WH Group Limited - Proxy Solicitation & Information Statement 2018

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 a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares of China Baoli Technologies Holdings Limited, you should at once hand this circular together with the accompanying form of proxy to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

This circular is for information only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities mentioned herein.

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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China Baoli Technologies Holdings Limited 中國寶力科技控股有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 164)

CONNECTED TRANSACTION

PROPOSED ISSUE OF NEW SHARES TO CONNECTED PERSONS UNDER THE SHARE AWARD SCHEME PURSUANT TO SPECIFIC MANDATE AND

NOTICE OF SPECIAL GENERAL MEETING

Independent Financial Adviser to the Shareholders of the Company

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A notice convening the SGM of the Company to be held on Monday, 8 October 2018 at 3: 00 p.m. at Monaco Room, Basement 1, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong is set out on pages 52 to 54 of this circular and a form of proxy for the SGM is despatched together with this circular. Whether or not you are able to attend the SGM, you are requested to complete, sign and return the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the branch share registrar of the Company in Hong Kong, Tricor Secretaries Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the enclosed form of proxy will not preclude you from attending and voting in person at such meeting or any adjournment meeting should you so wish.

A letter from the Board is set out on pages 5 to 31 of this circular.

A letter from Lego Corporate Finance Limited, the Independent Financial Adviser to the Independent Shareholders, containing its advice to the Independent Shareholders is set out on pages 32 to 46 of this circular.

19 September 2018

		Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from	the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter of Advice from Lego Corporate Finance Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		32
Appendix	— General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	47
Notice of Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		52

– i –

DEFINITIONS

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

‘‘Adjusted Shares’’ ordinary shares of HK$0.10 each in the share capital of the Company (being ordinary shares of the Company with such nominal amount as resulted from the Share Consolidation taking effect)
‘‘associate(s)’’ has the meaning ascribed to this term under the Listing Rules
‘‘Award’’ an award of Awarded Shares granted by the Board to a Selected Employee as the Board may determine at its discretion in accordance with the Scheme Rules
‘‘Awarded Shares’’ Shares granted to a Selected Employee under an Award
‘‘Board’’ the board of Directors
‘‘Company’’ China Baoli Technologies Holdings Limited, a company incorporated in Bermuda with limited liability, the Shares of which are listed on the Stock Exchange
‘‘Connected Awarded the Awarded Shares to be awarded to the Connected Selected Shares’’ Employees
‘‘connected person(s)’’ has the meaning ascribed thereto under the Listing Rules
‘‘Connected Selected Selected Employees who are Directors and/or directors of certain Employees’’ subsidiaries of the Company
‘‘Director(s)’’
the director(s) of the Company
‘‘Employee(s)’’ any employee (including without limitation any executive director and consultant) of any member of the Group and Yota at any time during the term of the Trust
‘‘Excluded Employee(s)’’
(i) any Employee who is resident in a place where the Award of the Awarded Shares and/or the vesting and transfer of the Awarded Shares pursuant to the Scheme Rules is not permitted under the laws or regulations of such place or where in the view of the Board or the Trustee (as the case may be), compliance with applicable laws or regulations in such place makes it necessary or expedient to exclude such Employee; or (ii) any Employee who has tendered his/her resignation or who has been given a notice of dismissal by the relevant member of the Group
‘‘General Mandate’’ the general mandate granted by the Shareholders at the annual general meeting of the Company held on 26 September 2017

– 1 –

DEFINITIONS

‘‘Group’’

the Company and its Subsidiaries from time to time

‘‘HK$’’ Hong Kong dollar, the lawful currency of Hong Kong
‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the PRC
‘‘Independent Selected Selected Employee(s), who are independent of the Company and Employees’’ connected persons of the Company (save as being employees of the members of the Group)
‘‘Independent Shareholders other than the Connected Selected Employees and Shareholders’’ their respective associates who are not required to abstain from voting at the SGM to approve the Award of Connected Awarded Shares
‘‘Latest Practicable 17 September 2018, being the latest practicable date prior to the Date’’ or ‘‘LPD’’ printing of this circular for the purpose of ascertaining certain information contained in this circular
‘‘Lego’’ or Lego Corporate Finance Limited, a corporation licensed by the ‘‘Independent SFC to conduct Type 6 (advising on corporate finance) regulated Financial Adviser’’ activity under the SFO, the independent financial adviser appointed by the Company to advise the Independent Shareholders in respect of the proposed allotment and issue of the Connected Awarded Shares to the Connected Selected Employees
‘‘Listing Committee’’ has the meaning ascribed to it under the Listing Rules
‘‘Listing Department’’ the Listing Department of the Stock Exchange
‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange
‘‘Model Code’’ the Model Code for Securities Transactions by Directors of Listed Issuers contained in Appendix 10 to the Listing Rules
‘‘PRC’’
the People’s Republic of China
‘‘Pre-Adjusted Shares’’ ordinary shares of HK$0.01 each in the share capital of the Company (being ordinary shares of the Company with such nominal amount prior to the Share Consolidation taking effect)
‘‘Previous Circular’’
the circular of the Company dated 25 May 2018 in relation to the Award of Awarded Shares to certain Connected Selected Employees under the Share Award Scheme

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DEFINITIONS

‘‘Previous SGM’’ the special general meeting of the Company held at 3: 00 p.m. on Tuesday, 12 June 2018 to consider and, if appropriate, to approve the Award of the Connected Awarded Shares to the Connected Selected Employees

‘‘Previous Specific the specific mandate obtained from the Independent Mandate’’ Shareholders at the Previous SGM in respect of the allotment and issue of the Connected Awarded Shares
‘‘Remuneration the remuneration committee of the Company Committee’’
‘‘Scheme Rules’’ the rules relating to the Share Award Scheme as amended from time to time
‘‘Selected Employee(s)’’ Employee(s) selected by the Board for participation in the Share Award Scheme
‘‘SFC’’ the Securities and Futures Commission of Hong Kong
‘‘SFO’’ the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong
‘‘SGM’’ a special general meeting of the Company to be held on Monday, 8 October 2018 at 3: 00 p.m. at Monaco Room, Basement 1, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong to consider and, if appropriate, to approve the resolutions contained in the notice of SGM which is set out on pages 52 to 54 of this circular, or any adjournment thereof
‘‘Share(s)’’ ordinary shares in the share capital of the Company (or of such other nominal amount as will result from a sub-division, consolidation, reclassification or reconstruction of the share capital of the Company from time to time)
‘‘Share Award Scheme’’ the share award scheme approved and adopted by the Board in accordance with the Scheme Rules on 15 January 2018 and as amended from time to time
‘‘Share Consolidation’’ the consolidation of every ten (10) issued and unissued ordinary shares of HK$0.01 each in the share capital of the Company into one (1) issued and unissued ordinary share of HK$0.10 each in the share capital of the Company, which became effective on 3 August 2018
‘‘Shareholder(s)’’ holders of the Shares

