THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Hong Kong Exchange 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. If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in Sage International Group Limited (the ‘‘Company’’), you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or transferee. This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of the Company.

SAGE INTERNATIONAL GROUP LIMITED 仁智國際集團有限公司 (Incorporated in the Cayman Islands and continued in Bermuda with limited liability) (Stock Code: 8082)

MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE INVESTMENT IN FILM PRODUCTION INVOLVING ISSUE OF CONSIDERATION SHARES; AND NOTICE OF SGM

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

A notice convening the SGM to be held at 10th Floor, Fun Tower, 35 Hung To Road, Kwun Tong, Kowloon, Hong Kong on Monday, 17 July 2017 at 4:00 p.m. is set out on pages 97 to 99 of this circular. A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not later than Saturday, 15 July 2017 at 4:00 p.m. (Hong Kong Time), being 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish. This circular will remain on the ‘‘Latest Company Announcements’’ page of the GEM website at www.hkgem.com for at least 7 days from the date of its posting.

29 June 2017 CHARACTERISTICS OF GEM

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

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

– i – CONTENTS

Page

Definitions ...... 1

Letter from the Board ...... 6

Letter from the Independent Board Committee ...... 25

Letter from the Independent Financial Adviser ...... 27

Appendix I – Financial Information of the Group ...... 51

Appendix II – Unaudited Pro Forma Financial Information of the Group ...... 53

Appendix III – Valuation Report ...... 61

Appendix IV – General Information ...... 85

Notice of SGM ...... 97

– ii – DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions have the following meanings:

‘‘Announcement’’ the announcement of the Company dated 24 January 2017 in relation to, among other matters, the Investment

‘‘Board’’ the board of the Directors

‘‘Business Day’’ any day (excluding Saturday, Sunday and public holidays) on which licensed banks are generally open for business in Hong Kong throughout their normal business hours

‘‘Bye-laws’’ the bye-laws of the Company, as amend from time to time

‘‘Company’’ Sage International Group Limited, a company incorporated in the Cayman Islands and continued in Bermuda with limited liability, the issued Shares of which are listed on the GEM

‘‘Completion’’ completion of the Investment contemplated under the Investment Agreement pursuant to the terms and conditions of the Investment Agreement

‘‘Completion Date’’ the date on which Completion occurs, being the third Business Day after the fulfilment or waiver (as the case may be) of the conditions precedent to the Investment Agreement (or such other date as the parties to the Investment Agreement may agree in writing)

‘‘Consideration’’ the investment amount of HK$26,270,770 to be contributed by Sunny Side Up for financing the production of the Target Film pursuant to the Investment Agreement

‘‘Consideration Shares’’ an aggregate of 164,192,312 new Shares to be allotted and issued by the Company to Sun Entertainment or its nominee at the Issue Price at Completion pursuant to the Investment Agreement

‘‘core connected person(s)’’ has the same meaning as defined in the GEM Listing Rules

‘‘Director(s)’’ the director(s) of the Company, from time to time

– 1 – DEFINITIONS

‘‘Distributable Distribution Net the Distribution Net Income less the Production Bonus Income’’

‘‘Distribution Income’’ the income generated from the distribution of the Target Film in the world, including using, licensing, transferring and sublicensing, and re-transferring the copyright of the Target Film in the form of distribution and screening in cinemas, internet transmission, television broadcast, audio and video products publication etc. and other income generated from the Target Film such as advertising and sponsorship, less the commission of the distributor

‘‘Distribution Net Income’’ the Distribution Income less the distribution costs reasonably incurred (including but not limited to copy fee, master tape fee, publicity fee, material fee, copyright certificate and administrative fee) and withholding tax for the release of the Target Film (if any)

‘‘Extension Letter’’ the extension letter dated 28 April 2017 entered into between Sunny Side Up and Sun Entertainment to extend the long stop date by which the conditions precedent to the Investment should be fulfilled or waived, as the case may be, from 30 April 2017 to 31 July 2017

‘‘GEM’’ the Growth Enterprise Market of the Stock Exchange

‘‘GEM Listing Rules’’ the Rules Governing the Listing of Securities on the GEM

‘‘Group’’ the Company and its subsidiaries

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

‘‘Income Right’’ the right to the Distributable Distribution Net Income

‘‘Independent Board Committee’’ an independent committee of the Board comprising all independent non-executive Directors (namely Mr. Chan Wai Man, Mr. Siu Hi Lam, Alick and Mr. Ting Kit Lun), which has been established by the Board to advise the Independent Shareholders on the terms of the Investment Agreement and the transactions contemplated thereunder (including but not limited to the allotment and issue of the Consideration Shares)

– 2 – DEFINITIONS

‘‘Independent Financial Adviser’’ Messis Capital Limited authorised to carry out Type 1 or ‘‘Messis Capital’’ (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO and the independent financial adviser appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the major and connected transaction, in relation to the Investment in film production involving issue of Consideration Shares

‘‘Independent Shareholders’’ Shareholders other than those who are required under the GEM Listing Rules to abstain from voting at the SGM for the resolution approving the Investment Agreement and the transactions contemplated thereunder

‘‘Independent Third Party’’ a party which is not connected persons (as defined under the GEM Listing Rules) of the Company and is independent of the Company and its connected persons

‘‘Independent Valuer’’ Greater China Appraisal Limited, an independent valuer appointed by the Company

‘‘Investment’’ the payment of HK$26,270,770 to Sun Entertainment for financing the production of the Target Film in exchange of 20% of the Income Right

‘‘Investment Agreement’’ the investment agreement dated 24 January 2017 (as amended and supplemented by the Extension Letter) and enteredintobetweenSunnySideUpandSun Entertainment in respect of the joint investment in the production of the Target Film

‘‘Issue Price’’ the issue price of HK$0.16 per Consideration Share

‘‘Net Profit’’ the Distribution Net Income less the Production Costs

‘‘Latest Practicable Date’’ 26 June 2017, being the latest practicable date prior to the bulk print of this circular for ascertaining certain information contained herein

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

– 3 – DEFINITIONS

‘‘Production Bonus’’ the bonus to be paid to the production company of the Target Film, Aether Film Production Limited, being 8% of the Net Profit

‘‘Production Budget’’ the estimated Production Costs expected to be incurred for the production of the Target Film, being HK$131,353,850

‘‘Production Costs’’ the costs and expenses incurred in the production of the Target Film, which, for the avoidance of doubt, shall cover the costs and expenses for (i) pre-production, (ii) preparation and adoption of production plan, filming and post-production, (iii) royalty for the licence of adaptation of the script and/or script development costs; (iv) remunerations of casts and film crews including directors, producers, scriptwriters and all other production and casting crews; and (v) the administrative expenses charged by Sun Entertainment and any other costs in relation to the production of the Target Film

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

‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

‘‘SGM’’ means the special general meeting of the Company to be convened and held at 10th Floor, Fun Tower, 35 Hung To Road, Kwun Tong, Kowloon, Hong Kong on Monday, 17 July 2017 at 4:00 p.m.

‘‘Share(s)’’ ordinary share(s) of HK$0.025 each of the Company, or, if there has been a sub-division, consolidation, re- classification or re-construction of the share capital of the Company, shares forming part of the ordinary equity share capital of the Company of such other nominal amount as shall result from any such sub-division, consolidation, re- classification or re-construction

‘‘Shareholder(s)’’ holder(s)oftheShare(s)

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

– 4 – DEFINITIONS

‘‘Sun Entertainment’’ Sun Entertainment Films Limited（太陽娛樂電影有限公 司）, a company incorporated in Hong Kong with limited liability on 26 August 2015, is ultimately and beneficially owned by Mr. Dong Choi Chi, Alex, an executive Director and a substantial Shareholder of the Company

‘‘Sunny Side Up’’ Sunny Side Up (BVI) Limited（光尚文化有限公司）,a company incorporated in British Virgin Islands, a direct wholly-owned subsidiary of the Company

‘‘Target Film’’ 《貪狼》Paradox

‘‘HK$ and cents’’ Hong Kong dollars and cents, the lawful currency of Hong Kong

‘‘%’’ per cent.

– 5 – LETTER FROM THE BOARD

SAGE INTERNATIONAL GROUP LIMITED 仁智國際集團有限公司 (Incorporated in the Cayman Islands and continued in Bermuda with limited liability) (Stock Code: 8082)

Executive Directors: Registered Office: Mr. Chui Bing Sun (Chairman) Clarendon House Mr. Dong Choi Chi, Alex 2ChurchStreet Mr. Yao Kan Shan Hamilton HM11 Bermuda Independent non-executive Directors: Mr. Chan Wai Man Head office and principal place of Mr. Siu Hi Lam, Alick business in Hong Kong: Mr. Ting Kit Lun 10th Floor, Fun Tower 35 Hung To Road Kwun Tong, Kowloon Hong Kong

29 June 2017

To the Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE INVESTMENT IN FILM PRODUCTION INVOLVING ISSUE OF CONSIDERATION SHARES; AND NOTICE OF SGM

INTRODUCTION

Reference is made to the announcement of the Company dated 24 January 2017 in which the Board announced that on 24 January 2017 (after the trading hours of the Stock Exchange), Sunny Side Up, a direct wholly-owned subsidiary of the Company, and Sun Entertainment entered into the Investment Agreement, pursuant to which the parties thereto have conditionally agreed to jointly invest in the production of the Target Film.

– 6 – LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things, further information of the Investment Agreement and the transactions contemplated thereunder (including the allotment and issue of the Consideration Shares) and the notice of the SGM.

THE INVESTMENT AGREEMENT

Date

24 January 2017 (as supplemented by the Extension Letter dated 28 April 2017)

Parties

(i) Sun Entertainment;

and

(ii) Sunny Side Up, a direct wholly-owned subsidiary of the Company

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Sun Entertainment is a company incorporated in Hong Kong with limited liability and is principally engaged in movie production and distribution. As at the Latest Practicable Date, Sun Entertainment is ultimately and wholly-owned by Mr. Dong Choi Chi, Alex (‘‘Mr. Dong’’). Mr. Dong is an executive Director and a substantial Shareholder of the Company interested in approximately 12.21% of the entire issued share capital of the Company as at the Latest Practicable Date. As such, Sun Entertainment is a connected person of the Company under the GEM Listing Rules.

Subject Matter

Sun Entertainment will be responsible for, among other things, the production and distribution of the Target Film, while Sunny Side Up shall be responsible for contributing HK$26,270,770 to finance the production of the Target Film, representing approximately 20% of the Production Budget of the Target Film. The Production Budget of the Target Film is HK$131,353,850. Sunny Side Up shall be entitled to 20% of the Income Right upon Completion. Sun Entertainment and other investors of the Target Film shall be entitled to the remaining 80% of the Income Right in accordance with the percentage of the total investment cost contributed by them. Pursuant to the Investment Agreement, Sun Entertainment can invite other investors to contribute for the remaining 80% of the Production Budget and Sunny Side Up’srightsand benefits under the Investment Agreement shall not be affected or diluted whatsoever. Sun

– 7 – LETTER FROM THE BOARD

Entertainment guaranteed that the investment agreements entered into between Sun Entertainment and other investors in relation to the production of the Target Film shall not affect the rights and benefits of Sunny Side Up under the Investment Agreement. Sun Entertainment has further irrevocably warranted and undertaken to indemnify Sunny Side Up for any liabilities, losses, damages, expenses and costs arising from the arrangement between Sun Entertainment and other investors of the Target Film.

The Production Budget of the Target Film was preparedbySunEntertainment.Basedonthe valuation prepared by the Independent Valuer, namely Greater China Appraisal Limited, the fair value of 20% of the Income Right is approximately HK$26,333,000 as at 30 November 2016. If the actual Production Costs exceeded the Production Budget, Sun Entertainment shall be responsible for payment of the excess amount and should not be included as part of the Production Costs. Sunny Side Up’s rights and benefits under the Investment Agreement shall not be affected or diluted whatsoever. It is also agreed that in the event the actual Production Costs is less than the Production Budget, Sun Entertainment shall refund 20% of the balance (which is in proportion to the Income Right entitled to by Sunny Side Up) within 14 Business Days after Sunny Side Up having approved the report of the final Production Costs. It has also been agreed that an amount equivalent to approximately 6% of the Production Budget was the administrative fee charged by Sun Entertainment.

Pursuant to the Investment Agreement, parties thereto also agreed that the production company of the Target Film, Aether Film Production Limited, is entitled to 8% of the Net Profit as its bonus. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, each of Aether Film Production Limited and its ultimate beneficial owners is Independent Third Party.

Consideration

The Consideration, being HK$26,270,770, is payable to Sun Entertainment at Completion and is to be satisfied by way of allotment and issue of the Consideration Shares at the Issue Price to Sun Entertainment or its nominee upon Completion. Sun Entertainment shall then be responsible for the payment of the investment amount in relation to the production of the Target Film to be contributed by Sunny Side Up, representing 20% of the Production Budget of the Target Film.

The Consideration was determined after arm’s length negotiations between Sunny Side Up and Sun Entertainment and with reference to, among other things (i) the Income Right; (ii) the Production Budget of the Target Film; and (iii) the preliminary valuation prepared by Independent Valuer of the fair value of 20% of the Income Right.

– 8 – LETTER FROM THE BOARD

Based on the experience of our Directors and senior management personnel who have extensive experience and relevant business network in the film industry, further taking into account the opinion of Greater China Appraisal Limited set out in the Appendix III Valuation Report, the Board is of the view that the Production Budget is fair and reasonable. As disclosed above, pursuant to the Investment Agreement, in the event that the actual Production Costs is less than the Production Budget, Sun Entertainment shall refund 20% of the balance to Sunny Side Up. Taking into account of the potential income to be guarantee from the Income Right, the Independent Valuer’s valuation on the fair value of 20% of the Income Right, the Board is of the view that the Consideration is fair and reasonable.

Income Guarantee

Sun Entertainment has irrevocably warranted and undertaken that:

(i) if, in any event (including any event of Force Majeure), the production of the Target Film could not be finished and the Target Film could not be released on or before 31 December 2018 (or such other date as the parties to the Investment Agreement may agree in writing), Sun Entertainment shall compensate Sunny Side Up in an amount equivalent to the Consideration, being HK$26,270,770; and

(ii) if, within two years from the date of first release of the Target Film (the ‘‘Guarantee Period’’), the Distributable Distribution Net Income received by Sunny Side Up is less than the Consideration, being HK$26,270,770, Sun Entertainment shall pay to Sunny Side Up in advance the difference between the Consideration and the Distributable Distribution Net Income actually received by Sunny Side Up within 30 days after the Guarantee Period. For the avoidance of doubt such payment in advance is non- refundable in any events but can be used for offsetting the Distributable Distribution Net Income payable by Sun Entertainment to Sunny Side Up thereafter in the future if any.

The Directors consider the income guarantee stated above is fair and reasonable and is in the interests of the Company and its shareholder as a whole as it ensures that Sunny Side Up would be able to receive an aggregate income from the Target Film equivalent to or more than the amount of the Consideration during the Guarantee Period. According to (ii) above, if 20% of the Distributable Distribution Net Income received by Sunny Side Up within the Guarantee Period is less than the Consideration, i.e. HK$26,270,770, Sun Entertainment shall pay to Sunny Side Up in advance the shortfall within 30 days after the Guarantee Period. When the Target Film continues to generate income after the Guarantee Period, Sun Entertainment would not need to pay the 20% of the Distributable Distribution Net Income entitled by Sunny Side Up until the amount exceed HK$26,270,770 as such payment has already been paid by Sun Entertainment in advance.

– 9 – LETTER FROM THE BOARD

The Company will strictly comply with Rule 20.61 of the GEM Listing Rule in relation to the income guarantee as stated above and will make further announcement(s) and disclose the related matter in its annual reports as and when appropriate in accordance with the requirements of the GEM Listing Rules.

Settlement Method

Pursuant to the Investment Agreement, Sun Entertainment shall prepare and submit a report every six months within the first year from the first release of the Target Film and thereafter, once every year, to Sunny Side Up detailing the income generated from the Target Film and the parties’ respective entitlement to the income generated. The actual submission date of the report is to be agreed by the parties thereto. Upon verifying the information of the report by independent auditor and confirmation by both parties the accuracy of the report, and subject to the actual receipt of the income by Sun Entertainment, Sun Entertainment shall deposit the portion of the Distributable Distribution Net Income which Sunny Side Up is entitled, to a designated account of Sunny Side Up within 15 Business Days thereafter.

Sun Entertainment guaranteed to pay Sunny Side Up the Distributable Distribution Net Income in accordance with the settlement schedule stated above. In the event of delay in payment, Sun Entertainment shall pay to Sunny Side Up a daily penalty equivalent to 0.05% of the amount payable to Sunny Side Up.

Conditions Precedent

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

(a) the passing of all necessary resolutions by the Shareholders (other than those who are required to abstain from voting in accordance with the GEM Listing Rules or other applicable laws, rules and regulations) at the SGM approving the Investment Agreement and the transactions contemplated thereunder, including but not limited to the allotment and issue of the Consideration Shares;

(b) the Listing Committee of the Stock Exchange having granted the listing of and permission to deal in the Consideration Shares;

(c) all requirements, approvals and exemptions required for the Investment Agreement and the transactions contemplated thereunder in accordance with the GEM Listing Rules and/or all applicable laws and regulations having been obtained by the Company, such as passing of resolutions in the SGM and publication of announcements or notices (if applicable);

– 10 – LETTER FROM THE BOARD

(d) a valuation report (in form and substance satisfactory to Sunny Side Up) prepared by an independent professional valuer appointed by Sunny Side Up indicating the fair value of 20% of the Income Right entitled by Sunny Side Up as at 30 November 2016 of not less than HK$26,270,770 having been obtained;

(e) Sunny Side Up having obtained all necessary consents and approvals in relation to the Investment Agreement and the transactions contemplated thereunder;

(f) Sun Entertainment having obtained all necessary consents and approvals in relation to the Investment Agreement and the transactions contemplated thereunder; and

(g) the representations and warranties given by Sun Entertainment under the Investment Agreement remaining true, accurate and not misleading.

Sunny Side Up may at its absolute discretion at any time waive in writing the condition (g) set out above (to the extent it is capable of being waived) and such waiver may be made subject to such terms and conditions as are determined by Sunny Side Up. Conditions (a), (b), (c), (d), (e) and (f) set out above are incapable of being waived. If the conditions set out above have not been satisfied or waived (if applicable) on or before 31 July 2017, or such other date as the parties thereto may agree in writing, the Investment Agreement shall cease and terminate (save and except clauses in relation to notice, confidentiality, governing law and jurisdiction, and costs and expenses which shall continue to have full force and effect) and neither party shall have any claim against the other, save for any antecedent breaches of the terms thereof.

As at the Latest Practicable Date, none of the conditions precedent set out above has been fulfilled or waived.

Completion

Completion shall take place at 4:00 p.m. (or such other time as agreed by the parties to the Investment Agreement) on the Completion Date.

THE CONSIDERATION SHARES

Pursuant to the Investment Agreement, the Consideration Shares to be allotted and issued to Sun Entertainment (or its nominee) shall be 164,192,312 Shares, representing (i) approximately 19.82% of the issued share capital of the Company as at the date of the Investment Agreement; (ii) approximately 16.52% of the issued share capital of the Company as at the Latest Practicable Date; and (iii) approximately 14.18% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares upon Completion. The Consideration Shares shall rank pari passu in all respects with the Shares in issue on the date of allotment and issue including voting right, and the right to all dividends, distributions and other payments made or to be made for which the record date falls on or after the date of such allotment and issue.

– 11 – LETTER FROM THE BOARD

The Consideration Shares will be allotted and issued under a specific mandate proposed to be sought from the Independent Shareholders at the SGM. An application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares.

As at the Latest Practicable Date, the authorised share capital of the Company is HK$80,000,000. The aggregate nominal value of the Consideration Shares is HK$4,104,807.80.

Although the Consideration will be settled by way of issuance of the Consideration Shares which will result in a dilution on the existing shareholders, the Directors are of the view that the Company has no need to pay high interest costs and the pledge of the Group’s asset as collateral in debt financing. As compared to other means of equity financing like open offer or right issue, the allotment and issue of the Consideration Shares are less costly and time-consuming, and do not involve preparation and filing of prospectuses and other related documents. Most importantly, the net asset value attributable to equity holders of the Company per Share will increase after the Completion as set out in the paragraph headed ‘‘Effect on net asset value per share’’ in the ‘‘Letter from the Independent Financial Adviser’’. Having considered the aforesaid factors, the Directors are of the view that the dilution effect to the shareholding interest of the existing shareholders is acceptable and the issuance of the Consideration Shares is a preferred method to settle the Consideration.

