HISTORY, REORGANISATION AND CORPORATE ...

OUR BUSINESS DEVELOPMENT

Our Group was founded in 2003 through the establishment of SMU by Mr. Fang, our

executive Director, Ms. Zhu and Ms. Zhang, who are Independent Third Parties, and SumZone

Auto. SMU was a limited company established in the PRC with a registered and paid up capital

of RMB 2,000,000 on 16th July, 2003 and its business scope includes the provision of media

investments, design and production of advertisements, corporate management and consultancy

services, PR and event marketing services. Upon the establishment of SMU, Mr. Fang, Ms. Zhu,

Ms. Zhang and SumZone Auto owned 33%, 37%, 20% and 10% equity interests in SMU,

respectively.

During the period between January 1999 and February 2002, Mr. Fang became the chief

operating officer of Auto Weekly (汽車週刊) of Jiefang Daily (解放日報) which is an Independent

Third Party. Jiefang Daily is held by Jiefang Press Group (解放日報報業集團) which is ultimately

controlled by the Publicity Department of the Communist Party of China Shanghai Municipal

Committee (中共上海市委宣傳部). Mr. Fang was familiar with the automobile industry and had

then accumulated experience in advertising business. In August 2002, Auto Report (which was

formerly known as Auto Mobile Time Weekly in English and 車時代週刊 in Chinese) was founded

by SumZone Auto and Mr. Fang was in charge of the overall operation and management of the

magazine. By August 2004, the business operations and relevant staff of Auto Report were

transferred to SMU for nil consideration pursuant to an agreement entered into between SumZone

Auto and SMU on 16th August, 2004. The reason for the nil consideration for the transfer was that

the business operations of Auto Report suffered losses at that time and it was operating on a

limited scale with a small revenue base and that SMU had agreed to assume all rights and

liabilities as well as future financial obligations (including all printing, distribution and staff

costs) of Auto Report.

In May, 2004, SMU launched Auto 007 in pursuance of the entrusted management

arrangement with Shanghai Business Daily (上海商報社) which is an Independent Third Party,

thereby enabling us to extend our print media resources from magazines to newspapers. Auto

007 was then one of the professional automobile media in Yangtze River Delta in the PRC and

it had become the designated information disclosure media for Office of Automobile Profession

of Shanghai Consumer Rights Protection Committee (上海市消費者權益保護委員會汽車專業辦公室), which is an Independent Third Party, in 2005.

Pursuant to an agreement entered into between SMU and Pyramid Media on 1st June, 2004

(the “Auto 007 Supporting Services Agreement”), from June 2004 to December 2010, the content

production, printing and distribution services of Auto 007 were outsourced to Pyramid Media in

view of the relatively limited operating history of SMU at that time and the availability of the more

established media operations and production team of Pyramid Media to support the business of

Auto 007. According to the Auto 007 Supporting Services Agreement, in return for the services

provided by Pyramid Media to Auto 007, we paid service charges representing 70% of the

advertising income from Auto 007 to Pyramid Media during the relevant period which ended on

31st December, 2010.

HISTORY, REORGANISATION AND CORPORATE STRUCTURE

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B2 Q6

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Pyramid Media is a professional media services operator incorporated in the PRC on 3rd

June, 2004. Upon its establishment, Pyramid Media was held by Mr. Fang and Wang Tao (王濤),

a Chinese national who is an Independent Third Party, as to 55% and 45% equity interests

respectively. In preparation for the Listing, during the period from 30th December, 2009 to 7th

January, 2011, the 55% equity interests in Pyramid Media held by Mr. Fang were transferred to

上海口碑廣告傳媒有限公司, an Independent Third Party, through a series of transfers of equity

interests in between Chen Liwen (陳麗雯), He Weiqi (賀維琪) and Cai Shibin (蔡仕彬), who were

employees of our Group, and Wang Tao (王濤), as a transitional arrangement for the disposal of

the 55% interests of Mr. Fang. After these transfers of equity interests, 上海口碑廣告傳媒有限公司and Wang Tao (王濤) owned 55% and 45% equity interests in Pyramid Media, respectively.

The business of Pyramid Media was not injected into SMU as both companies were private

companies controlled by Mr. Fang prior to 1st January, 2011 and as we commenced our listing

preparation process in or about end of 2010, Mr. Fang decided to take up the business of Pyramid

Media through SMU for the purpose of our group restructuring. On 27th December, 2010, SMU

and Pyramid Media entered into a termination agreement under which the Auto 007 Supporting

Services Agreement was terminated and from 1st January, 2011 onwards, we ceased to engage

Pyramid Media to provide any services to our Group. At around the same time, the disposal of

Mr. Fang’s equity interests in Pyramid Media was completed and the remaining business of

Pyramid Media is no longer related to our Group.

Pursuant to the termination agreement referred to above, the primary service resources of

Auto 007, including, amongst other things, editorial and content production teams, printers and

distributors, of Pyramid Media were taken up by us at nil consideration which was determined

on the basis of (i) the satisfactory business cooperation between SMU and Pyramid Media since

2004; (ii) the steady track record of income contributed by SMU to Pyramid Media over the years;

and (iii) SMU’s commitment to retain the key employees of Pyramid Media and continue to

operate Auto 007 at its own risks going forward.

In March 2006, we established East Shanghai SumZone jointly with East Shanghai Media

Group. East Shanghai Media Group, the majority shareholder of East Shanghai SumZone, is a

large-scale media enterprise which possesses significant media resources and local connections

through which East Shanghai SumZone is in an advantageous position to identify and introduce

suitable business partners to SMU. The establishment of East Shanghai SumZone facilitated the

expansion of our media operation resources and client base, such as the entrustment

arrangements of Shanghai Today and Shanghai Scene.

In 2006, we launched www.cnnauto.com which is a website providing automobile

consumption information for automobile consumers and it closely cooperated with our own

automobile media such as Auto Report and Auto 007 in providing Internet advertising services for

brands in the automobile industry and supporting our EPR and event marketing businesses. It

also features an “automobile distributors search engine”. Through continuous testing and

upgrade, we enhanced the content of www.cnnauto.com with comprehensive car reviews, car

comparisons and selections, information on protection of rights of automobile consumers and

online forums in order to provide an interactive digital platform for car consumers.


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Upon the invitation by Shanghai Journalist Association (上海市新聞工作者協會), an

Independent Third Party, we assisted it to set up and operate Automobile Journalists Association

of Shanghai (上海汽車記者聯會) (“AJAS”), an Independent Third Party, in 2006. We believe

joining such network will assist our expansion in PR business.

In March, 2007, we strengthened our PR business through the establishment of our

professional PR department which comprised a team of existing staff and PR professionals

recruited by us. We aim to provide more structured and customised PR services to major

automobile brands as our concerted efforts to upgrade our professional service capacity and

offerings.

In January, 2008, with a view to effectively integrating our outstanding sales personnel and

professional planning and execution staff, we established our group operational division which

pooled all the then available resources together to strengthen our sales and marketing team

targeting brands in need of more sophisticated marketing and communication services. This

further set the directions for the future development of our integrated marketing communications

businesses.

In June, 2008, we obtained the right to operate Shanghai Today which was founded in 1996

by the Information Office of Shanghai Municipality and is a comprehensive political and

economic issue promoting the economy, politics and cultural development of Shanghai.

In June, 2008, we obtained the right to operate Shanghai Scene which contains articles on

the traditional customs and interesting stories of old Shanghai. It was first published in 1987

targeting readers like China emigrants or their descendants who are interested in the heritage of

Shanghai.

Our publishing partners, Shanghai Scene Magazine (上海灘雜誌社), Shanghai Today

Magazine (今日上海雜誌社) and Shanghai Business Daily Media Company Limited (上海商報傳媒有限公司) are publishers of periodicals and newspaper under the applicable laws and regulations

in China. Shanghai Scene Magazine, an Independent Third Party, was established as an institution

as legal person (事業單位法人) with the right to operate Shanghai Scene founded in 1987.

According to its legal person certificate, the scope of business of Shanghai Scene Magazine

includes the editing and distribution of Shanghai Scene, and the provision of advertising and

photography services of Shanghai Scene. Shanghai Today Magazine, an Independent Third Party,

was established as an institution as legal person (事業單位法人) with a right to operate Shanghai

Today founded in 1996. According to its legal person certificate, its scope of business includes,

through Shanghai Today, comprehensively introduces the development of Shanghai for the

purpose of providing information in relation to investment in Shanghai, business, sightseeing and

travel. Shanghai Business Daily Media Company Limited, also an Independent Third Party, was

established as an institution as legal person (事業單位法人) and was changed to a domestic

enterprise in 2009. According to its business licence, the scope of business of Shanghai Today

Magazine includes, amongst other things, the publication of Shanghai Business Daily, design,

prepare and release of advertisement and provide advertising agency services.


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Since January, 2008, we became one of the PR services providers for the Royal Danish

Consulate General, Shanghai.

In January, 2009, we launched I home which is a professional magazine about lifestyle and

architectural design and decoration and we distributed the magazine to outlets of Red Star

Macalline Home Fashion in the PRC for circulation to potential consumers of home fashion

brands.

In July, 2010, we established our digital marketing division as part of our Group’s strategic

development to increase our product line and scope of services. We transferred internal strategic,

creative and execution staff to such division and recruited external EPR professionals to develop,

amongst other things, our Internet advertising, wireless marketing and EPR businesses.

