A Metaverse Company — Proxy Solicitation & Information Statement 2016

Apr 11, 2016

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 a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Silverman Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee, or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of Silverman Holdings Limited.

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.

Silverman Holdings Limited 銀 仕 來 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1616)

PLACING OF NEW SHARES UNDER SPECIFIC MANDATE RE-ELECTION OF DIRECTORS AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

Financial adviser

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Placing agent

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A notice convening the extraordinary general meeting of Silverman Holdings Limited to be held at 2:00 p.m. on Wednesday, 27 April 2016 at 3/F, Business Center, Four Seasons Hotel, 48 Liang Ma Qiao Road, Chaoyang District, Beijing, the PRC is set out on pages 49 to 51 of this circular. Whether or not you are able to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar and transfer office of the Company in Hong Kong, Tricor Investor Services Limited of Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible and in any event not later than 48 hours before the time for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so wish.

11 April 2016

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Appendix — Details of Directors Proposed for Re-election . . . . . . . . . . . . . . . . . . . . . . . . . . . .	46
Notice of the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	49

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DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions have the following meanings:

• ‘‘Announcement’’

the announcement of the Company dated 4 February 2016 in relation to the Share Placing

• ‘‘Articles’’

the articles of association of the Company

• ‘‘associate(s)’’

• having the meaning ascribed thereto under the Listing Rules

• ‘‘Board’’

• the board of Directors

• ‘‘Business Day(s)’’

• any day (not being a Saturday, Sunday or public holiday) on which licensed banks are generally open for business in Hong Kong throughout their normal business hours

• ‘‘Company’’

• Silverman Holdings Limited (銀仕來控股有限公司), a company incorporated in the Cayman Islands with limited liability and the issued Shares of which are listed on Main Board of the Stock Exchange with stock code 1616

• ‘‘Completion Date’’

• on or before the seventh (7[th] ) business day after and not including the date when the conditions precedent set out above to the Share Placing have been fulfilled (or such other time or date as the Company and Guotai Junan shall agree in writing) on which completion of the Share Placing shall take place pursuant to the Share Placing Agreement

• ‘‘connected person(s)’’

having the meaning ascribed thereto under the Listing Rules

• ‘‘Contractual Arrangements’’

• the contractual arrangements dated 6 July 2015 entered into between Huasheng Century, Huasheng Media and its shareholders, namely, the exclusive technology support and services agreement (‘‘Exclusive Technology Support and Services Agreement’’), the exclusive option agreement (‘‘Exclusive Option Agreement’’), the equity pledge agreement (‘‘Equity Pledge Agreement’’) and the power of attorney executed by each of the two Registered Shareholders

• ‘‘Director(s)’’

the director(s) of the Company

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DEFINITIONS

‘‘EGM’’

• the extraordinary general meeting of the Company to be convened and held at 2:00 p.m. on Wednesday, 27 April 2016 at 3/F, Business Center, Four Seasons Hotel, 48 Liang Ma Qiao Road, Chaoyang District, Beijing, the PRC for the purpose of considering and, if thought fit, approving the ordinary resolutions in respect of, among others, the Share Placing Agreement and the transactions contemplated thereunder, and the allotment and issue of the Placing Shares under the Specific Mandate and the re-election of Directors

• ‘‘Group’’ the Company and its subsidiaries

• ‘‘Guotai Junan’’

• Guotai Junan Securities (Hong Kong) Limited, a licensed corporation under the SFO to carry out Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities as defined in the SFO

• ‘‘Hong Kong’’

• the Hong Kong Special Administrative Region of the PRC

• ‘‘Huasheng Century’’

• 北京華晟世紀傳媒科技有限公司 (Beijing Huasheng Century Media Technology Company Limited), a limited company established in the PRC

• ‘‘Huasheng Media’’

• 北京華晟泰通傳媒投資有限公司 (unofficial English name, Beijing Huasheng Taitong Media Investment Company Limited), a limited company established in the PRC

• ‘‘Huasheng Television’’

• 湖北長江華晟影視有限責任公司 (unofficial English name, Hubei Changjiang Huasheng Television Company Limited), a limited company established in the PRC and is held as to 40% by Huasheng Media

• ‘‘Independent Third Party(ies)’’

• persons who themselves (and in the case of any corporate entities, their ultimate beneficial owners) are, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, third parties independent of, and not connected with, the Company and its connected persons

• ‘‘Latest Practicable Date’’

• 8 April 2016, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular

• ‘‘Last Trading Day’’

• 4 February 2016, being the date of the Share Placing Agreement

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DEFINITIONS

• ‘‘Listing Committee’’

the listing committee appointed by the Stock Exchange for considering applications for listing and the granting of listing of securities on the Stock Exchange

• ‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange

• ‘‘Long Stop Date’’

• 31 May 2016, or such other time and date as the relevant parties to the Share Placing Agreement may agree in writing

• ‘‘Minimum Placing Price’’ HK$2.50 per Placing Share

• ‘‘Mr. Liu’’

• Mr. Liu Zhihua (劉志華), one of the two Registered Shareholders and a substantial shareholder of the Company

• ‘‘Placing Price’’ the price per Placing Share (being not less than the Minimum Placing Price), to be determined by the Company and Guotai Junan, based on the then market conditions

• ‘‘Placing Share(s)’’ up to a total of 320,000,000 new Shares to be placed by Guotai Junan (as placing agent) to the Share Placees in accordance with the terms and conditions of the Share Placing Agreement

• ‘‘PRC’’ the People’s Republic of China

• ‘‘Registered Shareholders’’

• Mr. Liu and Mr. Guo Tao (郭濤) (an Independent Third Party), being the current registered shareholders of Huasheng Media

• ‘‘SARFT’’

• State Administration of Press, Publication, Radio, Film and Television of the PRC (中國國家新聞出版廣電總局)

• ‘‘SFO’’

• Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• ‘‘Share(s)’’ ordinary share(s) of nominal value of USD0.01 each in the capital of the Company

• ‘‘Shareholder(s)’’ holder(s) of the Share(s)

• ‘‘Share Placees’’

• any independent individual, professional or institutional investors whom Guotai Junan (as the placing agent) and/or any of its sub-placing agent(s) has procured to subscribe for any of the Placing Shares under the Share Placing

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DEFINITIONS

• ‘‘Share Placing’’

• the placing of up to 320,000,000 Placing Shares in accordance with the terms and conditions of the Share Placing Agreement

• ‘‘Share Placing Agreement’’ the conditional placing agreement entered into between the Company and Guotai Junan dated 4 February 2016 in relation to the Share Placing

• ‘‘Specific Mandate’’ the specific mandate to be sought from the Shareholders at the EGM to authorize the Directors to allot and issue the Placing Shares

• ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited

• ‘‘substantial shareholder(s)’’ having the meaning ascribed thereto under the Listing Rules

• ‘‘Takeovers Code’’ The Hong Kong Code on Takeovers and Mergers

• ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong

• ‘‘USD’’ U.S. dollars, the lawful currency of the United States of America

• ‘‘%’’ per cent

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LETTER FROM THE BOARD

Silverman Holdings Limited 銀 仕 來 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1616)

Executive Directors:

Mr. LIU Dong (Chairman) Mr. LIU Zongjun (Chief Executive Officer)

Ms. CHEN Chen

Registered office: P.O. Box 309 Ugland House Grand Cayman KY1-1104 Cayman Islands

Independent Non-executive Directors:

Mr. PAN Hongye Mr. LAM Kai Yeung Mr. GAO Gordon Xia

Principal place of business in Hong Kong: 18/F, Tesbury Centre 28 Queen’s Road East Wanchai Hong Kong

11 April 2016

To the Shareholders

Dear Sir or Madam,

PLACING OF NEW SHARES UNDER SPECIFIC MANDATE RE-ELECTION OF DIRECTORS AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the Announcement in relation to the Share Placing. The Board announced that, on 4 February 2016 (after trading hours), the Company and Guotai Junan entered into the conditional Share Placing Agreement, pursuant to which the Company has conditionally agreed to place, through Guotai Junan, on a best effort basis, the Placing Shares in accordance with the terms of the Share Placing Agreement. The Share Placing Agreement is conditional upon,

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LETTER FROM THE BOARD

among others, the passing by the Shareholders of all necessary resolution(s) to approve the Share Placing Agreement and the transactions contemplated thereunder, and the Specific Mandate for the allotment and issue of the Placing Shares.

The purpose of this circular is to give you (i) further details of the Share Placing Agreement and the transactions contemplated thereunder; (ii) further details in relation to the re-election of Directors; and (iii) the notice of the EGM.

PLACING OF NEW SHARES UNDER SPECIFIC MANDATE

On 4 February 2016 (after trading hours), the Company and Guotai Junan entered into the Share Placing Agreement pursuant to which the Company has conditionally agreed to place, through Guotai Junan, on a best effort basis, up to 320,000,000 Placing Shares, to not less than six Share Placees who and whose ultimate beneficial owners are Independent Third Parties at the Placing Price of not less than HK$2.50 per Placing Share. The principal terms of the Placing Agreement are set out below.

THE SHARE PLACING AGREEMENT

Date

4 February 2016 (after trading hours)

Parties

• (1) The Company (as the issuer); and

• (2) Guotai Junan (as the placing agent)

To the best of the knowledge, information and belief of the Board, having made all reasonable enquiries, Guotai Junan and its ultimate beneficial owner(s) are Independent Third Parties.

Pursuant to the Share Placing Agreement, the Company has conditionally agreed to place, through Guotai Junan, on a best effort basis, up to an aggregate of 320,000,000 new Placing Shares to not less than six Share Placees at the Placing Price of not less than HK$2.50 per Placing Share. The Directors (including the independent non-executive Directors) are of the view that the terms of the Share Placing Agreement and the transactions contemplated thereunder, are on normal commercial basis, fair and reasonable and in the interests of the Company and its Shareholders as a whole.

The Company does not intend to issue any Placing Shares to a Share Placee if such issue would result in such Share Placee, together with the parties acting in concert (as defined in the Takeovers Code) with it (if any), being entitled to exercise or control the exercise of 30% (or any amount specified in the Takeovers Code as the level for triggering a mandatory general offer obligation) or more of the voting power at any general meeting of the Company.

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LETTER FROM THE BOARD

Share Placees

It is expected that the Placing Shares will be placed to not less than six Share Placees, who and whose ultimate beneficial owners are Independent Third Parties. It is expected that none of the Share Placees will become a substantial shareholder (as defined under the Listing Rules) of the Company immediately after completion of the Share Placing. If any of the Share Placees becomes a new substantial shareholder of the Company after the completion of the Share Placing, further announcement will be made by the Company.

Number of Placing Shares

Assuming that there is no change in the issued share capital of the Company between the date of this circular and the completion of the Share Placing (save for and except the Share Placing), the maximum number of 320,000,000 Placing Shares represents: (a) approximately 33.42% of the existing issued share capital of the Company; and (b) approximately 25.05% of the issued share capital of the Company as enlarged merely by the Share Placing. The aggregate nominal value of the maximum number of Placing Shares is USD3,200,000.

Placing Price

The Minimum Placing Price of HK$2.50 per Placing Share represents:

• (i) a discount of approximately 0.40% to the closing price of HK$2.51 per Share as quoted on the Stock Exchange on the Last Trading Day, being the date of the Share Placing Agreement; and

• (ii) a premium of approximately 2.63% over the average closing price of HK$2.436 per Share as quoted on the Stock Exchange for the last five trading days immediately prior to the Last Trading Day;

• (iii) a premium of approximately 3.73% over the average closing price of approximately HK$2.41 per Share as quoted on the Stock Exchange for the last ten trading days immediately prior to the Last Trading Day; and

• (iv) a premium of approximately 128.3% over the audited net assets value per share of approximately RMB0.92 based on the audited net assets value of the Company of RMB885.5 million as at 31 December 2015 as set out in the Company’s 2015 annual results announcement for the year ended 31 December 2015 and 957,644,656 Shares issued as at the date of this circular. The translation of HK$ into RMB was made at the rate of HK$1.00 to RMB0.84.

The Placing Price shall be no less than HK$2.50 per Placing Share. The Minimum Placing Price under the Share Placing Agreement was determined after arm’s length negotiations between the Company and Guotai Junan with reference to the historical trading prices of the Shares, the

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LETTER FROM THE BOARD

prevailing market sentiment and conditions, liquidity flow in the capital market and the Group’s existing financial position. An announcement of the Placing Price and the final number of Placing Shares to be placed by Guotai Junan under the Share Placing will be made by the Company.

