Creative China Holdings Limited

Transcription

1 Creative China Holdings Limited (Incorporated in the Cayman Islands with limited liability) Stock Code: 8368 BY WAY OF PLACING Sole Sponsor Lead Manager and Underwriter

2 IMPORTANT If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice. Creative China Holdings Limited (Incorporated in the Cayman Islands with limited liability) LISTING ON THE GROWTH ENTERPRISE MARKET OF THE STOCK EXCHANGE OF HONG KONG LIMITED BY WAY OF PLACING Number of Placing Shares : 300,000,000 new Shares Placing Price : Not more than HK$0.39 per Placing Share and expected to be not less than HK$0.27 per Placing Share (payable in full upon application and subject to refund, plus brokerage fee of 1%, SFC transaction levy of % and Stock Exchange trading fee of 0.005%) Nominal value : HK$0.01 per Share Stock code : 8368 Sole Sponsor Lead Manager and Underwriter Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this prospectus, 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 in this prospectus. A copy of this prospectus having attached thereto the documents specified in the section headed Documents delivered to the Registrar of Companies and available for inspection in Appendix V to this prospectus has been registered by the Registrar of Companies in Hong Kong as required by section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance. The Securities and Futures Commission of Hong Kong and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this prospectus or any other documents referred to above. The Placing Price is expected to be fixed by an agreement between our Company and the Lead Manager (for itself and on behalf of the Underwriter) on the Price Determination Date, which is expected to be on or before 5:00 p.m. on Monday, 16 November 2015 (Hong Kong time) or such later date or time as agreed by our Company and the Lead Manager (for itself and on behalf of the Underwriter). The Placing Price is currently expected to be not more than HK$0.39 per Placing Share and not less than HK$0.27 per Placing Share. The Lead Manager (for itself and on behalf of the Underwriter) may reduce the indicative Placing Price range stated in this prospectus at any time prior to the Price Determination Date. In such case, a notice of the reduction of the indicative Placing Price range will be published on the Stock Exchange s website at and our Company s website at If, for any reason, the Placing Price is not agreed between our Company and the Lead Manager (for itself and on behalf of the Underwriter) by the Price Determination Date or such later date or time as may be agreed between our Company and the Lead Manager (for itself and on behalf of the Underwriter), the Placing will not become unconditional and will lapse. Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this prospectus, including but not limited to the risk factors set out in the section headed Risk factors in this prospectus. Prospective investors of the Placing should note that the Underwriter is entitled to terminate its obligations under the Underwriting Agreement by notice in writing given by the Lead Manager (for itself and on behalf of the Underwriter) upon the occurrence of any of the events set forth in the section headed Underwriting Grounds for termination in this prospectus at any time prior to 8:00 a.m. (Hong Kong time) on the Listing Date. 12 November 2015

3 CHARACTERISTICS OF GEM GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors. Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM. The principal means of information dissemination on GEM is publication on the internet website operated by the Stock Exchange. Listed companies are not generally required to issue paid announcements in gazetted newspaper. Accordingly, prospective investors should note that they need to have access to the Stock Exchange s website in order to obtain up-to-date information on GEM-listed issuers. i

4 EXPECTED TIMETABLE (Note 1) Expected Price Determination Date (Note 2)... atorbefore 5:00 p.m. on Monday, 16 November 2015 Announcement of the Placing Price, the level of indication of interests in the Placing and the basis of allocations to be published on the Stock Exchange s website at and our Company s website at on (Note 3)... Tuesday, 17 November 2015 Allotment of Placing Shares on... Tuesday, 17 November 2015 Deposit of share certificates for the Placing Shares into CCASS on (Notes 4 and 5)... Tuesday, 17 November 2015 Dealings in the Shares on GEM to commence at 9:00 a.m. on... Wednesday, 18 November 2015 Notes: 1. In this prospectus, unless otherwise stated, all times and dates refer to Hong Kong local times and dates. If there is any change to the above expected timetable, our Company will make a separate announcement on the Stock Exchange s website at and our Company s website at 2. The Price Determination Date is expected to be at or before 5:00 p.m. on Monday, 16 November 2015 (or such later date or time as agreed between our Company and the Lead Manager (for itself and on behalf of the Underwriter). If the Lead Manager (for itself and on behalf of the Underwriter) and our Company are unable to reach an agreement on the Placing Price on the Price Determination Date, or such later date or time as agreed between our Company and the Lead Manager, the Placing will not become unconditional and will lapse. 3. None of our Company s website or any of the information contained in our Company s website forms part of this prospectus. 4. The share certificates are expected to be issued in the name of HKSCC Nominees Limited or in the name of the placee(s) or their agent(s) as designated by the Underwriter and/or the placing agents. Share certificates for the Placing Shares to be distributed via CCASS are expected to be deposited into CCASS on Tuesday, 17 November 2015 for credit to the respective CCASS participant s stock accounts or CCASS investor participants stock accounts designated by the Underwriter, the placing agents, the placees or their agents, as the case may be. Our Company will not issue any temporary documents or evidence of title. 5. All share certificates will only become valid certificates of title when the Placing has become unconditional in all respects and the Underwriting Agreement has not been terminated in accordance with its terms prior to 8:00 a.m. (Hong Kong time) on the Listing Date. Details of the structure of the Placing, including the conditions thereto, are set out in the section headed Structure and conditions of the Placing in this prospectus. ii