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DEFINITIONS

‘‘Specific Mandate’’
the specific mandate to be obtained from the Independent Shareholders at the SGM in respect of the allotment and issue of the Connected Awarded Shares
‘‘Stock Exchange’’

The Stock Exchange of Hong Kong Limited

‘‘Subsidiary’’ a company which is for the time being and from time to time a subsidiary (within the meaning given under section 15 of the Companies Ordinance (Chapter 622 of the Laws of Hong Kong)) of the Company, whether incorporated in Hong Kong or elsewhere
‘‘Trinity World’’ Trinity World Management Limited, a company incorporated in the British Virgin Islands
‘‘Trust’’ the trust constituted by the Trust Deed to service the Share Award Scheme
‘‘Trust Deed’’ the trust deed dated 15 January 2018 entered into between the Company and the Trustee (as may be restated, supplemented and amended from time to time) in relation to the Share Award Scheme
‘‘Trustee’’
the trustee, Bank of Communications Trustee Limited, appointed by the Company for the purpose of the Trust, who is independent of the Company and connected persons of the Company
‘‘US$’’ United States dollar, the lawful currency of the United States of America
‘‘VSA’’ the proposed acquisition by the Group of 25.1% equity interest in Yota from Trinity World, details of which are set out in the announcements of the Company dated 5 July 2018 and 9 July 2018
‘‘VSA Consideration the consideration shares to be allotted and issued to Trinity Shares’’ World or its nominee upon completion of the VSA
‘‘Yota’’
an exempted company incorporated with limited liability under the laws of the Cayman Islands which is held as to 40% by the Company as at the Latest Practicable Date
‘‘Yota Group’’ Yota and its subsidiaries
‘‘%’’ per cent.

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LETTER FROM THE BOARD

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China Baoli Technologies Holdings Limited 中國寶力科技控股有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 164)

Executive Directors: Mr. Zhang Yi (Chairman) Ms. Chu Wei Ning (Chief Executive Officer) Mr. Yeung Chun Wai, Anthony Mr. Wong King Shiu, Daniel

Registered Office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Independent Non-executive Directors: Mr. Chan Chi Yuen Mr. Chan Fong Kong, Francis Mr. Chan Kee Huen, Michael Mr. Han Chunjian

Principal place of business in Hong Kong: Suites 3103–3104, 31/F., Oxford House, Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong 19 September 2018

To the Shareholders,

Dear Sir/Madam,

CONNECTED TRANSACTION

PROPOSED ISSUE OF NEW SHARES TO CONNECTED PERSONS UNDER THE SHARE AWARD SCHEME PURSUANT TO SPECIFIC MANDATE AND

NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

References are made to the announcements of the Company dated 26 January 2018, 8 February 2018, 7 May 2018, 12 June 2018 and the Previous Circular in relation to the Award of Awarded Shares to certain Independent Selected Employees and certain Connected Selected Employees under the Share Award Scheme.

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LETTER FROM THE BOARD

In relation to the Awards to the Independent Selected Employees, the allotment and issue of 126,840,000 Pre-Adjusted Shares to the Trustee to hold in trust for 29 Independent Selected Employees pursuant to the General Mandate was completed on 28 March 2018. The Awarded Shares became vested in the Independent Selected Employees on 3 April 2018.

In relation to the Awards to the Connected Selected Employees, the Previous SGM was convened and held on 12 June 2018 for considering and, if thought fit, approving the grant of the Awards to the 9 Connected Selected Employees. At the Previous SGM, the proposed ordinary resolution set out in the notice of the Previous SGM was duly passed by the Independent Shareholders by way of poll in accordance with the requirements of the Listing Rules. As at the Latest Practicable Date, the allotment and issue of Awarded Shares to the Connected Selected Employees pursuant to the Previous Specific Mandate has not yet been completed.

Some recent developments of the Group and public disclosures made by the Company subsequent to the despatch of the Previous Circular involved certain Connected Selected Employees. The information in relation to such recent developments and public disclosures might or might not have affected the voting intention of the Independent Shareholders on the Award of the Connected Awarded Shares to the Connected Selected Employees at the Previous SGM. Nonetheless, the Company proposed to issue this circular containing the information on the Award of the Connected Awarded Shares to the Connected Selected Employees and the advice from Lego to the Independent Shareholders, as well as the information in relation to such recent developments and public disclosures, for the Independent Shareholders’ re-consideration, and to seek the Independent Shareholders’ reapproval of the Award of the Connected Awarded Shares to the Connected Selected Employees by convening and holding the SGM.

As set out in the announcement of the Company dated 16 July 2018, Mr. Wong Hoi Kuen, who used to be one of the Connected Selected Employees, resigned as director of the Company with effect from 16 July 2018. The relevant Awards made to him automatically lapsed forthwith. Accordingly, this circular has not included information on the Award given to Mr. Wong Hoi Kuen. At the SGM, the Independent Shareholders will not be required to consider and, if thought fit, approve the grant of the Specific Mandate and the grant of the Awarded Shares as far as it relates to Mr. Wong Hoi Kuen.

DETAILS OF THE AWARD

As set out in the announcement of the Company dated 26 January 2018, on 26 January 2018, the Board resolved to award an aggregate of 1,030,540,000 Pre-Adjusted Shares to 38 Selected Employees under the Share Award Scheme, of which, (i) 126,840,000 Pre-Adjusted Shares would be awarded to 29 Independent Selected Employees by way of allotment and issue of new Shares pursuant to the General Mandate; and (ii) 903,700,000 Pre-Adjusted Shares would be awarded to 9 Connected Selected Employees by way of allotment and issue of new Shares pursuant to the Previous Specific Mandate to be obtained from the Independent Shareholders at the Previous SGM.

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LETTER FROM THE BOARD

The 29 Independent Selected Employees are employees of the members of the Group and Yota who are engaged in the mobile technologies business of the Group and work in Hong Kong, the PRC, Russia and Finland.

Upon allotment and issue of the new Shares, the Trustee will hold the new Shares in trust for the Selected Employees and such new Awarded Shares shall be transferred to the Selected Employees at nil consideration. The allotment and issue of Awarded Shares to the Trustee to be held in trust for 29 Independent Selected Employees pursuant to the General Mandate was completed on 28 March 2018. The Awarded Shares became vested in the Independent Selected Employees on 3 April 2018.

The 800,000 Pre-Adjusted Shares awarded to Mr. Wong Hoi Kuen, being one of the then Connected Selected Employees, had lapsed following his resignation on 16 July 2018. In addition, the Share Consolidation became effective on 3 August 2018. Following these two events, a total of 90,290,000 Adjusted Shares (instead of 903,700,000 Pre-Adjusted Shares as set out in the Previous Circular) will be awarded to 8 Connected Selected Employees (instead of 9 Connected Selected Employees as set out in the Previous Circular) by way of allotment and issue of new Shares pursuant to the Specific Mandate to be obtained from the Independent Shareholders at the SGM.

