed as zero. The maximum amount of deduction to the Second Consideration and the Third Consideration shall be RMB135,000,000 and RMB180,000,000, respectively.

Comparing to other transactions, the Company considers payment terms are favorable in that:

(i) payments are arranged by installments and the first payment is only 30% of total;

(ii) profit guarantee is formulated based on a solid business plan, which has been executed competently;

(iii) if the Target Group cannot satisfy the guarantee, the payment can be adjusted; and

(iv) payments are expected to execute in two to three years, which is longer than other similar transactions.

The Company will publish announcement(s) and disclose in its future annual report(s), among others, the outcome of the 2018 Profit Guarantee and the 2019 Profit Guarantee, before 30 April 2019 and 30 April 2020.

THE VIE OPERATING AGREEMENTS

(1) The Exclusive Operation Service Agreement

Date:

Upon Completion

Parties:

(1) Guangzhou Huohua;

(2) Guangzhou Daide;

– 18 – LETTER FROM THE BOARD

(3) PRC Equity Owners; and

(4) the Target Company.

(Guangzhou Daide and the Target Company, collectively the ‘‘Services Recipients’’)

Subject matter of the Exclusive Operation Service Agreement

Pursuant to the Exclusive Operation Service Agreement, the Services Recipients agree to engage Guangzhou Huohua as its exclusive consultant and service provider. Guangzhou Huohua has the exclusive right to provide the Services Recipients with consulting services including but not limited to: (1) provision of advice on the operations of the movie and drama production business of the Services Recipients; (2) management and consultation related to the movie and drama production business of the Services Recipients, and training of the staff of the Services Recipients; (3) provision of advice on human resources; (4) assistance on market research; (5) selection and introductions of clients; (6) formulation of operation and sales strategies; (7) quality control of the movie and drama production business of the Services Recipients; and (8) provision of advice on financing.

Guangzhou Huohua has proprietary rights to all the intellectual properties developed or created by Guangzhou Huohua from the performance of these services. During the term of the Exclusive Operation Service Agreement, Guangzhou Huohua may use the intellectual property rights owned by the Services Recipients free of charge and without any conditions. The Services Recipients may also use the intellectual property work created by Guangzhou Huohua from the services performed by Guangzhou Huohua in accordance with the Exclusive Operation Service Agreement.

Services fee

Guangzhou Daide shall pay to Guangzhou Huohua a service fee which is equal to 100% of its audited annual distributable profits (after deduction of any loss of the previous year and statutory provident fund (if applicable)) before 30 June of every year.

The services fee was determined by the parties to ensure that Guangzhou Huohua will enjoy the economic benefits of the VIE Agreements.

(2) The Exclusive Option Agreements

The Exclusive Option Agreements comprise the Exclusive Option Agreement (Guangzhou Daide) and the Exclusive Option Agreement (Target Company) which are of substantial similar terms.

Date:

Upon Completion

– 19 – LETTER FROM THE BOARD

Parties:

For Exclusive Option Agreement (Guangzhou Daide):

(1) Guangzhou Huohua;

(2) PRC Equity Owners; and

(3) Guangzhou Daide.

For Exclusive Option Agreement (Target Company):

(1) Guangzhou Huohua;

(2) Guangzhou Daide; and

(3) Target Company.

Subject matter of the Exclusive Option Agreements

Pursuant to the Exclusive Option Agreement (Guangzhou Daide),

(i) each of PRC Equity Owners irrevocably and unconditionally grants an exclusive option to Guangzhou Huohua which entitles Guangzhou Huohua to elect to purchase at any time, when permitted by the then applicable PRC laws, all or any part of the equity interest in the Guangzhou Daide by itself or through its designated person(s); and

(ii) Guangzhou Daide irrevocably and unconditionally grants an exclusive option to Guangzhou Huohua which entitles Guangzhou Huohua to elect to purchase at any time, when permitted by the then applicable PRC laws, all or any part of the assets of Guangzhou Daide by itself or through its designated person(s).

Pursuant to the Exclusive Option Agreement (Target Company),

(i) Guangzhou Daide irrevocably and unconditionally grants an exclusive option to Guangzhou Huohua which entitles Guangzhou Huohua to elect to purchase at any time, when permitted by the then applicable PRC laws, all or part of the equity interest in the Target Company by itself or through its designated person(s); and

(ii) the Target Company irrevocably and unconditionally grants an exclusive option to Guangzhou Huohua which entitles Guangzhou Huohua to elect to purchase at any time, when permitted by the then applicable PRC laws, all or part of the assets of the Target Company by itself or through its designated person(s).

– 20 – LETTER FROM THE BOARD

Guangzhou Huohua’s rights under the Exclusive Option Agreements can only be exercisable as and when permitted by the then applicable PRC laws, in particular, when there are no limitation on foreign ownership in the Target Group.

Under the Exclusive Option Agreements, without the Guangzhou Huohua’s prior written consent, each of Guangzhou Daide and PRC Equity Owners will not themselves or procure others to sell, transfer, mortgage or otherwise dispose of all or part of the equity interests in or assets of Guangzhou Daide and the Target Company.

TheExercisePrice

The transfer price of the relevant equity interests and assets shall be the minimum purchase price permitted under PRC law, and each of PRC Equity Owners, Guangzhou Daide and the Target Company will undertake that she/he/it will return in full the consideration received in relation to such transfer of equity interests or assets to Guangzhou Huohua or its designated person(s).

The exercise price was determined by the parties to ensure that Guangzhou Huohua will enjoy the economic benefits of the VIE Agreements.

(3) Entrustment Agreements and Powers of Attorney

The Entrustment Agreements and Powers of Attorney comprise Entrustment Agreement and Powers of Attorney (Guangzhou Daide) and Entrustment Agreement and Powers of Attorney (Target Company) which are of substantial similar terms.

Date:

Upon Completion

Parties:

For Entrustment Agreement and Powers of Attorney (Guangzhou Daide):

(1) Guangzhou Huohua;

(2) PRC Equity Owners; and

(3) Guangzhou Daide.

For Entrustment Agreements and Powers of Attorney (Target Company):

(1) Guangzhou Huohua;

(2) Guangzhou Daide; and

(3) Target Company.

– 21 – LETTER FROM THE BOARD

Subject matter of the Entrustment Agreements and Powers of Attorney

Each of PRC Equity Owners irrevocably appoints Guangzhou Huohua or its designated person(s) (other than the PRC Equity Owners) as its attorney-in-fact to act for all matters pertaining to the Guangzhou Daide and to exercise all of their rights as shareholders of the Guangzhou Daide, including but not limited to:

(i) proposing to convene and attend shareholders’ meetings of the Guangzhou Daide;

(ii) exercising all the voting rights as shareholders of the Guangzhou Daide;

(iii) dealing with the rights as a shareholder to the assets and profits of the Guangzhou Daide;

(iv) transferring or disposing of the shares of the Guangzhou Daide;

(v) receiving notice of convening and proceedings of shareholders’ meetings of the Guangzhou Daide, signing minutes of shareholders’ meetings and submitting any documents to relevant company registration authorities for filing purpose;

(vi) receiving the remaining assets of the Guangzhou Daide upon its dissolution or liquidation; and

(vii) exercising all other shareholders’ rights under other applicable PRC laws and regulations and the articles of association (as amended from time to time) of the Guangzhou Daide.

Each of the PRC Equity Owners irrevocably undertakes, among other things, that he/she will neither, directly or indirectly (either on his/her own or through any other individual or legal entity), participate or engage in any business which is or may be in competition with the business of Guangzhou Daide, or acquire or hold any such business, nor carry on any activities which may lead to any conflict of interest between himself/herself and Guangzhou Daide.

Guangzhou Daide irrevocably appoints Guangzhou Huohua or its designated person(s) (other than the PRC Equity Owners) as its attorney-in-fact to act for all matters pertaining to the Target Company and to exercise all of its rights as the shareholder of the Target Company, including but not limited to:

(i) proposing to convene and attend shareholders’ meetings of the Target Company;

(ii) exercising all the voting rights as shareholders of the Target Company;

(iii) dealing with the rights as a shareholder to the assets and profits of the Target Company;

(iv) transferring or disposing of the shares of the Target Company;

– 22 – LETTER FROM THE BOARD

(v) receiving notice of convening and proceedings of shareholders’ meetings of the Target Company, signing minutes of shareholders’ meetings and submitting any documents to relevant company registration authorities for filing purpose;

(vi) receiving the remaining assets of the Target Company upon its dissolution or liquidation; and

(vii) exercising all other shareholders’ rights under other applicable PRC laws and regulations and the articles of association (as amended from time to time) of the Target Company.

Guangzhou Daide irrevocably undertakes, among other things, that it will neither, directly or indirectly, participate or engage in any business which is or may be in competition with the business of the Target Company, or acquire or hold any such business, nor carry on any activities which may lead to any conflict of interest between itself and the Target Company.

Furthermore, as advised by the PRC Legal Advisers, since the Exclusive Option Agreements, the Entrustment Agreements and the Powers of Attorney encompass dealing with the assets of Guangzhou Daide and the Target Company, the liquidator can seize their assets in a winding up situation for the benefit of Guangzhou Huohua’s shareholders or creditors.

(4) Equity Pledge Agreements

The Equity Pledge Agreements comprise the Equity Pledge Agreement (Guangzhou Daide) and the Equity Pledge Agreement (Target Company) which are of substantial similar terms.

Date:

Upon Completion

Parties:

For Equity Pledge Agreement (Guangzhou Daide):

(1) Guangzhou Huohua;

(2) PRC Equity Owners; and

(3) Guangzhou Daide.

For Equity Pledge Agreement (Target Company):

(1) Guangzhou Huohua;

(2) Guangzhou Daide; and

(3) Target Company.

– 23 – LETTER FROM THE BOARD

Subject matter of the Equity Pledge Agreements

Pursuant to the Equity Pledge Agreements,

(i) Each of PRC Equity Owners agrees to pledge all of his/her respective equity interests in Guangzhou Daide to Guangzhou Huohua to secure performance of obligations of himself/herself and Guangzhou Daide under the VIE Operating Agreements; and

(ii) Guangzhou Daide agrees to pledge all of its respective equity interests in the Target Company to Guangzhou Huohua to secure performance of obligations of itself and the Target Company under the VIE Operating Agreements.

Without the prior written consent of Guangzhou Huohua, each of PRC Equity Owners and Guangzhou Daide undertakes not to create or allow to create any new pledge or encumbrance over their respective interests in Guangzhou Daide and the Target Company.

(5) Loan Agreement

Date:

Upon Completion

Parties:

(1) Guangzhou Huohua; and

(2) Guangzhou Daide.

Subject matter of the Loan Agreement

Pursuant to the terms of the Loan Agreement, Guangzhou Huohua shall provide a non- interest bearing loan facility in the maximum principal amount of RMB450,000,000 (subject to any downward adjustment as contemplated by the Profit Guarantee Agreement) to Guangzhou Daide for the purpose of the acquisition of the entire equity interest of the Target Company. The loan will be provided to Guangzhou Daide by installment corresponding to Guangzhou Daide’s payment schedule under the Equity Transfer Agreement.

The loan will be financed by way of shareholder’sloantobemadeavailableto Guangzhou Huohua, with an annual interest rate of 7% and a term of three years.

Theloanwillbeforatermof20yearsfromtherespectivedrawdowndateofeach installment of the loan. Guangzhou Daide shall repay the loan in full if Guangzhou Huohua gives prior notice to Guangzhou Daide demanding for repayment. Save as the demand notice given by Guangzhou Huohua, Guangzhou Daide shall have no right of early repayment.

– 24 – LETTER FROM THE BOARD

(6) Spouse’s Confirmation

Date:

Upon Completion

Party:

The spouse of Ms. Wang

Subject Matter of the Spouse’s Confirmation:

The spouse of Ms. Wang will execute a spouse confirmation, pursuant to which he undertakes and agrees to, among others, (i) acknowledge that all the equity interests held by Ms. Wang in Guangzhou Daide belongs to herself and do not form part of matrimonial property, and any disposal of the equity interest held by Ms. Wang pursuant to the relevant VIE Operating Agreements does not require the consent of him; and (ii) any execution and amendment of any of the VIE Operating Agreements does not require the signing, confirmation and consent of him.

As at the Latest Practicable Date, Mr. Tang, the other PRC Equity Owner, does not have a spouse.

DISPUTE RESOLUTION

Each of the VIE Agreements contains a dispute resolution provision, which stipulates that in the event of any dispute relating to the interpretation and performance of the VIE Agreements, the parties shall negotiate in good faith to resolve such disputes. If the parties fail to reach an agreement on the resolution of such a dispute within 30 days, the relevant dispute may be submitted to the China International Economic and Trade Arbitration Commission (the ‘‘CIETAC’’)for arbitration in accordance with the then effective arbitration rules. The arbitration shall be conducted in Beijing, and the language used in the arbitration shall be Chinese. The arbitration ruling shall be final and binding on all parties. The VIE Agreements contain provisions to the effect that the arbitrators may award remedies over the shares and/or assets of PRC Equity Owners, Guangzhou Daide and the Target Company, injunctive reliefs (such as mandatory transfer of assets) and/or winding up of Guangzhou Daide and the Target Company. In addition, the VIE Agreements contain provisions to the effect that courts in the PRC, Hong Kong and the Cayman Islands are empowered to grant interim remedies in supporting of the arbitration pending the formation of an arbitral tribunal.

SUCCESSION

As advised by the PRC Legal Advisers, the provisions set out in the VIE Agreements are also binding on any successors of the Target Company, Guangzhou Daide and the PRC Equity Owners as if such successors were a signing party to the VIE Agreements. As such, any breach by the successors would be deemed to be a breach of the VIE Agreements. Under the succession laws of

– 25 – LETTER FROM THE BOARD the PRC, the statutory successors include the spouse, children, parents, brothers, sisters, paternal grandparents and maternal grandparents and any breach by the successors would be deemed to be a breach of the VIE Agreements. In case of a breach, Guangzhou Huohua can enforce its rights against the successors.

LIQUIDATION, BANKRUPTCY OR DEATH

Pursuant to the Exclusive Option Agreements, (i) in the event of a dissolution or liquidation of the Target Company, all the residual assets which are attributable to Guangzhou Daide shall be transferred to Guangzhou Huohua or its designated person(s) at the minimum purchase price permitted under PRC law, and Guangzhou Daide undertakes that it will, subject to applicable PRC laws, return in full the consideration received in relation to such transfer to Guangzhou Huohua or its designated person(s); (ii) in the events of liquidation/bankruptcy, restructurings, amalgamation, spin-offs of Guangzhou Daide, or the death or loss of capacity for civil conduct of the PRC Equity Owners or change of shareholding or any reasons causing changes to the share ownership of Guangzhou Daide, the successors of the PRC Equity Owners shall assume any and all rights and obligations of the PRC Equity Owners under the VIE Agreements; and (iii) the PRC Equity Owners must not assist or allow Guangzhou Daide to dispose any of its shareholdings unless Guangzhou Huohua consents in writing.

Further, as confirmed by the PRC Legal Advisers, there is no bankruptcy procedures applicable for PRC individuals under the relevant laws and regulations in the PRC as at the Latest Practicable Date.

In addition, pursuant to the Exclusive Option Agreements, Guangzhou Huohua is entitled to exercise its option to purchase at any time, when permitted by the then applicable PRC laws, the equity interest in Guangzhou Daide, by itself or through its designated person(s) at the minimum purchase price permitted under the PRC law.

All equity interest owned by the PRC Equity Owners in Guangzhou Daide and all equity interest owned by Guangzhou Daide in the Target Company are also pledged to Guangzhou Huohua under the Equity Pledge Agreements to secure performance of obligations by the PRC Equity Owners, Guangzhou Daide and the Target Company under the VIE Agreements and in case of any breach of such obligations, Guangzhou Huohua is entitled to enforce such pledge. Accordingly, in the event of a dissolution or liquidation of Guangzhou Daide or the Target Company (as applicable), a liquidator may seize and deal with the assets which are attributable to the PRC Equity Owners or Guangzhou Daide (as applicable) based on the VIE Agreements for the benefit of Guangzhou Huohua’s shareholders or creditors.

LOSS SHARING

As advised by the PRC Legal Advisers, none of the VIE Agreements provides that the Group is obligated to share the losses of Guangzhou Daide or the Target Company or provide financial support to Guangzhou Daide or the Target Company. Further, Guangzhou Daide and the Target Company are limited liability companies and shall be solely liable for their own debts and losses

– 26 – LETTER FROM THE BOARD with assets and properties owned by them. Under the PRC laws and regulations, the Company, as the primary beneficiary of Guangzhou Daide and the Target Group under the VIE Agreements, is not required to share the losses of Guangzhou Daide and the Target Company or provide financial support to Guangzhou Daide and the Target Company.

ARRANGEMENTS TO ADDRESS POTENTIAL CONFLICTS OF INTERESTS

The Company confirms that appropriate arrangements have been made to address the potential conflict of interests between the PRC Equity Owners and the Group. Guangzhou Daide, PRC Equity Owners and the Target Company undertake that, during the period that the VIE Agreements remain effective, they shall not take or omit to take any action which may lead to a conflict of interest with Guangzhou Huohua or Guangzhou Huohua’s direct or indirect shareholders. If there is any conflict of interest, Guangzhou Huohua shall have the right to decide in its sole discretion on how to deal with such conflict of interest in accordance with the applicable PRC laws. Guangzhou Daide, PRC Equity Owners and the Target Company will unconditionally follow the instructions of Guangzhou Huohua to take any action to eliminate such conflict of interest.

INSURANCE

The management of the Company has approached several reputable insurance agents for insurance coverage for the risks relating to the VIE Agreements and the transactions contemplated thereunder. However, there is no relevant insurance product available in the market at the moment. Accordingly, the Group did not purchase any insurance to cover the risks relating to the VIE Agreements.

After discussing with the PRC Legal Advisers and considering the relevant risks that may arise from the VIE Agreements together with the internal control that will be put in place, the Company is of the view that such arrangement is in the interest of the Company and its Shareholders as a whole.

OPERATIONS IN COMPLIANCE WITH THE VIE AGREEMENTS

The VIE Agreements contain certain provisions in order to exercise effective control over and to safeguard the assets of Guangzhou Daide and the Target Group.