5 CONTENTS This prospectus is issued by our Company solely in connection with the Placing and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the Placing Shares offered by this prospectus. This prospectus may not be used for the purpose of, and does not constitute, an offer to sell or a solicitation of an offer in any other jurisdiction or in any circumstances. You should rely only on the information contained in this prospectus to make your investment decision. Our Company, the Sponsor, the Lead Manager and the Underwriter have not authorised anyone to provide you with information that is different from what is contained in this prospectus. Any information or representation not made or contained in this prospectus must not be relied on by you as having been authorised by our Company, the Sponsor, the Lead Manager, the Underwriter, any of their respective directors, officers, employees, advisers, agents, representatives or affiliates or any other persons or parties involved in the Placing. The contents of our Company s website at which is the official website of our Group, do not form part of this prospectus. Page CHARACTERISTICS OF GEM... EXPECTED TIMETABLE.... CONTENTS... i ii iii SUMMARY... 1 DEFINITIONS GLOSSARY FORWARD-LOOKING STATEMENTS RISK FACTORS WAIVERS FROM STRICT COMPLIANCE WITH THE GEM LISTING RULES INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING DIRECTORS AND PARTIES INVOLVED IN THE PLACING iii

6 CONTENTS Page CORPORATE INFORMATION INDUSTRY OVERVIEW REGULATORY OVERVIEW HISTORY, REORGANISATION AND CORPORATE STRUCTURE BUSINESS CONTRACTUAL ARRANGEMENTS RELATIONSHIP WITH CONTROLLING SHAREHOLDERS CONNECTED TRANSACTIONS DIRECTORS AND SENIOR MANAGEMENT SUBSTANTIAL SHAREHOLDERS SHARE CAPITAL THE CORNERSTONE PLACING FINANCIAL INFORMATION FUTURE PLANS AND USE OF PROCEEDS UNDERWRITING STRUCTURE AND CONDITIONS OF THE PLACING APPENDICES I. Accountants report... I-1 II. Unaudited pro forma financial information... II-1 III. Summary of the constitution of the Company and Cayman Company Law... III-1 IV. Statutory and general information... IV-1 V. Documents delivered to the Registrar of Companies and available for inspection.... V-1 iv

7 SUMMARY This summary aims to give you an overview of the information contained in this prospectus. As this is a summary, it does not contain all the information that may be important to you. You should read the whole prospectus before you decide to invest in the Placing Shares. There are risks associated with any investment. Some of the particular risks in investing in the Placing Shares are set out in the section headed Risk factors in this prospectus. You should read that section carefully before you decide to invest in the Placing Shares. OVERVIEW Our business Our Group was established in 2002 and is principally engaged in businesses of (i) program production which covers the production of television and online broadcasting program content and (ii) event organisation in the PRC. Our main customers include SARFT Group comprising SARFT Program Production Centre and its wholly-owned subsidiary namely 1905 (Beijing) Network Technology Co. Ltd., online platforms, advertising agents, public relations companies and brand owners in the PRC. Our produced programs are broadcasted on well-known television channels such as CCTV6/movie channel and online platforms such as 1905 Film Net. We provide our services primarily through our PRC Operating Entities. According to the Ipsos Report, we ranked the fourth among event organisers in the event organisation industry in the PRC in terms of relevant revenue in For details, please refer to the section headed Industry overview Competitive landscape in the event organisation industry in the PRC in this prospectus. Program production Our program production business covers the production of content for television and online broadcasting programs, which we began in the PRC since Programs produced by us generally include arts and entertainment programs (excluding television drama series and films) such as film introductory and variety programs, micro-films, television guides and corporate promotional videos. We provide one-stop production services based on customers needs including program pre-planning, content creation, filming, editing, promotion and the overall management and coordination of the program production process and/or any of such services. Some of our signature programs during the Track Record Period include Film Star Podcast and Studio on the Spot which are shown on CCTV6/movie channel and on 1905 Film Net. Our production of programs is conducted by five of our PRC Operating Entities namely Joy Star, New Image, Great Wise, Emphasis Media and Starry Knight, which hold the Permit to Produce and Distribute Radio or Television Programs. According to the Ipsos Report, our Group s market share in the television broadcasting content production industry (excluding films, micro-films and television drama series) in the PRC was approximately 0.02% in

