Elife Holdings Limited - Proxy Solicitation & Information Statement 2021

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 SUBSCRIPTION OF NEW SHARES BY CONNECTED PERSON 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 4 to 13 of this circular. A letter from the Independent Board Committee is set out on page 14 of this circular. A letter from Draco Capital containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 15 to 28 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 Monday,6 September 2021 at 11:00 a.m., is set out on pages EGM-1 and EGM-2 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 54, 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.

16 August 2021

			Page
DEFINITIONS		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER	FROM	THE BOARD
1.	Subscription of Shares under Specific Mandate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		4
2.	EGM	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
LETTER	FROM	THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . . . .	14
LETTER	FROM	DRACO CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
APPENDIX – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			I-1
NOTICE	OF EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		EGM-1

DEFINITIONS

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

‘‘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;
‘‘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;
‘‘Completion’’ completion of the Subscription pursuant to the Subscription Agreement;
‘‘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 Agreement;
‘‘Director(s)’’ the director(s) of the Company; ‘‘EGM’’ the extraordinary general meeting of the Company to be convened for the purpose of considering and if thought fit, approving the Subscription Agreement and the transactions contemplated thereunder, including the grant of the Specific Mandate to allot and issue the Subscription Shares;
‘‘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;

‘‘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 Agreement and the transactions contemplated thereunder;

‘‘Independent Financial Adviser’’ or ‘‘Draco Capital’’

Draco Capital Limited, a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO, being the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Subscription;

DEFINITIONS

‘‘Independent Shareholder(s) other than the Subscriber and his associates who Shareholder(s)’’ are required to abstain from voting at the EGM;
‘‘Last Trading Date’’ 19 July 2021, being the last full trading day of the Shares on the Stock Exchange immediately prior to the signing of the Subscription Agreement;
‘‘Latest Practicable Date’’ 11 August 2021, 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;
‘‘PRC’’ the People’s Republic of China, and for the sole purpose of this circular excludes Hong Kong, Macau Special Administrative Region and Taiwan;
‘‘Relevant Period’’ the period commencing on the date falling six months preceding 19 July 2021, being the date of the Subscription Announcement, up to and including the Latest Practicable Date;
‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong);
‘‘Share Award Scheme’’ the share award scheme of the Company adopted on 17 August 2017;
‘‘Shares’’ the ordinary shares of HK$0.02 each in the issued share capital of the Company;
‘‘Shareholder(s)’’ holder(s) of the Shares;
‘‘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 to grant the authority to the Board for the allotment and issue of the Subscription Shares;
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited;
‘‘Subscriber’’ Mr. Zhu Qian (朱其安), a substantial shareholder of two non wholly-owned subsidiaries of the Company;

DEFINITIONS

‘‘Subscription’’

the subscription of the Subscription Shares by the Subscriber pursuant to the terms and subject to the conditions of the Subscription Agreement;

‘‘Subscription Agreement’’ the conditional subscription agreement dated 19 July 2021 between the Company and the Subscriber in relation to the Subscription;

‘‘Subscription Announcement’’ the announcement dated 19 July 2021 made by the Company in relation to the Subscription;

‘‘Subscription Price’’

the subscription price of HK$0.055 per Subscription Share;

‘‘Subscription Share(s)’’

the 145,000,000 new and fully paid Shares to be subscribed for by the Subscriber; 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)

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

16 August 2021

To the Shareholders

Dear Sir or Madam,

(1) CONNECTED TRANSACTION IN RELATION TO SUBSCRIPTION OF NEW SHARES BY CONNECTED PERSON UNDER SPECIFIC MANDATE; AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

The Company refers to the Subscription Announcement dated 19 July 2021 in relation to the Subscription of new Shares by the Subscriber under the Specific Mandate. The purpose of this circular is to provide you with, among other things, (i) details of the Subscription Agreement; (ii) the recommendation from the Independent Board Committee to the Independent Shareholders in relation to the Subscription Agreement and the transactions contemplated thereunder; (iii) the letter of advice from Draco Capital to the Independent Board Committee and the Independent Shareholders in relation to the Subscription Agreement 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) THE SUBSCRIPTION AGREEMENT

On 19 July 2021, the Company entered into the Subscription Agreement with the Subscriber. Pursuant to the Subscription Agreement, the Company has conditionally agreed to allot and issue, and the Subscriber has conditionally agreed to subscribe for, 145,000,000 Subscription Shares at the Subscription Price of HK$0.055 per Subscription Share for a consideration of HK$7,975,000. The salient terms of the Subscription Agreement are set out as follows:

Principal terms of the Subscription Agreement

Date

19 July 2021

Parties to the Subscription Agreement

(i) the Company; and
(ii) the Subscriber.

The Subscription

Pursuant to the Subscription Agreement, the Company conditionally agreed to allot and issue (pursuant to the Specific Mandate), and the Subscriber conditionally agreed to subscribe for, 145,000,000 Subscription Shares at the Subscription Price for each Subscription Share. The cash consideration payable by the Subscriber shall be HK$7,975,000 (payable in full on the date of the Completion).

The Subscription Shares

The total number of the Subscription Shares is 145,000,000 Shares, which represents approximately 4.56% of the existing issued share capital of the Company as at the Latest Practicable Date and approximately 4.36% of the enlarged issued share capital of the Company immediately following the Completion (assuming that there are no other changes in the share capital of the Company from the Latest Practicable Date to the date of Completion).

The nominal value of the Subscription Shares is HK$2,900,000.

The Subscription Price

The Subscription Price of HK$0.055 per Subscription Share:

(i) represents a premium of approximately 5.77% over the closing price of HK$0.052 per Share as quoted on the Stock Exchange on the Last Trading Date and the date of the Subscription Agreement;
(ii) represents a premium of approximately 3.00% over the average of the closing price of HK$0.0534 per Share quoted on the Stock Exchange for the last five consecutive trading days immediately prior to the Last Trading Date;

LETTER FROM THE BOARD

(iii) represents a discount of approximately 1.08% to the average of the closing price of HK$0.0556 per Share quoted on the Stock Exchange for the last ten consecutive trading days immediately prior to the Last Trading Date;
(iv) represents a premium of approximately 149.39% over the Group’s audited consolidated net assets per Share as at 31 March 2021 of approximately HK$0.022; and
(v) represents a premium of approximately 5.77% over the closing price of HK$0.052 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$0.0531 per Subscription Share. The cash consideration of HK$7,975,000 is payable in cash by the Subscriber on or before Completion. The Subscription Price was arrived at after arm’s length negotiations between the Company and the Subscriber taking into account the prevailing market price of the Shares and the Group’s historical performances as well as current market condition. The Directors (including the independent non-executive Directors) consider that the Subscription Price is fair and reasonable in light of the prevailing market conditions and the recent price performance of the Shares.

Ranking

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

Conditions Precedent

Completion is conditional upon the fulfillment 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 and such listing and permission not subsequently revoked; and
(ii) the passing of the resolution(s) at the EGM by the Independent Shareholders to approve the Subscription Agreement and the transactions contemplated thereunder, including the grant of the Specific Mandate to allot and issue the Subscription Shares.

None of the Conditions Precedent can be waived by any parties to the Subscription Agreement. The Company shall use its endeavours to make the Conditions Precedent to be fulfilled on or before 31 October 2021.

In the event that the Conditions Precedent are not fulfilled on or before 31 October 2021, the Subscription Agreement will lapse and become null and void forthwith and the parties thereto shall be released from all obligations thereunder.

LETTER FROM THE BOARD

Completion

Completion of the Subscription shall take place within fifteen (15) Business Days after fulfilment of the Conditions Precedent or any other date as agreed by the parties to the Subscription Agreement in writing.

