Fortunet e Commerce : (1) MAJOR TRANSACTION IN RELATION TO THE DEEMED DISPOSAL OF EQUITY INTEREST IN A SUBSIDIARY AND (2) NOTICE OF EXTRAORDINARY GENERAL MEETING

September 22, 2020 at 10:00 am

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Changyou Alliance Group Limited, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser(s) or the transferee(s) or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the transferee(s).

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

CHANGYOU ALLIANCE GROUP LIMITED

暢由聯盟集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1039)

(1) MAJOR TRANSACTION IN RELATION TO

THE DEEMED DISPOSAL OF EQUITY INTEREST IN A SUBSIDIARY

AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

Capitalised terms used in this cover page shall have the same meanings as those defined in this circular.

A notice convening the EGM to be held at Rooms 1908-1916, 19/F, Sun Hung Kai Centre, 30 Harbour Road, Wan Chai, Hong Kong on Wednesday, 14 October 2020 at 11:00 a.m. is set out on pages EGM-1 to EGM-2 of this circular. A proxy form for use by the Shareholders for the EGM is enclosed with this circular. Whether or not you are able to attend the EGM in person, you are requested to complete the enclosed proxy form in accordance with the instructions printed thereon and return the same to the Company's Hong Kong share registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof (as the case may be). The completion and return of the proxy form will not preclude you from attending and voting in person at the EGM or any adjourned meeting thereof (as the case may be) should you so wish, and in such event, the instrument appointing a proxy shall be deemed to be revoked.

PRECAUTIONARY MEASURES FOR THE EGM

Please refer to the section headed "Precautionary Measures for the EGM" of this circular for the precautionary measures being implemented by the Company in order to safeguard the health and safety of the Shareholders and all attendees at the EGM and to prevent the spread of the coronavirus ("COVID-19"), including:

compulsory body temperature checks will be conducted at the entrance of the EGM venue. Any person with a body temperature of 37.4 degrees Celsius or above, or is exhibiting flu-like symptoms, may be denied entry into the EGM venue and may be required to leave the EGM venue but may be allowed to vote by submitting a voting slip to the scrutineer at the entrance of the EGM venue;
every attendee will be required to wear a surgical face mask throughout the EGM and at all times within the EGM venue;
appropriate social distancing and seating arrangements in line with the Regulation will be maintained; and
no refreshment or drinks will be served at the EGM.

Any person who does not comply with the precautionary measures above or is subject to any Hong Kong Government prescribed quarantine may be denied entry to the EGM venue. The Company would like to further remind the Shareholders that physical attendance in person at the EGM is not necessary for the purpose of exercising voting rights. Shareholders are encouraged to appoint the chairman of the EGM as their proxy to vote on the relevant resolution at the EGM, as an alternative to attending the EGM in person.

22 September 2020

	CONTENTS
		Page
Precautionary Measures for the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Definitions . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Appendix I	- Financial Information of the Group . . . . . . . . . . . . . . . . . .	I-1
Appendix II	- General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
Notice of Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . .	EGM-1

- i -

PRECAUTIONARY MEASURES FOR THE EGM

To safeguard the health and safety of the Shareholders and all attendees at the EGM and to prevent the spread of COVID-19, the following precautionary measures will be implemented at the EGM, including:

compulsory body temperature checks will be conducted for every attendee at the entrance of the EGM venue. Any person with a body temperature of 37.4 degrees Celsius or above, or is exhibiting flu-like symptoms, may be denied entry into the EGM venue and may be required to leave the EGM venue but may be allowed to vote by submitting a voting slip to the scrutineer at the entrance of the EGM venue;
every attendee will be required to wear# a surgical face mask throughout the EGM and at all times within the EGM venue;
in view of the Prevention and Control of Disease (Prohibition on Group Gathering) Regulation (Chapter 599G of the Laws of Hong Kong) (the "Regulation"), the Shareholders attending in person at the venue of the EGM in excess of the 20 persons limit (or such other prevailing limit from time to time) under the Regulation will be accommodated in separate room(s) and/or partitioned area(s) in the same room at the venue of the EGM, with not more than 20 (or such other number of persons allowed under the Regulation) persons (including supporting staff for the EGM) in each such room and/or partitioned area; and
no refreshment or drinks will be served at the EGM.

Any person who does not comply with the precautionary measures above or is subject to any Hong Kong Government prescribed quarantine may be denied entry to the EGM venue.

The Company would like to remind the Shareholders that physical attendance in person at the EGM is not necessary for the purpose of exercising voting rights. Shareholders are encouraged to appoint the chairman of the EGM as their proxy to vote on the relevant resolution at the EGM, as an alternative to attending the EGM in person. In order to be valid, a proxy form together with the power of attorney or other authority (if any) under which it is signed or a certified copy thereof shall be deposited at the Company's Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong not less than 48 hours before the time appointed for holding of the EGM or any adjournment thereof (as the case may be).

Subject to the development of the COVID-19 pandemic and any directive(s) that may be further issued by the Hong Kong Government, the Company may implement further changes and precautionary measures and may issue further announcement(s) on such measures as and when appropriate.

A reference to a person wearing a mask is a reference to the person wearing a mask over and covering the person's nose and mouth, with the mask touching the person's nose, chin and cheeks.

- ii -

DEFINITIONS

In this circular, unless the context requires otherwise, capitalised terms used shall have the following meanings:

"Actual Valuation"	has the meaning ascribed to it in the paragraph headed
	"Letter from the Board - SUBSCRIPTION
	AGREEMENT - Undertakings" in this circular
"Affiliate(s)"	any individual, company or other legal entity which (i)
	directly or indirectly controls Sendlink; (ii) is
	controlled by Sendlink; or (iii) is, together with
	Sendlink, controlled by a third party
"Announcement"	the announcement of the Company dated 29 July 2020
	in respect of the Subscription Agreement and the
	transactions contemplated thereunder, including the
	Subscription
"associate(s)"	has the meaning ascribed to it under the Listing Rules
"Board"	the board of Directors
"Business Day(s)"	a day (other than a Saturday or Sunday) on which
	banks are open in Hong Kong, the PRC and the
	Cayman Islands for general commercial business
"BVI"	British Virgin Islands
"Changyou Alliance"	has the meaning ascribed to it in the paragraph headed
	"Letter from the Board - SUBSCRIPTION
	AGREEMENT - 2019 Subscription" in this circular
"Company"	Changyou Alliance Group Limited 暢由聯盟集團有限公司
	(formerly known as Fortunet e-Commerce Group
	Limited 鑫網易商集團有限公司), a company incorporated
	in the Cayman Islands, the shares of which are listed
	on the Main Board of the Stock Exchange (stock code:
	1039)
"Compensation Shares"	has the meaning ascribed to it in the paragraph headed
	"Letter from the Board - SUBSCRIPTION
	AGREEMENT - Undertakings" in this circular
"connected person(s)"	has the meaning ascribed to it under the Listing Rules
"Deed of Accession"	the deed of accession to be executed by the Investor to
	be joined as a party to the JV Agreement
"Director(s)"	director(s) of the Company

- 1 -

	DEFINITIONS
"Eastern E-Commerce"	China Eastern Airlines E-Commerce Co., Ltd（東方航空
	電子商務有限公司）, a company established under the
	laws of the PRC and a wholly-owned subsidiary of
	China Eastern Airlines Corporation Limited
"EGM"	the extraordinary general meeting of the Company to
	be convened and held at 11:00 a.m. on Wednesday, 14
	October 2020 for the Shareholders to consider, and if
	thought fit, approve the Subscription Agreement and
	the transactions contemplated thereunder, including the
	Subscription
"Existing PRC Changyou	the existing digital point electronic platform of the
Platform"	Group, "Changyou", in relation to its Digital Point
	Business in the PRC market, the particulars of which
	are further described in the paragraph headed
	"Appendix I - Financial Information of the Group - 3.
	Financial and Trading Prospects of the Group" in this
	circular
"Extra Step"	Extra Step Investments Limited, a company
	incorporated in the BVI with limited liability, and a
	wholly-owned subsidiary of China Mobile (Hong Kong)
	Group Limited
"Group"	the Company and its subsidiaries
"HK$"	Hong Kong dollar, the lawful currency of Hong Kong
"Hong Kong"	the Hong Kong Special Administrative Region of the
	People's Republic of China
"Hong Kong Government"	the government of Hong Kong
"Investor"	Sendlink or the Investor Nominee (as the case may be)
"Investor Nominee"	(i) any Affiliate nominated by Sendlink; or (ii) any
	other person (other than an Affiliate) nominated by
	Sendlink and approved by PCL in writing, such person
	and its ultimate beneficial owners shall be third parties
	independent of the Company and its connected persons
"Joy Empire"	Joy Empire Holdings Ltd., a company incorporated in
	the BVI with limited liability and a wholly-owned
	subsidiary of Bank of China Group Investment Limited

- 2 -

	DEFINITIONS
"JV Agreement"	the agreement dated 29 November 2016 and entered
	into between Pointsea Holdings, Extra Step and Joy
	Empire, as supplemented by a supplemental agreement
	dated 22 May 2020 entered into between Pointsea
	Holdings and the Original Investors in relation to,
	among other things, the development of the business of
	PCL and its subsidiaries from time to time, the
	particulars of which are further described in the
	paragraph headed "Letter from the Board - JV
	AGREEMENT" in this circular
"Latest Practicable Date"	16 September 2020, being the latest practicable date
	prior to the printing of this circular for the purpose of
	ascertaining certain information contained therein
"Listing Rules"	the Rules Governing the Listing of Securities on The
	Stock Exchange of Hong Kong Limited
"Long Stop Date"	has the meaning ascribed to it in the paragraph headed
	"Letter from the Board - SUBSCRIPTION
	AGREEMENT - Conditions precedent" in this circular
"New International Changyou	the new digital point electronic platform to be
Platform"	developed by the Group to expand its Digital Point
	Business into the Hong Kong and overseas markets, the
	particulars of which are further described in the
	paragraph headed "Appendix I - Financial Information
	of the Group - 3. Financial and Trading Prospects of
	the Group" in this circular
"Original Investor(s)"	Extra Step, Joy Empire, Eastern E-Commerce, Zhongjin
	Qizhi and Senran Investment
"PCL"	Pointsea Company Limited（分海有限公司）, a company
	incorporated in the Cayman Islands with limited
	liability, being an indirect non-wholly-owned subsidiary
	of the Company
"PCL Share(s)"	the ordinary share(s) with a par value of
	RMB0.0000125 each in the issued share capital of PCL
"Pointsea Holdings"	Pointsea Holdings Company Limited, a company
	incorporated in the BVI with limited liability, being the
	holding company of PCL and an indirect
	non-wholly-owned subsidiary of the Company