In July, 2010, as a milestone of our digital marketing business, we commenced our wireless

marketing business by entering into an advertising agency agreement with the exclusive

advertising agency of 12580 Life Journal, a mobile phone magazine distributed through the

network of China Mobile which is an Independent Third Party. We were appointed, on a

non-exclusive basis, as an advertising agency of 12580 Life Journal during the period from 1st

July, 2010 to 31st December, 2010 in relation to the placement of advertisements in 12580 Life

Journal by us for a major international automobile brand.

As our revenue generated from event marketing business gradually increased and in

contemplation of certain large events to be organised by us, in October 2010, we set up our event

marketing division which pooled together existing staff who had been providing event marketing

services to our clients and formed a team of event marketing specialists to tailor integrated

marketing communications services with a primary focus on organising large-scale events on

behalf of our clients. This was an important milestone for us to enhance the professional level

of our event marketing team and our ability to provide a better variety of integrated marketing

communications services.

In 2011, we entered into a strategic partnership agreement with Shanghai Xunqi, the existing

exclusive advertising agency of 12580 Life Journal, for a term of 5 years commencing on 1st

January, 2011. Shanghai Xunqi operates 12580 Life Journal on the mobile communication

platform of China Mobile and disseminates information about lifestyle and spending to more than

40 million subscribers of China Mobile.

On 26th August, 2011, we established SumZone Advertising and SumZone Marketing to

rationalise our advertising, digital marketing and event marketing resources respectively in our

continuous efforts to expand our Group into a major integrated marketing communications

player in the PRC.


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OUR CORPORATE HISTORY

Our Company was established in the Cayman Islands under the Companies Law as an

exempted company with limited liability on 15th March, 2011.

Pursuant to the Reorganisation, our Company became the holding company of our Group on

26th August, 2011. Further information of the Reorganisation is set out in the paragraph

“Reorganisation of Our Group” in this section and the paragraph under “Further Information

about our Company — 4. Corporate reorganisation” in Appendix V to this prospectus.

CORPORATE AND SHAREHOLDING STRUCTURE OF OUR GROUP IMMEDIATELY BEFORE

IMPLEMENTATION OF THE REORGANISATION

Our corporate and shareholding structure immediately before implementation of the

Reorganisation was as follows:

49%

100%

Mr. Fang

SMU(established in the PRC)

East Shanghai SumZone(established in the PRC)

REORGANISATION OF OUR GROUP

Quick Motion was incorporated in BVI on 6th January, 2011 and is an investment holding

company.

Century Linker was incorporated in Hong Kong on 18th January, 2011 and is an investment

holding company. It also carries out certain administrative functions for our Group.

Century Linker established Shanghai SumZone Enterprise, a wholly foreign owned

enterprise, in the PRC on 1st June, 2011 with an initial registered capital of HK$5,000,000, of

which HK$1,000,000 has been paid up.


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Co.Ord.III(21)

B2 Q23

STRUCTURED CONTRACTS

Introduction

We provide customised advertising, PR and event marketing services for brands by utilising

the capacity and resources of the SMU Publications. During the Track Record Period, SMU

entered into several agreements with East Shanghai SumZone and another publishing partner in

the PRC in connection with the entrustment and transfer of operation and business of the SMU

Publications, details of which are set out in the subsection “Cooperation with our publishing

partners in the PRC” in the section “Business” in this prospectus. According to the terms of the

entrustment agreements and transfer agreements, SMU has been entrusted by its publishing

partners in the PRC to participate in the process of producing the content of the SMU Publications

which are in turn reviewed and approved by the PRC publishing partners of SMU. In addition,

SMU participates in determining the circulation strategy, printing prices and printing costs of the

publications and arranges for printing and distribution of the SMU Publications. Our PRC lawyers

are of the view that on the basis of the various entrusted agreements and transfer agreements,

SMU has been entrusted to participate in content production, printing and distribution of the SMU

Publications, which constitute “publishing activities” under the PRC laws. In accordance with the

PRC laws, publishing of books, newspapers and periodicals is regarded as a category of industry

in which foreign investment is prohibited. In this regard, the operation of the SMU Publications

is subject to prohibition on foreign investment under the PRC laws.

The various entrusted agreements and transfer agreements enable SMU to attain the key

publishing resources to support its business operations, including but not limited to advertising,

PR and event marketing businesses. In relation to our advertising business, SMU participates in

the design, production and release of advertising materials including text advertisements. In

relation to our PR (including EPR) business, SMU is principally involved in the editing,

production and release of PR articles and other promotional materials. In view of the above, the

relevant advertising business relating to content design and production and PR (including EPR)

business in which SMU is engaged, which form part and parcel of our integrated marketing

communications businesses, constitute “publishing activities” and are subject to prohibition on

foreign investment under the PRC laws. Accordingly, the business of SMU, which was the core

operating entity of our Group during the Track Record Period, involves business activities that

are prohibited from foreign investment under PRC laws, which prevents SMU from being included

in our Group directly.

The operation of www.cnnauto.com, our own website which provides an automobile

related information platform for automobile consumers, involve the release of our EPR articles

and for the purpose of supporting our future business expansion, may involve the provision of

value-added telecommunications services in future. As such, the operation of www.cnnauto.com

is a type of business activity subject to prohibition or restriction on foreign investment under the

PRC laws although the operation of the website during the Track Record Period does not fall

within the definition of value-added telecommunications services. We are therefore of the view

that the operation of the SMU Publications and www.cnnauto.com, our relevant advertising

business relating to content design and production as well as our PR (including EPR) business are

Restricted Businesses and they should continue to be operated by SMU after the Listing.


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B4 Q1

B6 Q1(ii)

During the Track Record Period, we generated Internet advertising income from advertising

agency activities for www.cnnauto.com, which is not prohibited or restricted under the PRC laws.

As regards our wireless marketing business, as we only acted as an advertising agency of 12580

Life Journal and were not involved in the operation of 12580 Life Journal during the Track

Record Period, our wireless marketing business is not subject to prohibition or restriction on

foreign investment under the PRC laws. Accordingly, advertising agency business arising from the

SMU Publications, www.cnnauto.com, and other advertising media channels and event marketing

businesses are Unrestricted Business and they are being and will be transferred to SumZone

Advertising, SumZone Marketing and, or any other PRC subsidiaries of Shanghai SumZone

Enterprise in pursuance of our Group’s long-term strategic plans.

As the business operations of SMU involve Restricted Businesses, we cannot acquire equity

interest in SMU. As a result, Shanghai SumZone Enterprise, SMU, Mr. Fang and Century Linker

entered into a series of contracts and power of attorney that were designed to provide Shanghai

SumZone Enterprise and thus our Group with effective control over the financial and operational

policies of SMU and (to the extent permitted by PRC laws and regulations) the right to acquire

the equity interests in SMU after the Listing by Century Linker. The Structured Contracts were

entered into on 1st June, 2011 under which all the material business activities of SMU are

instructed and supervised by Shanghai SumZone Enterprise and all economic benefits and risks

arising from the business of SMU are transferred to our Group.

The Structured Contracts currently in force comprise five agreements, namely: (i) the

exclusive consulting and service agreement; (ii) the share pledge agreement; (iii) the exclusive

business operating agreement; (iv) the exclusive option agreement; and (v) the power of

attorney, which were entered into between or amongst SMU, Shanghai SumZone Enterprise, Mr.

Fang and, or Century Linker, and were designed to provide Shanghai SumZone Enterprise and

thus our Group with effective control over the financial and operational policies of SMU and (to

the extent permitted by PRC laws and regulations) the right to acquire the equity interests in SMU

by Century Linker. The PRC legal advisers of our Company have advised that the Structured

Contracts are in compliance with and are enforceable under the existing PRC laws or regulations.

Details of the Structure Contracts are set out below:

• Exclusive consulting and service agreement

Shanghai SumZone Enterprise and SMU entered into an exclusive consulting and service

agreement dated 1st June, 2011, pursuant to which Shanghai SumZone Enterprise will, on an

exclusive basis, provide consulting and other supporting services to SMU.

In consideration of the provision of the aforesaid services provided by Shanghai SumZone

Enterprise to SMU, SMU has agreed to pay to Shanghai SumZone Enterprise service fee on an

annual basis. Service fee payable to Shanghai SumZone Enterprise will be equivalent to the

audited revenue before income tax expenses after deducting, amongst other things, all the

necessary costs, expenses and business tax expenses incurred from the business operation of

SMU. SMU has agreed to pay the service fee before each 31st day of March for service provided

in the preceding year. Nevertheless, Shanghai SumZone Enterprise is entitled to adjust the basis

of service fee according to the scale of service provided to SMU.


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B1 Q1(d)B2 Q5(ii)

SMU has further agreed to convene board meetings in order to confirm and implement the

payment arrangement of service fee payable to Shanghai SumZone Enterprise, whereas Shanghai

SumZone Enterprise is entitled to and responsible for all economic benefits and risks derived by

SMU. If any operating loss or critical operation adversity occurs, Shanghai SumZone Enterprise

will provide financial support to SMU, and only Shanghai SumZone Enterprise can decide

whether SMU should continue its operation and SMU shall unconditionally accept the decision

made by Shanghai SumZone Enterprise as aforesaid. Our Directors consider that the above

arrangement will ensure the economic benefits generated from the operations of SMU will flow

to Shanghai SumZone Enterprise and hence, our Group as a whole.

