Asiaray Media Group Limited - Proxy Solicitation & Information Statement 2017

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Asiaray Media Group Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, 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 transferee.

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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ASIARAY MEDIA GROUP LIMITED 雅仕維傳媒集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1993)

CONNECTED TRANSACTION

ISSUE OF PERPETUAL SUBORDINATED CONVERTIBLE SECURITIES

Independent financial adviser to the Independent Board Committee and Independent Shareholders of the Company

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A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 15 to 16 of this circular. A letter from Beijing Securities Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders, containing its advice to the Independent Board Committee and the Independent Shareholders in respect of the issue of perpetual subordinated convertible securities and the transactions contemplated thereunder is set out on pages 17 to 40 of this circular.

A notice convening the EGM to be convened at 16th Floor, Kornhill Plaza — Office Tower, 1 Kornhill Road, Quarry Bay, Hong Kong on Friday, 15 December 2017 at 11:00 a.m. is set out on pages EGM-1 to EGM-2 of this circular. A form of proxy for use at the EGM is enclosed with this circular. Whether or not you plan to attend the EGM, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Company’s branch share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and 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.

30 November 2017

		Pages
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from	the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from	the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Letter from	Beijing Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Appendix I	— General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Notice of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		EGM-1

– i –

DEFINITIONS

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

‘‘Asiaray China’’
Asiaray China Media Limited, a company established in Samoa with limited liability on 11 May 1999 and is wholly owned by Mr. Lam
‘‘associates’’

has the meaning ascribed thereto in the Listing Rules

‘‘Beijing Asiaray’’
北京雅仕維廣告有限公司 (Beijing Asiaray Advertising Company Limited*), a company established in the PRC with limited liability on 9 July 1998 and an indirect whollyowned subsidiary of the Company
‘‘Beijing Securities’’ or ‘‘Independent Financial Adviser’’
Beijing Securities Limited, a licensed corporation to carry out type 1 (dealing in securities), type 4 (advertising on securities) and type 6 (advising on corporate finance) regulated activities as defined under the SFO and the independent financial adviser appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the Subscription Agreement, the Supplemental Agreement and the Subscription
‘‘Billion China’’
Billion China International Limited, a company established in Samoa with limited liability on 8 August 2005 and is wholly owned by Mr. Lam
‘‘Board’’
the board of Directors
‘‘Business Day’’
a day, other than a Saturday or Sunday or public holiday, on which commercial banks are generally open for normal banking business in Hong Kong
‘‘Chairman’’
the chairman of the Company
‘‘Company’’
Asiaray Media Group Limited, a company incorporated in the Cayman Islands with limited liability and the shares of which are listed on the Main Board of the Stock Exchange
‘‘Completion’’
the First Completion or the Second Completion, as the case may be
‘‘Conditions’’
the terms and conditions of the PSCS
‘‘connected person(s)’’
has the meaning ascribed to it under the Listing Rules
‘‘Controlling Shareholder(s)’’ controlling shareholder(s) (which has the meaning ascribed to it under the Listing Rules) of the Company

– 1 –

DEFINITIONS

‘‘Conversion’’
the exercise of the conversion rights attached to the PSCS and the issuance of the Conversion Shares accordingly
‘‘Conversion Price’’
the price at which each Conversion Share(s) will be issued upon Conversion, being HKD3.54 per Conversion Share initially, and subject to adjustments which may be made pursuant to the Conditions
‘‘Conversion Share(s)’’

the new Share(s) to be issued upon Conversion

‘‘Director(s)’’ the director(s) of the Company
‘‘EGM’’
the extraordinary general meeting of the Company to be convened to approve the Subscription Agreement, the Supplemental Agreement and the transactions contemplated thereunder
‘‘First Completion’’
completion of the subscription for and issue of the PSCS in the principal amount of HKD30,000,000 in accordance with the terms and conditions of the Subscription Agreement and the Supplemental Agreement
‘‘Genesis Printing’’
Genesis Printing and Production Limited, a company incorporated in Hong Kong with limited liability on 8 October 2007 and an indirect wholly-owned subsidiary of the Company
‘‘Group’’
the Company and its subsidiaries
‘‘HKD’’
Hong Kong dollars, the lawful currency of Hong Kong
‘‘Hong Kong’’
Hong Kong Special Administrative Region of the PRC
‘‘Hong Kong Asiaray’’
Hong Kong Asiaray Advertising Limited, a company incorporated in Hong Kong with limited liability on 31 October 1995, and an indirect wholly-owned subsidiary of the Company
‘‘Independent Board Committee’’
an independent committee of the Board comprising all the independent non-executive Directors, established to advise the Independent Shareholders in respect of the Subscription Agreement, the Supplemental Agreement and the transactions contemplated thereunder
‘‘Independent Shareholders’’

Shareholders other than the Subscriber and its associates

– 2 –

DEFINITIONS

‘‘Last Trading Date’’
7 September 2017, being the last full trading day in the Shares immediately before the publication of the announcement dated 7 September 2017
‘‘Latest Practicable Date’’ 28 November 2017, 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
‘‘Long Stop Date’’ 31 December 2017 or such other date as may be agreed in writing between the Company and the Subscriber
‘‘Mr. Lam’’
Mr. Lam Tak Hing, Vincent, an executive Director and a controlling shareholder of the Company
‘‘Parity Securities’’
any instrument or security (including preference shares) issued, entered into or guaranteed by the Company which ranks or is expressed to rank pari passu with the PSCS
‘‘Peaky’’
Peaky Limited, a company incorporated in Hong Kong with limited liability on 29 March 2011 and is wholly owned by Mr. Lam
‘‘PRC’’ the People’s Republic of China and for the purpose of this circular, excluding Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan
‘‘PSCS’’
the perpetual subordinated convertible securities in the principal amount of HKD50,000,000 to be issued by the Company to the Subscriber
‘‘Second Completion’’
completion of the subscription for and issue of the PSCS in the principal amount of HKD20,000,000 in accordance with the terms and conditions of the Subscription Agreement and the Supplemental Agreement
‘‘SFO’’
Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
‘‘Shanghai Asiaray’’ 上海雅仕維廣告有限公司 (Shanghai Asiaray Advertising Company Limited*), a company established in the PRC with limited liability on 27 April 1999 and an indirect wholly-owned subsidiary of the Company
‘‘Share(s)’’
ordinary share(s) of HKD0.10 each in the share capital of the Company

– 3 –

DEFINITIONS

‘‘Shareholders’’

holder(s) of the Share(s)

‘‘Stock Exchange’’

The Stock Exchange of Hong Kong Limited

‘‘Subscriber’’
Space Management Limited, a company incorporated under the laws of the British Virgin Islands, being a controlling shareholder of the Company holding 17.73% of the existing issued share capital of the Company as at the Latest Practicable Date
‘‘Subscription’’
the subscription of the PSCS by the Subscriber pursuant to the terms of the Subscription Agreement and the Supplemental Agreement
‘‘Subscription Agreement’’
the subscription agreement dated 7 September 2017 (as amended and supplemented by the Supplemental Agreement) entered into between the Company and the Subscriber in relation to the Subscription
‘‘Supplemental Agreement’’
the supplemental agreement dated 10 November 2017 entered into between the Company and the Subscriber to amend certain terms of the Subscription Agreement
‘‘USD’’
means United States Dollars, the lawful currency of the United States of America
‘‘%’’
per cent
For identification purpose only

For the purpose of illustration only, amounts denominated in RMB in this circular have been translated into HKD at the rate of RMB0.85 = HKD1. Such translations should not be construed as a representation that the amounts in question have been, could have been or could be converted at any particular rate or at all.

– 4 –

LETTER FROM THE BOARD

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ASIARAY MEDIA GROUP LIMITED 雅仕維傳媒集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1993)

Executive Directors:

Mr. Lam Tak Hing, Vincent (Chairman) Mr. Lam Ka Po

Non-executive Director: Mr. Wong Chi Kin

Independent non-executive Directors: Mr. Ma Andrew Chiu Cheung Mr. Ma Ho Fai GBS JP Ms. Mak Ka Ling

Registered office: Maples Corporate Services Limited P.O. Box 309 Ugland House Grand Cayman, KY1-1104 Cayman Islands

Head office and principal place of business in Hong Kong: 16th Floor, Kornhill Plaza — Office Tower 1 Kornhill Road Quarry Bay Hong Kong

30 November 2017

To the Shareholders,

Dear Sirs,

CONNECTED TRANSACTION ISSUE OF PERPETUAL SUBORDINATED CONVERTIBLE SECURITIES

INTRODUCTION

Reference is made to the announcements of the Company dated 7 September 2017 and 10 November 2017 in relation to the Subscription by the Subscriber (being a connected person) of the PSCS in the principal amount of HKD50,000,000 convertible into Conversion Shares at the initial Conversion Price of HKD3.54 per Conversion Share (subject to adjustments) in two tranches at the face value of HKD30,000,000 and HKD20,000,000 respectively.

On 7 September 2017, the Company and the Subscriber entered into the Subscription Agreement in relation to the Subscription.

– 5 –

LETTER FROM THE BOARD

On 10 November 2017, the Company and the Subscriber entered into the Supplemental Agreement, pursuant to which the Company and the Subscriber agreed to amend certain terms of the Subscription Agreement which include, among others, amendments, to the material effects that the call for the Subscriber to subscribe for the second tranche of the PSCS shall be subject to the Independent Shareholders’ approval.

For the avoidance of doubt, the Distribution shall not lead to any adjustment of the Conversion Price. Assuming the exercise in full of the conversion rights attaching to the PSCS at the initial Conversion Price, a total of 14,124,293 Conversion Shares will be issued.

The purpose of this circular is to provide you with, among other things, (i) further information regarding the Subscription; (ii) a letter from the Independent Board Committee to the Independent Shareholders regarding the Subscription; (iii) a letter from Beijing Securities containing its advice to the Independent Board Committee and Independent Shareholders regarding the Subscription; and (iv) the notice of the EGM.

THE SUBSCRIPTION AGREEMENT

Date

7 September 2017 (as varied and supplemented by the Supplemental Agreement dated 10 November 2017)

Parties

Issuer: the Company

Subscriber: Space Management Limited

The Subscriber is a controlling shareholder of the Company holding 17.73% of the existing issued share capital of the Company as at the Latest Practicable Date.

The Subscriber is a company incorporated under the laws of the British Virgin Islands. It is an investment holding company, the sole investment of which is its interest in the Company. The sole ultimate beneficial owner of the Subscriber is Mr. Lam, who is an executive Director and a controlling shareholder of the Company.