Assuming all the Placing Shares are successfully placed by Guotai Junan at the Minimum Placing Price of HK$2.50 per Placing Share and based on the estimated expenses of the Share Placing in the amount of up to approximately HK$26 million, the gross and net proceeds from the Share Placing are estimated to be approximately HK$800 million and approximately HK$774 million respectively. Therefore, the net price for the Share Placing is approximately HK$2.42 per Placing Share.

Ranking of the Placing Shares

The Placing Shares will, when issued and allotted, rank pari passu in all respects among themselves and with all other fully paid Shares in issue on the date of allotment and issue of such Placing Shares, including the right to receive all dividends and distributions which may be declared, made or paid after such date and will be free and clear of all encumbrances.

Conditions precedent to the Share Placing

Completion of the Share Placing is conditional upon the fulfillment of the following conditions:

• (a) the passing of resolutions at the EGM by the Shareholders approving the Share Placing Agreement and the transactions contemplated hereunder, and the Specific Mandate for the allotment and issue of the Placing Shares; and

• (b) the Listing Committee of the Stock Exchange agreeing to grant approval for the listing of, and permission to deal in, the Placing Shares on the Stock Exchange either unconditionally or subject to conditions to which the Company does not object.

If the conditions precedent in respect of the Share Placing are not fulfilled by the Long Stop Date, the Share Placing Agreement shall thereupon lapse and become null and void and all rights, obligations and liabilities of the parties thereunder in respect of the Share Placing shall cease and determine and none of the parties shall have any claim against the other in respect of the Share Placing, save for any liability arising out of any antecedent breaches of the Share Placing Agreement.

Completion of the Share Placing

Completion of the Share Placing will take place on or before the seventh (7[th] ) Business Days after and not including the fulfilment of the last outstanding condition set out above, or such other date to be agreed between the Company and Guotai Junan.

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LETTER FROM THE BOARD

Force majeure

If at any time between the date of the Share Placing Agreement and at or before 8:00 a.m. on the Completion Date, there occurs:

• (a) there is any change in national, international, financial, exchange control, political, economic conditions in Hong Kong which render the Share Placing unable to proceed; or

• (b) any moratorium, suspension or material restriction on trading in shares or securities in general on the Stock Exchange occurs after the date of the Share Placing Agreement which render the Company or Guotai Junan unable to proceed with the Share Placing; or

• (c) the Company commits any material breach of or omits to observe any of its obligations or undertakings under the Share Placing Agreement which will render the Share Placing unable to proceed; or

• (d) Guotai Junan shall become aware of the fact that any of the representations under the Share Placing Agreement was, when given, materially untrue or inaccurate, or such untrue representation or warranty will have a material adverse effect on the Share Placing,

then Guotai Junan, after consultation with the Company, may upon giving notice to the Company terminate the Share Placing Agreement with immediate effect. If the Share Placing Agreement shall be terminated, obligations and liabilities of the parties under the Share Placing Agreement shall cease and determine, save in respect of any antecedent breaches.

Specific Mandate

The Placing Shares will be allotted and issued under the Specific Mandate which is subject to Shareholders’ approval at the EGM.

Application for listing

Application will be made by the Company to the Stock Exchange for the grant of the listing of, and permission to deal in, the Placing Shares.

Shareholders and potential investors should note that the Share Placing is subject to the fulfillment of the conditions precedent set out in the Share Placing Agreement, and may or may not proceed. Shareholders and investors should exercise caution when dealing in the Shares.

I. REASONS FOR THE SHARE PLACING AND USE OF PROCEEDS

As announced by the Company on 19 November 2015, the Group intends to further expand its operation and engage in the media industry in the PRC. The Company has recently completed acquisition of Huasheng Media, which is primarily engaged in production and distribution of

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LETTER FROM THE BOARD

television drama series in the PRC. Please refer to the announcements of the Company dated 9 December 2015, 23 December 2015 and 24 December 2015 for details of the acquisition of Huasheng Media.

It is expected that the maximum aggregate gross proceeds and net proceeds from the Share Placing will be approximately HK$800 million and HK$774 million respectively. As previously disclosed in the Announcement, the Company originally intended to allocate approximately HK$250 million of the net proceeds from the Share Placing for the acquisition of other media related companies where opportunities arise. As at the Latest Practicable Date, the Company has not yet identified any specific suitable acquisition targets. Taking into account the uncertainties in the proposed acquisition, the Company has adjusted the allocation of net proceeds from the Share Placing by re-allocating the said HK$250 million to production of television series of Huasheng Media. As such, the net proceeds from the Share Placing are intended to be used (i) as to HK$200 million for settlement of the promissory note issued as partial consideration for the acquisition of Huasheng Media; (ii) as to approximately HK$550 million for the production of television series of Huasheng Media. Please refer to ‘‘Business Overview of the Group’s Television Series Production — Huasheng Media’s Operation Objectives and Company’s Future Development Strategic Plan’’ below for further details; and (iii) as to approximately HK$24 million for general working capital.

The Directors are of the view that the Share Placing can strengthen the financial position of the Group and provide funding to the Group to meet any future development opportunities and obligations. The Share Placing also represents good opportunities to broaden the Shareholders’ base and the capital base of the Company. The Directors (including the independent non-executive Directors) consider that the terms of the Share Placing Agreement (including the Placing Price) are on normal commercial terms, fair and reasonable, and in the interests of the Company and its Shareholders as a whole.

II. INDUSTRY OVERVIEW OF TELEVISION SERIES PRODUCTION BUSINESS

1. OVERVIEW OF THE TELEVISION SERIES INDUSTRY IN WHICH THE COMPANY OPERATES

The Company operates in the television series industry, a segment of the culture and entertainment industry. As a culture and entertainment industry, on one hand, the development of the television series industry is closely related to the national economic development and the growth rate of per capita GDP, therefore, strong economic growth can effectively promote the development of culture industry, television series industry included. On the other hand, during economic downturn, although material demand of the general public will contract, demand for television series, as cultural consumer goods which do not only fulfil people’s spiritual needs but are also economically affordable, will not decrease linearly but will relatively increase. It can be said that the television series industry has the characteristic of resilience to economic cycle.

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LETTER FROM THE BOARD

Huasheng Media is currently engaged in investment, production and distribution of television series. The television series production industry and its upstream industry which includes script creation, shooting services, acting services and photography, arts and other ancillary services and downstream industry which includes television stations, websites and other media companies, video publishing houses and demand sides of brand promotion constitute the whole industry chain of the television series industry. The relationship between each of the upstream and downstream industries is as follows:

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2. OPERATION MODEL OF THE TELEVISION SERIES INDUSTRY

The television series industry has its unique operation model which is different from traditional production industries.

Uniqueness in asset structure. ‘‘Light assets’’ is a common feature of television series production companies. Unlike industrial enterprises which mainly use fixed assets such as production lines and factories for production, inputs of television series production are mainly scripts, services of cast and crew, props and other production cost. Special facilities, equipment, and scenes which are required during shooting and production process are primarily acquired through leasing.

Uniqueness in business model. For production model, the production and organization unit in television series production is the crew while exclusive investment or joint investment are adopted to complete filming depending on capital requirements. For sales model, sales of television series are mainly licensing of copyrights of television series. Customers are primarily broadcasting platforms such as television stations of different levels and new media and products for sale are broadcasting rights of television series. For allocation, there are more income allocation methods under joint filming model, which mainly includes allocation in accordance with investment proportions, districts of copyrights, types of copyrights or a mix of the above. For the Company’s specific operation model, please see ‘‘Business Overview of the Group’s Television Series Production’’ of this circular.

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LETTER FROM THE BOARD

3. CURRENT DEVELOPMENT STATUS AND FUTURE DEVELOPMENT TREND OF TELEVISION SERIES INDUSTRY

In recent years, the topic of forging the culture industry into a national pillar industry has been gaining increasing attention, fueling the expectation of the whole society on the revenue that can be generated from television series production units. As a result, funds from other different industries, including departments of different levels of the party and the government, enterprises and individuals from other industries and different kinds of financial funds, were invested in producing television series, which increased the total investment in television series production and unleashed the productivity of television series.

According to the statistical data of SARFT, in terms of television series which have obtained publishing licenses, the changes in production volume of domestic television series from 2005 to 2014 are as follows:

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Source of data: SARFT

It can be seen from the above diagram that in recent years, the amount of television series produced in China was maintained at over 400 as opposed to the relatively large fluctuation of number of episodes produced which has shown a general upward trend. Despite the relatively large drop in production of domestic television series due to the impacts of international financial crisis and slowdown in domestic economic growth in 2009, along with economic recovery and flourishing development of domestic culture industry, production of domestic television series in terms of episode increased relatively in 2010 and reached 17,703 episodes in 2012, which was the highest in history. The number of episodes dropped to 15,776 episodes in 2013 and reached 15,983 in 2014, which remained steady in general.

In the past few years, average total television series production per annum has exceeded 14,000 episodes. However, nearly half of the television series produced each year was not broadcasted. This structural contradiction between excess supply and unmet demand of television

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LETTER FROM THE BOARD

stations for outstanding television series created enormous wastes of social resources. More television series production units are urgently required to fulfill the demand for outstanding television series so as to eliminate backward productive forces in the industry.

The pressure of ratings intensified competitions among provincial television stations. Due to relatively large discrepancy in competitiveness among numerous provincial television stations, it seems that popular channels are getting an increasing share of evening ratings of provincial satellite channels.

According to The Development of Radio and Television Industries during the ‘‘Eleventh FiveYear’’ Period published by SARFT, and the China Radio, Film and Television Development Report (中國廣播電影電視發展報告) in 2014, the broadcast hour of television programmes in film and drama category increased by 1,828,000 hours to 7,427,000 hours from 5,599,000 hours in 2005, representing an increase of 32.65%. Statistical data showed that among the broadcasted programmes, the proportion of television programmes in film and drama category maintained at a steady level of over 40% in the period from 2010 to 2014 and television series occupied significant position in the broadcast structures of major television stations.

Since 1 January 2015, SARFT stipulated that the same television series is not allowed to be simulcasted on more than two satellite television general channels during evening prime time and satellite television general channels are not allowed to broadcast more than two episodes of one television series during prime time every evening. Implementation of these stipulations will further intensify competition among satellite television channels for outstanding television series.

In addition, although the emerging new media such as the Internet and mobile terminals have to a certain extent, affected the television media market, in essence, such new media broadcasting platforms have not reduced the demand for videos but boosted the demand for television series and total transaction volume.

Besides the increasing demand for television series by new media, demand for television series from overseas traditional television markets such as Southeast Asia and Chinese-speaking regions around the world is also increasing. With its unique oriental appeal, Chinese culture and history deeply influence Asian countries, which provided the cultural foundation for the export of Chinese television series. Along with the increasing television series production standard in China, export volume of television series is expected to grow.

4. COMPETITION OF TELEVISION SERIES INDUSTRY

(1) Market competition of television series industry in China

Domestic television production institutions can be generally divided into two major categories, state-owned production institutions and private production institutions.

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LETTER FROM THE BOARD

State-owned television series production institutions emerged in China earlier. As a result, they have relatively stronger strength, more mature business and have more significant influences to the television series production industry in China. Well known institutions include China Film Group Corporation (中國電影集團), August First Film Studio (八一電影 製片廠), China TV Drama Production Centre (中國電視劇製作中心), Beijing HualuBaina Film & TV Company Limited (北京華錄百納影視股份有限公司) and television series production centers under provincial radio and television systems. As television series market was opened to the private sector at a later stage, private production institutions started business rather late.

Currently, the country encouraged domestic private capital to engage in television series production business, bringing in a large number of television series production companies. According to the data released by SARFT, 137 institutions obtained the 2014 TV Play Production License (Class A) (電視劇製作許可證(甲種)) and 7,248 institutions (excluding the military system) held the Radio and Television Program Production and Business Operation License (廣播電視節目製作經營許可證) and were required to apply for license (class B) before shooting, showing a year by year increasing trend.

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Source of data: SARFT

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LETTER FROM THE BOARD

The television series production industry has a relatively low level of concentration. According to the data on licenses granted as disclosed by SARFT, licenses were granted to 429 domestic television series with 15,983 episodes in 2014. According to statistics conducted on catalog information of license granted, the above television series were invested and produced by around 300 production institutions, representing 4.01% of a total of 7,394 institutions with production qualifications in 2014, in which around 231 institutions only invested in and produced 1 television series. This showed that although there were numerous television series production institutions, not many of them actually engaged in investment and production businesses of television series, fewer of them were capable to produce in large scale and even fewer could produce excellent television series.