General Information

The information in relation to the allotment and issue of the Awarded Shares to the Selected Employees is set out below:

Securities issued/to be issued: 126,840,000 Pre-Adjusted Shares or 12,684,000 Adjusted Shares allotted and issued to the Trustee on 28 March 2018 to be held in trust for the Independent Selected Employees. The Awarded Shares became vested in the Independent Selected Employees on 3 April 2018. 902,900,000 Pre-Adjusted Shares or 90,290,000 Adjusted Shares to be allotted and issued to the Trustee to be held in trust for the Connected Selected Employees. Issue price: New Pre-Adjusted Shares shall be allotted and issued to the Trustee at nominal value of HK$0.01 each (representing the nominal value of the Pre-Adjusted Shares before the Share Consolidation became effective on 3 August 2018) or new Adjusted Shares shall be allotted and issued to the Trustee at nominal value of HK$0.10 each (representing the nominal value of the Adjusted Shares after the Share Consolidation became effective on 3 August 2018).

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LETTER FROM THE BOARD

The aggregate nominal value of the 126,840,000 PreAdjusted Shares allotted and issued to the Independent Selected Employees was HK$1,268,400.

The aggregate nominal value of the 90,290,000 Adjusted Shares to be allotted and issued to the Trustee to be held in trust for the Connected Selected Employees will be HK$9,029,000.

Funds to be raised:

Identity of the allottee(s):

Vesting:

Market price of the Shares:

The Selected Employees are not required to pay any consideration for the grant of the Awarded Shares. No fund will be raised by the Company as a result of the allotment and issue of the Awarded Shares. An amount equal to the nominal value of the Awarded Shares shall be paid by the Trustee from funds contributed to the Trust by the Company.

The Trustee, Bank of Communications Trustee Limited, who is, to the best knowledge, information and belief of the Directors, independent of the Company and connected persons of the Company, will hold the Awarded Shares in trust in accordance with the Trust Deed for the 37 Selected Employees, who are (i) Directors; (ii) employees of the members of the Group; and (iii) employees of Yota.

All Awarded Shares shall vest upon the allotment and issue of the Awarded Shares. Upon allotment and issue of the new Awarded Shares, the independent Trustee will hold the new Awarded Shares in trust for the Selected Employees and such new Awarded Shares shall be transferred to the Selected Employees at nil consideration.

The closing price of the Shares as at 26 January 2018 (being the date on which the Board resolved to award the Awarded Shares to the Independent Selected Employees and the Connected Selected Employees under the Share Award Scheme) as quoted on the Stock Exchange was HK$0.14 per Pre-Adjusted Share (before taking into consideration the effect of the Share Consolidation) or HK$1.40 per Adjusted Share (after taking into consideration the effect of the Share Consolidation).

– 8 –

LETTER FROM THE BOARD

The average closing price of the Shares for the five consecutive trading days immediately preceding 26 January 2018 as quoted on the Stock Exchange was approximately HK$0.14 per Pre-Adjusted Share (before taking into consideration the effect of the Share Consolidation) or approximately HK$1.40 per Adjusted Share (after taking into consideration the effect of the Share Consolidation).

The closing price of the Adjusted Shares as at the Latest Practicable Date was HK$0.55 per Adjusted Share.

The net asset value of the Company per Pre-Adjusted Share according to the latest financial statements of the Company as included the annual report of the Company for the year ended 31 March 2018 (based on the net asset of the Company as at 31 March 2018 of HK$884,174,000 and the number of Pre-Adjusted Shares in the issued share capital of the Company as at 31 March 2018 of 35,225,130,641 Pre-Adjusted Shares) was approximately HK$0.0251.

Lock-up undertaking:

Twelve of the Selected Employees shall undertake to the Company that:

From the issue date to the date falling six months after the issue date of the Awarded Shares (both dates inclusive) (the ‘‘First Six-month Period’’), each of them shall not transfer or dispose of the Awarded Shares held by each of them.

From the day next immediately after the First Sixmonth Period to the date falling twelve months after the issue date of the Awarded Shares (both dates inclusive), each of them shall not transfer or dispose of 50% of the Awarded Shares held by each of them.

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LETTER FROM THE BOARD

Apart from two independent non-executive Directors, the Awarded Shares of all of the Connected Selected Employees are subject to lockup. The Company is of the view that the grant of the Awarded Shares is a recognition of the contribution of the Connected Selected Employees to the Group’s mobile technologies business and the grant itself can motivate the Connected Selected Employees to continue their efforts in promoting the long-term benefits for the Company. The Company is of the view that the current length of lock-up period is reasonable as it is in line with the market practices in respect of the allotment of awarded shares (such as Zhong Ao Home Group Limited (stock code: 1538) whereby the lock-up period is around 12 months. Also, granting the Awarded Shares to the Connected Selected Employees and making them Shareholders (thereby aligning their interests and the interests of the Group together) is essential to retain talents for the continual operation and development of the Group. The Board is of the view that the current proposed lock-up arrangement is fair and reasonable.

Fund raising activities:

The Company has not engaged in any other fund raising activities by any issue of Shares from 1 March 2017 to the Latest Practicable Date, except for the following:

(a) the issue of the first tranche consideration PreAdjusted Shares of 976,744,186 Pre-Adjusted Shares and the second tranche consideration Pre-Adjusted Shares of 418,604,651 PreAdjusted Shares under general mandate on 1 March 2017 and 8 May 2017 respectively to the vendor in connection with the acquisition of 75% equity interest in We Fly Travel Limited;
(b) the issue of 552,500,000 placing Pre-Adjusted Shares under general mandate on 27 March 2017, the net proceeds from the placing was applied to the research and development, marketing and professional fee of Yota 3 and general working capital of the Group; and

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LETTER FROM THE BOARD

(c) the issue of the first tranche consideration PreAdjusted Shares of 593,246,187 Pre-Adjusted Shares under General Mandate on 29 March 2018 to the vendor in connection with the acquisition of 10% equity interest in Yota.

The detailed breakdown of the use of proceeds from the placing of Pre-Adjusted Shares on 27 March 2017 is as follows:

Research and development of Yota 3: approximately HK$53.425 million
Marketing and professional fee of Yota 3: approximately HK$23.085 million
Staff and directors’ remuneration: approximately HK$11.733 million
Administrative expenses: approximately HK$3.086 million
Legal and professional fee: approximately HK$4.987 million
Office rental expense: approximately HK$1.671 million

As disclosed in the annual report of the Company for the year ended 31 March 2018, general working capital includes staff and directors’ remuneration, administrative expenses, legal and professional fee as well as office rental expense as mentioned above.

For the usage of the net proceeds from the placing of Shares on 27 March 2017, there is no material difference between the intended usage amount and actual usage amount.

