Hephaestus Holdings Limited — M&A Activity 2009

Jun 24, 2009

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement.

智庫媒體集團（控股）有限公司

Intelli - Media Group (Holdings) Limited

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8173)

DISCLOSABLE TRANSACTION

DISPOSAL OF INTEREST IN DATEWELL GROUP AND

CPE PROGRAM DISTRIBUTION LIMITED

The Company wishes to announce that on 23 June 2009, it entered into the Sale and Purchase Agreement with the Purchaser in respect of the Disposal. The aggregate consideration for the Disposal is for a nominal price of HK$100. Completion of the Disposal is expected to take place within 5 business days from the date of the signing of the Sale and Purchase Agreement. The Disposal constitutes a discloseable transaction of the Company under the GEM Listing Rules.

THE SALE AND PURCHASE AGREEMENT

Date: 23 June 2009

Parties:

(1) Purchaser: Mr. Chen Wei Dong
(2) Vendor: the Company

To the best of the Directors' knowledge, information and belief having made all reasonable enquires, the Purchaser is a third party independent of and not connected with the Company and any of its connected persons as defined under the GEM Listing Rules.

Interest to be disposed of:

The Sale Shares, comprise (i) 100 ordinary shares of US$1.00 each, representing the entire issued share capital of Datewell; and (ii) 1 ordinary share of US$1.00 each, representing the entire issued capital of CPE Program.

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According to the unaudited financial statements of the Company, as at 31 March 2009, the Datewell Group had net liabilities of approximately HK$22,470,000, and CPE Program had net liabilities of approximately HK$15,014,000.

Consideration:

The consideration paid by the Purchaser to the Vendor for the Disposal is a nominal sum of HK$100.

The Consideration was agreed between the Company and the Purchaser after arm's length negotiations based on the net liabilities of the Datewell Group and CPE Program. The Directors (including independent non-executive Directors) consider that the Consideration to be fair and reasonable.

Completion

Completion is expected to take place within 5 business days from the date of the execution of the Sale and Purchase Agreement on 23 June 2009.

INFORMATION ON DATEWELL GROUP AND CPE PROGRAM

Datewell is an investment holding company. The Datewell Group is principally engaged in the licensing of animation characters and design, co-production and distribution of animation characters, animation and related merchandises.

The chart below shows the current group structure of the Datewell Group:

Note: the balance of 30.56% is held by an Independent Third Party

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Intelli-Media (HK) Limited, a direct subsidiary of Datewell (the balance of 30.55% shareholding is held by an Independent Third Party), is engaged in licensing of animation characters, co-production and distribution of animation and related merchandises. Creative Power Entertaining Company Limited, an indirect subsidiary of Datewell and a wholly-owned subsidiary of Intelli-Media (HK) Limited, is engaged in the design and development of animation characters, animation and related merchandises.

On 29 December 2006, the Group acquired 100% of the issued share capital of Datewell Group for a consideration of approximately HK$4,204,000 which represents the gross consideration of HK$5,500,000 less the guarantee profit receivable of HK$1,296,000 in accordance with the sale and purchase agreement dated 22 November 2006. The consideration was satisfied on a non-cash basis, through the allotment and issue of new 80,460,000 consideration shares in the capital of the Company.

CPE Program was incorporated on 22 March 2007. On 18 May 2007, CPE Program acquired the copy right of "Pleasant Goat and Big Big Wolf", a television cartoon series, from the vendor (廣東原創動力文化傳播有限公司) for a consideration of HK$15,000,000 in accordance with the sale and purchase agreement dated 16 April 2007. The consideration was satisfied by the Company by issuing to the vendor (廣東原創動力文化傳播有限公司) a convertible bond in the amount of HK$6 million and by making a cash payment in the amount of HK$9 million. As at the date of the Disposal, all 150 episodes of Pleasant Goat and Big Big Wolf have been aired and broadcasted by numerous television stations in the PRC.

According to the audited accounts of the Company, which have been prepared in accordance with the Hong Kong Financial Reporting Standards, for the financial years ended 31 March 2007 and 31 March 2008, the audited losses of Datewell Group were approximately HK$97,000 and approximately HK$10,483,000, respectively, and the audited losses of CPE Program were approximately HK$2,884,000 for the year ended 31 March 2008.

FINANCIAL EFFECT OF THE DISPOSAL

Upon Completion, the Group expects to recognize a loss on the Disposal of approximately HK$32,650,000 which is calculated based on the projected loss on impairment of receivable of the Company and the gain from disposal of aggregate net liabilities of Datewell Group and CPE Program.