In addition, the Group will adopt the following measures to ensure legal and regulatory compliance of the VIE Agreements upon Completion:

(i) as part of the internal control measures, major issues arising from the implementation of the VIE Agreements with Guangzhou Daide, PRC Equity Owners and the Target Company will be regularly reviewed, at least on an annual basis, by the Board. The Board will determine, as part of its periodic review process, whether legal advisers and/ or other professionals will be retained to assist the Group to deal with specific issues arising from the VIE Agreements;

– 27 – LETTER FROM THE BOARD

(ii) matters relating to compliance and regulatory enquiries from government authorities (if any) will be discussed at regular meetings by the Board no less frequently than on a quarterly basis;

(iii) the relevant business units and operation divisions of the Group will report regularly, which will be no less frequently than on a monthly basis, to the senior management of the Company in relation to compliance and performance conditions under the VIE Agreements and other related matters;

(iv) the chief financial officer of the Company shall conduct regular site visits to Guangzhou Daide and the Target Group and conduct personnel interviews quarterly and submit reports to the Board;

(v) the chief financial officer of the Company shall collect monthly management accounts, bank statements and cash balances and major operational data of Guangzhou Daide and the Target Group for review. Upon discovery of any suspicious matters, the chief financial officer must report to the Board;

(vi) any material contracts entered into by Guangzhou Daide and the Target Group which is outside their respective ordinary course of business must be approved by the Company;

(vii) if the payment of the service fees from Guangzhou Daide to Guangzhou Houhua is delayed, the chief financial officer must meet with the PRC Equity Owners to investigate, and should report any suspicious matters to the Board;

(viii) Guangzhou Daide and PRC Equity Owners undertake they will not carry on, own or acquire any business which is in competition with or is likely to be in competition with the business carried on by the Target Group without the prior written consent of Guangzhou Huohua; and

(ix) the Group will terminate the VIE Agreements as soon as the law allows the business to be operated without them.

As of the Latest Practicable Date, to the best of the knowledge, information and belief of the Directors, having made all reasonable enquiry, the Directors are not aware of any factors that has led or would lead to any interference from or restrictions imposed by any PRC governing bodies on the Group’s operating the businesses of the Target Group under the VIE Agreements.

Further, the Company will disclose details relating to the VIE Agreements on an ongoing basis in the Company’s annual report and accounts in accordance with the relevant provisions of the Listing Rules for so long as the VIE Agreements are subsisting.

– 28 – LETTER FROM THE BOARD

EFFECT AND LEGALITY OF THE VIE AGREEMENTS

Investment activities in the PRC by foreign investors are primarily regulated by the Catalogue, which was promulgated and is amended from time to time jointly by the Ministry of Commerce of the PRC (the ‘‘MOFCOM’’) and the National Development and Reform Commission of the PRC (the ‘‘NDRC’’). The Catalogue divides industries into four categories in terms of foreign investment, including ‘‘encourage’’, ‘‘restricted’’ and ‘‘prohibited’’, and all industries not listed under any of these categories are deemed to be ‘‘permitted’’. Pursuant to the Catalogue, the business that the Target Group currently operates falls into the category of ‘‘prohibited’’. Therefore, as Guangzhou Huohua is a foreign-owned company, it is not allowed to hold any equity interests of the Target Company under the PRC laws.

Therefore, in order to comply with applicable PRC laws and regulations, Guangzhou Huohua, Guangzhou Daide, the PRC Equity Owners and the Target Company entered into the VIE Agreements to enable the financial results, the entire economic benefits and the risks of the businesses of Guangzhou Daide and the Target Company to flow into Guangzhou Huohua and to enable Guangzhou Huohua to gain control over the Target Company via Guangzhou Daide.

The PRC Legal Advisers, after taking all reasonable and possible actions and steps to reach its legal conclusions, are of the following legal opinion:

. the VIE Agreements are narrowly tailored to achieve the business purposes of the Company and minimise the potential for conflict with relevant PRC laws and regulations;

. each of Guangzhou Huohua, Guangzhou Daide and the members of the Target Group are duly established and validly existing under the PRC laws, and has obtained or completed all requisite approvals, permits, registrations or filings that are material for carrying out its business operations as required by the applicable PRC laws, regulations and rules;

. each of the VIE Agreements, taken individually and collectively, constitutes legal, valid and binding obligations of the parties thereto and will be enforceable under applicable PRC laws and regulations except that (a) the CIETAC has no power to grant injunctive relief, nor will it be able to order the winding up of Guangzhou Daide or the Target Company pursuant to the current PRC laws; and (b) interim remedies or enforcement order granted by overseas courts such as the courts of Hong Kong and the Cayman Islands may not be recognised or enforceable in the PRC;

. the VIE Agreements do not, individually or collectively, violate the mandatory provisions of the PRC Contract Law, the General Principles of the PRC Civil Law and other applicable PRC laws and regulations and are not deemed as ‘‘concealing illegal intentions with a lawful form’’ resulting in the invalidity of the VIE Agreements;

. none of the VIE Agreements violates any provisions of the existing articles of association of each of Guangzhou Huohua, Guangzhou Daide and members of the Target Group; and

– 29 – LETTER FROM THE BOARD

. the execution, effectiveness and enforceability of the VIE Agreements do not require any approvals from any PRC governmental authority, except that (1) each of the Equity Pledge Agreements is subject to registration requirements with the relevant administration for industry and commerce; (2) the exercising of the exclusive options by Guangzhou Huohua according to the Exclusive Option Agreements shall be subject to the then effective PRC laws and regulations and relevant approving procedures (if applicable); and (3) if the enforcement of the VIE Agreements is subject to the enforcement of the ruling by the arbitrator and/or overseas courts outside PRC, the claimant shall enforce the ruling via PRC courts with jurisdiction.

BOARD’S VIEW ON THE VIE AGREEMENTS

Based on the above, the Board is of the view that the VIE Agreements are in compliance with the guidance letter HKEX-GL77-14 and the listing decision HKEX-LD43-3 specifically structured because they are only used to address the foreign ownership restriction under the Catalogue. The VIE Agreements are also specifically structured to achieve the business purposes of the Company and minimise the potential for conflict with relevant PRC laws and regulations. By entering into the VIE Agreements, the Company, through Guangzhou Huohua, is able to control and consolidate Guangzhou Daide and the Target Group and to obtain the economic benefits of Guangzhou Daide and the Target Group. In particular, pursuant to the relevant provisions of the VIE Agreements, (i) Guangzhou Huohua has the right to unwind the VIE Agreements as soon as the relevant PRC laws and regulations allow Guangzhou Huohua to register itself as the shareholder of Guangzhou Daide; (ii) the VIE Agreements (a) include Entrustment Agreements and Powers of Attorney by which the PRC Equity Owners or Guangzhou Daide (as the case may be) appoints Guangzhou Huohua as its attorney-in-fact and to exercise all the rights as shareholders of Guangzhou Daide or the Target Company (as the case may be); (b) contain dispute resolution provision, which provide for arbitration and that arbitrators may reward remedies over the shares and/or assets of the PRC Equity Owners, Guangzhou Daide and the Target Company, injunctive reliefs and/or winding up of Guangzhou Daide and the Target Company and provide the courts in the PRC, Hong Kong and the Cayman Islands with the power to grant interim remedies in support of the arbitration pending formation of the arbitral tribunal; and (iii) the VIE Agreements encompasses dealing with the assets of Guangzhou Daide, and not only the right to manage its business but also the right to revenue. The Directors further believe that, the VIE Agreements are enforceable under the relevant PRC laws and regulations, and that the VIE Agreements will provide a mechanism that enables Guangzhou Houhua to exercise effective control over Guangzhou Daide. Accordingly, the Directors are of the view that the VIE Acquisition Agreement and the transactions contemplated thereunder are fair and reasonable, on normal commercial terms and are in the interests of the Company and the Shareholders as a whole.

– 30 – LETTER FROM THE BOARD

RISK FACTORS IN RELATION TO THE VIE AGREEMENTS

There is no assurance that the VIE Agreements could comply with future changes in the regulatory requirements in the PRC and the PRC government may determine that the VIE Agreements do not comply with applicable regulations.

Background of the Draft Foreign Investment Law

On 19 January 2015, the MOFCOM circulated Foreign Investment Law of the PRC (Draft for Comment) 《(中華人民共和國外國投資法(草案徵求意見稿)》) and the Explanation on the draft PRC Foreign Investment Law《 ( 關於〈中華人民共和國外國投資法(草案徵求意見稿)的說明》) (collectively the ‘‘Draft Law’’), which proposed changes to the PRC foreign investment legal regime and the treatment of the VIE structures, including contractual arrangement such as the VIE Agreements. The Draft Law, if finally adopted, may have a material impact on the PRC foreign investment legal regime.

There is no concrete guidance on how the existing VIE structures should be treated in the Draft Law. For investments using VIE structures, such as the VIE Agreements which exist before the Draft Law is adopted and becomes law, if the underlying businesses are still being categorized as prohibited or restricted foreign investment businesses after the Draft Law is adopted and becomes law, there are three suggested available alternatives (the ‘‘Suggested Alternatives’’)in dealing with existing VIE structures pursuant to the Draft Law:

(a) the reporting regime: the foreign investment enterprise under the VIE arrangement shall report to the foreign investment authority under the State Council of the PRC that it is effectively controlled by PRC investors. After such reporting, the VIE arrangement can be retained and the relevant parties can continue the operation;

(b) the recognition regime: the foreign investment enterprise under the VIE arrangement shallfileanapplicationwiththeforeigninvestment authority under the State Council of the PRC for being recognised as a party under the effective control of PRC investors. If the foreign investment authority recognizes it a being effectively controlled by PRC investors, the VIE arrangement can be retained and the relevant parties can continue the operation; or

(c) the entry permit regime: the foreign investment enterprise under the VIE arrangement shall apply for entry permit from the foreign investment authority under the State Council of the PRC, and the foreign investment authority and relevant authorities will consider factors including the actual controller of the foreign investment enterprise and make a decision on how the relevant VIE arrangement should be handled.

Among other things, the Draft Law purports to introduce the principle of ‘‘actual control’’ in determining whether a company is considered as a foreign invested enterprises or a foreign invested entity (‘‘FIE’’). For this purpose, ‘‘control’’ is defined in Article 18 of the Draft Law to cover any of the following categories: (i) holding directly or indirectly 50% or more of the equity interest,

– 31 – LETTER FROM THE BOARD assets, voting rights or similar equity interest of the subject entity; (ii) holding directly or indirectly less than 50% of the equity interest, assets, voting rights or similar equity interest of the subject entity but: (a) having the power to directly or indirectly appoint or otherwise secure at least 50% of the seats on the board or other equivalent decision-making bodies, (b) having the power to secure its nominated person to acquire at least 50% of the seats on the board or other equivalent decision- making bodies, or (c) having the voting power to exert material influence over decision-making bodies, such as the shareholders’ meeting or the board; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s operations, financial, staffing and technology matters.

For the purpose of the Draft Law, ‘‘actual controller’’ refers to a natural person or an enterprise that directly or indirectly controls a foreign investor or an FIE.

AsdefinedintheDraftLaw,‘‘PRC investors’’ refer to the following subjects: (i) natural persons with PRC nationality; (ii) the PRC government and the departments or agencies there under; or (iii) domestic enterprises under the control of the subjects as mentioned in the preceding two categories. Meanwhile, ‘‘foreign investors’’ refer to the following subjects making investments within the territory of the PRC: (i) natural persons without the PRC nationality; (ii) enterprises incorporated under the laws of countries or regions other than the PRC; (iii) the governments of countries or regions other than the PRC and the departments or agencies thereunder; or (iv) international organisations. Domestic enterprises under the control of foreign investors as mentioned in the preceding sentence are deemed as foreign investors.

The Potential Impact of the Draft Law on the Company

Assuming the Draft Law is adopted and becomes law and one of the Suggested Alternatives is adopted by the PRC government, in the event that the Target Group’s business still falls within the restricted or prohibited lists of the final foreign investment law (the ‘‘FIL’’), the Group will have to:

(a) report to the competent authorities if the reporting regime is finally adopted. The existing VIE structure will be permitted to continue following reporting to the MOFCOM that the VIE structure is ultimately controlled by a PRC investor. However, the Draft Law has not mentioned how to deal with the existing VIE structures ultimately controlled by a foreign investor and whether the relevant entity could continue its business operations under the reporting regime;

(b) obtain recognition from the competent authorities if the recognition regime is finally adopted. The existing VIE structure will be permitted to continue following recognition, on the application of the investor, by the MOFCOM of the VIE structure being ultimately controlled by a PRC investor. However, the Draft Law has not mentioned how to deal with the existing VIE structure ultimately controlled by a foreign investor and whether the relevant entity could continue its business operations under the recognition regime; or

– 32 – LETTER FROM THE BOARD

(c) obtain entry permit from the competent authorities if the entry permit regime is finally adopted. The existing VIE structure will be permitted to continue following the entry permit is granted by the MOFCOM after taking into account a number of considerations including, without limitation, the identity (whether PRC investor or foreign investor) of the ultimate control person.

There is no guarantee that the Group will be able to obtain such recognition or entry permit. If the Group is unable to obtain such recognition or entry permit, the Group may be required to terminate the VIE Agreements and dispose of the business carried out by the Target Group. As a result, the Group will lose control over Guangzhou Daide and the Target Group, which could negatively affect the Group’s ability to conduct its business. In the event that the Company no longer has a sustainable business after such disposal, the Stock Exchange may delist the Company.

According to the PRC Legal Advisers, the Draft Law has not yet been effective or legally binding. As there are uncertainties on the final content and interpretations of the Draft Law, there is no assurance that the VIE Agreements will comply with the Draft Law when it is adopted and becomes law. If the PRC government finds that the VIE Agreements do not comply with PRC laws and regulations, or if these laws and regulations or their interpretations change in the future, the Company could be subject to severe penalties or be forced to relinquish its interests received through the VIE Agreements.

Measures adopted by the Company to mitigate against any potential risk arising from the FIL

The Draft Law was circulated in January 2015 for comments and there has been no indication as to when it will be promulgated and come into effect and it does not contain a concrete guidance to deal with the existing VIE structures. Also, the Draft Law is currently in draft form only and remains subject to changes. As such, as advised by the PRC Legal Advisers, the Board will closely monitor the development of the Draft Law with the help of the Company’s inhouse counsel in the PRC and if there is any development, they will discuss with the Company’s PRC legal advisers in order to assess any possible impact arising from the change of the Draft Law or the FIL on the VIE Agreements and the business operation of the Group. In case there would be material and adverse effect on the Group or the business of the Target Group arising from the Draft Law or the FIL, the Company will pursuant to Part XIVA of the SFO, timely announce (i) any updates or material changes to the Draft Law; (ii) in the event that the FIL has been promulgated, a clear description andanalysisofthelaw,specificmeasurestakenbytheCompanytobeincompliancewiththeFIL with the support of a PRC legal opinion; and (iii) any material impact of the FIL on the Company’s operations and financial position.

However, since the Draft Law has not been finalized and requirements under the FIL may be difference from those set out in the Draft Law, the above-mentioned measures may not be effective.

– 33 – LETTER FROM THE BOARD

Current Status of promulgation of the Draft Law

According to the PRC Legal Advisers, the Draft Law was circulated for comment and has not been legislated by the relevant authority. As the Draft Law is currently in draft form only, it is uncertain whether or when the Draft Law will be promulgated and come into effect, and if so, whether it is to be promulgated in the current draft form after it undergoes through further enactment process. The MOFCOM and the State Council of the PRC may amend the Draft Law in light of any feedbacks or comments at the drafting stage. It may be further amended after being tabled if comments are raised by the Standing Committee of the National People’s Congress or the National People’s Congress. Furthermore, the MOFCOM has not issued any definite rule or regulation to govern existing contractual arrangements.

The VIE Agreements may not be as effective in providing operational control as direct ownership and Guangzhou Daide or its shareholders may fail to perform its obligations under the VIE Agreements.

The Group will not have equity ownership interests in the Target Company. The VIE Agreements may not be as effective as direct ownership in providing the Group with control over the Target Company. Direct ownership would allow the Group, for example, to directly or indirectly exercise its rights as a shareholder to effect changes in the board of directors of the Target Company, which, in turn, could effect changes, subject to any applicable fiduciary obligations, at the management level.

If the Target Company or its shareholders fail to perform their respective obligations under the VIE Agreements, the Group may not obtain the full economic benefits of the Target Group. In addition, in that case the Group may have to incur substantial costs and expend significant resources to enforce those arrangements and resort to litigation or arbitration and rely on legal remedies under PRC laws which may be limited. These remedies may include seeking specific performance or injunctive relief and claiming damages, any of which may not be effective. For example, if the shareholder(s) of the Target Company or Guangzhou Daide refuse to transfer their equity interest in the Target Company or Guangzhou Daide to Guangzhou Huohua or its designee(s) when Guangzhou Huohua exercises the option pursuant to the VIE Agreements, or if it were otherwise to act in bad faith toward the Group, the Group might have to take legal actions to compel it to perform its respective contractual obligations. Furthermore, uncertainties of the PRC legal system could impede the Group’s ability to exercise the option to acquire ownership and subject us to substantial costs.

The Group may lose control over the Target Company and may not enjoy the full economic benefits of the Target Group if the Target Company declares bankruptcy or becomes subject to a dissolution or liquidation proceeding.

Guangzhou Daide holds 100% equity interest in the Target Company. The VIE Agreements contain terms that specifically provide that the Target Company or Guangzhou Daide may not be voluntarily liquidated without the written consent of Guangzhou Huohua. However, if the shareholders of the Target Company or Guangzhou Daide breach this obligation and voluntarily

– 34 – LETTER FROM THE BOARD liquidate the Target Company or Guangzhou Daide or if the Target Company or Guangzhou Daide declares bankruptcy, all or part of its assets may become subject to liens or rights of third-party creditors and the Group may be unable to continue control the Target Company or Guangzhou Daide and may not enjoy the economic benefits of the Target Group, which could adversely affect the Group’s business, financial condition and results of operations.

The VIE Agreements may be subject to scrutiny by the PRC tax authorities and additional taxes may be imposed. A finding that the Group’s owe additional taxes could substantially reduce the Group’s net income.

According to applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to challenge by the PRC tax authorities and additional taxes and interest may be imposed. The Group would be subject to adverse tax consequences if the PRC tax authorities were to determine that transactions under the VIE Agreements among Guangzhou Huohua, PRC Equity Owners, Guangzhou Daide and the Target Company (as applicable) were not conductedonanarm’s length basis as the PRC tax authorities have the authority to make special tax adjustments to the tax positions of Guangzhou Huohua, Guangzhou Daide and the Target Company. Moreover, in accordance with the Implementation Measures of Special Tax Adjustments (Trial Version) (Guo Shui Fa 2009 No. 2), additional corporate income tax payable as a result of a special tax adjustment made by the PRC tax authorities on or after 1 January 2008 shall be subject to an interest levy calculated on a daily basis. The Group’s net income may be adversely affected if Guangzhou Huohua, Guangzhou Daide and the Target Company’s tax liabilities increase or if it is subject to late payment fees or other penalties.