THE ISSUE PRICE

The Issue Price of HK$0.16 per Consideration Share represents:

(i) a discount of approximately 17.95% to the closing price of HK$0.195 per Share as quoted on the Stock Exchange on 24 January 2017, being the date of the Investment Agreement;

(ii) a discount of approximately 15.79% to the average closing price of HK$0.190 per Share as quoted on the Stock Exchange for the 5 trading days immediately prior to the date of the Investment Agreement;

(iii) a discount of approximately 16.67% to the average closing price of HK$0.192 per ShareasquotedontheStockExchangeforthelast5tradingdaysuptoandincluding the date of the Investment Agreement;

(iv) a discount of approximately 16.23% to the average closing price of approximately HK$0.191 per Share as quoted on the Stock Exchange for the last 10 trading days up to and including the date of the Investment Agreement;

– 12 – LETTER FROM THE BOARD

(v) a discount of approximately 14.44% to the average closing price of approximately HK$0.187 per Share as quoted on the Stock Exchange for the last 30 trading days up to and including the date of the Investment Agreement;

(vi) a discount of approximately 12.57% to the average closing price of approximately HK$0.183 per Share as quoted on the Stock Exchange for the last 45 trading days up to and including the date of the Investment Agreement;

(vii) a premium of approximately 175.86% over the audited net asset value per Share as at 31 December 2016 of approximately HK$0.058 calculated based on the Group’s audited consolidated net asset value of approximately HK$48.36 million and 828,605,695 Shares in issue as at 31 December 2016;

(viii) a premium of approximately 116.22% over the audited net asset value per Share as at 31 December 2016 (adjusted by the completion of placing of new shares on 24 March 2017) of approximately HK$0.074; and

(ix) a discount of approximately 31.91% to the closing price of HK$0.235 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The Issue Price was determined after arm’s length negotiations between the parties to the Investment Agreement with reference to the prevailing market price of the Shares. The Board has considered the average closing price of the Shares of the Company and the number of Shares traded for the last 30 trading days up to and including the date of the Investment Agreement. The Issue Price represents a discount of approximately 14.44% to the 30-day average. The trading in Share is inactive and the daily trading volume is low.

Considering that trading of Shares is not active in the market, the low daily trading volume and the saving of fundraising costs and financing costs for the Investment, the Board is of the view that a discount of 17.95% to the closing price of the date of the Investment Agreement is fair and reasonable and in the interest of the Company and its existing shareholders.

– 13 – LETTER FROM THE BOARD

EFFECT ON SHAREHOLDING STRUCTURE

Assuming that there were no other changes in the issued share capital of the Company from the Latest Practicable Date up to and immediately prior to Completion, the change of the shareholding structure of the Company as at the Latest Practicable Date and immediately upon Completion are as follows:

As at the Latest Immediately upon Practicable Date Completion Number of Number of Shares Approx.% Shares Approx.%

Mr. Chui Bing Sun (‘‘Mr. Chui’’)(1) 149,474,298 15.04 149,474,298 12.91 Mr. Dong(2) 121,300,000 12.21 285,492,312 24.66 Mr. Chan Ping Che 97,390,000 9.80 97,390,000 8.41 Mr. Chan Wai Man(3) 27,000 0.00 27,000 0.00

Sub-total 368,191,298 37.05 532,383,610 45.98

Public Shareholders 625,414,397 62.95 625,414,397 54.02

Total 993,605,695 100.00 1,157,798,007 100.00

Notes:

1. 149,472,498 Shares are held by New Brilliant Investments Limited (‘‘New Brilliant’’), a company incorporated in the British Virgin Islands. It is wholly and beneficially owned by Mr. Chui, an executive Director.

2. 120,300,000 Shares are held by Heading Champion Limited, a company incorporated in the British Virgin Islands and 164,192,312 Shares will be held by Sun Entertainment upon Completion. Both Heading Champion Limited and Sun Entertainment are wholly and beneficially owned by Mr. Dong, an executive Director.ByvirtueoftheSFO,Mr.DongisdeemedtobeinterestedintheSharesheldbyHeading Champion Limited and Sun Entertainment.

3. Mr. Chan Wai Man is an independent non-executive Director.

4. Certain percentage figures included in the above table have been subject to rounding adjustments. Accordingly, figures shown as totals may not be an arithmetic aggregation of the figures preceding them.

INFORMATION OF SUN ENTERTAINMENT AND THE TARGET FILM

Sun Entertainment, principally engaged in movie production and distribution, is the owner of the copyright of the Target Film and one of the investors of the Target Film.

– 14 – LETTER FROM THE BOARD

The Target Film is Paradox《貪狼》, an upcoming action movie directed by Mr. Yip Wai Shun, Wilson（葉偉信）,andstarredbyMr.LouisKoo（古天樂）,Mr.TonyJaa,Mr.WuYue（吳 樾）, Mr. Chris Collins and Mr. Ken Lo（盧惠光）. The action director is Mr. Sammo Hung（洪金 寶）.

FINANCIAL EFFECTS OF THE INVESTMENT ON EARNINGS AND ASSETS AND LIABILITIES OF THE COMPANY

Effect on assets and liabilities

According to the unaudited pro forma financial information of the Group set out in Appendix II to this circular, which illustrates the financial effects of the Investment by assuming the completion has taken place on 31 December 2016. Based on the unaudited pro forma financial information of the Group, the total assets of the Group would increase 39.85% from HK$65,927,000 to approximately HK$92,198,000 and its total liabilities would be remain unchanged since the consideration is satisfied by way of allotment and issue of new Shares of the Company.

Effect on earnings

As at the Latest Practicable Date, the Target Film is performed at post-production stage. The Company considers that the effect on earnings will be subject to the distribution of the Target Film.

REASONS FOR AND BENEFITS OF THE INVESTMENT

The Group is principally engaged in the provision of deathcare services and related business in the PRC and Hong Kong. As disclosed in the announcement of the Company dated 26 May 2016, whilst the Group remains focused on developing its existing businesses, the Group had made investments in the media and entertainment industry in order to diversify the existing businesses.

As disclosed in First Quarterly Report 2017, the business of funeral service and related products in Hong Kong are growing slightly and the business of cremation in PRC is performing steadily. Due to special nature of the deathcare service business, no public advertisement is conducted, yet customers have been referred to us through word-of-mouth, where customers who are satisfied with our products and services share their experience with others around them. The Company understood that reputation is the key to success of the deathcare service, therefore the Group will adopt the conservative strategy to maintain good quality products and services to enable the business stay competitive in the market. Simultaneously, the Group will streamline its

– 15 – LETTER FROM THE BOARD operational workflow to reduce cost and hence increase its efficiency and profitability. Except for the possible disposal of Sage Eternity Gem Service Limited (‘‘Sage Eternity’’), an indirect wholly owned subsidiary of the Company principally engaged in the business of Eternity Gem, transformation of cremated ash into durable memorial gem stone, the Company has no intention to dispose of its deathcare service and related business. Having said that, the Company has no intention to downsize its deathcare service and related business and the Company intends to apply the net proceeds from the potential disposal for working capital use of its existing deathcare service and related business. The revenue and total asset of Sage Eternity attributed approximately 7.77% and 1.20% to the revenue of the Group for the year ended 31 December 2016 and total assets of the Group as at 31 December 2016 (as adjusted by the allotment and issue of placing shares by the Company under a placing agreement dated 8 March 2017 which was completed on 24 March 2017 and announced by the Company on 8 March 2017 and 24 March 2017). Sage Eternity has been loss-making since its commencement of business on 11 July 2014 and it is currently in net liabilities position according to its latest management account. The Directors undertake strategic reviews of the Group’s assets from time to time with a view to maximising returns to the Shareholders. The Board was approached by a purchaser for the potential disposal and the Directors consider that the potential disposal, if materialises, will provide an opportunity for the Group to realise its investment in the Eternity Gem business. The Directors are of the view that the potential disposal, if completed, will make a positive contribution to the cash flow and financial position of the Group and provide additional capital for the development of the Group’s deathcare services and related business. The Board expect that the potential disposal and the transactions contemplated thereunder will be conducted on normal commercial terms and will be fair and reasonable and in the interests of the Group and the Shareholders as a whole. Further announcement in respect of the potential disposal, should it be materialised, will be made by the Company as and when appropriate.

As set out below, the media and entertainment market in PRC is expanding rapidly, the Group will allocate more resources on developing the business of media and entertainment to capture the arising opportunities for potential strategic investment which may complement with the Group’s existing investment, including, among others, film investment and production.

The growing momentum of the media and entertainment industry in the PRC is robust in recent year. The Group is optimistic about the industry, particularly the film right, musical, drama, online TV drama/movie, live shows and related intellectual property (‘‘IP’’) trading, etc. On 31 December 2016, The State Administration of Press, Publication, Radio, Film and Television of the People’s Republic of China (‘‘SAPPRFT’’)(‘‘中華人民共和國國家新聞出版廣 電總局’’) published that Box Office of China in 2016 reached RMB 45.71 billion, an increase of 3.73% over 2015. The total film audience in 2016 reached 1.37 billion, an increase of 8.9% year- on-year. In addition, according to the forecast in ‘‘China entertainment and media outlook 2016- 2020’’ published by PricewaterhouseCoopers (PwC), the film industry in China will grow at a

– 16 – LETTER FROM THE BOARD

CAGR of 19.1% in the coming five years up to 2020, which is notably higher than that of the world at large for the same period. Further, with the PRC government implementing favourable policies such as China’s Film Industry Promotion Law, the film industry will gain robust momentum in the near future. These statistics imply that China holds an immensely lucrative film market.

Upon the completion of the subscription of 70% of the equity interest in Black Sesame Entertainment Co. Limited (‘‘Black Sesame’’) and the service agreement with Mr. Chan Siu Kei (please refer to the circular of the Company dated 28 October 2016 for details), Black Sesame became an important operating arm of the Group and is mainly focusing on original musicals to create IP, collaboration with industry partners to enable the musical to further turn into online or movie properties. In addition, Sunny Side Up, a wholly owned subsidiary of the Group, was inaugurated in January 2017. Sunny Side Up’s primary business focus is media and entertainment investment and production, with projects covering films, online/TV drama series, concerts and other types of commercial performance art media including artist management and retail & branding to optimise its business and development opportunities. The Board believes that the formation of Black Sesame and Sunny Side Up can enhance the Group’s presence in the film and entertainment industry and complement the Group’s business projects in the long run.

Currently, the business of media and entertainment is led by Mr. Dong, an executive Director who has extensive experience and relevant expertise in the industry. In 2011, Mr. Dong participated in the establishment of Sun Entertainment Culture Ltd., the business of which widely ranged from concert organizing, film production and distribution, event promotion and planning to artist management and training etc. As a film lover, Mr. Dong was actively engaged in the film production, distribution and investment. It’s worth mentioning that the film ‘‘Vulgaria’’ won the honors of ‘‘Best Supporting Actor’’ and ‘‘Best Supporting Actress’’ at the 32nd Hong Kong Film Award. He also contributed to the local film industry by production of ‘‘SPL2’’ in 2015, with box office results of RMB 560 million in Hong Kong and the PRC. As disclosed in First Quarterly Report 2017, Sunny Side Up was inaugurated in January 2017 and appointed a chief executive officer who has valuable experience and wide business network in the media and entertainment industry. Simultaneously, Sunny Side Up also formed a professional team which include one marketing manager, one project manager, three assistants to participate in various projects. The Group believes that extensive experience of Mr. Dong and the senior management personnel in the media and entertainment industry can manage and oversee the operation of the Target Film.

– 17 – LETTER FROM THE BOARD

Pursuant to the Investment Agreement, Sun Entertainment will be responsible for, among other things, the production and distribution of the Target Film. Consent should be obtained from Sunny Side Up for strategic decisions in relation to the production and distribution of the Target Film, including but not limit to recruitment and nomination of the production team, screenwriter and distributor etc. In addition, Sunny Side Up has right to advise on the script and theme of the Target Film.

The Target Film is a prequel to Sha Po Lang (‘‘SPL’’)《殺破狼》series, also directed by Mr. Yip Wai Shun, Wilson (‘‘Mr. Yip’’) and Mr. Cheang Pou Soi (‘‘Mr. Cheang’’), the prestigious actors, filmmakers and screenwriters particular in action movies, with good track record of box office. Mr. Yip’s productions include the IP Man trilogy《葉問》and SPL《殺破 狼》.Mr.Cheang’s productions include SPL2《殺破狼II》, the Monkey King《西遊記之大鬧天 宮》and the Monkey King 2《西遊記之孫悟空三打白骨精》. According to the website of 中國 票房 (www.cbooo.cn), the accumulated gross box office receipts of SPL2《殺破狼II》,the Monkey King《西遊記之大鬧天宮》and the Monkey King 2《西遊記之孫悟空三打白骨精》 reach over RMB560.41 million, RMB1.05 billion and RMB1.2 billion after their releases on 18 June 2015, 31 January 2014 and 8 February 2016 respectively, Last year, Mr. Cheang promoted as the Third Film Director, whose productions of two Chinese films, with gross box office receipts reach over RMB1 billion followed by 徐崢 and 周星馳.

Further reference to the data from 藝恩電影智庫 as at 23 December 2016 and website mentioned above, the box office of action movie in 2016 reach over RMB 15.41 billion which account for approximately 34% of the total box office in PRC, an increase of 13.25% over 2015. The accumulated gross box office receipts 2016 of Operation Mekong《湄公河行動》and IP Man 3《葉問3》, reach over RMB1.18 billion and RMB770 million after their releases on 30 September 2016 and 4 March 2016 respectively. Overview the trend of the film market in the PRC, the popularity of the action movie is growing steadily and keeps enticing broad audience. Given that the film industry in the PRC is under rapid development with the government keen support by implementing favouable policies, the Group has utmost confidence in the future of the industry. The Directors are of the view that the Target Film is in the ordinary course of business which is in line with the Group’s strategies. The Target Film is an action movie which stands on favourable movies type for the audience. Having taking into above factors, and leveraging the extensive experience of the Film Directors, Mr. Yip, Mr. Cheang, the action Director Mr. Sammo Hung and major casts with good track records, the Directors are of the view that the Target Film will generate economic success for the business of the Group.

– 18 – LETTER FROM THE BOARD

BUSINESS CYCLE OF FILM PRODUCTION AND INVESTMENT

The business cycle of film production and investment, including the work to be performed at each stage and the approximate amount of time each stage takes are described below:

Development

In the development stage, the film producer/director selects a story, which may be from a book, a play, another film, a true story, a comic book, a novel, or an original idea, etc. After identifying a story, the film producer/director selects a screenwriter and works with the screenwriter to prepare a synopsis of the film. The screenwriter then writes a screenplay. Once the screenplay is in its final form, the film producer/director prepares a pitch and presents it to potential investors. If a pitch succeeds, the parties involved would negotiate the terms of the investment and the film production and enter into definitive agreements in connection with the film. This stage usually takes approximately three months to six months.

Pre-production

In the pre-production stage, every step of creating the film is carefully designed and planned. The film is pre-visualised by the film director, and may be storyboarded with the help of illustrators and concept artists. A production budget is prepared to determine expenditures for the film. The producer hires a crew, which may include storyboard artists, production manager, location manager, production designer, costume designer, make-up and hair designer, casting director, cinematographer and director of audiography. This stage usually takes approximately three months to six months.

Production

In the production stage, the film is created and recorded. The setting up of construction, dressing and lighting may take many hours or even days. While the crew prepares their equipment, the actors are dressed in their costumes and complete their hair and make-up preparations. The actors rehearse with the film director, the cameraman and sound crews. Finally, the film is recorded. This production stage usually takes approximately three months to four months.

Post-production

In the post-production stage, the film is assembled by the film editor. The film shots and production sounds are edited, music tracks and songs are composed and recorded, sound effects are designed and recorded and any computer-graphic visual effects are digitally added. This stage usually takes approximately six months to nine months.

– 19 – LETTER FROM THE BOARD

Distribution

In the distribution stage, the film is released to cinemas, directly to consumer media (such as DVD and Blu-ray) or directly downloaded from a digital online platform media provider. Film distributors usually release a film with a launch party, a red-carpet premiere, and press broadcasting releases, interviews with the press, press preview screenings and film festival screenings. The investor(s) of the film will share the profits or losses generated from the distribution of such film. This stage usually takes approximately three months to six months.

RELEVANT RULES AND REGULATIONS

The following rules and regulations apply to films and other media productions in the PRC:

In accordance with the Regulations on the Administration of Movies which became effective on1February2002andtheInterimProvisionson Operation Qualification Access for Movie Enterprises which became effective on 10 November 2004, both of them being the latest regulations, production, distribution, import and projection of films are subject to licences issued by SAPPRFT. A film production licence or a film production licence (single film) is required for production of films in the PRC. If a PRC producer cooperates with a foreign producer to produce a film, an additional ‘‘Permit for Sino-foreign Cooperation in Film Production’’ must be obtained. A film distribution company in the PRC must obtain a film distribution licence and only movie import entities designated by the SAPPRFT may be engaged in import of foreign films. In addition, other aspects of the film industry, including the contents of films and scripts, the foreign investment in the industry and the projection time for different types of films by film theaters are also subject to detailed and extensive regulations.

Time frame to apply for and obtain licences for production and distribution of films or other productions would depend on the type of licences, the applicable regulatory authority and the location of such authority which has jurisdiction over the relevant film or production, but in any event, the relevant licences and approvals would typically take approximately two to three months to obtain.

– 20 – LETTER FROM THE BOARD

RISK ASSOCIATED WITH THE INVESTMENT IN THE FILM AND ENTERTAINMENT BUSINESS

Given that film productions require substantial fund investment, if the Group does not accurately judge audience acceptance of a film in selecting the films it invests in, the audience rating and box office returns may be materially affected, the Group may not recoup its costs or realise its anticipated profits. As relevant rules and regulations set out in the preceding paragraphs, (i) the Group will be susceptible to the loss of the preliminary investment if the planned film fail to obtain the license from the SAPPRFT for shooting; and (ii) the Group will be confronted with the risk of failure to obtain license for release if its finished products is unable to pass the examination of contents.

Sunny Side Up has no direct arrangement with or rights against the distributor in the Target Film in respect of the Income Right. If the distributor fails to make payment to Sun Entertainment or Sun Entertainment defaults in all of its payment obligations to Sunny Side Up, the Group’s financial results may be adversely affected. However, Sun Entertainment has confirmed to Sunny Side Up that it did not experience difficulties in receiving its portion of net proceeds in respect of the box office receipts of the films they invested in. Over the years, Sun Entertainment participated in and co-invested in numerous film investment and production which include From Vegas to Macau series《賭城風雲》,SPLseries《殺破狼》and Call of Heroes《危城》etc. Apart from film investment and production, its group companies also engaged in concert investment, production and coordination, artist and model management, investment holding, sports, entertainment. Having considered the information available as aforesaid of Sun Entertainment, (i) the Directors consider that the default risk in respect of the Income Right is remote and (ii) given that Mr. Dong is the ultimate beneficial owner of Sun Entertainment, the Directors are not aware of the existence of any other risks may materially affecting the collectability of the Distributable Distribution Net Income to be generated from the Target Film. In any event, Sun Entertainment has irrecoverably warranted and undertaken to provide the income guarantee to Sunny Side Up as detailed in the paragraph headed ‘‘Income Guarantee’’. The Directors consider that the Investment will not cause any material adverse effect on the business, financial position or prospect of the Group taken as a whole, but beneficial to the Group and facilitates the roll-out of the initiatives that are complementary to the Group’s strategies.

– 21 – LETTER FROM THE BOARD

As at the Latest Practicable Date, the Target Film has obtained film production licence and is currently in the post-production stage. Following the procedures of the applicable laws, the Target Film will apply for the film distribution licence afterwards and scheduled to release on the second half of this year. According to the Company’s understanding after consulting a PRC lawyer, there is no legal impediments for the Target Film to obtain the relevant distribution licence. Having considered the benefits of the Investment set out above, including (i) extensive experience of the Directors; (ii) good track record of film directors of the Target Film; (iii) keen support from PRC government by implementing favourable policies and (iv) favourable acceptance of action movie in the PRC, the Directors consider that the Investment is an opportunity for the Group to gain a foothold in the media and entertainment industry.

The Directors (excluding Mr. Dong, who had abstained from voting in the relevant board meeting and the independent non-executive Directors whose view will be given after considering the advice of the Independent Financial Adviser as to the fairness and reasonableness of the terms of the Investment Agreement) consider that the terms of the Investment Agreement are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As one of the applicable percentage ratios as defined under the GEM Listing Rules in respect of the Investment is more than 25% but less than 100%, the Investment Agreement and the transactions contemplated thereunder constitutes a major transaction of the Company under Chapter 19 of the GEM Listing Rules which is subject to the reporting, announcement and shareholders’ approval requirements under the GEM Listings Rules.

