A Metaverse Company — Proxy Solicitation & Information Statement 2019

Mar 20, 2019

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about this circular or as to the action to be taken, you should consult your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional advisers.

If you have sold or transferred all your shares in Starrise Media 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 manager, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

This circular is for your information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the shares or other securities of Starrise Media 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.

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Starrise Media Holdings Limited 星宏傳媒控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1616)

(1) PROPOSED EXTENSION OF MATURITY DATE OF CONVERTIBLE BONDS UNDER SPECIFIC MANDATE AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

Capitalised terms used herein shall have the meanings set out in the section headed ‘‘Definitions’’ of this circular.

A notice convening the EGM (as defined herein) of Starrise Media Holdings Limited to be held at Building A10, 50 Anjialou, Chaoyang District, Beijing, the People’s Republic of China on Monday, 8 April 2019 at 2:00 p.m. is set out on pages 25 to 26 of this Circular. Whether or not you are able to attend the meeting, please complete and return the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar and transfer office of Starrise Media Holdings Limited in Hong Kong, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible and in any event not less than 48 hours before (i.e. 2:00 p.m. on Saturday, 6 April 2019) the time fixed for the holding of the meeting or any adjournment thereof (as the case may be). 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 (as the case may be) should you so wish.

20 March 2019

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
APPENDIX – NOTICE OF THE EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25

– i –

DEFINITIONS

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

• ‘‘Affiliate(s)’’

with respect to a person, any and all other person(s) that, directly or indirectly through one or more intermediaries, control, is controlled by, or is under common control with, such person

• ‘‘Aim Right’’

Aim Right Ventures Limited, a company incorporated in the British Virgin Islands with limited liability whollyowned by Mr. Liu Zhihua

• ‘‘Aim Right Shares’’

all Shares registered in the name and/or otherwise held by Aim Right Ventures Limited as at the date of the Extension Agreement, which amounted to 202,472,656 Shares and represented approximately 14.29% of the issued share capital of the Company as at the Latest Practicable Date

• ‘‘Base Redemption Amount’’

in respect of any principal amount of the outstanding Bonds and to be redeemed by the Company (other than in an early redemption due to the occurrence of an event of default), an amount equal to the aggregate of:

• (1) 100% of the principal amount of the outstanding Bonds;

• (2) interest accrued and unpaid under the conditions of the Bonds (including any interest accruing on overdue but unpaid amounts);

• (3) the Premium;

• (4) any default interest accrued and outstanding to the Bondholder pursuant to the conditions of the Bonds; and any other payment accrued and outstanding to the Bondholder pursuant to the conditions of the Bonds

• ‘‘Board’’

the board of Directors

• ‘‘Bondholder’’

• a person who is for the time being the registered holder of a Bond

– 1 –

DEFINITIONS

• ‘‘Bonds’’

• the unlisted convertible bonds in an aggregate principal amount of HK$300.00 million issued by the Company on 28 February 2017, or any part thereof

• ‘‘Business Day’’

• a day other than a Saturday or Sunday on which commercial banks are open for business in Hong Kong

• ‘‘Company’’

• Starrise Media Holdings Limited, a limited liability company incorporated in the Cayman Islands, the shares of which are listed on the main board of the Stock Exchange

• ‘‘Conditions Precedent’’ the conditions precedent to the Extension, details of which are set out in the paragraph headed ‘‘Conditions Precedent to the Extension’’ of this circular

• ‘‘Conversion Price’’ the conversion price per Conversion Share after adjustment, which is currently HK$0.74 per Conversion Share (subject to further adjustments)

• ‘‘Conversion Rights’’

• the right(s) of a Bondholder to convert whole or part of the principal amount of any Bond into Shares subject to and in accordance with the terms and conditions of the Bonds

• ‘‘Conversion Share(s)’’ the Share(s) to be issued and allotted upon conversion of the Bonds

• ‘‘Current Market Price’’

• in respect of a Share on a particular date, the average of the closing price for the five consecutive trading days ending on the trading day immediately preceding such date

• ‘‘Directors’’

• the directors of the Company

• ‘‘EGM’’

• the extraordinary general meeting of the Company to be held for considering, and if thought fit, approving the New Specific Mandate

• ‘‘Extended Period’’

• the period commenced on the second anniversary of the Issue Date and ending on the third anniversary of the Issue Date

• ‘‘Extension’’

• the extension of the Maturity Date of the Remaining Bonds by one additional year to 28 February 2020

– 2 –

DEFINITIONS

• ‘‘Extension Agreement’’

• the amendment agreement dated 28 February 2019 entered into between the Company and the Original Bondholder in relation to the Extension

• ‘‘Group’’ the Company and its subsidiaries from time to time

• ‘‘Guarantees’’ the guarantee deeds executed by Aim Right and Mr. Liu Zhihua, respectively, on the Issue Date in respect of the continuing guarantee over all sums due and payable to Original Bondholder under the Bonds

• ‘‘Guarantors’’ Aim Right and Mr. Liu Zhihua

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

• ‘‘Hong Kong’’

• the Hong Kong Special Administrative Region of the People’s Republic of China

• ‘‘Independent Third Party(ies)’’

• a person independent of the Company and its connected person (as defined in the Listing Rules)

• ‘‘Issue Date’’

• 28 February 2017, being the date of issue of the Bonds

• ‘‘Last Trading Day’’

• 27 February 2019, being the last trading day preceding the date of signing of the Extension Agreement