The shareholder(s) of Guangzhou Daide may have conflicts of interest with the Group, which may materially and adversely affect the Group’s business and financial conditions.

The Group’s control over Guangzhou Daide and the Target Company held by Guangzhou Daide is based upon the VIE Agreements with, among others, Guangzhou Daide and its shareholders. The shareholders of Guangzhou Daide may potentially have a conflict of interest with the Group, and they may breach their agreements with the Group or if they otherwise act in bad faith, if they believe the VIE Agreements would adversely affect their own interests. There is no assurance that when conflicts of interest arise between the Group and the shareholders of Guangzhou Daide, the shareholders of Guangzhou Daide will act completely in the Group’s interests or that the conflicts of interest will be resolved in the Group’s favor. If the shareholders of Guangzhou Daide do not act completely in the Group’s interests or the conflicts of interest between the Group and them are not resolved in the Group’s favor, the Group’s business and financial condition may be materially and adversely affected.

In addition, the shareholders of Guangzhou Daide may breach or cause Guangzhou Daide or the Target Company to breach the VIE Agreements. If the Target Company, Guangzhou Daide or its shareholders breach their agreements with the Group or otherwise have disputes with the Group, the Group may have to initiate arbitration or other legal proceedings, which involve significant uncertainty. Such disputes and proceedings may significantly distract the management’s attention,

– 35 – LETTER FROM THE BOARD adversely affect the Group’s ability to control Guangzhou Daide and the Target Company and otherwise result in negative publicity and adversely affect the reputation of the Group. There is no assurance that the outcome of any such dispute or proceeding will be in the Group’s favor.

Certain terms of the VIE Agreements may not be enforceable under PRC law and enforcement of certain of the Group’s rights under the VIE Agreements is subject to regulatory approval.

All the agreements which constitute the VIE Agreements are governed by PRC laws and all disputes will be submitted for arbitration, whose ruling will be final and binding. Accordingly, these agreements would be interpreted in accordance with PRC laws and disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions and uncertainties in the PRC legal system could limit the Group’s ability to enforce the VIE Agreements. In the event that the Group is unable to enforce the VIE Agreements, or if the Group suffers significant time delays or other obstacles in the process of enforcing them, it would be very difficult to exert control over Guangzhou Daide and the Target Company.

The VIE Agreements contain provisions to the effect that the arbitral body may award remedies over the shares and/or assets of Guangzhou Daide and the Target Company, injunctive relief and/or winding up of these entities. These agreements also contain provisions to the effect that courts of competent jurisdictions are empowered to grant interim remedies in support of the arbitration pending the formation of an arbitral tribunal. However, under PRC laws, these terms may not be enforceable. Under PRC laws, an arbitral body does not have the power to grant injunctive relief or to issue a provisional or final liquidation order. In addition, interim remedies or enforcement order granted by overseas courts such as Hong Kong and the Cayman Islands may not be recognizable or enforceable in the PRC. Therefore, in the event of breach of any of the VIE Agreements by the Target Company, Guangzhou Daide or their shareholder(s), and if the Group is unable to enforce the VIE Agreements, the Group may not be able to exert control over Guangzhou Daide and the Target Company, which could negatively affect the Group’s ability to conduct its business.

Pursuant to the VIE Agreements, Guangzhou Huohua (or its designee) has the exclusive right to purchase all or any part of the equity interests in Guangzhou Daide and the Target Company from PRC Equity Owners and Guangzhou Daide for the minimum price permitted under the then applicable PRC laws. The equity interest transfer is subject to the approval from or filings with the MOFCOM and/or their local competent branches, which is outside of the Group’s control.

A substantial amount of costs and time may be involved in transferring the ownership of Guangzhou Daide and the Target Company to the Group under the Exclusive Option Agreements

The Exclusive Option Agreements grant Guangzhou Huohua a right to elect to purchase part or all of the equity interest in the registered capital or part or all of the assets of Guangzhou Daide and the Target Company. Nevertheless, such rights can only be exercised by Guangzhou Houhua as

– 36 – LETTER FROM THE BOARD and when permitted by the relevant PRC laws and regulations, in particular, when there are no limitations on foreign ownership in PRC companies that engage in TV entertainment show and TV program production and operation.

In addition, a substantial amount of costs and time may be involved in transferring the ownership or assets of Guangzhou Daide and the Target Company to Guangzhou Houhua if it chooses to exercise the exclusive right under the Exclusive Option Agreements, which may have a material adverse impact on the Group’s business, prospects and results of operation.

The Group does not have any insurance which covers the risks relating to the VIE Agreements and the transactions contemplated thereunder.

The insurance of the Group does not cover the risks relating to the VIE Agreements and the transactions contemplated thereunder and the Company has no intention to purchase any insurance in this regard. If any risk arises from the VIE Agreements in the future, such as those affecting the enforceability of the VIE Agreements and the operation of the Guangzhou Daide or the Target Company, the financial results and financial position of the Group may be adversely affected. However, the Group will monitor the relevant legal and operational environment from time to time to comply with the applicable laws and regulations.

GENERAL INFORMATION OF GUANGZHOU DAIDE AND THE TARGET GROUP

Information on Guangzhou Daide and PRC Equity Owners

Guangzhou Daide is a private company establishedinthePRCon9March2018withlimited liability and the entire equity interest of it is owned as to 1% by Ms. Wang and 99% by Mr. Tang. Guangzhou Daide is principally engaged in investments holding. Guangzhou Daide will own the entire equity interest of the Target Company upon Completion.

The PRC Equity Owners, namely Ms. Wang and Mr. Tang, each an Independent Third Party, are residents in Beijing, PRC. They were introduced to the Target Group by Mr. Zhang Liang Johnson, the chairman and the controlling Shareholder of the Company. Ms. Wang and Mr. Tang have been employees of companies held by Mr. Zhang Liang Johnson outside the Group. Ms. Wang is the legal representative and director of Guangzhou Daide. She is engaged in the culture and artistic business in the PRC and has many years of experience in the entertainment industry management. Mr. Tang is engaged in the beverage industry in the PRC and possesses extensive knowledge of corporate management. Accordingly, based on the PRC Equity Owners’ experience, which is relevant to the business of the Target Group and corporate management in general, they were appointed as the registered owners of Guangzhou Daide. Upon Completion, each of Ms. Wang and Mr. Tang, as the PRC Equity Owners will enter into the VIE Operating Agreements (other then the Loan Agreement), which constitute a contractual obligation on each of them, with provision to safeguard the Company’s interest in the Target Group.

– 37 – LETTER FROM THE BOARD

InformationontheTargetGroup

The Target Company is a private company established in the PRC on 26 October 2016 with limited liability and the entire equity interest of it is owned by the Vendors. The Target Company is principally engaged in the production of TV drama.

The Target Company owns the entire equity interest of the Target Subsidiary. The Target Subsidiary is principally engaged in TV entertainment show and TV program production. To the best knowledge, information and belief of the Directors having made all reasonable enquiries, the Target Company and the Target Subsidiary are Independent Third Parties.

According to the audited financial statements of the Target Group prepared in accordance with HKFRS, total assets of the Target Group as at 31 December 2017 were approximately RMB83.7 million; the revenue of the Target Group for the period from 26 October 2016 (date of incorporation) to 31 December 2017 was approximately RMB74.9 million; the profit before taxation of the Target Group for the period from 26 October 2016 (date of incorporation) to 31 December 2017 was approximately RMB20.7 million; and the profit after taxation of the Target Group for the period from 26 October 2016 (date of incorporation) to 31 December 2017 was approximately RMB20.7 million.

FINANCIAL EFFECT OF THE INVESTMENT

Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix IV to this circular, and the bases and assumptions taken into account in preparing such information, assuming the Investment had been completed as at 31 December 2017, the Group’s total assets and total liabilities are expected to increase by HK$387,174,000 and HK$393,645,000, respectively.

As set out in Appendix II to this circular, the audited revenue and profit after tax of the Target Group for the period ended from 26 October 2016 (date of incorporation) to 31 December 2017 were RMB74,889,000 and RMB20,667,000, respectively. While the Investment would not have any immediate impact on the earnings of the Group, upon Completion, the Target Group will become wholly-owned subsidiaries of the Company and its consolidated net profit will be consolidated into the Enlarged Group. It is expected that the Investment would enhance the Group’sbusiness development and have an accretive effect on the Group’s earnings.

REASONS FOR AND BENEFITS OF THE TRANSACTION

The Group is principally engaged in (i) film and TV series production, distribution and licensing of film rights, (ii) film exhibitions, (iii) post production, and (iv) advertising, marketing and publication. As disclosed in the 2016/2017 annual report of the Company, the Group will continue to identify quality investment opportunities in film and TV series projects worldwide, not only to strengthen the Group’s revenue base, but also to enrich its knowledge and experience for tapping into the global market.

– 38 – LETTER FROM THE BOARD

Taking into account, among other things, the entering into the VIE Agreements will enable the Group to (1) extend its footprint to the prosperous production business of TV programs and the PRC showbiz industry; (2) obtain the drama production licenses held by the Target Group; (3) obtain the intellectual property rights of drama held by the Target Group; (4) diversify its distribution channels through the cooperation between the Target Group and different TV stations and online video platforms in the PRC; (5) leverage the human capital of the Target Group to facilitate its growth in the PRC showbiz industry; and (6) in view of the Profit Guarantee Agreement, the Target Group may contribute positively to the Group’s revenue and cash flow, the Directors consider that the terms of the VIE Agreements are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

As at the Latest Practicable Date and save for the disposal as disclosed by the Company by way of announcement on 8 May 2018, the Company has no intention to, or has not entered into any other discussion, negotiation, agreement, arrangement, understanding or undertaking (whether formal or informal, express or implied) on any acquisition of new business or assets, or disposal of the Company’s existing business. Further, the Company has no other existing business of which involves contractual arrangement as at the Latest Practicable Date.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios (as defined under the Listing Rules) in respect of the Investment exceed 25% and all the applicable percentage ratios are less than 100%, the Investment constitutes a major transaction of the Company under Chapter 14 of the Listing Rules and is subject to the reporting, announcement and shareholders’ approval requirements under the Listing Rules.

WRITTEN SHAREHOLDER’S APPROVAL

Pursuant to Rule 14.44 of the Listing Rules, in lieu of a resolution to be passed at a general meeting of the Company, written shareholder’s approval for the Investment has been obtained from the controlling shareholder of the Company, namely Nice Rich, who held 1,836,391,914 Shares, representing approximately 70.75% of the issued share capital of the Company as at the date of such written approval. To the best of the Directors’ knowledge, information and belief, after having made all reasonable enquiries, none of the Shareholders had any material interest in the Investment and therefore no Shareholder would be required to abstain from voting if the Company were to convene an extraordinary general meeting for the approval of the Investment.

RECOMMENDATION

The Directors (including the independent non-executive Directors) consider that the terms of the Investment are fair and reasonable and the Investment is in the interest of the Company and the Shareholders as a whole. Although a general meeting will not be convened by the Company to approve the Investment, if such a general meeting were to be convened by the Company, the Board would recommend the Shareholders to vote in favour of the resolution to approve the Investment.

– 39 – LETTER FROM THE BOARD

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendices to this circular.

ByOrderoftheBoard Transmit Entertainment Limited Zhang Liang Johnson Chairman

– 40 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION OF THE GROUP

The audited consolidated financial statements of the Group for the three years ended 30 June 2015, 2016 and 2017 and for the six months ended 31 December 2017 together with the relevant notes thereto are disclosed in the following documents which have been published on the website of the Stock Exchange (www.hkexnews.hk) and the website of the Company (https://www.transmit- ent.com/en/reports.php):

. pages 61 to 68 in the annual report of the Company for the year ended 30 June 2015 published on 16 October 2015;

. pages 49 to 57 in the annual report of the Company for the year ended 30 June 2016 published on 16 October 2016;

. pages 63 to 76 in the annual report of the Company for the year ended 30 June 2017 published on 20 October 2017; and

. pages 4 to 10 in the interim report of the Company for the six months ended 31 December 2017 published on 7 March 2018.

Each of the said consolidated financial statements of the Group is incorporated by reference to this circular and forms part of this circular. The management discussion and analysis of the Company for the years ended 30 June 2015, 2016 and 2017 and six months ended 31 December 2017 are disclosed in the published annual reports of the Company for the relevant period. Please also see below the links to the relevant annual reports and interim report of the Company:

. Annual report of the Company for the year ended 30 June 2015

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/1016/LTN20151016037.pdf

. Annual report of the Company for the year ended 30 June 2016

http://www.hkexnews.hk/listedco/listconews/SEHK/2016/1017/LTN20161017183.pdf

. Annual report of the Company for the year ended 30 June 2017

http://www.hkexnews.hk/listedco/listconews/SEHK/2017/1020/LTN20171020027.pdf

. Interim report of the Company for six months ended 31 December 2017

http://www.hkexnews.hk/listedco/listconews/SEHK/2018/0307/LTN20180307291.pdf

– 41 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

2. INDEBTEDNESS STATEMENT

As of the close of business on 31 May 2018, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Enlarged Group had indebtedness of approximately HK$44,288,000.

Bank borrowing

The carrying amount of the Enlarged Group’s outstanding bank borrowing as at 31 May 2018 was approximately HK$8,409,000. The bank borrowing was secured by a bank deposit and guaranteed by Transmit Entertainment Limited (formerly known as Pegasus Entertainment Holdings Limited).

Amount due to a related company

The carrying amount of the Enlarged Group’s outstanding amount due to its related company as at 31 May 2018 was approximately HK$30,000,000 and it was unguaranteed and unsecured.

Amounts due to a joint venture

The carrying amounts of the Enlarged Group’s outstanding amounts due to a joint venture as at 31 May 2018 was approximately HK$5,879,000 and it was unguaranteed and unsecured.

Save as disclosed above and apart from intra-group liabilities and normal trade payables in the normal course of business, as at the close of business on 31 May 2018, the Group did not have any debt securities issued and outstanding, and authorised or otherwise created but unissued, bank overdrafts, charges or debentures, mortgages, loans or other similar indebtedness or any finance lease commitments, hire purchase commitments, liabilities under acceptances (other than normal trade bills), acceptance credits, material contingent liabilities or any guarantees.

3. MATERIAL ADVERSE CHANGE

The Company is not aware of any material adverse change in the financial or trading position of the Group since 30 June 2017, being the date to which the latest published audited financial statements of the Company were made up.

4. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the financial resources available to the Group including the available credit facilities and the Group’s internally generated funds and the cash flow impact of the Investment, the Group has sufficient working capital to satisfy its requirements for at least the next 12 months following the date of this circular.

– 42 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

As disclosed in the 2016/2017 annual report of the Company, the Company will maintain the steady expansion of its core businesses based on the firm foundation, strengthen its film and TV series production and distribution operations by producing and investing in more diversified and higher quality films and TV programs. Looking forward, the Group will continue to identify quality investment opportunities in film and TV series projects worldwide, not only to strengthen the Group’s revenue base, but also to enrich its knowledge and experience for tapping into the global market. The management of the Company is overwhelmingly confident that the Company will poise to be a leading film and television content’s provider, an industrial whole-chain supplier in film and television entertainment products, transforming itself successfully into an emerging pioneer with formidable potential for sustainable development in the film and television entertainment.

The unaudited consolidated pro forma financial information of the Enlarged Group illustrating the financial impact of the Investment on the assets and liabilities of the Enlarged Group is set out in Appendix IV to this circular. The pro forma financial information of the Enlarged Group has been prepared for illustrative purpose only, based on the judgments and assumptions of the Directors, and, due to its hypothetical nature, it may not give a true picture of the financial position of the Enlarged Group as at the date of completion of the Investment or any future date.

– 43 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

The following is the text of a report set out on pages 44 to 72, received from the Company’s reporting accountants, Crowe (HK) CPA Limited, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION OF TARGET GROUP TO THE DIRECTORS OF TRANSMIT ENTERTAINMENT LIMITED

INTRODUCTION

We report on the historical financial information of Khorgas Houhai Culture Media Company Limited (霍爾果斯厚海文化傳媒有限公司)(the‘‘Target Company’’) and its subsidiary (together the ‘‘Target Group’’) set out on pages 47 to 72, which comprises the consolidated statements of financial position of the Target Group and the statements of financial position of the Target Company as at 31 December 2017 and 31 March 2018, and the consolidated statements of profit or loss and other comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows for period from 26 October 2016 (date of incorporation) to 31 December 2017 and the three months ended 31 March 2018 (the ‘‘Relevant Periods’’)anda summary of significant accounting policies and other explanatory information (together, the ‘‘Historical Financial Information’’). The Historical Financial Information set out on pages 47 to 72 forms an integral part of this report, which has been prepared for inclusion in the circular of Transmit Entertainment Limited (the ‘‘Company’’) dated 26 July 2018 (the ‘‘Circular’’)in connection with the proposed major acquisition by the Company (the ‘‘Proposed Acquisition’’).

DIRECTORS’ RESPONSIBILITY FOR THE HISTORICAL FINANCIAL INFORMATION

The sole director of the Target Company is responsible for the 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, and for such internal control as the sole director of the Target 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.

The consolidated financial statements of Target Group for the Relevant Periods (‘‘Underlying Financial Statements’’), on which the Historical Financial Information of Target Group is based, were prepared by the sole director of Target Company based on the management accounts of Target Group for the Relevant Periods. The sole director of Target Company is responsible for the preparation of Target Group’s financial statements that give a true and fair view in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information,

– 44 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP and for such internal control as the sole director determines is necessary to enable the preparation of Target Group’s financial statements that are 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 (‘‘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.

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 Historical Financial Information that give 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 Target Company’s and the Target Group’s financial position as at 31 December 2017 and 31 March 2018 and of the Target Group’s financial performance and cash flows for the Relevant Periods in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information.

REVIEW OF STUB PERIOD CORRESPONDING FINANCIAL INFORMATION

We have reviewed the stub period corresponding financial information of the Target Group which comprises the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the three months ended 31 March 2017 and other explanatory information (the ‘‘Stub Period Corresponding Financial Information’’). The sole director of the Target Company are responsible for the preparation and presentation of the Stub Period Corresponding Financial Information in

– 45 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information. Our responsibility is to express a conclusion on the Stub Period Corresponding Financial Information based on our review. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ issued by the HKICPA. A review consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the Stub Period Corresponding Financial Information, for the purpose of the accountants’ report, is not prepared, in all material respects, in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information.