Subscription

Subject to the fulfillment of the conditions set out below in the section headed ‘‘Conditions Precedent’’, the Company has agreed to issue, and the Subscriber has agreed to subscribe for, the PSCS in the principal amount of HKD50,000,000 convertible into Conversion Shares at the initial Conversion Price of HKD3.54 per Conversion Share (subject to adjustments) in two tranches at the face value of HKD30,000,000 and HKD20,000,000 respectively. For the avoidance of doubt, the Distribution shall not lead to any adjustment of the Conversion Price.

– 6 –

LETTER FROM THE BOARD

The Conversion Price was arrived at after arm’s length negotiations between the Company and the Subscriber taking into account the average closing price of the Shares for the 5 trading days, 10 trading days, 30 trading days, 60 trading days and 90 trading days prior to the date of the Subscription Agreement. The Conversion Price represents:

(i) a premium of approximately 30% to the closing price of HKD2.72 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a premium of approximately 29% to the average of the closing prices of approximately HKD2.74 per Share for the 5 trading days of the Shares up to and including the Last Trading Day;
(iii) a premium of approximately 30% to the average of the closing prices of approximately HKD2.72 per Share for the 10 trading days of the Shares up to and including the Last Trading Day;
(iv) a premium of approximately 32% to the average of the closing prices of approximately HKD2.69 per Share for the 30 trading days of the Shares up to and including the Last Trading Day;
(v) a premium of approximately 33% to the average of the closing prices of approximately HKD2.66 per Share for the 60 trading days of the Shares up to and including the Last Trading Day;
(vi) a premium of approximately 37% to the average of the closing prices of approximately HKD2.59 per Share for the 90 trading days of the Shares up to and including the Last Trading Day;
(vii) a premium of approximately 168% to the audited net asset value per Share of approximately HKD1.32, which is calculated based on the audited net asset value of the Company of approximately HKD582,505,000 as at 31 December 2016 as stated in its 2016 annual report divided by its total number of 440,000,000 issued Shares as at 31 December 2016.

Assuming the exercise in full of the conversion rights attaching to the PSCS at the initial Conversion Price, a total of 14,124,293 Conversion Shares may be issued, representing approximately 3.21% of the existing issued share capital of the Company and approximately 3.11% of the issued share capital of the Company as enlarged by the Conversion.

The Conversion Shares in relation to the first tranche of the PSCS will be allotted and issued under the general mandate granted to the Directors by a resolution of the Shareholders passed at the Company’s annual general meeting held on 26 June 2017 pursuant to which the Directors were allowed to allot and issue up to 88,000,000 Shares. As at the Latest Practicable Date, no Shares have been issued and allotted pursuant to such general mandate. The second tranche of the PSCS shall not be issued under the general mandate granted on 26 June 2017 but separately by the Independent Shareholders’ approval when the Company calls for subscription from the Subscriber.

– 7 –

LETTER FROM THE BOARD

Conditions Precedent

The First Completion

Completion is conditional upon the fulfillment of the following conditions before the Long Stop Date:

A. the Independent Shareholders having approved the Subscription Agreement and the transaction contemplated therein in the EGM; and
B. the Listing Committee of the Stock Exchange having granted the listing of and permission to deal in the Conversion Shares in relation to the first tranche of the PSCS.

If any of the above conditions precedent is not fulfilled on or before the Long Stop Date, the Subscription Agreement shall be terminated and become null and void and none of the parties shall have any claim against the other for any costs or losses (save for any antecedent breaches).

The First Completion shall take place on the 7th Business Day following the date on which all the above conditions precedent (or such other date as may be agreed in writing between the Company and the Subscriber). The Subscriber shall pay the principal amount of HKD30,000,000 to the Company for the first tranche of the PSCS.

The Second Completion

The Second Completion is conditional upon the fulfillment of the following conditions:

A. the Independent Shareholders having approved the issue of the second tranche of the PSCS; and
B. the Listing Committee of the Stock Exchange having granted the listing of and permission to deal in the Conversion Shares in relation to the second tranche of the PSCS.

The Second Completion shall take place on the 7th Business Day following the date of the notice served by the Company, exercising its right at its sole discretion within 5 years from the First Completion, on the Subscriber (or such other date as may be agreed in writing between the Company and the Subscriber) calling for the Subscriber to subscribe for the second tranche of the PSCS at the principal amount of HKD20,000,000. The call for the Subscriber to subscribe for the second tranche of the PSCS shall be subject to the Independent Shareholders’ approval.

– 8 –

LETTER FROM THE BOARD

Warranties and Undertakings

The Company has given customary warranties and undertakings to the Subscriber under the Subscription Agreement.

Termination

The Subscription Agreement shall terminate:

A. if any of the conditions precedent for the First Completion has not been fulfilled by the Long Stop Date; or
B. by agreement between the Company and the Subscriber prior to the First Completion.

PRINCIPLE TERMS OF THE PSCS

Issue price

: 100% of the principal amount of the PSCS
Form : The PSCS will be issued in registered form Maturity Date : There is no maturity date

Status and Subordination

: The PSCS constitutes direct, unsecured and subordinated obligations of the Company and rank pari passu without any preference or priority among themselves.

In the event of the winding-up of the Company, the rights and claims of the holder(s) of the PSCS shall:

(a) rank ahead of those persons whose claims are in respect of any class of share capital of the Company;
(b) be subordinated in right of payment to the claims of all other present and future senior and subordinated creditors of the Company; and
(c) pari passu with each other and with the claims of holders of Parity Securities

Distribution

: The PSCS confers a right to receive distribution(s) (the ‘‘Distribution’’) from and including the date of issue of the PSCS at the rate of distribution payable quarterly in arrears on 31 March, 30 June, 30 September and 31 December each year (the ‘‘Distribution Payment Date’’), subject to the terms of the PSCS. For the avoidance of doubt, no part of the Distribution shall be converted into Conversion Shares in lieu of payment

– 9 –

LETTER FROM THE BOARD

Rate of Distribution

Optional deferral of distributions

Conversion Price

Conversion Shares

Conversion period

Restrictions on Conversion

Fractional Shares

: 5.75% per annum of any outstanding principal amount of PSCS (the ‘‘Rate of Distribution’’)
: The Company may, at its sole discretion, elect to defer a Distribution pursuant to the terms of the PSCS. The deferred Distribution shall be non-interest bearing. The number of times of optional deferral of Distribution by the Company is not restricted
: Initially HKD3.54 per Conversion Share, subject to adjustment as provided for in the terms of the PSCS, including but not limited to an alteration to the nominal amount of the Shares as a result of consolidation, subdivision or reclassification, capitalization of profits or reserves, capital distributions, rights issues or issue of options, warrants or other rights to subscribe for, purchase or otherwise acquire any Shares
: 14,124,293 Conversion Shares will be allotted and issued by the Company upon full conversion of the PSCS at the initial Conversion Price
: Conversion of the PSCS into Conversion Shares may take place at any time after the date of issue of the PSCS, subject to the relevant terms as provided in the terms of the PSCS
: No conversion right shall be exercised by the holder of the PSCS (or when it is exercised by virtue of a conversion notice having been given, the Company shall not be obliged to issue any Conversion Shares but may treat that conversion notice as invalid) if the Company will be in breach of the Listing Rules or The Codes on Takeovers and Mergers and Share Repurchases immediately following such Conversion
: Fractions of Shares will not be issued on Conversion and no cash adjustments will be made in respect thereof. Notwithstanding the foregoing, in the event of a consolidation or re-classification of Shares by operation of law or otherwise occurring after the date of constitution of the PSCS, the Company will upon Conversion pay in cash a sum equal to such portion of the principal amount of the PSCS represented by the certificate deposited in connection with the exercise of conversion rights as corresponds to any fraction of a Share not issued as aforesaid if such sum exceeds HKD100

– 10 –

LETTER FROM THE BOARD

Voting : The holder(s) of PSCS will not be entitled to receive notice of, attend or vote at general meetings of the Company by reason only of it being a PSCS holder
Transferability : Subject to the terms of the PSCS, the PSCS may be transferred by delivery of the certificate issued in respect of those PSCS, with the form of transfer in the agreed form as set out in the terms of the PSCS duly completed and signed, to the registered office of the Company. No transfer of the PSCS will be valid unless and until (a) the Company has provided its written consent to the transfer (such consent shall not be unreasonably withheld); and (b) such transfer has been entered on the register of PSCS holder(s)
Redemption rights : The PSCS may be redeemed at the option of the Company, at 100% or 50% of the principal amount of the PSCS each time, on any Distribution Payment Date at the face value of the outstanding principal amount of the PSCS to be redeemed plus 100% or 50% (as the case may be) of Distributions accrued to such date
Listing : No application will be made for the listing of the PSCS on the Stock Exchange. An application will be made by the Company to the Listing Committee for the listing of, and permission to deal in, the Conversion Shares

EFFECT ON THE SHAREHOLDING STRUCTURE

Assuming that there is no change in the issued share capital of the Company prior to the Conversion, the shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) upon full Conversion by the Subscriber will be as follows:

Substantial Shareholders Media Cornerstone Limited1 The Subscriber2 Public Public Shareholders	Shareholding as at the Latest Practicable Date Number of Shares % (approx.) 242,000,000 55.00 78,001,000 17.73 119,999,000 27.27 440,000,000 100.00	Shareholding upon full Conversion by the Subscriber Number of Shares % (approx.) 242,000,000 53.29 92,125,293 20.29 119,999,000 26.42 454,124,293 100.00	Shareholding upon full Conversion by the Subscriber Number of Shares % (approx.) 242,000,000 53.29 92,125,293 20.29 119,999,000 26.42 454,124,293 100.00
			100.00

– 11 –

LETTER FROM THE BOARD

Notes:

Mr. Lam is the founder of the Shalom Trust (a discretionary trust established by Mr. Lam as settlor of which UBS Trustee (BVI) Limited acts as the trustee and beneficiaries of which are Mr. Lam, certain of his family members and others persons who may be added from time to time) which indirectly holds the entire issued share capital of Media Cornerstone Limited, which holds 242,000,000 Shares.
Mr. Lam is the sole shareholder of the Subscriber which holds 78,001,000 Shares. Mr. Lam has undertaken that upon Conversion, he would procure the Subscriber to place down the Shares to maintain the public flow of 25% in compliance with the Listing Rules.

USE OF PROCEEDS AND REASONS FOR THE SUBSCRIPTION

The Company was incorporated in the Cayman Islands with limited liability. The Company is an investment holding company and its subsidiaries are principally engaged in the development and operations of out-of-home advertising media, including advertising in airports, metro lines, billboards and building solutions in the PRC and Hong Kong.

