CHINA STATE CONSTRUCTION DEVELOPMENT HOLDINGS LIMITED — Proxy Solicitation & Information Statement 2016

Jan 13, 2016

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

This circular is for your information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities.

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 China Jiuhao Health Industry Corporation Limited, 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 or transfer was effected for transmission to the purchaser or transferee.

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

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(Incorporated in the Cayman Islands with limited liability) (Stock Code: 419)

SUBSCRIPTION OF SHARES APPLICATION FOR WHITEWASH WAIVER AND NOTICE OF EXTRAORDINARY GENERAL MEETING

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

A letter from the Board is set out on pages 12 to 32 of this circular. A letter of recommendation from the Independent Board Committee is set out on pages 33 to 34 of this circular. A letter from the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders, is set out on pages 35 to 62 of this circular.

A notice convening the EGM to be held at Boardroom 3, Mezzanine Floor, Renaissance Harbour View Hotel Hong Kong, 1 Harbour Road, Wanchai, Hong Kong on Monday, 1 February 2016, at 10 a.m., is set out on pages 208 to 210 of this circular. Whether or not you are able to attend, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not later than 48 hours before the time appointed for the holding of such meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at such meeting or any adjournment thereof should you so wish.

14 January 2016

CONTENTS

	Pages
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33
Letter from the Independent Financial Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35
Appendix I – Financial Information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	63
Appendix II – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	188
Notice of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	208

– i –

DEFINITIONS

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

• “acting in concert”

has the same meaning as ascribed to it under the Takeovers Code

• “Affiliate”

means any other person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such specified person

• “Animation Film Cooperation Agreement”

• has the meaning given to it in the section headed “Use of proceeds and future business plan” of this circular

• “Animation Film Producer”

• has the meaning given to it in the section headed “Use of proceeds and future business plan” of this circular

• “Announcement”

• the announcement dated 10 December 2015 of the Company regarding, among other things, the Subscription Agreements and the Whitewash Waiver

• “Applicable Laws”

• means, with respect to any person, any laws, rules, regulations, directives, treaties, decrees or orders of any governmental or regulatory authority that are applicable to and binding on such person and without limitation to the foregoing, shall, in respect of the Company, include the Listing Rules and the Takeovers Code

• “Articles of Association”

• means the Company’s articles of association from time to time

• “associate(s)”

has the same meaning as ascribed to it under the Takeovers Code, unless the contexts otherwise specify

• “Board”

means the board of Directors from time to time

• “Business Day”

means a day (other than a Saturday or Sunday or public holiday and any other day on which a tropical cyclone warning no. 8 or above or a “black” rain warning signal is hoisted in Hong Kong) on which commercial banks are open for business in the city in which the specified office of the registrar is located and in Hong Kong and the PRC

– 1 –

DEFINITIONS

• “Capital Reorganisation”

means the capital reorganisation of the Company as more particularly set out in the circular of the Company dated 21 May 2015 which includes, among other things, the capital reduction where the par value of each issued existing ordinary share of the Company has been reduced from HK$0.20 to HK$0.02 effective on 25 August 2015

• “China Jiuhao” China Jiuhao Limited, a company incorporated in Hong Kong and a direct wholly-owned subsidiary of the Company

• “Circular 7” means the Announcement of the State Administration of Taxation on Several Issues concerning the Enterprise Income Tax on the Indirect Transfers of Properties by Non-Resident Enterprises Announcement of the State Administration of Taxation 2015 No.7 issued by State of Administration of Taxation of the PRC

• “Closing” means the completion of the Subscriptions

• “Closing Conditions” means the conditions precedent to the Subscriptions set out under the section headed “Conditions of the Subscriptions” of this circular

• “Closing Date” means the date of Closing, which shall be the fourteenth day after the Unconditional Date, or such other date as the parties may agree

• “Company” or “Issuer” means China Jiuhao Health Industry Corporation Limited, a company incorporated in the Cayman Islands, the issued shares of which are listed on Main Board of the Stock Exchange

• “Concert Group” means Huayi Brothers, Tencent and parties acting in concert with any of them

• “Confidex” means Confidex Key Limited, a company incorporated under the laws of the British Virgin Islands whose registered office is at 171 Main Street, Road Town, Tortola VG1110, British Virgin Islands. It is an investment vehicle and 100% controlled subsidiary of Yunfeng Fund II, L.P.

– 2 –

DEFINITIONS

• “connected person(s)”

“Control”

has the meaning as ascribed to it in the Listing Rules

means in relation to an undertaking:

• (a) the power to direct the exercise of a majority of the voting rights capable of being exercised at a general meeting of that undertaking;

• (b) the right to appoint or remove a majority of the board of directors (or corresponding officers) of that undertaking; or

• (c) the right to exercise a dominant influence over that undertaking by virtue of provisions contained in its constitutional documents or under a control contract or otherwise,

in each case either directly or indirectly and “Controlled” and “Controlling” shall be construed accordingly

• “Deeds of Undertaking”

• “Director(s)”

• “Disposal”

• “Disposed Entities”

• the deeds of undertaking entered into by Mr. Yuen with each of Huayi Brothers and Tencent, both dated 10 December 2015

• the director(s) of the Company from time to time

• means the disposal by the Group of all of its interest and/or obligations in certain companies which have no substantial operations or are immaterial to the Group

• has the meaning given to it in the section headed “Conditions of the Subscriptions” of this circular

– 3 –

DEFINITIONS

• “Distribution”

means the distribution to every shareholder of the Company whose name appeared on the Company’s share register at the record date on 5 October 2015, proportional to their interests in the total issued share capital of the Company: (i) HK$500 million in cash; (ii) 1,500,000,000 shares in Eternity Investment Limited (listed on the Main Board of the Stock Exchange with stock code: 764) received by the Company as consideration for the VSD, details of which are more particularly set out in the joint announcement of the Company and Eternity Investment Limited dated 15 May 2015 and the Company’s circular dated 23 June 2015. The Distribution has been completed in accordance with the Company’s announcement on 6 October 2015

• “EGM”

• means the extraordinary general meeting of the Company to be convened to approve, among other things, the Huayi Brothers Subscription, the Tencent Subscription, the Other Investors’ Subscriptions and the Whitewash Waiver

• “Enlarged Issued Share Capital” means the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares assuming there is no other change in the issued share capital of the Company

• “Eternity Investment” means Eternity Investment Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (stock code: 764)

• “Executive”

• means the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director

• ‘‘Extended Longstop Date’’

• means 21 April 2016

• “Group” means the Company and its Subsidiaries from time to time

• “HK$” means Hong Kong dollars, the lawful currency of Hong Kong

– 4 –

DEFINITIONS

• “Hong Kong” means Hong Kong Special Administrative Region of the PRC

• “Huayi Brothers”

means Huayi Brothers International Limited, a company incorporated under the laws of Hong Kong, whose registered office is at Room 2, 5/F, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong

• “Huayi Brothers and Tencent Locked-up Shares”

has the meaning given to it in the section headed “Huayi Brothers’ and Tencent’s Lock-up Undertakings” of this circular

• “Huayi Brothers Media Corporation”

means Huayi Brothers Media Corporation, a company listed on the Shenzhen Stock Exchange (stock code: 300027) and an integrated entertainment group

• “Huayi Brothers Subscription”

means the subscription of the Huayi Brothers Subscription Shares under the Huayi Brothers Subscription Agreement

• “Huayi Brothers Subscription Agreement”

means the conditional subscription agreement entered into by the Company with Mr. Yuen and Huayi Brothers in respect of the Huayi Brothers Subscription dated 10 December 2015

• “Huayi Brothers Subscription Shares”

means 2,452,447,978 Subscription Shares to be subscribed by Huayi Brothers under the Huayi Brothers Subscription Agreement

• “Independent Board Committee”

means an independent committee of the Board established by the Board, comprising Dr. Wong Yau Kar, David, BBS, JP, Mr. Yuen Kin, Mr. Chu Yuguo, Mr. Tian Suning, Edward and Mr. Hugo Shong to advise the Independent Shareholders in respect of the Huayi Brothers Subscription, the Tencent Subscription, the Other Investors’ Subscriptions and the Whitewash Waiver

• “Independent Financial Adviser”

Somerley Capital Limited

– 5 –

DEFINITIONS

• “Independent Shareholders”

• “Investors”

• “Investors’ Rights Agreement”

• “Key Ability”

• “Last Trading Day”

• “Latest Practicable Date”

• “Listing Rules”

• “Locked-up Shares”

means (i) as regards the Subscription Agreements and the issue of the Subscription Shares, Shareholders other than those who have a material interest in the Huayi Brothers Subscription, the Tencent Subscription, the Other Investors’ Subscriptions, the Concert Group, the Other Investors and their respective associates and those who are involved in or interested in the Subscription Agreements; or (ii) as regards the Whitewash Waiver, Shareholders other than Concert Group, the Other Investors, Mr. Yuen, and their respective associates and other Shareholders who are interested or involved in the Huayi Brothers Subscription, the Tencent Subscription, the Other Investors’ Subscriptions and/or the Whitewash Waiver

• means Huayi Brothers, Tencent and the Other Investors

has the meaning given to it in the section headed “The Investors’ Rights Agreement” of this circular

• means Key Ability Limited, a company incorporated in the British Virgin Islands with limited liability whose registered office is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. Its primary business is investment holding. It is wholly-owned by Ms. Huang Ying

• means 29 May 2015, being the last Trading Day of the Shares immediately prior to the date of the Rule 3.7 Announcement

• 11 January 2016, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

• means the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

• has the meaning given to it in the section headed “Mr. Yuen’s Lock-up Undertakings” of this circular

– 6 –

DEFINITIONS

• “Lofty Rainbow”

means Lofty Rainbow Limited, a company incorporated in the British Virgin Islands with limited liability whose registered office is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. Its primary business is investment holding. It is wholly-owned by Ms. Zhang Huiling

• “Longstop Date”

means 22 January 2016

• “Material Adverse Effect”

means any event, circumstance or effect or any combination of them which is, or which could reasonably be expected to be, materially adverse to (i) the business, operations, business results or financial condition of the Group taken as a whole; or to (ii) the ability of the Company to perform its obligations under the Subscription Agreements or to complete the Subscriptions, excluding in any such case, any event, circumstance or effect resulting from the following or any combination of the following:

• (a) performance of obligations under, or compliance with, the terms and conditions of the Subscription Agreements and any transaction or agreements contemplated to be performed by the Company under each of them; or

• (b) pandemics, earthquakes, hurricanes, tornadoes or other natural disasters, or fire, war, riot, terrorism or similar force majeure events, provided that any such events do not disproportionately and substantially affect the Group in any material respect

• “Merit New”

means Merit New Limited, a company incorporated in the British Virgin Islands with limited liability whose registered office is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. Its primary business is investment holding. It is wholly-owned by Ms. Xu Luping

“Mr. Yuen” means Mr. Yuen Hoi Po, the existing Chairman and Executive Director of the Company

– 7 –

DEFINITIONS

• “Other Investors”

• means Confidex, Merit New, Key Ability and Lofty Rainbow

• “Other Investors’ Subscription Agreements”

• means the four conditional subscription agreements entered into by the Company and Mr. Yuen with each of Confidex, Merit New, Key Ability and Lofty Rainbow in respect of the Other Investors’ Subscriptions, each dated 10 December 2015

• “Other Investors’ Subscriptions” means the subscriptions of the Other Investors’ Subscription Shares under the Other Investors’ Subscription Agreements

• “Other Investors’ Subscription means 2,268,920,415 Subscription Shares to be Shares” subscribed by the Other Investors under the Other Investors’ Subscription Agreements

• “PRC” or “China”

• means The People’s Republic of China

• “Relevant Period”

• the period beginning six months prior to the date of the Rule 3.7 Announcement and up to the Latest Practicable Date

• “RMB” means Renminbi, the lawful currency of the PRC

• “Rule 3.7 Announcement” means the announcement of the Company dated 23 June 2015 pursuant to rule 3.7 of the Takeovers Code and rule 13.09 of the Listing Rules

• “SFC” means the Securities and Futures Commission of Hong Kong

• “SFO” means the Hong Kong Securities and Futures Ordinance

• “Share(s)” means the ordinary share(s) with a par value of HK$0.02 each in the issued share capital of the Company

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

• “Stock Exchange” means The Stock Exchange of Hong Kong Limited

– 8 –

DEFINITIONS

• “Subscriptions”

means the subscriptions of the Subscription Shares under the Subscription Agreements

• “Subscription Agreements”

means the Huayi Brothers Subscription Agreement, the Tencent Subscription Agreement and Other Investors’ Subscription Agreements

• “Subscription Price” means HK$0.08 per Subscription Share

• “Share Option Schemes”

means the share option schemes of the Company adopted by the Company on 30 July 2002 and 4 June 2012

• “Subscription Shares” means the ordinary Shares with a par value of HK$0.02 each in the share capital of the Company to be subscribed by the Investors pursuant to the Subscription Agreements;

“Subsidiaries” includes, in relation to any person: (i) any company or business entity of which that person owns or controls (either directly or through one or more other subsidiaries) more than 50 per cent. of the issued share capital or other ownership interest having ordinary voting power to elect the directors, managers or trustees of such company or business entity; (ii) any company or business entity of which that person owns or controls (either directly or through one or more other subsidiaries) not more than 50 per cent. of the issued share capital or other ownership interest having ordinary voting power to elect directors, managers or trustees of such company or business entity but effectively controls (either directly or through one or more other subsidiaries) the management of the direction of business operations of such company or business entity; and (iii) any company or business entity which at any time has its accounts consolidated with those of that person or which, under Hong Kong law or any other applicable law regulations or the Hong Kong Financial Reporting Standards issued by Hong Kong Institute of Certified Public Accountants from time to time or such other applicably generally accepted accounting principles from time to time, should have its accounts consolidated with those of that person

– 9 –

DEFINITIONS

• “Takeovers Code”

means the Codes on Takeovers and Mergers issued by the SFC as amended from time to time

• “Tencent”

means Mount Qinling Investment Limited, a company incorporated under the laws of the British Virgin Islands whose registered office is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands and its corresponding address is at c/o Tencent Holdings Limited, Level 29, Three Pacific Place, 1 Queen’s Road East, Wanchai, Hong Kong. Tencent is a wholly-owned subsidiary of Tencent Holdings Limited, which is a leading provider of Internet services in China whose shares are listed on the Main Board of the Stock Exchange (stock code: 700)

• “Ten Film Production Cooperation Agreement”

• has the meaning given to it in the section headed “Use of proceeds and future business plan” in this circular

• “Ten Films Total Investment Amount”

• “Tencent Subscription”

• has the meaning given to it in the section headed “Use of proceeds and future business plan” in this circular means the subscription of the Tencent Subscription Shares under the Tencent Subscription Agreement

• “Tencent Subscription Agreement”

• means the conditional subscription agreement entered into by the Company with Mr. Yuen and Tencent in respect of the Tencent Subscription dated 10 December 2015

• “Tencent Subscription Shares”

• means 2,116,251,467 Subscription Shares to be subscribed by Tencent under the Tencent Subscription Agreement

• “Trading Day” means a day on which the Shares are traded on the Stock Exchange

• “Unconditional Date”

• means the date on which all the Closing Conditions have been satisfied (or waived in accordance with the Subscription Agreements)

• “Update Announcements” means the announcement of the Company dated 7 August 2015, 14 September 2015 and 26 October 2015 and 7 December 2015 in connection with the proposed subscriptions by the Investors

– 10 –

DEFINITIONS

“USD”

“VSD”

“Whitewash Waiver”

means United States dollars, the lawful currency of the United States

means the disposal by Unique Talent Group Limited (a wholly-owned subsidiary of the Company) of its entire shareholding interest in Smart Title Limited (a company incorporated in the British Virgin Islands) and the assignment by Unique Talent Group Limited of a shareholder’s loan due from Smart Title Limited, in each case to Eternity Investment, completed on 6 October 2015, details of which are more particularly set out in the joint announcement of the Company and Eternity Investment dated 15 May 2015 and the Company’s circular dated 23 June 2015

means a waiver from the Executive pursuant to Note 1 on the Dispensations from Rule 26 of the Takeovers Code in respect of the obligations of Huayi Brothers and Tencent to make a mandatory general offer for all of the Shares not already owned or agreed to be acquired by the Concert Group which would, if the Huayi Brothers Subscription and the Tencent Subscription proceed, otherwise arise as a result of the issue of the Huayi Brothers Subscription Shares and the Tencent Subscription Shares upon Closing

– 11 –

LETTER FROM THE BOARD

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(Incorporated in the Cayman Islands with limited liability) (Stock Code: 419)

Executive Directors:

Mr. Yuen Hoi Po Mr. Zhang Changsheng

Non-executive Director:

Mr. Tian Suning, Edward Mr. Hugo Shong

Independent non-executive Directors:

Dr. Wong Yau Kar David, BBS, JP Mr. Yuen Kin Mr. Chu Yuguo

Registered Office:

Cricket Square Hutchins Drive, P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Principal place of business in Hong Kong: Suite 3503, 35/F Tower Two, Lippo Centre 89 Queensway Hong Kong

14 January 2016

To the Shareholders

Dear Sir or Madam,

SUBSCRIPTION OF SHARES APPLICATION FOR WHITEWASH WAIVER AND NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

On 10 December 2015, the Company announced that Huayi Brothers, Tencent and each of the Other Investors entered into the Subscription Agreements with the Company and Mr. Yuen, pursuant to which the Investors have conditionally agreed to subscribe for, and the Company has conditionally agreed to allot and issue, a total of 6,837,619,860 Subscription Shares at an issue price of HK$0.08 per Subscription Share to the Investors in an aggregate gross amount

– 12 –

LETTER FROM THE BOARD

of approximately HK$547 million. Out of 6,837,619,860 Subscription Shares, 2,452,447,978 Subscription Shares representing a shareholding percentage of approximately 18.17% of the Enlarged Issued Share Capital, will be subscribed for by Huayi Brothers and 2,116,251,467 Subscription Shares representing a shareholding percentage of approximately 15.68% of the Enlarged Issued Share Capital, will be subscribed for by Tencent. The remaining 2,268,920,415 Subscription Shares representing an aggregate shareholding percentage of approximately 16.81% of the Enlarged Issued Share Capital will be subscribed for by the Other Investors.

The purpose of this circular is to provide you with, among other things, (i) further information regarding the Subscriptions and the Whitewash Waiver, (ii) the recommendations of the Independent Board Committee to the Independent Shareholders in relation to the Subscriptions and the Whitewash Waiver, (iii) the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the terms of the Subscriptions and the Whitewash Waiver, and (iv) the notice of the EGM.

THE SUBSCRIPTION AGREEMENTS

Date	:	10 December 2015
Issuer	:	The Company
Investors	:	Each of Huayi Brothers, Tencent, Confidex, Key Ability, Lofty Rainbow
		and Merit New entered into a separate Subscription Agreement with the
		Company and Mr. Yuen.

Each of Huayi Brothers, Tencent, Confidex, Key Ability, Lofty Rainbow and Merit New and their respective ultimate beneficial owners are third parties independent of the Company and its connected persons. Please refer to the section headed “Information on the Investors” for more information on the Investors.

The Subscriptions

On 10 December 2015, the Company entered into six separate Subscription Agreements with the respective Investors pursuant to which the Investors have severally and conditionally agreed to subscribe for, and the Company has conditionally agreed to allot and issue to the Investors, a total of 6,837,619,860 Subscription Shares at an issue price of HK$0.08 per Subscription Share for an aggregate gross amount of approximately HK$547 million. Holders of the Subscription Shares will be entitled to receive all future dividends and distributions, which are declared, made or paid on or after the close of business on the date of allotment and issue of the Subscription Shares.

– 13 –

LETTER FROM THE BOARD

The following table sets out a summary of the Subscription Shares to be subscribed for by each of the Investors pursuant to the Subscription Agreements:

		Shareholding
		percentage (at
		Closing assuming
		there is no change
		to the current
		share capital of
		the Company other
		than the issue of
	Number of	the Subscription
Name	Subscription Shares	Shares)
Huayi Brothers	2,452,447,978	18.17%
Tencent	2,116,251,467	15.68%
Confidex	691,882,675	5.13%
Key Ability	600,118,893	4.45%
Lofty Rainbow	610,675,788	4.52%
Merit New	366,243,059	2.71%
Total	6,837,619,860	50.66%

The Subscription Price

In terms of closing price quoted on the Stock Exchange

The Subscription Price of HK$0.08 per Subscription Share represents:

• (i) a discount of approximately 90.91% to the closing price of HK$0.88 per Share as quoted on the Stock Exchange on 29 May 2015, being the Last Trading Day;

• (ii) a discount of approximately 91.56% to the average of the closing price per Share of approximately HK$0.95 for the last five trading days as quoted on the Stock Exchange up to and including the Last Trading Day;

– 14 –

LETTER FROM THE BOARD

• (iii) a discount of approximately 91.64% to the average of the closing price per Share of approximately HK$0.96 for the last 10 trading days as quoted on the Stock Exchange up to and including the Last Trading Day;

• (iv) a discount of approximately 94.63% to the closing price of HK$1.49 per Share as quoted on the Stock Exchange on 9 December 2015, being the last trading day prior to the Announcement; and

• (v) a discount of approximately 91.30% to the closing price of HK$0.92 per Share as quoted on the Stock Exchange on 11 January 2016, being the Latest Practicable Date.

- In terms of theoretical ex entitlement closing price

The Distribution has been completed in accordance with the Company’s announcement on 6 October 2015. The Distribution comprised a distribution of cash of HK$500 million and a total of 1,500 million shares of Eternity Investment. Based on the closing share price of Eternity Investment on the Last Trading Day of HK$0.99 per share, the pro forma value of Distribution per share was approximately HK$0.30 per share.

The Subscription Price of HK$0.08 per Subscription Share represents:

• (i) a discount of approximately 86.21% to the theoretical ex-entitlement closing price (after excluding the pro forma value of Distribution per share as calculated above) of HK$0.58 on the Last Trading Day;

• (ii) a discount of approximately 87.69% to the average of the theoretical ex-entitlement closing price (after excluding the pro forma value of Distribution per share as calculated above) of HK$0.65 for the last five trading days up to and including the Last Trading Day; and

• (iii) a discount of approximately 87.88% to the average of the theoretical ex-entitlement closing price (after excluding the pro forma value of Distribution per share as calculated above) of HK$0.66 for the last ten trading days up to and including the Last Trading Day.

The Subscription Price was arrived at after arm’s length negotiation between the Company and the Investors after taking into account the prevailing market price of the Shares, the trading volume of the Shares, the historical financial performance and net asset value of the Group, the Capital Reorganisation, the VSD, the Distribution, the trading position and prospects of the Group’s existing business and the future business opportunities, relationships and capabilities potentially made available through the relationships between the Company and the Investors.

– 15 –

LETTER FROM THE BOARD

Conditions of the Subscriptions

The obligations of the Investors to subscribe and pay for, and the obligations of the Company to issue, the Subscription Shares to the Investors are subject to the fulfilment or waiver (as the case may be) of the following conditions precedent:

• (1) Approvals: all necessary approvals for the Subscriptions required under the articles of association of the Company, applicable laws (including the Takeovers Code) and the Listing Rules and otherwise having been obtained, including:

• (i) the passing by the requisite majority of Shareholders or Independent Shareholders (as appropriate) in the EGM of all resolutions required under relevant laws and regulations, including pursuant to the Listing Rules and the Takeovers Code, in respect of, among other things, the specific mandates for the allotment and issue of the Subscription Shares and the Whitewash Waiver; and

• (ii) the granting of the approval for the listing of, and permission to deal in the Subscription Shares by the Listing Committee of the Stock Exchange;

• (2) Due Diligence: the Investors having completed each of their due diligence of the Group to their satisfaction;

• (3) Share Options: all options under the Share Option Schemes having been exercised or cancelled before the Closing;

• (4) Completion of the tax filings: all filings in connection with the VSD as required by Applicable Laws (including Circular 7) with the relevant tax authorities in the PRC have been completed;

• (5) Completion of Disposal: the completion of the Disposal by the Group. The Disposal represents the disposal by the Group of all of its interest in respect of four companies (the “ Disposed Entities ”) which have no substantial operations or are immaterial to the Group. The purpose of the Disposal is to streamline the group structure and carveout certain entities which are dormant, inactive or with no material operations relevant to the principal business of the Group. The Disposal is in progress and has not been completed as at the date of this circular. The Group intends to dispose of the four Disposed Entities by way of disposal to joint venture partners or independent third parties which are not existing Shareholders;

– 16 –

LETTER FROM THE BOARD

(6) Compliance:

• (i) the representations and warranties of the Company in the Subscription Agreements continuing to be true, accurate and correct in all material respects as of the Closing Date; and

• (ii) the Company having performed all of its obligations under the Subscription Agreements expressed to be performed on or before such date;

• (7) Material Adverse Effect: no Material Adverse Effect on members of the Group having occurred since the date of the Subscription Agreements;

• (8) No injunction: no injunction, interim or otherwise, having been granted in respect of the Company which would prohibit the Company to enter into and perform its obligations under the Subscription Agreements;

• (9) Whitewash Waiver: the Executive granting the Whitewash Waiver and the satisfaction of any condition attached to the Whitewash Waiver and the Whitewash Waiver not having been revoked or withdrawn;

• (10) Investors’ Warranties: the representations and warranties of the Investors in the Subscription Agreements continuing to be true, accurate and correct in all material respects as of the Closing Date; and

• (11) Shareholders’ Approval: the ultimate holding company of Huayi Brothers, namely Huayi Brothers Media Corporation (華誼兄弟傳媒股份有限公司) having obtained the approval from the shareholders at its shareholders’ meeting approving the Huayi Brothers Subscription Agreement and the transactions contemplated thereunder.

Huayi Brothers, Tencent and Confidex may jointly at any time by notice in writing to the other parties waive any of the conditions set out in paragraphs 2, 3, 5, 6 and 7 above. The Company may at any time by notice in writing to the other parties waive the conditions set out in paragraph 10 above. The conditions set out in paragraphs 1, 4, 8, 9 and 11 are not waivable by the Company or the Investors. Furthermore, each of the Huayi Brothers Subscription, the Tencent Subscription and the Other Investors’ Subscriptions are subject to concurrent Closing of each other (except any of such Concurrent Subscriptions, the closing of which has been waived jointly by Huayi Brothers, Tencent and Confidex). Hence, among other things, if the Whitewash Waiver is not granted by the Executive or approved by the Independent Shareholders at the EGM, the Subscriptions will not proceed.

As at the Latest Practicable Date, the conditions set out in items 3 and 11 have been satisfied.

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LETTER FROM THE BOARD

Closing of Subscriptions

Closing will take place on the Closing Date. If the Closing Conditions have not been satisfied or waived on or before the Longstop Date, the Investors may either (i) terminate the Subscription Agreements with immediate effect, by written notice to the other parties after the date falling five Business Days after the Longstop Date; or (ii) at any time up to five Business Days prior to the Longstop Date, the parties can mutually agree to extend the Longstop Date to such later date as the parties may determine (such date being not more than 90 days after the Longstop Date). The Company has notified the Investors of its request to extend the Longstop Date to 21 April 2016, and the Investors have confirmed their acceptance of this Extended Longstop Date. If the Closing Conditions have not been satisfied or waived by the Extended Longstop Date, then the Subscription Agreements (other than certain provisions designated as surviving provisions) shall automatically terminate. In the event of termination of the Subscription Agreements, the parties shall be released and discharged from their respective obligations under the Subscription Agreements (without prejudice to the rights and/or obligations of any party in respect of any antecedent breach).

Mr. Yuen’s Lock-up Undertakings

Mr. Yuen, through Rich Public Limited and Smart Concept Enterprise Limited, companies incorporated under the laws of the British Virgin Islands and wholly-owned by Mr. Yuen directly or indirectly, is beneficially interested in a total of 1,976,492,607 Shares, representing approximately 29.67% of the issued share capital of the Company as of the date of the Subscription Agreements.

Pursuant to the Huayi Brothers Subscription Agreement and the Tencent Subscription Agreement, Mr. Yuen undertakes to and covenants with the Huayi Brothers and Tencent that, unless with the prior written consent of Huayi Brothers and Tencent, he shall not, and he shall procure his Affiliates not to, during the period commencing on the date of the Huayi Brothers Subscription Agreement and the Tencent Subscription Agreement until the expiry of 18 months from the Closing Date, directly or indirectly, including by or through his Affiliates:

• (a) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, whether directly or indirectly, the 1,976,492,607 Shares beneficially owned by Mr. Yuen (collectively referred to as the “ Locked-up Shares ”); or

• (b) enter into a swap or other arrangement that would have (i) the same economic consequences as paragraph (a) above or (ii) the effect of transferring to another party any of the economic benefits of ownership of the Locked-up Shares, for the purpose of hedging his or any of his Affiliate’s economic or beneficial ownership in, or holdings of, the Locked-up Shares.

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LETTER FROM THE BOARD

Huayi Brothers’ and Tencent’s Lock-up Undertakings

Pursuant to the Deeds of Undertaking, each of Huayi Brothers and Tencent undertakes to and covenants with Mr. Yuen that, without the prior written consent of Mr. Yuen, each of Huayi Brothers and Tencent shall not, and each of Huayi Brothers and Tencent shall procure their Affiliates not to, during the period of 18 months commencing on the Closing Date, directly or indirectly, including by or through its Affiliates:

• (a) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, whether directly or indirectly, 2,452,447,978 Shares in the case of Huayi Brothers and 2,116,251,467 Shares in the case of Tencent (or such number of Shares caused by any adjustment to the number of Shares held by each of Huayi Brothers and Tencent, respectively, including but not limited to share subdivision or share consolidation) (collectively referred to as the “ Huayi Brothers and Tencent Locked-up Shares ”); or

• (b) enter into a swap or other arrangement that would have (i) the same economic consequences as paragraph (a) above or (ii) the effect of transferring to another party any of the economic benefits of ownership of the Huayi Brothers and Tencent Locked-up Shares, for the purpose of hedging its or any of its Affiliate’s economic or beneficial ownership in, or holdings of, the Huayi Brothers and Tencent Locked-up Shares.

The Investors’ Rights Agreement

On 10 December 2015, Huayi Brothers and Tencent entered into an agreement between themselves which sets forth certain rights and obligations of each of them in respect of their respective interests in the Company (the “ Investors’ Rights Agreement ”) as follows:

• each party shall have a right of first refusal to acquire the other party’s Shares in the event that either party proposes to sell its Shares other than via an on-market sale;

• each party shall have a right to tag along on the same terms and conditions if the other party proposes to transfer any Shares held by it through a placing agent or an offmarket transfer;

• each party has agreed not to dispose of its Shares without the consent of the other party for a period of 18 months from the Closing Date (as defined in the Subscription Agreement), save for any transfer to an affiliate;

• each of the parties shall be entitled to nominate three (3) persons as Directors, respectively, and shall vote their respective shares in such a manner as to cause such persons to be elected to the Board.

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LETTER FROM THE BOARD

The Investors’ Rights Agreement may be terminated (a) automatically if the Closing fails to occur pursuant to the terms and conditions of the Subscription Agreements, or (b) at any time if agreed in writing by the parties to the Investors’ Rights Agreement.

Effect on shareholding structure of the Company

As at the Latest Practicable Date, the relevant securities of the Company comprise 6,660,486,717 issued and fully-paid up Shares. As at the Latest Practicable Date, the Company has no outstanding securities convertible or exchangeable into Shares.

The following table illustrates the shareholding structure of the Company as at the Latest Practicable Date and immediately following Closing:

					As a% of	Enlarged	As a% of
		Existing		Number of	existing issued	issued	enlarged issued
Existing	Name of	number of	Existing%	Subscription	number of	number of	number of
Shareholders	Subscribers	issued Shares	Shareholding	Shares	Shares	Shares	Shares
						(at Closing assuming there is
						no change to the
						share capital	of the Company
						other than	the issue of the
						Subscription Shares)
Mr. Yuen1	–	1,976,492,607	29.67%	–	–	1,976,492,607	14.64%
Mr. Zhang Changsheng	–	20,000,000	0.30%	–	–	20,000,000	0.15%
Mr. Tian Suning, Edward	–	195,951,534	2.94%	–	–	195,951,534	1.45%
Mr. Chu Yuguo	–	2,000,000	0.03%	–	–	2,000,000	0.01%
–	Huayi Brothers	–	–	2,452,447,978	36.82%	2,452,447,978	18.17%
–	Tencent	–	–	2,116,251,467	31.77%	2,116,251,467	15.68%
	Sub total of
–	Concert Group	–	–	4,568,699,445	68.59%	4,568,699,445	33.85%

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LETTER FROM THE BOARD

					As a% of	Enlarged		As a% of
		Existing		Number of	existing issued	issued	enlarged issued
Existing	Name of	number of	Existing%	Subscription	number of	number of		number of
Shareholders	Subscribers	issued Shares	Shareholding	Shares	Shares	Shares		Shares
						(at Closing assuming there is
						no change to the
						share capital	of	the Company
						other than the issue of the
						Subscription Shares)
Public
–	Confidex	–	–	691,882,675	10.39%	691,882,675		5.13%
–	Key Ability	–	–	600,118,893	9.01%	600,118,893		4.45%
–	Lofty Rainbow	–	–	610,675,788	9.17%	610,675,788		4.52%
–	Merit New	–	–	366,243,059	5.50%	366,243,059		2.71%
Other public Shareholders	–	4,466,042,576	67.06%	–	–	4,466,042,576		33.09%
Sub-total	–	4,466,042,576	67.06%	2,268,920,415	34.07%	6,734,962,991		49.90%
Total	–	6,660,486,717	100.00%	6,837,619,860	102.66%	13,498,106,577		100.00%

1 Mr. Yuen is deemed to be interested in 1,976,492,607 Shares (29.67%) legally owned by his wholly-owned corporations namely Rich Public Limited (139,492,607 Shares, 2.09%) and Smart Concept Enterprise Limited (1,837,000,000 Shares, 27.58%).

Information on the Group

The Group is principally engaged in media business and provision of online and offline healthcare and wellness services.

Information on the Investors

Huayi Brothers is a company incorporated under the laws of Hong Kong with limited liability whose registered office is at Room 2, 5/F, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong. It is a wholly-owned subsidiary of Huayi Brothers Media Corporation (華誼兄弟傳媒股份有 限公司), which is a company listed on the Shenzhen Stock Exchange (stock code: 300027) and an integrated entertainment group in the PRC principally engaged in the sectors of films, TV shows, talents management, games, music, cinema, entertainment market, live entertainment and new media.

Tencent is a company incorporated under the laws of the British Virgin Islands, whose registered office is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. Its primary business is investment holding. It is a wholly-owned subsidiary of Tencent Holdings Limited, which is a leading provider of Internet services in China whose shares are listed on the Main Board of the Stock Exchange (stock code: 700). Shenzhen Tencent Computer Systems Company Limited (深圳市騰訊計算機系統有限公司), a subsidiary of Tencent Holdings Limited, owns 111,876,452 shares of Huayi Brothers Media Corporation, representing approximately 8.06% of Huayi Brothers Media Corporation’s total issued share capital as at 30 September 2015.

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LETTER FROM THE BOARD

Confidex, an investment vehicle, is a 100% controlled subsidiary of Yunfeng Fund II, L.P. Yunfeng Fund II, L.P. is a Cayman Islands exempted limited partnership that primarily focuses on investments in the telecommunications, technology and media, consumer and retail and healthcare industries. Yunfeng Investment II, L.P. is the general partner of Yunfeng Fund II, L.P. Yunfeng Investment II, L.P. in turn is a limited partnership and its general partner is Yunfeng Investment GP II, Ltd., which is owned as to 60% by Mr. Yu Feng and as to 40% by Mr. Ma Yun.

Key Ability is a company incorporated in the British Virgin Islands with limited liability. Its primary business is investment holding. It is wholly-owned by Ms. Huang Ying. Ms. Huang Ying is a professional investor in the telecommunication, media and technology sector and has invested in multiple start-up companies.

Lofty Rainbow is a company incorporated in the British Virgin Islands with limited liability. Its primary business is investment holding. It is wholly-owned by Ms. Zhang Huiling. Ms. Zhang Huiling is a professional investor in the telecommunication, media and technology sector and has invested in multiple start-up companies.

Merit New is a company incorporated in the British Virgin Islands with limited liability. Its primary business is investment holding. It is wholly-owned by Ms. Xu Luping. Ms. Xu Luping is an entrepreneur in food service business and owns an agricultural company.

Mr. Yu Feng and Mr. Ma Yun owns 15,968,525 shares and 49,912,200 shares of Huayi Brothers Media Corporation, representing approximately 1.15% and approximately 3.59% of Huayi Brothers Media Corporation’s total issued share capital as at 30 September 2015, respectively. Mr. Yu Feng was a director of Huayi Brothers Media Corporation until 1 July 2015 when his resignation from the directorship became effective. THL A8 Limited, a wholly-owned subsidiary of Tencent Holdings Limited, the parent company of Tencent, is a limited partner of Yunfeng Fund II, L.P. contributing approximately 2.73% of the total capital commitments of Yunfeng Fund II, L.P. As a limited partner, THL A8 Limited does not have any voting power over Yunfeng Fund II, L.P. Save for the foregoing, there are no personal or business relationships between the Concert Group and each of the Other Investors and their respective beneficial owners. None of the members of the Concert Group is a party acting in concert with any of the Other Investors. None of the Other Investors has entered into or intend to enter into any agreement or arrangement (either explicit or implicit) or understanding (whether formal or informal) with any of the Other Investors or any member of the Concert Group in connection with the Subscriptions and/or the voting rights of the Company and the Whitewash Waiver.

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LETTER FROM THE BOARD

Concert Group’s dealing and interest in the Company’s securities

As at the Latest Practicable Date, save for the Huayi Brothers Subscription, the Tencent Subscription, Mr. Yue’s Lock-up Undertakings and Huayi Brothers’ and Tencent’s Lock-up Undertakings, (i) the Concert Group does not hold, control or have direction over any outstanding options, warrants, or any securities that are convertible into Shares or any outstanding derivatives in respect of securities in the Company, or hold any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company; (ii) the Concert Group has not borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company; (iii) there is no arrangement referred to in Note 8 to Rule 22 of the Takeovers Code (whether by way of option, indemnity or otherwise) in relation to the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company or the Concert Group, which might be material to the Huayi Brothers Subscription, the Tencent Subscription and the Whitewash Waiver, with any other persons; (iv) there is no agreement or arrangement to which any member of the Concert Group is a party which relates to circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Huayi Brothers Subscription, the Tencent Subscription and the Whitewash Waiver; and (v) none of the members of the Concert Group has received any irrevocable commitment to vote for or against the Huayi Brothers Subscription, the Tencent Subscription or the Whitewash Waiver.

Except for the entering into of the Subscription Agreements, none of the members of the Concert Group, the Other Investors or parties acting in concert with any of them has dealt in the Shares, outstanding options, derivatives, warrants or other securities convertible or exchangeable into Shares, during the six months prior to the date of the Rule 3.7 Announcement and up to the Latest Practicable Date, being the Relevant Period.

Intention of the Concert Group regarding the Group

As mentioned in the section headed “Resignation and Appointment of Directors” below, it is envisaged that three new Directors nominated by Huayi Brothers, three new Directors nominated by Tencent and such number of independent non-executive Directors that will represent at least one-third of the total number of Directors shall constitute the Board with effect from Closing if so elected in accordance with the Company’s Articles of Association. The Concert Group is considering suitable candidates and information regarding the proposed Directors as nominated by Concert Group will be announced in due course. Save as aforesaid, it is the intention of the Concert Group for the Group to continue with its existing businesses in the manner in which it is presently conducted and to continue the employment of the employees of the Group.

Based on the discussion among Huayi Brothers, Tencent and the Company, it is intended that the Company will deploy the net proceeds from the Subscriptions to invest in, develop and operate offline and online cultural and new media business in China and overseas. The Concert Group intends to cooperate with the Company to distribute and operate culture media assets by leveraging their resources and know-how in culture and media related areas. The Concert Group intends to

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LETTER FROM THE BOARD

use commercially reasonable efforts to fully develop the value of the Company’s existing media business and provide customers with the top quality culture and media products and/or services. Also, the Concert Group does not intend to redeploy the fixed assets of the Company.

Reasons for and benefits of the Subscriptions

The Directors have considered the financial position of the Company, current market conditions and outlook for the Group’s businesses, and the potential strengthening of the Company’s financial position and future business opportunities that may result from the Subscriptions.

While the Company has no current need for capital for the Group’s online and offline healthcare and wellness services, the Directors consider that the new capital to be injected into the Company upon Closing will enable the Company to further expand its media businesses which will be in the best interests of the Company and its Shareholders as a whole.

In addition, the Board considers that by introducing Huayi Brothers and Tencent as the Company’s major shareholders, the Subscriptions will bring strategic benefits and resources of China’s strongest media and Internet players to develop business opportunities in culture and new media businesses.

