Television Broadcasts Limited — Capital/Financing Update 2018

Aug 29, 2018

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.

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China Fortune Financial Group Limited

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 290)

Website: http://www.290.com.hk

DISCLOSEABLE TRANSACTION SUBSCRIPTION OF SHARES IN AN INVESTMENT FUND

THE SUBSCRIPTION

On 29 August 2018 (after trading hours), the Subscriber has applied to subscribe for Class B Participating Shares of the Fund, a feeder fund, on the terms and conditions of the Subscription Agreement, pursuant to which, among other things, the Subscriber or its affiliate committed to invest up to US$10 million (equivalent to approximately HK$77.8 million) in the Class I Participating Shares of the Master Fund through the Subscription. Subsequent sale of the Subscribed Shares is restricted because transfer or assignment of Participating Shares in the Fund without the permission of the Board of the Fund, which may or may not be granted, depending upon circumstances at the time, is not allowed, unless otherwise agreed in writing by the Fund.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios as set out in Rule 14.07 of the Listing Rules in relation to the Subscription are more than 5% but less than 25%, the execution of the Subscription Agreement and the transactions contemplated thereunder constitute a discloseable transaction of the Company pursuant to Rule 14.06 of the Listing Rules and is subject to the reporting and announcement requirements but exempt from the Shareholders’ approval requirement under Chapter 14 of the Listing Rules.

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THE SUBSCRIPTION AGREEMENT

On 29 August 2018 (after trading hours), the Subscriber has applied to subscribe for Class B Participating Shares of the Fund on the terms and conditions of the Subscription Agreement, pursuant to which, among other things, the Subscriber or its affiliate committed to invest up to US$10 million (equivalent to approximately HK$77.8 million) in the Class I Participating Shares of the Master Fund through the Subscription. Subsequent sale of the Subscribed Shares is restricted because transfer or assignment of Participating Shares in the Fund without the permission of the Board of the Fund, which may or may not be granted, depending upon circumstances at the time, is not allowed, unless otherwise agreed in writing by the Fund.

Set out below are principal terms of the Subscription:

Date: 29 August 2018 Parties: (i) the Subscriber; (ii) the Fund; (iii) FAML; and (iv) CEFML

Issue price: The subscription price will be US$1,000 per Class B Participating Share of the Fund Class of Class B Participating Shares of the Fund the Subscribed Shares: Amount of The Subscriber applied to subscribe US$4.70 million the present subscription: (equivalent to approximately HK$36.566 million) Other commitments: (a) FAML shall subscribe, or to cause its affiliates to subscribe, for Class B Participating Shares in an aggregate amount of not less than US$5,000,000 within six (6) months of the commencement date of the Fund; and

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• (b) FAML shall subscribe, or to cause its affiliates to subscribe, on demand in writing by CEFML, for Class B Participating Shares in the amount and on the subscription day specified in such demand, provided that no demand can be made if the aggregate amount of Class B Participating Shares subscribed by the investors exceeds US$10,000,000, and the subscription amount stated in the demand shall not be more than 25% of the positive difference between the amount of subscription money received by the Fund with respect to Class A Participating Shares issued on the subscription day immediately preceding the date of the demand and the amount of redemption proceeds paid by the Fund with respect to Class A Participating Shares redeemed on the redemption day immediately preceding the date of the demand.

In case FAML fails to fulfil any of the above commitments (a) or (b), FAML shall on demand in writing by the Fund pay to the Fund US$50,000 within 30 days of the date of the written demand.

INFORMATION OF THE FUND AND THE MASTER FUND

Set out below are the principal terms of the Fund and the Master Fund:

Name of the Fund:

CEL Fortune Convertible Opportunities Feeder Fund

Name of the Master Fund: Everbright Convertible Opportunities Fund

Investment objective: The Fund is a feeder fund of the Master Fund and will directly invest most or all of its assets into Class I Participating Shares of the Master Fund, of which the investment objective is to generate stable return in USD through adopting a combination of convertible and credit strategies over the medium term (there is no assurance that the Master Fund will be able to achieve its investment objective).