The Group has solid financial position with sufficient financial resources for the operation of the Group. The net proceeds from the issue of the PSCS (after deduction of all related expenses) will be approximately HKD49,700,000. The proceeds from the first tranche of PSCS would be used as general working capital of the Company including approximately HKD15 million to improve the advertising fixtures and conduct office renovation, approximately HKD10 million for new recruitment and salary costs, and approximately HKD5 million for bank charges and interest expenses. If more capital is required for working capital or business development opportunities, the Company will call for the Second Completion of the PSCS.

The Board is of the view that, since the PSCS is considered to be equity of the Company, the entering into of the Subscription Agreement could help control the corporate structure of the Company and represents an opportunity for the Company to raise immediate capital for the Company and to broaden the capital base of the Company. The PSCS is fixed-for-fixed and there is no need for the PSCS to mark to market every year. Besides, even though the Company currently has sufficient financial resources (basically all short-term credit facilities), it needs long-term financial resources to match the terms of various airport and metro projects which are usually 5 to 10 years. Given the immediate dilution effect, equity financing by way of issue of new shares to third parties is not in the best interests of the Shareholders whereas the issue of PSCS provides additional financial resources without an immediate dilution effect on the shareholding of the existing Shareholders. No conversion right shall be exercised by the holder of the PSCS if the Company will be in breach of the Listing Rules or the Takeover Codes immediately following such Conversion. Mr. Lam has also undertaken that upon Conversion, he would procure the Subscriber to place down the Shares to maintain the public flow of 25% in compliance with the Listing Rules. The Board considers that the second tranche of PSCS serves as a committed contingent long-term facility for the Group. When the Group comes across a good project, investment or imminent financing needs in the future, it has the option but not an obligation to draw on the same to capture a business opportunity. The Company can utilise the second tranche without immediate dilution, it is especially the case when the share price of the Company is relatively low. Further, there is no principal and interest repayment pressure to the Company. The issue of PSCS is an efficient mean to raise funds as there is no instant material cash outflow pressure on the Group before the repayment

– 12 –

LETTER FROM THE BOARD

of the PSCS since the PSCS has no maturity date. Furthermore, the Company may at its sole discretion to elect to defer a Distribution pursuant to the terms of the PSCS, which makes the financial and cashflow management of the Group more flexible.

The Directors (including the independent non-executive Directors) consider that the Subscription and terms and conditions of the Subscription Agreement were negotiated on an arm’s length basis, agreed on normal commercial terms between the Company and the Subscriber and the terms were fair and reasonable. The Subscription Agreement was entered into in the interests of the Company and the Shareholders as a whole.

FUND RAISING ACTIVITY BY THE COMPANY IN THE LAST 12 MONTHS

					Actual use of
					the net
					proceeds as at
			Proposed use		the Latest
Date of	Fund raising	Net proceeds raised	of the net		Practicable
announcement	activity	(approximately)	Proceeds		Date
10 October 2016 and	Issue of non-	HKD40,700,000 (upon	General working		The warrants
13 October 2016	listed warrants	exercise with a net		capital of the	have not been
		warrant exercise price		Company	exercised
		of approximately
		HKD4.07 per warrant
		share)

Save for the above, the Company had not conducted any fund raising exercise in the past twelve months immediately before the Latest Practicable Date.

LISTING RULES IMPLICATION

The Subscriber is a controlling shareholder of the Company holding 17.73% of the existing issued share capital of the Company and the sole ultimate beneficial owner of the Subscriber is Mr. Lam, who is an executive Director and a controlling shareholder of the Company. The Subscriber is therefore a connected person of the Company and the Subscription constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules, which is subject to the reporting, announcement and Independent Shareholders’ approval requirements.

Save for Mr. Lam, who has a material interest in the issue of the PSCS, has abstained from voting on the relevant board resolutions, no other Directors have a material interest in the transaction and have abstained from voting on the board resolutions.

Mr. Lam and his associates (beneficially interested in an aggregate of 320,001,000 Shares, representing approximately 72.73% of the entire issued share capital of the Company as at the Latest Practicable Date) shall abstain from voting on the proposed resolution to the issue of the PSCS at the EGM.

– 13 –

LETTER FROM THE BOARD

An Independent Board Committee has been formed to advise the Independent Shareholders and Beijing Securities has been appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the Subscription Agreement.

EGM

An EGM to be held at 16th Floor, Kornhill Plaza — Office Tower, 1 Kornhill Road, Quarry Bay, Hong Kong on Friday, 15 December 2017 at 11:00 a.m. during which ordinary resolution will be proposed to approve Subscription and the transactions contemplated thereunder. The Subscriber and its associates are required to abstain from voting on the resolution to be proposed at the EGM.

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for the 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. Voting on the proposed resolution at the EGM will be taken by poll.

RECOMMENDATIONS

Your attention is drawn to the recommendation of the Independent Board Committee and the letter of advice from Beijing Securities, both contained in this circular regarding their respective advice on the Subscription. The Independent Shareholders are advised to read these letters before deciding how to vote on the resolution in the EGM.

The Board (excluding Mr. Lam who has material interest in the Subscription) considers that the proposed ordinary resolution in relation to the Subscription is in the interests of the Company and the Shareholders as a whole and accordingly recommends the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM.

Yours faithfully, By order of the Board Asiaray Media Group Limited Lam Tak Hing, Vincent Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of the letter of recommendation from the Independent Board Committee to the Independent Shareholders prepared for the purpose of inclusion in this circular.

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ASIARAY MEDIA GROUP LIMITED 雅仕維傳媒集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1993)

30 November 2017

To the Independent Shareholders,

Dear Sirs,

CONNECTED TRANSACTION ISSUE OF PERPETUAL SUBORDINATED CONVERTIBLE SECURITIES

We refer to the circular of the Company to the Shareholders dated 30 November 2017 (the ‘‘Circular’’), of which this letter forms part. Unless specified otherwise, capitalised terms used herein shall have the same meanings as those defined in the Circular.

We have been appointed as the Independent Board Committee to consider the Subscription and the transaction contemplated thereunder (including but not limited to the issue of the PSCS to the Subscriber and the allotment and issue of the Conversion Shares upon the exercise of the conversion rights attached to the PSCS), to advise the Independent Shareholders as to the fairness and reasonableness of the terms of the Subscription Agreement and the transactions contemplated thereunder, and to recommend how the Independent Shareholders should vote at the EGM. Beijing Securities Limited has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholder in this regard.

We wish to draw your attention to the letter from the Board and letter from the Independent Financial Advisor set out on pages 5 to 14 and pages 17 to 40 of the Circular respectively, and the additional information set out in the appendices to the Circular.

Having taken into account the terms of the Subscription and the transactions contemplated thereunder and the principal factors and reasons considered by the Independent Financial Advisor, we concur with the view of the Independent Financial Advisor and consider that the terms of the Subscription and the transactions contemplated thereunder are on normal

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend you to vote in favour of the resolution to be proposed at the EGM to approve the Subscription and the transactions contemplated thereunder.

Yours faithfully,

The Independent Board Committee Mr. Ma Andrew Chiu Cheung Mr. Ma Ho Fai GBS JP Independent non-executive Directors

Ms. Mak Ka Ling

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LETTER FROM BEIJING SECURITIES

The following is the letter of advice from Beijing Securities to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

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BEIJING SECURITIES LIMITED

14th Floor, Shanghai Industrial Investment Building, 48 Hennessy Road, Wanchai, Hong Kong

30 November 2017

To the Independent Board Committee and the Independent Shareholders of Asiaray Media Group Limited

Dear Sirs,

CONNECTED TRANSACTION ISSUE OF PERPETUAL SUBORDINATED CONVERTIBLE SECURITIES

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Subscription Agreement, details of which are set out in the letter from the Board (the ‘‘Letter from the Board’’) contained in the circular of the Company dated 30 November 2017 (the ‘‘Circular’’), of which this letter forms a part. Terms used in this letter shall have the same meanings as those defined in the Circular unless the context requires otherwise.

On 7 September 2017, the Company entered into the Subscription Agreement with the Subscriber pursuant to which the Company has conditionally agreed to issue, and the Subscriber has conditionally agreed to subscribe for, the PSCS in the principal amount of HKD50,000,000 convertible into Conversion Shares at the initial Conversion Price of HKD3.54 per Conversion Share (subject to adjustments) in two tranches. On 10 November 2017, the Company and the Subscriber entered into the Supplemental Agreement, pursuant to which the Company and the Subscriber agreed to amend certain terms of the Subscription Agreement which include, among others, amendments, to the material effects that the call for the Subscriber to subscribe for the second tranche of the PSCS shall be subject to the Independent Shareholders’ approval. For the avoidance of doubt, the Distribution shall not lead to any adjustment of the Conversion Price. The net proceeds from the issue of the PSCS (after deduction of related expenses) will be approximately HKD49,700,000. The proceeds from the first tranche of PSCS would be used as general working capital of the Company including approximately HKD15 million to improve the advertising fixtures and conduct office renovation, approximately HKD10 million for new recruitment and salary costs, and

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LETTER FROM BEIJING SECURITIES

approximately HKD 5 million for bank charges and interest expenses. If more capital is required for working capital or business development opportunities, the Company will call for the Second Completion of the PSCS.

As at the Latest Practicable Date, the Subscriber is a controlling shareholder of the Company holding approximately 17.73% of the existing issued share capital of the Company and the sole ultimate beneficial owner of the Subscriber is Mr. Lam, who is an executive Director and a controlling shareholder of the Company. The Subscriber is therefore a connected person of the Company and the Subscription constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules, which is subject to the reporting, announcement and Independent Shareholders’ approval requirements.

The Board currently comprises of two executive Directors, one non-executive Director and three independent non-executive Directors. The Independent Board Committee, which currently comprises of all the independent non-executive Directors, Mr. Ma Andrew Chiu Cheung, Mr. Ma Ho Fai GBS JP and Ms. Mak Ka Ling, has been established to advise the Independent Shareholders regarding the Subscription Agreement. We have been appointed by the Company as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this respect, and such appointment has been approved by the Independent Board Committee.

Beijing Securities Limited is not connected with the directors, chief executive or substantial shareholders of the Company and its subsidiaries or any of their respective associates and therefore is considered suitable to give independent advice to the Independent Board Committee and the Independent Shareholders. Apart from normal professional fees payable to us in connection with this appointment, no arrangement exists whereby Beijing Securities Limited will receive any fees or benefits from the Company or the directors, chief executive or substantial shareholders of the Company and its subsidiaries or any of their respective associates.

