Tian Ge Interactive Holdings Limited — Proxy Solicitation & Information Statement 2019

Apr 29, 2019

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about this circular or as to the action to be taken, you should consult your stockbroker, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Tian Ge Interactive Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale 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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Tian Ge Interactive Holdings Limited 天鴿互動控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1980)

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO DISPOSAL OF INTEREST AND NOTICE OF EXTRAORDINARY GENERAL MEETING

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

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A letter from the Board is set out on pages 5 to 16 of this circular. A letter from the Independent Board Committee containing its advice to the Independent Shareholders is set out on pages 17 to 18 of this circular. A letter from Lego Corporate Finance Limited containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 19 to 37 of this circular.

A notice convening the EGM of Tian Ge Interactive Holdings Limited to be held at 12A, Intime City Tower E, Gongshu District, Hangzhou, Zhejiang, PRC on Friday, May 24, 2019 at 3:00 p.m. is set out on pages 44 to 45 of this circular. A form of proxy for use at the EGM is also enclosed. Such form of proxy is also published on the website of The Stock Exchange of Hong Kong Limited (www.hkexnews.hk) and the website of the Company (www.tiange.com).

Whether or not you are able to attend the EGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to the Share Registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event no less than 48 hours before the time appointed for the holding of the EGM (i.e. before 3:00 p.m. on Wednesday, May 22, 2019) or any adjournment thereof. 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 should you so wish.

April 29, 2019

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . . . . .	17
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . . . . . . . .	19
APPENDIX — GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38
NOTICE OF EXTRAORADINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . .	44

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DEFINITIONS

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

• “Articles of Association”

the articles of association of the Company currently in force

• “Benqu Network”

馬鞍山本趣網絡科技合夥企業(普通合夥) (Maanshan Benqu Network Technology Partnership (General Partnership)*), a limited liability partnership established by the Founders in the PRC, which owns 6% equity interest in the Target Company as of the Latest Practicable Date

• “Board”

• board of Directors

• “Business Day”

any day (other than Saturday or Sunday) on which commercial banks are open for business in Hong Kong, or the next Business Day where the Share Transfer Agreement provides that any action be taken on or before a day which is not a Business Day

• “Company”

• Tian Ge Interactive Holdings Limited (天鴿互動控股有限 公司), an exempted company with limited liability incorporated under the laws of the Cayman Islands on July 28, 2008, the Shares of which are listed on the Main Board of the Stock Exchange

• “Completion”

completion of the Disposal in accordance with the terms and conditions of the Share Transfer Agreement, i.e. after all conditions precedents specified in the Share Transfer Agreement have been met, the business registration of the Equity Transfers have been completed, the renewed business licenses of the Target Company and Jinhua Ruian have been obtained and the Purchaser has paid the Consideration in full

• “Completion Date”

• the date on which the business registration of the Equity Transfers have been completed, the renewed business licenses of the Target Company and Jinhua Ruian have been obtained and the Purchaser has paid the Consideration in full

• “connected person(s)”

• has the meaning ascribed thereto under the Listing Rules

• “Consideration”

• the consideration for the Disposal which is RMB292.6 million (approximately HK$340.2 million)

• “Director(s)”

• the director(s) of the Company

• “Disposal”

• the disposal of the Sale Shares by the Vendor to the Purchaser pursuant to the Share Transfer Agreement

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DEFINITIONS

“EGM” the extraordinary general meeting of the Company to be held at 12A, Intime City Tower E, Gongshu District, Hangzhou, Zhejiang, PRC on Friday, May 24, 2019 at 3:00 p.m., or any adjournment thereof and notice of which is set out on pages 44 to 45 of this circular “Equity Transfers” the Vendor’s transfer of 36% equity interest in Jinhua Ruian to the Purchaser and Benqu Network’s transfer of 6% equity interest of the Target Company to the Purchaser

“Founders” Mr. Wu Hao, Mr. Zhou Li, and Mr. Chen Hao, the founders and natural person shareholders of the Target Company

• “Group” the Company and its subsidiaries from time to time

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

“Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China “Independent Board Committee” an independent board committee, comprising Ms. Yu Bin, Mr. Yang Wenbin and Mr. Chan Wing Yuen Hubert, all being independent non-executive Directors, formed to consider and advise the Independent Shareholders in connection with the terms of the Share Transfer Agreement and the transactions contemplated thereunder

“Independent Shareholders” Shareholders who are independent of and have no interest in the transactions contemplated under the Share Transfer Agreement

“Independent Financial Adviser” Lego Corporate Finance Limited, a corporation licensed to carry out Type 6 (advising on corporate finance) regulated activity under the SFO, being the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders as regards the terms of the Disposal, the Share Transfer Agreement and the transaction contemplated thereunder

“Jinhua Chaduan” 金華察端投資管理有限公司 (Jinhua Chaduan Investment Management Company Limited*), a company established in the PRC with limited liability and a wholly-owned subsidiary of Jinhua99 Information Technology Company Limited, a company controlled by the Company through contractual arrangements. Jinhua Chaduan transferred its 80% equity interest in the Target Company to Jinhua Ruian on August 9, 2018

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DEFINITIONS

“Jinhua Ruian” 金華睿安投資管理有限公司 (Jinhua Ruian Investment Management Company Limited), a company established in the PRC with limited liability and a wholly-owned subsidiary of the Vendor “Latest Practicable Date” April 23, 2019, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “Main Board” the stock market operated by the Stock Exchange, which excludes GEM and the options market “Parties” the Vendor, Jinhua Ruian, the Purchaser, the Target Company, the Founders and the Benqu Network collectively “PRC” the People’s Republic of China, and for the purpose of this circular only, excluding Hong Kong, the Macau Special Administration Region of the PRC and Taiwan “Purchaser” 北京微夢創科創業投資管理有限公司 (Beijing Weimeng Chuangke Investment Management Company Limited), a company established in the PRC with limited liability and an associate of the beneficial owner of Sina Hong Kong Limited “RMB” Renminbi, the lawful currency of the PRC “Sale Shares” 36% of Jinhua Ruian’s equity interest “Share(s)” ordinary share(s) of par value of US$0.0001 each in the share capital of the Company or if there has been a subsequent sub-division, consolidation, reclassification or reconstruction of the share capital of the Company, shares forming part of the ordinary equity share capital of the Company “Share Transfer Agreement” the share transfer agreement entered into, among others, between the Vendor, the Purchaser and the Target Company in relation to the Disposal on January 16, 2019 “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended from time to time “Shareholder(s)” the holder(s) of the Share(s) “Share Registrar” Computershare Hong Kong Investor Services Limited, the Company’s branch share registrar in Hong Kong

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DEFINITIONS

• “Stock Exchange” The Stock Exchange of Hong Kong Limited “substantial shareholder(s)” has the meaning ascribed to it under the Listing Rules “Target Company” 上海本趣網絡科技有限公司 (Shanghai Benqu Internet Technology Company Limited*), a company established in the PRC with limited liability which is owned as to 20% by the Founders (6% through Benqu Network and 14% through Wuta Enterprise), and 80% by the Jinhua Ruian as of the Latest Practicable Date

• “Target Group” the Target Company and its sole subsidiary “Vendor” 金華睿馳投資管理有限公司 (Jinhua Ruichi Investment Management Company Limited*), a company established in the PRC with limited liability and a wholly-owned subsidiary of Jinhua99 Information Technology Company Limited, a company controlled by the Company through contractual arrangements

• “Wuta Enterprise” 馬鞍山吾他企業管理中心（普通合夥） (Maanshan Wuta Enterprise Management Center (General Partnership)*), a limited liability partnership established by the Founders in PRC, which owns 14% equity interest in the Target Company as of the Latest Practicable Date

• “%” per cent

• for identification purpose only

In this circular, amounts denominated in RMB have been converted into HK$ at the rate of RMB0.86=HK$1.00 for illustration purpose only. No representation is made to the effect that any amount in RMB or HK$ have been, could have been or could be converted at the above rate or at any other rates or at all.

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LETTER FROM THE BOARD

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Tian Ge Interactive Holdings Limited 天鴿互動控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1980)

Executive Directors: Mr. Fu Zhengjun (Chairman and Chief Executive Officer) Mr. Mai Shi’en (Chief Operating Officer and Acting Chief Financial Officer)

Registered office: Grand Pavilion, Hibiscus Way 802 West Bay Road P.O. Box 31119, KY1-1205 Cayman Islands

Non-executive Directors: Mr. Mao Chengyu Ms. Cao Fei Independent non-executive Directors: Ms. Yu Bin Mr. Yang Wenbin Mr. Chan Wing Yuen Hubert

Headquarters: Room 322 East Tower Building 1 No. 17-1 Chuxin Road Gongshu District Hangzhou, PRC

Principal place of business in Hong Kong: 31/F, Tower Two Times Square, 1 Matheson Street Causeway Bay Hong Kong April 29, 2019

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO DISPOSAL OF INTEREST AND NOTICE OF EXTRORDINARY GENERAL MEETING

INTRODUCTION

References are made to the announcements of the Company dated January 16, 2019 and April 29, 2019 in relation to, among other things, the Disposal.

On January 16, 2019, the Vendor (a wholly-owned subsidiary of a PRC operating entity of our Group), the Purchaser and the Target Company entered into the Share Transfer Agreement pursuant to

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LETTER FROM THE BOARD

which the Vendor agreed to sell, and the Purchaser agreed to purchase, 36% of the equity interest of Jinhua Ruian, which as of the Latest Practicable Date is a wholly-owned subsidiary of the Vendor and holds 80% equity interest in the Target Company, for an aggregate Consideration of approximately RMB292.6 million (approximately HK$340.2 million). Pursuant to the Share Transfer Agreement, the Purchaser also agreed to purchase, and Benqu Network agreed to sell, 6% equity interest of the Target Company, in consideration of approximately RMB61.0 million (approximately HK$70.9 million).

The purpose of this circular is to provide you with, among other things, (i) further details of the Disposal; (ii) the recommendation of the Independent Board Committee to the Independent Shareholders in relation to the Disposal; (iii) the advice of the Independent Financial Adviser on the Disposal; (iv) other information as required under the Listing Rules; and (v) the notice convening the EGM.

THE SHARE TRANSFER AGREEMENT

Date: January 16, 2019

Parties:

(1) The Vendor: 金華睿馳投資管理有限公司 (Jinhua Ruichi Investment Management Company Limited*), a company established in the PRC with limited liability and a wholly-owned subsidiary of Jinhua99 Information Technology Company Limited, a company controlled by the Company through contractual arrangements

(2) Jinhua Ruian: 金華睿安投資管理有限公司 (Jinhua Ruian Investment Management Company Limited), a company established in the PRC with limited liability and a wholly-owned subsidiary of the Vendor (3) The Purchaser: 北京微夢創科創業投資管理有限公司 (Beijing Weimeng Chuangke Investment Management Company Limited), a company established in the PRC with limited liability and an associate of the beneficial owner of Sina Hong Kong Limited which is a substantial shareholder of the Company (4) Target Company: 上海本趣網絡科技有限公司 (Shanghai Benqu Internet Technology Company Limited*), a company established in the PRC with limited liability which is owned as to 80% by the Vendor and 20% by the Founders as of the Latest Practicable Date (5) The Founders: Mr. Wu Hao, Mr. Zhou Li, and Mr. Chen Hao, the founders and natural person shareholders of the Target Company

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LETTER FROM THE BOARD

(6) Benqu Network: 馬鞍山本趣網絡科技合夥企業（普通合夥）(Maanshan Benqu Network Technology Partnership (General Partnership)*), a limited liability partnership established by the Founders in the PRC, which owns 6% equity interest in the Target Company as of the Latest Practicable Date

Interest to be disposed of by the Group

Pursuant to the terms and conditions of the Share Transfer Agreement, the Vendor agreed to sell, and the Purchaser agreed to purchase, 36% of equity interest in Jinhua Ruian, which holds 80% equity interest in the Target Company. As of the Latest Practicable Date, Jinhua Ruian is 100%-owned by the Vendor.