Huayi Brothers is a wholly-owned subsidiary of Huayi Brothers Media Corporation (華 誼兄弟傳媒股份有限公司), which is a company listed on the Shenzhen Stock Exchange (stock code: 300027) and China’s well-known integrated entertainment group, established in 1994 by brothers Wang Zhongjun and Wang Zhonglei. Huayi Brothers Media Corporation’s main business includes film, TV shows, talent management, etc. Huayi Brothers Media Corporation is China’s leading producer and distributor of original film and TV content. In the past 20 years, as one of the first Chinese private movie studios that started commercial film production and distribution, Huayi Brothers Media Corporation has created numerous high profile films, and has won many awards in domestic and international film festivals. The blockbusters include: Cellphone, A World Without Thieves, Rob-B-Hood, Assembly, You Are The One series, The Forbidden Kingdom, The Message, Aftershock, Detective Dee series, Love, Painted Skin 2, 1942, CZ12, Journey to the West: Conquering the Demons, Personal Tailored, etc., making the company a Chinese box office champion many times over.

Tencent is a wholly-owned subsidiary of Tencent Holdings Limited, which is a leading provider of Internet services in China whose shares are listed on the Main Board of the Stock Exchange (stock code: 700). Tencent Holdings Limited uses technology to enrich the lives of Internet users. Every day, hundreds of millions of people communicate, share experiences, consume information and seek entertainment through its integrated platforms. Tencent Holdings Limited’s diversified services include QQ, Weixin and WeChat for communications; Qzone for social networking; QQ Game Platform for online games; QQ.com and Tencent News for information, and Tencent Video for video content. Tencent Holdings Limited seeks to evolve with the Internet by investing in innovation, providing a hospitable environment for its partners, and staying close to its users. As of 30 September 2015, the number of monthly active users (MAU) of QQ was 860 million and the combined MAU of Weixin and WeChat reached 650 million.

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LETTER FROM THE BOARD

Although the Other Investors are financial investors as opposed to strategic investors and therefore would not be giving any direct strategic direction to the Company’s management, the Directors consider that the Other Investors can contribute meaningfully to the Company’s business because the Other Investors’ Subscriptions will bring in gross proceeds of approximately HK$181.5 million, thereby enabling the Group to have sufficient financial resources to pursue opportunities in cultural and new media industries in China and overseas, as set out in the section headed “Use of proceeds and future business plan” below.

The Directors noted that the Group’s media business is undergoing rapid development, with its revenue having more than doubled in the first six months of 2015. On the basis of available market data, the Directors consider there likely to be ongoing significant expansion in the media and entertainment market. The Group will therefore continue to invest in film-related projects in order to generate better return.

According to “Outlook insights: an analysis of global entertainment and media outlook 2015 – 2019” prepared by PricewaterhouseCoopers (the “PwC Report”) and the “2014 Report on the Market Influence of Chinese Films”* (2014年中國電影市場影響力研究報告) issued by entgroup. cn (the “Entgroup Report”), the global box office revenue will increase at a compound annual growth rate (CAGR) of 5.7% from US$36.70 billion in 2014 to US$48.45 billion in 2019. In 2014, the United States whose film revenue reached US$10.3 billion, was the largest film market in the world. China became the second largest film market in the same year following the United States. Importantly, China was also the fastest growing market. In keeping with the rapid development of the economy and fast improvement of people’s living standards, China’s film industry has grown exponentially in recent decades. Both China’s film box office and film production have risen to a new level. According to China’s State Administration of Press, Publication, Radio, Film and Television, China’s total box office reached RMB29.6 billion in 2014, representing a year-on-year increase of 36.2% which is in excess of the global CAGR. According to the Entgroup Report, China’s total box office reached RMB32.78 billion for the nine months ended 30 September 2015, which is 51% higher than the same period in 2014. According to the PwC Report, China’s box office is expected to further increase to over RMB50 billion by 2019. As the market size of the film industry grows, theatre expansion is also expected. According to the Entgroup Report, the number of screens in China was about 23,600 in 2014, with the number of new screens in the year being 5,397 or an average of 15 new screens per day. This rapid growth of theatres and screens is laying a good foundation for the fast development of the film industry.

The Directors have also considered the fact that the net asset value of the Group as at 30 June 2015 will be significantly reduced from approximately HK$0.35 per share to approximately HK$0.12 per share after taking into account the effect of VSD and Distribution. The VSD and Distribution have been completed in accordance with the Company’s announcement on 6 October 2015. After weighing up the benefits of the Subscription and taking into account the various factors as described above, the Directors consider the Subscription Price fair and reasonable.

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LETTER FROM THE BOARD

The Directors therefore consider the Subscriptions an invaluable opportunity for the Company and is in the best interests of the Company and its Shareholders as a whole.

For the reasons stated above, the Directors (excluding the members of the Independent Board Committee who have expressed their opinion in the section titled “Letter from the Independent Board Committee” in this circular after considering the advice of the Independent Financial Adviser set out in the section titled “Letter from the Independent Financial Adviser” in this circular as to the fairness and reasonableness of the terms of the Huayi Brothers Subscription, the Tencent Subscription, the Other Investors’ Subscriptions and the Whitewash Waiver) consider that the terms of the Huayi Brothers Subscription, the Tencent Subscription and the Other Investors’ Subscriptions are fair and reasonable and on normal commercial terms and in the interests of the Company and the Shareholders as a whole.

Use of proceeds and future business plan

If the Closing occurs in accordance with the Subscription Agreements, the gross proceeds from the Subscriptions would amount to approximately HK$547 million. The net proceeds from the Subscriptions is estimated to be approximately HK$527 million, which is intended to be utilized by the Company to pursue opportunities in cultural and new media industries in China and overseas for the Company’s further development.

As stated in the interim report of the Company for the six months ended 30 June 2015, the Group’s revenue for the six months ended 30 June 2015 in respect of (i) the existing offline healthcare and wellness services business of the Group, (ii) the online healthcare services businesses and (iii) the media business was HK$53,091,000, HK$693,000 and HK$7,575,000 respectively. Furthermore, the Company has not entered into any agreement, arrangement, understanding, undertaking or negotiation (concluded or otherwise) to dispose of or downsize the existing offline healthcare and wellness services and online healthcare services businesses of the Group. The Group continues to be committed to providing mobile internet health management and chronic disease management services in China. Meanwhile, the Group will also combine its offline health service operations to provide comprehensive health management and wellness solutions for people in pursuit of good health and patients with chronic diseases in China. In connection with this, the Company intends to continue the operation of its existing offline healthcare and wellness services businesses of the Group, including the operation of Beijing Bayhood No. 9 Club, details of which are more particularly set out in the joint announcement of the Company and Eternity Investment Limited dated 15 May 2015 and the Company’s circular dated 23 June 2015. Further, the Company intends to continue the operation of its existing online healthcare services businesses, including development through its “Kangxun 360” cloud health management services platform, details of which are more particularly set out in the joint announcement of the Company and Eternity Investment Limited dated 15 May 2015 and the Company’s circular dated 23 June 2015, and will continue to assess future plans and business opportunities in this regard. Based on the above, the Company does not expect the Subscriptions will render the Group’s existing businesses becoming insignificant when comparing to the media business. In respect of the healthcare and wellness services business of the Group, the Company may from time to time consider any other appropriate

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fund raising opportunities at the subsidiary level to further expand its business operation although the entities conducting such fund raising activities will remain subsidiaries of the Company and their financial results will continue to be consolidated into the accounts of the Group. As such, the proportion of the Group’s healthcare and wellness services business will not be significantly changed as a result of such fund raising activities. The Company believes that the value of the Company’s interest in those relevant subsidiaries shall remain significant and the investment by other investors will bring synergies to the existing operation and improve the long-term returns to the Group in this sector. The Company will comply with the applicable Listing Rules in respect of those fund raising transactions when necessary.

Based on the discussion among Huayi Brothers, Tencent and the Company, it is intended that the Company will invest in, develop and operate offline and online cultural and new media business in China and overseas. Following Closing, the Company intends to leverage on the resources and industry experiences of Huayi Brothers (being one of the leading media players in China) and Tencent (being one of the leading internet players in China), such that the Group could strategically position itself as a prominent player in offline and online cultural and new media industries, focusing mainly on viewers in the Greater China region, as well as open to international opportunities. The Company, together with, Huayi Brothers and Tencent, consider that the following elements are critical in achieving this long-term strategic objective:

(a) Strong and consistent presence in offline cultural and media-related contents production

As media contents are scarce in China and other parts of the world, the Group will need to make multiple investments in cultural and media-related contents on a rolling basis so as to continuously produce content and achieve investment returns over future years. The investment return period from production of contents to distribution/ box office and receipt of investment return typically averages approximately two years. In addition, the Group will need to build up its own intellectual property rights inventory, which is critical for its expansion into online entertainment and new media sector.

(b) Internationalized productions and distribution

Huayi Brothers is a wholly-owned subsidiary of Huayi Brothers Media Corporation, a well-known integrated entertainment group in China, which is principally engaged in businesses including film, TV programs and talent management. It is intended that the Group’s media contents production will leverage on the support from Huayi Brothers and will tap into international investment opportunities, for example, in Hollywood production and Korean productions. With Huayi Brothers and Tencent’s strategic support, the Group also has prominent advantages in online and offline marketing and distribution of such internationalized production in China.

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LETTER FROM THE BOARD

• (c) Integrated entertainment platform for online promotion, marketing, distribution and sale

Possession of its own online entertainment platform which serves the function of online promotion, marketing, distribution and content releases and sale for the Group’s own cultural and media-related content productions and other third party productions establishing a link of online-to-offline and providing synergies between the Group’s online and offline media business. This integrated online entertainment platform is essential in the long-term to the Group’s mission of becoming a prominent player in offline and online cultural and new media industries as currently approximately twothirds of the box offices receipts in China are distributed and sold through online platform.

The Group has already entered into the following legally binding agreements pursuant to which the Group is committed to invest the whole of the net proceeds of the Subscriptions of approximately HK$527 million in various film production projects which will be used within 4 months following the Closing:

• China Jiuhao has entered into a film production cooperation agreement and a supplemental film cooperation agreement (collectively referred to as the “ Ten Film Production Cooperation Agreement ”) with a film producer in the United States, being an independent third party and not connected with the Company (the “ Film Producer ”), pursuant to which China Jiuhao has agreed to invest in 10 film projects produced and distributed by the Film Producer. China Jiuhao has committed to invest an aggregate amount of RMB305 million (equivalent to approximately HK$369 million) for the 10 film projects (the “ Ten Films Total Investment Amount ”). The Ten Film Production Cooperation Agreement shall become effective upon completion of the Subscriptions, and China Jiuhao agreed to pay to the Film Producer (a) RMB122 million (40% of the Ten Films Total Investment Amount) within 15 business days from the effective date of the Ten Film Production Cooperation Agreement, (b) RMB122 million (40% of the Ten Films Total Investment Amount) within 60 days from the effective date of the Ten Film Production Cooperation Agreement, and (c) RMB61 million (20% of the Ten Films Total Investment Amount) within 120 days from the effective date of the Ten Film Production Cooperation Agreement; and

• China Jiuhao has entered into a film cooperation agreement (the “ Animation Film Cooperation Agreement ”) with an animation film production house, being an independent third party and not connected with the Company (the “ Animation Film Producer ”), pursuant to which China Jiuhao has agreed to invest in three animation films produced by the Animation Film Producer. The Animation Film Cooperation Agreement shall become effective upon completion of the Subscriptions, and China Jiuhao agreed to pay to the Animation Film Producer USD24 million (equivalent to approximately HK$187 million), consisting of USD22 million as the investment amount

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for the first animation film and USD2 million as a prepayment for the second and the third animation films, within 15 business days from the effective date of the Animation Film Cooperation Agreement. Subject to the entering into of separate cooperation agreements with the Animation Film Producer for the second and third animation films, China Jiuhao may further invest USD4.5 million for each of the second and the third animation films.

As at the Latest Practicable Date and save as disclosed above, no definitive proposals, terms or timetable have been determined for any such possible future cooperation, investments or any associated transactions, no specific acquisition targets had been identified and no agreements for any such possible future cooperation, investments, acquisition or any associated transactions have been entered into. Further, as at the Latest Practicable Date, the Company has no intention or further plans to raise additional financing by way of debt or equity in the next 12 months from Closing for the purpose of satisfying its obligations under the Ten Film Production Cooperation Agreement and Animation Film Cooperation Agreement.

Expenses

The Company and the Investors shall each be liable for the costs and expenses of their own legal and other professional advisers (including auditors) incurred in connection with the Subscriptions. The Company shall reimburse the Investors for such costs and expenses of the Investors in connection with the Subscriptions provided that Closing takes place, and the Company shall pay all fees, costs and expenses incurred in connection with the allotment, issue and listing of the Subscription Shares on the Stock Exchange and the execution or delivery of the Subscription Agreements, including any value added, turnover or similar tax payable in respect thereof.

FUND RAISING EXERCISE FOR THE PAST 12 MONTHS

Save for the Subscriptions, the Company did not undertake any equity fund raising exercise in the past 12 months immediately prior to the date of the Rule 3.7 Announcement.

APPLICATION FOR WHITEWASH WAIVER

Immediately after Closing, the Concert Group, being Huayi Brothers, Tencent and parties acting in concert with any of them, will in aggregate be interested in 68.59% of the issued share capital of the Company as at the Latest Practicable Date and approximately 33.85% of the Enlarged Issued Share Capital.

Under Rule 26.1 of the Takeovers Code, the Concert Group would be obliged to make a mandatory general offer to the Shareholders for all the issued Shares and other securities of the Company not already owned or agreed to be acquired by the Concert Group as a result of the issue of the Subscription Shares unless the Whitewash Waiver is obtained from the Executive. In this regard, the Concert Group has made an application to the Executive for the Whitewash

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LETTER FROM THE BOARD

Waiver in respect of the allotment and issue of the Huayi Brothers Subscription Shares and Tencent Subscription Shares and the Executive has indicated that it is minded to grant the Whitewash Waiver. The Whitewash Waiver, if granted by the Executive, will be subject to, among other things, approval by the Independent Shareholders at the EGM by way of a poll. Closing of the Huayi Brothers Subscription and Tencent Subscription is conditional upon, among other things, the Whitewash Waiver being granted by the Executive and approved by Independent Shareholders.

RESIGNATION AND APPOINTMENT OF DIRECTORS

Pursuant to the Subscription Agreements, each of the current Directors (except for Mr. Yuen and the independent non-executive directors), being, Mr. Zhang Changsheng (Vice Chairman), Mr. Tian Suning, Edward and Mr. Hugo Shong shall resign as a Director with effect from Closing. It is envisaged that three new Directors nominated by Huayi Brothers, three new Directors nominated by Tencent and such number of independent non-executive Directors that will represent at least one-third of the total number of Directors shall constitute the Board with effect from Closing if so elected in accordance with the Company’s Articles of Association.

The Concert Group is considering suitable candidates and information regarding the proposed Directors as nominated by Concert Group will be announced in due course.

An announcement will be made upon resignation and appointment of those directors in compliance with the Listing Rules.

EGM

A notice convening the EGM is set out on pages 208 to 210 of this circular. Whether or not you intend to attend and vote at the EGM in person, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to the share registrar of the Company, Tricor Tengis Limited, Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as practicable but in any event not less than 48 hours before the time appointed for holding the EGM. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned meeting thereof should you so wish.

The voting in relation to the Huayi Brothers Subscription, the Tencent Subscription, each of the Other Investors’ Subscriptions, the issue of the Subscription Shares and the Whitewash Waiver at the EGM will be conducted by way of a poll. As regards the Subscription Agreements and the issue of the Subscription Shares, Mr. Yuen and other Shareholders who have a material interest in the Huayi Brothers Subscription, the Tencent Subscription, the Other Investors’ Subscriptions, the Concert Group, the Other Investors, and their respective associates and those who are involved in or interested in the Subscription Agreements (if any) shall abstain from voting on the relevant ordinary resolutions to be proposed at the EGM to approve the matters.

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LETTER FROM THE BOARD

As regards the Whitewash Waiver, Mr. Yuen, the Concert Group, the Other Investors, and their respective associates and other Shareholders who are interested or involved in Huayi Brothers Subscription, the Tencent Subscription, the Other Investors’ Subscriptions and/or the Whitewash Waiver (if any) shall abstain from voting on the relevant ordinary resolution to be proposed at the EGM to approve the Whitewash Waiver.

As at the Latest Practicable Date, Mr. Yuen (through Rich Public Limited and Smart Concept Enterprise Limited both of which are wholly owned by Mr. Yuen) holds 1,976,492,607 Shares (29.67%).

As at the Latest Practicable Date, Mr. Zhang Changsheng (an executive Director) holds 20,000,000 Shares, Mr. Tian Suning, Edward (a non-executive Director) holds 2,084,918 Shares and holds another 193,866,616 Shares through his deemed interest in CBC China Media Limited, Mr. Zhang Changsheng and Mr. Tian Suning were not involved in the negotiation and discussion of the Subscription Agreements nor otherwise involved in or interested in the Subscription Agreements and/or the Whitewash Waiver. Mr. Chu Yuguo (an independent non-executive Director) holds 2,000,000 Shares and was not involved in nor interested in the Subscription Agreements and/or the Whitewash Waiver. They intend to vote (or procure their respective wholly-owned company or interested company to vote) in favour of the Subscription Agreements, the issue of the Subscription Shares and the Whitewash Waiver.

RECOMMENDATION

The Independent Board Committee has been established to advise the Independent Shareholders regarding the Subscriptions and the Whitewash Waiver. The Independent Board Committee comprises Dr. Wong Yau Kar David, BBS, JP, Mr. Yuen Kin, Mr. Chu Yuguo, Mr. Tian Suning, Edward and Mr. Hugo Shong all of whom are not directly or indirectly interested or involved in the Subscriptions and the Whitewash Waiver.

As announced by the Company on 15 December 2015, Somerley Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders regarding the terms of the Subscriptions and the Whitewash Waiver. The Independent Board Committee has approved the appointment of Somerley Capital Limited. The Independent Board Committee, having considered the advice of the Independent Financial Adviser, is of the opinion that the terms of the Subscriptions and the Whitewash Waiver are in the interests of the Company and the Shareholders as a whole and are fair and reasonable and therefore recommends the Independent Shareholders to vote in favour of the resolutions relating to the foregoing matters at the EGM.

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LETTER FROM THE BOARD

Your attention is drawn to (i) the letter from the Independent Board Committee which contains the recommendation of the Independent Board Committee to the Independent Shareholders regarding the resolutions to approve the Subscriptions and the Whitewash Waiver, and (ii) the letter from the Independent Financial Adviser which contains its advice to the Independent Board Committee and the Independent Shareholders regarding the terms of the Subscriptions and the Whitewash Waiver.

The Board (including the Independent Board Committee after taking into account the advice of the Independent Financial Adviser) considers that (i) the allotment and issue of a total of 6,837,619,860 Subscription Shares at an issue price of HK$0.08 per Subscription Share to the Investors in an aggregate gross amount of approximately HK$547 million and (ii) the Whitewash Waiver are in the interests of the Company and the Shareholders as a whole, and recommends that the Shareholders vote in favour of the resolutions relating to the foregoing matters at the EGM.

ADDITIONAL INFORMATION

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

Yours faithfully, By Order of the Board CHINA JIUHAO HEALTH INDUSTRY CORPORATION LIMITED Yuen Hoi Po Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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(Incorporated in the Cayman Islands with limited liability) (Stock Code: 419)

Registered Office: Principal place of business in Cricket Square Hong Kong: Hutchins Drive, P.O. Box 2681 Suite 3503, 35/F Grand Cayman KY1-1111 Tower Two, Lippo Centre Cayman Islands 89 Queensway Hong Kong

14 January 2016

SUBSCRIPTION OF SHARES AND APPLICATION FOR WHITEWASH WAIVER

We refer to the circular (the “ Circular ”) of China Jiuhao Health Industry Corporation Limited dated 14 January 2016, of which this letter forms part. The terms used in this letter shall have the same meanings as defined in this circular unless the context otherwise requires.

We have been appointed to form the Independent Board Committee to advise you as to whether, in our opinion, the respective terms of the Huayi Brothers Subscription, the Tencent Subscription, the Other Investors’ Subscriptions and the Whitewash Waiver and the transactions contemplated thereunder are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

Somerley Capital Limited has been appointed as the Independent Financial Adviser to advise this Independent Board Committee on the fairness and reasonableness of the terms of the Subscriptions and the Whitewash Waiver.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

We wish to draw your attention to the letter from the Board, as set out on pages 12 to 32 of the Circular, and the letter of advice from the Independent Financial Adviser, as set out on pages 35 to 62 of the Circular, both of which provide details of the Huayi Brothers Subscription, the Tencent Subscription, the Other Investors’ Subscriptions and the Whitewash Waiver and the transactions contemplated thereunder. Having considered the advice rendered by the Independent Financial Adviser and the principal factors and reasons taken into consideration by it in arriving its advice, we are of the opinion that the terms of the Huayi Brothers Subscription, the Tencent Subscription, the Other Investors’ Subscriptions and the Whitewash Waiver and transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole and are fair and reasonable. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution(s) which will be proposed at the EGM to approve the respective terms of the Huayi Brothers Subscription, the Tencent Subscription, the Other Investors’ Subscriptions and the Whitewash Waiver and the transactions contemplated thereunder.

Yours faithfully,

For and on behalf of the

Independent Board Committee of China Jiuhao Health Industry Corporation Limited Mr. Tian Suning, Edward and Mr. Hugo Shong

Non-executive Directors

Dr. Wong Yau Kar, David, BBS, JP, Mr. Yuen Kin, and Mr. Chu Yuguo Independent non-executive Directors

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of a letter of advice from the Independent Financial Adviser, Somerley Capital Limited, to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

SOMERLEY CAPITAL LIMITED

20th Floor China Building 29 Queen’s Road Central Hong Kong

14 January 2016

To: the Independent Board Committee and the Independent Shareholders

Dear Sirs,

(1) SUBSCRIPTION OF SHARES AND

(2) APPLICATION FOR WHITEWASH WAIVER

INTRODUCTION

We refer to our appointment as independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in connection with (i) the Subscriptions pursuant to the Subscription Agreements; and (ii) the Whitewash Waiver. Details of the Subscriptions and the Whitewash Waiver are set out in the “Letter from the Board” contained in the circular of the Company to the Shareholders dated 14 January 2016 (the “Circular”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless otherwise defined herein.

As set out in the section headed “Application for Whitewash Waiver” in the “Letter from the Board” contained in the Circular, immediately after Closing, the Concert Group (being Huayi Brothers, Tencent and parties acting in concert with them) will in aggregate be interested in approximately 33.85% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares (assuming there is no change in the issued share capital of the Company other than the issue of the Subscription Shares between the Latest Practicable Date and Closing). Under Rule 26.1 of the Takeovers Code, the Concert Group would be obliged to make a mandatory general offer to the Shareholders for all the issued Shares and other securities of the Company not already owned or agreed to be acquired by the Concert Group as a result of the issue of the Subscription Shares unless the Whitewash Waiver is obtained from the Executive. In this regard, the Concert Group has made an application to the Executive for the Whitewash Waiver in respect of the allotment and issue of the Huayi Brothers Subscription Shares and the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Tencent Subscription Shares. The Whitewash Waiver, if granted by the Executive, will be subject to, among other things, approval by the Independent Shareholders at the EGM by a way of poll. As regards the Subscription Agreements and the issue of the Subscription Shares, Mr. Yuen and other Shareholders who have a material interest in the Huayi Brothers Subscription, the Tencent Subscription, the Other Investors’ Subscriptions, the Concert Group, the Other Investors, and their respective associates and those who are involved in or interested in the Subscription Agreements (if any) shall abstain from voting on the relevant ordinary resolutions to be proposed at the EGM. As regards the Whitewash Waiver, Mr. Yuen, the Concert Group, the Other Investors, and their respective associates and other Shareholders who are interested or involved in the Huayi Brothers Subscription, the Tencent Subscription, the Other Investors’ Subscriptions and/or the Whitewash Waiver (if any) shall abstain from voting on the ordinary resolution to be proposed at the EGM to approve the Whitewash Waiver.

The granting by the Executive of the Whitewash Waiver and the approval by the Independent Shareholders at the EGM are part of the conditions of the Subscriptions which cannot be waived. If the Whitewash Waiver is not granted by the Executive or is not approved by the Independent Shareholders, the Subscription Agreements will not become unconditional and the Subscriptions will not proceed.

The Independent Board Committee comprising all of the five non-executive Directors, namely Dr. Wong Yau Kar, David, BBS, JP, Mr. Yuen Kin, Mr. Chu Yuguo, Mr. Tian Suning, Edward and Mr. Hugo Shong, has been established to advise the Independent Shareholders on (1) whether the Whitewash Waiver and the terms of the Subscription Agreements are fair and reasonable so far as the Independent Shareholders are concerned; (2) whether the Subscriptions and the Whitewash Waiver are in the interests of the Company and the Shareholders as a whole; and (3) the voting action that should be taken by the Independent Shareholders at the EGM. The Independent Board Committee has approved our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

We are not associated or connected with the Company, the Investors or any of their respective substantial shareholders or any party acting, or presumed to be acting, in concert with any of them and accordingly we are considered eligible to give independent advice to the Independent Board Committee and the Independent Shareholders on the Subscription Agreements and the Whitewash Waiver. Apart from normal professional fees payable to us in connection with our appointment, no arrangement exists whereby we will receive any fees or benefits from the Company, the Investors or any of their respective substantial shareholders or any party acting, or presumed to be acting, in concert with any of them.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In formulating our opinion, we have reviewed, among other things, (i) the Circular; (ii) the annual report of the Company for the year ended 31 December 2014 and the interim report of the Company for the six months ended 30 June 2015; (iii) the circular of the Company dated 23 June 2015 (the ‘‘VSD Circular’’); (iv) the announcements published by the Company on the website of the Stock Exchange since 1 January 2015; and (v) the material change statement set out in Appendix I to the Circular. We have relied on the information and facts supplied by the Company, and the opinions expressed by the Directors, and have assumed that the information and facts provided and opinions expressed to us are true, accurate and complete in all material aspects as at the Latest Practicable Date. We have further assumed that all representations contained or referred to in the Circular are true, accurate and complete as at the Latest Practicable Date. Independent Shareholders will be informed as soon as practicable if we become aware of any material change to such information. We have also sought and received confirmation from the Directors that no material facts have been omitted from the information supplied and opinions expressed to us. We consider that the information we have received is sufficient for us to reach our opinion and give the advice and recommendation set out in this letter. We have no reason to believe that any material information has been omitted or withheld, or doubt the truth or accuracy of the information provided. We have, however, not conducted any independent investigation into the business and affairs of the Group, the Investors or any of their respective associates or any party acting, or presumed to be acting, in concert with any of them, nor have we carried out any independent verification of the information supplied.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In considering (1) whether the Whitewash Waiver and the terms of the Subscription Agreements are fair and reasonable so far as the Independent Shareholders are concerned; and (2) whether the Subscriptions and the Whitewash Waiver are in the interests of the Company and the Shareholders as a whole, we have taken into account the principal factors and reasons set out below:

BACKGROUND TO AND REASONS FOR THE SUBSCRIPTIONS

The Group is principally engaged in (i) media business; (ii) provision of online healthcare service; and (iii) provision of offline healthcare and wellness services. The Group’s media business involves (a) investments in, and licensing of, films and TV dramas in the PRC and overseas; (b) investments in the joint venture company operating Travel Channel, a provincial satellite television channel of Hainan province, the PRC; and (c) programs and film production. The Group’s online healthcare services relate to the operation of the Group’s product, “Kangxun 360” mobile portal, a professional health management software, in conjunction with one of the largest smart cloud health management service platforms for chronic diseases in the PRC. The Group’s offline healthcare and wellness services mainly relate to the operation of “Beijing Bayhood No.9 Club”, being membership-based club facilities in Beijing. This club was one of the major assets of the group involved in the VSD, further details of which are set out in the VSD Circular and in this letter below.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

For the six months ended 30 June 2015, the Group’s sales from continuing operations amounted to approximately HK$61.4 million, representing an increase of approximately 13.5% as compared to the restated figures for the same period in 2014. As set out in the Company’s 2015 interim report, the Group has three reportable segments from continuing operations, namely (i) online healthcare service; (ii) offline healthcare and wellness services; and (iii) media. For the six months ended 30 June 2015, the online healthcare service segment recorded sales of only HK$693,000 (2014: nil). We are advised by the executive Directors that this business is still in its development stage. It only started generating revenue in first half of 2015 and incurred a loss. Further expertise and cash investments are required to support the long-term sustainable development of this business. This segment operates in a relatively new market as compared to the Group’s two other business segments and therefore is subject to uncertainties from a financial and market perspective. The sales generated from the Group’s offline healthcare and wellness services segment was approximately HK$53.1 million (2014: approximately HK$51.6 million), a slight increase of approximately 2.9% as compared to 2014. For the six months ended 30 June 2015, the Group’s sales from media segment increased by more than 200% to approximately HK$7.6 million (2014: approximately HK$2.5 million). As set out in the Company’s 2015 interim report, the Group continued to increase its investment in film-related projects with plans to seek additional quality

projects.

As advised by the executive Directors, the Group has been engaged in the media and entertainment business since 2005. Currently the Group’s media business is operated through (i) licensing of films and TV drama in the PRC and overseas by its subsidiaries; (ii) the operation of Travel Channel (a provincial satellite television channel of Hainan province, the PRC) operated by its joint venture company; and (iii) programs and film production by the Company’s subsidiary and joint venture. As set out in the Company’s 2014 annual report, the Group increased its investment in programs and film production to approximately HK$68 million as at 31 December 2014. As advised by the executive Directors, such investment was increased to approximately HK$76 million as at 30 June 2015. In view of (a) the PRC governmental support of the PRC film industry as set out in ‘‘關於支持電影發展若干經濟政策的通知’’ (‘‘The Notice of the Ministry of Finance, the National Development and Reform Commission, the Ministry of Land and Resources, and Other Departments on Several Economic Policies for Supporting the Development of Films’’) issued on 31 May 2014, which promoted Chinese film industry development in five aspects, namely, financial subsidies, tax incentives, financial support, land policies and implementation by and coordination among various administrations; and (b) the general increase in living standards and spending power of the population in the PRC, the executive Directors are of the view that the media and entertainment industry will be one of the fastest growing and well-developed consumer industries in the PRC. Taking these into account, as well as other factors including, (i) the high-growth online healthcare services requires additional expertise and cash investments and is not without risk as described above; and (ii) the operation of “Beijing Bayhood No.9 Club” is stable but has limited expansion opportunities, the executive Directors consider that it would be in the interests of the Group to establish a strategic cooperation with substantial and reputable partners who could assist the Group to secure further develop business opportunities in cultural and new media businesses in the PRC and overseas.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Concert Group, being Huayi Brothers, Tencent and parties acting in concert with them, will in aggregate be interested in approximately 33.85% of the Enlarged Share Capital upon Closing. Huayi Brothers is a wholly-owned subsidiary of Huayi Brothers Media Corporation (華 誼兄弟傳媒股份有限公司), which is a company listed on the Shenzhen Stock Exchange (stock code: 300027) and a well-known integrated entertainment group in the PRC. As set out in the ‘‘Letter from the Board’’ contained in the Circular, Huayi Brothers Media Corporation is a leading PRC producer and distributor of original film and TV content and is principally engaged in the sectors of films, TV shows, talent management, games, music, cinema, entertainment market, live entertainment and new media. According to Huayi Brothers Media Corporation’s 2014 annual report, it recorded audited consolidated revenue and net profit attributable to shareholders of approximately RMB2,389.0 million and RMB896.7 million respectively. It is set out in Huayi Brothers Media Corporation’s 2015 third quarterly report that as at 30 September 2015, its unaudited consolidated total assets and equity attributable to shareholders amounted to approximately RMB14,078.2 million and RMB9,245.7 million, respectively. Huayi Brothers Media Corporation has created numerous high profile films and received awards at domestic and international film festivals.

Tencent is a wholly-owned subsidiary of Tencent Holdings Limited, which is a leading provider of Internet services in China whose shares are listed on the Main Board of the Stock Exchange (stock code: 700). Tencent Holdings Limited’s diversified services include QQ, Weixin and WeChat for communications; Qzone for social networking; QQ Game Platform for online games; QQ.com and Tencent News for information and Tencent Video for video content. According to the results announcement of Tencent Holdings Limited for the three and nine months ended 30 September 2015, the number of monthly active user accounts (“MAU”) of QQ was approximately 860 million, the combined MAU of Weixin and WeChat was approximately 650 million, and the MAU of Qzone was approximately 653 million. Further details regarding the Investors are set out in the ‘‘Letter from the Board’’ contained in the Circular.

The executive Directors consider that Huayi Brothers and Tencent are highly suitable strategic partners for the Group. By introducing them as the Company’s major shareholders, the Subscriptions will enable the Group to establish a strategic alliance with Huayi Brothers and Tencent, and leverage on their resources as leading PRC media and Internet players to develop business opportunities in offline and online cultural and new media business in the PRC and overseas. It is intended that the Group’s media content investments/production will, with the support of Huayi Brothers, be able to tap into international investment opportunities, for example, in Hollywood and Korean productions. As set out in the sub-section headed “Use of proceeds and future business plan” in the “Letter from the Board” as contained in the Circular, the Group has already entered into related film production agreements including one with a film producer in the United States. These agreements will only become effective upon completion of the Subscriptions, without which they would not be available to the Company through Huayi Brothers. Accordingly, the executive Directors consider that the Subscriptions allow the Group to grasp such business opportunities and tap into business connections with international movie producers/investors. Considering this and other long term benefits of a strategic partnership with Huayi Brothers and Tencent, the executive Directors consider that it is in the interests of the Company and the Shareholders as a whole to proceed with the Subscriptions by entering into the Subscription Agreements.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We agree with the executive Directors’ view that the Subscriptions will allow the Group to grasp business opportunities and connections to further develop its media business, and that the existing strength of the Group in the media business can be increased and complemented by the business network, industry experience and resources of Huayi Brothers and Tencent.

THE SUBSCRIPTIONS AND THE WHITEWASH WAIVER

1. Principal terms of the Subscription Agreements

Set out below is a summary of principal terms of the Subscription Agreements. Further details of the terms of the Subscription Agreements are set out in the “Letter from the Board” contained in the Circular.

• (a) The Subscription Agreements

Date: 10 December 2015 Issuer: the Company Investors: (i) Huayi Brothers (ii) Tencent (iii) Confidex (iv) Key Ability (v) Lofty Rainbow (vi) Merit New

Each of the Investors above has entered into a separate Subscription Agreement with the Company and Mr. Yuen. Pursuant to the Subscription Agreements, each of the Investors has conditionally agreed to subscribe for, and the Company has conditionally agreed to allot and issue to the Investors, a total of 6,837,619,860 Subscription Shares at an issue price of HK$0.08 per Subscription Share. Details of the Subscription Shares to be subscribed for by each of the Investors are set out in the table in the sub-section headed “The Subscriptions” in the section headed “The Subscription Agreements” in the “Letter from the Board” contained in the Circular.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• (b) The Subscription Price

The Subscription Price is HK$0.08 per Subscription Share. As stated in the sub-section headed “The Subscription Price” in the section headed “The Subscription Agreements” in the “Letter from the Board” contained in the Circular, the Subscription Price was arrived at after arm’s length negotiations between the Company and the Investors. Factors taken into account included the then prevailing market price and trading volume of the Shares, the historical financial performance and net asset value of the Group, the Capital Reorganisation, the VSD, the Distribution, the trading position and prospects of the Group’s existing business on the one hand and, on the other hand, the future business opportunities, relationships and capabilities potentially made available through the relationships between the Company and the Investors.

• (c) The size of the Subscriptions, rights of the Subscription Shares and the specific mandate

As at the Latest Practicable Date, there were 6,660,486,717 Shares in issue. The 6,837,619,860 Subscription Shares represent approximately 102.66% of the existing issued share capital of the Company as at the Latest Practicable Date. Assuming there is no change in the issued share capital of the Company other than the issue of the Subscription Shares in the period from the Latest Practicable Date to Closing, the 6,837,619,860 Subscription Shares will represent approximately 50.66% of the Enlarged Issued Share Capital.

The Subscription Shares will rank pari passu in all respects with the Shares in issue as at the date of allotment and issue of the Subscription Shares. An application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Subscription Shares.

The Subscription Shares will be allotted and issued pursuant to the specific mandate to be sought from the Independent Shareholders at the EGM.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(d) Conditions of the Subscriptions

Closing of the Subscriptions is conditional upon fulfilment or waiver (as the case may be) of certain conditions (i.e. the Closing Conditions). A number of the Closing Conditions, including (1) the obtaining of the approval of the Shareholders or Independent Shareholders (as appropriate) at the EGM in respect of, among other things (i) the Whitewash Waiver; and (ii) the specific mandates for the allotment and issue of the Subscription Shares; (2) the granting of the Whitewash Waiver by the Executive; and (3) the obtaining of approval of Huayi Brothers Media Corporation’s shareholders in respect of the Huayi Brothers Subscription Agreement, cannot be waived in any event. The EGM will be convened to approve, among other things, resolutions relating to the Subscriptions and the Whitewash Waiver, and voting on which will be conducted by way of a poll. Each of the Huayi Brothers Subscription, the Tencent Subscription and the Other Investors’ Subscriptions are subject to the concurrent Closing of each other. Further details of the Closing Conditions are set out in the subsection headed “Conditions of the Subscriptions” in the section headed “The Subscription Agreements” in the “Letter from the Board” contained in the Circular.

Closing will take place on the fourteenth day after the Unconditional Date (the date on which all the Closing Conditions have been satisfied (or waived in accordance with the Subscription Agreements)), or such other date as the parties to the Subscription Agreements may agree. If the Closing Conditions have not been satisfied or waived on or before 21 April 2016 (i.e. the Extended Longstop Date), the Subscription Agreements (other than certain provisions designated as surviving provisions) shall automatically terminate. In the event of termination of the Subscription Agreements, the parties shall be released and discharged from their respective obligations under the Subscription Agreements (without prejudice to the rights and/or obligations of any party in respect of any antecedent breach). As at the Latest Practicable Date, certain of the Closing Conditions have been satisfied, further details of which are set out in the sub-section headed “Conditions of the Subscriptions” in the section headed “The Subscription Agreements” in the “Letter from the Board” contained in the Circular.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• (e) Lock-up arrangements and the Investors’ Rights Agreement

The Locked-up Shares, and the Huayi Brothers and Tencent Locked-up Shares (as defined in the sub-sections headed ‘‘Mr. Yuen’s Lock-up Undertakings’’ and “Huayi Brothers’ and Tencent’s Lock-up Undertakings” respectively) are subject to certain lock-up arrangements for a period of 18 months from the Closing Date. Further details are set out in the subsections headed “Mr. Yuen’s Lock-up Undertakings” and “Huayi Brothers’ and Tencent’s Lock-up Undertakings” respectively in the section headed “The Subscription Agreements” in the “Letter from the Board” contained in the Circular.

Huayi Brothers and Tencent entered into an agreement (i.e. The Investors’ Rights Agreements) on 10 December 2015 which sets forth certain rights and obligations of each of them in respect of their respective interests in the Company including each of the parties’ right to nominate three persons as Directors. Further details of the Investors’ Rights Agreement are set out in the sub-section headed “The Investors’ Rights Agreements” in the section headed “The Subscription Agreements” in the “Letter from the Board” contained in the Circular.

2. Intention of the Concert Group regarding the Group

As set out in the sub-section headed “Intention of the Concert Group regarding the Group” in the “Letter from the Board” contained in the Circular, it is intended that the Company will deploy the net proceeds from the Subscriptions to invest in, develop and operate offline and online cultural and new media business in China and overseas. The Concert Group intends to cooperate with the Company to distribute and operate cultural media assets by leveraging their resources and know-how in the culture and media related areas. The Concert Group intends to use commercially reasonable efforts to fully develop the value of the Company’s existing media business and provide customers with top quality cultural and media products and/or services.

Pursuant to the Subscription Agreements, each of the current Directors (except for Mr. Yuen and the independent non-executive directors), being Mr. Zhang Changsheng (Vice Chairman), Mr. Tian Suning, Edward and Mr. Hugo Shong, shall resign as Directors with effect from Closing. As set out in the section headed “Resignation and appointment of Directors” in the “Letter from the Board” contained in the Circular, it is envisaged that three new Directors nominated by Huayi Brothers, three new Directors nominated by Tencent and such number of independent non-executive Directors that will represent at least one-third of the total number of Directors shall constitute the Board with effect from Closing, if so elected in accordance with the Company’s Articles of Association. Save as the aforesaid, it is the intention of the Concert Group for the Group to continue with its existing businesses in the manner in which they are presently conducted and to continue the employment of the employees of the Group.