As at the Latest Practicable Date, Sun Entertainment is ultimately and wholly-owned by Mr. Dong. Accordingly, Sun Entertainment is a connected person of the Company under the GEM Listing Rules. As such, the Investment contemplated under the Investment Agreement constitutes a connected transaction on the part of the Company under Chapter 20 of the GEM Listing Rules. As the applicable percentage ratio(s) (other than the profits ratio) (as defined under the GEM Listing Rules) in respect of the transactions contemplated under the Investment Agreement exceed 25% and the Consideration exceeds HK$10 million, the transactions contemplated under the Investment Agreement is subject to reporting, announcement, and independent shareholders’ approval requirements as set out in Chapter 20 of the GEM Listing Rules.

– 22 – LETTER FROM THE BOARD

SGM

The SGM will be held at 10th Floor, Fun Tower, 35 Hung To Road, Kwun Tong, Kowloon, Hong Kong on Monday, 17 July 2017 at 4:00 p.m. for the purpose of considering and, if thought fit, approving the proposed Investment. A notice convening the SGM is set out on pages 97 to 99 of this circular.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’sRoadEast, Wanchai, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding the SGM (i.e. 4:00 p.m. (Hong Kong Time), on Saturday, 15 July 2017) or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish.

GENERAL

As stated above, Mr. Dong is a connected person of the Company and is considered as being interested in the Investment. Accordingly, Mr. Dong and his associates, being interested in 12.21% of the total number of the issued shares of the Company as at the Latest Practicable Date, shall abstain from voting on the proposed resolution(s) to approve the Investment Agreement and the transactions contemplated thereunder (including the allotment and issue of the Consideration Shares) at the SGM. Save for the aforesaid, to the best of the Director’s knowledge, information and belief, having made all reasonable enquiries, no other Shareholder is involved or has a material interest in the Investment which requires him/her to abstain from voting on the resolution(s) to be proposed at the SGM to approve the Investment.

As stated above, Mr. Dong is considered as having a material interest in the transactions contemplated under the Investment Agreement and accordingly have abstained from voting on the board resolution for approving the Investment Agreement and the transactions contemplated thereunder.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, there is (i) no voting trust or other agreement or arrangement or understanding entered into by or binding upon any Shareholder; and (ii) no obligation or entitlement of any Shareholder as at the Latest Practicable Date, whereby it has or may have temporarily or permanently passed control over the exercise of the voting right in respect of Shares to a third party, either generally or on a case-by-case basis.

– 23 – LETTER FROM THE BOARD

RECOMMENDATION

The Directors (including the independent non-executive Directors but excluding Mr. Dong who has abstained from voting in the relevant board meeting) consider that the terms of the Investment Agreement and the transactions contemplated thereunder (including the allotment and issue of the Consideration Shares) are fair and reasonable and in the interest of the Company and the Shareholders as a whole. The Board therefore recommends to the Shareholders to vote in favour of the ordinary resolution(s) to be proposed at the SGM to approve the entering of the Investment Agreement and the Investment and matters ancillary thereto as set out in the notice of SGM.

FURTHER INFORMATION

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

Yours faithfully, For and on behalf of the Board Sage International Group Limited Chui Bing Sun Chairman and executive Director

– 24 – LETTER FROM THE INDEPENDENT BOARD COMMITTEE

SAGE INTERNATIONAL GROUP LIMITED 仁智國際集團有限公司 (Incorporated in the Cayman Islands and continued in Bermuda with limited liability) (Stock Code: 8082)

29 June 2017

To the Independent Shareholders

Dear Sir or Madam,

We refer to the circular of the Company dated 29 June 2017 (the ‘‘Circular’’)tothe Shareholders, of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise requires.

We have been appointed by the Board as members to form the Independent Board Committee and to advise you as to whether the terms of the Investment Agreement and the transactions contemplated thereunder (including the allotment and issue of the Consideration Shares) are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. Messis Capital has been appointed to advise the Independent Board Committee and the Independent Shareholders in this respect. Details of its advice, together with the principal factors taken into consideration in arriving at such advice, is set out on pages 27 to 50 of the Circular.

Your attention is also drawn to the letter from the Board set out on pages 6 to 24 of the Circular and the additional information set out in the appendices of the Circular.

– 25 – LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the terms of the Investment Agreement and the transactions contemplated thereunder (including the allotment and issue of the Consideration Shares), the principal reasons and factors considered by, and the advice of Messis Capital, we are of the opinion that the terms of Investment Agreement and the transactions contemplated thereunder (including the allotment and issue of the Consideration Shares) is on normal commercial terms and the terms of the Investment Agreement (including the allotment and issue of the Consideration Shares) are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution(s) to be proposed at the SGM to approve the Investment Agreement and the transactions contemplated thereunder (including the allotment and issue of the Consideration Shares).

Yours faithfully, Independent Board Committee of Sage International Group Limited

Chan Wai Man Siu Hi Lam, Alick Ting Kit Lun Independent non-executive Independent non-executive Independent non-executive Director Director Director

– 26 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter from the Independent Financial Adviser which sets out its advice to the Independent Board Committee and the Independent Shareholders for inclusion in this circular.

29 June 2017

To: The Independent Board Committee and the Independent Shareholders of Sage International Group Limited

Dear Sir/Madam,

MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE INVESTMENT IN FILM PRODUCTION INVOLVING ISSUE OF CONSIDERATION SHARES

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the major and connected transaction, details of which are set out in the letter from the Board (the ‘‘Letter from the Board’’) contained in the circular of the Company to the Shareholders dated 29 June 2017 (the ‘‘Circular’’), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

Pursuant to the Investment Agreement, Sun Entertainment shall be responsible for, among other things, the production and distribution of the Target Film, while Sunny Side Up shall be responsible for contributing HK$26,270,770 to finance the production of the Target Film, representing approximately 20% of the Production Budget. Upon completion of the Investment, Sunny Side Up shall be entitled to 20% of the Income Right. As at Latest Practicable Date, Sun Entertainment is ultimately and wholly-owned by Mr. Dong Choi Chi, Alex (an executive Director and a substantial Shareholder interested in approximately 12.21% of the entire issued share capital of the Company as at the Latest Practicable Date). Accordingly, Sun Entertainment is a connected person of the Company under the GEM Listing Rules. As such, the Investment contemplated under the Investment Agreement constitutes a connected transaction on the part of the Company under Chapter 20 of the GEM Listing Rules. As the applicable percentage ratios (other than the profits ratio) (as defined under the GEM Listing Rules) in respect of the transactions contemplated under the Investment Agreement exceed 25% and the Consideration exceeds HK$10 million, the transactions contemplated under the Investment Agreement is subject to reporting, announcement, and Independent Shareholders’ approval requirements as set out in Chapter 20 of the GEM Listing Rules.

– 27 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

OUR INDEPENDENCE

We have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard. As at the Latest Practicable Date, we did not have any relationships or interests with the Company or any other parties that could reasonably be regarded as relevant to our independence. In the last two years, we have not acted as the independent financial adviser to the independent board committee and the independent shareholders of the Company. Apart from normal professional fees paid or payable to us in connection with this appointment as the Independent Financial Adviser, no arrangements exist whereby we had received or will receive any fees or benefits from the Company or any other parties that could reasonably be regarded as relevant to our independence. Accordingly, we consider that we are independent from the Company pursuant to Rule 17.96 of the GEM Listing Rules.

Our role as the Independent Financial Adviser is to give our independent opinion to the Independent Board Committee and the Independent Shareholders in relation to the Investment Agreement and the transactions contemplated thereunder on (i) whether the terms of the Investment Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the Investment is in the interests of the Company and the Shareholders as a whole; (iii) advise to the Independent Board Committee on whether the Independent Shareholders should vote in favour of the Investment Agreement and the transactions contemplated thereunder.

BASIS OF OUR OPINION AND RECOMMENDATION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have reviewed, among other things, the Investment Agreement, the annual report of the Company for the year ended 31 December 2016 (the ‘‘2016 Annual Report’’), the first quarterly report of the Company for the three months ended 31 March 2017 (the ‘‘2017 First Quarterly Report’’) and the valuation report as set out in Appendix III to the Circular (the ‘‘Valuation Report’’), which was prepared by Greater China Appraisal Limited (the ‘‘Valuer’’), an independent valuer, in relation to the preliminary fair value of 20% of the Income Right as at 30 November 2016 (the ‘‘Valuation Date’’). We have also discussed with the Company regarding the prospect of the business of the Group. Since we are not experts in the valuation of film income right, we have relied solely upon the Valuation Report for the fair value of 20% of the Income Right.

– 28 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In relying on the Valuation Report, we have considered that fairness, reasonableness and completeness of the assumptions made by the Valuer in the Valuation Report. Regarding the opinion or valuation of the Valuer in relation to the Income Right, we have interviewed the Valuer as to its expertise and any current or prior relationships with the Company or any of its respective subsidiaries or associates; reviewed the terms of engagement and scope of work of the Valuer, in particular, as to whether it is subject to any limitations that might undermine the level of assurance given with respect to the Valuation Report; and discussed with the Valuer in relation to its work done in preparation of the Valuation Report. We have also reviewed the credentials provided by the Valuer and publicly available information on the Valuer’s experience in performing valuations for companies listed on the Stock Exchange.

Based on our discussions with the Valuer, together with our assessment of its profile and experience in performing valuation services, we are not aware of any matters that would cause us to doubt the Valuer’s independence and expertise in relation to the engagement, and with particular attention to its scope of work, we are not aware of any limitations on the scope of work which might adversely impact on the degree of assurance given by the Valuation Report.

We have relied on the statements, information, opinions and representations contained or referred to in the Circular and the representations made to us by the Company, the Directors and the management of the Company. We have assumed that all statements, information and representations provided by the Company, the Directors and the management of the Company, for which they are solely responsible, are true and accurate at the time when they were provided and continue to be so as at the date of despatch of the Circular. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company, its advisers and/or the Directors, which have been provided to us.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts not contained in the Circular, that the omission of which would make any statement contained in the Circular, including this letter, incorrect or misleading.

– 29 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, carried out any independent verification of the information provided, nor have we conducted any independent investigation into the business and affairs of the Group, the other connected persons or their respective subsidiaries or associates. Where information in this letter has been extracted from published or otherwise publicly available sources, the sole responsibility of us is to ensure that such information has been correctly and fairly extracted, reproduced or presented from the relevant stated sources and not be used out of context.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation, we have considered the following principal factors and reasons:

1. Information of the Group

1.1 Principal business activities of the Group

According to the 2016 Annual Report and the 2017 First Quarterly Report, the Group’s business is organised into two operating and reportable segments: (i) funeral services; and (ii) media and entertainment. Funeral services primarily include the provision of funeral services and deathcare related business. Media and entertainment business focuses on concert related projects, live event and film rights.

1.2 Financial information of the Group

Set out below the summary of financial highlights of the Group as extracted from the 2016 Annual Report and the 2017 First Quarterly Report:

For the year ended Forthethreemonthsended 31 December 31 March 2015 2016 2016 2017 HK$’000 HK$’000 HK$’000 HK$’000 (audited) (audited) (unaudited) (unaudited)

Revenue 14,608 16,287 4,652 5,248 Gross profit 8,347 9,989 2,626 3,112 Loss for the year/period attributable to equity holders of the Company (21,336) (17,293) (3,966) (3,580)

– 30 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at 31 December 2015 2016 HK$’000 HK$’000 (audited) (audited)

Net assets 44,948 48,361 Cash and cash equivalents 34,657 22,615 Shareholders’ equity 40,166 41,489

Source: 2016 Annual Report and 2017 First Quarterly Report

As disclosed in the 2016 Annual Report, the total revenue of continuing operations (which mainly consists of the funeral services and media and entertainment business) was approximately HK$16.3 million, which was 11.49% higher than the corresponding period of last year of approximately HK$14.6 million. The increase was mainly due to the increase in sales of Eternity Gem, as a result of exhibition, promotion programmes, cooperation with major local and overseas funeral service providers and pet shops. Gross profits increased from approximately HK$8.3 million to approximately HK$10.0 million. The overall gross profit margin of the continuing operations for the year ended 31 December 2016 was approximately 61.33% and increased slightly as compared with the corresponding period in 2015 of approximately 57.14%.

According to the 2017 First Quarterly Report, the total revenue (which mainly consists of the funeral services and media and entertainment business) was approximately HK$5.2 million for the three months ended 31 March 2017, which was 12.81% higher than that of the corresponding period of last year of approximately HK$4.7 million. The increase was mainly due to the revenue generated from media and entertainment business and the increase in management service income in funeral segment.

– 31 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1.3 Business outlook

According to the 2016 Annual Report and the 2017 First Quarterly Report, whilst the Group remains focused on developing its existing businesses, the Group has recently made investments in the media and entertainment industry in order to diversify the existing business. The Group is optimistic about the industry, particularly the film right, musical, drama, online TV drama/movie, live shows and related Intellectual Property (‘‘IP’’) trading, etc. With reference to the Company’s announcement dated 19 August 2016, Winning Spotlight Limited, a wholly-owned subsidiary of the Company (as subscriber) and Black Sesame Entertainment Co. Limited (‘‘Black Sesame’’) (as the issuer) entered into a subscription agreement, pursuant to which Winning Spotlight Limited has subscribed for the subscription shares of Black Sesame, representing 70% of the total number of shares of Black Sesame upon completion in November 2016. Black Sesame is principally engaged in the business of production of drama and musical performance (including musicals and live shows), artist management and music intellectual property rights management, and the ancillary marketing matters. Further reference to the Company’s circular dated 28 October 2016, pursuant to the service agreement with Mr. Chan Siu Kei, Black Sesame will become an important operating arm of the Group and will mainly focusing on original musicals to create IP, collaboration with industry partners to enable the musical to further turn into online or movie properties.

In addition, Sunny Side Up was inaugurated in January 2017 and its primary business focus is media and entertainment investment and production, with projects covering films, online/TV drama series, concerts and other types of commercial performance art media including artist management and retail & branding to optimise its business and development opportunities. Soon after its inauguration, Sunny Side Up has established work partnerships with various top-notch industry professionals from acclaimed directors, producers, production studios to sales agents, marketing companies, distributors and cinemas.

2. Background information of the Investment

The Target Film is Paradox《貪狼》, an upcoming action movie directed by Mr. Yip Wai Shun Wilson（葉偉信）, and starred by Mr. Louis Koo（古天樂）,Mr.TonyJaa,Mr.Wu Yue（吳樾）, Mr. Chris Collins and Mr. Ken Lo（盧惠光）. The action director is Mr. Sammo Hung（洪金寶）. The Distribution Company is the owner of the copyright of the Target Film and would be responsible for the production and distribution of the Target Film. The shooting of the Target Film started in October 2016 and the screening period is expected in the second half of 2017.

– 32 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Pursuant to the Investment Agreement, the Company would make investment in the Production Costs, which is equivalent to 20% of the production budget, and in return the Company is entitled to share 20% of the Distributable Distribution Net Income from the Target Film. Distributable distribution Net Income refers to the income generated from the distribution of the Target Film in the world less the commission to the distributors, the distribution costs reasonably incurred, withholding tax for the release of the Target Film and the bonus to be paid to the production company of the Target Film.

Based on the Investment Agreement, if the actual production costs exceed the production budget, Sun Entertainment shall be responsible for payment of the excess amount and the excess amount should not be included as part of the Production Costs. Inversely, if the actual production costs are less than the production budget, Sun Entertainment would refund 20% of the shortfall to Sunny Side Up.

3. Valuation of the Income Right

As described in the Letter from the Board, the Consideration was determined after arm’s length negotiations between the parties to the Investment Agreement on normal commercial terms, taking into account, among other things (i) the Income Right; (ii) the Production Budget of the Target Film; and (iii) the preliminary valuation prepared by the Valuer of the fair value of 20% of the Income Right as at the Valuation Date, details of which are set out in the section headed ‘‘Valuation Report’’ in Appendix III to the Circular.

The valuation has been prepared in accordance with the International Valuation Standards (2013 Edition) (‘‘IVS 2013’’) on valuation published by International Valuation Standards Council.

(i) Valuation methodology

We have also reviewed the Valuation Report and discussed with the Valuer the methodology, bases and assumptions which they have adopted. We understood from the Valuer that they have applied the cost approach to derive the fair value of 20% of the Income Right as at the Valuation Date of approximately HK$26,333,000. According to the discussion with the Valuer, the valuation of any asset can be broadly classified into one of three approaches, namely the cost approach, the market approach and the income approach. In any valuation analysis, all three approaches must be considered, and the approach deemed most relevant will then be selected for use in the fair value analysis of that asset. We noted that the Valuer had used the cost approach, and understood from the Valuer that the market approach and the income approach were not applicable to the valuation of the fair value of 20% of the Income Right as at the Valuation Date mainly because:

– 33 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(a) the Target Film was still under shooting and production phase as at the Valuation Date, so it would be more reasonable for the buyers to make reference to the cost of reproducing the Target Film when determining the consideration. Also, the management of Sunny Side Up has provided the record of actual costs and major agreements related to the cost of reproduction. Accordingly, the cost of reproducing the Target Film could reasonably reflect the fair value of 20% of the Income Right;

(b) the market approach was not applicable since available public information in relation to the acquisition of such income right or similar asset frequently involves specific buyers who pay a premium/discount under unique circumstances, so it was difficult to make adjustment to reflect the unique circumstances of 20% of the Income Right; and

(c) the income approach was not applicable since the financial projection of 20% of the Income Right cannot be easily substantiated due to the performance of the Target Film being subject to various uncertainties, such as economic environment in the future.

Further, as advised by the Valuer, the cost approach is based on the economic principle of substitution which essentially measures what is the asset value as at the valuation date and how much it would cost to assemble or construct an equivalent asset. One of the replacement cost, reproduction cost and liquidation value method is used to estimate the fair value of the assets. Given that (i) the Target Film was still under shooting and production phase as at the Valuation Date, which means that 20% of the Income Right has just been newly created, rather than being well-established; and (ii) the actual cost record of the Target Film was readily available, thus the reproduction cost method was selected in the valuation accordingly. Based on our discussion with the Valuer and the review of the Valuation Report, we were given to understand from the Valuer that the methodology applied is consistent with the market practice and we have not identified any substantial factors which cause us to doubt the fairness and reasonableness of the methodology adopted in arriving at the valuation.

– 34 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) Valuation assumptions

The valuation of fair value of 20% of the Income Right was based on underlying assumptions, including: (i) no material change in the existing political, legal, fiscal, foreign trade and economic conditions in the countries where the Target Film would be on screen; (ii) no significant deviation in the industry trends and market conditions from the current market expectation; (iii) no material change in interest rates or foreign currency exchange rates from those currently prevailing; (iv) no major change in the current taxation law in the countries where the Target Film would be on screen; (v) all relevant legal approvals, business certificates or licenses for the normal course of operation were formally obtained, in good standing and that no additional costs or fees were needed to procure such during the application; (vi) Sunny Side Up would retain competent management, key personnel, and technical staff to support the ongoing business operations; and (vii) the Investment Agreement was entered between Sunny Side Up and Sun Entertainment. From our discussions with the Valuer, we understand that such assumptions are generally adopted in similar valuation activities and are necessary for the Valuer to arrive at a reasonable estimated fair value of the Investment.

In addition, as advised by the Valuer, up to the valuation date, the Target Film was still under shooting and production phase, so the completion of the Target Film and the profitability of the Target Film is still unknown. The cost to reproduce the Income Right was substantiated by the actual production costs incurred up to the valuation date. Also, the expected total cost of reproducing the Income Right would be the production budget, which was confined to the terms in the Investment Agreement. The reproduction costs in this case mainly consists the Production Costs and the contribution by the coordinator of the Target Film. Accordingly, we have further reviewed the details of the reproduction costs of 20% of the Income Right as provided by the Valuer and noted the reproduction cost model had taken into account the actual cost occurred up to the valuation date and the best available market information of the similar cost items, and thus we considered the valuation provided a fair and reasonable basis to derive the consideration.

As at the Valuation Date, the Target Film was still under shooting process, which caused the difference of approximately HK$52.4 million (the ‘‘Difference’’)between the actual Production Costs incurred up to the Valuation Date of approximately HK$78.9 million and the Production Budget of approximately HK$131.4 million. The Production Costs further incurred included remaining compensation to the director and side cast, salary to local production crew, post-production fee and other production overhead. We have also reviewed the film production agreement (the ‘‘Film Production Agreement’’) which was entered into between Sun Entertainment and Aether Film Production Limited (the ‘‘Production House’’) on 20 February 2016. According to the management of the Company, approximately HK$39.8 million

– 35 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

between the budgeted Production House cost of approximately HK$77.4 million and the actual Production House cost of approximately HK$37.6 million incurred as at the Valuation Date, will be payable upon the completion of the production. The majority of such sum will be used in the post-production fee and other production overhead. Such sum accounts for the majority of the Difference, which has been covered under the contracted Production House costs pursuant to the Film Production Agreement. The remaining of the Difference represents approximately 10% of the total Production Budget. According to the Valuer, such Difference is considered to be normal given that there is still about half year of production time before the production is completed. As at the Valuation Date, given the information available, there was no material event which might result in a significant change of the original production plan. Therefore, it is expected that the Production Costs would not deviate significantly from the Production Budget.