On or before the date of the Completion, the Subscriber shall pay to the Company cash consideration of HK$7,975,000 under the Subscription Agreement 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 Subscriber.

Undertaking

The Subscriber undertakes to the Company that at any time after the date of the Subscription Agreement, the Subscriber shall not directly or indirectly holds 10% or more of the issued share capital of the Company, and shall not become a substantial Shareholder and a connected person of the Company at the issuer level. If the Subscriber is aware that his shareholding interest in the Company exceeds 10% or more, the Subscriber shall take appropriate measures (including but not limited to placing of Shares to third party(ies) independent of the Company and its connected persons) to ensure that the Subscriber directly or indirectly holds less than 10% of the issued share capital of the Company. This undertaking shall remain valid after Completion and will be terminated on the earlier of the date on which (i) the Subscriber no longer holds any shareholding interest in the Company; or (ii) the Shares are no longer listed and traded on the Stock Exchange.

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.

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 Subscriber

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 commodities trading, sales, marketing and brand building of the anti-epidemic and daily cleaning products businesses across Greater China as well as the provision of esmart digital services. It has also been expanding its businesses into the consumer products market conforming to the Group’s business principle of ‘‘making life easier and benefiting people’s livelihood’’ (易生活，惠民生).

LETTER FROM THE BOARD

The Subscriber, Mr. Zhu Qian (朱其安先生), is a PRC resident and experienced in the field of daily cleaning materials and sanitizing products. He is currently the beneficial owner of the entire equity interest of Yangzhou Yuanda Daily Chemicals Co., Ltd. (揚州市遠大日用化工品有限公司), which is principally engaged in the manufacturing of daily cleaning chemicals and sanitizing products. The Subscriber is a substantial shareholder (as defined under the Listing Rules) of each of Century Smart Group Limited and Smart Challenger Global Limited, both non wholly-owned subsidiaries of the Company. As at the Latest Practicable Date, the Subscriber holds an aggregate of 64,000,000 Shares, representing approximately 2.0% of the total number of issued Shares.

Reasons for the Subscription and use of proceeds

As disclosed in the announcement of final results of the Group for the year ended 31 March 2021 dated 29 June 2021, the Group recorded turnover of approximately HK$276,040,000, representing an increase of approximately 4 times year-on-year. The revenue was mainly generated from commodities trading and sales of anti-epidemic and daily cleaning products. The increase in revenue during the year was primarily due to (i) an increase in the sales volume of metals trading; (ii) the fact that the Group has been proactively increasing its business activities in the PRC by setting up two joint venture companies for the sales of daily cleaning and anti-epidemic products and licensed branded watches in the PRC and overseas. The revenue generated from the sales of daily cleaning and anti-epidemic products and licensed branded watches contributed approximately HK$39,473,000 and approximately HK$672,000 respectively for the year ended 31 March 2021; and (iii) the Group increased its variety of products and customers.

The Group’s gross profit for the year ended 31 March 2021 was approximately HK$9,458,000 (2020: gross loss approximately HK$1,725,000). The gross profit margin of the Group for the year was significantly improved as the COVID-19 pandemic led to a higher demand of the daily cleaning and anti-epidemic products.

In view of the above, particularly the improving financial results of the Group attributable to the commodities trading, anti-epidemic and daily cleaning products businesses, the Group would like to further expand and contribute more funds and resources to satisfy the working capital requirements for the business development of the Group.

As at 31 July 2021, the Group had available cash and cash balances of approximately HK$11.8 million. It is currently estimated that the working capital requirements of the Group from August 2021 to December 2021 amount to approximately HK$19.5 million, comprising the followings:

(a) working capital to maintain the Group’s daily operations of approximately HK$12.7 million, out of which (i) approximately HK$2.7 million will be used to settle outstanding legal and professional fees, (ii) approximately HK$1.2 million will be used to pay rental expenses, (iii) approximately HK$4.9 million will be used to pay salaries and allowances; (iv) approximately HK$2.4 million will be used to pay other office administrative expenses; and (v) approximately HK$1.5 million will be used for other general working capital; and
(b) funding for developing the Group’s business of approximately HK$6.8 million.

LETTER FROM THE BOARD

In order to satisfy the aforesaid working capital requirements of the Group from August 2021 to December 2021, the Board considers that the Subscription is necessary.

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. The Company contacted three securities firms in mid-July 2021 and was told that it would be difficult to locate investors for share placements due to the recent market sentiment (in particular, (i) during the Relevant Period, the closing price of the Shares recorded the highest of HK$0.083 on 26 March 2021, and eventually dropped to HK$0.052 on the Last Trading Date; and (ii) the low trading volume and relatively illiquidity of the Shares) and the continuous net loss of the Company. 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$0.055, representing a premium over the closing price of the Shares as quoted on the Stock Exchange on the Last Trading Date and the average closing price of the Shares quoted on the Stock Exchange for the last five consecutive trading days immediately prior to the Last Trading Date. The Subscription by the Subscriber, being an important partner of the Company in the anti-epidemic and daily cleaning products businesses, reflects the confidence of the Subscriber towards the long-term and sustainable growth of the Group, and the continuing support of the Subscriber would be beneficial to the longterm business development of the Group. The Subscription will also create further alignment of interest with an important partner in the anti-epidemic and daily cleaning products businesses. Based on the aforesaid, the Directors (including the independent non-executive Directors) are of the view that the terms of the Subscription Agreement 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.

None of the Directors was in any way interested in the Subscription Agreement and the transactions contemplated thereunder, and was required to abstain from voting on the relevant Board resolutions approving the Subscription Agreement.

LETTER FROM THE BOARD

The aggregate gross proceeds of the Subscription will amount to HK$7,975,000 and the aggregate net proceeds, after the deduction of the related expenses, will be approximately HK$7,700,000, representing a net Subscription Price of approximately HK$0.0531 per Subscription Share. The Company intends to use the net proceeds for (i) working capital to maintain the Group’s daily operations of approximately HK$5.0 million; and (ii) funding for developing the Group’s business of approximately HK$2.7 million, both on or before December 2021.

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

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

Date of	Equity fund raising	Net proceeds	Intended use of	Actual use of
announcement	exercise	raised	proceeds	proceeds
15 December 2020	Partial completion	Approximately	For general working	Fully utilized for
	of the subscription	HK$20,980,000	capital to maintain	general working
	of new Shares by		the Group’s daily	capital purpose of
	Mr. Gao Feng, the		operations and	approximately
	Vice-Chairman of		funding for	HK$20,980,000
	the Board and an		developing the
	executive Director		daily consumer
	under the specific		goods trading
	mandate		business of the
			Group
31 March 2021	Partial completion	Approximately	For general working	Fully utilized for
	of the subscription	HK$3,500,000	capital to maintain	general working
	of new Shares by		the Group’s daily	capital purpose of
	Mr. Gao Feng, the		operations and	approximately
	Vice-Chairman of		funding for	HK$3,500,000
	the Board and an		developing the
	executive Director		daily consumer
	under the specific		goods trading
	mandate		business of the
			Group

LETTER FROM THE BOARD

Shareholding structure of the Company

The shareholding structures of the Company (i) as at the Latest Practicable Date; and (ii) immediately upon Completion (assuming that there is no change in the issued share capital of the Company from the Latest Practicable Date and up to the date of Completion), are summarised as follows:

Substantial Shareholder Ms. Liu Qiuhua Directors Mr. Zhang Xiaobin Mr. Gao Feng Mr. Chiu Sui Keung Mr. Cheng Wing Keung, Raymond Mr. Lam Williamson Mr. Wong Hoi Kuen Mr. Lam Lee G. Other directors of the subsidiaries of the Company The Subscriber Public Public Shareholders Total:	As at the Latest Practicable Date Number of Shares Approximate shareholding percentage % 358,817,000 11.3% 95,651,489 3.0% 251,757,531 7.9% 28,271,000 0.9% 2,041,000 0.1% 2,181,000 0.1% 2,181,000 0.1% 1,000,000 0.0% 42,404,000 1.3% 64,000,000 2.0% 2,331,339,542 73.3% 3,179,643,562 100.0%	Immediately following the Completion Number of Shares Approximate shareholding percentage % 358,817,000 10.8% 95,651,489 2.9% 251,757,531 7.6% 28,271,000 0.9% 2,041,000 0.1% 2,181,000 0.1% 2,181,000 0.1% 1,000,000 0.0% 42,404,000 1.3% 209,000,000 6.3% 2,331,339,542 70.0% 3,324,643,562 100.0%	Immediately following the Completion Number of Shares Approximate shareholding percentage % 358,817,000 10.8% 95,651,489 2.9% 251,757,531 7.6% 28,271,000 0.9% 2,041,000 0.1% 2,181,000 0.1% 2,181,000 0.1% 1,000,000 0.0% 42,404,000 1.3% 209,000,000 6.3% 2,331,339,542 70.0% 3,324,643,562 100.0%
			100.0%

Listing Rules implications

The Subscriber is a substantial shareholder (as defined under the Listing Rules) of each of Century Smart Group Limited and Smart Challenger Global Limited, both non wholly-owned subsidiaries of the Company, and is, therefore, a connected person of the Company at the subsidiary level under Chapter 14A of the Listing Rules. Accordingly, the Subscription constitutes a connected transaction of the Company under the Listing Rules and is 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 Agreement 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.

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

(2) EGM

An EGM will be convened for the purpose of considering and, if thought fit, approving, among other things, the Subscription Agreement and the transactions contemplated thereunder, including the grant of the 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 Monday, 6 September 2021 at 11:00 a.m.. The notice of the EGM is set out on pages EGM-1 and EGM-2 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 54, 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 Subscriber and his associates hold an aggregate of 64,000,000 Shares as at the Latest Practicable Date and will abstain from voting on the resolution at the EGM. No other Shareholder will be required to abstain from voting in respect of the resolution(s) that would be proposed to approve the Subscription Agreement 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 the Subscription is subject to the satisfaction of the Conditions Precedent as set out in the Subscription Agreement, the Subscription 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 Wednesday, 1 September 2021 to Monday, 6 September 2021, both days inclusive, during which period no transfer of Shares will be registered. The record date for such purposes is Monday, 6 September 2021.

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 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not later than 4:30 p.m. on Tuesday, 31 August 2021.

RECOMMENDATION

Your attention is drawn to (i) the letter from the Independent Board Committee set out on page 14 of this circular which contains the recommendation of the Independent Board Committee to the Independent Shareholders in relation to the Subscription Agreement and the transactions contemplated thereunder; and (ii) the letter from Draco Capital set out on pages 15 to 28 of this circular which contains its advice to the Independent Board Committee and the Independent Shareholders in relation to the Subscription 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 Draco Capital, considers that the terms of the Subscription Agreement are fair and reasonable so far as the Independent Shareholders are concerned and that the Subscription is 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 Agreement are fair and reasonable, and that the Subscription is 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 appendix and the notice of EGM, which form part of this circular.

Yours faithfully, By order of the Board Elife Holdings Limited Zhang Xiaobin Chairman

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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

16 August 2021

To the Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTION IN RELATION TO SUBSCRIPTION OF NEW SHARES BY CONNECTED PERSON UNDER SPECIFIC MANDATE

We refer to the circular of the Company to the Shareholders dated 16 August 2021 (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 whether or not the Subscription Agreement 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.

Draco Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the Subscription. Details of its advice, together with the principal factors and reasons taken into consideration in arriving at such advice, are set out on pages 15 to 28 of the Circular. Your attention is also drawn to the letter from the Board set out on pages 4 to 13 of the Circular and the additional information set out in the appendix to the Circular.

Having considered the terms of the Subscription Agreement and the situation of the Company, and the factors and reasons considered by Draco Capital and its opinion as stated in its letter of advice, we consider that (i) the terms of the Subscription Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned, and (ii) the entering into of the Subscription Agreement 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 Agreement and the transactions contemplated thereunder.

Yours faithfully, Independent Board Committee of

Elife Holdings Limited

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

LETTER FROM THE DRACO CAPITAL

The following is the full text of the letter from Draco Capital Limited setting out its advice to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

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4/F Connaught Harbourfront House 35 Connaught Road West, Sheung Wan, Hong Kong

16 August 2021

To the Independent Board Committee and the Independent Shareholders

Dear Sirs or Madams,

CONNECTED TRANSACTION IN RELATION TO SUBSCRIPTION OF NEW SHARES BY CONNECTED PERSON UNDER SPECIFIC MANDATE

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the Subscription Agreement and the transactions contemplated thereunder, details of which are set out in the ‘‘Letter from the Board’’ (the ‘‘Board Letter’’) contained in the circular of the Company dated 16 August 2021 and issued to the Shareholders (the ‘‘Circular’’), of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular, unless the context requires otherwise.

On 19 July 2021, the Company entered into the Subscription Agreement with the Subscriber. Pursuant to the Subscription Agreement, the Company has conditionally agreed to allot and issue, and the Subscriber has conditionally agreed to subscribe for, 145,000,000 Subscription Shares at the Subscription Price of HK$0.055 per Subscription Share for a consideration of HK$7,975,000. The Subscription Shares will be allotted and issued pursuant to the Specific Mandate.

As at the Latest Practicable Date, the Subscriber is a substantial shareholder (as defined under the Listing Rules) of each of Century Smart Group Limited and Smart Challenger Global Limited, both non wholly-owned subsidiaries of the Company, and is, therefore, a connected person of the Company at the subsidiary level under Chapter 14A of the Listing Rules. Accordingly, the Subscription constitutes a connected transaction of the Company under the Listing Rules and is subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. As the Subscription Shares will be allotted and issued under the Specific Mandate to be obtained at the EGM, the grant of the Specific Mandate for the allotment and issue of the Subscription Shares is subject to the Independent Shareholders’ approval at the EGM.

As at the Latest Practicable Date, Mr. Zhu Qian, the Subscriber, holds an aggregate of 64,000,000 Shares, representing approximately 2.0% of the total number of issued Shares. Therefore, Mr. Zhu Qian will be required to abstain from voting in respect of the resolution(s) that would be proposed to approve the Subscription Agreement and the transactions contemplated thereunder at the EGM.

LETTER FROM THE DRACO CAPITAL

INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising Mr. Cheng Wing Keung Raymond, Mr. Lam Williamson, Mr. Wong Hoi Kuen and Dr. Lam Lee G, being all the Company’s independent nonexecutive Directors, has been established to advise the Independent Shareholders in relation to the Subscription Agreement and the transactions contemplated thereunder. Our role as independent financial adviser is to give our opinion and recommendation as to whether the Subscription Agreement is on normal commercial terms, in the ordinary and usual course of business of the Company, fair and reasonable insofar as the Independent Shareholders are concerned and in the interests of the Company and its Shareholders as a whole.

BASIS OF OUR OPINION

In formulating our opinion and recommendation, we have considered, among other things, (i) the terms of the Subscription Agreement; (ii) the 2021 final results of the Company; and (iii) other information as set out in the Circular.