Since its establishment in 2004, all television series invested, produced and filmed by Huasheng Media were able to be broadcast during prime time on CCTV or the state’s top ten satellite television stations, representing a 100% successful release rate. Moreover, with superior production and high profitability, Huasheng Media is able to produce 3 to 4 television series every year, which made it one of the handful domestic companies which are capable to realize mass production of premium television series.

In the future, imbalance of market supply and demand in the quality and premium television series segment will further intensify market competition and increase the difference in strength among enterprises. Middle to small scale television series production institutions will be gradually eliminated or become subordinated production units of large scale production institutions. Large scale television series production institutions with higher productivity will dominate the market and market concentration, as a result, will increase.

(2) Description of the competitors

Huasheng Media owns significant competitive advantages in the segment of domestic television series production. Huasheng Media will be able to leverage on the listing platform advantages of the Company and further expand the scale and strength in television series production. Its competitors will mainly be state-owned or private listed or unlisted film and television culture companies with complete industry chain or high competitiveness in a certain segment, for example, Huayi Brothers Media Corporation (華誼兄弟傳媒股份有限公司), New Classics Media Corporation (新麗傳媒股份有限公司), Hai Run Movies & TV Production Co., Ltd (北京海潤影視集團有限公司), Zhejiang Huace Film & TV Co., Ltd (浙江華策影視股份 有限公司), Great Wall Movie And Television Co., Ltd. (長城影視股份有限公司) and Shanghai New Culture Media Group Co., Ltd. (上海新文化傳媒集團股份有限公司).

5. Entry Barriers of Television Series Industry

(1) Policy entry barrier

The television series industry belongs to the state licensing business. Television series production companies must obtain the Radio and Television Program Production and Business Operation License (廣播電視節目製作經營許可證) to carry out production and distribution of

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television series. Upon completion of shooting of television series, a review by SARFT or its provincial level counterparts in accordance with the jurisdictions must be conducted to obtain a Teleplays Distribution License (電視劇發行許可證). Television series without a Teleplays Distribution License are not allowed to enter the market.

According to the Catalogue for Guidance of Foreign Investment (外商投資產業指導目 錄), production and distribution companies of radio and television programs are prohibited in the Catalogue for Guidance of Foreign Investment.

(2) Barrier of resources integration of talents and production factors

Television series production is a complicated systematic project. Only through effective integration of different quality resources can a premium television series be produced. Before shooting, the producers who are responsible to choose the topic and are able to keenly grasp market topics as well as paying attention on aligning social benefits and economic benefits have to work together with professional scriptwriters who are proficient in creations and familiar with filming methods of television series in order to select and complete outstanding scripts. During shooting and the stage of post-production, producers with excellent management capability, directors who can integrate various factors for creation, actors with profound performing skills and crew with professional techniques are required to complete the execution of the project. Distribution of television series is also priority among priorities. A large number of professional distribution personnel is indispensable in outstanding television series production companies.

Currently, only a few enterprises in the industry are equipped with the ability to gather resources. Even though a majority of production enterprises own abundant capital and employ related talents, they are not able to successfully carry out effective integration of required resources in a short period of time and it is difficult for them to produce premium television series recognized by the market.

(3) Capital barrier

The business model of investment and production of television series required production institutions to input massive funds in the initial stage. The more sophisticated the production and the higher the quality of the television series, the higher the requirement for cost inputs in early stages. Meanwhile, along with the rapid development of the television series market in recent years, costs for production factors such as scripts, directors and actors were also on the rise, which impose higher capital requirements in early stages to production companies.

Accordingly, capital barrier of the television series industry is obvious to enterprises without strong capital strength or financing channels.

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(4) Brand barrier

Due to intense competitions, low market concentration, large number of television series production institutions and large discrepancy in scale, corporate brands become the foundation for television series enterprises to survive and develop. Only enterprises with strong strength and are able to continuously launch brilliant premium television series as well as paying attention to brand building can gradually establish and accumulate good market image and reputation.

In television series production, companies with brand influence are more likely to have market appeal and are able to attract first-class cast such as directors, actors and producers to join the creation, filming and distribution teams.

In television series distribution, television stations tend to cooperate with highly-reputed production institutions of which previous works and production standards were recognized by the market. As a result, it is not easy for production institutions without good brand reputation to open up sales channels in a short period of time.

III. BUSINESS OVERVIEW OF THE GROUP’S TELEVISION SERIES PRODUCTION

1. MAJOR BUSINESSES AND PRODUCTION PROCESS OF HUASHENG MEDIA

Currently, Huasheng Media is primarily engaged in investment, production and distribution of television series and television series and relevant derivative businesses. Television series are available for sale after completion of shooting and obtaining the Teleplays Distribution License (電 視劇發行許可證). The Company obtains corresponding copyright income through selling television broadcast rights of television series to various television stations, audio and video products distribution rights of television series to audio and video products distribution enterprises, information network publication rights of television series to Internet video service enterprises and copyrights of television series to middlemen such as television series distribution enterprises which are engaged in professional television series distribution business.

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Specific processes of television series production of the Company are shown in the following diagram:

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2. MAJOR BUSINESS MODEL OF HUASHENG MEDIA

‘‘Light assets’’ is a common feature of television series production companies. Different from industrial enterprises which mainly use fixed assets such as production lines and factories for production, inputs of television series production are mainly scripts, services of cast and crew, props and other production cost. Special facilities, equipment, and scenes which are required during shooting and production process are acquired primarily through leasing. Specific business model of Huasheng Media is as follows:

(1) Procurement model

Procurement involved in the television series industry mainly includes scripts creation services, services of crew personnel, shooting consumables, costumes, cosmetics, props, postproduction services as well as special facilities, equipment, operation and leasehold of scenes and so on.

As the basis and source of television series, the quality of scripts affects whether a television series will succeed. Currently, Huasheng Media generally acquires scripts through two ways: one is to directly purchase copyrights of scripts and the other is to engage scriptwriters to create scripts. The latter includes two ways, the first one is to purchase

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television series adaptation rights of novels and comics and engage scriptwriters to create the scripts afterwards, and the second one is that Huasheng Media plans and selects topics of television series on its own and engages scriptwriters to create the scripts afterwards.

Brilliant crew personnel, including directors, cameramen and actors, are scarce resources in the television series industry and are employed and paid by Huasheng Media or the crew.

The requirement lists of shooting consumables, costumes, cosmetics and props are made by relevant department of the crew. After approval by the producers (some procurement is required to be approved by the Company), specialized procurement staff or relevant department staff will carry out procurement.

Post-production services such as editing and dubbing are provided by external professional teams employed by Huasheng Media.

The crew generally rents or sets up the scenes and site leasing fees are usually counted by days. The crew has to report to Huasheng Media on the selection of leading actors and make up, costumes, props and scale procurement for scenes and get the approval.

To reduce project costs and enhance efficiency management, focus on coordination and management work such as project creations, planning and filmmaking, Huasheng Media engages professional crew management and organization institutions with crew services such as procurement of services of non-leading actors, purchase and leasing of shooting consumables, costumes, cosmetics, props, procurement for scenes and post-production services. After those institutions provide supplier solutions and Huasheng Media accepts the solutions, Huasheng Media then procures from those institutions. All procurement costs incurred in the production process are paid by the party engaged.

(2) Production model

1) Crew as the production unit

Huasheng Media’s television series businesses take crew as production unit. Crew is a unique production unit and a form of organization in the television series industry. It is an ad hoc working team established for engaging in shooting during the shooting stage of television series.

The crew comprises various professional personnel. Huasheng Media adopts the producer system. As the chief person in charge and the core organizer and administrator, during the production process of television series, the producer plays the role of overall planning, making commands, controlling and coordination; his/her management responsibilities cover the whole process, including project proposal, filmmaking, promotion and distribution, and broadcast benefits. The production manager is responsible for daily management of the crew while the director is responsible for the

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shooting works of television series. The crew generally comprises filmmaking department, directing department, shooting department, recording department, art department and styling department.

2) Adoption of exclusive or joint investment in shooting

① Exclusive investment in shooting

For projects with better prospects and lower investment risks and under the circumstances that Huasheng Media has abundant capital, Huasheng Media generally adopts the way of exclusive shooting. That means Huasheng Media provides all the capital and is responsible for the whole production process. Huasheng Media is also solely entitled to all copyright income of the television series as well as undertakes all investment risks.

② Joint investment in shooting (as the production execution party)

For projects with larger investment scale and higher investment risks, Huasheng Media generally provides the capital for production together with other investment parties and shares the benefits and risks in accordance with investment proportions or contractual agreements in order to alleviate capital pressure and reduce investment risk. Under this model, Huasheng Media serves as the production execution party and is responsible for crew formation, specific shooting works and capital management. Other investment parties generally will not participate in specific filmmaking and management works.

Currently, Huasheng Media has served as the production execution party for all television series which were jointly invested in shooting.

Huasheng Media owns a complete business system for planning and production of television series. According to the practical situation such as the features of television series as well as its own capital position, Huasheng Media decides on whether to adopt the exclusive shooting model or the joint shooting model on the basis of maximization of its own benefits. Since its establishment, Huasheng Media mainly adopts the two models with stronger control, namely exclusive shooting and joint shooting with Huasheng Media as the production execution party. Meanwhile, Huasheng Media makes effective use of the capital, talents and industry experience from cooperating parties to enhance business scale and profitability of its television series. Those situations will not adversely affect completeness, independence and future sustainable profitability of Huasheng Media’s business.

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(3) Sales model

Sales of television series is actually sales of intellectual property, including sales of television broadcast rights, information network publication rights and audio and video products distribution rights. There are two models, being independent distribution and entrusted distribution, for the sales of television series. Independent distribution model refers to direct sales of broadcast rights to television stations while entrusted distribution model refers to sales of broadcast rights to specialized distribution enterprises which on-sell the broadcast rights to television stations and Internet video service enterprises. Television series producers who do not possess independent sales channels and access to the market adopt the entrusted distribution model for sales of the broadcast rights of television series. Television series producers also take into account their capital position in deciding their sale model as entrusted distribution model enables early recovery of capital and relieves capital pressure, in particular during the production stage.

Huasheng Media possesses complete and independent sales capability. Under normal circumstances, television broadcast rights of television series sold by Huasheng Media to television stations are divided into transfer of first round broadcast right and transfer of second round broadcast right. First round broadcast right refers to the right with which some television stations can start broadcast in accordance with the agreed sequence within 24 months (some television series may extend to 36 to 60 months) after Teleplays Distribution License (電視劇發行許可證) is obtained. Second round broadcast right refers to the right with which other television stations can continue to broadcast after first round broadcast. For the sales of information network broadcasting rights, under normal circumstances, Huasheng Media grants exclusive information network broadcasting rights of television series with a term of certain years (generally five years) to one Internet video service enterprise so as to obtain licensing revenue.

For the reason of recovering capital as soon as possible, Huasheng Media may also sell both television broadcast rights and information network broadcasting rights of some television series to specialized distribution enterprises and they will sell the rights to television stations and Internet video service enterprises. That means there are two ways, being independent distribution and entrusted distribution, for Huasheng Media to sell television series.

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3. MAJOR CUSTOMERS AND REGIONAL DIVISION OF HUASHENG MEDIA

Major customers of television series industry are television stations, new media such as Internet video service and publishers of audio and video products. Television stations are tradition broadcast platforms of television series and the most important customers of Huasheng Media. Since its establishment in 2004, all television series invested, produced and filmed by Huasheng Media were broadcasted during prime time on CCTV or the state’s top ten satellite television stations. Huasheng Media’s main customers are CCTV, Hubei Satellite Television, Beijing Satellite Television, Shenzhen Satellite Television and so on. As the copyright market becomes more and more standardized and mature, new media has become important customers in the television series industry. For new media, major customers of Huasheng Media are Internet new media such as Sohu, PPTV and Letv.

Distribution of customers in the television series industry is different from traditional industries. In China, television stations are distributed evenly and each province and city has its own television broadcast channel. However, the strength and therefore the influences of television stations are different. Among which CCTV and provincial satellite televisions have national coverage. In China, the most influential television stations are CCTV and the state’s top ten satellite television stations. Major customers of Huasheng Media are CCTV, Hubei Satellite Television, Beijing Satellite Television and Shenzhen Satellite Television. Although customers are located in Beijing, Hubei and Shenzhen, the influences of products cover the whole nation.