8 SUMMARY Event organisation We began offering event organisation services in the PRC since Our business of event organisation involves the provision of a variety of services to the hosts of the events in tailor-made packages including planning, undertaking, organising and/or managing the events. Depending on customers needs, we may design the flow and plan of the events, source and coordinate with different working groups such as performers and designing firms in respect of the stage, sound and visual effects, and/or provide any of the said services. Events that we provide organisation services include public events such as awards ceremonies, film promotional events, commercial events and private events. Some of the events are large-scale and broadcasted on television channels with nationwide coverage and with high viewership ratings, especially on CCTV6/movie channel. Our engagement in these events at a national level is a testament of the quality of our services. Some of our milestone events during the Track Record Period and up to the Latest Practicable Date include the 29th and 30th Golden Rooster Awards Ceremony 29 30, the 32nd People s Hundred Flowers Awards Ceremony 32, the 13th and 14th Lily Film Awards Ceremony and the premiere ceremony for the film Transformers 4 in the PRC. Our event organisation business is conducted by two of our PRC Operating Entities namely Starry Knight and Joy Star which hold the Commercial Performance Licence. According to the Ipsos Report, our Group s market share in the event organisation industry in the PRC was approximately 0.5% in During the Track Record Period, all of our revenue was generated from the PRC. The following table sets forth a breakdown of our revenue by business segments during the Track Record Period: Year ended 31 December Six months ended 30 June RMB 000 % RMB 000 % RMB 000 % RMB 000 % (unaudited) Program production segment Production income 28, , , , Advertising income 2, , , , , , Event organisation segment Service income 17, , , , Advertising income 3, , , , , , Total revenue 48, , , ,

9 SUMMARY Our revenue increased from approximately RMB48.5 million for the year ended 31 December 2013 to approximately RMB56.1 million for the year ended 31 December 2014, representing an increase of approximately 15.8% which was mainly due to the increased service income derived from organisation of awards ceremonies, film premieres and press conferences and commercial events and the increased advertising income under event organisation segment. For the six months ended 30 June 2015, our revenue was approximately RMB21.5 million, representing a slight decrease of approximately 8.8% from approximately RMB23.6 million for the corresponding period of last year. The decrease was mainly attributable to the rescheduling of an annual film awards ceremony hosted by SARFT Group from the first half to the second half of As at the Latest Practicable Date, discussion on engagement or preparation of the rescheduled event has not commenced yet and we are awaiting further notice from the customer, which is beyond our Company s control. In the event that it would not take place in 2015, our results of operations for the year may be affected. However, up to the Latest Practicable Date, we did not receive any notice from the customer for potential cancellation of the event or change of event service provider. We will keep liaising with the customer for further update on the engagement and preparation of the event. In the meantime, we will continue to exercise manpower to seek for new business opportunity to minimise the impact if such event would not take place. The following table sets forth a breakdown of our revenue derived from program production segment and the number of programs or advertisement contracts, by service types, during the Track Record Period: Year ended 31 December Six months ended 30 June No. of programs/ advertisement contracts RMB 000 % No. of programs/ advertisement contracts RMB 000 % No. of programs/ advertisement contracts RMB 000 % No. of programs/ advertisement contracts RMB 000 % (unaudited) Production income Recurring programs Film introductory and variety programs 15, ,356 10, , , Television guides 7, N/A (Note) 7, N/A (Note) 3, N/A (Note) 2, N/A (Note) Micro films 4, , , , N/A 20, N/A 7, N/A 8, N/A One-off programs 1, , , , , N/A 27, N/A 8, N/A 9, N/A Advertising income Advertisements 2, , Total segment revenue 31, N/A 29, N/A 8, N/A 9, N/A Note: During the Track Record Period, the program would be broadcasted around 16 times a day, with duration of 2-5 minutes each which we produced at a fixed annual fee for a capped number of hours of the program. The programs we produced are categorised into recurring programs and one-off programs. For details regarding programs produced by us, please refer to the section headed Business Description of programs and events Program production in this prospectus. 3

10 SUMMARY The following table sets forth a breakdown of our revenue derived from event organisation segment and the number of events or advertisement contracts, by service types, during the Track Record Period: Year ended 31 December Six months ended 30 June RMB 000 % No. of events/ advertisement contracts RMB 000 % No. of events/ advertisement contracts RMB 000 % No. of events/ advertisement contracts RMB 000 % No. of events/ advisement contracts (unaudited) Service income Awards ceremonies 7, , , Film promotional events 2, , Commercial events 4, , , , Private events 4, , , , Others , , , , , Advertising income Advertisements 3, , Total segment revenue 17, N/A 26, N/A 15, N/A 12, N/A For details regarding event organisation services which we provided, please refer to the section headed Business Description of programs and events Event organisation in this prospectus. Our business and revenue model The following chart summarises the business and revenue model of our program production business: Services providers Services for our production Service Fee Main services providers include: Production service providers Visual and graphic designers audio and lighting system video editing Our Group Advertising Fee Content for Television and online programs Advertising agents and brand owners Products and logo appearances Production Fee Television operating entities, online platform, corporate clients Our main services include: Program pre-planning and content creation Filming Casting Post-production Supervision over service providers Production income: In general we generate our production income by charging our customers a fixed production fee for producing content for television and online programs. Advertising income: We generate revenue from the advertisements offered by advertising agents and brand owners for product or logo appearances in the programs we produced. 4