Pursuant to the exclusive consulting and service agreement, Shanghai SumZone Enterprise

shall provide advice and recommendations to SMU in respect of its (i) assets and business

operation; (ii) claims and indebtedness; (iii) negotiation of material contracts; (iv) mergers and

acquisitions; and (v) daily business management and staff training. In connection with the above

arrangement, SMU shall not, without the prior written consent of Shanghai SumZone Enterprise

and except in the case of ordinary course of business, amongst other things, deal with SMU’s

assets and interest in business; incur or take up any guarantee or indebtedness; alter its registered

capital or capital structure; or enter into any material contract for an amount more than RMB1

million unless with the prior consent of Shanghai SumZone Enterprise or a director or general

manager of SMU nominated by Shanghai SumZone Enterprise.

The exclusive consulting and service agreement has become effective on 1st June, 2011 and

shall continue to be in full force and effect until it is terminated by Shanghai SumZone Enterprise

by giving SMU a 30 days’ prior written notice of termination. SMU shall have no right to terminate

the exclusive consulting and service agreement in any event.

• Irrevocable powers of attorney

Mr. Fang executed an irrevocable power of attorney dated 1st June, 2011, which enables

Shanghai SumZone Enterprise to exercise all the powers of the shareholder of SMU through the

chairman of its board of directors.

The irrevocable power of attorney has become effective on 1st June, 2011 and shall be in

full force and effect during the term of the Structured Contracts.

Pursuant to the power of attorney, Mr. Fang, being the sole shareholder of SMU, shall in the

interest of and, or as instructed by Shanghai SumZone Enterprise exercise his rights (including

but not limited to rights of voting, dividend, sale or transfer of all or part of his interests in SMU,

distribution of surplus assets in liquidation, and designation or appointment of director(s)); and

in the event of his ceasing to be the chairman of Shanghai SumZone Enterprise, Mr. Fang shall

designate and authorise his successor nominated by Shanghai SumZone Enterprise as the

chairman of Shanghai SumZone Enterprise to assume all his shareholder’s rights and obligations

arising from his interest in SMU pursuant to the power of attorney. Furthermore, Mr. Fang or the

nominated chairman if Mr. Fang ceases to be the chairman of Shanghai SumZone Enterprise shall

transfer all distributible dividends, capital dividend and other asset receivable by him at nil


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R11.13(2)

consideration to Shanghai SumZone Enterprise as soon as practicable but in any event no later

than three days upon receipt of the same by Mr. Fang or the nominated chairman (as the case may

be). The Directors consider that the above rights granted under the power of attorney have

strengthened the control of SMU by Shanghai SumZone Enterprise.

• Exclusive business operating agreement

Shanghai SumZone Enterprise, SMU and Mr. Fang entered into an exclusive business

operating agreement dated 1st June, 2011, which took effect upon its signing and remaining in

full force and effect unless it is terminated in accordance with the terms of the exclusive business

operating agreement or other agreements entered among the parties pursuant to which: (a) at the

request of SMU and on condition that SMU has complied with the terms of the exclusive business

operating agreement, Shanghai SumZone Enterprise may (but was not obliged to) act as a

guarantor for SMU in its business-related agreements or transactions; (b) as a counter-guarantee,

SMU agreed to pledge its trade receivables and all its assets to Shanghai SumZone Enterprise; (c)

SMU should not, without the written approval of Shanghai SumZone Enterprise, enter into any

transaction which might affect its assets, rights, obligations or operations; and (d) SMU should

appoint a candidate nominated by Shanghai SumZone Enterprise as director(s) of SMU, and SMU

should appoint a candidate nominated by Shanghai SumZone Enterprise to be a member of the

senior management of SMU.

Pursuant to the exclusive business operating agreement, without the prior written approval

from Shanghai SumZone Enterprise, SMU shall not enter into any transactions that may affect its

assets, obligations, rights or operation, including but not limited to the following matters:

(a) to obtain any advances from third parties or incur any indebtedness;

(b) to dispose of or acquire any assets including but not limited to any intellectual property

rights to or from any third parties;

(c) to provide any guarantee relating to its assets or intellectual property rights to any third

parties; and

(d) to assign any of its rights and obligations under the exclusive business operating

agreement to any third parties.

In addition to the aforesaid, Mr. Fang shall transfer all distributable dividends, capital

dividend and other asset receivable by him at nil consideration to Shanghai SumZone Enterprise

as soon as practicable but in any event no later than three days upon receipt of the same by Mr.

Fang.

Mr. Fang, being the chairman of our Company, has been appointed as the sole director of

SMU and has taken up the leading role in the governance of implementation of the financial and

operating policies in respect of SMU in order to ensure that SMU will be managed and operated

according to our Group’s policies and the terms of the Structured Contracts.


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R11.13(1)

The exclusive business operating agreement has become effective on 1st June, 2011 and

shall continue to be in full force and effect until it is terminated by Shanghai SumZone Enterprise

by giving each of SMU and Mr. Fang a 30 days’ prior written notice of termination. Pursuant to

the exclusive business operating agreement, Shanghai SumZone Enterprise is also entitled to but

not obliged to terminate all agreements between itself and SMU if any agreement entered into

between them is terminated or expired. In any event, neither SMU nor Mr. Fang has the right to

terminate the exclusive business operating agreement.

• Exclusive option agreement

Century Linker, Mr. Fang and SMU entered into an exclusive option agreement dated 1st

June, 2011, pursuant to which Mr. Fang, being the sole equity holder of SMU, agreed to grant an

irrevocable option to Century Linker to acquire from him all or any of the equity interests he held

in SMU, on condition that such acquisition should comply with the PRC laws and regulations, at

nil consideration or at nominal price if permissible under the PRC law and regulations.

Otherwise, the consideration will be determined by the parties with reference to the valuation of

SMU at the time of transfer.

Pursuant to the exclusive option agreement, SMU has undertaken to perform certain acts or

refrain from performing certain other acts unless it has obtained prior approval from Century

Linker, or Shanghai SumZone Enterprise, or a director or general manager nominated by

Shanghai SumZone Enterprise (as the case may be), including but not limited to the following

matters:

(a) SMU shall not alter its constitutional documents or its registered capital;

(b) SMU shall prudently and effectively operate its business and transactions in accordance

with the good financial and business standards and conventions;

(c) SMU shall not sell, transfer, create encumbrances or otherwise dispose of its any assets,

business, legal or beneficial interest of its income or allow any guarantee or security

to be created on its assets;

(d) SMU shall operate its business in order to maintain its asset value or not allow any acts

or omission which adversely affects its business or assets value;

(e) SMU shall not enter into any material contracts which constitute capital reorganisation,

division, spin-off, bankruptcy, acquisition, merger, joint venture, partnership and other

major issues, other than in the ordinary course of business and the amount is less than

RMB1 million;

(f) SMU shall not incur, take up, guarantee or allow any indebtedness other than those in

the ordinary course of business and having been disclosed to and consented by

Century Linker;


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R11.13(2)

(g) as requested by Century Linker, SMU shall provide its operational and financial

information;

(i) SMU shall not engage in any mergers or acquisitions or make investment in any

entities;

(j) SMU shall immediately inform Century Linker if its assets or business involved in any

disputes, litigations, arbitrations or administrative proceedings;

(k) at the request by Shanghai SumZone Enterprise, SMU shall appoint such persons

nominated by Shanghai SumZone Enterprise to act as directors of SMU; and

(l) to maintain all rights in assets owned by SMU, SMU shall sign such documents and take

such actions as necessary or appropriate, and initiate or defend such claims as

necessary or appropriate.

Pursuant to the exclusive option agreement, Mr. Fang and SMU have undertaken that,

amongst other things, the performance of any of their obligations under the exclusive option

agreement will not result in breach of any applicable PRC laws and any contract or agreement to

which either of them is a party or which has a binding effect on either of them.

The exclusive option agreement has become effective on 1st June, 2011 and shall continue

to be in full force and effect until the transfer of all the equity interests in SMU by Mr. Fang to

Century Linker or a transferee as designated by Century Linker (based on the date of registration

of such transfer) or otherwise terminated by Century Linker unilaterally by written confirmation.

• Share pledge agreement

Shanghai SumZone Enterprise and Mr. Fang entered into a share pledge agreement dated 1st

June, 2011, pursuant to which Mr. Fang agreed to pledge his entire equity interests in SMU to

Shanghai SumZone Enterprise to secure the fees and other payables that SMU might be liable to

pay to Shanghai SumZone Enterprise under the exclusive consulting and service agreement from

time to time.

Pursuant to the share pledge agreement, Mr. Fang has undertaken to Shanghai SumZone

Enterprise, amongst other things:

(a) not to transfer the interest in his shares in SMU (save and except transfers of shares to

Century Linker and, or other designated persons) and not to create or allow any pledge

thereon that may affect the rights and interest of Shanghai SumZone Enterprise without

the prior written consent from Shanghai SumZone Enterprise;

(b) to comply with and implement the requirements under all applicable PRC laws and

regulations, and on the receipt of any notice, order or proposal issued by any


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R11.13(2)

competent authority in relation to the share pledge, to deliver the same to Shanghai

SumZone Enterprise not later than 5 days after such receipt and to comply with such

notice, order or proposal, or raise objections and comments according to Shanghai

SumZone Enterprise’s reasonable instructions or its consents;

(c) to promptly notify Shanghai SumZone Enterprise any event or notice of event that may

affect Mr. Fang’s equity interest in SMU or the validity of the warranties and

representations made by Mr. Fang under the share pledge agreement; and

(d) to comply with his warranties, undertakings, agreements, representations and

obligations under the share pledge agreement and to compensate Shanghai SumZone

Enterprise in the event that Mr. Fang fails to perform or fully fulfill such warranties,

undertakings, agreements, representations and obligations.

