THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular. 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 licenced securities dealer, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in China Animation Characters Company Limited, you should at once hand this circular to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee. China Animation Characters Company Limited 華夏動漫形象有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock code: 01566) MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF 85.1% OF THE SHARES IN SEGA LIVE CREATION INC. MAJOR TRANSACTION AND CONNECTED TRANSACTION IN RELATION TO THE GRANT OF THE PUT OPTION TO SEGA SAMMY HOLDINGS INC. Independent Financial Adviser to the Independent Board Committee and the Shareholders A letter from the Board is set forth on pages 7 to 18 of this circular. A letter from the Independent Board Committee containing its recommendation to the Shareholders is set forth on page 19 of this circular. A letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the Shareholders is set forth on pages 20 to 32 of this circular. 29 June 2017 TABLE OF CONTENTS Page DEFINITIONS ..................................................... 1 LETTER FROM THE BOARD ......................................... 7 LETTER FROM THE INDEPENDENT BOARD COMMITTEE ................ 19 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER ............... 20 APPENDIX I — FINANCIAL INFORMATION ...................... I-1 APPENDIX II — ACCOUNTANTS’ REPORT OF THE TARGET GROUP . II-1 APPENDIX III — UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP ....... III-1 APPENDIX IV — GENERAL INFORMATION ........................ IV-1 DEFINITIONS In this circular, unless the context otherwise requires, the capitalised terms and expressions used herein shall have the following meanings: “Acquired Shares” 851 SLC Shares, representing 85.1% of all issued shares of SLC; “Acquisition” the acquisition of the Acquired Shares by CTP pursuant to the Share Purchase Agreement; “Affiliates” with respect to any entity, any other entity directly or indirectly controlling, controlled by, or under common control with such entity. For the purposes of this definition, “control”, “controlled by” and “under common control with” means the ownership of a majority of the voting share capital of an entity or the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of an entity, whether through the ownership of voting securities, by agreement or otherwise; “Attraction” rides which require construction works upon setting up and operation staff to operate; “Board” the board of Directors; “Bonville” Bonville Glory Limited, a limited company incorporated in the BVI on 26 August 2013, the issued share capital of which is wholly-owned by Mr. TING, an executive Director, being one of the Concert Parties; “Bright Rise” Bright Rise Enterprises Limited (明揚企業有限公司), a limited company incorporated in the BVI on 6 February 2008, the issued share capital of which is held by Newgate (PTC) Limited acting as the trustee of a trust created in the Cayman Islands by Mr. ZHAUNG on 18 November 2014, namely The Fortune Trust, being one of the Concert Parties; “BVI” the British Virgin Islands; “China Animation (BVI)” China Animation Holdings (BVI) Limited (華夏動漫集 團（英屬處女島）有限公司), a company incorporated in the BVI on 24 June 2014 and a wholly-owned subsidiary of the Company; –1– DEFINITIONS “Company” China Animation Characters Company Limited (華夏 動漫形象有限公司), a company incorporated in the Cayman Islands on 25 September 2013 with all the Shares listed on the Stock Exchange (stock code: 01566); “Completion” completion of the Acquisition; “Completion Date” the date of Completion, being 1 January 2017; “Concert Parties” collectively, Mr. ZHUANG, Bright Rise, Mr. TING, Bonville, Ms. LI, Fortress Strength, Mr. IKEDA, Dragon Year, Ms. OR and East Jumbo; “Concert Party Agreement” the agreement dated 25 November 2014 and entered into amongst the Concert Parties, further information on which is set forth in the section headed “Controlling Shareholders and Substantial Shareholders” in the Prospectus; “Conditions” the Purchaser’s Conditions and the Seller’s Conditions under the Share Purchase Agreement, further information of which is set forth in the section headed “Letter from the Board – Acquisition and principal terms of the Share