- 3 -

	DEFINITIONS
"PRC"	the People's Republic of China, and for the purposes of
	this circular, excluding Hong Kong, the Macau Special
	Administrative Region of the People's Republic of
	China and Taiwan
"Pre-money Valuation"	has the meaning ascribed to it in the paragraph headed
	"Letter from the Board - SUBSCRIPTION
	AGREEMENT - Subscription Shares and Subscription
	Price" in this circular
"RMB"	Renminbi, the lawful currency of the PRC
"Sendlink"	Sendlink LTD, a company incorporated in the BVI with
	limited liability
"SFO"	the Securities and Futures Ordinance (Chapter 571 of
	the Laws of Hong Kong)
"Senran Investment"	Senran Investment HK Company Limited （森然
	投資（香港）有限公司）, a company incorporated in Hong
	Kong with limited liability
"Share(s)"	the ordinary share(s) of a par value of US$0.01 each in
	the issued share capital of the Company
"Shareholder(s)"	the holder(s) of the Shares
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"Subscription"	the subscription of the Subscription Shares by the
	Investor at the Subscription Price pursuant to the
	Subscription Agreement
"Subscription Agreement"	the subscription agreement dated 29 July 2020 and
	entered into between PCL and Sendlink in relation to
	the Subscription
"Subscription Price"	not less than US$35,670,000 but not more than
	US$42,800,000, being the subscription price payable by
	the Investor to PCL in relation to the Subscription
	pursuant to the Subscription Agreement
"Subscription Shares"	not less than 61,078,767 but not more than 73,287,671
	new PCL Shares to be allotted and issued by PCL to
	the Investor pursuant to the Subscription Agreement
"subsidiary"	has the meaning ascribed to it in the Listing Rules

- 4 -

	DEFINITIONS
"Transfer Notice"	has the meaning ascribed to it in the paragraph headed
	"Letter from the Board - SUBSCRIPTION
	AGREEMENT - Transfer of the equity interest in
	PCL" in this circular
"US$"	United States dollar(s), the lawful currency of the
	United States of America
"Zhongjin Qizhi"	Zhongjin Qizhi (Shanghai) Equity Investment Centre
	(Limited Partnership)* （中金祺智（上海）股權投資中心（有
	限合夥））, a limited partnership established in the PRC
"%"	per cent.

The English translation of the name of this entity is for reference only and the official name of this entity is in Chinese.

- 5 -

LETTER FROM THE BOARD

CHANGYOU ALLIANCE GROUP LIMITED

暢由聯盟集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1039)

Executive Directors:	Registered Office:
Mr. Cheng Jerome (Chairman)	Royal Bank House
Mr. Yuan Weitao	3rd Floor
	24 Shedden Road
Non-executive Director:	P.O. Box 1586
Mrs. Guo Yan	Grand Cayman, KY1-1110
	Cayman Islands
Independent non-executive Directors:
Mr. Wong Chi Keung	Principal place of business in Hong Kong:
Mr. Liu Jialin	Rooms 1908-1916
Mr. Chan Chi Keung, Alan	19/F, Sun Hung Kai Centre
	30 Harbour Road
	Wan Chai
	Hong Kong
	22 September 2020
To the Shareholders
Dear Sir or Madam,

(1) MAJOR TRANSACTION IN RELATION TO

THE DEEMED DISPOSAL OF EQUITY INTEREST IN A SUBSIDIARY

AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the Announcement in relation to the Subscription Agreement.

On 29 July 2020 (after trading hours), PCL, an indirect non-wholly owned subsidiary of the Company, entered into the Subscription Agreement with Sendlink, pursuant to which, among other things, PCL conditionally agreed to allot and issue, and Sendlink conditionally agreed to subscribe for (or shall procure the Investor Nominee to subscribe for), not less than 61,078,767 but not more than 73,287,671 Subscription Shares at the Subscription Price of not less than US$35,670,000 but not more than US$42,800,000.

The purpose of this circular is to provide you with, among other things, (a) further information of the Subscription Agreement and the transactions contemplated thereunder; and (b) other information as required by the Listing Rules, together with a notice convening the EGM and the proxy form in respect of the EGM.

- 6 -

LETTER FROM THE BOARD

SUBSCRIPTION AGREEMENT

Date

29 July 2020 (after trading hours)

Parties

PCL; and
Sendlink.

To the best of the knowledge, information and belief of the Directors after having made all reasonable enquiries, as at the Latest Practicable Date, (i) Sendlink and its ultimate beneficial owner, Mr. Chen Rongsheng （陳融聖）, were third parties independent of the Company and its connected persons, and (ii) save for the Subscription, Mr. Chen Rongsheng （陳融聖）did not have any relationship (whether shareholding or business relationship) with

the Company and its connected persons.

The principal terms of the Subscription Agreement are set out below:

Subscription Shares and Subscription Price

Pursuant to the Subscription Agreement, PCL conditionally agreed to allot and issue, and Sendlink conditionally agreed to subscribe for (or shall procure the Investor Nominee to subscribe for), not less than 61,078,767 but not more than 73,287,671 Subscription Shares at the Subscription Price of not less than US$35,670,000 but not more than US$42,800,000. The exact number of Subscription Shares will be notified by Sendlink to PCL before the date of completion of the Subscription.

The Subscription Price payable by the Investor to PCL was determined after arm's length negotiations between PCL and Sendlink on the basis of a pre-money valuation of PCL of approximately US$593 million (the "Pre-moneyValuation"). The Investor shall pay the Subscription Price in full to PCL in US dollars on the date of completion of the Subscription.

The Pre-money Valuation is based on the pre-money valuation of PCL conducted by an investor (the "2019 Investor") in the subscriptions of PCL Shares by it and other investors, as disclosed in the announcement of the Company dated 31 January 2019 (the "2019 Subscription").

2019 Subscription

During the negotiations of the 2019 Subscription, the 2019 Investor performed an analysis (the "Investor Analysis") in order to determine the pre-money valuation of PCL (the "2019 Valuation"). During the Investor Analysis, both the discounted cash flow analysis and the comparable company analysis were considered for determining the 2019 Valuation.

- 7 -

LETTER FROM THE BOARD

The discounted cash flow analysis was based on, among other things, the following principal assumptions as set out in the Investor Analysis:

the growth rate in the number of registered users on the Existing PRC Changyou Platform would be maintained, taking into account the respective user bases of certain partners of Changyou Alliance;
the registered users on the Existing PRC Changyou Platform would become active users thereon at a certain conversion rate;
the growth rate in (i) above and the conversion rate in (ii) above would gradually decrease at a reasonable rate as the forecast period extended and the scale of the Existing PRC Changyou Platform further expanded;
taking into account the number of registered users on the Existing PRC Changyou Platform, the transaction price per customer and the frequency of transactions and with reference to the industry norms, it was expected that the revenue to be generated from the Company's digital point business through the Existing PRC Changyou Platform would be proportional to the relevant transaction amounts or gross merchandise volumes (as the case may be), and that a certain percentage of commission would be charged based on the relevant transaction amounts;
the marketing expenses to be incurred would primarily depend on the number of existing customers and new customers on the Existing PRC Changyou Platform and the respective average marketing expenses required per each existing customer and new customer;
the costs including the costs of sales, research and development costs, management costs and lease rentals (but excluding staff costs) estimated to be incurred were projected on a reasonable basis and would be proportional to the revenue to be generated;
the staff costs estimated to be incurred were projected based on the estimated number of staff of various functions and their corresponding remuneration levels;
a cashflow discount rate of 20% was adopted based on an assessment of the principal risks inherent in PCL's business operations and the corresponding expected return rate taking into account the expected return rate on investments in newly incorporated companies engaging in the principal business of online finance which ranged from 20% to 30%; and
a cashflow growth rate of 8% was adopted for the sixth to tenth year of the forecast period and a cashflow perpetual growth rate of 3% was adopted for the period thereafter.

- 8 -

LETTER FROM THE BOARD

According to the Investor Analysis, the comparable company analysis was based on the following indicators:

The "price/registered user" indicator ("公司價值/註冊用戶"指標):
The table below sets forth the price/registered user value of the following comparable companies whose businesses depend substantially on the number of registered users on their respective online platforms:

Comparable		Price/
company	Background and principal business	registered user
		(US$ per user)
Company A	Company A is a PRC-based company	25.0
	principally engaging in the operation of
	an online customer credit technology
	platform and its shares are listed on
	various stock exchanges including the
	New York Stock Exchange.
Company B	Company B is a PRC-based company	13.4
	principally engaging in the operation of
	an online consumer finance marketplace
	with a focus on delivering financial
	services to borrowers and investors, and
	its shares are listed on various stock
	exchanges including the New York Stock
	Exchange.
Company C	Company C is a PRC-based company	7.4
	principally engaging in the provision of
	an open platform for the discovery and
	recommendation of financial products in
	the PRC and its shares are listed on
	various stock exchanges including the
	New York Stock Exchange.

Based on the estimated number of registered users on the Existing PRC Changyou Platform as at the end of 2018 of approximately 28.9 million, the 2019 Valuation based on the price/registered user indicator would be in the region of approximately US$215 million to US$723 million.

- 9 -

LETTER FROM THE BOARD

The "price/active user" indicator ("公司價值/活躍用戶"指標):
The table below sets forth the price/active user value of the following comparable companies which operate integrated online financial platforms and the valuation of which is primarily predicated upon the number of active users on their respective platforms:

Comparable		Price/
company	Background and principal business	active user
		(US$ per user)
Company D	Company D is principally engaging in the	43.5
	provision of finance, urban computing,
	agriculture, campus services and digital
	marketing through the use of big data,
	artificial intelligence (AI), the Internet of
	Things (IoT) and blockchain.
Company E	Company E is principally engaging in the	214.0
	provision of digital payment and
	merchant services and the operation of a
	digital finance technology platform and is
	the parent company of the largest digital
	payment platform in the PRC.

Based on the estimated number of active users on the Existing PRC Changyou Platform as at the end of 2018 of approximately 19.1 million, the 2019 Valuation based on the price/active user indicator would be in the region of approximately US$830 million to US$4,085 million.