Under the share pledge agreement, Mr. Fang is, among other things, deemed to have

defaulted on the terms of the share pledge agreement if:

(a) Mr. Fang is insolvent or fails to fulfill any of his personal debt or repayment

obligations; or

(b) Mr. Fang’s successors or personal representatives only partially perform or fail to

perform the payment obligations under the exclusive consulting and service

agreement.

If any of the events of default set out in the share pledge agreement occurs, Shanghai

SumZone Enterprise shall be entitled to exercise the following rights:

(a) if service fees payable by SMU to Shanghai SumZone Enterprise under the exclusive

consulting and service agreement has not been fully settled, Mr. Fang shall not transfer

his equity interest in SMU without the written consent of Shanghai SumZone

Enterprise;

(b) Shanghai SumZone Enterprise shall issue notice of default to Mr. Fang when exercising

its rights under the share pledge agreement;

(c) unless Mr. Fang has rectified defaults occurred to the satisfaction of Shanghai SumZone

Enterprise, Shanghai SumZone Enterprise may at the time of or any time after the issue

of notice of default exercise its rights to take remedial actions against Mr. Fang;

(d) Shanghai SumZone Enterprise is in priority to acquire the equity interests in SMU at a

discounted price, or at such price obtained in tender or by sale in accordance with the

PRC statutory procedures until all unpaid service fees payable under the exclusive

consulting and service agreement and all other payables have been fully settled; and

(e) Mr. Fang shall not hinder and shall provide necessary assistance if Shanghai SumZone

Enterprise exercises and implements its rights under the share pledge agreement.


— 101 —

B6Q5

According to the terms of the share pledge agreement and the PRC laws, rights and

obligations in the share pledge agreement will be succeeded by the successors of Mr. Fang and

Shanghai Sumzone Enterprise.

The share pledge agreement dated 1st June, 2011 was registered on SMU’s register of

shareholders and with the Administration for Industry and Commerce on 24th October, 2011,

following which the share pledge agreement shall be in full force and effect until the termination

of the exclusive consulting and service agreement and the discharge of all SMU’s obligations

under the exclusive consulting and service agreement.

Diagrammatic representation of the Structured Contracts

The following simplified diagram illustrates how the Structured Contracts effectively

transfer the economic benefits of SMU and pass the risks associated therewith to our Group as

stipulated under the Structured Contracts:

100%

100%

100%

100% (2), (3) and (4) dividend, power of attorney, exclusive business operating arrangements and

share pledge

(5) option to acquire equity interest in

SMU

(1) service fee

(1) provision of consultation and ancillary services

Structured Contracts

Mr. Fang

SMU

Company

Quick Motion

Century Linker

Shanghai SumZone Enterprise



— 102 —

B1 Q1(f)

B2 Q5(ii)

B2 Q5(vi)

Notes:

1. Shanghai SumZone Enterprise provides consultation and ancillary services to SMU. In return, SMU shall pay

consultation service fee (being its audited revenue before income tax expenses after deducting, amongst other

things, all the necessary costs, expenses and business tax expenses incurred from the business operation of SMU)

to Shanghai SumZone Enterprise on an annual basis, pursuant to the exclusive consulting and service agreement.

2. Pursuant to the power of attorney and the exclusive business operating agreement, Mr. Fang shall transfer all

distributable dividends, capital dividend and other assets receivable by him at nil consideration to Shanghai

SumZone Enterprise as soon as practicable but in any event no later than three days upon receipt of the same by

Mr. Fang.

3. In the interest of and, or as instructed by Shanghai SumZone Enterprise, Mr. Fang, as sole director of SMU, shall

exercise his rights (including but not limited to the rights of voting, dividend, sale or transfer of all or part of his

interests in SMU, distribution of surplus assets in liquidation, and designation or appointment of director(s)), and

in the event of his ceasing to be the chairman of Shanghai SumZone Enterprise, Mr. Fang shall designate and

authorise his successor nominated by Shanghai SumZone Enterprise as the chairman of Shanghai SumZone

Enterprise to assume all his shareholder’s rights and obligations under the power of attorney.

4. Pursuant to the share pledge agreement, Mr. Fang has pledged the entire equity interest in SMU to Shanghai

SumZone Enterprise as a first priority security for guaranteeing the payment of the service fee under the exclusive

consulting and service agreement.

5. Mr. Fang has irrevocably granted an option to Century Linker to acquire the entire equity interest in SMU on the

terms of the exclusive option agreement.

Conduct of operations in compliance with the Structured Contracts

Our Group has adopted and will adopt the following procedures, systems and controls to

ensure the sound and effective operation of our Group (including SMU) and the implementation

of the Structured Contracts after the Listing:

(a) as part of our internal control measures, major issues arising from implementation of

the Structured Contracts will be reviewed by the Board (including the independent

non-executive Directors) on a regular basis, which will be no less frequent than on a

quarterly basis;

(b) matters relating to compliance and regulatory enquiries from governmental authorities

(if any) will be discussed at such regular meetings or extraordinary meetings of the

Board (including the independent non-executive Directors), if appropriate, which will

be no less frequent than on a quarterly basis;

(c) the relevant business units and operation divisions of our Group will report regularly

(which will be no less frequent than on a monthly basis) to the senior management of

our Company in relation to the compliance and performance conditions under the

Structured Contracts and other related matters and the senior management of our

Company will in turn report any non-compliance issues to the Board (including

independent non-executive Directors) on a regular basis;


— 103 —

B2 Q5(vii)(c)

(d) given that the Structured Contracts will constitute continuing connected transactions of

our Company upon Listing, our Company has applied to the Stock Exchange, and the

Stock Exchange has agreed to grant a waiver, further information on which is set out

in the section “Connected Transactions” in this prospectus. Our Company will comply

with the conditions prescribed under the waiver given by the Stock Exchange in

connection with the continuing connected transactions contemplated under the

Structured Contracts;

(e) (if required) legal advisors and, or other professionals will be retained to assist our

Group to deal with specific issues arising from the Structured Contracts; and

(f) our independent non-executive Directors will review the compliance of the Structured

Contracts on an annual basis and their confirmation will be disclosed in our annual

report.

To ensure that Mr. Fang and SMU will comply with the Structured Contracts, we have

decided to further introduce the following measures:

(i) subject to completion of relevant PRC regulatory and registration procedures, the

number of directors of SMU will be increased from one to three, including Mr. Fang,

an executive Director, and Mr. Lin and Mr. Fan, the non-executive Directors, or such

number of directors or composition of the board of SMU to be determined by the

nomination committee of the Company (comprising all independent non-executive

Directors) from time to time to the effect that Mr. Fang will not be able to control the

majority of the board of SMU. The three independent non-executive Directors will

continue to play an independent role in the Board by reviewing the effective

implementation of the procedures and controls referred to above and compliance of

the Structured Contracts;

(ii) going forward, Mr. Fang shall abstain from voting on any resolutions of SMU in which

he may have conflict of interest, and all resolutions shall be passed unanimously or by

the affirmative vote of a simple majority of the board of SMU (as the case may be), and

if any resolution could not be passed by the board of SMU unanimously or by a simple

majority of votes (as the case may be), such resolution would be considered as

disapproved; and

(iii) our Group has implemented corporate governance measures referred to in the section

“Directors, senior management and employees — Management of conflict of interest

between our Group and Directors” in this prospectus to manage any conflict of interest

between our Group and the Directors.


— 104 —

Effect and legality of the Structured Contracts

The PRC legal advisers of our Company are of the opinion that:

1. based on the prevailing laws and regulations in the PRC, the Structure Contracts are in

compliance with, and do not violate the existing rules, regulations and laws in the PRC

including but not limited to “Catalogue of Industries for Guiding Foreign Investment”;

2. each of the above contracts was, unless terminated, legal, valid and binding on the

contracting parties under the PRC laws;

3. the Structured Contracts are in compliance with the respective articles of association of

Shanghai SumZone Enterprise and SMU; and

4. no filings, approvals and licences of any PRC government authorities were or are

required in connection with the execution, delivery and enforceability of each of the

above contracts, except for the share pledge agreement.

In addition, on 20th September, 2011, the Ministry of Commence of the PRC (“MOC”)

clarified, amongst other things, that no laws, regulations and policies have been issued by the

MOC to govern variable interest entities (“VIE” )structures in the PRC. In view of the above and

pursuant to the relevant PRC laws and regulations, in the opinion of our PRC lawyers, the

authority in charge of approving foreign investment has not introduced any specific regulations

and policies to regulate VIE structures. Accordingly, our Group is not required to obtain any

approval from the regulatory authorities in regard to the Structured Contracts. In addition, on the

basis of the principle of non-retrospectivity of laws (法不溯及既往原則) under the Legislation Law

of the People’s Republic of China and other relevant PRC laws and regulations, generally, PRC

laws or regulations take effect towards the future upon promulgation or on the prescribed

effective dates and have no retrospective effect. In this regard, our PRC lawyers are of the

opinion that as the PRC government has not introduced any specific laws, regulations and

policies to regulate VIE structures, we are not required to obtain any approval from the regulatory

authorities in regard to the Structured Contracts, and that even if the PRC government introduces

laws, rules and, or regulations to regulate such structures in future, under the principle of

non-retrospectivity of laws, the status of compliance with applicable laws and regulations

regarding the Structured Contracts and the VIE structure of our Group shall not be affected.

