Asiaray Media Group Limited — Proxy Solicitation & Information Statement 2019

Aug 22, 2019

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)

MAJOR AND CONNECTED TRANSACTION: KUNMING AIRPORT AGREEMENT − EXCLUSIVE CONCESSION RIGHTS FOR ADVERTISING AND MEDIA RESOURCES

22 August 2019

CONTENTS

			Pages
Definitions	. . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Appendix I	—	Financial information of the Group . . . . . . . . . . . . . . . . . .	15
Appendix II	—	Unaudited Pro Forma
		Financial Information of the Group . . . . . . . . . . . . . . . .	17
Appendix III	—	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Appendix IV	—	Valuation report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32

– 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 wholly owned by Mr. Lam

• “associates”

• has the meaning ascribed to it under the Listing Rules

• “Beijing Asiaray”

• Beijing Asiaray Advertising Company Limited* (北京 雅仕維廣告有限公司), a company established in the PRC with limited liability on 9 July 1998 and an indirect wholly-owned subsidiary of the Company

• “Beijing Metro Line 14”

• metro system in Beijing which has 37 stations, connecting the northeast and southwest Beijing with a total length of 47.3 km

• “Beijing MTR”

• 北京京港地鐵有限公司 (Beijing MTR Corporation Limited*), a company established in the PRC with limited liability

• “Billion China”

• Billion China International Limited (億華國際有限公 司), a company established in Samoa with limited liability on 8 August 2005 and 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

• “connected person(s)”

• has the meaning ascribed to it under the Listing Rules

• “Director(s)”

• the director(s) of the Company

– 1 –

DEFINITIONS

• “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

• “Hangzhou Metro Line 5”

• the metro system in Hangzhou which has 38 stations and total length of 51.5 km

• “High Speed Rail”

• the 26-km long Hong Kong Section of the Guangzhou Shenzhen-Hong Kong Express Rail Link running from West Kowloon in Hong Kong to the boundary of Hong Kong and Shenzhen

• “HKD”

• Hong Kong dollars, the lawful currency of Hong Kong

• “HKFRS”

• Hong Kong Financial Reporting Standards

• “Hong Kong”

• Hong Kong Special Administrative Region of the PRC

• “Hong Kong Asiaray”

• Hong Kong Asiaray Advertising Limited (香港雅仕維 廣告有限公司), a company incorporated in Hong Kong with limited liability on 31 October 1995, and an indirect wholly-owned subsidiary of the Company

• “Hong Kong Warehouse A”

• the premises situated at part of Workshop A on 9/F, and Car Parking Space C4 on G/F, Supreme Industrial Building, No. 15–17 Shan Mei Street, Shatin, New Territories, Hong Kong

• “Hong Kong Warehouse B”

• the premises situated at part of Workshop A on 9/F, Supreme Industrial Building, No. 15–17 Shan Mei Street, Shatin, New Territories, Hong Kong

• “Independent Shareholders”

• Shareholders other than the Subscriber and its associates

• “Kunming Airport”

• Kunming Changshui International Airport

– 2 –

DEFINITIONS

• “Kunming Airport Agreement”

• The exclusive concession rights agreement dated 9 July 2019 entered into between Kunming Airport Company and Yunnan Airport Asiaray in relation to, among other things, the grant of the exclusive concession right to Yunnan Airport Asiaray to use and operate the advertising and media resources at Terminal 1 of Kunming Airport

• “Kunming Airport Company”

• 昆明長水國際機場有限責任公司 (Kunming Changshui International Airport Limited Liability Company*), a company established in PRC on 11 April 2012 and is wholly owned by Yunnan Airport Company

• “Latest Practicable Date”

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

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

• “Mr. Lam”

• Lam Tak Hing, alias Vincent Lam, the executive Director, chairman, chief executive officer and controlling shareholder of the Company

• “Peaky”

• Peaky Limited, a company incorporated in Hong Kong with limited liability on 29 March 2011 and 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

• “RMB”

• Renminbi, the lawful currency of the PRC

• “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”

• “Space Management Limited”

• “Stock Exchange”

• “Terminal 1”

• “VAT”

• “Wenzhou MTR”

• “Wenzhou Metro Line S1”

• “Yunnan Airport Asiaray”

• “Yunnan Airport Company”

• “Zhuhai Asiaray”

• holder(s) of the Share(s)

• a company incorporated under the laws of the British Virgin Islands, being a controlling shareholder of the Company holding 8.68% of the existing issued share capital of the Company, 10,000,000 Shares in non-listed derivatives and conversion rights of 14,124,293 Shares pursuant to the First and Second Tranche of Completion as at the date of this circular

• The Stock Exchange of Hong Kong Limited

• Terminal one of Kunming Airport

• Value-added tax

• 溫州市鐵路與軌道交通投資集團有限公司 (Wenzhou Mass Transit Railway Investment Group Co., Limited*), a company established in the PRC with limited liability

• the first phase of the Wenzhou metro system, begins at Panqiao Town in the west, south of Wenzhou South Railway Station, and ends at Peninsula No. 2 Station in the east, with approximately 51.9 km of track and 20 stations

• 雲南空港雅仕維信息傳媒有限公司 (Yunnan Airport Asiaray Information Media Company Limited*), a company established in the PRC with limited liability on 26 June 2002 and an indirect non-wholly owned subsidiary of the Company

• 雲南機場集團有限責任公司 (Yunnan Airport Group Limited Liability Company*), a PRC stated-owned enterprise established on 26 April 2004

• 珠海雅仕維報業傳媒有限公司 (Zhuhai Asiaray Newspaper Media Company Limited*), a company established in the PRC with limited liability on 20 December 2017 and 60% of its equity interest is held by the Group

– 4 –

DEFINITIONS

“Zhuhai	Office”	the premise situated at Suite 2901, 29/F, Yuhai World
		Financial Center, No. 1009 Middle Jiuzhou Avenue,
		Jida, Xiangzhou District, Zhuhai City, Guangdong,
		PRC
“%”		per cent

• For identification purpose only

For illustrative purpose of this circular and unless otherwise specified, conversion of RMB to HKD is based on the exchange rate of RMB 1.00 = HKD 1.136.

– 5 –

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

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

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

Head office and principal place of business in Hong Kong: 16/F, Kornhill Plaza – Office Tower 1 Kornhill Road Quarry Bay Hong Kong 22 August 2019

To the Shareholders,

Dear Sirs,

MAJOR AND CONNECTED TRANSACTION: KUNMING AIRPORT AGREEMENT − EXCLUSIVE CONCESSION RIGHTS FOR ADVERTISING AND MEDIA RESOURCES

INTRODUCTION

Reference is made to the announcement of the Company dated 9 July 2019 in relation to the major and connected transaction of the Kunming Airport Agreement, where Yunnan Airport Asiaray as leasee, entered into the Kunming Airport Agreement with Kunming Airport Company as leasor, a connected person of the Group at the subsidiary level, pursuant to which Kunming Airport Company agreed to grant exclusive concession rights to Yunnan Airport Asiaray to operate, manage, maintain and sale of advertising and media resources located at Terminal 1 of Kunming Airport.