The "price/sales growth" indicator ("公司價值/收入增長"指標):
The table below sets forth the price/sales growth rate of the following comparable companies which are principally engaging in the internet finance business and the valuation of which is supported by the rapid growth rate in their businesses:

Comparable		Price/sales
company	Background and principal business	growth
		(US$ per user)
Company E	Company E is principally engaging in the	17.1
	provision of digital payment and
	merchant services and the operation of a
	digital finance technology platform and is
	the parent company of the largest digital
	payment platform in the PRC.

- 10 -

LETTER FROM THE BOARD

Comparable		Price/sales
company	Background and principal business	growth
		(US$ per user)
Company F	Company F is a PRC-based company	4.0
	principally engaging in the operation of
	an online lending and wealth management
	platform and a subsidiary of a company
	whose shares are listed on the Hong
	Kong Stock Exchange and the Shanghai
	Stock Exchange.

Based on the estimated sales growth of PCL for the year of 2019 of approximately US$115.5 million, the 2019 Valuation based on the price/sales growth indicator would be in the region of approximately US$467 million to US$1,975 million.

The "price/gross merchandise volume" indicator ("公司價值/成交總額"指標):
The table below sets forth the price/gross merchandise volume ("GMV") of the following comparable companies which operate integrated online financial platforms and the GMV of which has a relatively significant impact on their respective valuations:

Comparable
company	Background and principal business	Price/GMV
		(US$ per user)
Company F	Company F is a PRC-based company	0.1194
	principally engaging in the operation of
	an online lending and wealth management
	platform and a subsidiary of a company
	whose shares are listed on the Hong
	Kong Stock Exchange and the Shanghai
	Stock Exchange.
Company D	Company D is principally engaging in the	0.1971
	provision of finance, urban computing,
	agriculture, campus services and digital
	marketing through the use of big data,
	artificial intelligence (AI), the Internet of
	Things (IoT) and blockchain.

Based on the estimated GMV of the Company's digital point business through the Existing PRC Changyou Platform for the year of 2019 of approximately US$1,256.8 million, the 2019 Valuation based on the price/GMV indicator would be in the region of approximately US$150 million to US$248 million.

- 11 -

LETTER FROM THE BOARD

Under the Investor Analysis,

if adopting the discounted cash flow method, the 2019 Valuation was approximately US$829 million; and
if conducting the comparable company analysis based on:
1. price/registered user ("公司價值/註冊用戶"指標), the 2019 Valuation was in the region of US$215 million to US$723 million;
2. price/active user ("公司價值/活躍用戶"指標), the 2019 Valuation was in the region of US$830 million to US$4,085 million;
3. price/sale growth rate ("公司價值/收入增長率"指標), the 2019 Valuation was in the region of US$467 million to US$1,975 million; and
4. price/gross merchandise volume ("公司價值/成交總額"指標), 2019 Valuation was in the region of US$150 million to US$248 million.

As such, based on the Investor Analysis, the 2019 Valuation would be in the region of US$150 million to US$1,975 million (the "Range"), after eliminating the outlier (the highest figure US$4,085 million) if the discounted cash flow method and comparable company analysis were adopted.

It was, however, concluded by the parties to the 2019 Subscription that neither the discounted cash flow analysis nor the comparable company analysis valuation method was suitable for determining the 2019 Valuation in light of the unpractical Range. The 2019 Investor and PCL further specifically considered the following:

given the Existing PRC Changyou Platform was still in the early stage with a lot of uncertainties, its actual financial performance may vary significantly with the projection, the discounted cash flow method was not suitable for determining the 2019 Valuation; and
since the Existing PRC Changyou Platform was operating under a new business model which no other companies were operating under or even close to operating under, it was not possible to find a comparable which could present a meaningful comparison to PCL (as illustrated in the unpractical figures in the Range above).

As such, the 2019 Investor proposed and the parties agreed that the 2019 Valuation should be based on more generic considerations, including the following factors (the "Factors"), taking into account Changyou Alliance's vast potential growth and expansion in various aspects:

the innovative business model and the continued expansion of the user base of PCL;

- 12 -

LETTER FROM THE BOARD

the introduction of new partners to the Changyou digital point business ecosystem alliance (the "Changyou Alliance") in the future which will attract further potential users;
the increase in the utilisation rate of shopping malls and financial services provided by the future digital point-based platforms of the Existing PRC Changyou Platform; and
the expanding business model of the Changyou Alliance which allows PCL to further enrich and deepen its business operations.

In order to narrow down the region of the 2019 Valuation as much as possible, the

2019 Investor and PCL finally decided to select the middle region of the Range. By sorting in ascending order the ranges of the 2019 Valuation as if the discounted cash flow method and comparable company analysis were adopted, which would be: US$150 million, US$215 million, US$248 million, US$467 million, US$723 million, US$829 million, US$830 million and US$1,975 million, it was determined that the middle region of the Range would be US$467 million and US$723 million.

Based on the assessment of the Factors and making reference to the middle region of the Range, i.e. in the region of US$467 million to US$723 million, the 2019 Investor proposed and the parties agreed that the 2019 Valuation should be the range of US$400 million and US$600 million (the "Valuation Range"). Given the uniqueness of the business model of PCL and after taking into account the Factors, the 2019 Investor considered that the Valuation Range could objectively reflect the pre-money valuation of PCL, which was also acceptable to both the 2019 Investor and PCL.

Pre-money Valuation

During the negotiations of the Subscription, the parties looked at the Investor Analysis and agreed that the discounted cash flow analysis and the comparable company analysis in the Investor Analysis were not suitable to determine the pre-money valuation of PCL for the Subscription. Again, the Investor and PCL considered and agreed that the pre-money valuation of PCL should be determined based on generic considerations, including the Factors, (i) taking into account the current and future growth and expansion of the Changyou Alliance and the Existing PRC Changyou Platform; and (ii) in order not to trigger any issue of compensation shares to the previous investors of PCL. On such basis, it was agreed that the fair pre-money valuation of PCL to the Investor and PCL would be not less than US$400 million. The Investor and PCL finally negotiated a pre-money valuation (US$593 million) closer to the higher band of the Valuation Range (i.e. US$600 million) which is more favourable and beneficial to PCL and the Group as a whole.

Notwithstanding that the Pre-money Valuation was not calculated with reference to any available historical data, market transactions, market statistics or reference points, the Pre-money Valuation was however determined by the Investor and PCL subsequent to an arm's length bona fide negotiation with reference to the Investor Analysis and taking into consideration PCL's one-of-its-kind business model and future growth and expansion.

- 13 -

LETTER FROM THE BOARD

On the basis that (i) the Board is of the view that the Changyou Alliance is very unique and operates on a one-of-its-kind business model; (ii) assessment of the Factors is more appropriate in determining the fair valuation of PCL; and (iii) the Pre-money Valuation is higher than any previous rounds of fund raising by PCL, including the 2019 Subscription, which is favourable and beneficial to PCL and the Group as a whole, the Board considers that the Pre-money Valuation is fair and reasonable.

In addition to the Factors, the Directors have taken into account the following in determining the Pre-money Valuation and its fairness and reasonableness:

as at 30 June 2020, the cash balance held by PCL and its subsidiaries amounted to approximately RMB32.5 million, and their net liabilities also amounted to approximately RMB71.4 million. PCL will deplete all its cash from operations by September 2020. It is now relying on an unsecured revolving loan facility from Century Investment (Holdings) Limited ("CIH"), being the controlling shareholder of the Company to continue its operations. PCL has an urgent need for funding to avoid the risk of discontinuance of its operations and to fulfil its corporate social responsibility to, among other things, retain its employees, in particular, during the current COVID-19 pandemic outbreak; and
given that (i) PCL has an urgent need for funding its operations as described above; (ii) being an asset-lighttech-driven company, it is not easy for PCL to obtain loan facilities from conventional financial institutions and it is not uncommon for companies like PCL to conduct equity fund raising, as in the Subscription; (iii) the current market sentiment on fund raising, especially in respect of private equity investments, due to the uncertainties associated with the COVID-19 pandemic outbreak, most private equity firms have been cautious in making investment decisions amidst the current downward shift in global growth outlook, which impeded the equity fund raising exercises by PCL; (iv) despite the aforesaid difficulties, PCL has secured the Investor to participate in the Subscription based on the Pre-money Valuation (approximately US$593 million) which is approximately 20% higher than the 2019 Valuation; (v) based on the 2019 Valuation of US$500 million, the Pre-money Valuation, being approximately US$ 593 million, carries a premium of close to 20% reflecting the growth of business of PCL as a result of the increase in the number of registered users of the Existing PRC Changyou Platform since the 2019 Subscription, leading to a significant growth in the business scale of the Existing PRC Changyou Platform, the Directors consider that the Pre-money Valuation, being a valuation agreed subsequent to an arm's length bona fide negotiation with the Investor and having taken into account the future growth and expansion of the Existing PRC Changyou Platform, is fair and reasonable.

- 14 -

LETTER FROM THE BOARD

Conditions precedent

Completion of the Subscription is subject to, among other things, the following conditions being satisfied:

the Investor shall have obtained its final internal approval to consummate the transactions contemplated under the Subscription Agreement and executed the Deed of Accession to (i) join as a party to the JV Agreement in its capacity as a shareholder of PCL; and (ii) agree with each other person who is or who becomes a party to the JV Agreement in accordance with the terms thereof that the Investor shall comply with and be bound by the terms of the JV Agreement as if it had originally been a party to the JV Agreement, on or before the completion of the Subscription;
all necessary consents, waivers (including the waivers to be obtained from the relevant shareholders of PCL with respect to their respective rights of pre-emption in relation to the Subscription) and approvals (including all internal approvals of PCL and/or approvals by the direct or indirect shareholders of PCL (if required)) for the consummation of the transactions contemplated under the Subscription Agreement and all other third party consents, authorisations, permits, approvals and waivers, shall have been obtained; and
the Company shall have complied with all applicable disclosure, shareholders' approval and other requirements under the Listing Rules for the consummation of the transactions contemplated under the Subscription Agreement.

PCL and Sendlink shall use all reasonable efforts within their respective capacity to satisfy the conditions to the completion of the Subscription on or before 30 June 2021 (or such later date as may be agreed between PCL and Sendlink in writing) (the "Long Stop Date") and proceed to the completion of the Subscription. If any of such conditions is not satisfied or waived by PCL or Sendlink (as the case may be) in accordance with the Subscription Agreement by the Long Stop Date (all of the above conditions cannot be waived), the Subscription Agreement shall be automatically terminated with immediate effect and a party will not have any claim under the Subscription Agreement of any nature whatsoever against the other party except in respect of any rights and obligations which have accrued before such termination.

