Elife Holdings Limited - Proxy Solicitation & Information Statement 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, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Elife Holdings Limited, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or 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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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 223)

(1) CONNECTED TRANSACTION IN RELATION TO SUBSCRIPTIONS OF NEW SHARES BY THE DIRECTORS UNDER SPECIFIC MANDATE AND
(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

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A letter from the Board is set out on pages 6 to 17 of this circular. A letter from the Independent Board Committee is set out on page 18 of this circular. A letter from Euto Capital containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 19 to 45 of this circular.

A notice convening the EGM to be held at Unit 806, Level 8, Core D, Cyberport 3, 100 Cyberport Road, Hong Kong on Friday, 21 June 2019 at 2:30 p.m., is set out on pages 54 to 56 of this circular. Whether or not you are able to attend the EGM, please complete the form of proxy in accordance with the instructions printed thereon and return the same to the Hong Kong branch share registrar and transfer office, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not later than forty-eight (48) hours before the time appointed for holding 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.

31 May 2019

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
LETTER FROM THE BOARD
1. Subscriptions of New Shares under Specific Mandate . . . . . . . . . . . . . . . . . . . . . . . . . 6
2. EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . . . . . . . 18
LETTER FROM EUTO CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
APPENDIX – GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
NOTICE OF EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

DEFINITIONS

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

“Acquisition”

the proposed acquisition of 51% of the issued share capital of Central Luxuriant Limited as disclosed in the announcements of the Company dated 15, 18 and 25 October 2018 and was subsequently terminated pursuant to a termination agreement dated 29 March 2019 (as disclosed in the announcement of the Company dated 29 March 2019);

“Award(s)”
the share award(s) granted by the Board under the Share Award Scheme;
“Board”
the board of Directors;
“Business Day”
a day (excluding Saturday) on which banks in Hong Kong are generally open for business throughout their normal business hours;
“BVI”
the British Virgin Islands;
“Circular”
the circular dated 18 December 2018 issued by the Company in relation to the Subscriptions under the Original Proposal;
“Company”
Elife Holdings Limited, a company incorporated in the Cayman Islands with limited liability, the issued Shares of which are listed on the Main Board of the Stock Exchange (stock code: 223);
“Completion” completion of the Subscriptions pursuant to the Subscription Agreements;
“connected person(s)” has the meaning ascribed thereto under the Listing Rules;
“Conditions Precedent”
the conditions precedent in respect of the Completion set out in the Subscription Agreements;
“Director(s)”
the director(s) of the Company;
“EGM”

the extraordinary general meeting of the Company to be convened at Unit 806, Level 8, Core D, Cyberport 3, 100 Cyberport Road, Hong Kong on Friday, 21 June 2019 at 2:30 p.m. for the purpose of considering and if thought fit, approving the Subscription Agreements and the transactions contemplated thereunder, including the grant of Specific Mandate to allot and issue the Subscription Shares;

DEFINITIONS

“Encumbrance”

charge, pledge, lien or any other similar rights on the Shares;

“First Supplemental Agreement A”
the first supplemental agreement dated 15 November 2018 to the Subscription Agreement A entered into between the Company and Subscriber A;
“First Supplemental Agreement B”

the first supplemental agreement dated 15 November 2018 to the Subscription Agreement B entered into between the Company and Subscriber B;

“First Supplemental Agreements”
collectively, the First Supplemental Agreement A and the First Supplemental Agreement B;
“Group”

the Company together with its subsidiaries;

“HK$”
Hong Kong dollar(s), the lawful currency of Hong Kong;
“Hong Kong”
the Hong Kong Special Administrative Region of the PRC;
“Huimin”
Zhongshang Huimin (Beijing) E-Commerce Co. Ltd.;
“Independent Board Committee”
the independent committee of the Board which comprises all the independent non-executive Directors, namely Mr. Cheng Wing Keung Raymond, Mr. Lam Williamson, Mr. Wong Hoi Kuen and Dr. Lam Lee G, established to advise the Independent Shareholders in respect of the Subscription Agreements and the transactions contemplated thereunder;
“Independent Financial Advisor” or “Euto Capital”
Euto Capital Partners Limited, a corporation licensed to carry out Type 6 (advising on corporate finance) regulated activity under the SFO and the independent financial adviser of the Independent Board Committee and the Independent Shareholders in respect of the Subscriptions;
“Independent Third Party(ies)”
third party(ies) independent of and not connected with the Company and its connected persons (has the meaning ascribed to it in the Listing Rules);

“Independent Shareholder(s)” Shareholder(s) other than the Subscribers and their associates who are required to abstain from voting at the EGM;

DEFINITIONS

“Last Trading Date” 25 April 2019, being the last full trading day of the Shares on the Stock Exchange immediately prior to the signing of the Third Supplemental Agreements;
“Latest Practicable Date” 29 May 2019, being the latest practicable date prior to the publication of this circular for the purpose of ascertaining certain information contained in this circular;
“Listing Committee” has the meaning ascribed thereto under the Listing Rules;
“Listing Rules”

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

“Mr. Wang”
Mr. Wang Haoyu (王浩宇先生), an Independent Third Party;
“Original Proposal” the original proposal for the Subscriptions involving subscription of new Shares by the Subscribers pursuant to the Subscription Agreements for an aggregate cash consideration of HK$120 million;
“PRC” the People’s Republic of China, and for the sole purpose of this circular excludes Hong Kong, Macau Special Administrative Region and Taiwan;
“Registrar” the Hong Kong branch share registrar of the Company, being Tricor Tengis Limited as at the Latest Practicable Date;
“Relevant Period” the period commencing on the date falling six months preceding 26 April 2019, being the date of the announcement of the Company relating to, among other things, the Third Supplemental Agreements, up to and including the Latest Practicable Date;
“Revised Proposal” the revised proposal for the Subscriptions involving subscription of new Shares by the Subscribers pursuant to the Subscription Agreements (as amended and supplemented by the Supplemental Agreements) for an aggregate cash consideration of HK$50 million;
“Second Supplemental Agreement A”
the second supplemental agreement dated 14 December 2018 to the Subscription Agreement A entered into between the Company and Subscriber A;
“Second Supplemental the second supplemental agreement dated 14 December 2018 to the Agreement B” Subscription Agreement B entered into between the Company and Subscriber B;

DEFINITIONS

“Second Supplement collectively, the Second Supplemental Agreement A and the Second Agreements” Supplemental Agreement B; “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong); “Share Transfer Agreement” the share transfer agreement dated 15 October 2018 between, among others, the Company and Central Luxuriant Limited in relation to the Acquisition, as supplemented by the supplemental agreement thereto dated 28 December 2018, which was terminated pursuant to the termination agreement dated 29 March 2019; “Share(s)” the ordinary shares of HK$0.02 each in the issued share capital of the Company; “Share Award Scheme” the share award scheme of the Company adopted on 17 August 2017; “Shareholder(s)” holder(s) of the issued Share(s); “Share Option Scheme” the share option scheme of the Company adopted on 8 October 2010 and amended on 17 August 2017; “Specific Mandate” the specific mandate to be sought from the Independent Shareholders at the EGM and to be granted to the Board for the allotment and issue of the Subscription Shares; “Stock Exchange” The Stock Exchange of Hong Kong Limited; “Subscriber A” Mr. Zhang Xiaobin (張曉彬), the Chairman of the Board and an executive Director; “Subscriber B” Mr. Gao Feng (高峰), the Vice-Chairman of the Board and an executive Director; “Subscribers” collectively, Subscriber A and Subscriber B; “Subscription(s)” the respective subscription(s) of the Subscription Shares by the Subscribers pursuant to the Subscription Agreements; “Subscription Agreement A” the conditional subscription agreement dated 26 October 2018 (as supplemented by the Supplemental Agreements) and entered into between the Company and Subscriber A in relation to the subscription of 53,191,489 Subscription Shares;

DEFINITIONS

“Subscription Agreement B”
“Subscription Agreements”
“Subscription Announcements”
“Subscription Price”
“Subscription Share(s)”
“Supplemental Agreements A”
“Supplemental Agreements B”
“Supplemental Agreements”
“Third Supplemental Agreement A”
“Third Supplemental Agreement B”
“Third Supplemental Agreements”
“%”
the conditional subscription agreement dated 26 October 2018 (as supplemented by the Supplemental Agreements B) and entered into between the Company and Subscriber B in relation to the subscription of 212,765,957 Subscription Shares;

collectively, Subscription Agreement A and Subscription Agreement B;

the announcements dated 26 October 2018, 15 November 2018, 14 December 2018 and 26 April 2019 issued by the Company in relation to the Subscriptions;
the subscription price of HK$0.188 per Subscription Share;
the new and fully paid Shares to be subscribed for by the Subscribers;
collectively, the First Supplemental Agreement A, the Second Supplemental Agreement A and the Third Supplemental Agreement A;
collectively, the First Supplemental Agreement B, the Second Supplemental Agreement B and the Third Supplemental Agreement B;
collectively, the Supplemental Agreements A and the Supplemental Agreements B;
the third supplemental agreement dated 26 April 2019 to the Subscription Agreement A entered into between the Company and Subscriber A;
the third supplemental agreement dated 26 April 2019 to the Subscription Agreement B entered into between the Company and Subscriber B;
collectively, the Third Supplemental Agreement A and the Third Supplemental Agreement B; and
per cent.

LETTER FROM THE BOARD

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(Incorporated in the Cayman Islands with limited liability) (Stock Code: 223)

Executive Directors:

Mr. Zhang Xiaobin (Chairman) Mr. Gao Feng (Vice Chairman) Mr. Chiu Sui Keung (Chief Executive Officer) Mr. Sun Qiang (Chief Technology Officer)

Non-executive Directors:

Mr. Zhang Yichun (Vice Chairman) Ms. Xu Ying

Independent non-executive Directors:

Mr. Cheng Wing Keung, Raymond Mr. Lam Williamson Mr. Wong Hoi Kuen Dr. Lam Lee G

Registered office:

Cricket Square Hutchins Drive P. O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Principal place of business in Hong Kong: Unit 806, Level 8, Core D, Cyberport 3, 100 Cyberport Road, Hong Kong

31 May 2019

To the Shareholders

Dear Sir or Madam,

(1) CONNECTED TRANSACTION IN RELATION TO SUBSCRIPTIONS OF NEW SHARES BY THE DIRECTORS UNDER SPECIFIC MANDATE AND (2) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

The purpose of this circular is to provide you with, among other things, (i) details of the Subscription Agreements (as amended and supplemented by the Supplemental Agreements); (ii) the recommendation from the Independent Board Committee to the Independent Shareholders in relation to the Subscription Agreements (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder; (iii) the letter of advice from Euto Capital to the Independent Board Committee and the Independent Shareholders in relation to the Subscription Agreements (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder; (iv) the notice of the EGM; and (v) other information as required under the Listing Rules.

The notice of the EGM is enclosed herein as part of this circular.

LETTER FROM THE BOARD

(1) SUBSCRIPTIONS OF NEW SHARES UNDER SPECIFIC MANDATE

Under the Original Proposal, the Company has conditionally agreed to allot and issue, and the Subscribers have conditionally agreed to subscribe for, an aggregate of 571,428,571 Subscription Shares at the Subscription Price of HK$0.21 per Subscription Share for an aggregate consideration of HK$120,000,000.

On 29 March 2019, the Company announced that the Share Transfer Agreement and the supplemental agreements thereto were terminated with effect from the same date. The Company then entered into negotiations with the two Subscribers on the revisions to the major terms of the Subscriptions and entered into the Third Supplemental Agreements to the Subscription Agreements on 26 April 2019.

Revisions to the major terms of the Subscriptions

A summary of the revisions to the major terms of the Subscriptions is set out as follows:

The total subscription amount and the gross proceeds to be raised from the Subscriptions is adjusted from HK$120 million to HK$50 million, out of which, HK$10 million and HK$40 million shall be payable by Subscriber A and Subscriber B, respectively.
The Subscription Price is adjusted from HK$0.21 to HK$0.188.
The total number of Subscription Shares is adjusted from 571,428,571 Shares to 265,957,446 Shares.

Principal terms of the Subscription Agreements (as supplemented by the Supplemental Agreements)

Date

Subscription Agreements – 26 October 2018 First Supplemental Agreements – 15 November 2018 Second Supplemental Agreements – 14 December 2018 Third Supplemental Agreements – 26 April 2019

Parties

(1) The Company; and
(2) Subscriber A (for Subscription Agreement A and Supplemental Agreements A) Subscriber B (for Subscription Agreement B and Supplemental Agreements B)

LETTER FROM THE BOARD

The Subscriptions

Pursuant to the Subscription Agreement A, the Company conditionally agreed to issue (pursuant to the Specific Mandate), and Subscriber A conditionally agreed to subscribe for, 53,191,489 Subscription Shares at the Subscription Price for each Subscription Share. The cash consideration payable by Subscriber A shall be HK$10,000,000 (payable in full on the date of the Completion).

Pursuant to the Subscription Agreement B, the Company conditionally agreed to issue (pursuant to the Specific Mandate), and Subscriber B conditionally agreed to subscribe for, 212,765,957 Subscription Shares at the Subscription Price for each Subscription Share. The cash consideration payable by Subscriber B shall be HK$40,000,000 (payable in full on the date of the Completion).

The Subscription Shares

The 265,957,446 Subscription Shares represent:

(i) approximately 9.13% of the existing number of issued Shares; and
(ii) approximately 8.37% of the number of issued Shares as enlarged by the allotment and issue of the Subscription Shares.