Having considered that Sun Entertainment guaranteed the Production Costs for the purpose of calculating the Distributable Distribution Net Income entitled by Sunny Side Up not exceeding the Production Budget, it is believed that total cost of reproducing the Income Right would approximate to the sum of the Production Budget. Based on the discussion above, we noted that (i) the Consideration has reflected therein the reproduction costs of the Target film; (ii) the fair value of 20% of the Income Right estimated by the Valuer has reflected the conditions of the Income Right; and (iii) the reasons for the Investment as described below, on this basis, we are of the view that the abovementioned valuation assumptions are fair, reasonable and complete in relation to the Valuation Report.

(iii) Valuer’s competence

We have reviewed the qualifications and working experiences of Mr. Max K.P. Tsang, a director of the Valuer who has over 7 years’ experience in business valuation for private and listed companies for the purposes of financial reporting, initial public offerings, mergers and acquisitions, financing, tax and litigation support purposes, who is responsible for signing of the Valuation Report. We have also reviewed the qualifications and working experiences of Ms. Elaine Y.T. Leung and Mr. Matthew L.P. Leung, who involved in the Valuation Report. Ms. Elaine Y.T. Leung is a senior manager of the Valuer who has over 5 years’ experience in valuation of both business and intangibles assets with industry ranging from post-production service, port operation, mining, metal processing, food & beverage, financial services to information technology and Mr. Matthew L.P. Leung is a manager of the Valuer, who has over 5 years of experience in providing valuation and business consulting services for public and private companies for financial reporting and transaction purposes. According to the Valuer, they have extensive experience in handling valuation matters including business valuation, intangible asset valuation (such as trademarks, distribution networks, patents and customer relationship), biological assets valuation,

– 36 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

mining valuation and financial instrument valuation. Furthermore, we note from publicly available documents that the Valuer has substantial experience in providing valuation services to listed companies. Hence, we are satisfied that the Valuer has sufficient experience and competency to perform the valuations.

As set out above, we are satisfied that (i) the Valuer is independent from the Company and has sufficient experience and competence to perform the valuation; (ii) the Valuer’s scope of work is appropriate for the relevant engagement; and (iii) the valuation assumptions and methodologies used by the Valuer are fair, reasonable and complete in relation to the Valuation Report. Based on the above, we are of the view that the valuation of the Income Right by the Valuer is fair and reasonable.

4. Reasons and benefits for the Investment

The Group is principally engaged in the provision of deathcare services and related business in the PRC and Hong Kong. As disclosed in the announcement of the Company dated 26 May 2016, whilst the Group remains focused on developing its existing businesses, the Group had made investments in the media and entertainment industry in order to diversify the existing businesses.

According to the Letter from the Board, the growing momentum of the media and entertainment industry in the PRC is robust in recent year. The Group is optimistic about the industry, particularly the film right, musical, drama, online TV drama/movie, live shows and related IP trading, etc. On 31 December 2016, The State Administration of Press, Publication, Radio, Film and Television of the People’s Republic of China (‘‘SAPPRFT’’) (‘‘中華人民共和國國家新聞出版廣電總局’’) published that Box Office of China in 2016 reached RMB45.71 billion, an increase of 3.73% over 2015. The total film audience in 2016 reached 1.37 billion, an increase of 8.9% year-on-year. In addition, according to the forecast in ‘‘China entertainment and media outlook 2016-2020’’ published by PricewaterhouseCoopers (PwC), the film industry in China will grow at a CAGR of 19.1% in the coming five years up to 2020, which is notably higher than that of the world at large for the same period. Further, with the PRC government implementing favourable policies such as China’s Film Industry Promotion Law, the film industry will gain robust momentum in the near future. These statistics imply that China holds an immensely lucrative film market.

The Board believes that the Investment can enhance the Group’s presence in the media and entertainment industry and complement the Group’s business projects in the long run, enabling further collaborations with potential and existing business partners.

– 37 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have conducted independent research on the industry outlook of the film industry in the PRC. The PRC film industry experienced strong and consistent growth in recent years in terms of number of cinema admissions, screens and box office receipts. According to the SAPPRFT, the box office receipts in the PRC increased from approximately RMB17.07 billion in 2012 to approximately RMB45.71 billion in 2016, representing a CAGR of approximately 27.92%. Driven by increasing number of cinemas and audience as well as the development of cinemas in third and fourth-tier cities in the PRC, the total number of screens in the PRC increased from approximately 13,100 in 2012 to approximately 41,200 in 2016, representing a CAGR of approximately 33.17%.

According to the National Bureau of Statistics, the total urban population in the PRC increased from approximately 711.82 million in 2012 to approximately 792.98 million in 2016, and the urban population as percentage of the total population increased from approximately 52.57% in 2012 to approximately 57.35% in 2016. The per capita disposable annual income of urban households in the PRC increased from approximately RMB24,564.7 in 2012 to approximately RMB33,616.0 in 2016, representing a CAGR of approximately 8.16%. With the increasing number of cinemas and screens and the growth of disposable income per capita, the number of cinema admissions in the PRC recorded continuous growth. The number of cinema admissions in the PRC increased from approximately 0.83 billion in 2014 to approximately 1.37 billion in 2016, representing a CAGR of approximately 28.57%.

Taking into account the aforementioned reasons, we are of the view that the Investment is in the ordinary and usual course of business of the Group, and it is justifiable and in the interests of the Company and the Shareholders as a whole.

5. Principal terms of the Investment Agreement

To assess the fairness and reasonableness of the Investment, we have reviewed the Investment Agreement and considered, among others, the following terms of the Investment Agreement.

5.1 Conditions precedent and undertakings of Sun Entertainment

Please refer to the sub-section of the ‘‘Letter from the Board’’ of the Circular headed ‘‘Conditions precedent’’ for details of the conditions precedent under the Investment Agreement. We note that the conditions precedent set out therein are normal commercial terms and find them to be fair and reasonable.

We note that the undertakings of Sun Entertainment in relation to the income guarantee (the ‘‘Income Guarantee’’), in particular, if the production of the Target Film could not be finished and the Target Film could not be released on or before 31 December 2018 (or such other date as the parties to the Investment Agreement may agree in writing), Sun Entertainment shall compensate to Sunny Side Up in an amount equivalent to the investment amount, being HK$26,270,770.

– 38 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

If within two years from the date of first release of the Target Film (the ‘‘Guarantee Period’’), the Distributable Distribution Net Income received by Sunny Side Up is less than the investment amount, being HK$26,270,770, Sun Entertainment shallpaytoSunnySideUpinadvancethedifference between the Consideration and the Distributable Distribution Net Income actually received by Sunny Side Up, within 30 days after the Guarantee Period. For the avoidance of doubt such payment in advance is non-refundable in any events but can be used for offsetting the Distributable Distribution Net Income payable by Sun Entertainment to Sunny Side Up thereafter in the future if any.

In this regard, we consider that the conditions precedent and the Income Guarantee arrangement caps the investment amount to be paid by the Group and thereby limits the risk exposure of the Group, and that the relevant terms to be in the interests of the Company and the Shareholders as a whole.

5.2 Consideration

We understand from the management of the Company that the Consideration in the amount of HK$26.3 million was agreed after arm’s length negotiations between SunnySideUpandSunEntertainmentandwithreferenceto,amongotherthings(i) the Income Right; (ii) the Production Budget of the Target Film; and (iii) the preliminary valuation prepared by the Valuer of the fair value of 20% of the Income Right.

Taking into consideration the fair value of 20% of the Income Right was approximately HK$26.3 million as stated in the Valuation Report, we considered that the valuation of the Income Right is fair and reasonable as elaborated in the paragraph headed ‘‘Valuation of the Income Right’’ above, and that the Consideration and basis thereof are fair and reasonable.

5.3 Settlement method

The Consideration, being HK$26,270,770 is payable to Sun Entertainment at Completion and is to be satisfied by way of allotment and issue of the Consideration Shares at the Issue Price to Sun Entertainment or its nominee upon Completion. Sun Entertainment shall then be responsible for the payment of the investment amount in relation to the production of the Target Film to be contributed by Sunny Side Up, representing 20% of the Production Budget of the Target Film.

After enquiring the management of the Company, we are given to understand the Directors considered that the settlement of the Consideration by way of allotment and issue of Consideration Shares will lead to a better alignment of interests between the Group and Sun Entertainment in the investment of the Target Film and is in the interest of the Company and the Shareholders as a whole.

– 39 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The issue of the Consideration Shares to settle the Consideration would not affect the immediate liquidity position of the Group and would allow the Company to complete the Investment without any significant cash outlay. We note that if the Group settles the Investment entirely by cash, all of the cash and bank balances of the Group (as at 31 December 2016) would be used. We were also given to understand from the management of the Company that the preserved cash could be applied towards its normal business operations in the current financial year.

Based on the above, we are of the view that the settlement method and arrangement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

5.3.1 Consideration Shares

Evaluation of the Issue Price

Pursuant to the Investment Agreement, the Consideration Shares to be allotted and issued to Sun Entertainment (or its nominee) shall be 164,192,312 Shares, representing approximately 16.52% of the existing issued share capital of the Company as at the Latest Practicable Date and approximately 14.18% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares upon Completion. The Consideration Shares shall rank pari passu in all respects with the Shares in issue on the date of allotment and issue including voting right, and the right to all dividends, distributions and other payments made or to be made for which the record date falls on or after the date of such allotment and issue.

The Issue Price of HK$0.16 per Consideration Share represents:

(i) a discount of approximately 17.95% to the closing price of HK$0.195 per Share as quoted on the Stock Exchange on 24 January 2017, being the date of the Investment Agreement;

(ii) a discount of approximately 15.79% to the average closing price of HK$0.190 per Share as quoted on the Stock Exchange for the 5 trading days immediately prior to the date of the Investment Agreement;

(iii) a discount of approximately 16.67% to the average closing price of HK$0.192 per Share as quoted on the Stock Exchange for the last 5 trading days up to and including the date of the Investment Agreement;

– 40 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iv) a discount of approximately 16.23% to the average closing price of approximately HK$0.191 per Share as quoted on the Stock Exchange for the last 10 trading days up to and including the date of the Investment Agreement;

(v) a discount of approximately 14.44% to the average closing price of approximately HK$0.187 per Share as quoted on the Stock Exchange for the last 30 trading days up to and including the date of the Investment Agreement;

(vi) a discount of approximately 12.57% to the average closing price of approximately HK$0.183 per Share as quoted on the Stock Exchange for the last 45 trading days up to and including the date of the Investment Agreement;

(vii) a premium of approximately 175.86% over the audited net asset value per Share as at 31 December 2016 of approximately HK$0.058 calculated based on the Group’s audited consolidated net asset value of approximately HK$48.36 million and 828,605,695 Shares issued as at 31 December 2016;

(viii) a premium of approximately 116.22% over the audited net asset value per Share as at 31 December 2016 (adjusted by the completion of placing of new shares on 24 March 2017) of approximately HK$0.074; and

(ix) a discount of approximately 31.91% to the closing price of HK$0.235 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

As discussed with the Board, considering for saving of fundraising costs and financing costs for the Investment and the trading of Shares is not active in the market, we are of the view that the discount of approximately 17.95% to the closing price of the date of the Investment Agreement is fair and reasonable.

When allotted and issued at Completion, the Consideration Shares will represent approximately:

(i) 16.52% of the existing issued share capital of the Company as at the Latest Practicable Date; and

(ii) 14.18% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares.

– 41 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

To assess the fairness and reasonableness of the Issue Price, we have compared the Issue Price with reference to (a) historical trading volume of the Shares; (b) historical Share prices; and (c) the market comparable analysis, as set out below:

(a) Historical trading volume

Set out in the table below are the monthly trading volumes of the Shares and the percentages of such monthly trading volumes to the issued sharecapitaloftheCompanyduringtheperiodfrom1January2016upto and including 31 January 2017 (the ‘‘Review Period’’).

Monthly %of trading issued Share % of public volume of capital of the floatofthe the Shares Company Company (Note 1) (Note 2) (Note 3)

2016 January 3,825,000 0.46% 0.83% February 530,400 0.06% 0.12% March 902,400 0.11% 0.20% April 1,694,500 0.20% 0.37% May 1,250,000 0.15% 0.27% June 4,626,300 0.56% 1.00% July 7,447,800 0.90% 1.62% August 5,214,400 0.63% 1.13% September 2,176,500 0.26% 0.47% October 997,300 0.12% 0.22% November 442,000 0.05% 0.10% December 2,430,000 0.29% 0.53%

2017 January 591,000 0.07% 0.13%

Notes:

1. Source: HKEx website

2. The calculation is based on the total monthly trading volume of the Shares divided by the total issued share capital of the Company as at the date of the Investment Agreement.

3. The calculation is based on the monthly trading volume of Shares as a percentage of the issued share capital of the Company, divided by the total percentage of Shares held by public Shareholders as at date of the Investment Agreement.

– 42 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As illustrated in the table above, during the Review Period, the monthly trading volume of the Shares ranged between 442,000 and 7,447,800, with an average of approximately 2,471,354 Shares. In addition, the percentage of monthly trading volume of the Shares during the Review Period ranged from approximately 0.05% to approximately 0.90% of the total number of Shares in issue as at the date of the Investment Agreement, with an average of approximately 0.30%. We note that the trading of Shares did not appear to be active during the Review Period.

(b) Historical Share prices

We have reviewed the Share price performance during the Review Period. We consider that a period of 13 months is adequate to illustrate the Share price performance for conducting a reasonable comparison between the closing price of the Shares and the Issue Price. The chart below illustrates the daily closing price per Share for the Review Period.

Closing price during the Review Period HK$ per share 0.35

0.3

0.25

0.2

0.15 Company announced the 0.1 2016 interim result on 12 August 2016 Closing price 0.05 Issue price 0 4/1/2016 4/2/2016 4/3/2016 4/4/2016 4/5/2016 4/6/2016 4/7/2016 4/8/2016 4/9/2016 4/10/2016 4/11/2016 4/12/2016 4/1/2017

Source: HKEx website

– 43 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

During the Review Period, the closing Share price fluctuated between HK$0.155 per Share and HK$0.320 per Share, with an average Closing Share price of approximately HK$0.191 per Share. The Issue Price of HK$0.16 represented (i) a premium of approximately 3.2% to the lowest closing price per Share; (ii) a discount of approximately 16.2% to average closing price per Share; and (iii) a discount of approximately 50.0% to the highest closing price per Share.

On 12 August 2016, the Company announced the interim results for the six months ended 30 June 2016. The revenue of the Group increased from approximately HK$7.9 million for the six months ended 30 June 2015 to approximately HK$8.7 million for the six months ended 30 June 2016 and the gross profit for the six months ended 30 June 2016 increased by approximately 15.61% to approximately HK$4.8 million and the gross profit margin was approximately 55.71% and increased as compared with that of last year corresponding period of approximately 52.88%. Possibly due to the publication of this announcement, the closing Share price of the Company increased to HK$0.22 per Share the next trading day from HK$0.208 per Share after the date of the relevant announcement.

We note that (i) cash and cash equivalent balances of the Group accounted for a moderate proportion of the total asset value of the Group (which represented approximately 57.4% and 34.3% as at 31 December 2015 and 2016 respectively); and (ii) the available-for-sale financial assets of the Group accounted for approximately 16.7% of the total asset value of the Group as at 31 December 2016 (31 December 2015: nil). As such, we consider that the Company has an asset-light business model.

We have considered other commonly adopted comparison approaches. We consider (i) the Share price performance to be a more appropriate indicator of reasonableness and fairness of the Issue Price than the price-to- earnings ratio approach, given the consolidated net loss of the Group for year ended 31 December 2016 as set out in the paragraph headed ‘‘Financial information of the Group’’; and (ii) the net asset value per Share approach, given the composition of the Group’s assets as elaborated above.

– 44 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(c) Comparable issues

In assessing the reasonableness of the terms of the issue of Consideration Shares, we have based on the information available from the Stock Exchange’s website, identified an exhaustive list of 13 major and connected transactions announced by companies listed on the Stock Exchange since 24 April 2016 and including the date of the Investment Agreement (the ‘‘Comparable(s)’’). For the purpose of our analysis, the basis of our selection of the Comparables is as follows: (i) major and connected transaction which is also an acquisition; and (ii) the acquisition is fully or partly settled by the issue of shares as consideration. We consider that the selection of comparable companies within an approximate 9-month period to be sufficient and appropriate for our analysis as it has covered the prevailing market conditions and sentiments in the Hong Kong stock market at the time which the terms of the issue of the Consideration Shares were determined.

Taking into account that the terms of the Comparables are determined under similar market conditions and sentiments as the issue of the Consideration Shares, we consider that the Comparables may reflect the recent market trend of connected transactions, which is also an acquisition involving issuance of shares as full or partial settlement of consideration. As such, we consider the Comparables are fair and representative samples for comparison.

It should be noted that all the companies involved in the Comparables may have different principal activities, market capitalisation, profitability, and financial position as compared with those of the Company. Circumstances leading the Comparables companies to issue consideration shares may differ from that of the Company. The analysis is meant to be used as a general reference to similar types of transactions in Hong Kong, and we consider them to be one of the appropriate basis to assess the fairness and reasonableness of the Issue Price.

– 45 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Premium/(discount) of issue price over/(to) the closing price Last five trading days up to and including the date of respective sale Date of and purchase respective sale agreement or Date of and purchase acquisition announcement Company Stock code Issue price agreement agreement (HK$) (Approximate (Approximate %) %)

28/4/2016 Digital Domain Holdings Limited 547 0.596 (5.40) (9.15) (Note 1) 25/5/2016 O Lux Holdings Limited 860 0.30 – (1.60) 26/5/2016 CNQC International Holdings 1240 2.80 (4.11) 3.65 Limited (Note 1) 13/6/2016 Hoifu Energy Group Limited 7 0.50 (1.96) (11.66) 17/6/2016 ELL Environmental Holdings 1395 0.50 9.89 7.76 Limited (Note 1) 17/6/2016 Fujian Holdings Limited 181 0.43 7.50 6.44 (Note 1) 9/8/2016 Lisi Group (Holdings) Limited 526 0.37 (43.76) (43.93) 30/8/2016 Phoenix Healthcare Group Company 1515 8.04 (11.60) – Limited 20/10/2016 Sparkle Roll Group Limited 970 0.45 (40.79) (32.02) 27/10/2016 Prosperity International Holdings 803 0.15 5.63 10.62 (H.K.) Limited 15/12/2016 China Sandi Holdings Limited 910 0.27 1.67 1.67 20/12/2016 U-Home Group Holding Limited 2327 0.35 (10.3) (10.3) 12/1/2017 Midland IC&I Limited 459 0.046 (4.2) (4.6) (Note 1)

Maximum 9.89 10.62 Minimum (43.76) (43.93) Average (7.49) (8.51)

The Company 8082 0.16 (17.95) (16.67) (Note 1)

Notes:

1. To be consistent with other Comparables, we re-calculated the average closing price for the last five trading days for the Comparable to include the last trading day up to the date of the respective sale and purchase agreement or acquisition agreement.

2. To be consistent with the calculation of the Comparables, the discount is re- calculated based on the Issue Price over average closing price of the Shares for the last five trading day up to and including the date of the Investment Agreement.

– 46 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As shown in the above table of the Comparables, the issue prices of all of the Comparables to (i) the relevant closing price on the date of the respective sale and purchase agreement or acquisition agreement ranged from a premium of approximately 9.89% to a discount of approximately 43.76%, with an average discount of approximately 7.49%; (ii) the last five trading days closing prices ranged from a premium of approximately 10.62% to a discount of approximately 43.93%, with an average discount of approximately 8.51%. We note that the Issue Price of HK$0.16 represents a discount of approximately 17.95% to the closing price of the Shares on the date of the Investment Agreement and a discount of approximately 16.67% to the average closing price of the Shares in the last five trading days up to and including the date of the Investment Agreement, and such discounts fall within the abovementioned ranges of the Comparables.

