The board announced that Poly Culture Group Corporation Limited entered into a Joint Venture Agreement with Poly Investment and Poly Real Estate on 26 March 2018, pursuant to which the company, Poly Investment and Poly Real Estate agreed to jointly contribute RMB 100 million to establish Poly Art Investment Company Limited to develop youth art education business. The Joint Venture Agreement, the registered capital of the new company is proposed to be RMB 100 million, of which the company will contribute RMB 40 million, accounting for 40% of the registered capital; Poly Investment will contribute RMB 20 million, accounting for 20% of the registered capital; and Poly Real Estate will contribute RMB 40 million, accounting for 40% of the registered capital. The new company is proposed to be incorporated in Beijing in the PRC.

Poly Group directly holds 43.3% equity interest of the company and indirectly holds 20.4% equity interest of the Company through Poly Southern, a subsidiary of Poly Group, hence Poly Group is a connected person of the Company pursuant to Chapter 14A of the Listing Rules. Since Poly Group and its subsidiaries directly and indirectly hold a total of 100% and 40.87% equity interest of Poly Investment and Poly Real Estate respectively, both Poly Investment and Poly Real Estate are connected persons of the company under Chapter 14A of the Listing Rules. Therefore, the joint capital contribution by the company, Poly Investment and Poly Real Estate to establish the New Company constitutes a connected transaction of the company.

As the highest applicable percentage ratio calculated in accordance with the Listing Rules is higher than 0.1% but lower than 5%, the transaction is subject to the relevant reporting and announcement requirements, but exempted from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.