– 43 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Financial information and prospects of the Group

(a) Financial information of the Group

Revenue from different segments of the Group for the six months ended 30 June 2014 and 2015 are set out below:

	For the six months	ended 30 June
	2015	2014
	(Unaudited)	(Unaudited)
		(Restated)
		(Note)
	HK$’000	HK$’000
Continuing operations
Online healthcare service	693	–
Offline healthcare and wellness services	53,091	51,576
Media	7,575	2,469
Total revenue from continuing operations	61,359	54,045

Note:

The operation of a project to be disposed within 12 months from 30 June 2015 as part of the VSD has been treated as a separate line of business. Consequently, it is accounted for as discontinued operation for the six months ended 30 June 2015. The comparative financial information for the six months ended 30 June 2014 has been reclassified to conform with the presentation for the six months ended 30 June 2015. Further details are set out in the Company’s 2015 interim report.

The Group’s revenue was mainly generated from the offline healthcare and wellness services segment, which contributed approximately 86.5% and 95.4% of the Group’s revenue from continuing operations for the six months ended 30 June 2015 and 2014 respectively. Income generated from media segment increased by approximately 206.8% from the first half of 2014 to the first half of 2015, and accounted for approximately 12.3% and 4.6% of the Group’s revenue from continuing operations for the six months ended 30 June 2015 and 2014 respectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Group recorded profit attributable to equity holders of the Company from continuing operations of approximately HK$26.3 million for the six months ended 30 June 2015, representing a decrease of approximately 72.5% as compared to the restated figures for the six months ended 30 June 2014. The decrease was mainly due to a number of factors. These include (i) legal and professional fees of approximately HK$54 million incurred for the VSD; (ii) the impairment provision made for some of the Group’s prepayments, interest in a joint venture and amount due from a subsidiary of a joint venture of approximately HK$79 million (of which provision for impairment of interest in a joint venture operating Travel Channel amounted to approximately HK$47 million); and (iii) gain on disposal of joint ventures and reversals of payables with aggregate amount of approximately HK$62.5 million for the six months ended 30 June 2014 which were not recorded for the six months ended 30 June 2015. These factors were partially offset by realised gain on financial assets at fair value through profit and loss for the six months ended 30 June 2015.

As set out in the VSD Circular in relation to, among other things, the VSD and the Distribution, Smart Title Limited (being the target company of the VSD) and its subsidiaries are principally engaged in the provision of recreational and wellness services through the management of “Beijing Bayhood No. 9 Club”. The completion of the VSD and the Distribution took place in October 2015. The Group will continue to operate “Beijing Bayhood No. 9 Club” after completion of the VSD through a leasing agreement (the “Leasing Agreement”) with a term of twenty years (which can be further extended to 31 December 2051 upon request by the Group). Further details of the VSD, the Leasing Agreement and the Distribution are set out in the VSD Circular. As disclosed in the announcement of the Company dated 6 October 2015, the Board estimated that a loss on disposal before taxation of approximately HK$220 million would be recognised upon completion of the VSD. The executive Directors estimated that the net asset value of the Group as at 30 June 2015 would be significantly reduced from approximately HK$0.35 per Share to approximately HK$0.12 per Share (the ‘‘Proforma NAV per Share’’) after taking into account the effect of the VSD and the Distribution.

As set out in the Company’s 2015 interim report, the Group had consolidated total assets of approximately HK$3,083.6 million as at 30 June 2015, whilst assets of the disposal group classified as held for sale amounted to approximately HK$2,268.3 million as at 30 June 2015. The Group’s consolidated total liabilities amounted to approximately HK$753.4 million, whilst liabilities of the disposal group classified as held for sale amounted to approximately HK$649.4 million.

Further details in respect of the Group’s historical financial information are set out in Appendix I to the Circular. However, following completion of the VSD and the Distribution, the published historical financial statements of the Group are, in our opinion, of limited relevance to the Shareholders, who should concentrate on the position and prospects of the Group as reduced in size by the VSD and the Distribution.

– 45 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) Prospects of the Group

As set out in the sub-section headed “Reasons for and benefits of the Subscriptions” in the “Letter from the Board” to the Circular, the Group’s media business is undergoing rapid development with more than 200% growth in sales for the six months ended 30 June 2015 and the Group will continue to invest in film-related projects in order to generate better returns for the Group. Based on available market data, the executive Directors consider that there likely to be ongoing significant expansion in the media and entertainment market in particular, the film industry. Further details with respect to selected film industry data is set out in the aforesaid sub-section. According to the market statistics issued by EntGroup, the accumulated box office in the PRC reached approximately RMB29.4 billion in 2014. For the year ended 31 December 2015, the accumulated box office in the PRC reached approximately RMB43.9 billion, representing approximately 23-times the total box office in the PRC in 2005. According to its official website, EntGroup focuses on the Chinese film industry, the Chinese manga and animation industry, offers box office data, provides customized research, consulting and event services mainly to local and overseas clients in media, entertainment and advertising industry, conducts moviegoer surveys, and also establishes online platform for entertainment industry at www.entgroup.cn . We note from the prospectus of IMAX China Holding, Inc. (stock code: 1970) dated 24 September 2015 that IMAX China Holding, Inc. commissioned EntGroup Century International Information and Consulting (Beijing) Co. Ltd. to produce an industry report on the film industry in the PRC. The approximate accumulated box office in the PRC is illustrated in the chart below (data sourced from EntGroup):

Total Box office in the PRC

==> picture [420 x 184] intentionally omitted <==

----- Start of picture text -----

RMB'billion
(Approximate)
50
45 43.88
40
35
29.38
30
25 21.88
20 16.88
15 13.13
10.00
10 6.25
4.38
5 1.88 2.50 3.13
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
----- End of picture text -----

Source: EntGroup

– 46 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In view of the industry growth, coupled with PRC governmental support of the PRC film industry and general increase in living standards and spending power of the population in the PRC as set out in this letter above, the executive Directors are of the view that the prospect of the Group’s media business is positive.

The executive Directors consider that there is growing demand among Chinese citizens for health management services, with an aging population and a growing incidence rate of chronic diseases in China. However, as set out in this letter above, the Group’s online health management service business is still in its development stage and is subject to uncertainties in its path of development. Further cash investments and expertise will also be required to support its long-term sustainable growth. On the other hand, the operation and financial performance of “Beijing Bayhood No.9 Club”, being the major part in the Group’s offline healthcare and wellness services, is more stable, but has limited expansion opportunities. Further details regarding the Group’s future business plan are set out in the sub-section headed “Use of proceeds and future business plan” in the “Letter from the Board” contained in the Circular.

4. Analysis of the historical price performance of the Shares

• (a) Comparison of the Subscription Price to market price

The Company announced the VSD and the Distribution (distribution of (i) HK$500 million in cash and (ii) 1,500,000,000 shares in Eternity Investment) on 15 May 2015. Both the VSD and the Distribution have been completed in October 2015. The ex-entitlement date in respect of the Distribution was 25 September 2015. The Shares were traded on “cumDistribution” basis during the period between the announcement of the Distribution and up to 24 September 2015. Since the Subscription Shares are being issued “ex-Distribution”, for the purposes of comparing “like with like”, we have compared the Subscription Price with the prices of the Shares on an “ex-Distribution” basis for the period from 15 May 2015 and up to the Last Trading Day. As set out in the sub-section headed “The Subscription Price” under the section headed “The Subscription Agreements” in the “Letter from the Board” contained in the Circular, based on the closing share price of Eternity Investment on the Last Trading Day of HK$0.99 per share, the pro forma value of Distribution per Share is approximately HK$0.30 per Share. On this basis, the Subscription Price represents:

• (i) a discount of approximately 86.21% to the theoretical ex-entitlement closing price (after excluding the pro forma value of Distribution per Share) of HK$0.58 on the Last Trading Day;

• (ii) a discount of approximately 87.69% to the average of the theoretical exentitlement closing prices (after excluding the pro forma value of Distribution per Share) of approximately HK$0.65 for the last five trading days up to and including the Last Trading Day; and

– 47 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• (iii) a discount of approximately 87.88% to the average of the theoretical exentitlement closing prices (after excluding the pro forma value of Distribution per Share) of approximately HK$0.66 for the last ten trading days up to and including the Last Trading Day.

These discounts are, in our view, substantial but within the range (although close to the high end of discount range and less favourable than the mean of the range of discounts) for comparable issues as set out in the sub-section headed “Comparable issues” of this letter below.

(b) Value premium

We have compared the closing market capitalisation of the Company on (i) the Last Trading Day; and (ii) the Latest Practicable Date, as follows:

	HK$’million
	(approximate)
Closing market capitalisation of the Company on	3,863.1	A
the Last Trading Day	(Note 1)
Closing market capitalisation of the Company on	6,127.6	B
the Latest Practicable Date	(Note 2)
Value Premium	2,264.5	C=B-A
Percentage increase	(58.6%)

Notes:

• (1) During the period from the Last Trading Day to the Latest Practicable Date, a total of 68,082,706 Shares were issued (37,500,000 Shares in June, 24,497,788 Shares in August, and 6,084,918 Shares in December 2015 respectively). For comparative purposes, the closing market capitalisation of the Company on the Last Trading Day is calculated by multiplying (a) 6,660,486,717 Shares (being the number of issued Shares as at the Latest Practicable Date), and (b) the theoretical ex-Distribution closing Share price of HK$0.58 on the Last Trading Day.

• (2) Source from Bloomberg

As shown in the table above, the closing market capitalisation of the Company on the Latest Practicable Date is approximately HK$6,127.6 million, representing a premium of approximately HK$2,264.5 million (or approximately 58.6%) over the closing market capitalisation of the Company on the Last Trading Day on an “ex-Distribution” basis. During the period from the Last Trading Day to the Latest Practicable Date, the Company published several announcements in relation to, among other things, the proposed Subscriptions (including the Rule 3.7 Announcement, the Update Announcements and the Announcement), the VSD and the Distribution. Further details of the historical trading prices of the Shares are set out in paragraph (c) below.

– 48 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Value Premium represented an increase in value of the Company, as a result of increase in the Share prices, after publication of the aforesaid announcements as set out in paragraph (c) below, but without any other material change in the fundamentals of the Company, apart from the decrease in net profit of the Group for the six months ended 30 June 2015, which would normally be expected to have a negative effect on the Share price. As discussed in this letter above, both the VSD and the Distribution were completed in October 2015. We also note that the closing Hang Seng Index decreased by approximately 27.5% from the Last Trading Day to the Latest Practicable Date. Therefore, we consider it appropriate to assume that the change in the Company’s market value during the above period is primarily due to the announcement of the Subscriptions. This suggests a positive market reaction to the announcement of the Subscriptions, and quantifies the perceived valuation of the Company by the market after considering the terms of the Subscriptions (including the Subscription Price) and the benefits accruing to the Group from the Subscriptions. There is no assurance that the closing Share price will remain at recent high levels or that the Value Premium can be maintained if the Subscriptions do not proceed or cannot be completed for any reason.

(c) Share price performance

The chart below illustrates the daily closing price per Share for the period from 1 January 2014 up to and including the Latest Practicable Date (the “Review Period”).

Share price chart

==> picture [403 x 260] intentionally omitted <==

----- Start of picture text -----

HK$ per Share
2.5
2
The Announcement
Resumption of
trading in Shares
after two Update
Announcements
1.5
Suspension of trading in Announcement of
the Shares before the VSD and the
announcement of the VSD Distribution
1
Last Trading Day
0.5
Rule 3.7 Announcement
Subscription Price of HK$0.08 per Subscription Share
0
Source: Bloomberg
----- End of picture text -----

Note: The chart above has been prepared based on figures from Bloomberg where the closing Share prices were not stated on the “ex-Distribution” basis explained in paragraph (a) above.

– 49 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The closing Share price fluctuated between HK$0.365 per Share and HK$0.78 per Share from 1 January 2014 up to 11 December 2014, with a closing Share price on that date of HK$0.70 per Share. Trading in the Shares was suspended starting from 12 December 2014 pending the release of the announcement relating to the VSD. On 15 May 2015, after trading hours, the Company published announcements relating to, among other things, the VSD and the Distribution. Trading in the Shares resumed on the following trading day (18 May 2015) and the Shares closed at HK$1.14 per Share, representing an increase of approximately 62.9% compared to the closing Share price before suspension. The closing price subsequently eased from HK$1.14 per Share on 18 May 2015 to HK$0.88 per Share on 29 May 2015 (i.e. the Last Trading Day), after which trading in the Shares was suspended.

The Company published a number of announcements, including, among other things, the Rule 3.7 Announcement, the Update Announcements and the Announcement, in relation to the proposed Subscriptions from 24 June 2015 onwards. As set out in the chart above, closing Share price increased significantly after the publication of the Rule 3.7 Announcement (i.e. when the market became aware of the proposed Subscriptions), with a closing price of HK$1.64 per Share on 24 June 2015, which represented an increase of approximately 86.4% over the closing Share price on the Last Trading Day. Trading of the Shares was suspended again on 8 July 2015. The Company subsequently published several announcements in relation to, among other things, the VSD and the proposed Subscriptions. On 14 September 2015, the Company published (a) an announcement relating to the expected timetable and closure of register of members in respect of the Distribution; and (b) an Update Announcement in relation to, among other things, a decision letter from the Stock Exchange on 10 September 2015 to the effect that the Company would become a cash company under Rule 14.82 of the Listing Rules upon completion of the proposed subscriptions. Trading in the Shares resumed on 15 September 2015 and the closing Share price decreased by approximately 35.7% on this news, suggesting an adverse market reaction. Closing Share prices fluctuated between HK$0.60 per Share and HK$1.56 per Share from 16 September 2015 to 10 December 2015. The Company published the Announcement after trading hours on 10 December 2015.

The Shares closed at a price of HK$0.92 per Share as at the Latest Practicable Date. The Subscription Price represents a discount of approximately 91.3% to the closing price of the Shares as at the Latest Practicable Date.

– 50 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

5. Comparable issues

As set out in the section headed ‘‘Introduction’’ of the Announcement and the sub-section headed “Principal terms of the Subscription Agreements” above of this letter, the Subscription Shares represented approximately 102.75% of the number of issued Shares as at the date of the Announcement and approximately 102.66% as at the Latest Practicable Date. We have searched the website of the Stock Exchange on a best efforts basis to identify all share issues (the “Comparable Issues”) announced since 1 January 2015 and up to the date immediately prior to the Latest Practicable Date by companies listed on the Stock Exchange involving (a) subscription of new shares of the listed companies by subscribers with cash (where the shares were to be listed on the Stock Exchange); (b) the application of whitewash waivers by the subscribers where such whitewash waivers have been approved by independent shareholders; and (iii) increase of the issued share capital by over 100% upon completion of the share subscription. We have excluded subscriptions (i) announced by listed companies which, as at the date of announcement and/or currently, were/ are under prolonged suspension; (ii) involving only convertible securities; and (iii) transactions involving open offers or rights issues of new shares, where different pricing considerations apply.

It should be noted that the subject companies involved in the Comparable Issues may have different principal activities, market capitalisations, profitability and financial positions as compared with those of the Company. The circumstances leading to the subject companies to proceed with the subscriptions may also be different from those relating to the Company. Accordingly, the Comparable Issues are set out for the Independent Shareholders’ information only and do not form a material basis for us to assess the fairness of the Subscription Price.

The Comparable Issues represent an exhaustive list of subscriptions meeting the criteria set out above. The table below illustrates the details of the Comparable Issues:

– 51 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

		Discount of subscription	Discount of subscription	price to
		closing share	average closing	average closing
		price as at	share price for	share price for
		the last day	the 5	the 10
		of trading	trading days	trading days
		immediately	immediately	immediately
		prior to the	prior to the	prior to the
Date of announcement	Company name	announcement	announcement	announcement
		(note 1)	(note 1)	(note 1)
		%	%	%
		(approximate)	(approximate)	(approximate)
29 January 2015	Good Resources Holdings Limited (formerly known	(31.4)	(20.8)	(20.6)
	as “Good Fellow Resources Holdings Limited”) (stock
	code: 109)
2 February 2015	Beijing Enterprises Clean Energy Group Limited	(43.6)	(42.0)	(38.7)
	(formerly known as “Jin Cai Holdings Company
	Limited”) (stock code: 1250)
9 March 2015	China Minsheng Drawin Technology Group Limited	(42.9)	(35.1)	(31.3)
	(formerly known as “South East Group Limited”)
	(stock code: 726)
13 May 2015	Huanxi Media Group Limited (formerly known as	(66.9)	(66.8)	(65.7)
	“21 Holdings Limited” (“21 Holdings”)) (stock code:
	1003)(Note 2)
29 May 2015	REORIENT GROUP LIMITED (“REORIENT”)	(51.3)	(47.7)	(47.6)
	(stock code: 376)(Note 3)
4 June 2015	China Goldjoy Group Limited (formerly known as	(41.0)	(36.8)	(32.3)
	“World Wide Touch Technology (Holdings) Limited”
	(“World Wide”)) (stock code: 1282)(note 4)
31 July 2015	HengTen Networks Group Limited (formerly known	(97.9)	(97.6)	(97.5)
	as “Mascotte Holdings Limited”) (stock code: 136)
27 August 2015	China Minsheng Financial Holding Corporation	(89.9)	(87.7)	(86.6)
	Limited (formerly known as “China Seven Star
	Holdings Limited”) (stock code: 245)
12 October 2015	SRE Group Limited (stock code: 1207)	(74.4)	(73.3)	(74.0)

– 52 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	Discount of subscription	Discount of subscription	price to
	closing share	average closing	average closing
	price as at	share price for	share price for
	the last day	the 5	the 10
	of trading	trading days	trading days
	immediately	immediately	immediately
	prior to the	prior to the	prior to the
	announcement	announcement	announcement
	(note 1)	(note 1)	(note 1)
	%	%	%
	(approximate)	(approximate)	(approximate)
Mean (simple average)	(59.9)	(56.4)	(54.9)
Minimum discount	(31.4)	(20.8)	(20.6)
Maximum discount	(97.9)	(97.6)	(97.5)
The Subscriptions
– by reference to the “ex-Distribution” prices	(86.2)	(87.7)	(87.9)

Source: relevant announcements relating to the application for whitewash waiver of the companies involved in the Comparable Issues

Notes:

1. The closing share prices are sourced from Bloomberg.

2. 21 Holdings published an announcement in relation to a possible subscription of new shares involving a possible application of whitewash waiver after trading hours on 13 April 2015. Accordingly, we have taken 1 April 2015 (i.e. the last day of trading immediately prior to the aforesaid announcement) as the last trading day for our assessment, including calculation of the average closing share prices of different periods prior to and including 1 April 2015.

3. REORIENT published an announcement in relation to a possible subscription by potential investor of new securities in REORIENT after trading hours on 24 March 2015. Accordingly, we have taken 12 March 2015 (i.e. the last day of trading immediately prior to the aforesaid announcement) as the last trading day for our assessment, including calculation of the average closing share prices of different periods prior to and including 12 March 2015.

4. As stated in the announcement of World Wide dated 4 June 2015, the subscription price of HK$0.18 per share was determined on or about the date of signing the memorandum of understanding dated 14 April 2015. Trading in the shares of World Wide was halted with effect from 9:00 a.m. on 14 April 2015 pending the release of an announcement in relation to the aforesaid memorandum of understanding. Accordingly, we have taken 13 April 2015 (i.e. the last day of trading immediately prior to 14 April 2015) as the last trading day for our assessment, including calculation of the average closing share prices of different periods prior to and including 13 April 2015.

– 53 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

5. Simsen International Corporation Limited (“Simsen”) (stock code: 993) published an announcement dated 7 October 2014 in relation to, among other things, entering into of a memorandum of understanding between Simsen and a potential investor for possible subscription of shares of Simsen. Following that, an announcement was made by Simsen dated 23 March 2015 in relation to, among other things, (i) the subscription of new shares of Simsen; (ii) application for whitewash waiver; and (iii) distribution in specie of a subsidiary of Simsen. The above subscription would in theory have met our selection criteria for Comparable Issues as set out above. However, as set out in Appendix I to the Simsen’s circular dated 30 June 2015, the theoretical downward effect of the distribution in specie (item iii above) on the share price could not be quantified beforehand and would be impacted by different factors. Accordingly, we have excluded Simsen from our analysis.

The 9 Comparable Issues set out in the table above have involved subscriptions of new shares at discounts to their respective historical trading prices. As set out in the table above, the Subscription Price represents (a) a discount of approximately 86.2% to the closing Share price on “ex-Distribution” basis on the Last Trading Day; (b) a discount of approximately 87.7% to the average closing price on “ex-Distribution” basis for the 5 trading days immediately prior to and including the Last Trading Day; and (c) a discount of approximately 87.9% to the average closing price on “ex-Distribution” basis for the 10 trading days immediately prior to and including the Last Trading Day. These discounts are:

• (1) within the range of discounts, although close to the high end of discount range, of the Comparable Issues for the closing share price as at the last trading day immediately prior to the announcement, as well as the average closing share price for each of the 5 and 10 trading days; and

• (2) less favourable than the mean of the range of discounts of the Comparable Issues for the closing share price as at the last trading day immediately prior to the announcement, as well as the average closing share price for each of the 5 and 10 trading days.

6. Discussion on the Subscription Price

During the course of our analysis, we could not identify any companies listed on mainboard of the Stock Exchange with principal activities similar to the specific mix of businesses of the Group as described above. Accordingly, we have not carried out a comparison between the Company and other similar Hong Kong listed companies. Instead, our analysis in this respect includes comparing the Subscription Price and the price of the Shares after the Subscriptions were announced against historical price performance of the Shares as set out in the sub-section headed “Analysis of the historical price performance of the Shares” above (including the Value Premium under paragraph (b)), and our view on the Subscription Price is formed after taking into consideration a number of factors as summarised below (in particular, the background and expertise of Huayi Brothers and Tencent, and the benefits of the Subscriptions as set out in the section above headed “Background to and reasons for the Subscriptions”).

– 54 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Subscription Price is considerably below the closing prices and average closing prices of the Shares on an “ex-Distribution” basis prior to the Last Trading Day. The Subscription Price also represents a discount of approximately 33.3% to the Proforma NAV per Share of approximately HK$0.12. Nevertheless, we consider that the Subscription Price is fair and reasonable to the Independent Shareholders based on a number of qualitative and quantitative factors, as follows:

• (1) the Subscriptions enable the Company to build on the increase in revenue from media business segment of the Group during the first half of 2015 and to establish a strategic cooperation with substantial and reputable partners;

• (2) the strong and relevant industry expertise and resources of Huayi Brothers and Tencent, which will benefit the Group’s long term development and bring additional investment opportunities to the Company and allow the Group to tap into business connections with international movie producers/investors. Further details are set out in the section above headed “Background to and reasons for the Subscriptions”;

• (3) the Value Premium (as a result of positive response to the Subscriptions by the market after considering the terms of the Subscriptions including the Subscription Price) of approximately HK$2.3 billion (approximately 58.6%) (being the increase in value of the Company between (i) the closing market capitalisation of the Company on the Last Trading Day on a theoretical ‘‘ex-Distribution’’ basis; and (ii) the closing market capitalisation of the Company on the Latest Practicable Date), which benefits all Shareholders; as contrasted with:

• (4) the adverse market reaction to the risk that the Subscriptions might not proceed as reflected in a drop in Share price which occurred following the announcement of the decision letter from the Stock Exchange to the effect that the Company would become a cash company as discussed in the sub-section headed “Analysis of the historical price performance of the Shares” of this letter above.

7. Use of proceeds and future business plan

As set out in the sub-section headed “Use of proceeds and future business plan” in the “Letter from the Board” contained in the Circular, the gross proceeds from the Subscriptions would amount to approximately HK$547 million and net proceeds are estimated to be approximately HK$527 million. The Group has already entered into legally binding agreements pursuant to which the Group is committed to invest the whole of the net proceeds of the Subscriptions in the following film production projects:

– 55 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• a film production cooperation agreement and a supplemental film cooperation agreement with a film producer in the United States, pursuant to which the Group has agreed to invest in 10 film projects produced and distributed by the film producer. Total investment amount committed by the Group amounts to RMB305 million (equivalent to approximately HK$369 million). Such agreements shall become effective upon completion of the Subscriptions; and

• a film cooperation agreement with an animation film production house, pursuant to which the Group has agreed to invest in a series of three animation films. The Group has agreed to pay USD24 million (equivalent to approximately HK$187 million) for the investment in the first animation film and as prepayments for the second and the third animation film. The Group may further invest USD4.5 million in each of the next two series subject to the entering into of separate cooperation agreements.

Further details regarding the above agreements and use of proceeds are set out in the subsection headed “Use of proceeds and future business plan” in the “Letter from the Board” contained in the Circular.

The Company has not entered into any agreement, arrangement, understanding, undertaking or negotiation (concluded or otherwise) to dispose of or downsize the existing offline healthcare and wellness services and online healthcare services businesses of the Group.

8. Financial effects of the Subscriptions

On the basis set out in the sub-section headed “Reasons for and benefits of the Subscriptions” in the “Letter from the Board” of the Circular, the net asset value of the Group attributable to equity holders of the Company as at 30 June 2015 would be significantly reduced from approximately HK$0.35 per share to the Proforma NAV per Share of approximately HK$0.12. The VSD was completed in October 2015. The Subscription Price of HK$0.08 represents a discount of approximately 33.3% to the Proforma NAV per Share. Upon Closing, 6,837,619,860 new Subscription Shares will be issued by the Company for cash. Accordingly, the executive Directors expect the net asset value of the Group to increase by approximately the same amount as the net proceeds from the Subscriptions, while the Proforma NAV per Share will decline. The table below sets out, for illustration purpose, such effect on the Group’s net asset value per Share:

– 56 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	HK$’ million
	(approximate)
Implied proforma net asset value of the Group after taking into account
the effect of the VSD and the Distribution (approximately HK$0.123
multiplied by 6,629,904,000 Shares in issue as at 30 June 2015)	815
Add: Estimated net proceeds from the Subscriptions	527
Total	1,342
	Number of Shares
Number of Shares in issue as at 30 June 2015	6,629,904,000
Add: Number of new Subscription Shares to be issued	6,837,619,860
Total	13,467,523,860
Net asset value of the Group immediately after Closing (approximately	Approximately
HK$1,342 million divided by 13,467,523,860 Shares)	HK$0.10
	per Share

As illustrated above, the net asset value per Share of approximately HK$0.10 immediately after Closing represents a decrease of approximately 17% as compared to the Proforma NAV per Share of approximately HK$0.12. However, we consider that the Company will be valued in the future primarily by reference to the plans to commit the new funds raised as set out above and net assets per Share will not be of critical significance. Consequently, we consider the decrease is acceptable in light of the benefits of the Subscriptions as a whole as set out in this letter.

9. Whitewash Waiver – dilution effects on shareholding

The following table summarises the effect of the Subscriptions on the shareholding structure of the Company (a) as at the Latest Practicable Date; and (b) at Closing assuming there is no change to the share capital of the Company other than the issue of the Subscription Shares. Further details on (i) the effect of the Subscriptions on the shareholding structure; and (ii) the accompanying note to the shareholding table are set out in the sub-section headed “Effect on shareholding structure of the Company” in the “Letter from the Board” contained in the Circular.

– 57 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Mr. Yuen Directors Concert Group Huayi Brothers Tencent Public Shareholders Confidex Key Ability Lofty Rainbow Merit New Other public Shareholders Sub-total Total	As at the Latest Practicable Date Number of Shares % 1,976,492,607 29.67 217,951,534 3.27 – – – – – – – – – – – – 4,466,042,576 67.06 4,466,042,576 67.06 6,660,486,717 100.00	At Closing (assuming no change to the share capital of the Company other than the issue of the Subscription Shares) Number of Shares % 1,976,492,607 14.64 217,951,534 1.61 2,452,447,978 18.17 2,116,251,467 15.68 691,882,675 5.13 600,118,893 4.45 610,675,788 4.52 366,243,059 2.71 4,466,042,576 33.09 6,734,962,991 49.90 13,498,106,577 100.00	At Closing (assuming no change to the share capital of the Company other than the issue of the Subscription Shares) Number of Shares % 1,976,492,607 14.64 217,951,534 1.61 2,452,447,978 18.17 2,116,251,467 15.68 691,882,675 5.13 600,118,893 4.45 610,675,788 4.52 366,243,059 2.71 4,466,042,576 33.09 6,734,962,991 49.90 13,498,106,577 100.00
			100.00

As illustrated above, the shareholding of the existing public Shareholders would be reduced from approximately 67.06% as at the Latest Practicable Date to approximately 33.09% at Closing.

There will be substantial dilution to the shareholding interest of the existing public Shareholders as a result of the Subscriptions. However, having taken into account (i) the benefits to be derived by the Group from the Subscriptions as set out in the section above headed “Background to and reasons for the Subscriptions”; (ii) that the Subscription Price is considered to be fair and reasonable as set out in this letter above; and (iii) the increase in the value of the Company (i.e. Value Premium) as a result of increase in Share prices as discussed in the sub-section headed “Analysis of the historical price performance of the Shares” above which benefits all Shareholders, we consider that the dilution effect to the shareholding interest of the existing public Shareholders as a result of the Subscriptions is acceptable.

– 58 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

10. Whitewash Waiver – Takeovers Code provisions

As set out in the section headed “Application for Whitewash Waiver” in the “Letter from the Board” contained in the Circular, immediately after Closing, the Concert Group will in aggregate be interested in approximately 33.85% of the Enlarged Issued Share Capital as at Closing.

Pursuant to Rule 26.1 of the Takeovers Code, the acquisition of voting rights under such circumstances will trigger an obligation to make a mandatory general offer by the Concert Group for all the issued Shares and other securities of the Company other than those already owned (or agreed to be acquired) by it and parties acting in concert with it, unless the Whitewash Waiver is obtained from the Executive. An application to the Executive for the Whitewash Waiver in respect of the allotment and issue of the Huayi Brothers Subscription Shares and Tencent Subscription Shares has been made by the Concert Group. The Executive has indicated that it will grant the Whitewash Waiver subject to, among other things, the approval of the Independent Shareholders on a vote by way of poll at the EGM.

Shareholders should note that the Subscriptions are subject to the fulfilment or waiver (as the case may be) of a number of conditions precedent as set out in the sub-section headed “Conditions of the Subscriptions” in the “Letter from the Board” contained in the Circular, including the granting by the Executive of the Whitewash Waiver and the approval by the Independent Shareholders at the EGM of the Whitewash Waiver, which cannot be waived. Consequently, the Subscriptions may or may not proceed.

Having taken into consideration (i) the benefits to be derived by the Group from the Subscriptions as set out in the section headed “Background to and reasons for the Subscriptions” above of this letter; (ii) that the Subscription Price is considered to be fair and reasonable as set out in this letter above; and (iii) the Value Premium (as a result of positive response to the Subscriptions by the market after considering the terms of the Subscriptions including the Subscription Price) which benefits all Shareholders, we are of the view that the Whitewash Waiver (the granting of which is one of the conditions of the Subscriptions) is fair and reasonable, and in the interests of the Company and the Shareholders as a whole.

– 59 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

DISCUSSION AND ANALYSIS

The Group completed the VSD and the Distribution in October 2015, too late for the full effects be reflected in the Group’s 2015 interim results. Therefore, the published historical financial statements of the Group are, in our opinion, of limited relevance to the Shareholders, who should concentrate on the position and prospects of the Group as reduced in size by the VSD and the Distribution. As set out in the section headed “Background to and reasons for the Subscriptions” above, the online healthcare service business will require additional expertise and cash investments, and is not without risk, and the operation of “Beijing Bayhood No.9 Club” is stable but has limited expansion opportunities. In these circumstances, in our opinion, the Group would benefit from greater financial resources and access to relevant industry expertise, in particular, for further development of the Group’s existing media business which is considered by the executive Directors to be one of the fastest growing and well-developed consumer industries in the PRC. The Subscriptions would allow the Group to establish a strategic alliance with Huayi Brothers and Tencent, and leverage on their resources as leading PRC media and Internet players to develop business opportunities in offline and online cultural and new media business in the PRC and overseas. We agree with the executive Directors’ view that the existing strength of the Group in the media business can be increased and complemented by the business network, industry experience and resources of Huayi Brothers and Tencent.

As set out in the sub-section above headed “Analysis of the historical price performance of the Shares”, the Subscription Price represents discounts in a range from approximately 86.21% to approximately 87.88% to the theoretical ex-entitlement closing Share prices under various parameters on or before the Last Trading Day. The Shares closed at a price of HK$0.92 per Share as at the Latest Practicable Date, to which the Subscription Price represents a discount of approximately 91.3%. The Subscription Price is low compared to the theoretical ex-entitlement Share prices and below the Proforma NAV per Share of approximately HK$0.12, but the Subscriptions have nevertheless, in our opinion, brought about a substantial Value Premium of approximately HK$2,264.5 million (representing approximately 58.6% of the closing market capitalisation of the Company on the Last Trading Day as set out above). This Value Premium is likely to be related to market expectations of the benefits that will be brought to the Group as a result of the Subscriptions and suggest a positive market reaction. There is no assurance that the closing Share price will remain at recent levels or that the Value Premium can be maintained if the Subscriptions do not proceed or cannot be completed for any reason.

– 60 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Our analysis of the Subscription Price is set out in the sub-section above headed “Discussion on the Subscription Price”. Based on the qualitative and quantitative factors set out in that subsection, including (a) the opportunity to build on the increase in revenue from the Group’s media segment for the first half of 2015 and to establish a strategic cooperation with substantial and reputable partners; (b) the strong and relevant industry expertise and resources of Huayi Brothers and Tencent, which will benefit the Group’s long term development and bring additional investment opportunities to the Company and allow the Group to tap into business connections with international movie producers/investors; and (c) the Value Premium of approximately HK$2.3 billion (or approximately 58.6%) as a result of positive response to the Subscriptions by the market after considering the terms of the Subscriptions including the Subscription Price, which benefits all Shareholders as discussed above, we consider that the Subscription Price is fair and reasonable. Further details are set out in the sub-section above headed “Discussion on the Subscription Price”.

As stipulated under the Subscription Agreements, the Investors will subscribe for approximately 6.8 billion new Shares. Mr. Yuen, Huayi Brothers and Tencent are “locked-up” for 18 months from the Closing Date. The net proceeds from the Subscriptions are estimated to be approximately HK$527 million and will be used for investment in various film production projects. As set out in the sub-section headed “Use of proceeds and future business plan” in the “Letter from the Board” contained in the Circular, the Group has already entered into various legally binding film cooperation agreements. These agreements will only become effective upon completion of the Subscriptions, without which they would not be available to the Company through Huayi Brothers.

The dilution to the shareholding interest of the existing public Shareholders from approximately 67.06% as at the Latest Practicable Date to approximately 33.09% immediately after Closing is substantial. However, in view of (i) the benefits to be derived by the Group from the Subscriptions; (ii) the Subscription Price being considered to be fair and reasonable as discussed above; and (iii) the increase in the value of the Company (i.e. Value Premium) which benefits all Shareholders, we consider that the dilution effect is acceptable.

The Concert Group has applied for the Whitewash Waiver, which is a condition of the Subscriptions being completed, and which because of the benefits set out above we consider fair and reasonable.

– 61 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

OPINION AND RECOMMENDATION

Having taken into account the above principal factors and reasons which are summarised in the section above headed “Discussion and analysis” of this letter, we consider that (1) the Whitewash Waiver and the terms of the Subscription Agreements are fair and reasonable so far as the Independent Shareholders are concerned; and (2) the Subscriptions and the Whitewash Waiver are in the interests of the Company and the Shareholders as a whole.

Accordingly, we advise the Independent Board Committee to recommend, and we ourselves recommend, the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Subscriptions and the Whitewash Waiver.

Yours faithfully, for and on behalf of SOMERLEY CAPITAL LIMITED M. N. Sabine Chairman

Mr. M. N. Sabine is a licensed person registered with the SFC and a responsible officer of Somerley Capital Limited, which is licensed under the SFO to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities. He has over thirty years’ experience in the corporate finance industry.

– 62 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL SUMMARY

The following is a summary of (i) the audited financial results of the Group for each of the three financial years ended 31 December 2012, 2013, 2014 and unaudited interim financial results for 30 June 2015; and (ii) the audited assets and liabilities of the Group as at 31 December 2012, 2013, 2014 and unaudited assets and liabilities as at 30 June 2015 as extracted from the annual reports and interim announcement of the Company for the year ended 31 December 2013, 2014 and for the period ended 30 June 2015.

(a) Consolidated income statement

For the year ended 31 December

Sales from continuing operations Gross profit from continuing operations Profit/(loss) before income tax from continuing operations Income tax (expense)/credit from continuing operations Profit/(loss) for the year/period from continuing operations Loss for the year/period from discontinued operations Profit/(loss) for the year/period Attributable to: Equity Shareholders of the Company Non-controlling interests Earnings/(loss) per share Basic (HK$) Diluted (HK$) Dividend per share	2012 (audited) HK$’000 165,068 94,089 (56,467) (12,633) (69,100) 25,511 (43,589) (43,589) – (43,589) (1.92) (1.92) –	2013 (audited) HK$’000 126,192 17,043 (31,622) (1,402) (33,024) (132,698) (165,722) (165,722) – (165,722) (6.24) (6.24) –	2014 (audited) HK$’000 110,137 25,806 47,800 4,235 52,035 (906) 51,129 55,178 (4,049) 51,129 1.07 1.05 –	For the six month period ended 30 June 2015 (unaudited) HK$’000 61,359 33,137 26,778 (5,235) 21,553 (21) 21,532 26,239 (4,707) 21,532 0.40 0.39 –

– 63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Consolidated statement of financial position

As at 31 December

Total assets Total liabilities Net assets Equity attributable to owners of the Company Non-controlling interests Total equity	2012 (audited) HK$’000 3,025,756 1,428,859 1,596,897 1,596,897 – 1,596,897	2013 (audited) HK$’000 2,983,149 1,184,086 1,799,063 1,799,063 – 1,799,063	2014 (audited) HK$’000 3,044,914 750,540 2,294,374 2,293,447 927 2,294,374	As at 30 June 2015 (unaudited) HK$’000 3,083,620 753,373 2,330,247 2,334,027 (3,780) 2,330,247

The auditors of the Company for each of the three years ended 31 December 2012, 2013 and 2014, PricewaterhouseCoopers, did not issue any qualified opinion on the financial statements of the Group for each of the three years ended 31 December 2012, 2013 and 2014.

As detailed in the joint announcement of the Company and Eternity Investment dated 15 May 2015 and the Company’s circular dated 23 June 2015, the Group has entered into agreements on 11 December 2014 for the disposal of the entire shareholding interest in Smart Title Limited. The underlying operation of Smart Title Limited and its subsidiaries are accounted for as a discontinued operation accordingly for the year ended 31 December 2014 and 2013.

Save for the above, the Group did not have any items which are exceptional because of size, nature or incidence for each of the three years ended 31 December 2012, 2013 and 2014.

– 64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) Material Litigation

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration or claims which would materially and adversely affect the operations of the Company and no litigation, arbitration or claim which would materially and adversely affect the operations of the Company is known to the Directors to be pending or threatened by or against any member of the Group.

(d) Material Change

Save as disclosed below, the Directors confirm that there has been no material change in the financial or trading position or outlook of the Group since 31 December 2014, being the date to which the latest published audited consolidated financial statements of the Group were made up, up to and including the Latest Practicable Date.

(1) Decrease in unaudited consolidated profit attributable to equity holders of the Company for the six months ended 30 June 2015

As disclosed in the Company’s interim report for the six months ended 30 June 2015 (the “Interim Report”), the Group recorded profit attributable to equity holders of the Company from continuing operations of approximately HK$26.3 million for the six months ended 30 June 2015, representing a decrease of approximately 72.5% as compared to the restated figures for the six months ended 30 June 2014. The decrease in profit was mainly attributable to a number of factors, including (i) legal and professional fees of approximately HK$54 million incurred for the VSD (also as disclosed in the Company’s announcement dated 6 August 2015); and (ii) the impairment provision made for some of the Group’s prepayments, interest in a joint venture and amount due from a subsidiary of a joint venture of approximately HK$79 million (of which provision for impairment of interest in a joint venture operating Travel Channel amounted to approximately HK$47 million). These factors were partially offset by realised gain on financial assets at fair value through profit or loss for the six months ended 30 June 2015 (which included a net gain of approximately HK$169 million as set out in the Company’s announcement dated 18 June 2015). Further details are set out in the Interim Report and the aforesaid announcements.

– 65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(2) Capital and operating lease commitments

As set out in the paragraph headed “Indebtedness Statement” below, the Group had operating lease commitments (as lessees) of approximately HK$226 million and capital commitments of approximately HK$5 million as at 30 November 2015 as compared to approximately HK$1,058 million and approximately HK$95 million respectively as at 31 December 2014. The decrease in the aforesaid commitments was mainly as a result of the disposal of the target company in the VSD. Further details regarding the VSD are set out in the Company’s circular dated 23 June 2015 (the “VSD Circular”).

(3) Capital reorganisation

The capital reorganisation of the Company involving, among other things, capital reduction and increase in the authorised ordinary share capital of the Company has been completed and became effective since 25 August 2015. Further details regarding the capital reorganisation are set out in the Company’s circular dated 21 May 2015 and the Interim Report.