Consideration

The Consideration for the Disposal is approximately RMB292.6 million (approximately HK$340.2 million) and shall be paid by the Purchaser to the Vendor in the following manner:

Subject to the fulfillment of the conditions precedent or the written waiver by the Purchaser, and Jinhua Chaduan returning the prepaid payment to the Purchaser, the Purchaser shall, within 10 working days from the date of completion of the conditions precedent, pay the Consideration to the Vendor’s designated account.

The Consideration was agreed among the Purchaser, the Vendor and the Target Company after arm’s length negotiation and was determined with reference to the valuation of comparable companies and the future prospects of the business of the Target Group. For comparable companies, the Company has identified several public companies listed on the Hong Kong Stock Exchange which are principally engaged in the operation of mobile entertainment platforms and online advertisement, such as Feiyu Technology International Company Ltd. and Inke Limited. The price-to-sales of the selected comparable companies range from approximately 0.9 times to approximately 3.7 times, with the average of approximately 2.5 times. The implied price-to-sales of the Target Group in proportion to the equity interest to be disposed of under the Disposal is approximately 17.1 times, which exceeds the maximum price-to-sales of the selected comparable companies of approximately 3.7 times. The price-to-earnings of the selected comparable companies range from approximately 35.4 times to approximately 42.8 times, with the average of approximately 39.1 times. The implied price-to-earnings of the Target Group in proportion to the equity interest to be disposed of under the Disposal is approximately 49.8 times, which is higher than the maximum price-to-earnings of the selected comparable companies.

Taking into account the matters above and the reasons and benefits as stated in the paragraph below headed “Reasons for and benefits of the Disposal”, the Directors consider that the Consideration is fair and reasonable.

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LETTER FROM THE BOARD

Conditions Precedent

Completion is conditional upon, among others:

• (1) all necessary internal authorisations and approvals (including but not limited to the approval of the board of directors and shareholders’ meeting) and the approvals of the governmental authority (if any) of the parties involved in the transactions have been obtained and have not been revoked;

• (2) the proper signing of all transaction documents;

• (3) the Target Company and Jinhua Ruian have completed the business registration procedures for the Equity Transfers; and

• (4) the registered capital of the Target Company has been fully paid.

The Purchaser may waive any of the conditions precedent, except for (1) the internal authorisations and approvals and the approvals of the governmental authority which are according to the requirements of the Listing Rules and other relevant laws and regulations. If any of the conditions precedent are not met due to the Purchaser’s own reasons, except for condition (1), the relevant conditions precedent are deemed to have been met. As at the Latest Practicable Date and to the Company’s knowledge, other than the signing of transaction documents, no other condition above has been fulfilled or waived.

Completion

Completion shall take place on the Completion Date. Upon Completion, Jinhua Ruian will remain a non-wholly owned subsidiary of the Vendor and the Company will still have a controlling interest in the Target Company through the Vendor.

The following tables set out the legal shareholding structure of the Target Company and Jinhua Ruian (i) as of the Latest Practicable Date; and (ii) immediately upon Completion.

Legal shareholding structure of Jinhua Ruian:

	As of the Latest	Immediately upon
Name of shareholders	Practicable Date	Completion
The Vendor	100.00%	64.00%
The Purchaser	0.00%	36.00%
Total	100.00%	100.00%

Legal shareholding structure of the Target Company:

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LETTER FROM THE BOARD

	As of the Latest	Immediately upon
Name of shareholders	Practicable Date	Completion
Jinhua Ruian	80.00%	80.00%
Benqu Network	6.00%	0.00%
Wuta Enterprise	14.00%	14.00%
The Purchaser	0.00%	6.00%
Total	100.00%	100.00%

Redemption Liabilities

Pursuant to the shareholders agreement dated January 16, 2019 entered into by the Purchaser, the Vendor, the Target Company, Wuta Enterprise, Jinhua Ruian and the Founders, at the Purchaser’s discretion, it shall have the right to:

• (1) request the Vendor to repurchase all or part of the Sale Shares from the Purchaser, and the Founders and Wuta Enterprise shall have joint and several liabilities to repurchase all or part of the shares the Purchaser held in the Target Company, or

• (2) request the Target Company to repurchase its own shares or reduce its registered capital (if permitted by relevant laws and regulations),

in the event that within three years after the Completion Date, (a) one of the Founders, Mr. Wu Hao, voluntarily resigns from the Company or fails to serve full time in the Target Company (except for force majeure) (the “ Triggering Event A ”), or (b) there is any material adverse breach by any of the Target Company, the Founders, the Vendor and Wuta Enterprise of the representations and warranties in relevant transaction documents (the “ Triggering Event B ”).

The right of redemption is exercisable by the Purchaser and not the Company.

The consideration at which the Vendor would be required to repurchase the Sale Shares from the Purchaser pursuant to (1) above due to Triggering Event A shall be the product of (i) the amount received from the Purchaser upon Completion, plus a 10% interest yield per year minus the aggregate dividends paid to the Purchaser during the period of its holding of the Sale Shares, and (ii) the Progress Rate (as defined below).

Progress Rate = number of day(s) from the date of Triggering Event A to the day representing three years after the Completion Date/the number of day(s) from the Completion Date to the day representing three years after the Completion Date

The consideration at which the Vendor would be required to repurchase the Sale Shares from the Purchaser pursuant to (1) above due to Triggering Event B shall be the amount received from the Purchaser upon Completion, plus a 10% interest yield per year minus the aggregate dividends paid to the Purchaser during the period of its holding of the Sale Shares.

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LETTER FROM THE BOARD

The 10% interest rate was negotiated based on arm’s length negotiations with reference to similar arrangements in the Purchaser’s previous investments and the premiums comparable companies paid in similar transactions, such as Shanghai Dasheng Agriculture Finance Technology Co., Ltd.’s disposal which was initially announced on December 24, 2018.

The consideration and the amount of the repurchase and/or capital reduction by the Target Company pursuant to (2) above were not specified in the shareholders agreement as such term is contained in the form of shareholders agreement designated by the Purchaser, and which the Company believes such term is unlikely to be invoked and hence immaterial to the transaction as a whole. According to the advice from our PRC legal adviser, Global Law Office, the enforceability of the Target Company’s obligations to repurchase its own shares and/or reduce its registered capital pursuant to (2) above are legally uncertain according to prevailing PRC laws and PRC courts’ precedent cases. The Company is of the view that in the unlikely event that such term is exercised, the Purchaser and the Vendor will negotiate the amount and consideration of repurchase and/or capital reduction based on several parameters, which include the Purchaser’s then shareholding in the Target Company and the valuation of the Target Company at the time of the exercise. According to the opinion of our PRC legal adviser, Global Law Office, even if the repurchase and/or capital reduction term is to be exercised, under PRC laws, the amount of shares and/or registered capital that the Target Company is required to repurchase and/or reduce will be limited to 6% of the total share capital of the Target Company (under the condition that the Target Company’s current shareholding structure does not change) and the consideration will be determined either based on the Purchaser’s cost of acquiring such 6% share capital plus accumulated interests, or based on the Target Company’s then valuation or other criteria (noting that the criteria to be adopted by the arbitration committee are uncertain), subject to the arbitration committee’s discretion. Due to its uncertainty of being enforced and the Company’s belief that such term is unlikely to be invoked, the Company does not consider this clause to be a material term/will have a material impact to the Company, and will be willing to go through arbitration procedures should any issues arise.

The Directors are of the view that the redemption liabilities under the shareholders agreement (despite the uncertainties over the repurchase and capital reduction term pursuant to (2) above) was negotiated on an arm’s length basis and on normal commercial terms, in the ordinary course of business of the Company, and are fair and reasonable and in the interests of the Company and its shareholders as a whole.

As the Purchaser is a connected person of the Company under the Listing Rules, the redemption liabilities of the Group, once triggered, will constitute a connected transaction for the Company under Chapter 14A of the Listing Rules. As one or more of the applicable percentage ratios (as defined under the Listing Rules) in respect of the Group’s redemption liability is/are expected to be more than 5% but all of the applicable percentage ratios are expected to be less than 25%, the redemption liabilities, if performed in full, would constitute a discloseable and connected transaction of the Company, which would be subject to the relevant requirements of the Listing Rules.

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LETTER FROM THE BOARD

INFORMATION OF THE TARGET GROUP

The Target Company is a company established in the PRC with limited liability. Its sole and wholly-owned subsidiary, Ningbo Benqu Culture Media Co., Ltd.* (寧波本趣文化傳媒有限公司), is a company established in the PRC with limited liability in June 2018 principally engaged in online advertisement business. The Target Group principally engaged in developing and operating mobile photo and video applications in the PRC and developing platforms for simultaneous video re-touching features.

The audited financial information of the Target Company for the two financial years ended December 31, 2017 is set out below:

			**For the **	year ended
			December 31,
			2017	2016
			RMB’000	RMB’000
Net	loss	before taxation	4,888	3,078
Net	loss	after taxation	4,888	3,078

According to the unaudited management accounts of the Target Group, for the year ended December 31, 2018, unaudited consolidated net profit before taxation and unaudited consolidated net profit after taxation of the Target Group amounted to approximately RMB9.4 million and approximately RMB8.9 million, respectively. As of December 31, 2018, audited consolidated net assets of the Target Group amounted to approximately RMB29.5 million.

As of the Latest Practicable Date, the Group has been holding part of its equity interest in the Target Company for 12 months or less. Jinhua Chaduan originally acquired 13.6% equity interests in the Target Company for a cost of approximately RMB19.6 million during the fourth quarter of 2017, and subsequently acquired further 66.4% equity interests therein for a cost of approximately RMB206.9 million in April 2018, further details of which are set out in the announcement of the Company dated January 26, 2018.

INFORMATION OF JINHUA RUIAN

Jinhua Ruian, a wholly-owned subsidiary of the Vendor, is a company established in the PRC with limited liability in July 2018. It is an investment holding company principally engaged in investment management, enterprise management and consulting in the PRC. Jinhua Chaduan transferred its 80% equity interest in the Target Company to Jinhua Ruian on August 9, 2018.

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LETTER FROM THE BOARD

The unaudited consolidated financial information of Jinhua Ruian for the period from July 19, 2018 (the date of incorporation) to December 31, 2018 is set out below:

			For the period from
			July 19, 2018 to
			December 31, 2018
			RMB’000
Net	profits	before taxation	1,669
Net	profits	after taxation	2,581

As of December 31, 2018, unaudited consolidated net assets of Jinhua Ruian amounted to approximately RMB239.3 million.