We have also relied on all relevant information, opinions and facts supplied and representations made to us by the Company, the Directors and the management of the Company. We have assumed that all such information, opinions, facts and representations provided to us or contained or referred to in the Circular, for which the Company and the Directors are fully responsible, are true and accurate in all respects as at the date hereof and may be relied upon. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Company, and the Company has confirmed that no material facts have been withheld or omitted from the information provided and referred to in the Circular, which would make any statement therein misleading.

We consider that we have reviewed sufficient information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our recommendation. We have not, however, carried out independent verification of the information provided by the Company and the Directors, nor have we conducted any form of in-depth investigation into the businesses, affairs, operations, financial position or future prospects of the Company, the Group, or any of their respective subsidiaries or associates. Our advice was necessarily based on financial, economic, market and other conditions in effect, and the information made available to us, as at the Latest Practicable Date. As the independent financial adviser to the Independent Board Committee and the Independent Shareholders, we have not been involved in the negotiations in respect of the terms of the Subscription Agreement.

LETTER FROM THE DRACO CAPITAL

OUR INDEPENDENCE

We are not connected with the Directors, chief executive and substantial shareholders of the Company, the Group, or any of their respective subsidiaries or associates and do not have any shareholding, direct or indirect, in any member of the Company or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Company as at the date hereof. No arrangement exists whereby we will receive any benefits from the Company or the Directors, chief executive and substantial shareholders of the Company, the Group, or any of their respective subsidiaries or associates for our services to the Company in connection with this appointment aside from our professional fees. Within the two years prior to the Latest Practicable Date, we have been acting as the independent financial adviser to the then independent board committee of the Company in relation to the discloseable and connected transaction in relation to increase of shareholding interests in subsidiaries involving issue of consideration shares and convertible bonds under specific mandate, details of which were set out in the announcement of the Company dated 27 November 2020. We consider that we are independent from the Company pursuant to Rule 13.84 of the Listing Rules and are accordingly eligible to provide an opinion to the Independent Board Committee and the Independent Shareholders in respect of the Subscription Agreement and the transactions contemplated thereunder in view that under the previous engagement, (i) our role was independent in nature; and (ii) we were only entitled to receive professional fees that were comparable to market rates and in line with general market practice.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating and giving our opinion to the Independent Board Committee and the Independent Shareholders in relation to the Subscription Agreement and the transactions contemplated thereunder, we have taken into account the following principal factors:

1. Background and financial information of the Group

The Group is principally engaged intrading businesses across Asia as well as the provision of esmart digital services. It has also been expanding its businesses into the consumer products market.

LETTER FROM THE DRACO CAPITAL

The following table summarises the audited consolidated statements of profit or loss and other comprehensive income of the Group for the years ended 31 March 2020 and 2021 (‘‘Year 2020’’ and ‘‘Year 2021’’, respectively) as extracted from the 2021 final results of the Company:

Revenue – Commodities trading business – Esmart digital services Gross profit Loss for the year Loss attributable to owners of the Company	For the year ended 31 March 2020 2021 HKD’000 HKD’000 (Audited) (Audited) 54,536 276,040 253 – 54,789 276,040 (1,725) 9,458 (95,945) (30,644) (76,932) (26,403)

For the years ended 31 March 2020 and 2021, the Group generated revenue mainly from two business segments, being (i) commodities trading business; and (ii) Esmart digital services. For commodities trading business, during the year ended 31 March 2021, the Group developed its commodities trading into metals commodities, daily cleaning and anti-epidemic products and licensed branded watches in the PRC and overseas. The Joint Venture Group, comprising Century Smart, Smart Challenger, Elife International Trading Limited and Yiansheng International Trading (Yangzhou) Co., Ltd., possesses the supply chain including the formula, brand and packages design of the anti-epidemic and daily cleaning products and engages in the sales, marketing and brand building of such products. It also has further differentiated and expanded its business by developing the sales and marketing of personal healthcare and protective products (e.g. medical diagnostic test kit for testing COVID-19 and surgical gloves and nitrile gloves). The profit margin for trading business has improved due to high margin of the daily cleaning and anti-epidemic products. For the business of licensed branded watches, development of the official website of ROYALELASTICS and Wechat Mall of the AiShang e-buy is almost completed and the watches will be sold online starting from June or July 2021.

Esmart Group leverages on the intelligentisation of retail information as its core technology and relies on the combined application of internet, cloud computing, artificial intelligence and big data to create a brand-new platform that is closely integrated with traditional industries. With digital marketing solution as service objective and retailers as the service object, the Group provides an integrated software and hardware store management system and an information marketing solution, and is an advanced online-to-offline smart retail service provider.

LETTER FROM THE DRACO CAPITAL

Comparison of financial performance between the years ended 31 March 2021 and 2020

For the year ended 31 March 2021, the Group recorded turnover of approximately HK$276,040,000 (2020: approximately HK$54,789,000), representing an increase of approximately 4 times. The revenue was mainly generated from commodities trading and sales of anti-epidemic and daily cleaning products. The increase in revenue during the year was primarily due to (i) an increase in the sales volume of metals trading; (ii) the fact that the Group has been proactively increasing its business activities in the PRC by setting up two joint venture companies for the sales of daily cleaning and anti-epidemic products and licensed branded watches in the PRC and overseas. The revenue generated from the sales of daily cleaning and anti-epidemic products and licensed branded watches contributed approximately HK$39,473,000 and approximately HK$672,000 respectively for the year ended 31 March 2021 (2020: Nil and Nil respectively); and (iii) the Group increased its variety of products and customers.

For the year ended 31 March 2021, the Group recorded a loss attributable to shareholders of the Company (the ‘‘Shareholders’’) of approximately HK$26,403,000 (2020: approximately HK$76,932,000), representing a decrease of approximately 65.7%. Basic loss per Share was approximately HK0.9 cents (2020: approximately HK2.6 cents) for the year ended 31 March 2021. The substantial decrease in loss for the year was mainly due to the substantial drop in operating costs of approximately HK$29 million after implementing the cost-saving measures during the year. In addition, the gross profit margin of the Group for the year was significantly improved as the COVID-19 pandemic led to a higher demand of the daily cleaning and anti-epidemic products.

The following table summarises the audited consolidated statements of financial position of the Group as at 31 March 2020 and 2021 as extracted from the 2021 financial results of the Company:

Non-current assets Current assets Total assets Non-current liabilities Current liabilities Total liabilities Equity attributable to owners of the Company Non-controlling interests Total equity	As at 31 2021 HK$’000 15,212 108,340 123,552 18,258 35,171 53,429 135,742 (65,619) 70,123	March 2020 HK$’000 17,746 117,044 134,790 1,291 71,870 73,161 942,557 (61,951) 61,629

Source: 2021 final results of the Company

LETTER FROM THE DRACO CAPITAL

As at 31 March 2021, the Group recorded total assets of approximately HK$123,552,000, representing a decrease of 8.3% as compared with that of 31 March 2020. The total equity of the Group amounted to approximately HK$70,123,000, representing an increase of approximately 13.8% as compared with that of 31 March 2020. Such increase was primarily due to the changes in exchange differences on translating foreign operations through other comprehensive income.

2. Information of the Subscriber

The Subscriber, Mr. Zhu Qian, is a PRC resident and experienced in the field of daily cleaning materials and sanitizing products. He is currently the beneficial owner of the entire equity interest of Yangzhou Yuanda Daily Chemicals Co., Ltd.* (揚州市遠大日用化工品有限公司), which is principally engaged in the manufacturing of daily cleaning chemicals and sanitizing products. The Subscriber is a substantial shareholder (as defined under the Listing Rules) of each of Century Smart Group Limited and Smart Challenger Global Limited, both non wholly-owned subsidiaries of the Company. As at the Latest Practicable Date, the Subscriber holds an aggregate of 64,000,000 Shares, representing approximately 2.0% of the total number of issued Shares.