• ‘‘Latest Practicable Date’’

• 28 February 2019, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein

• ‘‘Listing Rules’’

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

• ‘‘Mandatory Conversion Event Trigger’’

shall occur if:

• (a) during the third year after the Issue Date (if the Maturity Date has been extended pursuant to the conditions of the Bonds), the Closing Price of the Shares for 30 consecutive trading days ending on and including the trading day last preceding such date at any time is at or above HK$3.30;

– 3 –

DEFINITIONS

• (b) during the fourth year after the Issue Date (if the Maturity Date has been extended pursuant to the conditions of the Bonds), the Closing Price of the Shares for 30 consecutive trading days ending on and including the trading day last preceding such date at any time is at or above HK$4.30; or

• (c) during the fifth year after the Issue Date (if the Maturity Date has been extended pursuant to the conditions of the Bonds), the Closing Price of the Shares for 30 consecutive trading days ending on and including the trading day last preceding such date at any time is at or above HK$5.60

‘‘Maturity Date’’

‘‘Mr. He Han’’

‘‘Mr. Liu Zhihua’’

‘‘New Arrangements’’

‘‘New Specific Mandate’’

• ‘‘Obligors’’

• ‘‘Original Bondholder’’

initially, 28 February 2019, being the second anniversary of the Issue Date; or if the Extension becomes effective, 28 February 2020, being the third anniversary of the Issue Date

Mr. He Han（何漢）, an executive Director of the Company

Mr. Liu Zhihua（劉志華）, a substantial shareholder of the Company

the Extension and the transactions contemplated under the Remaining Bonds after the Extension, which for the purposes of the Listing Rules would together be treated by the Stock Exchange as new arrangements for the Company to issue the Remaining Bonds to the Original Bondholder

the specific mandate to be sought from the Shareholders at the EGM for the allotment and issue of the Conversion Shares upon full conversion of the Remaining Bonds at the Conversion Price of HK$0.74 (subject to further adjustments) under the New Arrangements

the Company, Aim Right and Mr. Liu Zhihua

Dragon Capital Entertainment Fund One LP, an exempted limited partnership registered in the Cayman Islands

– 4 –

DEFINITIONS

• ‘‘Price Adjustment’’

the adjustment to the Conversion Price of the Bonds from HK$1.21 per Conversion Share to HK$0.74 per Conversion Share which took effect from 5 February 2018, details of which are set out in the Price Adjustment Announcements

• ‘‘Price Adjustment Announcement’’ the announcements of the Company dated 17 January 2018 and 5 February 2018, respectively, in relations to, among other things, the Price Adjustment

• ‘‘PRC’’ The People’s Republic of China, which for the purpose of this circular excludes Hong Kong, Taiwan and the Macau Special Administrative Region

• ‘‘Previous Circular’’ the circular of the Company dated 17 January 2017 in relation to the initial issuance of the Bonds to the Original Bondholder

• ‘‘Previous Specific Mandate’’ the specific mandate previously granted by the Shareholders at the extraordinary general meeting of the Company held on 6 February 2017 for the allotment and issue of the Conversion Shares upon full conversion of the Bonds at the initial Conversion Price of HK$1.21

• ‘‘Premium’’

• such additional amount which would make up a return of 12% per annum on the principal amount of any outstanding Bonds, calculated from the Issue Date to the date of redemption of the same, taking into account all interest paid on the Bonds prior to or on the date of such redemption

• ‘‘Remaining Bonds’’ Bonds in aggregate principal amount of HK$180,000,000 which remain outstanding as at the Latest Practicable Date, or any part thereof

• ‘‘SFO’’

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

• ‘‘Share(s)’’

• ordinary share(s) of US$0.01 each in the share capital of the Company

• ‘‘Shareholder(s)’’

the holder(s) of the Shares

– 5 –

DEFINITIONS

‘‘Share	Charge’’	charge over the Aim Right Shares to be executed	charge over the Aim Right Shares to be executed	by Aim
		Right as security for	the due performance	of the
		Company’s obligations	under the conditions	of the
		Remaining Bonds during	the Extended Period
‘‘Stock	Exchange’’	The Stock Exchange of Hong Kong Limited
‘‘Terms	of Extension’’	the additional terms and	conditions which are applicable to
		the Remaining Bonds	during the Extended Period as
		agreed between the Company and the Original Bondholder
‘‘%’’		per cent.

– 6 –

LETTER FROM THE BOARD

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Starrise Media Holdings Limited 星宏傳媒控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1616)

Executive Directors: Registered office in the Cayman Islands: Mr. LIU Dong (Chairman) P.O. Box 309 Mr. LIU Zongjun (Chief Executive Officer) Ugland House Ms. CHEN Chen Grand Cayman KY1-1104 Mr. HE Han Cayman Islands Mr. TAN Bin Principal place of business in Hong Kong: Independent Non-executive Directors: 40/F, Sunlight Tower Mr. LAM Kai Yeung 248 Queen’s Road East Ms. LIU Chen Hong Wanchai Mr. WANG Liangliang Hong Kong 20 March 2019

To the Shareholders

Dear Sir or Madam,

(1) PROPOSED EXTENSION OF MATURITY DATE OF CONVERTIBLE BONDS UNDER SPECIFIC MANDATE AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to:

• (i) the Previous Circular of the Company dated 17 January 2017 and the announcements of the Company dated 22 December 2016, 30 December 2016 and 28 February 2017, respectively, in relation to the initial issuance of the Bonds in the aggregate principal amount of HK$300,000,000 to Original Bondholder;

– 7 –

LETTER FROM THE BOARD

• (ii) the announcements of the Company dated 17 January 2018 and 5 February 2018, respectively, in relations to, among other things, the adjustments in the conversion price of the Bonds to HK$0.74 per Conversion Share; and

• (iii) the announcements of the Company dated 28 February 2019 and 1 March 2019, respectively, in relations to, among other things, the extension of the Maturity Date of the Remaining Bonds by one additional year to 28 February 2020.