To the best knowledge of the Company, the vendors in connection with the abovementioned acquisitions and the placees in the placing of Pre-Adjusted Shares on 27 March 2017 are independent of the Connected Selected Employees.

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LETTER FROM THE BOARD

Basis of the Award

The Share Award Scheme forms part of the incentive schemes of the Group. The Share Award Scheme, when adopted, would operate alongside the share option scheme adopted by the Company on 22 August 2011 and provide an additional means for the Group to incentivise the Selected Employees.

The Company granted the Awards to the Selected Employees according to their seniority and contributions to the mobile technologies business.

The purpose of the grant of the Awarded Shares is to provide the Selected Employees with the opportunity to acquire proprietary interests in the Company. It acts as incentives for the contribution of the Selected Employees to the Group and serves as a flexible means to attract, retain and remunerate suitable participants to work towards enhancing the value of the Group and thus increase the Shareholders’ values.

The Company conducted annual appraisals with employees and evaluated their performances during the assessment period. The grant of the Awarded Shares is to recognise the Selected Employees for their past contributions as well as to incentivise their continual supports to the Group and their efforts in promoting the Group’s long-term growth and development. In determining the Awarded Shares, the Company has mainly considered the following factors:

the seniority and the importance of the work position, taking into account the background and working experience of the Selected Employees;
the contribution of the Selected Employees;
the individual performance of the Selected Employees; and
the Group’s overall business objectives and future development plan.

The Company mainly considered the contribution of the Selected Employees to the mobile technologies business which commenced in April 2016. The Selected Employees have made contributions to the Group’s business transformation into a technology and mobile related business which are essential to the Group’s future sustainability. The third generation of the dual screen mobile devices Yota 3 was officially launched in China at the end of October 2017. The Selected Employees have put a lot of effort during the development processes of the mobile technologies business. This business segment is highly competitive. More innovative ideas are needed to build and maintain the success of this business segment. Employees and their knowhow would be the most important assets. Therefore, the Company decided to grant the Awarded Shares to those employees who have made contribution in the mobile technologies business in order to reward their past efforts and provide them the opportunities to enjoy the fruits of the mobile technologies business development in the future.

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LETTER FROM THE BOARD

Award to the Connected Persons of the Company

Among those 37 Selected Employees, 8 of the Selected Employees are Directors and/or directors of certain subsidiaries of the Company and accordingly connected persons (as defined in Chapter 14A of the Listing Rules) of the Company.

Their details are as follows:

Name of Connected Selected Employees Relationship with the Group Zhang Yi (‘‘Mr. Zhang’’) Executive Director Chu Wei Ning (‘‘Ms. Chu’’) Executive Director and a director of certain subsidiaries and an associate of the Company (Note 1) Yeung Chun Wai, Anthony (‘‘Mr. Yeung’’) Executive Director and a director of certain subsidiaries of the Company Wong King Shiu, Daniel Executive Director and a director of certain subsidiaries of the Company Chan Chi Yuen Independent non- executive Director Chan Kee Huen, Michael Independent non- executive Director Han Chunjian Independent non- executive Director Sie Winston (‘‘Mr. Sie’’) Director of certain subsidiaries and an associate of the Company (Note 2) Total	Number of Adjusted Shares to be granted Condition 80,000 with lock-up period 30,000,000 with lock-up period 30,000,000 with lock-up period 80,000 with lock-up period 80,000 with lock-up period 25,000 25,000 30,000,000 with lock-up period 90,290,000	Approximate percentage of the total issued Adjusted Shares as at the LPD (%) 0.002% 0.852% 0.852% 0.002% 0.002% 0.001% 0.001% 0.852%
		2.564%

– 13 –

LETTER FROM THE BOARD

Notes:

As at the Latest Practicable Date, such subsidiaries include Baoli Yota Technologies (Shenzhen) Limited (‘‘寶力優特科技（深圳）有限公司’’), (‘‘Baoli Yota (SZ)’’), a 80% owned subsidiary of the Company, and Chongqing Baoli Yota Technologies Limited (‘‘重慶寶力優特科技有限公司’’), a 100% owned subsidiary of the Company, which focus on the mobile technologies business. Ms. Chu is also a director of Yota, an associate of the Company.
As at the Latest Practicable Date, such subsidiaries include Baoli Yota (SZ), a 80% owned subsidiary of the Company, and Chongqing Baoli Yota Technologies Limited* (‘‘重慶寶力優特科技有限公司’’), a 100% owned subsidiary of the Company, which focus on the mobile technologies business. Mr. Sie is also a director of Yota, an associate of the Company.

The grant of Awarded Shares to Selected Employees who are Directors (including independent non-executive Directors) has been approved by all the members of the Remuneration Committee, comprising Mr. Chan Chi Yuen, Mr. Chan Kee Huen, Michael and Mr. Yeung as at the date of the grant. The grant of Awarded Shares to a member of the Remuneration Committee has been approved by all of the other members of the Remuneration Committee.

Conditions

The allotment and issue of 90,290,000 Adjusted Shares to the Connected Selected Employees shall be subject to the following conditions:

(a) the approval of the Specific Mandate by the Independent Shareholders at the SGM in respect of the allotment and issue of the Connected Awarded Shares to the Connected Selected Employees; and
(b) the grant of the listing approval by the Stock Exchange in respect of the Connected Awarded Shares.

Application will be made by the Company to the Stock Exchange for the granting of the listing of, and permission to deal in, 90,290,000 Adjusted Shares to the Connected Selected Employees in due course.

Details of Awarded Shares

The aggregate of 90,290,000 Adjusted Shares to be allotted and issued by the Company to the Connected Selected Employees represent approximately 2.564% of the total number of Adjusted Shares in issue as at the Latest Practicable Date and approximately 2.499% of the total number of the Adjusted Shares in issue as enlarged by the allotment and issue of the 90,290,000 Adjusted Shares (assuming no issue or buy back of Shares other than the issue of such Adjusted Shares).

Based on the closing price of HK$0.14 per Pre-Adjusted Share as quoted on the Stock Exchange as at 26 January 2018 (being the date on which the Board resolved to award the Awarded Shares to the Independent Selected Employees and the Connected Selected Employees under the Share Award Scheme), the market value of 126,840,000 Pre-Adjusted

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LETTER FROM THE BOARD

Shares to the Independent Selected Employees as at such date was HK$17,757,600 and the market value of 902,900,000 Pre-Adjusted Shares to the Connected Selected Employees as at such date was HK$126,406,000.

Based on the closing price of HK$1.40 per Adjusted Share as quoted on the Stock Exchange as at 26 January 2018, the market value of 12,684,000 Adjusted Shares to the Independent Selected Employees as at such date was HK$17,757,600 and the market value of 90,290,000 Adjusted Shares to the Connected Selected Employees as at such date was HK$126,406,000.