11 SUMMARY The following chart summarises the business and revenue model of our event organisation business: Service providers Services Service fee Main services providers include: Actors/actors agency Equipment providers Visual and graphic designers Audio and lighting system Stage construction Our Group Advertising fee Events organisation services Our main services include: Service fee Event planning Coordination and organisation Stage design Choreography, musical selection Supervision over service providers Products and logo appearances Advertising agents and public relation companies Hosts of events Service income: In general we generate our service income by charging our customers a fixed service fee for providing services related to event organisation. Advertising income: We generate revenue from the advertisements offered by advertising agents and public relations companies for displaying products or logos in the events for which we are engaged. OUR MAJOR CUSTOMERS AND SUPPLIERS Customers During the Track Record Period, our five largest customers were mainly SARFT Group including SARFT Program Production Centre and 1905 (Beijing) Network Technology Co. Ltd., online platforms, advertising agents and other corporate customers. For the years ended 31 December 2013 and 2014 and the six months ended 30 June 2015, the revenue from our five largest customers were approximately RMB47.8 million, RMB48.1 million and RMB19.4 million, which accounted for approximately 98.6%, 85.6% and 90.3% of our total revenue respectively. Our relationship with SARFT Group Our largest customer during the Track Record Period was SARFT Group including SARFT Program Production Centre and 1905 (Beijing) Network Technology Co. Ltd. where our revenue derived from such customer was approximately RMB39.8 million, RMB38.9 million and RMB12.1 million representing approximately 82.0%, 69.2% and 56.5% of our total revenue for the years ended 31 December 2013 and 2014 and the six months ended 30 June 2015 respectively. We have been working with SARFT Program Production Centre since 2003 and 1905 (Beijing) Network Technology Co. Ltd. since Our major programs broadcasted on CCTV6/movie channel include Film Star Podcast and Studio on the Spot. We recognise that reducing our reliance on major customer is the key to achieve sustainable long-term growth of our business. With a view to reducing our reliance on SARFT Group, we have adopted a number of measures including engaging new customers and diversifying customer base, entering into cooperation agreement with a provincial television station, expanding our revenue from online platforms, providing integrated marketing services and applying our transferable skills in exploring business opportunities. Accordingly, while our 5

12 SUMMARY revenue derived from SARFT Group remained generally stable at approximately RMB39.8 million and RMB38.9 million for the years ended 31 December 2013 and 2014 respectively, our portion of revenue generated from it decreased from approximately 82.0% for the year ended 31 December 2013 to approximately 69.2% for the year ended 31 December 2014 of our total revenue, which reflects our effort in engaging new customers and diversifying our customer base. Details about our relationship with SARFT Group are set out under the section headed Business Customers Our relationship with SARFT Group in this prospectus. Suppliers Our suppliers mainly include sub-contractors conducting part of program production or providing stage construction, audio, lighting, visual, video shooting and fire-work services, and suppliers such as production crew, actors and performers (or their agents). For details regarding our sub-contractors, please refer to section headed Business Sub-contractors in this prospectus. During the Track Record Period, our five largest suppliers were mainly sub-contractors mostly conducting part of the program production or providing stage construction, audio, lighting, visual, video shooting and fire-work services. For the years ended 31 December 2013 and 2014 and the six months ended 30 June 2015, costs related to our five largest suppliers in aggregate were approximately RMB5.8 million, RMB3.1 million and RMB1.9 million, which accounted for approximately 18.9%, 10.9% and 17.0% of our direct costs respectively, while the costs related to the largest supplier were approximately RMB1.7 million, RMB0.7 million and RMB0.5 million, which accounted for 5.5%, 2.5% and 4.3% of our direct costs respectively. COMPETITIVE LANDSCAPE According to the Ipsos Report, the market of television broadcasting content (excluding films, micro-films and television drama series) production is a highly competitive and fragmented industry in the PRC with the top five players taking up only around 1.44% of the total market size while we take around 0.02% of the total market share. Market players are television stations with internal production teams and affiliated production houses, online video networks with internal production teams and independent television broadcasting content production houses. According to the Ipsos Report, event organisation industry in the PRC is also highly fragmented, with the top five players occupying only about 2.9% of total market size in the industry. We compete with other event organisation service providers. We ranked fourth among the top five event organisation companies in the PRC in terms of relevant revenue in 2014 and accounted for around 0.5% of the overall market share according to the Ipsos Report. The majority of event organisers holding the Commercial Performance Licence engage in mid-and-small scale event planning due to the requirements of large capital investment, a professional event organisation team and rich experience for large scale events. OUR COMPETITIVE STRENGTHS We believe that the following competitive strengths of our Group have contributed to our success: (i) experienced management team; (ii) deep understanding and local experience in the PRC market and high quality of our production and services; (iii) well-positioned to 6