(4) The VSD and the Distribution

As set out in the VSD Circular in relation to, among other things, the VSD and the Distribution, Smart Title Limited (being the target company of the VSD) and its subsidiaries are principally engaged in the provision of recreational and wellness services through the management of “Beijing Bayhood No. 9 Club”. It is further stated in the VSD Circular that the Group will continue to operate “Beijing Bayhood No. 9 Club” after completion of the VSD through a leasing agreement (the “Leasing Agreement”) with a term of twenty years (which can be further extended to 31 December 2051 upon request by the Group). As disclosed in the announcement of the Company dated 6 October 2015, the Board estimated that a loss on disposal before taxation of approximately HK$220 million would be recognised upon completion of the VSD. The completion of the VSD and the Distribution took place in October 2015. As set out in the sub-section headed “Reasons for and benefits of the Subscriptions” in the “Letter from the Board” of this circular, it is estimated that the net asset value of the Group as at 30 June 2015 would be significantly reduced from approximately HK$0.35 per Share to approximately HK$0.12 per Share after taking into account the effect of the VSD and the Distribution. Further details of the VSD, the Leasing Agreement and the Distribution are set out in the VSD Circular.

– 66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(5) The Subscription Agreements and film cooperation agreements entered into by the Group

On 10 December 2015, the Company announced that Huayi Brothers, Tencent and each of the Other Investors entered into the Subscription Agreements with the Company and Mr. Yuen to raise gross proceeds of approximately HK$547 million from the Subscriptions. It is stated in the sub-section headed “Use of proceeds and future business plan” in the “Letter from the Board” contained in this circular that the Group has entered into legally binding agreements pursuant to which the Group is committed to invest the whole of the net proceeds of the Subscriptions of approximately HK$527 million in various film production projects which will be used within four months following the Closing. As set out in the sub-section headed “Conditions of the Subscriptions” in the “Letter from the Board” contained in this circular, it is one of the conditions to the Subscriptions that all filings in connection with the VSD as required by Applicable Laws (including Circular 7) with the relevant tax authorities in the PRC be completed. Potential tax liability may arise in this regard. Further details regarding the Subscriptions and film cooperation agreements are set out in the “Letter from the Board” contained in this circular.

(e) Indebtedness Statement

As at 30 November 2015, apart from the intra-group liabilities and normal trade payable in the ordinary course of business, the Group has the following commitments:

(a) Capital commitment

Capital expenditure for purchase of property, plant and equipment contracted for as at 30 November 2015 but not yet incurred amounted to approximately HK$5,010,000.

(b) Operating lease commitment (as lessees)

As at 30 November 2015, the Group had future aggregate minimum lease payments for land and buildings under non-cancellable operating leases amounting to approximately HK$225,887,000.

Other than the aforesaid, the Group has no other loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptance credits, debentures, mortgages, charges, hire purchases commitments, guarantees or other material contingent liabilities as of 30 November 2015.

– 67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. AUDITED CONSOLIDATED FINANCIAL INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2014

The following is the full text of the audited consolidated financial information of the Group for the year ended 31 December 2014 as extracted from the annual report of the Company for the year ended 31 December 2014:

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2014

Notes Continuing Operations Sales 5 Cost of sales Gross profit Other income and other gains, net 5 Marketing and selling expenses Administrative expenses Share of results of joint ventures 17 Finance income/(cost), net 7 Profit/(loss) before taxation 8 Taxation 9 Profit/(loss) for the year from continuing operations Discontinued Operations Loss for the year from discontinued operations 32 Profit/(loss) for the year	2014 HK$’000 110,137 (84,331) 25,806 70,243 (384) (69,019) 585 27,231 20,569 47,800 4,235 52,035 (906) 51,129	2013 HK$’000 (Restated) (Notes 2(y), 32) 126,192 (109,149) 17,043 19,058 (379) (76,952) 16,261 (24,969) (6,653) (31,622) (1,402) (33,024) (132,698) (165,722)

– 68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes Attributable to: Equity holders of the Company – Continuing operations – Discontinued operations Non-controlling interests – continuing operations Profit/(loss) per share attributable to the equity holders of the Company for the year Basic earnings/(loss) per share 11 – From continuing operations – From discontinued operations Diluted earnings/(loss) per share 11 – From continuing operations – From discontinued operations Dividend 12	2014 HK$’000 56,084 (906) 55,178 (4,049) 51,129 HK Cents 1.09 (0.02) 1.07 1.07 (0.02) 1.05 HK$’000 –	2013 HK$’000 (Restated) (Notes 2(y), 32) (33,024) (132,698) (165,722) – (165,722) HK Cents (1.24) (5.00) (6.24) (1.24) (5.00) (6.24) HK$’000 –

– 69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2014

Notes Profit/(loss) for the year Other comprehensive income: Items that may be subsequently reclassified to profit or loss: – Currency translation differences 29 Other comprehensive (loss)/income for the year, net of tax Total comprehensive income/(loss) for the year Total comprehensive income/(loss) attributable to: Equity holders of the Company – continuing operations – discontinued operations Non-controlling interests	2014 HK$’000 51,129 (5,275) (5,275) 45,854 50,802 (906) (4,042) 45,854	2013 HK$’000 (Restated) (Note 2(y), 32) (165,722) 38,148 38,148 (127,574) 5,124 (132,698) – (127,574)

– 70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

As at 31 December 2014

Notes NON-CURRENT ASSETS Property, plant and equipment 14 Intangible assets 15 Interests in joint ventures 17 Deferred income tax assets 9 Prepayments 23 CURRENT ASSETS Trade receivables 19 Inventories 20 Amounts due from joint ventures and their subsidiaries 17 Programmes and film production in progress 21 Financial assets at fair value through profit or loss 22 Prepayments, deposits and other receivables 23 Cash and cash equivalents 24 Assets of disposal group classified as held for sale 32 CURRENT LIABILITIES Agency fee payables 25 Trade payables 25 Receipt in advance, other payables and accrued liabilities 25 Amount due to a joint venture Deferred revenue 26 Current income tax liabilities Promissory notes 27 Convertible notes 27	As at 31 December 2014 2013 HK$’000 HK$’000 9,513 390,219 21 1,645,263 62,823 70,910 19,881 20,037 17,947 35,162 110,185 2,161,591 – 2,182 2,316 10,823 290,178 396,104 68,262 – 138,652 16,000 24,839 54,909 162,745 99,880 686,992 579,898 2,247,737 241,660 2,934,729 821,558 – 100,661 19 2,499 69,469 157,314 – 34,290 – 32,100 13,994 90,875 – 6,099 19,068 – 102,550 423,838	As at 31 December 2014 2013 HK$’000 HK$’000 9,513 390,219 21 1,645,263 62,823 70,910 19,881 20,037 17,947 35,162 110,185 2,161,591 – 2,182 2,316 10,823 290,178 396,104 68,262 – 138,652 16,000 24,839 54,909 162,745 99,880 686,992 579,898 2,247,737 241,660 2,934,729 821,558 – 100,661 19 2,499 69,469 157,314 – 34,290 – 32,100 13,994 90,875 – 6,099 19,068 – 102,550 423,838
		2,161,591
		2,182 10,823 396,104 – 16,000 54,909 99,880
		579,898
		241,660
		821,558
		100,661 2,499 157,314 34,290 32,100 90,875 6,099 –
		423,838

– 71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes Liabilities of disposal group classified as held for sale 32 NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Convertible notes 27 Other payables 25 Deferred revenue 26 Deferred income tax liabilities 9 NET ASSETS EQUITY Capital and reserves attributable to the equity holders of the Company Share capital 28 Reserves 29 Non-controlling interests 29 TOTAL EQUITY	As at 31 December 2014 2013 HK$’000 HK$’000 640,993 – 743,543 423,838 2,191,186 397,720 2,301,371 2,559,311 – 334,588 6,997 7,098 – 77,601 – 340,961 6,997 760,248 2,294,374 1,799,063 1,311,981 856,238 981,466 942,825 2,293,447 1,799,063 927 – 2,294,374 1,799,063	As at 31 December 2014 2013 HK$’000 HK$’000 640,993 – 743,543 423,838 2,191,186 397,720 2,301,371 2,559,311 – 334,588 6,997 7,098 – 77,601 – 340,961 6,997 760,248 2,294,374 1,799,063 1,311,981 856,238 981,466 942,825 2,293,447 1,799,063 927 – 2,294,374 1,799,063
		423,838
		397,720
		2,559,311
		334,588 7,098 77,601 340,961
		760,248
		1,799,063
		856,238 942,825
		1,799,063 –
		1,799,063

– 72 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

BALANCE SHEET

As at 31 December 2014

Notes NON-CURRENT ASSET Interests in subsidiaries 16 Loans advance to subsidiaries 16 CURRENT ASSETS Prepayments, deposits and other receivables 23 Cash and cash equivalents 24 CURRENT LIABILITIES Other payables and accrued liabilities 25 Convertible notes 27 NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Convertible notes 27 NET ASSETS EQUITY Capital and reserves attributable to the equity holders of the Company Share capital 28 Reserves 29 TOTAL EQUITY	2014 HK$’000 126,010 2,027,502 2,153,512 558 63,946 64,504 1,943 19,068 21,011 43,493 2,197,005 – 2,197,005 1,311,981 885,024 2,197,005	2013 HK$’000 126,010 1,910,409
		2,036,419
		15 76,873
		76,888
		3,731 –
		3,731
		73,157
		2,109,576
		334,588
		1,774,988
		856,238 918,750
		1,774,988

– 73 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2014

Notes Cash flows from operating activities Cash used in operations 30 Income tax refunded, net Net cash used in operating activities Cash flows from investing activities Bank interest received Purchases of investment securities Purchases of property, plant and equipment Acquisition of subsidiaries – net of cash acquired 31 Disposal of joint ventures 32 Additions in programmes and film production in progress 21 Purchases of intangible assets Disposals of property, plant and equipment Disposal of intangible assets Disposal of investment securities Deposit received from proposed disposal of subsidiaries 32 Recovery of investment return from programmes and film production in progress 21 Net cash generated from/(used in) investing activities	2014 HK$’000 (75,797) 5 (75,792) 2,795 (69,845) (74,126) – 252,688 (50,705) (86) 46 – 2,448 60,000 2,095 125,310	2013 HK$’000 (2,515) 2,237 (278) 98 – (40,123) (7,596) – – (13,775) – 7,514 – – – (53,882)

– 74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes Cash flows from financing activities Proceeds from issuance of shares on exercise of share options Proceeds from issuance of shares on placement – net of expenses Capital injection from non-controlling shareholder of a subsidiary Repayment of promissory notes Net cash generated from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January 24 Exchange gains on cash and cash equivalents Cash and cash equivalents at 31 December Analysis of cash and cash equivalents Cash and cash equivalents of the Group Reclassification to assets of disposal group held for sale 32 24	2014 HK$’000 600 96,000 4,969 (6,357) 95,212 144,730 99,880 (876) 243,734 243,734 (80,989) 162,745	2013 HK$’000 2,000 79,666 – (108,287) (26,621) (80,781) 179,527 1,134 99,880 99,880 – 99,880

– 75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2014

Attributable to equity holders of

the Company

Balance at 1 January 2013 Comprehensive income: – Loss for the year Other comprehensive income: – Currency translation differences Issuance of shares upon conversion of convertible notes Issuance of shares upon exercise of share options Issuance of consideration shares Issuance of shares upon placement Balance at 31 December 2013 Balance at 1 January 2014 Comprehensive income: – Profit for the year Other comprehensive income: – Currency translation differences Capital injection from non-controlling shareholder of a subsidiary Issuance of shares upon conversion of convertible notes Issuance of shares upon exercise of share options Issuance of shares upon placement Balance at 31 December 2014	Share capital HK$’000 510,818 – – 281,000 2,000 15,000 47,420 856,238 856,238 – – – 398,000 600 57,143 1,311,981	Other reserves Accumulated losses HK$’000 HK$’000 2,819,459 (1,733,380) – (165,722) 38,148 – (57,826) – – – 9,900 – 32,246 – 2,841,927 (1,899,102) 2,841,927 (1,899,102) – 55,178 (5,282) – – – (50,112) – – – 38,857 – 2,825,390 (1,843,924)	Non- controlling interests HK$’000 – – – – – – – – – (4,049) 7 4,969 – – – 927	Total equity HK$’000 1,596,897 (165,722) 38,148 223,174 2,000 24,900 79,666 1,799,063 1,799,063 51,129 (5,275) 4,969 347,888 600 96,000 2,294,374

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2014

1 GENERAL INFORMATION

China Jiuhao Health Industry Corporation Limited (the “Company”) and its subsidiaries (together, the “Group”) is principally engaged in the provision of online and offline healthcare and wellness services. The Group is also engaged in media business in the People’s Republic of China (“PRC”). The Company was incorporated in the Cayman Islands as an exempted company with limited liability on 27 May 2002 under the Company Law (2002 Revision) (Cap. 22) of the Cayman Islands.

The address of the Company’s registered office is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.

The Company is listed on The Stock Exchange of Hong Kong Limited.

These financial statements are presented in thousand Hong Kong dollars (HK$’000), unless otherwise stated. These financial statements have been approved for issue by the Board of Directors on 30 March 2015.

2 PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

(a) Basis of preparation

The consolidated financial statements of the Company have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities at fair value through profit or loss, which are carried at fair value.

The preparation of financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 4.

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APPENDIX I

Changes in accounting policy and disclosures:

• (i) New, revised and amended standards and interpretations to existing standards effective in 2014 adopted by the Group

The Group has adopted the following new, revised and amended standards and interpretations to existing standards (“new HKFRS”) that have been issued and are effective for the Group’s accounting year beginning on 1 January 2014:

HKAS 32 (Amendment) Financial Instruments: Presentation on asset and liability offsetting HKAS 36 (Amendment) Impairment of assets on recoverable amount disclosure HKAS 39 (Amendment) Financial Instruments: Recognition and Measurement – Novation of derivatives HKFRS 10, 12 and HKAS 27 Consolidation for investment entities (Amendment) HK(IFRIC) 21 Levies

The adoption of the above new HKFRSs did not result in substantial changes to the accounting policies of the Group and had no material effect on how the results and financial position for the current or prior accounting periods have been prepared and presented.

• (ii) New, revised and amended standards and interpretations to existing standards that are not effective in 2014 and have not been early adopted by the Group

The following new, revised and amended standards and interpretations to existing standards have been issued, but are not effective for the financial year beginning 1 January 2014 and have not been early adopted by the Group:

		Effective for
		the accounting
		period beginning
		on or after
HKAS 1	Amendments to HKAS 1 for disclosure	1 January 2016
(Amendment)	initiative
HKAS 16 and 41	Agriculture: Bearer plants	1 January 2016
(Amendment)
HKAS 16 and 38	Clarification of acceptable methods of	1 January 2016
(Amendment)	depreciation and amortization
HKAS 19	Defined Benefit Plans: Employee	1 July 2014
(Amendment)	Contributions
HKAS 27	Equity method in separate financial	1 January 2016
(Amendment)	statements
HKFRS 10 and HKAS	Sale or contribution of assets between	1 January 2016
28 (Amendment)	an investor and its associate or joint
	venture
HKFRS 9	Financial Instruments	1 January 2018

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Effective for the accounting period beginning on or after

HKFRS 14	Regulatory Deferral Accounts	1 January 2016
HKFRS 15	Revenue from Contracts with Customers	1 January 2017
HKFRS 10, 12, and	Investment entities: applying the	1 January 2016
HKAS 28	consolidation exception
HKFRS 11	Accounting for acquisitions of interest in	1 January 2016
(Amendment)	joint operations
Annual improvements	Amendments to include changes from	1 July 2014
2012	the 2010-2012 cycle of the annual
	improvements project
Annual improvements	Amendments to include changes from	1 July 2014
2013	the 2011-2013 cycle of the annual
	improvements project
Annual improvements	Amendments to include changes from	1 January 2016
2014	the 2012-2014 cycle of the annual
	improvements project

The Group has commenced an assessment of the impact of these new, amended and revised HKFRSs but is not yet in a position to state whether they would have a significant impact on its results of operations and financial position.

In addition, the requirements of Part 9 “Accounts and Audit” of the new Hong Kong Companies Ordinance (Cap. 622) come into operation as from the Company’s first financial year commencing on or after 3 March 2014 in accordance with section 358 of that Ordinance. The Group is in the process of making an assessment of expected impact of the changes in the Companies Ordinance on the consolidated financial statements in the period of initial application of Part 9 of the new Hong Kong Companies Ordinance (Cap. 622). So far it has concluded that the impact is unlikely to be significant and only the presentation and the disclosure of information in the consolidated financial statements will be affected.

(b) Group accounting

(i) Consolidation

The consolidated financial statements include the financial statements of the Company and all of its subsidiaries made up to 31 December.

(ii) Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

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APPENDIX I

Inter-company transactions, balances, income and expenses on transactions between Group companies are eliminated. Unrealized gains or losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(iii) Business combinations

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognizes any noncontrolling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognized amounts of acquiree’s identifiable net assets.

If the business combination is achieved in stages, the carrying value of acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognized in profit or loss.

Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognized in accordance with HKAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognized and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the income statement.

(iv) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

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APPENDIX I

(v) Disposal of subsidiaries

When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.

(vi) Separate financial statements

Investments in subsidiaries are accounted for at cost less impairment. Cost also includes direct attributable costs of investment. The results of subsidiaries are accounted for by the company on the basis of dividend and receivable.

Impairment testing of the investments in subsidiaries is required upon receiving dividends from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.

(vii) Joint arrangements

Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor has rather than the legal structure of the joint arrangement. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are only accounted for using the equity method.

Under the equity method of accounting, interests in joint ventures are initially recognized at cost and adjusted thereafter to recognize the Group’s share of the postacquisition of profits or losses and movements in other comprehensive income. The Group’s investments in joint ventures include goodwill identified on acquisition. Upon the acquisition of the ownership interest in a joint venture, any difference between the cost of the joint venture and the Group’s share of the net fair value of the joint venture’s identifiable assets and liabilities is accounted for as goodwill. When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.

Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(viii) Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-marker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the management committee, which comprises the chief executive officer and the chief financial officer of the Group, that makes strategic decisions.

(c) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). As the Company is listed on the Main Board of the Stock Exchanges of Hong Kong, the directors considers that it will be more appropriate to adopt Hong Kong dollar as the Group’s and the Company’s presentation currency. Accordingly, the consolidated financial statements are presented in Hong Kong dollars (“HK$”).

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the consolidated income statement within “finance income/ (cost), net”. All other foreign exchange gains and losses are presented in the income statement within “other income and other gains, net”.

Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognized in consolidated income statement as part of the fair value gain or loss. Translation differences on non-monetary financial assets, such as equities classified as available for sale, are included in other comprehensive income.

(iii) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• (a) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• (b) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

• (c) all resulting exchange differences are recognized in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognized in equity.

(d) Property, plant and equipment

Property, plant and equipment, comprising leasehold land and buildings, plant, equipment and other assets are stated at historical cost less accumulated depreciation and impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are expensed in the consolidated income statement during the financial period in which they are incurred.

Depreciation of property, plant and equipment is calculated using the straight-line method to allocate their costs to their residual values over their estimated useful lives, as follows:

Golf courses	30 years
Buildings	20-30 years
Leasehold improvements	5 years
Furniture, computer and equipment	3-5 years
Machinery and equipment	5-10 years
Motor vehicles	4-5 years

Construction in progress is stated at historical cost less impairment losses. Historical cost includes expenditure that is directly attributable to the construction.

No depreciation is provided on construction in progress since they are not ready for use. On completion, the costs are transferred to the appropriate property, plant and equipment.

Major costs in restoring property, plant and equipment to their normal working conditions are charged to the consolidated income statement. Improvements are capitalized and depreciated over their expected useful lives to the Group.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2(f)).

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in the consolidated income statement.

(e) Intangible assets

(i) Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group’s interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the noncontrolling interest in the acquiree.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units (“CGUs”), or Groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognized immediately as an expense and is not subsequently reversed.

(ii) Cooperation Construction and Operating Agreements

Cooperation Construction and Operating Agreements represent the rights (i) to construct and operate the club facilities of “Bayhood No. 9 Club” up to 31 December 2051; and (ii) to develop and operate a piece of 580 Chinese acre land adjacent to “Bayhood No. 9 Club” up to 31 May 2048. The cost of the Cooperation Construction and Operating Agreements represents of fair value of such asset as at the completion of the relevant business combination, and is amortized on a straight-line basis until the expiry of the relevant agreement. The Cooperation Construction and Operating Agreements are stated at cost net of accumulated amortization and impairment losses, if any.

(f) Impairment of non-financial assets

Assets that have an indefinite useful life, for example, goodwill or intangible assets are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash- generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(g) Non-current assets (or disposal groups) held for sale and discontinued operations

Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probably.

A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the group and which represents a separate major line of business or geographic area of operations, or is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale.

When an operation is classified as discontinued, a single amount is presented in the income statement, which comprises the post-tax profit or loss of the discontinued operation and the post-tax gain or loss recognized on the measurement to fair value less costs to sell, or on the disposal, of the assets or disposal group(s) constituting the discontinued operation.

Upon the reclassification of disposal group held for sales, the amortization of intangible assets and depreciation of property, plant and equipment are ceased. The finance cost of convertible notes and promissory notes attributable to the disposal group is continued to be recognized and capitalized as cost of qualifying asset of construction in progress. Operating lease payment for land use right is continued to be incurred and capitalized to the carrying amount of disposal group.

(h) Financial assets

Classification

The Group classifies its financial assets in the following categories: at fair value through profit or loss and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

(i) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorized as held for trading unless they are designated as hedges. Assets in this category are classified as current assets, if expected to be settled within 12 months; otherwise, they are classified as noncurrent.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for the amounts that are settled or expected to be settled more than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise “programmes and film production in progress”, “trade receivables”, “amounts due from joint ventures and its subsidiaries”, “deposits and other receivables”, “cash and cash equivalents” in the consolidated balance sheet.

Recognition and measurement

Regular way purchases and sales of financial assets are recognized on the tradedate – the date on which the Group commits to purchase or sell the asset. Financial assets are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognized at fair value, and transaction costs are expensed in the consolidated income statement. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortized cost using the effective interest method.

Gains or losses arising from changes in the fair value of the “financial assets at fair value through profit or loss” category are presented in the consolidated income statement within “other income and other gains, net”, in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognized in the consolidated income statement as part of “other income and other gains, net” when the Group’s right to receive payments is established.

Programmes and film production in progress are accounted for on a programmeby- programme or film-by-film basis and are stated at cost less accumulated impairment losses, if any. Cost of programmes or film production in progress includes production costs, costs of services, direct labour costs, facilities and raw materials consumed in the creation of a programme or a film. Upon completion, these programmes and films under production are reclassified as programmes and film rights.

(i) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(j) Impairment of financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in the consolidated income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the reversal of the previously recognized impairment loss is recognized in the consolidated income statement.

(k) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

(l) Trade and other receivables

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default of delinquency in payments are considered indicators that the receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the assets is reduced through the use of an allowance account, and the amount of the loss is recognized in the consolidated income statement within “administrative expenses”. When a trade receivable is uncollectible, it is written off against the allowance account for receivables. Subsequent recoveries of amounts previously written off are credited against “administrative expenses” in the consolidated income statement.

(m) Cash and cash equivalents

Cash and cash equivalents includes cash on hand and deposits held at call with banks.

(n) Share capital

Ordinary shares and preference shares are classified as equity.

Preference shares are classified as equity as there is no contractual right to convert the preference shares to any outflow of liability on the Company.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(o) Dividend distribution

Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s consolidated financial statements in the period in which the dividends are approved by the Company’s shareholders, or directors where appropriate.

(p) Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(q) Borrowings

Borrowings, comprise convertible notes and promissory notes, are recognized initially at fair value, net of transaction costs incurred. Promissory note is subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the consolidated income statement over the period of the promissory note using the effective interest method.

During 2012, the Group has issued convertible note that can be converted to share capital at the option of the holder, and the number of shares to be issued does not vary with changes in their fair value.

The liability component of the convertible note is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially at the difference between the fair value of the convertible note as a whole and the fair value of the liability component, which is included in shareholders’ equity in other reserves. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a convertible note is measured at amortized cost using the effective interest method. The equity component of a convertible note is not re-measured subsequent to initial recognition.

The promissory note and liability component of the convertible note are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

(r) Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognized in consolidated income statement in the period in which they are incurred.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(s) Current and deferred income tax

The tax expense for the year comprises current and deferred tax. Tax is recognized in the consolidated income statement, except to the extent that it relates to item recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.

(i) Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries, joint ventures and an associated company operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

(ii) Deferred income tax

Inside basis difference

Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

(iii) Offsetting

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(t) Provisions

Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Provisions are not recognized for future operating losses.

When there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.

(u) Revenue recognition

Revenue is measured at the fair value of consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, rebates and discounts and after eliminating sales within the Group.

The Group recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits with flow to the entity and when specific criteria have been met for each of the Group’s activities as described below.

• (1) Food and beverage income and club activities income are accounted for when the services are rendered. Members’ annual fees are recognized on a straight-line basis over the subscription period. Membership entrance fees represent non-refundable upfront registration fee for lifetime entitlement by members for using the golf facilities and enjoying certain privileges in other facilities in the club and are recognized on a reducing balance method for which the membership is granted and the reducing rate is based upon historical usage pattern of existing members. The portion of membership entrance fees which relates to services not yet rendered as at year end is included in the financial information as deferred revenue. Such food and beverage income and club activities income are reported under Health industry segment.

• (2) Revenue from programmes and film production in progress is recognized on a time proportion basis and reported under Media segment.

• (3) Interest income is recognized on a time proportion basis using the effective interest method.

• (4) Dividend income is recognized when the right to receive payment is established.

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APPENDIX I

(v) Employee benefits

(i) Retirement benefit costs

The Group operates a defined contribution retirement benefits scheme (the “Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for all those employees who are eligible to participate in the Scheme. The Scheme became effective on 1 December 2000. Contributions are made based on a percentage of the employees’ basic salaries and are charged to the consolidated income statement as they became payable in accordance with the rules of the Scheme. The assets of the Scheme are held separately from those of the Group in an independent administered fund. The Group’s employer contributions vest fully with the employees when contributed into the Scheme except for the Group’s employer voluntary contributions, which are refunded to the Group when the employee leaves employment prior to the contributions vesting fully, in accordance with the rules of the Scheme.

The Company’s subsidiaries in the PRC except Hong Kong are members of the state- managed retirement benefits scheme operated by the government of the PRC except Hong Kong. The retirement scheme contributions, which are based on a certain percentage of the salaries of the subsidiaries’ employees, are charged to the consolidated income statement in the period to which they relate and represent the amount of contributions payable by these subsidiaries to the scheme.

For both retirement benefits schemes, the Group has no legal or constructive obligation to pay further contributions if the funds do not hold sufficient assets to pay all employees the benefits relating to employee service in the current or prior periods.

Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payment is available.

(ii) Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognizes termination benefits when it is demonstrably committed to terminate the employment of current employees without possibility of withdrawal. In case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.

(iii) Profit-sharing and bonus plans

The Group recognizes a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to the Company’s shareholders after certain adjustments. The Group recognizes a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

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APPENDIX I

(iv) Employee leave entitlements

Employee entitlements to annual leave and long service leave are recognized when they accrue to employees. A provision is made for the estimated liability for annual leave and long- service leave as a result of services rendered by employees up to the balance sheet date.

Employee entitlements to sick leave, maternity and other non-accumulating compensated absences are not recognized until the time of leave.

(w) Share-based payments

The Group operates a number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options is recognized as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:

• including any market performance conditions;

• excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and

• including the impact of any non-vesting conditions.

Non-market performance and service conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. In addition, in some circumstances employees may provide services in advance of the grant date and therefore the grant date fair value is estimated for the purposes of recognising the expenses during the period between service commencement period and grant date. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-marketing vesting conditions. It recognizes the impact of the revision to original estimates, if any, in the consolidated income statement, with a corresponding adjustment to equity.

When the options are exercised, the Company issue new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognized as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(x) Operating leases

Leases where substantially a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor), are charged to the consolidated income statement on a straight-line basis over the period of the lease.

(y) Comparative figures

The comparative figures in the Group’s consolidated income statement relating to the provision for impairment of film rights and film in production of HK$21,050,000, which have been separately shown, is now included in “cost of sales” in order to conform to the current year’s presentation for a better understanding of the Group’s activities. This reclassification has no effect on the Group’s consolidated balance sheets as at both 31 December 2014 and 2013, or the Group’s profit/(loss) or cash flows for the years ended 31 December 2014 and 2013.

3 FINANCIAL RISK MANAGEMENT

(i) Financial risk factors

The Group’s activities expose it to a variety of financial risks: cash flow and fair value interest rate risk, credit risk, foreign exchange risk, price risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial market and seeks to minimize potential adverse effects on the Group’s financial performance.

(a) Cash flow and fair value interest rate risk

The Group has cash balances placed with reputable banks, which generate interest income for the Group.

Borrowings at fixed rates, including promissory notes, expose the Group to fair value interest-rate risk.

The Group has not used any interest rate swaps to hedge its exposure to interest rate risk.

The Group analyzes its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, and alternative financing. Based on these scenarios, the Group calculates the impact on profit and loss of a defined interest rate shift. For each simulation, the same interest rate shift is used. The scenarios are run only for financial assets and liabilities that represent the major floating interest-bearing positions.

Based on the simulations performed on cash balances placed with banks carried at floating interest rate, if the interest rate increased/decreased by 60 basis-point with all other variables held constant, profit/(loss) attributable to the equity holders of the Company for the year ended 31 December 2014 would increase/decrease by HK$976,000 (2013: decrease/increase by HK$599,000).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Credit risk

Credit risk is managed on a group basis. The carrying amounts of bank balances, trade receivable, deposits and other receivables, programme and film production in progress and amounts due from joint ventures and its subsidiaries represent the Group’s maximum exposure to credit risk in relation to financial assets. The Group has policies that limit the amount of credit exposure to any financial institutions. The Group has also policies in place to ensure that the sales are made to customers with appropriate credit history and the Group performs periodic credit evaluations of its customers.

In regards to the amount due from joint ventures and its subsidiaries, management assessed the financial position and performance of the counter-party, taking into account its business plans, financial information and other factors. In addition, the Group reviews regularly the recoverable amount of deposits and other receivable, programme and film production in progress and amounts due from joint ventures and its subsidiaries to ensure that a adequate impairment losses are made for irrecoverable amounts.

The credit risk on bank balances is limited because the counterparties are financial institutions with good credit standing.

Other than concentration of credit risk on bank balances, which are deposited with several banks with good credit ratings, the Group has no significant concentration of credit risk, with exposure spread over a number of counterparties.

(c) Foreign exchange risk

The Group mainly operates in Hong Kong and the PRC. Foreign exchange risk arises from the fluctuation between Hong Kong Dollars and Renminbi of balances between the Company’s subsidiaries in Hong Kong and the PRC. During the year, appreciation in Renminbi against Hong Kong Dollars from those balances resulted in the significant increase in exchange gain presented in the consolidated income statement within “other income and other gains, net”.

The Group has not used any forward contracts, currency borrowings or other means to hedge its foreign currency exposure but manages through constant monitoring to limit as much as possible its net exposures.

As at 31 December 2014, if Renminbi had strengthened/weakened by 5% against Hong Kong dollars with all other variables held constant, the profit for the year would increase/decrease and accumulated losses would decrease/increase by HK$26,273,000 (2013: loss for the year and accumulated loss would decrease/increase by HK$19,216,000), mainly as a result of foreign exchange gains/losses on translation of Renminbi denominated loans and receivables.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(d) Liquidity risk

Prudent liquidity risk management includes maintaining sufficient cash and bank balances.

Due to the dynamic nature of the Group’s underlying businesses, the Group monitors the current and expected liquidity requirements and maintains flexibility in funding by maintaining sufficient cash and cash equivalent to meet operational needs and possible investment opportunities.

The table below analyzed the financial liabilities of the Group and the Company into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table were the contractual undiscounted cash flows. Balances due within twelve months equaled their carrying balances, as the impact of discounting was not significant.

The convertible notes is based on the contractual maturity date without considering the potential conversion. The promissory notes is based on the face value plus interest as stipulated by the contractual terms.

Group At 31 December 2014 Trade payables, other payables and accrued liabilities Convertible notes At 31 December 2013 Agency fee payables Trade payables, other payables and accrued liabilities Amount due to a joint venture Promissory notes Convertible notes Company At 31 December 2014 Other payables and accrued liabilities Convertible notes At 31 December 2013 Other payables and accrued liabilities Convertible notes	Less than 1 year HK$’000 9,487 19,068 100,661 149,670 34,290 6,600 – 1,943 19,068 3,731 –	Between 1 and 2 years HK$’000 – – – – – – 334,588 – – – 334,588	Between 2 and 5 years HK$’000 – –
			– – – – –
			– –
			– –

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(e) Price risk

The Group is exposed to equity securities price risk because of investments held by the Group and classified on the consolidated balance sheet at fair value through profit or loss. The Group is not exposed to commodity price risk. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group.

The Group’s investments in equity of other entities are publicly traded in The Stock Exchange of Hong Kong Limited. Gains and losses arising from changes in the fair value of financial asset at fair value through profit or loss are dealt with in consolidated income statement. The performance is monitored regularly, together with an assessment of its relevance to the Group’s strategic plans.

As at 31 December 2014, if the share price increased/decreased by 5%, with all other variables held constant, the Group’s profit of the year would increase/decrease and accumulated losses would decrease/increase by HK$6,933,000 (2013: loss for the year and accumulated losses would decrease/increase by HK$800,000).

(ii) Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debts.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated balance sheet plus net debt. As at 31 December 2014, the Group has a net cash position and its cash and bank balances exceeded the total balance of borrowings by HK$143,677,000. The total gearing ratio at 31 December 2013 was 12%. The decrease in the gearing ratio during 2014 resulted primarily from the conversion of convertible notes to ordinary shares and settlement of promissory notes during the year (Note 27).

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APPENDIX I

(iii) Fair value estimation

The fair values of the Group’s financial instruments are not materially different from their carrying values.

The fair values of financial instruments that are not traded in active market are made references to amounts as determined by discounted cash flow techniques.

The carrying values less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

The table below analysis financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

• Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

The following table presents the Group’s assets and liabilities that are measured at fair value:

At 31 December 2014 Financial assets at fair value through profit or loss Trading securities At 31 December 2013 Financial assets at fair value through profit or loss Trading securities	Level 1 HK$’000 138,652 16,000	Level 2 HK$’000 – –	Level 3 HK$’000 – –	Total HK$’000 138,652
				16,000

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing services, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in Level 1. Instruments included in Level 1 comprise primarily the listed equity investments.

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APPENDIX I

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates and judgements will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

(i) Estimated impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with HKAS 36 “Impairment of Assets” (“HKAS 36”). The recoverable amounts of cashgenerating units have been determined based on value-in-use calculations. These calculations require the use of estimates. Had the revenue growth rate and terminal growth rate applied to the discounted cash flow been lower than the management’s estimate, the goodwill might result in impairment. Details are described in Note 15 to the consolidated financial statements.

(ii) Classification of assets and liabilities as disposal group held for sale and discontinued operations

On 11 December 2014, the Group entered into a sales and purchase agreement, pursuant to which the Group conditionally agreed to sell the entire interest in Smart Title Limited (the “Target Company”). This transaction has not yet been completed as at the date of the annual report.

The Group follows the guidance of HKFRS 5 to classify the assets and liabilities of Beijing Bayhood No. 9 Club and adjacent projects under development (the “Subject Land”) and the Subject Land’s operation as disposal group held for sale and discontinued operation. This determination requires significant judgement. In making this judgement, the Group considers that (i) the assets (or disposal group) are available for immediate sale in its present condition and the sale is highly probable given the proposed disposal has been approved and committed by the Group and a conditional sales and purchase agreement has been entered; (ii) the disposal would be completed within twelve months after the end of the reporting period; and (iii) the carrying amount would be recovered principally through a sale transaction rather than through continuing use.

The operation of Beijing Bayhood No. 9 Club remains as continuing operation as the management considers that the Group will continue to operate Beijing Bayhood No.9 Club by entering into a club lease agreement. Pursuant to this agreement, the operating right of Beijing Bayhood No. 9 Club will be leased to the Group for a term of twenty years (can be further extended to 31 December 2051 upon request by the Group) upon the completion of disposal. In addition, the Group will continue to manage the daily operations and be responsible for the decision making of Beijing Bayhood No. 9 Club’s operation. Therefore, the Group continues to recognize Beijing Bayhood No. 9 Club as continuing operation.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

If any of the circumstances mentioned above about classification as disposal group held for sale or discontinued operation is no longer satisfied, the assets and liabilities of Beijing Bayhood No. 9 Club and the Subject Land and the Subject Land’s operation shall be derecognized as assets and liabilities of disposal group held for sale and discontinued operations. The depreciation of property, plant and equipment and amortization of intangible assets shall be resumed upon the date of reclassification to continuing operations.

Additional information is disclosed in note 32.

(iii) Income taxes

The Group recognizes income tax liabilities based on estimates of anticipated amounts of taxes that will be due. Where the final tax outcome is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

(iv) Impairment of programmes and film production in progress

The Group assesses whether the programmes and films production in progress have suffered any impairment. Such assessment requires significant judgement. In making this judgement, the Group evaluates to current market conditions and trade history. If projected cash inflow from these investments deteriorates, provision for impairment may be required.

(v) Fair value of convertible notes

The fair value of convertible notes issued as part of the consideration for business combination was estimated using a valuation model carried out by American Appraisal China Limited. Several key assumptions including, for example, volatility of share price of the Company, risk free rate and effective yield. Had management determined that different assumptions used for the valuation, this would have caused a different liability component and equity component of convertible note and the fair value of consideration at the date of acquisition. Details are described in Note 27 to the consolidated financial statements.

(vi) Membership entrance fees

Membership entrance fees represents non-refundable upfront registration fee for lifetime entitlement by members for using the Bayhood No.9 Club facilities and enjoying certain privileges in other facilities in the club and are recognized on a reducing balance method which is based upon historical usage pattern of the members. The portion of membership entrance fees which relates to services not yet rendered as at year end is included in the financial information as deferred revenue.

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APPENDIX I

5 SALES AND OTHER INCOME AND OTHER GAINS, NET

The Group is principally engaged in provision of online and offline healthcare and wellness services and media business. Revenues recognized during the year are as follows:

Sales Offline healthcare and wellness services Media Other income and other gains, net Interest income Fair value gain on financial assets at fair value through profit or loss Exchange gain Gain on disposal of joint ventures_(Note 32)_ Miscellaneous	Group 2014 2013 HK$’000 HK$’000 (Restated) 104,491 125,465 5,646 727 110,137 126,192 2,791 90 55,255 4,400 894 15,174 11,028 – 275 (606) 70,243 19,058

6 SEGMENT INFORMATION

The chief operating decision-maker has been identified as the management committee which comprises the chief executive officer and the chief financial officer of the Group. The management committee reviews the Group’s internal reporting in order to assess performance and allocate resources. The management committee has determined the operating segments based on these reports.

The management committee has determined that the Group is organized into three main operating segments from continuing operations: (i) online healthcare service; (ii) offline healthcare and wellness services; and (iii) media business; and two operating segments from discontinued operations – (i) offline healthcare and wellness services (Beijing Healthcare and Wellness Si He Yuan and Hotel); and (ii) properties investment which has been disposed by the Group during 2013. The management committee measures the performance of the segments based on their respective segment results. The segment results derived from profit before income tax, excluding exchange gain, finance costs and unallocated costs. Unallocated costs mainly comprise of corporate expenses including salary, office rental and other administrative expenses which are not attributable to particular reportable segment.

There are no sales between the operating segments in year 2014 (2013: nil).

During the year, there is no provision of impairment of intangible assets in the segment result of Media business (2013: HK$21,050,000).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

All of the Group’s operating segments operate in the PRC. No geographical segment information is presented.