As disclosed in the announcements set out in sub-paragraph (iii) above, the Company has, after arm’s length negotiations between the Company and the Original Bondholder, entered into the Extension Agreement with the Original Bondholder, pursuant to which the Company and the Bondholder have agreed to extend the Maturity Date of the Remaining Bonds by one additional year to 28 February 2020 subject to the conditions set out therein.

The purpose of this circular is to provide you with further details of the Extension and the New Specific Mandate, the notice convening the EGM, and other information as required under the Listing Rules.

THE EXTENSION AGREEMENT

Date

28 February 2019

Parties

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

• (2) Original Bondholder (as the Bondholder of the Remaining Bonds).

To the best of the knowledge, information and belief of the Board having made all reasonable enquiries, the Original Bondholder is an Independent Third Party.

The Extension

Subject to the fulfilment of the Conditions Precedent, the Company and the Original Bondholder agreed that the Maturity Date of the Remaining Bonds shall be extended by one additional year to 28 February 2020 on the Terms of Extension set out below:

• (a) at any time during the first six months of the Extended Period, the Company may, at its sole and absolute discretion, redeem all or part of the Remaining Bonds at the Base Redemption Amount together with any accrued and unpaid amounts owing to the Original Bondholder in connection with the outstanding Bonds by serving a notice to the Original Bondholder; and

– 8 –

LETTER FROM THE BOARD

• (b) at any time during the last six months of the Extended Period, the Original Bondholder may, by giving notice to the Company, require the Company to redeem all of the then outstanding Bonds at the Base Redemption Amount together with any accrued and unpaid amounts owing to the Original Bondholder in connection with the outstanding Bonds.

Save for the Extension and the Terms of Extension, all other terms and conditions of the Remaining Bonds as set out in the Circular shall remain unchanged.

Conditions Precedent to the Extension

The Extension will become effective subject to the fulfilment of, among other things, the following conditions:

• (a) the Stock Exchange having approved the Extension in accordance with the Listing Rules;

• (b) Aim Right having executed the Share Charge in favor of the Original Bondholder;

• (c) all necessary consents and approvals required to be obtained on the part of the Company in respect of the Extension having been obtained; and

• (d) the Original Bondholder’s legal counsel having issued a legal opinion addressed to the Original Bondholder on the Extension, in such form and substance satisfactory to the Original Bondholder.

Each of the conditions set out above is not waivable under any circumstances. As at the Latest Practicable Date, the Conditions Precedent are not yet satisfied in full.

The Share Charge

As a Condition Precedent to the Extension, Aim Right, as a substantial shareholder of the Company, shall execute the Share Charge over all of the Aim Right Shares as security for the due performance of the Company’s obligations under the conditions of the Remaining Bonds during the Extended Period.

– 9 –

LETTER FROM THE BOARD

The Guarantees

As disclosed in the Previous Circular, the Guarantees were executed by Aim Right and Mr. Liu Zhihua, respectively, on the Issue Date. The Guarantees shall remain effective and unchanged during the Extended Period notwithstanding the Extension. Set out below is a summary of the principal terms of the Guarantees:

Date

28 February 2017, being the date of issue of the Bonds

Guarantors

Aim Right and Mr. Liu Zhihua, respectively

Subject matter

Each of the Guarantors had, among other things:

• (a) agreed to guarantee to the Original Bondholder the due and punctual observance and performance by each Obligor of all moneys, obligations and liabilities owing or payable or expressed to be owing or payable by the Obligors to the Original Bondholder under or in connection with the transaction documents relating to the Bonds;

• (b) undertaken to pay the Original Bondholder from time to time, upon demand by the Original Bondholder, any and all sums of money which any Obligor is at any time liable, or expressed to be liable, to pay to the Original Bondholder under or pursuant to any or all of the transaction documents relating to the Bonds and which have become, or are expressed to have become, due and payable but have not been paid at the time such demand is made as if it/he was the principal obligor in respect of that amount; and

• (c) agreed with the Original Bondholder that if, for any reason, any amount claimed by the Original Bondholder pursuant to the transaction documents relating to the Bonds is not recoverable from it/him on the basis of a guarantee, then it/he will be liable as principal debtor and primary obligor to indemnify the Original Bondholder in respect of any loss it incurs as a result of any Obligor failing to pay any amount expressed to be payable by it under a transaction document relating to the Bonds on the date when the Original Bondholder ought to have been paid.

– 10 –

LETTER FROM THE BOARD

Status

The Guarantees are each a continuing guarantee and indemnity, and shall each be extended to the ultimate balance of all sums payable by the Obligors under the transaction documents relating to the Bonds, regardless of any intermediate payment or discharge in part, until all moneys, obligations and liabilities owing or payable or expressed to be owing or payable by the Obligors to the Original Bondholder under or in connection with the transaction documents relating to the Bonds have been irrevocably repaid and discharged in whole.