– 6 –

LETTER FROM THE BOARD

PRINCIPAL TERMS OF THE KUNMING AIRPORT AGREEMENT

Date:

9 July 2019

Parties:

(i) Kunming Airport Company

(ii) Yunnan Airport Asiaray

Subject matter:

Yunnan Airport Asiaray was granted the exclusive concession rights to use and operate the advertising and media resources in Terminal 1 of the Kunming Airport operated by Kunming Airport Company with concession fees payable to Kunming Airport Company.

Agreement period:

From 28 June 2019 to 27 June 2026, the Kunming Airport Agreement will lapse automatically if its term has not been renewed before 27 June 2026. Yunnan Airport Asiaray should apply for renewal of the Kunming Airport Agreement 6 months prior to the lapse date, and should be given priority to renewal of the exclusive concession rights in the Kunming Airport Agreement.

Concession Fees:

The total consideration for the concession fees is approximately RMB919,033,000 (equivalent to approximately HKD1,044,021,000) (VAT is included) from 28 June 2019 to 27 June 2026, payable from Yunnan Airport Asiaray to Kunming Airport Company.

– 7 –

LETTER FROM THE BOARD

Payment:

Yunnan Airport Asiaray shall pay Kunming Airport Company the following approximately amounts for each calendar year:

From 28 June 2019 to 31 December 2019: RMB53,150,000 (equivalent to approximately HKD60,379,000); From 1 January 2020 to 31 December 2020: RMB112,678,000 (equivalent to approximately HKD128,002,000); From 1 January 2021 to 31 December 2021: RMB119,439,000 (equivalent to approximately HKD135,683,000); From 1 January 2022 to 31 December 2022: RMB126,605,000 (equivalent to approximately HKD143,823,000); From 1 January 2023 to 31 December 2023: RMB134,201,000 (equivalent to approximately HKD152,452,000); From 1 January 2024 to 31 December 2024: RMB142,253,000 (equivalent to approximately HKD161,599,000); From 1 January 2025 to 31 December 2025: RMB150,789,000 (equivalent to approximately HKD171,296,000); and From 1 January 2026 to 27 June 2026: RMB79,918,000 (equivalent to approximately HKD90,787,000).

Yunnan Airport Asiaray agreed to pay Kunming Airport Company concession fees semi-annually in every calendar year during the agreement period. Concession fees for the first half of each calendar day are payable on or before the 15th day of July in every calendar year and concession fees for the second half of each calendar year are payable on or before the 15th day of January of the next calendar year.

Guarantee:

Yunnan Airport Asiaray shall issue Kunming Airport Company a sum of RMB10,000,000 (equivalent to approximately HKD11,360,000) in form of a bank guarantee (the “ Guarantee ”) as guarantee for the performance of the Kunming Airport Agreement within 30 days upon signing of the Kunming Airport Agreement.

– 8 –

LETTER FROM THE BOARD

Kunming Airport Company is entitled to deduct from the Guarantee if Yunnan Airport Asiaray (i) failed to pay concession fees in accordance with the Kunming Airport Agreement; or (ii) caused damages to Kunming Airport Company due to failure to perform in accordance with the Kunming Airport Agreement.

Kunming Airport Company is entitled to demand further payment from Yunnan Airport Asiaray if the Guarantee is insufficient to cover the above payments and/or damages. If any deductions is made to the Guarantee, Kunming Airport Company is entitled to notify Yunnan Airport Asiaray to request payment for the deducted amount and Yunnan Airport Asiaray should make payments accordingly within 7 calendar days, otherwise Kunming Airport Company is entitled to terminate the Kunming Airport Agreement.

The Guarantee would be returned to Yunnan Airport Asiaray upon the following conditions, (i) the end of the Agreement period of the Kunming Airport Agreement; (ii) Yunnan Airport Asiaray had returned the subject matter of the Kunming Airport Agreement and Kunming Airport Company has accepted the condition of the subject matter of the Kunming Airport Agreement; (iii) Yunnan Airport Asiaray has paid all the related expenses (including service expenses, utilities management fees etc.); and (iv) Yunnan Airport Asiaray had performed in accordance with the Kunming Airport Agreement or had indemnified the damage caused by its non-performance of the Kunming Airport Agreement.

– 9 –

LETTER FROM THE BOARD

INFORMATION OF PARTIES TO THE EXCLUSIVE CONCESSION RIGHTS AGREEMENT

The Group

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.

Yunnan Airport Asiaray

Yunnan Airport Asiaray was established in the PRC with limited liability and is a subsidiary of the Company with 51% of its equity interest indirectly held by the Company. Yunnan Airport Asiaray is principally engaged in out-of-home advertising media services in the PRC.

Yunnan Airport Company

Yunnan Airport Company, a PRC state-owned enterprise, together with its associate(s), are principally engaged in management and operation of the civil airports in Yunnan Province. Yunnan Airport Company holds 49% of the equity interest in Yunnan Airport Asiaray.

Kunming Airport Company

Kunming Airport Company was established in the PRC with limited liability and is a wholly-owned subsidiary of Yunnan Airport Company. Kunming Airport Company is principally engaged in operation and management of the Kunming Airport.

Yunnan Airport Asiaray is held as to 49% by Yunnan Airport Company and 51% by Shanghai Asiaray, an indirect wholly-owned subsidiary of the Company. For the purpose of the Listing Rules, Yunnan Airport Company is a substantial shareholder of Yunnan Airport Asiaray, and each of the Yunnan Airport Company and its associates is thus a connected person at subsidiary level of the Company. Since Kunming Airport Company is wholly-owned by Yunnan Airport Company, accordingly, the transaction between Yunnan Airport Asiaray and Kunming Airport Company contemplated under the Kunming Airport Agreement constitutes a connected transaction at subsidiary level for the Company pursuant to Rule 14A.23 and Rule 14A.24 of the Listing Rules.

– 10 –

LETTER FROM THE BOARD

TWO YEARS REVENUE INFORMATION

	Year ended	Year ended
	31 December 2018	31 December 2017
	HKD’000	HKD’000
Revenue generated from
the old lease agreement	253,539	224,432

The revenue for years ended 31 December 2017 and 2018 has been disclosed above for reference only, and the revenue to be generated from the new contract may be different. It should not read as comparables for the Kunming Airport Agreement since the payments and other terms of the Kunming Airport Agreement are different from the old lease agreement.