The aggregate nominal value of the Subscription Shares is HK$5,319,148.92.

The Subscription Price

The Subscription Price is HK$0.188 per Subscription Share, which was originally HK$0.105 under the Subscription Agreements and was adjusted to HK$0.21 pursuant to the First Supplemental Agreements, and was subsequently adjusted to HK$0.188 pursuant to the Third Supplemental Agreements.

The Subscription Price of HK$0.188 per Subscription Share represents:

(i) a premium of approximately 5.03% over the closing price of HK$0.179 per Share as quoted on the Stock Exchange on the Last Trading Date;
(ii) a premium of approximately 8.04% over closing price of HK$0.174 per Share as quoted on the Stock Exchange on the date of the Third Supplemental Agreements;
(iii) equal to the average of the closing price of HK$0.188 per Share quoted on the Stock Exchange for the last five consecutive trading days immediately prior to and including the Last Trading Date;

LETTER FROM THE BOARD

(iv) a premium of approximately 6.88% over the average of the closing price of HK$0.1759 per Share quoted on the Stock Exchange for the last ten consecutive trading days immediately prior to and including the Last Trading Date;
(v) a premium of approximately 104.35% over the Group’s audited tangible net assets per Share as at 31 March 2018 of approximately HK$0.092; and
(vi) a premium of approximately 11.24% over the closing price of HK$0.169 per Share quoted on the Stock Exchange on the Latest Practicable Date.

The net Subscription Price, after deduction of relevant expenses, is estimated to be approximately HK$0.186 per Subscription Share. The cash consideration of HK$10,000,000 under the Subscription Agreement A (as supplemented by the Supplemental Agreements A) and HK$40,000,000 under the Subscription Agreement B (as supplemented by the Supplemental Agreements B), are payable in cash by the Subscribers respectively on or before the Completion.

The Subscription Price was arrived at after arm’s length negotiations between the Company and the Subscribers taking into account the prevailing market price of the Shares, the Group’s historical performances and present financial position as well as current market condition. The Directors (including the independent non-executive Directors) consider that the Subscription Price, which is equivalent to the average of the closing prices of the Shares quoted on the Stock Exchange for the last five consecutive trading days immediately prior to the Last Trading Day (that is, from 19 April 2019 to 25 April 2019), is fair and reasonable.

Ranking

The Subscription Shares, when issued and fully paid, will rank pari passu in all respects with Shares in issue at the time of allotment and issue of the Subscription Shares.

Conditions Precedent

Completion is conditional upon the fulfilment of the following conditions:

(i) the Listing Committee of the Stock Exchange having granted (conditionally or unconditionally) the listing of, and permission to deal in, the Subscription Shares on the Main Board of the Stock Exchange;
(ii) the passing of the resolution(s) at the EGM by the Independent Shareholders to approve the Subscription Agreements (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder, including the grant of the Specific Mandate to allot and issue the Subscription Shares.

None of the conditions aforesaid can be waived by any party to the Subscription Agreements.

LETTER FROM THE BOARD

The Company shall use its endeavours to make the aforesaid conditions to be fulfilled on or before 31 August 2019. In the event that the aforesaid conditions are not fulfilled on or before 31 August 2019, the Subscription Agreements and the Supplemental Agreements will lapse and become null and void forthwith and the parties thereto shall be released from all obligations thereunder.

The Subscription Agreements are not inter-conditional upon each other.

Completion

Completion of the Subscriptions shall take place within three (3) Business Days after fulfilment of the Conditions Precedent or any other date as agreed by the parties to the Subscription Agreements in writing.

On or before the date of the Completion, Subscriber A and Subscriber B shall pay to the Company cash consideration of HK$10,000,000 under the Subscription Agreement A and HK$40,000,000 under the Subscription Agreement B, respectively, for the subscription of the Subscription Shares.

On the date of the Completion, the Company shall issue and deliver share certificates in relation to the Subscription Shares to the Subscribers respectively.

Lock-up Undertakings

The Subscribers undertake to and covenant with the Company that, without the prior written consent of the Company and unless in compliance with the requirements of the Listing Rules, the Subscribers shall not, in the period commencing on the date of the Completion and ending on the date which is 6 months from the date of the Completion, dispose of, or enter into any agreement to dispose of or otherwise create any Encumbrance in respect of, any of the Subscription Shares.

The 6 months’ lock-up period was agreed upon between the Company and each of the Subscribers after arm’s length negotiations with reference to the connected share subscriptions conducted by other Hong Kong listed companies in recent months. Each of the Subscribers has no intention to dispose of or otherwise create any Encumbrance on the Subscription Shares during the 6 months’ lock-up period. The lock-up period is beneficial to the Company and the Shareholders in the sense that it signifies the long-term nature of the investment which would therefore align the interests of the Company and the Shareholders with those of the Subscribers and would also limit the negative impact of the issue of the Subscription Shares on the market price of the Shares.

Specific Mandate to Issue Subscription Shares

The Subscription Shares will be allotted and issued pursuant to the Specific Mandate proposed to be sought from the Independent Shareholders at the EGM.

The Specific Mandate to be sought at the EGM will be valid until 31 August 2019. If the conditions of the Subscriptions cannot be fulfilled on or before 31 August 2019 or there are material changes to the major terms of the Subscriptions, the Company will re-comply with the Listing Rules’ requirements and seek Shareholders’ approval for a new specific mandate.

LETTER FROM THE BOARD

Application for listing

An application will be made by the Company to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Subscription Shares on the Main Board of the Stock Exchange.

Information of the Company and the Subscribers

The Company is a company incorporated under the laws of the Cayman Islands with limited liability and the issued Shares of which are listed on the Main Board of the Stock Exchange. The Company is an investment holding company and the Group is principally engaged in provision of esmart terminal services for retail stores in the PRC, trading businesses across Asia and developing its business into the consumer product market, which conform to the Group’s business principle of “making life easier and benefiting people’s livehood” (易生活，惠民生).

Subscriber A, Mr. Zhang Xiaobin, aged 66, is the Chairman of the Board and an executive Director. Subscriber A holds 42,460,000 Shares, representing approximately 1.52% of the total number of issued Shares.

Subscriber B, Mr. Gao Feng, aged 48, is the Vice-Chairman of the Board and an executive Director. Subscriber B holds 121,082,000 Shares, representing approximately 4.34% of the total number of issued Shares.

Reasons for entering into the Third Supplemental Agreements and use of proceeds

As disclosed in the Circular, the aggregate net proceeds from the Subscriptions under the Original Proposal, after deducting the related expenses, will be approximately HK$119,500,000, which was intended to be used as follows: (i) as to approximately HK$46 million for settling part of the consideration for the Acquisition; (ii) as to approximately HK$37 million for developing the Group’s daily consumer goods trading and esmart terminal businesses; and (iii) as to approximately HK$36.5 million for general working capital of the Group.

On 29 March 2019, the Company announced that the Share Transfer Agreement and the supplemental agreements thereto were terminated with effect from the same date. In addition, the Group obtained the loan from Mr. Wang in the principal amount of RMB20 million in early March 2019. Taking into account the aforesaid, the Company and the Subscribers entered into negotiations and agreed upon the Revised Proposal with the Subscriptions downsized from HK$120 million to HK$50 million.

The aggregate gross proceeds of the Subscriptions will amount to HK$50,000,000 and the aggregate net proceeds, after the deduction of the related expenses, will be approximately HK$49,500,000, representing a net Subscription Price of approximately HK$0.186 per Subscription Share.

LETTER FROM THE BOARD

As at 30 April 2019, the Group had available cash and cash balances of approximately HK$5.9 million. It is currently estimated that the working capital requirements of the Group from May 2019 to September 2019 amount to approximately HK$45.9 million, comprising the followings:

(a) working capital to maintain the Group’s daily operations of approximately HK$14.2 million, out of which (i) approximately HK$5.16 million will be used to settle outstanding legal and professional fees, (ii) approximately HK$1.3 million will be used to pay rental expenses, (iii) approximately HK$4.14 million will be used to pay salaries and allowances; (iv) approximately HK$1.79 million will be used to pay other office administrative expenses; and (v) approximately HK$1.81 million will be used for other general working capital;
(b) funding for developing the Group’s daily consumer goods trading business of approximately HK$5 million; and
(c) estimated developing cost for developing the Group’s esmart terminal business of approximately HK$30.3 million, which in turn comprises (i) the cost of manufacturing esmart terminals of approximately HK$12 million, (ii) the research and development expenses of approximately HK$10 million and (iii) the cost to be incurred in technology, design and trial testing of hardware, development of software system, marketing and promotion of approximately HK$8.3 million.

The Company intends to use the net proceeds from the Subscriptions of approximately HK$49.5 million to satisfy the aforesaid working capital requirements of the Group from May 2019 to September 2019. If one of the Subscriptions is voted down by the Shareholders at the EGM, the net proceeds from the Subscription approved by the Shareholders will be allocated to the proposed uses on a pro rata basis.

Regarding the recovery of certain “other receivables” of the Group, the Board would like to update the status thereof as follows:

(i) In relation to the interest-free and unsecured performance deposit of RMB50,000,000 paid by Zhongnongxin Supply Chain Management Company Limited (an indirect wholly-owned subsidiary of the Company) to Huimin pursuant to the supply agreement dated 8 March 2017, as at 30 April 2019, the Group received an aggregate of RMB2,800,000 from Huimin and RMB47,200,000 has remained outstanding. Management of the Company is in the course of negotiating with the representatives of Huimin on the repayment schedule of the outstanding amount. The Company will issue announcement(s) to update the Shareholders on the progress of the same as and when necessary.

LETTER FROM THE BOARD

(ii) In relation to the outstanding balance of the third instalment of the consideration payable by Jetgo Group Limited for acquiring 10.5% of the issued share capital of Sino United Energy Investment Co., Ltd from the Group of HK$74,496,000, Jetgo Group Limited was unable to settle the outstanding amount by the due date on 31 December 2018. On 28 November 2018, 2 January 2019 and 25 April 2019, the Group (either by itself or through its legal advisers) issued demand letters to Jetgo Group Limited while the management of both parties continued to discuss the means to settle the outstanding amount. However, as at the Latest Practicable Date, the said amount remained outstanding. The Company sought legal advices from two separate Hong Kong law firms on the viability of taking legal action against Jetgo Group Limited on its failure to make the repayment in accordance with the sale and purchase agreement dated 2 June 2015. Considering Jetgo Group Limited is a BVI incorporated company and does not have any assets in Hong Kong while considerable time and cost will be incurred on litigation process, both law firms do not recommend the Company to take legal action against Jetgo Group Limited. The Company is currently exploring other options including but not limited to disposal of the outstanding amount to a debt collector and will update the Shareholders and public investors by way of announcement(s) as and when appropriate.

In response to the funding needs of the Group, the Company has considered a number of financing methods such as debt financing and other ways of equity financing (including open offer, rights issue and share placement to independent institutional and individual investors). Debt and bank financing usually require security of properties and other assets which is not feasible to the Company and will incur additional interest burden to the Group, rendering it not the optimal financing method under the prevailing market conditions. Open offer and rights issue may impose financial burden on the existing Shareholders and will incur high underwriting commission and may not be beneficial to the Company and the Shareholders as a whole. On the other hand, no commission is payable to the Subscribers under the Subscriptions. Under the prevailing market conditions and the small market capitalisation and loss-making position of the Company, it is unlikely that there is any third-party securities firm who is willing to take the risk to underwrite a rights issue or an open offer conducted by the Company. The Company contacted four securities firms which are Independent Third Parties and licensed cooperations under the SFO and was informed that it would be difficult to locate investors for share placements due to the recent poor market sentiment and the relatively small market capitalisation of the Company (about HK$560 million as at the date of the Subscription Agreements). The Company then approached the two Subscribers and agreed on the terms of the Subscriptions and entered into the Subscription Agreements and the Supplemental Agreements after arm’s length negotiations. In addition, other equity financing methods, including open offer, rights issue and share placement to independent institutional and individual investors customarily involve the issue of new shares at a discount to the market price. In contrast, the Subscription Price has been set at HK$0.188, representing a premium over the prevailing market prices of the Shares prior to entering into the Third Supplemental Agreements. The Company notes that the Subscriptions will dilute the shareholding of the public Shareholders from approximately 79.10% to approximately 72.49% upon the Completion. Having considered the aforesaid reasons and benefits of the Subscriptions and that the terms of the Subscription Agreements (as supplemented and amended by the Supplemental Agreements) are fair and reasonable and the Subscriptions are in the interests of the Company and the Shareholders as a whole, the Company is of the view that the said dilution to the public shareholding is acceptable. In addition, the Subscriptions by the two Subscribers,

LETTER FROM THE BOARD

being the Chairman and Vice-Chairman of the Company, reflects the confidence and commitment of the Board towards the long-term and sustainable growth of the Group, and the continuing support of the Board would be beneficial to the long-term business development of the Group. The Board (other than the Directors who were required to abstain from voting) is of the view that the terms of the Subscription Agreements (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder are on normal commercial terms agreed upon after arm’s length negotiations between the parties, fair and reasonable and in the interests of the Company and the Shareholders as a whole. In the event that the Subscriptions are not proceeded or completed for any reason, the Company will consider conducting rights issue to meet the funding requirements.

As at the Latest Practicable Date, the Company has not identified any other concrete fund raising plan and has not contemplated any further fund raising exercise.