Further, on 10th November, 2011, our PRC lawyers have consulted the MOFCOM on an

informal basis regarding VIE structures. According to the reply of relevant personnel at the

Department of Foreign Investment Administration of MOFCOM (中華人民共和國商務部外國投資管理司), at present, there are no specific laws, regulations or policies to regulate VIE structures

in the PRC, and the Structured Contracts are subject to the independent opinions of the PRC

lawyers.


— 105 —

B1 Q1(g)

B2 Q5(i)

B1 Q1(b)B2 Q4

B3 Q1(b)

B4 Q4

Upon due and reasonable enquiries, our PRC lawyers are of the opinion that during the

Track Record Period and up to the Latest Practicable Date, the PRC subsidiaries of our Group

including SMU have complied with all the relevant laws and regulations relating to their

operations in all material respects before and after implementation of the Structured Contracts.

The Directors and the Sponsor are therefore of the view that there are no recent PRC government

policies restricting the Listing by using VIE contracts and the Structured Contracts are not likely

to be challenged by the relevant authorities until new policies are officially announced by the

MOC in relation to VIE structures.

Since Century Linker and Mr. Fang (other than the business of our Group) currently have no

direct business operating in the PRC and according to our PRC lawyers, they are therefore not

required to obtain any permits, approvals or other certificates of qualifications from the PRC

government. As for Shanghai SumZone Enterprise and SMU, after due and reasonable enquiries,

in the opinion of the PRC lawyers, the two companies have obtained all the necessary permits,

approvals and certificates of qualifications to carry out their existing business activities in the

PRC.

Manner of settlement of disputes which may arise from the Structured Contracts

Pursuant to the Structured Contracts, any dispute arising from the interpretation and

implementation of the Structured Contracts between the parties should first be resolved through

negotiation, failing which any party may submit the said dispute to the China International

Economic and Trade Arbitration Commission with a view to resolving the dispute through

arbitration in accordance with the arbitration rules of the commission. The results of the

arbitration shall be final and binding on all relevant parties.

Our PRC lawyers have confirmed that the abovementioned dispute resolution provisions set

forth in the Structured Contracts are in compliance with the PRC laws, legally valid and binding

on the relevant signatories.

Basis of consolidating the results of SMU (including the revenue and profit

attributable to SMU during the Track Record Period)

The Structured Contracts collectively permitted Shanghai SumZone Enterprise to

consolidate the financial results of SMU as a wholly owned subsidiary of Shanghai SumZone

Enterprise because the above contracts effectively transfer the economic risks and benefits of

SMU to Shanghai SumZone Enterprise commencing from 1st June, 2011.

Since SMU, Century Linker and Shanghai SumZone Enterprise are under common control by

Mr. Fang under the Structured Contracts, the Reporting Accountants of our Company concur with

management’s view to consolidate the results of SMU in the financial statements of Shanghai

SumZone Enterprise before and after the Listing. The basis of consolidating the results of SMU is

disclosed in note 1 to the Accountants’ Report set out in Appendix I to this prospectus.


— 106 —

Q4 Q5(ii)

B4 Q5(ii)

B1 Q1(c)

B2 Q5(vii)(b)

B2 Q5(iv)

B4 Q5(i)

THE PROVISIONS OF THE MINISTRY OF COMMERCE ON IMPLEMENTING THE SYSTEM

OF SECURITY REVIEW FOR ACQUISITIONS OF DOMESTIC ENTERPRISES BY FOREIGN

INVESTORS (THE ‘PROVISIONS’)

On 25th August, 2011, the MOFCOM published the Provisions which came into force as of

1st September, 2011.

For the purpose of supporting our future business expansion, including, amongst other

things, value-added services in relation to wireless marketing, for example, Internet information

services, SMU holds a Value-added Telecommunications Service Operating Permit and foreign

investment in value-added telecommunications services is restricted under PRC laws. Foreign

investors are not entitled to control more than 50% equity interest in such business. Nonetheless,

during the Track Record Period and up to the Latest Practicable Date, we have not commenced

to provide value-added telecommunications services or database marketing services. According

to our PRC lawyers, the Internet advertising, EPR and wireless marketing businesses currently

operated by our Group including the operation of www.cnnauto.com during the Track Record

Period, which remains a type of Restricted Businesses, do not fall into the definition of

value-added telecommunications services.

In relation to the Provisions, as confirmed by our PRC lawyers, the businesses conducted by

us during the Track Record Period do not fall within the scope of industries specified in the list

of industries subject to security review by the commerce authorities in the PRC and therefore we

are not subject to the security review under the Provisions.

OUR OPERATING ENTITIES IN THE PRC

SMU

SMU was established under the laws of the PRC as a domestic company with limited liability

on 16th July, 2003 with a registered capital of RMB 2,000,000 by Mr. Fang, Ms. Zhu, Ms. Zhang

and SumZone Auto and its business scope includes the provision of media investments, design,

production of advertisements, corporate management and consultancy services, PR and event

marketing services. Upon the establishment of SMU, Mr. Fang, Ms. Zhu, Ms. Zhang and SumZone

Auto owned 33%, 37%, 20% and 10% equity interests in SMU respectively. At the time of

establishment of SMU, Ms. Zhu and Ms. Zhang were friends and business partners of Mr. Fang.

SumZone Auto was Mr. Fang’s former employer and then became his business partner. Mr. Fang

had worked as the general manager of SumZone Auto prior to the establishment of SMU.

On 18th February, 2004, Mr. Fang and Ms. Zhang entered into an equity transfer agreement,

pursuant to which Ms. Zhang transferred her 20% equity interest in SMU to Mr. Fang at a

consideration in the amount of RMB 400,000 which was determined in proportion to her equity

interest in SMU. Ms. Zhang, as a friend and a business partner of Mr. Fang, agreed to invest in

SMU but did not participate in the management or operation of SMU. Ms. Zhang then decided to

transfer her 20% equity interest to Mr. Fang at the consideration of RMB400,000 which was

equivalent to her original contribution in SMU through friendly negotiations with Mr. Fang. After

the above transfer, Mr. Fang then owned 53% equity interest in SMU. On the same date, the


— 107 —

B1 Q1(a)

B1 Q18(a)

B1 Q18(a)

B2 Q20B2 Q21

shareholders of SMU approved the above transfer and the amendments of the articles of

association of SMU to change its business scope by including “wholesale and retail of advertising

materials, cultural accessories and craft gifts”. On 24th March, 2004, the Songjiang Branch of

Shanghai Administration for Industry and Commerce (上海市工商行政管理局松江分局) issued a

new business licence to SMU.

On 29th September, 2010, Mr. Fang and Ms. Zhu entered into an equity transfer agreement,

pursuant to which Ms. Zhu transferred her 37% equity interest in SMU to Mr. Fang at a

consideration in the amount of RMB 740,000 which was determined in proportion to her equity

interest in SMU. Ms. Zhu, as a friend and a business partner of Mr. Fang, agreed to invest in SMU

but did not participate in the management or operation of SMU. Ms. Zhu then decided to transfer

her 37% equity interest to Mr. Fang at the consideration of RMB740,000 which was equivalent to

her original contribution in SMU through friendly negotiations with Mr. Fang. On 1st December,

2010, Mr. Fang and SumZone Auto entered into an equity transfer agreement, pursuant to which

SumZone Auto transferred its 10% equity interest in SMU to Mr. Fang at a consideration in the

amount of RMB 3,639,000 which was determined with reference to the appraised value of the

entire equity interest of SMU as at 30th September, 2010 in the amount of RMB36,390,000 as

provided in the valuation report issued by 上海集聯資產評估有限公司 (Shanghai Jilian Assets

Appraisal Co., Ltd.) on 8th November, 2010. At the time of establishment of SMU, SumZone Auto

was Mr. Fang’s former employer and later became his business partner. SumZone Auto then

agreed to invest in SMU and cooperated with Mr. Fang in the business and operation of SMU. In

consideration of more involvement and contribution in the business development and operation

of SMU by SumZone Auto, Mr. Fang agreed to acquire the 10% equity interest from SumZone Auto

based on the appraised value of SMU after arm’s length negotiation with Mr. Fang. After the above

transfers, Mr. Fang then owned the entire equity interest in and became the sole beneficial owner

of SMU and remains as the sole beneficial owner of SMU up to the Latest Practicable Date. The

business scope of SMU includes the provision of media investments and design, production,

agency and release of various advertisements, corporate management and consultancy services,

PR in major events, wholesale and retail of advertising materials, cultural accessories and craft

gifts.