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4. HUASHENG MEDIA’S OPERATION OBJECTIVES AND COMPANY’S FUTURE DEVELOPMENT STRATEGIC PLAN

Huasheng Media will continue to carry forward its objective of producing ‘‘premium television series’’, exert core competitive advantages, persist in promotion of television series business upgrade, ensure steady growth of performance and consolidate Huasheng Media’s ascendancy in television series industry.

Huasheng Media’s television series production plan is as follows:

			Planned
			commencement
No.	Title	Theme	time of shooting	Note
1	The Great Eastern Battlefield	Historical drama	—	To be broadcast in the
	(東方戰場)			first half of 2016
2	The Adoption	Urban emotional drama	—	To be broadcast in the
	(領養)			first half of 2016
3	The Last Stronghold	Historical story drama	—	Post-production stage
	(最後的要塞)
4	Qiao’s Grand Courtyard 2	Historical story drama	6 March 2016	Shooting in progress
	(喬家大院2 )
5	March in River City	Modern city drama	Third quarter of	Script completed
	(江城三月)		2016
6	Wudang Yijian	Kung fu drama	Third quarter of	Script completed
	(武當一劍)		2016
7	Ma Beier	Republic period drama	Fourth quarter of	Script completed
	(馬背兒)		2016
8	The Anti-traitor Team	Spy thriller drama	2017	Script completed
	(鋤奸團)
9	One Vessel, One Town,	Legend story drama	2017	Script completed
	One Master
	(一鼎一鎮一夫子)
10	The Myth of Wudang	Mythology and fantasy	2017	Creating script
	(神話武當)	drama
11	The Financial Empire	Historical drama	2017/2018	Creating script
	(金融帝國)
12	Qiao’s Grand Courtyard 3	Historical story drama	2018	Creating script
	(喬家大院3)
13	The Army in Qikou	War legend drama	2018	Creating script
	(兵臨磧口)
14	Wudang (天下武當)	Republic period drama	2018	Creating script

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Approximately HK$550 million of the proceeds of the Share Placing will be invested in the production of television series of Qiao’s Grand Courtyard 2 (喬家大院2), March in River City (江城三月), Wudang Yijian (武當一劍), Ma Beier (馬背兒), The Anti-traitor Team (鋤奸團), One Vessel, One Town, One Master (一鼎一鎮一夫子), The Myth of Wudang (神話武當), The Financial Empire (金融帝國), Qiao’s Grand Courtyard 3 (喬家大院3), The Army in Qikou (兵臨磧口) and The World’s Wudang (天下武當) as mentioned in the production plan of Huasheng Media above, and is currently estimated to be allocated as follows:

Television Series

Estimated approximate allocation of proceeds

Qiao’s Grand Courtyard 2 (喬家大院2) March in River City (江城三月) Wudang Yijian (武當一劍) Ma Beier (馬背兒) The Anti-traitor Team (鋤奸團) One Vessel, One Town, One Master (一鼎一鎮一夫子) The Myth of Wudang (神話武當) The Financial Empire (金融帝國) Qiao’s Grand Courtyard 3 (喬家大院3) The Army in Qikou (兵臨磧口) Wudang (天下武當)	HK$49,500,000 HK$37,000,000 HK$49,500,000 HK$43,000,000 HK$43,000,000 HK$49,500,000 HK$62,000,000 HK$55,500,000 HK$62,000,000 HK$49,500,000 HK$49,500,000

Total

HK$550,000,000

According to the experience of Huasheng Media, the production cost of a 40-episode television series in China generally ranges from around RMB60 million (or approximately HK$75 million) to RMB80 million (or approximately HK$100 million), depending on, among others, the nature of drama and the cast of production crew. Generally speaking, production costs of historical and mythology and fantasy dramas which involve customized costume, props and scenic settings as well as demands for special effects are higher than modern city dramas. The Company also takes into account potential inflation in preparing its budgets for production of television series. Furthermore, the Company currently intends to adopt the joint shooting model for the abovementioned planned television series. For further details of the joint shooting model, please refer to ‘‘Business Overview of the Group’s Television Series Production — Major Business Model of Huasheng Media — Production Model — Adoption of exclusive or joint investment in shooting’’ above. Under the joint shooting model, the Company expects to provide 50% of the production costs of the television series with the remaining funded by other investment parties but will serve as the production execution party. In the event that any joint shooting arrangement constitutes a notifiable transaction under the Listing Rules, the Company will comply with the applicable requirements under the Listing Rules. The Company has taken into account the aforesaid factors in allocation of the proceeds of the Share Placing for production of television series.

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To be specific, in the aspect of television series investment and production in the next three years, the Company plans to invest in and produce 6 to 10 influential premium television series with each comprising of around 40 episodes and put them in the market. Whether the above objectives can be reached depends on normal development of the domestic television industry.

5. EXPENDITURE ITEMS OF HUASHENG MEDIA

Expenditures incurred during the shooting of television series of Huasheng Media mainly include scripts, services and expenses of crew personnel, shooting costs and post-production cost, in which shooting costs include expenses of site rental, costumes, props, scene setting, filming, lighting and cast affairs. Expenditures of shooting television series are generally accounted for with crew as the unit.

From historical data, service expenses of crew personnel and shooting expenses are the major components of television series expenditures of Huasheng Media.

6. LICENCES AND QUALIFICATIONS

The regulatory policies involved in the television series industry mainly include entry license of television series production qualifications and the television series shooting administrative licensing system.

In accordance with the Regulations on Television Series Content Management (電視劇內容管 理規定) and the Regulations on Radio and Television Program Production Management (廣播電視 節目製作經營管理規定), the state implemented the entry qualification licensing system towards television series production business. Without a license, no unit or individual is allowed to be engaged in television series production business. Production units are required to obtain the Radio and Television Program Production and Business Operation License (廣播電視節目製作經營許可 證). With this license, they can legally carry out television production business.

At the same time, television series shooting works carried out by television series production companies legally established must pass the register and publication management of SARFT before commencement. The licenses issued by SARFT can be divided into the TV Play Production License (Class B) (電視劇製作許可證(乙種)) (‘‘Class B License’’) and the TV Play Production License (Class A) (電視劇製作許可證(甲種)) (‘‘Class A License’’). Before television series production companies can start shooting every television series, they must apply for and obtain a Class B License for the television series from SARFT or its provincial level counterparts according to jurisdictions. The ‘‘One television series, one application’’ system is implemented for Class B License and the license will be cancelled automatically after the whole series are broadcasted. In order to shoot a new television series afterward, the license examination and approval procedure must be carried out again. Class B License is limited to the television series specified on the license and the valid period will not exceed 180 days. The valid period of Class A License is two years. During the two-year period, Class A License is applicable to all television series produced by the institutions. Institutions can apply for extension of the license upon expiration. Television

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production companies with Class A License are only required to register with provincial Administration of Radio, Film and Television for review and the provincial Administration of Radio, Film and Television will register with SARFT.

Currently, Huasheng Media holds No. 02211 (Jing) Radio and Television Program Production and Business Operation License (廣播電視節目製作經營許可證) issued by Beijing Municipal Bureau of Press, Publication, Radio, Film and Television and adopts ‘‘One television series, one application’’ to apply for the TV Play Production License (Class B) (電視劇製作許可證(乙種)) for the shooting of television series.

Huasheng Television (Huasheng Media holds 40% of its shares), a joint venture company of Huasheng Media and 湖北長江廣電傳媒集團有限公司, owns No. 128 (E) Radio and Television Program Production and Business Operation License (廣播電視節目製作經營許可證) issued by Hubei Provincial Administration of Press, Publication, Radio, Film and Television and No. A315 TV Play Production License (Class A) (電視劇製作許可證(甲種)) issued by SARFT.

The Company has obtained the licenses required for television series production in accordance with relevant regulations and is in compliance with the requirements of law and regulations with no operational obstacle.

IV. MANAGEMENT OF TELEVISION SERIES BUSINESS OF THE COMPANY

Mr. Xu Dongsheng, the Company’s Chief Strategy Officer and the General Manager in Media Investment together with the existing operation team of Huasheng Media headed by Mr. Meng Fanyao, the General Manager of Huasheng Media is responsible for the management and operation of the new business of television drama series production and distribution of the Company.

Mr. Xu Dongsheng owns years of experience in operation management and investment in the film and television culture industry. He joined the Company since January 2016 as the Chief Strategy Office and General Manager in Media Investment. Mr. Xu Dongsheng used to be the Vice President of 北京派格太合泛在文化傳媒有限公司, which is a famous media company in the PRC and has produced《愛情呼叫轉移》,《真情來電》,《天機‧富春山居圖》,《拳法》,《第三種愛情》etc. Mr. Xu graduated from the computer engineering department of Beijing University of Technology in 1998 and graduated from China Europe International Business School with a master degree in Business Administration in 2004. Mr. Xu is responsible for the Company’s operation and management in the media industry and is the person in charge of the Company’s media business.

Mr. Meng Fanyao is the general manager of Huasheng Media. Mr. Meng has more than thirty years of experience in the film and television industry and is a well-known film and television series producer in China. He has been awarded with the title of ‘‘Top Ten Producers’’ of national television series for three times and is the only outstanding contributor in the state who has been awarded with the honor of ‘‘Television Top Ten Producer’’ for three times. He was given the title of ‘‘the state’s most influential producer’’ in 2010. His magnum opuses include Qiao’s Grand Courtyard, Passion-burning Years, The Wild Duck 1, The Wild Duck 2, The Moon Opera, TiandiMinxin, Mazu and the Legend of a Hong’an General. Many of his works have won the

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‘‘Flying Apsaras Award’’, the ‘‘Golden Eagle Award’’ and the national ‘‘Five ‘One’ Project Award’’. Under Mr. Meng’s leadership, Huasheng Media has attracted outstanding scriptwriters and directors in the industry to participate in the shooting of the Company’s film and television series relying on its years of film and television experience and good brand image. Huasheng Media has maintained good cooperative relations with famous directors such as Zhang Shaolin, Kang Honglei, Cheng Hao, Hu Mei, Shao Jinghui, Yu Chun, Gu Jing, Li Xiaoping and Lu Qi as well as wellknown scriptwriters such as Zhu Sujin, Jiang Xiaoqin, Chen Ping, Ran Ping, Zhu Xiuhai, Tian Yougang and Ma Lianlun.

The Company has also appointed an industry expert, Mr. Pan Hongye, to the Board as independent non-executive Director. Mr. Pan Hongye currently serves as a professional lecturer of the School of Economics and Management of Communication University of China. Mr. Pan has over 50 years of experience in the culture industry. He was the general manager of Beijing Chang’an Culture and Entertainment Centre (北京市長安文化娛樂中心), the director of the Exchange Centre of Television Program and the Television Series Centre of Beijing Television Station (北京電視台電視節目交流中心、影視劇中心) and the general manager of Combined Television (Hainan) Company Limited (匯視(海南)股份有限公司). Mr. Pan is now the general manager of Beijing Dong Wang Cultural Development Company Limited (北京東王文化發展有限 公司). The Board will seek professional independent advice regarding development in the media industry from Mr. Pan and will benefit from Mr. Pan’s industry expertise.

V. CURRENT ARRANGEMENT OF EXISTING BUSINESS

As of the Latest Practicable Date, the Company has not reached or entered into any consensus, arrangement, comprehending, intention or discussion regarding any disposal, termination or reduction of scale of the Group’s textile business. The Board currently plans to continue the operation and development of the existing textile business.

The Board has been aware of the weakening demand due to general economic downturn in the PRC and that competition within the textile industry has become more severe. The Company intends to maintain the sustainability of its textile business by continuously increasing its competitiveness and improving its profitability. The Company plans to enhance its research and development capability especially in development of new materials and fibers’ applications, optimize the utilization of its production facilities to enhance efficiency, and implement further cost control measures.

VI. INFORMATION ON THE CONTRACTUAL ARRANGEMENTS

Introduction

The Company, through the Contractual Arrangements, conducts the television series production business in the PRC in order to comply with the applicable PRC laws and regulations and asserts management control over the operations of, and enjoys all of the economic benefits of,

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the Huasheng Media. For further details of the Contractual Arrangements, please refer to the announcements of the Company dated 9 December 2015 and 23 December 2015 and 24 December 2015.

According to the Provision for the Administration of the Production and Distribution of Radio and Television Programmes 《( 廣播電視節目製作經營管理規定》), PRC incorporated companies with foreign investment, namely, the sino-foreign equity joint venture enterprises, the sino-foreign cooperative joint venture enterprises and the wholly owned foreign-invested enterprises, are not allowed to apply for the Radio and Television Programmes Production and Operation License, which is required for the operation of Huasheng Media’s principal business.