THE REMAINING BONDS

As at the Latest Practicable Date, Bonds in the principal amount of HK$180,000,000, being the Remaining Bonds, remain outstanding.

The Remaining Bonds are convertible into 243,243,243 Conversion Shares at the Adjusted Conversion Price of HK$0.74 per Conversion Share, which represents approximately 17.17% of the issued share capital of the Company as at the date hereof and approximately 14.65% of the issued share capital of the Company as enlarged by the issuance of such Conversion Shares.

Principal terms of the Remaining Bonds

The principal terms of the Remaining Bonds (as amended by the Price Adjustment, the Extension and the Terms of Extension) are summarized below:

Aggregate principal	:	HK$180.00 million
amount
Maturity Date	:	28 February 2020
Conversion Price	:	HK$0.74 per Conversion Share (subject to further
		adjustment(s), if any)
Interests	:	5% per annum payable in advance every three
		calendar months.
Default interests	:	If an event of default occurs, interest shall accrue on
		the then outstanding	principal	amount of the
		Remaining Bonds from	and including the date of
		occurrence of such event	of default	at an interest rate
		of 25% per annum and shall be payable on demand.
Conversion Period	:	The period from the date	of issuance	of the Remaining
		Bonds up to the Maturity	Date (both	days inclusive).

– 11 –

LETTER FROM THE BOARD

Conversion Rights :

Subject to the terms and conditions of the Remaining Bonds, a Bondholder shall have the right, exercisable during the Conversion Period, to convert the whole or any part (in integral multiples of HK$5.00 million) of the outstanding principal amount of the Remaining Bonds held by such bondholder into such number of Conversion Shares as will be determined by dividing the principal amount of the Remaining Bonds to be converted by the Conversion Price in effect on the date of conversion.

If a Mandatory Conversion Event Trigger occurs, the Company shall issue a conversion notice to the Bondholder to, subject to the terms and conditions of the Remaining Bonds, require the Bondholder to convert all or part of the outstanding Remaining Bonds held by the Bondholder at that time. The Bondholder shall at all times have the discretion to determine the amount of Remaining Bonds to be converted (provided that such amount is more than HK$5.00 million and is an integral multiple of HK$5.00 million). Each conversion following a Mandatory Conversion Event Trigger may only occur once a year.

• Ranking : Shares converted upon exercise of the Conversion Rights shall rank pari passu in all respects with all other Shares in issue at the date of conversion and all Conversion Shares shall include rights to participate in all dividends and other distributions.

• Transferability : The Remaining Bonds may be transferred to an Affiliate of the Bondholder without consent from the Company and may be transferred to any other person after receiving prior written consent from the Company.

– 12 –

LETTER FROM THE BOARD

To the best of the Company’s knowledge and belief, having made all reasonable enquires, each of the Original Bondholder and its Affiliates (i.e. the permitted transferees of the Remaining Bonds under the bond instrument), is an Independent Third Party. The Original Bondholder also confirmed that, to the best of its knowledge and belief, having made all reasonable enquiries, none of its Affiliates is a connected person of the Company and that the Original Bondholder will not, and shall procure that its Affiliates will not, transfer any of the Remaining Bonds to a connected person of the Company. In addition, the Board shall not, and shall procure that the Company will not, consent to a transfer of any of the Remaining Bonds to any of the Company’s connected persons.

With the above safeguards in place, the Board believes that it would be unlikely for any permitted transfers of the Remaining Bonds to trigger any implications under Chapter 14A of the Listing Rules. Should any transfer of the Remaining Bonds constitute connected transaction(s) under Chapter 14A of the Listing Rules, the Company shall use its best endeavours to ensure its compliance with the relevant requirements of the Listing Rules in respect of such transfer.

Adjustment of the : The Conversion Price shall from time to time be Conversion Price adjusted upon:

• (i) consolidation or sub-division;

• (ii) capitalisation of profits or reserves;

• (iii) capital distributions;

• (iv) rights issues of Shares or options over Shares;

• (v) issuance of Shares or any options, warrants or other rights to subscribe for or purchase Shares wholly for cash at less than 90% of the Current Market Price; or

• (vi) other issues of Shares at less than 90% of the Current Market Price.

– 13 –

LETTER FROM THE BOARD

Listing : No application has been or will be made for the listing of the Remaining Bonds on the Stock Exchange or any other stock exchange. Application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in the Conversion Shares under the New Arrangement. Redemption : Maturity: Unless (i) the maturity of the Remaining Bonds is accelerated upon the occurrence of an event of default, or (ii) the Remaining Bonds are redeemed prior to the Maturity Date, the Company shall redeem all outstanding Bonds on the Maturity Date in the following manners:

• (1) if the Bondholder has not exercised any of the Conversion Rights before the Maturity Date, the Bondholder shall redeem all of the outstanding Bonds at the Base Redemption Amount; or

• (2) if the Bondholder has exercised all or a portion of the Conversion Rights before the Maturity Date, the Bondholder shall redeem all such outstanding Bonds at the Base Redemption Amount (but excluding the Premium).

No redemption: The Remaining Bonds may not be redeemed by the Company at any time prior to the Maturity Date, save that:

• (a) at any time during the first six months of the Extended Period, the Company may, at its sole and absolute discretion, redeem all or part of the Remaining Bonds at the Base Redemption Amount together with any accrued and unpaid amounts owing to the Original Bondholder in connection with the outstanding Bonds by serving a notice to the Original Bondholder; and

– 14 –

LETTER FROM THE BOARD

• (b) at any time during the last six months of the Extended Period, the Original Bondholder may, by giving notice to the Company, require the Company to redeem all of the then outstanding Bonds at the Base Redemption Amount together with any accrued and unpaid amounts owing to the Original Bondholder in connection with the outstanding Bonds.