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During the term of the Fund, any amounts realized by or distributed to the Fund may be retained by the Fund for reinvestment.

Investment strategies:

The Master Fund seeks to adopt broadly two strategies, namely, the convertible bond strategy and the credit strategy. The convertible bond strategy includes making investments in long dated equity options through convertible bonds and convertible arbitrage. The credit strategy includes making investments in fixed income securities, including, without limitation, investment grade bonds, below investment grade bonds, structured notes and mortgage-backed securities. The Master Fund may also invest, to a lesser extent, in deposits, money market instruments, equities, preference shares and other types of securities.

It is believed that there are inefficiencies in the offshore Asian corporate debt and convertible bond markets, which provide adequate opportunities for generating healthy risk adjusted returns. The Investment Manager of the Master Fund combines its quantitative analysis with its fundamental credit and economic research in seeking to exploit these inefficiencies.

The Investment Manager of the Master Fund believes that there are inefficiencies in the offshore Asian corporate debt and convertible bond markets, which provide adequate opportunities for generating healthy risk adjusted returns. The Investment Manager of the Master Fund combines its quantitative analysis with its fundamental credit and economic research in seeking to exploit these inefficiencies.

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While the Master Fund’s geographical focus will be on Asia, the Investment Manager of the Master Fund intends to take an opportunistic approach and may, in its discretion, invest in other geographical markets should opportunity arises. The Investment Manager of the Master Fund aims to invest in a well-diversified portfolio across different sectors, geographical locations and issuers. The Master Fund’s investment in fixed income securities may be denominated in USD and nonUSD, and may include those issuers and guarantors from governments, quasi-government institutions and supra-nationals in Mainland China, Hong Kong, Macau and other countries. The Master Fund may also invest in deposits and money market instruments issued outside mainland China such as term deposits, bank certificates of deposit, commercial paper, short term bills, short term notes, repurchase agreements and reverse repurchase agreements.

The Master Fund may enter into derivative transactions for investment or any other purposes. The Master Fund may also take short positions in bonds and equities (including short selling) and engage in securities borrowing and lending transactions.

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Risk:

Among other risks mentioned in the Offering Memorandum, the board of the Fund is aware of the below:

Investments in unlisted securities

The Master Fund may invest in unlisted securities. Because of the absence of any trading market for these investments, it may take longer to liquidate these positions than would be the case with publicly traded securities. Accordingly, the ability of the Master Fund to respond to market movements may be impaired and the Master Fund may experience adverse price movements upon liquidation of their investments. Although these securities may be resold in privately negotiated transactions, prices realised on these sales could be less than those originally paid by the Master Fund. Settlement of transactions may be subject to delay and administrative uncertainties. Further, companies whose securities are not publicly traded will generally not be subject to public disclosure and other investor protection requirements applicable to publicly traded securities. The lack of publicly available information and the lack of an actively traded market in unlisted securities will also give rise to uncertainty in valuing such securities.

High volatility

The Master Fund may hold financial instruments, the prices of which may be highly volatile. Price movements of forward and other derivative contracts in which the assets of the Master Fund may be invested will be influenced by, among other things, interest rates, changing supply and demand relationships, trade, fiscal, monetary and exchange control programs and policies of governments, and national and international political and economic events and policies.

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Management of the Fund:

The directors of the Fund retain overall supervision of and control over the management of the investments of the Fund. The Fund is managed by the Board of the Fund who have, in pursuant to the agreements between the Fund, CEFML and FAML, appointed the following parties to be Co-Managers of the Fund: (i) CEFML and (ii) FAML, whose Co-Management role may be terminated by the Fund with immediate effect by notice in writing if any of the following events occur:

• (a) FAML breaches its obligations under the above ‘Other commitments’ section; and

• (b) if immediately after and as a result of a redemption of Class B Participating Shares by any investor, the aggregate amount that were paid to subscribe for Class B Participating Shares held by all investors falls below US$5,000,000.