INFORMATION OF THE PURCHASER

The Purchaser is an investment holding company. It is an associate of SINA Corporation, the beneficial owner of Sina Hong Kong Limited. Sina Hong Kong Limited, a substantial shareholder of the Company holding 23.74% of the issued share capital of the Company as of the Latest Practicable Date, is a company principally engages in offering online media and advertising services and is wholly-owned by SINA Corporation. Hence, the Purchaser, being an associate of SINA Corporation, is a connected person of the Company under the Listing Rules.

INFORMATION OF THE GROUP

The Group is principally engaged in the live social video businesses.

REASONS FOR AND BENEFITS OF THE DISPOSAL

SINA Corporation is a leading online media company with a comprehensive digital media network of SINA.com, SINA mobile and Weibo. Although as of the Latest Practicable Date, the Group has been holding part of its equity interest in the Target Company for 12 months or less, the Company considers the Disposal is beneficial to the Group. On the one hand, it enables the Group to realize/liquidate part of its investments in the Target Company calculated at fair market value and on the other hand it is expected that the expertise and know-how, business network and the established resources of the SINA Corporation with respect to the development of social media platforms may facilitate the Group to achieve full integration between live streaming and social interaction.

The Directors are of the view that the terms of the Share Transfer Agreement have been negotiated on an arm’s length basis and on normal commercial terms, in the ordinary course of business of the Company, and are fair and reasonable and in the interests of the Company and its shareholders as a whole.

FINANCIAL EFFECT OF THE DISPOSAL

As at the Latest Practicable Date, Jinhua Ruian was indirectly wholly owned by the Company and accounted for as a subsidiary of the Company. Upon Completion, Jinhua Ruian will be legally owned as to 64% by the Company through the Vendor and as to 36% by the Purchaser, and will remain as a subsidiary of the Company. The financial results of Jinhua Ruian will continue to be consolidated into the financial accounts of the Group.

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LETTER FROM THE BOARD

Immediately upon Completion, subject to review by the auditor and before considering income tax, it is expected that total assets of the Group will increase by approximately RMB292.6 million as a result of an increase in its cash and cash equivalent by the amount of proceeds from the Disposal, and total liabilities of the Group will increase by approximately RMB399.9 million mainly attributable to the redemption liability arising from the Disposal in relation to the potential repurchase of all or part of the Sale Shares from the Purchaser in accordance with the terms and conditions of the shareholders agreement dated January 16, 2019, further details of which are set out in the sub-section headed “Redemption Liabilities” of the Letter from the Board. In light of the above, it is expected that before considering the potential income tax to be incurred, the equity and the consolidated net assets of the Company shall decrease by approximately RMB107.3 million immediately upon Completion. After considering the net impacts on the non-controlling interests at the Completion Date but before considering the potential income tax to be incurred, the equity and the consolidated net assets attributable to owners of the Company shall decrease by approximately RMB38.4 million immediately upon Completion.

As the Group shall maintain its control over Jinhua Ruian upon Completion, subject to review by the auditors, it is expected that the Disposal will be accounted for as an equity transaction upon the lapse of conditions to the aforementioned potential repurchase of Sale Shares. Immediately upon Completion, the Disposal will not result in recognition of gain or loss before taxation in the consolidated statement of comprehensive income of the Group and accordingly, the Disposal shall not have any material impacts on the earnings before taxation of the Group on initial recognition. In accordance with the PRC taxation regulations, the Disposal is subject to income tax which may have an impact on the earnings of the Group.

In terms of the accounting treatments, before considering the potential income tax to be incurred, the Disposal is expected to lead to a debit in “cash and cash equivalent” by the Consideration in the amount of approximately RMB292.6 million, a debit in “non-controlling interests” by the potential redemption liability to be borne by the non-controlling interests arising from the potential repurchase of shares in accordance with the terms and conditions of the shareholders agreement in the amount of approximately RMB68.9 million, a credit in “financial liability” by the potential aggregate redemption liability arising from the potential repurchase of shares in accordance with the terms and conditions of the Shareholder Agreement in the amount of approximately RMB399.9 million, and a debit in “other reserve” by an amount of approximately RMB38.4 million as an offsetting treatment.

USE OF PROCEEDS

It is expected that 80% of the net proceeds of the Disposal will be used for future development and/or expansion of the Group’s online interactive entertainment business including but not limited to, potential acquisition of other competitors within the industry and 20% of the net proceeds of the Disposal will be used for general working capital of the Group.

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LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

The Purchaser is an associate of the beneficial owner of Sina Hong Kong Limited, and Sina Hong Kong Limited is a substantial shareholder of the Company holding 23.73% of the issued share capital of the Company as of the Latest Practicable Date. Hence the Purchaser constitutes a connected person of the Company under the Listing Rules, and the Disposal constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. As one or more of the applicable percentage ratios (as defined under the Listing Rules) in respect of the Disposal is/are more than 5% but all of the applicable percentage ratios are less than 25%, the Disposal constitutes a discloseable and connected transaction of the Company, which is subject to the reporting, announcement, circular and the Independent Shareholders’ approval requirements under Chapter 14 and Chapter 14A of the Listing Rules. As set out in the sub-section headed “Redemption Liabilities” of the Letter from the Board, the Purchaser will have the option to request the Target Company to repurchase its own shares after Completion. The Shareholders will consider the Disposal, including the Target Company’s repurchase liabilities, at the EGM and the Company will comply with applicable Listing Rules requirements should the Purchaser choose to exercise the repurchase clause.

APPROVAL BY DIRECTORS AND INDEPENDENT SHAREHOLDERS

Ms. Cao Fei, being a Director nominated to the Board by Sina Hong Kong Limited, should abstain from voting on the Board resolutions for considering and approving the Disposal to avoid a perception of a conflict of interest. At the Board meeting to consider and approve the Disposal, Ms. Cao Fei had abstained from voting on the resolutions to approve the same. Save as disclosed above, there are no other Directors who have any material interest in the Disposal, and no other Directors are required to abstain from voting on the Board resolutions for considering and approving the Disposal.

The Independent Board Committee (comprising all independent non-executive Directors) has been established to advise the Independent Shareholders in relation to the Disposal. None of the members of the Independent Board Committee has any material interest in the Disposal. A letter from the Independent Board Committee is set out on pages 17 to 18 of this circular.

Pursuant to the Listing Rules, any Shareholder with a material interest in the Disposal is required to abstain from voting in respect of the Disposal. As at the Latest Practicable Date, Sina Hong Kong Limited (including its associates) is holding 300,000,000 shares of the Company and is a substantial shareholder holding 23.73% of the issued share capital of the Company. The Purchaser is an associate of the beneficial owner of Sina Hong Kong Limited. In view of the interests of Sina Hong Kong Limited in the Disposal, Sina Hong Kong Limited and its associates shall abstain from voting in respect of the resolution relating to the Disposal at the EGM. To the best knowledge of the Company, save for Sina Hong Kong Limited and its associates, no other Shareholder is required to abstain from voting in respect of the resolution relating to the Disposal at the EGM.

INDEPENDENT FINANCIAL ADVISER

Lego Corporate Finance Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Disposal. A letter from the Independent Financial Adviser is set out on pages 19 to 37 of this circular.

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LETTER FROM THE BOARD

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from May 21, 2019 to May 24, 2019, both days inclusive, in order to determine the Shareholders’ entitlements to attend and vote at the EGM. In order to be eligible for attending and voting at the EGM, all transfer documents accompanied by the relevant share certificates and transfer forms must be lodged with the Share Registrar, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration no later than 4:30 p.m. on May 20, 2019.

EGM

A notice dated April 29, 2019 convening the EGM is set out on pages 44 to 45 of this circular, which contains an ordinary resolution to approve the Disposal.

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the Share Registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding of the EGM (i.e. before 3:00 p.m. on May 22, 2019) or any adjournment thereof.

Completion and return of the form of proxy will not prevent you from attending and voting in person at the EGM and at any adjournment thereof if you so wish and, in such event, the form of proxy shall be deemed to be revoked.

VOTING BY POLL

The resolution set out in the notice of the EGM would be decided by poll in accordance with the Listing Rules and the Articles of Association. The Chairman will explain the detailed procedures for conducting a poll at the commencement of the EGM.

On a poll, every Shareholder present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy shall have one vote for every fully paid Share held. A Shareholder present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy who is entitled to more than one vote need not use all his/its votes or cast all his/its votes in the same way.

After the conclusion of the EGM, the poll results will be published on the website of the Stock Exchange at www.hkexnews.hk and the website of the Company at www.tiange.com.

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LETTER FROM THE BOARD

RECOMMENDATION

After taking into account the reasons for and benefits of the Disposal, the Directors are of the view that the terms of the Share Transfer Agreement are fair and reasonable, on normal commercial terms, in the ordinary and usual course of business of the Company, and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Independent Board Committee to advice the Independent Shareholders to vote in favor of the ordinary resolution to approve the Disposal at the EGM. You are advised to read the letter from the Independent Board Committee and the letter from the Independent Financial Adviser mentioned above before deciding how to vote on the resolution to be proposed at the EGM.

Yours faithfully, By order of the Board Tian Ge Interactive Holdings Limited Fu Zhengjun

Chairman and Chief Executive Officer

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter of advice from the Independent Board Committee setting out their recommendation to the Independent Shareholders for the purpose of inclusion in this circular.

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Tian Ge Interactive Holdings Limited 天鴿互動控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1980)

April 29, 2019

To the Independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL OF INTEREST

We refer to the circular of the Company dated April 29, 2019 (the “ Circular ”) of which this letter forms part. Terms defined in the Circular shall have the same meanings when used in this letter unless the context otherwise requires.

We have been appointed by the Board as members of the Independent Board Committee to advise the Independent Shareholders in respect of the Disposal. Lego Corporate Finance Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

We wish to draw your attention to the letter from the Board on pages 5 to 16 of the Circular, which sets out details of the Disposal including the redemption liabilities. We also wish to draw your attention to the letter from the Independent Financial Adviser set out on pages 19 to 37 of the Circular, which contains its advice to the Independent Board Committee and the Independent Shareholders in respect of the Disposal.

Having considered the reasons for and benefits of the Disposal and the advice of the Independent Financial Adviser, we consider that the terms of the Share Transfer Agreement are fair and reasonable, on normal commercial terms, in the ordinary and usual course of business of the Company, and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Independent Board Committee to advice the Independent Shareholders to vote in favor of the ordinary resolution to approve the Disposal, particulars of which are set out in the notice of EGM set out on pages 44 to 45 of this Circular.

Yours faithfully, For and on behalf of the Independent Board Committee Yu Bin Yang Wenbin Chan Wing Yuen Hubert Independent non-executive Directors

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter from the Independent Financial Adviser setting out its advice to the Independent Board Committee and the Independent Shareholders in relation to the Disposal, which has been prepared for the purpose of inclusion in this Circular.

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29 April 2019

• To: The Independent Board Committee and the Independent Shareholders of Tian Ge Interactive Holdings Limited

Dear Sirs and Madams,

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO DISPOSAL OF INTEREST

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Disposal, details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular of the Company dated 29 April 2019 (the “ Circular ”), of which this letter forms part. Unless specified otherwise, capitalised terms used herein shall have the same meanings as those defined in the Circular.