Sales Inter-segment revenue Revenue from external customers Share of results of joint ventures Segment results Exchange gain Unallocated income, net Finance income Profit before taxation Taxation Profit for the year Non-controlling interests Profit attributable to the equity holders of the Company Depreciation expense – Allocated – Unallocated Amortization expense				2014
	Online Healthcare Services HK$’000 – – – – (28,780) 529 –	Offline Healthcare and Wellness Services HK$’000 104,491 – 104,491 – (26,834) 22,407 8,488	Media HK$’000 5,646 – 5,646 585 39,622 357 –	Total Continuing operations HK$’000 110,137 – 110,137 585 (15,992) 894 42,329 27,231 20,569 47,800 4,235 52,035 4,049 56,084 23,293 438 8,488	Discontinued operations: Offline Healthcare and Wellness Services - Beijing Healthcare and Wellness Si He Yuan and Hotel Project HK$’000 – – – – (985) 65 (13) (933) – (933) 27 (906) – (906) 90 – –	Total HK$’000 110,137 –
						110,137
						585
						(16,977) 959 42,316
						26,298 20,569
						46,867 4,262
						51,129 4,049
						55,178
						23,383 438 8,488

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Sales Inter-segment revenue Revenue from external customers Share of results of joint ventures Segment results Exchange gain Unallocated costs, net Finance costs Loss before taxation Taxation Loss for the year Non-controlling interests Loss attributable to the equity holders of the Company Depreciation expense – Allocated – Unallocated Amortization expense			2013
	Online Healthcare Services HK$’000 – – – – – – –	Offline Healthcare and Wellness Services HK$’000 125,465 – 125,465 – (8,090) 21,058 8,662	Media Total Continuing operations Offline Healthcare and Wellness Services – Beijing Healthcare and Wellness Si He Yuan and Hotel Project HK$’000 HK$’000 HK$’000 (Restated) 727 126,192 – – – – 727 126,192 – 16,261 16,261 – (9,644) (17,734) (24,324) 15,174 (667) (22,409) – (24,969) (24,991) (6,653) (47,784) (31,622) (72,775) (1,402) 5,476 (33,024) (67,299) – – (33,024) (67,299) 423 21,481 73 870 – 1,562 10,224 16,014	Investment Properties Total Discontinued operations HK$’000 HK$’000 (Restated) – – – – – – 4,253 4,253 (65,399) (89,723) – (667) – – (65,399) (90,390) – (47,784) (65,399) (138,174) – 5,476 (65,399) (132,698) – – (65,399) (132,698) – 73 – – – 16,014	Total HK$’000 126,192 –
					126,192
					20,514
					(107,457) 14,507 (22,409)
					(115,359) (54,437)
					(169,796) 4,074
					(165,722) –
					(165,722)
					21,554 870 26,238

Note: No segment assets and liabilities are disclosed as the chief operating decision makers are not relying on these segment information for the purposes of resources allocation and performance assessment.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7 FINANCE INCOME/(COST), NET

Accrued interest on agency fee payable Interest expense on promissory notes Notional non-cash interest on promissory notes Notional non-cash interest on convertible notes Less: Amounts capitalized as the cost of qualifying assets (i) Reversal of accrued interest on agency fee payable (ii) Reclassification to loss from discontinued operations_(note 32)_	Group 2014 2013 HK$’000 HK$’000 (Restated) – (6,653) – (561) (258) (9,655) (32,368) (66,176) (32,626) (83,045) 32,626 28,608 – (54,437) 20,569 – 20,569 (54,437) – 47,784 20,569 (6,653)

• (i) Finance costs on the promissory notes and convertible notes capitalized during the year were borrowing costs attributable to the construction of the “Beijing Healthcare and Wellness Si He Yuan and Hotel” project.

• (ii) During the year, the Group and Hainan Haishi Tourist Satellite TV Media Co. Ltd. (“Travel Channel”), an associated company of joint ventures of the Group, have mutually agreed that the Group is waived from the payment of certain accrued interest on agency fee payable to Travel Channel upon the full settlement of the outstanding agency fee by the Group. The reversal of such accrued interest payable amounted to approximately HK20,569,000 and has been offset against finance costs during the current year.

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APPENDIX I

8 PROFIT/(LOSS) BEFORE TAXATION

Profit/(loss) before taxation is stated after charging the following:

	Group
	2014	2013
	HK$’000	HK$’000
		(Restated)
Depreciation of property, plant and equipment_(Note 14)_	23,821	22,424
Less: Reclassification to loss from discontinued
operations_(Note 32)_	(90)	(73)
	23,731	22,351
Amortization of intangible assets_(Note 15)_	36,326	37,392
Less: Amortization capitalized_(Note 15)_	(27,838)	(11,154)
Less: Reclassification to loss from discontinued
operations_(Note 32)_	–	(16,014)
	8,488	10,224
Auditor’s remuneration	2,655	2,625
Provision for impairment of film rights and film-in-
production_(Note 15)_	–	21,050
Operating lease rentals – land and buildings	3,390	1,135
Operating lease rentals – operating rights	16,226	16,124
Less: Operating lease capitalized_(Note 14)_	(10,209)	(4,098)
Less: Reclassification to loss from discontinued
operations_(Note 32)_	–	(5,883)
	6,017	6,143
Loss on disposal of property, plant and equipment	13	62
Staff costs:
Directors’ fees	800	800
Wages and salaries	64,829	55,999
Contributions to defined contribution pension schemes	7,713	7,413
	73,342	64,212

9 TAXATION

Hong Kong profits tax has been provided at the rate of 16.5% (2013: 16.5%) on the estimated assessable profit for the year. Taxation on profits outside Hong Kong has been calculated on the estimated assessable profit for the year at the rates of taxation prevailing in the regions/countries in which the Group operates.

Effective from 1 January 2008, the Company’s subsidiaries incorporated in the PRC are required to determine and pay the Corporate Income Tax (“CIT”) in accordance with the Corporate Income Tax Law of the PRC (the “New CIT Law”) as approved by the National People’s Congress on 16 March 2007 and Detailed Implementations Regulations of the New CIT Law (the “DIR”) as approved by the State Council on 6 December 2007.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

According to the New CIT Law and DIR, the income tax rates for both domestic and foreign investment enterprises have been unified at 25% effective from 1 January 2008. PRC Corporate Income Tax has been provided for at the rate of 25% (2013: 25%) on the estimated assessable profit for the year accordingly.

Current income tax – PRC Corporate income tax Deferred income tax Income tax credit	Group 2014 2013 HK$’000 HK$’000 (Restated) 1,268 2,284 (5,503) (882) (4,235) 1,402

The tax on the Group’s loss before taxation differs from the theoretical amount that would arise using the domestic tax rate applicable to the profit or loss before taxation of the consolidated entities in the respective countries as follows:

Profit/(loss) before taxation Tax calculated at domestic tax rates applicable to the profit or loss in the respective countries Tax effects of joint ventures and their subsidiaries’ results reported net of tax Income not subject to tax Expenses not deductible for tax purposes Utilization of previously unrecognized tax losses Derecognition of deferred tax assets Unrecognized tax losses Income tax (credit)/expense

Group 2014 2013 HK$’000 HK$’000 (Restated) 47,800 (31,622) 8,577 (11,668) (146) (4,065) (28,279) (3,094) 2,752 10,453 (58) – – 2,711 12,919 7,065 (4,235) 1,402

The weighted average applicable tax rate was 17.94% (2013: 36.90%). The change in weighted average applicable tax rate was mainly caused by a change in mix of profits earned.

Income tax credit for the year mainly represented the utilization of deferred tax liabilities arising from amortization of intangible assets.

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APPENDIX I

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. The analysis of deferred tax assets and deferred tax liabilities is as follows:

Deferred tax liabilities to be recovered within 12 months Deferred tax liabilities to be recovered after 12 months Deferred tax assets to be recovered after 12 months Deferred tax assets/(liabilities), net	Group 2014 2013 HK$’000 HK$’000 – (3,391) – (337,570) – (340,961) 19,881 20,037 19,881 (320,924)

The movement in gross deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

Deferred tax assets:

Decelerated tax amortization in the PRC Amortization of operating lease HK$’000 HK$’000 At 1 January 2013 7,603 833 (Charged)/credited to the consolidated income statement – 900 Exchange difference 238 41 At 31 December 2013 7,841 1,774 Credited/(charged) to the consolidated income statement – 2,665 Exchange difference (27) (10) Reclassification to asset of disposal group held for sale_(Note 32)_ – (2,680) At 31 December 2014 7,814 1,749	Group Impairment losses HK$’000 8,249 – 258 8,507 – (28) – 8,479	Tax losses HK$’000 5,577 (3,777) 115 1,915 (70) (6) – 1,839	Total HK$’000 22,262 (2,877) 652 20,037 2,595 (71) (2,680) 19,881

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Deferred tax liabilities:

At 1 January 2013 Credited to the consolidated income statement Exchange difference At 31 December 2013 (Charged)/credited to the consolidated income statement Exchange difference Reclassification to liabilities of disposal group held for sale_(Note 32)_ At 31 December 2014	Accelerated tax depreciation HK$’000 (10,609) (2,688) (362) (13,659) (8,074) 35 21,698 –	Group Intangible assets HK$’000 (326,176) 8,947 (10,073) (327,302) 9,078 1,074 317,150 –	Total HK$’000 (336,785) 6,259 (10,435) (340,961) 1,004 1,109 338,848 –

Deferred tax assets are recognized for tax losses carry-forward to the extent that the realization of the related tax benefit through the future taxable profits is probable. As at 31 December 2014, the Group had unrecognized tax losses of approximately HK$489,581,000 (2013: HK$491,598,000) to carry forward against future taxable income, subject to agreement by the Inland Revenue Department of Hong Kong and local tax bureau of the PRC. The tax losses of the PRC subsidiaries have an expiry period of five years, while the tax losses of Hong Kong subsidiaries have no expiry date. Losses amounting to HK$23,767,000 (2013: HK$65,898,000), HK$40,975,000 (2013: HK$23,767,000), HK$22,491,000 (2013: HK$40,975,000), HK$22,685,000 (2013: HK$22,491,000) and HK$30,290,000 (2013: HK$22,685,000) expire in 2015, 2016, 2017, 2018 and 2019 respectively.

Deferred income tax liabilities of HK$36,798,000 (2013: HK$21,442,000) have not been recognized for the withholding tax and other taxes that would be payable on the unremitted earnings of certain subsidiaries and joint ventures. Unremitted earnings totalled HK$367,978,000 as at 31 December 2014 (2013: HK$214,417,000).

10 LOSS ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

The loss attributable to equity holders of the Company is dealt with in the financial statements of the Company to the extent of approximately HK$22,471,000 (2013: HK$73,373,000).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11 EARNINGS/(LOSS) PER SHARE

Basic earnings/(loss) per share

Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

Weighted average number of ordinary shares in issue (thousands) Profit/(loss) from continuing operations attributable to equity holders of the Company (HK$’000) Basic earnings/(loss) per share from continuing operations attributable to equity holders of the Company (HK cents per share) Loss from discontinued operation attributable to equity holders of the Company (HK$’000) Basic loss per share from discontinued operation attributable to equity holders of the Company (HK cents per share) Earnings/(loss) per share attributable to equity holders of the Company (HK cents per share)	2014 5,156,237 56,084 1.09 (906) (0.02) 1.07	2013 (Restated) 2,654,817 (33,024) (1.24) (132,698) (5.00) (6.24)

Diluted earnings/(loss) per share

Diluted earnings/(loss) per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. As at 31 December 2014 and 2013, the Company has only two categories of potential ordinary shares: convertible notes and share options. The convertible notes are assumed to have been converted into ordinary shares, and the net profit is adjusted to eliminate the interest expense less the tax effect. For the share options, a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average market share price of the Company’s shares during the year) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

The conversion of all potential ordinary shares would have an anti-dilutive effect on the basic loss per share for the year ended 31 December 2013.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Diluted earnings/(loss) per share

Weighted average number of ordinary shares in issue (thousands) Adjustments for: – share options (thousands) – convertible notes (thousands) Weighted average number of ordinary shares for diluted earnings per share (thousands) Profit/(loss) from continuing operations attributable to equity holders of the Company (HK$’000) Diluted earnings/(loss) per share from continuing operations attributable to equity holders of the Company (HK cents per share) Loss from discontinued operation attributable to equity holders of the Company (HK$’000) Diluted loss per share from discontinued operation attributable to equity holders of the Company (HK cents per share) Diluted earnings/(loss) per share attributable to equity holders of the Company (HK cents per share)	2014 5,156,237 41,027 67,310 5,264,574 56,084 1.07 (906) (0.02) 1.05	2013 (Restated) 2,654,817 – – 2,654,817 (33,024) (1.24) (132,698) (5.00) (6.24)

12 DIVIDEND

The directors do not recommend the payment of a final dividend in respect of the year ended 31 December 2014 (2013: nil).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13 DIRECTORS’ AND SENIOR MANAGEMENT’S EMOLUMENTS

(a) Directors’ and chief executive’s emoluments

The aggregate amounts of emoluments paid or payable to directors and the chief executive of the Company during the year are as follows:

Fees Salaries, bonuses, allowances and benefits in kind Total	2014 HK$’000 800 2,427 3,227	2013 HK$’000 800 1,755
		2,555

The remuneration of each director and the chief executive for the year ended 31 December 2014 is set out below:

		Salaries,	Contributions
		bonuses,	to defined
		allowances	contribution
		and benefits	pension		Share-based
Name	Fees	in kind	schemes	Sub-total	payments (i)	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Director and chief executive
Mr. YUEN Hoi Po	–	–	–	–	–	–
Directors
Mr. ZHANG Changsheng	–	2,427	–	2,427	–	2,427
Mr. Edward TIAN Suning	–	–	–	–	–	–
Mr. Hugo SHONG	–	–	–	–	–	–
Professor WEI Xin	200	–	–	200	–	200
Dr. WONG Yau Kar David	200	–	–	200	–	200
Mr. YUEN Kin	200	–	–	200	–	200
Mr. CHU Yuguo	200	–	–	200	–	200

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The remuneration of each director and chief executive for the year ended 31 December 2013 is set out below:

		Salaries,	Contributions
		bonuses,	to defined
		allowances	contribution
		and benefits	pension		Share-based
Name	Fees	in kind	schemes	Sub-total	payments (i)	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Director and chief executive
Mr. YUEN Hoi Po	–	–	–	–	–	–
Directors
Mr. ZHANG Changsheng	–	1,755	–	1,755	–	1,755
Mr. Edward TIAN Suning	–	–	–	–	–	–
Mr. Hugo SHONG	–	–	–	–	–	–
Professor WEI Xin	200	–	–	200	–	200
Dr. WONG Yau Kar David	200	–	–	200	–	200
Mr. YUEN Kin	200	–	–	200	–	200
Mr. CHU Yuguo	200	–	–	200	–	200

• (i) Share-based payments represent the recognition of the fair value of share options of the Company granted to the directors over the vesting period.

Other than as presented above, for 2013 and 2014 there were:

• (1) no arrangement under which a director waived or agreed to waive any remuneration; and

• (2) no emoluments were paid by the Group to the directors as an inducement to join or upon joining the Group, or as compensation for loss of office.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year include one (2013: one) director whose emoluments are reflected in the analysis presented above. The emoluments payable to the four (2013: four) individuals during the year are as follows:

Salaries, bonuses, allowances and benefits in kind Contributions to defined contribution pension schemes	Group 2014 2013 HK$’000 HK$’000 4,509 4,380 256 129 4,765 4,509	Group 2014 2013 HK$’000 HK$’000 4,509 4,380 256 129 4,765 4,509
		4,509

The emoluments fell within the following bands:

Emolument bands HK$500,001 – HK$1,000,000 HK$1,500,001 – HK$2,000,000 HK$2,000,001 – HK$2,500,000	Number of individuals 2014 2013 3 3 – 1 1 – 4 4	Number of individuals 2014 2013 3 3 – 1 1 – 4 4
		4

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14 PROPERTY, PLANT AND EQUIPMENT – GROUP

Cost At 1 January 2013 Additions Acquisition of subsidiaries (Note 31) Transfers and disposals Exchange difference At 31 December 2013 Accumulated depreciation At 1 January 2013 Disposals Depreciation Exchange difference At 31 December 2013 Net book value: At 31 December 2013	Golf course HK$’000 110,736 – – – 3,468 114,204 12,150 – 8,707 516 21,373 92,831	Buildings HK$’000 193,906 – 774 – 6,072 200,752 10,544 – 7,654 450 18,648 182,104	Machinery and equipment Furniture, computer and equipment Leasehold improvements HK$’000 HK$’000 HK$’000 9,765 9,051 15,238 630 913 566 8 2 – (157) – 5,656 306 276 465 10,552 10,242 21,925 2,944 2,460 957 (97) – – 1,541 1,174 562 116 93 28 4,504 3,727 1,547 6,048 6,515 20,378	Motor vehicles HK$’000 17,660 193 256 (71) 487 18,525 10,717 (69) 2,786 334 13,768 4,757	Construction in progress HK$’000 1,533 81,681 – (5,656) 28 77,586 – – – – – 77,586	Total HK$’000 357,889 83,983 1,040 (228) 11,102
						453,786
						39,772 (166) 22,424 1,537
						63,567
						390,219

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Cost At 1 January 2014 Additions Disposals Exchange difference Reclassification to assets of disposal group held for sale (Note 32) At 31 December 2014 Accumulated depreciation At 1 January 2014 Disposals Depreciation Exchange difference Reclassification to assets of disposal group held for sale (Note 32) At 31 December 2014 Net book value: At 31 December 2014	Golf course HK$’000 114,204 – – (382) (113,822) – 21,373 – 8,828 (86) (30,115) – –	Buildings HK$’000 200,752 – – (672) (199,309) 771 18,648 – 7,786 (75) (26,333) 26 745	Machinery and equipment HK$’000 10,552 764 (120) (36) (11,117) 43 4,504 (115) 1,491 (18) (5,852) 10 33	Furniture, computer and equipment HK$’000 10,242 1,878 – (33) (8,364) 3,723 3,727 – 1,455 (14) (3,437) 1,731 1,992	Leasehold improvements HK$’000 21,925 666 – (73) (21,434) 1,084 1,547 – 1,777 (7) (2,779) 538 546	Motor vehicles HK$’000 18,525 715 (2,225) (55) (13,719) 3,241 13,768 (2,171) 2,484 (43) (12,411) 1,627 1,614	Construction in progress HK$’000 77,586 140,776 – (37) (213,742) 4,583 – – – – – – 4,583	Total HK$’000 453,786 144,799 (2,345) (1,288) (581,507)
								13,445
								63,567 (2,286) 23,821 (243) (80,927)
								3,932
								9,513

Depreciation expense of HK$20,724,000 (2013: HK$20,266,000), HK$3,007,000 (2013: HK$2,085,000) and HK$90,000 (2013: HK$73,000) has been charged in cost of sales, administrative expenses and loss from discontinued operations respectively.

During 2014, the Group has capitalized borrowing costs of HK$32,626,000 (2013: HK$28,608,000), amortization of HK$27,838,000 (2013: HK$11,154,000) and operating lease rentals of HK$10,209,000 (2013: HK$4,098,000) with an aggregated capitalized amount of HK$70,673,000 (2013: HK$43,860,000).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15 INTANGIBLE ASSETS – GROUP

At 1 January 2013 Cost Accumulated amortization and impairment Net book amount Year ended 31 December 2013 Opening net book amount Additions Transfers and disposals Amortization Impairment expense Exchange difference Closing net book amount At 31 December 2013 Cost Accumulated amortization and impairment Net book amount	Non-current assets		Total HK$’000 1,763,441 (116,442) 1,646,999 1,646,999 13,775 (7,514) (37,392) (21,050) 50,445 1,645,263 1,818,688 (173,425) 1,645,263
	Goodwill Programmes and film rights Investments in programmes and film production in progress Cooperating construction and operating agreements HK$’000 HK$’000 HK$’000 HK$’000 312,216 116,214 8,440 1,325,548 – (94,683) – (20,845) 312,216 21,531 8,440 1,304,703 312,216 21,531 8,440 1,304,703 – – 13,775 – – – (7,514) – – (1,562) – (35,788) – (19,993) (1,057) – 9,777 24 346 40,294 321,993 – 13,990 1,309,209 321,993 118,407 15,064 1,362,197 – (118,407) (1,074) (52,988) 321,993 – 13,990 1,309,209	Software and licences HK$’000 1,023 (914) 109 109 – – (42) – 4 71 1,027 (956) 71

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Year ended 31 December 2014 Opening net book amount Additions Transfers and disposals Amortization Exchange difference Reclassification to assets of disposal group held for sale (Note 32) Closing net book amount At 31 December 2014 Cost Accumulated amortization and impairment Net book amount			Non-current assets	Non-current assets
	Goodwill HK$’000 321,993 – – – (1,078) (320,915) – – – –	Programmes and film rights HK$’000 – – – – – – – – – –	Investments in programmes and film production in progress HK$’000 13,990 – (13,990) – – – – – – –	Cooperating construction and operating agreements HK$’000 1,309,209 – – (36,276) (4,333) (1,268,600) – – – –	Software and licences HK$’000 71 86 – (50) – (86) 21 25 (4) 21	Total HK$’000 1,645,263 86 (13,990) (36,326) (5,411) (1,589,601)
						21
						25 (4)
						21

Amortization of HK$8,438,000 (2013: HK$9,897,000), HK$50,000 (2013: HK$327,000) and nil (2013: HK$16,014,000) has been charged in cost of sales, administrative expenses and loss from discontinued operations respectively. Amortization of HK$27,838,000 (2013: HK$11,154,000) has been capitalized in construction in progress.

Cooperation Construction and Operating Agreements represents the rights (i) to construct and operate the club facilities of “Beijing Bayhood No. 9 Club” up to 31 December 2051 acquired through a business combination completed in July 2011; and (ii) to develop and operate a piece of 580 Chinese acre land adjacent to “Beijing Bayhood No. 9 Club” up to 30 January 2062 acquired through a business combination completed in October 2012.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The carrying amounts of film rights and films in production have been reduced to their recoverable amounts through recognition of provision for impairment losses of HK$21,050,000 during the year ended 31 December 2013. The recoverable amounts of film rights and films in production is assessed by management at the end of each reporting period with reference to both internal and external market information.

Impairment tests for goodwill

Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to operating segment as follows:

Offline health and wellness services – Beijing Bayhood No. 9 Club (i) – Beijing Healthcare and Wellness Si He Yuan and Hotel (ii) Reclassification of assets of disposal group held for sale_(Note 32)_	2014 HK$’000 51,460 269,455 320,915 (320,915) –	2013 HK$’000 51,634 270,359
		321,993 –
		321,993

• (i) As of 31 December 2013, the recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management. Cash flows beyond the budget period are extrapolated using the estimated growth rates stated as below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.

• (ii) The recoverable amount of a CGU is determined based on financial budgets plan approved by management. Cash flows beyond the budget period are extrapolated using the estimated growth rates stated as below.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Key assumptions used for value-in-use calculations:

	Health industry
	2014	2013
Beijing Bayhood No. 9 Club (i)
– Compound annual growth rate of revenue in
budget period	N/A	5%
– Annual growth rate	N/A	2%
– Discount rate	N/A	13.5%
Beijing Healthcare and Wellness Si He Yuan and
Hotel (ii)
– Compound annual growth rate of revenue	N/A	5%
– Discount rate	N/A	15.2%

• (i) Management determined the average annual revenue growth rate based on past performance and its expectations of market development. The discount rates used reflect specific risks relating to the relevant segments.

• (ii) Management determined the assumptions applied in the impairment testing in current year remain appropriate since its acquisition in 2012. Management determined the average annual growth based on market data in the same industry and its expectations of market development. The decision rates used reflect specific risks relating to the relevant segment.

• (i), (ii) If the compound annual growth rate of revenue in the forecast period applied had been 1% lower or the discount rate applied had been 1% higher than management’s estimates as at 31 December 2013 with all other variables held constant, no further impairment provision would be required for the goodwill as at 31 December 2013.

– 119 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16 INTERESTS IN SUBSIDIARIES AND LOANS ADVANCE TO SUBSIDIARIES – COMPANY

Unlisted shares at cost_(Note a)_ Provision for impairment loss Loans advance to subsidiaries Provision for impairment loss	Company 2014 2013 HK$’000 HK$’000 760,837 760,837 (634,827) (634,827) 126,010 126,010 2,335,827 2,218,734 (308,325) (308,325) 2,027,502 1,910,409 2,153,512 2,036,419

All the balances with subsidiaries were unsecured, interest-free and not repayable within 12 months.

Particulars of the principal subsidiaries are set out in Note 38 to the consolidated financial statements.

• Note a: Expenses relating to share options granted by the Company to (i) certain employees working for, and (ii) parties providing services to, subsidiaries of the Group is recognized as deemed investments in subsidiaries.

17 INTERESTS IN JOINT VENTURES AND AMOUNT DUE FROM/TO JOINT VENTURES AND ITS SUBSIDIARIES

(a) Amount due from/to joint ventures and its subsidiaries

As at 31 December 2014 and 2013, amounts due from/(to) joint ventures and its subsidiaries are unsecured, interest-free and the amount due from joint ventures and its subsidiaries are past due but not impaired and they are expected to be settled within 12 months from the year end date.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Interests in joint ventures

Set out below are the joint ventures of the Group as at 31 December 2014, which, in the opinion of the directors, are material to the Group. All these joint ventures are private companies and there is no quoted market price available for their shares. There are no contingent liabilities relating to the Group’s interest in these joint ventures, and there are no contingent liabilities and commitments of these joint ventures themselves.

					Principal
	Place of establishment		Percentage	of equity	activities
	and kind of legal	Registered	interests attributable		and place of
Name	entity	capital	to the Group		operation
			2014	2013
Joint ventures for media business
Hainan Hailu	The PRC, limited	RMB1,000,000	50%	50%	Advertising
Advertising Limited	liability company				agency, design
Liability Company					and production
(2)
Asia Union Film and	The PRC, limited	RMB120,000,000	50%	50%	Investment in
Media (1) (2)	liability company				television
					drama, film
					production and
					advertising
					production in
					the PRC

• (1) Pursuant to the shareholders’ agreements, the Group and Poly Culture and Arts Co., Ltd. (“PCACL”), the joint venture partner, agreed that the Group maintains the joint control over AUFM but the profit sharing ratio of the Group in AUFM is 75%.

• (2) The names of the companies referred to above represent management’s best effort in translating the Chinese names of the companies as no English names for these companies have been registered.

– 121 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Summarised financial information for joint ventures

Set out below are the summarized financial information for joint ventures for media business and properties investment business which are accounted for using the equity method.

Haina Hailu Advertising Limited Liability Company 2014 2013 HK’000 HK’000 Summarised balance sheet Current Cash and cash equivalents 13,841 131,825 Other current assets (excluding cash) 11,340 10,883 Total current assets 25,181 142,708 Current financial liabilities (excluding trade and other payables and provisions) (2,123) (100,335) Other current liabilities (including trade and other payables and provisions) (9,677) (13,548) Total current liabilities (11,800) (113,883) Non-current Assets 150 – Non-current financial liabilities (excluding trade and other payables and provisions) – – Other non-current liabilities (including trade, other payables and provisions) – – Total non-current liabilities – – Net assets 13,531 28,825	Asia Union Film and Media Joint ventures not individually significant 2014 2013 2014 2013 HK’000 HK’000 HK’000 HK’000 1,392 2,093 598 598 7,693 19,662 – – 9,085 21,755 598 598 (299,293) (90,746) – – (83,029) (396,909) (1,343) (1,346) (382,322) (487,655) (1,343) (1,346) 357,380 450,279 – – – – – – – – – – – – – – (15,857) (15,621) (745) (748)	Total 2014 2013 HK’000 HK’000 15,831 134,516 19,033 30,545 34,864 165,061 (301,416) (191,081) (94,049) (411,803) (395,465) (602,884) 357,530 450,279 – – – – – – (3,071) 12,456	Total 2014 2013 HK’000 HK’000 15,831 134,516 19,033 30,545 34,864 165,061 (301,416) (191,081) (94,049) (411,803) (395,465) (602,884) 357,530 450,279 – – – – – – (3,071) 12,456
			165,061 (191,081) (411,803)
			(602,884) 450,279 – –
			– 12,456

– 122 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Haina Hailu Advertising Limited Liability Company 2014 2013 HK’000 HK’000 Summarised statement of comprehensive income Revenue – – Depreciation and amortization (83) (230) Interest income 3,125 1,168 Interest expense – – Profit or loss from continuing operations 1,601 751 Income tax expense – – Post-tax from continuing operations 1,601 751 Other comprehensive income – – Total comprehensive income 1,601 751 Dividend received from joint ventures 8,398 –	Asia Union Film and Media 2014 2013 HK’000 HK’000 12,274 11,343 (347) (348) 4 5 – – (289) 21,213 – (20) (289) 21,193 – – (289) 21,193 – –	Joint Venture for properties investment business (i) Joint ventures not individually significant 2014 2013 2014 2013 HK’000 HK’000 HK’000 HK’000 – 15,312 – – – (27) – (22) – 13 – 2 – – – – – 11,257 – (20) – (2,751) – – – 8,506 – (20) – – – – – 8,506 – (20) – 13,740 – –	Total 2014 2013 HK’000 HK’000 12,274 26,655 (430) (627) 3,129 1,188 – – 1,312 33,201 – (2,771) 1,312 30,430 – – 1,312 30,430 8,398 13,740	Total 2014 2013 HK’000 HK’000 12,274 26,655 (430) (627) 3,129 1,188 – – 1,312 33,201 – (2,771) 1,312 30,430 – – 1,312 30,430 8,398 13,740
				30,430 –
				30,430
				13,740

The information above reflects the amounts presented in the financial statements of the joint ventures (and not the Group’s share of those amounts) adjusted for differences in accounting policies between the Group and the joint ventures.

– 123 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Investment in joint ventures

	Haina Hailu Advertising	Haina Hailu Advertising					Joint ventures not individually	Joint ventures not individually	Joint ventures not individually	Joint ventures not individually				Joint Venture for properties	Joint Venture for properties
	Limited Liability Company		Asia Union	Film and Media			significant					Total		investment business (i)			Total
	2014	2013	2014		2013		2014		2013		2014		2013	2014	2013	2014		2013
	HK$’000	HK$’000	HK$’000		HK$!000		HK$’000		HK$’000		HK$’000		HK$’000	HKS’000	HK$’000	HK$’000		HK$’000
Investment in joint ventures
At 1 January	14,412	13,605	56,232		38,552		266		264		70,910		52,421	–	325,503	70,910		377,924
Share of profit/(loss)	801	376	(216)		15,895		–		(10)		585		16,261	–	4,253	585		20,514
Exchange differences	(49)	431	(222)		1,785		(3)		12		(274)		2,228	–	216	(274)		2,444
Transfer to assets of disposal group
held for sale	–	–	–		–		–		–		–		–	–	(316,232)	–		(316,232)
Dividend received from a joint
venture	(8,398)	–	–		–		–		–		(8,398)		–	–	(13,740)	(8,398)		(13,740)
At 31 December	6,766	14,412	55,794		56,232		263		266		62,823		70,910	–	–	62,823		70,910
Summarized financial information
Opening net assets 1 January	28,825	27,211	(15,621)		(35,410)		(748)		(705)		12,456		(8,904)	–	651,006	12,456		642,102
Profit/(loss) for the year	1,601	751	(289)		21,193		–		(20)		1,312		21,924	–	8,506	1,312		30,430
Exchange differences	(99)	863	53		(1,404)		3		(23)		(43)		(564)	–	432	(43)		(132)
Dividend paid	(16,796)	–	–		–		–		–		(16,796)		–	–	(27,480)	(16,796)		(27,480)
Transfer to assets of disposal group
held for sale	–	–	–		–		–		–		–		–	–	(632,464)	–		(632,464)
Closing net assets	13,531	28,825	(15,857)		(15,621)		(745)		(748)		(3,071)		12,456	–	–	(3,071)		12,456
Interest in joint ventures	6,766	14,412	(11,893)		(11,716)		(373)		(374)		(5,500)		2,322	–	–	(5,500)		2,322
Goodwill	–	–	67,687		67,948		636		640		68,323		68,588	–	–	68,323		68,588
Carrying value	6,766	14,412	55,794		56,232		263		266		62,823		70,910	–	–	62,823		70,910

(i) The joint ventures for properties investment business is reclassified as assets of disposal group held for sale in current year as disclosed in Note 32.

– 124 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18 FINANCIAL INSTRUMENTS BY CATEGORY – GROUP AND COMPANY

The accounting policies for financial instruments were applied to the line items below:

Group

Assets as per consolidated balance sheet

As at 31 December 2014 Amounts due from joint ventures and their subsidiaries Programmes and film production in progress Financial assets at fair value through profit or loss Deposits and other receivables Cash and cash equivalents Total As at 31 December 2013 Trade receivables Amounts due from joint ventures and their subsidiaries Financial assets at fair value through profit or loss Deposits and other receivables Cash and cash equivalents Total	Loans and receivables Financial assets at fair value through profit or loss HK$’000 HK$’000 290,178 – 68,262 – – 138,652 8,066 – 162,745 – 529,251 138,652 2,182 – 396,104 – – 16,000 24,900 – 99,880 – 523,066 16,000	Total HK$’000 290,178 68,262 138,652 8,066 162,745
		667,903
		2,182 396,104 16,000 24,900 99,880
		539,066

– 125 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Group

Liabilities as per consolidated balance sheet

As at 31 December 2014 Trade payables Other payables and accrued liabilities Convertible notes – liability component Total As at 31 December 2013 Agency fee payables Trade payables Other payables and accrued liabilities Amount due to a joint venture Convertible notes – liability component Promissory notes Total Company Assets as per balance sheet As at 31 December 2014 Deposits and other receivables Amounts due from subsidiaries Cash and cash equivalents Total As at 31 December 2013 Deposits and other receivables Amounts due from subsidiaries Cash and cash equivalents Total	Other financial liabilities at amortized cost HK$’000 19 16,465 19,068 35,552 100,661 2,499 147,171 34,290 334,588 6,099 625,308 Loans and receivables HK$’000 – 2,027,502 63,946 2,091,448 15 1,910,409 76,873 1,987,297	Total HK$’000 19 16,465 19,068
		35,552
		100,661 2,499 147,171 34,290 334,588 6,099
		625,308
		Total HK$’000 – 2,027,502 63,946
		2,091,448
		15 1,910,409 76,873
		1,987,297

– 126 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Company

Liabilities as per balance sheet

As at 31 December 2014 Other payables and accrued liabilities Convertible notes – liability component Total As at 31 December 2013 Other payables and accrued liabilities Convertible notes – liability component Total	Other financial liabilities at amortized cost HK$’000 1,943 19,068 21,011 3,731 334,588 338,319	Total HK$’000 1,943 19,068
		21,011
		3,731 334,588
		338,319

19 TRADE RECEIVABLES – GROUP

The aging analysis of the trade receivables is as follows:

0–3 months 4–6 months Over 6 months Provision for doubtful debts (all made against trade receivables aged over 6 months)	Group As at 31 December 2014 2013 HK$’000 HK$’000 – 14 – 53 13,894 16,056 13,894 16,123 (13,894) (13,941) – 2,182	Group As at 31 December 2014 2013 HK$’000 HK$’000 – 14 – 53 13,894 16,056 13,894 16,123 (13,894) (13,941) – 2,182
		16,123 (13,941)
		2,182

The net carrying amounts of the trade receivables of the Group are denominated in Renminbi.

The Group generally requires customers to pay in advance, but grants a credit period of 30 days to 90 days to some customers.

– 127 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed to perform as contracted. As at 31 December 2014, HK$13,894,000 of the trade receivables was considered impaired (2013: HK$13,941,000).

The aging analysis of trade receivables that were past due but not impaired is as follows:

4–6 months Over 6 months	Group As at 31 December 2014 2013 HK$’000 HK$’000 – 53 – 2,115 – 2,168	Group As at 31 December 2014 2013 HK$’000 HK$’000 – 53 – 2,115 – 2,168
		2,168

Management does not expect any material losses from non-performance by these counterparties, as these relate to a number of independent customers for whom there is no recent history of default.

Movements on the Group’s provision for doubtful debts are as follows:

At 1 January Exchange differences At 31 December	Group 2014 2013 HK$’000 HK$’000 13,941 13,518 (47) 423 13,894 13,941	Group 2014 2013 HK$’000 HK$’000 13,941 13,518 (47) 423 13,894 13,941
		13,941

Amounts charged to the provision account are generally written off when there is no expectation of recovering additional cash.

The carrying amounts of trade receivables approximate their respective fair values.

The maximum exposure to credit risk at the balance sheet date is the carrying value of trade receivables disclosed above. The Group does not hold any collateral as security.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

20 INVENTORIES

Raw materials Finished goods Reclassification to assets of disposal group held for sale (Note 32)	Group As at 31 December 2014 2013 HK$’000 HK$’000 2,482 2,185 9,433 8,638 11,915 10,823 (9,599) – 2,316 10,823	Group As at 31 December 2014 2013 HK$’000 HK$’000 2,482 2,185 9,433 8,638 11,915 10,823 (9,599) – 2,316 10,823
		10,823 –
		10,823

The cost of inventories recognized as expense and included in cost of sales, administrative expenses and other income and other (losses)/gains, net amounted to approximately HK$3,050,000 (2013: HK$6,533,000), HK$715,000 (2013: HK$1,397,000) and nil (2013: HK$1,072,000), respectively.

21 PROGRAMMES AND FILM PRODUCTION IN PROGRESS

At 1 January Additions Transfer Investment return recognized Receipt of investment return Exchange difference At 31 December	Group 2014 2013 HK$’000 HK$’000 – – 50,705 – 13,990 – 5,714 – (2,095) – (52) – 68,262 –	Group 2014 2013 HK$’000 HK$’000 – – 50,705 – 13,990 – 5,714 – (2,095) – (52) – 68,262 –
		–

Programmes and film production in progress are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

– 129 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

22 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS – GROUP

Equity security: Listed in Hong Kong Market value of listed security	Group As at 31 December 2014 2013 HK$’000 HK$’000 138,652 16,000 138,652 16,000	Group As at 31 December 2014 2013 HK$’000 HK$’000 138,652 16,000 138,652 16,000
		16,000

Financial assets at fair value through profit or loss are presented within “operating activities” as part of changes in working capital in the consolidated cash flow statement (Note 30).

Changes in fair value of financial assets at fair value through profit or loss are recorded in “other income and other gains, net” in the consolidated income statement (Note 5).

The fair value of the equity security was based on its current bid prices in an active market denominated in Hong Kong dollar, and is within level 1 of the fair value hierarchy.

23 PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES – GROUP AND COMPANY

Prepayments Deposits and other receivables Less non-current portion	Group As at 31 December 2014 2013 HK$’000 HK$’000 34,720 65,171 8,066 24,900 42,786 90,071 (17,947) (35,162) 24,839 54,909	Company As at 31 December 2014 2013 HK$’000 HK$’000 558 – – 15 558 15 – – 558 15	Company As at 31 December 2014 2013 HK$’000 HK$’000 558 – – 15 558 15 – – 558 15
			15 –
			15

– 130 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The carrying amounts of prepayments, deposits and other receivables of the Group and the Company are denominated in the following currencies:

HK$ RMB	Group As at 31 December 2014 2013 HK$’000 HK$’000 1,446 19,465 41,340 70,606 42,786 90,071	Company As at 31 December 2014 2013 HK$’000 HK$’000 558 15 – – 558 15	Company As at 31 December 2014 2013 HK$’000 HK$’000 558 15 – – 558 15
			15

The carrying amounts of prepayments, deposits and other receivables approximate their fair values and do not contain past due or impaired assets.

The maximum exposure to credit risk at the balance sheet date is the carrying value of deposits and other receivables disclosed above.

24 CASH AND CASH EQUIVALENTS – GROUP AND COMPANY

Cash and bank balances Denominated in: HK$ RMB United States Dollar (USD) Other Maximum exposure to credit risk	Group As at 31 December 2014 2013 HK$’000 HK$’000 162,745 99,880 162,745 99,880 84,136 79,170 68,074 15,037 10,533 5,620 2 53 162,745 99,880 162,577 99,142	Company As at 31 December 2014 2013 HK$’000 HK$’000 63,946 76,873 63,946 76,873 63,944 76,871 – – 2 2 – – 63,946 76,873 63,946 76,873	Company As at 31 December 2014 2013 HK$’000 HK$’000 63,946 76,873 63,946 76,873 63,944 76,871 – – 2 2 – – 63,946 76,873 63,946 76,873
			76,873
			76,871 – 2 –
			76,873
			76,873

– 131 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• 25 AGENCY FEE PAYABLE, TRADE PAYABLES, RECEIPT IN ADVANCE, OTHER PAYABLES AND ACCRUED LIABILITIES – GROUP AND COMPANY

Current liabilities: Agency fee payable (i) Trade payables Receipt in advance (Note 32) Other payables and accrued liabilities (ii) Non-current liabilities: Other payables	Group As at 31 December 2014 2013 HK$’000 HK$’000 – 100,661 19 2,499 60,001 10,143 9,468 147,171 69,488 260,474 6,997 7,098 76,485 267,572	Company As at 31 December 2014 2013 HK$’000 HK$’000 – – – – – – 1,943 3,731 1,943 3,731 – – 1,943 3,731	Company As at 31 December 2014 2013 HK$’000 HK$’000 – – – – – – 1,943 3,731 1,943 3,731 – – 1,943 3,731
			3,731 –
			3,731

• (i) During the year ended 31 December 2006, Beijing Hua Yi Qian Si Advertising Company Limited (“Qiansi”), a wholly-owned subsidiary of the Group, has entered into an exclusive advertising agency agreement (“Agreement”) with Hai Nan Haishi Tourist Satellite TV Media Co., Ltd. (“HNTV”), an associated company of a joint venture of the Group. Under the agreement, Qiansi has been granted an exclusive right to sell all of the advertising resources of HNTV for a period of up to six years with effect from 1 January 2006. In return, Qiansi has agreed to make pre-agreed monthly payments to HNTV during the same period. In December 2009, Qiansi and HNTV have entered into a supplemental agreement, whereby the expiry date of the above-mentioned exclusive right was changed to 31 December 2009. The balance as at 31 December 2013 represents outstanding agency fee payable for the previous use of exclusive right from 2006 to 2009, which has been fully settled during the year.