The total value of the 90,290,000 Adjusted Shares to the Connected Selected Employees based on the closing price of the Adjusted Shares as at the Latest Practicable Date of HK$0.55 per Adjusted Share was HK$49,659,500.

The value of the Adjusted Shares to each of the Connected Selected Employees based on (i) the closing price of the Pre-Adjusted Shares as at 26 January 2018 of HK$0.14 per Pre-Adjusted Share and (ii) the closing price of the Adjusted Shares as at the Latest Practicable Date of HK$0.55 per Adjusted Share is as follows:

Name of Connected Selected Employees Mr. Zhang Ms. Chu Mr. Yeung Wong King Shiu, Daniel Chan Chi Yuen Chan Kee Huen, Michael Han Chunjian Mr. Sie Total:	Number of Pre-Adjusted Shares 800,000 300,000,000 300,000,000 800,000 800,000 250,000 250,000 300,000,000 902,900,000	Value of the Pre-Adjusted Shares as at 26 January 2018 (HK$) 112,000 42,000,000 42,000,000 112,000 112,000 35,000 35,000 42,000,000 126,406,000	Number of Adjusted Shares 80,000 30,000,000 30,000,000 80,000 80,000 25,000 25,000 30,000,000 90,290,000	Value of the Adjusted Shares as at the Latest Practicable Date (HK$) 44,000 16,500,000 16,500,000 44,000 44,000 13,750 13,750 16,500,000
				49,659,500

The new Shares, when allotted and issued and fully paid, shall rank pari passu among themselves and with those Shares in issue, with the right to receive all dividends and other distributions declared, made or paid on or after the date of allotment and issue.

The shareholding structure of the Company (i) as at the Latest Practicable Date, (ii) immediately after the allotment and issue of the 90,290,000 Adjusted Shares to the Connected Selected Employees (assuming no other change in the issued share capital of the Company other than the allotment and issue of the 90,290,000 Adjusted Shares to the Connected Selected Employees) and (iii) immediately after the allotment and issue of the 90,290,000 Adjusted Shares to the Connected Selected Employees and the 823,285,041 VSA Consideration Shares to Mr. Sie or his associates (assuming no other change in the issued

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LETTER FROM THE BOARD

share capital of the Company other than the allotment and issue of the 90,290,000 Adjusted Shares to the Connected Selected Employees and the 823,285,041 VSA Consideration Shares to Mr. Sie or his associates) is as follows:

As at Latest Practicable Date Number of Adjusted Shares % 15,200,000 0.432% 61,213,720 1.738% 9,000,000 0.255% 152,100,718 4.318% 237,514,438 6.743% — 0.000% 215,347,500 6.113% 215,347,500 6.113% — 0.000% 20,000 0.001% 475,000 0.013% — 0.000% — 0.000% 88,892,500 2.524% 2,980,263,626 84.606% 3,522,513,064 100%	As at Latest Practicable Date Number of Adjusted Shares % 15,200,000 0.432% 61,213,720 1.738% 9,000,000 0.255% 152,100,718 4.318% 237,514,438 6.743% — 0.000% 215,347,500 6.113% 215,347,500 6.113% — 0.000% 20,000 0.001% 475,000 0.013% — 0.000% — 0.000% 88,892,500 2.524% 2,980,263,626 84.606% 3,522,513,064 100%	Immediately after the issuance of the Adjusted Shares to the Connected Selected Employees (assuming no other change in the issued share capital of the Company) Number of Adjusted Shares % 15,200,000 0.421% 91,213,720 2.525% 9,000,000 0.249% 152,100,718 4.210% 267,514,438 7.405% 80,000 0.002% 215,347,500 5.961% 215,427,500 5.963% 30,000,000 0.830% 100,000 0.003% 555,000 0.015% 25,000 0.001% 25,000 0.001% 118,892,500 3.291% 2,980,263,626 82.491% 3,612,803,064 100%	Immediately after the issuance of the Adjusted Shares to the Connected Selected Employees (assuming no other change in the issued share capital of the Company) Number of Adjusted Shares % 15,200,000 0.421% 91,213,720 2.525% 9,000,000 0.249% 152,100,718 4.210% 267,514,438 7.405% 80,000 0.002% 215,347,500 5.961% 215,427,500 5.963% 30,000,000 0.830% 100,000 0.003% 555,000 0.015% 25,000 0.001% 25,000 0.001% 118,892,500 3.291% 2,980,263,626 82.491% 3,612,803,064 100%	Immediately after the issuance of the Adjusted Shares to the Connected Selected Employees and the issuance of the VSA Consideration Shares (assuming no other change in the issued share capital of the Company) Number of Adjusted Shares % 15,200,000 0.343% 91,213,720 2.056% 9,000,000 0.203% 152,100,718 3.429% 267,514,438 6.031% 80,000 0.002% 215,347,500 4.854% 215,427,500 4.856% 30,000,000 0.676% 100,000 0.002% 555,000 0.013% 25,000 0.001% 25,000 0.001% 942,177,541 21.239% 2,980,263,626 67.181% 4,436,088,105 100%	Immediately after the issuance of the Adjusted Shares to the Connected Selected Employees and the issuance of the VSA Consideration Shares (assuming no other change in the issued share capital of the Company) Number of Adjusted Shares % 15,200,000 0.343% 91,213,720 2.056% 9,000,000 0.203% 152,100,718 3.429% 267,514,438 6.031% 80,000 0.002% 215,347,500 4.854% 215,427,500 4.856% 30,000,000 0.676% 100,000 0.002% 555,000 0.013% 25,000 0.001% 25,000 0.001% 942,177,541 21.239% 2,980,263,626 67.181% 4,436,088,105 100%
237,514,438 — 215,347,500	6.743% 0.000% 6.113%	267,514,438 80,000 215,347,500	7.405% 0.002% 5.961%	267,514,438 80,000 215,347,500	6.031% 0.002% 4.854%
215,347,500 — 20,000 475,000 — — 88,892,500 2,980,263,626	6.113% 0.000% 0.001% 0.013% 0.000% 0.000% 2.524% 84.606%	215,427,500 30,000,000 100,000 555,000 25,000 25,000 118,892,500 2,980,263,626	5.963% 0.830% 0.003% 0.015% 0.001% 0.001% 3.291% 82.491%	215,427,500 30,000,000 100,000 555,000 25,000 25,000 942,177,541 2,980,263,626	4.856% 0.676% 0.002% 0.013% 0.001% 0.001% 21.239% 67.181%
3,522,513,064	100%	3,612,803,064	100%	4,436,088,105	100%

Notes:

(1) Mr. Yeung is an executive Director. Rising Elite Global Limited and Nova Investment Group Limited are beneficially wholly owned by Mr. Yeung. Ms. Lui Lai Yan is the spouse of Mr. Yeung.
(2) Mr. Zhang is an executive Director and the Chairman of the Board. One Faith Investments Limited is beneficially wholly owned by Mr. Zhang.
(3) Each of Ms. Chu, Mr. Wong King Shiu, Daniel, Mr. Chan Chi Yuen, Mr. Chan Kee Huen, Michael and Mr. Han Chunjian is a Director.