Reference is made to the announcement of the Company dated 16 January 2019, according to which on 16 January 2019, the Vendor (a wholly-owned subsidiary of a PRC operating entity of the Group), the Purchaser, Jinhua Ruian, the Target Company, the Founders and Benqu Network entered into the Share Transfer Agreement pursuant to which (i) the Vendor has conditionally agreed to sell, and the Purchaser has conditionally agreed to purchase, 36% of the equity interest of Jinhua Ruian, which as of the Latest Practicable Date was a wholly-owned subsidiary of the Vendor and held 80% equity interest in the Target Company, at the Consideration of approximately RMB292.6 million (equivalent to approximately HK$340.2 million); and (ii) Benqu Network has conditionally agreed to sell, and the Purchaser has conditionally agreed to purchase, 6% equity interest of the Target Company at the consideration of approximately RMB61.0 million (equivalent to approximately HK$70.9 million).

Upon Completion, Jinhua Ruian will be legally owned as to 64% by the Company through the Vendor, and as to 36% by the Purchaser. Among others, the Purchaser will have an option to request the Target Company to repurchase its own shares after Completion, further details of which are set out in the sub-section headed “Redemption Liabilities” of the Letter from the Board.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As the Purchaser was an associate of the beneficial owner of Sina Hong Kong Limited, and Sina Hong Kong Limited was a substantial shareholder of the Company holding 23.74% of the issued share capital of the Company as at the Latest Practicable Date, the Purchaser was a connected person of the Company under the Listing Rules, and the Disposal constituted a connected transaction for the Company under Chapter 14A of the Listing Rules.

As one or more of the applicable percentage ratios (as defined under the Listing Rules) in respect of the Disposal is/are more than 5% but all of the applicable percentage ratios are less than 25%, the Disposal constitutes a discloseable and connected transaction of the Company, which is subject to the reporting, announcement, circular and the Independent Shareholders’ approval requirements under Chapter 14 and Chapter 14A of the Listing Rules.

The EGM will be convened and held for the Independent Shareholders to consider and, if thought fit, pass the ordinary resolution(s) to approve the Disposal. According to the Letter from the Board, Sina Hong Kong Limited and its associates have a material interest in the Disposal, and will therefore be required to abstain from voting on the relevant resolution(s) at the EGM.

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising all of the three independent non-executive Directors, namely Ms. Yu Bin, Mr. Yang Wenbin and Mr. Chan Wing Yuen Hubert, has been established to advise the Independent Shareholders as regards the terms of the Disposal.

We, Lego Corporate Finance Limited, have been appointed by the Company as the Independent Financial Adviser in accordance with the requirements of the Listing Rules to advise the Independent Board Committee and the Independent Shareholders as regards the Disposal. Our appointment has been approved by the Independent Board Committee.

During the past two years, save for the engagement in connection with the Disposal, we had not been engaged by the Company for the provision of other services that would affect our independence. Apart from the normal professional fees for our services to the Company in connection with the engagement to act as the Independent Financial Adviser, no other arrangement exists whereby we will receive any fees and/or benefits from the Group. As at the Latest Practicable Date, we were not aware of any relationships or interests between us and the Group, the Purchaser and Benqu Network or any of their respective substantial shareholders, directors or chief executives, or of their respective associates that could reasonably be regarded as relevant to our independence. We are independent under Rule 13.84 of the Listing Rules to act as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in connection with the Disposal.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR ADVICE

In formulating our opinions and recommendations, we have reviewed, inter alia, the Share Transfer Agreement, the announcement of the Company dated 16 January 2019, the annual report of the Company for the financial year ended 31 December 2017 (the “ 2017 Annual Report ”), the interim report of the Company for the six months ended 30 June 2018 (the “ 2018 Interim Report ”), the announcement of the Company in relation to the consolidated results of the Group for the year ended 31 December 2018 (the “ 2018 Results Announcement ”), the consolidated management accounts of Jinhua Ruian and its subsidiaries (the “ Jinhua Ruian Group ”) for the period from 19 July 2018 up to and including 31 December 2018, the respective audit reports of the Target Company for the financial years ended 31 December 2016 and 31 December 2017 (collectively, the “ Target Company Audit Reports ”), the management accounts of the Target Company for the period from 1 January 2018 to 31 May 2018 (the “ Target Company 2018 Accounts ”), as well as the management consolidated accounts of the Target Group (to be defined in the sub-section below headed “2.2 Background information on the Jinhua Ruian Group” of this letter) for the period from 1 June 2018 to 31 December 2018 (the “ Target Group 2018 Accounts ”). We have also reviewed certain information provided by the management of the Company (the “ Management ”) relating to the operations, financial conditions and prospects of the Group. We have also (i) considered such other information, analyses and market data which we deemed relevant; and (ii) conducted verbal discussions with the Management regarding the terms of the Disposal, the businesses and future outlook of the Group. We have taken reasonable steps to ensure that such information and statements, and any representation made to us, which we have relied upon in formulating our opinions, are true, accurate and complete in all material respects as of the Latest Practicable Date and the Shareholders shall be notified of any material changes, if any, as soon as possible.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts not contained in the Circular, the omission of which would make any statement herein or in the Circular misleading. We consider that we have been provided with, and we have reviewed, all currently available information and documents which are available under present circumstances to enable us to reach an informed view regarding the terms of and reasons for entering into the Disposal to justify reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis of our opinion. We have no reasons to suspect that any material information has been withheld by the Directors or the Management, or is misleading, untrue or inaccurate. We have not, however, for the purpose of this exercise, conducted any independent detailed investigation or audit into the business or affairs or future prospects of the Group. Our opinion is necessarily based on financial, economic, market and other conditions in effect, and the information made available to us as at the Latest Practicable Date.

This letter is issued for the information of the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the Disposal, the Share Transfer Agreement and the transaction contemplated thereunder. Except for its inclusion in the Circular, this letter shall not be quoted or referred to, in whole or in part, nor shall it be used for any other purposes, without our prior written consent.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinions in respect of the Disposal, we have taken into consideration the following principal factors and reasons:

1 Financial information of the Group

The Group is principally engaged in the provision of online interactive entertainment services as well as provision of advertising and other services.

Set out below in Table 1 is certain financial information of the Group for the two financial years ended 31 December 2017 as extracted from the 2017 Annual Report, and for the financial year ended 31 December 2018 as extracted from the 2018 Results Announcement.

Table 1: Financial information of the Group

Revenue arising from: -Continuing operations -Discontinued operations (Note) Profit/(loss) for the year attributable to owners of to the Shareholders arising from: -Continuing operations -Discontinued operations Non-current assets Current assets Current liabilities Net current assets Non-current liabilities Net assets

For the year ended 31 December 2018 2017 2016 (audited) (audited) (audited) RMB’000 RMB’000 RMB’000 751,933 915,969 823,133 — 88,619 11,052 751,933 1,004,588 834,185 218,276 319,650 232,801 — 4,449 412 218,276 324,099 233,213 As at 31 December 2018 2017 2016 (audited) (audited) (audited) RMB’000 RMB’000 RMB’000 1,572,543 1,359,049 1,087,818 1,583,997 1,605,098 1,819,224 (199,771) (228,999) (266,818) 1,384,226 1,376,099 1,552,406 (112,599) (6,391) (16,252) 2,844,170 2,728,757 2,623,972

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Note:

According to the 2017 Annual Report, the game licensing segment of the Group was disposed of as at 30 September 2017, and was reported as a discontinued operation in such report.

For the year ended 31 December 2017

For the year ended 31 December 2017, total revenue of the Group from continuing operations was approximately RMB916.0 million, representing an increase of approximately 11.3% as compared to that of approximately RMB823.1 million (after excluding the revenue generated from the game licensing segment of the Group of approximately RMB11.1 million) for the year ended 31 December 2016. Based on the Annual Report 2017, such increase in revenue was mainly driven by the Group’s online interactive entertainment service, the revenue of which was contributed as to approximately 58.7% by mobile devices for the year ended 31 December 2017 as compared to approximately 46.4% for the preceding year.

For the year ended 31 December 2017, the Group recognised profit for the year attributable to the Shareholders arising from continuing operations of approximately RMB319.7 million, representing a significant increase of approximately 37.3% as compared to that of approximately RMB232.8 million for the year ended 31 December 2016. Based on the Annual Report 2017, such improvement was mainly due to the year-on-year increase in operating profit as contributed by, among others, the foresaid year-on-year increase in revenue arising from continuing operations, the recognition of finance income for the year ended 31 December 2017 against the finance costs as recognised for the preceding year.

As at 31 December 2017, the Group recorded net current assets and net assets of approximately RMB1,376.1 million and approximately RMB2,728.8 million, respectively.

For the year ended 31 December 2018

For the year ended 31 December 2018, total revenue from continuing operations of the Group was approximately RMB751.9 million, representing a decrease of approximately 17.9% as compared to that of approximately RMB916.0 million (after excluding the revenue generated from the game licensing segment of the Group of approximately RMB88.6 million) for the year ended 31 December 2017. Based on the 2018 Results Announcement, such decrease in revenue was mainly driven by the Group’s online interactive entertainment service segment.

For the year ended 31 December 2018, the Group recognised profit for the year attributable to the Shareholders arising from continuing operations of approximately RMB218.3 million, representing a decrease of approximately 31.7% as compared to that of approximately RMB319.7 million for the year ended 31 December 2017. Based on the 2018 Results Announcement, such decrease was mainly due to the net effects of, among others, the year-on-year increase in operating profit, the year-on-year decrease in net finance income, the year-on-year increase in share of loss of investment accounted for using the equity method, the recognition of impairment of investment accounted for using the equity method for the year ended 31 December 2018 while no such recognition had been made for the preceding year, as well as the year-on-year increase in income tax expense.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at 31 December 2018, the Group recorded net current assets and net assets of approximately RMB1,384.2 million and approximately RMB2,844.2 million, respectively.

2 Background information on the Jinhua Ruian Group

According to the Letter from the Board and as advised by the Management, Jinhua Ruian is an investment holding company established in the PRC in July 2018 for the sole purpose of holding the equity interests of the Target Company, which in turns held the entire equity interests of 寧波本趣文 化傳媒有限公司 (Ningbo Benqu Culture Media Co., Ltd.) (“ Ningbo Benqu ”, or collectively with the Target Company, the “ Target Group ”) as at the Latest Practicable Date _.*_ On 9 August 2018, Jinhua Chaduan transferred its then 80% equity interests in the Target Company to Jinhua Ruian. As at the Latest Practicable Date, Jinhua Ruian was a wholly-owned subsidiary of the Vendor and save for its 80% equity interests in the Target Company, Jinhua Ruian did not have equity interests in any other companies.

The Target Company is a company established in the PRC in January 2015 with limited liability. According to the Letter from the Board, Ningbo Benqu, the sole and wholly-owned subsidiary of the Target Company , is a company established in the PRC in June 2018 with limited liability and is principally engaged in online advertisement business. The Target Group is principally engaged in developing and operating mobile photo and video applications in the PRC, as well as developing platforms for simultaneous video re-touching features . As at the Latest Practicable Date, the Target Group developed and operated Wuta Camera application, a leading mobile photo and video application in the PRC, which has utilised artificial intelligence technology.