Save and except the Subscribers who are materially interested in the Third Supplemental Agreements and the transactions contemplated thereunder, and therefore, abstained from voting on the relevant Board resolutions approving the Subscription Agreements (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder, none of the other Directors was in any way materially interested in the Subscription Agreements and/or the Supplemental Agreements and the transactions contemplated thereunder, and was required to abstain from voting on the relevant Board resolutions.

Fund raising activities in the past twelve months prior to the Latest Practicable Date

The Company has conducted the following equity fund raising exercise in the past twelve months immediately prior to the Latest Practicable Date:

Date of	Equity fund	Net proceeds	Intended use	Actual use
announcement	raising exercise	raised	of proceeds	of proceeds
28 May 2018	Allotment and issue of an aggregate of	Approximately	For general	Approximately
	95,660,000 Shares at HK$0.128 each to	HK$9,750,000	working capital	HK$9,750,000
	an independent subscriber (the number of		of the Group and	has been used for
	Shares was adjusted to 76,500,000		development of	general working
	pursuant to a supplemental agreement		the Group’s daily	capital of the
	entered into between the Company and		consumer goods	Group
	the independent subscriber on 26 June		trading and
	2018)		esmart terminal
			businesses
26 April 2019	Allotment and issue of an aggregate of	HK$23,501,662.36	For general	Approximately
	125,008,842 Shares at HK$0.188 each to		working capital	HK$18,500,000
	Mr. Wang pursuant to the terms and		of the Group	has been used for
	subject to the conditions of the loan			general working
	capitalisation agreement entered into			capital of the
	among the Company, Huimin			Group
	International (HK) Limited and Mr. Wang

LETTER FROM THE BOARD

Shareholding structures of the Company

The shareholding structures of the Company (i) as at the Latest Practicable Date and (ii) upon Completion are summarised as follows:

Substantial Shareholder Ms. Liu Qiuhua Directors Mr. Zhang Xiaobin Mr. Gao Feng Mr. Chiu Sui Keung Other Directors/directors of the subsidiaries of the Company Public Public Shareholders Total:	As at the Latest Practicable Date Number of Shares Approximate shareholding percentage % 358,817,000 12.32 42,460,000 1.46 121,082,000 4.16 28,271,000 0.97 57,966,000 1.99 2,304,180,542 79.10 2,912,776,542 100.00	Immediately following the Completion Number of Shares Approximate shareholding percentage % 358,817,000 11.29 95,651,489 3.01 333,847,957 10.50 28,271,000 0.89 57,966,000 1.82 2,304,180,542 72.49 3,178,733,988 100.00	Immediately following the Completion Number of Shares Approximate shareholding percentage % 358,817,000 11.29 95,651,489 3.01 333,847,957 10.50 28,271,000 0.89 57,966,000 1.82 2,304,180,542 72.49 3,178,733,988 100.00
			100.00

Listing Rules Implications

The Subscribers are Directors and connected persons under Chapter 14A of the Listing Rules. Accordingly, the Subscriptions constitute connected transactions of the Company under the Listing Rules and are subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

LETTER FROM THE BOARD

Independent Board Committee and Independent Financial Adviser

The Independent Board Committee, comprising all the independent non-executive Directors, namely Mr. Cheng Wing Keung Raymond, Mr. Lam Williamson, Mr. Wong Hoi Kuen and Dr. Lam Lee G, has been established to consider the terms of the Subscription Agreements (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder, and to advise the Independent Shareholders as to whether the aforesaid transactions are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Euto Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the Subscriptions.

(2) EGM

An EGM will be convened for the purpose of considering and, if thought fit, approving, among other things, the Subscription Agreements (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder, including the grant of Specific Mandate to allot and issue the Subscription Shares. The EGM will be held at Unit 806, Level 8, Core D, Cyberport 3, 100 Cyberport Road, Hong Kong on Friday, 21 June 2019 at 2:30 p.m.. The notice of the EGM is set out on pages 54 to 56 of this circular. Whether or not you are able to attend the EGM, please complete the form of proxy in accordance with the instructions printed thereon and return the same to the Hong Kong branch share registrar and transfer office, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not later than forty-eight (48) hours before the time appointed for holding the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish and, in such event, the proxy form previously submitted shall be deemed to be revoked.

The votes of the Independent Shareholders at the EGM will be taken by poll in accordance with Rule 13.39(4) of the Listing Rules and the Company will announce the results of the poll in the manner prescribed under Rule 13.39(5) of the Listing Rules. To the best knowledge of the Directors after making all reasonable enquiries, the Subscribers and their associates, are collectively interested in 163,542,000 Shares, representing approximately 5.61% of the existing number of issued Shares, are required to abstain from voting in respect of the resolution(s) that would be proposed to approve the Subscription Agreements and the transactions contemplated thereunder at the EGM. To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, there is (i) no voting trust or other agreement or arrangement or understanding entered into by or binding upon any Shareholder; and (ii) no obligation or entitlement of any Shareholder as at the Latest Practicable Date, whereby he/she has or may have temporarily or permanently passed control over the exercise of the voting right in respect of his/her Shares to a third party, either generally or on a case-by-case basis. Accordingly, to the best knowledge, information and belief of the Directors, there exists no discrepancy between any Shareholder’s beneficial shareholding interest in the Company and the number of Shares in respect of which such Shareholder will control or will be entitled to exercise control over the voting right at the EGM.

As Completion of each of the Subscriptions is subject to the satisfaction of the condition precedent as set out in the Subscription Agreements, the Subscriptions may or may not proceed. Shareholders and prospective investors of the Company are advised to exercise caution when dealing in the Shares.

LETTER FROM THE BOARD

CLOSURE OF REGISTER OF MEMBERS

For the purposes of determining Shareholders’ eligibility to attend and vote at the EGM, the register of members of the Company will be closed from Tuesday, 18 June 2019 to Friday, 21 June 2019, both days inclusive, during which period no transfer of Shares will be registered. The record date for such purposes is Friday, 21 June 2019.

In order to be eligible to attend and vote at the EGM, all properly completed transfer forms accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar and transfer office in Hong Kong, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not later than 4:30 p.m. on Monday, 17 June 2019.

RECOMMENDATION

Your attention is drawn to (i) the letter from the Independent Board Committee set out on page 18 of this circular which contains the recommendation of the Independent Board Committee to the Independent Shareholders in relation to the Subscription Agreements and the transactions contemplated thereunder; and (ii) the letter from Euto Capital is set out on pages 19 to 45 of this circular which contains its advice to the Independent Board Committee and the Independent Shareholders in relation to the Subscriptions together with the principal factors and reasons considered by it in concluding its advice.

The Independent Board Committee, having taken into account the advice of Euto Capital, considers that the terms of the Subscription Agreements are fair and reasonable so far as the Independent Shareholders are concerned and that the Subscriptions are on normal commercial terms and in the interests of the Company and the Shareholders as whole. Accordingly, the Directors (including the independent non-executive Directors) consider that the terms of the Subscription Agreements are fair and reasonable, and that the Subscriptions are on normal commercial terms and in the interests of the Company and the Shareholders as whole.

FURTHER INFORMATION

Your attention is also drawn to the additional information set out in the appendices and the notice of EGM, which form part of this circular.

Yours faithfully, By order of the Board Elife Holdings Limited Chow Chi Fai Company Secretary

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 223)

31 May 2019

To the Shareholders

Dear Sir or Madam,

THIRD SUPPLEMENTAL AGREEMENT OF CONNECTED TRANSACTION IN RELATION TO SUBSCRIPTIONS OF NEW SHARES BY THE DIRECTORS UNDER SPECIFIC MANDATE

We refer to the circular of the Company to the Shareholders dated 31 May 2019 (the “ Circular ”), in which this letter forms part. Unless the context requires otherwise, capitalised terms used in this letter will have the same meanings as defined in the Circular unless the context otherwise requires.

We have been appointed by the Board as members to form the Independent Board Committee to advise the Independent Shareholders on the Subscription Agreements and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Euto Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the Subscriptions. Details of its advice, together with the principal factors and reasons taken into consideration in arriving at such advice, are set out on pages 19 to 45 of the Circular. Your attention is also drawn to the letter from the Board set out on pages 6 to 17 of the Circular and the additional information set out in the appendix to the Circular.

Having considered the terms of the Subscription Agreements (as amended and supplemented by the Supplemental Agreements) and the situation of the Company, and the factors and reasons considered by Euto Capital and its opinion as stated in its letter of advice, we consider that (i) the terms of the Subscription Agreements (as amended and supplemented by the Supplemental Agreements) are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned, although the Subscriptions are not conducted in the ordinary and usual course of business of the Group; and (ii) the entering into of the Subscription Agreements (as amended and supplemented by the Supplemental Agreements) is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve the Subscription Agreements (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder.

Yours faithfully, Independent Board Committee of Elife Holdings Limited

Mr. Cheng Wing Keung, Raymond Mr. Lam Williamson Mr. Wong Hoi Kuen Dr. Lam Lee G Independent Non-executive Independent Non-executive Independent Non-executive Independent Non-executive Directors Directors Directors Directors

LETTER FROM EUTO CAPITAL

Set out below is the text of a letter received from Euto Capital, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Subscriptions for the purpose of inclusion in this circular.

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Euto Capital Partners Limited Room 2418, Wing On Centre, T +852 3106 2393 111 Connaught Road Central, F +852 3582 4722 Hong Kong www.eutocapital.com

31 May 2019

To the Independent Board Committee and

the Shareholders of Elife Holdings Limited

Dear Sirs and Madams,

CONNECTED TRANSACTION IN RELATION TO THE THIRD SUPPLEMENTAL AGREEMENTS TO THE SUBSCRIPTION AGREEMENTS RELATING TO SUBSCRIPTIONS OF NEW SHARES BY THE DIRECTORS UNDER SPECIFIC MANDATE

INTRODUCTION

We refer to our appointment as the independent financial adviser of the Company (the “ Independent Financial Adviser ”) to advise the Independent Board Committee and the Independent Shareholders in respect of the Subscriptions Agreements (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder, including the grant of the Specific Mandate to allot and issue the Subscription Shares (the “ Transaction ”), particulars of which are set out in the sections headed “Letter from the Board” (the “ Letter ”) contained in the circular of the Company to the Shareholders dated 31 May 2019 (the “ Circular ”), of which this letter forms part. Terms used in this letter shall have the same meanings as ascribed to them under the section headed “Definitions” in the Circular unless the context requires otherwise.

Reference are made to the announcements of the Company dated 26 October 2018, 15 November 2018, 14 December 2018, 7 January 2019, 31 January 2019, 5 March 2019 and 26 April 2019 and the circular of the Company dated 18 December 2018 in relation to, among other things, the Subscriptions.

1. The Subscriptions

1.1 Background of the Original Proposal

On 26 October 2018, the Company entered into the Subscription Agreements with each of the Subscribers respectively. Pursuant to the Subscription Agreements, the Company conditionally agreed to allot and issue, and the Subscribers conditionally agreed to subscribe for, an aggregate of 1,142,857,142 Subscription Shares as at the Subscription Price of HK$0.105 per Subscription Share for an aggregate cash consideration of HK$120,000,000.

LETTER FROM EUTO CAPITAL

On 15 November 2018 and 14 December 2018, the Company entered into the First Supplemental Agreements and the Second Supplemental Agreements with each of the Subscribers respectively to amend certain terms of each of the Subscription Agreements. Pursuant to the First Supplemental Agreements and the Second Supplemental Agreements, the amended terms primarily include:

(i) the Subscription Shares to be subscribed by each of the Subscribers was the consolidated shares of the Company (the “ Consolidated Shares ”) upon completion of the share consolidation exercise proposed by the Company as stated in the announcement of the Company dated 14 November 2018 (the “ Share Consolidation ”);
(ii) the Subscription Price was adjusted from HK$0.105 to HK$0.21; and
(iii) the number of Subscription Shares to be subscribed by the Subscribers shall be 571,428,571 Consolidated Shares instead of 1,142,857,142 Shares before the Share Consolidation.

On 29 March 2019, the Company entered into negotiations with the Subscribers on the revisions to the major terms of the Subscriptions and entered into the Third Supplemental Agreements on 26 April 2019.

1.2 The Third Supplemental Agreements

On 26 April 2019, the Company entered into the Third Supplemental Agreements with the Subscribers to revise certain major terms of the Subscription Agreements. Pursuant to the Subscription Agreements (as amend and supplemented by the Supplemental Agreements), the Company conditionally agreed to allot and issue, and the Subscribers conditionally agreed to subscribe for, an aggregate of 265,957,446 Subscription Shares at the Subscription Price of HK$0.188 each for an aggregate cash consideration of HK$50,000,000.

Implications under the Listing Rules

As at the Latest Practicable Date, Mr. Zhang Xiaobin, as the Subscriber A, is the Chairman of the Board and an executive Director; and Mr. Gao Feng, as the Subscriber B, is the Vice-Chairman of the Board and an executive Director and hence both of them are connected persons of the Company under Rule 14A.07(1) of the Listing Rules. Accordingly, the Subscriptions constitute connected transactions of the Company under the Listing Rules and are subject to the announcement, reporting and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

As the revision to the major terms of the Subscriptions pursuant to the Third Supplemental Agreements constitutes a material variation to the terms of the Subscriptions previously approved by the Shareholders at the extraordinary general meeting of the Company held on 7 January 2019, the Company will re-comply with the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules in connection with the Subscriptions.