Mandatory redemption: Notwithstanding the other provisions of the conditions of the Remaining Bonds, if either of the Guarantors:

• (1) deceases or is incapacitated;

• (2) becomes of unsound mind, or is or becomes a patient for any purpose of any applicable laws relating to mental health; or

• (3) becomes insolvent or is unable to pay its debts as they mature or applies for or consents to the appointment of any administrator, liquidator or receiver of the whole or any material part of its undertaking, property, assets or revenues or enters into a general assignment or compromise with or for the benefit of its creditors,

the Company shall redeem all of the outstanding Bonds at the Base Redemption Amount after prior notice has been given by the Bondholder not less than 20 Business Days prior to the intended date of redemption.

Event of default redemption: Upon the occurrence of any of the events of default, the Company shall have a period of one month starting from the date of receipt by the Bondholder of the notice of event of default to remedy such event of default. If such event of default is not remedied within such period or if such event of default is incapable of remedy, the Bondholder shall be entitled to require the Bonds registered in its name to be redeemed at the Base Redemption Amount.

– 15 –

LETTER FROM THE BOARD

• Event of default : If any event of default set out in the terms and conditions of the Remaining Bonds occurs and (if such event of default is capable of remedy) the relevant period for the Company to remedy such event of default expires, the Bondholder may give notice to the Company that the Remaining Bonds together with any amount payable by the Company pursuant to the terms of the Bonds will become immediately due and repayable.

• Other undertakings : (a) the Company will notify the Bondholder in writing immediately upon becoming aware of the occurrence of any event of default;

• (b) the Company shall at all times use its reasonable endeavours to ensure that the minimum public shareholding requirement of the Listing Rules is complied with;

• (c) the Company shall at all times maintain its net asset value (by reference to the Company’s latest interim or annual reports) at not less than RMB1,000,000,000;

• (d) the Company shall at all times maintain its liability to asset ratio (by reference to the Company’s latest interim or annual reports) at a level not higher than 50%; and

• (e) Aim Right shall not, without the prior consent of the Bondholder, dispose any of the Aim Right Shares.

– 16 –

LETTER FROM THE BOARD

Conversion Price:

Effective from 5 February 2018, the Conversion Price of the Bonds was adjusted from HK$1.21 per Conversion Share to HK$0.74 per Conversion Share pursuant to the terms and conditions of the Bonds following the issuance of 209,000,000 new Shares at HK$0.74 per Share on such date.

The adjusted Conversion Price of HK$0.74 per Conversion Share represents:

• (1) a discount of approximately 43.94% to the closing price of HK$1.32 per Share as quoted at 4:00 p.m. on the Stock Exchange on the Last Trading Day;

• (2) a discount of approximately 43.94% to the average closing price of HK$1.32 per Share as quoted on the Stock Exchange for the last five trading days immediately prior to and including the Last Trading Day; and

• (3) a discount of approximately 44.78% to the average closing price of HK$1.34 per Share as quoted on the Stock Exchange for the last ten trading days immediately prior to and including the Last Trading Day.

The Conversion Price adjustment mechanism under the conditions of the Bonds (which were effective since the initial Issue Date of the Bonds and remain unchanged despite the Extension) was arrived at after arm’s length negotiations between the Company and the Original Bondholder with reference to prevailing market practice.

In addition, the Terms of Extension was also arrived at after arm’s length negotiations between the Company and the Original Bondholder having considered the factors set out below:

• (i) as at the date of the Extension Agreement, the Group was engaged in the production of various films and television dramas which required a sizeable amount of capital commitment. If the Remaining Bonds were to be redeemed on the original Maturity Date, the production of these films and television dramas would be adversely affected;

• (ii) having considered the expected working capital requirements for the Group’s on-going film and television drama productions during the Extended Period and the latest release schedule of substantially completed television dramas and films, it is currently expected that the Group will have sufficient uncommitted resources to redeem the Remaining Bonds in full within the first six months of the Extended Period;

– 17 –

LETTER FROM THE BOARD

• (iii) it was therefore the intention of the parties that the Remaining Bonds would be redeemed within the first six months of the Extended Period and a right to do so was granted to the Company by the Original Bondholder after arms-length negotiation;

• (iv) as the working capital requirements of the Group’s on-going film and television drama productions are subject to change from time to time, there is, however, no guarantee that the Group will have sufficient uncommitted resources for the early redemption of the Remaining Bonds during the first six months of the Extended Period. Accordingly, the Company had requested that the Maturity Date of the Remaining Bonds be extended for one year (instead of six months) to allow sufficient buffer time for the Group to arrange for financial resources to redeem the Remaining Bonds; and

• (v) as a pre-condition for the Original Bondholder to grant the Company such additional buffer time, the Original Bondholder had requested additional rights to be included for the Extended Period. After arms-length negotiations, the parties have agreed that the Original Bondholder would be granted a right, exercisable at any time during the last six months of the Extended Period at the Original Bondholder’s discretion, to require the Company to redeem all of the then outstanding Bonds.