Set out below in Table 2 and Table 3 is certain consolidated financial information of the Jinhua Ruian Group for the period from 19 July 2018 (the date of incorporation of Jinhua Ruian) up to and including 31 December 2018, and certain financial information of the Target Company for the two financial years ended 31 December 2017, respectively.

Table 2: Unaudited consolidated financial information of the Jinhua Ruian Group

			For the period from
			19 July 2018 to
			31 December 2018
			(unaudited)
			(approximate)
			RMB’000
Net	profit	before taxation	1,669
Net	profit	after taxation	2,581

As at 31 December 2018, unaudited consolidated net assets of the Jinhua Ruian Group amounted to approximately RMB239.3 million.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Table 3: Audited financial information of the Target Company

			For the year ended	For the year ended
			31 December
			2017	2016
			(audited)	(audited)
			(approximate)	(approximate)
			RMB’000	RMB’000
Net	loss	before taxation	4,888	3,078
Net	loss	after taxation	4,888	3,078

For the year ended 31 December 2018, unaudited consolidated net profit before taxation and unaudited consolidated net profit after taxation of the Target Group amounted to approximately RMB9.4 million and approximately RMB8.9 million, respectively. As at 31 December 2018, audited consolidated net assets of the Target Group amounted to approximately RMB29.5 million.

3 Reasons for and benefits of the entering into of the Disposal, the Share Transfer Agreement and the transaction contemplated thereunder

According to the Letter from the Board, it is intended that a substantial portion of approximately 80% of the net proceeds arising from the Disposal will be used for future development and/or expansion of the Group’s online interactive entertainment business including but not limited to potential acquisition of other competitors within the industry, and the remaining portion of approximately 20% the Group’s general working capital purpose.

In assessing the fairness and reasonableness of entering into the Share Transfer Agreement and the transaction contemplated thereunder, we have primarily considered the recent development of the online interactive entertainment business of the Group as well as the future prospect thereof, while reference has also been made to the background of the Purchaser.

3.1 Development of the Group’s online interactive entertainment business

The Group is principally engaged in the online interactive entertainment business through, among others, the operations of live streaming platforms, beauty camera application as well as online and mobile games. According to the 2017 Annual Report, the Group operates various flagship social interactive entertainment platforms including but not limited to 9158 Live Streaming, Sina Show and Miao Broadcasting. Based on the 2018 Results Announcement, during the year ended 31 December 2018, the segment of online interactive entertainment service contributed substantially for approximately 84.3% of the Group’s total annual revenue from continuing operations, and the number of monthly active users of the Group’s online interactive entertainment service exhibited a rapid year-on-year growth of approximately 115.7% during the year ended 31 December 2017, demonstrating the significant growth potential of the segment.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Due to the continuous diversification of life entertainment, live streaming has gradually become a social lifestyle in the community. With reference to the recent annual reports of the Company, the Group has been continuously pursuing the strategy of “Mobile + PC” dual live streaming by streamlining its mobile and Internet live streaming business, promoting innovating playing methods and improving the content quality of its platforms. In particular, the Group has continued to enhance the value of its live streaming business by promoting its synergies with camera, short videos, information products and social products, as well as optimising the interconnections between the live streaming platforms and mobile games. In addition, the operation of Wuta Camera application, a beauty camera application in the PRC with a large user base of approximately 37.8 million monthly active users as at 31 December 2018, has, on one hand, attracted the first-tier advertisers which has resulted in a continuous growth in advertising revenue, and, on the other hand, helped expanding the overall user base of the Group.

As advised by the Management, the Group shall continue to expand its online interactive entertainment business in the future through potential acquisition of other competitor(s) within the market and/or internal development . According to the 2018 Results Announcement, the Group shall focus more on content differentiation, product content optimisation and user experience enhancement in order to attract more Internet users in the future. In addition to video, streaming live and beauty camera, it is the intention of the Group to consecutively launch more new features and innovative applications in its live streaming platforms. Through the expected full integration between live streaming and social interaction, it is anticipated that the core competitiveness of the Group’s online interactive entertainment business shall be strengthened, facilitating its expansion in the future.

3.2 Future prospect of the online interactive entertainment market

The global entertainment and media ecosystem has been rapidly evolving in recent years. According to “Perspectives from the Global Entertainment & Media Outlook 2018-2022 - Trending Now: Convergence, Connections and Trust” as published by PricewaterhouseCoopers LLP. ( https://www.pwc.com/ ), the overall amount of time and money spent on the entertainment and media industry have been growing from the global perspective. It is stated in the report that the cumulative compound annual growth rate of the Internet advertising revenue is expected to reach approximately 8.7% throughout the five years ending 2022, which shall be more than three times of that of the broadcast television advertising revenue, indicating the increasing penetration of the Internet and the growth potential of online platforms within the entertainment industry. Moreover, it is emphasised that personalisation in terms of content, distribution, user experience and monetisation has become increasingly critical to succeed in the entertainment and media marketplace. On the other hand, the report suggested that connected mobile devices are becoming consumers’ primary means of accessing entertainment and media content and services across all markets worldwide, making it imperative for social media distributors and platforms to develop the means to reach and monetise mobile consumers directly through mobile experiences rather than through traditional sales and distribution approaches. In fact, with reference to “2018 Media and Entertainment Industry Outlook” as published by Deloitte Development LLC. ( https://www2.deloitte.com/ ), it is expected to see increasing co-operations between media companies and telecommunication companies in the coming years, and media content providers are suggested to consider exploring alternative content formats geared to smaller screens and optimising the content quality in order to differentiate themselves from the competitors.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

With respect to the PRC market, according to “The 42nd China Statistical Report on Internet Development” published in July 2018 by China Internet Network Information Center ( http://cnnic.com.cn ) (the “ CINIC Report ”), a directly affiliated institution of the Office of the Central Internet Security and Informatisation Commission of the PRC, the number of Internet users and the number of mobile Internet users in the PRC exhibited year-on-year growths and reached 802 million and 788 million respectively as of June 2018. Among others, the expansion of the network coverage, the increase in connection speed as well as the reduction in usage costs have paved the way for the Internet popularisation in the PRC, and the national Internet penetration rate is expected to rise continuously in the future.

The demand for the PRC online entertainment market was strong during the first half of 2018. According to the CINIC Report, the number of online game players in the PRC increased annually and reached approximately 486 million by June 2018, accounting for 60.6% of the total number of Internet users in the PRC. Also, as compared to that as of June 2017, the number of PRC mobile online game players increased significantly to 458 million as of June 2018, accounting for 58.2% of the mobile Internet users in the PRC. On the other hand, usage of short videos has been rapidly spreading out to the third and fourth tier cities since 2017, and the number of users reached 594 million as of June 2018, accounting for 74.1% of the overall Internet users in the PRC. In view of the tightening regulations over the industry, short video platforms are suggested to strengthen its cooperation with e-commerce and social media in order to enhance the quality of the video content and obtain a sustainable development. Further, the number of live streaming users increased year-on-year to 425 million as of June 2018, representing a utilisation rate of users of approximately 53.0%. It is suggested that the live streaming industry in the PRC has undergone an accelerated integration, from which a number of small to medium-sized live streaming companies have been shuffled out, while those leading companies have established a differentiated advantage by virtue of its stable user base and operation mode.

Going forward, with reference to《工業和資訊化部關於貫徹落實推進互聯網協議第六版（IPv6） 規模部署行動計畫的通知》(“The Notice of the Implementation of the Action Plan for Promoting the Scale Deployment of Internet Protocal Version 6 by the Ministry of Industry and Information Technology of the PRC*”) issued by the Ministry of Industry and Information Technology of the PRC in May 2018, it will be the national intention to accelerate the upgrade of network and application infrastructures in order to promote the integration and innovation of the Internet with different fields of the society, which shall help advance the Internet development, ultimately benefiting the development of the online interactive entertainment market.

3.3 Background information of the Purchaser

Upon Completion, Jinhua Ruian will be legally owned as to 36% by the Purchaser, an associate of the beneficial owner of Sina Hong Kong Limited. According to the latest annual report of Sina Corporation ( http://ir.sina.com/ ) for the financial year ended 31 December 2017 (the “ Sina Annual Report ”), Sina Hong Kong Limited was wholly owned by Sina Corporation.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Sina Corporation is a company listed in Nasdaq Stock Market (NASDAQ:SINA). Based on the Sina Annual Report, Sina Corporation is a leading online media company with a comprehensive digital media network of SINA.com, SINA mobile and Weibo. SINA.com is an online media property which provides professional digital contents to users and offers online brand advertising and marketing solutions to customers, and consists of websites dedicated to four destinations across the globe including the PRC, Taiwan, Hong Kong and the North America. On the other hand, news information, entertainment contents and professional media contents customised for mobile users are provided through mobile applications such as SINA news, SINA Finance, SINA Blog, as well as through SINA.cn, the mobile portal of Sina Corporation and its subsidiaries (the “ Sina Corporation Group ”). Further, Weibo is a leading social media platform which combines the means of public self-expression in real time with a powerful platform for social interaction, as well as content aggregation and distribution. It serves a wide range of users including ordinary people, celebrities, media outlets, businesses, government agencies, charities and other organisations, making it a microcosm of Chinese society. In fact, with reference to the recently released unaudited financial results for the financial year ended 31 December 2018 of Sina Corporation and the Sina Annual Report, the segment of Weibo has consistently been the main contributor to the total annual revenue of the Sina Corporation Group, with the proportion of such contribution having been increased annually throughout at least the past four years. Among all segments, the segment of Weibo has obtained the most significant growth in revenue of approximately 49.4% for the year ended 31 December 2018, demonstrating the increasing monetisation capacity of this segment as well as the social media platforms in general. The consolidated net income of Sina Corporation Group for the year ended 31 December 2018 was approximately 426.3 million United States dollars, representing a significant increase of approximately 22.0% as compared to that for the preceding year.

Accordingly, in light of (i) the recent increasing Internet penetration as supported by the growths in the number of Internet users as well as mobile Internet users; (ii) the solid demand for the PRC online entertainment during the first half of 2018; and (iii) the national intention to promote Internet development, it is expected that the prospect of the online entertainment market shall be optimistic in the future. Notwithstanding the Group’s online interactive entertainment segment has consistently achieved satisfactory performances with a rapidly growing user base, the Group is also aware of the importance of user experience enrichment and product differentiation for enhancing its competitiveness within the market, which is consistent with the general viewpoints as suggested in the previously mentioned industry reports. By implementing the Disposal, the Group will be able to, on one hand, maintain its controlling interests in the Jinhua Ruian Group which shall enable it to enjoy the economic benefits therefrom and, on the other hand, obtain funding which is essential for employing its business strategies and plans for expanding the online interactive entertainment business. Also, the intended allocation of net proceeds for general working capital of the Group shall provide the Group with enhanced internal resources and financial capacity for future development should any suitable opportunities arise. Further, it is expected that the expertise and know-how, business network and the established resources of the SINA Corporation Group with respect to the development of social media platforms may facilitate the Group to achieve full integration between live streaming and social interaction, which may ultimately help foster the development of the online interactive entertainment business and enhance returns to the Shareholders.