As a result of the foregoing, the Company, through its wholly-owned subsidiary, Huasheng Century, has entered into the Contractual Arrangements with Huasheng Media to conduct the television series production business in the PRC in order to comply with the applicable PRC laws and regulations and to assert management control over the operations of, and enjoy all of the economic benefits of, the Huasheng Media. The Contractual Arrangements are designed specifically to confer upon Huasheng Century right to enjoy all the economic benefit of Huasheng Media, to exercise management control over the operations of Huasheng Media, and to prevent leakages of assets and values of Huasheng Media to the registered shareholders of Huasheng Media. The Contractual Arrangements entered into by the Group are: (i) the Exclusive Technology Support and Services Agreement; (ii) the Exclusive Option Agreement; (iii) the Equity Pledge Agreement; and (iv) the power of attorney.

The Company’s PRC legal advisor has opined that the Contractual Arrangements are legally binding on and enforceable against each party of each of the agreements in accordance with their terms and provisions under PRC laws and regulations, and do not violate the articles of association of Huasheng Century and Huasheng Media.

The Directors therefore believe that save as disclosed, the Contractual Arrangements are enforceable under the relevant laws and regulations in the PRC, and that the Contractual Arrangements provide a mechanism that enables the Company to exercise effective control over Huasheng Media.

The Board believes that the Contractual Arrangements have been narrowly tailored to achieve the Company’s business purpose and to minimize the potential conflict with relevant PRC laws and regulations. Huasheng Media’s principal business is considered to be production of television series in the PRC, a sector where foreign investment is significantly restricted pursuant to the Guidance Catalogue of Industries for Foreign Investment 《( 外商投資產業指導目錄》) and Provision for the Administration of the Production and Distribution of Radio and Television Programmes 《( 廣播電視 節目製作經營管理規定》). In addition, Radio and Television Programmes Production and Operation License is required for the operation of Huasheng Media’s principal business can only be obtained by domestic companies incorporated in the PRC without foreign investments. Since the Company was incorporated in the Cayman Islands, any investment made by the Company directly or through any of its subsidiaries, including Huasheng Century, is regarded as foreign investment under PRC laws. Therefore, the Company and its subsidiaries are not eligible to apply for the licenses and

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approvals required for the operation of the television series production business, nor could they acquire equity interests of any company which has already held these licenses under the PRC laws. In order to comply with the applicable PRC laws, the licenses and permits that are essential to the operation of the principal business are held by Huasheng Media. The Company, through Huasheng Century, entered into the Contractual Arrangements with Huasheng Media to conduct its principal business in the PRC and to assert management control over the operations of, and enjoy all of the economic benefits of Huasheng Media.

Diagram of the Contractual Arrangements

The following simplified diagram illustrates the flow of economic benefits from Huasheng Media to the Company stipulated under the Contractual Arrangements:

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Structured Contracts

(1) Exclusive Technology Support and Services Agreement

Huasheng Century, Huasheng Media and the Registered Shareholders entered into the Exclusive Technology Support and Services Agreement, pursuant to which Huasheng Media agrees to engage Huasheng Century as its exclusive technology and service provider. Accordingly, Huasheng Century shall provide technology support and consultation services to Huasheng Media in respect of, among others, (i) research and development and technical support for television series production business; (ii) relevant consulting and advisory services; (iii) pre-employment and onemployment staff training; (iv) licensed use of any intellectual property rights including software,

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trademark, website and technology know-how; (v) any other service items from time to time agreed by Huasheng Century and Huasheng Media taking into account of the business needs of Huasheng Media and the capacity of Huasheng Century.

Pursuant to the Exclusive Technology Support and Services Agreement, Huasheng Media shall pay to Huasheng Century a service fee that equals to the total revenue of Huasheng Media, after offsetting costs, expenses, taxes and any other amounts with held according to laws and regulations, thus all economic benefits of Huasheng Media will belong to Huasheng Century. Huasheng Media shall agree to pay the service fee on a regular basis as determined by Huasheng Century on its sole discretion.

The Exclusive Technology Support and Services Agreement is for an initial term of 10 years commencing from the date of the agreement (i.e. 6 July 2015), which can be extended for another 10 years at the option of Huasheng Century on a recurring basis, until it is terminated by Huasheng Century by giving a prior written notice of termination. Huasheng Media and the Registered Shareholders are not contractually entitled to terminate the Exclusive Technology Support and Services Agreement.

(2) Exclusive Option Agreement

Huasheng Century, the Registered Shareholders and Huasheng Media entered into the Exclusive Option Agreement, pursuant to which the Registered Shareholders irrevocably grant to Huasheng Century or the person as designated by Huasheng Century exclusive options to purchase, to the extent permitted by PRC laws and regulations, their equity interests in Huasheng Media, entirely or partially, at the minimum purchase price permitted by PRC laws and regulations. In addition, pursuant to the Exclusive Option Agreement, the Registered Shareholders and Huasheng Media irrevocably grant to Huasheng Century or the person as designated by Huasheng Century, exclusive options to acquire, to the extent permitted by PRC laws and regulations, all or part of the assets of Huasheng Media at the minimum purchase price permitted under PRC laws and regulations. The Registered Shareholders have also undertaken under the Exclusive Option Agreement that they will return to Huasheng Century or the person as designated by Huasheng Century any proceeds which they will receive upon the exercise of the aforesaid exclusive options.

In addition, unless otherwise agreed in the Exclusive Option Agreement, the Registered Shareholders and/or Huasheng Media may not at any time, among others, sell, transfer, or in any other way dispose of any equity interest of Huasheng Media and/or any interest in any asset of Huasheng Media, or allow any encumbrance to be created on any such interests, without prior written consent from Huasheng Century. Based on this, the Contractual Arrangements encompass dealing with assets of Huasheng Media, and not only the right to manage its business and the right to revenue. This is to ensure that the liquidator, acting on the Contractual Arrangements, can seize the assets of Huasheng Media in a winding up situation for the benefit of the shareholders and creditors of Huasheng Century.

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The Exclusive Option Agreement is for an indefinite term commencing from the date of the agreement (i.e. 6 July 2015), until it is terminated by Huasheng Century by giving prior written notice of termination. Huasheng Media and the Registered Shareholders are not contractually entitled to terminate the Exclusive Option Agreement. In addition, the Registered Shareholders and Huasheng Media undertake under the Exclusive Option Agreement that subject to the applicable PRC laws and regulations, they will return to Huasheng Century or the person as designated by Huasheng Century any proceeds they will receive upon the exercise of the aforesaid exclusive options.

(3) Equity Pledge Agreement

Huasheng Century, the Registered Shareholders and Huasheng Media entered into the Equity Pledge Agreement, pursuant to which the Registered Shareholders shall pledge all of their respective equity interests in Huasheng Media to Huasheng Century to secure the performance of all their obligations and the obligations of the Registered Shareholders and Huasheng Media under the Contractual Arrangements. Under the Equity Pledge Agreement, if any of the Registered Shareholders and/or Huasheng Media breaches any obligation under the Contractual Arrangements, Huasheng Century, as the pledgee, is entitled to request the Registered Shareholders to transfer the pledged equity interests, entirely or partially to Huasheng Century and/or any entity or person as designated by Huasheng Century. In addition, pursuant to the Equity Pledge Agreement, each of the Registered Shareholders undertakes to Huasheng Century, among other things, not to transfer the interest in his respective equity interests in Huasheng Media and not to create any pledge thereon without Huasheng Century’s prior written consent.

The Equity Pledge Agreement comes into effect from the date of signing (i.e. 6 July 2015) and is for an indefinite term until all the relevant obligations under the Contractual Arrangements have been fulfilled, lapsed or terminated. The pledge under the Equity Pledge Agreement has been established from the date of registration with the relevant local administration for industry and commerce (i.e. 17 November 2015). Huasheng Media and the Registered Shareholders are not contractually entitled to terminate the Equity Pledge Agreement.

(4) Power of Attorney

Each of the Registered Shareholders has issued a power of attorney in favor of Huasheng Century, pursuant to which they irrevocably authorize Huasheng Century to exercise all of their rights and powers as shareholders of Huasheng Media, including (i) rights to attend shareholders’ meeting and sign relevant shareholders’ resolutions; (ii) rights to exercise shareholders’ rights including without limitation voting rights, nomination rights and appointment rights in a shareholders’ meeting; (iii) rights to file documents with relevant governmental authorities or regulatory bodies; (iv) rights to receive dividends relating to, dispose of, transfer, pledge or deal with all or part of the equity interests of Huasheng Media or to be entitled to any distribution upon liquidation of Huasheng Media; and (v) any other rights as shareholders of Huasheng Media.

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Spousal Consent

The spouse of each of the Registered Shareholders has issued a spousal consent, pursuant to which they irrevocably promise that they will observe the Contractual Arrangements in any case if they obtain any of the equity interest of Huasheng Media as a result of any reason and make best effort to ensure the obligations of Huasheng Media under the Contractual Arrangements will be observed.

Compliance of the Contractual Arrangements with PRC laws, rules and regulations

The Company’s PRC legal advisor has opined that (i) each of the Contractual Arrangements above will not violate existing PRC laws and regulations, (ii) the Contractual Arrangements are valid and legally binding and will not result in any violation of existing PRC laws and regulations, and (iii) the Contractual Arrangements does not fall within any of the circumstances (including, without limitation, ‘‘concealing illegal intentions with a lawful form’’) under Section 52 of the PRC Contract Law pursuant to which the contracts would be determined to be invalid. Up to the Latest Practicable Date, the Group has not encountered any interference or encumbrance from any governing bodies in operating its business through Huasheng Media under the Contractual Arrangements. As a result, the Directors believe that the Contractual Arrangements shall be enforceable under the PRC laws and regulations. The Directors confirm that the Contractual Arrangements are in full compliance with the Guidance Letter HKEX-GL77-14 of the Stock Exchange.

Settlement of potential dispute arising from the Contractual Arrangements

The structured contracts under the Contractual Arrangements are governed by the PRC laws. When a dispute arises under any of the structured contracts under the Contractual Arrangements, the relevant parties thereto shall settle the dispute through negotiation in an amicable manner. In case the dispute is not resolved, the structured contracts under the Contractual Arrangements provide that such dispute to be submitted to the China International Economic and Trade Arbitration Commission for arbitration. The decision of such arbitration is final and binding on the parties concerned. The structured contracts under the Contractual Arrangements contain dispute resolution clauses that provide for arbitration and that arbitrators may award remedies over the equity interests or assets of Huasheng Media, injunctive relief (for example, for the conduct of business or to compel the transfer of assets) or order the winding up of Huasheng Media.

Internal control measures

In order to have effective control over and to safeguard the assets of Huasheng Media, the Contractual Arrangements provide that, without the prior written consent of Huasheng Century, the Registered Shareholders shall not at any time sell, transfer, mortgage or dispose of in any manner any assets, legitimate interests in the business or revenue of Huasheng Media, or allow any encumbrance thereon of any security interest. Huasheng Media and the Registered Shareholders

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shall always operate all of Huasheng Media’s businesses in the ordinary and usual course of business and shall maintain the asset value of Huasheng Media and refrain from any action/ omission that may adversely affect Huasheng Media’s operating status and asset value.

In addition to the abovementioned internal control measures as provided in the Contractual Arrangements, the Company has implemented, through Huasheng Century, additional internal control measures on Huasheng Media with reference to the internal control measures adopted by the Group from time to time, which include (without limitation):

• . requiring Huasheng Media to make available monthly management accounts and submit key operating data and bank statements after each month-end and provide explanations on any material fluctuations to Huasheng Century;

• . requiring Huasheng Media to assist and facilitate Huasheng Century to conduct quarterly onsite internal audit on Huasheng Media; and

• . if required, engaging legal advisers and/or other professionals to deal with specific issues arising from the Contractual Arrangements and ensure that the operation of Huasheng Media will from time to time comply with applicable laws and regulations.

Unwinding the Contractual Arrangements

Huasheng Century agrees that it will unwind the Contractual Arrangements as soon as the law allows the television series production business in the PRC to be operated without the Contractual Arrangements. Pursuant to the Exclusive Option Agreement, the Registered Shareholders have undertaken that the consideration the Registered Shareholders received in respect of the acquisition of equity interest of Huasheng Media by Huasheng Century or the person designated by Huasheng Century during the course of unwinding the Contractual Arrangements will be returned to Huasheng Century in compliance with the PRC law.