Accordingly, the Directors consider that the adjusted Conversion Price and the Terms of Extension are fair and reasonable and in the interests of the Company and its Shareholders as a whole.

NEW SPECIFIC MANDATE TO ISSUE THE CONVERSION SHARES

The Conversion Shares to be allotted and issued upon full conversion of the Remaining Bonds at the Conversion Price of HK$0.74 (subject to further adjustments) under the New Arrangements will be allotted and issued pursuant to the New Specific Mandate to be sought from the Shareholders at the EGM.

INFORMATION ABOUT THE GROUP

The principal business of the Company is investment holding. The Group is principally engaged in the business of (i) manufacturing of textile products and provision of related processing service; and (ii) film and television drama series production and distribution.

USE OF PROCEEDS FROM THE INITIAL ISSUANCE OF THE BONDS

As disclosed in the Previous Circular, the net proceeds from the initial issuance of the Bonds after deducting the professional fees and other costs involved were approximately HK$295.35 million.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, the net proceeds of approximately HK$295.35 million from the initial issuance of the Bonds were currently being allocated for the Group’s films and television dramas in the following manner:

				Percentage
				of the net	Actual amount
				proceeds from	used/spent as
				the initial	at the Latest
			Amount to be	issuance of	Practicable
Title	Theme	Status	allocated	the Bonds	Date
			(approximate	(approximate	(approximate
			HK$’ million)	%)	HK$’ million)
The Alarm of Xibaipo	Epic television drama	Submitted for	38.00	12.87%	38.00
(formerly known as The Echoes	based on revolution	screening
of Xibaipo)（西柏坡的警鐘	history
（原《西柏坡的回聲》））
Detective He（神探鶴真人）	Internet drama	Broadcasted	0.70	0.24%	0.70
The Heavenly Emperor 1 and 2	Mythical fantasy internet	Broadcasted	1.80	0.61%	1.80
（御天神帝1、2）	drama
The Heavenly Emperor 3 and 4	Mythical fantasy internet	Broadcasted	2.35	0.80%	2.35
（御天神帝3、4）	drama
Us and Them（後來的我們）	Urban emotional film	Broadcasted	5.30	1.79%	5.30
Hello My Dog（監獄犬計劃）	Comedy film	Broadcasted	3.80	1.29%	3.80
Once upon a Time in the Northeast	Youth nostalgic film	Under	4.50	1.52%	4.50
（東北往事）		post-production
Here Comes Dashan	Youth nostalgic film	Under	0.70	0.24%	0.70
（大山來了）		post-production
Horror Blockbuster（恐不大片）	Horror film	Under	2.35	0.80%	2.35
		post-production
The Family in That City	Realistic drama	Broadcasted	29.00	9.82%	29.00
（那座城，這家人）
Mystic Kitchen 1	Internet movie	Broadcasted	0.40	0.14%	0.40
（如意廚房1）
Mystic Kitchen 2	Internet movie	Under	0.60	0.20%	0.60
（如意廚房2）		post-production
Oh, My Honey!（甜心軟糖）	Internet movie	Broadcasted	0.95	0.32%	0.95
Alien Monster: Survival in the Wild	Internet movie	Under	3.00	1.02%	2.00
（異星怪獸之荒野求生）		post-production
Lipstick Princess	Internet drama	Under	5.40	1.83%	4.40
（唯美貌不可辜負）		post-production
Soulmate（七月與安生）	Internet drama	Under	14.00	4.74%	14.00
		post-production

– 19 –

LETTER FROM THE BOARD

Title Theme Status Legend of Taotie（饕餮記） Internet drama Under post-production Monster Hunters（鎮魂歌） Internet movie Under post-production In Broad Daylight（光天化日） Theatrical film Shooting started and under filming Legend of Businessman in Hongjiang（一代洪商） Historical story drama Under post-production Bulletproof Teacher （穿越火線） Internet drama Preparing script Total	Amount to be allocated (approximate HK$’ million) 24.00 9.50 6.00 120.00 22.99 295.35	Percentage of the net proceeds from the initial issuance of the Bonds (approximate %) 8.13% 3.22% 2.03% 40.63% 7.79% 100%	Actual amount used/spent as at the Latest Practicable Date (approximate HK$’ million) 20.00 6.50 6.00 100.00 1.00
			244.35

REASONS FOR AND BENEFITS OF THE EXTENSION

Without the Extension, the Remaining Bonds would mature on 28 February 2019. The Extension would allow the Company to arrange for repayment of its debts under the Bonds on essentially the same terms but on a much later date, and would therefore effectively provide the Group with flexibility in relation to the Group’s deployment of its financial resources to fund its operation and development as well as the planning of its working capital requirements. Without the Extension, the Company would have to apply substantial cash resources for the redemption of the Remaining Bonds on maturity. Save for the Extension and the Terms of Extension, no other term or condition of the Bonds would be amended. Accordingly, the Directors (including the independent non-executive Directors) consider that the Extension is fair and reasonable, and is in the interests of the Company and its Shareholders as a whole.

INFORMATION ABOUT THE ORIGINAL BONDHOLDER

Dragon Capital Entertainment Fund One LP is an exempted limited partnership registered in the Cayman Islands. It is part of an independent fund which focuses on investment opportunities in the technology, media and telecommunications sector, and China Huarong International Holdings Limited is the largest limited partner of this fund.