13 SUMMARY combine and leverage on our experience, market knowledge, resources and customer relationship in the program production and event organisation businesses; and (iv) established track record of cooperation with a variety of suppliers and subcontractors enhances the control of the quality of our services. OUR STRATEGIES We intend to strengthen our position and expand revenue sources by implementing the following business strategies: (i) expanding our businesses in program production and event organisation and related services; (ii) exploring additional and diversified revenue streams to share the advertising profits of our customers generated from the television and online programs produced by us in addition to charging a fixed production fee; (iii) expanding our spectrums of program categories to be broadcasted online and related services; and (iv) setting up a studio for shooting programs, holding promotional events for brand owners and other related uses. FUTURE PLANS AND USE OF PROCEEDS Based on a Placing Price of HK$0.33 per Placing Share (being the mid-point of the indicative Placing Price range), we estimate that the net proceeds from the Placing (after deducting underwriting fees and other expenses in connection with the Placing) will be approximately HK$76.1 million. We intend to allocate the net proceeds from the Placing for the purposes and in the amounts set out below: approximately 50% of the net proceeds, representing approximately HK$38.0 million, for expanding our spectrums of video categories to be broadcasted online and related services; approximately 25% of the net proceeds, representing approximately HK$19.0 million, for exploring additional and diversified revenue streams to share the advertising profits of our customers generated from the television and online programs produced by us in addition to charging a fixed production fee; approximately15% of the net proceeds, representing approximately HK$11.5 million, for setting up a studio for shooting programs, holding promotional events for brand owners and other related uses; and approximately 10% of the net proceeds, representing approximately HK$7.6 million, for expanding our businesses in program production and event organisation and related services, and as general working capital. SHAREHOLDER INFORMATION Upon completion of the Capitalisation Issue and the Placing, Mr. Yang and Ms. Mu, via Guang Rui collectively hold approximately 79.71% of the issued share capital of Youth Success, which will own approximately 33.90% of the issued share capital of our Company, and Mr. Li Lin via Alpha Master, Ms. Yang Qi via Qiao Tian and Mr. Wang Yong via Goldbless will own approximately 5.28%, 2.25% and 13.13% of the issued share capital of 7

14 SUMMARY our Company. By virtue of the Shareholders Voting Agreement, Mr. Yang and Ms. Mu are entitled to control the voting rights attached to the all the Shares held by Alpha Master, Qiao Tian and Goldbless and thus will be collectively entitled to control approximately 54.57% of the issued share capital of our Company upon the Listing, taking no account of any Shares to be issued pursuant to the exercise of any option that may be granted under the Share Option Scheme. Mr. Yang and Ms. Mu are the parents of Mr. Philip Yang who is our executive Director, the chairman and the chief executive officer of our Group. PRINCIPAL RISK FACTORS There are risks associated with any investment. Set out below are some of the major risks that may materially and adversely affect us: Our cooperative relationship with SARFT Group has been, and is expected to continue to be, critical to our business and financial performance. We receive a substantial portion of our revenue from a limited number of customers, and the loss of these customers could materially and adversely impact our business, results of operations and financial conditions. Our income is generally project based and non-recurring in nature, and we may not be awarded project contracts under fierce competition. If our cost estimates fail to account for cost factors arising from any unforeseen future and unanticipated events or we fail to control our costs as estimated, our results of operations would be adversely affected. We may not be able to successfully implement our strategies, or achieve our business objectives. We rely on the Contractual Arrangements with the PRC Contractual Entities for our operations in China, which may not be as effective in providing operational control as direct ownership. The risks mentioned above are not the only significant risks that may affect our business and results of operations. As different investors may have different interpretations and standards for determining materiality of a risk, you are cautioned that you should carefully read the entire section headed Risk factors in this prospectus before you decide to invest in the Shares. SELECTED FINANCIAL INFORMATION The tables below present the selected financial information of our Group for the Track Record Period, which set forth under the section headed Financial information in this prospectus and should be read in conjunction with the accountants report set out in Appendix I to this prospectus. 8