Our role is to provide you with our independent opinion and recommendation as to (i) whether the Subscription Agreement was entered into in the ordinary and usual course of business and on normal commercial terms and whether the terms thereof are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole; and (ii) how the Independent Shareholders should vote in respect of the relevant resolution(s) to approve the Subscription Agreement at the EGM.

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained or referred to in the Circular and the information and representations provided to us by the Directors, the Company and its management.

We have assumed that all information and representations that have been provided by the Directors, for which they are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so as at the Latest Practicable Date, and should there

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LETTER FROM BEIJING SECURITIES

be any material changes to our opinion after the Latest Practicable Date, Shareholders would be notified as soon as possible. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company, its management and/or the Directors, which have been provided to us. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts not contained in the Circular, the omission of which would make any statement in the Circular misleading.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent verification of the information included in the Circular and provided to us by the Directors and the management of the Group nor have we conducted any form of in-depth investigation into the business and affairs or the future prospects of the Group.

PRINCIPAL FACTORS TAKEN INTO CONSIDERATION

In formulating our opinion in respect of the Subscription Agreement to the Independent Board Committee and the Independent Shareholders, we have considered the following principal factors and reasons:

1. Introduction

On 7 September 2017, the Company entered into the Subscription Agreement with the Subscriber pursuant to which the Company has conditionally agreed to issue, and Subscriber has conditionally agreed to subscribe for, the PSCS in the principal amount of HKD50,000,000 convertible into Conversion Shares at the initial Conversion Price of HKD3.54 per Conversion Share (subject to adjustments) in two tranches. For the avoidance of doubt, the Distribution shall not lead to any adjustment of the Conversion Price.

Assuming the exercise in full of the conversion rights attaching to the PSCS at the initial Conversion Price, a total of 14,124,293 Conversion Shares will be issued, representing approximately 3.21% of the existing issued share capital of the Company and approximately 3.11% of the issued share capital of the Company as enlarged by the Conversion.

The net proceeds from the issue of the PSCS (after deduction of related expenses) will be approximately HKD49,700,000. The proceeds from the first tranche of PSCS would be used as general working capital of the Company including approximately HKD15 million to improve the advertising fixtures and conduct office renovation,

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LETTER FROM BEIJING SECURITIES

approximately HKD10 million for new recruitment and salary costs, and approximately HKD5 million for bank charges and interest expenses. If more capital is required for working capital or business development opportunities, the Company will call for the Second Completion of the PSCS.

2. Background and financial information of the Group

Set out below is a summary of the audited financial information of the Group for the two years ended 31 December 2016 as extracted from the annual report of the Company for the year ended 31 December 2016 (‘‘Annual Report’’) and the unaudited financial information of the Group for the six months ended 30 June 2017 as extracted from the interim report of the Company for the six months ended 30 June 2017 (‘‘Interim Report’’).

Revenue — Airport business — Metro lines business — Billboards and building solutions — Others Total Profit/(Loss) attributable to owners of the Company for the period/year	For the six months ended 30 June 2017 (HKD’000) (unaudited) 380,318 206,745 68,963 87,653 743,679 5,037	For the year ended 31 December 2016 2015 (HKD’000) (HKD’000) (audited) (audited) 685,434 628,957 457,843 424,829 157,867 160,888 169,651 191,619 1,470,795 1,406,293 15,826 (39,616)

For the year ended 31 December 2016

As set out in the Annual Report, the Group was ranked first in airport advertising and second in metro advertising in Greater China region among the privately-owned media companies for the year ended 31 December 2016. New projects incepted by the Group during the year ended 31 December 2016 included the exclusive concession rights for the advertising space at Xiamen Gaoqi International Airport Terminal 4, Sanya Phoenix International Airport Terminal 2

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LETTER FROM BEIJING SECURITIES

and Beijing Metro Line No. 16. As at 31 December 2016, the Group’s media portfolio also covered 37 cities in the Greater China region. Further, as of 31 December 2016, the Group secured the exclusive concession rights of the mainstream media resources of 27 airports and 12 metro lines in the Greater China region. In addition, the annual aggregate passenger traffic of all the airports exclusively covered by the Group as at 31 December 2016 amounted to approximately 248.2 million, which accounted to approximately one-quarter of the aggregate passenger traffic of all airports across the PRC.

For the year ended 31 December 2016, revenue was approximately HKD1,470.8 million, which represented an increase of approximately 4.6% from approximately HKD1,406.3 million for the year ended 31 December 2015. The increase in revenue was mainly due to, among others, the increase in revenue in the airports media and metro media segments which was partially offset by the decrease in revenue in others business segments. For the year ended 31 December 2016, profit attributable to owners of the Company was approximately HKD15.8 million as compared with a loss of approximately HKD39.6 million for the year ended 31 December 2015. The increase in such profit for the year ended 31 December 2016 was, amongst others, the net effect of the following factors: (i) the increase in revenue of the Group; (ii) a write-back of the compensation provision for the early termination of the concession rights contract of Ningbo Metro Line No. 1; and (iii) the increased cost in concession cost due to inception of new projects, such as Xiamen Airport and Sanya Airport, and increase of concession fee payable under the concession rights contract of Zhengzhou Airport commenced in the first half of 2016.

For the six months ended 30 June 2017

As set out in the Interim Report, the Group continues to be ranked first in airport advertising and second in metro advertising in Greater China region among the privately-owned media companies for the six months ended 30 June 2017. New projects incepted by the Group during the six months ended 30 June 2017 included the exclusive concession rights for Tianjin Metro Lines 2 and 3 and Hangzhou Metro Lines 2 and 4. As at 30 June 2017, the Group’s media portfolio also covered 38 cities in the Greater China region. Further, as of 30 June 2017, the Group secured the exclusive concession rights of the mainstream media resources of 27 airports and 16 metro lines in the Greater China region. In addition, as set out in the Interim Report, the annual aggregate passenger traffic of all the airports exclusively covered by the Group as at the end of 2016 amounted to approximately 248.2 million, which accounted to approximately one-quarter of the aggregate passenger traffic of all airports across the PRC.

For the six months ended 30 June 2017, revenue was approximately HKD743.7 million, which represented an increase of approximately 11.7% from approximately HKD666.0 million for the six months ended 30 June 2016. The increase in revenue was mainly due to, amongst others, the growth in revenue from airport media segment. For the six months ended 30 June 2017, profit attributable to owners of the Company was approximately HKD5.0 million as compared with a loss of

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LETTER FROM BEIJING SECURITIES

approximately HKD7.7 million for the six months ended 30 June 2016. The increase in such profit for the six months ended 30 June 2017 was, amongst others, the net effect of the increase in revenue of the Group which was partially offset by the absence of the HKD28.4 million other gain associated with the written back of provision of compensation loss in the six months ended 30 June 2017.

Outlook

As set out in the Annual Report, the Group is committed to exploring development opportunities in airports and metro lines to achieve long-term growth as well as to continue to strategically attain new projects in prime locations with growth potential in out-of-home (‘‘OOH’’) advertising and capture opportunities in digitalisation of OOH media with the aim of balancing between near-term profitability and long-term sustainable growth.

To achieve the Group’s objective, the Group will accelerate its digital transformation strategies to better monetise its OOH media resources. The Group has developed data-driven OOH advertising solutions which can offer targeted contents based on various parameters including audience demographics, weather and other events. This digital out-of-home (‘‘DOOH’’) advertising solutions will not only facilitate the purchase decision by advertising planners and buyers but also enable advertisers to have more targeted advertising with measurable results. This will ultimately increase the monetisation of the Group’s OOH media portfolio.

Further, we understand that the Group is committed to exploring development opportunities in airports and metro lines. In addition, as set out above, the Group has been expanding its projects such as obtaining the exclusive concession rights for Tianjin Metro Lines 2 and 3 and Hangzhou Metro Lines 2 and 4 during the six months ended 30 June 2017. It is expected that the Group will continue to strategically attain new projects in prime locations with growth potential in OOH advertising.

Fund raising activity by the Company in the last 12 months

				Actual use of the
				net proceeds as at
Date of	Fund raising		Proposed use of	the Latest
announcement	activity	Net proceeds raised	the net Proceeds	Practicable Date
10 October	Issue of non-	Approximately HKD40,700,000	General working	The warrants have
2016 and 13	listed warrants	(upon exercise with a net	capital of the	not been
October 2016		warrant exercise price of	Company	exercised
		approximately HKD4.07 per
		warrant share)

Save for the above, the Company had not conducted any fund raising exercise in the past twelve months immediately preceding the Latest Practicable Date.

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LETTER FROM BEIJING SECURITIES

3. The Subscription Agreement

The terms and conditions of the Subscription Agreement were arrived at after an arm’s length negotiations between the Company and the Subscriber. Set out below is the principal terms of the Subscription Agreement. Further details of the terms and conditions of the Subscription Agreement are also set out in the Letter from the Board.

Date : 7 September 2017 (as varied and supplemented by the Supplemental Agreement dated 10 November 2017)
Parties : Issuer: the Company

Subscriber: Space Management Limited

The Subscriber is a controlling shareholder of the Company holding 17.73% of the existing issued share capital of the Company as at the Latest Practicable Date. The Subscriber is a company incorporated under the laws of the British Virgin Islands. It is an investment holding company, the sole investment of which is its interest in the Company. The sole ultimate beneficial owner of the Subscriber is Mr. Lam, who is an executive Director and a controlling shareholder of the Company.

Subscription

: Subject to the fulfillment of the conditions set out below in the section headed ‘‘Conditions Precedent’’, the Company has agreed to issue, and the Subscriber has agreed to subscribe for, the PSCS in the principal amount of HKD50,000,000 convertible into Conversion Shares at the initial Conversion Price of HKD3.54 per Conversion Share (subject to adjustments) in two tranches at the face value of HKD30,000,000 and HKD20,000,000 respectively. For the avoidance of doubt, the Distribution shall not lead to any adjustment of the Conversion Price.

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LETTER FROM BEIJING SECURITIES

Conditions Precedent

: The First Completion

Completion is conditional upon the fulfillment of the following conditions before the Long Stop Date:

(a) the Independent Shareholders having approved the Subscription Agreement and the transaction contemplated therein in the EGM; and
(b) the Listing Committee of the Stock Exchange having granted the listing of and permission to deal in the Conversion Shares in relation to the first tranche of the PSCS.

The Second Completion

The Second Completion is conditional upon the fulfillment of the following conditions:

(a) the Independent Shareholders having approved the issue of the second tranche of the PSCS; and
(b) the Listing Committee of the Stock Exchange having granted the listing of and permission to deal in the Conversion Shares in relation to the second tranche of the PSCS.