• (ii) Other payables and accrued liabilities mainly represented PRC tax payables, provisions of social insurance for staffs in the PRC and interest payable.

– 132 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The aging analysis of the trade payables is as follows:

0–3 months 4–6 months Over 6 months Reclassification to liabilities of disposal group held for sale_(Note 32)_	Group As at 31 December 2014 2013 HK$’000 HK$’000 760 1,776 390 349 510 374 1,660 2,499 (1,641) – 19 2,499	Group As at 31 December 2014 2013 HK$’000 HK$’000 760 1,776 390 349 510 374 1,660 2,499 (1,641) – 19 2,499
		2,499 –
		2,499

The carrying amounts of agency fee payable, trade payables, receipt in advance, other payables and accrued liabilities are mainly denominated in Renminbi. The carrying amounts of these balances are approximate their fair values.

26 DEFERRED REVENUE

Deferred revenue includes the deferred membership entrance fee income and rental income during the year.

Balance as at 1 January – Current portion – Non-current portion Additions during the year Recognized in the consolidated income statement Exchange differences Reclassification to liabilities of disposal group held for sale_(Note 32)_ Balance as at 31 December Less: Current portion Non-current portion	Group As at 31 December 2014 2013 HK$’000 HK$’000 32,100 36,322 77,601 75,005 109,701 111,327 27,420 40,849 (42,129) (45,181) (908) 2,706 (94,084) – – 109,701 – (32,100) – 77,601	Group As at 31 December 2014 2013 HK$’000 HK$’000 32,100 36,322 77,601 75,005 109,701 111,327 27,420 40,849 (42,129) (45,181) (908) 2,706 (94,084) – – 109,701 – (32,100) – 77,601
		111,327 40,849 (45,181) 2,706 –
		109,701 (32,100)
		77,601

– 133 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

27 BORROWINGS

Current Promissory notes Convertible notes Non-current Convertible notes	Group As at 31 December 2014 2013 HK$’000 HK$’000 – 6,099 19,068 – – 334,588 19,068 340,687	Company As at 31 December 2014 2013 HK$’000 HK$’000 – – 19,068 – – 334,588 19,068 334,588	Company As at 31 December 2014 2013 HK$’000 HK$’000 – – 19,068 – – 334,588 19,068 334,588
			334,588

(a) Convertible notes

The Company issued a three-year term zero-coupon convertible note with principal amount of RMB569 million (equivalent to approximately HK$700 million at the time of issuance) in October 2012. The convertible notes mature in three years from the issue date at their nominal value of RMB569 million or can be converted into a maximum of 3,500,000,000 ordinary shares of the Company at the holder’s option at any time during the period between the issue date and the maturity date at the conversion price of HK$0.20 each, subject to certain conditions. The values of the liability component and the equity conversion component were determined at issuance of the convertible note.

The fair values of the convertible notes are determined using option pricing method based on the key assumptions, including volatility of daily stock price return of 63.4% and risk free rate of 0.56%.

On 3 September 2013, the Company and Smart Concept Enterprise Limited, a company wholly-owned by Mr. Yuen, an executive director of the Company and being the sole noteholder, entered into the Deed of Variation to amend a term of the convertible notes to permit the Company to early redeem the outstanding convertible notes at their face value. Management assessed the value by considering the characteristics of the modification in the market and considered the value of the modification is immaterial to the convertible notes.

During the year, convertible notes with principal amount equivalent to HK$398 million (2013: HK$281 million) have been converted into 1,990,000,000 (2013: 1,405,000,000) ordinary shares of the Company at the conversion price of HK$0.20 per share.

– 134 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The convertible notes recognized in the consolidated balance sheet is calculated as follows:

Liability component at 1 January Less: Conversion of convertible notes during the year Interest expense_(Note 7)_ Liability component at 31 December	Group and 2014 HK$’000 334,588 (347,888) 32,368 19,068	Company 2013 HK$’000 491,587 (223,175) 66,176 334,588

The liability component of the convertible bond at 31 December 2014 amounted to approximately HK$19,068,000 (31 December 2013: approximately HK$334,588,000), which is calculated using cash flows discounted at a rate based on the borrowings rate of 13.7%.

(b) Promissory notes

The Group issued a 5% fixed interest promissory note with principal amount of HK$150 million in October 2012. The repayment date of the promissory note is the date falling the on last day of the 24th month from the date of issuance (the “Repayment Date”), and the Group could, at its discretion, repay the promissory notes in whole or in part prior to the Repayment Date. The promissory notes bear interest from the date of the issuance at the best lending rate of the Hongkong and Shanghai Banking Corporation Limited on the outstanding amount of the promissory notes and is repayable in arrears on the Repayment Date.

At 1 January Interest expense_(Note 7)_ Repayments At 31 December	Group 2014 2013 HK$’000 HK$’000 6,099 104,170 258 10,216 (6,357) (108,287) – 6,099

The promissory notes is calculated using cash flows discounted at a rate based on the borrowings rate of 9.8%.

– 135 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

28 SHARE CAPITAL

Authorized: At 31 December 2014 (Note a) Issued and fully paid: At 1 January 2014 Issuance of shares upon conversion of convertible notes (Note 27(a)) Issuance of shares upon exercise of share options Issuance of shares upon placement (Note b) At 31 December 2014 Authorized: At 31 December 2013 (Note a) Issued and fully paid: At 1 January 2013 Issuance of shares upon conversion of convertible notes (Note 27(a)) Issuance of shares upon exercise of share options Issuance of consideration shares (Note c) Issuance of shares upon placement (Note b) At 31 December 2013	Ordinary shares of HK$0.2 each No. of shares ’000 HK$’000 15,000,000 3,000,000 4,281,190 856,238 1,990,000 398,000 3,000 600 285,714 57,143 6,559,904 1,311,981 15,000,000 3,000,000 2,554,090 510,818 1,405,000 281,000 10,000 2,000 75,000 15,000 237,100 47,420 4,281,190 856,238	Preference shares of HK$0.01 each No. of shares ’000 HK$’000 240,760 2,408 – – – – – – – – – – 240,760 2,408 – – – – – – – – – – – –	Total HK$’000 3,002,408
			856,238 398,000 600 57,143
			1,311,981
			3,002,408
			510,818 281,000 2,000 15,000 47,420
			856,238

– 136 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes:

• (a) Authorized share capital

The total number of authorised shares includes ordinary shares and preference shares 15,000,000,000 shares (2013: 15,000,000,000 shares) are ordinary shares with par value of HK$0.2 per share (2013: HK$0.2). 240,760,000 shares are preference shares with par value of HK$0.1 per share (2013: HK$0.1). All issued shares are fully paid.

• (b) Placing of new shares

On 16 December 2013, the Company and its placing agent have entered into a placing agreement, pursuant to which, the placing agent has agreed to place, on a best endeavours basis, up to 522,814,285 new ordinary shares of the Company at a placing price of HK$0.35 per share. China Life Trustees Limited, a wholly-owned subsidiary of China Life (Overseas) which in turn is a wholly-owned subsidiary of China Life Insurance (Group) Company, is one of the placees to subscribe for 285,714,285 shares at the placing price of HK$0.35. As at 31 December 2013, placing of 237,100,000 shares was completed. The placing of the remaining 285,714,285 shares was completed on 15 January 2014.

• (c) Consideration Shares

• (i) According to the sale and purchase agreement dated 26 January 2011 and the supplemental agreement dated 16 May 2011 in relation to the acquisition of the entire equity interests of Smart Title Limited, the Company has issued the Second Consideration Shares of 50,000,000 new ordinary shares on 11 June 2013.

• (ii) On 4 June 2013, the Group has entered into an agreement in relation to the acquisition of Sanya Haoyuntong Agricultural Technology Co., Ltd. Upon completion, among others, the Company has issued consideration shares of 25,000,000 new ordinary shares.

Share Option

Pursuant to a resolution passed on the extraordinary general meeting of the Company dated 4 June 2012, the share option scheme adopted by the Company on 30 July 2002 (“Terminated Option Scheme”) has been terminated and the Company has adopted a new 10-year term share option scheme (“New Option Scheme”) on the same date. Outstanding share options granted under the Terminated Option Scheme shall continue to be valid and exercisable. Pursuant to the New Option Scheme, the Company can grant options to Qualified Persons (as defined in the New Option Scheme) for a consideration of HK$1.00 for each grant payable by the Qualified Persons to the Company. The total number of the shares issued and to be issued upon exercise of options granted to each Qualified Person (including exercised, cancelled and outstanding options) in any 12-month period shall not exceed 1% of the shares then in issue. Pursuant to said resolution passed on 4 June 2012, the Company can grant up to 225,958,972 share options to the Qualified Persons.

– 137 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Subscription price in relation to each option pursuant to the New Option Scheme shall not be less than the higher of (i) the closing price of the shares as stated in Stock Exchange’s daily quotation sheets on the date on which the option is offered to a Qualified Person; or (ii) the average of the closing prices of the shares as stated in the Stock Exchange’s daily quotation sheets for the 5 trading days immediately preceding the date of offer; or (iii) the nominal value of the shares of the Company. There shall be no minimum holding period for the vesting or exercise of the options and the options are exercisable within the option period as determined by the Board of Directors of the Company. For the year ended 31 December 2014, no (2013: nil) share option have been granted under the New Option Scheme and no share-based payment expense has been charged to the condensed consolidated income statement (2013: nil).

Movement of share options during the current year and the prior year is as follows:

Tranche Date of share option granted 1 1 5 May 2008 2 4 November 2008 3 15 June 2012		Number of share options	Number of share options		Exercisable as at 31 December 2014 Exercise Price Vesting date Expiry date HK$ 1,042,459 2.58 From 1 April 31 December 2009 2015 26,582,706 0.86 From 8 March 31 December 2009 to 2015 8 March 2011 64,000,000 0.20 From 15 June 14 June 2012 2017 91,625,165
	Outstanding as at January 2014 1,042,459 26,582,706 67,000,000 94,625,165	Cancelled/ lapsed during the year – – – –	Exercised during the year – – (3,000,000) (3,000,000)	Outstanding as at 31 December 2014 1,042,459 26,582,706 64,000,000 91,625,165

– 138 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

==> picture [371 x 250] intentionally omitted <==

----- Start of picture text -----

Number of share options
Cancelled/ Outstanding Exercisable
Date of share Outstanding lapsed Exercised as at as at
option as at during during 31 December 31 December
Tranche granted 1 January 2013 the year the year 2013 2013 Exercise Price Vesting date Expiry date
HK$
1 5 May 2008 1,042,459 – – 1,042,459 1,042,459 2.58 From 1 April 31 December
2009 2015
2 4 November 2008 26,582,706 – – 26,582,706 26,582,706 0.86 From 8 March 31 December
2009 to 2015
8 March
2011
3 15 June 2012 77,000,000 – (10,000,000) 67,000,000 67,000,000 0.20 From 15 June 14 June 2017
2012
–
104,625,165 (10,000,000) 94,625,165 94,625,165
----- End of picture text -----

There are no performance conditions or market conditions required for these tranches of issued options.

Options exercised in 2014 resulted in 3,000,000 shares (2013: 10,000,000 shares) being issued at a weighted average exercise price of HK$0.20 each (2013: HK$0.20 each). The related weighted average share price at the time of exercise was HK$0.53 (2013: HK$0.40) per share.

In 2012, the weighted average fair value of options granted during the period determined using the Black-Scholes valuation model was HK$0.033 per option. The significant inputs into the model were weighted average share price HK$0.077 per share at the grant date, exercise price shown above, volatility of 76.5%, dividend yield of 0%, an expected option life of three years and an annual risk-free interest rate of 0.46%.

– 139 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

29 RESERVES

Group

Balance at 1 January 2013 Loss for the year Issuance of shares upon placement Issuance of shares upon exercise of share options Issuance of shares upon conversion of convertible notes Issue of consideration shares Currency translation differences Balance at 31 December 2013	Share premium HK$’000 (Note ii) 1,524,338 – 32,246 351 77,846 9,900 – 1,644,681	Merger reserve HK$’000 (Note i) 860,640 – – – – – – 860,640	Equity component of convertible notes HK$’000 337,971 – – – (135,672) – – 202,299	Share option reserve HK$’000 16,832 – – (351) – – – 16,481	Capital redemption reserve HK$’000 (Note iii) 1,206 – – – – – – 1,206	Currency translation reserve HK$’000 (Note iv) 78,472 – – – – – 38,148 116,620	Accumulated losses HK$’000 (1,733,380) (165,722) – – – – – (1,899,102)	Total HK$’000 1,086,079 (165,722) 32,246 – (57,826) 9,900 38,148 942,825	Non- controlling interests HK$’000 – – – – – – – –	Total HK$’000 1,086,079 (165,722) 32,246 – (57,826) 9,900 38,148
										942,825

Balance at 1 January 2014 Profit for the year Issuance of shares upon placement Issuance of shares upon exercise of share options Issuance of shares upon conversion of convertible notes Capital injection from non-controlling shareholder of a subsidiary Currency translation differences Balance at 31 December 2014	Share premium HK$’000 (Note ii) 1,644,681 – 38,857 214 142,048 – – 1,825,800	Merger reserve HK$’000 (Note i) 860,640 – – – – – – 860,640	Equity component of convertible notes HK$’000 202,299 – – – (192,160) – – 10,139	Share option reserve HK$’000 16,481 – – (214) – – – 16,267	Capital redemption reserve HK$’000 (Note iii) 1,206 – – – – – – 1,206	Currency translation reserve Accumulated losses HK$’000 HK$’000 (Note iv) 116,620 (1,899,102) – 55,178 – – – – – – – – (5,282) – 111,338 (1,843,924)	Total HK$’000 942,825 55,178 38,857 – (50,112) – (5,282) 981,466	Non- controlling interests HK$’000 – (4,049) – – – 4,969 7 927	Total HK$’000 942,825 51,129 38,857 – (50,112) 4,969 (5,275)
									982,393

– 140 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Company

At 1 January 2013 Issuance of shares upon placement Issue of shares upon exercise of share options Issuance of shares upon conversion of convertible notes Issuance of consideration shares Loss for the year At 31 December 2013 At 1 January 2014 Issuance of shares upon placement Issue of shares upon exercise of share options Issuance of shares upon conversion of convertible notes Loss for the year At 31 December 2014	Share premium Equity component of convertible notes HK$’000 HK$’000 (Note ii) 1,524,338 337,971 32,246 – 351 – 77,846 (135,672) 9,900 – – – 1,644,681 202,299 1,644,681 202,299 38,857 – 214 – 142,048 (192,160) – – 1,825,800 10,139	Share option reserve HK$’000 16,832 – (351) – – – 16,481 16,481 – (214) – – 16,267	Capital redemption reserve HK$’000 (Note iii) 1,206 – – – – – 1,206 1,206 – – – – 1,206	Accumulated losses HK$’000 (872,544) – – – – (73,373) (945,917) (945,917) – – – (22,471) (968,388)	Total HK$’000 1,007,803 32,246 – (57,826) 9,900 (73,373)
					918,750
					918,750 38,857 – (50,112) (22,471)
					885,024

Notes:

• (i) The merger reserve of the Group derives from the difference between the nominal value of the Company’s shares issued to acquire the issued share capital of China Jiuhao Group Limited (formerly known as Universal Appliances Limited) pursuant to the Group reorganisation in 2002, and the consolidated net asset value of China Jiuhao Group Limited so acquired. Under the Companies Law (2003 Revision) (Cap. 22) of the Cayman Islands, the merger reserve is distributable to shareholders under certain prescribed circumstances.

• (ii) The share premium of the Company represents the excess of the fair value of the issued shares over the nominal value of the Company’s shares issued in exchange therefor. Under the Companies Law (2003 Revision) (Cap. 22) of the Cayman Islands, a company may make distributions to its members out of the share premium in certain circumstances.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• (iii) During the year ended 31 December 2008, the Company repurchased 120,600,000 issued ordinary shares on the Stock Exchange. These repurchased shares were cancelled immediately upon repurchase. The total amount paid to acquire these issued ordinary shares of HK$4,609,000 were deducted from shareholders’ equity. A sum equivalent to the nominal value of the repurchased shares amounting to HK$1,206,000 has been transferred from accumulated losses to capital redemption reserve.

• (iv) The Group had certain investments in PRC subsidiaries with Renminbi as their functional currency, which is subjected to foreign currency translation risk. Fluctuation in such currencies would be reflected in the movement of the translation reserve. Increase in currency translation differences in other comprehensive income in current year was resulted from appreciation in Renminbi against Hong Kong dollars.

30 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

• (a) Reconciliation of profit/(loss) before taxation to cash used in operations

Profit/(loss) before taxation from continuing operations Loss before taxation for the year from discontinued operation in relation to Beijing Healthcare and Wellness Si He Yuan and Hotel Adjustments for: – Share of results of joint ventures – Gain on disposal of joint ventures – Bank interest income – Depreciation – Loss on disposal of property, plant and equipment – Provision for impairment of film rights and film in production – Amortization of intangible assets – Capitalization of operating lease rentals – Membership entrance fee income and rental income recognized – Fair value gain on financial assets at fair value through profit or loss – Finance (income)/costs, net – Investment return recognized from programmes and film production in progress	2014 HK$’000 47,800 (933) (585) (11,028) (2,795) 23,821 13 – 8,488 (10,209) (42,129) (55,255) (20,569) (5,714) (69,095)	2013 HK$’000 (31,622) (72,775) (16,261) – (98) 22,424 62 21,050 26,238 (4,098) (45,181) (4,400) 54,437 – (50,224)

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APPENDIX I

Changes in working capital: – Increase in trade receivables, prepayments, deposits and other receivables – (Increase)/decrease in inventories – (Decrease)/increase in agency fee payables, trade payables, amounts due with joint ventures, receipt in advance, other payables and accrued liabilities – Cash inflow from membership entrance fee and rental income Cash used in operations (b) Non-cash transactions (i) Conversion of 1,990 million (2013: 1,405 million) ordinary shares (ii) Acquisition of subsidiaries_(Note 31)_ – Issuance of consideration shares	2014 HK$’000 (14,820) (1,092) (18,210) 27,420 (75,797) 2014 HK$’000 347,888 –	2013 HK$’000 (5,850) 8,348 4,362 40,849 (2,515) 2013 HK$’000 223,174 11,000

31 ACQUISITION OF SUBSIDIARIES

For year 2014

There was no significant business acquisition during the year.

For year 2013

On 4 June 2013, the Group and Mr. WANG Edward Dongqing (the “Vendor”) has entered into a sale and purchase agreement, pursuant to which the Group has conditionally agreed to acquire the entire equity interests in Sanya Haoyuntong Agricultural Technology Co., Ltd. (“Sanya Haoyuntong”) free from encumbrances for consideration to be settled in the following manner upon completion of the acquisition:

• (i) HK$11,000,000 which shall be satisfied by the allotment and issue of the 25,000,000 consideration shares upon completion;

• (ii) RMB1,000,000 in cash to be settled no later than the latest time for such payment as to be allowed according to the approval document to be issued by the local authority of the Ministry of Commerce in respect of the acquisition; and

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APPENDIX I

(iii) RMB5,000,000 in cash to be paid in relation to the transfer or settlement of RMB5,000,000 of the shareholder’s loan.

The said acquisition has been completed on 27 December 2013.

The following table summarises the fair value of consideration paid for the Vendor and the fair value of acquisition of Group assets acquired and liabilities assumed at the acquisition date.

Consideration: – Cash – Consideration shares Total consideration Recognized amounts of identifiable assets acquired and liabilities assumed Property, plant and equipment_(Note 14)_ Prepayment, deposits and other receivables Long-term lease prepayment Receipt in advance, other payables and accrued liabilities Total identifiable net assets Net cash outflow on acquisition of assets: Cash consideration paid

HK$’000 7,596 11,000 18,596 1,040 84 18,630 (1,158) 18,596 (7,596)

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APPENDIX I

32 DISPOSAL GROUP HELD FOR SALE AND DISCONTINUED OPERATIONS

For year 2014

On 11 December 2014, Unique Talent Group Limited (the “Vendor”), a wholly-owned subsidiary of the Company, the Company (as a guarantor) and an independent third party (the “Purchaser“) entered into a sales and purchase agreement (the “S&P Agreement”) (as amended and supplemented by a supplemental agreement dated 30 March 2015 entered into by parties to the S&P Agreement) pursuant to which (i) the Vendor conditionally agreed to sell, and the Purchaser conditionally agreed to purchase, the entire shareholding interest in Smart Title Limited (the “Target Company”), a whollyowned subsidiary of the Vendor; and (ii) the Group agreed to assign to the Purchaser the benefit and interest in a loan due from the Target Company to the Vendor of approximately HK$1,076 million (the “Shareholder’s Loan”) upon completion of the transactions in accordance with the terms and conditions of the S&P Agreement (the “Completion”) free from encumbrances. The total consideration payable for the sale and purchase of the entire shareholding interest in the Target Company and the assignment of the Shareholder’s Loan is agreed at HK$1,650 million in aggregate (the “Consideration”). The Consideration shall be settled as to (i) HK$60 million of the Consideration which has been paid in cash by the Purchaser upon signing of the S&P Agreement as the refundable deposit and will be applied as partial payment of the Consideration upon Completion; (ii) on Completion, HK$540 million of the Consideration which shall be paid in cash by the Purchaser; and (iii) on Completion, the Purchaser shall in accordance with the instructions of the Vendor issue to the Company the share entitlement note (“SEN”), which shall entitle the SEN holder the right to call for the issue of 1,500,000,000 new ordinary shares of HK$0.01 each of the Purchaser at an issue price of HK$0.70 per share.

The Group and the Purchaser will also enter into a club lease agreement (the “Club Lease Agreement”) pursuant to which the assets relevant to the operations of “Beijing Bayhood No. 9 Club” (the Purchaser will be entitled to the right to operate “Beijing Bayhood No. 9 Club” through its ownership in the Target Company upon Completion) will be leased to the Group for a term of twenty years (can be further extended to 31 December 2051 upon request by the Group) after Completion, and the Group will continue to operate the businesses of “Beijing Bayhood No. 9 Club” during the period. There are four rental periods during the term of 20 years of five years each. In addition, the Group has an option to early terminate the Club Lease Agreement by giving notice to the lessor at least six months prior to the expiry of each rental period.

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APPENDIX I

The Target Company and its subsidiaries (the “Target Group”) is principally engaged in the provision of offline healthcare and wellness services through the management of “Beijing Bayhood No. 9 Club”, a membership-based luxury club which comprises of business hotel facilities, an 18-hole golf course, driving range facilities, theme restaurants and cafes, spa facilities, retail shops, and the first PGA branded and managed golf academy in Asia. “Beijing Bayhood No. 9 Club” is located near the city centre of Beijing, PRC. The major assets owned by the Target Group are i) the rights to construct and operate the club facilities of “Beijing Bayhood No. 9 Club” up to 31 December 2051; and ii) the rights to develop and operate a piece of 580 Chinese acre land adjacent to “Beijing Bayhood No. 9 Club” (the “Subject Land”) up to 30 January 2062. Construction of “Beijing Healthcare and Wellness Si He Yuan and Hotel” project with an approved total gross floor area of 80,000 square meters on the Subject Land is in progress.

The abovementioned transactions have not yet been completed as at the date of the annual report.

Assets of disposal group held for sale as at 31 December 2014:

Property, plant and equipment_(Note 14) Intangible assets(Note 15) Deferred tax assets(Note 9) Inventories(Note 20)_ Prepayments, deposits and other receivables Cash and cash equivalents	HK$’000 500,580 1,589,601 2,680 9,599 64,288 80,989
	2,247,737

Liabilities of disposal group held for sale as at 31 December 2014:

Trade payables_(Note 25) Receipt in advance, other payables and accrued liabilities Deferred tax liabilities(Note 9) Deferred revenue(Note 26)_ Current income tax liabilities	HK$’000 1,641 130,634 338,848 94,084 75,786
	640,993

As the operation of offline healthcare and wellness services – Beijing Healthcare and Wellness Si He Yuan and Hotel Project is considered as a separate major line of business during the year, they are accounted for as a discontinued operation. The comparative financial information for the year ended 31 December 2013 has been reclassified to conform with current year presentation in accordance with HKFRS 5 “Non-Current Assets Held for Sale and Discontinued Operations”. The disposal was not yet completed as at 31 December 2014, but is expected to be completed within 12 months from the year end date.

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Analysis of the result of discontinued operations in relation to offline healthcare and wellness services - Beijing Healthcare and Wellness Si He Yuan and Hotel project is as follows:

Cost of sales Other income and other gains/(losses), net Administrative expenses Finance cost Loss before tax of discontinued operations Tax Loss for the year from discontinued operations attributable to the equity holders of the Company	2014 HK$’000 – 72 (1,005) – (933) 27 (906)	2013 HK$’000 (5,884) (659) (18,448) (47,784) (72,775) 5,476 (67,299)

Analysis of the cash flows of discontinued operations in relation to offline healthcare and wellness services - Beijing Healthcare and Wellness Si He Yuan and Hotel project is as follows:

Operating cash flows Investing cash flows Financing cash flows Total cash flows	2014 HK$’000 (6,814) (66,640) – (73,454)	2013 HK$’000 (9,145) (29,461) – (38,606)

For year 2013

On 17 April 2013, the Group has entered into a sale and purchase agreement to dispose of its 100% equity interests in Green Harmony Investments Limited (“Green Harmony”) and Green Villa Investments Limited (“Green Villa”) to Aote Holding Limited at an aggregate consideration of RMB190,000,000 (equivalent to approximately HK$241,660,000 as of 31 December 2013) payable in cash. Green Harmony and Green Villa are both investment holding companies, indirectly holds 50% of equity interest in Shenzhen ITC Tian An Co., Ltd. and Shenzhen Tian An International Building Property Management Co., Ltd.

As the operation of Green Harmony and Green Villa are considered as a separate major line of business during the year, they are accounted for as a discontinued operation in accordance with HKFRS 5 “Non-Current Assets Held for Sale and Discontinued Operations”. The disposal was not yet completed as at 31 December 2013 and was lapsed in April 2014.

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APPENDIX I

On 24 April 2014, the Company and Shenzhen Honghaiwan Asset Management Limited (深 圳市紅海灣資產管理有限公司) (“Shenzhen Honghaiwan”) have entered into a sale and purchase agreement, whereby the Company agreed to sell the entire issued share capital in and assign its loan due from Green Harmony and Green Villa to Shenzhen Honghaiwan at an aggregate consideration of RMB200,000,000 (equivalent to approximately HK$252,688,000) payable in cash.

The said disposal has been completed during the year and a gain on disposal of approximately HK$11,028,000 was recorded in “other income and other gains, net”.

• (a) Results of the operation of Green Harmony and Green Villa during the year have been included in the consolidated income statement as follows:

Loss recognized on measurement to fair value less costs to sell (i) Administrative expenses Share of results of joint ventures Loss before income tax Loss from discontinued operation attributable to the equity holders of the Company	31 December 2014 2013 HK$’000 HK$’000 – (69,646) – (6) – 4,253 – (65,399) – (65,399)

• (i) Loss recognized represented the loss incurred in adjusting the carrying amount of the Group’s interests in Tian An International Building and the management company of the building to the fair value less cost to sell.

• (b) Assets of disposal group held for sale

Interests in joint ventures_(Note 17) Amount due to joint venture(ii) Loss recognized on measurement to fair value less costs to sell(Note 32 (a))_	31 December 2014 2013 HK$’000 HK$’000 – 316,232 – (4,926) – 311,306 – (69,646) – 241,660

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APPENDIX I

• (ii) The amount due to joint ventures represent liability to derecognize within the assets of disposal group held for sale.

Interest in joint ventures of the disposal group held for sale as at 31 December 2014 and 2013:

	Place of				Principal activities
	establishment and	Registered	Percentage of equity interest		and place of
Name	kind of legal entity	capital	attributable to the Group		operation
			2014	2013
Shenzhen ITC Tian An	The PRC, Sino-	US$8,880,000	N/A	50%	Holding and rental
Co., Ltd.	foreign equity				of investment
	joint venture				properties in the
					PRC
Shenzhen Tian An	The PRC, Sino-	RMB3,000,000	N/A	50%	Property management
International Building	foreign equity				in the PRC
Property Management	joint venture
Co., Ltd.

33 COMMITMENTS

(a) Capital commitments – Group

Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:

	2014	2013
	HK$’000	HK$’000
Property, plant and equipment	94,982	94,152

(b) Operating lease commitment – group companies as lessee

At 31 December 2014, the Group had future aggregate minimum lease payments under non- cancellable operating leases as follows:

Not later than one year Later than one year and not later than five years Later than five years	2014 HK$’000 36,259 140,006 881,508 1,057,773	2013 HK$’000 12,141 49,063 531,960
		593,164

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APPENDIX I

The above future aggregate minimum lease payments under non-cancellable operating leases have included committed operating lease rental arising from leasing a property for a term of twelve years up to 31 July 2026, and land and building and operating rights of the Cooperation Construction Operating Agreements, being the rights (i) to construct and operate the club facilities of “Bayhood No. 9 Club” up to 31 December 2051; and (ii) to develop and operate a piece of 580 Chinese acre land adjacent to “Bayhood No. 9 Club” up to 30 January 2062.

34 RELATED PARTY TRANSACTIONS

• (i) Remuneration for key management personnel, including amounts paid to the Company’s directors, is disclosed in Note 13 and certain of the highest paid employees is disclosed in Note 13.

• (ii) During the year, the Group and Hainan Haishi Tourist Satellite TV Media Co. Ltd. (“Travel Channel”), an associated company of joint ventures of the Group, have mutually agreed that the Group is waived from the payment of certain accrued interest on agency fee payable to Travel Channel upon the full settlement of the outstanding agency fee by the Group. The reversal of such accrued interest payable amounted to approximately HK20,569,000 has been offset against finance costs during the current year. (2013: Included in finance costs for the year was an accrued interest on agency fee payable to Travel Channel amounting to approximately HK$6,653,000.)

The Group and Travel Channel have also mutually agreed that the Group is waived from the payment of certain consulting fees payable to the Travel Channel. The reversal of such accrued payable amounted to approximately HK$33,014,000 and has been offset against administrative expenses during the current year.

• (iii) On 3 September 2013, the Company and Smart Concept, a company wholly-owned by Mr. YUEN Hoi Po, the Chairman and a substantial shareholder of the Company and being the sole holder of the convertible notes issued by the Company in 2012, entered into the deed of variation relating to the amendment of a term of the convertible notes to permit the Company to early redeem the outstanding convertible notes at their face value (Note 27(a)). The purpose of the amendment is (i) to give flexibility to the Company; (ii) to permit the Company to better manage its gearing levels; and (iii) to assist the Board to manage possible dilution to shareholders in the future. Apart from the amendment, all other terms and conditions of the convertible notes remain unchanged. As Mr. YUEN is an executive director of the Company, the amendment constitutes a connected transaction for the Company under the Listing Rules. Details of the modification has been disclosed in Note 27(a).

35 CONTINGENCIES

During the year ended 31 December 2006, the Group has entered into an exclusive advertising agency agreement with Travel Channel for an exclusive advertising right. Travel Channel has obtained an order from the People’s Court of Yang Pu Economic Development Zone of Hainan Province in year 2008 to freeze the assets of Beijing Hua Yi Hao Ge Media Culture Co. Ltd, a subsidiary of the Group, in connection with the allegation of an outstanding agency fee payable amount of RMB79.9 million for the previous use of exclusive advertising right.

During the year, the Group and Travel Channel have mutually agreed on the settlement on the outstanding balances and the said court order has been terminated.

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APPENDIX I

36 SUBSEQUENT EVENTS

Subsequent to the year end, as mentioned in note 32 in relation to the S&P Agreement about the disposal of the entire shareholding interest in the Target Company, the parties to the S&P Agreement have entered into a supplemental agreement on 30 March 2015 pursuant to which the lease term in the Club Lease Agreement has been extended to twenty years (which can be further extended to 31 December 2051 upon request by the Group). There are four rental periods during the term of twenty years of five years each. In addition, the Group has an option to early terminate the Club Lease Agreement by giving notice to the lessor at least six months prior to the expiry of each rental period.

37 APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Board of Directors on 30 March 2015.

38 PARTICULARS OF PRINCIPAL SUBSIDIARIES

The table below lists out the subsidiaries of the Company which, in the opinion of the directors, principally affected the results of the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

		Nominal value of
	Place of incorporation/	Issued ordinary
	establishment and	share/registered	Interest	Principal activities and
Name	kind of legal entity	capital	held	place of operation
Anglo Alliance Co., Ltd (1)	British Virgin Islands,	US$2 ordinary	100%	Investment holding
	limited company
Beijing Hua Yi Hao Ge Media	PRC, co-operative joint	RMB136,651,563	100%	Investment holding and
Culture Co., Ltd. (4)	venture			licensing of films and
				TV drama in the PRC
Beijing Hua Yi Qian Si	PRC, co-operative liability	RMB5,000,000	100%	Advertising agency in the
Advertising Company	company			PRC
Limited (4)
Effort Wonder Limited (1)	British Virgin Islands,	US$1 ordinary	100%	Investment holding
	limited company
Unique Talent Group (1)	British Virgin Islands,	US$1 ordinary	100%	Investment holding
	limited company
Smart Title Limited	British Virgin Islands,	US$1 ordinary	100%	Investment holding
	limited company
China Jiuhao Health Industry	Hong Kong, limited	HK$1 ordinary	100%	Investment holding
Group Limited (3)	company

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APPENDIX I

		Nominal value of
	Place of incorporation/	Issued ordinary
	establishment and	share/registered	Interest	Principal activities and
Name	kind of legal entity	capital	held	place of operation
Sihai Nengrong (Beijing)	PRC, wholly-owned foreign	US$1,050,000	100%	Food and beverage and
Food and Beverage Culture	enterprise			hotel management in
Limited (4)				the PRC
Happy Era Culture Development	PRC, limited liability	RMB100,000	100%	Media and marketing
(Beijing) Limited (4)	enterprise			consultancy in the
				PRC
Beijing Bayhood No. 9 Business	PRC, limited liability	RMB50,000,000	100%	Provision of offline
Hotel Company Limited (4)	company			health and wellness
				services through
				the management of
				“Bayhood No. 9
				Club”, a membership-
				based club in the PRC
Beijing Si Hai Jun Tian	PRC, limited liability	RMB8,000,000	51%	Provision of offline health
Trading Company Limited	company			and wellness services
(2)(4)				through operation of
				wellness centre in the
				PRC
Yuan Shun Investments Limited	British Virgin Islands,	US$1 ordinary	100%	Investment holding
	limited company
Horizon Partner Holdings Limited	British Virgin Islands,	US$1 ordinary	100%	Investment holding
(1)	limited company
China Jiuhao Health Management	Hong Kong, limited	HK$1 ordinary	100%	Investment holding
Limited (3)	company
Beijing Bayhood No.9 Cloud	PRC, wholly-owned foreign	US$2,000,000	100%	Internet and information
Technology Company Limited	enterprise			technology in the PRC
(formerly known as Beijing
Bayhood Business Consultants
Company Limited) (4)
Beijing Bayhood No.9 Cloud	PRC, wholly-owned foreign	RMB10,000,000	100%	Health management
Health Technology Company	enterprise			services in the PRC
Limited (4)
China Jiuhao Health Industry	Hong Kong, limited	HK$2 ordinary	100%	Group treasury and
(Hong Kong) Limited (1)(3)	company			administrative services
				in Hong Kong

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

		Nominal value of
	Place of incorporation/	Issued ordinary
	establishment and	share/registered	Interest	Principal activities and
Name	kind of legal entity	capital	held	place of operation
China Jiuhao Limited (1)(3)	Hong Kong, limited	HK$499,373,000	100%	Investment holding and
	company	ordinary		licensing of films in
		HK$43,337,000		Hong Kong
		preference
China Jiuhao (Haikou) Investment	British Virgin Islands,	US$1 ordinary	100%	Investment holding
Company Limited (1)	limited company
China Jiuhao Health Industry	Hong Kong, limited	HK$1 ordinary	100%	Investment holding
Corporation (Haikou) Limited	company
(3)(4)
Haikou Jiuhao Hotel Management	PRC, wholly-owned foreign	RMB10,000,000	100%	Hotel management
Company Limited (4)	enterprise			services in the PRC
China Jiuhao (Sanya) Investment	British Virgin Islands,	US$1 ordinary	100%	Investment holding
Company Limited (1)	limited company
China Jiuhao Health Industry	Hong Kong, limited	HK$1 ordinary	100%	Investment holding
Corporation (Sanya) Limited	company
(3)(4)
Sanya Haoyuntong Agricultural	PRC, wholly-owned foreign	RMB1,000,000	100%	Agricultural business in
Technology Co., Ltd. (4)	enterprise			the PRC

• (1) Shares held directly by the Company.

• (2) Newly established in 2014.

• (3) The statutory financial statements of these companies for the year ended 31 December 2014 are audited by PricewaterhouseCoopers.

• (4) The names of the companies referred to above represent management’s best effort in translating the Chinese names of the companies as no English names for these companies have been registered.

