SMI Culture & Travel : INSIDE INFORMATION MEMORANDUM OF UNDERSTANDING IN RELATION TO POSSIBLE ACQUISITIONS

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

SMI Culture & Travel Group Holdings Limited

星 美文化 旅遊 集團控 股有 限公司

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)

(Stock Code: 2366)

INSIDE INFORMATION

MEMORANDUM OF UNDERSTANDING

IN RELATION TO POSSIBLE ACQUISITIONS

This announcement is made by the Company pursuant to Rule 13.09(2) of the Listing Rules and the Inside Information Provisions (as defined under the Listing Rules) under Part XIVA of the SFO.

THE MOU

The Board is pleased to announce that on 11 September 2019 (after trading hours of the Stock Exchange), the Company entered into the MOU with the Vendor in relation to the Possible Acquisition.

GENERAL

In the event that the Possible Acquisitions materialises, it may constitute a notifiable and connected transaction of the Company under the Listing Rules. Further announcement(s) in relation to the Possible Acquisitions will be made by the Company as and when appropriate in compliance with the Listing Rules.

There is no assurance that any transactions referred to in this announcement will materialise or eventually be consummated. Shareholders of the Company and potential investors should note that the Possible Acquisitions are subject to, among other things, the entering into of a formal agreement, major terms and conditions of which are yet to be agreed. The Possible Acquisitions may or may not proceed and the final structure and terms of the Possible Acquisitions, which are still subject to the further negotiations between the parties, have yet to be finalised and may deviate from that set out in the MOUs. Shareholders of the Company and potential investors are advised to exercise caution when dealing in the shares of the Company.

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This announcement is made by SMI Culture & Travel Group Holdings Limited (the ''Company'' , together with its subsidiaries and associated corporations, the ''Group'') pursuant to Rule 13.09(2) of the Rules Governing the Listing of Securities (the ''Listing Rules'') on The Stock Exchange of Hong Kong Limited (the ''Stock Exchange'') and the Inside Information Provisions (as defined under the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the ''SFO'').

The board (the ''Board'') of directors (''Director(s)'') of the Company is pleased to announce that on 11 September 2019 (after trading hours of the Stock Exchange), the Company (the "Purchaser") entered into ( i ) a memorandum of understanding (the ''MOU 1'') with Poly Culture Group Corporation Limited ( "Vendor 1") in relation to a mutual intention on a possible acquisition (the ''Possible Acquisition 1'') from Vendor 1 of all or certain equity interests of 保 利 影 業 投 資 有 限 公 司 (Poly Film Investment Corporation Limited*) (the ''Target Company 1''), which is beneficially owned by Vendor1, by the Company (or its d e s i g n a t e d wholly-owned subsidiary); and (ii) a memorandum of understanding ( the ''MOU 2'', together with MOU 1, the "MOUs") with SMI Holdings Group Limited ("Vendor 2"), together with Vendor 1, the "Vendors") in relation to a mutual intention on a possible acquisition (the ''Possible Acquisition 2'', together with Possible Acquisition 1, the "Possible Acquisitions") from Vendor 2 of all equity interests of 成都潤運文化傳播有限公司 (Chengdu Runyun Culture Broadcasting Limited*), which is indirectly beneficially owned by Vendor 2, and all other cinemas interests in the People's Republic of China ("PRC") beneficially owned by Vendor 2 (the ''Target Company 2'',together with the Target Company 1, the "Target Companies"), by the Company (or its wholly owned subsidiary), respectively. Details of the MOUs are set out below:

THE MOUs
MOU 1
Date:	11	September 2019 (after trading hours of the Stock Exchange)
Parties:	(1)	Poly Culture Group Corporation Limited, as Vendor 1; and
	(2)	the Company (or its designated wholly-owned subsidiary), as

Purchaser.

To the best knowledge, information and belief of the Directors after making all reasonable enquiries, Vendor 1 and its ultimate beneficial owner(s) are independent third parties of the Company and its connected persons (with the meanings ascribed to it under the Listing Rules).

MOU 2
Date:	11	September 2019 (after trading hours of the Stock Exchange)
Parties:	(1)	SMI Holdings Group Limited, as Vendor 2; and
	(2)	the Company (or its designated wholly-owned subsidiary), as

Purchaser.

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To the best knowledge, information and belief of the Directors after making all reasonable enquiries, Vendor 2 is the controlling shareholder of the Company. As at the date of this announcement, Vendor 2 indirectly holds 63.01% of the equity interest of the Company. Therefore, Vendor 2 is a connected party (with the meanings ascribed to it under the Listing Rules) of the Company (as the Purchaser).

Assets intended to be acquired

Pursuant to MOU 1, Vendor 1 intends to sell and the Company (or its designated wholly-owned subsidiary) intends to acquire all or part of the interests of Target Company 1. Target Company 1 mainly holds equity interests in the operation of cinemas in PRC owned by Vendor 1. Currently, there are more than 70 cinemas operating in PRC.