ADDITIONAL FINANCIAL INFORMATION OF THE COMPANY

According to HKFRS 16 which took effect on 1 January 2019, the Company is required to recognize a right-of-use assets. As such, the adjusted total assets of the Company have been prepared using valuation of the underlying leases prepared by respective valuers for the purpose of Chapter 14 of the Listing Rules (the value of these leases calculated under HKFRS 16 may be different) is as follow:

Total Assets as at 1 January 2019 Adjusted by: Dividends declared Right-of-use of assets in respect of 瓊海博鰲機場 (Qionghai Boao Airport*) (Note 1) Right-of-use of assets in respect of Beijing Metro Line 14 (Note 2) Right-of-use of assets in respect of Yichang Sanxia Airport (Note 3) Right-of-use of assets in respect of Wenzhou Metro Line S1 (Note 4) Right-of-use of assets in respect of Kunming Airport (Note 5) Adjusted Total Assets	(HKD’000) 1,599,456
	(11,000) 17,040 172,930 18,135 151,913 841,652
	2,790,126

Note 1 : The valuation was conducted by an independent valuer. The estimated value of the right-of-use asset under the contract is RMB15,000,000 (equivalent to approximately HKD17,040,000).

Note 2 : The valuation was conducted by an independent valuer. The estimated value of the right-of-use asset under the exclusive concession rights agreement in relation to Beijing Metro Line 14 is approximately RMB152,227,000 (equivalent to approximately HKD172,930,000). Please refer to the announcement of the Company dated 11 February 2019.

– 11 –

LETTER FROM THE BOARD

• Note 3 : The valuation was conducted by an independent valuer. The estimated value of the right-of-use asset under the exclusive concession rights agreement in relation to Yichang Sanxia Airport is approximately RMB15,964,000 (equivalent to approximately HKD18,135,000).

• Note 4 : The valuation was conducted by an independent valuer. The estimated value of the right-of-use asset under the exclusive concession rights agreement in relation to Wenzhou Metro Line S1 is approximately RMB133,726,000 (equivalent to approximately HKD151,913,000). Please refer to the announcement of the Company dated 22 March 2019.

• Note 5 : The valuation was conducted by an independent valuer. The estimated value of the right-of-use asset under the exclusive concession rights agreement in relation to Kunming Airport is approximately RMB740,891,000 (equivalent to approximately HKD841,652,000) (VAT amounting to RMB41,937,000 (HKD47,656,000) is included). The value of the transactions contemplated under the Kunming Airport Agreement is calculated on the basis of rights-of-use asset based on income approach by discounting the future payments, according to the Kunming Airport Agreement, which comprise of: (i) the amount of the initial measurement of the lease liability; (ii) any lease payments made at or before the commencement date, less any lease incentives received; (iii) any initial direct costs incurred by the lessee; and (iv) an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

REASONS FOR AND BENEFITS OF ENTERING INTO THE KUNMING AIRPORT AGREEMENT

The Group is a leading out-of-home media group in Mainland China and Hong Kong with a strategic focus on airport and metro line advertising. The Group is also one of two out-of-home resources companies operating in the metro lines segment in Hong Kong.

Kunming Airport is one of the busiest airports in the world in terms of passenger traffic. According to the Civil Aviation Administration of China, Kunming Airport ranked the sixth in all airports in the PRC by passenger traffic in 2018 with 47,088,140 passengers. The Group would like to maintain the Group’s leading position in the airport advertising market of the PRC. The Directors believe that the entering into of the Kunming Airport Agreement would enable the Group to exert their strengths and grasp market opportunities in airport advertising market in the PRC and create a greater return for the Shareholders.

The terms of the Kunming Airport Agreement have been arrived at after arm’s length negotiations between the parties. The Directors (including the independent non-executive Directors) consider that the terms of the Kunming Airport Agreement and the transactions contemplated thereunder are fair and reasonable, on normal commercial terms and in the interests of the Company and its Shareholders as a whole.

LISTING RULES IMPLICATION

The transactions contemplated under the Kunming Airport Agreement, in aggregate, will constitute a major transaction for the Company under Rule 14.07 of the Listing Rules on the basis that certain of the applicable percentage ratios are more than 25%. As one or more of the applicable percentage ratios in respect of the consideration under the Kunming Airport Agreement is more than 25% but less than 100%, the entering into the Kunming Airport Agreement constitutes a major transaction of the Company under Chapter 14 of the Listing Rules and is therefore subject to the announcement, circular and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

– 12 –

LETTER FROM THE BOARD

Pursuant to entering of the Kunming Airport Agreement, the Group estimated the amount of the exclusive concession rights as right-of-use asset is approximately RMB740,891,000 (equivalent to approximately HKD841,652,000) (VAT is included) calculated with reference to the aggregated present value of the fixed lease payments under the Kunming Airport Agreement, thus the entering into the Kunming Airport Agreement and the transactions contemplated thereunder will be regarded as an acquisition of asset by the Group. The estimated value is for the management to determine the arm’s length transaction purpose. The value of the Kunming Airport Agreement is calculated based on income approach by discounting the future payments, according to the Kunming Airport Agreement which comprise of: (i) the amount of the initial measurement of the lease liability; (ii) any lease payments made at or before the commencement date, less any lease incentives received; (iii) any initial direct costs incurred by the lessee; and (iv) an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

Furthermore, Yunnan Airport Asiaray is held as to 49% by Yunnan Airport Company and 51% by Shanghai Asiaray, an indirect wholly-owned subsidiary of the Company. For the purpose of the Listing Rules, Yunnan Airport Company is a substantial shareholder of Yunnan Airport Asiaray, and each of the Yunnan Airport Company and its associates is thus a connected person at subsidiary level of the Company. Since Kunming Airport Company is wholly-owned by Yunnan Airport Company, accordingly, the transaction between Yunnan Airport Asiaray and Kunming Airport Company contemplated under the Kunming Airport Agreement constitutes a connected transaction at subsidiary level for the Company pursuant to Rule 14A.23 and Rule 14A.24 of the Listing Rules.

The terms of the Kunming Airport Agreement have been arrived at after arm’s length negotiations between the parties. The Directors (including the independent non-executive Directors) consider that the terms of the Kunming Airport Agreement and the transactions contemplated thereunder are fair and reasonable, on normal commercial terms and in the interests of the Company and its Shareholders as a whole. Pursuant to Rule 14A.101 of the Listing Rules, the transactions contemplated under the Kunming Airport Agreement are subject to reporting and announcement requirements but are exempt from the circular, independent financial advice and shareholders’ approval requirement.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, no Director have a material interest in the Kunming Airport Agreement and the transactions contemplated thereunder, and therefore no Director has to abstain from voting on the relevant board resolutions approving the Kunming Airport Agreement and the transaction contemplated thereunder. Since no shareholder is required to abstain from voting, pursuant to Rule 14.44 of the Listing Rules, written approval from a shareholder or a closely allied group of shareholders who together hold more than 50% of the voting rights at the general meeting to approve the transaction such shareholder can be accepted in lieu of holding a general meeting for the purpose of approving the Kunming Airport Agreement.