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 have been made.

Dividends

We refer to Note 18(b) to the Historical Financial Information which states that no dividends have been paid by Target Company in respect of the Relevant Periods.

Crowe (HK) CPA Limited Certified Public Accountants Hong Kong, 26 July 2018

Yau Hok Hung Practising Certificate Number P04911

– 46 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

HISTORICAL FINANCIAL INFORMATION OF THE TARGET GROUP

Set out below is the Historical Financial Information which forms an integral part of this accountants’ report.

The Underlying Financial Statements, on which the Historical Financial Information is based, were audited by Crowe (HK) CPA Limited in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

The Historical Financial Information is presented in Renminbi (‘‘RMB’’) and all values are rounded to the nearest thousand (RMB’000) except when otherwise indicated.

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Period from 26 October 2016 (date of incorporation) to 31 Three months ended December 31 March 2017 2018 2017 Note RMB’000 RMB’000 RMB’000 (unaudited)

Revenue 4 74,889 113 —

Cost of sales (52,327) (45) —

Gross profit 22,562 68 —

Other income 196 10 119 General and administrative expenses (2,091) (812) (413)

Profit/(loss) before taxation 5 20,667 (734) (294)

Income tax 8 ———

Profit/(loss) and total comprehensive income/(loss) for the period 20,667 (734) (294)

The accompanying notes form part of this Historical Financial Information.

– 47 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at As at 31 December 31 March 2017 2018 Note RMB’000 RMB’000

NON-CURRENT ASSET Plant and equipment 9 41 39

CURRENT ASSETS TV series rights and production in progress 10 15,148 54,143 Trade and other receivables 12 62,865 75,223 Loans to the sole director 13 — 6,000 Cash and cash equivalents 14 5,641 155

TOTAL CURRENT ASSETS 83,654 135,521

CURRENT LIABILITIES Trade and other payables 15 (16,728) (21,127) Receipts in advance 16 (16,300) (44,500) Amount due to an owner 17 — (20,000)

TOTAL CURRENT LIABILITIES (33,028) (85,627)

NET CURRENT ASSETS 50,626 49,894

NET ASSETS 50,667 49,933

CAPITAL AND RESERVES 18 Paid-in capital 2,500 2,500 Reserves 48,167 47,433

TOTAL EQUITY 50,667 49,933

The accompanying notes form part of this Historical Financial Information.

– 48 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Paid-in Capital Statutory Retained capital reserve reserve profits Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (see note below)

Balance at 26 October 2016 (date of incorporation) —————

Changes in equity for the period from 26 October 2016 (date of incorporation) to 31 December 2017:

Profit and total comprehensive income ———20,667 20,667

Appropriation to statutory reserve ——1,250 (1,250) —

Capital injection 2,500 27,500 ——30,000

Balance at 31 December 2017 2,500 27,500 1,250 19,417 50,667 Balance at 1 January 2017 (unaudited) ———(211) (211)

Changes in equity for the period from 1 January 2017 to 31 March 2017 (unaudited):

Loss and total comprehensive loss ———(294) (294)

Balance at 31 March 2017 (unaudited) ———(505) (505)

– 49 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Paid-in Capital Statutory Retained capital reserve reserve profits Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (see note below)

Balance at 1 January 2018 2,500 27,500 1,250 19,417 50,667

Changes in equity for the period from 1 January 2018 to 31 March 2018:

Loss and total comprehensive loss ———(734) (734)

Balance at 31 March 2018 2,500 27,500 1,250 18,683 49,933

Note: Statutory reserves

In accordance with the relevant laws and regulations of the PRC, the Target Company and its subsidiary are required to transfer 10% of its profit after taxation prepared in accordance with the accounting regulation of the PRC to the statutory reserve until the reserve balance reaches 50% of the respective registered capital. Such reserve may be used to offset accumulated losses or increase the registered capital of the Target Company and its subsidiary, subject to the approval from the Board of Directors, and are not available for dividend distribution to the owners.

The accompanying notes form part of this Historical Financial Information.

– 50 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

CONSOLIDATED STATEMENTS OF CASH FLOWS

Period from 26 October 2016 (date of incorporation) Three months ended to 31 December 31 March 2017 2018 2017 RMB’000 RMB’000 RMB’000 (unaudited)

Operating activities Profit/(loss) before taxation 20,667 (734) (294) Adjustments for: Depreciation of plant and equipment 7 2 1 Interests income (196) (10) (119)

Operating cash flows before movements in working capital 20,478 (742) (412) Increase in TV series rights and production in progress (15,148) (38,995) (49,743) Increase in trade and other receivables (62,865) (12,358) (5,332) Loan advanced to the sole director — (6,000) — Increase in receipts in advance 16,300 28,200 30,000 Increase in trade and other payables 16,728 4,399 21,113

Net cash used in operating activities (24,507) (25,496) (4,374)

Investing activities Payment for purchase of plant and equipment (48) — (34) Interests received 196 10 119

Net cash generated from investing activities 148 10 85

Financing activities Capital injection from owners of the Target Company 30,000 —— Amount advanced from an owner of the Target Company — 20,000 —

Net cash generated from financing activities 30,000 20,000 —

Net increase/(decrease) in cash and cash equivalents 5,641 (5,486) (4,289)

Cash and cash equivalents at beginning of period — 5,641 28,008

Cashandcashequivalentatendofperiod 5,641 155 23,719

The accompanying notes form part of this Historical Financial Information.

– 51 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

STATEMENTS OF FINANCIAL POSITION

As at As at 31 December 31 March 2017 2018 Note RMB’000 RMB’000

NON-CURRENT ASSET Plant and equipment 41 39

CURRENT ASSETS TV series rights and production in progress 14,951 53,615 Trade and other receivables 62,865 75,223 Loans to the sole director — 6,000 Cash and cash equivalents 5,641 132

TOTAL CURRENT ASSETS 83,457 134,970

CURRENT LIABILITIES Trade and other payables (16,401) (20,263) Receipts in advance (16,300) (44,500) Amount due to an owner — (20,000)

TOTAL CURRENT LIABILITIES (32,701) (84,763)

NET CURRENT ASSETS 50,756 50,207

NET ASSETS 50,797 50,246

CAPITAL AND RESERVES Paid-in capital 2,500 2,500 Reserves 48,297 47,746

TOTAL EQUITY 50,797 50,246

The accompanying notes form part of this Historical Financial Information.

– 52 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1. BASIS OF PREPARATION AND PRESENTATION OF THE HISTORICAL FINANCIAL INFORMATION

Khorgas Houhai Culture Media Company Limited (霍爾果斯厚海文化傳媒有限公司)(the‘‘Target Company’’)was incorporated on 26 October 2016 in the People’s Republic of China (the ‘‘PRC’’) with limited liability under the laws of the PRC. The address of its registered office is No 8-16-83, Floor 8, building Chayan Yewu, supporting facility of cooperation center, South of Zhuhai Road, West of Beijing Road, Khorgas, Ili, Xinjiang (新疆伊犁州霍爾果斯市北京路以西、珠海路以南合作中心配套區查驗業務樓8樓8-16-83號).

In the opinion of the sole director of the Target Company, as at 31 March 2018 and during the Relevant Periods, the ultimate controlling party of the Target Company is Zhao Wenzhu.

The Target Company and its subsidiary (collectively referred to as the ‘‘Target Group’’) are principally involved in TV entertainment show and TV show production in the PRC.

The Historical Financial Information set out in this report have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (‘‘HKFRSs’’), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (‘‘HKASs’’) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’). Further details of the significant accounting policies adopted by the Target Group are set out in Note 2.

The HKICPA has issued a number of new and revised HKFRSs. For the purpose of preparing this Historical Financial Information, the Target Company has adopted all applicable new and revised HKFRSs to the Relevant Periods, except for any new standards or interpretations that are not yet effective for the annual accounting period beginning on 1 January 2017. The revised and new accounting standards and interpretations issued but not yet effective for the annual accounting period beginning on 1 January 2017 are set out in Note 22.

The Historical Financial Information also complies with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and with the disclosure requirements of the Hong Kong Companies Ordinance (Cap. 622).

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 financial statements are presented in RMB, which is also the functional currency of the Group and the Company. The measurement basis used in the preparation of the Historical Financial Information is the historical cost.

(b) Use of estimates and judgements

The preparation of Historical Financial Information in conformity with HKFRSs 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.

– 53 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

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.

Subsidiaries are entities controlled by the Target Group. The Target 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 Target Group has power, only substantive rights (held by the Target Group and other parties) are considered.

An investment in a subsidiary is consolidated into the consolidated financial statements 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 consolidated financial statements. 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.

Changes in the Target Group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognised.

When the Target Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset or, when appropriate, the cost on initial recognition of an investment in an associate or joint venture.

In the Company’s statement of financial position, an investment in a subsidiary is stated at cost less impairment losses (see Note 2(g)).

(d) TV series rights and production in progress

TV series rights are stated at cost less accumulated amortisation and accumulated impairment losses (if any). The Target Group amortises costs of TV series rights in the same ratio that current period actual revenue (numerator) bears to estimated total projected revenue (denominator). The Target Group begins amortisation of the capitalised costs of TV series rights when a TV series is released and it begins to recognise revenue from that TV series.

The Target Group reviews and revises estimates of total projected revenue and total production costs of TV series rights at the end of each reporting period. If estimates are revised, the Target Group adjusts the amount of total projected revenue (denominator) from the period when such changes in estimates take place and re-calculated the ratio for amortisation of TV series rights. The effect from changes in estimates is recognised on a prospective basis.

TV series production in progress is stated at cost less any provision for impairment losses. Cost includes all costs associated with the production of TV series. Costs are transferred to TV series rights upon completion.

(e) Leased assets

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Target Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

– 54 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(i) Classification of assets leased to the Target Group

Assets that are held by the Target Group under leases which transfer to the Target Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Target Group are classified as operating leases.

(ii) Operating lease charges

Where the Target Group has the use of assets under operating leases, payments made under the leases are charged to profit or loss in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged toprofitorlossintheaccountingperiodinwhichthey are incurred.

(f) Loans and receivables

Loans and receivables are initially recognised at fair value and thereafter stated at amortised cost using the effective interest method, less allowances for impairment of doubtful debts (see note 2(g)(i)), except where the receivables are interest-free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of doubtful debts.

(g) Impairment of assets

(i) Impairment of loans and receivables

Investments in current and non-current receivables that are stated at amortised cost are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Target Group about one or more of the following loss events:

— significant financial difficulty of the debtor;

— a breach of contract, such as a default or delinquency in interest or principal payments;

— it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;

— significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and

If any such evidence exists, any impairment loss is determined and recognised as follows:

— For trade receivables and other current receivables and other financial assets carried at amortised cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’soriginal effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where these financial assets share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

– 55 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of trade debtors included within trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Target Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade debtors directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

(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:

— plant and equipment;

— TV series rights and production in progress; and

— investments in subsidiaries 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 the 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 whenever 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 first to reduce the carrying amount of the assets in the unit (or group of units) on a pro rata basis, except that the carrying amount 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 years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised.

– 56 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(h) Financial liabilities

Financial liabilities are initially recognised at fair value and are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(i) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Target 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.

(j) Income tax

Income tax for the reporting 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 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 reporting 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 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. Apart from differences which arise on initial recognition of assets and liabilities, 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.

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.

(k) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Target Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows:

(i) Income from advertising services is recognised upon the rendering of the relevant services.

(ii) Interest income is recognised as it accrues using the effective interest method.

(l) Joint arrangements — joint operations

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

– 57 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

When a group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its interest in a joint operation:

— its assets, including its share of any assets held jointly;

— its liabilities, including its share of any liabilities incurred jointly;

— its revenues from the sale of its share of the output arising from the joint operation;

— its share of the revenue from the sale of the output by the joint operation; and

— its expenses, including its share of any expenses incurred jointly.

The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the HKFRSs applicable to the particular assets, liabilities, revenues and expenses.

When a group entity sells or contributes assets to a joint operation in which a group entity is a joint operator, the Target Group is considered to be selling or contributing assets to the other parties to the joint operation, and gains and losses resulting from the sale or contribution are recognised in the consolidated financial statements only to the extent of other parties’ interests in the joint operation.

When a group entity purchases assets from a joint operation in which a group entity is a joint operator, the Target Group does not recognise its share of the gains and losses until it resells those assets to a third party.

(m) Employee benefits

Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the year 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.

(n) Related parties

For the purpose of these financial statements, related party includes a person and entity as defined below:

(a) A person or a close member of that person’s family is related to the Target Group if that person:

(i) has control or joint control over the Target Group;

(ii) has significant influence over the Target Group; or

(iii) is a member of the key management personnel of the Target Group or of the Target Group’s parent.

(b) An entity is related to the Target Group if any of the following conditions applies:

(i) The entity and the Target Group are members of the same Target Group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a Target Group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third entity.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

– 58 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(v) The entity is a post-employment benefit plan for the benefit of employees of either the Target Group or an entity related to the Target 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 Target Group of which it is a part, provides key management personnel services to the Target Group or to the Target Group’sparent.

Close members of the family of a person are those family members who may be exposed to influence, or be influenced by, that person in their dealings with the entity.

(o) 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 Target Group’s most senior executive management for the purposes of allocating resources to, and assessing the performance of, the Target 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 type or class of customers, the methods used to sell 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 JUDGEMENT AND ESTIMATES

In the process of applying the Target Group’s accounting policies, management has used its judgements and made assumptions of the effects of uncertain future events on the financial statements. The most significant use of judgements and key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are described below.

(a) Impairment of trade receivables

The Target Group evaluates whether there is any objective evidence that trade receivables are impaired, and estimates allowances for doubtful debts as a result of the inability of the debtors to make required payments. The Target Group bases the estimates on the ageing of the trade receivables balance and credit-worthiness of the customer. If the financial condition of the debtors were to deteriorate, actual write-offs would be higher than estimated.

(b) Impairment of TV series rights and production in progress

At the end of each of the reporting period, the management of the Target Group assesses the impairment on TV series rights and production in progress with reference to its recoverable amount. The assessment was made on an item-by-item basis. The recoverable amount of the TV series rights and production in progress was determined based on the greater of its fair value less costs of disposal and value in use.

If the recoverable amount is lower than the carrying amount, the carrying amount of the TV series rights and production in progress will be written down to its recoverable amount. The Target Group’s estimation of impairment provision of TV series rights and production in progress reflects the management’s best estimate of future cash flows expected to be generated from TV series rights.

– 59 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

According to the management’s cash inflow forecast in respect of each TV series right, no impairment loss of TV series rights and no impairment loss of TV series in progress were recognised respectively in the consolidated statements of profit or loss and other comprehensive income to reduce the carrying amounts of TV series rights and production in progress to their recoverable amounts. If projected cash inflow from these TV series were to deteriorate, additional provision for impairment may be required.

As at 31 December 2017 and 31 March 2018, the carrying amount of TV series rights and production in progress amounted to approximately RMB15,148,000 and RMB54,143,000 respectively.

4. REVENUE AND SEGMENT REPORTING

(a) Revenue

Revenue represents advertising service income from TV entertainment show.

The Target Group’s advertising service income from TV entertainment show includes two, one and nil (unaudited) customers with whom transactions have exceed 10% of the Target Group’s revenue for the period from 26 October 2016 (date of incorporation) to 31 December 2017 and three months ended 31 March 2018 and 2017 respectively. Revenue arising from TV entertainment show to these customers, including sales to entities which are known to the Target Group to be under common control with each of these customers, for the period from 26 October 2016 (date of incorporation) to 31 December 2017 was RMB59,795,000 and RMB9,434,000, respectively, and RMB113,000 for the three months ended 31 March 2018. Details of concentrations of credit risk arising from these customers are set out in Note 20(b).

(b) Segment reporting

The Target Group determines its operating segments based on the reports reviewed by the Target Group’ssole director that are used to make strategic decisions. During Relevant Periods, the Target Group’s principally operates in one operating and reportable segment which is TV entertainment show.

The Target Group operates in the PRC with all of its results derived from its operation in the PRC. Accordingly, no segment information is presented. The Target Group’s non-current assets are all located in the PRC.

– 60 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

5. PROFIT/(LOSS) BEFORE TAXATION

Profit/(loss) before taxation is arrived at after charging/(crediting):

(a) Staff costs

Period from 26 October 2016 (date of incorporation) Three months ended to 31 December 31 March 2017 2018 2017 RMB’000 RMB’000 RMB’000 (unaudited)

Employee benefit expenses (including directors’ emoluments) 878 182 119 Less: staff cost capitalised into TV series production in progress (799) — (119)

79 182 —

(b) Other items

Period from 26 October 2016 (date of incorporation) Three months ended to 31 December 31 March 2017 2018 2017 RMB’000 RMB’000 RMB’000 (unaudited)

Cost of services provided 175 45 — Amortisation of TV series rights (Note (i)) 52,152 —— Operating lease rentals 361 206 — Interest income (196) (10) (119)

Note (i): Cost of services provided and the amortisation of TV series rights for the Relevant Periods are included in ‘‘Cost of sales’’ in the consolidated statements of profit or loss and other comprehensive income.

– 61 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

6. DIRECTORS’ EMOLUMENTS

Directors’ emoluments disclosed pursuant to section 383(1) of the Hong Kong Companies Ordinance and Part 2 of the Companies (Disclosure of Information about Benefits of Directors) Regulation during the Relevant Periods are as follows:

From 26 October 2016 (date of incorporation) to 31 December 2017 Salaries, allowances Retirement and benefits Discretionary scheme Fees in kind bonuses contributions Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Executive director Zhao Wenzhu — 112 — 33 145

Supervisor Zhu Weiming —————

— 112 — 33 145

Three months ended 31 March 2018 Salaries, allowances Retirement and benefits Discretionary scheme Fees in kind bonuses contributions Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Executive director Zhao Wenzhu — 22 — 729

Supervisor Zhu Weiming —————

— 22 — 729

Three months ended 31 March 2017 (unaudited) Salaries, allowances Retirement and benefits Discretionary scheme Fees in kind bonuses contributions Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Executive director Zhao Wenzhu — 22 — 729

Supervisor Zhu Weiming —————

— 22 — 729

– 62 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

7. INDIVIDUALS WITH HIGHEST EMOLUMENTS

Of the five individuals with the highest emoluments, one is director of the Company whose emoluments are disclosed in Note 6. The aggregate of the emoluments of the remaining four individuals were as follows:

Period from 26 October 2016 (date of incorporation) Three months ended to 31 December 31 March 2017 2018 2017 RMB’000 RMB’000 RMB’000 (unaudited)

Salaries and other emoluments 448 88 88 Contributions to retirement benefits schemes 132 28 28

580 116 116

The emoluments of the four individuals with the highest emoluments are within the following bands:

Number of individuals Period from 26 October 2016 (date of incorporation) Three months ended to 31 December 31 March 2017 2018 2017

Nil–RMB1,000,000 4 4 4

8. INCOME TAX

(a) Income tax in the consolidated statements of profit or loss and other comprehensive income represents:

The Target Company and its subsidiary in the PRC are subject to income tax at the rate at 25%. No provision for income tax has been made in the Historical Financial Information as (i) the Target Company is entitled to tax exemption for the Relevant Periods; and (ii) the subsidiary of the Target Group did not generate any estimated assessable profits in the PRC during the Relevant Periods.