Pursuant to MOU 2, Vendor 2 intends to sell and the Company (or its designated wholly-owned subsidiary) intends to acquire all the equity interests of Target Company 2 and other cinema operating business in PRC held by Vendor 2. Target Company 2 mainly holds the equity interests of cinema operating business in PRC owned by Vendor 2. Currently, there are more than 200 cinemas operating in PRC.

As at the date of this announcement, Vendor 1 holds all the equity interests of Target Company 1 and Vendor 2 holds all equity interests of Target Company 2.

Consideration

Pursuant to MOU 1, under the preliminary negotiation between the two parties, the total cost of the Target Company 1 (including the cinema assets owned by the Target Company 1) is estimated to be about HK$3 billion. The total value of all or part of the equity interest of the Target Company 1 will be determined by the two parties to the MOU 1 after making reference to the valuation of the Target Company 1 to be assessed by a professional valuer and will be included in the formal share transfer agreement to be signed by the both parties in the future.

Pursuant to MOU2, under the preliminary understanding between the two parties, he total cost of the Target Company 2 (including the cinema assets owned by the Target Company 2) is estimated to be about HK$10 billion. The total value of the equity interest of the Target Company 2 will be determined by the both parties to MOU 2 after making reference to the valuation of the the Target Company 2 to be assessed by a professional valuer and will be included in the formal shares transfer agreement to be signed by the both parties in the future.

The terms of payment under the Possible Acquisitions will be settled to Vendor 1 and Vendor 2 respectively by the Company (as Purchaser) by issuing new shares of the Company at the agreed considerations. The issuance price per new share of the Company is tentatively set at HK$0.20.

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Due diligence

After t h e signing of the MOUs, the Company (and its advisers and/or agents) shall be entitled to conduct due diligence review on the operation, finance, legal and other affairs of the Target Companies. The Vendors shall provide assistance to the Company (and its advisers and/or agents) in this respect.

Formal agreement

The parties to the MOUs shall conduct in good faith and conclude formal shares transfer agreements after the parties have determined the detailed terms of the transactions and met the relevant conditions.

Legal effect

The MOUs does not create legally binding obligations on the parties on the substantive terms in relation to the Possible Acquisitions (including the Consideration, the capital commitment) but is legally binding as to some miscellaneous and general terms relating to confidentiality, , the due diligence review, expenses, termination, and governing laws contained therein.

INFORMATION ON THE VENDORS AND THE TARGET COMPANIES

Vendor 1 is a limited company incorporated in PRC. Its shares are listed and traded on the Main Board of the Stock Exchange (stock code: 3636). Vendor 1 holds 100% equity interest in Target Company 1 at the date of this publication.

Vendor 2 is a company incorporated in Bermuda. Its shares are listed and traded on the main board of the Stock Exchange (stock code: 0198). As at the date of this announcement, Vendor 2 indirectly holds 100% equity interest in Target Company 2.

Target Company 1 is a limited company incorporated in PRC. It mainly holds the equity interests of cinemas in PRC owned by Vendor 1. Currently, there are more than 70 cinemas operating in PRC.

Target Company 2 is a limited company incorporated in China, which mainly holds the equity interests of all cinemas in PRC owned by Vendor 2. Currently, there are more than 200 cinemas operating in China.

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REASONS FOR AND BENEFIT OF THE POSSIBLE ACQUISITION

The Group is principally engaged in the investment in the production and distribution of films, investment in the production and distribution of television dramas and creation, production and distribution of new media contents, production and distribution of online and film advertisements, agency operation for films, directors, scriptwriters and artists, tourism and online ticketing platform operation.

The Board considers that the Possible Acquisitions is in line with the Group's investment strategy to seek business opportunities and intend to acquire high quality business with good potential for the expansion of the Group's business. The Possible Acquisitions would provide an opportunity for the Company to diversify the Group's income stream and enhance Shareholders' value.

GENERAL

In the event that the Possible Acquisitions materialises, it may constitute notifiable and connected transactions of the Company under the Listing Rules. Further announcement(s) in relation to the Possible Acquisitions will be made by the Company as and when appropriate in compliance with the Listing Rules.

There is no assurance that any transactions referred to in this announcement will materialise or eventually be consummated. Shareholders of the Company and potential investors should note that the Possible Acquisitions is subject to, among other things, the entering into of a formal agreement, major terms and conditions of which are yet to be agreed. The Possible Acquisitions may or may not proceed and the final structure and terms of the Possible Acquisitions, which are still subject to further negotiations between the parties, have yet to be finalised and may deviate from that set out in the MOUs. Shareholders of the Company and potential investors are advised to exercise caution when dealing in the shares of the Company.

By order of the Board

SMI Culture & Travel Group Holdings Limited

Yao Qinyi

Executive Director

Hong Kong, 11 September 2019

As at the date of this announcement, the executive directors are Mr. Wu Chien-Chiang (Chairman), Ms. Yao Qinyi and Mr. Li Kai; and the independent non-executive directors are Mr. Rao Yong, Mr. Liu Xianbo and Mr. Zhao Xuebo.

*for identification purpose only

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