As at the Latest Practicable Date, none of the above conditions have been satisfied.

Completion

Completion of the Subscription shall take place on a Business Day falling within ten

Business Days after the date on which all of the conditions to the completion of the Subscription are satisfied (or waived, as the case may be) or on such other date as may be agreed between PCL and Sendlink in writing.

Upon completion of the Subscription, the Subscription Shares shall be issued as fully paid up.

- 15 -

LETTER FROM THE BOARD

Upon completion of the Subscription, (i) assuming the minimum of 61,078,767 Subscription Shares are subscribed by the Investor pursuant to the Subscription Agreement, PCL will be held as to approximately 44.56% by Pointsea Holdings, approximately 49.77% by the Original Investors in aggregate and approximately 5.67% by the Investor of the issued share capital of PCL as enlarged by the issue of the Subscription Shares; and (ii) assuming the maximum of 73,287,671 Subscription Shares are subscribed by the Investor pursuant to the Subscription Agreement, PCL will be held as to approximately 44.06% by Pointsea Holdings, approximately 49.21% by the Original Investors in aggregate and approximately 6.73% by the Investor of the issued share capital of PCL as enlarged by the issue of the Subscription Shares.

Upon completion of the Subscription, (i) assuming the minimum of 61,078,767 Subscription Shares are subscribed by the Investor pursuant to the Subscription Agreement, Pointsea Holdings' equity interest in PCL will be reduced from approximately 47.24% to approximately 44.56% and the Group's effective equity interest in PCL will be reduced from approximately 18.93% to approximately 17.86%; and (ii) assuming the maximum of 73,287,671 Subscription Shares are subscribed by the Investor pursuant to the Subscription Agreement, Pointsea Holdings' equity interest in PCL will be reduced from approximately 47.24% to approximately 44.06% and the Group's effective equity interest in PCL will be reduced from approximately 18.93% to approximately 17.66%. The shareholdings in PCL before and immediately after the completion of the Subscription are set out below:

						Immediately after completion	Immediately after completion
						of the Subscription (assuming	of the Subscription (assuming
						the minimum of 61,078,767	the maximum of 73,287,671
	Before completion of the	Subscription Shares are	Subscription Shares are
Shareholders	Subscription	subscribed by the Investor)	subscribed by the Investor)
	No. of PCL	Approximate	No. of PCL	Approximate	No. of PCL	Approximate
	Shares	%		Shares	%	Shares	%
Pointsea Holdings	480,000,000		47.24		480,000,000		44.56	480,000,000	44.06
Joy Empire	160,000,000		15.75		160,000,000		14.85	160,000,000	14.69
Extra Step	160,000,000		15.75		160,000,000		14.85	160,000,000	14.69
Eastern E-Commerce	160,000,000		15.75		160,000,000		14.85	160,000,000	14.69
Zhongjin Qizhi	28,036,564		2.76		28,036,564		2.60	28,036,564	2.57
Senran Investment	28,036,564		2.76		28,036,564		2.60	28,036,564	2.57
Investor	-			-		61,078,767		5.67	73,287,671	6.73
Total	1,016,073,128		100.00		1,077,151,895		100.00	1,089,360,799	100.00

- 16 -

LETTER FROM THE BOARD

Undertakings

PCL undertakes to the Investor that, for anti-dilution protection purpose to the Investor, if, in another series of financing of PCL following the completion of the Subscription involving a further subscription of PCL Share(s) by new investor(s), the pre-money valuation of PCL (the "Actual Valuation") is less than US$400 million (which is 80% of the 2019 Valuation of US$500 million), PCL shall, subject to the relevant laws and regulations and the memorandum and articles of association of PCL, compensate the Investor by allotting and issuing additional PCL Shares (the "Compensation Shares") to the Investor, credited as fully paid up, based on 85% of the Actual Valuation in accordance with the following formula (the "Formula"):

Number of	= (	Subscription Price	-	Subscription Price	)	x	960,000,000
Compensation
Actual Valuation x 85%	US$400,000,000	PCL Shares
Shares

The Board considered the following factors before agreeing to the arrangement of issuing Compensation Shares: (a) the Company would not lose control of PCL as a result of any issue of the Compensation Shares; (b) as disclosed in the annual report of the Company for the financial year ended 31 December 2019, the Board and management of the Group consider PCL a subsidiary of the Group through its power to control the board of directors of PCL; (c) none of the Investor, Zhongjin Qizhi and Senran Investment, being the minority shareholders of PCL, are entitled to nominate or appoint any person to act as a director of PCL and the control of PCL by the Company will not be impaired; (d) the anti-dilution protection should be on terms no more favourable than those offered to other investors, namely Zhongjin Qizhi and Senran; (e) in the event that the valuation of PCL in future financing involving issuance of PCL Shares is based on a valuation lower than US$400 million (the "Down Round Financing"), the issue of the Compensation Shares will only be triggered upon completion of the Down Round Financing; and (f) the Company, through its control of PCL, has absolute discretion not to proceed with a Down Round Financing if, among other things, the Actual Valuation in such round of financing is too low or not satisfactory to the Company, and hence there will be no issue of the Compensation Shares, i.e. the Company has total control over the occurrence of the event triggering the issue of the Compensation Shares. In view of the aforesaid consideration, the current arrangement of the issue of Compensation Shares was agreed and without any cap on the number of Compensation Shares to be issued, and the Board is of the view that such arrangement is fair and reasonable, and in the interest of PCL, the Company and its shareholders as a whole.

Zhongjin Qizhi and Senran Investment, which had completed the 2019 Subscription, are also entitled to the Compensation Shares based on the Formula, applying mutatis mutandis. The components of the Formula were negotiated during the 2019 Subscription and the then total number of issued PCL Shares immediately prior to the completion of the 2019 Subscription, being 960,000,000 in the Formula, had been agreed and set in the Formula. Fewer Compensation Shares will be allotted and issued to the Investor if using "960,000,000", instead of "1,016,073,128", being the total number of issued PCL Shares immediately prior to the completion of the Subscription, in the Formula, which is indubitably more favourable to the Company and PCL.

- 17 -

LETTER FROM THE BOARD

The number of Compensation Shares which is required to be allotted and issued depends on the amount of the Actual Valuation. In normal circumstances, the anti-dilution protection mechanism will be triggered if the Actual Valuation is less than the valuation upon which the Investor's investment is based. However, the parties agreed to apply a 20% discount on the 2019 Valuation of US$500 million and a further discount (the "Actual Valuation Discount") on the Actual Valuation to the Formula (the smaller the Actual Valuation Discount, the fewer the number of the Compensation Shares to be allotted and issued). The parties finally agreed to set the Actual Valuation Discount to 15%, i.e. 85% of the Actual Valuation in the Formula, such that fewer Compensation Shares will be allotted and issued to the Investor in the event that the valuation of PCL in future financing involving issuance of PCL Shares is based on a valuation lower than US$400 million. The Board is of the view that the Formula adopting the said discounts is indubitably more favourable to the Company and PCL.

For illustration purpose, if the Actual Valuation is US$399 million, the Compensation Shares to be allotted and issued to the Investor will be:

18,429,933 PCL Shares if using 85% of the Actual Valuation (i.e. a smaller Actual Valuation Discount); and
26,001,804 PCL Shares if using 80% of the Actual Valuation (i.e. a greater Actual Valuation Discount).

Transfer of the equity interest in PCL

If the Investor, in its capacity as a shareholder of PCL, upon completion of the Subscription, proposes to sell, assign, transfer or otherwise dispose of its legal or beneficial interest in any equity securities of PCL to any party (other than its Affiliates), the Investor shall provide written notice of such proposal (the "Transfer Notice") to PCL and each of Pointsea Holdings, Joy Empire, Extra Step and Eastern E-Commerce pursuant to the terms of the JV Agreement and the memorandum and articles of association of PCL. Such shareholders of PCL shall have the right to purchase all or part of such equity interest on the same terms and conditions prescribed in such Transfer Notice.

JV AGREEMENT

On 29 November 2016, Pointsea Holdings entered into an agreement with Extra Step and Joy Empire pursuant to which, among other things, Pointsea Holdings, Extra Step and Joy Empire conditionally agreed to subscribe for shares in PCL and to cooperate in the development of the business of PCL and its subsidiaries.

Incorporation of PCL and additional subscriptions

Pursuant to the terms of the JV Agreement, PCL was incorporated in the Cayman Islands by Pointsea Holdings by subscribing for one PCL Share.

- 18 -

LETTER FROM THE BOARD

Following incorporation of PCL, Pointsea Holdings, Extra Step, Joy Empire and Eastern E-Commerce subscribed for 5,999 PCL Shares, 2,000 PCL Shares, 2,000 PCL Shares and 2,000 PCL Shares, respectively. Please refer to the announcements of the Company dated 29 November 2016, 7 December 2016 and 30 June 2017 for further details.

Conditions precedent and completion

Completion of the subscriptions under the JV Agreement was subject to certain conditions being fulfilled. All condition precedents were fulfilled and the subscriptions pursuant to the JV Agreement were accordingly completed on 10 January 2017 and 20 June 2017.

Board composition

The board of directors of PCL comprises seven directors. Pointsea Holdings is entitled to appoint three directors and each of Extra Step, Joy Empire and Eastern E-Commerce is entitled to appoint one director. One independent director will be nominated by Pointsea Holdings whose appointment is subject to the approval by the shareholders at a general meeting of PCL. The chairman of the board will be elected by the board of directors of PCL.

Profits/liabilities of PCL

The parties will enjoy all the profits and bear all the liabilities of PCL in proportion and subject to their equity interests and their investment amount in PCL.

FINANCIAL EFFECT OF THE DEEMED DISPOSAL ON THE GROUP

- 19 -

LETTER FROM THE BOARD

As the Investor shall not be entitled to nominate or appoint any person to act as a director of PCL, the Subscription will not result in the Group losing its control of the board of directors of PCL, and therefore PCL will continue to be a subsidiary of the Group. Accordingly, the financial position and results of PCL will continue to be consolidated with the financial statements of the Company after completion of the Subscription. The Subscription will be accounted for as an equity transaction and will not result in any gain or loss being accrued to the Company. As the financial position and results of PCL will continue to be consolidated with the financial statements of the Company, the assets of the Company will increase accordingly by an amount equivalent to the net subscription proceeds (after deduction of the relevant professional and other expenses) raised from the Subscription. The Subscription will not result in any liabilities being accrued to the Company.