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LETTER FROM BEIJING SECURITIES

The Second Completion shall take place on the 7th Business Day following the date of the notice served by the Company, exercising its right at its sole discretion within 5 years from the First Completion, on the Subscriber (or such other date as may be agreed in writing between the Company and the Subscriber) calling for the Subscriber to subscribe for the second tranche of the Securities at the principal amount of HKD20,000,000. The call for the Subscriber to subscribe for the second tranche of the PSCS shall be subject to the Independent Shareholders’ approval.

Termination

: The Subscription Agreement shall terminate:
(a) if any of the conditions precedent for the First Completion has not been fulfilled by the Long Stop Date; or
(b) by agreement between the Company and the Subscriber prior to the First Completion.

4. Use of proceeds and reasons for the Subscription

The net proceeds from the issue of the PSCS (after deduction of all related expenses) will be approximately HKD49,700,000. The proceeds from the first tranche of PSCS would be used as general working capital of the Company including approximately HKD15 million to improve the advertising fixtures and conduct office renovation, approximately HKD10 million for new recruitment and salary costs, and approximately HKD5 million for bank charges and interest expenses. If more capital is required for working capital or business development opportunities, the Company will call for the Second Completion of the PSCS. The second tranche of PSCS serves as a committed contingent long-term facility for the Group. When the Group comes across a good project, investment or imminent financing needs in the future, it has the option but not an obligation to draw on the same to capture a business opportunity.

As set out in the section ‘‘Background and financial information of the Group’’ above, the Group’s revenue has increased by approximately 4.6% and 11.7% for the year ended 31 December 2016 and six months ended 30 June 2017 respectively from the corresponding prior period. The Group also achieved profitability for the year ended 31 December 2016 and six months ended 30 June 2017. Going forward, the Group is committed to continue to improve its existing OOH advertising platform and will continue to explore development opportunities in airports and metro lines to achieve long-term growth as well as to continue to strategically attain new projects in prime locations with growth potential in OOH advertising and capture opportunities in digitalisation of OOH media with an aim of balancing between near-term profitability and long-term sustainable growth for the benefit of the shareholders. The proceeds therefore will provide the

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LETTER FROM BEIJING SECURITIES

resources to enable the Group to improve on its existing OOH advertising platform and in particular by upgrading its various advertising fixtures as well as to continue its strategy to capture opportunities in airports and metro lines to achieve long-term growth.

As discussed with the management of the Company, the Directors have considered other fund-raising alternatives such as bank financing, rights issue and/or open offer and placing of new shares. The Company considered that assets pledge and other securities may be required for bank financing whilst such security is not required under the PSCS. Also, the Rate of Distribution is competitive when compared to the prevailing interest rate of bank financing to be obtained by the Company. The Company has also considered a rights issue and/or an open offer. Given the thin trading volume of the Shares and costly underwriting commission and a relatively long underwriting period associated with in a rights issue and/or an open offer, the Directors considered that the entering into of the Subscription Agreement represents an opportunity for the Company to raise immediate capital for the Company at a reasonable cost. Further, placing of new shares will result in immediate dilution to the Shareholders whereas the issue of the PSCS provides additional financial resources to the Company without an immediate dilution effect on the shareholding of the existing Shareholders.

In addition to the above, we also understand that the issue of the PSCS has the following benefits: (i) the PSCS has no maturity date and therefore there is no instant material cash outflow impact on the Group as a result of repayment of the principal amount; (ii) payments of distribution can be deferred at the discretion of the Company, which makes the financial and cashflow management of the Group more flexible; (iii) there is no limit as to the number of times for the deferral of distribution; and (iv) the PCSC will be accounted for as equity in the financial statement of the Company which will strengthen the capital base of the Company, which in turn enhance the ability of the Group to obtain external financing with a lower cost in the future if it elects to do so.

In light of the above, we are of the view that the use of proceeds and the Subscription are fair and reasonable so far as the Independent Shareholders are concerned and are in the interest of the Company and the Shareholders as a whole.

5. The PSCS

5.1 Principal terms of the PSCS

Set out below are the principal terms of the PSCS. Further details of the terms of the PSCS are also set out in the Letter from the Board.

Issue price : 100% of the principal amount of the PSCS Form : The PSCS will be issued in registered form Maturity Date : There is no maturity date

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LETTER FROM BEIJING SECURITIES

Status and : The PSCS constitutes direct, unsecured and Subordination subordinated obligations of the Company and rank pari passu without any preference or priority among themselves.

In the event of the winding-up of the Company, the rights and claims of the holder(s) of the PSCS shall:

(a) rank ahead of those persons whose claims are in respect of any class of share capital of the Company;
(b) be subordinated in right of payment to the claims of all other present and future senior and subordinated creditors of the Company; and
(c) pari passu with each other and with the claims of holders of Parity Securities.
Distribution : The PSCS confer a right to receive distribution(s) (the ‘‘Distribution’’) from and including the date of issue of the PSCS at the rate of distribution payable quarterly in arrears on 31 March, 30 June, 30 September and 31 December each year (the ‘‘Distribution Payment Date’’), subject to the terms of the PSCS. For the avoidance of doubt, no part of the Distribution shall be converted into Conversion Shares in lieu of payment.
Rate of : 5.75% per annum of any outstanding principal amount Distribution of PSCS (the ‘‘Rate of Distribution’’).
Optional deferral : The Company may, at its sole discretion, elect to defer of distributions a Distribution pursuant to the terms of the PSCS. The deferred Distribution shall be non-interest bearing. The number of times of optional deferral of Distribution by the Company is not restricted.
Conversion Price : Initially HKD3.54 per Conversion Share, subject to adjustment as provided for in the terms of the PSCS, including but not limited to an alteration to the nominal amount of the Shares as a result of consolidation, subdivision or reclassification, capitalization of profits or reserves, capital distributions, rights issues or issue of options, warrants or other rights to subscribe for, purchase or otherwise acquire any Shares.

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LETTER FROM BEIJING SECURITIES

Conversion Shares : 14,124,293 Conversion Shares will be allotted and issued by the Company upon full conversion of the PSCS at the initial Conversion Price.
Conversion period : Conversion of the PSCS into Conversion Shares may take place at any time after the date of issue of the PSCS, subject to the relevant terms as provided in the terms of the PSCS.
Restrictions on : No conversion right shall be exercised by the holder of Conversion the PSCS (or when it is exercised by virtue of a conversion notice having been given, the Company shall not be obliged to issue any Conversion Shares but may treat that conversion notice as invalid) if the Company will be in breach of the Listing Rules or The Codes on Takeovers and Mergers and Share Repurchases immediately following such Conversion.
Fractional Shares : Fractions of Shares will not be issued on Conversion and no cash adjustments will be made in respect thereof. Notwithstanding the foregoing, in the event of a consolidation or re-classification of Shares by operation of law or otherwise occurring after the date of constitution of the PSCS, the Company will upon Conversion pay in cash a sum equal to such portion of the principal amount of the PSCS represented by the certificate deposited in connection with the exercise of conversion rights as corresponds to any fraction of a Share not issued as aforesaid if such sum exceeds HKD100.
Voting : The holder(s) of PSCS will not be entitled to receive notice of, attend or vote at general meetings of the Company by reason only of it being a PSCS holder.
Transferability : Subject to the terms of the PSCS, the PSCS may be transferred by delivery of the certificate issued in respect of those PSCS, with the form of transfer in the agreed form as set out in the terms of the PSCS duly completed and signed, to the registered office of the Company. No transfer of the PSCS will be valid unless and until (a) the Company has provided its written consent to the transfer (such consent shall not be unreasonably withheld); and (b) such transfer has been entered on the register of PSCS holder(s).

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Redemption rights : The PSCS may be redeemed at the option of the Company, at 100% or 50% of the principal amount of the PSCS each time, on any Distribution Payment Date at the face value of the outstanding principal amount of the PSCS to be redeemed plus 100% or 50% (as the case may be) of Distributions accrued to such date.
Listing : No application will be made for the listing of the PSCS on the Stock Exchange. An application will be made by the Company to the Listing Committee for the listing of, and permission to deal in, the Conversion Shares.

The principal terms of the PSCS were arrived at following arm’s length negotiations between the Company and the Subscriber.

5.2 Analysis on the terms of the PSCS

When assessing the fairness and reasonableness of the terms of the PSCS, we have taken into account (i) the daily closing price of the Shares as quoted on the Stock Exchange commencing on 1 September 2016 (being approximately a 12-month period prior to the date of the Subscription Agreement) up to and including the Last Trading Day (the ‘‘Share Price Review Period’’); and (ii) the comparison of the recent issues of convertible bonds/notes by companies listed on the main board of the Stock Exchange.

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(i) Share price movement during the Share Price Review Period

Set out below is the movement of the closing prices of the Shares during the Share Price Review Period in relation to the Conversion Price:

==> picture [409 x 230] intentionally omitted <==

----- Start of picture text -----

Share Price (HKD)
4.000
3.500
3.000
2.500
2.000
1.500
1.000
Closing prices of the Shares
0.500 Conversion Price of HKD3.54
0.000
1/9/20169/9/201620/9/201628/9/20166/10/201617/10/201626/10/20163/11/201611/11/201621/11/201629/11/20167/12/201615/12/201623/12/20165/1/201713/1/201723/1/20172/2/201710/2/201720/2/201728/2/20178/3/201716/3/201724/3/20173/4/201712/4/201724/4/20174/5/201712/5/201722/5/201731/5/20178/6/201716/6/201726/6/20174/7/201712/7/201720/7/201728/7/20177/8/201715/8/201724/8/2017
----- End of picture text -----

Source: website of Stock Exchange

As illustrated in the chart above, during the Share Price Review Period, the closing prices of the Shares ranged from HKD2.270 per Share to HKD3.390 per Share. Therefore, the Conversion Price of HKD3.54 is above the range of closing prices of the Shares during the entire Share Price Review Period. Further, the Conversion Price represents a premium of approximately 30% over the closing price of HKD2.72 per Share as quoted on the Stock Exchange on the Last Trading Day.

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(ii) Comparison with other perpetual convertible securities

To further evaluate the fairness and reasonableness of the terms of the PSCS, we have also made a comparison of perpetual convertible securities (transactions with put options granted to the investors/subscribers are excluded as the PSCS could only be redeemed at the option of the Company) issued by other companies listed on the Main Board of the Stock Exchange for fund raising purposes. We have identified 12 perpetual convertible securities comparable transactions from 1 January 2015 up to the Last Trading Day (refer to collectively as the ‘‘Comparable(s)’’).