MFSCL to be the Administrator of the Fund to administer the business of the Fund, including without limitation the preparation of financial statements, the calculation of the Net Asset Value, the processing of subscription applications and redemption requests and the maintenance of the Register

Investment Manager of the CEFML Master Funds:

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Investment Adviser of the Master Funds:

CEAML, whose key personnel in pursuant to the Offering Memorandum are as follow:

• (i) Chung Fu Wing, Will (Co-Portfolio Manager)

Mr. Chung has more than 20 years of industry experience in asset management, strategy consulting and financial advisory. Prior to joining CEAML or its affiliate, he served as portfolio manager at Shining Capital Management, and head of tactical asset allocation at Shin Kong Life Insurance. Prior to his career in asset management, Mr. Chung was a Project Leader of the regional financial services practices of The Boston Consulting Group. He started his career with Arthur Andersen’s financial advisory group, focusing on due diligence works on Chinese enterprises. Mr. Chung is a member of American Institute of Certified Public Accountants and is a CFA Charterholder. He was also a founding Board Director of the CFA Association of Taiwan. Mr. Chung received an MBA in Finance from the Columbia Business School with Beta Gamma Sigma Honor.

• (ii) Girish Kumarguru (Co-Portfolio Manager)

Mr. Kumarguru has over 18 years’ experience spanning investments, proprietary trading, credit rating, and credit risk management. He has been a Portfolio Manager with China Everbright Limited since July 2012. Previously, Mr. Kumarguru worked as a trader at the Principal Strategies Group (PSG) at ABN Amro/RBS, and in the Convertible Bond trading desk at RBS. Prior to that, he was a hedge fund credit risk analyst at ABN AMRO. Mr. Kumarguru worked as a senior credit analyst at CRISIL (now, an S&P subsidiary) in Mumbai (India). He has a Masters of Technology in Mechanical Engineering from Indian Institute of Technology (IIT) Bombay in Mechanical Engineering with specialization in Operations Research and Management; and PGDBM in Finance from XLRI, Jamshedpur (India). Mr. Kumarguru holds Chartered Financial Analyst (CFA), Financial Risk Manager (FRM) and Chartered Alternative Investment Analyst (CAIA) certifications.

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(iii) Tsang Sui Cheong, Frederick (Director)

Mr. Tsang Sui Cheong, Frederick is the Chief Risk Officer of China Everbright Limited and a member of the Management Decision Committee of China Everbright Limited. He is in charge of the company’s risk matters. Mr. Tsang is a Chartered Financial Analyst and was President of The Hong Kong Society of Financial Analysts Limited from 2012 to 2015. In November 2016, he has been appointed as a member of the Process Review Panel for the Securities and Futures Commission, for a term from November 2016 to October 2018. Mr. Tsang was also appointed as a member of the Hong Kong Securities and Futures Commission’s (SFC) Advisory Committee from 2011 to 2017. He was a member of the Securities and Futures Appeals Tribunal from 2009 to 2015. Mr. Tsang is a holder of Bachelor’s degree in Arts and Master’s degree in Arts, majored in Economics and Finance. He joined China Everbright Limited in February 2000. Mr. Tsang has over 32 years of experience in the financial industry.

Redemptions of the Subscribed Shares:

The Subscribed Shares may be redeemed at the option of the Subscriber on the first Business Day of any month immediately following the last day of the 6th month of the date of issuance of the Subscribed Shares subject to the following limitations:

• (i) with respect to Class B of the Fund, if, on any Valuation Day, the Net Asset Value of Class A (inclusive of certain adjustments) is equal to or greater than six (6) times of the Net Asset Value of Class B (inclusive of certain adjustments), redemption will be suspended until the next Valuation Day where the Net Asset Value of Class A (inclusive of certain adjustments) is less than six (6) times of the Net Asset Value of Class B (inclusive of certain adjustments); and

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• (ii) with respect to Class I Participating Shares of the Master Fund, if the Master Fund Administrator receives redemption requests in respect of Class I Participating Shares of the Master Fund on any redemption day of the Master Fund which in aggregate exceed 20%, or such other percentage as the Master Fund Directors may determine, of the total number of Class I Participating Shares in issue on such redemption day, the Master Fund may refuse to redeem all Class I Participating Shares of the Master Fund, but in such circumstances the amounts to be redeemed will be scaled down pro rata in response to such extent as they consider may be necessary and may further determine that any redemption requests in respect of Class I Participating Shares of the Master Fund which have been postponed from any prior redemption day shall have priority on any subsequent redemption day. Until such time as a redemption request is satisfied in full, the portion of any redemption request that is not dealt with yet will remain invested in, and therefore subject to the risks of, the Master Fund.