REASONS FOR AND BENEFITS OF THE SUBSCRIPTION AND INTENDED USE OF PROCEEDS FROM THE SUBSCRIPTION

As disclosed above in the paragraph headed "Letter from the Board - SUBSCRIPTION AGREEMENT - Pre-money Valuation" in this circular, (i) PCL has an urgent need for funding its operations; (ii) being an asset-lighttech-driven company, it is not easy for PCL to obtain loan facilities from conventional financial institutions; and (iii) the current market sentiment on fund raising, especially in respect of private equity investments, due to the uncertainties associated with the COVID-19 pandemic outbreak, most private equity firms have been cautious in making investment decisions amidst the current downward shift in global growth outlook, impeded the equity fund raising exercises by PCL.

In particular, the Directors have considered various alternative means of financing apart from the Subscription, including the following:

Shareholder's loans: PCL is currently relying on an unsecured revolving loan facility from CIH to continue its operations in relation to the Existing PRC Changyou Platform. Further, as disclosed in the announcement of the Company dated 29 July 2020, the Company had entered into a subscription agreement with CIH in relation to the issue of convertible bonds in the aggregate principal amount of HK$126,000,000 (the "CB") to CIH (the "CB Issue"), the proceeds of which will be utilised to develop the New International Changyou Platform, which is a different and distinct purpose from the development of the Existing PRC Changyou Platform. As at the Latest Practicable Date, the CB Issue had not yet taken place. However, given the existing loan facility from CIH, and assuming completion of the CB Issue, it is very difficult for the Company and/or PCL to further request for funding from CIH for the current operations of Group or PCL;
Debt financing from conventional financial institutions: The Company had approached three banks, money lenders and/or other financial institutions for new loans for its financing needs. However, due to the prevailing market conditions, the loss-makingfinancial performance of the Group in recent years and the overall financial position of the Group, the banks and/or money lenders had indicated that they were unable to make any loan offer to the Company of similar size as the principal amount of the CB. In addition, the Company considered that

- 20 -

LETTER FROM THE BOARD

bank loan applications may be subject to lengthy due diligence and negotiations with the bank, which could not match the Group's schedule for its financing needs; and

Other equity financing: The Company had considered other means of equity financing such as placing, rights issue or open offer of new Shares, and had approached three placing agents and/or underwriters in this regard. However, given the current market sentiment on fund raising due to the uncertainties associated with the COVID-19 pandemic outbreak, the loss-making financial performance of the Group in recent years and the overall financial position of the Group, and notwithstanding the attempts made by the Company to explore the aforesaid equity financing methods to raise funds of similar size as the principal amount of the CB, the proposals were being rejected by the placing agents and/or underwriters, and the parties did not proceed further to negotiate other principal terms. Further, the Company, after having discussed with the placing agents and/ or underwriters, is of the view that (a) if it were to raise funds by way of placing, rights issue or open offer of new Shares, the subscription price would have to be set at a deeper discount to the prevailing market price of the Shares so as to attract subscription by potential investors or the Shareholders; and (b) given the current volatile market condition, there is high uncertainty in the willingness of subscription by potential investors of the Shareholders. In addition, placing, rights issue or open offer of new Shares is subject to underwriting uncertainty and market risk, and any arm's length underwriting is normally subject to standard force majeure clause in favour of the underwriter, which may result in higher transaction costs (such as underwriting and other fees) being incurred by the Company.

In consideration of the above factors as a whole, the Board considers that the Subscription is the most appropriate fund raising method for PCL.

It is intended that the proceeds from the Subscription shall be utilised for the development and expansion of the "Changyou" digital point business of the Group (through the Existing PRC Changyou Platform), capital expenditure and general working capital of PCL and its subsidiaries.

- 21 -

LETTER FROM THE BOARD

As disclosed above, (i) as at 30 June 2020, the cash balance held by PCL and its subsidiaries amounted to approximately RMB32.5 million, and their net liabilities also amounted to approximately RMB71.4 million. PCL will deplete all its cash from operations by September 2020; and (ii) assuming completion of the CB Issue, a substantial part of the proceeds from the CB Issue are intended to be allocated and utilised for the development of the New International Changyou Platform, which is a different and distinct purpose to the development of the Existing PRC Changyou Platform. Assuming the maximum proceeds of US$42,800,000 (equivalent to approximately HK$333,840,000) raised from the Subscription, it is expected that the proceeds will be applied as follows, and will be fully utilised by June 2022:

				Proposed use of proceeds from the Subscription
		From the
		date of
	Completion	During	During	During	During	During
		to 31	the 1st	the 2nd	the 3rd	the 4th	the 1st
		December	quarter	quarter	quarter	quarter	half of
Use of the net proceeds	2020	of 2021	of 2021	of 2021	of 2021	2022	Total
		HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
Fixed expenses (comprising salaries
and other administrative expenses)
for the recruitment and retention of
personnel and management and for
the development of the Existing
PRC Changyou Platform	22,393		22,237		22,237		22,237		22,237		44,474		155,815
Promotional and marketing activities
to attract and maintain customers'
loyalty and their participation and
consumption of the products and
services provided on the Existing
PRC Changyou Platform	18,624		28,567		29,223		28,567		29,223		31,821		166,025
Capital expenditure of the Existing
PRC Changyou Platform	300		300		300		300		300		500		2,000
General working capital of PCL and
its subsidiaries		1,500		1,500		1,500		1,500		1,500		2,500		10,000
Total	42,817		52,604		53,260		52,604		53,260		79,295		333,840

In consideration of the above factors as a whole, the Board (including the independent non-executive Directors) considers that the Subscription is crucial to the continuing operations of PCL and its subsidiaries, and that the terms of the Subscription Agreement are normal commercial terms and are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

- 22 -

LETTER FROM THE BOARD

INFORMATION ON SENDLINK

Sendlink is an investment holding company incorporated in the BVI on 30 June 2020 with limited liability and is principally engaged in investments in high-tech and other technological innovation industries. Mr. Chen Rongsheng（陳融聖）is the ultimate beneficial owner of Sendlink.

Based on the annual report dated April 2020 issued by Tatwah Smartech Co., Ltd. ("Tatwah"), a company listed on the Shenzhen Stock Exchange, Mr. Chen is a director and a shareholder of Tatwah. As stated in Tatwah's annual report, Mr. Chen graduated with a master's degree and has participated in various technology projects in the Fujian province, PRC in recent years. Mr. Chen has received numerous awards including the Third Prize of Science and Technology Progress Award of Fujian Province, the Outstanding Young Entrepreneurs of Fujian, and the Fujian Youth Entrepreneur Achievement Award (Outstanding Achievement Award). Since 2001, Mr. Chen has been the legal representative and a director of New Doone Science & Technology Co., Ltd, Tatwah's wholly-owned subsidiary. Since 2014, Mr. Chen has been the director and chief executive of Tatwah.

Sendlink was introduced to the Group by Zhongjin Qizhi, being one of the Original Investors. Given (i) the involvement and expertise of Mr. Chen in various technological projects in the past and his experience and knowledge of the industry as set out above, the Board considers that the introduction of Sendlink to PCL can bring in the knowledge and expertise which is relevant to the Existing PRC Changyou Platform and the Digital Point Business, and the proceeds raised from the Subscription will assist in the development of the Existing PRC Changyou Platform as disclosed in the paragraph headed "Letter from the Board - Reasons for and benefits of the Subscription and intended use of proceeds from the Subscription" in this circular, and is therefore in the interest of the Company and its shareholders as a whole, and (ii) Sendlink's confidence in the future business prospects of the Group, Sendlink and PCL negotiated the terms of the Subscription and entered into the Subscription Agreement.

INFORMATION ON PCL

PCL is an investment holding company incorporated in the Cayman Islands with limited liability. PCL and its subsidiaries are engaged in the integration and redemption of digital membership points through the Existing PRC Changyou Platform.

- 23 -

LETTER FROM THE BOARD

Set out below is a summary of the audited consolidated financial statements of PCL for

the financial year ended 31 December 2018; and (ii) the financial year ended 31 December 2019:

	For the year ended	For the year ended
	31 December 2018	31 December 2019
	RMB'000	RMB'000
	(audited)	(audited)
Turnover	50,321		204,112
Loss before taxation	(206,868)	(118,042)
Loss after taxation	(206,868)	(118,042)

The audited net liabilities value of PCL was approximately RMB103,385,000 as at 31 December 2018. The audited net liabilities value of PCL was approximately RMB28,576,000 as at 31 December 2019. The decrease in the audited net liabilities value for 2018 as compared to 2019 was attributable to the receipt of net proceeds from the subscription of PCL Shares by Zhongjin Qizhi and Senran Investment, which was completed in March 2019, and the loss for the financial year ended 31 December 2019. This was mainly represented by the increase in trade and other receivables of approximately RMB84,783,000, increase in cash and cash equivalents of approximately RMB17,289,000, increase in trade and other payables of approximately RMB96,499,000, and decrease in the loan from the Company of approximately RMB69,729,000.

INFORMATION ON THE COMPANY AND THE GROUP

The Company is an investment holding company incorporated in the Cayman Islands with limited liability. The Group is engaged in the development and operations of the Existing PRC Changyou Platform, which aims to integrate the digital membership points, resources and strategic advantages of business partners in the Changyou Alliance. The digital membership points from various partnership entities and industries are redeemable and can be purchased, earned and used by customers for the purchase and consumption of merchandise, games and entertainment, financial services and other commercial transactions.

LISTING RULES IMPLICATIONS

Upon completion of the Subscription, (i) assuming the minimum of 61,078,767 Subscription Shares are subscribed by the Investor pursuant to the Subscription Agreement, Pointsea Holdings' equity interest in PCL will be reduced from approximately 47.24% to approximately 44.56% and the Group's effective equity interest in PCL will be reduced from approximately 18.93% to approximately 17.86%; and (ii) assuming the maximum of 73,287,671 Subscription Shares are subscribed by the Investor pursuant to the Subscription Agreement, Pointsea Holdings' equity interest in PCL will be reduced from approximately 47.24% to approximately 44.06% and the Group's effective equity interest in PCL will be reduced from approximately 18.93% to approximately 17.66%. Accordingly, the Subscription constitutes a deemed disposal of the Group under Rule 14.29 of the Listing Rules. As the

- 24 -

LETTER FROM THE BOARD

Investor shall not be entitled to nominate or appoint any person to act as a director of PCL, the Subscription will not result in the Group losing its control of the board of directors of PCL, and therefore PCL will continue to be a subsidiary of the Group.