After taking into account (i) the Consideration was adjusted based on the Valuation Report, prepared by the Valuer; (ii) the trading price of Shares during the Review Period is not too distant from the Issue Price (which represented a discount of approximately 19.6% to the average closing price per Share during the Review Period) and the trading liquidity during the Review Period is considered thin; (iii) the discount rate of the Issue Price of the Consideration Shares is within the discount range of the Comparables; and (iv) the Issue Price represented a premium of approximately 175.86% over the audited net asset value per Share as at 31 December 2016, we are of the view that the terms of the Investment Agreement and transactions contemplated thereunder under are on normal terms and are fair and reasonable as far as the Independent Shareholders are concerned.

– 47 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

5.3.2 Effect of dilution on public Shareholders

The effect of the allotment and issue of the Consideration Shares on the shareholding structure of the Company as at the Latest Practicable Date and immediately upon Completion (assuming that there are no other changes in the issued share capital of the Company from the Latest Practicable Date up to and immediately prior to Completion) are as follows:

As at the Latest Immediately Practicable Date upon Completion Number of Approximate Number of Approximate shares % shares % Mr. Chui Bing Sun (‘‘Mr. Chui’’) (1) 149,474,298 15.04% 149,474,298 12.91% Mr. Dong (2) 121,300,000 12.21% 285,492,312 24.66% Mr. Chan Ping Che 97,390,000 9.80% 97,390,000 8.41% Mr. Chan Wai Man (3) 27,000 0.00% 27,000 0.00%

Sub-total 368,191,298 37.05% 532,383,610 45.98%

Public Shareholders 625,414,397 62.95% 625,414,397 54.02%

Total 993,605,695 100.00% 1,157,798,007 100.00%

Notes:

1. 149,472,498 Shares are held by New Brilliant Investments Limited (‘‘New Brilliant’’), a company incorporated in the British Virgin Islands. It is wholly and beneficially owned by Mr. Chui, an executive Director.

2. 120,300,000 Shares are held by Heading Champion Limited, a company incorporated in the British Virgin Islands and 164,192,312 Shares will be held by Sun Entertainment upon Completion. Both Heading Champion Limited and Sun Entertainment are wholly and beneficially owned by Mr. Dong, an executive Director. By virtue of the SFO, Mr. Dong is deemed to be interested in the Shares held by Heading Champion Limited and Sun Entertainment.

3. Mr. Chan Wai Man is an independent non-executive Director.

4. Certain percentage figures included in the above table have been subject to rounding adjustments. Accordingly, figures shown as totals may not be an arithmetic aggregation of the figures preceding them.

– 48 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As illustrated in the above shareholding table, upon Completion, a total of 164,192,312 Shares will be allotted and issued by the Company to Sun Entertainment pursuant to Investment Agreement as payment for part of the Consideration. As a result, the aggregate shareholding of the public Shareholders will then be diluted from approximately 62.95% to approximately 54.02%, representing a dilution of approximately 8.93%.

We noted that the above action will result in a dilution effect for the public Shareholders. Nonetheless taking into account (i) the benefits of the Investment as disclosed under the section headed ‘‘Reasons and benefits for the Investment’’ above; (ii) the advantages of the settlement method and arrangement as elaborated under the sections headed ‘‘Consideration’’ and ‘‘Settlement Method’’ above; and (iii) the potential positive financial impact to the Group and its Shareholders as a result of the Investment, in particular in the total assets of the Group, we are of the view that the potential benefits and positive effects arising from the Investment outweigh the dilution effect to the existing public Shareholders. We are therefore of the view that the level of dilution is acceptable and fair and reasonable.

5.4 Our view

Based on the above discussion and having considered the above reasons and analysis, we are of the view that the Investment is in the ordinary and usual course of business of the Group, the terms of the Investment Agreement are fair and reasonable, and are in the interest of the Company and the Independents Shareholders as a whole.

6. Potential financial effects as a result of the Investment

6.1 Effect on assets and liabilities

The unaudited pro forma financial information of the Group is set out in Appendix II to this circular, which illustrates the financial effects of the Investment by assuming the completion has taken place on 31 December 2016. Based on the unaudited pro forma financial information of the Group, the total assets of the Group would increase by 39.85% from approximately HK$65,927,000 to approximately HK$92,198,000 and its total liabilities would remain unchanged since the consideration is satisfied by way of allotment and issue of new Shares of the Company.

6.2 Effect on earnings

As at the Latest Practicable Date, the Target Film is performed at post-production stage. The Company considers that the effect on earnings will be subject to the distribution of the Target Film.

– 49 – LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

6.3 Effect on net asset value per share

We noted that the Issue Price of HK$0.16 represents a premium of approximately 175.86% over the audited consolidated net asset value attributable to equity holders of the Company per Share as at 31 December 2016. On 24 March 2017, the Company completed the placing of 165,000,000 new Shares with the net proceeds of which amounted to approximately HK$25.51 million. The total assets of the Group would increase from approximately HK$65,957,000 to approximately HK$91,463,000. The net asset value attributable to equity holders of the Company per Share as at 24 March 2017 increased to approximately HK$0.074. After the Completion, the total assets of the Group would increase by approximately 28.72% from approximately HK$91,463,000 to approximately HK$117,734,000 and its total liabilities would remain unchanged. The net asset value attributable to equity holders of the Company per Share as at the Completion date will increase to approximately HK$0.101 per Share.

RECOMMENDATION

Having taken into consideration the principal factors and reasons discussed above, we are of the opinion that (i) the major and connected transaction under the Investment Agreement was entered into in the interests of the Company and the Shareholders as a whole; (ii) the Investment is in the ordinary and usual course of the Company’s business; and (iii) the terms of the Investment Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the relevant resolutions to be proposed at the SGM to approve the transactions as contemplated under the Investment Agreement.

Yours faithfully, For and on behalf of Messis Capital Limited Erica Law Director

Ms. Erica Law is a licensed person registered with the Securities and Future Commission of Hong Kong and a responsible officer of Messis Capital Limited to carry out type 6 (advising on corporate finance) regulatory activity under the SFO and has over 7 years of experience in corporate finance industry.

– 50 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION OF THE GROUP

The financial information of the Group for each of three years ended 31 December 2014, 31 December 2015 and 31 December 2016 has been disclosed in the 2014, 2015, 2016 annual reports of the Company, respectively, which are published on both the Stock Exchange’s website (www.hkexnews.hk) and the Company’s website (www.sig.hk).

2. INDEBTEDNESS

As at the close of business on 30 April 2017, being the latest practicable date for the purpose of determining this indebtedness of the Group prior to the printing of this circular, the Group did not have any contingent liabilities. Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities and the normal trade bills and payables in the normal course of business, at the close of business on 30 April 2017, the Group did not have any loan capital issued and outstanding, and authorized or otherwise created but unissued, bank overdrafts, loan or other similar indebtedness, liabilities under acceptance or acceptable credits, debentures, mortgages, charges, hire purchase or other finance lease commitments, guarantees or other material contingent liabilities.

3. WORKING CAPITAL

The Directors, after due and careful enquiry, are of the opinion that in the absence of unforeseeable circumstances and after taking into account (i) the financial resources available to the Group including internally generated funds; and (ii) the acquisition, but without taken into account the proceed and effect from the potential disposal of Sage Eternity Gem Services Limited, the Group will have sufficient working capital for its present requirements for at least the next 12 months from the date of this circular.

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial position or settlement position of the Group since 31 December 2016, being the date to which the latest published audited financial statements of the Group were made up.

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

Upon completion of the Investment, the Group shall be entitled to 20% of the Income Right. Based on the unaudited pro forma financial information of the Group as set out in Appendix II to this circular, net assets recorded by the Group as at 31 December 2016 was approximately HK$48.36 million, the unaudited pro forma net assets of the Group will increase to approximately HK$74.63 million.

– 51 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The Group is principally engaged in the provision of deathcare services and related business in the PRC and Hong Kong. As disclosed in the announcement of the Company dated 26 May 2016, whilst the Group remains focused on developing its existing businesses, the Group had made investments in the media and entertainment industry in order to diversify the existing businesses.

As disclosed in First Quarterly Report 2017, the business of funeral service and related products in Hong Kong are growing slightly and the business of cremation in PRC is performing steadily. The Company understand that reputation is the key to success of the deathcare service, therefore the Group will adopt the conservative strategy to maintain good quality products and services to enable the business stay competitive in the market. Simultaneously, the Group will streamline its operational workflow to reduce cost and hence increase its efficiency and profitability.

The growing momentum of the media and entertainment industry in the PRC is robust in recent year. The Group is optimistic about the industry, particularly the film right, musical, drama, online TV drama/movie, live shows and related intellectual property (‘‘IP’’) trading, etc. Upon completion of the subscription of 70% of the equity interest in Black Sesame Entertainment Co. Limited (‘‘Black Sesame’’) and the service agreement with Mr. Chan Siu Kei (please refer to the circular of the Company dated 28 October 2016 for details), Black Sesame became an important operating arm of the Group and is mainly focusing on original musicals to create IP, collaboration with industry partners to enable the musical to further turn into online or movie properties.

In addition, Sunny Side Up, a wholly owned subsidiary of the Group, was inaugurated in January 2017. Sunny Side Up’s primary business focus is media and entertainment investment and production, with projects covering films, online/TV drama series, concerts and other types of commercial performance art media including artist management and retail & branding to optimise its business and development opportunities.

The Board believes that the formation of Black Sesame and Sunny Side Up can enhance the Group’s presence in the media and entertainment industry and complement the Group’s business projects in the long run, enabling further collaborations with potential and existing business partners.

– 52 – APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

(A) UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE GROUP

Pursuant to the Investment Agreement, Sunny Side Up, a direct wholly-owned subsidiary of the Company, and Sun Entertainment have conditionally agreed to jointly invest in the production of the Target Film. Sun Entertainment shall be responsible for, among other things, the production and distribution of the Target Film, while Sunny Side Up shall be responsible for contributing HK$26,270,770 to finance the production of the Target Film, representing approximately 20% of the Production Budget. Upon completion of the Investment, Sunny Side Up shall be entitled to 20% of the Income Right of the Target Film.

The investment amount of HK$26,270,770, is payable to Sun Entertainment at Completion and is to be satisfied by way of allotment and issue of an aggregate of 164,192,312 new ordinary shares of the Company at the issue price of HK$0.16 per ordinary share to Sun Entertainment or its nominee upon Completion. Sun Entertainment shall then be responsible for the payment of the investment amount in relation to the production of the Target Film to be contributed by Sunny Side Up, representing 20% of the Production Budget of the Target Film.

The accompanying unaudited pro forma statement of assets and liabilities of the Group (the ‘‘Statement’’) has been prepared to illustrate the effect of the Investment Agreement, assuming the transaction had been completed as at 31 December 2016, might have affected the financial position of the Group.

The Statement is prepared based on the audited consolidated statement of financial position of the Group as at 31 December 2016 as extracted from the annual report of the Company for the year ended 31 December 2016 after making certain pro forma adjustments resulting from the Investment Agreement.

The Statement is prepared based on a number of assumptions, estimates, uncertainties and currently available information, and is provided for illustrative purposes only. Accordingly, as a result of the nature of the Statement, it may not give a true picture of the actual financial position of the Group that would have been attained had the Investment Agreement actually occurred on 31 December 2016. Furthermore, the Statement does not purport to predict the Group’s future financial position.

The Statement should be read in conjunction with the financial information of the Group as set out in Appendix I of this circular and other financial information included elsewhere in this circular.

– 53 – APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

Unaudited Pro Forma The Group of the as at Group as at 31 December Pro forma 31 December 2016 adjustment 2016 HK$’000 HK$’000 HK$’000 (Note 1) (Note 2)

Non-current assets Property, plant and equipment 18,622 – 18,622 Intangible assets 10,486 26,271 36,757 Available-for-sale financial assets 7,769 – 7,769 Deposits 450 – 450

37,327 26,271 63,598

Current assets Inventories 294 – 294 Trade and other receivables 2,437 – 2,437 Available-for-sale financial assets 3,254 – 3,254 Cash and cash equivalents 22,615 – 22,615

28,600 – 28,600

Current liabilities Trade payables 236 – 236 Other payables and accruals 6,211 – 6,211 Income tax payables 6,076 – 6,076 Deferred income 312 – 312

12,835 – 12,835

Net current assets 15,765 – 15,765

Total assets less current liabilities 53,092 26,271 79,363

– 54 – APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

Unaudited Pro Forma The Group of the as at Group as at 31 December Pro forma 31 December 2016 adjustment 2016 HK$’000 HK$’000 HK$’000 (Note 1) (Note 2)

Non-current liabilities Deferred income 2,484 – 2,484 Deferred income tax liabilities 2,247 – 2,247

4,731 – 4,731

NET ASSETS 48,361 26,271 74,632

EQUITY Share capital 20,715 4,105 24,820 Other reserves 301,943 22,166 324,109 Accumulated losses (281,169) – (281,169)

Equity attributable to owners of the Company 41,489 26,271 67,760 Non-controlling interests 6,872 – 6,872

TOTAL EQUITY 48,361 26,271 74,632

– 55 – APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

(B) NOTES TO THE UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE GROUP

(1) The financial information is extracted from the audited consolidated statement of financial position of the Group as at 31 December 2016 as set out in the published annual report of the Company for the year ended 31 December 2016.

(2) It represents the issue of an aggregate of 164,192,312 new ordinary shares of the Company at the issue price of HK$0.16 per ordinary share for the acquisition of the 20% of the Income Right of the Target Film.

(3) Save as set out above, the Statement does not take into account any trading results or other transactions of the Group subsequent to the date of the financial statements as included in the Statement.

– 56 – APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

(C) ACCOUNTANT’S REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, from the independent reporting accountants, ZHONGHUI ANDA CPA Limited, Certified Public Accountants, Hong Kong.

ZHONGHUI ANDA CPA Limited Certified Public Accountants

29 June 2017

The Board of Directors Sage International Group Limited

Dear Sirs,

We have completed our assurance engagement to report on the compilation of pro forma financial information of Sage International Group Limited (the ‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) by the directors of the Company (the ‘‘Directors’’) for illustrative purposes only. The pro forma financial information consists of the unaudited pro forma statement of assets and liabilities of the Group as at 31 December 2016 (the ‘‘Statement’’) as set out in pages 53 to 56 of the investment circular (the ‘‘Circular’’) issued by the Company. The applicable criteria on the basis of which the Directors have compiled the Statement are set out in Section B of Appendix II of the Circular.

The Statement has been compiled by the Directors to illustrate the impact of the proposed investment to acquire the 20% income right of the film,《貪狼》Paradox, by issuing 164,192,312 new ordinary shares of the Company at the issue price of HK$0.16 per ordinary share on the Group’s financial position as at 31 December 2016 as if the transaction had taken place on 31 December 2016. As part of this process, information about the Group’s financial position has been extracted by the Directors from the Group’s audited consolidated financial statements as included in the annual report for the year ended 31 December 2016.

– 57 – APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

DIRECTORS’ RESPONSIBILITIES FOR THE STATEMENT

The Directors are responsible for compiling the Statement in accordance with paragraph 31 of Chapter 7 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the ‘‘GEM Listing Rules’’) and with reference to Accounting Guideline (‘‘AG’’)7‘‘Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars’’ issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).

OUR INDEPENDENCE AND QUALITY CONTROL

We have complied with the independence and other ethical requirement 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.

The firm applies Hong Kong Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

REPORTING ACCOUNTANT’S RESPONSIBILITIES

Our responsibility is to express an opinion, as required by paragraph 31(7) of Chapter 7 of the GEM Listing Rules, on the Statement 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 Statement beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

– 58 – APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 ‘‘Assurance Engagements to Report on the Compilation of Statement Included in a Prospectus’’ issued by the HKICPA. This standard requires that the reporting accountant plan and perform procedures to obtain reasonable assurance about whether the directors have compiled the Statement in accordance with paragraph 31ofChapter7oftheGEMListingRulesandwith reference to AG 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars’’ 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 Statement, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the Statement.

The purpose of the Statement included in the 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 2016 would have been as presented.

A reasonable assurance engagement to report on whether the Statement 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 Statement 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 adjustment gives appropriate effect to those criteria; and

– The Statement reflects the proper application of the adjustment to the unadjusted financial information.

– 59 – APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the Group, the event or transaction in respect of which the Statement has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the Statement.

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 Statement has been properly compiled on the basis stated;

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

(c) the adjustment is appropriate for the purposes of the Statement as disclosed pursuant to paragraph 31(1) of Chapter 7 of the GEM Listing Rules.

Yours faithfully,

ZHONGHUI ANDA CPA Limited Certified Public Accountants Hong Kong

Ngan Hing Hon Practicing Certificate Number P05294

– 60 – APPENDIX III VALUATION REPORT

The following is the text of a valuation report as at 30 November 2016 received from Greater China Appraisal Limited, an independent valuer, for the purpose of incorporation in this circular.

Room 2703, 27/F Shui On Centre 6–8 Harbour Road Wanchai Hong Kong

29 June 2017

Board of Directors Sage International Group Limited 10/F, Fun Tower 35 Hung To Road Kwun Tong Kowloon, Hong Kong

Dear Sir/Madam,

Valuation of 20% of the Income Right

In accordance with your instructions, we were engaged to assist you in the valuation analysis of fair value of a right to receive 20% of the Distributable Distribution Net Income (‘‘20% of the Income Right’’) of a film called ‘‘貪狼’’ (the ‘‘Target Film’’) as at 30 November 2016 (the ‘‘Valuation Date’’).

It is our understanding that our analysis will be used by the management of Sage International Group Limited (the ‘‘Company’’) for the transaction (the ‘‘Transaction’’) relating to the Company’s investment in the Target Film, and forms part of the circular of the Company (the ‘‘Circular’’) dated 29 June 2017. Our work was performed subject to the limiting conditions and general service conditions described in this report. The standard of value is fair value; whilst the premise of value is going concern.

The approaches and methodologies used in our work did not comprise an examination in accordance with generally accepted accounting principles, the objective of which is an expression of an opinion regarding the fair presentation of financial statements or other financial information, whether historical or prospective, presented in accordance with generally accepted accounting principles.

We express no opinion and accept no responsibility for the accuracy and completeness of the financial information or other data provided to us by others. We assume that the financial and other information provided to us is accurate and complete, and we have relied upon this information in performing our valuation.

– 61 – APPENDIX III VALUATION REPORT

I. PURPOSE OF ENGAGEMENT

The purpose of this particular engagement is for the Transaction reference and this report forms part of the Circular.

II. SCOPE OF SERVICES

We were engaged by you in determination of the fair value of 20% of the Income Right as at the Valuation Date.

III. BASIS OF VALUATION

We have performed valuation of the Intangible Asset on the basis of fair value which defines as ‘‘the estimated price for the transfer of an asset or liability between identified knowledgeable and willing parties that reflects the respective interests of those parties’’.

Our valuation has been prepared in accordance with the International Valuation Standards (2013 Edition) (‘‘IVS 2013’’) on valuation published by International Valuation Standards Council. This standard contains guideline on the basis and valuation approaches used in valuation.

IV. PREMISE OF VALUE

Premise of value relates to the concept of valuing a subject in the manner in which it would generate the greatest return to the owner of the property, taking account of what is physically possible, financially feasible, and legally permissible. Premise of value includes the following:

1. Going concern: appropriate when a business is expected to continue operating without the intention or threat of liquidation in the foreseeable future;

2. Orderly liquidation: appropriate for a business that is clearly going to cease operations in the near future and is allowed sufficient time to sell its assets in the open market;

3. Forced liquidation: appropriate when time or other constraints do not allow an orderly liquidation; and

4. Assembled group of assets: appropriate when all assets of a business are sold in the market piecemeal instead of selling the entire business.

This valuation was prepared on a going concern basis.

– 62 – APPENDIX III VALUATION REPORT

V. SOURCES OF INFORMATION

Our analysis and conclusion were based on our discussions with the management of the Company, as well as reviews of key documents and records, including but not limited to:

1. Background information and shooting schedule of the Target Film;

2. The budgets for the production costs of the Target Film;

3. The actual productions cost incurred for the Target Film up to the Valuation Date;

4. Service agreements of the director, action director, producer and major casts being signed for the Target Film;

5. The film production agreement (the ‘‘Film Production Agreement’’) being entered between Sun Entertainment Films Limited (‘‘Sun Entertainment’’) and Aether Film Production Limited (the ‘‘Production House’’) on 20 February 2016; and

6. The investment agreement (the ‘‘Investment Agreement’’) being entered into between SunnySideUp(BVI)Limited(‘‘Sunny Side Up’’) and Sun Entertainment.

We also relied upon publicly available information from sources on capital markets, including industry reports, and various databases of publicly traded companies and news.

VI. ECONOMIC OVERVIEW

In conjunction with the preparation of this valuation, we reviewed and analysed the current economic condition of China where the profits of the Target Film would be derived, and how the valuation of 20% of the Income Right might be impacted.