Restrictions against Subsequent Sale:

Subsequent sale of the Subscribed Shares is restricted because transfer or assignment of Participating Shares in the Fund without the permission of the Board of the Fund, which may or may not be granted, depending upon circumstances at the time, is not allowed, unless otherwise agreed in writing by the Fund.

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Distribution:

Each Subscribed Shares confers its holder the right to receive dividend equal to 12% per annum multiplied by the number of days the Participating Share in issue in the Dividend Period relevant to that Dividend Record Date over the number of days in that calendar year, multiplied by USD1,000, provided that the following requirements are satisfied:

• (i) as of the Dividend Record Date, the Net Asset Value of Class A (inclusive of certain adjustment) is less than four (4) times of the Net Asset Value of Class B (inclusive of certain adjustment); and

• (ii) the declaration of dividends and the payment of such dividends are not otherwise prohibited under the memorandum and articles of association of the Fund or applicable laws and regulations.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, the counterparties and their ultimate beneficial owners are third parties independent of and are not connected with the Company and its connected persons under the Listing Rules.

The Subscription of the Fund (including the amount of subscription and basis of consideration) was determined after arm’s length negotiation between the parties to the Subscription Agreement on normal commercial terms. The amount is intended to be funded by internal resources of the Group.

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INFORMATION OF THE PARTIES

The Subscriber and the Group

The Subscriber, incorporated in BVI since 26 March 2018, is a directly wholly-owned subsidiary of the Company.

The Company is an investment holding company incorporated in the Cayman Islands with limited liability and the issued shares of which are listed on the Stock Exchange. The Group is principally engaged in the provision of brokerage and margin financing, proprietary securities trading, corporate finance, asset management, money lending, factoring, consultancy and insurance brokerage services.

The Fund

The Fund is a feeder fund of the Master Fund and will directly invest most or all of its assets in the Master Fund, which is registered as a regulated mutual fund under section 4(3) of the Mutual Funds Law of Cayman Islands. The Fund is an open-ended exempted company incorporated with limited liability in the Cayman Islands on 3 May 2018, and is empowered under its constitutive documents and the laws of the Cayman Islands to issue and redeem its own Shares and to carry on investment activities. The Fund is registered as a mutual fund under section 4(3) of the Mutual Funds Law.

FAML

FAML, licensed to carry out type 4 (advising on securities) and type 9 (asset management) regulated activities under the SFO, is a company with limited liability incorporated in Hong Kong. FAML is an indirect wholly-owned subsidiary of the Company.

CEFML

CEFML, which provides investment management and investment advisory services, is an exempted company incorporated with limited liability under the laws of Cayman Islands on 21 May 2009. It has been registered as an Excluded Person under the Securities Investment Business Law (2015 revision) of the Cayman Islands and is therefore exempt from being regulated by Cayman Islands Monetary Authority.

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REASONS FOR AND THE BENEFITS OF THE SUBSCRIPTION

Firstly, the Company has considered investment opportunities that may further enhance its profitability. Having considered the mentioned investment objective and investment strategies, it is believed that the Subscription enables the Subscriber to seize the investment opportunity and would provide the Group with capital appreciation. Secondly, with the background and experience of the key personnel of the Investment Adviser of the Master Fund as mentioned above, it is of the view that the Subscription provides the benefits of seeking investment returns through the Fund operated by professionals specialised in the financial market.

The terms of the Subscription Agreement were determined after arm’s length negotiations between the parties thereto. The Board considers that the terms of the Subscription Agreement are on normal commercial terms, fair and reasonable and the Subscription is in the ordinary and usual course of business of the Group and in the interest of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios as set out in Rule 14.07 of the Listing Rules in relation to the Subscription are more than 5% but less than 25%, the Subscription and the transactions contemplated thereunder constitute a discloseable transaction of the Company pursuant to Rule 14.06 of the Listing Rules and is subject to the reporting and announcement requirements but exempt from the Shareholders’ approval requirement under Chapter 14 of the Listing Rules.