Purchase Agreement – Conditions precedent” in this circular; “connected person(s)” has the meaning ascribed to it by the Listing Rules; “Consideration” cash consideration for the Acquisition, being JPY600.0 million (equivalent to approximately HK$44.5 million); “CTP” China Theme Park Limited (中國主題樂園有限公司), a company incorporated in the BVI on 21 September 2012 and a wholly-owned subsidiary of the Company; “Director(s)” the director(s) of the Company; “Dragon Year” Dragon Year Group Limited, a limited company incorporated in the BVI on 3 January 2012, being one of the Concert Parties; “East Jumbo” East Jumbo Development Limited (華寶發展有限公司), a limited company incorporated in the BVI on 3 April 2012, the share capital of which is wholly-owned by Ms. OR, being one of the Concert Parties; –2– DEFINITIONS “Enlarged Group” the Company and its subsidiaries following Completion, including members of the SLC Group; “Excluded Business” the business operations and activities conducted by SLC using the trademark of “Orbi” as of the date of the Share Purchase Agreement; “Existing Interactive collectively, Tokyo JOYPOLIS, Umeda JOYPOLIS, Entertainment Parks” Shanghai JOYPOLIS, Qingdao JOYPOLIS and SEGA Republic; “First Announcement” the announcement of the Company dated 1 November 2016 on the Acquisition; “Fortress Strength” Fortress Strength Limited, a limited company incorporated in the BVI on 8 July 2013, the share capital of which is wholly-owned by Ms. LI, being one of the Concert Parties; “Group” the Company and its subsidiaries; “HK$” Hong Kong dollars, the lawful currency of Hong Kong; “Hong Kong” The Hong Kong Special Administrative Region of the PRC; “Independent Board an independent committee of the Board, comprising Committee” all the independent non-executive Directors, namely Mr. NI Zhenliang, Mr. TSANG Wah Kwong and Mr. HUNG Muk Ming, established for the purpose of advising the Shareholders on the grant of the Put Option; “JPY” Japanese yen, the lawful currency of Japan; “Latest Practicable Date” 27 June 2017, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein; “Lego” or “Independent Lego Corporate Finance Limited, a corporation Financial Adviser” licenced to carry on type 6 (advising on corporate finance) regulated activity under the SFO), and the independent financial adviser to Independent Board Committee and the Shareholders on the grant of the Put Option; –3– DEFINITIONS “Listing Rules” The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited; “Mr. IKEDA” Mr. Shinichiro IKEDA (池田慎一郎), the Honourable Chairman of the Company, being one of the Concert Parties; “Mr. TING” Mr. TING Ka Fai Jeffrey (丁家輝), the Chief Operating Officer of the Group and an executive Director, being one of the Concert Parties; “Mr. ZHUANG” Mr. ZHUANG Xiangsong (庄向松), the Chief Executive Officer of the Group and an executive Director, being one of the Concert Parties; “Ms. LI” Ms. LI Ruifang (李瑞芳), the spouse of Mr. ZHUANG, being one of the Concert Parties; “Ms. OR” Ms. OR Den Fung Bonnie (柯丹鳳), being one of the Concert Parties; “percentage ratio(s)” the percentage ratio(s) set forth in Rule 14.07 of the Listing Rules to be applied for determining the classification of a transaction; “Prospectus” the prospectus of the Company issued on 28 February 2015; “PRC” or “China” The People’s Republic of China which for the purpose of this circular, does not include Taiwan, Hong Kong and The Macau Special Administrative Region of the People’s Republic of China; “Put Option” the put option granted to SEGA SAMMY by CTP under the SLC Shareholders Agreement, pursuant to which SEGA SAMMY may sell all SLC Shares owned by SEGA SAMMY (or its permitted transferees) to CTP at the relevant Put Prices during the relevant Put Period; “Put Period” the period during which the Put Option may be exercised which will commence from the third anniversary of the Completion Date and ending on the day immediately before the sixth anniversary of the Completion Date; –4– DEFINITIONS “Put Prices” the prices at which SEGA SAMMY will be entitled to sell all SLC Shares owned by it to CTP during the Put Period pursuant to the SLC Shareholders Agreement, further information on which is set forth in the section headed “Letter from the Board – SLC Shareholders Agreement”; “Qingdao JOYPOLIS” an interactive entertainment park operated by the Group