Datewell Group and CPE Program will cease to be subsidiaries of the Company upon Completion.

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REASONS FOR THE DISPOSAL

The Group is principally engaged in the business of distributing home video entertainment - in both video compact disc and digital video disc formats - across popular genres to East Asian and Southeast Asian markets. In addition to home video distribution, the Company provides entertainment programs under license to other platforms including cable television.

Given the ongoing difficult business and market conditions in the past 2 to 3 years, the inability to generate sufficient cash flow to cover operating expenses, and the capital intensive nature of the business in creative development and product awareness and promotion, it is difficult for the Company to justify further investment in this business particularly in view of the difficulty in properly protecting its intellectual property rights in the PRC market, its largest market. Hence, the Company, on 18 December 2008, decided to diversify its business activities by acquiring a direct and indirect majority stake in Mt. Mogan Development and Resources Limited, a company set up for the purpose of mining the mineral resource of magnetite, a basic raw material in the production of steel. The Directors believe it is in the best interest of shareholders for the Company to focus its resources in an industry with good prospects over the short to medium term.

The Directors are of the view that the Disposal is in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS FOR THE COMPANY

Based on the latest published results of the Group for the year ended 31 March 2008 and the latest published financial position of the Group as at 30 September 2008, all of the applicable percentage ratios resulting from the Disposal exceeds 5% but is less than 25%. Accordingly, pursuant to Rule 19.06 of the GEM Listing Rules, the Disposal constitutes a discloseable transaction.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following words and expressions shall have the following meanings when used herein:

"Board"
the board of Directors

"Company"
Intelli-Media Group (Holdings) Limited, a company incorporated in the Cayman Islands with limited liability and the issued Shares of which are listed on GEM

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“Completion” the completion of the transfer of the Sale Shares

“connected persons” has the meaning ascribed thereto in the GEM Listing Rules

“Consideration” the consideration of HK$100 payable by the Purchaser to the Company for the Disposal pursuant to the terms of the Sale and Purchase Agreement

“CPE Program” CPE Program Distribution Limited, a company incorporated in the British Virgin Islands with limited liability

“Datewell” Datewell Limited, a company incorporated in the British Virgin Islands with limited liability

“Datewell Group” Datewell and its subsidiaries

“Director(s)” the director(s) of the Company

“Disposal” the disposal of Sale Shares

“GEM Listing Rules” Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited

“Group” the Company and its subsidiaries

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

“Independent Third Party(ies)” third party(ies) independent of the Company and connected persons (as defined under the GEM Listing Rules) of the Company and are not connected persons (as defined under the GEM Listing Rules) of the Company

“PRC” the People’s Republic of China, which for the purposes of this announcement excludes Hong Kong, Macau Special Administrative Region and Taiwan

“Purchaser” Mr. Chen Wei Dong, an Independent Third Party

“Sale and Purchase Agreement” the sale and purchase agreement dated 23 June 2009 entered into between the Purchaser and the Company in respect of the Disposal

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"Sale Shares"
100 ordinary shares of US$1.00 each in the issued share capital of Datewell and 1 ordinary share of US$1.00 each in the issued share capital of CPE Program.

"Shares"
ordinary shares in the capital of the Company

"Shareholder(s)"
shareholder(s) of the Company

"Stock Exchange"
The Stock Exchange of Hong Kong Limited

"HK$"
Hong Kong dollars, the lawful currency of Hong Kong

By order of the Board
Intelli-Media Group (Holdings) Limited
Kwong Wai Ho, Richard
Executive Director

Hong Kong, 24 June 2009

As at the date of this announcement, the Board comprises two executive Directors, Mr. Kwong Wai Ho, Richard and Mr. Wong Chung Yu Denny, one non-executive Director, Mr. Yin Mark Teh-min, and three independent non-executive Directors, Mr. Lai Kai Jin, Michael, Mr. Chan Siu Wing, Raymond, and Mr. Chu Hung Lin, Victor.

This announcement, for which the directors of the Company (the "Directors") collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited 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: (1) the information contained in this announcement is accurate and complete in all material respects and not misleading; (2) there are no other matters the omission of which would make any statement in this announcement misleading; and (3) all opinions expressed in this announcement have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

This announcement will remain on the page of "Latest Company Announcement" on the GEM website for at least 7 days from the date of its posting.

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