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DEFINITIONS

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

“Board” the board of directors “Board of the Fund” the board of the directors of the Fund “Business Day” the twenty-four-hour day, on all days (except Saturdays, Sundays and public holidays) in Hong Kong, provided that where as a result of a Number 8 Typhoon Signal or higher, Black Rainstorm Warning or other similar event, the period during which banks in Hong Kong are open on any day is reduced, such day shall not be a Business Day, or such other day as the Board of the Fund, after consultation with the Investment Manager of the Master Fund, may from time to time determine “BVI” British Virgin Islands “CEAML” China Everbright Assets Management Limited, a limited liability company incorporated under the laws of Hong Kong on 7 August 1990 licensed and regulated in the conduct of Type 1 regulated activity (dealing in securities), Type 4 regulated activity (advising on securities) and Type 9 regulated activity (asset management) by the SFC to carry on in the business of such activities in Hong Kong. It is a wholly-owned subsidiary of China Everbright Assets Management Holdings Limited

“CEFML” China Everbright Fund Management Limited, a company incorporated in the Cayman Islands, whose ultimate beneficial owner is CEL

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“CEL”

• China Everbright Limited, a company incorporated in Hong Kong whose issued shares are listed on the Stock Exchange

• “Class A” or “Class A means collectively Class A1 Participating Shares, Class A2 Participating Shares” Participating Shares and Class A3 Participating Shares of the Fund

• “Class B” or “Class B Participating Shares”

• means a class of Participating Shares that is designated as Class B Participating Shares, which confers no right to receive notice of, attend and vote at general meetings to the holder

• “Class I Participating Shares of the Master Fund”

• means a class of participating share designated by the directors of the Master Fund as a Class I Participating Share, which confers no right to receive notice of, attend and vote at general meetings to the holder

• “Company”

• China Fortune Financial Group Limited, a company incorporated in the Cayman Islands with limited liability and the Shares of which are listed on the Stock Exchange

• “Completion” completion of the transactions contemplated under the Subscription Agreement

• “Co-Management Agreement”

• the agreement by which the Fund has appointed the CoManagers to provide management services to the Fund

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• “Co-Managers of the Fund”

• “Dividend Period”

• “Dividend Record Date”

• “Directors”

• “FAML”

• “Financial Period”

• “Fund”

• “Group”

• “HK$”

• means co-managers of the Fund appointed by the Board of the Fund to carry out the day-to-day management and operation of the Fund and its assets, each with the respective responsibilities as set forth in the co-management agreement executed on 11 July 2018 (after trading hours)

• means each three-month period ending on the last day of February, May, August or November

• means the last Valuation Day of the relevant Dividend Period

• the directors of the Company

• Fortune Asset Management Limited, an indirectly whollyowned subsidiary of the Company, which holds the licence to conduct the Type 4 and Type 9 regulated activities under the SFC

• a 12-month period ending on 31 December, except for the first Financial Period which commences on the date of registration of the Fund as a regulated mutual fund under the Mutual Funds Law of Cayman Islands and ends on 31 December 2018

• CEL Fortune Convertible Opportunities Feeder Fund, which was incorporated in the Cayman Island on 3 May 2018

• the Company and its subsidiaries from time to time

Hong Kong dollars, the lawful currency of Hong Kong

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“Hong Kong”

• “High Water Mark”

the Hong Kong Special Administrative Region of the People’s Republic of China

the greater of either (a) or (b) listed in the below:

• (a) the last highest Net Asset Value per Participating Share where Performance Fee has been paid; or

• (b) the Subscription Price

• “Initial Offering Period”

• “Investment Adviser of the Master Fund”

• “Investment Manager of the Master Fund”

• “Management Fee”

• the initial offering period available for subscriptions for Participating Shares, being the period commences at 9 a.m. (Hong Kong Time) on 10 July 2018 and ends at 6 p.m. (Hong Kong time) on 13 July 2018, or such other period as the Directors of the Fund shall determine