LETTER FROM EUTO CAPITAL

INDEPENDENT BOARD COMMITTEE

An Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Cheng Wing Keung Raymond, Mr. Lam Williamson, Mr. Wong Hoi Kuen and Dr. Lam Lee G, has been established to consider the terms of the Subscription Agreements (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder, and to advise the Independent Shareholders as to whether the aforesaid transactions are on the normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole. None of the members of the Independent Board Committee has any material interest in the Subscriptions.

In our capacity as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders for the purpose of the Listings Rules, our role is to give an independent opinion to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the Subscriptions Agreements (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder, including the grant of the Specific Mandate to allot and issue the Subscription Shares are in the interest of the Company and the Shareholders as a whole, being fair and reasonable so far as the Independent Shareholders are concerned.

OUR INDEPENDENCE

We, Euto Capital Partners Limited (“ Euto Capital ”), have been appointed as the Independent Financial Advisor to advise the Independent Board Committee and the Independent Shareholders in this regard. Mr. Manfred Shiu (“ Mr. Shiu ”) is the person signing off the opinion letter from Euto Capital contained in the Circular. Mr. Shiu has been a responsible officer of Type 6 (advising on corporate finance) regulated activities under SFO since 2009 and has participated in and completed various independent financial advisory transactions in Hong Kong. As at the Latest Practicable Date, we confirmed that there is no relationship or interest between Euto Capital and the Company or any other parties that could be reasonably be regarded as hindrance to Euto Capital’s independence as defined under Rule 13.84 of the Listing Rules to act as the Independent Financial Advisor to the Independent Board Committee and the Shareholders in respect of the Transaction.

We are not associated with the Company, its subsidiaries, its associates or their respective substantial shareholders or associates, and accordingly, are eligible to give independent advice and recommendations. Apart from normal professional fees payable to us in connection with this appointment as the Independent Financial Advisor to the Independent Board Committee and the Independent Shareholders, no arrangement exists whereby we will receive any fees from the Company, its subsidiaries, its associates or their respective substantial shareholders or associates. We confirmed that there is no existence of or change in any circumstances that would affect our independence. Euto Capital has not acted as a financial adviser to the Company in the last two years. Accordingly, we consider that we are eligible to give independent advice on the terms of the Subscription Agreements (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder.

LETTER FROM EUTO CAPITAL

BASIS OF OUR OPINION

In formulating our opinion and recommendation to the Independent Board Committee and the Independent Shareholders in relation to the terms of the Subscription Agreements (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder, we have relied on the information, facts and representations contained or referred to in the Circular and the information, facts and representations provided by, and the opinions expressed by the Directors, management of the Company and its subsidiaries (the “ Management ”). We have assumed that all information, facts, opinions and representations made or referred to in the Circular were true, accurate and complete at the time they were made and continued to be true and that all expectations and intentions of the Directors and the Management, will be met or carried out as the case may be. We have no reason to doubt the truth, accuracy and completeness of the information, facts, opinions and representations provided to us by the Directors and the Management. 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 have also sought and received confirmation from the Directors that no material facts have been omitted from the information supplied and opinions expressed.

We consider that we have been provided with, and we have reviewed sufficient information to reach an informed view, to justify relying on the accuracy of the information contained in the Circular and to provide a reasonable basis for our opinion. We have no reason to doubt that any relevant material facts have been withheld or omitted from the information provided and referred to in the Circular or the reasonableness of the opinions and representations provided to us by the Directors and the Management. We have not, however, conducted any independent verification of the information provided, nor have we carried out any independent investigation into the business, financial conditions and affairs of the Group or its future prospects.

Based on the foregoing, we confirm that we have taken all reasonable steps, which are applicable to the Transactions, as referred to in Rule 13.80 of the Listing Rules (including the notes thereof) in formulating our opinion and recommendation.

This letter is issued for the information for the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the terms of the Subscription Agreements and the transactions contemplated thereunder, except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

LETTER FROM EUTO CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion to the Independent Board Committee and the Independent Shareholders, we have taken into consideration the following principal factors and reasons:

1. Background of the Subscriptions

(i) the Subscription Shares to be subscribed by each of the Subscribers were the Consolidated Shares upon completion of the Share Consolidation;
(ii) the Subscription Price was adjusted from HK$0.105 to HK$0.21; and
(iii) the number of Subscription Shares to be subscribed by the Subscribers shall be 571,428,571 Consolidated Shares instead of 1,142,857,142 Shares before the Share Consolidation.

1.1 Information on the Company and the Group

The Company is a company incorporated under the laws of the Cayman Islands with limited liability and the issued Shares of which have been listed on the Main Board of the Stock Exchange.

(a) Principal business of the Company and the Group

The Company is an investment holding company and the holding company of the Group.

LETTER FROM EUTO CAPITAL

The Group is principally engaged in the provision of esmart terminal services for retail stores in the PRC, trading businesses across Asia and developing its business into the consumer product market, which conform to the Group’s business principle of “making life easier and benefiting people’s livehood” (易生活，惠民生).

(b) Financial performance of the Group

Set out below are the consolidated financial information of the Group as extracted from the annual report of the Company for the year ended 31 March 2018 (the “ 2018 Annual Report ”) and the interim report of the Company for the six months period ended 30 September 2018 (the “ 2018 Interim Report ”).

Table 1: Summary of the consolidated financial performance of the Group

Segment revenue Unconventional gas business Commodities trading business Esmart terminal business Total revenue for the year/period Segment results Unconventional gas business Commodities trading business Esmart terminal business Total segment loss for the year/period Loss before income tax for the year/period Loss for the year/period	For the year ended 31 March 2017 2018 (audited) (audited) HK$’000 HK$’000 – – 19,450 144,385 – 8,654 19,450 153,039 (6,545) (17,735) (8,129) (14,279) – (23,340) (14,674) (55,354) (154,765) (144,506) (154,767) (144,506)	For the six months ended 30 September 2017 2018 (unaudited) (unaudited) HK$’000 HK$’000 – – 32,305 52,211 1,662 285 33,967 52,496 (6,657) (2,227) (7,488) (4,400) (15,044) (13,200) (29,189) (19,827) (89,355) (34,969) (89,359) (34,969)

LETTER FROM EUTO CAPITAL

For the year ended 31 March 2018

For the year ended 31 March 2018, the audited consolidated total revenue of the Group mainly derived from three segments, namely, (i) unconventional gas business, (ii) commodities trading business and (iii) esmart terminal business.

As set out in the above table 1, the audited consolidated total revenue of the Group for the year ended 31 March 2018 was increased by approximately HK$133,589,000 or 686.83% to approximately HK$153,039,000, as compared with approximately HK$19,450,000 for the year ended 31 March 2017. Such increase was mainly due to the followings:

(i) the increase of segment revenue generated from commodities trading business segment from approximately HK$19,450,000 for the year ended 31 March 2017 to approximately HK$144,385,000 for the year ended 31 March 2018. Such increase was primarily attributable to the establishment of more sales channels of cooperation by the Group to further increase the customer base which in turn increase the revenue as well as gross profit margin from direct sales or develop customized products; and
(ii) the recognition of revenue generated from esmart terminal business segment of approximately HK$8,654,000 during the year 2018 (2017: Nil).

As further set out in the table 1, the Group’s total loss for the year ended 31 March 2018 was approximately HK$144,506,000, representing a decrease of approximately HK$10,261,000, or 6.63%, from the Group’s total loss for the year ended 31 March 2017 of approximately 154,767,000. Such decrease in loss for the year was mainly attributable to a net effect of the followings:

(i) the increase in the Group segment loss from approximately HK$14,674,000 for the year ended 31 March 2017 to approximately HK$55,354,000 for the year ended 31 March 2018. Out of the total segment loss, HK$23,340,000 was recognized from the Esmart terminal business during the year. As advised by the Management, the acquisition of 51.2% of the entire issued share capital of Admiral Glory Global Limited (the “ Esmart Group ”), which is principally engaged in the provision of esmart terminal business, was completed in July 2017, given the internet technologies platform developed by the Esmart Group was in the development stage and was not ready to launch in the market, operating cost was incurred for the business and a loss was recognized as a result.

LETTER FROM EUTO CAPITAL

(ii) the decrease of other operating expenses incurred by the Group from approximately HK$161,428,000 to approximately HK$142,703,000 for the year ended 31 March 2018, representing a decrease of approximately 11.6%. The decrease was attributable to (1) impairment loss on goodwill of approximately HK$1,379,000 (2017: approximately HK$45,251,000), which significantly dropped by approximately 97.0%; (2) no impairment loss on interests in associates provided during the year (2017: approximately HK$16,513,000); and (3) share-based payment of approximately HK$45,684,000 (2017: approximately HK$52,313,000) in reduction of approximately 12.7%;
(iii) the decrease in the loss from associates recognized by the Group from HK$11,778,000 for the year ended 31 March 2017 to approximately HK$5,775,000 for the year ended 31 March 2018, representing a decrease of approximately 51.0%; and
(iv) the decrease in the finance costs incurred by the Group from approximately HK$1,905,000 for the year ended 31 March 2017 to approximately HK$115,000 for the year ended 31 March 2018, representing a reduction of approximately 94.0%. The decrease was mainly due to the full repayment of one promissory note in the previous year so that no imputed interest expense was incurred in the current year.

For the 6 months ended 30 September 2018

As set out in the above table 1, the unaudited consolidated total revenue of the Group was increased from approximately HK$33,967,000 for the six months ended 30 September 2017 to approximately HK$52,496,000 for the six months ended 30 September 2018, representing an increase of approximately HK$18,529,000 or 54.55%. Such increase was attributable to the increase in revenue generated from commodities trading business segment result from approximately HK$32,305,000 for the 6 months ended 30 September 2017 to approximately HK$52,211,000 for the 6 months ended 30 September 2018. Such increase was mainly attributable to the low margin strategy adopted by the Group for the purpose of attracting more sales channels.

As further set out in the table 1, the Group’s loss for the period was approximately HK$34,969,000 for the six months ended 30 September 2018, representing a decrease of approximately HK$54,390,000 or 60.87%, from approximately HK$89,359,000 for the six months ended 30 September 2017. Such decrease in loss for the period was mainly attributable to an increase in the total revenue as described above.

LETTER FROM EUTO CAPITAL

Table 2: Summary of the consolidated financial position of the Group

Non-current assets Current assets Total assets Current liabilities Non-current liabilities Total liabilities Net current assets Total equity	As at 31 2017 (audited) HK$’000 35,817 314,844 350,661 13,189 – 13,189 301,655 337,472	March 2018 (audited) HK$’000 66,285 238,923 305,208 21,970 25,433 47,403 216,953 257,805	As at 30 September 2018 (unaudited) HK$’000 64,699 283,058 347,757 63,710 25,800 89,510 219,348 258,247

As at 30 September 2018

Non-current assets and current assets

As set out in the table 2 above, as at 30 September 2018, non-current assets and current assets of the Group amounted to approximately HK$64,699,000 and HK$283,058,000 respectively. Set out below is the breakdown of the non-current assets and currents assets of the Group as at 31 March 2018 and 30 September 2018.

LETTER FROM EUTO CAPITAL

Table 3: Breakdown of the consolidated total assets of the Group

Non- current assets Property, plant and equipment Goodwill Available-for-sale financial asset Current assets Inventories Trade and bill receivables Deposits, prepayments and other receivables Cash and cash equivalents Total assets	As at 31 March 30 September 2018 2018 (audited) (unaudited) HK$’000 HK$’000 43,157 40,348 23,127 24,351 1 – 66,285 64,699 8,401 11,136 27,007 29,137 195,648 230,711 7,867 12,074 238,923 283,058 305,208 347,757	As at 31 March 30 September 2018 2018 (audited) (unaudited) HK$’000 HK$’000 43,157 40,348 23,127 24,351 1 – 66,285 64,699 8,401 11,136 27,007 29,137 195,648 230,711 7,867 12,074 238,923 283,058 305,208 347,757
		64,699
		11,136 29,137 230,711 12,074
		283,058
		347,757

As set out in the above table, the non-current assets of the Group decreased from approximately HK$66,285,000 as at 31 March 2018 to approximately HK$64,699,000 as at 30 September 2018, representing a decrease of approximately HK$1,586,000 or 2.39%. The decrease in non-current assets of the Group was mainly due to a decrease in the amount of property, plant and equipment from approximately HK$43,157,000 as at 31 March 2018 to approximately HK$40,348,000 as at 30 September 2018, representing a decrease of approximately 6.51%. As advised by the Management, such decrease was mainly due to the depreciation recognized during the period.

Further set out in the above table, the total assets of the Group increased from approximately HK$305,208,000 as at 31 March 2018 to approximately HK$347,757,000 as at 30 September 2018, representing an increase of approximately HK$42,549,000 or 13.94%. Such increase was primarily due to an increase in the amount of the deposits, prepayments and other receivables from approximately HK$195,648,000 as at 31 March 2018 to approximately HK$230,711,000 as at 30 September 2018, representing an increase of approximately 17.92%. As advised by the Management, the increase in such amounts was mainly due to prepayments to trading suppliers of approximately HK$35,000,000 near period ended 30 September 2018.

Non-current liabilities and current liabilities

LETTER FROM EUTO CAPITAL

As further set out in the table 2 above, as at 30 September 2018, non-current liabilities and current liabilities of the Group are amounted to approximately HK$25,800,000 and HK$63,710,000 respectively. Set out below is the breakdown of the non-current liabilities and current liabilities of the Group as at 31 March 2018 and 30 September 2018.