3. Reasons for and benefits of the Subscription

According to the Company’s 2021 annual report published on 27 July 2021, the Group’s gross profit for the year ended 31 March 2021 was approximately HK$9,458,000 (2020: gross loss approximately HK$1,725,000). The gross profit margin of the Group for the year was significantly improved as the COVID-19 pandemic led to a higher demand of the daily cleaning and anti-epidemic products. In view of the above, particularly the improving financial results of the Group attributable to the commodities trading, anti-epidemic and daily cleaning products businesses, the Group would like to further expand and contribute more funds and resources to satisfy the working capital to maintain the Group’s daily operations and funding for the business development of the Group. According to the Letter from the Board, as at 31 July 2021, the Group had available cash and cash balances of approximately HK$11.8 million. It is currently estimated that the working capital requirements of the Group from August 2021 to December 2021 amount to approximately HK$19.5 million, comprising the followings:

(a) working capital to maintain the Group’s daily operations of approximately HK$12.7 million, out of which (i) approximately HK$2.7 million will be used to settle outstanding legal and professional fees, (ii) approximately HK$1.2 million will be used to pay rental expenses, (iii) approximately HK$4.9 million will be used to pay salaries and allowances; (iv) approximately HK$2.4 million will be used to pay other office administrative expenses; and (v) approximately HK$1.5 million will be used for other general working capital; and
(b) funding for developing the Group’s business of approximately HK$6.8 million.

LETTER FROM THE DRACO CAPITAL

In order to satisfy the aforesaid working capital requirements of the Group from August 2021 to December 2021, we concur with the Board that the Subscription is necessary.

We further noted from the Company’s 2021 financial results that there was a decrease in financial resources of the Group. The Group’s cash and cash equivalents decreased from approximately HK$16.2 million as at 31 March 2020 to approximately HK$14.6 million as at 31 March 2021. The current assets of the Group also decreased from approximately HK$117.0 million as at 31 March 2020 to approximately HK$108.3 million as at 31 March 2021. We concur with the Directors that the Group needs to raise additional funding to facilitate the successful implementation of its business strategies.

We further noted that the Company recently contacted three securities firms and was told that it would be difficult to locate investors for share placements due to the recent market sentiment and the continuous net loss of the Company and that the Subscription by the Subscriber could also create further alignment of interest with an important partner in the anti-epidemic and daily cleaning products businesses.

Having considered the aforesaid reasons, including (i) the proposed use of proceeds by the Group is in line with the strategic plan of the Group to develop its daily cleaning and anti-epidemic products and licensed branded watches business; (ii) the financial position of the Group as at 31 March 2021; (iii) the Subscription can enhance the Group’s capital base and working capital for its business development plan; (iv) the Subscription will also create further alignment of interest with an important partner in the antiepidemic and daily cleaning products businesses, we concur with the Directors that the Subscription is fair and reasonable insofar as the Independent Shareholders are concerned.

4. Principal terms of the Subscription Agreement

4.1 Principal terms of the Subscription Agreement

4.2 The Subscription Price

The Subscription Price is HK$0.055 per Subscription Share. As stated in the Board Letter, the Subscription Price was determined after arm’s length negotiations between the Company and the Subscriber, with reference to the prevailing market price of the Shares and the Group’s historical performances as well as current market condition. The Directors have reviewed the Closing Price as quoted on the Stock Exchange from 20 January 2021 up to and including 19 July 2021, representing approximately six months prior to the date of Subscription Agreement. During the period under review, the Closing Price ranged from the lowest of HK$0.047 per Share in July 2021 to the highest of HK$0.12 per Share in August 2021. According to the Board Letter, the Directors are of the view that the terms of the Subscription Price are fair and reasonable, having considered that the Subscription Price is within the range of the Closing Price during the Review Period. The Subscription Price represents:

(a) a premium of approximately 5.77% over the closing price of HK$0.052 per Share as quoted on the Stock Exchange on the Last Trading Date and the date of the Subscription Agreement;

LETTER FROM THE DRACO CAPITAL

(b) a premium of approximately 3.00% over the average of the closing price of HK$0.0534 per Share quoted on the Stock Exchange for the last five consecutive trading days immediately prior to the Last Trading Date; and
(c) a discount of approximately 1.08% to the average of the closing price of HK$0.0556 per Share quoted on the Stock Exchange for the last ten consecutive trading days immediately prior to the Last Trading Date.

In order to determine the fairness and reasonableness of the Subscription Price, we have conducted the following analysis:

(i) Review on the historical price of the Shares

To assess the fairness and reasonableness of the Subscription Price, we have reviewed the Subscription Price with the historical highest and lowest closing prices and the average daily closing price of the Shares as quoted on the Stock Exchange in each month during the period commencing from 20 July 2020 to 19 July 2021, being the 12-month period prior to the date of the Subscription Agreement (the ‘‘Review Period’’). We consider that the Review Period which covers a full year prior to the date of the Subscription Agreement represents a reasonable and sufficient period to provide a general overview of the recent trend of the Share price free from the influence of, if any, short term market volatility, when assessing the Subscription Price. The review on the historical price of the Shares is summarised as follows:

	Highest	Lowest	Average daily
Month	closing price	closing price	closing price
	(HK$)	(HK$)	(HK$)
2020
July (Since: 20/7)	0.056	0.047	0.052
August	0.12	0.056	0.095
September	0.09	0.07	0.079
October	0.084	0.074	0.08
November	0.079	0.066	0.072
December	0.079	0.06	0.069
2021
January	0.061	0.052	0.058
February	0.065	0.053	0.058
March	0.083	0.056	0.063
April	0.07	0.059	0.065
May	0.062	0.056	0.058
June	0.068	0.058	0.062
July (up to the date 19/7 of the
Subscription Agreement)	0.061	0.052	0.056
Maximum closing price during the
Review Period	0.120
Minimum closing price during the
Review Period	0.047

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

LETTER FROM THE DRACO CAPITAL

During the Review Period, the closing prices of the Shares ranged from the lowest of HK$0.047 per Share in July 2020 to the highest of HK$0.12 per Share in August 2020. The Subscription Price is thus within the said historical price range of the Shares. Besides, during the Review Period, the average closing prices of the Shares ranged from the lowest of HK$0.052 per Share in July 2020 to the highest of HK$0.095 per Share in August 2020. The Subscription Price is within the range of the average closing prices of the Shares during the Review Period. The Subscription Price of HK$0.055 per share is at the low-end of the closing prices of the Shares during the Review Period, which is in-line with the market’s low sentiment around July 2021. In July 2021, the Hang Seng index notched its lowest close since November 2020, and the Hang Seng Tech index erased all gains since its inception in July 2020.

In addition, according to Rule 13.36(5) of the Listing Rules, in the case of a placing of securities for cash consideration, the issuer may not issue any securities pursuant to a general mandate given under Rule 13.36(2)(b) if the relevant price represents a discount of 20% or more to benchmarked price of the securities, such benchmarked price being the higher of: (a) the closing price on the date of the relevant placing agreement or other agreement involving the proposed issue of securities under the general mandate; and (b) the average closing price in the 5 trading days immediately prior to the earlier of: (i) the date of announcement of the placing or the proposed transaction or arrangement involving the proposed issue of securities under the general mandate; (ii) the date of the placing agreement or other agreement involving the proposed issue of securities under the general mandate; and (iii) the date on which the placing or subscription price is fixed. We noted that the Subscription Price was determined at a premium to the closing price per Share on the date of the Subscription Agreement and the average closing price per Share for the last five consecutive trading days prior to the date of the Subscription Agreement, and therefore could have met the requirement of Rule 13.36(5) of the Listing Rules even if the Subscription Shares were to be issued and allotted under the General Mandate.