• the investment adviser of the Master Fund who should provide certain investment advisory and management services to the Investment Manager in respect of the Master Fund’s investments

• the investment manager of the Master Fund, who should carry out the day-to-day investment management of the Master Fund’s assets, and in this connection, the Investment Manager has delegated to the Investment Adviser certain functions, including managing the Master Fund’s investments in accordance with its mandate and directions

the fee payable to the Co-Managers by the Fund for the services provided by them to the Fund

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“MFSCL”

Maples Fund Services (Cayman) Limited, a licensed mutual fund administrator, headquartered in the Cayman Islands

• “Master Fund”

• Everbright Convertible Opportunities Fund, an exempted company incorporated with limited liability in the Cayman Islands on 14 February 2014 with registered number 285227

• “Net Asset Value”

• total assets less the total liabilities

• “Offering Memorandum”

• means the offering memorandum containing particulars of the Fund

• “Participating Shares” the non-voting participating redeemable shares of the Fund of US$0.001 par value each which are designated as participating shares in the Fund

• “Participating Shareholder”

• a holder of Participating Shares

• “Performance Fee”

• the fee payable to the Co-Managers by the Fund based on the performance of the Fund

• “Performance Period”

the period commencing from the day immediately following the end of the previous Performance Period and ending on the last Business Day of the Financial Period of the Fund, except for:

• (a) the first Performance Period, which, in relation to Class B Participating Shares, will commence on the date of issuance for the Participating Share and end on 31 December 2018; and

• (b) the last Performance Period, which will commence on the day immediately following the end of the previous Performance Period and end on the day of which the Directors of the Fund resolved to be the last day of the Performance Period

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“Redemption Price” the price at which Participating Shares may be redeemed, being the Net Asset Value per Participating Share at the Valuation Point on the relevant Valuation Day “SFC” The Securities and Futures Commission of Hong Kong “SFO” The Securities and Futures Ordinance, Chapter 571 of the laws of Hong Kong “Shareholders” shareholder(s) of the Company “Stock Exchange” The Stock Exchange of Hong Kong Limited “Subscriber” Galaxy Way Development Limited, a wholly-owned subsidiary of the Company incorporated in BVI since 26 March 2018 “Subscribed Shares” the Class B Participating Shares of the Fund subscribed by the Subscriber under the Subscription Agreement “Subscription” the subscription of the Subscribed Shares under the Subscription Agreement

• “Subscription Agreement” the agreement to be concluded on 29 August 2018 (after trading hours) with terms set forth in the Offering Memorandum and other written instruments between the Fund, CEFML, FAML and the Subscriber and in pursuant to such written instruments, the Subscriber or its affiliates has (1) applied to subscribe US$4.70 million (equivalent to approximately HK$36.566 million) as of 29 August 2018, and (2) committed to invest up to US$10 million (equivalent to approximately HK$77.8 million) in the Fund

“Subscription Price” means the price at which each of the Participating Share can be subscribed, being US$1,000

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“Valuation Day” the last Business Day of each month or such other day as the Board shall from time to time determine “Valuation Point” the close of business of the last relevant market of which the Fund traded on each Valuation Day or such other time as the Board may from time to time prescribe “US$” or “USD” United States dollars, the lawful currency of the United States of America “%” percentage

For illustrative purpose only, amount denominated in US$ has been translated into HK$ at the rate of US$1.00 = HK$7.78 in this announcement. No representation is made that any amount in US$ or HK$ has been, could have been or could be converted at the above rate or any other.

By order of the Board of China Fortune Financial Group Limited HUA Yang

Executive Director and Chief Executive Officer

Hong Kong, 29 August 2018

As at the date of this announcement, the Board consists of four executive Directors, namely Mr. XIE Zhichun (Chairman), Mr. HUA Yang, Mr. HAN Hanting and Mr. LIU Yinan; two nonexecutive Directors, namely Mr. CHEN Zhiwei and Mr. WU Ling; and four independent nonexecutive Directors, namely Mr. CHAN Kin Sang, Mr. NG Kay Kwok, Mr. CHIU Kung Chik and Mr. LI Gaofeng.

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