Insurance to cover the risks relating to the Contractual Arrangements

The Group does not intend to purchase any insurance to cover the risks relating to the Contractual Arrangements.

Potential exposure of the Company to losses

Huasheng Century is not obligated under the Contractual Arrangements to provide any financial support to Huasheng Media. Where losses occurred to Huasheng Media, Huasheng Century will not share the losses directly. In respect of any limited liability company, under PRC Company Law 《( 公司法》), it is a basic principle that a shareholder’s liability in respect of a company is limited to the registered capital it subscribes. Hence, even if a company incurs loss to the extent that it becomes insolvent, its shareholder is not under any legal obligation to bear any debt incurred by the company or provide any additional capital to the company (unless otherwise

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agreed by the shareholder). In the current case, there is no shareholding relationship between Huasheng Century and Huasheng Media, but similarly, there is no legal obligation for Huasheng Century to share any losses incurred by Huasheng Media.

Notwithstanding the above, since Huasheng Media is expected to contribute revenue to Huasheng Century way of making payment to Huasheng Century under the Contractual Arrangements. Any loss incurred by Huasheng Media will have an adverse impact on the ability of Huasheng Media to make such payment and hence indirectly affecting Huasheng Century’s financial performance on a consolidated basis.

Succession

The provisions set out in the Contractual Arrangements are also binding on any successors of the Registered Shareholders as if the successor was a signing party to the Contractual Arrangements. Although the Contractual Arrangements do not specify the identity of successors to such shareholders, under the succession law of the PRC, statutory successors may include the spouse, children, parents, brothers, sisters, paternal grandparents and the maternal grandparents, and as such any breach by the successors would be deemed to be a breach of the Contractual Arrangements. In case of a breach, Huasheng Century can exercise its rights against the successors. Pursuant to the Contractual Arrangements, any successor of the Registered Shareholders shall assume any and all rights and obligations of the Registered Shareholders under the Contractual Arrangements as if the successor was a signing party to such Contractual Arrangements.

In addition, the spouse of each of the Registered Shareholders has provided irrevocable undertakings which stipulate certain matters to succession of the rights and obligations under the Contractual Arrangements. For details, please refer to ‘‘Spousal Consent’’ above in this section. The Directors are of the view that (i) the Contractual Arrangements provide protection to our Group even in the event of death or divorce of any Registered Shareholders and (ii) the death or divorce of such Registered Shareholder would not affect the validity of the Contractual Arrangements, and the successors of such Registered Shareholder would be bound by the Contractual Arrangements.

Bankruptcy

The concept of bankruptcy of a natural person does not exist under PRC laws, and, as such, there is currently no possibility of an event of bankruptcy of the Registered Shareholders under PRC laws.

Arrangements to Address Potential Conflicts of Interests

Each of the Registered Shareholders has given their irrevocable undertakings in the powers of attorney in favour of Huasheng Century, and has given certain restrictive covenants under the Contractual Arrangements which address potential conflicts of interests that may arise in connection with the Contractual Arrangements. For details, please refer to ‘‘Structured Contracts’’ above in this section.

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PRC Laws and Regulations Relating to the Television Series Production Industry

According to the Provision for the Administration of the Production and Distribution of Radio and Television Programmes 《( 廣播電視節目製作經營管理規定》), PRC incorporated companies with foreign investment, namely, the sino-foreign equity joint venture enterprises, the sino-foreign cooperative joint venture enterprises and the wholly owned foreign-invested enterprises, are not allowed to apply for the Radio and Television Programmes Production and Operation License, which is required for the operation of Huasheng Media’s principal business.

Information on Draft Law Regarding Foreign Investment in the PRC

On 19 January 2015, the Ministry of Commerce of the PRC published the consultation draft of the new PRC Foreign Investment Law (the ‘‘Draft Law’’), which contains changes to the PRC foreign investment legal regime and the treatment of the contractual arrangements such as the Contractual Arrangements. The Draft Law clearly defines the contractual arrangements such as the Contractual Arrangements as a form of foreign investment. However, there is no concrete guidance on how the existing and new contractual arrangements such as the Contractual Arrangements should be treated in the Draft Law and additionally the Draft Law is currently in consultation stage and has not yet been effective or legally binding. As there are uncertainties on the final content and interpretations of the Draft Law if and when it is adopted and becomes law, there is no assurance whether the Contractual Arrangements and the business of Huasheng Media will be materially affected or not in the future. In order to continuously monitor the development of the Draft Law to assess the possible impact on the Contractual Arrangements and the business of the Huasheng Media, the Board will monitor the updates of the Draft Law and discuss with the Company’s PRC legal adviser on a regular basis. In case there would be material impact on the Group or the business of Huasheng Media, the Company will timely publish announcements in relation to material developments of and arising from the Draft Law.

The Company would like to emphasize that the Draft Law is merely a draft released for the purpose of public consultation and has no legal effect. The approaches to deal with investment falling within prohibited or restricted foreign investment after the coming into force of the Draft Law are set out to solicit public opinions on the treatment of existing structured contracts arrangements and have not been formally adopted and may be subject to revisions and amendments taking into account of the results of public consultation and/or further research and recommendation. There is no definite timeline when the Draft Law will come into effect.

Given the aforementioned, the Company is of the view that it might not be appropriate at this stage to evaluate the potential impact of the Draft Law and to formulate any specific measures to keep Huasheng Media as controlled by PRC investors. In addition, as the main goal of the Draft Law is to standardize market entry requirements and procedures for foreign and domestic investors, rather than tightening foreign investment requirements or banning foreign investors, the Company believes that even if the Draft Law finally comes into effect, it would not have adverse impact on the Company’s interest in Huasheng Media.

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Nevertheless, in the event that the Draft Law comes into effect in the future, where the Company is no longer controlled by PRC investors by then and it includes strict clauses preventing foreign investment in PRC companies, the Company will first consider the then available options and in the worst circumstance, the Company might be requested to dispose of its interest in the relevant restricted business. Upon such disposal, if materializes, the Company would realize its investment in such relevant business and would continue the operation of its then existing businesses.

In addition, the Company will from time to time seek guidance from the PRC legal adviser to ascertain all relevant regulatory updates and developments and guidance relating to the Structured Contracts, and explore ways to continue the businesses of Huasheng Media without employing the Structured Contracts in the future (including but not limited to revising/optimizing the business models of the Group and revising the structures of the Group) as and when necessary to ensure compliance with all relevant rules and regulations in the PRC at all times.

The Company has implemented the following measures to maintain the control over Huasheng Media through the Structured Contracts arrangement and the Company’s compliance with the Structured Contracts:

• (1) the Company will engage external legal advisers and/or professional advisers, if necessary, to pay close attention to the update status of relevant laws and regulations, and to assist the Board to review the implementation of the Structured Contracts, review the legal compliance of Huasheng Century and Huasheng Media to deal with specific issues or matters arising from the Structured Contracts;

• (2) major issues arising from the implementation and compliance with the Structured Contracts or any regulatory enquiries from government authorities will be submitted to the Board, if necessary, for review and discussion on an occurrence basis; and

• (3) the Board will review the overall performance of and compliance with the Structured Contracts at least once a year; the Company will disclose the overall performance and compliance with the Structured Contracts in its annual/interim report to update the Shareholders and potential investors.

VII. RISKS RELATING TO THE CORPORATE STRUCTURE OF THE GROUP

The PRC government may determine that corporate structure of the Group or the Contractual Arrangements are not in compliance with any existing or future applicable PRC laws or regulations.

If the PRC government finds that the agreements that will establish the structure for operating the television series production business of the Group in the PRC do not comply with applicable PRC laws and regulations, or if these regulations or their interpretations change in the future, the Group could be subject to severe consequences, including the nullification of the Contractual Arrangements and the relinquishment of Huasheng Century’s interest in Huasheng Media.

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Huasheng Media is principally engaged in television series production business. Under the current PRC regulatory circumstances, Huasheng Century as a wholly foreign owned enterprise would not be able to obtain the relevant business license(s) of such businesses and thus is unable to conduct television series production business in PRC directly. In compliance with Provision for the Administration of the Production and Distribution of Radio and Television Programmes 《( 廣播電視 節目製作經營管理規定》) and other relevant laws, any direct or indirect acquisition by Huasheng Century of the equity interests in Huasheng Media would constitute foreign investment in television series production industry in the PRC and would render Huasheng Century or the acquired entity ineligible to obtain the Radio and Television Programmes Production and Operation License.

In addition, several recent articles, including an article published in early June 2013 on The New York Times and another one on The Economic Observer (經濟觀察報), reported discussions that a recent PRC Supreme Court decision and two VIE structure-related arbitration decisions in Shanghai had cast doubt on the validity of the contractual arrangements for the VIE structure. According to these articles, the PRC Supreme Court ruled in late 2012 that an entrustment agreement entered into by and between a Hong Kong company and a PRC domestic entity, which was purported to enable such Hong Kong company to make equity investment in a PRC bank through the proxy PRC domestic entity, was void on the ground that this agreement established an entrustment relationship meant to circumvent the PRC laws and regulations that prohibit foreign investment in PRC financial institutions and as such, constituted an act of concealing illegal intentions with a legitimated form. These articles argued that as the contractual arrangement in a VIE structure and the entrustment agreement in the cited case were similar in that the contractual arrangements in the VIE structure were also designed to ‘‘get around’’ the regulatory restrictions on foreign investment in certain industries. As such, the articles noted that this Supreme Court decision might increase the uncertainties relating to the PRC government’s view on the validity of the contractual arrangements used in the VIE structure. These articles also reported, without providing sufficient details, that two arbitration decisions by the then Shanghai CIETAC which invalidated the contractual arrangements used in a VIE structure in 2010 and 2011.

It cannot be assured that the PRC government or judicial authorities would agree that the corporate structure of the Group or the Contractual Arrangements comply with PRC licensing, registration, other regulatory requirements or policies that may be adopted in the future. If the PRC government or judicial authorities determines that the Group does not comply with applicable laws and regulations, it could have broad discretion in dealing with such incompliance, including:

1. requiring the nullification of the Contractual Arrangements;

2. levying fines and/or confiscating the proceeds generated from the operations under the Contractual Arrangements;

3. revocation of the business licenses or operating licenses of Huasheng Media and/or Huasheng Century;

4. discontinuing or placing restrictions or onerous conditions on the business operations of Huasheng Media and/or Huasheng Century;

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1. imposing conditions or requirements which the Group may not be able to comply with or satisfy;

2. requiring the Group to undergo a costly and disruptive restructuring; and

3. taking other regulatory or enforcement actions that could be harmful to or even shutdown business of the Group.

The imposition of any of the above-mentioned consequences could result in a material and adverse effect on the Group’s ability to conduct its business. In addition, if the imposition of any of these consequences causes Huasheng Century to lose the rights to direct the activities of Huasheng Media or its right to receive its economic benefits, the Company would no longer be able to consolidate the financial results of Huasheng Media and thus affect the financial results of the Company.

Substantial uncertainties exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability of the current corporate structure of Huasheng Media, corporate governance, business operations and financial results.

The Ministry of Commerce, or the MOFCOM, published a discussion draft of the proposed PRC Foreign Investment Law in January 2015 aiming to, upon its enactment, replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The draft PRC Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. While the MOFCOM solicited comments on this draft earlier this year, substantial uncertainties exist with respect to its enactment timetable, interpretation and implementation. The draft PRC Foreign Investment Law, if enacted as proposed, may materially impact the entire legal framework regulating the foreign investments in China and may also impact the viability of the current corporate structure of Huasheng Media, and its corporate governance, business operations and financial results to some extent.

Among other things, the draft PRC Foreign Investment Law expands the definition of foreign investment and introduces the principle of ‘‘actual control’’ in determining whether a company is considered a foreign invested enterprise, or an FIE. The draft PRC Foreign Investment Law specifically provides that entities established in China but ‘‘controlled’’ by foreign investors will be treated as FIEs, whereas an entity set up in a foreign jurisdiction would none the less be, upon market entry clearance by the MOFCOM, treated as a PRC domestic investor provided that the entity is ‘‘controlled’’ by PRC entities and/or citizens. In this connection, ‘‘control’’ is broadly defined in the draft law to cover any of the following summarized categories: (i) holding 50% or more of the voting rights or similar equity interest of the subject entity; (ii) holding less than 50% of the voting rights or similar equity interest of the subject entity but having the power to secure at

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least 50% of the seats on the board or other equivalent decision making bodies, or having the voting power to material influence on the board, the shareholders’ meeting or other equivalent decision making bodies; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s operations, financial matters or other key aspects of business operations.