15 SUMMARY Highlights of consolidated statements of comprehensive income Year ended 31 December Six months ended 30 June RMB 000 RMB 000 RMB 000 RMB 000 (unaudited) Revenue 48,479 56,144 23,576 21,499 Gross profit 17,703 27,782 9,952 10,510 Profit/(loss) before income tax 2,804 9,205 (113) (3,202) Profit/(loss) and total comprehensive income for the year/period attributable to owners of our Company 1,972 6,493 (1,210) (4,017) For the six months ended 30 June 2014 and 2015, we recorded net losses of approximately RMB1.2 million and RMB4.0 million respectively, which were principally due to the seasonality nature of our business and the non-recurring listing expenses incurred in the first half of We usually generate larger portion of revenue during the second half of each year due to the seasonality nature of our business, particularly for our event organisation segment where several large-scale film awards ceremonies that we were engaged consecutively as event organisation service provider are normally scheduled in the second half of each year. In addition, advertising agents and brand owners generally intend to place advertisements in large-scale or film related events that are more frequently held in the second half of a year, which would affect our advertising income thereby. Save for the above factors to our interim results, the higher net loss for the six months ended 30 June 2015 of our Group comparing to the results of 2014 for the same period, was principally due to (i) the 14th Lily Film Awards Ceremony was held in the first half of 2014, while the 15th of this award ceremony in 2015 has been rescheduled from the first half to the second half of this year; (ii) a fee received by us in early 2014 to compensate costs incurred for services already rendered in our preparation work for the 15th China Huabiao Film Awards Ceremony which was eventually cancelled by the customer and (iii) the listing expenses incurred during the same period for the preparation of the Listing with approximately RMB5.7 million. Assuming all other factors remain constant and exclusion of listing expenses, we would record net profit for the six months ended 30 June Summary of current assets and liabilities As at 31 December As at 30 June RMB 000 RMB 000 RMB 000 Current assets 14,249 23,898 33,576 Current liabilities 14,797 15,927 12,152 Net current (liabilities)/assets (548) 7,971 21,424 9

16 SUMMARY Key financial ratios As at/ for the As at/ for the year ended 31 December six months ended 30 June Gross profit margin 36.5% 49.5% 48.9% Net profit margin 4.1% 11.6% (18.7)% Return on total assets 5.8% 15.3% (7.9)% Return on equity 13.1% 27.6% (11.2)% Current ratio Quick ratio Gearing ratio N/A N/A N/A Debt to equity ratio N/A N/A N/A Interest coverage N/A Note: N/A represents the ratio is not applicable to our Company. Our gross profit margins were approximately 36.5%, 49.5% and 48.9% while our net profit margins were approximately 4.1%, 11.6% and -18.7% for the years ended 31 December 2013 and 2014 and the six months ended 30 June 2015 respectively. The higher net profit margin for the year ended 31 December 2014 was principally in line with the higher gross profit margin for the year, which was due to the reduction of our produced programs with relatively lower profitability and the increased portion of revenue derived from the advertising income for the year ended 31 December The decrease in net profit margin for the six months ended 30 June 2015 was mainly due to non-recurring listing expenses incurred by us for the preparation of the Listing. LEGAL COMPLIANCE During the Track Record Period, we did not fully comply with the applicable PRC laws and regulations in respect of social insurance contributions and housing provident fund contributions. For details regarding the non-compliance incidents, the remedial measures taken, the relevant risks and internal control measures adopted, please refer to the sections headed Risk factors Any enforcement action taken against us for non-compliance incidents may materially and adversely affect our business. and Business Regulatory compliance Non-compliance incidents Non-compliance relating to social insurance and housing provident fund contributions in this prospectus. CONTRACTUAL ARRANGEMENTS We conduct the business of program production and event organisation in the PRC. The PRC Contractual Entities are key operating entities within our Group. As at the Latest Practicable Date, all of the PRC Contractual Entities are holders of the Permit to Produce and Distribute Radio or Television Programs, and Starry Knight and Joy Star operate as a performance brokerage enterprise with the relevant license. Under the applicable PRC laws and regulations, foreign investors are 10

17 SUMMARY prohibited from holding equity interest in the PRC Contractual Entities, and we are not able to acquire and hold the equity interest in the PRC Contractual Entities. Details of the applicable PRC laws and regulations are set forth under the sections headed Regulatory overview - PRC laws and regulations relating to foreign investment and Regulatory overview PRC laws and regulations relating to production of television programs, performance brokerage and large-scale mass activities in this prospectus. In order to achieve our Group s business purposes and be in line with common practice in industries in the PRC subject to foreign investment restrictions, we have adopted the Contractual Arrangements to exercise and maintain control over the operations of the PRC Contractual Entities, obtain their entire economic benefits and prevent leakage of the assets and values of the PRC Contractual Entities to their shareholders in the PRC. Accordingly, the Contractual Arrangements allow the PRC Contractual Entities financials and results of operations to be consolidated into our financial statements as if they are wholly-owned subsidiaries of our Group. The following diagram illustrates the flow of economic benefit from the PRC Contractual Entities to our Group stipulated under the Contractual Arrangements: (1) Powers of Attorney (2) Exclusive Option Agreements (3) Equity Interest Pledge Agreements (4) Business Operating Agreements (5) Exclusive Technology Consultation and Service Agreements (6) Spouse Undertakings New Talent Media Relevant Shareholders (Note) Service Service fee 100% The PRC Contractual Entities Direct legal and beneficial ownership in the equity interest Contractual relationship Note: Relevant Shareholders are Mr. Yang, New Element, Mr. Li Lin, Ms. Yang Qi, Mr. Sun Rui, Ms. Yang Jianping, Mr. Guan Rongliang, Mr. Yang Shiyuan and Mr. Wan Shuxing, being the registered shareholders of Emphasis Media; Mr. Yang and Ms. Mu, being the registered shareholders of Joy Star; and Emphasis Media, being the registered shareholder of Starry Knight, New Image and Great Wise. 11