In light of the foregoing, we are of the view that the entering into of the Disposal, the Share Transfer Agreement and the transaction contemplated thereunder are in the interests of the Company and the Independent Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4 Principal terms of the Share Transfer Agreement and the transaction contemplated thereunder

Pursuant to the Share Transfer Agreement, among others, the Vendor has conditionally agreed to sell, and the Purchaser has conditionally agreed to purchase, 36% of the equity interest in Jinhua Ruian at the Consideration of approximately RMB292.6 million (equivalent to approximately HK$340.2 million).

4.1 Assessment of the Consideration

According to the Letter from the Board, the Consideration was determined among the Purchaser, the Vendor and the Target Company after arm’s length negotiations with reference to the valuations of the comparable companies and the future prospects of the business of the Target Group . Considering the above pricing basis and (i) the relatively short establishment period of Jinhua Ruian of approximately nine months as at the Latest Practicable Date as compared to that of approximately four years and four months of the Target Company; and (ii) the sole establishment purpose of Jinhua Ruian of holding the equity interests in the Target Group, we are of the view that the 28.8% equity interests indirectly held by the Company in the Target Group through Jinhua Ruian is in substance the subject being disposed of under the Disposal, and have therefore made reference to the valuations of companies comparable to the Target Group rather than the Jinhua Ruian Group for our analysis purpose, which in our view serves as more relevant references for assessing the fairness and reasonableness of the Consideration. Initially, we have considered adopting various common valuation approaches, namely the price-to-earnings (“ P/E ”) valuation approach, the price-to-book valuation approach and the price-to-sales (“ P/S ”) valuation approach. Having considered that (i) the P/E ratio would be the most meaningful for stable and/or defensive companies with stable earnings or revenues such as utilities companies; (ii) the price-to-book ratio would be the most meaningful for asset-based companies such as banks and insurance companies; and (iii) the Target Group is principally engaged in a high-growth industry, being the operation of Wuta Camera application which in turn is a mobile entertainment application generating online advertising revenue, the P/S valuation approach has been primarily relied upon in assessing the fairness and reasonableness of the consideration given the cyclicality as well as the non-capital intensive nature of the business of the Target Group, while the P/E analysis has also been conducted for reference purpose only, results of which are set out below in this sub-section.

In conducting the P/S and the P/E analyses, we have identified companies from the public domain that (i) are listed on the Stock Exchange; and (ii) are principally engaged in the operation of mobile entertainment platforms and online advertisement, with annual revenue from such business segments having accounted substantially for more than 50% of the total consolidated revenue during their respective latest financial years. On a best-effort basis, we have identified an exhaustive list of four companies that have met all of the above-mentioned selection criteria (the “ Comparables ”). It is worth noting that the implied P/S and the implied P/E of the Target Group in proportion to the 28.8% equity interests therein to be disposed of under the Disposal (respectively, the “ Implied P/S ” and the “ Implied P/E ”) are respectively compared with the P/S and the P/E of the Comparables in our analysis based on the assumption that interests in private companies can be converted into cash quickly at minimum costs in an active open market as the interests in public companies. Yet, in reality, interests in private companies generally do not possess such characteristics due to their lack of marketability

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

and are therefore generally worth less than the interests in public companies. Accordingly, the Implied P/S and the Implied P/E of the Target Group, the members of which are private companies, in our analyses are subject to potential downward biases in comparison to the P/S and the P/E of the Comparables, being publicly listed companies.

Further, development status of the Target Group’s businesses has been taken into consideration when computing the Implied P/S and the Implied P/E. Through the establishment of the Target Company in 2015, the Target Group developed and principally operates Wuta Camera application, which was launched in December 2015 for beta-testing and upgraded at the end of 2016 upon which it started to include in its name “相機” as key search word, according to the announcement of the Company dated 20 April 2018. As advised by the Management, it generally takes time for a mobile application to immerse into the market, build the user base and consistently generate revenue and earnings therefrom through channels including but not limited to online advertisement upon the initial launch. As for the case of Wuta Camera application, it is noted that revenue of the Target Company before June 2018 (the month in which Ningbo Benqu was established) and the consolidated revenue of the Target Group before July 2018 were generally insignificant and intermittent, causing it failed to indicate fairly the underlying revenue generating capability of the Target Group. Based on the Target Company Audit Reports, annual revenue of the Target Company amounted to approximately RMB0.2 million and approximately RMB0.4 million for each of the two years ended 31 December 2017, respectively. According to the Target Company 2018 Accounts and the Target Group 2018 Accounts, the Target Company started to recognise revenue in February in 2018 and, amid the increasing trend throughout the period, monthly revenue from February towards May as well as the consolidated monthly revenue of the Target Group in June were constantly significantly below the monthly average for the year, demonstrating that the Target Company/Target Group was still in its initial development phrase with fragmentary and insignificant revenue during the first half of 2018. Conversely, revenue of the Target Group achieved a significant turnaround in July 2018, from which the monthly revenue thereafter generally exceeded the monthly average for 2018. It is also noted that the Target Group merely started to recognise accumulated net profit from July 2018 onwards. As such, we consider that due to the growth in the number of monthly active users of Wuta Camera application and accordingly the gain from the effects arising therefrom along the development of Wuta Camera application, the Target Group started to demonstrate the revenue generating capability, and accordingly the earnings generating capability of its businesses from July 2018 onwards. In light of the above and for illustrative purpose only, we have (i) used the revenue of the Target Group annualised based on its total revenue for the period from July 2018 up to and including December 2018 (the “ Annualised Revenue ”) for calculating the Implied P/S; and (ii) used the net profit after taxation of the Target Group annualised based on its total net profit after taxation for the same corresponding period (the “ Annualised Net Profit ”) for calculating the Implied P/E. Our findings are summarised in Table 4 below.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Table 4: A summary of the Comparables

		Latest reported
		number of
		monthly active	Market
Listed issuer	Stock code	users	capitalisation	P/S	P/E
			(Note 1)	(Note 2)	(Note 3)
		(million)	(HK$ million)	(times)	(times)
		(approximate)	(approximate )	(approximate )	(approximate)
Feiyu Technology
International
Company Ltd.	1022	7.1	510.5	3.3	N/A_(Note 4)_
Inke Limited	3700	25.3	4,039.4	0.9	N/A_(Note 4)_
Digital Hollywood
Interactive
Limited	2022	1.8	478.0	2.1	35.4
iDreamSky
Technology
Holdings Limited	1119	129.5	7,554.8	3.7	42.8
			Minimum	0.9	35.4
			Maximum	3.7	42.8
			Average	2.5	39.1
Target Group		37.8	1,181.4	17.1	49.8
			(Note5)	(Note6)	(Note 7)

Source

The official website of the Stock Exchange (http://www.hkexnews.hk/)

Notes

1. Computed based on the number of ordinary shares in issue and the closing share price of the Comparables as at the date of the Share Transfer Agreement.

2. Computed by dividing the respective market capitalisations of the Comparables as at the date of the Share Transfer Agreement by the respective latest reported sales revenue of the Comparables, as extracted from the latest annual reports or the listing documents of the Comparables (as the case may be).

1. Computed by dividing the respective market capitalisations of the Comparables as at the date of the Share Transfer Agreement by the respective net profit after taxation for the respective latest financial years of the Comparables as extracted from the latest annual reports or the listing documents of the Comparables (as the case may be).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1. Not applicable since such relevant Comparables recognised a net loss after taxation during their respective latest financial years.

2. The implied value of the Consideration with respect to 100% equity interests in the Target Group; computed by dividing the converted Consideration of approximately HK$340.2 million by the proportion of equity interests in the Target Group to be disposed of under the Disposal of 28.8%.

3. The Implied P/S; computed based on the implied value of the Consideration with respect to 100% equity interests in the Target Group and the Annualised Revenue.

4. The Implied P/E; computed based on the implied value of the Consideration with respect to 100% equity interests in the Target Group and the Annualised Net Profit.

5. Where applicable and for illustration purpose only, the exchange rate of RMB1.00 = HK$0.86 is used for the conversion between RMB and HK$ and the exchange rate of 1.00 United States dollar = HK7.81 is used for the conversion between the United States dollars and HKS.

Based on (i) the implied value with respect to 100% equity interests in the Target Group of the Consideration in the amount of approximately HK$1,181.4 million; and (ii) the Annualised Revenue in the amount of approximately HK$69.0 million, the Implied P/S amounts to approximately 17.1 times. As illustrated in Table 4, the P/S of the Comparables range from approximately 0.9 times to approximately 3.7 times, with the average of approximately 2.5 times. Therefore, notwithstanding the above-mentioned potential bias on the results of the P/S analysis, the Implied P/S of approximately 17.1 times exceeds the maximum P/S of the Comparables of approximately 3.7 times.

On the other hand, based on (i) the implied value with respect to 100% equity interests in the Target Group of the Consideration in the amount of approximately HK$1,181.4 million; and (ii) the Annualised Net Profit in the amount of approximately HK$23.7 million, the Implied P/E amounts to approximately 49.8 times. As illustrated in Table 4, the P/E of the Comparables range from approximately 35.4 times to approximately 42.8 times, with the average of approximately 39.1 times. Therefore, notwithstanding the above-mentioned potential bias on the results of the P/E analysis, the Implied P/E of approximately 49.8 times is higher than the maximum P/E of the Comparables of approximately 42.8 times.

In addition to the comparable analysis as set out above, according to the Letter from the Board, Jinhua Chaduan originally acquired 13.6% equity interests in the Target Company for cost of approximately RMB19.6 million during the fourth quarter of 2017, and subsequently acquired further 66.4% equity interests therein for a cost of approximately RMB206.9 million in April 2018, collectively representing an aggregate cost of approximately RMB226.5 million for 80.0% in the Target Company. Such aggregate cost represents an implied consideration for 28.8% equity interests in the Target Group of approximately RMB86.0 million (the “ Implied Consideration ”), after taking into account the fair value gain in equity interests in the Target Company held before the original acquisitions as stated in the 2018 Interim Report. The Consideration in the amount of RMB292.6 million therefore represents approximately 240.2% of the Implied Consideration.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Accordingly, taking into account (i) the Implied P/S of approximately 17.1 times exceeds the maximum P/S of the Comparables of approximately 3.7 times; (ii) the Implied P/E of approximately 49.8 times is higher than the maximum P/E of the Comparables of approximately 42.8 times; and (iii) the Consideration is higher than the Implied Consideration, and represents approximately 240.2% of the Implied Consideration, we are of the view that the determination of the Consideration in the amount of approximately RMB292.6 million is fair and reasonable.

4.2 Redemption liabilities

Pursuant to the shareholder agreement dated 16 January 2019 entered into by the Purchaser, the Vendor, the Target Company, Wuta Enterprise, Jinhua Ruian and the Founders (the “ Shareholder Agreement ”), at the Purchaser’s discretion, it shall have right to (i) request the Vendor to repurchase all or part of the Sale Shares from the Purchaser, and the Founders and Wuta Enterprise shall have joint and several liabilities to repurchase all or part of the shares the Purchaser held in the Target Company; or (ii) request the Target Company to repurchase its own shares or reduce its registered capital (if permitted by relevant laws and regulations), in the event that within three years after the Completion Date, (a) one of the Founders, Mr. Wu Hao, voluntarily resigns from the Company or fails to serve full time in the Target Company (except for force majeure); or (b) there is any material adverse breach by any of the Target Company, the Founders, the Vendor and Wuta Enterprise of the representations and warranties in relevant transaction documents.