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Reasons for the Award

The Group is principally engaged in mobile technologies business, leisure-related business including tourism and hospitality, gamma ray irradiation service, and securities trading and investment.

In April 2016, the Company acquired 30% equity interest in Yota, a company engaged in the design, research and development, production and marketing and sales of smartphones and other connectivity devices and was granted an exclusive intellectual property license to market and sell any connectivity devices and ancillary products in the Greater China region. Since then, the Company has allocated significant resources to the development of the mobile technologies business. Pursuant to the Intellectual Property License Agreement (please refer to the circular of the Company dated 31 March 2016 for details), the Company has been granted an exclusive license to market and sell any connectivity devices and ancillary products in the Greater China region. The Yota team in Russia is responsible for the technology development of the electronic paper display (‘‘EPD’’) screens and the integration of the dual screen functions. The Intellectual Property License Agreement also specifies that Yota has to dedicate a project management and technical support team to assist in the development and manufacturing of Yota 3.

In the making of Yota 3, the Company and its PRC subsidiaries are mainly responsible for the funding, localisation, ODM, supply chain management, identification of suitable content partners and the sales and marketing of Yota 3 in the PRC market.

China Baoli Yota Team

Hong Kong & PRC Team Russia & Finland Team – Funding – Technology Development – Localisation of the EPD Screens and – ODM the Integration of the dual screen functions – Supply Chain Management – Project Management and – Identification of Suitable Technical Support to assist Content Partners in the development and – Sales & Marketing manufacturing of Yota 3

During the period, the Selected Employees have made significant contributions to the development of the mobile technologies business of the Company, from the development of a new generation of the dual-screen phones to the sales and marketing and strategic cooperation with various partners. Some of the Selected Employees are from Yota Russia and Finland who work as consultants to assist in the research and development of dual-

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screen smartphone for the PRC market. The IPs and technologies surrounding the dualscreen feature of the smartphone is a unique technology with strong technical barrier. In addition, building up a mobile technologies business is not an easy task and it requires a lot of funding to expand the business. Some of the Selected Employees assisted in the fund raising by looking for and meeting with different strategic and financial partners in order to explore collaboration and cooperation opportunities.

Through the above efforts and contributions, Yota 3 was launched in the PRC at the end of October 2017 as stated in the interim report of the Company as at 30 September 2017. In future, the Group would continue to strengthen its research and development capabilities, improve the brand awareness and expand customer base for its mobile technologies business.

After the launch of Yota 3 in China, the Company has been deeply encouraged by the potential of Yota 3 in the PRC market and the purchasing power of the PRC buyers. The Group is now even more confident about the prospect of YotaPhone and Yota. The efforts of the Group are coming to fruition and the Group is beginning to yield favourable financial performance in its mobile technologies business. Yota is an international brand and is well-known for having the dual-screen mobile devices technologies. The Company believes that YotaPhone also has great prospect in other parts of the world. Yota currently operates with a licensing model as its business strategy where royalties is its main income source. Moreover, most high technology companies tend to incur losses during their initial stage of development before generating any sustainable profit as they focus on developing new products and building up their market shares, as it was the case in Yota where significant amount of research and development expenses have been incurred since its commencement of operation. The Company believes that Yota’s financial performance will improve.

The Share Award Scheme forms part of the incentive schemes of the Group. In order to recognise the above efforts and contributions made by the Selected Employees and to provide incentives to them and to allow the Group to retain talents for the continual operation and development of the Group, the Company granted the Awards to the Selected Employees according to their seniority and contribution to the mobile technologies business.

The Board determined to remunerate the Selected Employees (i.e. Independent Selected Employees and Connected Selected Employees) with the Awarded Shares after considering their respective roles, contributions and remuneration packages.

The information of the professional expertise, experience and business network of each of the Connected Selected Employees is as follows:

Ms. Chu Wei Ning was appointed as an executive Director on 8 July 2015. Ms. Chu is also the Chief Executive Officer of the Company. She is currently responsible for the strategic investment and business development of the Company. She has extensive experience in the venture capital, direct investment, investment banking and business operations.

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Leveraging her expertise in working with technology companies both overseas and in the PRC, she has demonstrated strong capabilities in leading the Yota team and China team to a successful launch of Yota 3. She is instrumental in transforming the Company into a technology focused company.

Mr. Sie Winston has worked in the investment banking industry for more than 16 years. He has extensive working experiences in the PRC and understands well the culture. He is currently the director of certain subsidiaries of the Company, which focus on the mobile technologies business. He has a strong network in the PRC and Hong Kong markets. He has brought in some of the strategic partners in the PRC and has built a strong team in relation to the development of the mobile technologies business in the PRC.

Mr. Yeung Chun Wai, Anthony was appointed as an executive Director on 15 July 2015. Prior to that, Mr. Yeung served as senior banker in various international investment banks. He has proven track records and extensive experience in corporate restructuring and rescuing, consulting, corporate finance and business negotiation with well-versed business and people network in the region. With his extensive network, Mr. Yeung introduced different potential investors for the Company.

Mr. Zhang Yi was appointed as an executive Director on 5 September 2016. Mr. Zhang is also the Chairman of the Board. He has over 15 years of investment experience in the technology field, with the scope of investment spanning across various regions including Canada, the United States of America, Singapore, the Mainland China and Hong Kong. He is in particular familiar with the investment in and operations of telecommunications and communications industries. He has good relations with the PRC government and telecommunications operators and has accumulated extensive local and overseas network in the industry. He has provided invaluable advice in formulating strategies of the Company.

Mr. Wong King Shiu, Daniel was appointed as an executive Director on 13 January 2012. Mr. Wong has over 13 years of experience in natural resources industry and served as an executive director in a natural resources company which is listed in Hong Kong. He also has extensive experience in the management and development of natural resources projects in the PRC. He mainly monitors the businesses other than the mobile technologies business of the Company since he has more than 6 years experience in the Company and is familiar with such business.

Mr. Chan Chi Yuen was appointed as an independent non-executive Director on 30 April 2006. He holds a bachelor’s degree in Business Administration and a Master of Science degree in Corporate Governance and Directorship. He is a fellow member of the Hong Kong Institute of Certified Public Accountants, the Association of Chartered Certified Accountants and the Institute of Chartered Accountants in England and Wales. Mr. Chan is a practicing certified public accountant and has extensive experience in accounting, taxation, financial management, corporate finance and corporate governance. He has the necessary professional experience in monitoring the corporate governance and internal control of the Company to ensure proper functioning of the Company in different areas.

