IMAGI Buys Toon Express

Hong Kong (February 20, 2011) — IMAGI International Holdings Limited, has announced on Friday February 18, 2011 the acquisition of Toon Express Group (“Toon Express”), the manager and owner of, among others, trademarks and character copyrights of popular Chinese animation Pleasant Goat and Big Big Wolf.

IMAGI will settle the initial consideration of HK$814 million by way of a cash payment of HK$330 million, and the remainder by the issuance of 1,382,857,143 consideration shares at HK$0.35 apiece. IMAGI has entered into a subscription agreement with ten investors for the subscription of 1,282,816,000 new shares at HK$0.28 each (the “Subscription”), raising gross proceeds of approximately HK$359 million to fund the cash payment of the initial consideration. In addition, IMAGI may pay an earn-out payment of up to HK$232.5 million in the form of promissory notes in accordance with the financial performance of Toon Express in 2011 and 2012. Therefore, the total consideration may increase to HK$1,046.5 million.

IMAGI’s chairman Francis Leung Pak To said, “We are very excited with the acquisition of Toon Express, a leading brand manager in China’s animation industry. Toon Express’ core business is development and management of animation brands and consumer products licensing, capitalising on a group of well-known brands and cartoon characters across multiple distribution channels in the PRC. The acquisition enables the Company to tap into the fast growing animation business in
the PRC.”

Toon Express has developed a strong recognition of its cartoon characters, in particular Pleasant Goat and Big Big Wolf. The animation Pleasant Goat and Big Big Wolf, which was created in China in 2005, is now broadcast over more than 75 national, provincial and municipal satellite and cable television networks in China. In the second quarter of 2010, according to AC Nielsen, various series of Pleasant Goat and Big Big Wolf programmes occupied five out of the top ten ratings for animation programmes in the PRC based on primetime viewership by children aged 4 —14 in cities. Pleasant Goat and Big Big Wolf has also been distributed in other territories in the Asia Pacific region via television programmes, movies, publications and other means such as Disney Channels.

Toon Express has key commercial arrangements with two contractual partners, being Creative Power Entertaining LLC (“CPE”) and Disney Enterprises, Inc (“Disney”). CPE is engaged in the development, production and distribution of AV Programmes. It is also involved in publication, content development and licensing as well as stage shows and mobile carnival operations. Through contractual commercial arrangements with CPE and Toon Express’ consumer products
licensing business, which is managed by Disney on behalf of Toon Express, Toon Express has IMAGI International Holdings Limited 20 February 2011 (p. 2 of 4)
developed an integrated business model which allows it to tap into each segment of the value chain of the entertainment industry. CPE owns the content  copyrights of television programmes, movies, publications, and stage shows. As strategic commercial partners, CPE and Toon Express jointly cooperate and coordinate brand activities.

Mr. Leung noted that the Acquisition will bring real value to IMAGI by transforming the Company into an owner of leading brands in family entertainment and broadening and enhancing the Group’s revenue sources.

“We also aim to promote IMAGI’s original animations and cartoon characters through Toon Express’ multiple distribution channels. All in all, the acquisition is value and earnings accretive for IMAGI. We are very bullish on the Company’s future development,” Leung concluded.