18 SUMMARY On 19 January 2015, the Ministry of Commerce of the People s Republic of China (MOFCOM) circulated Foreign Investment Law of the People s Republic of China (Draft for Comment) ( Draft Foreign Investment Law ) and Notes to the Foreign Investment Law of the People s Republic of China (Draft for Comment) ( Notes ), which contains proposed changes to the PRC foreign investment legal regime and the treatment of the variable interest entity structure, and invited comments from the general public on the Draft Foreign Investment Law. According to the Notes, foreign investments refer to foreign investors direct or indirect control of equity interests in PRC enterprises through structured contracts, trust or other ways. As at the Latest Practicable Date, the Draft Foreign Investment Law has yet to undergo revisions and further legislative procedures and therefore is not legally binding for enforcement under the Legislative Law of the PRC. According to the Draft Foreign Investment Law, where any foreign investor (no matter whether it is controlled by PRC investors or not) directly or indirectly holds shares, equities, properties or other interests or voting rights in any domestic company, such domestic company is not allowed to invest in any sector set out in the Catalogue of Prohibitions ( Prohibited List ), unless otherwise specified by the State Council. Where the foreign investors who are under the control of PRC investors, engage in any investment as set out in the Catalogue of Restrictions ( Restricted List ), they may when applying for access permission, submit documentary evidence to apply for identifying their investment as controlled by PRC investors. For details of the Draft Foreign Investment Law and our PRC Legal Advisers opinions on the Draft Foreign Investment Law, please refer to the sections headed Risk factors Any changes of the PRC foreign investment legal regime may, materially and adversely affect our Group s operations and the Contractual Arrangements and Contractual Arrangements Potential changes of the PRC foreign investment legal regime in this prospectus. RECENT DEVELOPMENT SUBSEQUENT TO TRACK RECORD PERIOD Subsequent to the Track Record Period and up to the Latest Practicable Date, our business model has remained unchanged and we continue to focus on the businesses of program production and event organisation in the PRC. There were no material fluctuations recorded in terms of our revenue and gross profit compared to the Track Record Period. With a view to diversifying our revenue streams and reducing our reliance on our major customer, we entered into a three-year cooperation agreement with a provincial television station in the PRC on 9 May 2015 to produce a music program which is expected to be a seasonal reality show. We will be mainly responsible for planning and producing the content of the program, while both parties will collaborate in inviting artistes to participate in the show, soliciting sponsors and promoting the show. According to the cooperation agreement, the expected amount of investment for the first season of this program will be not less than RMB45 million and we will contribute not less than 50% of investment amount to the program. Since the project was kicked off in August 2015, the parties have been in preparation for production of the first season of the program and have also been soliciting advertisers and sponsors for the music program together. In September 2015, we obtained 12

19 SUMMARY authorisation from the cooperative partner to enter into agreements with advertisers and sponsors for the project on its behalf. As at the Latest Practicable Date, the advertisements and sponsorships secured by the cooperative partner and us are expected to be sufficient to cover the total estimated production costs of the first season of the program of approximately RMB45 million. In light of such satisfactory sponsorship sourcing progress, the cooperative partner and we have reached the consensus that our Company s investment obligation for the first season of the program pursuant to the cooperation agreement has been discharged. For the subsequent seasons, the investment arrangement will be further negotiated by both parties. The production of the program is expected to take place before the end of 2015 and the program will be broadcasted during the summer of Although the parties have tentatively agreed upon the timetable of production and the show, our Company cannot assure the project under the three-year cooperation agreement will be successfully implemented, be implemented on schedule, achieve profit margins as high as our historical profit margin level, or in a profitable manner and our Group may not be able to achieve the desired economic results and commercial success. As a result, our business, financial conditions and results of operation may be materially and adversely affected. For further details regarding this cooperation agreement and the progress of the project thereunder, please refer to the section headed Business Customers Reducing reliance on SARFT Group and for the risks and uncertainties in the implementation of the project, please refer to the section headed Risk factors The project under the three-year cooperation agreement with a provincial television station may be delayed, scaled down, terminated early or may not be implemented at all, or may not achieve the expected economic or commercial results and our financial results may be adversely affected in this prospectus. Subsequent to the Track Record Period and up to the Latest Practicable Date, save as disclosed in the paragraph headed Listing expenses in this section, we did not have any significant non-recurrent items in our consolidated financial statements. Our Directors confirm that, up to the date of this prospectus and save as disclosed above and in the paragraph headed Listing expenses in this section, there has been no material adverse change in our finance and trading position or prospects since 30 June 2015, and there is no event since 30 June 2015 which would materially affect the information shown in the accountants report, the text of which is set out in Appendix I to this prospectus. DIVIDEND DISTRIBUTION During the Track Record Period and up to the Latest Practicable Date, we did not declare nor pay any dividends to shareholders of our Company. The declaration, payment and amount of dividends will be at the discretion of our Directors and will be dependent upon our earnings, financial conditions, cash requirements and availability, future prospects, contractual restrictions, applicable laws and provisions and other relevant factors. To the extent profits are distributed as dividends, such portion of profits will not be available to be reinvested in our operations. We do not currently have a dividend policy or intention to pay dividends, thus there is no assurance as to the amount of dividend payment, if any, or the timing of any dividend payment. We do not currently have any predetermined dividend distribution ratio. 13