– 20 –

LETTER FROM THE BOARD

CHANGES IN SHAREHOLDING STRUCTURE

As at the Latest Practicable Date, the Company has 1,416,911,818 Shares in issue. Set out below is a breakdown of the shareholding interests in the Company of the Shareholders as at (i) the Latest Practicable Date; (ii) immediately after the completion of the issue of the Conversion Shares assuming the Conversion Rights under the Remaining Bonds are exercised in full at the adjusted Conversion Price of HK$0.74 per Conversion Share:

Excel Orient Limited(Note 1) Emerges Ventures Limited(Note 2) Aim Right Ventures Limited(Note 3) BeiTai Investment LP He Han Other public Shareholders Original Bondholder Total	As at the Latest Practicable Date No. of Shares Approximate % 273,609,836 19.31 209,000,000 14.75 202,472,656 14.29 162,162,162 11.44 14,008,000 0.99 555,659,164 39.22 – – 1,416,911,818 100	Immediately after the full conversion of the Remaining Bonds at the adjusted Conversion Price of HK$0.74 per Conversion Share No. of Shares Approximate % 273,609,836 16.48 209,000,000 12.59 202,472,656 12.20 162,162,162 9.77 14,008,000 0.84 555,659,164 33.47 243,243,243 14.65 1,660,155,061 100	Immediately after the full conversion of the Remaining Bonds at the adjusted Conversion Price of HK$0.74 per Conversion Share No. of Shares Approximate % 273,609,836 16.48 209,000,000 12.59 202,472,656 12.20 162,162,162 9.77 14,008,000 0.84 555,659,164 33.47 243,243,243 14.65 1,660,155,061 100
			100

Notes:

1. 273,609,836 Shares are held in the name of Excel Orient Limited, a limited liability company incorporated in the BVI wholly owned by Mr. Liu Dong.

2. 209,000,000 Shares are held in the name of Emerges Ventures Limited, a limited liability company incorporated in the BVI wholly owned by Mr. Jin Peng.

3. 202,472,656 Shares are held in the name of Aim Right Ventures Limited, a limited liability company incorporated in the BVI wholly owned by Mr. Liu Zhihua.

– 21 –

LETTER FROM THE BOARD

FUND RAISING ACTIVITIES IN THE PAST TWELVE-MONTH PERIOD

The Company has not conducted any equity fund raising activities in the past twelve months immediately preceding the date of the Company’s announcement dated 28 February 2019.

The Company currently does not have any plans for further equity fund raising in the near future. Having said that, the Company will continue to, from time to time, look for investment opportunities to maximise its profits and to bring value to its Shareholders. If any suitable opportunities arise and further external financing is needed, the Company may raise funds through equity financing. If the Company decides to conduct further equity financing activities, the Company shall use its best endeavours to comply with all applicable Listing Rules and all applicable laws and regulations in respect of such financing activities.

LISTING RULES IMPLICATIONS

The Extension

As stated in the Previous Circular, the Maturity Date may be extended three times, each time by one year if agreed between the Company and the Original Bondholder provided that, at the time of each extension, the Company has sufficient mandate, on the basis of the then effective general mandate granted by the Shareholders at the then most recent annual general meeting of the Company, to issue such number of new Shares to cover all of the then outstanding Conversion Rights.

However, as the Extension would require mutual agreement between the Original Bondholder and the Company, the Extension would not take place automatically despite the sufficiency of general mandate. Accordingly, the Stock Exchange would treat the Extension as new arrangements for the Company to issue the Remaining Bonds to the Original Bondholder and the Company may not rely on the Previous Specific Mandate for the New Arrangements.

In addition, as the adjusted Conversion Price of HK$0.74 per Conversion Share is lower than the benchmarked price (as defined under Rule 13.36(5) of the Listing Rules), the Company would be required to obtain a specific mandate from Shareholders for the New Arrangements pursuant to Rule 13.36(6) of the Listing Rules.

– 22 –

LETTER FROM THE BOARD

The EGM will be held for the purpose of, among other matters, considering, and if thought fit, approving the New Specific Mandate. The notice of the EGM of the Company is set out on pages 25 to 26 of this circular. If you do not intend to attend and vote at the EGM in person, you are requested to complete and return the enclosed form of proxy to the Company’s branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited, on Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before (i.e. 2:00 p.m. on Saturday, 6 April 2019) the time appointed for the holding of the meeting or any adjournment thereof. The completion and delivery of a form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

The register of members of the Company will be closed from Tuesday, 2 April 2019 to Monday, 8 April 2019, 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, 1 April 2019.

The voting in respect of the resolutions (as set out in the notice of the EGM) at the EGM will be conducted by way of a poll. To the best knowledge of the Company having made all reasonable enquiries, save as disclosed in this circular, none of the substantial Shareholders has entered, or contemplated to enter into any other arrangements, agreements or understanding (whether formal or informal and whether express or implied) with the Original Bondholder and their associates which will confer any of the substantial Shareholders a benefit (whether economic or otherwise) not available to the other Shareholders of the Company. As at the Latest Practicable Date, to the extent that the Company was aware having made all reasonable enquiries, no Shareholder has any material interests in the Bonds or the New Specific Mandate, and therefore no Shareholder is required to abstain from voting on the resolutions as set out in the notice of the EGM.