Table 4: Breakdown of the consolidated total liabilities of the Group

Current liabilities Trade payables Accrued liabilities and other payable Amount due to a shareholder Borrowings Obligations under finance lease Non-current liabilities Amounts due to shareholders Amounts due to non-controlling interests Obligations under finance lease Total liabilities	As at 31 March 30 September 2018 2018 (audited) (unaudited) HK$’000 HK$’000 3 2,237 20,705 55,981 542 78 – 4,484 720 930 21,970 63,710 14,670 14,670 8,370 8,370 2,393 2,760 25,433 25,800 47,403 89,510	As at 31 March 30 September 2018 2018 (audited) (unaudited) HK$’000 HK$’000 3 2,237 20,705 55,981 542 78 – 4,484 720 930 21,970 63,710 14,670 14,670 8,370 8,370 2,393 2,760 25,433 25,800 47,403 89,510
		63,710
		14,670 8,370 2,760
		25,800
		89,510

As set out in the above table, the current liabilities of the Group increased by approximately HK$41,740,000 or 189.99% from approximately HK$21,970,000 as at 31 March 2018 to approximately HK$63,710,000 as at 30 September 2018. The increase in current liabilities of the Group was mainly due to the net effect of (i) the increase in the amount of accrued liabilities and other payable from approximately HK$20,705,000 as at 31 March 2018 to approximately HK$55,981,000 as at 30 September 2018; and (ii) the increase in the amount of borrowings of approximately HK$4,484,000 as at 30 September 2018.

LETTER FROM EUTO CAPITAL

As further set out in the above table, the non-current liabilities of the Group were increased by approximately HK$367,000 or 1.44% from approximately HK$25,433,000 as at 31 March 2018 to approximately HK$25,800,000 as at 30 September 2018. Such increase was mainly due to an increase in the amount of obligations under finance lease from approximately HK$2,393,000 as at 31 March 2018 to approximately HK$2,760,000 as at 30 September 2018.

Table 5: Calculation of the gearing ratio of the Group

Total debt Unsecured non-interest-bearing loan from shareholders Unsecured non-interest-bearing loan from non-controlling shareholders Bank and other borrowings Obligation under finance lease Sub-total of total debt (A) Total equity (B) Gearing ratio ((A)/(B) x 100%)	As 31 March 2018 HK$’000 15,212 8,370 – 3,113 26,695 257,805 10.4%	at 30 September 2018 HK$’000 14,748 8,370 4,484 3,690 31,292 258,247 12.1%

As stated in the above table, as at 30 September 2018, the Group’s gearing ratio was 12.1 (31 March 2018: 10.4), which was calculate on the basis of total debt over total equity of the Company. Total debt comprises unsecured non-interest-bearing loan from shareholders and non-controlling shareholders, banks and other borrowings and obligation under finance lease. As noted above, the gearing position of the Group remains relatively stable with no significant liquidity problem.

1.2 Information on the Subscribers

(a) The Subscriber A – Mr. Zhang Xiaobin

Subscriber A, aged 66, is the Chairman of the Board and an executive Director. Subscriber A is interested in 42,460,000 Shares, representing approximately 1.52% of the total number of issued Shares as at the Latest Practicable Date.

LETTER FROM EUTO CAPITAL

(b) The Subscriber B – Mr. Gao Feng

Subscriber B, aged 48, is the Vice-Chairman of the Board and an executive Director. Subscriber B is interested in 121,082,000 Shares, representing approximately 4.34% of the total number of issued Shares as at the Latest Practicable Date.

2. Reasons for entering into the Third Supplemental Agreements and the intended use of proceeds

2.1 Intended use of proceeds

(a) Intended use of proceeds under the Original Proposal

As set out in the Letter, the aggregate net proceeds from the Subscriptions under the Original Proposal, after deducting the related expenses, will be approximately HK$119,500,000, which was intended to be used as follows: (i) as to approximately HK$46 million for settling part of the consideration for the Acquisition; (ii) as to approximately HK$37 million for developing the Group’s daily consumer goods trading and esmart terminal businesses; and (iii) as to approximately HK$36.5 million for general working capital of the Group.

On 29 March 2019, the Company announced that the Acquisition under the Share Transfer Agreement and the supplemental agreements thereto were terminated with effect from the same date. In addition, the Group obtained the loan from Mr. Wang in the principal amount of RMB20 million in early March 2019. Taking into account the aforesaid, the Company and the Subscribers entered into negotiations and agreed upon the Revised Proposal with the Subscriptions downsized from HK$120 million to HK$50 million.

(b) Intended use of proceeds after the revision pursuant to the Third Supplemental Agreements

Assuming the Subscription Shares are subscribed for, the estimated aggregate gross proceeds from the Subscriptions is expected to be HK$50,000,000. After deducting related fees and expenses, the estimated net proceeds of the Subscriptions will amount to approximately HK$49,500,000, representing a net Subscription Price of approximately HK$0.186 per Subscription Share.

The Company intends to use the net proceeds from the Subscriptions as follows:

(i) as to HK$35.3 million for development the Group’s daily consumer goods trading and esmart terminal businesses; and
(ii) as to HK$14.2 million for general working capital of the Group.

LETTER FROM EUTO CAPITAL

(c) Review on the existing financial resources of the Group

According to the 2018 Interim Report, the cash and cash equivalents of the Group as at 30 September 2018 was approximately HK$12,074,000. As at 30 April 2019, the Group had cash and cash equivalents of approximately HK$5.9 million. As advised by the Management, based on the Group’s internal cash flow budget covering May to September 2019, the Management is of the view that the proceeds from the Subscriptions can satisfy most of the Company’s expected funding needs for the said period. In this regard, we have reviewed the aforesaid internal cash flow budget and noted that the estimated working capital needs of the Group from operating activities for the second half of the year 2019 (excluding directors remuneration) amounting to approximately HK$14.2 million, comprises of (i) the settlement of outstanding legal and professional fees of approximately HK$5.16 million, (ii) the payment of rental expenses of approximately HK$1.3 million, (iii) the payment of salaries and allowances of approximately HK$4.14 million; (iv) payment of other office administrative expenses of approximately HK$1.79 million; and (v) other general working capital of approximately HK$1.81 million.

We further note that after settling the above budgeted payment, it is expected by the Management that although the Group has budgeted enough financial resources for its daily working capital and implementing its existing business plan, however, additional funding would be required for the Group in order to further develop the Group’s daily consumer goods trading and esmart terminal businesses. Based on this, we have inquired the Management and reviewed the budget of development of the daily consumer goods trading and esmart terminal businesses under the Esmart Group. We noted that approximately HK$5 million will be used for development of the daily consumer trading business while the estimated development cost incurred under the Esmart Group mainly comprises the cost incurred in (i) the cost of manufacturing esmart terminals of approximately HK$12 million; (ii) the research and development expenses of approximately HK$10 million; and (iii) the remaining intended proceeds of approximately HK$8.3 million incurred in technology, design and trial testing of hardware, development of software system, marketing and promotion expenses.

As regards to the cash flow generating position of the Group, we understand from the Board that the Group is in the process of recovering certain “other receivables”, however, given the repayment of such other receivables is not certain and the Company has imminent funding needs as mentioned above, the existing cash position of the Group will not be sufficient to meet the same without conducting further fund raising exercise (i.e. the Subscriptions), hence, we consider that the use of proceeds from the Subscriptions could satisfy the Group’s most of the working capital needs and contribute to the Group’s business development which is beneficial to the Company and its Shareholders as a whole. For details of the above-mentioned “other receivables”, please refer to the sub-section headed “Reasons for entering into the Third Supplemental Agreements and use of proceeds” in the Letter.

LETTER FROM EUTO CAPITAL

In additions, we have discussed with the Board and reviewed the 2018 Annual Report, we understand that the Company intends to allocate resources for developing the benefit of people related consumer goods market, in particular daily consumer products, by expanding its existing trading business to this area and considering acquisitions of relevant business with growth potentials. Accordingly, after having reviewed the aforementioned budget plan, we concur with the Directors that the intended use of proceeds from the Subscriptions are in line with the Group’s business strategies and will contribute to the development of the Group’s business development.

2.2 Other financing alternatives

As advised by the Board, the Directors believe that the Subscriptions will improve the Company’s conditions. In addition, the Subscriptions will enhance the Company’s capital foundation and financial conditions while lowering the gearing level and reducing financing cost, therefore raising the Company’s market competitiveness. The Directors consider that the Subscriptions reflect the confidence of the Subscribers towards the long-term and sustainable development of the Company, and that the continuing support of the Subscribers is crucial in maintaining business stability and sustaining long-term development of the Group.

For our due diligence purpose, we have made enquires towards the Management and are advised that the Directors would exercise due and careful consideration when choosing the best financing method available to the Group. We understand that the Directors have considered other ways of fund raising such as debt financing, bank borrowing, rights issue or open offer.

With regard to debt financing and bank borrowing, having considered that it would increase the gearing level of the Group and the interest expenses and finance costs which would impose additional financial burden to the Group’s future cash flow, the Board considered that such fund raising method is currently not the most appropriate method for the Group. With regard to the viability of a rights issue or an open offer, the Directors consider that equity financing by way of the Subscriptions are relatively more appropriate for raising additional capital for the Company for the following reasons:

(i) less documentation is typically required for the Subscriptions than rights issue or open offer;
(ii) it generally takes shorter time to arrange the Subscriptions than rights issue or open offer given (1) less documentation is involved in the Subscriptions as mentioned above; and (2) the procedures involved in a rights issue or an open offer often take around three months typically, which include the following steps which are generally not required in the Subscriptions, such as, engaging the auditors and the overseas legal advisers for the arrangement letters and comfort letters and the overseas legal opinion, verification and registration of the prospectus and commencement and close of offer period; while it is estimated that the procedures involved in the Subscriptions take less than one month typically; and

LETTER FROM EUTO CAPITAL

(iii) based on the management’s estimation, it is less costly to arrange the Subscriptions as it is expected that the Company would incur higher costs to arrange a rights issue or an open offer given (1) for an open offer or a rights issue, more professional parties would need to be engaged, including but not limited to, underwriters, sub-underwriters (where required), legal advisers for both the Company and the underwriters, legal advisers for overseas legal opinion (if necessary), auditors, share registrar and financial printer; (2) the number of documents required to be prepared in the Subscriptions is fewer than that of a rights issue or an open offer; and (3) a higher underwriting commission incurred under a rights issue or an open offer.

With regard to equity financing, although both rights issue and open offer would allow Shareholders to maintain their respective pro-rata shareholdings in the Company and at the same time strengthening the capital base of the Company, such fund raising exercises would be relatively more time consuming as compared with the Subscriptions. Meanwhile, the Directors are of the opinion that the Subscriptions as a timely source of funding to the Group is a more preferable method of fund raising for the Group. In addition, the Company can raise fund under the Subscriptions by saving the placing commission in respect of the Subscription Shares.

Our view

We considered the Subscriptions is more preferable for the Group based on the following:

(i) it is expected that a rights issue or open offer often takes longer time to complete than the placing or subscription of shares;
(ii) the Group’s previous fund raising activities from the independent third parties in relation to the subscription of new shares under general mandate as set out in the Company’s announcement dated 28 May 2018 offered lower premium (4.1% to the closing price of HK$0.123 per Share as quoted on the Stock Exchange on the last trading day prior to the date of the respective subscription agreement) as compared to the premium offered in the Subscriptions (8.04% to the closing price of HK$0.174 per Share as quoted on the Stock Exchange on the last trading day prior to the date of the Third Supplemental Agreements);
(iii) the Company has recently approached four securities firms which are Independent Third Parties and licensed corporations under the SFO and was informed that it would be difficult to locate potential investors for share placement given the recent poor market sentiment, the poor financial performance of the Group in its previous financial years and the limited liquidity of the Company’s Shares and
(iv) debt financing shall inevitably impose interest payment obligations on the Group and it may be subject to lengthy due diligence and negotiations with banks or financial institutions for provision of loans to the Group.

LETTER FROM EUTO CAPITAL

Having taken into account the above detailed analysis of the financing choice, we concur with the Directors’ view that the Subscriptions are more preferable fund raising method than the financing alternatives as mentioned above.

Conclusions

After considering the above-mentioned factors, we concur with the Directors’ view that in order to further develop the business of the Company, it would be an option for the Group to finance the working capital from the proposed Subscriptions.

3. Principal terms of the Subscription Agreements (as amended and supplemented by the Supplemental Agreements)

On 26 October 2018, the Company entered into the Subscription Agreements with each of the Subscribers respectively. On 15 November 2018 and 14 December 2018, the Company entered into the First Supplemental Agreements and the Second Supplemental Agreements with each of the Subscribers respective to amend certain terms of each of the Subscription Agreements. Pursuant to the First Supplemental Agreements and the Second Supplemental Agreements, the amended terms primarily include:

(i) the Subscription Shares to be subscribed by each of the Subscribers were the Consolidated Shares after the Share Consolidation;
(ii) the Subscription Price was adjusted from HK$0.105 to HK$0.21; and
(iii) the number of Subscription Shares to be subscribed by the Subscribers shall be 571,428,571 Consolidated Shares instead of 1,142,857,142 Shares before the Share Consolidation.

On 26 April 2019, the Company entered into the Third Supplemental Agreements with the Subscribers to revise certain major terms of the Subscription Agreements. A summary of the revisions to the major terms of the Subscriptions pursuant to the Third Supplemental Agreements is set out as follows:

(i) the total subscription amount and the gross proceeds to be raised from the Subscriptions is adjusted from HK$120 million to HK$50 million, out of which, HK$10 million and HK$40 million shall be payable to Subscriber A and Subscriber B, respectively;
(ii) the Subscription Price is adjusted from HK$0.21 to HK$0.188; and
(iii) the total number of Subscription Shares is adjusted from 571,428,571 Shares to 265,957,446 Shares.