6.1 Nominal GDP Growth in China

In the period of 12th Five-year Plan (2011-2015), the status of economic development has been altered from rapid growth to medium-high speed growth. Under the new 13th Five- Year Plan (2016-2020), economy growth is expected to shift into lower gear as the country pursues a more sustainable and balanced expansion based on consumption, while striving to achieve a moderately prosperous society. Although the authorities are unlikely to roll out large-scale measures to drive growth, supply side reforms should gradually free up market vitality. A number of initiatives, notably the Belt and Road Initiative, Internet Plus and Made in China 2025, should also facilitate economic upgrading and increased global integration. As such, efforts to boost consumption are likely to whet an appetite for consumer goods, whereas industry upgrading is expected to stimulate demand for capital goods.

– 63 – APPENDIX III VALUATION REPORT

It can be observed that the real gross domestic products (‘‘GDP’’) annual growth rate has been stabilised at around 7% from 2012 onwards, whereas the inflation has remained moderate around 2%. The slowdown of the economic expansion was not a turning signal of economic downturn, but in fact it was matched with the expectation of Chinese government. Upon the inauguration of Chinese President Mr. Xi Jinping and the new government officials in 2013, the core of economic policy has shifted from focusing on short-term stimulus to no stimulus, deleveraging and structural reform on the national economy. Premier Mr. Li Ke Qiang has expressed his administration’s policies, named as ‘‘Likonomics’’, on the future direction of Chinese economy. In the nutshell, it represents short-term pain in return for a long term gain in the economy.

Table 6 – 1 Real GDP Annual Growth Rate and Inflation of China

2012A 2013A 2014A 2015A 2016E Real GDP Annual Growth Rate (%) 7.90 7.80 7.30 6.90 6.59 Inflation (%) 2.65 2.62 1.99 1.44 2.08

Source: World Economic Outlook Database (October 2016), International Monetary Fund

According to analysts’ comment of Barclays bank, the Likonomics will put Chinese economy into a sustainable path, and it was estimated the annual growth for the next 10 years would lie at between 6% and 7%. In accordance with the forecast published by International Monetary Fund (‘‘IMF’’), the overall real GDP growth is at 6.90% in 2015, while the projection of the real GDP growth in the next five year would follow a steady decline from 6.59% in 2016 to 5.90% in 2020, which is in line with Mr. Li’s administration direction.

The following diagram shows the real GDP annual growth rate forecasts from 2016 to 2021.

Figure 6 – 1 Forecasts of Real GDP Annual Growth Rate of China

7.00%

6.00%

5.00%

4.00% 2016E 2017 2018 2019 2020 2021

Real GDP growth (Annual percentage change)

Source: World Economic Outlook Database (October 2016), International Monetary Fund

– 64 – APPENDIX III VALUATION REPORT

According to ‘‘World Economic Outlook Database (October 2016)’’ by IMF, the Chinese economy was ranked 2nd in terms of size in 2015, it possesses the greatest growth prospect among top six economies in the world; the Chinese economy was forecasted to grow from USD11,392 billion in 2016 to USD18,033 billion in 2021 with a compound annual growth rate (‘‘CAGR’’) of 9.6%. It is worth noting that the gap between the United States and China was projected to be narrowing over time.

Table 6 – 2 Worldwide GDP

Country GDP – Billions of the United States Dollar (‘‘USD’’) 2015A 2016E 2017F 2018F 2019F 2020F 2021F 1 United States 18,037 18,562 19,377 20,251 21,105 21,927 22,767 2 China 11,182 11,392 12,362 13,576 14,918 16,458 18,033 3 Japan 4,124 4,730 5,106 5,230 5,396 5,506 5,604 4 Germany 3,365 3,495 3,619 3,736 3,867 4,008 4,114 5 United Kingdom 2,858 2,650 2,610 2,709 2,814 2,928 3,022 6 France 2,420 2,488 2,570 2,650 2,741 2,851 2,941

Source: World Economic Outlook Database (October 2016), International Monetary Fund

In the near-term outlook, there are several challenges affecting the China’s economy. The rapid growth in credit financing has derived a so-called ‘shadow banking system’, raising concerns about the quality of investment and the ability on repayment, especially when capital is flowing through less-well supervised parts of the financial system. Furthermore, China suffered from the first corporate bond default in March 2014. It sent a warning signal to the bond investors regarding the creditability of the borrowers and the stability of the market.

In addition, China’s economic growth in the past was highly depends on continuous investment in infrastructure projects. Redundant and duplicate developments resulted in a mismatch and wastage of resources. The recovery of these substantial investments which mainly financed by borrowing is challenging. In 2013, when the China’s government tried to tighten the funding channel, the capital market has immediately quaked. Not only the GDP growth rate but also the stability of the entire capital market system in China would potentially be impacted if the problem cannot be handled properly.

Furthermore, President Xi’s campaign against corruption and extravagant spending will improve the image of the government and increase the operational efficiency. On the other hand, it will affect the customer spending sector, especially, the luxury goods, fine dining and business travelling which used to be the unofficial fringe benefits of the government officers.

While the GDP growth of China’s market stalls, the other markets start recovering. The World Bank commented that the major obstacles to the recovery, including a Eurozone meltdown have been overcome. The Chinese policymaker must clamp down on lending to prevent asset bubbles. Unless the Chinese economy faces imminent risk collapse, the ‘‘temporary hard-landing’’ will not deter the long-term growth prospect of China.

– 65 – APPENDIX III VALUATION REPORT

6.2 GDP per Capita in China

Improving standard of living was one of the main issues in social aspect of the 12th Five-year plan. The disposable income level, being a good measure, has grown significantly over the past few years. According to the National Bureau of Statistics of China, annual disposable income per capita of urban households in China has increased from RMB19,109 in 2010 to RMB31,195 in the 2015, representing a CAGR of approximately 10.3%; annual disposable income per capita of rural households has increased from RMB5,919 in 2010 to RMB11,422 in 2015, representing a CAGR approximate to 14.1%. In comparison to the inflationary figures, the annual inflation rate is between 1.44% and 5.40% during the period from 2010 to 2015. Hence, there were improvement of the standard of living of Chinese people overall in the period from 2010 to 2015.

The following diagram shows the GDP per capita, annual urban and rural disposal income per capita from 2010 to 2015.

Figure 6 – 2 GDP per Capita of China

Source: National Bureau of Statistics of China

6.3 Population Growth

The population of China accounts for almost one fifth of the world’s population. According to the National Bureau of Statistics of China, the population has grown from 1.31 billion in 2006 to 1.37 billion in 2015, representing a CAGR of approximately 0.44%.

The proportion of urban population in China increased from 44.34% in 2006 to 56.10% in 2015, representing a CAGR of approximately 2.65%.

– 66 – APPENDIX III VALUATION REPORT

The following diagram shows the population growth and corresponding urban population growth in China from 2006 to 2015.

Figure 6 – 3PopulationandPortionofUrbanPopulationinChina

1,380.00 60% 1,370.00 1,360.00 50% 1,350.00 40% 1,340.00 1,330.00 30% 1,320.00 1,310.00 20% 1,300.00 10% 1,290.00 1,280.00 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Population (Million) Proportion of Urban Population

Source: National Bureau of Statistics of China

Population growth is expected to be steady in this decade. Population growth along with increasing urbanization and expansion of the middle class are particularly important to support the future growth of the domestic demand on affordable luxury goods, such as vehicles, luxury watches, etc. Steady growth in population together with improving living standard continuously derives a strong demand on housing and transportation. On the other hand, the unemployment rate was recorded at around 4.1% for the past few years, and it is estimated the status will not change from 2015 to 2020.

Table 6 – 3 Population Forecast of China

2015A 2016E 2017F 2018F 2019F 2020F

Population (Million) 1,373.49 1,378.98 1,384.50 1,389.94 1,394.82 1,399.08 Unemployment rate (%) 4.05 4.05 4.05 4.05 4.05 4.05

Source: World Economic Outlook Database (October 2016), International Monetary Fund

Although the one-child policy has curbed the growth of birth rate in China, the rising trend of China’s population has not been slowed down in few decades. At the same time, the side effect of the policy has started to take effect in the current decade; the number of elderly people is rising and this age group is forecasted to grow in the next few decades. However, the Government now has realized this trend and introduced Two-child policy which comes into effect throughout the country since October 2015. Hopefully this policy will offset the aging population structure in next few decades.

– 67 – APPENDIX III VALUATION REPORT

Table 6 – 4 Age Distribution of China

Age distribution 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 CAGR

0-14 (Million) 260 257 252 247 223 222 223 223 226 227 –1.47% 15-64 (Million) 951 958 967 975 999 1,003 1,004 1,006 1,005 1,004 0.60% >=65 (Million) 104 106 110 113 119 123 127 132 138 144 3.65%

Source: National Bureau of Statistics of China

6.4 Inflation

Managing inflation risk has been one of the key missions for the China’s government since 2010. The latest economic data released by National Bureau of Statistics of China indicated that the inflation rate was reportedat2.50%inJanuary2017onyear-over-year basis, as compared with that of 1.80% in January 2016. China is expected to continue a prudent monetary policy, keep money supply, delever the state-led investment to a reasonable level, and optimize financing and credit structures in the future.

In comparison to the inflation of world’s average and of emerging and developing economies, the outlook of China’s inflation is far left behind. The continual appreciation on RMB during the period from mid-2010 to 2013 as well as the dominating role of export in China economy were the primary reasons. On one hand, with the Federal Reserve raising interest in December 2016, a new round of currency depreciation is expected to incur in emerging countries; on the other hand, in domestic, the total import trading volume keeps increasing. Due to these two factors, expectation for RMB depreciation becomes much stronger and the situation has been prevailing since 2014.

Table 6 – 5 Annual Inflation Forecasts of China

Inflation, Average Consumer Prices Changes (%) 2015A 2016E 2017F 2018F 2019F 2020F 2021F

World 2.782.903.283.283.233.273.25 Emerging and developing economies 4.71 4.51 4.43 4.23 4.09 4.10 4.05 China 1.442.082.302.402.603.003.00

Source: World Economic Outlook Database (October 2016), International Monetary Fund

– 68 – APPENDIX III VALUATION REPORT

6.5 Government Policy

The Chinese government has issued the 13th Five-Year Plan (2016-2020) with the supply side reform as the main thread. The plan aims at 1) maintaining modest economy growth on a balanced, inclusive and sustainable basis, targeting to double GDP and per capita income of urban and rural residents comparing to 2010 by 2020; 2) upgrading the industry towards high-end level accompanied with contributions of consumption to economic growth accounting more, and improving the urbanization rate to a higher level; 3) enhancing agricultural modernization, improving people’s living standards and quality, and helping the rural poor population out of poverty; 4) improving overall national quality, ecological environment quality and social civilization significantly; and 5) implementing a more mature and stereotyped political system and achieving significant progress in national governance systems and governance capacity modernization.

In the Central Economic Work Conference held in Beijing at the end of 2016, the top leaders of the Communist Party of China emphasised that the main tasks in 2017 were as follows:

• Keeping stability while progressing in governance and economy development;

• Keeping advancing the ‘‘Three Cutting, One Reducing, One Supplement’’ policy;

• Enhancing the supply side reform of agriculture;

• Renovating hypostatic economy and industry development;

• Establishing long-term stable and healthy mechanism for real estate industry; and

• Actively attracting foreign investment to expand opening to the outside world.

Overall speaking, inflation was mild and the economy may suffer a short-term slowdown, but it is just the part of the structural reform of the economy as stated in Likonomics. Currently, it leaves policy makers sufficient flexibility if they believe the economy needs any stimulation policies.

– 69 – APPENDIX III VALUATION REPORT

VII. INDUSTRY OVERVIEW

7.1 Industry Background

In the late 20th century, with the deepening of reform and opening, as well as the completion of marketization, China’s film industry transformed into the mass media. In mid- 90’s, various types of large films with commercial element emerged in China’s film industry, for example, action films, comedy films, war films, etc. These movies contained the business concept of the success of Hong Kong’s film industry. Since then, the filmmakers in China have been exploring the opportunities to put forward the commercialization of the films. Accordingly, China’s commercial film market officially opened.

During the beginning of the 21st century, attributable to China’s rapid economic development, the number of cinemas sprang up. Meanwhile, due to the appreciation of the Renminbi and inflation, the cinema ticket fare also rose significantly. With the ‘‘value back to the fare’’ mentality of the audience, casting with superstars, grand shooting scenes and billions of investment amounts became the trend of films in China. Hence, large films became the mainstream product in the film industry in China.

Starting from 2010, the film industry in China has gradually transformed from the trend of large films to a script-oriented films. Meanwhile, the number of films has risen and the film types have become more diversified. In overall, the film industry has been in prosperity stage.

7.2 Market Size

According to State Administration of Press, Publication, Radio, Film and Television (SAPPRFT), the total box office in 2016 was RMB45.71 billion, representing a YoY growth of 3.73%; the number of urban cinema viewers was 1.37 billion, representing a YoY growth of 8.89%. Also, the number of new screens was 9,552 and resulted in 41,179 screens in total by 2016, being the world’slargest.

For the domestic films, the box office generated by local screening was RMB26.66 billion, which accounted for 58.32% of total box office in 2016, based on the statistics of SAPPRFT. In terms of the number of domestic films in 2016, there were 772 feature films, 49 animated films, 67 educational films, 32 documentary films and 24 special films.

– 70 – APPENDIX III VALUATION REPORT

Figure 7 – 1 Total Box Office of China Film Industry from 2012 to 2016

RMB (billion) 50 45.71 44.07

40

29.64 30

21.77 17.07 20

10

0 2012 2013 2014 2015 2016

Source: SAPPRFT

7.3 Film Co-production

According to China-International Film Co-production Handbook (the ‘‘Handbook’’) published by China Film Co-Production Corporation (CFCC) and Motion Picture Association (MPA), film co-productions fall into three categories: co-produced, assisted and entrusted. A co-produced film is shot by a China-based film producer and a foreign producer featured by joint investments (including funding, labor and materials), joint filming, and joint sharing of both benefits and risks. Such films are subject to preferential policies that are typically applied to domestic Chinese films within the Chinese marketplace. An assisted film is a foreign-invested film that is produced in a China setting. The assisted film must go through import formalities and is not subject to the preferential policies typically applied to domestic films in China. An entrusted film is a film in which a foreign party has fully entrusted a Chinese party to produce according to specified content and technical requirements, and is also not subject to the preferential policies typically applied to domestic films in China.

SAPPRFT launched the Provisions on the Administration of Sino-Foreign Cooperative Production of Films, which set some regulative articles to the film co-production, including but not limited to:

• A ‘‘Permit for Sino-foreign Cooperation in Film Production’’ shall be valid for two years;

– 71 – APPENDIX III VALUATION REPORT

• Where it is necessary to employ major, non-local personnel for a joint production, these individuals shall be approved by SARFT, and the proportion of the major actors of the foreign party shall not exceed two-thirds of the total number of the major actors; and

• These Provisions shall also apply to the cooperative production of films in China by film producers from the Hong Kong, Macao and Taiwan.

7.4 Film Distribution

According to the Handbook, the major traditional means of film distribution in China include profit-sharing distribution and buy-out distribution. The profit-sharing distribution is the most common means of distribution. Under the profit-sharing distribution, producers, distributors, theatre chains and cinemas proportionately share box office after deducting expenses. Buy-out distribution refers to that a distributor purchases the film, the digital copyright and the television copyright, and pays certain copyright fees.

With the popularity of the Internet and the development of technology, online cinema chains have become an important distribution channel, apart from traditional ones. For instance, several major media companies formed a distribution alliance for online cinema chains, including LETV, Tencent, PPTV, PPS, Youku, Phoenix Video and Sohu Video. These distribution alliances possess a comprehensive copyright library of films and TV shows through exclusive sales and distribution. In addition, online ticket platform has become another new distribution channel. The online ticket platforms offer online ticket booking in the form of ‘‘online seat selection’’ and ‘‘group buying’’. The major examples of online ticket platforms include WeChat Film Tickets, QQ Film Tickets, Meituan, Maoyan, etc. Online ticket booking has become popular for young people in China.

According to study performed by Entgroup1, the business model of traditional distribution companies tends to be film-oriented. That is, they ensure as many screenings on cinemas as possible for a higher box office sharing. Their comparative advantage lies in the early establishment of the frontier team and their relationship with the cinemas. On the other hand, new media distribution companies are user-oriented and data-driven. They involve in the film promotion stage by the accumulation of user data, and generate revenue through user data and traffic. Their comparative advantage is their promotion channels enhanced by new media and having no time and space constraint.

1 Sources: Study titled ‘‘ 藝恩–影視大數據平臺領航者2015國產電影發行市場白皮書’’ by Entgroup in January 2016.

– 72 – APPENDIX III VALUATION REPORT

7.5 Return Arising from Films

Apart from the traditional factors like content creation and creative staff selection, there are also other factors affecting the returns from films, including marketing strategy and the extension of film-derived business.

According to the study of Deloitte2, the mastery of new media user data will enhance the precision of the marketing of films. The use of new media user data, together with the traditional marketing tools, such as trailers and posters, will facilitate the matching between the theme content and the target audience, so that the box office will be promoted. One major example is the film series called Tiny Times. Through the analysis of those blog users who mentioned ‘‘Tiny Times’’ in their blogs, a series of online and offline activities were carried out to the target audience who were those born after 90s. Tiny Times series finally received a success in the box office.

As per the study of Deloitte, nowadays domestic box office occupies most of the income from the films in China and Hong Kong, whereas the derivatives and video on demand accounts for insignificant portion, so the return from films (in terms of time span) are in a long-tailed curve. On the other hand, in some mature film markets of foreign countries, the films are basic products while the derivatives, DVD, video on demand, pay TV, which are subsequently launched based on a certain time sequence, account for more than 80% of overall revenue from the films. As a result, revenue from the above ‘‘after- market’’ products can spread the potential risk arising from the box office. In addition, it improves the films’ return from a long-tailed curve to a thick-tailed. The underlying strategy of the above extension of film-derived business is actually the process of re-realization of the intellectual property rights arising from the films, through brand licensing, derivatives, real entertainment and internet entertainment.

VIII.COMPANY OVERVIEW

8.1 Sage International Group Limited (the ‘‘Company’’)

The Company, together with its subsidiaries is principally engaged in the provision of deathcare services and related business in China and Hong Kong. Also, the Company has made investment in the media and entertainment industry.

2 Sources: Study titled “中國文化娛樂產業前瞻電影新紀元” by Deloitte in November 2015.

– 73 – APPENDIX III VALUATION REPORT

IX. OVERVIEW OF 20% OF THE INCOME RIGHT

According to the Investment Agreement, the director of the Target Film is Wilson Yip Wai Shun and the major casts include Louis Koo, Tony Jaa and Wu Yue. Sun Entertainment is the owner of the copyright of the Target Film and would be responsible for the production and distribution of the Target Film. The shooting of the Target Film started in October 2016 and the screening period is expected to be in the second half of 2017. As confirmed with the management of the Company, the Target Film is a co-produced film.

According to the Investment Agreement, Sunny Side Up would make investment in the production costs of the Target Film (the ‘‘Production Costs’’), which is equivalent to 20% of the production budget (the ‘‘Production Budget’’), and in return Sunny Side Up is entitled to share 20% of the Distributable Distribution Net Income from the Target Film. Distributable Distribution Net Income refers to the income generated from the distribution of the Target Film in the world less the commission to the distributors, the distribution costs reasonably incurred, withholding tax for the release of the Target Film and the bonus to be paid to the Production House of the Target Film.

Based on the Investment Agreement, if the actual Production Costs exceed the Production Budget, Sun Entertainment shall be responsible for payment of the excess amount and the excess amount should not be included as part of the Production Costs for calculating the Distributable Distribution Net Income to be shared by Sunny Side Up. Inversely, if the actual Production Costs are less than the Production Budget, Sun Entertainment would refund 20% of the shortfall to Sunny Side Up.

X. VALUATION METHODOLOGY

The valuation of any asset can be broadly classified into one of three approaches, namely the cost approach, the market approach and the income approach. In any valuation analysis, all three approaches must be considered, and the approach or approaches deemed most relevant will then be selected for use in the fair value analysis of that asset.

10.1 Cost Approach

This is a general way of determining a fair value indication of a business, business ownership interest, security, or intangible asset by using one or more methods based on the value of the assets net of liabilities.

– 74 – APPENDIX III VALUATION REPORT

Value is established based on the cost of reproducing or replacing the property, less depreciation from physical deterioration and functional and economic obsolescence, if present and measurable.