(b) Deferred taxation not recognised

No deferred taxation has been accounted for in the Historical Financial Information as there was no significant deferred taxation at 31 December 2017 and 31 March 2018.

– 63 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

9. PLANT AND EQUIPMENT

Furniture and equipment RMB’000

At 26 October 2016 (date of incorporation) Cost — Accumulated depreciation —

Net carrying amount —

Period from 26 October 2016 to 31 December 2017 Opening net carrying amount — Additions 48 Depreciation (7)

Closing net carrying amount 41

At 31 December 2017 Cost 48 Accumulated depreciation (7)

Net carrying amount 41

Three months ended 31 March 2018 Opening net carrying amount 41 Additions — Depreciation (2)

Closing net carrying amount 39

At 31 March 2018 Cost 48 Accumulated depreciation (9)

Net carrying amount 39

– 64 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

10. TV SERIES RIGHTS AND PRODUCTION IN PROGRESS

TV series TV series production in rights progress Total RMB’000 RMB’000 RMB’000

Cost: At 26 October 2016 (date of incorporation) ——— Additions 9,527 57,773 67,300 Transfer 52,152 (52,152) —

At 31 December 2017 61,679 5,621 67,300

At 1 January 2018 61,679 5,621 67,300 Additions 869 38,126 38,995 Transfer ———

At 31 March 2018 62,548 43,747 106,295

Accumulated amortisation: At 26 October 2016 (date of incorporation) ——— Amortisation for the period 52,152 — 52,152

At 31 December 2017 52,152 — 52,152

At 1 January 2018 52,152 — 52,152 Amortisation for the period ———

At 31 March 2018 52,152 — 52,152

Carrying amount: At 31 December 2017 9,527 5,621 15,148

At 31 March 2018 10,396 43,747 54,143

Amortisation of approximately RMB52,152,000 and RMBNil are included in the cost of sales in the consolidated statements of profit or loss and other comprehensive income for the period from 26 October 2016 (date of incorporation) to 31 December 2017 and three months ended 31 March 2018 respectively.

Impairment test for TV series rights and production in progress

The Target Group observes whether the TV series rights and production in progress are subject to any impairment indication, in accordance with the accounting policies set out in Note 2 of the Historical Financial Information.

During the Relevant Periods, management assessed whether there was an impairment indicator in relation to the TV series rights and production in progress by reviewing current market condition and popularity of TV entertainment show. Management has further performed an assessment on the recoverable amount of the TV series rights and production in progress based on each TV series sales forecast. No impairment has been made for the Relevant Periods on the TV series rights and production in progress in the consolidated statements of profit or loss and other comprehensive income.

– 65 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

11. INTERESTS IN JOINT OPERATIONS

The Target Group established joint arrangements with outside TV entertainment show and TV drama series production partners for co-financing the production of TV entertainment show and TV drama series. In accordance with the agreement, the decisions about relevant activities in these entities require unanimous consent of the parties sharing control and, therefore management has accounted for the investments as joint operations.

Details of the Group’s interest in the material joint operations, all of which are accounted for using the line-by-line basis to the extent of the Group’s interest in the joint operations, are as follows:

Percentage of ownership interest held Form of At At Name of joint business Place of 31 December 31 March operation structure business 2017 2018 Principal activities

Give Me Five Unincorporated The PRC 50% — Production of TV Season I entertainment show

Tribes and Empires: Unincorporated The PRC — 30% Production of TV Mrs. Hu Zhu drama series

Give Me Five Unincorporated The PRC — 50% Production of TV Season II entertainment show

12. TRADE AND OTHER RECEIVABLES

At At 31 December 31 March 2017 2018 RMB’000 RMB’000

Trade receivables 42,171 34,171 Other receivables 20,694 35,954 Loans advanced to staff* — 5,098

62,865 75,223

* The loans advanced to staff including RMB2,300,000 is unsecured, interest-free and has no fixed repayment terms, and RMB2,798,000 is unsecured, interest-free and repayable on 29 July 2018.

– 66 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(a) Ageing analysis

As of the end of each of the reporting period, the ageing analysis of trade receivables (which are included in trade and other receivables), based on the invoice date and net off allowance for doubtful debts, is as follows:

At At 31 December 31 March 2017 2018 RMB’000 RMB’000

Within 1 month 2,000 — 1 to 3 months 14,000 — Over 3 months 26,171 34,171

42,171 34,171

Trade receivables are generally due within 30–90 days from the date of billing except for certain transactions with credit worthly customers where the credit period is extendable up to 12 months. The Target Group’scredit policy is set out in Note 20(b). All of the trade and other receivables of the Target Group are expected to be recovered within one year.

(b) The ageing analysis of trade receivables that are neither individually nor collectively considered to be impaired are as follows:

At At 31 December 31 March 2017 2018 RMB’000 RMB’000

Neither past due nor impaired 42,171 34,171

Receivables that were neither past due nor impaired relate to the customers for whom there was no recent history of default.

13. LOANS TO THE SOLE DIRECTOR

The loans to the sole director including RMB4,000,000* (which is trade in nature in respect of the payment for production costs) is unsecured, interest-free and has no fixed repayment terms, and RMB2,000,000 (which is non-trade in nature) is unsecured, interest-free and repayable on 28 July 2018.

Loans to the sole director of the Target Group disclosed pursuant to Section 383 of the Hong Kong Companies Ordinance (Cap.622) and the Companies (Disclosure of information about Benefits of Directors) Regulation (Cap. 622G) is as follows:

From 26 October 2016 (date of incorporation) Three months ended to 31 December 2017 31 March 2018 RMB’000 RMB’000

Name of the sole director: Zhao Wenzhu

Outstanding amount at the beginning of the period —— Outstanding amount at the end of the period — 6,000 Maximum outstanding amount during the period — 6,000

* The loan to the sole director was fully repaid in July 2018.

– 67 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

14. CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise:

At At 31 December 31 March 2017 2018 RMB’000 RMB’000

Cash at bank 5,641 155

15. TRADE AND OTHER PAYABLES

At At 31 December 31 March 2017 2018 RMB’000 RMB’000

Amounts due to TV series production investors* 14,498 8,361 Trade creditors 811 7,304 Other payables and accruals 1,419 5,462

16,728 21,127

* The amounts due to TV series production investors are interest-free, unsecured and repayable on demand.

As of the end of each of the reporting period, the ageing analysis of trade creditors (which are included in trade and other payables), based on the invoice date, is as follows:

At At 31 December 31 March 2017 2018 RMB’000 RMB’000

Within 1 month 251 6,589 1 to 3 months 60 155 3 to 6 months — 60 6 to 12 months 500 500

811 7,304

16. RECEIPTS IN ADVANCE

Receipts in advance represents the amounts received from the investors for TV series production in progress at 31 December 2017 and 31 March 2018.

17. AMOUNT DUE TO AN OWNER OF THE TARGET COMPANY

The amount due to an owner of the Target Company is interest-free, unsecured and repayable on 31 December 2018.

– 68 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

18. PAID-IN CAPITAL, RESERVES AND DIVIDENDS

(a) Movements in components of equity of the Target Company

The reconciliation between the opening and closing balances of each component of the Target Group’s equity is set out in the consolidated statements of changes in equity. Details of the changes in the Target Company’s individual components of equity between the beginning and the end of the Relevant Periods are set out below.

Paid-in Capital Statutory Retained capital reserve reserve profits Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 26 October 2016 (date of incorporation) ————— Changes in equity for the period from 26 October 2016 (date of incorporation) to 31 December 2017:

Profit and total comprehensive income ———20,797 20,797

Appropriation to statutory reserve ——1,250 (1,250) —

Capital injection 2,500 27,500 ——30,000

Balance as at 31 December 2017 2,500 27,500 1,250 19,547 50,797

Balance at 1 January 2017 (unaudited) ———(211) (211)

Changes in equity for the period from 1 January 2017 to 31 March 2017 (unaudited):

Loss and total comprehensive loss ———(294) (294)

Balance at 31 March 2017 (unaudited) ———(505) (505)

Balance at 1 January 2018 2,500 27,500 1,250 19,547 50,797

Changes in equity for the period from 1 January 2018 to 31 March 2018:

Loss and total comprehensive loss ———(551) (551)

Balance at 31 March 2018 2,500 27,500 1,250 18,996 50,246

– 69 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(b) Dividends

No dividend was declared or paid by Target Company during the Relevant Periods to its owners.

RMB’000

Paid-in capital during the Relevant Periods and at 31 December 2017 and 31 March 2018 2,500

(d) Reserves

(i) Capital reserve

The difference between the amount of owners’ contribution and the paid-in capital of the Target Company was recognised in the capital reserve.

(ii) Statutory reserve

Under the PRC laws, the Target Company registered in the PRC are required to appropriate 10% of its respective net profit to the statutory reserve, until the reserve balance reaches 50% of its registered capital.

(e) Capital risk management

The Target Group’s objectives when managing capital are to safeguard the Target Group’s ability to continue as a going concern and to maximise the return to the owners through the optimisation of the debt and equity balance.

The Target Group currently does not have any specific policies and processes for managing capital.

The Target Group is not subject to any externally imposed capital requirements.

19. MATERIAL RELATED PARTY TRANSACTIONS

Except as disclosed elsewhere in the Historical Financial Information, the Target Group had no material related party transaction. The Target Group defines the sole director of the Company as key management personnel and her remunerations are set out in Note 6.

20. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

At At 31 December 31 March 2017 2018 RMB’000 RMB’000

Financial assets Loans and receivables (including cash and cash equivalents) 68,506 81,378

Financial liabilities At amortised cost 33,028 85,627

– 70 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(b) Financial risk management objectives and policies

The Group’s financial instruments include trade and other receivables, loans to the sole director, cash at banks, trade and other payables, receipts in advance and amount due to an owner. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management of the Target Group manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Credit risk

Credit risk refers to the risk that the counterparty to a financial instrument would fail to discharge its obligation under the terms of the financial instrument and cause a financial loss to the Target Group. The Target Group’s exposure to credit risk mainly arises from granting credit to its customers and other counterparties in the ordinary course of its operation. The Target Group trades mainly with recognised and creditworthy third parties. It is the Target Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Target Group’s exposure to bad debts is not significant. Further detailed exposure to credit risk on trade receivables of the Target Group is disclosed in Note 12. All the Target Group’sbank balances are deposited with major banks located in the PRC. None of the financial assets of the Target Group are secured by collateral or other credit enhancements. The Target Group was exposed to concentration of credit risk on one of its trade customers which accounted for 62% and 59% of its trade receivables as at 31 December 2017 and 31 March 2018 respectively. The top customer has a good financial background. Except for the above, the Target Group does not have any other significant concentration of credit risk.

Liquidity risk

In the management of the liquidity risk, the Target Group monitors and maintains a level of cash and cash equivalents adequate to finance the Target Group’s operations and mitigate the effects of fluctuations in cash flows. The owners of the Target Company agreed to provide adequate funds for the Target Group to meet its financial obligations as they fall due.

The carrying amounts of the Target Group’s financial liabilities represent the undiscounted cash flows of the financial liabilities which are repayable on demand and non-interest bearing.

The sole director of Target Company considers that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the Historical Financial Information approximate their fair values.

21. OPERATING LEASE COMMITMENTS

At 31 December 2017 and 31 March 2018, the total minimum lease payments under non-cancellable operating lease are payable as follows:

At At 31 December 31 March 2017 2018 RMB’000 RMB’000

Within one year 823 823 After 1 year but within 5 years 480 274

1,303 1,097

– 71 – APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

The Group is a lessee in respect of office premises under an operating lease. The lease runs for an initial period of two years, with an option to renew the lease when all terms are renegotiated.

22. POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE ANNUAL ACCOUNTING PERIOD ON 1 JANUARY 2017

Up to the date of issue of the Historical Financial Information, the HKICPA has issued a number of amendments and new standards which are not yet effective for the annual accounting period on 1 January 2017 and which have not been adopted in this Historical Financial Information. These include the following which may be relevant to the Target Group.

HKFRS 9 Financial Instruments1 HKFRS 15 Revenue from Contracts with Customers and the related Amendments1

HKFRS 16 Leases2

HK (IFRIC) 23 Uncertainty over Income Tax Treatments2

Amendments to HKFRSs Annual Improvements to HKFRSs 2015–2017 Cycle2

1 Effective for annual periods beginning on or after 1 January 2018 2 Effective for annual periods beginning on or after 1 January 2019

The Group is in the process of making an assessment of what the impact of these amendments, new standards and interpretations is expected to be in the period of initial application. So far the Group has not identified any new standards which may have a significant impact on the consolidated financial statements of the Target Group.

The Target Group is currently assessing the impacts of adopting new standards on its financial statements. Further analysis is required to determine whether this change in accounting policy may have a material impact on the amount reported in any given financial reporting period.

23. SUBSIDIARY

The following list contains only the particulars of a subsidiary.

Held Place of Group’s by the incorporation Particulars of effective Target Name of company and business registered capital interest Company Principal activity

北京聚海文化傳媒有限公司 The PRC RMB3,000,000* 100% 100% Not yet commenced (Beijing Juhai Culture business Media Company Limited)

* At 31 March 2018, the Target Company has not yet contributed capital to this subsidiary.

24. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Target Company in respect of any period subsequent to 31 March 2018.

– 72 – APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

This appendix summarizes the business and financial results and other financial information of the Target Group for the period from 26 October 2016 (date of incorporation) to 31 December 2017 and for three months ended 31 March 2017 and 2018.

I BUSINESS AND FINANCIAL RESULTS OF THE TARGET GROUP

The Target Company is a company incorporated in Khorgos, the PRC on 26 October 2016 and the Target Subsidiary is a company incorporated in Beijing, the PRC on 19 January 2017. The Target Subsidiary was established right after inception the Target Company. In mainland China, most of companies in TV series production industry set up office in Beijing since Beijing is the cultural center. A subsidiary set up in Beijing is necessary and convenient for daily operation. The Target Subsidiary did not have any operations during the track record period. The Target Group holds the Broadcasting And TV Program Production Management License* 《( 廣播電視制作經營許可證》) and certain copyrights and trademarks. Both the Target Company and the Target Subsidiary hold the Broadcasting And TV Program Production Management License. The Broadcasting And TV Program Production Management License is one kind of authorization by the government to broadcast or product TV programs in mainland China.

The license held by the Target Company is for TV entertainment show and TV series production, operation, and broadcast. The license held by the Target Subsidiary is for TV entertainment show, TV series and cartoon production, operation, and broadcast.

All broadcasting and TV program production management license in mainland China are only for two years.

TheexpirationdateofthelicenseheldbytheTarget Company is 1 April 2019 and the one for the Target Subsidiary is 29 March 2019.

The Company plans to renew these licenses following the common practice. Normally the broadcasting and TV program production management license will be renewed if the license holder has no misconduct during prior licensed period. The Target Group has a strong team with substantial experience in this sector, the Company does not expect material difficulties to renew the licenses after completion of this transaction.

As at the Latest Practicable Date, the Target Group is involved in TV entertainment show and TV series production in the PRC. According to 2018 TV Entertainment Show Industry Report For Mainland China (‘‘2018中國綜藝行業報告’’), TV entertainment show industry has developed rapidly since 2016. It is estimated that total market size in mainland China for TV entertainment show would be almost RMB 27 billion in 2017.

Favorable policy, development of new broadcasting platform, diversity requirements to TV entertainment show from younger generation and new technique are four key factors making positive influence on the development.

– 73 – APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

From 2013 to 2016, many favorable policies, such as No Foreign TV Entertainment Show (‘‘限模令’’)andNo Korean TV Entertainment Show (‘‘限韓令’’) were implemented. Local TV entertainment show were produced and broadcasted. Also, new broadcasting platform, such as Aiqiyi and Tencent developed rapidly, generating huge demand for more TV entertainment shows. Further, for younger generation, traditional TV entertainment shows are too boring for them. Growing up in a fast-developing society, they require diversity from TV entertainment show. Last, more sophisticated technique are used in TV entertainment show nowadays.

According to 2018 TV Series Industry Development Report For Mainland China (‘‘2018中國電視劇產業發展報告’’), TV series production industry developed very well in 2017. Under influence of policy One TV series, Two broadcast platform (‘‘一劇兩星’’)andNo Korean TV series (‘‘限韓令’’), more and more high-quality local TV series were produced and broadcasted from the past few year. In 2017, totally 1,180 TV series with 46,520 episodes were produced. TV series with young star actresses such as Yang Mi, Angelababy, and Sun Li achieved top 10 audience rating in CSM (‘‘中國央視索福瑞媒介研究’’).

Also, TV series broadcasted in Internet platform, such as Tencent (‘‘騰訊視頻’’)andAiqiyi, becoming more and more popular. Unlike their parents, younger generation in mainland chose to watch TV series on the Internet and as a result, TV series production companies gained a higher income since more broadcast platform can be chosen.

According to annual report 2015–2017 from listing production companies, such as Huace Group (‘‘華策影視’’)orCiwen Media (‘‘慈文影視’’) in mainland, gross profit from TV series production ranged from approximately 30%–50%, which showed high profitability in this industry.

Revenue, Cost of goods sold and gross profit

Revenue and gross profit of the Target Group for the period from 26 October 2016 (date of incorporation) to 31 December 2017 and for the three months ended 31 March 2017 and 2018 are as follows:

Period from 26 October 2016 For the three months （date of incorporation）to ended 31 March 31 December 2017 2018 2017 RMB’000 RMB’000 RMB’000 (audited) (audited) (unaudited)

Revenue 74,889 113 — Cost of Goods Sold (52,327) (45) — Gross profit 22,562 68 —

For the period from 26 October 2016 (date of incorporation) to 31 December 2017 and the three months ended 31 March 2017 and 2018, the Target Group recorded revenue of approximately RMB74.9 million, RMBnil and RMB0.1 million, respectively.