Based on the above analyses, we concur with the Board that the Subscription Price is on normal commercial terms, fair and reasonable, and in the interests of the Company and its Shareholders as a whole.

(ii) Comparable analysis

We have conducted research on companies whose shares are listed on the Main Board of the Stock Exchange and entered into placing and/or share subscription transaction for fund raising, irrespective of whether or not such share exercises were proceeded to completion, in the one month immediately preceding the date of the Subscription Agreement, which we believe represents a reasonable and meaningful period to reflect the recent volatile and fast changing market condition around July 2021 as mentioned in ‘‘Review on the historical price of the Shares’’ above for conducting fund raising activity and is therefore considered fair and representative. We have identified a total of 12 comparable transactions (the ‘‘Comparable Transactions’’), which to the best of our knowledge represent the exhaustive samples that meet the aforesaid selection criteria. Taking into account (i) the number of Comparable Transactions covered in the review period which was close to the date of the Subscription Agreement such that the Comparable Transactions were conducted under similar and recent

LETTER FROM THE DRACO CAPITAL

market conditions and sentiments; and (ii) the average figures calculated are not likely to be significantly affected by any individual comparable transaction, we consider the Comparable Transactions to be sufficient, fair and representative.

Although the companies involved in the Comparable Transactions are not identical to the Company in terms of principal business, operating scale and financial position, we consider that the Comparable Transactions could provide a general understanding on share subscription and placing in the Hong Kong stock market because the Comparable Transactions of the Comparable Companies are under the latest market environment, market sentiment and are therefore considered to be reasonable reference on the recent market practice and conditions regarding the Subscription. The following table sets out the details of the Comparable Transactions:

					Premium/(Discount)	Premium/(Discount)
			Premium/(Discount)		of	placing price and/
			of placing price and/		or	subscription price
			or subscription price		to the average closing
			to	the closing price	price of the last five			Premium/
			on the last trading			trading days		(Discount) of
				day prior to the	immediately prior to			the placing
				release of the		the release of the		price and/or
			announcement or the		announcement or the			subscription
			date of agreement in		date of agreement in			price as
				relation to the		relation to the		compared with
			respective placing			respective placing	Net asset	the net asset
	Stock	Date of	and/or subscription of		and/or subscription of		value per	value per	Net profit/
Company name	code	announcement		shares		shares	shares	share	(loss)
				(Note 1)		(Note 1)	(Note 2)		(Note 3)
							(HK$)
Xingye Alloy Materials Group Limited	505	16 July 2021		(15.04)%		(15.79)%	$1.79	(46.37)%	RMB150.08
									million
Oriental Payment Group Holdings	8613	09 July 2021		(13.58)%		(13.58)%	$0.047	48.94%	HKD (29.22
Limited									million)
China Creative Digital Entertainment	8078	09 July 2021		(22.22)%		(17.65)%	($2.18)	N/A	HKD (781.19
Limited									million)
EC Healthcare	2138	09 July 2021		(2.95)%		(2.68)%	$1.185	1123.63%	HKD311.45
									million
Dragon King Group Holdings Limited	8493	08 July 2021		3.48%		(1.98)%	($0.396)	N/A	HKD (74.76
									million)
Value Convergence Holdings Limited	821	05 July 2021		(18.00)%		(16.46)%	$0.492	(58.33)%	HKD (32.32
									million)
ISP GLOBAL LIMITED	8487	30 June 2021		(19.51)%		(15.60)%	$0.104	534.62%	S$0.284
									million
Seamless Green China (Holdings)	8150	29 June 2021		14.94%		49.70%	$0.021	376.19%	HKD6.8
Limited									million
Shen You Holdings Limited	8377	25 June 2021		(1.64)%		(0.99)%	$0.19	215.79%	HKD (15.60
									million)
China Green (Holdings) Limited	904	25 June 2021		(6.98)%		11.11%	$1.095	(81.74)%	RMB (860.2
									million)
Tesson Holdings Limited	1201	25 June 2021		(11.11)%		(10.71)%	$0.878	(54.44)%	HKD130.9
									million
Skyfame Realty (Holdings) Limited	59	20 June 2021		(8.65)%		(9.96)%	$0.651	34.72%	RMB1,003.01
									million
Average				(8.44)%		(3.72)%	N/A	209.30%	N/A
							(Note 4)		(Note 4)
Maximum				14.94%		49.70%	HKD	1123.63%	RMB1,003.01
							$1.79		million
Minimum				(22.22)%		(17.65)%	HKD	(81.74)%	RMB (860.2
							($2.18)		million)
Company	223	19 July 2021		5.77%		3.00%	0.042	30.95%	HKD (95.94)
									million

LETTER FROM THE DRACO CAPITAL

Notes:

The relevant figures of the Comparable Transactions are referenced to the figures as disclosed in the respective announcements regarding their placing and/or subscription of shares.
The net asset value per share is calculated based on the net assets or capital deficiency attributable to the owners of the companies as at the end of their respective latest financial year divided by the total shares in issue as at the end of their respective financial year. The net asset value per share is translated into Hong Kong Dollars based on the relevant exchange rates published by The Hong Kong Association of Banks as at the end of the respective financial year of the companies.
The net profit/loss of the companies to the Comparable Transactions are extracted from the annual reports of the companies for their respective latest full financial year published as at the Latest Practicable Date.
As some of the companies to the Comparable Transactions recorded capital deficiency as at the end of their latest financial year or net loss for their latest financial year, the average net asset value per share and the average net profit for the Comparable Transactions are considered not meaningful to the analysis.

As shown in the above table, the placing and/or subscription prices of the majority of the Comparable Transactions were set as discount to the relevant benchmarked price of the securities. The placing and/or subscription prices of the Comparable Transactions (i) as compared with their respective closing price on the last trading day prior to the release of the announcement or the date of agreement in relation to the respective placing and/or subscription of shares ranged from 22.22% discount to a premium of approximately 14.94%, with an average discount of approximately 8.44%; and (ii) as compared with their respective average closing price of the last five trading days immediately prior to the release of the announcement or the date of agreement in relation to the respective placing and/or subscription of shares ranged from a discount of approximately 17.65% to a premium of 49.70%, with an average discount of approximately 3.72%. The premium represented by the Subscription Price (a) as compared with the closing price per Share on the date of the Subscription Agreement of approximately 5.77% was within the range of the (discounts)/ premiums in the Comparable Transactions of approximately (22.22)% to 14.94%, and higher than the average discount of the Comparable Transactions of approximately 8.44%; and (b) as compared with the average closing price per Share for the last five trading days immediately prior to the date of the Subscription Agreement of approximately 3.00% was within the range of the (discounts)/premiums in the Comparable Transactions of approximately (17.65)% to 49.70%, and higher than the average discount of the Comparable Transactions of approximately 3.72%.

Having considered the above, and further taking into account that the Subscription Price of HK$0.055 per Share represents a premium of 30.95% over the audited consolidated net asset value per Share of the Company of approximately HK$0.042 as at 31 December 2020, which was within the range of the discount of approximately 81.74% and the premium of approximately 1,123.63% of the placing and/or subscription price over the net asset value per share represented by the Comparable Transactions, we consider that the Subscription Price is fair and reasonable insofar as the Independent Shareholders are concerned.

LETTER FROM THE DRACO CAPITAL

Conditions precedent of the Subscription

The Subscription Completion is subject to, among others, the passing by the Independent Shareholders in accordance with the Listing Rules and all applicable laws at the EGM and granting of the listing of and permission to deal in all the Subscription Shares by the Stock Exchange.