We confirm the list of Comparables is an exhaustive list. We also consider that the review period for the perpetual convertible securities is appropriate to capture the relevant Comparables and their features as a general reference for the market practices under the prevailing market conditions and sentiments. However, given the differences amongst the Comparables and the Group in terms of business nature, financial performance, market capitalisation, financial position as well as the reasons for the issue of the respective perpetual convertible securities by the Comparables Issuers and their respective funding requirements, we consider that the Comparables might not constitute close and representative reference to the PSCS, but a fair market reference on general character and terms of the PSCS.

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LETTER FROM BEIJING SECURITIES

				Conversion terms		Perpetual convertible securities will	be converted automatically upon	occurrence of capital adequacy	trigger event, where the ratio of	the issuer’s core equity capital to	its total risk-weighted assets is	Perpetual convertible securities will	be converted automatically upon	occurrence of capital adequacy	trigger event, where the ratio of	the issuer’s core equity capital to	Perpetual convertible securities will	be converted automatically upon	occurrence of capital adequacy	trigger event, where the ratio of	the issuer’s core equity capital to	its total risk-weighted assets is	less than 7%. Holders do not
				Redemption terms		Redemption in whole at sole	discretion of the issuer on any	reset date at a redemption price	equal to 100% of the principal	amount plus any accrued and	unpaid interest	Redemption at issuer’s option in	whole, on any reset date at 100%	of their principal amount,	together with any accrued but	unpaid interest	Redemption in whole at the option	of the issuer on any resettable	security reset date at a	redemption price equal to 100%	of the principal amount plus any	accrued, unpaid and not	cancelled interest.
Perpetual	convertible	securities	secured by	assets		No						No					No
	Initial	annual	distribution Distribution terms/	rate listing status	(%)	6.38 Semi-annually,	cancellable/listed on	the Global	Exchange Market of	the Irish Stock	Exchange	6.50 Semi-annually,	cancellable/listed on	the Stock Exchange			6 Semi-annually,	cancellable/listed on	the Global	Exchange Market of	the Irish Stock	Exchange
	Premium/	(Discount)	to the last	closing price	(%)	(53.2)						(30)					(45.9)
			Initial conversion	price		USD4.03488	(equivalent to	about HK$31.5	based on USD1	to HKD7.8)		USD11.424	(equivalent to	about HKD89.1	based on USD1	to HKD7.8)	EUR3.73559	(equivalent to	approximately	HKD31.8 based	on EUR1 to	HKD8.5)
			Date of	announcement		24-Mar-15						30-Mar-15					28-Sep-15
				Issuer (stock code)		HSBC Holdings plc	(5)					Standard Chartered	plc (2888)				HSBC Holdings plc	(5)

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LETTER FROM BEIJING SECURITIES

				Conversion terms		Holder has the right to convert at	any time after the completion	date of the subscription	agreement. If such perpetual	convertible securities shall have	been called for redemption by	the issuer, up to and including	the close of on a date no later	than ten days prior to the date	fixed for redemption													Holder has the right to convert at	any time on or after the issue	date up to and including, if such	perpetual convertible securities	shall have been called for	redemption by the issuer
				Redemption terms		Redemption at the option of the	issuer in whole, at any time, on	giving not less than 30 nor more	than 60 days’ irrevocable notice	to the security holders at an	amount equal to the sum of (i)	100% of the principal amount	together with distributions	(including any arrears of	distribution and any additional	distribution amount) accrued but	unpaid; and (ii) such amount as	would result in the internal rate	of return on the securities to be	redeemed to be equal to 12.0%	per annum from the closing date	to the relevant redemption date,	provided that where the amount	so determined under this	paragraph (ii) is less than zero,	such amount shall be deemed to	be equal to zero	Redemption at its option, at any	time, on giving not less than 15	nor more than 30 days’ notice to	the holders, in whole or in part	only on a date specified for such	redemption in such notice at	their principal amount together	with any distribution accrued to	the date fixed for redemption
Perpetual	convertible	securities	secured by	assets		No																						No
	Initial	annual	distribution Distribution terms/	rate listing status	(%)	7.5 Semi-annually,	cancellable/not	listed																				7 Semi-annually,	cancellable/listed on	the Singapore Stock	Exchange
	Premium/	(Discount)	to the last	closing price	(%)	4.3																						27.3
			Initial conversion	price		HKD0.75																						HKD8.06
			Date of	announcement		4-Nov-15																						23-Dec-15
				Issuer (stock code)		Landsea Green	Properties Co.,	Limited (106)																				Evergrande Real	Estate Group	Limited (3333)

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LETTER FROM BEIJING SECURITIES

				Conversion terms		Perpetual convertible securities will	be converted automatically upon	occurrence of capital adequacy	trigger event, where the ratio of	the issuer’s core equity capital to	its total risk-weighted assets is	less than 7%. Holders do not	have rights to convert its	perpetual convertible securities in	Perpetual convertible securities will	be converted automatically upon	occurrence of capital adequacy	trigger event, where the ratio of	the issuer’s core equity capital to	Holders shall have the right to	convert any of their perpetual	convertible securities into new	ordinary shares at any time after
				Redemption terms		Redemption in whole at the option	of the issuer in its sole discretion	on any reset date at a redemption	price equal to 100% of the	principal amount plus any	accrued and unpaid interest,	subject to certain conditions	described in the securities	indenture	Redemption at issuer’s option in	whole, on any reset date at 100%	of their principal amount,	together with any accrued but	unpaid interest	Redemption at the option of the	Company in full, on any	Distribution Payment Date, at the	face value
Perpetual	convertible	securities	secured by	assets		No									No					No
	Initial	annual	distribution Distribution terms/	rate listing status	(%)	6.88 Semi-annually,	cancellable/listed on	the Global	Exchange Market of	the Irish Stock	Exchange				7.5 Semi-annually,	cancellable/listed on	the Stock Exchange			6 Semi-annually,	cancellable after the	first anniversary/not	listed
	Premium/	(Discount)	to the last	closing price	(%)	(36.5)									(9.1)					(5.19)
			Initial conversion	price		USD3.9474	(equivalent to	about HKD30.79	based on USD1	to HKD7.8)					USD7.732	(equivalent to	about HKD60.31	based on USD1	to HKD7.8)	HKD0.128
			Date of	announcement		25-May-16									12-Aug-16					5-Sep-16
				Issuer (stock code)		HSBC Holdings plc	(5)								Standard Chartered	plc (2888)				Orient Victory China	Holdings Limited	(265)

– 34 –

LETTER FROM BEIJING SECURITIES

				Conversion terms		Perpetual convertible securities will	be converted automatically upon	occurrence of capital adequacy	trigger event, where the ratio of	the issuer’s core equity capital to	Perpetual convertible securities will	be converted automatically upon	occurrence of capital adequacy	trigger event, where the ratio of	the issuer’s core equity capital to	its total risk-weighted assets is	less than 7%. Holders do not	have rights to convert its	perpetual convertible securities in	Perpetual convertible securities will	be converted automatically upon	occurrence of capital adequacy	trigger event, where the ratio of	the issuer’s core equity capital to	its total risk-weighted assets is	less than 7%. Holders do not	have rights to convert its	perpetual convertible securities in
				Redemption terms		Redemption at issuer’s option in	whole, on any reset date at 100%	of their principal amount,	together with any accrued but	unpaid interest	Redemption in whole at the option	of the issuer in its sole discretion	on any reset date at a redemption	price equal to 100% of the	principal amount plus any	accrued and unpaid interest,	subject to certain conditions	described in the securities	indenture	Redemption in whole at the option	of the issuer in its sole discretion	on any reset date at a redemption	price equal to 100% of the	principal amount plus any	accrued and unpaid interest,	subject to certain conditions	described in the securities	indenture
Perpetual	convertible	securities	secured by	assets		No					No									No
	Initial	annual	distribution Distribution terms/	rate listing status	(%)	7.75 Semi-annually,	cancellable/listed on	the Stock Exchange			6 Semi-annually,	cancellable/listed on	the Global	Exchange Market of	the Irish Stock	Exchange				4.7 Semi-annually,	cancellable/listed on	the Global	Exchange Market of	the Irish Stock	Exchange
	Premium/	(Discount)	to the last	closing price	(%)	(2.9)					(60.7)									(59.2)
			Initial conversion	price		USD7.732	(equivalent to	about HKD60.31	based on USD1	to HKD7.8)	USD3.4799	(equivalent to	about HKD27.143	based on USD1	to HKD7.8)					SGD4.80694	(equivalent to	about HKD27.88	based on SGD1	to HKD5.8)
			Date of	announcement		12-Jan-17					16-May-17									6-Jun-17
				Issuer (stock code)		Standard Chartered	plc (2888)				HSBC Holdings plc	(5)								HSBC Holdings plc	(5)

– 35 –

LETTER FROM BEIJING SECURITIES

				Conversion terms		Perpetual convertible securities will	be converted automatically upon	occurrence of capital adequacy	trigger event, where the ratio of	the issuer’s core equity capital to	its total risk-weighted assets is	less than 7%. Holders do not	have rights to convert its	perpetual convertible securities in				Holders shall have the right to	convert any of their PSCS into	Conversion Shares at any time	after the issue date
				Redemption terms		Redemption in whole at the option	of the issuer in its sole discretion	on any reset date at a redemption	price equal to 100% of the	principal amount plus any	accrued and unpaid interest,	subject to certain conditions	described in the securities	indenture				Redemption at the option of the	Company, at 100% or 50% of	the principal amount of the	PSCS each time, on any	Distribution payment date at	the face value of the	outstanding principal amount	of the PSCS to be redeemed	plus 100% or 50% (as the case	may be) of Distributions	accrued to such date
Perpetual	convertible	securities	secured by	assets		No												No
	Initial	annual	distribution Distribution terms/	rate listing status	(%)	4.75 Quarterly, cancellable/	listed on the Global	Exchange Market of	the Irish Stock	Exchange					6.41	7.75	4.70	5.75 Quarterly, deferrable/	not listed
	Premium/	(Discount)	to the last	closing price	(%)	(62.2)									(27.8)	27.3	(62.2)	30
			Initial conversion	price		EUR3.05451	(equivalent to	about HKD27.49	based on EUR1	to HKD9)								HKD3.54
			Date of	announcement		30-Jun-17												7-Sep-17
				Issuer (stock code)		HSBC Holdings plc	(5)								Average	Maximum	Minimum	The Company

– 36 –

LETTER FROM BEIJING SECURITIES

(a) Conversion Price

As shown in the table above, the conversion price of the Comparables to their last closing price ranged from a discount of approximately 62.2% to a premium of approximately 27.3%, with an average discount of approximately 27.8%. As the Conversion Price is set at a premium of 30% to the closing price on the Last Trading Day, which is above the highest premium of the conversion price of the Comparables to their last closing price, we are of the view that the Conversion Price is favourable to the Company.