– 74 – APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

For the period from 26 October 2016 (date of incorporation) to 31 December 2017, the Target Group’s revenue mainly included advertisement income, of approximately RMB57 million and artiest arrangement income (‘‘藝人統籌收入’’) of approximately RMB3 million, from the TV entertainment show of Give Me Five Season I. Targeting at younger generation in mainland China, Give Me Five is a TV entertainment show with positive-energy. In Season I, five idols of younger generation, Junkai Wang (‘‘王俊凱’’), Haoran Liu (‘‘劉昊然’’), Zijian Dong (‘‘董子健’’), Yishan Zhang (‘‘張一山’’)andDarren Wang (‘‘王大陸’’) emceed this twelve episodes show. With a theme of ‘‘Twelve Lessons of Growth (‘‘成長十二課’’), the program gained a national wide attention and favor, especially in teenagers. A high audience rating in CSM system reflected its success.

As a co-producer of Give Me Five Season I, The Target Group produced the program with a subsidiary of Beijing Culture (‘‘北京文化’’). Besides producing, the Target Group was also in charge of artiest arrangement. The entertainment show was broadcasted in Zhejiang TV (‘‘浙江衛視’’). After Zhejiang TV received the advertisement income of this show, the income was shared by Beijing Culture and the Target Group with percentages agreed by these two parties before. The show was broadcasted from April 2017 and as a result, no revenue was recorded in the first three months in 2017.

For the period from 26 October 2016 (date of incorporation) to 31 December 2017, the Target Group also recorded revenue from artiest arrangement income amounted to RMB1.9 million from other programs and sales of copyrights mounted to RMB13.2 million for Physiology: Chapter 7 (‘‘生理第七章’’)andAs Stars Into The Sea (‘‘你像星辰入海流’’).

The Target Group’s revenue recorded in the three months ended 31 March 2018 was RMB0.1 million. In 2018, The Target Group’s revenue is expected to come mainly from advertisement income from TV entertainment show Give Me Five Season II and copyright authorization income from TV series Hikaru no Go.

Hikaru no Go is a Japanese manga series basedontheboardgame,writtenbyYumi Hotta and illustrated by Takeshi Obata. It was serialized in Weekly Shōnen Jump (‘‘少年周刊 Jump’’) from 1999 to 2003, with the chapters collected into 23 tankōbon volumes by Shueisha (‘‘株式會社集英社’’).

Give Me Five Season II was broadcasted from April 2018 and copyright of Hikaru no Go is expected to be delivered in September 2018 and as a result, small revenue was recorded in the first three months of 2018. The expected revenue to be recognized in the Target Group from Give Me Five Season II would be approximately RMB72 million.

For the period from 26 October 2016 (date of incorporation) to 31 December 2017 and the three months ended 31 March 2017 and 2018, the Target Group recorded cost of approximately RMB52.3 million, RMBnil and RMB0.05 million respectively.

– 75 – APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

The Target Group’s cost of goods sold mainly included production fee and artiest remuneration of TV entertainment show Give Me Five Season I, which was amounted to RMB52.2 million. Cost of goods sold also included original cost of copyrights of Physiology: Chapter 7 and As Stars Into The Sea, which was amounted to RMB0.1 million in total.

General and administrative expenses and income tax expenses

General and administrative expenses and income tax expense of the Target Group for the period from 26 October 2016 (date of incorporation) to 31 December 2017 and for the three months ended 31 March 2017 and 2018 are as follows:

Period from 26 October 2016 (date of For the three months incorporation) to ended 31 March 31 December 2017 2018 2017 RMB’000 RMB’000 RMB’000 (audited) (audited) (unaudited)

General and administrative expenses (2,091) (812) (413) Income tax expense ———

General and administrative expenses

For the period from 26 October 2016 (date of incorporation) to 31 December 2017 and the three months ended 31 March 2017 and 2018, the Target Group recorded general and administrative expenses of approximately RMB2.1 million, RMB0.4 million and RMB0.8 million respectively.

General and administrative expenses primarily consisted of salaries and rental expenses the period from 26 October 2016 (date of incorporation) to 31 December 2017 and the three months ended 31 March 2017 and 2018.

Income tax expense

According to tax preference policy in Khorgos, the PRC, the Target Group did not need to pay income tax expense for the period from 26 October 2016 (date of incorporation) to 31 December 2017 and the three months ended 31 March 2017 and 2018.

– 76 – APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

Net Profit/(loss) for the period

Net profit/(loss) for the period of the Target Group for the period from 26 October 2016 (date of incorporation) to 31 December 2017 and for the three months ended 31 March 2017 and2018areasfollows:

Period from 26 October 2016 For the three months （date of incorporation）to ended 31 March 31 December 2017 2018 2017 RMB’000 RMB’000 RMB’000 (audited) (audited) (unaudited)

Net profit/(loss) for the period 20,667 (734) (294)

The Target Group recorded net profit for RMB20.7 million for the period from date of incorporationto31December2017andlossforRMB0.3millionandRMB0.7millionforthe three months ended 31 March 2017 and 2018, respectively.

Due to the business pattern, the Target Group normally recorded the major revenue in the second half of the year and as a result, loss was recorded for the first three months both in 2017 and 2018.

II FINANCIAL POSITION AND CAPITAL STRUCTURE OF THE TARGET GROUP

Financial resources and gearing ratio

The Target Group generally finances its operations with cash flows generated internally from its operating activities. The Target Group had no interest bearing borrowings as at 31 March 2018.

In mainland China, all equipment in TV series and TV entertainment show production can be rent and few companies in this sector would invest in high-value equipment. Therefore, the Target Group does not plan for material investments or capital assets in the near future.

The Target Group’s gearing ratio as at 31 March 2018 was nil.

As at 31 March 2018, the loan to the sole director, Zhao Wenzhu, was RMB6 million. RMB4 million of the loan was repaid in July 2018. Rest of the loan would be fully repaid upon completion.

As at 31 May 2018, the unaudited cash and cash equivalents held by the Target Group are approximately RMB1.08 million.

– 77 – APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

Significant investments held

For the period from 26 October 2016 (date of incorporation) to 31 December 2017 and for the three months ended 31 March 2017 and 2018, the Target Group did not hold any significant investments.

Material acquisitions and disposals of subsidiaries and associated companies

For the period from 26 October 2016 (date of incorporation) to 31 December 2017 and for the three months ended 31 March 2017 and 2018, the Target Group did not have any material acquisitions or disposals.

Segmental analysis

The Target Group is only engaged in TV entertainment and TV series producing in the PRC.

Employee’s remuneration and policy

The aggregate amount of remuneration paid to the employees of the Target Group for the period from 26 October 2016 (date of incorporation) to 31 December 2017 and for the three months ended 31 March 2017 and 2018 was RMB0.7 million, RMB0.3 million and RMB0.3 million. In addition to salaries, the Target Group also contributed to various defined contribution benefit plans organized by the relevant municipal and provincial governments in the PRC.

The Target Group has totally eighteen employees now, including one director and two deputy managers. Thirteen of them, including the director and managers, are in charge of TV series production and TV entertainment show production on project basis. The rest take responsibilities of daily administration, such as financial work, HR and legal issues.

The background of the directors and key management of the Target Group is as below:

Zhao Wenzhu, the sole director of the Target Group, graduated from Communication University of China with a master degree. With at least eight-year experience in entertainment industry, Zhao took a leading producer position for many TV entertainment shows, TV series and even movies before, including TV entertainment show Go Fighting (‘‘極限挑戰’’), TV series Romance of the Three Kingdoms (‘‘三國’’), Legend of Lu Zhen (‘‘陸貞傳奇’’), Long Trip to Beautiful Rivers and Mountains (‘‘秀麗江山’’), Naughty Grandfather and Grandson (‘‘淘氣爺孫’’) and movie BadGuysAlwaysDie(‘‘壞蛋必須死’’).

Zhao is independent of other vendors.

Ma Jin, deputy manager of the Target Group, graduated from Zhejiang University of Technology. From 2013 to 2015, Ma worked in Zhejiang Radio and TV Group (‘‘浙江廣電集團’’)andZhejiang TV, participating production of TV entertainment show Running Man

– 78 – APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

(‘‘奔跑吧兄弟’’), The Voice of China (‘‘中國好聲音’’) and movie Running Man (‘‘奔跑吧兄弟’’), Monster Hunt (‘‘抓妖記’’)andThe Taking of Tiger Mountain (‘‘智取威虎山’’). After that, Ma worked as deputy manager in Beijing Culture, a listed company in mainland China, being charge of TV entertainment show department, taking a leading position of TV entertainment show Go Fighting and Girls Fighting (‘‘加油美少女’’).

He Xian, deputy manager of the Target Group, graduated from Communication University of China with a master degree. With at least eight-year experience in entertainment industry, He had experience of producing many TV series and movie production before, including TV series Romance of the Three Kingdoms, Long trip to beautiful rivers and mountains, The Lost Tomb (‘‘盜墓筆記’’), Naughty Grandfather and Grandson and movie Bad Guys Always Die.

The Company does not intend to introduce any changes to the Board and key management of the Target Group.

Charges on assets

As at 31 March 2018, no asset was pledged.

Foreign Currencies

The main market of the Target Group is in the PRC so the Target Group is not exposed to other material foreign exchange risks and the Target Group has not used any hedging instrument to meditate foreign exchange exposures.

Contingent liabilities

As at 31 March 2018, the Target Group had no contingent liability.

The Company has no further commitment to the Target Group.

III PROSPECTS OF THE TARGET GROUP

The Target Group is involved in TV entertainment and TV series production in the PRC. It is expected that it will continue its business in these areas.

In 2018, The Target Group’s revenue is expected to come mainly from advertisement income from TV entertainment show of Give Me Five Season II and copyright authorization income from TV series Hikaru no Go. Both contracts have been signed. Give Me Five Season II ranked No.1 in audience rating in CSM during its broadcasting period. The expected revenue to be recognized in the Target Group from Give Me Five Season II would be approximately RMB72 million and from Hikaru no Go would be RMB68.4 million according to the signed contracts.

– 79 – APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

In 2019, The Target Group’s revenue is expected to come mainly from advertisement income from TV entertainment show Give Me Five Season III and production incomes from three TV series: Redemption on the Blade, Birth of the Drama Essence and Tribes and Empires: Mrs HuZhu. Considering the high popularity among the younger generation for Give Me Five Season I and II, the broadcasting platform intends to cooperate with the Target Group for producing Season III and IV. Revenue from Season III is expected to be higher than that from Season I or II. For project Redemption on the Blade, the contract with broadcasting platform was signed and is expected to be delivered in the first half year of 2019. For project Tribes and Empires: Mrs HuZhu, the contract with co-producer Jiaxing Media,whichisa listing company in mainland China, has been signed. Also considering the strong production team of the Target Group and the big success of TV series produced by the co-producer in recent years, project Tribes and Empires: Mrs HuZhu is expected to be very successful when delivered in the second half of 2019. Project BirthoftheDramaEssenceis also expected to be delivered in the first half year of 2019.

From 2020 to 2022, more TV series will be produced by the Target Group, including Give Me Five Season IV and at least six TV series Persuader (‘‘勸退師’’)SeasonIandII, Next To The Last Girlfriend (‘‘倒數第二個女朋友’’), Nine Knights in Beijing (‘‘京門九俠’’), TurnRedintoGreen(‘‘看朱成碧’’)andImperial Harem (‘‘後宮真煩傳’’). For TV series, the Target Group owns copyrights for all of them.

For TV entertainment show production, the Target Group is one of the two co-producers. Income from TV entertainment show production included advertisement income and artiest arrangement income. Advertisement income would be allocated among the broadcast platform and co-producers with percentages agreed after broadcasting in accordance with actual audience rating in CSM. Artiest arrangement income would be received after the Target Group finishing artiest arrangement for the show.

For TV series production, the Target Group could be the sole producer, one of co- producers, copyright authorizer or combination of producer and copyright authorizer.

If the Target Group is sole producer, the Target Group will sign contract with broadcast platform such as Aiqiyi and Zhejiang TV and receive production income from them after delivery of the TV series.

If the Target Group is one of co-producers, the Target Group will sign contract with broadcast platform and other co-producers. Income from projects being one of co-producers would be production income allocated among co-producers with percentage agreed.

If the Target Group is copyright authorizer, the Target Group will sign contract with broadcast platform and receive authorization income.

If the Target Group is both copyright authorizer and producer, the Target Group will receive both production income and authorization income.

– 80 – APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

The Target Group did not enter into any long-term contracts with its major customers and major suppliers. But the Target group does keep close cooperation relationship with large broadcast platform such Zhejiang TV and Aiqiyi etc. For the past two years, the Target Group built a strong relationship with Zhejiang TV when cooperating Give Me Five Season I and II. Further, the Target Group entered into agreement with Aiqiyi to cooperate producing Hikaru no Go in 2018.

The Company has rich experience in movie and TV series production. Although the Company is famous with movie production, it also did TV series production, such as The Grand Theater ‘‘大劇院’’ (2015). Further, the production of TV series and production of movies have many similarities. Therefore the Company has relevant and necessary experience and expertise in the Target Group’sbusiness.

It is the intention of the Company, following completion of the Agreement, to monitor the performance of the Target Group in the following ways:

(i) The annual budget of the Target Group is subject to the approval of the Board of Director of the Company.

(ii) The development plan, budget and material contracts of each project of the Target Group are subject to the approval of the senior management of the Company.

(iii) The finance team of the Company shall collect and review monthly management accounts, bank statements and cash balances and major operational data of the Target Group. Upon discovery of any suspicious matters, the finance team will report to the Board; and

(iv) The Target Group should assist and facilitate the Company to conduct semi-annual on-site internal audit.

– 81 – APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(1) BASIS OF PREPARATION OF THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The accompanying unaudited pro forma financial information of the Enlarged Group, being the Company and its subsidiaries (hereinafter collectively referred to as ‘‘the Group’’) together with Khorgas Houhai Culture Media Company Limited (the ‘‘Target Company’’) and its subsidiary (hereinafter collectively referred to as the ‘‘Target Group’’) (together with the Group hereinafter referred to as the ‘‘Enlarged Group’’), is prepared by the directors of the Company (the ‘‘Directors’’) to illustrate the effect of the proposed acquisition of the Target Group through VIE Acquisition Agreement (the ‘‘Proposed Acquisition’’) on the Group, as if the Proposed Acquisition had taken place at 31 December 2017. Details of the Proposed Acquisition are set out in the section headed ‘‘Letter from the Board’’ contained in this Circular.

The unaudited pro forma condensed consolidated statement of assets and liabilities (the ‘‘Unaudited Pro Forma Financial Information’’) of the Enlarged Group is prepared based on (i) the unaudited condensed consolidated statement of financial position of the Group as at 31 December 2017 which has been extracted from the published interim report of the Company for the six months period ended 31 December 2017, and (ii) the information on the audited consolidated statement of financial position of the Target Group as at 31 December 2017, which has been extracted from the accountants’ report set out in Appendix II to this Circular, after making certain pro forma adjustments resulting from the Proposed Acquisition.

The Unaudited Pro Forma Financial Information of the Enlarged Group has been prepared by the Directors in accordance with paragraph 29 of Chapter 4 of the Listing Rules and is solely for the purpose to illustrate the assets and liabilities of the Enlarged Group as if the Proposed Acquisition had taken place on 31 December 2017.

The Unaudited Pro Forma Financial Information of the Enlarged Group is prepared based on the aforesaid historical data after giving effect to the pro forma adjustments described in the accompanying notes. Narrative description of the pro forma adjustments of the Proposed Acquisition that are (i) directly attributable to the transactions; and (ii) factually supportable, is summarised in the accompanying notes.

The Unaudited Pro Forma Financial Information of the Enlarged Group has been prepared by the Directors based on certain assumptions, estimates and uncertainties. As it is prepared for illustrative purposes only and because of its hypothetical nature, the Unaudited Pro Forma Financial Information of the Enlarged Group may not purport to predict what the assets and liabilities of the Enlarged Group with the Proposed Acquisition would have been upon completion at any future dates.

The Unaudited Pro Forma Financial Information of the Enlarged Group should be read in conjunction with the historical financial information of the Group as set out in Appendix I to this Circular, and the financial information of the Target Group, as set out in Appendix II to this Circular and other financial information included elsewhere in this Circular.

– 82 – APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(2) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES

Proforma Adjustments The The The Enlarged The Group Target Group Target Group Group as at as at as at as at 31 December 31 December 31 December 31 December 2017 2017 2017 2017 (Unaudited) (Audited) (Audited) (Unaudited) HK$’000 RMB’000 HK$’000 HK$’000 HK$’000 HK$’000 equivalent Note 3 Note 1 Note 2 Note 2 Note 4 Note 5

Non-current assets Property, plant and equipment 142,714 41 49 142,763 Goodwill ———442,015 442,015 Intangible assets 5,600 ——13,200 18,800 Interests in associates 50,607 —— 50,607 Interest in a joint venture 109 —— 109 Prepayment to an artiste 6,000 —— 6,000 Rental deposits 29,013 —— 29,013 Deferred tax assets 14,102 —— 14,102

248,145 41 49 455,215 — 703,409

Current assets TV series rights — 9,527 11,432 11,432 TVandfilmproductionin progress 176,838 5,621 6,745 183,583 Available-for-sale investment 4,056 —— 4,056 Investments in film/drama production 25,693 —— 25,693 Inventories 892 —— 892 Trade and other receivables 14,186 62,865 75,435 89,621 Prepayment to an artiste 12,000 —— 12,000 Rental deposits 20,010 —— 20,010 Tax recoverable 908 —— 908 Pledged bank deposits 10,660 —— 10,660 Bank balances and cash 57,434 5,641 6,769 (162,000) (6,471) (104,268)

322,677 83,654 100,381 (162,000) (6,471) 254,587

– 83 – APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(2) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES — Continued

Current liabilities Trade and other payables 116,116 16,728 20,073 136,189 Receipts in advance 162,965 16,300 19,559 182,524 Tax payable 2,848 —— 2,848 Amounts due to related companies 3 —— 3 Amount due to a joint venture 2,116 —— 2,116 Bank borrowings 2,404 —— 2,404

286,452 33,028 39,632 ——326,084

Net current assets (liabilities) 36,225 50,626 60,749 (162,000) (6,471) (71,497)

Total assets less current liabilities 284,370 50,667 60,798 293,215 (6,471) 631,912

Non-current liabilities Bank borrowings 7,001 —— 7,001 Deferred tax liability ———3,300 3,300 Contingent consideration payable ———350,713 350,713

7,001 ——354,013 — 361,014

Net assets 277,369 50,667 60,798 (60,798) (6,471) 270,898

– 84 – APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(3) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

1. The assets and liabilities are extracted from the unaudited condensed consolidated statement of financial position of the Group as at 31 December 2017 as set out in the published interim report of the Company for the six months ended 31 December 2017.

