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