The Guarantees and the Share Charge

Aim Right and Mr. Liu Zhihua are each a substantial shareholder of the Company and therefore a connected person of the Company. The Guarantees provided by Aim Right and Mr. Liu Zhihua, respectively, and the Share Charge to be executed by Aim Right, would each be a form of financial assistance to the Company, and accordingly, constitute a connected transaction of the Company under Chapter 14A of the Listing Rules. As the Guarantees and the Share Charge was and would be provided for the benefit of the Company on normal commercial terms or better and no security over the assets of the Group is granted in respect of the Guarantees or under the Share Charge, the Guarantees and the Share Charge would therefore be exempted from the reporting, announcement and independent Shareholders’ approval requirements under the Listing Rules.

– 23 –

LETTER FROM THE BOARD

VOTING BY POLL

The resolutions set out in the notice of the EGM would be decided by poll in accordance with the Listing Rules and the articles of association of the Company.

On a poll, every Shareholder present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy shall have one vote for every Share held. A Shareholder present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy who is entitled to more than one vote need not use all his/its votes or cast all his/its votes in the same way.

After the conclusion of the EGM, the poll results will be published on the website of Hong Kong Exchanges and Clearing Limited at www.hkexnews.hk.

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 Group. 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 is not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

RECOMMENDATION

The Directors (including the independent non-executive Directors) are of the opinion that the Terms of the Extension and the transactions contemplated under the Extension are on normal commercial terms, in the ordinary and usual course of business of the Company, and are fair and reasonable, and that the New Arrangements and the grant of the New Specific Mandate are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors (including the independent non-executive Directors) recommend that all Shareholders should vote in favour of the resolutions to be proposed at the EGM.

Yours faithfully,

By Order of the Board

Starrise Media Holdings Limited LIU Dong

Chairman and Executive Director

– 24 –

NOTICE OF THE EGM

APPENDIX

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Starrise Media Holdings Limited 星宏傳媒控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1616)

NOTICE IS HEREBY GIVEN that a general meeting (the ‘‘Meeting’’) of Starrise Media Holdings Limited (the ‘‘Company’’) will be held at Building A10, 50 Anjialou, Chaoyang District, Beijing, the People’s Republic of China on Monday, 8 April 2019 at 2:00 p.m. for the purpose of considering and, if thought fit, passing with or without amendments, the following ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

‘‘THAT:

• (a) the amendment agreement dated 28 February 2019 (the ‘‘Extension Agreement’’) entered into between the Company and Dragon Capital Entertainment Fund One LP (the ‘‘Original Bondholder’’) in relation to the extension of the maturity date of the existing unlisted bonds in aggregate principal amount of HK$180,000,000 (the ‘‘Remaining Bonds’’) previously issued on 28 February 2017 by the Company to the Original Bondholder by one additional year, and the transactions contemplated under the Extension Agreement and the Remaining Bonds as modified by the Extension Agreement (collectively, the ‘‘New Arrangements’’), be and are hereby approved, ratified and confirmed;

• (b) the directors of the Company be and are hereby granted a specific mandate to exercise powers of the Company to issue and allot such number of shares of the Company as may be required to be issued and allotted upon exercise of the conversion rights attached to the Remaining Bonds at the conversion price of the Remaining Bonds (subject to adjustments in accordance with the terms of the Remaining Bonds) (including, for the avoidance of doubt, such additional number of shares of the Company that may be required to be issued and allotted upon the exercise of the conversion rights attached to the Remaining Bonds following adjustments to the conversion price of the Remaining Bonds) under the New Arrangements; and

– 25 –

NOTICE OF THE EGM

APPENDIX

• (c) any one or more directors of the Company be and are hereby authorised to sign, execute, perfect, deliver and do all such documents, deeds, acts, matters and things, as the case may be, as they may in their discretion consider necessary, desirable or expedient in connection with (1) the performance of the rights and/or obligations under the Extension Agreement and in accordance with the terms of the Remaining Bonds under the New Arrangements, and (2) the issue and allotment of the shares of the Company upon exercise of the conversion rights attached to the Remaining Bonds at the conversion price of the Remaining Bonds (subject to adjustments in accordance with the terms of the Remaining Bonds) under the New Arrangements.’’

By Order of the Board Starrise Media Holdings Limited Liu Dong Chairman

Shangdong, the PRC, 20 March 2019

Notes:

1. Any member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and, on a poll, vote instead of him/her. A proxy need not be a member of the Company.

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

3. In order to be valid, the form of proxy together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of such power or authority, must be deposited with the branch share registrar and transfer office of the Company in Hong Kong, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before (i.e. 2:00 p.m. on Saturday, 6 April 2019) the time appointed for holding the meeting or any adjourned meeting thereof (as the case may be).

4. Completion and return of the form of proxy will not preclude members from attending and voting in person at the meeting or at any adjourned meeting thereof (as the case may be) should they so wish, and in such event, the form of proxy shall be deemed to be revoke.

5. Where there are joint registered holders of any share, any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he/she was solely entitled thereto, but if more than one of such joint holders are present at the meeting, whether in person or by proxy, the joint registered holder present whose name stands first on the register of members of the Company in respect of the shares shall be accepted to the exclusion of the votes of the other registered holders.

6. The register of members of the Company will be closed from Tuesday 2 April 2019 to Monday, 8 April 2019, 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, 1 April 2019.

As at the date of this notice, the Board comprises eight Directors, namely Mr. LIU Dong, Mr. LIU Zongjun, Ms. CHEN Chen, Mr. HE Han and Mr. TAN Bin as executive Directors; and Mr. LAM Kai Yeung, Ms. LIU Chen Hong and Mr. WANG Liangliang as independent nonexecutive Directors.

– 26 –