– 13 –

LETTER FROM THE BOARD

As at the date of this circular, Media Cornerstone Limited owns 254,921,500 shares of the Company, representing approximately 57.94% of the entire issued ordinary share capital of the Company. The issued share capital of Media Cornerstone Limited is entirely held by 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). The Company has received a written approval given by Media Cornerstone Limited for the transactions contemplated under the Kunming Airport Agreement in lieu of holding a general meeting in accordance with Rule 14.44 of the Listing Rules.

RECOMMENDATIONS

The Directors (including the independent non-executive Directors) are of the opinion that the Kunming Airport Agreement and the transactions contemplated thereunder are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends that the resolution(s) to approve the transactions.

The Company has obtained a written approval from Media Cornerstone Limited for the transactions contemplated under the Kunming Airport Agreement in lieu of holding a general meeting, hence no general meeting will be convened to approve the Kunming Airport Agreement and the transactions contemplated thereunder.

FURTHER INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

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

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. THREE-YEAR FINANCIAL INFORMATION

Financial information of the Group for each of the three years ended 31 December 2018, 2017 and 2016 are disclosed in the annual reports of the Company for the years ended 31 December 2018, 2017 and 2016 respectively, which have been published on both the website of the Stock Exchange (www.hkexnews.com.hk) and the website of the Company (https://www.asiaray.com/zh/home/), and can be accessible by the links as follows:

• annual report of the Company for the year ended 31 December 2018 (pages 89 to 245) https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0417/ltn20190417288.pdf

• annual report of the Company for the year ended 31 December 2017 (pages 81 to 216) https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0427/ltn20180427630.pdf

• annual report of the Company for the year ended 31 December 2016 (pages 77 to 197) https://www1.hkexnews.hk/listedco/listconews/sehk/2017/0427/ltn201704272644.pdf

2. STATEMENT OF INDEBTEDNESS

Borrowings

As at 30 June 2019, being the latest practicable date for the purpose of this statement of indebtedness, the Group had outstanding bank borrowings of HKD225,981,000. Bank borrowings of HKD3,694,000 were secured by the Group’s building of HKD10,011,000. Bank borrowings of HKD222,287,000 were unsecured as at 30 June 2019. As at 30 June 2019, the Group had unutilised banking facilities of HKD277,037,000.

Lease liabilities

The Group has adopted HKFRS 16 ‘Leases’ for accounting period beginning on or after 1 January 2019 using the simplified transition approach without restating the comparative amounts for the year prior to first adoption. As such, leases have been recognised in the form of an asset (for the right of use) and a financial liability (for the payment obligation) of the same amount in the Group’s consolidated statements of financial position for accounting period beginning on or after 1 January 2019.

As at 30 June 2019, being the latest practicable date for the purpose of this statement of indebtedness, the Group had current lease liabilities of HKD790,181,000 and non-current lease liabilities of HKD2,670,860,000.

– 15 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Save as aforesaid or otherwise mentioned herein, and apart from intra-group liabilities and normal trade payables in the ordinary course of business, as at the close of business on 30 June 2019, the Group did not have any other outstanding borrowings, loan capital, bank overdrafts, debt securities or other similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, hire purchase commitments, guarantees or other material contingent liabilities.

3. WORKING CAPITAL

The Directors are of the opinion that, in the absence of unforeseeable circumstances, after taking into account the present available resources, banking facilities available to the Group and the internally generated funds, the completion of the proposed transaction, the Group will have sufficient working capital to satisfy its requirements for at least next 12 months following the date of this circular.

4. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Group is a leading out-of-home media group in Mainland China and Hong Kong with a strategic focus on airport and metro line advertising. The Group is also one of two out-of-home resources companies operating in the metro lines segment in Hong Kong.

According to a report by CTR Market Research (http://www.199it.com/archives/831411.html), the Mainland China advertising market underwent a period of adjustment and development in 2018. Overall advertising spending recorded a growth of only 2.9% in 2018, slipping from 4.3% in 2017. Looking ahead, the outlook for the global economy is expected to be filled with uncertainties as it will be affected by various issues including the US-China trade war, weaker prospects for emerging markets, geopolitical tensions, etc.

Despite the said challenging environment, the Group, as a market leader with strong presence and extensive network in the both the Hong Kong and Mainland China markets, remains prudently optimistic about the prospects due to the potential in the out-of-home market and the Group’s competitive advantages established. The Group believe that the entering into of the Kunming Airport Agreement would enable the Group to exert their strengths and grasp market opportunities in airport advertising market in the PRC and maintain its leading position in the airport advertising market.

– 16 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The unaudited pro forma consolidated statement of assets and liabilities of the Group has been prepared based on the audited consolidated balance sheet of the Group as at 31 December 2018 and adjusted for the effects of the Transaction to illustrate how the Transaction might have affected the financial position of the Group as if the Transaction had taken place on 31 December 2018. The Unaudited Pro Forma Financial Information has been prepared by the Directors for illustrative purpose only and, because of its hypothetical nature, it may not give a true picture of the financial position of the Group had the Transaction been completed as at 31 December 2018 or at any future date. The Unaudited Pro Forma Financial Information should be read in conjunction with other financial information included elsewhere in this circular.

ASSETS Non-current assets Property, plant and equipment Land use rights Investment properties Intangible assets Investments in associates Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Deferred income tax assets Right-of-use assets Restricted cash Non-current portion of other receivables Current assets Inventories Trade and other receivables Short-term bank deposits Restricted cash Cash and cash equivalents Total assets	Audited consolidated statement of assets and liabilities of the Group as at 31 December 2018 HK$’000 (Note 1) 106,235 23,724 8,785 21,400 38,136 5,943 7,619 92,937 – – 15,826 320,605 2,444 840,865 6,122 49,489 379,931 1,278,851 1,599,456	Pro forma adjustments HK$’000 (Note 2) – – – – – – – – 772,798 1,137 – 773,935 – – – – (1,137) (1,137) 772,798	Unaudited pro forma consolidated statement of assets and liabilities of the Group as at 31 December 2018 HK$’000 106,235 23,724 8,785 21,400 38,136 5,943 7,619 92,937 772,798 1,137 15,826
			1,094,540
			2,444 840,865 6,122 49,489 378,794
			1,277,714
			2,372,254

– 17 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

Liabilities Non-current liabilities Borrowings Deferred income tax liabilities Leased liabilities Current liabilities Trade and other payables Contract liabilities Financial liabilities at fair value through profit or loss Borrowings Leased liabilties Current income tax liabilities Total liabilities	Audited consolidated statement of assets and liabilities of the Group as at 31 December 2018 HK$’000 (Note 1) 77,726 2,854 – 80,580 573,053 145,051 6,611 191,280 – 27,704 943,699 1,024,279	Pro forma adjustments HK$’000 (Note 2) – – 762,596 762,596 – – – – 10,202 – 10,202 772,798	Unaudited pro forma consolidated statement of assets and liabilities of the Group as at 31 December 2018 HK$’000 77,726 2,854 762,596
			843,176
			573,053 145,051 6,611 191,280 10,202 27,704
			953,901
			1,797,077

• (Note 1) The audited consolidated statement of assets and liabilities of the Group as at 31 December 2018 is extracted from the Group’s published audited consolidated financial statements for year ended 31 December 2018.