As one or more of the applicable percentage ratios in respect of the Subscription are more than 25% and all of such ratios are less than 75%, the Subscription constitutes a major transaction of the Company under Chapter 14 of the Listing Rules and is therefore subject to the reporting, announcement and Shareholders' approval requirements under Chapter 14 of the Listing Rules.

EGM

The EGM will be convened and held at Rooms 1908-1916, 19/F, Sun Hung Kai Centre, 30 Harbour Road, Wan Chai, Hong Kong on Wednesday, 14 October 2020 at 11:00 a.m. to consider and, if thought fit, approve the Subscription Agreement and the transactions contemplated thereunder, including the Subscription. The voting on such resolution will be conducted by way of poll at the EGM in accordance with Rule 13.39(4) of the Listing Rules.

To the best of the knowledge, information and belief of the Directors, after having made all reasonable enquiries, as at the Latest Practicable Date, no Shareholders or any of their respective associates have any material interest in the Subscription. As such, none of the Shareholders would be required to abstain from voting in favour of the resolution approving the Subscription Agreement and the transactions contemplated thereunder at the EGM.

A notice convening the EGM is set out on pages EGM-1 to EGM-2 of this circular. A proxy form for use by the Shareholders for the EGM is enclosed with this circular. Whether or not you are able to attend the EGM in person, you are requested to complete the enclosed proxy form in accordance with the instructions printed thereon and return the same to the Company's Hong Kong share registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof (as the case may be). The completion and return of the proxy form will not preclude you from attending and voting in person at the EGM or any adjourned meeting thereof (as the case may be) should you so wish, and in such event, the instrument appointing a proxy shall be deemed to be revoked.

RECOMMENDATION

The Board (including the independent non-executive Directors) considers that the terms of the Subscription Agreement are normal commercial terms and are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board (including the independent non-executive Directors) recommends that all Shareholders vote in favour of the resolution to be proposed at the EGM to approve the Subscription Agreement and the transactions contemplated thereunder.

- 25 -

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

Shareholders and potential investors of the Company should note that completion of the Subscription is subject to the fulfilment of the condition precedents set out in the Subscription Agreement, and there is no assurance that the transactions contemplated under the Subscription Agreement will be completed. Accordingly, Shareholders and potential investors of the Company should exercise caution when dealing in the Shares.

Yours faithfully

By order of the Board

Changyou Alliance Group Limited

Mr. Cheng Jerome

Chairman

- 26 -

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION OF THE GROUP

The audited consolidated financial statements of the Group for each of the financial years ended 31 December 2018 and 2019 and the unaudited consolidated financial information of the Group for the six months ended 30 June 2020 are disclosed in the following documents, which have been published and are available on the website of the Stock Exchange (www.hkexnews.hk) and the website of the Company (www.changyou-alliance.com):

the annual report of the Company for the financial year ended 31 December 2018, published on 25 April 2019:
https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0425/ltn201904251665.pdf;
the annual report of the Company for the financial year ended 31 December 2019, published on 28 April 2020:
https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0428/2020042800666.pdf; and
the interim report of the Company for the six months ended 30 June 2020, published on 11 September 2020:
https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0911/2020091100444.pdf.

Each of the aforesaid financial statements of the Group is incorporated by reference to this circular and forms part of this circular.

2. STATEMENT OF INDEBTEDNESS

As at the close of business on 31 July 2020, being the latest practicable date for the purpose of preparing this statement of indebtedness, the Group had:

an unsecured borrowing from CIH amounting to HK$10 million;
outstanding lease obligations of approximately RMB13 million; and
a loan from a non-controlling equity shareholder of PCL amounting to RMB100 million, which is non-interest bearing and will mature upon receipt of the proceeds for the shares issued to such non-controlling equity shareholder by PCL.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities, as at the close of business on 31 July 2020, the Group did not have any debt securities issued and outstanding, debt securities authorised or otherwise created but unissued, term loans, bank overdrafts, liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments, mortgages, charges, guarantees or other material contingent liabilities.

- I-1 -

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Group is engaged in the development and operations of the Existing PRC Changyou Platform which aims to integrate the digital membership points, resources and strategic advantages of business partners in the Changyou Alliance. The digital membership points from various partnership entities and industries are redeemable and can be purchased, earned and used by customers for the purchase and consumption of merchandise, games and entertainment, financial services and other commercial transactions. For the year ended 31 December 2019 and the six months period ended 30 June 2020, the Group's total revenue generated from the business operations of the Changyou Alliance and the "Changyou" digital point business of the Group (through the Existing PRC Changyou Platform) (collectively, the "Digital Point Business") amounted to approximately RMB204.1 million and approximately RMB80.8 million respectively, and the gross merchandise volume of the Digital Point Business amounted to approximately RMB330.0 million and approximately RMB132.2 million respectively. The Changyou Alliance is continually seeking opportunities to increase its number of platform users and expand the scope and variety of products, services, business and consumption scenarios available on the Existing PRC Changyou Platform. As at the end of December 2019 and June 2020, the Existing PRC Changyou Platform had approximately 37.6 million and approximately 46.2 million registered users respectively.

In recent years, the Guangdong-HongKong-Macau Greater Bay Area has attracted much attention, and it has been one of the main focus areas of the local governments to expand the scope of development and growth opportunities and overall connectivity of the Greater Bay Area. The Company has put Greater Bay Area as one of its main focus areas to develop its Digital Point Business, and have, among other things, (i) set up a permanent team in Guangdong Province to liaise and negotiate cooperation opportunities with local internet technology companies, local businesses and financial institutions to expand the coverage of the Existing PRC Changyou Platform in the Greater Bay Area; (ii) collaborated with its existing networks and business partners to develop specialised area of operation and maintenance of the Existing PRC Changyou Platform tailored to the Greater Bay Area; and

entered into cooperative arrangements with certain e-commerce platforms and local businesses in the food and beverage and catering industries to leverage existing local networks in order to expand the coverage of the goods and services of the Existing PRC Changyou Platform. The Group intends to continue to explore further business development prospects with other industries in the Greater Bay Area in the future.

In the second half of 2020, the Group will continue to (i) develop the four major segments of the Existing PRC Changyou Platform, namely, the digital points payment system, the financial cooperation business, the business circle segment and the digital points mall business; (ii) initiate and expand the scope of corporation and collaboration with international leading enterprises in various industries to grasp richer and more diverse digital points resources; (iii) further expand the user base of the Existing PRC Changyou Platform; and (iv) improve the quality of the value-added services on the Existing PRC Changyou Platform through, among other things, (A) carrying out precise marketing by analysing comprehensive mass data and consumption scenarios and accurately identifying the characteristics and appeals of platform users with integrated user attributes and transactional big data; (B) providing merchants with advertising spaces through one-stop online advertising solutions to develop precise and creative strategies and monitoring its

- I-2 -

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

effectiveness through data analysis; and (C) integrating financial services resources to provide partnering institutions and personal users on the Existing PRC Changyou Platform with a series of financial services, including but not limited to asset transfer, supply chain finance and consumer finance services.

In addition to the above performance and growth of the Existing PRC Changyou Platform, the Company also intends to capitalise on its experience and connections and expand its Digital Point Business into the Hong Kong and overseas markets by developing the New International Changyou Platform to be based in Hong Kong. The Board is of the view that such expansion will help to enhance and diversify the future income sources of the Group's Digital Point Business and improve the attractiveness of the Existing PRC Changyou Platform by offering quality overseas goods and services to be provided on the New International Changyou Platform, which will in turn increase the loyalty and participation of members, customers and users, and thus the revenue generated from the Existing PRC Changyou Platform. The development of the New International Changyou Platform will also help to promote these opportunities on a cross-border and international scale.

With a view to further developing and expanding the Digital Point Business, the Group has been exploring investment opportunities from time to time to meet its financing needs. Having taken into account the reasons for and benefits of the Subscription as stated in the section headed "Letter from the Board" in this circular, the Board (including the independent non-executive Directors) considers that it is in the interests of the Company and the Shareholders as a whole to enter into the Subscription Agreement and the transactions contemplated thereunder. The Board expects that the proceeds from the Subscription will, among other things, facilitate the development and expansion of the Digital Point Business of the Group and enable the Group to maintain its business growth in the future.

4. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the proceeds from the Subscription and the CB Issue, the Group will have sufficient working capital to satisfy its requirements for at least the next 12 months from the date of this circular.

5. MATERIAL ADVERSE CHANGE

The Directors confirm that, as at the Latest Practicable Date, there had been no material adverse change in the financial or trading position of the Group since 31 December 2019 (being the date to which the latest published audited consolidated accounts of the Company have been made up).

- I-3 -

APPENDIX II

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. INTEREST AND SHORT POSITIONS OF DIRECTORS AND CHIEF EXECUTIVES PURSUANT TO THE SFO

As at the Latest Practicable Date, the interests and short positions of the Directors, chief executive of the Company or their respective associates in the Shares, underlying Shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which (i) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions in which they were taken or deemed to have under such provisions of the SFO); or (ii) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange, were as follows:

Long position in the Shares
	Number of	Approximate
	underlying Shares	percentage
	comprised in	of the Shares in
Name of Director	options	issue (Note 2)
Cheng Jerome	72,000,000 (Note 1)	3.98%

Notes:

This represents the interest in the underlying Shares of the share option scheme of the Company adopted on 28 June 2010 to be allotted and issued upon the exercise of the 72,000,000 options granted on 4 May 2018.
The approximate percentage is based on a total of 1,810,953,272 issued Shares as at the Latest Practicable Date.