Once an entity is determined to be an FIE, and its investment amount exceeds certain thresholds or its business operation falls within a ‘‘negative list’’ to be separately issued by the State Council in the future, market entry clearance by the MOFCOM or its local counterparts would be required. Otherwise, all foreign investors may make investments on the same terms as Chinese investors without being subject to additional approval from the government authorities as mandated by the existing foreign investment legal regime.

The ‘‘variable interest entity’’ structure, or VIE structure, has been adopted by many PRCbased companies, including Huasheng Media, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. Under the draft PRC Foreign Investment Law, variable interest entities that are controlled via contractual arrangements would also be deemed as FIEs, if they are ultimately ‘‘controlled’’ by foreign investors. Therefore, for any companies with a VIE structure in an industry category that is on the ‘‘negative list’’, the existing VIE structure may be deemed legitimate only if the ultimate controlling person(s) is/are of PRC nationality (either PRC state owned enterprises or agencies, or PRC citizens). Conversely, if the actual controlling person(s) is/are of foreign nationalities, then the variable interest entities will be treated as FIEs and any operation in the industry category on the ‘‘negative list’’ without market entry clearance may be considered as illegal.

The draft PRC Foreign Investment Law has not taken a position on what will happen to the existing companies with a VIE structure, although a few possible options were proffered at the comment solicitation stage. Under these options, a company with VIE structures and in the business on the ‘‘negative list’’ at the time of enactment of the new PRC Foreign Investment Law has either the option or obligation to disclose its corporate structure to the authorities, while the authorities, after reviewing the ultimate control structure of the company, may either permit the company to continue its business by maintaining the VIE structure (when the company is deemed ultimately controlled by PRC citizens), or require the company to dispose of its businesses and/or VIE structure based on circumstantial considerations.

Moreover, it is uncertain whether the current businesses that Huasheng Media operates or plans to operate through Huasheng Media, will be subject to the foreign investment restrictions or prohibitions set forth in the ‘‘negative list’’ to be issued.

If the enacted version of the PRC Foreign Investment Law and the final ‘‘negative list’’ mandate further actions, such as MOFCOM market entry clearance, to be completed by companies with existing VIE structure like Huasheng Media, Huasheng Media faces uncertainties as to whether such clearance can be timely obtained, or at all. If such corporate structure is required to be

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changed, further actions required to be taken by Huasheng Media under the enacted PRC Foreign Investment Law may materially and adversely affect the business and financial condition of Huasheng Media.

The draft PRC Foreign Investment Law, if enacted as proposed, may also materially impact the corporate governance practice and increase the compliance costs of Huasheng Media. For instance, the draft PRC Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and the applicable FIEs. Aside from investment implementation report and investment amendment report that are required at each investment and alteration of investment specifics, an annual report is mandatory, and large foreign investors meeting certain criteria are required to report on a quarterly basis. Any company found to be noncompliant with these information reporting obligations may potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible may be subject to criminal liabilities.

Huasheng Century relies on the Contractual Arrangements to control and obtain the economic benefits from Huasheng Media, which may not be as effective in providing operational control as direct ownership.

Due to the PRC’s legal restrictions on foreign investment in television series production industry, the Company, through Huasheng Century, controls, through the Contractual Arrangements rather than equity ownership, Huasheng Media, the operating entity in the PRC and the holder of the key licenses required to operate television series production business in the PRC.

However, the Contractual Arrangements may not be as effective in exercising control over Huasheng Media as equity ownership. For example, Huasheng Media and its shareholders could breach or fail to perform their obligations under the Contractual Arrangements. If Huasheng Century had direct ownership of Huasheng Media, Huasheng Century would be able to exercise its rights as a shareholder to effect changes in its board of directors, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management and operational level. Under the Contractual Arrangements, Huasheng Century would need to rely on its contractual rights thereunder to effect such changes or designate new shareholders for Huasheng Media.

If Huasheng Media or its shareholders breach their obligations under the Contractual Arrangements or if Huasheng Century loses the effective control over Huasheng Media for any reason, Huasheng Century would need to bring a claim against them under the terms of the Contractual Arrangements. The Contractual Arrangements are governed by the PRC law and provide that any dispute arising from these arrangements will be submitted to the China International Economic and Trade Arbitration Commission for arbitration, the ruling of which will be final and binding. Furthermore, personal liabilities of the shareholders of Huasheng Media may also subject the equity interest they hold in Huasheng Media to court preservation actions or enforcement. The legal framework and system in the PRC, particularly those relating to arbitration proceedings, is not as developed as other jurisdictions such as Hong Kong. As a result, significant uncertainties relating to the enforcement of legal rights through arbitration, litigation and other legal proceedings remain in the PRC, which could limit Huasheng Century’s ability to enforce the

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Contractual Arrangements and exert effective control over Huasheng Media. If Huasheng Media or any of its shareholders fails to perform its respective obligations under the Contractual Arrangements, and Huasheng Century is unable to enforce the Contractual Arrangements, or suffer significant delay or other obstacles in the process of enforcing the Contractual Arrangements, the Group’s business and operations could be severely disrupted, which could materially adversely affect its results of operations. As a result, the Group’s investment in Huasheng Media could also be materially and adversely affected.

Pursuant to Exclusive Option Agreement, the Registered Shareholders irrevocably grant to Huasheng Century or the person as designated by Huasheng Century exclusive options to purchase, to the extent permitted by PRC laws and regulations, their equity interests in Huasheng Media, entirely or partially, at the minimum purchase price permitted by PRC laws and regulations. In addition, the Registered Shareholders undertake under the Exclusive Option Agreement that they will return to Huasheng Century or the person as designated by Huasheng Century any proceeds which they will receive upon the exercise of the aforesaid exclusive options. If the Registered Shareholders fail to do so, the financial conditions of Huasheng Century or its subsidiaries may be materially and adversely affected. As a result, the Group’s investment in Huasheng Media could also be materially and adversely affected.

Certain terms of the Contractual Arrangements may not be enforceable under PRC laws.

The Contractual Arrangements provide for dispute resolution by way of arbitration. In case the dispute is not resolved, the structured contracts under the Contractual Arrangements provide that such dispute to be submitted to the China International Economic and Trade Arbitration Commission for arbitration. The Contractual Arrangements contain provisions to the effect that the arbitral body may award remedies over the shares and/or assets of Huasheng Media, injunctive relief and/or winding up of Huasheng Media.

However, the abovementioned provisions contained in the Contractual Arrangements may not be enforceable. As the abovementioned provisions do not have the legal basis under the PRC laws, there is possibility that the same may not be enforced during the arbitral stage, or in the event that relevant awards have been granted by the arbitral body, such awards may not be recognized by the PRC courts.

As a result, in the event that Huasheng Media or any of its shareholders breaches any of the Contractual Arrangements, Huasheng Century may not be able to obtain sufficient remedies in a timely manner, and its ability to exert effective control over Huasheng Media and conduct its business could be materially and adversely affected and the financial performance of the Company could be materially and adversely affected. As a result, the Group’s investment in Huasheng Media could also be materially and adversely affected.

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LETTER FROM THE BOARD

The Contractual Arrangements between Huasheng Century and Huasheng Media may be subject to scrutiny by the PRC tax authorities and any finding that Huasheng Century or Huasheng Media owes additional taxes could substantially reduce the consolidated net income of the Company and the value of the Group’s investment in the Huasheng Media.

Under the Contractual Arrangements among Huasheng Century and Huasheng Media and its equity holders, Huasheng Media will transfer all of its revenue to Huasheng Century after offsetting costs, expenses, taxes and any other amounts withheld according to laws and regulations, which will substantially reduce Huasheng Media’s taxable income. These arrangements and transactions are related party transactions which must be conducted on an arm’s length basis under applicable PRC tax rules. In addition, under PRC laws and regulations, arrangements and transactions among related parties may generally be subject to audit or scrutiny by the PRC tax authorities within ten years after the taxable year when the arrangements or transactions are conducted. As a result, the determination of service fees and other payments to Huasheng Century by Huasheng Media pursuant to the Contractual Arrangements may be challenged and deemed not in compliance with such tax rules. The Group could face material and adverse tax consequences if the PRC tax authorities determine that the Contractual Arrangements were not entered into on an arm’s length basis and therefore adjust the taxable income of Huasheng Media in the form of a transfer pricing adjustment which refers to the prices that one member of a group of affiliated corporation’s charges to another member of the group for goods, assets, services, financing or the use of intellectual property. A transfer pricing adjustment could, among other things, result in a reduction, for PRC tax purposes, of expense deductions recorded by Huasheng Media, which could in turn increase Huasheng Media’s tax liabilities. Any such adjustment could result in a higher overall tax liability of the Group. In addition, the PRC tax authorities may impose late payment fees and other penalties on Huasheng Media for any unpaid taxes. The consolidated net income of the Company may be materially and adversely affected if Huasheng Media’s tax liabilities increase or if it is subject to late payment fees or other penalties. As a result, the value of the Group’s investment may be materially and adversely affected.

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LETTER FROM THE BOARD

VIII. SHAREHOLDING STRUCTURE

Assuming that there will be no change in the shareholding structure of the Company immediately before completion of the Share Placing and the maximum number of the Share Placing Shares are successfully placed by the Placing Agent, the effects of the Share Placing on the shareholding structure of the Company are set out in the table below:

Shareholders Excel Orient Limited (Note 1) Aim Right Ventures Limited (Note 2) Other Shareholders Share Placees Other public Shareholders Total	As at the Latest Practicable Date Number of Shares % 273,609,836 28.57 157,644,656 16.46 — — 526,390,164 54.97 957,644,656 100	Immediately after the completion of the Share Placing (assuming the Placing Shares were placed in full) Number of Shares % 273,609,836 21.42 157,644,656 12.34 320,000,000 25.05 526,390,164 41.19 1,277,644,656 100	Immediately after the completion of the Share Placing (assuming the Placing Shares were placed in full) Number of Shares % 273,609,836 21.42 157,644,656 12.34 320,000,000 25.05 526,390,164 41.19 1,277,644,656 100
			100

Notes:

1. As at the Latest Practicable Date, such 273,609,836 Shares are owned by Excel Orient Limited, which is in turn wholly owned by Mr. Liu Dong.

2. As at the Latest Practicable Date, such 157,644,656 Shares are owned by Aim Right Ventures Limited, which is in turn wholly owned by Mr. Liu Zhihua.

3. The percentages are subject to round figures.

IX. FUND RAISING ACTIVITIES OF THE COMPANY IN THE PAST TWELVE MONTHS

The Company had not conducted any equity fund raising activities in the past twelve months immediately preceding the Latest Practicable Date.

X. RE-ELECTION OF DIRECTORS

In accordance with the code provision A.4.2 of the Corporate Governance Code as set out in Appendix 14 of the Listing Rules, all directors appointed to fill a casual vacancy should be subject to election by shareholders at the first general meeting after appointment. (i) Ms. Chen Chen was appointed by the Board as an executive Director with effect from 24 September 2015; (ii) Mr. Pan Hongye was appointed by the Board as an independent non-executive Director with effect from 3

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LETTER FROM THE BOARD

November 2015; and (iii) Mr. Gao Gordon Xia was appointed by the Board as an independent nonexecutive Director with effect from 25 November 2015. Accordingly, Ms. Chen Chen, Mr. Pan Hongye and Mr. Gao Gordon Xia are subject to election at the EGM.

Biographical information of Ms. Chen Chen, Mr. Pan Hongye and Mr. Gao Gordon Xia is set out in the Appendix to this circular.

XI. THE EGM

A notice convening the EGM of the Company to be held at 2:00 p.m. on Wednesday, 27 April 2016 at 3/F, Business Center, Four Seasons Hotel, 48 Liang Ma Qiao Road, Chaoyang District, Beijing, the PRC is set out on pages 49 to 51 of this circular for the purpose of considering and, if thought fit, passing the resolutions set out therein.

The register of members of the Company will be closed from Tuesday, 26 April 2016 to Wednesday, 27 April 2016, both days inclusive, during which period no share transfers can be registered. In order to be eligible for attending and voting at the EGM, all transfers accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong not later than 4:30 p.m. on Monday, 25 April 2016.

A form of proxy for the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited of Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish, and in such event, the form of proxy shall be deemed to be revoked.