Further details of the conditions precedent to the Subscription Completion are set out in the section headed ‘‘Conditions precedent’’ in the Board Letter.

According to the Board Letter, as at the Latest Practicable Date, none of the conditions has been fulfilled or waived.

5. Other alternative methods of financing

We have enquired the Company and we understand that the Company has considered other alternative means of fund raising such as debt financing, rights issue or open offer. However, the Board considered that debt financing is not the most appropriate way of fund raising to the Group as debt financing may be subject to lengthy due diligence and negotiations with banks and would also incur further interest burden to the Group. The Directors also considered that the issue of convertible bonds would not allow the Company to strengthen its balance sheet by raising long term equity fund without the need for payment of interest and/or repayment of principal at maturity in the event the bondholder does not convert the bond at maturity. The Directors considered that equity financing by way of Subscription is more appropriate means of raising additional capital for the Company than open offer and rights issue, taking into account (i) it is less cumbersome (as less documentation is required) and takes shorter time to arrange the Subscription than rights issue or open offer as the latter may involve the issue of a prospectus and other documentation (including but not limited to the underwriting agreement) and the offer would be required to remain open for a minimum period of time before it is closed; and (ii) it is less costly to arrange for the Subscription than rights issue or an open offer. In particular for the Subscription, the Company can raise fund without having to incur placing commission. Further, the Subscription reflects the confidence and commitment of the Subscriber towards the long-term and sustainable development of the Company, and that the continuing support of the Subscriber is crucial to ensure the business stability and long-term development of the Group. In view of (i) the reasons for and the benefits of the Subscription as mentioned above; (ii) the possible additional financial burden that could be incurred by the Group in debt financing and the issue of convertible bonds; (iii) the possible lengthy preparation time and additional transaction costs that could be incurred by the Group in conducting rights issue or open offer; (iv) that the Company would not incur any placing commission in the Subscription; and (v) that the Subscription demonstrates the Subscriber’s confidence and commitment to the Company, we concur with the Directors that the Subscription is an appropriate way to raise capital for the Company at the moment and is in the interests of the Company and the Shareholders as a whole.

6. Potential dilution effects

The shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) immediately after the Subscription Completion are set out in the section headed ‘‘Effects of the Subscription on the Shareholding Structure of the Company’’ in the Board Letter.

LETTER FROM THE DRACO CAPITAL

As set out in the Board Letter, the shareholding of the existing public Shareholders as at the Latest Practicable Date was approximately 75.3%. The Subscription Shares to be subscribed by the Subscriber represent 4.56% of the total number of issued Shares as at the Latest Practicable Date, and approximately 4.36% of the total number of issued Shares as enlarged by the allotment and issue of the Subscription Shares. On such basis, the shareholding of the existing public Shareholders will be diluted from approximately 75.3% to 72.0% upon the completion of the Subscription Agreement. Having taken into account that (i) the terms of the Subscription Agreement being fair and reasonable so far as the Independent Shareholders are concerned; (ii) our analysis as mentioned in the paragraph headed ‘‘Other alternative methods of financing’’ above; and (iii) the possible financial effects of the Subscription as mentioned in the paragraph headed ‘‘Financial effects of the Subscription’’ below, we are of the view that the aforesaid level of dilution to the shareholding interests of the existing public Shareholders is acceptable.

7. Financial effects of the Subscription

7.1 Net asset value

According to the 2021 final results of the Company, as at 31 March 2021, the total net assets of the Group was approximately HK$70.12 million. Upon the completion of Subscription, it is expected that the net assets of the Group will be increased by the estimated proceeds of approximately HK$7.975 million. We consider that the Subscription will have an overall improvement on the Group’s net assets position.

7.2 Current ratio

According to the 2021 final results of the Company, as at 31 March 2021, the current ratio of the Group, which was derived by the total current assets divided by the total current liabilities of the Group, was approximately 3.08. Upon completion of the Subscription, it is expected that the total current assets of the Group will be increased by approximately the estimated proceeds from the Subscription. As such, assuming the total current liabilities of the Group will remain at same level, it is expected that the gearing ratio will increase to approximately 3.31.

It should be noted that the aforementioned analyses are for illustrative purposes only and do not purport to represent how the financial position or results of the Group will be upon completion of the Subscription. Based on the above analysis, the Subscription would have positive impact on the Group’s net asset value, cashflow, and the gearing ratio. On such basis, we are of the view that the Subscription is in the interests of the Company and the Shareholders as a whole.

LETTER FROM THE DRACO CAPITAL

RECOMMENDATION

Having considered the principal factors and reasons as stated above, we consider that the terms of the Subscription Agreement and the Subscription Price are fair and reasonable insofar as the Independent Shareholders are concerned, and the Subscription is on normal commercial terms and in the interests of the Company and the Shareholders as a whole. Accordingly, we would recommend that the Independent Board Committee advise the Independent Shareholders, and we recommend that, the Independent Shareholders vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Subscription Agreement and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of Draco Capital Limited Kevin Choi Ivan Chan Managing Director Director

Mr. Kevin Choi and Mr. Ivan Chan are licensed persons under the SFO to carry out type 6 (advising on corporate finance) regulated activity under the SFO and regarded as responsible officers of Draco Capital Limited. Mr. Kevin Choi and Mr. Ivan Chan have over 10 and 5 years of experience in corporate finance industry, respectively.

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 of
	per Share	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	3,179,643,562	63,592,871.24

(ii) Share capital 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)

	Nominal Value	Number of
	per Share	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	3,179,643,562	63,592,871.24
Subscription Shares to be issued
pursuant to the Subscription	0.02	145,000,000	2,900,000.00
Shares in issue upon Completion	0.02	3,324,643,562	66,492,871.24

I-1

GENERAL INFORMATION

APPENDIX

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 the Shares in issue at the time of allotment and issue of the Subscription Shares. The Subscriber will be entitled to receive all dividends and distributions which may be declared, made or paid on or after the date of issue of the 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 equity and debt 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, 343,557,000 share options remained outstanding. The Group also adopted the Share Award Scheme on 27 July 2017. As at the Latest Practicable Date, 207,685,000 awarded Shares were granted to certain eligible participants including directors, senior management and employees of the Group by way of allotment and issue of new Shares and 5,050,000 existing awarded Shares were granted to a director of an indirect non wholly-owned subsidiary of the Company.

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$)
29 January 2021	0.058
26 February 2021	0.056
31 March 2021	0.068
30 April 2021	0.059
31 May 2021	0.058
30 June 2021	0.060
19 July 2021 (being the Last Trading Day)	0.052
30 July 2021	0.047
11 August 2021 (being the Latest Practicable Date)	0.052

I-2

GENERAL INFORMATION

APPENDIX

The highest and lowest closing market prices of the Shares recorded on the Stock Exchange during the Relevant Period were HK$0.083 on 26 March 2021 and HK$0.046 on 9 August 2021 and 10 August 2021 respectively.

(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 of	percentage of
Name of Directors	Nature of interest	Existing Shares	shareholding
		(Note 1)
Zhang Xiaobin	Beneficial owner	147,151,489 (L)	4.63%
		(Note 2)
Gao Feng	Beneficial owner	303,257,531 (L)	9.54%
		(Note 3)
Chiu Sui Keung	Beneficial owner	79,771,000 (L)	2.51%
		(Note 4)
Cheng Wing Keung, Raymond	Beneficial owner	5,941,000 (L)	0.19%
		(Note 5)
Lam Williamson	Beneficial owner	6,081,000 (L)	0.19%
		(Note 6)
Wong Hoi Kuen	Beneficial owner	6,081,000 (L)	0.19%
		(Note 7)
Lam Lee G	Beneficial owner	6,081,000 (L)	0.19%
		(Note 8)

Notes:

‘‘L’’ stands for a long position in the Shares.
71,191,489 Shares out of the 147,151,489 Shares are beneficially held by Mr. Zhang Xiaobin in his own capacity. 51,500,000 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.

