Poly Culture : INSIDE INFORMATION MEMORANDUM OF UNDERSTANDING IN RELATION TO THE POSSIBLE DISPOSAL

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.

(A joint stock limited company incorporated in the People's Republic of China with limited liability)

(Stock Code: 3636)

INSIDE INFORMATION

MEMORANDUM OF UNDERSTANDING IN RELATION TO THE POSSIBLE

DISPOSAL

The announcement is made by the Company pursuant to Rule 13.09 of the Listing Rules and the provisions of inside information under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

THE MOU

The Board hereby announces that on 11 September 2019, the Company entered into the MOU with the Purchaser in relation to the Possible Disposal.

GENERAL

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

There is no assurance of the Company 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 Disposal is subject to, among other things, the entering into of a formal equity transfer agreement, the major terms and conditions of which are yet to be agreed upon. The Possible Disposal may or may not proceed and the final structure and terms of the Possible Disposal, which are pending further negotiations between the parties, have yet to be finalised and may deviate from those set out in the MOU. Shareholders of the Company and potential investors are advised to exercise caution when dealing in the shares of the Company.

The announcement is made by Poly Culture Group Corporation Limited (the "Company") pursuant to Rule 13.09 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and the provisions of inside information under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

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The board of directors of the Company (the "Board") hereby announces that on 11 September 2019, the Company (as the Seller) entered into a memorandum of understanding (the "MOU") with SMI Culture & Travel Group Holdings Limited (as the Purchaser) in respect of the mutual intention on the possible disposal of all or part of the equity interests beneficially held by the Company in its subsidiary Poly Film Investment Co., Ltd. (the "Target Company") to the Purchaser (the "Possible Disposal"). Details of the MOU are set out as follows:

To the directors' knowledge, information and belief after having made all reasonable inquires, both the Purchaser and its ultimate beneficial owners are the third parties independent from the Company and its connected persons.

ASSETS PROPOSED TO BE DISPOSED

Pursuant to the MOU, the Company intends to sell and the Purchaser intends to acquire all or part of the interests in the Target Company.

As at the date of this announcement, the Company beneficially owns 100% of the interests in the Target Company.

CONSIDERATION

Upon initial negotiation between the parties, total proposed consideration for the Target Company (including the cinema assets owned by the Target Company) was HK$3,000,000,000.00 (three billion Hong Kong dollars in word). The consideration for the Purchaser's acquisition of all and/or part of the equity interests in the Target Company will be determined by both parties to the MOU after arm's length negotiations with reference to the valuation of the Target Company by a professional valuer, and will be included in the formal equity transfer agreement to be subsequently signed by the parties thereto.

The consideration for the Possible Disposal shall be paid by the Purchaser to the Company by means of issuance of the Purchaser's shares based on the consideration finally determined. As agreed upon by the parties, the provisional issuance price was HK$0.20 per share.

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DUE DILIGENCE

Upon signing the MOU, the Purchaser (and its advisors and/or agents) will perform due diligence on the business, financial, legal and other matters of the Target Company. The Company will assist the Purchaser (and its advisors and/or agents) in this regard.

FORMAL AGREEMENT

The parties to the MOU must negotiate on a good-faith basis and enter into a formal equity transfer agreement after the parties have determined the terms of the transaction and the relevant conditions are met.

LEGAL EFFECTS

The MOU does not impose legally binding obligations on the parties in relation to the material terms of the Possible Disposal (including the consideration and capital commitments), provided that some of the general provisions relating to confidentiality and governing laws are legally binding.

INFORMATION ABOUT THE PURCHASER AND THE TARGET COMPANY

The Purchaser is a company incorporated in Bermuda with limited liability and its shares are listed and traded on the Hong Kong Stock Exchange (stock code: 2366). The Purchaser and its subsidiaries are principally engaged in the investment, production and distribution of films, investment, production and distribution of television (TV) dramas and creation, production and distribution of new media contents, production and distribution of online and film advertisements, brokerage business for film directors, scriptwriters and artists, tourism business and operation business of an online ticketing platform.

The Target Company is a company incorporated in the PRC with limited liability and primarily holds interests in the Company's cinemas in the PRC. Up to date, the Target Company has more than 70 cinemas in operation in China.

REASONS FOR AND BENEFITS OF THE POSSIBLE DISPOSAL

The Company is a joint stock limited company incorporated in the PRC with limited liability and is principally engaged in art business and auction business, performance and theatre management business and cinema investment and management business.

The Board believes that the Possible Disposal enables the Company to integrate its resources more effectively. The acquisition by the Purchaser of more than 70 cinemas in total of the Target Company through issuance of consideration shares creates scale effects more effectively, thereby reducing expenses and increasing profits. If the Possible Disposal eventually materializes, the Company will hold interests in the Purchaser's listed securities through the consideration shares paid by the Purchaser, which enables the Company to share the Purchaser's profits generated from its operation

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of cinemas in the future. In addition, the Possible Disposal may expand the high-quality businesses with sound potential in the Company's portfolio. The Possible Disposal will provide the Company with opportunities to promote the value of the Company's shareholders.

GENERAL

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

There is no assurance of the Company 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 Disposal is subject to, among other things, the entering into of a formal equity transfer agreement, the major terms and conditions of which are yet to be agreed upon. The Possible Disposal may or may not proceed and the final structure and terms of the Possible Disposal, which are pending further negotiations between the parties, have yet to be finalised and may deviate from those set out in the MOU. 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

Poly Culture Group Corporation Limited

Xu Niansha

Chairman

Beijing, the PRC

11 September 2019

As at the date of this announcement, the executive directors of the Company are Mr. Xu Niansha, Mr. Zhang Xi, Mr. Jiang Yingchun and Mr. Li Weiqiang, the non-executive directors are Mr. Huang Geming and Mr. Wang Keling, and the independent non-executive directors are Mr. Li Boqian, Ms. Li Xiaohui and Mr. Yip Wai Ming.

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