SumZone Auto was established on 8th January, 2002, with registered capital of RMB 6

million and a registered address of SumZone Auto at 45/F, 3 Yanshou Road, Litahui Town,

Songjiang District, Shanghai, China. The legal representative was Wang Delai. The company’s

principal business activities include providing four-technical services in computer multimedia,

networking, and automotive information consulting, planning large-scale public relations events,

advertising design and production, and advertising agency (involving, and operated in

accordance with the relevant licences).

SumZone Auto’s founding shareholders include Wang Delai (44% equity interest), Qiu

Yueping (36% equity interest) and Shanghai Jiefang Advertising Limited (上海解放廣告有限公司)

(20% equity interest). All shareholders are Independent Third Parties.

Since SumZone Auto had no active business activities for an extended period of time, the

shareholders believe the continuation of SumZone Auto was unnecessary. As a result, the

company was liquidated on 29th July, 2011.


— 108 —

B1 Q18(b)

B2 Q20B2 Q21

B2 Q20B2 Q21

B1 Q19

B1 Q19

Mr. Fang, being the chairman of our Company, has been appointed as the sole director of

SMU and has taken up the leading role in the governance of implementation of the financial and

operating policies in respect of SMU in order to ensure that SMU will be managed and operated

according to our Group’s policies and the Structured Contracts.

East Shanghai SumZone

East Shanghai SumZone was established in the PRC with limited liability and a registered

and paid up capital of RMB 2,000,000 on 27th March, 2006. Upon the establishment of East

Shanghai SumZone and up to the Latest Practicable Date, SMU and East Shanghai Media Group,

an Independent Third Party, owned 49%, and 51% equity interests in East Shanghai SumZone

respectively. The business scope of East Shanghai SumZone includes, amongst other things,

design, production, agency and release of various advertisements, corporate management and

consultancy services, technical development and consultancy, PR and event marketing services

and lease of electric equipment.

On 26th August, 2011, we established SumZone Advertising and SumZone Marketing. On the

basis of the Structured Contracts and in pursuance of our Group’s long-term strategic plans,

SMU’s advertising agency business based on traditional and digital media and event marketing

business, which are not subject to prohibition on foreign investment in the PRC, and relevant

contracts and staff as well as intellectual property rights of SMU are being and will be transferred

to SumZone Advertising, SumZone Marketing and, or any other PRC subsidiaries of Shanghai

SumZone Enterprise, as more fully explained in the subsection “Structured Contracts” above and

the section “Business — Transfer of businesses” in this prospectus.

As advised by our PRC lawyers, other than the entities prescribed by the PRC laws and

administrative regulations that are required to apply for advertising operation licences, PRC laws

do not require any other entities or individuals to obtain advertising operation licences for

engaging in advertising business. Accordingly, in connection with the above-mentioned

businesses that are being transferred and will be transferred to the PRC subsidiaries of our Group,

we are not required to obtain any permits, certificates and licences from the PRC government or

go through any other local legal procedures.

Details and timetable in connection with the transfer of our businesses to SumZone

Advertising and SumZone Marketing are set out in the section “Business — Transfer of

businesses” in this prospectus.

SumZone Advertising

SumZone Advertising was established in the PRC with limited liability and a registered and

paid up capital of RMB 1,000,000 on 26th August, 2011. SumZone Advertising is wholly owned

by Shanghai SumZone Enterprise and its business scope includes the provision of design,

production, release and agency for various advertisement, organisation of cultural arts exchange

activities, business information consultation, craft gifts, advertising materials, wholesale of

cultural products (except for exclusive control).


— 109 —

B2 Q5(i)

SumZone Advertising was established with a view to rationalising our advertising resources

and service capabilities as part of our long term business development and expansion plans.

SumZone Marketing

SumZone Marketing was established in the PRC with limited liability and a registered and

paid up capital of RMB 1,000,000 on 26th August, 2011. SumZone Marketing is wholly owned by

Shanghai SumZone Enterprise and its business scope includes the provision of marketing

planning, development in the field of computer technology, technical consultation, technical

service, corporate information consultation, computer network engineering (except for special

approval), public relations in major events, development and sale of computer software and

hardware (except for special products on computer information system safety) and wholesale of

craft gifts and electronic products.

SumZone Marketing was established with a view to rationalising our digital marketing and

event marketing resources and expanding our digital marketing business, which is of strategic

importance to our Group and expected to be the future growth engine of our Group’s business.

INTRODUCTION OF STRATEGIC INVESTORS

(1) Jolly Win Agreement

On 20th April, 2011, our Company entered into the Jolly Win Agreement with (1) Jolly Win

and (2) Mr. Fang, pursuant to which Jolly Win agreed to subscribe for 120 Shares (“Jolly Win

Shares”) in our Company, representing 12% of the enlarged share capital of our Company

immediately upon the subscription of the Jolly Win Shares, for an aggregate subscription price

in Hong Kong dollars equivalent to RMB 20 million (“Subscription Price”) (the “Jolly Win

Investment”). The Subscription Price was arrived at after arm’s length negotiations among Jolly

Win, Mr. Fang and our Company with regard to the historical operating and financial performance

and future business prospects of our Group. The Jolly Win Investment was completed on 25th

May, 2011, the proceeds from which have been and will be utilised for general working capital

and business development pursuant to our Group’s strategic plans.

Jolly Win is a limited company incorporated in BVI on 6th June, 2007 and directly wholly

owned by Mr. Lin, our non-executive Director. Save as disclosed above, Jolly Win has no other

relationship with our Company’s connected persons. It is the offshore investment platform of Mr.

Lin and is principally engaged in securities and equity investments. Mr. Lin has significant

investment appetite for and interest in investing branding services, advertising and media

companies. Mr. Lin shows high regard for our management team with hands-on brand

management experience and extensive media experience. Jolly Win, being Mr. Lin’s investment

platform, invested in our Group because it is optimistic about the future development of the

consumer service industry in the PRC and it believes that it will contribute commercial resources

and bring business opportunities to our Group.


— 110 —

SC 2.15(c)

SC 2.15(b)

Pursuant to the Jolly Win Agreement, Mr. Fang has warranted and undertaken to Jolly Win

the audited net profits after tax and minority interests but before listing expenses for the financial

years ending 31st December, 2011, 2012 and 2013 of our Company to be no less than RMB 24

million, or less than RMB 40 million but equal to or more than RMB 24 million, RMB 30 million

and RMB 40 million respectively. If the audited net profits after tax and minority interests but

before listing expenses for the relevant financial years are less than the respective warranted

profits referred to above, Jolly Win will be entitled to a provision of consideration adjustment as

set out below.

The above warranted profit amounts of RMB 24 million or less than RMB 40 million but equal

to or more than RMB 24 million for 2011, RMB 30 million for 2012 and RMB 40 million for 2013

as stipulated in the Jolly Win Agreement were negotiated between Mr. Fang and Jolly Win for

consideration adjustment purpose and arrived at after the discussions between Jolly Win and Mr.

Fang with reference to the historical operating and financial performance and future business

prospects of our Group. The actual amount of our Group’s profit for each of the financial years

ending on 31st December, 2011, 2012 and 2013 will be subject to risks and uncertainty relating

to future events and circumstances some of which may be beyond the control of our Group, and

may differ materially from the above warranted profit amounts. The above warranted profit

amounts do not constitute profit forecasts of our Company under the GEM Listing Rules and such

amounts should not be regarded in any way as an indication of our Group’s projected profits for

the relevant financial years. There is no assurance that our Group can achieve such amounts of

profit for the relevant financial years.

2011 Adjustment

According to the Jolly Win Agreement, in the event that the audited net profit after tax and

minority interests but before listing expenses of our Company for the financial year ending 31st

December, 2011 (“2011 ANP”) is less than RMB 40 million (“2011 Warranted Profit”) but is equal

to or more than RMB 24 million, and provided that all applicable laws and regulations including

but not limited to the GEM Listing Rules are complied with and that there are no objections from

the Stock Exchange or other relevant regulatory authorities, Jolly Win shall be entitled to give

written notice to Mr. Fang requiring Mr. Fang to compensate Jolly Win in cash (the “2011 Cash

Adjustment”). In this instance, the 2011 Cash Adjustment for Jolly Win is equivalent to the sum

of cash compensation (to be determined based on the following formula) plus 10% interest per

annum.

Cash compensation =Hong Kong dollars

equivalent toRMB8,000,000

x(2011 Warranted Profit - 2011 ANP)

16,000,000

In the event that 2011 ANP is less than RMB 24 million, and provided that all applicable laws

and regulations including the GEM Listing Rules are complied with and that there are no

objections from the Stock Exchange or other relevant regulatory authorities, Jolly Win shall be

entitled to give written notice to Mr. Fang to compensate Jolly Win in cash. In this instance, the

2011 Cash Adjustment for Jolly Win is the sum of cash compensation at Hong Kong dollars

equivalent to RMB8,000,000 plus 10% interest per annum.


— 111 —

B1 Q21

Any 2011 Cash Adjustment for Jolly Win must be completed within 20 Business Days after

the publication of the audited financial statements of our Company for the year ending 31st

December, 2011 provided that Jolly Win shall serve the relevant written notice upon or within 15

Business Days after the publication of such financial statements, failing which Jolly Win shall be

deemed to have waived its right thereunder.

As disclosed in this prospectus, the (i) net profit after tax and minority interest and (ii) the

listing expenses for the year ended 31st December, 2011 were RMB34,453,305 and RMB5,590,415

respectively. Accordingly, the 2011 ANP amounted to RMB40,043,720, and therefore Mr. Fang

shall not be required to compensate Jolly Win for the year ended 31st December, 2011.