In addition, the Conversion Price was arrived at after arm’s length negotiations between the Company and the Subscriber taking into account the average closing price of the Shares for the 5 trading days, 10 trading days, 30 trading days, 60 trading days and 90 trading days prior to the date of the Subscription Agreement. The Conversion Price represents:

(i) a premium of approximately 30% to the closing price of HKD2.72 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a premium of approximately 29% to the average of the closing prices of approximately HKD2.74 per Share for the 5 trading days of the Shares up to and including the Last Trading Day;
(iii) a premium of approximately 30% to the average of the closing prices of approximately HKD2.72 per Share for the 10 trading days of the Shares up to and including the Last Trading Day;
(iv) a premium of approximately 32% to the average of the closing prices of approximately HKD2.69 per Share for the 30 trading days of the Shares up to and including the Last Trading Day;
(v) a premium of approximately 33% to the average of the closing prices of approximately HKD2.66 per Share for the 60 trading days of the Shares up to and including the Last Trading Day;
(vi) a premium of approximately 37% to the average of the closing prices of approximately HKD2.59 per Share for the 90 trading days of the Shares up to and including the Last Trading Day;
(vii) a premium of approximately 168% to the audited net asset value per Share of approximately HKD1.32, which is calculated based on the audited net asset value of the Company of approximately HKD582,505,000 as at 31 December 2016 as stated in its Annual Report divided by its total number of 440,000,000 issued Shares as at 31 December 2016.

– 37 –

LETTER FROM BEIJING SECURITIES

As noted above, the Conversion Price represents a premium to closing price of the Shares on the Last Trading Day as well as to the average closing price of the Shares for the 5 trading days, 10 trading days, 30 trading days, 60 trading days and 90 trading days prior to the date of the Subscription Agreement.

(b) Rate of Distribution

The PSCS confers a right for the its holder(s) to receive distribution from and including the date of issue of the PSCS at the Rate of Distribution of 5.75% per annum, subject to the optional deferral of distributions. The rate of distribution of the Comparables ranged from 4.70% to 7.75%, with an average distribution rate of approximately 6.41%. The Rate of Distribution therefore is within the range of and is also below the average rate of distribution offered by the Comparables. Further, we noted that the Hong Kong dollar and RMB bank loans of the Group carry an interest rate of up to approximately 4% per annum and 5.88% per annum respectively. Therefore, the Rate of Distribution of 5.75% per annum is in line with the interest rate currently incurred by the Group. In addition, the PSCS has the following benefits when compared to the Group’s current bank loans: the PSCS (i) does not have a maturity date; (ii) allows the Company to defer the distribution at its discretion without limit; and (iii) does not require any collaterals.

(c) Conversion

The PSCS can be freely converted into Conversion Shares at any time after issuance at the sole discretion of their holders. Therefore, it gives the holders an option and the flexibility to convert the PSCS into Conversion Shares depending on the market situation and the holders’ own preference. With reference to the terms of the Comparables above, we noted that 3 of the Comparables are freely convertible by the holders. As such, the free conversion feature of the PSCS is in line with market practice.

(d) Redemption

Since the Company has the option, but not obligation, to redeem in whole or in part of the principal amount of the PSCS, there is no instant material cash outflow impact on the Group as a result of repayment of the principal amount and therefore we are of the view such redemption rights are in the interests of the Company. Further, we note that the PSCS has similar redemption rights as all the Comparables.

Having considered that (i) the Conversion Price is priced within the of range of the Comparables; (ii) the Conversion Price is at a premium to the closing price of the Shares on the Last Trading Day as well as Day as well as to the average closing price of the Shares for the 5 trading days, 10 trading days, 30 trading days, 60 trading days and 90 trading days prior to the date of the Subscription Agreement; (iii) the Conversion Price is above the closing prices

– 38 –

LETTER FROM BEIJING SECURITIES

of the Shares during the entire Share Price Review Period; (iv) the Rate of Distribution is within the range of the Comparables and is also below the average rate of distribution offered by the Comparables; (v) the free conversion feature of the PSCS is in line with market practice; and (vi) there is no instant material cash outflow impact on the Group as a result of repayment of the principal amount as the PSCS has no maturity date, we are of the view that the terms of the PSCS are fair and reasonable so far as the Independent Shareholders are concerned and are in the interest of the Company and the Shareholders as a whole.

6. Potential dilution effect on the interests of other public Shareholders

As at the Latest Practicable Date, the issued share capital of the Company is 440,000,000 Shares of which the Subscriber is interested in 78,001,000 Shares (approximately 17.73% of the issued share capital of the Company) and Media Cornerstone Limited is interested in 242,000,000 Shares (approximately 55% of the issued share capital of the Company) whilst the remaining are held by the public Shareholders (approximately 27.27% of the issued share capital of the Company). Upon completion of the Subscription and assuming the full Conversion by the Subscriber of the PSCS and to the extent allowed, 14,124,293 Conversion Shares will be allotted and issued upon exercise of the conversion rights attaching to the PSCS in full. Under such a scenario, the total issued share capital of the Company will be 454,124,293 Shares and the public Shareholders will hold approximately 26.42% of the issued share capital of the Company.

The dilution effect in shareholding of the public Shareholders is minimal as the shareholding of the public Shareholders would decrease from approximately 27.27% to approximately 26.42%, representing a dilution of approximately 0.85%. In addition, although any dilution of shareholdings itself is not favourable to the public Shareholders, the public Shareholders should note that the Company will be benefited from the Subscription as a whole having considered (i) the intended use of proceeds as discussed above; (ii) the financing alternatives considered by the Directors; (iii) the benefits in issuing the PSCS (i.e., no maturity date, deferral of distribution and the PSCS will be accounted for as equity in the financial statement of the Company); and (iv) the terms of the PSCS are fair and reasonable as discussed above. In view of the above, we consider that the dilution effect is acceptable.

RECOMMENDATIONS

Having considered the principal factors discussed above and in particular the following:

(i) the benefits in issuing the PSCS (i.e., no maturity date, deferral of distribution and the PCSC will be accounted for as equity in the financial statement of the Company which will strengthen the capital base of the Company);
(ii) the financing alternatives considered by the Directors;

– 39 –

LETTER FROM BEIJING SECURITIES

(iii) the terms of the Subscription Agreement (including the PSCS) were determined after arm’s length negotiations;
(iv) the Conversion Price (a) is above the closing prices of the Shares during the entire Share Price Review Period, (b) as represented by its premium to the closing price on the Last Trading Day is above the highest premium of the conversion price of the Comparables to their last closing price, and (c) is set at a premium over the closing price of Shares on the Last Trading Day as well as to the average closing price of the Shares for the 5 trading days, 10 trading days, 30 trading days, 60 trading days and 90 trading days prior to the date of the Subscription Agreement;
(v) the Rate of Distribution as well as the conversion and redemption features of the PSCS are in-line with market practice; and
(vi) the dilution effect from the full Conversion of the PSCS is minimal,

we consider that the Subscription Agreement was entered into in the ordinary and usual course of business and on normal commercial terms. The terms of the Subscription Agreement are also fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. We therefore recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution(s) to approve the Subscription Agreement at the EGM. We also recommend the Independent Shareholders to vote in favour of the resolution(s) to approve the Subscription Agreement at the EGM.

Yours faithfully, For and on behalf of Beijing Securities Limited Charles Li Director

– 40 –

GENERAL INFORMATION

APPENDIX I

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the 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 not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ANY ASSOCIATED CORPORATION

(a) As at the Latest Practicable Date, the following directors of the Company had interests or short positions in the Shares, underlying Shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the ‘‘SFO’’)) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which each of them has taken or deemed to have taken under the provisions of the SFO); or (b) pursuant to section 352 of the SFO, to be entered into in the register referred to therein; or (c) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the ‘‘Model Code’’) to be notified to the Company and the Stock Exchange:

Long positions of the Directors’ interests in the Shares and underlying Shares of the Company:

Name of Directors Lam Tak Hing, Vincent Lam Ka Po Ma Andrew Chiu Cheung Ma Ho Fai GBS JP	Capacity/Nature of interest Founder of a discretionary trust and interest in a controlled corporation Beneficial owner Beneficial owner Beneficial owner Beneficial owner	Number of Shares 320,001,000 NIL NIL NIL NIL	Equity derivative (share options) NIL 4,400,000 1,278,000 100,000 100,000	Total number of Shares and underlying Shares Approximate percentage of issued share capital of the Company 320,001,000(1) 72.73% 4,400,000 1.00% 1,278,000 0.29% 100,000 0.02% 100,000 0.02%	Approximate percentage of issued share capital of the Company

– I-1 –

GENERAL INFORMATION

APPENDIX I

Note:

Mr. Lam is the sole shareholder of Space Management Limited (‘‘Space Management’’) which holds 78,001,000 Shares. In addition, Mr. Lam is the founder of the Shalom Trust (a discretionary trust established by Mr. Lam as settlor of which UBS Trustee (BVI) Limited acts as the trustee and beneficiaries of which are Mr. Lam, certain of his family members and other persons who may be added from time to time) which indirectly holds the entire issued share capital of Media Cornerstone Limited (‘‘Media Cornerstone’’) which holds 242,000,000 Shares. By virtue of the SFO, he is deemed to be interested in the Shares in which Space Management and Media Cornerstone are interested.

Save as disclosed in this circular, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in the Shares, underlying Shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which each of them has taken or deemed to have taken under such provisions of the SFO); or (b) pursuant to section 352 of the SFO, to be entered into the register referred to therein; or (c) pursuant to the Model Code to be notified to the Company and the Stock Exchange.

Save as disclosed above, none of the Directors was a director or employee of a company which had an interest or short position in the Shares and underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO as at the Latest Practicable Date.