LETTER FROM EUTO CAPITAL

3.1 Details of the principal terms of the Subscription Agreements (as amended and supplemented by the Supplements Agreements)

Set out below are the details of the Subscription Agreements (as amended and supplemented by the Supplements Agreements):

Date:

26 October 2018 – Subscription Agreements 15 November 2018 – First Supplemental Agreements 14 December 2018 – Second Supplemental Agreements – 26 April 2019 Third Supplemental Agreements

Parties:

(i) The Company;
(ii) The Subscriber A (for Subscription Agreement A as supplemented and amended by the Supplemental Agreements A); and
(iii) The Subscriber B (for Subscription Agreement B as supplemented and amended by the Supplemental Agreements B).
(a) Subject matter

Pursuant to the Subscription Agreement A (as supplemented and amended by the Supplemental Agreements A), the Company conditionally agreed to issue (pursuant to the Specific Mandate), and the Subscriber A conditionally agreed to subscribe for, 53,191,489 Subscription Shares at the Subscription Price for each Subscription Share. The cash consideration payable by Subscriber A shall be HK$10,000,000 (payable in full on the date of the Completion).

(b) The Subscription Shares

The 265,957,446 Subscription Shares represent approximately 9.13% of the number of issued Shares; and (ii) approximately 8.37% of the number of issued Shares as enlarged by the allotment and issue of the Subscription Shares.

LETTER FROM EUTO CAPITAL

The aggregated nominal value of the Subscription Shares is HK$5,319,148.92.

The Subscription Price is HK$0.188 per Subscription Share, which was originally HK$0.105 under the Subscription Agreements, and was adjusted to HK$0.21 pursuant to the First Supplemental Agreements, and was subsequently adjusted to HK$0.188 pursuant to the Third Supplemental Agreements.

The Subscription Price of HK$0.188 represents:

(i) a premium of approximately 5.03% over the closing price of HK$0.179 per Share as quoted on the Stock Exchange on the Last Trading Date;
(ii) a premium of approximately 8.04% over the closing price of HK$0.174 per Share as quoted on the Stock Exchange on the date of the Third Supplemental Agreements;
(iii) equals to the average of the closing price of HK$0.188 per Share quoted on the Stock Exchange for the last five consecutive trading days immediately prior to the Last Trading Date;
(iv) a premium of approximately 6.88% over the average of the closing price of HK$0.1759 per Share quoted on the Stock Exchange for the last ten consecutive trading days immediately prior to the Last Trading Date;
(v) a premium of approximately 104.35% over the Group’s audited tangible net assets per Share as at 31 March 2018 of approximately HK$0.092; and
(vi) a premium of approximately 11.24% over the closing price of HK$0.169 per Share quoted on the Stock Exchange on the Latest Practicable Date.

3.2 Evaluation on the basis of the Subscription Price

As stated in the Letter, the Subscription Price was arrived at after arm’s length negotiations between the Company and the Subscribers considering the prevailing market price of the Shares, the Group’s historical performances and present financial position as well as current market condition.

LETTER FROM EUTO CAPITAL

In assessing the fairness and reasonableness of the basis of the Subscription Price, we have primarily considered (i) the historical Share price performance; and (ii) the market comparables in respect of recent issuance of new shares through placement and/or subscription.

(a) Review on historical price performance of the Shares

As stated above, the Subscription Price was arrived at after arm’s length negotiations between the Company and the Subscribers considering the prevailing market price of the Shares. Based on this, in order to assess the fairness and reasonableness of the Subscription Price, we have reviewed the closing price of the Shares in the past 12 months. Set out below is the table showing (i) the historical highest and lowest closing prices of the Shares; and (ii) the average daily closing price of the Shares as quoted on the Stock Exchange in each month during the period commencing from 27 April 2018, being the 12 months prior to the date of the Third Supplemental Agreements, up to and including the Latest Practicable Date (the “ Review Period ”).

	Highest	Lowest	Average daily
	closing price	closing price	closing price
Month	per Share	per Share	per Share
	HK$	HK$	HK$
Year 2018
27 April 2018 to 30 April 2018	0.254	0.254	0.252
May	0.264	0.264	0.248
June	0.226	0.226	0.205
July	0.222	0.222	0.190
August	0.224	0.224	0.207
September	0.222	0.222	0.204
October	0.212	0.212	0.198
November	0.206	0.206	0.189
December	0.180	0.180	0.162
Year 2019
January	0.140	0.140	0.113
February	0.100	0.100	0.088
March	0.100	0.100	0.084
April	0.228	0.228	0.148
May (up to and including the Latest
Practicable Date)	0.195	0.162	0.182
Maximum			0.264
Minimum			0.076
Average			0.176

Source: website of the Stock Exchange (www.hkex.com.hk)

LETTER FROM EUTO CAPITAL

During the Review Period, the daily closing prices of the Shares ranged from the lowest of HK$0.076 per Share on 19 March 2019 and 3 April 2019 to the highest of HK$0.264 per Share on 7 May 2018. The Subscription Price is therefore within the said historical price range of Shares during the Review Period.

Furthermore, we note that the daily closing price of the Shares was on a descending trend decreasing from HK$0.254 on 27 April 2018 to HK$0.076 on 19 March 2019, being the lowest closing price of the Shares during the Review Period. After reviewing the trend of the daily closing price per Share during the Review Period, we note that during the Review Period, the Company has announced the following material corporate exercise:

(i) the subscription of 95,660,000 new Shares under general mandate as announced and completed on 28 May 2018 and 31 May 2018 respectively;
(ii) the annual results announcement of the Company for the year ended 31 March 2018 with a continuous loss for the year of approximately HK$144,506,000 as announced on 26 June 2018;
(iii) the entering into of a non-legally binding memorandum of understanding in relation to the strategic cooperation with 上海猫仕電子商務有限公司 (Shanghai Malls E-commerce Company Limited*) as announced on 17 August 2018;
(iv) the entering into of a non-legally binding memorandum of understanding in relation to the strategic cooperation with China Tobacco Hunan Industrial Co. Ltd.* (湖南中煙工業有限責任公司) as announced on 28 September 2018;
(v) the interim results announcement of the Company for the 6 months ended 30 September 2018 with a decrease in the loss position of the Group from approximately HK$89,359,000 for the 6 months ended 30 September 2017 to approximately HK$34,969,000 for the 6 months ended 30 September 2018;
(vi) the discloseable transaction in relation to the acquisition of 51% issued share capital of Central Luxuriant Limited as announced and terminated on 16 October 2018 and 29 March 2019 respectively;
(vii) the proposed share consolidation and proposed change in board lot size as announced and completed on 14 November 2018 and 8 January 2019, respectively; and
(viii) the announcements relating to the Subscriptions as announced on 26 October 2018, 15 November 2018, 14 December 2018, 7 January 2019, 31 January 2019 and 5 March 2019.

LETTER FROM EUTO CAPITAL

Apart from the above, we are not aware of any public information relating to the price movement during the Review Period. To conclude, we are of the view that the change in Share price during the Review Period reflects the change in the fundamentals of the Company and therefore, the Share price during such period serves a fair and reasonable indicator for assessing the issue price of the Subscription Shares.

In order to further assess the fairness and reasonableness of the Subscription Price as compared to the recent closing price of the Shares, we have further, based on the information available from the Stock Exchange’s website, identified the Comparables (as defined below) for further analysis.

(b) Review on the trading volume of the Shares

Set out below is the table showing the (i) monthly total trading volume of the Shares; (ii) the number of trading days; (iii) the average daily trading volume of the Shares; (iv) the total issued Shares at the end of each month; and (v) the percentage of the average daily trading volume of the Shares to the total issued Shares at the end of each month during the Review Period:

					Percentage of
					average daily
					trading volume
	Monthly			Total issued	to total number
	trading		Average daily	Shares at	of the Shares
	volume of	No. of	trading volume	the end of	to the total
Month	the Shares	trading days	of the Shares	each month	issued Shares
					(C)/(D)
	(A)	(B)	(C) = (A)/(B)	(D)	Approx. (%)
2018
April	8,439,000	19	444,158	5,192,160,400	0.0086
May	16,180,500	21	770,500	4,499,035,400	0.0140
June	10,994,000	20	549,700	5,575,535,400	0.0099
July	8,119,500	21	386,643	5,575,535,400	0.0069
August	27,824,500	23	1,209,761	5,575,535,400	0.0217
September	14,222,000	19	748,526	5,575,535,400	0.0134
October	15,304,000	21	728,762	5,575,535,400	0.0131
November	9,770,000	22	444,091	5,575,535,400	0.0080
December	4,310,000	19	226,842	5,575,535,400	0.0041
2019
January	7,918,500	22	359,932	2,787,767,700	0.0129
February	15,736,000	17	925,647	2,787,767,700	0.0332
March	12,115,500	21	576,929	2,787,767,700	0.0207
April	314,515,000	19	16,553,421	2,787,767,700	0.5938
May (up to and including Latest
Practicable Date)	209,115,000	18	11,617,500	2,912,776,542	0.5676

LETTER FROM EUTO CAPITAL

Based on the above table, the monthly trading volume of the Shares during the Review Period has not been consistent, ranged from the lowest of 4,310,000 to the highest of 314,515,000, representing approximately 0.0041% and 0.5938% of the total issued Shares respectively. It is noted that the number of Shares traded daily increased significantly after the publication of the announcement relating to (i) the discloseable transaction regarding the termination of the acquisition of 51% issued share capital of Central Luxuriant Limited on 29 March 2019 and (ii) the proposed cooperation with The Nielsen Company (Guangzhou) Limited (“ Nielsen Guangzhou ”) for the use of the Group’s own technology to collect store information and provide such information to Nielsen Guangzhou on 23 April 2019. Save for the aforementioned released announcements, we are not aware of any reasons for such fluctuations during the Review Period and believe that it was the result of the market response to the relevant published announcements of the Company. Hence, we consider the trading of Shares did not appear to be active during the Review Period. Given the low liquidity of the Shares during the Review Period, we consider that the basis of the Subscription Price, which represents a premium of approximately 8.04% over the closing price of the Share on the date of the Third Supplemental Agreements is fair and reasonable.

(c) Comparison with recent issues of placing shares and Subscription Shares by other listed issuers

In assessing the fairness and reasonableness of the Subscription Price, we have further considered to perform a comparison against comparable transactions by comparing the followings with the Comparables (as defined below):

(i) the premium/(discount) of the subscription price over/(to) the closing price of the relevant shares on the last trading date prior to or on the date of the relevant agreement; and
(ii) the premium/(discount) of the subscription price over/(to) the closing price of the relevant shares on the last five consecutive trading days immediately to and including the last trading date prior to or on the date of the relevant agreement.

In order to carry out the above analysis, we have based on the information available from the Stock Exchange’s website, identified an exhaustive list of 6 transactions announced by 6 companies listed on the Stock Exchange since April 2018 and including the date of Last Trading Date, being the last 6 months commencing from the date of announcement of the Subscriptions (the “ Comparables ”). For the purpose of our selection of the comparables, the basis of our selection of the Comparables is as follows: (i) the transaction involved a subscription of new shares under general mandate or specific mandate; and (ii) the transaction was classified as a connected transaction as defined under the Listing Rules.

Based on above criteria, we considered that the Comparables provide a relevant benchmark for the purpose of assessing the Subscription Price. We consider the Comparables an exhaustive list of relevant comparable companies based on the said criteria above and the selection of comparable companies within an approximate 6-month period to be sufficient and appropriate for our analysis as it has covered the prevailing market conditions and sentiments in the Hong Kong stock market at the time which the Subscription Price were determined.

LETTER FROM EUTO CAPITAL

Set out below showing the list of subscription exercise involved a connected transaction as announced by the Comparables during the last 6 months prior and including the date of the Third Supplemental Agreements:

				Premium/
				(discount) of the
				subscription
				price over/(to)
			Premium/	the closing price
			(discount) of the	of the relevant
			subscription	shares on the last
			price over/(to)	five consecutive
			the closing price	trading days
			of the relevant	immediately to
			shares on the	and including
			last trading date	the last trading
			prior to or on	date prior to
			the date of	or on the date of
Date of	Name of		the relevant	the relevant
announcement	Company	Stock code	agreement	agreement
26/11/2018	ZhuGuang Holdings Group	1176	(6.50%)	(7.80%)
	Company Limited
9/12/2018	Alibaba Pictures Group	1060	1.63%	1.13%
	Limited
14/12/2018	ShenWan HongYuan	218	30.90%	29.30%
	(H.K.) Limited
18/1/2019	Beijing Enterprises Water	371	0.23%	1.27%
	Group Limited
20/1/2019	Panda Green Energy Group	686	(23.08%)	(22.28%)
	Limited
15/4/2019	Chong Kin Group	1609	(8.00%)	(10.00%)
	Holdings Limited
Maximum			30.90%	29.30%
Minimum			(23.08%)	(22.28%)
Average			(0.80%)	(1.40%)
The Company			5.03%	0%

Source: website of the Stock Exchange (www.hkex.com.hk)

LETTER FROM EUTO CAPITAL

As shown in the above table, the subscription price of the Comparables to the relevant closing price of the relevant shares on the last trading date prior to or on the date of the relevant agreement ranged from a premium of approximately 30.90% to a discount of approximately 23.08%, with an average discount of approximately 0.80%. We noted that the premium of approximately 5.03% to the closing price of the Shares on the Last Trading Date under the Subscriptions falls within the abovementioned range of the Comparables and represents a higher premium as compared to the average discount of 0.80% of the Comparables.