20 SUMMARY PLACING STATISTICS Based on the indicative Placing Price of HK$0.27 per Placing Share Based on the indicative Placing Price of HK$0.39 per Placing Share Number of Placing Shares 300,000, ,000,000 Board lot 10,000 10,000 Market capitalisation (1) HK$324,000,000 HK$468,000,000 Pro forma adjusted net tangible asset value per Share (2) HK$0.09 HK$0.11 Notes: (1) The calculation of market capitalisation at the Placing Price is based on 1,200,000,000 Shares expected to be in issue immediately upon completion of the Capitalisation Issue and the Placing. (2) The consolidated tangible asset per Placing Share is based on the consolidated net tangible asset attributable to equity owners of our Company, estimated net proceeds from the Placing after deduction of the estimated underwriting fees and other related expenses payable by our Company, and 1,200,000,000 Shares expected to be in issue immediately following completion of the Capitalisation Issue and the Placing. LISTING EXPENSES Our listing expenses consist of fees paid or to be paid to various professionals for audit, financial advisory, legal and other professional services in relation to the preparation of the Listing. During the Track Record Period, we recorded listing expenses of nil, approximately RMB475,000 and RMB5.7 million respectively, which were charged to our income statement for the corresponding periods. We expect to incur a total of HK$22.9 million in listing expenses in connection with the Listing, of which HK$5.7 million is expected to be further charged to the income statement of our Group for the year ending 31 December Our Directors would like to emphasise that such cost is a current estimate for reference only, and the final amount to be recognised to the income statement of our Group or to be capitalised is subject to adjustment based on audit and the subsequent changes in variables and assumptions. Potential investors should note that the financial performance of our Group for the year ending 31 December 2015 is expected to be adversely affected by the estimated non-recurring listing expenses mentioned and may or may not be comparable to the financial performance of our Group in the past. For the associated risk, see Risk Factors Risks relating to the Shares and the Placing Risk relating to the financial results of our Group for the year ending 31 December 2015 due to non-recurring listing expenses in this prospectus. DISCLOSURE REQUIRED UNDER THE GEM LISTING RULES Save as disclosed in the section headed Financial information in this prospectus, our Directors have confirmed that, as at the Latest Practicable Date, there were no circumstances that would give rise to a disclosure requirement under Rules to of the GEM Listing Rules. 14

21 DEFINITIONS In this prospectus, unless the context otherwise requires, the following expressions have the following meanings: Alpha Master Articles of Association or Articles Alpha Master Global Limited, a company incorporated in the BVI with limited liability on 3 April 2014, wholly-owned by Mr. Li Lin articles of association of our Company adopted on 3 November 2015, as amended from time to time, a summary of which is set out in the section headed Summary of the constitution of the Company and Cayman Company Law in Appendix III to this prospectus associate(s) has the same meaning as defined under the GEM Listing Rules Audit Committee Board Business Day BVI CAGR CAPA Capitalisation Issue CCASS CCASS Clearing Participant the audit committee of our Board the board of Directors a day (other than a Saturday, Sunday or public holiday) on which licensed banks in Hong Kong are generally open for normal banking business the British Virgin Islands compound annual growth rate China Association of Performing Art the issue of Shares to be made upon capitalisation of certain sum standing to the credit of the share premium account of our Company referred to in the paragraph headed Written resolutions of the Shareholders of our Company passed on 3 November 2015 in Appendix IV to this prospectus the Central Clearing and Settlement System established and operated by HKSCC a person admitted to participate in CCASS as a direct clearing participant or general clearing participant CCASS Custodian Participant a person admitted to participate in CCASS as a custodian participant 15