3. ARRANGEMENTS AFFECTING DIRECTORS AND DIRECTORS’ INTEREST IN CONTRACTS AND ASSETS

Save for (i) the tenancy agreements between Shanghai Asiaray, an indirect wholly-owned subsidiary of the Company, as tenant, and Asiaray China, as landlord, to lease the office in Shanghai for RMB114,000 (equivalent to approximately HKD96,900 per month) for a term of three years from 1 July 2017 to 30 June 2020 (both days inclusive); and Beijing Asiaray, an indirect wholly-owned subsidiary of the Company, as tenant, entered into the a tenancy agreement with Billion China, as landlord, to lease the office in Beijing for RMB347,300 (equivalent to approximately HKD295,205 per month) for a term of three years from 1 July 2017 to 30 June 2020 (both days inclusive) as disclosed in the announcement of the Company dated 30 June 2017; and (ii) the tenancy agreements between Genesis Printing, an indirect wholly-owned subsidiary of the Company, as tenant, and Peaky, as landlord, to lease the warehouse premise in Hong Kong on 1 September 2017 for HKD30,000 per month for a term of two years and ten months from 1 September 2017 to 30 June 2020 (both days inclusive); and Hong Kong Asiaray, an indirect wholly-owned subsidiary of the Company, as tenant, and Peaky, as landlord, to lease the warehouse in Hong Kong on 1 February 2016 for HKD14,000 per month for a term of two years from 1 March 2016 to 28 February 2018 (both days inclusive), as disclosed in the announcement of the Company dated 1 September 2017, all of which Mr. Lam was interested in, as at the Latest Practicable Date, none of the Directors had any direct or indirect interests in any assets which have since 31 December 2016 (being the date to which the latest published audited financial statements of the Group were made up) been acquired or disposed of by or leased to any member of the Group, or was proposed to be acquired or disposed of by or leased to any member of the Group.

– I-2 –

GENERAL INFORMATION

APPENDIX I

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

4. QUALIFICATIONS AND CONSENT OF EXPERT

The following are the qualifications of the expert who has given its opinions and advice which are included in this circular:

Name Qualification Beijing Securities Limited a licensed corporation to carry out Type 1 (dealing in securities), Type 4 (advertising on securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

Beijing Securities has given and has not withdrawn its written consent to the issue of this circular with inclusion of its letter or reports and the references to its name in the form and context in which they respectively appear.

Beijing Securities did not have any interests in any Shares or shares in any member of the Group, or any right or option (whether legally enforceable or not) to subscribe for or nominate persons to subscribe for any securities in any member of the Group as at the Latest Practicable Date.

As at the Latest Practicable Date, Beijing Securities did not have any direct or indirect interests in any assets which have since 31 December 2016 (being the date to which the latest published audited financial statements of the Group were made up) been acquired or disposed of by or leased to or by any member of the Group, or was proposed to be acquired or disposed of by or leased to or by any member of the Group.

5. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors confirm that there has been no material adverse change in the financial or trading position of the Group since 31 December 2016, being the date to which the latest audited financial statements of the Group were made up.

6. SERVICE CONTRACTS

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

– I-3 –

GENERAL INFORMATION

APPENDIX I

7. COMPETING INTEREST

As at the Latest Practicable Date, none of the Directors and their respective associates had any interest in a business which competes or may compete with the businesses of the Group either directly or indirectly.

8. GENERAL

(a) The registered office of the Company is Maples Corporate Services Limited, P.O. Box 309 Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
(b) The share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(c) The secretary of the Company is Mr. Ip Pui Sum (‘‘Mr. Ip’’). Mr. Ip obtained a Higher Diploma in Accountancy from the Hong Kong Polytechnic University and a Master Degree of Business Administration from Henley Management College and Brunel University. Mr. Ip is a Certified Public Accountant (practising) in Hong Kong, a fellow member of the Chartered Association of Certified Accountants and an associate member of the Hong Kong Institute of Certified Public Accountants, the Chartered Institute of Management Accountants, the Institute of Chartered Secretaries and Administrators and the Hong Kong Institute of Chartered Secretaries.
(d) The English text of this circular and the accompanying form of proxy shall prevail over the Chinese text.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours on any weekday (public holidays excepted) at the principal place of business of the Company in Hong Kong at 16th Floor, Kornhill Plaza — Office Tower, 1 Kornhill Road, Quarry Bay, Hong Kong, Asiaray Media Group Limited, up to and including the date of the EGM:

(a) the Subscription Agreement;
(b) the Supplemental Agreement; and
(c) this circular

– I-4 –

NOTICE OF EGM

==> picture [211 x 34] intentionally omitted <==

ASIARAY MEDIA GROUP LIMITED 雅仕維傳媒集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1993)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of Asiaray Media Group Limited (the ‘‘Company’’) will be held at 16th Floor, Kornhill Plaza — Office Tower, 1 Kornhill Road, Quarry Bay, Hong Kong on Friday, 15 December 2017 at 11:00 a.m. for the purpose of considering and, if thought fit, passing (with or without modifications) the following resolution, which will be proposed as ordinary resolution of the Company:

ORDINARY RESOLUTION

‘‘THAT:

(a) the subscription agreement dated 7 September 2017 entered into between the Company and Space Management Limited (the ‘‘Subscriber’’) as amended and supplemented on 10 November 2017 (the ‘‘Subscription Agreement’’) in relation to the issue of the perpetual subordinated convertible securities in the principal amount of HKD50,000,000 convertible into Conversion Shares at the initial Conversion Price of HKD3.54 per Conversion Share (subject to adjustments) in two tranches at the face value of HKD30,000,000 and HKD20,000,000 respectively (a copy of the subscription agreement dated 7 September 2017 and the supplemental agreement dated 10 November 2017 have been produced to the meeting and marked ‘‘A’’ and ‘‘B’’ respectively, and initialed by the Chairman of the meeting for identification purpose) and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified; and
(b) any one director of the Company be and is hereby authorized to execute on behalf of the Company all such documents (to affix the common seal thereon, if necessary), take such actions and do such things he deems necessary, desirable or expedient for the implementation of, giving effect to or otherwise in connection with the Subscription Agreement and the transactions contemplated thereunder.’’

By order of the Board Asiaray Media Group Limited Lam Tak Hing, Vincent Chairman

Hong Kong, 30 November 2017

– EGM-1 –

NOTICE OF EGM

Notes:

(1) Any member of the Company entitled to attend and vote at the above meeting convened by this notice is entitled to appoint one or, if he/she is the holder of two or more shares of the Company, more than one proxy to attend and, subject to the provisions of the articles of association of the Company, vote in his stead. A proxy need not be a shareholder of the Company.
(2) 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 at the Company’s share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not later than 48 hours before the time for holding the above meeting or any adjournment thereof.
(3) Completion and return of the form of proxy will not preclude a member of the Company from attending and voting in person at the above meeting or any adjournment thereof and in such event, the instrument appointing a proxy shall be deemed to be revoked.
(4) In the case of joint holders of a share of the Company, any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he/she were solely entitled thereto to if more than one of such joint holders are present at the above 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. 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.
(5) For determining the entitlement to attend and vote at the above meeting, the register of members of the Company will be closed from Tuesday, 12 December 2017 to Friday, 15 December 2017, both dates inclusive, during which period no transfer of shares will be registered. In order to be eligible to attend and vote at the extraordinary general meeting, unregistered holders of shares of the Company shall ensure that all transfer documents accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration not later than 4:30 p.m. on Monday, 11 December 2017.

– EGM-2 –

AI assistant

Asiaray Media Group Limited — Proxy Solicitation & Information Statement 2017

50326_rns_2017-11-29_9d8b23d7-65a4-46a4-9235-75c1af3a3128.pdf

ASIARAY MEDIA GROUP LIMITED 雅 仕 維 傳 媒 集 團 有 限 公 司

CONNECTED TRANSACTION

ISSUE OF PERPETUAL SUBORDINATED CONVERTIBLE SECURITIES

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

ASIARAY MEDIA GROUP LIMITED 雅 仕 維 傳 媒 集 團 有 限 公 司

CONNECTED TRANSACTION ISSUE OF PERPETUAL SUBORDINATED CONVERTIBLE SECURITIES

INTRODUCTION

LETTER FROM THE BOARD

THE SUBSCRIPTION AGREEMENT

Date

Parties

Subscription

LETTER FROM THE BOARD

Conditions Precedent

The First Completion

The Second Completion

Warranties and Undertakings

Termination

PRINCIPLE TERMS OF THE PSCS

EFFECT ON THE SHAREHOLDING STRUCTURE

USE OF PROCEEDS AND REASONS FOR THE SUBSCRIPTION

FUND RAISING ACTIVITY BY THE COMPANY IN THE LAST 12 MONTHS

LISTING RULES IMPLICATION

LETTER FROM THE BOARD

EGM

RECOMMENDATIONS

ASIARAY MEDIA GROUP LIMITED 雅 仕 維 傳 媒 集 團 有 限 公 司

CONNECTED TRANSACTION ISSUE OF PERPETUAL SUBORDINATED CONVERTIBLE SECURITIES

Yours faithfully,

LETTER FROM BEIJING SECURITIES

BEIJING SECURITIES LIMITED

CONNECTED TRANSACTION ISSUE OF PERPETUAL SUBORDINATED CONVERTIBLE SECURITIES

INTRODUCTION

LETTER FROM BEIJING SECURITIES

BASIS OF OUR OPINION

LETTER FROM BEIJING SECURITIES

PRINCIPAL FACTORS TAKEN INTO CONSIDERATION

1. Introduction

2. Background and financial information of the Group

For the year ended 31 December 2016

LETTER FROM BEIJING SECURITIES

For the six months ended 30 June 2017

LETTER FROM BEIJING SECURITIES

Outlook

3. The Subscription Agreement

Subscription

LETTER FROM BEIJING SECURITIES

Conditions Precedent

The Second Completion

Termination

4. Use of proceeds and reasons for the Subscription

LETTER FROM BEIJING SECURITIES

5. The PSCS

5.1 Principal terms of the PSCS

LETTER FROM BEIJING SECURITIES

5.2 Analysis on the terms of the PSCS

(ii) Comparison with other perpetual convertible securities

LETTER FROM BEIJING SECURITIES

LETTER FROM BEIJING SECURITIES

LETTER FROM BEIJING SECURITIES

LETTER FROM BEIJING SECURITIES

LETTER FROM BEIJING SECURITIES

LETTER FROM BEIJING SECURITIES

(a) Conversion Price

(b) Rate of Distribution

(c) Conversion

(d) Redemption

LETTER FROM BEIJING SECURITIES

6. Potential dilution effect on the interests of other public Shareholders

RECOMMENDATIONS

1. RESPONSIBILITY STATEMENT

2. DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ANY ASSOCIATED CORPORATION

3. ARRANGEMENTS AFFECTING DIRECTORS AND DIRECTORS’ INTEREST IN CONTRACTS AND ASSETS

4. QUALIFICATIONS AND CONSENT OF EXPERT

Asiaray Media Group Limited Proxy Solicitation & Information Statement 2017

ASIARAY MEDIA GROUP LIMITED 雅仕維傳媒集團有限公司

ASIARAY MEDIA GROUP LIMITED 雅仕維傳媒集團有限公司

ASIARAY MEDIA GROUP LIMITED 雅仕維傳媒集團有限公司

ASIARAY MEDIA GROUP LIMITED 雅仕維傳媒集團有限公司