Save as disclosed in this circular, as at the Latest Practicable Date, none of the Directors, chief executive of the Company or their respective associates had any interests or short positions in the Shares, underlying Shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which (i) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions in which they were taken or deemed to have under such provisions of the SFO); or (ii) were required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein; or (iii)

- II-1 -

APPENDIX II

GENERAL INFORMATION

were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

3. INTERESTS AND SHORT POSITIONS OF SUBSTANTIAL SHAREHOLDERS PURSUANT TO THE SFO

As at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company, the following persons or companies (other than a Director or the chief executive of the Company) had an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provision of the SFO) or who were, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group:

			Approximate
			percentage of
Name of Shareholder	Nature of interest	Interest in Shares	interest (Note 7)
Century Investment	Beneficial interest	1,196,885,818 (L)	66.09%
(Holding)		220,000,000 (S)	12.15%
Limited (Note 1)
Greater Bay Area	Interest of controlled	271,673,000 (L)	15.00%
Homeland	corporation
Investments Limited
（大灣區共同家園
(Note 2)
投資有限公司）
Starr International	Interest of controlled	224,710,691 (L)	12.41%
Foundation (Note 3)	corporation
Beijing Enterprises	Beneficial interest	151,515,000 (L)	8.37%
Real Estate (HK)
Limited
（北控置業（香港）
(Note 4)
有限公司）
(Note 5)	Interest of controlled	148,400,000 (L)	8.19%
Yang Liu（劉央）
	corporation
Taiping Trustees	Beneficial interest	138,888,000 (L)	7.67%
Limited（太平信託

有限公司）(Note 6)

L = Long position; S = Short position

- II-2 -

APPENDIX II

GENERAL INFORMATION

Notes:

1. Century Investment (Holding) Limited ("CIH") is wholly-owned by Ms. Pun Tang. As at the Latest Practicable Date, CIH had a long position in 1,196,885,818 Shares, which comprised (i) direct holding of 598,885,818 Shares (being approximately 33.07% of the total shareholding of the Company as at the Latest Practicable Date); (ii) 300,000,000 Shares that may be issued upon conversion in full of the convertible bonds in the aggregate principal amount of HK$126,000,000 issued by the Company to CIH at the initial conversion price of HK$0.42 per conversion Share, pursuant to a subscription agreement dated 29 July 2020 and entered into between the Company and CIH. For further details, please refer to the announcement of the Company dated 29 July 2020; and

298,000,000 Shares upon the exercise in full of the warrants issued by the Company to CIH pursuant to a warrant subscription agreement dated 26 March 2018 and entered into between the Company and CIH.

On 18 April 2019, a subscription agreement (the "Exchangeable Bonds Subscription Agreement") was entered into between CIH and Mega Prime Development Limited ("Mega Prime"), pursuant to which CIH issued exchangeable bonds (the "Exchangeable Bonds") to Mega Prime, which are exchangeable into 220,000,000 Shares. Such underlying Shares are currently owned by CIH. Mega Prime is wholly-owned by Greater Bay Area Homeland Investments Limited.

Subsequently, on 30 July 2019, a novation deed (the "Novation Deed") was entered into between Mega Prime as outgoing party, Poly Platinum Enterprises Ltd ("Poly Platinum") as incoming party and CIH as continuing party, pursuant to which all rights, obligations and liabilities of Mega Prime under the Exchangeable Bonds Subscription Agreement were novated to Poly Platinum.

As at the Latest Practicable Date, Poly Platinum held 51,673,000 Shares and was the beneficial owner of the Exchangeable Bonds, which are exchangeable into 220,000,000 Shares. Poly Platinum is wholly-owned by Greater Bay Area Homeland Development Fund LP ("GBAHD Fund"). Greater Bay Area Homeland Development Fund (GP) Limited ("GBAHD GP") is the general partner of GBAHD Fund. Greater Bay Area Development Fund Management Limited ("GBAD Fund Management") is the fund manager of GBAHD Fund. Both GBAHD GP and GBAD Fund Management are wholly owned by Greater Bay Homeland Investments Limited.
As at the Latest Practicable Date, Starr Investments Cayman II, Inc. and Starr Investments Cayman V, Inc. were the beneficial owners of 114,801,600 Shares and 109,909,091 Shares, respectively (being approximately 6.34% and 6.07% of the total shareholding of the Company as at the Latest Practicable Date, respectively). Starr Investments Cayman II, Inc. is wholly-owned by Starr International Cayman, Inc., which is in turn wholly-owned by Starr Insurance and Reinsurance Limited. Starr Insurance and Reinsurance Limited and Starr Investments Cayman V, Inc. are wholly-owned subsidiaries of Starr International Investments Limited, which is in turn wholly-owned by Starr International Company Inc. Starr International Company Inc. is wholly-owned by Starr International AG, which is wholly-owned by Starr International Foundation, a charitable foundation established in Switzerland.
Beijing Enterprises Real Estate (HK) Limited is wholly-owned by 北京北控置業有限責任公司, which is in turn wholly-owned by Beijing Enterprises Group Company Limited. Beijing Enterprises Group Company Limited is wholly-owned by the State-owned Assets Supervision and Administration Commission of the People's Government of Beijing Municipality.
Atlantis Investment Management (Ireland) Limited and Atlantis Investment Management (Hong Kong) Limited are the beneficial owners of the Shares and are wholly-owned by Atlantis Capital Holdings Limited, which is in turn wholly owned by Yang Liu.
Taiping Trustees Limited is the beneficial owner of Shares. The ultimate controlling shareholder of Taiping Trustees Limited is China Taiping Insurance Group Limited, which is ultimately controlled by the State Council of the PRC.
The approximate percentage is calculated based on a total of 1,810,953,272 issued Shares as at the Latest Practicable Date.

- II-3 -

APPENDIX II

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, so far as is known to the Directors or chief executive of the Company, no other persons or companies (other than a Director or the chief executive of the Company) had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provision of the SFO), or who were, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying voting rights to vote in all circumstances at general meeting of any member of the Group.

4. DIRECTORS' INTERESTS IN CONTRACTS AND ASSETS

As at the Latest Practicable Date, there was no contract or arrangement subsisting in which a Director is materially interested and which is significant in relation to the business of the Group.

As at the Latest Practicable Date, none of the Directors had any direct or indirect interests in any assets which had been, since 31 December 2019 (being the date to which the latest published audited consolidated accounts of the Company have been made up), acquired or disposed of by or leased to, or were proposed to be acquired or disposed of by or leased to, any member of the Group.

5. DIRECTORS' INTEREST IN COMPETING BUSINESS

As at the Latest Practicable Date, none of the Directors and their respective close associates (as defined in the Listing Rules) was interested in any business, apart from the business of the Group, which competes or is likely to compete, either directly or indirectly, with the business of the Group.

6. LITIGATION

As at the Latest Practicable Date, the Group was not engaged in any litigation, arbitration or claims of material importance, and no litigation, arbitration or claims of material importance known to the Directors to be pending or threatened against any member of the Group.

7. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with the Group which is not determinable by the Company within one year without payment of compensation (other than statutory compensation).

- II-4 -

APPENDIX II

GENERAL INFORMATION

8. MATERIAL CONTRACTS

The following material contracts (not being in the ordinary course of business of the Group) have been entered into by members of the Group within the two years immediately preceding the date of this circular:

the loan agreement dated 3 January 2019 and entered into between Fortunet Development Limited (being an indirect wholly-owned subsidiary of the Company) as lender and Asia Television Holdings Limited as borrower, pursuant to which Fortunet Development Limited conditionally agreed to provide to Asia Television Holdings Limited a term loan of HK$40,000,000 at an interest rate of 12% per annum for a term of 12 months (further details of which are set out in the announcement of the Company dated 3 January 2019 and the annual report of the Company for the financial year ended 31 December 2019);
(A) the respective subscription agreements dated 31 January 2019 and entered into between PCL and three investors (including Zhongjin Qizhi and Senran Investment) (the "2019 Subscribers"), pursuant to which, among other things, PCL conditionally agreed to allot and issue, and the 2019 Subscribers conditionally agreed to subscribe for, an aggregate of 84,109,692 new PCL Shares at the subscription price in the aggregate amount of RMB300,000,000. The subscriptions by Zhongjin Qizhi and Senran Investment were completed in March 2019 and gross proceeds of RMB200,000,000 were received by the Group; (B) the respective funding arrangement agreements dated 31 January 2019 and entered into between the affiliates of certain 2019 Subscribers and certain subsidiaries of PCL in relation to certain funding arrangements of the relevant subscriptions; and
1. the respective deeds of undertaking dated 31 January 2019 and entered into between PCL, certain subsidiaries of PCL and the 2019 Subscribers in relation to certain representations, warranties and undertakings provided by such subsidiaries of PCL and indemnities provided by PCL and certain subsidiaries of PCL to the 2019 Subscribers. The subscription by the remaining 2019 Subscriber was terminated on 1 December 2019 (further details of which are set out in the announcements of the Company dated 31 January 2019, 14 February 2019, 31 May 2019 and 1 December 2019 and the annual report of the Company for the financial year ended 31 December 2019);
(A) the framework deed of amendment dated 10 July 2019 and entered into between the Company, Chance Talent Management Limited ("Chance Talent") and CIH (the "Amendment Deed"); and (B) the amendment deed poll dated 10 July 2019 and executed by the Company pursuant to the Amendment Deed (together with the Amendment Deed, the "Amendment Documents") in relation to the 13% secured convertible bonds due 2019 in the principal amount of US$10 million issued by the Company and subscribed by Chance Talent pursuant to the subscription agreement dated 7 December 2017 and entered into between the Company and Chance Talent (the "Bonds"). Pursuant to the Amendment Documents, the Company, Chance Talent and CIH agreed to, among other things, extend the maturity date of the Bonds from 3 June 2019 to 3 June 2020 (further

- II-5 -

APPENDIX II

GENERAL INFORMATION

details of which are set out in the announcements of the Company dated 7 December 2017 and 10 July 2019 and the annual report of the Company for the financial year ended 31 December 2019);

the facility agreement dated 3 September 2019 and entered into between the Company as lender and PCL as borrower, pursuant to which the Company conditionally agreed to grant an unsecured revolving loan facility of a total principal amount not exceeding HK$100 million to PCL for a term of three (3) years (further details of which are set out in the announcement of the Company dated 3 September 2019, the circular of the Company dated 15 October 2019 and the annual report of the Company for the financial year ended 31 December 2019);
the loan agreement dated 31 December 2019 and entered into between CIH as lender and the Company as borrower, pursuant to which CIH agreed to provide the Company with an unsecured term loan facility of HK$100,000,000 at an interest rate of 10% per annum for a term of 12 months;
the loan agreement dated 28 July 2020 and entered into between CIH as lender and PCL as borrower, pursuant to which CIH agreed to provide the Company with an unsecured revolving loan facility of HK$11,000,000 at an interest rate of 6.5% per annum for a term of 36 months;
the subscription agreement dated 29 July 2020 and entered into between the Company and CIH, pursuant to which the Company conditionally agreed to issue, and CIH conditionally agreed to subscribe for, the convertible bonds in the aggregate principal amount of HK$126,000,000 (the "Convertible Bonds") due on the date falling three (3) years after the date of first issue of the Convertible Bonds (further details of which are set out in the announcement of the Company dated 29 July 2020 and the circular of the Company dated 17 September 2020); and
the Subscription Agreement.