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APPENDIX I

3. UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE 2015

The following is the full text of the unaudited condensed consolidated financial information of the Group for six months ended 30 June 2015 as extracted from the interim report of the Company for the six months ended 30 June 2015:

CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT

For the six months ended 30 June 2015

Note Continuing Operations Sales 4 Cost of sales Gross profit Other income and other gains, net 5 Marketing and selling expenses Administrative expenses Share of results of joint ventures Finance (costs)/income, net 6 Profit before income tax 7 Income tax (expense)/credit 8 Profit for the period from continuing operations Discontinued Operations Loss for the period from discontinued operations 16 Profit for the period Attributable to: Equity holders of the Company – continuing operations – discontinued operations Non-controlling interest – continuing operation

Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) (Restated) (Note 16) HK$’000 HK$’000 61,359 54,045 (28,222) (35,288) 33,137 18,757 196,130 77,642 (14,248) (192) (175,629) (12,160) (12,464) (9,554) 26,926 74,493 (138) 20,505 26,788 94,998 (5,235) 500 21,553 95,498 (21) (201) 21,532 95,297 26,260 95,498 (21) (201) 26,239 95,297 (4,707) – 21,532 95,297

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CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT

For the six months ended 30 June 2015

Note Earnings per share from continuing and discontinued operations attributable to equity holders of the Company 9 Basic earnings/(loss) per share – From continuing operations – From discontinued operations Diluted earnings/(loss) per share 9 – From continuing operations – From discontinued operations	Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) (Restated) (Note 16) HK Cents HK Cents 0.40 2.05 – – 0.40 2.05 0.39 1.68 – – 0.39 1.68	Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) (Restated) (Note 16) HK Cents HK Cents 0.40 2.05 – – 0.40 2.05 0.39 1.68 – – 0.39 1.68
		2.05
		1.68 –
		1.68

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APPENDIX I

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2015

Profit for the period Other comprehensive income/(loss): Item that may be reclassified to profit or loss – Currency translation differences Other comprehensive income/(loss) for the period, net of tax Total comprehensive income for the period Total comprehensive income/(loss) attributable to: Equity holders of the Company arises from: – continuing operations – discontinued operations Non-controlling interest

Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) (Restated) (Note 16) HK$’000 HK$’000 21,532 95,297 452 (13,810) 452 (13,810) 21,984 81,487 26,712 81,688 (21) (201) (4,707) – 21,984 81,487

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APPENDIX I

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

At 30 June 2015

Note NON-CURRENT ASSETS Property, plant and equipment 11 Intangible assets 11 Interests in joint ventures 12 Deferred income tax assets Prepayments, deposits and other receivables CURRENT ASSETS Inventories Amounts due from joint ventures and subsidiaries of a joint venture 12 Programmes and film production in progress Financial assets at fair value through profit or loss Prepayments, deposits, other receivables and other assets Cash and cash equivalents Assets of disposal group classified as held for sale 16 CURRENT LIABILITIES Trade payables 13 Receipt in advance, other payables and accrued liabilities Current income tax liabilities Convertible notes 14	30 June 2015 (Unaudited) HK$’000 17,373 25,379 3,382 2,943 5,277 54,354 – 289,985 50,870 26,000 14,861 379,220 760,936 2,268,330 3,029,266 – 73,658 – 18,000	31 December 2014 (Audited) HK$’000 9,513 21 62,823 19,881 17,947
		110,185
		2,316 290,178 68,262 138,652 24,839 162,745
		686,992
		2,247,737
		2,934,729
		19 69,469 13,994 19,068

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APPENDIX I

Note Liabilities of disposal group classified as held for sale 16 NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Other payables Deferred income tax liabilities NET ASSETS EQUITY Capital and reserves attributable to equity holders of the Company Share capital 15 Reserves Non-controlling interest TOTAL EQUITY	30 June 2015 (Unaudited) HK$’000 91,658 649,398 741,056 2,288,210 2,342,564 11,750 567 12,317 2,330,247 1,325,981 1,008,046 2,334,027 (3,780) 2,330,247	31 December 2014 (Audited) HK$’000 102,550
		640,993
		743,543
		2,191,186
		2,301,371
		6,997 –
		6,997
		2,294,374
		1,311,981 981,466
		2,293,447 927
		2,294,374

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APPENDIX I

CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT

For the six months ended 30 June 2015

Net cash used in operating activities Cash flows from investing activities Bank interest received Purchase of investment securities Disposals of investment securities Purchase of property, plant and equipment Disposals of property, plant and equipment Disposal of joint ventures Net cash generated from investing activities Cash flows from financing activities Proceeds from issuance of shares on exercise of share options Repayment of promissory notes Net cash generated from financing activities Increase in cash and cash equivalents Cash and cash equivalents at 1 January Translation adjustments Cash and cash equivalents at 30 June Represented by Cash and cash equivalents Cash and cash equivalents included in disposal group classified as held for sale

Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) HK$’000 HK$’000 (105,127) (95,452) 929 250 – (69,845) 305,439 – (28,724) (21,458) 6 – – 250,080 277,650 159,027 11,600 96,100 – (6,359) 11,600 89,741 184,123 153,316 243,734 99,880 (96) (5,364) 427,761 247,832 379,220 247,832 48,541 – 427,761 247,832

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APPENDIX I

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY For the six months ended 30 June 2015

Balance at 1 January 2015 Total comprehensive income/(loss) for the period Transactions with owners in their capacity as owners: Issuance of shares upon exercise of share options Issuance of shares upon conversion of convertible notes Balance at 30 June 2015			(Unaudited)	(Unaudited)	(Unaudited)
			Attributable to equity holders of the Company				Non- Controlling Total Interests HK$’000 HK$’000 2,293,447 927 26,691 (4,707) 11,600 – 2,289 – 2,334,027 (3,780)	Total HK$’000 2,294,374 21,984 11,600 2,289
	Share capital HK$’000 1,311,981 – 11,600 2,400 1,325,981	Share premium HK$’000 1,825,800 – 4,159 1,048 1,831,007	Merger reserve HK$’000 860,640 – – – 860,640	Equity component of convertible notes HK$’000 10,139 – – (1,159) 8,980	Share Capital option redemption reserve reserve HK$’000 HK$’000 16,267 1,206 – – (4,159) – – – 12,108 1,206	Currency translation Accumulated reserve losses HK$’000 HK$’000 111,338 (1,843,924) 452 26,239 – – – – 111,790 (1,817,685)
								2,330,247

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Balance at 1 January 2014 Total comprehensive (loss)/ income for the period Transactions with owners in their capacity as owners: Issuance of shares upon exercise of share options Issuance of shares upon conversion of convertible notes Issuance of shares upon placement Balance at 30 June 2014						(Unaudited)
			Attributable to equity holders of			the Company		Total HK$’000 1,799,063 81,487 100 20,872 96,000 1,997,522	Non- Controlling Interests HK$’000 – – – – – –	Total HK$’000 1,799,063 81,487 100 20,872 96,000
	Share capital HK$’000 856,238 – 100 26,000 57,143 939,481	Share premium HK$’000 1,644,681 – 35 7,425 38,857 1,690,998	Merger reserve HK$’000 860,640 – – – – 860,640	Equity component of convertible notes HK$’000 202,299 – – (12,553) – 189,746	Share option reserve HK$’000 16,481 – (35) – – 16,446	Capital redemption reserve HK$’000 1,206 – – – – 1,206	Currency translation Accumulated reserve losses HK$’000 HK$’000 116,620 (1,899,102) (13,810) 95,297 – – – – – – 102,810 (1,803,805)
										1,997,522

– 161 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

1. GENERAL INFORMATION

China Jiuhao Health Industry Corporation Limited (the “Company”) and its subsidiaries (together, the “Group”) is principally engaged in the provision of online and offline healthcare and wellness services. The Group is also engaged in media business in the People’s Republic of China (the “PRC”).

The Company was incorporated in the Cayman Islands as an exempted company with limited liability on 27 May 2002 under the Company Law (2002 Revision) (Cap. 22) of the Cayman Islands. The address of the Company’s registered office is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1.1111, Cayman Islands.

The Company is listed on The Stock Exchange of Hong Kong Limited.

This condensed consolidated interim financial information is presented in thousand Hong Kong dollars (HK$’000), unless otherwise stated. This condensed consolidated interim financial information was approved for issue on 27 August 2015.

This condensed consolidated interim financial information has not been audited.

2. BASIS OF PREPARATION

This condensed consolidated interim financial information for the six months ended 30 June 2015 has been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34, “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2014, which have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”).

3. ACCOUNTING POLICIES, ESTIMATES AND FINANCIAL RISK MANAGEMENT

(i) Accounting Policies

Except as described below, the accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 December 2014, as described in those annual financial statements.

Income tax expense is recognized based on management’s best estimate of the weighted average annual income tax expected for the full financial year.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• (a) New, revised and amended standards and interpretations to existing standards effective in 2015 adopted by the Group

The Group has adopted the following new, revised and amended standards and interpretations to existing standards (“new HKFRSs”) that have been issued and are effective for the Group’s accounting period beginning on 1 January 2015:

HKAS 19 (Amendment) Defined Benefit Plans: Employee Contributions Annual improvements 2012 Amendments to include changes from the 2010-2012 cycle of the annual improvements project Annual improvements 2013 Amendments to include changes from the 2011-2013 cycle of the annual improvements project

The adoption of the above new HKFRSs did not result in substantial changes to the accounting policies of the Group and had no material effect on how the results and financial position for the current or prior accounting periods have been prepared and presented.

• (b) New, revised and amended standards and interpretations to existing standards that are not effective in 2015 and have not been early adopted by the Group

The following new, revised and amended standards and interpretations to existing standards have been issued, but are not effective for the financial period beginning 1 January 2015 and have not been early adopted by the Group:

		Effective for
		accounting
		periods beginning
		on or after
HKAS 1 (Amendment)	Amendments to HKAS 1 for	1 January 2016
	Disclosure Initiative
HKAS 16 and 41	Agriculture: Bearer Plants	1 January 2016
(Amendment)
HKAS 16 and 38	Clarification of Acceptable	1 January 2016
(Amendment)	Methods of Depreciation and
	amortization
HKAS 27 (Amendment)	Equity Method in Separate	1 January 2016
	Financial Statements
HKFRS 9	Financial Instruments	1 January 2018

– 163 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

		Effective for
		accounting
		periods beginning
		on or after
HKFRS 10 and HKAS 28	Sale or Contribution of Assets	1 January 2016
(Amendment)	between An Investor and Its
	Associate or Joint Venture
HKFRS 10, 12, and	Investment Entities: Applying the	1 January 2016
HKAS 28	Consolidation Exception
HKFRS 11 (Amendment)	Accounting for Acquisitions of	1 January 2016
	Interest in Joint Operations
HKFRS 14	Regulatory Deferral Accounts	1 January 2016
HKFRS 15	Revenue from Contracts with	1 January 2017
	Customers
Annual improvements 2014	Amendments to include changes	1 January 2016
	from the 2012-2014 cycle
	of the annual improvements
	project

The Group has commenced an assessment of the impact of these new, amended and revised HKFRSs but is not yet in a position to state whether they would have a significant impact on its results of operations and financial position.

(ii) Estimates

The preparation of condensed consolidated interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial information, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2014, with the exception of changes in estimates that are required in determining the provision for income taxes and provision for impairment of investment in a joint venture.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group tests at the end of each reporting period whether investments in joint ventures have suffered impairment. The recoverable amounts have been determined at the higher fair value less costs to sell and value in use. Value-in-use calculations use cash flow projections based on financial budgets approved by management. Cash flows beyond the budget period are extrapolated using estimated growth rates which do not exceed the long-term average growth rate for the business in which the joint ventures operate. Management’s judgement is required in assessing the ultimate realisation of these investments, including the operations and the ability to generate economic benefits in the foreseeable future. If the operations of the joint ventures were to deteriorate, resulting in an impairment of their ability to recover the carrying amount, additional impairment may be required.

For the six months ended 30 June 2015, provision for impairment of interest in a joint venture of approximately HK$47,000,000 has been charged to the condensed consolidated interim income statement.

(iii) Financial Risk Management

(a) Financial risk factors

The Group’s activities expose it to a variety of financial risks: cash flow and fair value interest rate risk, credit risk, foreign exchange risk, price risk and liquidity risk.

The condensed consolidated interim financial information does not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements as at 31 December 2014.

There have been no changes in the risk management policies since year end.

(b) Fair value estimation

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following table presents the Group’s assets that are measured at fair value:

At 30 June 2015 Financial assets at fair value through profit or loss Trading securities At 31 December 2014 Financial assets at fair value through profit or loss Trading securities	Level 1 HK$’000 26,000 138,652	Level 2 HK$’000 – –	Level 3 HK$’000 – –	Total HK$’000 26,000
				138,652

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing services, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1. Instruments included in level 1 comprise primarily the listed equity investments.

There were no transfers between levels 1, 2 and 3, and no change in valuation techniques during the period.

4. SEGMENT INFORMATION

The chief operating decision-maker has been identified as the management committee which comprises the chief executive officer and the chief financial officer of the Group. The management committee reviews the Group’s internal reporting in order to assess performance and allocate resources. The management committee has determined the operating segments based on these reports.

The management committee has determined that the Group is organized into three main operating segments from continuing operations: (i) Online healthcare service; (ii) Offline healthcare and wellness services; and (iii) Media business. The management committee measures the performance of the segments based on their respective segment results. The segment results derived from profit/(loss) before income tax, excluding exchange gain/(loss), net, finance (costs)/income, net and unallocated income, net. Unallocated income, net mainly comprise of corporate income net off with corporate expenses including salary, office rental and other administrative expenses which are not attributable to particular reportable segment.

There are no sales between the operating segments in the period (2014: Nil). All of the Group’s operating segments operate in the PRC.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The segment results for the six months ended 30 June 2015 are as follows:

Sales Segment results before provision for impairment Provision for impairment Segment results Exchange gain, net Unallocated income, net Finance costs, net Profit/(loss) before income tax Taxation Profit/(loss) for the period Non-controlling interest Profit/(loss) for the period attributable to equity holders of the Company Depreciation – Allocated – Unallocated Amortization	Online Healthcare Service (Unaudited) HK$’000 693 (22,231) (1,268) (23,499) 338 –	Offline Healthcare and Wellness Services (Unaudited) HK$’000 53,091 (5,098) (17,601) (22,699) 524 3	Media (Unaudited) HK$’000 7,575 4,326 (60,249) (55,923) 177 –	Total Continuing Operations Discontinued Operations: Offline Healthcare and Wellness Services- Beijing Healthcare and Wellness Si He Yuan and Hotel Project (Unaudited) (Unaudited) HK$’000 HK$’000 61,359 – (23,003) (28) (79,118) – (102,121) (28) 2,482 – 126,565 – 26,926 (28) (138) – 26,788 (28) (5,235) 7 21,553 (21) 4,707 – 26,260 (21) 1,039 – 102 – 3 –	Total (Unaudited) HK$’000 61,359
					(23,031) (79,118)
					(102,149) 2,482 126,565
					26,898 (138)
					26,760 (5,228)
					21,532 4,707
					26,239
					1,039 102 3

– 167 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The segment results for the six months ended 30 June 2014 are as follows:

							Discontinued	Discontinued	Discontinued
							Operations:
								Offline
								Healthcare
								and
								Wellness
								Services-
								Beijing
								Healthcare
			Offline					and
			Healthcare					Wellness
	Online		and			Total	Si He Yuan
	Healthcare		Wellness			Continuing		and Hotel
	Service		Services		Media	Operations		Project		Total
	(Unaudited)	(Unaudited)		(Unaudited)		(Unaudited)	(Unaudited)		(Unaudited)
			(Restated)			(Restated)		(Restated)
	HK$’000		HK$’000		HK$’000	HK$’000		HK$’000		HK$’000
Sales	–		51,576		2,469	54,045		–		54,045
Segment results before provision for
impairment	(10,820)		(5,985)		27,401	10,596		(225)		10,371
Segment results	(10,820)		(5,985)		27,401	10,596		(225)		10,371
Exchange loss, net						(2,568)		–		(2,568)
Unallocated income, net						66,465		–		66,465
						74,493		(225)		74,268
Finance income, net						20,505		–		20,505
Profit/(loss) before income tax						94,998		(225)		94,773
Taxation						500		24		524
Profit/(loss) for the period attributable
to equity holders of the Company						95,498		(201)		95,297
Depreciation
– Allocated	214		11,111		181	11,506		45		11,551
– Unallocated						292		–		292
Amortization	–		4,235		–	4,235		–		4,235

Note: No segment assets and liabilities are disclosed as the chief operating decision makers are not relying on these segment information for the purposes of resources allocation and performance assessment.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. OTHER INCOME AND OTHER GAINS, NET

Interest income Realised gain on financial assets at fair value through profit or loss Fair value (loss)/gain on financial assets at fair value through profit or loss Exchange gain/(loss), net Gain on disposal of joint ventures Miscellaneous	Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) (Restated) HK$’000 HK$’000 861 245 201,787 – (9,000) 67,775 2,482 (2,672) – 11,028 – 1,266 196,130 77,642

6. FINANCE (COSTS)/INCOME, NET

Notional non-cash interest on promissory notes Notional non-cash interest on convertible notes Imputed finance cost on discounting non-current rental deposit paid Less: Amounts capitalized as the cost of qualifying assets (i) Reversal of accrued interest on agency fee payable (ii) Imputed finance income on discounting non-current rental deposits received	Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) HK$’000 HK$’000 – (260) (1,221) (20,757) (1,492) – (2,713) (21,017) 1,221 21,017 (1,492) – – 20,505 1,354 – (138) 20,505

– 169 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• (i) Finance costs on the promissory notes and convertible notes capitalized were borrowing costs attributable to the construction of the “Beijing Healthcare and Wellness Si He Yuan and Hotel”.

• (ii) During the six months ended 30 June 2014, the Group and Hainan Haishi Tourist Satellite TV Media Co. Ltd. (“Travel Channel”), an associated company of joint ventures of the Group, have mutually agreed that the Group is waived from the payment of certain accrued interest on agency fee payable to Travel Channel upon the full settlement of the outstanding agency fee by the Group. The reversal of such accrued interest payable amounted to approximately HK$20,505,000 and has been offset against finance costs during the six months ended 30 June 2014.

7. PROFIT BEFORE INCOME TAX

Profit before income tax is stated after charging the following:

Depreciation of property, plant and equipment (Note 11) Amortization of intangible assets Provision for impairment of: – Interest in a joint venture – Prepayments – Amount due from a subsidiary of a joint venture Staff costs: Directors’ fees Wages and salaries Contributions to defined contribution pension schemes	Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) (Restated) HK$’000 HK$’000 1,141 11,843 3 4,235 47,000 – 22,673 – 9,445 –
	400 400 30,365 28,784 3,278 3,604
	34,043 32,788

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. INCOME TAX (EXPENSE)/CREDIT

No Hong Kong profits tax has been provided as there was no assessable profit from Hong Kong for the period (2014: Nil). PRC corporate income tax has been provided for at the rate of 25% (2014: 25%) on the estimated assessable profit for the period accordingly.

Current income tax – Hong Kong profits tax – PRC corporate income tax Deferred income tax Income tax (expense)/credit	Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) (Restated) HK$’000 HK$’000 – – 13,897 (1,295) (19,132) 1,795 (5,235) 500

The weighted average applicable tax rate for the six months ended 30 June 2015 was 16.4% (2014: 17.3%).

– 171 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

9. EARNINGS PER SHARE

(a) Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

Weighted average number of ordinary shares in issue (thousands) Profit from continuing operations attributable to equity holders of the Company_(HK$’000) Basic earnings per share from continuing operations attributable to equity holders of the Company (HK cents per share) Loss from discontinued operations attributable to equity holders of the Company(HK$’000)_ Basic loss per share from discontinued operations attributable to equity holders of the Company (HK cents per share) Earnings per share attributable to equity holders of the Company (HK cents per share)

Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) (Restated) 6,573,846 4,665,230 26,260 95,498 0.40 2.05 (21) (201) – – 0.40 2.05

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. As at 30 June 2015, the Company has two categories of potential ordinary shares: convertible notes and share options (2014: same). The convertible notes are assumed to have been converted into ordinary shares. The net profit is adjusted to eliminate any interest expense less the tax effect charged to profit or loss. For the share options, a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company’s share during the period) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

Weighted average number of ordinary shares in issue (thousands) Adjustments for: – share options (thousands) – convertible notes (thousands) Weighted average number of ordinary shares for diluted earnings per share (thousands) Profit from continuing operations attributable to equity holders of the Company_(HK$’000) Diluted earnings per share from continuing operations attributable to equity holders of the Company (HK cents per share) Loss from discontinued operations attributable to equity holders of the Company(HK$’000)_ Diluted loss per share from discontinued operations attributable to equity holders of the Company (HK cents per share) Diluted earnings per share attributable to equity holders of the Company (HK cents per share)

Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) (Restated) 6,573,846 4,665,230 15,008 32,885 79,415 971,720 6,668,269 5,669,835 26,260 95,498 0.39 1.68 (21) (201) – – 0.39 1.68

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. DIVIDENDS

The directors do not recommend the payment of any dividend in respect of the six months ended 30 June 2015 (2014: Nil).

11. CAPITAL EXPENDITURES

(i) Property, plant and equipment

Six months ended 30 June 2015

Opening net book amount at 1 January 2015 Additions Depreciation Exchange difference Closing net book amount at 30 June 2015	Golf course (Unaudited) HK$’000 – – – – –	Buildings (Unaudited) HK$’000 745 – (13) 4 736	Machinery and equipment (Unaudited) HK$’000 33 – (5) – 28	Furniture, computer and equipment Leasehold improvements (Unaudited) (Unaudited) HK$’000 HK$’000 1,992 546 134 8,142 (416) (521) 14 5 1,724 8,172	Motor vehicles Construction in progress (Unaudited) (Unaudited) HK$’000 HK$’000 1,614 4,583 – 692 (186) – 11 (1) 1,439 5,274	Total (Unaudited) HK$’000 9,513 8,968 (1,141) 33
						17,373

Six months ended 30 June 2014

Opening net book amount at 1 January 2014 Additions Depreciation Transfer Exchange difference Closing net book amount at 30 June 2014	Golf course (Unaudited) HK$’000 92,831 – (4,401) – (859) 87,571	Buildings (Unaudited) HK$’000 182,104 – (3,868) – (1,708) 176,528	Machinery and equipment (Unaudited) HK$’000 6,048 110 (712) – (54) 5,392	Furniture, computer and equipment Leasehold improvements (Unaudited) (Unaudited) HK$’000 HK$’000 6,515 20,378 1,538 563 (691) (885) – – (57) (189) 7,305 19,867	Motor vehicles Construction in progress (Unaudited) (Unaudited) HK$’000 HK$’000 4,757 77,586 204 59,460 (1,286) – – (593) (37) (101) 3,638 136,352	Total (Unaudited) HK$’000 390,219 61,875 (11,843) (593) (3,005)
						436,653

– 174 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

No depreciation expense (2014: HK$10,299,000) has been charged in cost of sales. Depreciation expense of HK$1,141,000 (2014: HK$1,544,000) has been charged in administrative expenses.

During the six months ended 30 June 2015, the Group has capitalized borrowing costs of approximately HK$1,221,000 (2014: HK$21,017,000) and operating lease rentals of approximately HK$5,975,000 (2014: HK$5,073,000). No amortization of intangible assets (2014: HK$13,876,000) has been capitalized. Aggregated amount capitalized during the period of approximately HK$7,196,000 (2014: HK$39,966,000) was included in assets of disposal group classified as held for sale.

(ii) Intangible assets

Six months ended 30 June 2015

Opening net book amount at 1 January 2015 Additions Amortization Exchange difference Closing net book amount at 30 June 2015 At 30 June 2015 Cost Accumulated amortization and impairment Net book amount		Non-current assets
	Goodwill (Unaudited) HK$’000 – – – – – – – –	Programme and film rights Programme and films production in progress Cooperating construction and operating agreement Software and licences (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 – – – 21 – 25,357 – – – – – (3) – 4 – – – 25,361 – 18 – 25,361 – 25 – – – (7) – 25,361 – 18	Total (Unaudited) HK$’000 21 25,357 (3) 4
			25,379
			25,386 (7)
			25,379

– 175 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Six months ended 30 June 2014

Opening net book amount at 1 January 2014 Additions Transfer Amortization Exchange difference Closing net book amount at 30 June 2014 At 30 June 2014 Cost Accumulated amortization and impairment Net book amount			Non-current assets	Non-current assets
	Goodwill (Unaudited) HK$’000 321,993 – – – (3,051) 318,942 318,942 – 318,942	Programme and film rights (Unaudited) HK$’000 – – – – – – 117,723 (117,723) –	Programme and films production in progress (Unaudited) HK$’000 13,990 – (13,990) – – – – – –	Cooperating construction and operating agreement (Unaudited) HK$’000 1,309,209 – – (18,088) (12,318) 1,278,803 1,349,291 (70,488) 1,278,803	Software and licences (Unaudited) HK$’000 71 24 – (23) – 72 152 (80) 72	Total (Unaudited) HK$’000 1,645,263 24 (13,990) (18,111) (15,369)
						1,597,817
						1,786,108 (188,291)
						1,597,817

No amortization (2014: HK$4,212,000) has been charged in cost of sales. Amortization of HK$3,000 (2014: HK$23,000) has been charged in administrative expenses. No amortization (2014: HK$13,876,000) has been capitalized in construction in progress.

Cooperation Construction and Operating Agreements represents the rights (i) to construct and operate the club facilities of “Bayhood No. 9 Club” up to 31 December 2051 acquired through a business combination; and (ii) to develop and operate a piece of 580 Chinese acre land adjacent to “Bayhood No. 9 Club” up to 30 January 2062 acquired through a business combination.

– 176 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12. INTERESTS IN JOINT VENTURES AND AMOUNTS DUE FROM JOINT VENTURES AND SUBSIDIARIES OF A JOINT VENTURE

(a) Interests in joint ventures

At 1 January Share of results Provision for impairment loss_(Note 7)_ Dividends declared Exchange differences At 30 June	Joint ventures for media business 2015 2014 (Unaudited) (Unaudited) HK$’000 HK$’000 62,823 70,910 (12,464) (9,554) (47,000) – – (8,346) 23 (727) 3,382 52,283
	2015 (Unaudited) HK$’000 62,823 (12,464) (47,000) – 23 3,382

Set out below are the joint ventures of the Group as at 30 June 2015, which, in the opinion of the directors, are material to the Group. All these joint ventures are private companies and there is no quoted market price available for their shares. There are no contingent liabilities relating to the Group’s interests in these joint ventures, and there are no contingent liabilities and commitments of these joint ventures themselves.

	Place of		Percentage of equity	Percentage of equity	Principal activities
	establishment and		interests attributable to		and place of
Name	kind of legal entity	Registered capital	the Group		operation
			2015	2014
Joint ventures for media business
Hainan Hailu Advertising	The PRC, limited	RMB1,000,000	50%	50%	Advertising agency,
Limited Liability Company	liability company				design and
(“HNHL”) (2) (3)					production in the
					PRC
Asia Union Film and Media	The PRC, limited	RMB120,000,000	50%	50%	Investment in
(“AUFM”)(1) (3)	liability company				television drama,
					film production
					and advertising
					production in the
					PRC

– 177 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• (1) Pursuant to the shareholders’ agreements, the Group and Poly Culture and Arts Co., Ltd. (“PCACL”), the joint venture partner, agreed that the Group maintains the joint control over AUFM but the profit sharing ratio of the Group in AUFM is 75%.

• (2) On 29 July 2015, the Group disposed its 50% equity interests in HNHL to another joint venture partner of HNHL.

• (3) The names of the Companies referred to above represent management’s best effort in translating the Chinese names of the companies as no English names for these companies have been registered.

(b) Amounts due from joint ventures and subsidiaries of a joint venture

As at 30 June 2015 and 31 December 2014, amounts due from joint ventures and subsidiaries of a joint venture are unsecured and interest-free.

As at 30 June 2015, amount due from a subsidiary of a joint venture was provided for impairment of approximately HK$9,445,000 (2014: Nil). Other amounts due from joint ventures and subsidiaries of a joint venture are past due but not impaired and are expected to be settled within 12 months from the period end date.

13. TRADE PAYABLES

At 30 June 2015, the aging analysis of the trade payables based on invoice date were as follows:

0–3 months 4–6 months Over 6 months Reclassification to liabilities of disposal group classified as held for sale_(Note 16)_	30 June 2015 (Unaudited) HK$’000 – – – – – –	31 December 2014 (Audited) HK$’000 760 390 510 1,660 (1,641) 19

– 178 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. BORROWINGS

	30 June	31 December
	2015	2014
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Current
Convertible notes	18,000	19,068

(a) Convertible notes

The Company issued three-year term zero-coupon convertible notes with principal amount of RMB569 million (equivalent to approximately HK$700 million at the time of issuance) in October 2012. The convertible notes mature three years from the issue date at their nominal value of RMB569 million or can be converted into a maximum of 3,500,000,000 ordinary shares of the Company at the holder’s option at any time during the period between the issue date and the maturity date at the conversion price of HK$0.20 each, subject to certain conditions. The values of the liability component and the equity conversion component were determined at issuance of the convertible notes.

The fair values of the convertible notes are determined using option pricing method based on the key assumptions, including volatility of daily stock price return of 63.4% and risk free rate of 0.56%.

During the period, convertible notes with principal amount equivalent to HK$2,400,000 (2014: HK$26,000,000) have been converted into 12,000,000 (2014: 130,000,000) ordinary shares of the Company at the conversion price of HK$0.20 per share.

The convertible notes recognized in the condensed consolidated interim balance sheet is calculated as follows:

Liability component at 1 January Less: Conversion of convertible notes Interest expense_(Note 6)_ Liability component at 30 June	Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) HK$’000 HK$’000 19,068 334,588 (2,289) (20,872) 1,221 20,757 18,000 334,473	Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) HK$’000 HK$’000 19,068 334,588 (2,289) (20,872) 1,221 20,757 18,000 334,473
		334,473

– 179 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The liability component of the convertible notes at 30 June 2015 amounted to approximately HK$18,000,000 (31 December 2014: approximately HK$19,068,000), which is calculated using cash flows discounted at a rate based on the borrowings rate of 13.7%.

(b) Promissory notes

The Group issued a 5% fixed interest promissory note with principal amount of HK$150 million in October 2012. The repayment date of the promissory note is the date falling on last day of the 24th month from the date of issuance (the “Repayment Date”), and the Group could, at its discretion, repay the promissory notes in whole or in part prior to the Repayment Date. The promissory notes bear interest from the date of the issuance at the best lending rate of the Hongkong and Shanghai Banking Corporation Limited on the outstanding amount of the promissory notes and is repayable in arrears on the Repayment Date.

At 1 January Interest expense_(Note 6)_ Repayments Fair value of promissory notes at 30 June	Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) HK$’000 HK$’000 – 6,099 – 260 – (6,359) – –	Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) HK$’000 HK$’000 – 6,099 – 260 – (6,359) – –
		–

15. SHARE CAPITAL

Authorized: At 30 June 2015 (Unaudited) (Note (a)) At 31 December 2014 (Audited) (Note (a)) At 1 January 2015 Issuance of shares upon conversion of convertible notes_(Note 14(a))_ Issuance of shares upon exercise of share options At 30 June 2015 (Unaudited)	Ordinary shares of HK$0.2 each No. of shares ’000 HK$’000 15,000,000 3,000,000 15,000,000 3,000,000 6,559,904 1,311,981 12,000 2,400 58,000 11,600 6,629,904 1,325,981	Preference shares of HK$0.01 each No. of shares ’000 HK$’000 240,760 2,408 240,760 2,408 – – – – – – – –	Total HK$’000 3,002,408
			3,002,408
			1,311,981 2,400 11,600
			1,325,981

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At 1 January 2014 Issuance of shares upon placement (Note (b)) Issuance of shares upon conversion of convertible notes_(Note 14(a)_) Issuance of shares upon exercise of share options At 30 June 2014 (Unaudited)	Ordinary shares of HK$0.2 each No. of shares ’000 HK$’000 4,281,190 856,238 285,714 57,143 130,000 26,000 500 100 4,697,404 939,481	Preference shares of HK$0.01 each No. of shares ’000 HK$’000 – – – – – – – – – –	Total HK$’000 856,238 57,143 26,000 100
			939,481

Notes:

(a) Authorized share capital

The total number of authorised shares includes ordinary shares and preference shares. 15,000,000,000 shares (2014: 15,000,000,000 shares) are ordinary shares with par value of HK$0.2 per share (2014: HK$0.2). 240,760,000 shares (2014: 240,760,000 shares) are preference shares with par value of HK$0.01 per share (2014: HK$0.01).

• (b) Placing of new shares

On 16 December 2013, the Company and its placing agent have entered into a placing agreement, pursuant to which, the placing agent has agreed to place, on a best endeavours basis, up to 522,814,285 new ordinary shares of the Company at a placing price of HK$0.35 per share. China Life Trustees Limited, a wholly-owned subsidiary of China Life (Overseas) which in turn is a wholly-owned subsidiary of China Life Insurance (Group) Company, is one of the placees to subscribe for 285,714,285 shares at the placing price of HK$0.35. As at 31 December 2013, placing of 237,100,000 shares was completed. The placing of the remaining 285,714,285 shares was completed on 15 January 2014.

Share Option

Pursuant to a resolution passed on the extraordinary general meeting of the Company dated 4 June 2012, the share option scheme adopted by the Company on 30 July 2002 (“Terminated Option Scheme”) has been terminated and the Company has adopted a new 10-year term share option scheme (“New Option Scheme”) on the same date. Outstanding share options granted under the Terminated Option Scheme shall continue to be valid and exercisable. Pursuant to the New Option Scheme, the Company can grant options to Qualified Persons (as defined in the New Option Scheme) for a consideration of HK$1.00 for each grant payable by the Qualified Persons to the Company. The total number of the shares issued and to be issued upon exercise of options granted to each Qualified Person (including exercised, cancelled and outstanding options) in any 12-month period shall not exceed 1% of the shares then in issue. Pursuant to a resolution passed on 16 May 2014, the Company can further grant up to 469,740,401 share options to the Qualified Persons.

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APPENDIX I

Subscription price in relation to each option pursuant to the New Option Scheme shall not be less than the higher of (i) the closing price of the shares as stated in Stock Exchange’s daily quotation sheets on the date on which the option is offered to a Qualified Person; or (ii) the average of the closing prices of the shares as stated in the Stock Exchange’s daily quotation sheets for the 5 trading days immediately preceding the date of offer; or (iii) the nominal value of the shares of the Company. There shall be no minimum holding period for the vesting or exercise of the options and the options are exercisable within the option period as determined by the Board of Directors of the Company. For the six months ended 30 June 2015, no share option (2014: Nil) have been granted under the New Option Scheme and no share-based payment expense (2014: Nil) has been charged to the condensed consolidated interim income statement.

Movement of share options during the period is as follows:

Tranche 1. 2. 3.			(Unaudited)
	Date of share options granted Outstanding as at 1 January 2015 5 May 2008 1,042,459 4 November 2008 26,582,706 15 June 2012 64,000,000 91,625,165		Number of share options Exercised during the period Outstanding as at 30 June 2015 Exercisable as at 30 June 2015 Exercise Price Vesting date Expiry date HK$ – 1,042,459 1,042,459 2.58 1 April 2009 31 December 2015 – 26,582,706 26,582,706 0.86 From 8 March 2009 to 8 March 2011 31 December 2015 (58,000,000) 6,000,000 6,000,000 0.20 15 June 2012 14 June 2017 (58,000,000) 33,625,165 33,625,165
			Exercised during the period Outstanding as at 30 June 2015 – 1,042,459 – 26,582,706 (58,000,000) 6,000,000 (58,000,000) 33,625,165

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Tranche 1. 2. 3.			(Unaudited)	(Unaudited)	(Unaudited)
	Date of share options granted 5 May 2008 4 November 2008 15 June 2012	Outstanding as at 1 January 2014 1,042,459 26,582,706 67,000,000 94,625,165	Number of share options		Exercisable as at 30 June 2014 Exercise Price Vesting date Expiry date HK$ 1,042,459 2.58 1 April 2009 31 December 2015 26,582,706 0.86 From 8 March 2009 to 8 March 2011 31 December 2015 66,500,000 0.20 15 June 2012 14 June 2017 94,125,165
			Exercised during the period – – (500,000) (500,000)	Outstanding as at 30 June 2014 1,042,459 26,582,706 66,500,000 94,125,165

16. DISPOSAL GROUP HELD FOR SALE AND DISCONTINUED OPERATIONS

For the six months ended 30 June 2015

On 11 December 2014, Unique Talent Group Limited (the “Vendor”), a wholly- owned subsidiary of the Company, the Company (as a guarantor) and an independent third party (the “Purchaser”) entered into a sales and purchase agreement (the “S&P Agreement”) (as amended and supplemented by a supplemental agreement dated 30 March 2015 entered into by parties to the S&P Agreement) pursuant to which (i) the Vendor conditionally agreed to sell, and the Purchaser conditionally agreed to purchase, the entire shareholding interest in Smart Title Limited (the “Target Company”), a wholly-owned subsidiary of the Vendor; and (ii) the Group agreed to assign to the Purchaser the benefit and interest in a loan due from the Target Company to the Vendor of approximately HK$1,076 million (the “Shareholder’s Loan”) upon completion of the transactions in accordance with the terms and conditions of the S&P Agreement (the “Completion”) free from encumbrances. The total consideration payable for the sale and purchase of the entire shareholding interest in the Target Company and the assignment of the Shareholder’s Loan is agreed at HK$1,650 million in aggregate (the “Consideration”). The Consideration shall be settled as to (i) HK$60 million of the Consideration which has been paid in cash by the Purchaser upon signing of the S&P Agreement as the refundable deposit and will be applied as partial payment of the Consideration upon Completion; (ii) on Completion, HK$540 million of the Consideration which shall be paid in cash by the Purchaser; and (iii) on Completion, the Purchaser shall in accordance with the instructions of the Vendor issue to the Company the share entitlement note (“SEN”), which shall entitle the SEN holder the right to call for the issue of 1,500,000,000 new ordinary shares of HK$0.01 each of the Purchaser at an issue price of HK$0.70 per share.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group and the Purchaser will also enter into a club lease agreement (the “Club Lease Agreement”) pursuant to which the assets relevant to the operations of “Beijing Bayhood No. 9 Club” (the Purchaser will be entitled to the right to operate “Beijing Bayhood No. 9 Club” through its ownership in the Target Company upon Completion) will be leased to the Group for a term of twenty years (can be further extended to 31 December 2051 upon request by the Group) after Completion, and the Group will continue to operate the businesses of “Beijing Bayhood No. 9 Club” during the period. There are four rental periods during the term of 20 years of five years each. In addition, the Group has an option to early terminate the Club Lease Agreement by giving notice to the lessor at least six months prior to the expiry of each rental period.

The Target Company and its subsidiaries (the “Target Group”) is principally engaged in the provision of offline healthcare and wellness services through the management of “Beijing Bayhood No. 9 Club”, a membership-based luxury club which comprises of business hotel facilities, an 18-hole golf course, driving range facilities, theme restaurants and cafes, spa facilities, retail shops, and the first PGA branded and managed golf academy in Asia. “Beijing Bayhood No. 9 Club” is located near the city centre of Beijing, PRC. The major assets owned by the Target Group are i) the rights to construct and operate the club facilities of “Beijing Bayhood No. 9 Club” up to 31 December 2051; and ii) the rights to develop and operate a piece of 580 Chinese acre land adjacent to “Beijing Bayhood No. 9 Club” (the “Subject Land”) up to 30 January 2062. Construction of “Beijing Healthcare and Wellness Si He Yuan and Hotel” project with an approved total gross floor area of 80,000 square meters on the Subject Land is in progress.

The abovementioned transactions have not yet been completed as at the date of this interim report.

Assets of disposal group classified as held for sale:

Property, plant and equipment Intangible assets Deferred tax assets Inventories Prepayments, deposits and other receivables Cash and cash equivalents	30 June 2015 (Unaudited) HK$’000 527,611 1,590,114 3,354 8,570 90,140 48,541 2,268,330	31 December 2014 (Audited) HK$’000 500,580 1,589,601 2,680 9,599 64,288 80,989
		2,247,737

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Liabilities of disposal group classified as held for sale:

Trade payables Receipt in advance, other payables and accrued liabilities Deferred tax liabilities Deferred revenue Current income tax liabilities	30 June 2015 (Unaudited) HK$’000 2,637 136,602 342,139 92,940 75,080 649,398	31 December 2014 (Audited) HK$’000 1,641 130,634 338,848 94,084 75,786
		640,993

As the operation of offline healthcare and wellness services – Beijing Healthcare and Wellness Si He Yuan and Hotel Project is considered as a separate major line of business, they are accounted for as discontinued operations. The comparative financial information for the six months ended 30 June 2014 has been reclassified to conform with current period presentation in accordance with HKFRS 5 “Non-Current Assets Held for Sale and Discontinued Operations”. The disposal was not yet completed as at 30 June 2015, but is expected to be completed within 12 months from the period end date.

Had any of the circumstances about classification as disposal group held for sale not satisfied for the period, the depreciation of property, plant and equipment and amortization of intangible assets changed to the condensed consolidated interim income statement would have been increased by approximately HK$11,181,000 and HK$4,219,000 respectively.

Analysis of the results of discontinued operations in relation to offline healthcare and wellness services – Beijing Healthcare and Wellness Si He Yuan and Hotel project is as follows:

Other income and other gains, net Administrative expenses Loss before income tax of discontinued operations Income tax credit Loss for the period from discontinued operations attributable to the equity holders of the Company	Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) HK$’000 HK$’000 69 111 (97) (336) (28) (225) 7 24 (21) (201)	Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) HK$’000 HK$’000 69 111 (97) (336) (28) (225) 7 24 (21) (201)
		(225) 24
		(201)

– 185 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Analysis of the cash flows of discontinued operations in relation to offline healthcare and wellness services – Beijing Healthcare and Wellness Si He Yuan and Hotel project is as follows:

Operating cash flows Investing cash flows Financing cash flows Total cash flows	Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) HK$’000 HK$’000 (5,896) (6,738) (19,176) (16,850) – – (25,072) (23,588)	Six months ended 30 June 2015 2014 (Unaudited) (Unaudited) HK$’000 HK$’000 (5,896) (6,738) (19,176) (16,850) – – (25,072) (23,588)
		(23,588)

17. COMMITMENTS

(a) Capital commitment

Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:

	30 June	31 December
	2015	2014
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Property, plant and equipment	109,280	94,982

(b) Operating lease commitment

(i) Lessor

The Group sub-leases certain commercial premises under non- cancellable operating lease agreements. Total commitments receivable under these operating lease agreements in respect of rented premises are analysed as follows:

Not later than one year Later than one year and not later than five years Later than five years	30 June 2015 (Unaudited) HK$’000 26,009 129,436 138,773 294,218	31 December 2014 (Audited) HK$’000 – – –
		–

– 186 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) Lessee

At 30 June 2015, the Group had future aggregate minimum lease payments under non-cancellable operating leases as follows:

Not later than one year Later than one year and not later than five years Later than five years	Land and 30 June 2015 (Unaudited) HK$’000 35,986 139,455 863,220 1,038,661	buildings 31 December 2014 (Audited) HK$’000 36,259 140,006 881,508
		1,057,773

The above future aggregate minimum lease payments under non- cancellable operating leases have included committed operating lease rental arising from the Cooperation Construction Operating Agreements, being the rights (i) to construct and operate the club facilities of “Bayhood No. 9 Club” up to 31 December 2051; and (ii) to develop and operate a piece of 580 Chinese acre land adjacent to “Bayhood No. 9 Club” up to 30 January 2062.

18. SUBSEQUENT EVENTS

Capital reorganisation

The Capital reorganisation comprising the following has been completed and effective since 25 August 2015:

• (i) the par value of each issued existing share was reduced from HK$0.20 to HK$0.02 and the issued ordinary share capital of the Company was cancelled to the extent of HK$0.18 of each share in issue, and the entire amount of the authorised but unissued ordinary share capital of the Company will be cancelled (“ Capital Reduction ”);

• (ii) the application of the credit arising from the Capital Reduction to set off the accumulated losses of the Company as at the effective date of the Capital Reduction with the balance to be transferred to the distributable reserve account of the Company to be applied in such manner as the Directors consider appropriate and in accordance with the articles of association of the Company, the order of the Court sanctioning the Capital Reduction and all applicable laws and rules; and

• (iii) an increase in the authorised ordinary share capital of the Company following the Capital Reduction to HK$3,000,000,000 by the creation of the appropriate number of additional unissued new shares.

– 187 –

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular (other than that relating to the Investors, Tencent Holdings Limited and Huayi Brothers Media Corporation) 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.