2. The financial information of Target Group are extracted from the accountants’ report as set out in Appendix II to this Circular, which have been prepared under Hong Kong Financial Reporting Standards and using accounting policies in accordance with those of the Company, and are translated into Hong Kong dollars (‘‘HK$’’) at the exchange rate of Renminbi (‘‘RMB’’) 1 to HK$1.2 prevailing at the close of business on 31 December 2017. No representation is made that RMB amounts have been, could have been or could be converted to HK$, or vice versa, at that rate or at any other rates or at all.

3. Upon completion of the Proposed Acquisition, Guangzhou Huohua Investment Company Limited, a wholly- owned subsidiary of the Company, enters into the VIE operating agreements (‘‘VIE Operating Agreements’’) with Guangzhou Daide Management Consultancy Company Limited (‘‘Guangzhou Daide’’) and the respective equity holders, which enable the Company to have effective control over the finance and operation of Guangzhou Daide and the Target Group and enjoy the entire economic interests and benefits generated by Guangzhou Daide and the Target Group.

The Company does not have any equity interest in the Target Group. However, as a result of the VIE Operating Agreements, the Company has power over the Target Group, has rights to variable returns from its involvement with the Target Group and has the ability to affect those returns through its power over the Target Group and therefore is considered to have control over the Target Group. Consequently, the Company regards the Target Group as indirect subsidiaries.

The identifiable assets and liabilities of the Target Group will be accounted for in the condensed consolidated financial statements of the Enlarged Group under the acquisition method of accounting in accordance with Hong Kong Financial Reporting Standard No. 3 (Revised), ‘‘Business Combinations’’ issued by the Hong Kong Institute of Certified Public Accountants.

This adjustment represents the recognition of goodwill and identifiable intangible assets and the related deferred tax liability as identified through the valuation arising from the Proposed Acquisition at their respective fair value, as if the Proposed Acquisition had been completed on 31 December 2017.

Notes HK$’000

Cash consideration 162,000 Fair value of contingent consideration payable 350,713

Fair value of consideration transferred a 512,713

Less: Fair value of net identifiable assets Net identifiable assets of the Target Group (excluding intangible assets and the related deferred tax liability) b 60,798 Intangible assets c 13,200 Deferred tax liability d (3,300)

Goodwill arising from the Proposed Acquisition e 442,015

– 85 – APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(a) In accordance with the VIE Acquisition Agreement entered into by the Group on 27 May 2018, the total cash consideration of the Proposed Acquisition is RMB450,000,000 (equivalent to approximately of HK$540,000,000), which includes a contingent consideration of RMB315,000,000 (equivalent to approximately of HK$378,000,000) stated on the VIE Acquisition Agreement which will be adjusted by the terms set out in the Profit Guarantee Agreement as presented below and settled in future years. The fair value of contingent consideration payable of approximately of HK$350,713,000 was valued by APAC Asset Valuation and Consulting Limited, an independent valuer, as if the Proposed Acquisition had taken place on 31 December 2017. The fair value was estimated by using discounted cash flow method, at the discount rate of 4.9%. Upon completion of the Proposed Acquisition, the fair value of contingent consideration payable will be re-assessed and maybe different from the estimated amount as presented above. The contingent consideration is adjusted as follows:

In the fiscal year of 2018, if the audited consolidated net profit for the year ending 31 December 2018 (the ‘‘2018 Actual Profit’’) of the Target Group cannot achieve RMB40,000,000 (the ‘‘2018 Guaranteed Profit’’), the contingent consideration of RMB135,000,000 (equivalent to approximately of HK$162,000,000) required to be paid will be reduced by an amount according to the formula: (RMB135,000,000 × (2018 Guaranteed Profit — 2018 Actual Profit)/2018 Guaranteed Profit × 30%) (the ‘‘2018 Profit Guarantee’’).

In the fiscal year of 2019, if the audited consolidated net profit for the year ending 31 December 2019 (the ‘‘2019 Actual Profit’’) of the Target Group cannot achieve RMB60,000,000 (the ‘‘2019 Guaranteed Profit’’), the contingent consideration of RMB180,000,000 (equivalent to approximately of HK$216,000,000) required to be paid will be reduced by an amount according to the formula: (RMB180,000,000 × (2019 Guaranteed Profit — 2019 Actual Profit)/2019 Guaranteed Profit × 40%) (the ‘‘2019 Profit Guarantee’’).

For the purpose of the Unaudited Pro Forma Financial Information, the Directors has assumed that the 2018 Guaranteed Profit and 2019 Guaranteed Profit can be fulfilled. Any change in the contingent consideration will affect the amount of goodwill recognised.

(b) For the purpose of the Unaudited Pro Forma Financial Information, it is assumed that the fair value of the net identifiable assets of the Target Group (excluding intangible assets and the related deferred tax liability) approximates their carrying values as at 31 December 2017. The fair value of the net identifiable assets of the Target Group (excluding intangible assets and the related deferred tax liability) being acquired is subject to changes upon completion of the Proposed Acquisition because the fair value being acquired shall be assessed at the date of the actual completion of the Proposed Acquisition.

(c) The estimated fair values of the identifiable intangible assets were based on the independent valuation report prepared by APAC Asset Valuation and Consulting Limited, an independent valuer, as at 31 December 2017. The intangible assets are estimated to have an useful life of 3 years.

The fair value of the intangible assets being acquired is subject to changes upon completion of the Proposed Acquisition because the fair value being acquired shall be assessed at the date of the actual completion of the Proposed Acquisition.

(d) Deferred tax liabilities, calculated based on the 25% tax rate, arose from the difference between the tax base and the fair value of intangible assets.

– 86 – APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(e) The adjustment represents the goodwill arising from the Proposed Acquisition provisionally determined based on the fair value of the identifiable assets and liabilities of the Target Group and the consideration on the completion date. For the purpose of the Unaudited Pro Forma Financial Information, the goodwill of HK$442,015,000 arising from the Proposed Acquisition, which represents the amount by which the fair value of consideration transferred exceeds the fair value of the identifiable assets and liabilities of the Target Group to be acquired, as if the Proposed Acquisition has been completed on 31 December 2017. The amount of goodwill is subject to change based on the fair value of the contingent consideration payable and when the fair value of assets and liabilities of the Target Group is finalised on date of actual completion of the Proposed Acquisition.

According to the Group’s accounting policy, after initial recognition, the goodwill will be measured at cost less any accumulated impairment losses. The goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, the goodwill is allocated to the Group’s cash generating units that are expected to benefit from the synergies of the acquisition, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Further, impairment is determined by assessing the recoverable amount of the cash-generating units to which the goodwill relates. Where the recoverable amount of the cash-generating units is less than the carrying amount of the units, an impairment loss will be recognised by reducing the carrying amount of any goodwill allocated to the units at first.

The Directors confirmed that they will adopt consistent accounting policies and principal assumptions to assess the impairment of assets (including the intangible assets) and goodwill of the Enlarged Group in the financial statements in the future.

4. Pursuant to the VIE Acquisition Agreement, (i) RMB135,000,000 (equivalent to approximately of HK$162,000,000) (the ‘‘First Consideration’’), being 30% of the total consideration (the ‘‘Consideration’’), shall be paid within three (3) months from the date of completion; (ii) RMB135,000,000 (equivalent to approximately of HK$162,000,000) (the ‘‘Second Consideration’’), being 30% of the Consideration, minus any deduction to be made pursuant to the 2018 Profit Guarantee, shall be paid within five (5) days upon the receipt of the consolidated audited accounts of the Target Group in respect of the financial year ending on 31 December 2018; and (iii) RMB180,000,000 (equivalent to approximately of HK$216,000,000) (the ‘‘Third Consideration’’), being 40% of the Consideration, minus any deduction to be made pursuant to the 2019 Profit Guarantee, shall be paid within five (5) days upon receipt of the consolidated audited accounts of the Target Group in respect of the financial year ending on 31 December 2019.

For the purpose of the Unaudited Pro Forma Financial Information, it is assumed that the Group will settle the First Consideration upon completion and the Second Consideration and Third Consideration in accordance with VIE Acquisition Agreement. Therefore, the Second and Third Consideration of RMB315,000,000 (equivalent to approximately of HK$378,000,000) is recognised as non-current liability as at 31 December 2017. Details of how the aggregate fair value of the Second and Third Consideration of HK$350,713,000 are set out in note 3(a) to this unaudited pro forma financial information.

The considerations are translated into HK$ at the exchange rate of RMB1 to HK$1.2 prevailing at the close of business on 31 December 2017. No representation is made that RMB amounts have been, could have been or could be converted to HK$, or vice versa, at that rate or at any other rates or at all.

5. The adjustment represents estimated acquisition-related costs, including but not limited to legal and professional fees of approximately HK$6,471,000 which are directly attributable costs for the Proposed Acquisition.

6. No other adjustments have been made to reflect any trading results or other transactions entered into by the Enlarged Group subsequent to 31 December 2017.

– 87 – APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of the independent reporting accountants’ assurance report received from Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong, the reporting accountants of the Company, in respect of the Group’s unaudited pro forma financial information prepared for the purpose of incorporation in this circular.

INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

To the Directors of Transmit Entertainment Limited (formerly known as Pegasus Entertainment Holdings Limited)

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Transmit Entertainment Limited (the ‘‘Company’’)andits subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) by the directors of the Company (the ‘‘Directors’’) for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma condensed statement of assets and liabilities as at 31 December 2017 and related notes as set out on pages 82 to 87 of the circular issued by the Company dated 26 July 2018 (the ‘‘Circular’’). The applicable criteria on the basis of which the Directors have compiled the unaudited pro forma financial information are described on pages 82 to 87 of the Circular.

The unaudited pro forma financial information has been compiled by the Directors to illustrate the impact of the proposed acquisition of the Target Group through the VIE Acquisition Agreement (as defined in the Circular) (the ‘‘Proposed Acquisition’’) on the Group’s financial position as at 31 December 2017 as if the Proposed Acquisition had taken place at 31 December 2017. As part of this process, information about the Group’s financial position has been extracted by the Directors from the Group’s financial statements for the six months period ended 31 December 2017, on which no auditor’s report or review report has been published.

Directors’ Responsibilities for the Unaudited Pro Forma Financial Information

The Directors are responsible for compiling the unaudited pro forma financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and with reference to Accounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars’’ (‘‘AG 7’’) issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).

– 88 – APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION — Continued

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the ‘‘Code of Ethics for Professional Accountants’’ issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

Our firm applies Hong Kong Standard on Quality Control 1 ‘‘Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements’’ issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 ‘‘Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus’’ issued by the HKICPA. This standard requires that the reporting accountants plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the unaudited pro forma financial information in accordance with paragraph4.29oftheListingRulesandwith reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the unaudited pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the unaudited pro forma financial information.

The purpose of unaudited pro forma financial information included in an investment circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at 31 December 2017 would have been as presented.

– 89 – APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION — Continued

A reasonable assurance engagement to report on whether the unaudited pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the unaudited pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

. the related pro forma adjustments give appropriate effect to those criteria; and

. the unaudited pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountants’ judgment, having regard to the reporting accountants’ understanding of the nature of the Group, the event or transaction in respect of which the unaudited pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the unaudited pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

(a) the unaudited pro forma financial information has been properly compiled on the basis stated;

(b) such basis is consistent with the accounting policies of the Group; and

(c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Deloitte Touche Tohmatsu Certified Public Accountants

Hong Kong, 26 July 2018

– 90 – APPENDIX V VALUATION REPORT OF THE TARGET GROUP

The following is the text of a report prepared for the purpose of incorporation in this circular received from APAC Asset Valuation and Consulting Limited, an independent valuer, in connection with its valuations as at 30 April 2018 of target group.

APAC Asset Valuation and Consulting Limited 5/F, Blissful Building, 243–247 Des Voeux Road Central, Hong Kong T: (852) 2357 0085 F: (852) 2951 0799

The Directors Transmit Entertainment Limited Flat B, 14/F Neich Tower 128 Gloucester Road Wanchai Hong Kong

Date: 26 July 2018

Dear Sirs,

IN RESPECT OF VALUATION OF INVESTMENT VALUE OF 100% EQUITY INTEREST IN KHORGAS HOUHAI CULTURE MEDIA COMPANY LIMITED 霍爾果斯厚海文化傳媒有限公司 AND ITS SUBSIDIARIES

Pursuant to the terms, conditions and purpose of an engagement agreement, we have assisted Transmit Entertainment Limited (the ‘‘Company’’) in the valuation analysis (‘‘Valuation’’)to determine the Investment Value (to be defined as below) of 100% equity interest in Khorgas Houhai Culture Media Company Limited 霍爾果斯厚海文化傳媒有限公司 and its subsidiaries (‘‘Target Group’’) as at 30 April 2018 (the ‘‘Valuation Date’’).

Purpose of Valuation

The purpose of this valuation is to assist the Company in the determination of Investment Value of the Target Group based on the prospective information, underlying assumptions and information provided by the management of the Target Group and the Company for announcement and compliance purpose. No third party shall have the right of reliance on this report and neither receipt nor possession of this report by any third party shall create any express or implied third- party beneficiary rights.

– 91 – APPENDIX V VALUATION REPORT OF THE TARGET GROUP

As per information from the Company, the vendor of equity interest of the Target Group will provide the profit guarantee (‘‘Profit Guarantee’’) in relation to sale and purchase of the sale shares of the Target Group. The profit guarantee details are as below:

Profit indicator

Consideration and terms Pursuant to the agreement, the Company shall pay RMB450,000,000 to the original shareholders subject for the sale and purchase of the sale shares.

Profit Guarantee Under the profit guarantee:

Profit Guarantee for the period from 1 January 2018 to 31 December 2018;

The audited net profit after tax of the Target Group for the period from 1 January 2018 to 31 December 2018 shall be not less than RMB40,000,000;

Profit Guarantee for the period from 1 January 2019 to 31 December 2019;

The audited net profit after tax of the Target Group for the period from 1 January 2019 to 31 December 2019 shall be not less than RMB60,000,000;

If the net profit after tax in the guaranteed period is less than the amount of the guaranteed profit, the consideration to be paid in that period will be reduced according to the following formula:

Reduction amount for second consideration (‘‘Second Consideration’’) of RMB135,000,000 = RMB135,000,000 × (2018 Guaranteed Profit – 2018 Actual Profit)/2018 Guaranteed Profit × 30%

Reduction amount for third consideration (‘‘Third Consideration’’) of RMB180,000,000 = RMB180,000,000 × (2019 Guaranteed Profit – 2019 Actual Profit)/2019 Guaranteed Profit × 40%

In the event that the Target Group incurs net loss in each of the financial years ending 31 December 2019, the audited net profit of the Target Group for such financial year shall be deemed as zero. The maximum amount of deduction to the Second Consideration and the Third Consideration shall be RMB135,000,000 and RMB180,000,000 respectively.

– 92 – APPENDIX V VALUATION REPORT OF THE TARGET GROUP

We relied upon completeness, accuracy and fair representation of operational, projection and business plans in relation to the Target Group provided by the management of the Company. The Investment Value of the Target Group is subject to numerous assumptions adopted in the prospective financial information. To the extent that any of these assumptions or facts changed, the result of the Investment Value conclusion would be changed accordingly. Regarding the prospective financial information, it has been represented by the management of the Company and was assumed for the purposes of this opinion that such analysis and prospective financial information were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments of the management of the Company. We can give no assurance that such financial analysis and prospective financial information can be realized or that actual result will not vary materially from those projected. As agreed with the Company, our valuation is agreed to be performed on the basis that the prospective financial information is expected to be achieved and it can be sustainable in the future. It is expected that the Company will perform independent due diligence on the achievement of projected results by themselves.

The intended use of the Valuation is to serve as basis for internal reference and compliance purpose. The ultimate transaction, if happens, and the corresponding acquisition prices would be the results of negotiations between the transacting parties. The responsibility for determining the agreed acquisition price of the Target Group rests solely with the Company. The results of our analysis should not be construed to be a fairness opinion, solvency opinion or an investment recommendation. It is inappropriate to use our valuation report for purpose other than its intended use or by third parties. These third parties should conduct their own investigation and independent assessment of the Valuation and underlying assumptions.

Standard of Value

According to International Valuation Standard, our opinion of the Investment Value is defined as ‘‘the value of an asset to a particular owner or prospective owner for individual investment or operational objectives’’.

Premise of Value

This report is prepared using the premise that the Target Group is a going concern. This meansthatitispresumedthatinthefuture,the assemblage of assets, resources and income producing items will continue to generate cash flow.

Brief Description of the Target Group

The Target Group is principally involved in TV entertainment show and TV show production in the PRC.

– 93 – APPENDIX V VALUATION REPORT OF THE TARGET GROUP

Economic Overview

China is the second-largest economy in the world, and is the top destination for many international firms looking to grow. According to the National Bureau of Statistics of China, the gross domestic product (GDP) in 2017 was 82,712.2 billion yuan, up by 6.9 percent over the previous year. Of this total, the value added of the primary industry was 6,546.8 billion yuan, up by 3.9 percent, that of the secondary industry was 33,462.3 billion yuan, up by 6.1 percent and that of the tertiary industry was 42,703.2 billion yuan, up by 8.0 percent. The value added of the primary industry accounted for 7.9 percent of the GDP; that of the secondary industry accounted for 40.5 percent; and that of the tertiary industry accounted for 51.6 percent. The contribution of the final consumption expenditure to GDP accounted for 58.8 percent, that of the gross capital formation 32.1 percent and that of the net exports of goods and services 9.1 percent. The per capita GDP in 2017 was 59,660 yuan, up by 6.3 percent compared with the previous year. The gross national income in 2017 was 82,501.6 billion yuan, up by 7.0 percent over the previous year.

Sources: National Bureau of Statistics of China

Industry Overview

China’s filmed entertainment sector is expected to grow 14.5 percent by 2019 to reach just under $10 billion, nearly doubling from $5.8 billion in 2015. This growth is due to China’spolicies to stimulate the sector, build its domestic movie production and digital theaters, and expand the role of co-productions, as well as addressing their quota system and increasing revenue sharing imports. According to the Los Angeles Times and Artisan Gateway (a leading film and cinema consulting firm in Asia), box office receipts increased 48.3 percent to $6.8 billion by year end of 2015. This enormous growth is the largest jump in the past five years, and 61 percent of it was generated by Chinese films, as American share of the market has continued to decline. Chinese screens increased by more than 9,000 in 2015, bringing the total amount of movie theaters to 32,000.