I-3

GENERAL INFORMATION

APPENDIX

89,000,000 Shares out of the 303,257,531 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, 51,500,000 Shares are held pursuant to share options granted under the Share Option Scheme, 138,297,531 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.
3,811,000 Shares out of the 79,771,000 Shares are beneficially held by Mr. Chiu Sui Keung in his own capacity, 51,500,000 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.
1,041,000 Shares out of the 5,941,000 Shares are beneficially held by Mr. Cheng Wing Keung, Raymond in his own capacity, 3,900,000 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 6,081,000 Shares are beneficially held by Mr. Lam Williamson in his own capacity, 3,900,000 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 6,081,000 Shares are beneficially held by Mr. Wong Hoi Kuen in his own capacity, 3,900,000 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.
5,081,000 Shares out of the 6,081,000 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:

			Approximate %
	Capacity/Nature of	Number of	of Interest in
Name	Interest	Shares	the Company
Mr. Zhu (Note)	Beneficial owner	688,958,000	21.67%
Ms. Liu Qiuhua	Beneficial owner	358,817,000	11.28%

I-4

GENERAL INFORMATION

APPENDIX

Note: As disclosed in the announcement of the Company dated 27 November 2020, a maximum of 479,958,000 Shares (comprising 200,000,000 consideration Shares, 200,000,000 conversion Shares and 79,958,000 bonus Shares) may be allotted and issued to Mr. Zhu under the Share Transfer Agreement (as defined therein) subject to fulfillment of the conditions precedent therein. The remaining 209,000,000 Shares comprise 145.000,000 Subscription Shares agreed to be subscribed by Mr. Zhu under the Subscription Agreement and 64,000,000 Shares held by Mr. Zhu in his personal capacity.

However, the actual number of Shares to be allotted and issued to him will be limited as (i) Mr. Zhu is subject to a restriction in the Share Transfer Agreement that he shall not convert any additional convertible bonds to conversion Shares if he will hold 10% or more of the Shares and (ii) he undertakes to the Company in the Subscription Agreement that he shall at all times hold less than 10% of the issued share capital of the Company after the date of the Subscription Agreement.

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 2021 (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).

I-5

GENERAL INFORMATION

APPENDIX

(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 2021, being the date to which the latest published audited accounts of the Company were made up.

(10) LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was 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

Draco Capital Limited A corporation licensed to carry on Type 6 (advising on corporate finance) regulated activities under the SFO

As at the Latest Practicable Date, Draco 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, Draco Capital does not have any interest, direct or indirect, in any assets which have been since 31 March 2021, 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.

Draco 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.

I-6

GENERAL INFORMATION

APPENDIX

(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 2021, 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.
(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 2019, 2020 and 2021;
(c) the Subscription Agreement;
(d) the letter from the Board as set out in this circular;
(e) the letter from the Independent Board Committee as set out in this circular;
(f) the letter from Draco Capital as set out in this circular;
(g) the written consent of the expert as referred to in the section headed ‘‘Expert and Consent’’ of this Appendix; and
(h) this circular.

I-7

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 Monday, 6 September 2021 at 11:00 a.m., for the purpose of considering and, if thought fit, passing the following resolutions:

ORDINARY RESOLUTIONS

‘‘THAT

(a) the conditional subscription agreement dated 19 July 2021 (the ‘‘Subscription Agreement’’) entered into by the Company with Mr. Zhu Qian (the ‘‘Subscriber’’), in relation to the allotment and issue of 145,000,000 new shares of the Company (each a ‘‘Subscription Shares’’) by the Company under the Specific 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 are to allot and issue to the Subscriber the Subscription Shares at the subscription price of HK$0.055 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 Subscription Shares, the grant of the specific mandate to the Directors to allot and issue the Subscription Shares (the ‘‘Specific Mandate’’) be and is hereby approved, confirmed and ratified; the Specific 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 of the Company (the ‘‘Director(s)’’) 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 Subscription Agreement.’’

By order of the Board Elife Holdings Limited Chow Chi Fai

Company Secretary

Hong Kong, 16 August 2021

EGM-1

NOTICE OF EGM

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

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 54, 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.
The register of members of the Company will be closed from Wednesday, 1 September 2021 to Monday, 6 September 2021 (both days inclusive), during which period no transfer of shares will be effected. In order to qualify for attending the EGM, all transfers accompanied by the relevant share certificates and transfer forms must be lodged with the Company’s share registrar in Hong Kong, Tricor Tengis Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not later than 4:30 p.m. on Tuesday, 31 August 2021.

As at the Latest Practicable Date, the executive Directors are Mr. Zhang Xiaobin, Mr. Gao Feng and Mr. Chiu Sui Keung, and the independent non-executive Directors are Mr. Cheng Wing Keung Raymond, Mr. Lam Williamson, Mr. Wong Hoi Kuen and Dr. Lam Lee G.

EGM-2

AI assistant

Elife Holdings Limited — Proxy Solicitation & Information Statement 2021

49047_rns_2021-08-13_8fb94235-1e58-45c6-9a99-2c55ed9d1161.pdf

(1) CONNECTED TRANSACTION IN RELATION TO SUBSCRIPTION OF NEW SHARES BY CONNECTED PERSON UNDER SPECIFIC MANDATE; AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

(1) CONNECTED TRANSACTION IN RELATION TO SUBSCRIPTION OF NEW SHARES BY CONNECTED PERSON UNDER SPECIFIC MANDATE; AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

(1) THE SUBSCRIPTION AGREEMENT

Principal terms of the Subscription Agreement

Date

Parties to the Subscription Agreement

The Subscription

The Subscription Shares

The Subscription Price

Ranking

Conditions Precedent

LETTER FROM THE BOARD

Completion

Undertaking

Specific Mandate to Issue Subscription Shares

Application for listing

Information of the Company and the Subscriber

LETTER FROM THE BOARD

Reasons for the Subscription and use of proceeds

LETTER FROM THE BOARD

LETTER FROM THE BOARD

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

LETTER FROM THE BOARD

Shareholding structure of the Company

Listing Rules implications

Independent Board Committee and Independent Financial Adviser

(2) EGM

CLOSURE OF REGISTER OF MEMBERS

RECOMMENDATION

FURTHER INFORMATION

CONNECTED TRANSACTION IN RELATION TO SUBSCRIPTION OF NEW SHARES BY CONNECTED PERSON UNDER SPECIFIC MANDATE

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CONNECTED TRANSACTION IN RELATION TO SUBSCRIPTION OF NEW SHARES BY CONNECTED PERSON UNDER SPECIFIC MANDATE

INTRODUCTION

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INDEPENDENT BOARD COMMITTEE

BASIS OF OUR OPINION

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OUR INDEPENDENCE

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background and financial information of the Group

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Comparison of financial performance between the years ended 31 March 2021 and 2020

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2. Information of the Subscriber

3. Reasons for and benefits of the Subscription

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4. Principal terms of the Subscription Agreement

4.1 Principal terms of the Subscription Agreement

4.2 The Subscription Price

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(i) Review on the historical price of the Shares

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(ii) Comparable analysis

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Conditions precedent of the Subscription

5. Other alternative methods of financing

6. Potential dilution effects

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7. Financial effects of the Subscription

7.1 Net asset value

7.2 Current ratio

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RECOMMENDATION

(1) RESPONSIBILITY STATEMENT

(2) SHARE CAPITAL

Elife Holdings Limited Proxy Solicitation & Information Statement 2021