This circular includes particulars given in compliance with the Takeovers Code for the purpose of giving information with regard to the Group. The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this circular (other than that relating to the Investors, Tencent Holdings Limited and Huayi Brothers Media Corporation) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this circular (other than those expressed by the directors of Huayi Brothers Media Corporation, Tencent and Tencent Holdings Limited, the sole director of each of Huayi Brothers, Confidex, Key Ability, Lofty Rainbow and Merit New) have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

The information in relation to Huayi Brothers and parties acting in concert with Huayi Brothers contained in this circular has been supplied by the sole director of Huayi Brothers, Mr. Wang Zhonglei. The sole director of Huayi Brothers accepts full responsibility for the accuracy of the information contained in this circular (other than that relating to the Company, Tencent, Tencent Holdings Limited, Confidex, Key Ability, Lofty Rainbow and Merit New) and confirms, having made all reasonable enquiries, that to the best of his knowledge, opinions expressed in this circular (other than those expressed by the Directors, the directors of Tencent and Tencent Holdings Limited, the sole director of each of Confidex, Key Ability, Lofty Rainbow and Merit New) have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

The information in relation to Huayi Brothers Media Corporation and parties acting in concert with Huayi Brothers Media Corporation contained in this circular has been supplied by the directors of Huayi Brothers Media Corporation. As at the Latest Practicable Date, the board of directors of Huayi Brothers Media Corporation comprises: Mr. Wang Zhongjun (Chairman), Mr. Wang Zhonglei (Vice Chairman), Ms. Liu Xiaomei, Ms. Wang Xiaorong, Ms. Hu Ming and Ms. Ding Qi; and the independent directors Mr. Wang Liqun, Mr. Ding Jian and Mr. Chen Yihong. The directors of Huayi Brothers Media Corporation jointly and severally accepts full responsibility for the accuracy of the information contained in this circular (other than that relating to the Company, Tencent, Tencent Holdings Limited, Confidex, Key Ability, Lofty Rainbow and Merit New) and confirm, having made

– 188 –

GENERAL INFORMATION

APPENDIX II

all reasonable enquiries, that to the best of their knowledge, opinions expressed in this circular (other than those expressed by the Directors, the directors of Tencent and Tencent Holdings Limited, and the sole director of each of Confidex, Key Ability, Lofty Rainbow and Merit New) have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

The information in relation to Tencent and parties acting in concert with Tencent contained in this circular has been supplied by the directors of Tencent and the directors of Tencent Holdings Limited. As at the Latest Practicable Date, the directors of Tencent are Mr. Ma Huateng and Mr. Charles St. Leger Searle; and the directors of Tencent Holdings Limited (“Tencent Holdings”) comprise Mr. Ma Huateng and Mr. Lau Chi Ping, Martin both of whom are executive directors, Mr. Jacobus Petrus (Koos) Bekker and Mr, Charles St Leger Searle both of whom are non-executive directors, and the independent non-executive directors Mr. Li Dong Sheng, Mr. Iain Ferguson Bruce and Mr. Ian Charles Stone. The directors of Tencent and the directors of Tencent Holdings Limited jointly and severally accept full responsibility for the accuracy of the information contained in this circular (other than that relating to the Company, Huayi Brothers, Huayi Brothers Media Corporation, Confidex, Key Ability, Lofty Rainbow and Merit New) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this circular (other than those expressed by the Directors, the directors of Huayi Brothers Media Corporation, and the sole director of each of Huayi Brothers, Confidex, Key Ability, Lofty Rainbow and Merit New) have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

The information in relation to Confidex and parties acting in concert with Confidex contained in this circular has been supplied by the sole director of Confidex, Mr. Huang Xin. The sole director of Confidex accepts full responsibility for the accuracy of the information contained in this circular (other than that relating to the Company, Huayi Brothers, Huayi Brothers Media Corporation, Tencent, Tencent Holdings Limited, Key Ability, Lofty Rainbow and Merit New) and confirms, having made all reasonable enquiries, that to the best of his knowledge, opinions expressed in this circular (other than those expressed by the Directors, the directors of Huayi Brothers Media Corporation, Tencent and Tencent Holdings Limited, the sole director of each of Huayi Brothers, Key Ability, Lofty Rainbow and Merit New) have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

The information in relation to Key Ability and parties acting in concert with Key Ability contained in this circular has been supplied by the sole director of Key Ability, Ms. Huang Ying. The sole director of Key Ability accepts full responsibility for the accuracy of the information contained in this circular (other than that relating to the Company, Huayi Brothers, Huayi Brothers Media Corporation, Tencent, Tencent Holdings Limited, Confidex, Lofty Rainbow and Merit New) and confirms, having made all reasonable enquiries, that to the best of her knowledge, opinions expressed in this circular (other than those expressed by the Directors, the directors of Huayi

– 189 –

GENERAL INFORMATION

APPENDIX II

Brothers Media Corporation, Tencent and Tencent Holdings Limited, the sole director of each of Huayi Brothers, Confidex, Lofty Rainbow and Merit New) have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

The information in relation to Lofty Rainbow and parties acting in concert with Lofty Rainbow contained in this circular has been supplied by the sole director of Lofty Rainbow, Ms. Zhang Huiling. The sole director of Lofty Rainbow accepts full responsibility for the accuracy of the information contained in this circular (other than that relating to the Company, Huayi Brothers, Huayi Brothers Media Corporation, Tencent, Tencent Holdings Limited, Confidex, Key Ability and Merit New) and confirms, having made all reasonable enquiries, that to the best of her knowledge, opinions expressed in this circular (other than those expressed by the Directors, the directors of Huayi Brothers Media Corporation, Tencent and Tencent Holdings Limited, the sole director of each of Huayi Brothers, Confidex, Key Ability and Merit New) have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

The information in relation to Merit New and parties acting in concert with Merit New contained in this circular has been supplied by the sole director of Merit New, Ms. Xu Luping. The sole director of Merit New accepts full responsibility for the accuracy of the information contained in this circular (other than that relating to the Company, Huayi Brothers, Huayi Brothers Media Corporation, Tencent, Tencent Holdings Limited, Confidex, Key Ability and Lofty Rainbow) and confirms, having made all reasonable enquiries, that to the best of her knowledge, opinions expressed in this circular (other than those expressed by the Directors, the directors of Huayi Brothers Media Corporation, Tencent and Tencent Holdings Limited, the sole director of each of Huayi Brothers, Confidex, Key Ability and Lofty Rainbow) have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

2. SHARE CAPITAL, OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES

(a) Shares

The authorised ordinary share capital of the Company is HK$3,000,000,000 divided into 150,000,000,000 Shares, and the authorised preference share capital of the Company was HK$2,407,600 divided into 240,760,000 preference shares with a par value of HK$0.01 each. As at the Latest Practicable Date, there are 6,660,486,717 issued and fully-paid up ordinary Shares and none of the preference shares of the Company is in issue. All the issued Shares rank pari passu with each other in all respects including the rights in respect of capital, dividend and voting. Since 31 December 2014 (being the end of the last financial year of the Company) and up to the Latest Practicable Date, no new Shares had been issued by the Company except for the following:

– 190 –

GENERAL INFORMATION

APPENDIX II

• (i) the issue of 24,497,788 Shares on 11 August 2015 and the issue of 2,084,918 Shares on 18 December 2015 pursuant to the exercise of share options granted under the Share Option Scheme adopted on 30 July 2002;

• (ii) the issue of 20,500,000 Shares on 19 May 2015, the issue of 35,000,000 Shares on 4 June 2015, the issue of 2,500,000 Shares on 5 June 2015, the issue of 2,000,000 Shares on 18 December 2015 and the issue of 2,000,000 Shares on 21 December 2015 pursuant to the exercise of share options granted under the Share Option Scheme adopted on 4 June 2012;

• (iii) the issue of 12,000,000 Shares on 20 May 2015 pursuant to conversion of convertible notes of the Company.

(b) Options, warrants and convertible securities

As at the Latest Practicable Date, the Company has no outstanding options, warrants or conversion rights affecting the Shares.

3. DISCLOSURE OF INTERESTS

(a) Interests in the Company

(i) Directors’ interests and short positions in Shares, underlying Shares and debentures of the Company

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executives of the Company in the Shares, underlying Shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, section 341 of the SFO (including interests and short positions which the Directors and the chief executives of the Company were deemed or taken to have under such provisions of the SFO) or which were required to be and were recorded in the register required to be kept pursuant to Section 352 of the SFO or otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers adopted by the Company were as follows:

– 191 –

GENERAL INFORMATION

APPENDIX II

As at the Latest Practicable Date, the following Directors held the following interests in the Shares of the Company:

				% of total issued
				share capital of
			Number of	the Company
Name of Director	Capacity	Nature of Interests	shares held	(Note 1)
Yuen Hoi Po	Interest of controlled	Corporation interest	1,976,492,607	29.67
	corporations		(Note 2)
Zhang Changsheng	Beneficial owner	Personal interest	20,000,000	0.30
Tian Suning, Edward	Interest of a controlled	Corporation interest & Personal	195,951,534	2.94
	corporation & beneficial	interest	(Note 3)
	owner
Chu Yuguo	Beneficial owner	Personal interest	2,000,000	0.03
Notes:

• 1 The percentage of shareholding is calculated with reference to the Company’s number of Shares in issue as at the Latest Practicable Date.

• 2 Mr. Yuen was deemed to be interested in 1,976,492,607 Shares held by his whollyowned corporations namely, Ming Bang Limited, Rich Public Limited and Smart Concept Enterprise Limited.

• 3 Mr. Tian Suning, Edward is personally interested in 2,084,918 Shares and was deemed to be interested in 193,866,616 Shares held by CBC China Media Limited.

Save as disclosed in this paragraph, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interests or short positions in the Shares of the Company or any of its associated corporations (within the meaning of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interest which any such Director was taken or deemed to have under section 344 of the SFO) or which were required, pursuant to section 352 of Part XV of the SFO, to be entered in the register referred to therein, or were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers to be notified to the Company and the Stock Exchange.

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GENERAL INFORMATION

APPENDIX II

Save as disclosed above and in section 3 (c) headed “Interests and dealings in the Investors”, as at the Latest Practicable Date, none of the Directors had any interest in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company or the Investors.

(ii) Directors’ rights to acquire Shares

Save in respect of the Distribution and as disclosed under the section 3 (b) (i) in relation to the Directors’ dealings in securities below, at no time during the Relevant Period were rights to acquire benefits by means of the acquisition of Shares in the Company granted to any Director or their respective spouse or minor children, or were any such rights exercised by them, or was the Company or any of its subsidiaries a party to any arrangement to enable the Directors to acquire such rights in any other body corporate.

(iii) Substantial Shareholders’ interests and short positions in Shares, underlying Shares and debentures of the Company

As at the Latest Practicable Date, so far as was known to any Director or chief executive of the Company, Shareholders (other than Directors or chief executives of the Company) who had, or were deemed or taken to have, interests or short positions in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were, 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 other members of the Group or held any option in respect of such capital were as follows:

				% of total
				issued share
				capital of the
			Number of	Company
Name of Shareholder	Capacity	Nature of Interests	shares held	(Note a)
Smart Concept Enterprise	Beneficial owner	Beneficial interest	1,837,000,000	27.58
Limited
Rich Public Limited	Beneficial owner_(Note b)_	Beneficial interest	139,492,607	2.09
Ming Bang Limited	Interest of a controlled	Corporation interest	139,492,607	2.09
	corporation_(Note c)_
Huayi Brothers International	Beneficial owner	Beneficial interest	2,452,447,978	36.82
Limited
Huayi Brothers Media	Interest of a controlled	Corporation interest	2,452,447,978	36.82
Corporation	corporation_(Note d)_

– 193 –

GENERAL INFORMATION

APPENDIX II

				% of total
				issued share
				capital of the
			Number of	Company
Name of Shareholder	Capacity	Nature of Interests	shares held	(Note a)
Tencent Holdings Limited	Interest of a controlled	Beneficial interest	2,116,251,467	31.77
	corporation_(Note e)_
MIH TC Holdings Limited	Interest of a controlled	Corporation interest	2,116,251,467	31.77
	corporation_(Note f)_
Naspers Limited	Interest of a controlled	Corporation interest	2,116,251,467	31.77
	corporation_(Note f)_
Confidex Key Limited	Beneficial owner	Beneficial interest	691,882,675	10.39
Mr. Yu Feng	Interest of a controlled	Corporation interest	691,882,675	10.39
	corporation_(Note g)_
Mr. Ma Yun	Interest of a controlled	Corporation interest	691,882,675	10.39
	corporation_(Note g)_
Yunfeng Investment GP II,	Interest of a controlled	Corporation interest	691,882,675	10.39
Ltd.	corporation_(Note g)_
Yunfeng Investment II, L.P.	Interest of a controlled	Corporation interest	691,882,675	10.39
	corporation_(Note g)_
Yunfeng Fund II, L.P.	Interest of a controlled	Corporation interest	691,882,675	10.39
	corporation_(Note g)_
Key Ability Limited	Beneficial owner	Beneficial interest	600,118,893	9.01
Ms. Huang Ying	Interest of a controlled	Corporation interest	600,118,893	9.01
	corporation_(Note h)_
Lofty Rainbow Limited	Beneficial owner	Beneficial interest	610,675,788	9.17
Ms. Zhang Huiling	Interest of a controlled	Corporation interest	610,675,788	9.17
	corporation_(Note i)_
Merit New Limited	Beneficial owner	Beneficial interest	366,243,059	5.50
Ms. Xu Luping	Interest of a controlled	Corporation interest	366,243,059	5.50
	corporation_(Note j)_

– 194 –

GENERAL INFORMATION

APPENDIX II

Notes:

• a. The percentage of shareholding is calculated with reference to the Company’s number of Shares in issue as at the Latest Practicable Date.

• b. Rich Public Limited is an investment holding company incorporated in the British Virgin Islands and its entire issued share capital is beneficially owned by Ming Bang Limited.

• c. Ming Bang Limited is an investment holding company incorporated in the British Virgin Islands and its entire issued share capital is beneficially owned by Mr. Yuen who is also a director of Ming Bang Limited.

• d. Huayi Brothers International Limited is a wholly-owned subsidiary of Huayi Brothers Media Corporation and is beneficially interested in 2,452,447,978 Shares of the Company.

• e. Mount Qinling Holdings Limited is a wholly-owned subsidiary of Tencent Holdings Limited and is beneficially interested in 2,116,251,467 Shares of the Company.

• f. MIH TC Holdings Limited is a controlling shareholder of Tencent Holdings Limited. MIH TC Holdings Limited is controlled by Naspers Limited through its wholly-owned intermediary companies, MIH (Mauritius) Limited, MIH Ming He Holdings Limited and MIH Holdings Proprietary Limited. As such. Naspers Limited, MIH (Mauritius) Limited, MIH Ming He Holdings Limited and MIH Holdings Proprietary Limited were deemed to be interested in the same block of 2,116,251,467 Shares under Part XV of the SFO.

• g. Each of Mr. Yu Feng, Mr. Ma Yun, Yunfeng Investment GP II, Ltd., Yunfeng Investment II, L.P., and Yunfeng Fund II, L.P. is deemed to be interested in the 691,882,675 Shares by virtue of their direct/indirect ownership of Confidex, as set out in the section headed “Information on the Investors” above.

• h. Ms. Huang Ying is deemed to be interested in the 600,118,893 Shares by virtue of her 100% ownership of Key Ability Limited.

• i. Ms. Zhang Huiling is deemed to be interested in the 610,675,788 Shares by virtue of her 100% ownership of Lofty Rainbow Limited.

• j. Ms. Xu Luping is deemed to be interested in the 366,243,059 Shares by virtue of her 100% ownership of Merit New Limited.

– 195 –

GENERAL INFORMATION

APPENDIX II

Save as disclosed in this paragraph, as at the Latest Practicable Date, there was no person known to the Directors or the chief executive of the Company other than Directors or the chief executive of the Company, who had an interest or short position in the Shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

(iv) The Investors, their ultimate beneficial owners and parties acting in concert with any of them

Save for the entering into of the Subscription Agreements, none of the Investors, their ultimate beneficial owners and parties acting in concert with any of them has dealt in the Shares, outstanding options, derivatives, warrants or other securities convertible or exchangeable into the Shares during the Relevant Period. As at the Latest Practicable Date, the Investors, their ultimate beneficial owners and parties acting in concert with any of them do not hold any Shares or other securities of the Company.

(v) Others

During the Relevant Period,

• i. Save for China Life Insurance (Overseas) Co. Ltd.’s interest in 285,714,285 Shares, all of which have been disposed of by China Life Insurance (Overseas) Co. Ltd. in September 2015, as of the Latest Practicable Date, none of the subsidiaries of the Company, nor any pension funds of the Company or of any of its subsidiaries, nor the Independent Financial Adviser nor any other advisers to the Company as specified in class (2) of the definition of “associate” under the Takeovers Code owned or controlled any Shares, convertible securities, warrants, options or derivatives of the Company. China Life Insurance (Overseas) Co. Ltd is an independent third party to the Group except being the Company’s former shareholder. The Company engages China Life Trustee, being a member of the China Life Group, as the trustee of the Group’s mandatory provident fund, which is an arm’s length contractual relationship.;

• ii. save for the Subscription Agreements, and the lock-up undertakings disclosed in the section headed “Mr. Yuen’s Lock-up Undertakings”, “Huayi Brothers’ and Tencent’s Lock-up Undertakings” and “The Investors’ Rights Agreement”, no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or any person who is an associate of the Company by virtue of clauses (1), (2), (3) and (4) of the definition of associate under the Takeovers Code, and with the Investors, their ultimate beneficial owners or any party acting in concert with any of them; and

• iii. no shareholding in the Company was managed on a discretionary basis by fund managers connected with the Company.

– 196 –

GENERAL INFORMATION

APPENDIX II

(b) Dealings in securities

(i) Directors

Save for:

• (i) the issue of 20,000,000 Shares on 19 May 2015 to Mr. Zhang Changsheng pursuant to the exercise of share options granted under the Share Option Scheme adopted on 4 June 2012;

• (ii) the issue of 12,000,000 Shares on 20 May 2015 to Smart Concept Enterprise Limited (a company wholly-owned by Mr. Yuen) pursuant to conversion of convertible notes of the Company;

• (iii) the issue of 2,000,000 Shares on 18 December 2015 to Mr. Wong Yau Kar, David pursuant to the exercise of share options granted under the Share Option Scheme adopted on 4 June 2012, all these Shares were disposed of in 3 batches on 21 December 2015, 4 January 2016 and 5 January 2016;

• (iv) the issue of 2,084,918 Shares on 18 December 2015 to Mr. Tian Suning, Edward pursuant to the exercise of share options granted under the Share Option Scheme adopted on 30 July 2002; and

• (v) the issue of 2,000,000 Shares on 21 December 2015 to Mr. Chu Yuguo pursuant to the exercise of share options granted under the Share Option Scheme adopted on 4 June 2012;

none of the Directors or parties acting in concert with any of them had dealt in any Shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period. Mr. Yuen is required to abstain from voting in respect of the Huayi Brothers Subscription, the Tencent Subscription, each of the Other Investors’ Subscriptions and the Whitewash Waiver as he was involved in the negotiation of the transaction and was deemed to be materially interested in the Subscriptions.

(ii) Others

Save for China Life Insurance (Overseas) Co. Ltd.’s interest in 285,714,285 Shares, all of which have been disposed of by China Life Insurance (Overseas) Co. Ltd. as of the Latest Practicable Date, during the Relevant Period, none of the subsidiaries of the Company, nor any pension fund of the Company or any of its subsidiaries, nor the Independent Financial Adviser nor any other advisers to the Company as specified in class (2) of the definition of “associate” under the Takeovers Code had dealt for value in any Shares, convertible securities, warrants, options or derivatives of the Company.

– 197 –

GENERAL INFORMATION

APPENDIX II

During the Relevant Period, no fund managers who managed funds on a discretionary basis connected with the Company had dealt for value in any Shares, convertible securities, warrants, options and derivatives of the Company.

During the Relevant Period, none of the Company or the Directors has borrowed or lent any Shares.

(c) Interests and dealings in the Investors

Save for Mr. Yuen Kin who holds 4,000 shares in Tencent Holdings Limited, none of the Directors or the Company had any interest in the shares, convertible securities, options, warrants or derivatives of the Investors and none of them had dealt for value in any shares, convertible securities, options, warrants or derivatives of the Investors during the Relevant Period. Mr. Yuen Kin acquired 1,000 shares in Tencent Holdings Limited on 24 August 2015 at the price of HK$125.60 per share, 2,000 shares in Tencent Holdings Limited on 28 August 2015 at the price of HK$131.28 per share, and 1,000 shares in Tencent Holdings Limited on 9 September 2015 at the price of HK$132.80 per share.

4. ADDITIONAL DISCLOSURE UNDER THE TAKEOVERS CODE

As at the Latest Practicable Date:

• (a) no Subscription Shares acquired by the Investors in pursuance of the Subscriptions will be transferred, charged or pledged to any other persons;

• (b) save for the Subscription Agreements and the Deeds of Undertakings, no agreement, arrangement or understanding (including any compensation arrangement) existed between (i) on one hand, any of the Investors or parties acting in concert with the Investors and (ii) on the other hand, any Directors, recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Subscriptions and/or the Whitewash Waiver;

• (c) there was no benefit to be given to any Directors as compensation for loss of office or otherwise in connection with the Subscriptions and/or the Whitewash Waiver;

• (d) save for the Deeds of Undertaking and the Investors’ Rights Agreement, there was no agreement or arrangement between any Directors and any other persons which is conditional on or dependent upon the outcome of the Subscriptions and/or the Whitewash Waiver or otherwise connected with the Subscriptions and/or the Whitewash Waiver;

• (e) save for the Deeds of Undertaking, there was no material contract entered into by any of the Investors in which any Director had a material personal interest;

– 198 –

GENERAL INFORMATION

APPENDIX II

• (f) the directors of the Investors were not interested in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company or had not dealt for value in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company during the Relevant Period;

• (g) no person had irrevocably committed themselves to vote for or against the resolutions to be proposed at the EGM to approve the Subscriptions and/or the Whitewash Waiver;

• (h) no relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company had been borrowed or lent by any of the Company and the Directors;

• (i) the Company did not have any interest in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Investors and had no dealings in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Investors during the Relevant Period;

• (j) save as dislcosed in section 3 (c) headed “Interests and dealings in the Investors”, none of the Directors had any interest in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Investors and none of them had dealt for value in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Investors during the Relevant Period;

• (k) save as disclosed in section 3 (a) (i) headed “Directors’ interests and short positions in Shares, underlying Shares and debentures of the Company” of this circular, none of the Directors had any interest in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company;

• (l) Mr. Yuen, an executive Director and chairman, was involved in negotiating the Subscriptions. Rich Public Limited and Smart Concept Enterprise Limited (both of which are wholly-owned by Mr. Yuen and have a material interest in the Subscriptions) will abstain form voting on all resolutions at the EGM.

5. MATERIAL CONTRACT

The following contracts (not being contracts in the ordinary course of business) have been entered into by members of the Group within the two years immediately preceding the Rule 3.7 Announcement and up to the Latest Practicable Date and are or may be material:

• (a) the Subscription Agreements, details of which are disclosed under the section headed “The Subscription Agreements” in this circular;

– 199 –

APPENDIX II

GENERAL INFORMATION

• (b) as per the Company’s joint announcement with Eternity Investment dated 15 May 2015, the sale and purchase agreement dated 11 December 2014 entered into between Eternity Investment as purchaser, Unique Talent Group Limited as vendor and the Company as guarantor (“ S&P Agreement ”) at an aggregate consideration of HK$1,650 million, pursuant to which (i) the vendor conditionally agreed to sell and Eternity Investment conditionally agreed to purchase the entire shareholding interest in the Smart Title Limited; and (ii) the Vendor agreed to assign the benefit and interest in a loan due from the Smart Title Limited to the Vendor to Eternity Investment upon completion of the relevant transactions under the S&P Agreement free from encumbrances;

• (c) as per the Company’s joint announcement with Eternity Investment dated 15 May 2015, the supplemental sale and purchase agreement dated 30 March 2015 entered into by parties to the S&P Agreement;

• (d) as per the Company’s joint announcement with Eternity Investment dated 15 May 2015, the supplemental agreement entered into on 12 June 2015 by parties to the S&P Agreement to extend the long stop date of the S&P Agreement from 31 August 2015 to 31 December 2015;

• (e) as per the Company announcements dated 19 December 2014 and 9 June 2015, the agreement dated 19 December 2014 entered into between the Company and REORIENT Financial Markets Limited, in respect of the introduction of the transactions contemplated under the S&P Agreement to the Company and related financial advisory services provided and to be provided by REORIENT Financial Markets Limited to the Company at the consideration of HK$49,500,000 payable by the Company in the form of 82,500,000 new Shares (the “ FAS Agreement ”), the addendum to the FAS Agreement entered into between the Company and REORIENT Financial Markets Limited on 8 June 2015 in respect of the change of payment terms of the consideration under the FAS Agreement of HK$49,500,000 to be payable in the form of cash (the “ Addendum ”), and the letter of termination dated 17 June 2015 between the Company and REORIENT Financial Markets Limited terminating the FAS Agreement (as amended by the Addendum);

• (f) a variation agreement dated 22 July 2014 entered into between Beijing Bayhood No. 9 Business Hotel Company Limited* (北京北湖九號商務酒店有限公司), an indirect wholly-owned subsidiary of Smart Title Limited, and Beijing Chaolai Football Centre (北 京朝來足球中心) pursuant to which Beijing Bayhood No. 9 Business Hotel Company Limited has the rights of development of and operation on the land of approximately 580 Chinese acres (equivalent to approximately 387,000 square metres), adjacent to the land on which Beijing Bayhood No. 9 Business Hotel Company Limited is operated, and to manage and operate the properties erected thereon for a revised term of up to 30 January 2062 as opposed to the original term of up to 31 May 2048;

– 200 –

APPENDIX II

GENERAL INFORMATION

• (g) as per the Company announcement dated 28 April 2014, the sale and purchase agreement dated 24 April 2014 entered into between Effort Wonder Limited, a whollyowned subsidiary of the Company, and Shenzhen Honghaiwan Asset Management Limited, pursuant to which Effort Wonder Limited agreed to sell the entire issued share capital in and assign its loan due from Green Harmony Investments Limited and Green Villa Investments Limited to Shenzhen Honghaiwan Asset Management Limited at an aggregate consideration of RMB200,000,000;

• (h) as per the Company announcement dated 18 March 2014, the health management service cooperation agreement dated 18 March 2014 entered into between the Company and Taiping Life Insurance Company Limited (“ TPL ”) in relation to “TaipingKangxun 360”, whereby both parties have agreed to launch “Taiping-Kangxun 360” by utilizing the Group’s “Kangxun 360” cloud health management platform. Pursuant to the health management service cooperation agreement, the Group will provide TPL’s insurance customers with the license to use “Taiping-Kangxun 360” health management platform, and provide all related technical support. Equipment (such as vital sign data collectors) to be used in conjunction with “Taiping-Kangxun 360” health management platform will be provided by TPL. TPL may purchase such equipment either from the Company or from other sources. In addition, TPL will provide its insurance customers with customer service related to “Taiping-Kangxun 360” health management platform through its insurance sales staff or agent teams, and the Group will provide related technical support;

• (i) as per the Company announcement dated 3 March 2014, the health management service cooperation agreement dated 3 March 2014 entered into between Beijing Bayhood No.9 Cloud Health Technology Company Limited, a wholly-owned subsidiary of the Company, and the General Practitioners Branch of Beijing Medical Doctor Association, whereby the General Practitioners Branch of Beijing Medical Doctor Association agreed to assist the Group in entering into service contracts with 400 Beijing-registered general practitioners within one and a half month, and to contract with at least 4,000 Beijing-registered general practitioners phase by phase within one year, providing doctor’s support for the forthcoming “Cloud Health Management Service Platform” to be launched by the Group and providing the contracted general practitioners with training according to the service standards set by the Group for general practitioners; and

• (j) as per the Company announcement dated 16 December 2013, the placing agreement dated 16 December 2013 entered into between the Company and REORIENT Financial Markets Limited pursuant to which, the REORIENT Financial Markets Limited agreed to place, on a best endeavours basis, up to 522,814,285 new Shares, at the placing price of HK$0.35 per placing share. The aggregate gross and net proceeds (after deduction of the commissions, taxes and other expenses relating to the Placing) from the Placing was approximately HK$182.98 million and approximately HK$175.67 million respectively (representing a net placing price of HK$0.336 per Placing Share);

– 201 –

GENERAL INFORMATION

APPENDIX II

• (k) as per the Company announcement dated 22 November 2013, the cooperation agreement dated 22 November 2013 entered into between the Company and Beijing Medical Doctor Association, whereby Beijing Medical Doctor Association agreed to make use of its over 2,000 members from various medical disciplines to provide highend medical expert support for the Group’s health services which include healthcare advisory, health and chronic disease management, health preservation and retirement, medical and healthcare clubs and Green Healthcare Channel offered to members of the Company;

• (l) as per the Company announcement dated 16 October 2013, the strategic cooperation framework agreement dated 16 October 2013 entered into between the Company and China Life Insurance (Overseas) Company Limited in relation to the formation of a strategic partnership and carrying out multi-field business cooperation for resource sharing, interconnection and a reasonable value chain expansion that foster mutual development;

• (m) as per the Company announcement dated 9 October 2013, the strategic cooperation framework agreement dated 9 October 2013 entered into between the Company and China-Japan Friendship Hospital in relation to the formation of a strategic partnership, under which China-Japan Friendship Hospital would provide the “Cloud Healthcare Platform”, a platform for information service management operated by the Group, with internationalized, professional and high-standard healthcare support;

• (n) as per the Company announcement dated 3 September 2013, the deed of variation dated 3 September 2013 entered into between the Company and Smart Concept Enterprise Limited, a company wholly-owned by Mr. Yuen, an executive director of the Company and being the sole holder of the convertible note issued by the Company in 2012, in relation to the amendment of a term of the convertible note to permit the Company to early redeem the outstanding convertible note at their face value; and

• (o) as per the Company announcement dated 1 August 2013, the framework agreement dated 1 August 2013 entered into between the Company, Yan Feng People’s Government and the Investment Invitation Center in relation to the cooperation on the development of the China Jiuhao (Haikou) Health Town on the land located at Yan Feng Zhen (演豐鎮), Meilan District (美蘭區), Haikou City, Hainan Province, the PRC with a total site area of approximately 2,600 mu (equivalent to approximately 1,733,000 square meters).

– 202 –

GENERAL INFORMATION

APPENDIX II

6. COMPETING BUSINESSES OR INTERESTS

As at the Latest Practicable Date, none of the Directors or any of their respective associates had any interests in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

7. DIRECTORS’ INTERESTS IN CONTRACTS AND ASSETS OF THE COMPANY

Save in respect of the VSD pursuant to which Mr. Yuen became a substantial shareholder of Eternity Investment following completion of the VSD, as at the Latest Practicable Date, none of the Directors had any interest in any assets which have been, since 31 December 2014, (being the date to which the latest published audited financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement subsisting at the date of this circular, which is significant in relation to the business of the Group.

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group which was entered into or had been amended within the 6-month period preceding the commencement of the offer period, or which is a continuous contract with a notice period of 12 months or more, or which is a fixed term contract with more than 12 months to run irrespective of the notice period.

8. NO MATERIAL ADVERSE CHANGE

Other than as disclosed by the Company in the Company’s interim results announcement for the six months ended 30 June 2015 and the estimated loss on disposal before taxation upon completion of the VSD of approximately HK$220 million as disclosed by the Company in the Company’s announcement dated 6 October 2015, the Directors are not aware of any material adverse change in the financial or trading position of the Group since the date to which the latest published audited combined financial statements of the Group were made up (being 31 December 2014).

9. MATERIAL LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration or claims which would materially and adversely affect the operations of the Company and no litigation, arbitration or claim which would materially and adversely affect the operations of the Company is known to the Directors to be pending or threatened by or against any member of the Group.

– 203 –

GENERAL INFORMATION

APPENDIX II

10. MARKET PRICES OF SHARES

The closing prices of the Shares quoted on the Stock Exchange (i) at the end of each of the calendar months during the period commencing the six months immediately preceding 23 June 2015, being the date of the Rule 3.7 Announcement and ending on the Latest Practicable Date, (ii) on the Last Trading Day, (iii) on 9 December 2015, being the last business day immediately preceding the date of the Announcement, and (iv) on the Latest Practicable Date were as follows:

	Closing Price of
Date	the Share
	(HK$)
11 December 2014 (last trading day prior to 31 December 2014)	0.5963
31 December 2014	Trading suspended
31 January 2015	Trading suspended
28 February 2015	Trading suspended
31 March 2015	Trading suspended
30 April 2015	Trading Suspended
29 May 2015 (Friday, Last Trading Day)	0.7880*
30 June 2015	1.5760*
7 July 2015 (last trading day prior to 31 July 2015)	1.1290*
31 July 2015	Trading suspended
31 August 2015	Trading suspended
30 September 2015	0.6300
30 October 2015 (Friday)	0.7500
30 November 2015	0.6600
9 December 2015	1.4900
31 December 2015	1.0500
Latest Practicable Date	0.92

– 204 –

GENERAL INFORMATION

APPENDIX II

The highest and lowest closing prices of the Shares as quoted on the Stock Exchange during the Relevant Period were HK$1.7380 on 26 June 2015 and HK$0.5640 on 21 September 2015, respectively.

• Adjusted closing price as quoted on the Stock Exchange due to the application of a new method for historical price adjustment effective from 1 January 2016.

11. EXPERT AND CONSENT

• (a) The following is the qualification of the expert who has given opinion or advice which is contained or referred to in this circular:

Name

Qualifications

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

• (b) As at the Latest Practicable Date, the Independent Financial Adviser did not have any shareholding in any Shares or any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any shares in any member of the Group.

• (c) As at the Latest Practicable Date, the Independent Financial Adviser did not have any direct or indirect interest in any assets which had been, since the date to which the latest published audited accounts of the Company were made up (being 31 December 2014), acquired or disposed of by, or leased to any member of the Group, or which were proposed to be acquired or disposed of by or leased to any member of the Group.

• (d) the Independent Financial Adviser has given and has not withdrawn its written consent to inclusion of its letter dated 14 January 2016 in this circular and the references to its name included herein in the form and context in which it appears.

– 205 –

GENERAL INFORMATION

APPENDIX II

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection (i) during normal business hours (9:00 a.m. to 6:00 p.m.) at the principal place of business of the Company in Hong Kong at Suite 3503, 35/F, Tower Two, Lippo Centre, 89 Queensway, Hong Kong on weekdays (Saturdays and public holidays excepted), (ii) on the website of the Company at www.jiuhaohealth.com, and (iii) on the website of the SFC at www.sfc.hk up to and including 1 February 2016 being the date of the EGM:

• (a) the Subscription Agreements;

• (b) the articles of association of the Company;

• (c) the annual reports of the Company for the last two financial years ended 31 December 2014;

• (d) the material contracts referred to in the section headed “Material Contract” in this appendix;

• (e) the letter from the Board, the text of which is set out on pages 12 to 32 of this circular;

• (f) the letter from the Independent Board Committee, the text of which is set out on pages 33 to 34 of this circular;

• (g) the letter from the Independent Financial Adviser, the text of which is set out on pages 35 to 62 of this circular;

• (h) the letter of consent from the Independent Financial Adviser referred to in the above paragraph headed “Expert and Consent” in this Appendix; and

• (i) the interim results of the Company for the six months ended 30 June 2015.

– 206 –

GENERAL INFORMATION

APPENDIX II

13. MISCELLANEOUS

• (a) The Company is principally engaged in investment holding. The principal activities of the Group are (i) media business; and (ii) provision of online and offline healthcare and wellness services.

• (b) The company secretary of the Company is Mr. Hau Wai Man, Raymond.

• (c) The registered office of the Company is at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.

• (d) The principal office of the Company in Hong Kong is at Suite 3503, 35/F, Tower Two, Lippo Centre, 89 Queensway, Hong Kong.

• (e) The principal share registrar and transfer office of the Company is Tricor Tengis Limited, Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (f) The English text of this circular shall prevail over the Chinese text, in case of any inconsistency.

– 207 –

NOTICE OF EGM

==> picture [297 x 116] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 419)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ Meeting ”) of China Jiuhao Health Industry Corporation Limited (the “ Company ”) will be held at Boardroom 3, Mezzanine Floor, Renaissance Harbour View Hotel Hong Kong, 1 Harbour Road, Wanchai, Hong Kong, on Monday, 1 February 2016 at 10:00 a.m. for the purposes of considering and, if thought fit, passing, with or without modifications, the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“THAT:

• (a) THAT the issue and allotment of 6,837,619,860 Shares (constituting approximately 102.75% of the share capital of the Company as of the date of the Subscription Agreements, and approximately 50.66% of the Enlarged Issued Share Capital) (the “Subscription Shares”) by the Company to Huayi Brothers International Limited (“Huayi Brothers”), Mount Qinling Investment Limited (“Tencent”), Confidex Key Limited (“Confidex”), Key Ability Limited (“Key Ability”), Lofty Rainbow Limited (“Lofty Rainbow”) and Merit New Limited (“Merit New”) (Huayi Brothers, Tencent, Confidex, Key Ability, Lofty Rainbow and Merit New collectively referred to as the “Investors”) in accordance with the summary table set out below, subject to, and in accordance with, the terms and conditions of the conditional subscription agreement entered into by the Company with Huayi Brothers in respect of the Huayi Brothers Subscription dated 10 December 2015, the terms and conditions of the conditional subscription agreement entered into by the Company with Tencent in respect of the Tencent Subscription, and the four conditional subscription agreements entered into by the Company with each of Confidex, Key Ability, Lofty Rainbow and Merit New in respect of the Other Investors’ Subscriptions dated 10 December 2015 (collectively the “Subscription Agreements”) details of which are set out in the circular of the Company dated 14 January 2016 (the “Subscriptions”) be and are hereby approved:

– 208 –

NOTICE OF EGM

	Number of
	Subscription
Name	Shares
Huayi Brothers	2,452,447,978
Tencent	2,116,251,467
Confidex	691,882,675
Key Ability	600,118,893
Lofty Rainbow	610,675,788
Merit New	366,243,059
Total	6,837,619,860

• (b) THAT , subject to and conditional on the passing of ordinary resolution no. 1, the waiver (the “Whitewash Waiver”) granted or to be granted by the Executive Director of the Corporate Finance Division of the Securities and Futures Commission of Hong Kong and any delegate of such Executive Director pursuant to Note 1 on dispensations from Rule 26 of the Hong Kong Code on Takeovers and Mergers in respect of the obligation on the part of Huayi Brothers, Tencent and parties acting in concert with any of them (collectively referred to as the “Concert Group”) to make a mandatory general offer to the shareholders of the Company for all issued Shares not already owned by the Concert Group or parties acting in concert with it under Rule 26 of the Hong Kong Code on Takeovers and Mergers as a result of the allotment and issue of the Huayi Brothers Subscription Shares and the Tencent Subscription Shares be and is hereby approved.

• (c) THAT , subject to and conditional on the passing of ordinary resolutions no. 1 and no. 2, the directors of the Company (the “Directors”) be and are hereby authorized to do all acts and execute all documents they consider necessary or expedient to give effect to the Subscriptions.”

Yours faithfully, By Order of the Board

CHINA JIUHAO HEALTH INDUSTRY CORPORATION LIMITED Yuen Hoi Po

Chairman

Hong Kong, 14 January 2016

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NOTICE OF EGM

Notes:

1. A member entitled to attend and vote at the EGM is entitled to appoint one or more proxy to attend and, subject to the provisions of the articles of associations of the Company, to vote on his behalf. A proxy need not be a member of the Company but must be present in person at the EGM to represent the member. 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. A form of proxy for use at the EGM is enclosed herewith. Whether or not you intend to attend the EGM in person, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon. Completion and return of a form of proxy will not preclude a member from attending in person and voting at the EGM or any adjournment thereof, should he so wish.

3. In order to be valid, the form of proxy, together with a power of attorney or other authority, if any, under which it is signed, or a certified copy of such power or authority must be deposited at the Company’s share registrar, Tricor Tengis Limited, Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof.

4. In the case of joint holders of shares, any one of such holders may vote at the EGM, either personally or by proxy, in respect of such share as if he was solely entitled thereto, but if more than one of such joint holders are present at the EGM personally or by proxy, then one of the said persons so present whose name stands first on the register of members of the Company in respect of such shares shall alone be entitled to vote in respect thereof.

6. All the resolutions are to be voted by way of poll.

7. The Board of the Company comprises Mr. Yuen Hoi Po and Mr. Zhang Changsheng (who are executive directors), Mr. Tian Suning, Edward and Mr. Hugo Shong (who are non-executive directors), and Dr. Wong Yau Kar David, BBS, JP, Mr. Yuen Kin and Mr. Chu Yuguo (who are independent non-executive directors).

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