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LETTER FROM THE BOARD

Mr. Han Chunjian has over 30 years of experience in the finance industry. He is currently the Chairman of Guangdong Nanyue Bank and Secretary of Party Committee. Mr. Han graduated from Hubei Normal University with a Bachelor degree in Economics in 2004. He obtained a Master degree in Economic Management from Guangdong Academy of Social Sciences in 2000, an Executive Master of Business Administration (EMBA) from Sun Yat-Sen University in 2009 and an Executive Master of Business Administration (EMBA) from Peking University in 2015. In addition, he is currently a deputy of the 14th People’s Congress of Zhanjiang City. He provides independent opinions to the Board with his extensive working experience.

Mr. Chan Kee Huen, Michael has over 35 years of experience in external audit, IT audit, training, accounting and finance, company secretarial and corporate administration, MIS management, internal audit, information security, risk management and compliance. He is a fellow member of the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants, a fellow member and specialist in Information Technology of CPA Australia and an associate of the Institute of Chartered Accountants in England and Wales. He was admitted as a certified information systems auditor with the Information Systems Audit and Control Association in 1985 and a fellow member of the Hong Kong Institute of Directors in 2000. With his strong profession background, he provides valuable suggestions on the internal control of the Company and ensures that the Company has appropriate corporate governance.

As can be seen from the above, the Connected Selected Employees all have extensive experience in various industries. Leveraging their collective experience, the Board is of the view that these Connected Selected Employees are instrumental to making the transformation of the Company to become more technology focused and they could lead the development of the Group in the best interests of the Company and the Shareholders. In particular, the good relationship of the Connected Selected Employees with the telecommunications operators can bring in opportunities to the Group to enhance the future sales and marketing of the dual screen devices. The Connected Selected Employees’ expertise in strategic investment and business development can also bring in new investment opportunities to the Group.

Among the Selected Employees, Ms. Chu, Mr. Yeung, Mr. Sie and Ms. Huang Huang, who were appointed the directors and/or members of the senior management of the Company and/or certain subsidiaries between 2015 and 2018, have made remarkable contributions to the Group’s business transformation implemented in recent years together with other members of the management team and staff. The Group’s transformation into the mobile technologies business is essential to the Group’s future sustainability, given the gloomy performance of the Group’s tourism and hospitality (especially the management of cruise ship) business. As such, the contributions made by the new management have not just growth potentials but have also re-engineered the Group in a broader and long-term context by introducing a more competitive strategic focus and positioning of the Group’s businesses. The Awarded Shares to the three directors (namely Ms. Chu, Mr. Yeung and Mr. Sie) are significantly higher than other Selected Employees because they have extensive involvement and significant contribution in relation to the development of the Group’s mobile technologies business. They are currently in charge of executive functions in the

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Company or its subsidiaries and they are the key personnel providing support for business development and daily operations of the Group. Their expertises and experiences will be valuable and essential to the future development of the Group. The Company considers the progress of the transformation is vital to the survival and further development of the Group. The success of the transformation depends very much on the contribution of those three directors. Therefore, they have been granted Awarded Shares that are significantly higher than other Selected Employees.

Among all the Connected Selected Employees, Ms. Chu, Mr. Sie and Mr. Zhang are mainly involved in the mobile technologies business. Mr. Yeung is involved in the mobile technologies business and tourism and hospitality business. Mr. Wong King Shiu, Daniel is involved in businesses other than the mobile technologies business. Mr. Chan Chi Yuen, Mr. Chan Kee Huen, Michael and Mr. Han Chunjian, who are the independent nonexecutive Directors, are involved in the corporate governance, internal control and providing independent opinions for all business segments of the Company.

The responsibilities of the Connected Selected Employees in the Group are set out as follows:

Name of Connected		Year of services
Selected Employees	Position	up to the LPD	Responsibilities
Mr. Zhang	Chairman and	2 years	Responsible for the Group’s
	Executive Director		overall development, investor
			and public relations, board
			governance and supervision of
			key management issues
Ms. Chu	Chief Executive	3 years 2 months	Responsible for the Group’s
	Officer and		overall business development,
	Executive Director		formulation of growth
			strategies in the Group’s
			mobile technologies business,
			identification and analysis of
			suitable investment
			opportunities, strategic
			partnership discussion and
			monitoring of the Group’s
			continuous sustainability and
			profitability
Mr. Yeung	Executive Director	3 years 2 months	Responsible for the Group’s
			overall strategy and fund
			raising activities as a whole, in
			order to realise the stable
			performance and continuing
			growth of the Group

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LETTER FROM THE BOARD

Name of Connected		Year of services
Selected Employees	Position	up to the LPD	Responsibilities
Wong King Shiu,	Executive Director	6 years 8 months	Responsible for the Group’s
Daniel			strategic planning, business
			development and strategic
			management in relation to
			other business other than
			mobile technologies business
Chan Chi Yuen	Independent Non-	12 years 4 months	Participate in the Board’s
	executive Director		decision-making process and
			provide independent opinions,
			ensure proper functioning of
			the Company’s audit,
			remuneration and nomination
			committees, monitor
			appropriate corporate
			governance and internal
			control of the Group
Chan Kee Huen,	Independent Non-	1 year 1 month	Participate in the Board’s
Michael	executive Director		decision-making process and
			provide independent opinions,
			ensure proper functioning of
			the Company’s audit,
			remuneration and nomination
			committees, monitor
			appropriate corporate
			governance and internal
			control of the Group
Han Chunjian	Independent Non-	1 year 1 month	Participate in the Board’s
	executive Director		decision-making process and
			provide independent opinions
Mr. Sie	Director of certain	2 years 2 months	Responsible for the business
	subsidiaries of the		development of the Group’s
	Company		mobile technologies business
			in the PRC, identification of
			suitable business
			opportunities, conduct of
			commercial negotiations with
			business partners and
			supervision of the business
			operations of certain
			subsidiaries of the Group

Leveraging their professional expertise, solid experience and business network, the new management of the Group has significantly contributed to a series of major developments in connection with the Group’s business transformation, which include (i) the successful acquisition of 30% equity interest of Yota and an exclusive intellectual property licence to

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LETTER FROM THE BOARD

market and sell ‘‘YOTAPHONE’’ in the Greater China region for 7 years as announced in April 2016; (ii) the framework agreement in relation to the strategic cooperation with Shanghai Yuewen Information Technology Co., Ltd. as announced in July 2017; (iii) the launch of the third generation of dual-screen smartphone, Yota 3, in October 2017 at one of the leading online retailers channel JD.com in the PRC; and (iv) the cooperation in relation to the development of the YotaPhone with People’s Government of Tongnan County of Chongqing City in the PRC.

Furthermore, in terms of mobile technologies business, the Connected Selected Employees set up the R&D team in the PRC for developing the mobile technologies business. Apart from the research, marketing and sale of Yota devices in the PRC, Baoli Yota (SZ) has also formed alliances with other content providers such as Shanghai Yuewen (上海閱文), Migu (咪咕), Ireader (掌閱) and JDRead (京東閱讀) to build a mobile reading ecosystem in the PRC market.