China boasts the second largest theatrical market worldwide after the United States, and box office revenues are on a meteoric rise and are expected to reach $8.8 billion (15.5 percent) by 2019. Filmed entertainment is a main driver for the entertainment sector in China, and the government has invested a tremendous amount in new mega theaters and entertainment complexes, collaboration with U.S. media and entertainment conglomerates, and co-productions with foreign entities and domestic film production.

Sources: 2016 Top Markets Report Media and Entertainment, U.S. Department of Commerce

Valuation Methodology and Basis

We have conducted the Valuation largely in accordance with the International Valuation Standard. The valuation procedures employed include an assessment of key assumptions, estimates, and representations made by the proprietor or the operator of the Target Group. All matters we consider essential to the proper understanding of the Valuation are disclosed in our valuation report.

– 94 – APPENDIX V VALUATION REPORT OF THE TARGET GROUP

We have been furnished with the information in respect of the Target Group provided by the Target Group and the Company. We have relied substantially on the information provided in the Valuation. The information included, but not limited to, the following:

. Background of the Target Group and relevant corporate information;

. Prospective financial Information of the Target Group;

. Bloomberg database and other public sources of market data;

. The business risks of the Target Group;

. Relevant licenses and agreements; and

. The economic outlook in general and the specific economic environment and market elements affecting the business, industry and market.

We have assumed that the data and information we obtained in the course of the Valuation, along with the opinions and representations provided to us by the Target Group and the Company, are true and accurate and accepted them without independent verification.

In arriving at our assessed value, we have considered three generally accepted approaches: Market approach, Cost approach and Income Approach.

Market approach: provides an indication of value by comparing the subject asset with identical or similar assets for which price information is available.

Cost approach: provides an indication of value using the economic principle that a buyer will pay no more for an asset than the cost to obtain an asset of equal utility, whether by purchase or by construction.

Income approach: provides an indication of value by converting future cash flows to a single current capital value.

In this valuation, the cost approach is not appropriate as it ignores the economic benefits of ownership of the business. The income approach is also not appropriate as the Target Group and the Company cannot provide relative long-term profit forecast. We have therefore relied solely on the market approach in the Valuation.

Selection of Valuation Multiples

In our valuation, we have considered various commonly used valuation multiples, including (i) price to earnings (‘‘P/E’’); (ii) price to sales (‘‘P/S’’)and(iii)pricetonetbookvalue(‘‘P/B’’). Based on the nature of the subject businesses, we have adopted the market approach known as the P/E multiple methodologies to assess the Investment Value of the Target Group.

– 95 – APPENDIX V VALUATION REPORT OF THE TARGET GROUP

As per specific instruction and the information of the profit guarantee provided by the Target Group and the Company, the Company will consider P/E multiple as basis of the profit guarantee. We have been requested to estimate the P/E multiple. In addition, P/S and P/B multiple ignore the profitability of the Target Group. We considered that P/E multiple is appropriate in our valuation.

As per request from the Company, we have provided an indicative value of the 100% interest in the Target Group based on the assumption and specific instruction that the guaranteed profit expected to be achieved and sustained by the Target Group. Based on the discussion with the Company, the forward P/E multiple will be achieved by dividing the equity value by the 2018 forecast earning of the comparable companies.

Investment value has been adopted since the guaranteed profit, which made reference to the Profit Guarantee Agreement, has been assumed as the basis of expected earnings level for the period from 1 January 2018 to 31 December 2018, which does not necessarily represent the market participants’ expectation on the Target Group’s earnings level. The provision of an indicative value, assuming the guaranteed profit as the earnings basis, is a hypothetical value particular to the Company on the assumption that the guaranteed profit can be achieved and sustained.

Under this methodology, Investment Value is determined by multiplying the 2018 guaranteed profit of the Target Group to a multiplier called forward P/E multiple with regard to the risks and nature of the business. In estimating the forward P/E, reference has been made to the 2018 forecast earning of the comparable companies with similar business nature and whose ownership interests are publicly trades. The detail of calculation formula and inputs are as follows:

Forward P/E multiple = Equity Value (or Market Capitalisation)/2018 Forecast Earnings

– 96 – APPENDIX V VALUATION REPORT OF THE TARGET GROUP

Identification of suitable comparable companies

Since many similar media production companies listed in Hong Kong and PRC have no positive forecast earning or exceptional outlier of P/E multiple as at Valuation Date, only very few comparable companies can be adopted for comparison. To avoid unreliable assessment results due to too few comparable companies, we expanded the range of selection and have identified relevant comparable companies listed on the stock exchanges globally. The selection criteria are: (i) the comparable company was mainly engaged in the business in relation to the production of movies and TV drama; (ii) the comparable company’s information must be publicly available; and (iii) the comparable company met other qualitative factors such as no long suspension period, normal capital structure, positive net income, etc. We considered that it’s appropriate and the following companies fulfilled these criteria. The P/E multiples of comparable companies included in our valuation were as follows:

As at 30 April 2018

Forward Listing Operating P/E Name location location Stock Code multiple

Ciwen Media Co Ltd China China 002343:CH 20.3 Huayi Brothers Media Corp China China 300027:CH 23.6 Beijing Enlight Media Co Ltd China China 300251:CH 17.3 Zhejiang Talent TV & Film Co Ltd China China 300426:CH 16.8 Toho Co Ltd/Tokyo Japan Japan 9602:JP 22.2 Leone Film Group Spa Italy Italy LFG:IM 9.4 mm2 Asia Ltd Singapore Singapore MM2:SP 17.0 Spackman Entertainment Group Ltd Singapore Korea SEG:SP 7.4 Time Warner Inc USA USA TWX:US 12.1

Median 17.0

Source: Bloomberg or other public sources

Lack of Marketability Discount

In general, the privately held companies are not readily marketable and can be converted into cash if the owner sell it compared with publicly held companies. The lack of marketability discount will be considered in the privately held company in the valuation.

Restricted stock is stock of a publicly traded company that is restricted from trading for a specific period of time. It is identical to the publicly traded stock except that it is not freely traded. Although, restricted stock cannot be sold in the public markets, it can be sold in private transactions.

– 97 – APPENDIX V VALUATION REPORT OF THE TARGET GROUP

The different in the value between restricted stock and the public traded company suggested a discount for lack of marketability for privately controlled ownership interest was approximately 35% on average accordingly to the above studies. As the companies involved in the studies belong to different industries and several studies have been considered, we considered that it is fair and appropriate to adopt such lack of marketability discount in our valuation.

Control Premium

As the valuation determined from market approach reflects value from a minority shareholder’s viewpoint, a control premium is required to consider in our valuation to determine 100% equity interest in the Target Group. After considering various research studies conducted on the control premium in developed overseas markets, we have adopted 20% as control premium and considered that it is fair and appropriate to adopt such control premium in our valuation.

For the purpose of our valuation, we have also derived the Investment Value of the Target Group based on the available information and presently prevailing operating conditions of the business and by taking into consideration other pertinent factors which basically include the followings:

— the market and the business risks of the Target Group;

— the general economic outlook as well as specific investment environment for the Target Group;

— the nature and current status of the Target Group;

— the assumptions as stated in the Assumptions of this report.

We have been provided with extracts of copies of relevant documents and prospective financial information relating to the Target Group. We have relied upon the aforesaid information in forming our opinion of Investment Value. However, we have not inspected the original documents to ascertain any amendments which may not appear on the copies handed to us. We have no reason to doubt the truth and accuracy of the said information which is material to the valuation. We have also been advised by the Target Group and the Company that no material facts have been omitted from the information provided. We have also made relevant inquiries and obtained further information as considered necessary for the purpose of this valuation.

While we have exercised our professional knowledge and cautions in adopting assumptions and other relevant key factors in our valuation, those factors and assumptions are still vulnerable to the change of the business, economic environment, competitive uncertainties or any other abrupt alternations of external factors.

– 98 – APPENDIX V VALUATION REPORT OF THE TARGET GROUP

Assumptions

Notwithstanding the incorporation of foreseeable changes in our valuation, a number of assumptions have been made in the preparation of the reported assessed figures. The assumptions are:

. We have assumed that the accuracy of prospective financial and operational information provided to us by the Target Group and the Company and relied to a considerable extent on such information in arriving at our opinion of value;

. As per information from the Company, 2018 net profits for Target Group were guaranteed to be at least RMB40 million. We have assumed that the guaranteed net profit in 2018 can be achieved and sustainable in the future;

. As agreed with the Company, our valuation was performed on the basis that the business of the Target Group can be sustainable with growth in the future;

. We have assumed that there are no hidden or unexpected conditions associated with the assets valued that might adversely affect the reported value;

. There will be no major changes in existing political, legal, fiscal or economic conditions in the country or district where the business is in operation;

. There will be no major changes in the current taxation law in the areas in which the Target Group carries on its business, that the rate of tax payable remains unchanged and that all applicable laws and regulations will be complied with;

. The inflation, interest rates and currency exchange rate will not differ materially from those presently prevailing;

. The Target Group will retain their key management and technical personnel to maintain their ongoing operations.

. There will be no major business disruptions through international crisis, industrial disputes, industrial accidents or severe weather conditions that will affect the existing business;

. The Target Group will remain free from claims and litigation against the business or its customers that will have a material impact on value;

. The Target Group are unaffected by any statutory notice and the operation of the business gives, or will give, no rise to a contravention of any statutory requirements;

. The businesses are not subject to any unusual or onerous restrictions or encumbrances; and

– 99 – APPENDIX V VALUATION REPORT OF THE TARGET GROUP

. The potential bad debt of the Target Group will not materially affect their business operations.

Limiting Conditions

We have to a considerable extent relied on the prospective financial data and other related information provided by the Target Group and the Company. We are not in a position to comment on the lawfulness of the business.

In accordance with our standard practice, we must state that this report and valuation is for the use only of the party to whom it is addressed and no responsibility is accepted to any third party for the whole or any part of its contents.

Management confirmation of facts

A draft of this report and our calculation has been sent to management of the Company. They have reviewed and orally confirmed to us that facts as stated in this report and calculation are accurate in all material respects and that they are not aware of any material matters relevant to our engagement which have been excluded.

Remarks

Unless otherwise stated, all money amounts are stated in Renminbi.

We hereby confirm that we have neither present nor prospective interest in the Company, subsidiaries and associated companies, or the value reported herein.

The conclusion of value is based on accepted valuation procedures and practices that rely on substantially on the use of numerous assumptions and the consideration of many uncertainties, not all of which can be easily quantified or ascertained. Further, while the assumptions and other relevant factors are considered by us to be reasonable, they are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Target Group, the Company and us.

– 100 – APPENDIX V VALUATION REPORT OF THE TARGET GROUP

Opinion of the Value

Based on the investigation and analysis stated above and, on the method, employed, we are of the opinion that Investment Value of 100% equity interest in the Target Group as at 30 April 2018 was reasonably stated by the amount of RMB530,000,000.

Yours faithfully, For and on behalf of APAC Asset Valuation and Consulting Limited

S. C. Tsoi MFin ICVS Director

Notes: Mr. S. C. Tsoi is the Master of Finance holder and the International Certified Valuation Specialist. He has over 10 years of professional experiences in banking, finance, investment consulting, financial analysis and valuation. His valuation experience covers Hong Kong, Mainland China, Taiwan other overseas countries in different industries, including IT, retail, manufacturing, trading, mining, etc.

– 101 – APPENDIX V VALUATION REPORT OF THE TARGET GROUP

SUMMARY OF VALUATION

Valuation Multiples adopted Forward P/E

Median of multiples of comparable companies A 17.0

Profit guarantee amount in 2018

Earning for 12 months ending 31 Dec 2018 (RMB’000) B 40,000

Equity Value (RMB’000) A × B 680,000

Weightings 100%

Equity Value of the Target Group before marketability discount and control premium (RMB’000) 680,000

Marketability Discount –35%

Control Premium 20%

Equity Value of the Target Group after marketability discount and control premium (RMB’000) 530,400

100% equity interest in the Target Group hold by the Company 100%

Fair Value of 100% equity interest in the Target Group (RMB’000) 530,400

Fair Value of 100% equity interest in the Target Group (RMB’000) (rounded) 530,000

– 102 – APPENDIX VI GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

(a) Directors and Chief Executive

As at the Latest Practicable Date, save as disclosed below, none of the Directors or the chief executive of the Company had or was deemed to have any interests and short positions in the Shares, underlying Shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the ListingRules,tobenotifiedtotheCompany and the Stock Exchange:

Number of Shares Approximate or underlying percentage of Name of Director Nature of interest Shares(1) shareholding(1)

Mr. Zhang Liang Interest in controlled 1,836,391,914 (L) 74.14% Johnson(2) corporation

Beneficial interest 87,928,000 (L)

Notes:

1. As at the Latest Practicable Date, the Company issued 2,595,613,733 Shares. The Letter ‘‘L’’ denotes the person’s long position in such Shares.

2. Mr. Zhang Liang Johnson through Nice Rich Group Limited holds 1,836,391,914 Shares of the Company.

– 103 – APPENDIX VI GENERAL INFORMATION

As at the Latest Practicable Date, save as disclosed above, none of the Directors was a director or employee of a company which had, or was deemed to have, an interest or a short position in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO.

(b) Substantial shareholders’ interest

As at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, the following persons (other than a Director or chief executive of the Company) had interests or short positions in the Shares or underlying shares of the Company as recorded in the register kept by the Company pursuant to section 336 of the SFO which would fall to be disclosed to the Company under the provisions Divisions 2 and 3 of Part XV of the SFO.

Number of Shares Approximate Name of Nature of or underlying percentage of Shareholder interest/capacity Shares(1) shareholding(1)

Nice Rich Group Beneficial owner 1,836,391,914 (L) 70.75% Limited(2)

Mr. Zhang Liang Interest in controlled 1,836,391,914 (L) 74.14% Johnson corporation

Beneficial interest 87,928,000 (L)

Notes:

1. As at the Latest Practicable Date, the Company issued 2,595,613,733 Shares. The Letter ‘‘L’’ denotes the person’s long position in such Shares.

2. Nice Rich Group Limited is a BVI company wholly owned by Mr. Zhang Liang Johnson.

Save as disclosed above, as at the Latest Practicable Date, no other person (other than the Directors or chief executives of the Company) had an interest or short position in the Shares or underlying Shares of the Company which were recorded in the register kept by the Company pursuant to section 336 of the SFO which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

3. DIRECTORS’ COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and their respective associates was interested in any business apart from the Group’s businesses which competed, or might compete, either directly or indirectly, with the businesses of the Group pursuant to Rule 8.10 of the Listing Rules.

– 104 – APPENDIX VI GENERAL INFORMATION

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group which would not expire or would not be determinable by such member of the Group within one year without payment of compensation (other than statutory compensation).

5. DIRECTORS’ INTERESTS IN CONTRACT OR ARRANGEMENT OF SIGNIFICANCE

As at the Latest Practicable Date, none of the Directors was materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date and which was significant in relation to the business of the Group.

6. DIRECTORS’ INTERESTS IN ASSETS

As at the Latest Practicable Date, none of the Directors had any interest, either directly or indirectly, in any assets which had since 30 June 2017 (being the date to which the latest published audited consolidated financial statements of the Group were made up), up to the Latest Practicable Date, been acquired or disposed of by or leased to, any member of the Group or were proposed to be acquired or disposed of by, or leased to, any member of the Group.

7. MATERIAL CONTRACTS

The following contracts (being contracts entered into outside the ordinary course of business carried on by the Group) had been entered into by members of the Group within the two years immediately preceding the Latest Practicable Date:

(a) the VIE Acquisition Agreement;

(b) the Equity Transfer Agreement; and

8. EXPERTS’ QUALIFICATION AND CONSENT

The following is the qualification of the experts whose names and/or reports are contained in this circular:

Name Qualifications

Deloitte Touche Tohmatsu Certified Public Accountants, Hong Kong

Crowe (HK) CPA Limited Certified Public Accountants, Hong Kong

APAC Asset Valuation and Consulting Limited Independent Valuer

– 105 – APPENDIX VI GENERAL INFORMATION

As at the Latest Practicable Date, each of the above experts (i) had no shareholding in any member of the Group and did not have any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group; (ii) had no direct or indirect interest in any assets which had been, since 30 June 2017 (the date to which the latest published audited consolidated financial statements of the Group were made up), acquired, disposed of by, or leased to any member of the Group, or were proposed to be acquired, disposed of by, or leased to any member of the Group; and (iii) has given and has not withdrawn its consent to the issue of this circular with the inclusion of its letter and the reference to its name included herein in the form and context in which it appears.

9. LITIGATION

As at the Latest Practicable Date, none of the members of the Group was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened against any member of the Group.

10. GENERAL

(a) The registered office of the Company is at Cricket Square, Hutchins Drive, P. O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands;

(b) The head office and the principal place of business of the Company in Hong Kong is at Flat B, 14/F, Neich Tower, 128 Gloucester Road, Wanchai, Hong Kong;

(d) The Cayman Islands principal share registrar and transfer office is Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, P. O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands;

(e) The Hong Kong branch share registrar and transfer office is Tricor Investor Services Limited, Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong; and

(f) This circular is prepared in both English and Chinese. In the event of inconsistency, the English text shall prevail over its Chinese text unless otherwise specified.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours from 9:00 a.m. to 6:00 p.m. on any weekday (except public holidays) at the principal place of business of the Company in Hong Kong at Flat B, 14/F, Neich Tower, 128 Gloucester Road, Wanchai, Hong Kong, up to and including the date falling on 14 days from the date of this circular:

(a) the memorandum and articles of association of the Company;

– 106 – APPENDIX VI GENERAL INFORMATION

(b) the annual reports of the Company for the three years ended 30 June 2017 and the interim report of the Company for six months ended 31 December 2017;

(c) the accountants’ report on the Target Group prepared by Crowe (HK) CPA Limited, the full text of which is set out in Appendix II to this circular;

(d) the report on unaudited pro forma financial information of the Enlarged Group from Deloitte Touche Tohmatsu, the text of which is set out in Appendix IV to this circular;

(e) the material contract(s) referred to in the paragraph headed ‘‘Material Contracts’’ in this Appendix;

(f) the valuation report issued by APAC Asset Valuation and Consulting Limited, the text of which is set out in Appendix V of this circular; and

(g) this circular.

– 107 –

Transmit Entertainment Limited 傳 遞 娛 樂 有 限

Transmit Entertainment Limited 傳遞娛樂有限