We have considered and accepted the cost approach because the Target Film was still under shooting and production phase as at the Valuation Date, so it would be more reasonable for the buyers to make reference to the cost of reproducing the Target Film when determining the consideration. Also, the management of the Company has provided us with the record of actual costs and major agreements related to the cost of reproduction. Accordingly, the cost of reproducing the Target Film could reasonably reflect the fair value of 20% of the Income Right.

10.2 Market Approach

This is a general way of determining a fair value indication of a business, business ownership interest, security, or intangible asset by using one or more methods that compare the subject to similar businesses, business ownership interests, securities, or intangible assets that have been sold.

Value is established based on the principle of competition. This simply means that if one thing is similar to another and could be used for the other, then they must be equal. Furthermore, the price of two alike and similar items should approximate one another.

We have considered but rejected the market approach for the valuation of 20% of the Income Right because the available public information in relation to the acquisition of such income right or similar asset frequently involves specific buyers who pay a premium/ discount under the unique circumstances, so it was difficult to make adjustment to reflect the unique circumstances of 20% of the Income Right.

10.3 Income Approach

This is a general way of determining a fair value indication of a business, business ownership interest, security, or intangible asset by using one or more methods that convert anticipated benefits into a present value amount.

In the income approach, an economic benefit stream of the asset under analysis is selected, usually based on historical and/or forecasted cash flow. The focus is to determine a benefit stream that is reasonably reflective of the asset’s most likely future benefit stream. This selected benefit stream is then discounted to present value with an appropriate risk- adjusted discount rate. Discount rate factors often include general market rates of return at the valuation date, business risks associated with the industry in which the company operates, and other risks specific to the asset being valued.

– 75 – APPENDIX III VALUATION REPORT

We have considered but rejected the income approach because the financial projection of 20% of the Income Right could not be easily substantiated due to the performance of the Target Film being subject to various uncertainties, such as economic environment in the future.

XI. GENERAL VALUATION ASSUMPTIONS

A number of general assumptions have to be established in order to sufficiently support our conclusion of fair value. The general assumptions adopted in this valuation were:

1. There would be no material change in the existing political, legal, fiscal, foreign trade and economic conditions in the countries where the Target Film would be on screen;

2. There would be no significant deviation in the industry trends and market conditions from the current market expectation;

3. There would be no material change in interest rates or foreign currency exchange rates from those currently prevailing;

4. There would be no major change in the current taxation law in the countries where the TargetFilmwouldbeonscreen;

5. All relevant legal approvals, business certificates or licenses for the normal course of operation were formally obtained, in good standing and that no additional costs or fees were needed to procure such during the application;

6. The Company would retain competent management, key personnel, and technical staff to support the ongoing business operations; and

7. The Investment Agreement was entered between Sunny Side Up and Sun Entertainment.

XII. COST APPROACH

12.1 Valuation Methodology

The cost approach is based on the economic principle of substitution; it essentially measures what is the asset value as at the Valuation Date and how much it would cost to assemble or construct an equivalent asset. One of the replacement cost, reproduction cost, and liquidation value method is used to estimate the fair value of the assets.

– 76 – APPENDIX III VALUATION REPORT

According to the IVS 2013, the reproduction cost is the cost that would be incurred in replicating the asset. It would reflect the time, investment and processes involved in creating the subject asset, at costs prevailing at the Valuation Date. It is most appropriate for recently created intangible assets,

For the replacement cost, it is the cost of creating a modern equivalent asset that offers the same utility or functionality as the subject asset. Due to changes that have occurred in the market, like changing consumer tastes or technological changes, the processes involved in creating the subject asset may no longer be appropriate. Replacement cost is most appropriate for well-established assets where a potential buyer may have options for creating an equivalent alternative that do not involve replicating the processes involved in creating the subject asset.

In this case, given that the Target Film was still under shooting and production phase as at the Valuation Date, it means that 20% of the Income Right has just been newly created, rather than being well-established. Also, the actual cost record of the Target Film was readily available. Accordingly, the reproduction cost method was selected in this valuation.

12.2 Determination of Value

The reproduction cost in this case mainly consists the Production Costs and the contribution by the coordinator of the Target Film.

The actual Production Costs being incurred for the Target Film up to the Valuation Date, which were provided by the Company, were mainly compensation to directors, producer and scriptwriter, main and side casts and production crew, and overseas filming cost. We have reviewed the services agreements, film production agreement, and breakdowns of actual Production Costs and Production Budget which were provided by the management of the Company. Hence, we have applied the total reproduction costs incurred, contracted production costs to be incurred plus any refund from Sun Entertainment (if applicable).

As at the Valuation Date, the Target Film had still been under shooting process, which caused the difference between the actual Production Costs incurred up to the Valuation Date and the Production Budget. The Production Costs further incurred included remaining compensation to the director and side cast, salary to local production crew, post-production fee and other production overhead.

– 77 – APPENDIX III VALUATION REPORT

On the other hand, the overall set-up of the Target Film, like the engagement of the directors, producer and major casts, was coordinated by the managing director of Sun Entertainment, Mr. Paco Wong (the ‘‘Coordinator’’). The Coordinator is experienced and has built extensive personal network within the media and entertainment industry. Therefore, the contribution of the Coordinator provided value to 20% of the Income Right. In quantifying the contribution of the Coordinator, we have made reference to the remuneration of individuals who possess similar profile as the Coordinator.

Based on the best available market information as at the Valuation date, we have obtained the following findings:

Table 12 – 1 Summary of Findings of the Remuneration of the Similar Position as the Coordinator

Findings Industry Title Place of work Basic Salary (HKD/year)

1) Media and Entertainment General Manager Hong Kong 1.2 million6 2) Media and Entertainment Director Hong Kong 1 - 1.5 million7

The above findings show that the salary of individuals with similar profile as the Coordinator is ranged from HKD1 million to HKD1.5 million per year. Further confirmed with the Company, the above findings fall within the reasonable range of the remuneration of individuals who possess similar profile as the Coordinator. Therefore, for valuation purpose we adopted the average of the above range, which was HKD1.25 million as the annual remuneration of the Coordinator.

According to the Company, the Coordinator spent three months on coordinating the set-up of the Target Film. As a result, the cost of the contribution of the Coordinator was estimated as his three-month remuneration on pro-rata basis, which was HKD312,500.

6 Source: the 2016 Salary & Employment Outlook of Michael Page 7 Source: Market Trends & Salary Report 2016 Hong Kong, Ambition

– 78 – APPENDIX III VALUATION REPORT

Table 12 – 2 Details of the allocation of budget and the actual costs incurred as at the Valuation Date are summarized as follows:

Incurred as at Valuation Allocation of budget Budget Date Difference HKD HKD HKD

Per Investment Agreement 131,353,850

Costs covered by Film Production Agreement: Production house (a) – (h): (a) overseas filming 33,467,614 27,937,373 5,530,241 (b) crew 16,841,936 7,575,502 9,266,434 (c) administrative fee 7,500,000 – 7,500,000 (d) post production 12,929,870 7,680 12,922,190 (e) daily expenses 1,099,330 715,721 383,609 (f) camera & lighting equipment 1,740,000 886,576 853,424 (g) Overseas travelling & accommodation 2,864,970 200,797 2,664,173 (h) other cast 1,000,000 363,000 637,000

Sub-total 77,443,720 37,686,649 39,757,0711

Costs subject to service agreements (i) – (j): (i) Main cast 22,000,000 20,162,133 1,837,867 (j) Director & producer 24,080,000 20,700,000 3,380,000

Sub-total 46,080,000 40,862,133 5,217,8672

Other components (k) – (m): (k) Insurance 900,000 – 900,000 (l) Company overhead 5,925,000 395,278 5,529,722 (m) Others 1,005,130 – 1,005,130

Sub-total 7,830,130 395,278 7,434,8522

Total 131,353,850 78,944,060 52,409,790

– 79 – APPENDIX III VALUATION REPORT

Notes:

1. With reference to the Film Production Agreement, the contract sum was HKD77,443,720. Confirmed with the management of the Company, the difference of HKD39,757,071 between the budgeted production costs of HKD77,443,720, as stipulated in the Film Production Agreement for items (a) – (h) and the actual production costs for items (a) – (h) of HKD37,686,649 incurred as at the Valuation Date, will be payable upon the completion of the production. The majority of such sum will be used in the post-production fee and other production overhead. Such sum accounts for the majority of the HKD52,409,790 difference between budgeted production costs and actual production costs incurred as at the Valuation Date.

2. The remaining HKD12,652,719 (HKD5,217,867 + HKD7,434,852) out of the HKD52,409,790 difference represents the production costs to be incurred not covered by the Film Production Agreement, which accounts approximately 10% of the total budget. Such difference can be temporary andisconsideredtobenormalgiventhatthereisstill about half year of production time before the production is completed as at the Valuation Date. Given the information available, there was no material event which might result in a significant change of the original production plan. Therefore, it is expected that the ultimate production costs would not deviate significantly from the original budget.

Table 12 – 3 The fair value of 20% of the Income Right as at the Valuation Date is as follows:

HKD

Total actual production costs incurred uptotheValuationDate(a) 78,944,060 Contracted production costs to be incurred (b) 39,757,071 Contribution by the Coordinator 312,500

Total reproduction cost plus contracted production costs to be incurred 119,013,631 Difference between (a)+(b) and Budgeted Production Cost1 12,652,719

Total 131,666,350 Interest shared by Sunny Side Up 20%

20% of the Income Right shared by Sunny Side Up 26,333,270 20% of the Income Right shared by Sunny Side Up (rounded) 26,333,000

Note:

1. The value of the difference shared by the 20% of the Income Right shared by Sunny Side Up can be subsequently realized by either subsequent spending in production of the film or refund from the Investment Agreement that equals to HKD131,353,850 minus (a)+(b) above.

– 80 – APPENDIX III VALUATION REPORT

12.3 Summary of Results

As mentioned, up to the Valuation Date the Target Film had still been under shooting process, so some production costs were further incurred thereafter. According to the management of the Company, the Production Costs have been managed in a cautious manner and subject to an ongoing review.

The Company expects to acquire 20% interest in the Income Right, which is considered as a minority interest compared to the investment made by Sun Entertainment. In addition, Sun Entertainment is experienced in movie production. As such, Sun Entertainment was responsible for the negotiation of the production agreement with the Production House. The Company had exerted its best effort in acquiring the majority of the key information in relations to the budgeted production costs.

We have performed market benchmarking on the key items of Production Budget obtained by the Company, namely the remuneration of the director, action director, producer and main cast. The aforementioned items accounts for 35% of the Production Budget stated in the Investment Agreement. The result of the benchmarking shows the aforementioned items were within reasonable range.

We have obtained and reviewed other major items of the Production Budget. For example, the overseas filming budget, which accounts for 43% of the budgeted production costs (excluding director, action director, producer and main cast) stated in the Film Production Agreement, was categorised by items such as lighting and equipment, travelling and accommodation, arts and costume. Each major category comprises further breakdowns. We have reviewed those breakdowns and the result shows that the overall Production Budget was formed on a logical basis.

As of the date of this report, the Production House has managed the cost of main cast well and the cost of director and producer was also managed below the budget. The shooting of the film has been successfully completed as of the date of this report. On the other hand, Sun Entertainment has engaged the Production House for the overall film production so other production costs have been managed. Therefore, no significant difference between the Production Costs and the Production Budget would be expected.

Having considered the above, Sun Entertainment guaranteed the Production Costs for the purpose of calculating the Distributable Distribution Net Income entitled by the Company not exceeding the Production Budget. In the event the Production Costs (excluding the contribution by the Coordinator) being less than the Production Budget, Sun Entertainment would refund 20% of the difference. Since the Company is entitled to share 20% of the Distributable Distribution Net Income in return of its investment in the Target Film, the fair value of 20% of the Income Right would be HKD26,333,000, representing the estimated total reproduction cost of the film plus any refund from Sun Entertainment (if applicable).

– 81 – APPENDIX III VALUATION REPORT

XIII. LIMITING CONDITIONS

We have made no investigation of and assumed no responsibility for the title to or any liabilities against the Company.

The opinions expressed in this report have been based on the information supplied to us by the Company and its staff, as well as from various institutes and government bureaus without verification. All information and advice related to this valuation are provided by the management of the Company. Readers of this report may perform due diligence themselves. We have exercised all due care in reviewing the supplied information. Although we have compared key supplied data with expected values, the accuracy of the results and conclusions from the review are reliant on the accuracy of the supplied data. We have relied on this information and have no reason to believe that any material facts have been withheld, or that a more detailed analysis may reveal additional information. We do not accept responsibility for any errors or omissions in the supplied information and do not accept any consequential liability arising from commercial decision or actions resulting from them.

This valuation reflected facts and conditions existing at the Valuation Date. Subsequent events have not been considered, and we have no obligation to update our report for such events and conditions.

XIV. SYNTHESIS AND RECONCILIATION

The following comparative data summarized the methods we have accepted or considered and rejected, along with their respective final values. Each method was rated in relations to the applicability of the method corresponding to the facts and circumstances of 20% of the Income Right. The strengths/weaknesses of each method were discussed.

Cost Approach CostofReproducingMethod...... HKD26,333,000 Application ...... Accepted

Market Approach Application ...... Rejected

Income Approach Application ...... Rejected

As the cost approach is the only applied methodology, we concluded that the fair value of 20% of the Income Right was HKD26,333,000 as at the Valuation Date.

– 82 – APPENDIX III VALUATION REPORT

XV. CONCLUSION OF VALUE

In conclusion, based on the analysis stated above and the valuation methods employed, it was our opinion that the fair value of the right to receive 20% of the distributable distribution net income of the film ‘‘貪狼’’ as at 30 November 2016 was as follows:

Fair Value

The Right to Receive 20% of the Distributable Distribution Net Income of the Film ‘‘貪狼’’, as at 30 November 2016 HKD26,333,000

The opinion of value was based on generally accepted valuation procedures and practices that rely extensively on the use of numerous assumptions and consideration of many uncertainties, not all of which can be easily quantified or ascertained.

We hereby certify that we have neither present nor prospective interests in the subject under valuation. Moreover, we have neither personal interests nor bias with respect to the parties involved.

This valuation report is issued subject to our general service conditions.

Yours faithfully, For and on behalf of GREATER CHINA APPRAISAL LIMITED

Max K.P. Tsang, CPA, CFA, FRM, MStat Director

Analysed and Reported by: Elaine Y.T. Leung, CPA Senior Manager, Business Valuation and Transaction Advisory

Matthew L.P. Leung, CPA, CFA, FRM Manager, Business Valuation and Transaction Advisory

– 83 – APPENDIX III VALUATION REPORT

INVOLVED STAFF BIOGRAPHY

Max K.P. Tsang, CPA, CFA, FRM, MStat

Director

Mr. Tsang is presently the Director of Greater China Appraisal Limited. Mr. Tsang is experienced in business valuation for private and listed companies for the purposes of financial reporting, initial public offerings, mergers and acquisitions, financing, tax and litigation support purposes. The valuation services provided included business valuation, intangible asset valuation (such as trademarks, distribution networks, patents and customer relationship), biological assets valuation, mining valuation and financial instrument valuation. Mr. Tsang has extensive experience in serving private and listed enterprises in Hong Kong, China, Singapore and the United States. His experience covers a wide range of industries including agriculture, financial services, infrastructure, telecommunications, information technology, retail, real estate, mining and multimedia.

Elaine Y.T. Leung, CPA

Senior Manager, Business Valuation and Transaction Advisory

Ms. Leung is experienced in valuation of both business and intangibles assets with industry ranging from post-production service, port operation, mining, metal processing, food & beverage, financial services to information technology. Her valuation jobs have been performed for transaction reference, IRS filing and financial reporting propose. The clients of her engagements cover both private and listed companies located in United Kingdom, China, Hong Kong.

Matthew L.P. Leung, CPA, CFA, FRM

Manager, Business Valuation and Transaction Advisory

Mr. Leung is experienced in providing valuation and business consulting services for public and private companies for financial reporting and transaction purposes. His industry exposure covers consumer and industrial, technology and media, alternative energy, financial services, utility and infrastructure, forestry, gaming and mining sectors. The clients of his engagements cover both private and listed companies located in China and Hong Kong.

– 84 – APPENDIX IV GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. 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’s interests and short positions in the securities of the Company and its associated corporations

As at the Latest Practicable Date, the interests or short positions of the Directors and the chief executives of the Company in the Shares, underlying Shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provision of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) to be notified to the Company and the Stock Exchange pursuant to Rule 5.46 to 5.67 of the GEM Listing Rules, were as follows:

Interests in Shares and underlying Shares of the Company

Number of Shares and underlying Shares beneficially held:

(A) Long positions

Total number Percentage of Number of Number of of Shares and the issued issued underlying underlying share capital of Name of Directors Capacity Notes Shares held Shares held Shares held the Company

Mr. Chui Bing Sun Interest of a controlled 1 149,472,498 – 149,472,498 15.04% (‘‘Mr. Chui’’) corporation Personal 2 1,800 1,052,820 1,054,620 0.11%

149,474,298 1,052,820 150,527,118 15.15%

Mr. Dong Choi Chi, Alex Interest of a controlled (‘‘Mr. Dong’’) corporation 3 284,492,312 – 284,492,312 28.63% Personal 1,000,000 – 1,000,000 0.10%

285,492,312 – 285,492,312 28.73%

Mr. Yao Kan Shan Personal 4 – 1,500,000 1,500,000 0.15% Mr. Chan Wai Man Personal 4 27,000 143,565 170,565 0.02% Mr. Siu Hi Lam, Alick Personal 4 – 119,638 119,638 0.01%

– 85 – APPENDIX IV GENERAL INFORMATION

Notes:

1. These Shares are held by New Brilliant Investments Limited (‘‘New Brilliant’’), a company incorporated in the British Virgin Islands. It is wholly and beneficially owned by Mr. Chui, an executive Director of the Company.

2. Mr. Chui had a personal interest in 1,800 Shares and 1,052,820 underlying Shares of the Company. The underlying Shares represent the share options granted by the Company to Mr. Chui to subscribe for 1,052,820 Shares at adjusted exercise price of HK$4.175 per Share.

3. 120,300,000 Shares are held by Heading Champion Limited, a company incorporated in the British Virgin Islands and 164,192,312 Shares will be allotted and issued to Sun Entertainment upon Completion pursuant to the terms and conditions of the Investment Agreement. Both Heading Champion Limited and Sun Entertainment are wholly and beneficially owned by Mr. Dong, an executive Director. By virtue of the SFO, Mr. Dong is deemed to be interested in the Shares held by Heading Champion Limited and Sun Entertainment.

4. For details of the underlying Shares, please refer to the next section headed ‘‘share options’’ which stated all the details of share options granted to Directors.

– 86 – APPENDIX IV GENERAL INFORMATION

(B) Share options

Pursuant to the new share options scheme adopted by the Company on 31 August 2011, certain Directors and participants were granted share options to subscribe for the Company’s shares, details of share options outstanding and exercisable as at the Latest Practicable Date were as follow:

Number of share options Outstanding and exercisable Outstanding Exercised as at as at Granted during during Lapsed during the Latest Exercise price 1 January 2017 the period the period the period Practicable Date Date of grant Exercise period per share

Category 1: Directors Mr. Chui 1,052,820 –––1,052,820 22 March 2011 22 March 2011 – HK$4.175 21 March 2021 Mr. Yao Kan Shan 1,500,000 –––1,500,000 22 August 2016 22 August 2019 – HK$0.211 21 August 2026 Mr. Chan Wai Man 23,927 –––23,927 15 February 2008 15 February 2008 – HK$6.892 14 February 2018 119,638 –––119,638 5 December 2011 5 December 2011 – HK$2.372 4 December 2021 Mr. Siu Hi Lam, Alick 119,638 –––119,638 5 December 2011 5 December 2011 – HK$2.372 4 December 2021

Sub total 2,816,023 –––2,816,023

Category 2: Employees/consultants Employee 38,284 –––38,284 15 February 2008 15 February 2008 – HK$6.892 14 February 2018 Employees 981,034 –––981,034 7 July 2010 7 July 2010 – HK$1.784 6July2020 Employee 153,137 –––153,137 12 August 2010 12 August 2010 – HK$4.912 11 August 2020 Employees 430,698 –––430,698 9 September 2010 9 September 2010 – HK$4.791 8 September 2020 Employees 765,686 –––765,686 13 September 2010 13 September 2010 – HK$4.474 12 September 2020 Employees 693,903 –––693,903 3 December 2010 3 December 2010 – HK$4.455 2 December 2020 Employee 1,196,386 –––1,196,386 5 December 2011 5 December 2011 – HK$2.372 4 December 2021 Employee 1,624,311 –––1,624,311 18 January 2013 18 January 2013 – HK$1.102 17 January 2023 Employees 1,900,000 ––(100,000) 1,800,000 11 April 2016 11 April 2019 – HK$0.188 10 April 2026 Employees – 5,400,000 ––5,400,000 25 January 2017 25 January 2020 – HK$0.200 24 January 2027 Consultant 382,843 –––382,843 14 December 2007 14 December 2007 – HK$5.846 13 December 2017 Consultant 555,122 –––555,122 12 August 2010 12 August 2010 – HK$4.912 11 August 2020 Consultant 135,430 –––135,430 6 September 2010 6 September 2010 – HK$4.137 5 September 2020 Consultant 1,052,820 –––1,052,820 22 March 2011 22 March 2011 – HK$4.175 21 March 2021 Consultant 4,500,000 –––4,500,000 11 April 2016 11 April 2017 – HK$0.188 10 April 2026 Consultant – 1,500,000 ––1,500,000 25 January 2017 25 January 2020 – HK$0.200 24 January 2027

Sub total 14,409,654 6,900,000 – (100,000) 21,209,654

Total of all categories 17,225,677 6,900,000 – (100,000) 24,025,677

– 87 – APPENDIX IV GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or 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) which were required (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) to be notified to the Company and the Stock Exchange pursuant to Rule 5.46 to 5.67 of the GEM Listing Rules.