To the best of the Director’s knowledge, information and belief having made all reasonable enquiries, no Shareholders have a material interest in the Share Placing Agreement which is different from other Shareholders. Accordingly, no Shareholders is required to abstain from voting on the resolution approving the Share Placing Agreement and the transactions contemplated thereunder and the allotment and issue of the Placing Shares under the Specific Mandate, and the re-election of Directors.

XII. VOTING BY POLL

All resolutions will be put to vote by way of poll at the EGM pursuant to Rule 13.39(4) of the Listing Rules. An announcement on the poll results will be made by the Company after the EGM in the manner prescribed under Rule 13.39(5) of the Listing Rules.

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LETTER FROM THE BOARD

XIII. RECOMMENDATION

The Directors consider the Share Placing Agreement and the transactions contemplated thereunder and the allotment and issue of the Placing Shares under the Specific Mandate are in the interests of the Company and the Shareholders as a whole and accordingly recommend the Shareholders to vote in favour of the proposed resolution as set out in the notice of EGM approving the Share Placing and the transactions contemplated thereunder and the allotment and issue of the Placing Shares under the Specific Mandate.

In addition, the Directors consider that the re-election of retiring Directors are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the proposed resolutions to approve the re-election of retiring Directors at the EGM.

XIV. 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.

By order of the Board Silverman Holdings Limited Liu Dong

Chairman

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DETAILS OF DIRECTORS PROPOSED FOR RE-ELECTION

APPENDIX

EXECUTIVE DIRECTOR

Ms. Chen Chen

Ms. Chen Chen (‘‘Ms. Chen’’) has been appointed as an Executive Director with effect from 24 September 2015.

The biographical details of Ms. Chen are set out below:

Ms. Chen, aged 36, has more than nine years of experience in the field of finance and investment. Ms. Chen held position as a senior vice president of Beijing Ying Sheng Culture Investment Limited (北京瀛晟文化投資有限公司) from February 2015 to September 2015. From April 2006 to October 2011, she was a vice president of Haitong Securities Co., Ltd (Investment Banking Division, Shenzhen Branch). From November 2011 to May 2014, she was the vice president in charge of investment of the Shenzhen branch company of Haitong Kaiyuan Investment Company Limited (海通開元投資有限公司). From June 2014 to November 2014, she was the assistant to the president and the finance director of the Energy Management Contracting department of NVC Lighting (China) Co., Ltd. Ms. Chen has studied German literature in the Beijing Foreign Studies University and obtained a master degree (Diplom) in business administration from the University of Mainz in Germany.

Ms. Chen has entered into a service contract with the Company for a term of three years commencing from 24 September 2015, subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the Articles. Ms. Chen is entitled to a monthly salary of HK$10,000 which is determined with regard to Ms. Chen’s experience, duties and responsibilities.

As at the Latest Practicable Date, save as disclosed above, Ms. Chen has confirmed to the Company that (i) she does not have any relationship with any of the other directors, senior management, substantial shareholders and controlling shareholders of the Company, as defined under the Listing Rules; (ii) she does not have any interest in the shares of the Company within the meaning of Part XV of the SFO; (iii) she does not hold any other position in the Company and its subsidiaries; (iv) she has not held any directorship in other public companies the securities of which are listed on any securities market in Hong Kong or overseas in the past three years; and (v) she does not have any other matters that need to be brought to the attention of the shareholders of the Company nor does she have any other information that is required to be disclosed pursuant to any of the requirements under Rule 13.51(2)(h) to (v) of the Listing Rules.

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DETAILS OF DIRECTORS PROPOSED FOR RE-ELECTION

APPENDIX

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. Pan Hongye

Mr. Pan Hongye (‘‘Mr. Pan’’) has been appointed as an independent non-executive Director, and the chairman of the remuneration committee, a member of each of the audit committee and the nomination committee of the Company, with effect from 3 November 2015.

The biographical details of Mr. Pan are set out below:

Mr. Pan, aged 70, currently serves as a professional instructor of the School of Economics and Management of Communication University of China. He has over fifty years’ experience in the cultural industry. He was the general manager of Beijing Chang’an Culture and Entertainment Centre (北京市長安文化娛樂中心), the director of the Exchange Centre of Television Program and the Television Series Centre of Beijing Television Station (北京電視臺電視節目交流中心、影視劇 中心) and the general manager of Combined Television (Hainan) Company Limited (匯視（海南） 股份有限公司). He is now the general manager of Beijing Dong Wang Cultural Development Company Limited (北京東王文化發展有限公司).

Mr. Pan has entered into a letter of appointment with the Company for a term of three years commencing from 3 November 2015, subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the Articles. Mr. Pan is entitled to an annual director’s fee of HK$60,000 which was determined by the Board and the remuneration committee of the Company with regard to the amounts of director’s fees payable to other independent nonexecutive Directors and the prevailing market level of remuneration for a similar position, as well as Mr. Pan’s experience, duties and responsibilities.

Mr. Pan has confirmed that he meets the independence criteria as set out in Rule 3.13 of the Listing Rules.

As at the Latest Practicable Date, save as disclosed above, Mr. Pan has confirmed to the Company that (i) he does not have any relationship with any of the Directors, senior management, substantial shareholders or controlling shareholders of the Company, as defined under the Listing Rules; (ii) he does not have any interest in the shares of the Company within the meaning of Part XV of the SFO; (iii) he does not hold any other position in the Company and its subsidiaries; (iv) he has not held any directorship in other public companies the securities of which are listed on any securities market in Hong Kong or overseas in the past three years; and (v) he does not have any other matters that need to be brought to the attention of the shareholders of the Company nor does he have any other information that is required to be disclosed pursuant to any of the requirements under Rule 13.51(2)(h) to (v) of the Listing Rules.

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DETAILS OF DIRECTORS PROPOSED FOR RE-ELECTION

APPENDIX

Mr. Gao Gordon Xia

Mr. Gao Gordon Xia (‘‘Mr. Gao’’) has been appointed as an independent non-executive Director, and the chairman of the nomination committee, a member of each of the audit committee and the remuneration committee of the Company with effect from 25 November 2015.

Mr. Gao, aged 47, holds a master of business administration from Fordham University in the United States. He obtained his bachelor degree in management of information system from the Beijing Information Engineering Institute (北京信息工程學院) in 1992. Mr. Gao has worked in various entities including the PRC government, enterprises in the PRC and the United States, listed companies and financial institutions for many years. He is experienced in the information technology, telecommunications and media industries. Mr. Gao currently serves as the chief operating officer and chief executive officer of Groupon China (gaopeng.com) (高朋團購) and a consultant at Tencent (騰訊) group providing commercialization consultancy to Wechat division. Mr. Gao joined Roosevelt Foundation as the Asia investment partner from July 2003 to July 2007. He was the founder, chief executive officer and director of CBCom Inc. (西康電訊) (listed on NASDAQ in the United States in 2001, stock code: CBCI) from June 1996 to December 2001. Leveraging the valuable experience in capital markets, re-organization and integrated management of Mr. Gao, as well as his abundant experience in Internet business, the Board believes that Mr. Gao will provide inspiration and support to the Company’s future development in the Internet and media industry.

Mr. Gao has entered into a letter of appointment with the Company for a term of three years commencing from 25 November 2015, subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the Articles. Mr. Gao is entitled to an annual director’s fee of HK$60,000 which was determined by the Board and the Remuneration Committee with regard to the amounts of director’s fees payable to other independent non-executive Directors of the Company and the prevailing market level of remuneration for a similar position, as well as Mr. Gao’s experience, duties and responsibilities.

Mr. Gao has confirmed that he meets the independence criteria as set out in Rule 3.13 of the Listing Rules.

As at the Latest Practicable Date, save as disclosed above, Mr. Gao has confirmed to the Company that (i) he does not have any relationship with any of the directors, senior management, substantial shareholders or controlling shareholders of the Company, as defined under the Listing Rules; (ii) he does not have any other interest in the shares of the Company within the meaning of Part XV of the SFO; (iii) he does not hold other position in the Company and its subsidiaries; (iv) he has not held any directorship in public companies, and the securities of which are listed on any securities market in Hong Kong or overseas in the past three years; and (v) he does not have any other matters that need to be brought to the attention of the shareholders of the Company nor does he have any other information that is required to be disclosed pursuant to any of the requirements under Rule 13.51(2)(h) to (v) of the Listing Rules.

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NOTICE TO EGM

Silverman Holdings Limited 銀 仕 來 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1616)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the ‘‘Meeting’’) of Silverman Holdings Limited (the ‘‘Company’’) will be held at 2:00 p.m. on Wednesday, 27 April 2016 at 3/F, Business Center, Four Seasons Hotel, 48 Liang Ma Qiao Road, Chaoyang District, Beijing, the PRC for the purpose of considering and, if thought fit, passing with or without amendments, the following resolutions of the Company:

ORDINARY RESOLUTIONS

1. ‘‘THAT

2. (a) the conditional placing agreement dated 4 February 2016 (the ‘‘Share Placing Agreement’’) and entered into between the Company as issuer and Guotai Junan Securities (Hong Kong) Limited (the ‘‘Placing Agent’’) as placing agent in relation to the placing of up to 320,000,000 new shares (the ‘‘Placing Share(s)’’) of USD0.01 each in the share capital of the Company in accordance with the terms and conditions of the Share Placing Agreement at the Placing Price of no less than HK$2.50 per Placing Share (a copy of which is produced to the Meeting marked ‘‘A’’ and signed by the Chairman of the Meeting for the purpose of identification), and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;

3. (b) conditional upon, among others, The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’) granting the listing of, and permission to deal in, the Placing Shares to be allotted and issued under the Share Placing Agreement, the allotment and issue of the Placing Shares to the relevant placee(s) in accordance with the terms and conditions of the Share Placing Agreement be and are hereby approved and the board (the ‘‘Board’’) of directors (the ‘‘Director(s)’’) of the Company be and is hereby granted with a specific mandate to allot and issue the Placing Shares to the relevant placee(s); and

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NOTICE TO EGM

• (c) any one Director of the Company be and is hereby authorised to do all such things and acts as he/she may in his/her discretion consider as necessary, expedient or desirable for the purpose of or in connection with the implementation of the Share Placing Agreement and the transactions contemplated thereunder, including but not limited to the execution all such documents under seal where applicable, as he/she considers necessary or expedient in his/her opinion to implement and/or give effect to the allotment and issue of the Placing Shares and to agree with such variation, amendment or waiver as, in the opinion of the Directors, in the interests of the Company and its shareholders as a whole.’’

• ‘‘THAT, each as a separate resolution:

• (a) Ms. Chen Chen be and is hereby re-elected as an executive director of the Company;

• (b) Mr. Pan Hongye be and is hereby re-elected as an independent non-executive director of the Company; and

• (c) Mr. Gao Gordon Xia be and is hereby re-elected as an independent non-executive director of the Company.’’

By order of the Board Silverman Holdings Limited Liu Dong Chairman

Beijing, the PRC, 11 April 2016

Notes:

1. Any member of the Company entitled to attend and vote at the Meeting shall be entitled to appoint another person as his/her proxy to attend and vote instead of him/her. A member who is the holder of two or more shares may appoint more than one proxy to represent him/her and vote on his/her behalf at the Meeting. A proxy need not be a member of the Company. On a poll, votes may be given either personally or by proxy.

2. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing or, if the appointer is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same.

3. To be valid, the instrument appointing a proxy and (if required by the Board) the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, shall be delivered to the Company’s branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited of Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time appointed for holding of the Meeting or any adjournment thereof.

4. For determining the entitlement for attending and voting at the Meeting, the register of members of the Company will be closed from Tuesday, 26 April 2016 to Wednesday, 27 April 2016, both days inclusive, during which period no share transfers can be registered. In order to be eligible for attending and voting at the Meeting, all transfers accompanied by the relevant share certificates must be lodged with the Company’s

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NOTICE TO EGM

branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration not later than 4:30 p.m. on Monday, 25 April 2016.

1. No instrument appointing a proxy shall be valid after expiration of 12 months from the date named in it as the date of its execution, except at an adjourned meeting or on a poll demanded at the Meeting or any adjournment thereof in cases where the Meeting was originally held within 12 months from such date.

2. Where there are joint holders of any shares, any one of such joint holders may vote at the Meeting, either in person or by proxy, in respect of such share as if he/she were solely entitled thereto, but if more than one of such joint holders be present at the Meeting, 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.

3. Completion and delivery of an instrument appointing a proxy shall not preclude a member from attending and voting in person at the Meeting if the member so wish and in such event, the instrument appointing a proxy should be deemed to be revoked.

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