Further, the subscription price of the Comparables to the relevant closing price of the relevant shares on the last five consecutive trading days immediately to and including the last trading date prior to or on the date of the relevant agreement ranged from a premium of approximately 29.30% to a discount of approximately 22.28%, with an average discount of approximately 1.40%. We noted that the Subscription Price is equivalent to the closing price of the Shares on the last five consecutive trading days immediately to and including the date of the Third Supplemental Agreements and hence falls within the abovementioned range of the Comparables and represents a higher premium as compared to the average discount of 1.40% of the Comparables.

We noted that the range of premium/discount of the Comparables as shown in the above table is wide, however, considering (i) the Comparables represent an exhaustive list which provide the most recent information as published in the Stock Exchange; (ii) the selection of the Comparables has taken into account the nature of the Subscriptions, being a connected transaction as defined under the Listing Rules, which represent as fair and reasonable sample size; and (iii) there is no specific reasons to eliminate any of the transactions from the Comparables for a fair comparison, we consider that the Comparables is representatives and the above analysis provides a meaningful analysis for the fairness and reasonableness of the Issue Price even the range of premium/discount of the Comparables is wide.

Having considered the above, we are of the view that the Subscription Price was set at a level of premium over the market that is beneficial to the Company and consider that the Subscription Price is fair and reasonable.

4. Possible dilution effects of the Subscriptions

Details of the changes of shareholding structure of the Company upon (i) completion of the allotment and issue of aggregate of 125,008,842 new shares to Mr. Wang pursuant to the loan capitalization agreement dated 26 April 2019 (for details, please refer to the announcement of the Company dated 26 April 2019) (the “ Loan Capitalization ”); and (ii) completion of the Subscriptions are set out in the section headed “Shareholding Structure of the Company” of the Letter.

LETTER FROM EUTO CAPITAL

As illustrated above, assuming there are no other changes in the share capital of the Company from the Latest Practicable Date, the shareholding of existing public Shareholders in the Company will be reduced from approximately 78.17% as at the Latest Practicable Date to approximately 72.48% immediately upon (i) completion of the Loan Capitalization; and (ii) completion of the Subscriptions. The value dilution is approximately 5.69%. Although there will be dilutive effects to the shareholding interests of the public Shareholders as a result of the Subscriptions, having considered, amongst others,

(i) the Subscription Price represent a premium of approximately 104.35% over the Group’s consolidated audited tangible net assets per Share as at 31 March 2018 of approximately HK$0.092;
(ii) the Subscription Price is the same as that of the issue price of HK$0.188 per new share allotted and issued by the Company to an independent third party under the Loan Capitalisation (for details, please refer to the announcement of the Company dated 26 April 2019);
(iii) the reasons for entering into the Third Supplemental Agreements as set out under the section headed “Reasons for entering into the Third Supplemental Agreements and the intended use of proceeds” in this letter;
(iv) the expected positive impacts of the Subscriptions as illustrated in the section headed “Possible financial effects of the Subscriptions” in this letter; and
(v) the net proceeds from the Subscriptions will provide additional funds for the Company and can improve its financial position and liquidity to service its general working capital requirements and towards new business opportunities, should such opportunities arise;

we are of the view that the dilution in the shareholding interests of the public Shareholders upon the completion of the Subscriptions is not prejudicial to their interests and thus is acceptable.

5. Possible financial effects of the Subscriptions

The financial effects of the issue of the Subscription Shares by the Group set out below are purely for illustrative purposes only and do not reflect the future financial position of the Company or the Group after the Completion.

(a) Effect on net asset value

According to the 2018 Interim Report, the unaudited consolidated net assets of the Group as at 30 September 2018 was approximately HK$258,247,000. Upon completion of the Loan Capitalisation on 10 May 2019, the total liabilities were decreased by RMB20,201,643.84 (equivalent to approximately HK$23,501,662.36). It is expected that upon completion of the Subscriptions, the cash and cash equivalents of the Group will be increased by the net proceeds of the Subscriptions which is expected to be approximately HK$49.50 million after deducting related professional fees and expenses. Based on the above, the Subscription are expected to have a positive impact on the total net asset value attributable to the owners of the Company.

LETTER FROM EUTO CAPITAL

(b) Effect on debt to equity ratio

According to the 2018 Interim Report, the total equity of the Group as at 30 September 2018 is approximately HK$258,247,000. The debt to equity ratio of the Group was approximately 12.1%, being the total liabilities divided by total equity. Upon completion of the Loan Capitalisation, the total liabilities were decreased as mentioned above. Assuming the Subscription Shares are subscribed for, the net proceeds of the Subscriptions (after deducting related placing commissions, professional fees and related expenses) are expected to be approximately HK$49.50 million with the equity to be increased by the same amount. Based on the above decreased total debt and increased equity, the debt-to-equity ratio of the Group is expected to improve upon completion of the Loan Capitalisation and the Subscriptions.

RECOMMENDATION

Having considered the principal factors and reasons referred to above, we are of the opinion that the terms of the Subscription Agreements (as amended and supplemented by the Supplemental Agreements) are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole, although the Subscriptions are not conducted in the ordinary and usual course of business of the Company. Accordingly, we recommend the Independent Board Committee to advise, and ourselves recommend, the Independent Shareholders to vote in favor of the relevant resolution(s) to be proposed at the EGM to approve the Subscription Agreements (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder.

Yours faithfully For and on behalf of

Euto Capital Partners Limited Manfred Shiu Director

For identification purpose only and should not be regarded as the official English translation of the Chinese names. In the event of any inconsistency, the Chinese names prevail.

GENERAL INFORMATION

APPENDIX

(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) SHARE CAPITAL

(a) Share capital of the Company

The authorised and issued share capital of the Company (i) as at the Latest Practicable Date; and (ii) immediately upon Completion (assuming there will be no other change in the number of issued Shares between the Latest Practicable Date and the date of the Completion) as follows:

(i) Share capital as at the Latest Practicable Date

	Nominal
	Value	Number
	per Share	of Shares	Amount
	HK$		HK$
Authorised:
As at the Latest Practicable Date	0.02	15,000,000,000	300,000,000.00
Issued and fully paid:
As at the Latest Practicable Date	0.02	2,912,776,542	58,255,530.84

GENERAL INFORMATION

APPENDIX

(ii) Share capital immediately upon Completion (assuming there will be no other change in the number of issued Shares between the Latest Practicable Date

	Nominal
	Value	Number
	per Share	of Shares	Amount
	HK$		HK$
Authorised:
As at the date of Completion	0.02	15,000,000,000	300,000,000.00
Issued and fully paid:
Immediately before the date of
Completion	0.02	2,912,776,542	58,255,530.84
Subscription Shares to be issued
pursuant to the Subscriptions	0.02	265,957,446	5,319,148.92
Shares in issue upon Completion	0.02	3,178,733,988	63,574,679.76

All issued Shares rank pari passu in all respects with each other, including, in particular, as to dividends, voting rights and return of capital.

The Subscription Shares to be allotted and issued will, when issued, rank pari passu in all respects with Shares in issue at the time of allotment and issue of the Subscription Shares. The Subscribers will be entitled to receive all dividends and distributions which may be declared, made or paid on or after the date of issue of Subscription Shares. As at the Latest Practicable Date, there was no arrangement under which future dividends are waived or agreed to be waived.

The issued Shares are listed on the Stock Exchange. None of the securities of the Company is listed or dealt in, and no listing or permission to deal in the securities of the Company is being or is proposed to be sought on any other stock exchange.

(b) Share options and share awards

The Share Option Scheme was adopted on 8 October 2010 and amended on 17 August 2017, with options to be granted to any directors, employees and other parties at the discretion of the Board. As at the Latest Practicable Date, 273,417,000 share options remained outstanding. The Group also adopted the Share Award Scheme on 27 July 2017. As at the Latest Practicable Date, 124,685,000 awarded Shares were granted to eligible directors and employees by way of allotment and issue of new shares.

GENERAL INFORMATION

APPENDIX

Save as disclosed above, the Company did not have any outstanding convertible securities, options or warrants in issue or similar rights which confer any right to subscribe for, convert or exchange into the Shares or any agreement or arrangement to issue Shares.

(3) MARKET PRICE

The table below sets out the closing prices of the Shares on the Stock Exchange (i) on the last trading day of each of the calendar months during the Relevant Period; (ii) on the Last Trading Day; and (iii) on the Latest Practicable Date.

	Closing price
Date	per Share
	(HK$)
30 April 2018	0.254
31 May 2018	0.222
29 June 2018	0.198
31 July 2018	0.174
31 August 2018	0.200
28 September 2018	0.204
31 October 2018	0.200
30 November 2018	0.176
31 December 2018	0.150
31 January 2019	0.105
28 February 2019	0.090
29 March 2019	0.085
25 April 2019 (being the Last Trading Day)	0.179
30 April 2019	0.159
29 May 2019 (being the Latest Practicable Date)	0.169

The highest and lowest closing market prices of the Shares recorded on the Stock Exchange during the Relevant Period were HK$0.264 on 7 May 2018 and HK$0.076 on 3 April 2019, respectively.

GENERAL INFORMATION

APPENDIX

(4) DISCLOSURE OF INTERESTS

(a) Directors and Chief Executive

As at the Latest Practicable Date, the interests and short positions, if any, of each Director and chief executive of the Company in the Shares, underlying Shares and debentures of the Company and any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which the Directors and chief executive were deemed or taken to have under provisions of the SFO), or which were required to be and are recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or as otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies adopted by the Company were as follows:

			Approximate
		Number	percentage of
Name of Directors	Nature of interest	of Shares	shareholding
		(Note 1)
Zhang Xiaobin	Beneficial owner	118,151,489 (L)	4.06%
		(Note 2)
Gao Feng	Beneficial owner	364,347,957 (L)	12.51%
		(Note 3)
Chiu Sui Keung	Beneficial owner	58,771,000 (L)	2.02%
		(Note 4)
Zhang Yichun	Beneficial owner	23,500,000 (L)	0.81%
		(Note 5)
Sun Qiang	Beneficial owner	24,460,000 (L)	0.84%
		(Note 6)
Xu Ying	Beneficial owner	23,500,000 (L)	0.81%
		(Note 7)
Cheng Wing Keung,	Beneficial owner	3,181,000 (L)	0.11%
Raymond		(Note 8)
Lam Williamson	Beneficial owner	3,181,000 (L)	0.11%
		(Note 9)
Wong Hoi Kuen	Beneficial owner	3,181,000 (L)	0.11%
		(Note 10)
Lam Lee G	Beneficial owner	3,181,000 (L)	0.11%
		(Note 11)

Notes:

“L” stands for a long position in the Shares.
18,000,000 Shares out of the 118,151,489 Shares are beneficially held by Mr. Zhang Xiaobin in his own capacity, 53,191,489 Shares are the Subscription Shares subscribed by Mr. Zhang Xiaobin pursuant to the Subscription Agreement A. 22,500,000 Shares are held by Mr. Zhang Xiaobin pursuant to share options granted under the Share Option Scheme while the remaining 24,460,000 Shares are held by Mr. Zhang Xiaobin pursuant to the Awards granted under the Share Award Scheme.

GENERAL INFORMATION

APPENDIX

89,000,000 Shares out of the 364,347,957 Shares are interest of ACE Channel Limited, a limited liability company incorporated in the British Virgin Islands and a controlled corporation held by Mr. Gao Feng, 30,500,000 Shares are held pursuant to share options granted under the Share Option Scheme, 7,622,000 Shares are held in his own capacity while the remaining 24,460,000 Shares are held by Mr. Gao Feng pursuant to the Awards granted under the Share Award Scheme. 212,765,957 Shares are the Subscription Shares subscribed by Mr. Gao Feng pursuant to the Subscription Agreement B.
3,811,000 Shares out of the 58,771,000 Shares are beneficially held by Mr. Chiu Sui Keung in his own capacity, 30,500,000 Shares are held pursuant to share options granted under the Share Option Scheme while the remaining 24,460,000 Shares are held by Mr. Chiu Sui Keung pursuant to the Awards granted under the Share Award Scheme.
22,500,000 Shares out of the 23,500,000 Shares are held by Mr. Zhang Yichun pursuant to share options granted under the Share Option Scheme while the remaining 1,000,000 Shares are held by Mr. Zhang Yichun pursuant to the Awards granted under the Share Award Scheme.
These 24,460,000 Shares are held by Mr. Sun Qiang pursuant to share options granted under the Share Option Scheme.
22,500,000 Shares out of the 23,500,000 Shares are held by Ms. Xu Ying pursuant to share options granted under the Share Option Scheme while the remaining 1,000,000 Shares are held by Ms. Xu Ying pursuant to the Awards granted under the Share Award Scheme.
1,181,000 Shares out of the 3,181,000 Shares are beneficially held by Mr. Cheng Wing Keung, Raymond in his own capacity, 1,000,000 Shares are held pursuant to share options granted under the Share Option Scheme while the remaining 1,000,000 Shares are held by Mr. Cheng Wing Keung, Raymond pursuant to the Awards granted under the Share Award Scheme.
1,181,000 Shares out of the 3,181,000 Shares are beneficially held by Mr. Lam Williamson in his own capacity, 1,000,000 Shares are held pursuant to share options granted under the Share Option Scheme while the remaining 1,000,000 Shares are held by Mr. Lam Williamson pursuant to the Awards granted under the Share Award Scheme.
1,181,000 Shares out of the 3,181,000 Shares are beneficially held by Mr. Wong Hoi Kuen in his own capacity, 1,000,000 Shares are held pursuant to share options granted under the Share Option Scheme while the remaining 1,000,000 Shares are held by Mr. Wong Hoi Kuen pursuant to the Awards granted under the Share Award Scheme.
2,181,000 Shares out of the 3,181,000 Shares are held by Dr. Lam Lee G pursuant to share options granted under the Share Option Scheme while the remaining 1,000,000 Shares are held by Dr. Lam Lee G pursuant to the Awards granted under the Share Award Scheme.