Our assessment of the fairness and reasonableness of the terms of the redemption liabilities under the Shareholder Agreement has been divided into the sections for (i) the consideration for the repurchase by the Vendor; and (ii) the consideration for the repurchase and the amount of capital reduction by the Target Company, details of which are set out below respectively.

Assessment of the consideration for the repurchase by the Vendor

According to the Letter from the Board, the maximum amount of consideration at which the Vendor would be required to repurchase the Sale Shares from the Purchaser shall implies an interest yield of 10% per annum (the “ Interest Yield ”), which was negotiated on an arm’s length basis. Further details of the aforementioned redemption liabilities including the implications under the Listing Rules are set out in the sub-section headed “Redemption liabilities” of the Letter from the Board.

The granting of the right of redemption is not an unusual arrangement under a disposal transaction. Based on our research conducted from the public domain, it is noted that during the three months immediately preceding and up to the date of the Shareholder Agreement, there were six initially announced disposals of equity interests of listed companies in Hong Kong having involved similar repurchase arrangements (the “ Repurchase Comparable(s) ”). In conducting our assessment, we have deduced the maximum interest yields per annum underlying the Repurchase Comparables as implied by (i) the aggregate amount to be payable by the underlying vendor (after taking into account the potential compensation to be liable for in accordance with the terms thereof) in respect of the repurchase; and (ii) the initial consideration paid or the underlying initial amount of money invested by the underlying purchaser (including the principal amount of loans advanced by such purchaser and the interest accrued thereof), details of which are set out in Table 5 below.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Table 5: A summary of the Repurchase Comparables

			Implied
			maximum
		Date of initial	interest yield
Listed issuer	Stock code	announcement	per annum (%)
Lai Sun Garment (International) Limited;	191; 571; 488;	2 January 2019	Not applicable
eSun Holdings Limited;	and 1125		(Note 1)
Lai Sun Development Company Limited;
and Lai Fung Holdings Limited
China Tianrui Group Cement Company	1252	29 December 2018	12.0
Limited			(Note 2)
Shanghai Dasheng Agriculture Finance	1103	24 December 2018	20.0
Technology Co., Ltd.			(Note 2)
HC Group Inc.	2280	20 December 2018	0.0
			(Note 2)
Texhong Textile Group Limited	2678	10 December 2018	Not applicable
			(Note 1)
GCL New Energy Holdings Limited	451	24 October 2018	Not applicable
			(Note 1)
		Minimum	0.0
		Maximum	20.0
		Average	10.7
The Company	1980	16 January 2019	10.0

Source

The official website of the Stock Exchange (http://www.hkexnews.hk/)

Notes

1. The implied maximum interest yield underlying each of such Repurchase Comparbles was either not explicitly disclosed in the relevant initial announcement and/or could not be deduced based on the information as disclosed in the relevant initial announcement.

2. The implied maximum interest yield underlying each of such Repurchase Comparables (the “ Interest Yield Comparables ”) was deduced based on a best-effort basis according to the information as disclosure in the relevant initial announcement for the purpose of this assessment only.

As shown in Table 5 above, the implied maximum interest yields per annum underlying the Interest Yield Comparables range from 0.0% to 20.0%, with an average of approximately 10.7%. Taking into account that the Interest Yield of 10.0% per annum is lower than the average of the corresponding figures of the Interest Yield Comparables of approximately 10.7% per annum, we are of the view that the consideration at which the Vendor would be required to repurchase the Sale Shares from the Purchaser under the Shareholder Agreement is fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Assessment of the consideration for the repurchase and the amount of capital reduction by the Target Company

As stated in the Letter from the Board, the consideration and the amount of the potential repurchase and capital reduction by the Target Company were not specified in the Shareholder Agreement. We have reviewed the relevant memorandum issued by the PRC legal adviser of the Company, Global Law Office, for the purpose of our assessment. According to such legal memorandum, the enforceability of the Target Company’s obligations to repurchase its own shares and/or reduce its registered capital pursuant to the terms of the Shareholder Agreement is considered to be legally uncertain with reference to the precedent cases of the PRC courts. Further, in the event that the repurchase and capital reduction term has been exercised, under the PRC laws, the amount of shares and/or registered capital that the Target Company will be required to repurchase and/or reduce will be limited to 6% of the total share capital of the Target Company (under the condition that the Target Company’s current shareholding structure does not change), and the consideration will be determined based on factors including the acquisition cost of the Purchaser for such 6% share capital plus accumulated interests, the then valuation of the Target Company and other uncertain criteria to be adopted by the China International Economic and Trade Arbitration Commission (the “ Arbitration Commission ”), subject to the then discretion of the Arbitration Committee.

Accordingly, despite the consideration and the amount of the potential repurchase and capital reduction by the Target Company were not specified in the Shareholder Agreement, taking into consideration that (i) the enforceability of the Target Company’s obligations to repurchase its own shares and/or reduce its capital as well as the determination basis of the consideration of such repurchase, which shall be principally with reference to the initial acquisition cost incurred by the Purchaser, the then appraised value of the Target Company and other criteria to be adopted by the Arbitration Committee, will be subject to the PRC laws and/or the then discretion of the Arbitration Committee; and (ii) in the event that the repurchase and capital reduction clause has been enforced, the relevant amount of the consideration/registered capital to be reduced will be limited to 6% of the total share capital of the Target Company, which is equivalent to the amount of equity interest in the Target Company directly purchased by the Purchaser under the Share Transfer Agreement, we are of the view that the determination bases of the consideration and the amount of the potential repurchase and capital reduction by the Target Company are fair and reasonable.

Having considered the above and the reasons for and benefits to the Group of entering into the Share Transfer Agreement and the transactions contemplating thereunder as set out previously in this letter, we are of the view that the potential repurchase arrangements and the capital reduction arrangement in accordance with the terms and conditions of the Shareholder Agreement (including the determination bases of the consideration and the amount of the potential repurchase and capital reduction by the Target Company), which were negotiated on an arm’s length basis, are on normal commercial terms, fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

In addition, we have reviewed other principal terms of the Share Transfer Agreement and the transaction contemplated thereunder including but not limited to the terms of payment and the conditions precedent thereto, further details of which are set out in the sub-sections respectively

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

headed “Consideration” and “Conditions Precedent” in the Letter from the Board, and are not aware of any terms being unusual. In view of the above, we are of the view that the terms of the Disposal on normal commercial terms, fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

5 Financial impacts of the Disposal

As at the Latest Practicable Date, Jinhua Ruian was indirectly wholly owned by the Company and accounted for as a subsidiary of the Company. Upon Completion, Jinhua Ruian will be legally owned as to 64% by the Company through the Vendor and as to 36% by the Purchaser, and will remain as a subsidiary of the Company. The financial results of Jinhua Ruian will continue to be consolidated into the financial accounts of the Group.

5.1. Net assets

Immediately upon Completion, subject to review by the auditor and before considering income tax, it is expected that total assets of the Group will increase as by approximately RMB 292.6 million a result of an increase in its cash and cash equivalent by the amount of proceeds from the Disposal, and total liabilities of the Group will increase by approximately RMB399.9 million mainly attributable to the redemption liability arising from the Disposal in relation to the potential repurchase of all or part of the Sale Shares from the Purchaser in accordance with the terms and conditions of the Shareholder Agreement, further details of which are set out in the sub-section headed “Redemption Liabilities” of the Letter from the Board. In light of the above, it is expected that before considering the potential income tax to be incurred, the equity and the consolidated net assets of the Company shall decrease by approximately RMB107.3 million immediately upon Completion. After considering the net impacts on the non-controlling interests at the Completion Date but before considering the potential income tax to be incurred, the equity and the consolidated net assets attributable to owners of the Company shall decrease by approximately RMB38.4 million immediately upon Completion.

5.2. Earnings

As the Group shall maintain its control over Jinhua Ruian upon Completion, subject to review by the auditors, it is expected that the Disposal will be accounted for as an equity transaction upon the lapse of conditions to the aforementioned potential repurchase of Sale Shares. Immediately upon Completion, the Disposal will not result in recognition of gain or loss before taxation in the consolidated statement of comprehensive income of the Group and accordingly, the Disposal shall not have any material impacts on the earnings before taxation of the Group on initial recognition. In accordance with the PRC taxation regulations, the Disposal is subject to income tax which may have an impact on the earnings of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In terms of the accounting treatments, we were advised by the Management that before considering the potential income tax to be incurred, the Disposal is expected to lead to a debit in “cash and cash equivalent” by the Consideration in the amount of approximately RMB292.6 million, a debit in “non-controlling interests” by the potential redemption liability to be borne by the non-controlling interests arising from the potential repurchase of shares in accordance with the terms and conditions of the Shareholder Agreement in the amount of approximately RMB68.9 million, a credit in “financial liability” by the potential aggregate redemption liability arising from the potential repurchase of shares in accordance with the terms and conditions of the Shareholder Agreement in the amount of approximately RMB399.9 million, and a debit in “other reserve” by an amount of approximately RMB38.4 million as an offsetting treatment.

It is worth noting that the above analyses are for illustrative purpose only and do not purport to represent how the financial position of the Group will be after the entering into of the Disposal or upon Completion.

RECOMMENDATIONS

Having considered the above principal factors and reasons including the potential financial impacts on the Group thereof, we are of the view that the Disposal, which is implemented in the ordinary and usual course of business of the Company, is on normal commercial terms, fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we advise the Independent Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the ordinary resolution(s) to be proposed for approving the Disposal at the EGM.

Yours faithfully, For and on behalf of Lego Corporate Finance Limited

Billy Tang Managing Director

Billy Tang is a licensed person registered with the Securities and Futures Commission to carry out Type 6 (advising on corporate finance) regulated activity under the SFO. He has over 17 years of experience in the corporate finance advisory profession.

* For identification purpose only

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GENERAL INFORMATION

APPENDIX

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for 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 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.

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As of Latest Practicable Date, the interests or short positions of the Directors or chief executives of the Company in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (“ SFO ”)) 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 or short positions which they were taken or deemed to have taken under such provisions of the SFO), or which would be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which would be required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “ Model Code ”) are as follows:

Interests in ordinary shares of the Company:

			Approximate
			percentage of
			shareholding
			as at Latest
		Number of	Practicable
Name of director	Nature of interests	shares held	Date
Mr. Fu Zhengjun (“Mr. Fu”)	Founder of a discretionary	306,000,000	24.20%
	trust (Note 1)
	Beneficial owner	200,000	0.02%

Note:

1. UBS Trustees (BVI) Limited, the trustee of Mr. Fu’s Trust (as defined below), holds the entire issued share capital of Three-Body Holdings Ltd through its nominee, UBS Nominee Limited. Three-Body Holdings Ltd holds the entire issued share capital of Blueberry Worldwide Holdings Limited. Blueberry Worldwide Holdings Limited in turn holds 306,000,000 shares in our Company. Mr. Fu’s trust (“ Mr. Fu’s Trust ”) is a discretionary trust established by Mr. Fu (as the settlor) and the discretionary beneficiaries of which are Mr. Fu and his family members. Accordingly, each of Mr. Fu, UBS Trustees (BVI) Limited, Three-Body Holdings Ltd and Blueberry Worldwide Holdings Limited is deemed to be interested in the 306,000,000 shares held by Blueberry Worldwide Holdings Limited.