9. GENERAL

The registered office of the Company is at Royal Bank House, 3rd Floor, 24 Shedden Road, P.O. Box 1586, Grand Cayman, KY1-1110, Cayman Islands.
The principal place of business of the Company in Hong Kong is at Rooms 1908-1916, 19/F, Sun Hung Kai Centre, 30 Harbour Road, Wan Chai, Hong Kong.
The company secretary of the Company is Mr. Chan Chi Keung, Billy, who is a fellow member of the Association of Chartered Certified Accountants.
The Company's share registrar in Hong Kong is Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong.

- II-6 -

APPENDIX II

GENERAL INFORMATION

In the event of inconsistency, the English version of this circular shall prevail over the Chinese version.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business

hours at the principal place of business of the Company at Rooms 1908-1916, 19/F, Sun Hung Kai Centre, 30 Harbour Road, Wan Chai, Hong Kong from the date of this circular up to and including 14 October 2020:

the memorandum and articles of association of the Company;
the material contracts referred to in the paragraph headed "8. MATERIAL CONTRACTS" in this appendix;
the annual reports of the Company for each of the financial years ended 31 December 2018 and 2019, respectively;
the interim report of the Company for the six months ended 30 June 2020;
a copy of each circular issued pursuant to the requirements set out in Chapters 14 and/or Chapter 14A of the Listing Rules which has been issued since 31 December 2019 (being the date to which the latest published audited consolidated accounts of the Company have been made up); and
this circular.

- II-7 -

NOTICE OF EXTRAORDINARY GENERAL MEETING

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this notice, 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 notice.

CHANGYOU ALLIANCE GROUP LIMITED

暢由聯盟集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1039)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the "EGM") of Changyou Alliance Group Limited (the "Company") will be held at Rooms 1908-1916, 19/F, Sun Hung Kai Centre, 30 Harbour Road, Wan Chai, Hong Kong on Wednesday, 14 October 2020 at 11:00 a.m., or at any adjournment thereof, to consider and, if thought fit, propose and pass the following resolution, with or without amendments, as an ordinary resolution of the Company:

ORDINARY RESOLUTION

"THAT:

the Subscription Agreement (as defined in the circular of the Company dated 22 September 2020 (the "Circular")), a copy of which has been produced to the EGM and marked "A" and initialed by the chairman of the EGM for identification purposes, pursuant to which, among other things, PCL (as defined in the Circular) conditionally agreed to allot and issue, and Sendlink (as defined in the Circular) agreed to subscribe for (or shall procure the Investor Nominee (as defined in the Circular) to subscribe for), not less than 61,078,767 but not more than 73,287,671 Subscription Shares (as defined in the Circular) at the Subscription Price (as defined in the Circular) of not less than US$35,670,000 but not more than US$42,800,000, be and is hereby considered, approved, confirmed and ratified; and
any one director of the Company be and is hereby authorised to, for and on behalf of the Company, do all such further acts and things and to sign and execute all such documents, instruments and agreements, and to take all such steps which in his/her opinion may be necessary, appropriate, desirable or expedient for the purpose of, or in connection with, implementing and/or giving effect to the Subscription Agreement and the transactions contemplated thereunder."

By order of the Board

Changyou Alliance Group Limited

Mr. Cheng Jerome

Chairman

Hong Kong, 22 September 2020

- EGM-1 -

NOTICE OF EXTRAORDINARY GENERAL MEETING

Notes:

A member of the Company entitled to attend and vote at the EGM by the above notice is entitled to appoint one or more proxies to attend and, on a poll, vote instead of him. A proxy need not be a member of the Company.
Where there are joint holders of any share of the Company, any one of such joint holder may vote, either in person or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders be present at the EGM, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.
In order to be valid, a form of proxy together with the power of attorney or other authority (if any) under which it is signed or a certified copy thereof shall be deposited at the Company's Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof (as the case may be). The proxy form will be published on the website of the Stock Exchange and the website of the Company.
Please refer to the section headed "Precautionary Measures for the EGM" of the Circular for precautionary measures implemented by the Company in order to safeguard the health and safety of the shareholders of the Company and all the attendees at the EGM and to prevent the spread of COVID-19, including: (i) compulsory body temperature checks; (ii) compulsory wearing# of surgical face masks for every attendee;
1. appropriate social distancing and seating arrangements in line with the Prevention and Control of Disease (Prohibition on Group Gathering) Regulation (Chapter 599G of the Laws of Hong Kong); and (iv) no refreshment or drinks will be served at the EGM.

Any person who does not comply with the precautionary measures or is subject to any Hong Kong Government prescribed quarantine may be denied entry into the EGM venue. The Company would like to encourage Shareholders to appoint the chairman of the EGM as their proxy to vote on the relevant resolution at the EGM, instead of attending the EGM in person.

A reference to a person wearing a mask is a reference to the person wearing a mask over and covering the person's nose and mouth, with the mask touching the person's nose, chin and cheeks.

As at the date of this notice, the executive Directors are Mr. Cheng Jerome and Mr. Yuan Weitao; the non-executive Director is Mrs. Guo Yan; and the independent non-executive Directors are Mr. Wong Chi Keung, Mr. Liu Jialin and Mr. Chan Chi Keung Alan.

- EGM-2 -

This is an excerpt of the original content. To continue reading it, access the original document here.

Attachments

Original document
Permalink

Disclaimer

Fortunet e-Commerce Group Ltd. published this content on 22 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 September 2020 08:59:03 UTC

Market Closed - Hong Kong S.E. Other stock markets 09:08:20 14/05/2024 BST			5-day change	1st Jan Change
0.129 ^HKD	0.00%		-17.83%	-0.77%

04-12	Changyou Alliance Group Limited Announces Directorate Appointments	CI
03-27	Changyou Alliance Group Limited Reports Earnings Results for the Full Year Ended December 31, 2023	CI

Changyou Alliance Group Limited Announces Directorate Appointments	04-12	CI
Changyou Alliance Group Limited Reports Earnings Results for the Full Year Ended December 31, 2023	03-27	CI
Changyou Alliance Shareholders to Vote April 10 on Share Issue to Controlling Shareholder	03-14	MT
Changyou Alliance to Issue HK$126 Million of Convertible Bonds to Controlling Shareholder	01-29	MT
Changyou Alliance Group Limited announced that it expects to receive HKD 126 million in funding	01-25	CI
Changyou Alliance Group Limited Reports Earnings Results for the Half Year Ended June 30, 2023	31/08/23	CI
Changyou Alliance Group Limited Announces Change in Directors and Change in the Composition of Board Committees	14/07/23	CI
Changyou Alliance Group Limited Auditor Raises 'Going Concern' Doubt	27/04/23	CI
Changyou Alliance Group Limited Reports Earnings Results for the Full Year Ended December 31, 2022	30/03/23	CI
Changyou Alliance Group Limited Reports Earnings Results for the Half Year Ended June 30, 2022	30/08/22	CI
Changyou's Up to $43 Million Deal with Tech Investor Falls Through; Shares Plunge 14%	04/07/22	MT
Changyou Alliance Group Limited Auditor Raises 'Going Concern' Doubt	28/04/22	CI
Changyou Alliance Group Limited Reports Earnings Results for the Full Year Ended December 31, 2021	30/03/22	CI
Changyou Alliance Group Limited Reports Earnings Results for the Half Year Ended June 30, 2021	30/08/21	CI
Changyou Alliance Group Limited Provides Earnings Guidance for the Six Months Ended June 30, 2021	17/08/21	CI
Changyou Alliance Group Limited Reports Earnings Results for the Full Year Ended December 31, 2020	30/03/21	CI
Changyou Alliance Group Limited Reports Earnings Results for the Half Year Ended June 30, 2020	31/08/20	CI
Changyou Alliance Group Limited Provides Group Earnings Guidance for the Six Months Ended June 30, 2020	21/08/20	CI
Changyou Alliance Group Limited announced that it expects to receive HKD 126 million in funding from Century Investment Limited	28/07/20	CI
Fortunet e-Commerce Group Limited has Changed its Name to Changyou Alliance Group Limited	03/06/20	CI
Fortunet e-Commerce Group Limited Announces Change of Principal Place of Business in Hong Kong	01/04/20	CI
Fortunet E-Commerce Group Limited Reports Earnings Results for the Full Year Ended December 31, 2019	31/03/20	CI
Fortunet E-Commerce Group Limited Reports Earnings Results for the Half Year Ended June 30, 2019	30/08/19	CI
Tranche Update on Fortunet e-Commerce Group Limited's Equity Buyback Plan announced on June 13, 2018.	30/08/19	CI
Fortunet e-Commerce Group Limited's Equity Buyback announced on June 13, 2018, has expired with 1,841,000 shares, representing 0.1% for HKD 1.62 million.	27/05/19	CI

	1st Jan change	Capi.
CHANGYOU ALLIANCE GROUP LIMITED	-0.77%	29.9M
MASTERCARD, INC.	+6.49%	426B
VENUSTECH GROUP INC.	-31.15%	3.1B
TOPSEC TECHNOLOGIES GROUP INC.	-41.10%	928M
BEIJING VRV SOFTWARE CORPORATION LIMITED	-7.58%	872M
BEIJING CERTIFICATE AUTHORITY CO.,LTD.	-20.84%	711M
CLEARSALE S.A.	+101.07%	273M
NHN KCP CORP.	+12.06%	272M
KGINICIS CO.,LTD	-1.58%	230M
GALAXIA MONEYTREE CO., LTD.	-38.86%	198M

Changyou Alliance Group Limited

Equities

1039

KYG2122D1034

Internet Services

Fortunet e Commerce : (1) MAJOR TRANSACTION IN RELATION TO THE DEEMED DISPOSAL OF EQUITY INTEREST IN A SUBSIDIARY AND (2) NOTICE OF EXTRAORDINARY GENERAL MEETING

Latest news about Changyou Alliance Group Limited

Chart Changyou Alliance Group Limited

Company Profile

Income Statement Evolution

Sector Internet Security & Transactions Services