(b) Substantial Shareholders

So far as is known to any Director or the chief executive of the Company, as at the Latest Practicable Date, Shareholders who had interests or short positions 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 which were recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO were as follows:

	Capacity/		Approximate%
	Nature	Number	of Interest in
Name	of Interest	of Shares	the Company
Ms. Liu Qiuhua	Beneficial owner	358,817,000	12.32

GENERAL INFORMATION

APPENDIX

Save as disclosed above, so far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, no other person (other than a Director or chief executive of the Company) had, or was deemed or taken to have, an interest or short position 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 held any option in respect of such capital.

As at the Latest Practicable Date, none of the Directors is a director or employee of a company which has an interest or short position 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.

(5) COMPETING BUSINESS INTEREST OF DIRECTORS

As at the Latest Practicable Date, none of the Directors or their respective close associates was interested in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group as required to be disclosed pursuant to the Listing Rules.

(6) DIRECTORS’ AND EXPERT’S INTERESTS IN ASSETS

None of the Directors nor the expert (as named in this circular) had any interest, directly or indirectly, in any asset which has, since 31 March 2018 (being the date to which the latest published audited consolidated financial statements of the Group were made up), up to the Latest Practicable Date, been acquired or disposed of by, or leased to, any member of the Group or are proposed to be acquired or disposed of by, or leased to, any member of the Group.

(7) DIRECTORS’ SERVICE CONTRACTS

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

(8) DIRECTORS’ INTEREST IN CONTRACTS OR ARRANGEMENT SIGNIFICANT TO THE GROUP

As at the Latest Practicable Date, none of the Directors was materially interested, directly or indirectly, in any contract or arrangement subsisting entered into by any member of the Group subsisting as at the Latest Practicable Date and which is significant in relation to the business of the Group.

(9) MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position or prospects of the Group since 31 March 2018, being the date to which the latest published audited accounts of the Company were made up.

GENERAL INFORMATION

APPENDIX

(10) LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries were engaged in any litigation or arbitration proceedings of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened by or against any member of the Group.

(11) EXPERT AND CONSENT

The following are the qualifications of the expert who has been named in this circular or has given opinion or letter contained in this circular:

Name Qualifications Euto Capital Partners Limited a corporation licensed to carry out Type 6 (advising on corporate finance) regulated activity under the SFO

As at the Latest Practicable Date, Euto Capital does not have any interest, direct or indirect, in any member of the Group or any right (whether legally enforceable or not), to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, Euto Capital does not have any interest, direct or indirect, in any assets which have been since 31 March 2018, the date up to which the latest published audited financial statements of the Group were made up, acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

Euto Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion in this circular of its letter of advice or report and/or references to its names in the form and context in which they appear.

(12) GENERAL

(a) None of the Directors had any direct or indirect interest in any assets which had been acquired or disposed of by or leased to any member of the Group or proposed to be so acquired, disposed of by or leased to any member of the Group since 31 March 2018, being the date to which the latest published audited accounts of the Company were made up, and up to the Latest Practicable Date.
(b) Save as disclosed in this circular, as at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group, which was subsisting and was significant in relation to the business of the Group.

GENERAL INFORMATION

APPENDIX

(c) The company secretary of the Company is Mr. CHOW Chi Fai, a member of the Hong Kong Institute of Certified Public Accountants.
(d) The registered office of the Company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands.
(e) The principal place of business of the Company in Hong Kong is Unit 806, Level 8, Core D, Cyberport 3, 100 Cyberport Road, Hong Kong.
(f) The share registrar and transfer office of the Company in Hong Kong is Tricor Tengis Limited.
(g) The English text of this circular shall prevail over their respective Chinese text for the purpose of interpretation.

(13) DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the Company’s principal place of business in Hong Kong at Unit 806, Level 8, Core D, Cyberport 3, 100 Cyberport Road, Hong Kong during normal business hours on any weekdays, except public holidays, from the date of this circular up to and including the date of the EGM:

(a) the memorandum and articles of association of the Company;
(b) the annual reports of the Company for the years ended 31 March 2016, 2017 and 2018;
(c) the Subscription Agreements;
(d) the Supplemental Agreements;
(e) the letter from the Board as set out in this circular;
(f) the letter from the Independent Board Committee as set out in this circular;
(g) the letter from Euto Capital as set out in this circular;
(h) the written consent of the expert as referred to in the section headed “Expert and Consent” of this Appendix; and
(i) this circular.

NOTICE OF EGM

==> picture [278 x 52] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 223)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the extraordinary general meeting (the “ EGM ”) of Elife Holdings Limited (the “ Company ”) will be held at Unit 806, Level 8, Core D, Cyberport 3, 100 Cyberport Road, Hong Kong on Friday, 21 June 2019 at 2:30 p.m., for the purpose of considering and, if thought fit, passing the following resolutions:

ORDINARY RESOLUTIONS

“ THAT subject to and conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”),
(a) the conditional subscription agreement dated 26 October 2018 (as amended and supplemented by the supplemental agreements thereto dated 15 November 2018, 14 December 2018 and 26 April 2019) (the “ Zhang Subscription Agreement ”) entered into by the Company and Mr. Zhang Xiaobin in relation to the allotment and issue of 53,191,489 new shares (the “ Zhang Subscription Shares ”) by the Company under the Zhang Mandate (as defined below), a copy of which has been produced to the EGM marked “A” and signed by the Chairman for the purpose of identification, pursuant to which the Company shall allot and issue to Mr. Zhang Xiaobin the Zhang Subscription Shares at the subscription price of HK$0.188 per Subscription Share be and are hereby approved, confirmed and ratified;
(b) conditional upon, among others, the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Zhang Subscription Shares, the grant of the specific mandate to the directors of the Company (the “ Directors ”) to allot and issue the Zhang Subscription Shares (the “ Zhang Mandate ”) be and is hereby approved, confirmed and ratified; the Zhang Mandate is in addition to, and shall not prejudice nor revoke any general or specific mandate(s) which has/have been granted or may from time to time be granted to the Directors by the shareholders of the Company prior to the passing of this resolution; and
(c) any one or more of the Directors be and is/are hereby authorised to do all such further acts and things and to sign and execute all such documents and to take all such steps which in his opinion may be necessary, appropriate, desirable or expedient to implement and/or give effects to the transactions contemplated under the Zhang Subscription Agreement.”

NOTICE OF EGM

“ THAT subject to and conditional upon the Listing Committee of the Stock Exchange,
(a) the conditional subscription agreement dated 26 October 2018 (as amended and supplemented by the supplemental agreements thereto dated 15 November 2018, 14 December 2018 and 26 April 2019) (the “ Gao Subscription Agreement ”) entered into by the Company and Mr. Gao Feng, in relation to the allotment and issue of 212,765,957 new shares (the “ Gao Subscription Shares ”) by the Company under the Gao Mandate (as defined below), a copy of which has been produced to the EGM marked “A” and signed by the Chairman for the purpose of identification, pursuant to which the Company shall allot and issue to Mr. Gao Feng the Gao Subscription Shares at the subscription price of HK$0.188 per Subscription Share be and are hereby approved, confirmed and ratified;
(b) conditional upon, among others, the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Gao Subscription Shares, the grant of the specific mandate to the Directors to allot and issue the Gao Subscription Shares (the “ Gao Mandate ”) be and is hereby approved, confirmed and ratified; the Gao Mandate is in addition to, and shall not prejudice nor revoke any general or specific mandate(s) which has/have been granted or may from time to time be granted to the Directors by the shareholders of the Company prior to the passing of this resolution; and
(c) any one or more of the Directors be and is/are hereby authorised to do all such further acts and things and to sign and execute all such documents and to take all such steps which in his opinion may be necessary, appropriate, desirable or expedient to implement and/or give effects to the transactions contemplated under the Gao Subscription Agreement.”

By order of the Board Elife Holdings Limited Chow Chi Fai Company Secretary

Hong Kong, 31 May 2019

Registered Office: Cricket Square Hutchins Drive P. O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Principal Place of Business in Hong Kong: Unit 806, Level 8, Core D, Cyberport 3, 100 Cyberport Road, Hong Kong

NOTICE OF EGM

Notes:

Any member entitled to attend and vote at the EGM (and any adjournment of such meeting) shall be entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares of the Company may appoint more than one proxy to represent him and vote on his behalf at the EGM (and any adjournment of such meeting). A proxy need not be a member of the Company. In addition, a proxy or proxies representing either a member who is an individual or a member which is a corporation shall be entitled to exercise the same powers on behalf of the member which he or they represent as such member could exercise.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same.
In order to be valid, the proxy form and the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power of attorney or authority, must be deposited with the Company’s branch share registrar and transfer office in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible and in any event not less than forty-eight (48) hours before the time appointed for holding the EGM (or any adjournment of such meeting) (as the case may be) at which the person named in the instrument proposes to vote.
Completion and return of the proxy form does not preclude a member from attending and voting in person at the EGM (or any adjournment of such meeting) and, in such event, the proxy form shall be deemed to be revoked.
Where there are joint holders of any shares of the Company, any one of such joint holders may vote, either in person or by proxy, in respect of such shares as if he were solely entitled thereto; but if more than one of such joint holders are present at the EGM (and any adjournment of such meeting), the most senior will alone be entitled to vote, whether in person or by proxy. For this purpose, seniority will be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.

AI assistant

Elife Holdings Limited — Proxy Solicitation & Information Statement 2019

49047_rns_2019-05-30_7aeae20a-3028-41a9-87dc-9310e090469a.pdf

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

(1) CONNECTED TRANSACTION IN RELATION TO SUBSCRIPTIONS OF NEW SHARES BY THE DIRECTORS UNDER SPECIFIC MANDATE AND (2) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

(1) SUBSCRIPTIONS OF NEW SHARES UNDER SPECIFIC MANDATE

Revisions to the major terms of the Subscriptions

Principal terms of the Subscription Agreements (as supplemented by the Supplemental Agreements)

Date

Parties

The Subscriptions

The Subscription Shares

The Subscription Price

Ranking

Conditions Precedent

Completion

Lock-up Undertakings

Specific Mandate to Issue Subscription Shares

Application for listing

Information of the Company and the Subscribers

Reasons for entering into the Third Supplemental Agreements and use of proceeds

LETTER FROM THE BOARD

Fund raising activities in the past twelve months prior to the Latest Practicable Date

LETTER FROM THE BOARD

Shareholding structures of the Company

Listing Rules Implications

Independent Board Committee and Independent Financial Adviser

(2) EGM

CLOSURE OF REGISTER OF MEMBERS

RECOMMENDATION

FURTHER INFORMATION

THIRD SUPPLEMENTAL AGREEMENT OF CONNECTED TRANSACTION IN RELATION TO SUBSCRIPTIONS OF NEW SHARES BY THE DIRECTORS UNDER SPECIFIC MANDATE

CONNECTED TRANSACTION IN RELATION TO THE THIRD SUPPLEMENTAL AGREEMENTS TO THE SUBSCRIPTION AGREEMENTS RELATING TO SUBSCRIPTIONS OF NEW SHARES BY THE DIRECTORS UNDER SPECIFIC MANDATE

INTRODUCTION

1. The Subscriptions

1.1 Background of the Original Proposal

1.2 The Third Supplemental Agreements

Implications under the Listing Rules

INDEPENDENT BOARD COMMITTEE

OUR INDEPENDENCE

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of the Subscriptions

1.1 Information on the Company and the Group

(b) Financial performance of the Group

LETTER FROM EUTO CAPITAL

Table 2: Summary of the consolidated financial position of the Group

Table 3: Breakdown of the consolidated total assets of the Group

1.2 Information on the Subscribers

(a) The Subscriber A – Mr. Zhang Xiaobin

2. Reasons for entering into the Third Supplemental Agreements and the intended use of proceeds

2.1 Intended use of proceeds

2.2 Other financing alternatives

LETTER FROM EUTO CAPITAL

Our view

Conclusions

3. Principal terms of the Subscription Agreements (as amended and supplemented by the Supplemental Agreements)

(b) The Subscription Shares

3.2 Evaluation on the basis of the Subscription Price

(a) Review on historical price performance of the Shares

(b) Review on the trading volume of the Shares

LETTER FROM EUTO CAPITAL

4. Possible dilution effects of the Subscriptions

5. Possible financial effects of the Subscriptions

(a) Effect on net asset value

(b) Effect on debt to equity ratio

RECOMMENDATION

Euto Capital Partners Limited Manfred Shiu Director

(1) RESPONSIBILITY STATEMENT

(2) SHARE CAPITAL

(a) Share capital of the Company

(i) Share capital as at the Latest Practicable Date

APPENDIX

(b) Share options and share awards

Elife Holdings Limited Proxy Solicitation & Information Statement 2019