(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO

So far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, the following persons (not being Directors or chief executive of the Company) had, or were deemed to have, interests or short positions in the Shares or underlying Shares 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, or who was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group:

Number of ordinary Shares and underlying Shares beneficially held

Total number of Shares Number of and Number of underlying underlying Long/short Percentage of Name Capacity Notes Shares Shares Shares position interests

New Brilliant Beneficial owner 1 149,472,498 – 149,472,498 Long 15.04%

Mr. Chui Interest of controlled 1 149,472,498 – 149,472,498 Long 15.04% corporations Personal 2 1,800 1,052,820 1,054,620 Long 0.11%

149,474,298 1,052,820 150,527,118 15.15%

Heading Champion Limited Beneficial owner 3 120,300,000 – 120,300,000 Long 12.11%

Sun Entertainment Beneficial owner 3 164,192,312 – 164,192,312 Long 16.52%

Mr. Dong Interest of controlled 3 284,492,312 – 284,492,312 Long 28.63% corporations Personal 1,000,000 – 1,000,000 Long 0.10%

285,492,312 – 285,492,312 28.73%

Mr. Chan Ping Che Beneficial owner 97,390,000 – 97,390,000 Long 9.8%

– 88 – APPENDIX IV GENERAL INFORMATION

Notes:

1. These Shares are held by New Brilliant, a company incorporated in the British Virgin Islands. It is wholly and beneficially owned by Mr. Chui.

2. Mr. Chui had a personal interest in 1,800 Shares and 1,052,820 underlying Shares. The underlying Shares represent the share options granted by the Company to Mr. Chui to subscribe for 1,052,820 Shares at adjusted exercise price of HK$4.175 per Share.

3. 120,300,000 Shares are held by Heading Champion Limited, a company incorporated in the British Virgin Islands and 164,192,312 Shares will be allotted and issued to Sun Entertainment upon Completion pursuant to the terms and conditions of the Investment Agreement. Both Heading Champion Limited and Sun Entertainment are wholly and beneficially owned by Mr. Dong, an executive Director. By virtue of the SFO, Mr. Dong is deemed to be interested in the Shares held by Heading Champion Limited and Sun Entertainment.

Save as disclosed above, As at the Latest Practicable Date, the Directors and the chief executive of the Company were not aware of any other person (other than the Directors and the chief executive of the Company) who had, or was deemed to have, interests or short positions in the Shares or underlying Shares, 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, or who was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group.

3. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by members of the Group within the two years immediately preceding the Latest Practicable Date which are or may be material:

(a) the placing agreement dated 26 May 2016 and entered into between the Company and Sun International Securities Limited as placing agent in relation to the placing of 138,000,000 new Shares, the net proceeds of which amounted to approximately HK$18.81 million;

(b) the subscription agreement dated 19 August 2016 entered into between Winning Spotlight Limited, a wholly-owned subsidiary of the Company as subscriber and Black Sesame Entertainment Co. Limited as the issuer in relation to the subscription of 7 new ordinary shares (the ‘‘Subscription Shares’’), representing 70% of the total number of shares as enlarged by the allotment and issue of the Subscription Shares of Black Sesame Entertainment Co. Limited;

– 89 – APPENDIX IV GENERAL INFORMATION

(c) the shareholders’ agreement dated 23 November 2016 entered into among Winning Spotlight Limited, a wholly-owned subsidiary of the Company, Keith Productions Limited and Black Sesame Entertainment Co. Limited relating to the shareholdings, management, activities and other matters concerning the operations of Black Sesame Entertainment Co. Limited;

(d) the Investment Agreement; and

(e) the placing agreement dated 8 March 2017 and entered into between the Company and Sun International Securities Limited as placing agent in relation to the placing of 165,000,000 new Shares, the net proceeds of which amounted to approximately HK$25.51 million.

4. DIRECTORS’ SERVICE CONTRACTS

Each of the executive Directors has entered into a service contract with the Company for an initial term of one year from the date of appointment and is renewable each year thereafter, until terminated by not less than two months’ notice in writing served by either party.

Each of the independent non-executive Directors has entered into a service contract with the Company for an initial term of one year from the date of appointment and is renewable each year thereafter, until terminated by not less than one month’s notice in writing served by either party.

Save and except the above, as at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation other than statutory compensation).

5. INTERESTS IN ASSETS, CONTRACTS OR ARRANGEMENT

As at the Latest Practicable Date, none of the Directors, has, or had, any direct or indirect interest in any assets which had been or are proposed to be acquired, disposed of by or leased to, any member of the Group since 31 December 2016, the date to which the latest published audited financial statements of the Company were made up.

None of the Directors is materially interested in any contract or arrangement subsisting at the Latest Practicable Date which is significant in relation to the business of the Group.

– 90 – APPENDIX IV GENERAL INFORMATION

6. EXPERT AND CONSENT

The following are the qualification of the experts who have given opinions or advice which are contained in this circular:

Name Qualifications

Greater China Appraisal Limited Independent Valuer

Messis Capital Limited A licensed corporation to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

Zhonghui Anda CPA Limited Certified Public Accountants

Each of the experts above has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter or report and references to its name in the form and context in which it appears. As at the Latest Practicable Date, each of the experts above did not have any shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

In addition, as at the Latest Practicable Date, each of the expert above did not have any direct or indirect interest in any assets which had been acquired, disposed of by or leased to, any member of the Group since 31 December 2016, the date to which the latest published audited financial statements of the Group were made up.

7. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any material litigation, claim or arbitration of material importance and no litigation, claim or arbitration of material importance is known to the Directors to be pending or threatened against any member of the Group.

8. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial position or settlement position of the Group since 31 December 2016 being the date to which the latest published audited financial statements of the Group were made up.

– 91 – APPENDIX IV GENERAL INFORMATION

9. COMPETING INTERESTS

Mr. Dong, an executive Director of the Company, is the sole owner and director of Sun Entertainment Holdings Limited, which together with its subsidiaries, including Sun Entertainment Culture Limited, are principally engaged in investment holding, artist and model management, entertainment, sports, publishing and film and concert production and coordination. He is also an ultimate beneficial owner and a director of Sun Motion (Hong Kong) Limited, which is also engaged in investment holding, artist and model management, entertainment, sports, publishing and film and concert production and coordination. He is also a substantial shareholder and director of Sun Entertainment Concert Group Holdings Limited, which together with its subsidiaries are principally engaged in concert investment, production and coordination. He is also a substantial shareholder and a director of Sun Entertainment Film Group Holdings Limited, which together with its subsidiaries are principally engaged in film investment and production. Mr. Dong is also one of the ultimate beneficial owners and a director of Sun Asia Group Limited, which together with its subsidiaries are principally engaged in the media and entertainment related investment and production in Macau. Therefore, he is considered to have interest in the business which competes or is likely to compete, either directly or indirectly, with the businesses of the Group in the media and entertainment industry (as would be required to be disclosed under Rule 11.04 of the GEM Listing Rules).

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor their respective associates was interested in any business apart from the business of the Group, which competes or is likely to compete, either directly or indirectly, with the business of the Group.

10. PARTICULARS OF DIRECTORS

Executive Directors

Mr. Chui Bing Sun (‘‘Mr. Chui’’), aged 40, joined the Group on 23 November 2007 and is also a Chairman and CEO of the Group. Mr. Chui leads the board in strategic direction and overall business development in the deathcare industry. Mr. Chui has extensive experiences in funeral industry. Mr. Chui studied over 60 cemeteries and funeral homes in China, Taiwan, United States (the ‘‘U.S.’’), United Kingdom (the ‘‘U.K.’’)and France. Prior to joining the Group, Mr. Chui has several years of experience in hedge fund and portfolio management. Mr. Chui has been a fund manager of two global hedge funds for five years and has worked for two international accounting firms. Mr. Chui is a member of the American Institute of Certified Public Accountants (‘‘AICPA’’)andisaChartered Financial Analyst (‘‘CFA’’). Mr. Chui is also currently pursuing his PhD in financial engineering at the University of Warwick.

– 92 – APPENDIX IV GENERAL INFORMATION

Mr.DongChoiChi,Alex(‘‘Mr. Dong’’), aged 36, joined the Group on 4 May 2015 and obtained his Master of Business Administration in Chinese Business Studies at St Clements University in 2011. Mr. Dong also obtained a Master of Business Administration at the Business University of Costa Rica in 2012. Mr. Dong has extensive experience in business development and marketing. He founded Nextra Marketing and Business Consulting Limited (‘‘Nextra Marketing’’) in Macau in 2009 specializing in event management and provision of tailor-made services to clients as well as assisting them in the formulation of strategic plans. In 2011, Mr. Dong also founded Nextra (HK) Limited (‘‘Nextra HK’’) which targets at providing creative marketing solutions to the Hong Kong market. Mr. Dong is currently the Chief Executive Officer of Nextra Marketing and Nextra HK. Meanwhile, Mr. Dong founded Sun Entertainment Culture Limited in 2011 which produces and distributes films and organizes live concert.

Mr.YaoKanShan(‘‘Mr. Yao’’), aged 38, joined the Group on 4 May 2015 and holds a Bachelor of Science in Applied Mathematics and Statistics from the State University of New York at Stony Brook, USA. After his graduation from the university in 2001, Mr. Yao started to gain experience in marketing and business development from working in companies of different sectors in Hong Kong. Since 2008, Mr. Yao spent much of his time involving in family business on an energy related project and subsequently on a lighting project in Indonesia. It was during this period that Mr. Yao further enriched and applied his experience in strategic planning, project management, branding development, product design and marketing. Mr. Yao joined Nextra HK in 2013 as Project Manager involving in various cross border projects on a diversified range of businesses.

Independent non-executive Directors

Mr. Chan Wai Man (‘‘Mr. Chan’’), aged 52, joined the Group on 23 November 2007 and is a member of the Institute of Chartered Accountants in England and Wales and also a fellow member of the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants. Mr. Chan has experiences in auditing, taxation and finance. Mr. Chan was an independent non-executive director of Tai United Holdings Limited (stock code: 718) and Global Mastermind Holdings Limited (stock code: 8063).

– 93 – APPENDIX IV GENERAL INFORMATION

Mr. Siu Hi Lam, Alick (‘‘Mr. Siu’’), aged 62, joined the Group on 2 February 2010, is the managing director of Fortune Take International Limited, a company engaging in providing financial consultancy services. Mr. Siu has worked in the finance and banking field for more than 25 years. Mr. Siu was the senior vice president of AIG Finance (Hong Kong) Limited and the vice president of Bank of America and responsible for business development and credit risk management. Mr. Siu obtained a Master degree in Business Administration from the University of Hull in the U.K. Mr. Siu is currently an independent non-executive director of BEP International Holdings Limited (stock code: 2326) and Get Nice Holdings Limited (stock code: 64).

Mr. Ting Kit Lun (‘‘Mr. Ting’’), aged 52, joined the Group on 12 October 2015, has been a senior executive with substantial experience in Fortune 500 and local corporations. Mr. Ting had served as APAC head of compliance and regional controller for 15 years in two sizeable US retailers. Mr. Ting has also served a multi-national manufacturing enterprise as Chief Operating Officer. Mr. Ting is currently a consultant providing business strategies advisory at the board level and risks management services in business operations to his clients, which include some prominent financial groups in Hong Kong and private equity firms in China. Mr. Ting is a Fellow of the Association of Chartered Certified Accountants. Mr. Ting obtained his Master of Business Administration degree from the University of Leicester, and his Master of Laws degree from the University of Hong Kong.

11. MISCELLANEOUS

(a) The registered office of the Company is at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda.

(b) The principal place of business of the Company in Hong Kong is at 10th Floor, Fun Tower, 35 Hung To Road, Kwun Tong, Kowloon, Hong Kong.

(c) The Hong Kong branch share registrar of the Company is Tricor Tengis Limited whose address is at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

(d) The company secretary of the Company is Mr. Jip Ki Chi. He is currently a fellow member of the Hong Kong Institute of Certified Public Accountants and is a Certified Practising Accountant of CPA Australia.

(e) The compliance officer of the Company is Mr. Chui Bing Sun appointed pursuant to Rule 5.19 of the GEM Listing Rules.

– 94 – APPENDIX IV GENERAL INFORMATION

(f) The audit committee of the Company was set up for the purpose of reviewing the Group’s financial controls, internal control and risk management systems, reviewing and monitoring the integrity of consolidated financial statements and reviewing annual, interim and quarterly consolidated financial statements and reports before submission to the Board and considering and recommending the appointment, re-appointment and removal of external auditors of the Company. The audit committee of the Company comprises three independent non-executive Directors, Mr. Chan Wai Man (Chairman of the audit committee of the Company), Mr. Siu Hi Lam, Alick and Mr. Ting Kit Lun. Set out above are their background and directorship (present and past) of other companies listed on GEM, the main board of the Stock Exchange or other stock exchanges.

(g) As at the Latest Practicable Date, there was no benefit to be given to any Director as compensation for loss of office or otherwise.

(h) As at the Latest Practicable Date, no person had irrevocably committed themselves to vote for or against the resolutions to be proposed at the SGM.

(i) In the event of any inconsistency, the English texts of this circular and the accompanying form of proxy shall prevail over their respective Chinese texts for the purpose of interpretation.

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of the Company at 10th Floor, Fun Tower, 35 Hung To Road, Kwun Tong, Kowloon, Hong Kong, during normal business hours from the date of this circular up to and including the date of the SGM.

(a) the memorandum and bye-laws of the Company;

(b) the annual reports of the Company for each of the two financial years ended 31 December 2016 and 31 December 2015;

(c) the interim reports of the Company for the six months ended 30 June 2016 and 30 June 2015;

(d) the service agreements referred to in the paragraph headed ‘‘Directors’ service contracts’’ in this Appendix;

– 95 – APPENDIX IV GENERAL INFORMATION

(e) the material contracts referred to in the paragraph headed ‘‘Material contracts’’ in this Appendix;

(f) the written consents of the expert(s) referred to in the paragraph headed ‘‘Expert and consent’’ in this Appendix;

(g) the report from Zhonghui Anda CPA Limited on the unaudited pro forma financial information of the Group, the text of which is set out in Appendix II to this circular;

(h) the valuation report prepared by Greater China Appraisal Limited, the text of which is set out in Appendix III to this circular;

(i) a copy of each of the circulars issued pursuant to the requirements set out in Chapter 19 and/or Chapter 20 of the GEM Listing Rules which have been issued by the Company since 31 December 2016 (the date to which the latest published audited consolidated financial statements of the Group were made up); and

(j) this circular.

– 96 – NOTICE OF SGM

SAGE INTERNATIONAL GROUP LIMITED 仁智國際集團有限公司 (Incorporated in the Cayman Islands and continued in Bermuda with limited liability) (Stock Code: 8082)

NOTICE IS HEREBY GIVEN that a special general meeting (the ‘‘SGM’’)ofthe shareholders of Sage International Group Limited (the ‘‘Company’’)willbeheldat10thFloor, Fun Tower, 35 Hung To Road, Kwun Tong, Kowloon, Hong Kong on Monday, 17 July 2017 at 4:00 p.m. for considering and, if thought fit, passing with or without amendments, the following resolution which will be proposed as an ordinary resolution of the Company:

ORDINARY RESOLUTION

‘‘THAT:

(i) the investment agreement dated 24 January 2017 (as amended and supplemented by an extension letter dated 28 April 2017) (the ‘‘Investment Agreement’’)(acopyofthe Investment Agreement has been produced to the meeting and marked ‘‘A’’,and initialed by the chairman of the meeting for the purpose of identification) entered into between Sunny Side Up (BVI) Limited (‘‘Sunny Side Up’’), a wholly-owned subsidiary of the Company, and Sun Entertainment Films Limited in relation to the joint investment in the production of the film 《貪狼》(Paradox) and the transactions contemplated thereunder (including but not limited to the allotment and issue of 164,192,312 new ordinary shares (the ‘‘Consideration Shares’’)ofHK$0.025eachin the share capital of the Company) or incidental thereto (details of which are set out in the circular of the Company dated 29 June 2017) be and are hereby approved, confirmed and ratified;

(ii) subject to fulfilment of the conditions precedent set out in the Investment Agreement, the allotment and issue of the Consideration Shares in accordance with the terms and conditions of the Investment Agreement be and are hereby approved;

– 97 – NOTICE OF SGM

(iii) the directors of the Company (the ‘‘Directors’’ and each a ‘‘Director’’)beandare hereby granted a specific mandate to exercise the powers of the Company to allot and issue the Consideration Shares pursuant to the terms and conditions of the Investment Agreement, where such Consideration Shares shall rank equally in all respects among themselves and with all fully paid ordinary shares of the Company in issue as at the date of allotment and issue. The aforementioned specific mandate is in addition to, and shall not prejudice nor revoke any general or special mandate(s) which has/have been granted or may from time to time be granted to the Directors prior to the passing of this resolution; and

(iv) any Director be and is hereby authorised for and on behalf of the Company to sign and execute all such documents, instruments, agreements or deeds and to implement and take all steps and to do all acts or things deemed by the Director in his/her absolute discretion to be necessary or desirable to give effect and/or to complete or in connection with the transactions contemplated by the Investment Agreement (including, without limitation to, the execution, amendment, supplement, delivery, submission and implementation of any further documents or agreements amending the terms of the Investment Agreement).’’

ByOrderoftheBoard Sage International Group Limited Chui Bing Sun Chairman and executive Director

Hong Kong, 29 June 2017

Registered Office: Clarendon House 2ChurchStreet Hamilton HM11 Bermuda

Head Office and Principal Place of Business in Hong Kong: 10th Floor, Fun Tower 35 Hung To Road Kwun Tong, Kowloon Hong Kong

– 98 – NOTICE OF SGM

Notes:

1. Any shareholder of the Company entitled to attend and vote at the SGM shall be entitled to appoint another person as his proxy to attend and vote instead of him. A proxy need not be a Shareholder. If more than one proxy is so appointed, the appointment shall specify the number and class of Shares in respect of which each such proxy is so appointed.

2. The form of proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing or, if the appointer is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same.

3. Delivery of the form of proxy shall not preclude a shareholder from attending and voting in person at the SGM and in such event, the form of proxy shall be deemed to be revoked.

4. Where there are joint shareholders any one of such joint shareholder may vote, either in person or by proxy, in respect of such shares as if he was solely entitled thereto, but if more than one of such joint shareholders be present at the SGM the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint shareholders, and for this purpose seniority shall be determined by the order in which the names stand in the register of shareholders of the Company in respect of the joint holding.

5. In order to be valid, the form of proxy must be deposited together with a power of attorney or other authority, if any, under which it is signed or a certified copy of that power or authority, at the office of the Company’sbranch share registrar and transfer office in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not later than Saturday, 15 July 2017 at 4:00 p.m. (Hong Kong Time), being 48 hours before the time for holding the SGM or any adjournment thereof. Completion and return of a form of proxy will not preclude a Shareholder from attending in person and voting at the SGM or any adjournment thereof, should he so wish.

6. Any voting at the SGM shall be taken by poll.

7. If a Typhoon Signal No. 8 or above is hoisted or a Black Rainstorm Warning Signal is in force at or at any time after 2:00 p.m. on the date of the meeting, the meeting will be adjourned. The Company will post an announcement on the HKEXnews website (www.hkexnews.hk) and the website of the Company (www.sig.hk) and to notify shareholders of the date, time and place of the adjourned meeting.

The meeting will be held as scheduled when an Amber or a Red Rainstorm Warning Signal is in force. Shareholders should decide on their own whether they would attend the meeting under bad weather conditions bearing in mind their own situations.

– 99 –