• (Note 2) The Group has applied HKFRS 16 with effect from 1 January 2019. Accordingly, the capitalisation of right-of-assets from exclusive concession right for advertising and media resources in Terminal 1 of Kunming Airport will be accounted for under HKFRS 16. For the purpose of preparing the Unaudited Pro Forma Financial Information, it is assumed that the capitalisation of right-of-use assets had been completed and the respective operation period of the Target Asset had commenced on 31 December 2018.

– 18 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The adjustments represent the recognition of the right-of-use assets and lease liabilities amounting to HK$773 million, respectively. In accordance with the Group’s accounting policies on the recognition of right-of-use asset, leased liabilities are measured at aggregated present value of the fixed lease payments by the Group's incremental borrowing rate. The Company applied discount rate of 5.88% in quantifying right-of-use asset after considering the interest expenses impact with reference to a portfolio of leases with reasonably similar characteristic adopted by the Group to reflect the adoption of HKFRS 16. The lessor include VAT in invoices for lease payments, acting as an agent of the government. The VAT is only payable by the lessor to the tax authority if the invoice is paid. The VAT is not a payment related to using the underlying asset, or a reimbursement of the lessor’s costs of owning the underlying asset. Therefore, the VAT is not a lease payment and is excluded from the lease liabilities. In addition, a restricted bank deposit amounting to HKD1,137,000 (equivalent to RMB1,000,000) would be recognised as a restricted deposit on 31 July 2019, for the bank issuing bank guarantee letter of HK$11,360,000 (equivalent to RMB10,000,000) to guarantee for the lease payments of the Kunming Airport Agreement.

After the completion of the capitalisation of right-of-use asset, the operation period will commence.

• (Note 3) The transaction costs of the Transaction are immaterial and have not been taken into account for the purpose of preparing the Unaudited Pro Forma Financial Information.

• (Note 4) No other adjustment has been made to the Unaudited Pro Forma Financial Information to reflect any trading results or other transactions of the Group entered into subsequent to 31 December 2018. In particular, all existing outstanding concession rights agreements as of 31 December 2018 have not been adjusted for HKFRS 16 and not been reflected as pro forma adjustments.

– 19 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

B. REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The following is the text of a report received from PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

==> picture [67 x 48] intentionally omitted <==

INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

To the Directors of Asiaray Media Group Limited

We have completed our assurance engagement to report on the compilation of Unaudited Pro Forma Financial Information of Asiaray Media Group Limited (the “ Company ”) and its subsidiaries (collectively the “ Group ”), and the exclusive concession rights to use and operate the advertising and media resources in Terminal 1 of the Kunming Airport (the “ Target Asset ”) (collectively the “ Enlarged Group ”) by the directors for illustrative purposes only. The Unaudited Pro Forma Financial Information consists of the unaudited pro forma statement of assets and liabilities as at 31 December 2018, and related notes (the “ Unaudited Pro Forma Financial Information ”) as set out on pages 17 to 19 of the Company’s circular dated 22 August 2019, in connection with the renewal of the exclusive concession rights in the Kunming Airport (the “ Transaction ”) by the Group. The applicable criteria on the basis of which the directors have compiled the Unaudited Pro Forma Financial Information are described on pages 17 to 19.

The Unaudited Pro Forma Financial Information has been compiled by the directors to illustrate the impact of the Transaction on the Group’s consolidated financial position as at 31 December 2018 as if the Transaction had taken place at 31 December 2018. As part of this process, information about the Group’s consolidated financial position has been extracted by the directors from the Group’s consolidated financial statements for the year ended 31 December 2018, on which an audit report has been published.

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

The directors are responsible for compiling the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”) and with reference to Accounting Guideline 7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars (“ AG 7 ”) issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”).

PricewaterhouseCoopers, 22/F Prince's Building, Central, Hong Kong T: +852 2289 8888, F: +852 2810 9888, www.pwchk.com

– 20 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

Our firm applies Hong Kong Standard on Quality Control 1 issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus , issued by the HKICPA. This standard requires that the reporting accountant plans and performs procedures to obtain reasonable assurance about whether the directors have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial Information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the Unaudited Pro Forma Financial Information.

The purpose of Unaudited Pro Forma Financial Information included in a circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Transaction at 31 December 2018 would have been as presented.

A reasonable assurance engagement to report on whether the unaudited pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors in the compilation of the unaudited pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

– 21 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

• The related pro forma adjustments give appropriate effect to those criteria; and

• The Unaudited Pro Forma Financial Information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the company, the event or transaction in respect of which the Unaudited Pro Forma Financial Information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the unaudited pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

• (a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;

• (b) such basis is consistent with the accounting policies of the Group; and

• (c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 22 August 2019

– 22 –

APPENDIX III

GENERAL INFORMATION

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 Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS IN SECURITIES

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required to be (i) 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 the Directors or, the chief executive of the Company were taken or deemed to have under such provisions of the SFO); or (ii) recorded in the register kept by the Company pursuant to section 352 of the SFO; or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules were as follows:

Long positions in the Shares

				Total	Approximate
				number of	percentage of
			Equity	Shares and	issued share
Name of	Capacity/	Number of	derivative	underlying	capital of
Directors	Nature of interest	Shares	and options	Shares	the Company
Mr. Lam	Founder of a discretionary	293,121,500	24,124,293	317,245,793(1)	72.10%
	trust and interest in a
	controlled corporation
	Beneficial owner	Nil	4,400,000	4,400,000	1.00%
Lam Ka Po	Beneficial owner	Nil	1,278,000	1,278,000	0.29%
Ma Andrew Chiu	Beneficial owner	Nil	100,000	100,000	0.02%
Cheung
Ma Ho Fai GBS JP	Beneficial owner	Nil	100,000	100,000	0.02%

– 23 –

APPENDIX III

GENERAL INFORMATION

Note:

1. Mr. Lam is the sole shareholder of Space Management which holds 38,200,000 Shares, 10,000,000 Shares in non-listed warrants and conversion rights of 14,124,293 Shares pursuant to the completion of the first and second tranche of subscription of PSCS. 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 which holds 254,921,500 Shares. By virtue of the SFO, he is deemed to be interested in the Shares in which Space Management and Media Cornerstone are interested.