2012 Adjustment

In the event that the audited net profit after tax and minority interests but before listing

expenses of our Company for the financial year ending 31st December, 2012 (“2012 ANP”) is less

than RMB 30 million (“2012 Warranted Profit”), and provided that all applicable laws and

regulations including the GEM Listing Rules are complied with and that there are no objections

from the Stock Exchange or otherrelevant regulatory authorities, Jolly Win shall be entitled to

give written notice to Mr. Fang requiring Mr. Fang to compensate Jolly Win in cash (the “2012

Cash Adjustment”). The 2012 Cash Adjustment for Jolly Win is equivalent to the sum of

compensation (to be determined based on the following formula) plus 10% interest per annum.

Cashcompensation

=

Hong Kong dollarsequivalent to(SubscriptionPrice - 2011

Cash Adjustment)

x(2012 Warranted Profit

- 2012 ANP)30,000,000

x

(Subscribed Shares- Disposed Shares)Subscribed Shares

(Notes)

Notes:

(i) Subscribed Shares mean the Jolly Win Shares together with the aggregate Shares to be issued and allotted

to Jolly Win pursuant to the Capitalisation Issue, excluding Shares acquired or disposed of by Jolly Win after

the Listing, if any.

(ii) Disposed Shares mean any of the Subscribed Shares to be disposed of by Jolly Win at any time after the

subscription of the Jolly Win Shares in whole or in part in whatsoever manner.







— 112 —

2013 Adjustment


expenses of our Company for the financial year ending 31st December, 2013 (“2013 ANP”) is less

than RMB 40 million (“2013 Warranted Profit”), and provided that all applicable laws and

regulations including the GEM Listing Rules are complied with and there are no objections from

the Stock Exchange or other relevant regulatory authorities, Jolly Win shall be entitled to give

written notice to Mr. Fang requiring Mr. Fang to compensate Jolly Win in cash (the “2013 Cash

Adjustment”). The 2013 Cash Adjustment for Jolly Win is equivalent to the sum of cash

compensation (to be determined based on the following formula) plus 10% interest per annum.

Cashcompensation

=

Hong Kong dollarsequivalent to(SubscriptionPrice - 2011

Cash Adjustment- 2012 CashAdjustment)


- 2013 ANP)2013 Warranted Profit

x(Subscribed Shares- Disposed Shares)Subscribed Shares






All the rights granted to Jolly Win pursuant to the Jolly Win Agreement including but not

limited to the special right to nominate a Director and the right to approve certain reserved

matters, and, amongst other things, to approve issue and allotment of Shares other than those

contemplated under the Listing will only remain valid and subsisting so long as it holds any

Shares and in any event will automatically terminate upon the Listing Date.

Mr. Lin is the non-executive Director nominated by Jolly Win pursuant to the nomination

right under the Jolly Win Agreement, whose appointment is with an initial term of three years

subject to the retirement and re-election requirements under the Articles.

Under the Jolly Win Agreement, Mr. Fang and Jolly Win will be bound by the restrictions of

transfer of the Shares under the GEM Listing Rules, and agree under normal market condition (but

not otherwise) not to deal with their Shares in a disorderly manner which could reasonably be

expected to have a material adverse effect on the price of the Shares. Jolly Win further undertakes

that it will at all times comply with the requirements of the GEM Listing Rules in dealing with its

interest in the Shares including, without limitation, not to deal with or enter into any agreement

to deal with its interest in the Shares during the six months after the Listing Date or any longer

period as may be required by the Stock Exchange.

As a result of the completion of the Jolly Win Investment under the Jolly Win Agreement,

Jolly Win was interested in 12% of the issued share capital of our Company immediately before

completion of the Placing and the Capitalisation Issue. The Jolly Win’s shareholding in our

Company will not be counted towards the public float under the GEM Listing Rules as one of our

non-executive Directors, Mr. Lin, is the sole and ultimate shareholder of Jolly Win.


— 113 —

SC 2.15(d)

B2 Q22

B2 Q22(i)

SC 2.15(e)

B2 Q22(ii)

The Directors confirm that the terms of the Jolly Win Agreement were determined on an

arm’s length basis with reference to the financial performance of our Group in 2010.

As confirmed by the PRC legal advisers of our Company, since Mr. Lin, the ultimate

shareholder of Jolly Win, invested in our Group as a financial investor and had not directly or

indirectly owned any interest in our PRC subsidiaries prior to the Jolly Win Investment nor

established or controlled any offshore special purpose vehicle with equity interest of domestic

companies, the requirements of Circular No. 75 were not applicable to the Jolly Win Investment.

(2) Whales Capital Agreement

On 20th April, 2011, our Company entered into the Whales Capital Agreement with (1)

Whales Capital, (2) Lapta International and (3) Mr. Fang, pursuant to which Lapta International

agreed to sell and Whales Capital agreed to purchase 130 Shares (“Whales Capital Shares”),

representing 13% of the enlarged share capital of our Company immediately upon the transfer of

the Whales Capital Shares, for an aggregate purchase price in Hong Kong dollar and, or

Singapore dollar equivalent to RMB 21,666,667 (“Purchase Price”) (the “Whales Capital

Investment”). The Purchase Price was arrived at after arm’s length negotiations between Lapta

International and Whales Capital with regard to the historical operating and financial

performance and future business prospects of our Group. The Whales Capital Investment was

completed on 25th May, 2011.

Whales Capital is a limited company incorporated in BVI on 28th March, 2011 and indirectly

wholly owned by Mr. Fan, our non-executive Director. Save as disclosed above, Whales Capital

has no other relationship with our Company’s connected persons. It mainly invests in growing

PRC enterprises and provides them with financial consultation service. It focuses on sectors such

as cultural media, retailing, modern service and cultural real estate. Whales Capital, being a

strategic investor with asset and equity investment background, invested in our Group pursuant

to its investment policy in selecting good quality companies in industries with growth potential.

Whales Capital invested in our Group because of our Group’s full-service business model,

professional teams and good financial performance and it believes that our Group will achieve

rapid growth on the back of continuous macroeconomic developments and strong growth in

domestic consumption in the PRC.

Pursuant to the Whales Capital Agreement, Mr. Fang has warranted and undertaken to

Whales Capital the audited net profits after tax and minority interests but before listing expenses

for the financial years ending 31st December, 2011, 2012 and 2013 of our Company to be no less

than RMB 24 million, or less than RMB 40 million but equal to or more than RMB 24 million, RMB

30 million and RMB 40 million respectively, which are the same as the warranted profits given to

Jolly Win as discussed above. If the audited net profits after tax and minority interests but before

listing expenses for the relevant financial years are less than the aforesaid respective warranted

profits respectively, Whales Capital will be entitled to a provision of consideration adjustment as

set out below.


— 114 —

B1 Q17

SC 2.15(c)

SC 2.15(b)

The above warranted profit amounts of RMB 24 million or less than RMB 40 million but equal

to or more than RMB 24 million for 2011, RMB 30 million for 2012 and RMB 40 million for 2013

as stipulated in the Whales Capital Agreement were negotiated amongst Lapta International, Mr.

Fang and Whales Capital for consideration adjustment purpose and arrived at after the arm’s

length discussions between Whales Capital and Mr. Fang with reference to the historical

operating and financial performance and future business prospects of our Group. The actual

amount of our Group’s profit for each of the financial years ending on 31st December, 2011, 2012

and 2013 will be subject to risks and uncertainty relating to future events and circumstances some

of which may be beyond the control of our Group, and may differ materially from the above

warranted profit amounts. The above warranted profit amounts do not constitute profit forecasts

of our Company under the GEM Listing Rules and such amounts should not be regarded in any

way as an indication of our Group’s projected profits for the relevant financial years. There is no

assurance that our Group can achieve such amounts of profit for the relevant financial years.

2011 Adjustment

According to the Whales Capital Agreement, in the event that the audited net profit after tax

and minority interests but before listing expenses of our Company for the financial year ending

31st December, 2011 of our Company (“2011 ANP”) is less than RMB 40 million (“2011 Warranted

Profit”) but equal to or more than RMB 24 million, and provided that all applicable laws and

regulations including the GEM Listing Rules are complied with and no objections from the Stock

Exchange or other relevant regulatory authorities, Whales Capital shall be entitled to give written

notice to Mr. Fang requiring Mr. Fang to compensate Whales Capital in cash (the “2011 Cash

Adjustment”). In this instance, the 2011 Cash Adjustment for Whales Capital is equivalent to the

sum of cash compensation (to be determined based on the following formula) plus 10% interest

per annum.

Cash compensation =Hong Kong dollars

equivalent toRMB8,666,667

x(2011 Warranted Profit - 2011 ANP)

16,000,000

In the event that 2011 ANP is less than RMB 24 million, and provided that all applicable lawsand regulations including the GEM Listing Rules are complied with and that there are noobjections from the Stock Exchange or other relevant regulatory authorities, Whales Capital shallbe entitled to give written notice to Mr. Fang to compensate Whales Capital in cash. In thisinstance, the 2011 Cash Adjustment for Whales Capital is the sum of cash compensation at HongKong dollars equivalent to RMB8,666,667 plus 10% interest per annum.