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APPENDIX

GENERAL INFORMATION

Interests in underlying shares of the Company:

					Approximate
			Number of		percentage of
			shares		shareholding
			represented	Exercise	as at Latest
	Position held within		by options or	price	Practicable
Name of director	our Group	Nature	RSUs	(US$)	Date
Mr. Mai Shi’en	Executive Director, chief	RSUs	4,050,000	Nil	0.32%
	opearting officer and acting	(Note 1)
	chief financial officer
Mr. Mao Chengyu	Non-executive Director	Options	200,000	0.35	0.02%
		(Note 2)
Ms. Yu Bin	Independent Non-executive	Options	200,000	0.35	0.02%
	Director	(Note 2)
Mr. Chan Wing Yuen, Hubert	Independent Non-executive	Options	200,000	0.35	0.02%
	Director	(Note 2)

Notes:

1. Mr. Mai Shi’en is interested in 405,000 Pre-IPO RSUs granted to him on May 22, 2014 under the Pre-IPO RSU Scheme entitling him to receive 4,050,000 shares subject to vesting.

2. Mr. Mao Chengyu, Ms. Yu Bin and Mr. Chan Wing Yuen, Hubert are each interested in 20,000 Pre-IPO options granted to each of them on May 22, 2014 under the Pre-IPO share Option Scheme entitling each of them to receive 200,000 shares subject to vesting.

Save as disclosed above, as at Latest Practicable Date, none of the Directors or chief executives of the Company had or was deemed to have any interests or short positions in the shares, underlying shares or debentures of the Company or 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 (including interests and short positions which they were taken or deemed to have taken under such provisions of the SFO), or which were required to be recorded in the register to be kept by the Company pursuant to section 352 of the SFO, or which were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

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GENERAL INFORMATION

APPENDIX

SUBSTANTIAL SHAREHOLDERS’ INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES

As at Latest Practicable Date, within the knowledge of the Directors, the following persons (other than the Directors or chief executive of the Company) had an interest or a short position in the Shares or underlying Shares of the Company which would be required to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO:

			Approximate
			percentage of
			interest as at
		Number of	Latest
		Shares or	Practicable
Name of shareholders	Nature of interests	securities held	Date
UBS Trustees (BVI) Limited	Trustee (Note 1)	306,000,000	24.20%
Three-Body Holdings Ltd	Interest in Controlled	306,000,000	24.20%
	Corporation (Note 1)
Blueberry Worldwide Holdings	Beneficial Owner (Note 1)	306,000,000	24.20%
Limited
Sina Hong Kong Limited	Beneficial Owner	300,000,000	23.73%
Ho Chi Sing	Interest in Controlled	110,000,000	8.70%
	Corporation (Note 2)
Zhou Quan	Interest in Controlled	110,000,000	8.70%
	Corporation (Note 2)
IDG-Accel China Growth Fund	Interest in Controlled	110,000,000	8.70%
GP II Associates Ltd.	Corporation (Note 2)
IDG-Accel China Growth Fund	Interest in Controlled	102,146,200	8.08%
II Associates L.P.	Corporation (Note 2)
IDG-Accel China Growth Fund	Beneficial Owner (Note 2)	102,146,200	8.08%
II L.P.

Notes:

(i) UBS Trustees (BVI) Limited, the trustee of Mr. Fu’s Trust and Mr. Fu Yanchang’s Trust (as defined below), holds the entire issued share capital of Blueberry Worldwide Holdings Limited through Three-Body Holdings Ltd. Blueberry Worldwide Holdings Limited holds 306,000,000 shares shares in our Company. Mr. Fu’s Trust is a discretionary trust established by Mr. Fu (as the settlor) and the discretionary beneficiaries of which are Mr. Fu and his family members. Accordingly, each of Mr. Fu, UBS Trustees (BVI) Limited, Three-Body Holdings Ltd and Blueberry Worldwide Holdings Limited is deemed to be interested in the 306,000,000 shares held by Blueberry Worldwide Holdings Limited. Mr. Fu Yanchang’s trust is a discretionary trust established by Mr. Fu Yanchang (as the settlor) and the discretionary beneficiaries of which are Mr. Fu Yanchang and his family members.

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GENERAL INFORMATION

APPENDIX

• (ii) IDG-Accel China Growth Fund II L.P. is wholly owned by IDG-Accel China Growth Fund II Associates L.P., which is in turn wholly owned by IDG-Accel China Growth Fund GP II Associates Ltd. Accordingly, each of IDG-Accel China Growth Fund II L.P., IDG-Accel China Growth Fund II Associates L.P. and IDG-Accel China Growth Fund GP II Associates Ltd. is deemed to be interested in the 102,146,200 shares held by IDG-Accel China Growth Fund II L.P.. Separately, IDG-Accel China Investors II L.P. is wholly owned by IDG-Accel China Growth Fund GP II Associates Ltd., therefore IDG-Accel China Growth Fund GP II Associates Ltd. is deemed to be interested in the shares held by IDG-Accel Growth Investors II L.P.

Each of Ho Chi Sing and Zhou Quan holds 50% of the issued share capital of IDG-Accel China Growth Fund GP II Associates Ltd., therefore both Ho Chi Sing and Zhou Quan are deemed to be interested in the 110,000,000 shares which IDG-Accel China Growth Fund GP II Associates Ltd. is interested in total.

Save as disclosed above, as at Latest Practicable Date, the Directors and the chief executives of the Company are not aware of any other person (other than the Directors or chief executive of the Company) who had an interest or short position in the shares or underlying shares of the Company as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO.

DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Group or any associated company of the Company (excluding contracts expiring or determinable within one year without payment of compensation, other than statutory compensation).

COMPETING BUSINESS INTEREST OF DIRECTORS

As at the Latest Practicable Date, none of the Directors or their respective close associates was interested in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group as required to be disclosed pursuant to the Listing Rules.

As at the Latest Practicable Date, no Director was materially interested in any subsisting contract or arrangement which was significant in relation to the business of the Group, and no Director was interested in any assets which had been acquired or disposed of by or leased to (or are proposed to be acquired or disposed of by or leased to) any member of the Group since the date of the latest published audited accounts of the Company.

MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since December 31, 2018, being the date to which the latest published audited financial statements of the Group were made up.

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GENERAL INFORMATION

APPENDIX

LITIGATION

So far as the Company is aware, as at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and there is no litigation or claim of material importance known to the Directors pending or threatened by or against any member of the Group.

EXPERT’S QUALIFICATION AND CONSENT

The following is the qualification of the expert who has given an opinion or advice to the Company as contained in this circular:

Name Qualification Lego Corporate Finance Limited a corporation licensed to carry out Type 6 (advising on corporate finance) regulated activity under the SFO Global Law Office a law firm qualified to practice PRC laws

The experts above have given and have not withdrawn their written consents to the issue of this circular with the inclusion of their report or opinion (as applicable) as set out in this circular and references to their names in the form and context in which they appear in this circular.

As at the Latest Practicable Date, the above experts had no shareholding, directly or indirectly, in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, the above experts had no interest, direct or indirect, in any asset since December 31, 2018, being the date to which the latest published audited consolidated financial statements of the Group were made up, have been 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 an member of the Group.

GENERAL

The English text of this circular shall prevail over its Chinese text in the case of inconsistency.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the Company’s principal place of business in Hong Kong at 31/F, Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong during normal business hours (from 9:00 a.m. to 5:30 p.m.) on any weekday, excluding public holidays, from the Latest Practicable Date up to and including the date of the EGM:

• (a) Articles of Association;

• (b) the Share Transfer Agreement;

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APPENDIX GENERAL INFORMATION

• (c) the letter from the Independent Board Committee, the text of which is set out in this circular;

• (d) the letter of advice from Lego Corporate Finance Limited to the Independent Board Committee and the Independent Shareholders, the text of which is set out in this circular; and

• (e) this circular.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

==> picture [141 x 35] intentionally omitted <==

Tian Ge Interactive Holdings Limited 天鴿互動控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1980)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the an extraordinary general meeting (the “ EGM ”) of Tian Ge Interactive Holdings Limited (the “ Company ”) will be held at 12A, Intime City Tower E, Gongshu District, Hangzhou, Zhejiang, PRC on Friday, May 24, 2019 at 3:00 p.m. to consider and, if thought fit, approve, with or without modifications, the following resolution as an ordinary resolution:

ORDINARY RESOLUTION

“ THAT :

• (a) the entering into and performance of the share transfer agreement dated January 16, 2019 (the “ Share Transfer Agreement ”) and other agreements ancillary to the the disposal of 36% equity interest of Jinhua Ruian Investment Company Limited (the “ Disposal ”), including the repurchase obligations assumed by the Group under the shareholders agreement dated January 16, 2019, be and are hereby approved, confirmed and ratified;

• (b) the Disposal be and is hereby approved, ratified and confirmed; and

• (c) any one director of the Company be and is hereby authorised to do all such acts and things and execute all such documents which he/she may consider necessary, desirable or expedient for the purpose of, or in connection with, the implementation of and giving effect to the Share Transfer Agreement and the transactions contemplated thereunder.”

By order of the Board Tian Ge Interactive Holdings Limited

Fu Zhengjun Chairman and Chief Executive Officer

Hong Kong, April 29, 2019

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NOTICE OF EXTRAORDINARY GENERAL MEETING

Registered office: Headquarter: Principal place of business in Grand Pavilion Room 322 Hong Kong: Hibiscus Way East Tower Building 1 31/F, Tower Two 802 West Bay Road No. 17-1 Chuxin Road Times Square P.O. Box 31119 Gongshu District 1 Matheson Street KY1-1205 Hangzhou, PRC Causeway Bay Cayman Islands Hong Kong

Notes:

• (i) The resolution at the EGM will be taken by poll pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”) and the results of the poll will be published on the websites of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) and the Company in accordance with the Listing Rules.

• (ii) Any member of the Company entitled to attend and vote at the EGM is entitled to appoint more than one proxy to attend and on a poll, vote instead of him. A proxy need not be a member of the Company. 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.

• (iii) In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the vote(s) of the other joint holder(s) and for this purpose seniority shall be determined as that one of the said persons so present whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof.

• (iv) In order to be valid, the form of proxy together with the power of attorney or other authority, if any, under which it is signed or a certified copy of that power of attorney or authority, must be deposited at Company’s share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited of 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for the holding of the EGM (i.e. before 3:00 p.m. on May 22, 2019) or any adjournment thereof. Delivery of the form of proxy shall not preclude a member of the Company from attending and voting in person at the EGM and, in such event, the instrument appointing a proxy shall be deemed to be revoked.

• (v) For determining the right to attend and vote at the EGM to be held on May 24, 2019, the register of members of the Company will be closed from May 21, 2019 to May 24, 2019 (both days inclusive), during which period no transfer of shares will be registered. In order to qualify for attending and voting at the EGM, all transfer of shares accompanied by the relevant share certificates and transfer forms must be lodged with the Company’s Share Registrar in Hong Kong, Computershare Hong Kong Investor Services Limited of Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration no later than 4:30 p.m. on May 20, 2019.

• (vi) Pursuant to Rule 13.39(4) of the Listing Rules, voting for the resolution set out in the notice of the EGM will be taken by poll, except where the chairman, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands.

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