Abbreviation: “L” stands for long position

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which, (a) were required to be notified to the Company and the Stock Exchange pursuant to provisions of Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which the Directors have taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules to be notified to the Company and the Stock Exchange.

– 24 –

APPENDIX III

GENERAL INFORMATION

3. SUBSTANTIAL SHAREHOLDERS’ INTERESTS IN SECURITIES

As at the Latest Practicable Date, so far as was known to any Director or chief executive of the Company, the following persons (other than the Directors and chief executive of the Company) had interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or had any options in respect of such capital:

Long positions in the Shares

			Approximate
			percentage of
			issued share
Name of	Capacity/	Number of	capital in
Shareholders	Nature of interest	shares	the Company(6)
Mr. Lam	Founder of a discretionary trust	317,245,793 (L)	72.10%
	and interest in a controlled
	corporation
	Beneficial owner	4,400,000 (L)(1)	1.00%
Media Cornerstone Limited	Beneficial owner	254,921,500 (L)(2)	57.94%
Shalom Family Holding Limited	Interest in a controlled	254,921,500 (L)(2)	57.94%
	corporation
UBS Trustee (BVI) Limited	Trustee of Shalom Trust	254,921,500 (L)(2)	57.94%
Space Management Limited	Beneficial owner	62,324,293 (L)(3)	14.16%
Great World HK Pte. Ltd.	Beneficial owner	23,609,000 (L)(4)	5.37%
L Capital Asia 2 Pte. Ltd.	Interest in a controlled	23,609,000 (L)(4)	5.37%
	corporation
L Capital Asia 2 LP	Interest in a controlled	23,609,000 (L)(4)	5.37%
	corporation
L Capital Asia 2 GP	Interest in a controlled	23,609,000 (L)(4)	5.37%
	corporation

– 25 –

APPENDIX III

GENERAL INFORMATION

Notes:

1. Mr. Lam was granted 4,400,000 share options on 21 May 2015.

2. The 254,921,500 Shares are held by Media Cornerstone. Media Cornerstone is wholly owned by Shalom Family Holding Limited, which is in turn wholly owned by the Shalom Trust, discretionary trust. The Shalom Trust established by Mr. Lam as settlor and UBS Trustees (BVI) Limited as trustee. The discretionary beneficiaries of the Family Trust are Mr. Lam, certain of his family members and other persons who may be added from time to time. By virtue of the SFO, the Trustee is deemed to be interested in the Shares in which Media Cornerstone is interested in.

3. Mr. Lam is the sole shareholder of Space Management, which holds interest in 62,324,293 Shares with 38,200,000 Shares in actual Shares, 10,000,000 Shares in non-listed derivatives, and conversion rights of 14,124,293 Shares pursuant to the completion of the first tranche and second tranche of subscription of the perpetual subordinated convertible securities (“ PSCS ”) in the principal amount of HKD30,000,000 and HKD20,000,000 under the subscription agreement dated 7 September 2017 as amended and supplemented by the supplemental agreement dated 10 November 2017. The first tranche of subscription was completed on 28 December 2017. The second tranche of subscription was completed on 28 June 2019.

4. Great World HK Media Pte Ltd. (“ Great World ”) is wholly owned by L Capital Asia 2 Pte. Ltd. (“ LC Pte ”). LC Pte is wholly owned by L Capital 2 LP (“ L Cap ”). L Cap is wholly owned by L Capital Asia 2 GP (“ L Cap Asia ”). By virtue of the SFO, Great World, LC Pte, L Cap, and L Cap Asia are deemed to be interested in the shares. Great World held long position in 23,609,000 shares in capacity as beneficial owner of these shares.

5. As at the Latest Practicable Date, the issued share capital was 440,000,000 Shares.

Abbreviations: “L” stands for long position

Save as disclosed herein, as at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company, there was no other person, other than the Directors or chief executive of the Company and (in the case of the other members of the Group) other than the Company, who had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

As at the Latest Practicable Date, so far as is known to the Directors, none of the Directors held offices in the substantial Shareholders.

– 26 –

APPENDIX III

GENERAL INFORMATION

4. ARRANGEMENTS AND MATTERS CONCERNING DIRECTORS AND MEMBERS

Save for the following transactions, no transactions, arrangements and contracts of significance in relation to the Group’s business to which the Company or its subsidiaries was a party and in which a Director of the Company or his or her connected entities had a material interest, whether directly or indirectly:

• (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 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 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;

• (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 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 a term of two years from 1 March 2018 to 30 June 2020 (both days inclusive), as disclosed in the announcement of the Company dated 1 March 2018; and

• (iii) the tenancy agreement between Zhuhai Asiaray, a company with 60% of its equity interest held by the Group, as tenant, and Mr. Lam, as landlord, to lease an office in PRC on 1 March 2018 for a term of two years and four months from 1 March 2018 to 20 June 2020 (both days inclusive), as disclosed in the announcement of the Company dated 1 March 2018, 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 2018 (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.

– 27 –

APPENDIX III

GENERAL INFORMATION

5. LITIGATION

As at the Latest Practicable Date, no member of the Group was involved in any litigation or claims of material importance nor was any litigation or claims of material importance known to the Directors to be pending or threatened against any member of the Group.

6. MATERIAL ADVERSE CHANGE

As of the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2018, being the date to which the latest published audited financial statements of the Group were made up, despite the profit warning announced by the Company on 26 July 2019.

7. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had a service contract with the Company which was not determinable by the Company within one year without payment of compensation, other than statutory compensation.

8. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by members of the Group within the two years immediately preceding the date of this circular and are or may be material:

1. The tenancy agreement dated 31 August 2017, entered into 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 a term of two years and ten months from 1 September 2017 to 30 June 2020 (both days inclusive);

2. The subscription agreement dated 7 September 2017, entered into between the Company as issuer and Space Management Limited as subscriber for subscription of 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 in two tranches;

3. The supplemental agreement dated 10 November 2017 to amend certain terms of the subscription agreement for perpetual subordinated convertible securities dated 7 September 2017, to the material effects that the call for the subscriber to subscribe for the second tranche of the perpetual subordinated convertible securities shall be subject to the independent shareholders’ approval;

– 28 –

APPENDIX III

GENERAL INFORMATION

1. The tenancy agreement dated 1 March 2018, entered into between Zhuhai Asiaray, a company with 60% of its equity interest is held by the Groups, as tenant and Mr. Lam, as landlord to lease the Zhuhai Office from 1 March 2018 to 30 June 2020;

2. The tenancy agreement dated 1 March 2018, entered into between Hong Kong Asiaray, an indirect wholly-owned subsidiary of the Company, as tenant and Peaky, as landlord to lease the Hong Kong Warehouse B from 1 March 2018 to 30 June 2020;

3. The supplemental tenancy agreement dated 1 March 2018, entered into between Genesis Printing, an indirect wholly-owned subsidiary of the Company, as tenant and Peaky, as landlord to amend certain terms of the new Hong Kong Warehouse A tenancy agreement A to reduce the size of the premise rented in Hong Kong Warehouse A and the rent;

4. The agreement dated 29 August 2018, entered into among Asiaray International Holdings Limited as purchaser and Mr. Lo Chi Kwong, Mr. Colin Neil Stewart and Mr. Leung Siu Pun as vendors for the acquisition of 51% of the entire issued capital of the Radius Displays International Limited at the consideration of not more than HK$114 million;

5. The service agreement for advertising dated 13 August 2018, entered into between Asiaray Metro Media Limited, a wholly-owned subsidiary of the Company and MTR Corporation Limited, pursuant to which, Asiaray Metro Media Limited has been granted the exclusive rights in respect of the marketing, promoting and selling services for the placing of advertisements covering advertising items such as advertising units, special advertising and digital advertising in the Hong Kong West Kowloon Station of the High Speed Rail;

6. The advertising resources operation contract dated 15 November 2018, entered into between Shanghai Asiaray and Hangzhou MTR Corporation Line 5 Limited, pursuant to which, Shanghai Asiaray has been granted the concession rights to operate the advertising resources of Hangzhou Metro Line 5;

7. The exclusive concession rights agreement dated 11 February 2019, entered into between Shanghai Asiaray and Beijing MTR, pursuant to which Beijing MTR agreed to grant exclusive concession rights to Shanghai Asiaray to operate, manage, maintain and sales of advertising and media resources located at Beijing Metro Line 14;

– 29 –

APPENDIX III

GENERAL INFORMATION

1. The exclusive concession rights agreement for advertising and media resources dated 22 March 2019, entered into between Shanghai Asiaray and Wenzhou MTR, pursuant to which Shanghai Asiaray was granted the exclusive rights to use and operate the advertising and media resources in Wenzhou Metro Line S1 operated by Wenzhou MTR with concession fees payable to Wenzhou MTR; and

2. The Kunming Airport Agreement.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours on any weekday (except public holidays) at the principal place of business of the Company in Hong Kong at 16/F, Kornhill Plaza – Office Tower, 1 Kornhill Road, Quarry Bay, Hong Kong, Asiaray Media Group Limited, from 22 August 2019 to 4 September 2019 (both days inclusive):

• (a) the Kumming Airport Agreement;

• (b) the memorandum and articles of association of the Company;

• (c) the material contracts as referred to in the section headed “8. Material contracts” in this appendix;

• (d) the annual reports of the Company for the two years ended 31 December 2017 and 2018, respectively;

• (e) the report on the unaudited pro forma financial information of the Group, the text of which is set out in Appendix II to this Circular;

• (f) the written approval dated 9 July 2019 from Media Cornerstone Limited;

• (g) this circular;

• (h) the valuation report; and

• (i) copy of last PSCS circular.

– 30 –

APPENDIX III

GENERAL INFORMATION

10. MISCELLANEOUS

• (a) The company 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.

• (b) The registered office of the Company is Maples Corporate Services Limited, P.O. Box 309 Ugland House, Grand Cayman, KY1-1104, Cayman Islands.

• (c) The share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited at Shop 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

• (d) In the event of any inconsistency, the English text of this circular shall prevail over the Chinese text.

– 31 –

APPENDIX IV

VALUATION REPORT

The following is the text of a report set out on pages 32 to 38, received from an independent professional valuer, Flagship Appraisals and Consulting Limited, for the purpose of incorporation in this circular.

LETTER OF OPINION

9 July 2019

The Board of Directors Asiaray Media Group Limited 16/F, Kornhill Plaza – Office Tower 1 Kornhill Road Quarry Bay, Hong Kong

Dear Sirs/Madams,

Re: Valuation of Right-Of-Use Assets

In accordance with the instructions from Asiaray Media Group Limited (the “ Company ” or the “ Lessee ”), we are engaged to measure the value of the right-of-use assets for a service contract, namely Kunming Changshui International Airport Paid Transfer Management Contract[1] (the “ Contract ”), as at 27 June 2019 (the “ Valuation Date ”).

Our analysis and conclusions, which are to be used only in their entirety, are for the use by the management (the “ Management ”) of the Company solely for internal reference. They are not to be used for any other purposes or by any other party for any purpose, without our express written consent. None should rely on our analysis and conclusion as a substitute for their own judgement or due diligence.

This valuation engagement is conducted in accordance with the International Valuation Standards. The estimate of value that results from a valuation engagement is expressed as a conclusion of value.

Based on our analysis, as described in this valuation report, the estimate of value of the right-of-use of the assets under the Contract as at Valuation Date was RMB740,891,000 (RENMINBI SEVEN HUNDRED FORTY MILLION EIGHT HUNDRED AND NINETY-ONE THOUSAND ONLY).

1 For identification only. The official name in Chinese: 昆明長水國際機場有償轉讓經營合同

– 32 –

APPENDIX IV

VALUATION REPORT

This conclusion is subject to the assumptions, the Limiting Conditions and the Statement of General Services Conditions described in this report. We have no obligation to update this report or our conclusion of value for information that comes to our attention after the date of this report.

Yours faithfully, For and on behalf of FLAGSHIP APPRAISALS AND CONSULTING LIMITED

Ferry S. F. Choy MSc. Fin, CFA, ICVS Managing Director

– 33 –

APPENDIX IV

VALUATION REPORT

1. INTRODUCTION

As of the Valuation Date, the Company and Kunming Changshui International Airport Co., Ltd.[2] (the “ Lessor ”) entered into a franchise agreement that the Lessor would grant a right to the Company to use its premises on Terminal 1 of the airport for the Company’s advertisement business for 7 years period explicitly. The Company would pay RMB919,032,892, including VAT, to the Lessor as consideration for a total 7 years period.

In this particular case, in order to facilitate the Management to understand the potential impact from the Contract on its financial statement, we are engaged to perform a valuation according the requirement under HKFRS 16 Lease (“ HKFRS 16 ”) with the reference date of market data and information to be 27 June 2019.

2. SCOPE OF SERVICES

We are engaged by the Management in perform an independent assessment on the value of the right-of-use assets for the Contract as at the Valuation Date for internal reference.