Any 2011 Cash Adjustment for Whales Capital must be completed or made within 20Business Days after the publication of the audited financial statements of our Company for theyear ending 31st December, 2011 provided that Whales Capital shall serve the relevant writtennotice upon or within 15 Business Days after the publication of such financial statements, failingwhich Whales Capital shall be deemed to have waived its right thereunder.

As disclosed in this prospectus, the (i) net profit after tax and minority interest and (ii) thelisting expenses for the year ended 31st December, 2011 were RMB34,453,305 and RMB5,590,415respectively. Accordingly, the 2011 ANP amounted to RMB40,043,720, and therefore Mr. Fangshall not be required to compensate Whales Capital for the year ended 31st December, 2011.


— 115 —

2012 Adjustment

In the event that the audited net profit after tax and minority interests but before listingexpenses of our Company for the financial year ending 31st December, 2012 of our Company(“2012 ANP”) is less than RMB 30 million (“2012 Warranted Profit”), and provided that allapplicable laws and regulations including the GEM Listing Rules are complied with and that thereare no objections from the Stock Exchange or other relevant regulatory authorities, WhalesCapital shall be entitled to give written notice to Mr. Fang requiring Mr. Fang to compensateWhales Capital in cash (the “2012 Cash Adjustment”). The 2012 Cash Adjustment for WhalesCapital is equivalent to the sum of cash compensation (to be determined based on the followingformula) plus 10% interest per annum.

Cashcompensation

=

Hong Kong dollarsequivalent to

(Purchase Price- 2011 CashAdjustment)

x

(2012 Warranted Profit- 2012 ANP)

x

(Purchased Shares- Disposed Shares)

2012 Warranted Profit PurchasedShares(Notes)

Notes:

(i) Purchased Shares mean Whales Capital Shares together with the aggregate Shares to be issued and allotted

to Whales Capital pursuant to the Capitalisation Issue, excluding any Shares to be acquired or disposed of

by Whales Capital after the Listing, if any.

(ii) Disposed Shares mean any of the Purchased Shares to be disposed of by Whales Capital at any time after the

purchase of the Whales Capital Shares in whole or in part in whatsoever manner.

Any 2012 Cash Adjustment for Whales Capital must be completed within 20 Business Days

after the publication of the audited financial statements of our Company for the year ending 31st

December, 2012 provided that Whales Capital shall serve the relevant written notice upon or

within 15 Business Days after the publication of such financial statements, failing which Whales

Capital shall be deemed to have waived its right thereunder.

2013 Adjustment


expenses of our Company for the financial year ending 31st December, 2013 of our Company

(“2013 ANP”) is less than RMB 40 million (“2013 Warranted Profit”), and provided that all

applicable laws and regulations including the GEM Listing Rules are complied with and there are

no objections from the Stock Exchange or other relevant regulatory authorities, Whales Capital

shall be entitled to give written notice to Mr. Fang requiring Mr. Fang to compensate Whales

Capital in cash (the “2013 Cash Adjustment”). The 2013 Cash Adjustment for Whales Capital is

equivalent to the sum of cash compensation (to be determined based on the following formula)

plus 10% interest per annum.

Cashcompensation

=

Hong Kong dollarsequivalent to

(Purchased Price- 2011 Cash

Adjustment - 2012Cash Adjustment)


- 2013 ANP)2013 Warranted Profit

x(Purchased Shares- Disposed Shares)Purchased Shares


— 116 —

Any 2013 Cash Adjustment for Whales Capital must be completed within 20 Business Days

after the publication of the audited financial statements of our Company for the year ending 31st

December, 2013 provided that Whales Capital shall serve the relevant written notice upon or

within 15 Business Days after the publication of such financial statements, failing which Whales

Capital shall be deemed to have waived its right thereunder.

All the rights granted to Whales Capital pursuant to the Whales Capital Agreement including

but not limited to the special right to nominate a Director and the right to approve certain

reserved matters, and, amongst other things, to approve issue and allotment of Shares other than

those contemplated under the Listing will only remain valid and subsisting so long as it holds any

Shares and in any event will automatically terminate upon the Listing Date.

Mr. Fan is the non-executive Director nominated by Whales Capital pursuant to the

nomination right under the Whales Capital Agreement, whose appointment is of an initial term

of three years subject to the retirement and re-election requirements under the Articles.

Under the Whales Capital Agreement, Mr. Fang, Lapta International and Whales Capital will

be bound by the restrictions on transfer of the Shares under the GEM Listing Rules, and agree

under normal market condition (but not otherwise) not to deal with their Shares in a disorderly

manner which could reasonably be expected to have a material adverse effect on the price of the

Shares. Whales Capital further undertakes that it will at all times comply with the requirements

of the GEM Listing Rules in dealing with its interest in the Shares including without limitation not

to deal with or enter into any agreement to deal with its interest in the Shares during the six

months after the Listing Date or any longer period as may be required by the Stock Exchange.

As a result of the completion of the Whales Capital Investment under the Whales Capital

Agreement, Whales Capital was interested in 13% of the issued share capital of our Company

immediately before completion of the Placing and the Capitalisation Issue. Whales Capital’s

shareholding in our Company will not be counted towards the public float under the GEM Listing

Rules as one of our non-executive Directors, Mr. Fan, is the sole and ultimate Shareholder of

Whales Capital.

The Directors confirmed that the terms of the Whales Capital Agreement were determined

on an arm’s length basis with reference to the financial performance of our Group in 2010.

As confirmed by the PRC legal advisers of our Company, since Mr. Fan, the ultimate

shareholder of Whales Capital, invested in our Group as a financial investor and had not directly

or indirectly owned any interest in our PRC subsidiaries prior to the Whales Capital Investment

nor established or controlled any offshore special purpose vehicle with equity interest of

domestic companies, the requirements of Circular No. 75 were not applicable to the Whales

Capital Investment.


— 117 —

SC 2.15(d)

B2 Q22

B2 Q22(i)

SC 2.15(e)

B2 Q22(ii)

B1 Q17

The details of the Jolly Win Investment and the Whales Capital Investment are summarised

as follows:

(1) Jolly Win Investment (completed on 25th May, 2011)

Name of investor : Jolly Win Management Limited

Date of Investment : 20th April, 2011

Amount of consideration paid : being the Hong Kong dollars equivalent to RMB 20

million

Date of payment of

consideration

: 23rd May, 2011

Cost per Share paid : approximately HK$1.32

Shareholding upon Listing : 18,000,000 Shares representing 9% of the issued

share capital of our Company upon Listing

Discount to the Placing Price : approximately 9.59% to 38.32%

Use of proceeds : To be utilised for general working capital and

business development under our Group’s strategic

plans

(2) Whales Capital Investment (completed on 25th May, 2011)

Name of investor : Whales Capital Holdings Limited

Date of Investment : 20th April, 2011

Amount of consideration paid : being the Hong Kong dollars and, or Singapore

dollars equivalent to RMB 21,666,667

Date of payment of

consideration

: 17th May, 2011 — 25th May, 2011

Cost per Share paid : approximately HK$1.35

Shareholding upon Listing : 19,500,000 Shares representing 9.75% of the issued

share capital of our Company upon Listing

Discount to the Placing Price : approximately 7.53% to 36.92%


— 118 —

SC 2.15(a)

CORPORATE AND SHAREHOLDING STRUCTURE BEFORE THE PLACING AND THE

CAPITALISATION ISSUE

Our corporate and shareholding structure before completion of the Placing and the

Capitalisation Issue (taking no account of the Shares that may be issued pursuant to the exercise

of any option that may be granted under the Share Option Scheme) will be as follows:

100%

12% 75% 13%

100%

100%

100%

49%

100% 100%

100%

100% 100%

Lapta International(incorporated in the BVI)

Jolly Win(incorporated in the BVI)

Whales Capital(incorporated in the BVI)

The Company(incorporated in the Cayman Islands)

Quick Motion(incorporated in the BVI)

Century Linker(incorporated in Hong Kong)

Shanghai SumZone Enterprise(established in the PRC)

Offshore

The PRC

SumZone Marketing(established in the PRC)

SumZone Advertising(established in the PRC)




Mr. Fan

(indirectshareholding)

Mr. FangMr. Lin


— 119 —

A1A(29)(1)A1A(29)(2)Co.Ord.III(29)

CORPORATE AND SHAREHOLDING STRUCTURE AFTER THE PLACING AND THE

CAPITALISATION ISSUE

Our corporate and shareholding structure upon completion of the Placing and the

Capitalisation Issue (taking no account of the Shares that may be issued pursuant to the exercise

of any option that may be granted under the Share Option Scheme) will be as follows:

100%

9.75%56.25% 25%

100%

100%

100%

9%

49%

100% 100%

100%100% 100%

Mr. Lin

Lapta International(incorporated in the BVI)

Jolly Win(incorporated in the BVI)

Whales Capital(incorporated in the BVI)

The Company(incorporated in the Cayman Islands)

Quick Motion(incorporated in the BVI)

Century Linker(incorporated in Hong Kong)

Shanghai SumZone Enterprise(established in the PRC)

Offshore

The PRC

SumZone Marketing(established in the PRC)

SumZone Advertising(established in the PRC)




PublicShareholders

Mr. Fang Mr. Fan

(indirect shareholding)


— 120 —

A1A(28)(2)

A1A(29)(1)A1A(29)(2)Co.Ord.III(29)

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