3. BASIS OF VALUE

The value of the Contract will be on the basis of right-of-use assets, which according to HKFRS 16, the value should meet the following criteria:

At the commencement date, a lessee shall measure the right-of-use asset at cost. The cost of the right-of-use asset shall comprise:

• (i) The amount of the initial measurement of the lease liability;

• (ii) Any lease payments made at or before the commencement date, less any lease incentives received;

• (iii) Any initial direct costs incurred by the lessee; and

• (iv) An estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. The lessee incurs the obligation for those costs either at the commencement date or as a consequence of having used the underlying assets during a particular period.

2 For identification only. The official name in Chinese: 昆明長水國際機場有限責任公司

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4. SOURCES OF INFORMATION

Sources of data utilized in our analysis include but not limited to the following:

• The undated draft service contract; and

• Bloomberg.

We also relied upon publicly available information from sources on capital markets, including industry reports, various databases of publicly traded companies and news. We express no opinion and accept no responsibility for the accuracy and completeness of the financial information or other data provided to us by others. We assume that the financial and other information provided to us is accurate and complete, and we have relied upon this information in performing our assessment.

5. KEY TERMS OF THE CONTRACT

Lessor

Kunming Changshui International Airport Co., Ltd.

Lessee

Asiaray Media Group Limited

Assets Premise within Terminal 1 of Kunming Changshui International Airport

Payment terms From 28 June 2019 to 31 December 2019: RMB53,150,000; From 1 January 2020 to 31 December 2020: RMB112,678,000; From 1 January 2021 to 31 December 2021: RMB119,439,000; From 1 January 2022 to 31 December 2022: RMB126,605,000; From 1 January 2023 to 31 December 2023: RMB134,201,000; From 1 January 2024 to 31 December 2024: RMB142,253,000; From 1 January 2025 to 31 December 2025: RMB150,789,000; and

From 1 January 2026 to 27 June 2026: RMB79,918,000.

Yunnan Airport Asiaray agreed to pay Kunming Airport Company concession fees semi-annually in every calendar year during the agreement period. Concession fees for the first half of each calendar day are payable on or before the 15th day of July in every calendar year and concession fees for the second half of each calendar year are payable on or before the 15th day of January of the next calendar year.

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6. VALUATION METHODOLOGY

According to HKFRS 16, at the commencement date, a lessee shall measure the right-of-use asset at cost. The cost of the right-of-use asset shall comprise:

• (i) The amount of the initial measurement of the lease liability;

• (ii) Any lease payments made at or before the commencement date, less any lease incentives received;

• (iii) Any initial direct costs incurred by the lessee; and

• (iv) An estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. The lessee incurs the obligation for those costs either at the commencement date or as a consequence of having used the underlying assets during a particular period.

Based on the above requirements, the cost of the right-of-use asset, in this particular case, is a stream of future payments. Therefore, in order to measure the value of the right-of-use assets, the income approach is the only methodology that can fulfil the requirements. Therefore, we have adopted the income approach in this valuation.

Income Approach: The value of an asset is the sum of the present value of future economic benefits streams. In this case, the future economic benefits streams refer to the future payments under the Contract.

7. MAJOR ASSUMPTIONS

We have adopted the following assumptions in our valuation.

• (i) The reference date of market data and information is 27 June 2019;

• (ii) The cash flows are derived based on the Contract; and

• (iii) The discount rate is 5.56% after considering the lessee’s incremental borrowing rate.

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8. LIMITING CONDITIONS

We have made no investigation of and assumed no responsibility for the title to or any liabilities against the Company.

The opinion expressed in this report has been based on the information supplied to us by the Company and their staff, as well as from various institutes and government bureaus without verification. All information and advice related to this valuation are provided by the Management. Readers of this report may perform due diligence themselves. We have exercised all due care in reviewing the supplied information. Although we have compared key supplied data with expected values, the accuracy of the results and conclusions from the review are reliant on the accuracy of the supplied data. We have relied on this information and have no reason to believe that any material facts have been withheld, or that a more detailed analysis may reveal additional information. We do not accept responsibility for any errors or omissions in the supplied information and do not accept any consequential liability arising from commercial decision or actions resulting from them.

This valuation reflects facts and conditions existing as at the Valuation Date. Subsequent events have not been considered, and we have no obligation to update our report for such events and conditions.

9. CONCLUSION

In conclusion, based on the analysis stated above and the valuation method employed, it is our opinion that the value of the right-of-use assets under the Contract as at Valuation Date was RMB740,891,000 (RENMINBI SEVEN HUNDRED FORTY MILLION EIGHT HUNDRED AND NINETY-ONE THOUSAND ONLY).

The opinion of value was based on generally accepted valuation procedures and practices that rely extensively on the use of numerous assumptions and consideration of many uncertainties, not all of which can be easily quantified or ascertained.

We hereby certify that we have neither present nor prospective interests in the subject under valuation. Moreover, we have neither personal interests nor bias with respect to the parties involved.

Yours faithfully, For and on behalf of FLAGSHIP APPRAISALS AND CONSULTING LIMITED

Ferry S. F. Choy

MSc. Fin, CFA, ICVS Managing Director

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INVOLVED STAFF BIOGRAPHIES

Ferry S.F. Choy, MSc. Fin, CFA, ICVS Managing Director

Mr. Choy is the Managing Director of Flagship Appraisals and Consulting Limited. Before taking up his current position, he had worked in the accounting and valuation profession for over 13 years, eleven years of which were spent in the valuation profession with the first two years with Sallmanns and then five years with Greater China Appraisals. Throughout his career, Mr. Choy has served many listed companies domiciled in Hong Kong, China, Malaysia and Singapore. In his position as Director at Greater China Appraisals, Mr. Choy’s experience included management advice, project evaluation, public listings, M&A and valuation of different assets.

Mr. Choy is a charter holder of Chartered Financial Analyst (CFA) and an International Certified Valuation Specialist (ICVS) – a professional credential in business valuation issued by the International Association of Certified Valuation Specialists (IACVS). He served on the Continuous Education Committee of the IACVS Hong Kong Chapter for one year, providing business valuation training courses to its members and different professional bodies including HKICPA and CPA Australia.

Mr. Choy has acted as a valuation specialist in different transactions of listed companies including disclosable acquisitions and disposals. He has also acted as an Expert Witness and a Single and Joint Expert in a number of commercial and family law assignments involving business valuation and shareholder disputes.

Chester C.L. Loo Senior Analyst

Mr. Loo holds a Bachelor of Science degree in Economics, and minors in Mathematics from the University of Iowa. He currently holds the position of Senior Analyst of Flagship Appraisals and Consulting Limited and assists in various valuation assessments for transaction and financial reporting purposes.

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