Yota 3 is currently sold through the following two distribution channels:

JD.com (京東商城), one of the two most prominent B2C e-commerce platforms in the PRC by transaction volume and revenue, and a member of the Fortune Global 500. As of September 2017, the platform has 266.3 million active users.
Shenzhen Aisidi Co. Ltd. (‘‘Aisidi’’) as the Group’s exclusive offline distributor in the PRC. It has established long and stable strategic partnerships with outstanding mobile phone manufacturers in the PRC and abroad and China Mobile, China Unicom and China Telecom. The number of Aisidi’s customers is more than 100,000. Aisidi has built first-class retail stores to provide better shopping experience in high-end fashion shopping centres in 25 cities of 15 provinces in the PRC.

The Connected Selected Employees assisted the Company in completing the acquisition of a further 10% interest of Yota on 29 March 2018. Further details of the acquisition were set out in the announcements of the Company dated 9 February 2018, 9 March 2018 and 29 March 2018.

During the year ended 31 March 2018, the revenue for the mobile technologies business was approximately HK$40,925,000. The Company is not aware of any business, operation or financial differences of the mobile technologies business between 21 May 2018 (the latest practicable date of the Previous Circular) and the Latest Practicable Date that may affect the Company’s reasons for the Awards set out in this circular.

As at the Latest Practicable Date, the Connected Selected Employees are also exploring the business opportunities with certain large state-owned enterprises to build customised versions of mobile devices for their customers. They are also constantly evaluating other business models such as licensing the technologies to other mobile operators and/or industry players.

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LETTER FROM THE BOARD

The transformation of business of the Company and the development of the mobile technologies business is a very difficult task. The Board is of the view that the contribution of the Connected Selected Employees mentioned above is remarkable.

To enhance the Group’s future sustainability, the Company has been putting in a lot of efforts in building the YotaPhone business in the PRC and overseas in the past 2 years.

Against the backdrop of sluggish global economic conditions and the tensions between the US and the PRC, the Group aims to diversify its business to reduce the negative impact of the current global economy on its financial performance. The Group has strategically shifted its focus from the tourism and hospitality business to the mobile technologies business as it believes that mobile phone and related applications could become the Group’s business growth engine and would bring long-term benefits to the Group.

Due to the slowdown of the region’s economic growth and the growing pressure on operating expenses of the cruise ship, the cruise ship business of the Group underwent a difficult year. The acquisition of We Fly Travel Limited which has an online platform in booking travel products helped to strengthen the Group’s tourism and hospitality business.

For the gamma ray irradiation business of the Group, it is relatively small and there has not been much development in this sector.

Most high technology companies tend to incur losses during their initial stage of development before generating any sustainable profit as they focus on developing new products and building up their market shares, as it was the case in Yota where significant amount of research and development expenses has been incurred since commencement of operation. The Shareholders may assess the value of Yota by referring to the following:

positive comments from the news on YotaPhone
overwhelming response on the launch of Yota 3 in the PRC
the unique dual-screen features of YotaPhone
the cooperation partners that the Company has been engaged with such as Yuewen, Migu, JD etc.
the support from Tongnan Government of Chongqing City
the development of the Yota 3

The talents from the technology sector are difficult to find. The Company should provide a better remuneration package to those employees for the purpose of retaining them. The Company considers that the grant of the Awarded Shares to them will further align their interests as key management members and Shareholders, and would further motivate them to devote their efforts to the Group’s development.

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LETTER FROM THE BOARD

Furthermore, there will not be any actual cash outflow by the Group under the award of the Awarded Shares to provide incentives to the Selected Employees. In this regard, the Directors consider that the terms and conditions of the Award are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

Further information

Some recent developments of the Group and public disclosures made by the Company involved some of the Connected Selected Employees. This might or might not have affected the voting intention of the Independent Shareholders on the Award of the Connected Awarded Shares to the Connected Selected Employees at the Previous SGM. Nonetheless, the Company has included such information below for the Independent Shareholders’ consideration for the purpose of the upcoming SGM:

(1) On 4 June 2018, China Baoli Technologies Services Limited, a wholly-owned subsidiary of the Company, entered into a sale and purchase agreement with Trinity World, a company wholly owned by Mr. Sie, in relation to further acquisition of 25.1% equity interest in Yota, for a consideration of US$60,000,000 (equivalent to HK$471,660,000) (the ‘‘VSA Consideration’’) which will be satisfied by the allotment and issue of 8,232,850,410 Pre-Adjusted Shares or 823,285,041 Adjusted Shares on the completion date at the issue price of HK$0.05729 per Pre-Adjusted Share or HK$0.5729 per Adjusted Share.

To the knowledge of the Company, Mr. Sie was (and is still) a director of Yota before joining the Group and he did not work in any shareholder of Yota before joining the Group. The Company is of the view that Mr. Sie’s directorship in Yota and his role in the Group do not indicate any conflict of interest issues.

To the knowledge of the Company, there were ongoing negotiations between Mr. Sie and Yota Holdings Limited, the then shareholder holding 25.1% equity interest of Yota, for the acquisition. The Company became aware of the then shareholder’s intention to sell 25.1% equity interest in Yota in July/August 2017. Mr. Sie purchased the 25.1% equity interest in Yota from the then shareholder of Yota in end April/early May 2018. Mr. Sie’s acquisition cost of 25.1% equity interest in Yota was approximately US$54,000,000.

The Company has been in discussions with Xinhua News Agency (‘‘Xinhua’’), the official state-run press agency of the PRC to launch a new e-commerce and advertising platform via distributing customized versions of mobile devices for their customers. Xinhua is the biggest and most influential media organization in China, and the largest news agency in the world in terms of correspondents worldwide. Xinhua is a ministry level institution subordinate to the Chinese central government, and is the highest ranking state media organization in the country alongside the People’s Daily.

Xinhua communicated its intention to require the Company to have control in Yota in or around early May 2018. In order to consolidate the cooperation with Xinhua, the Company started the negotiation for the VSA at the beginning of

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LETTER FROM THE BOARD

May 2018. Through the ability to control Yota, the Company can have a larger capacity to cooperate with Xinhua which is expected to generate a significant business volume to the Group’s mobile technologies business and bring greater value to the Company and the Shareholders.

The Group entered into the sale and purchase agreement in relation to the VSA with Trinity World on 4 June 2018. The VSA Consideration is approximately 11% higher than Mr. Sie’s acquisition cost. The VSA Consideration was determined after arm’s length negotiations between Trinity World and the Group with reference to the following:

(i) the estimated current valuation of the Yota Group of approximately US$239,000,000;
(ii) the historical commitment to the Yota Group by the Group amounting to approximately US$102,286,000 in aggregate including the cost of acquisition by the Group of 40% in aggregate of the issued share capital of Yota. Based on such historical commitment, the consideration for 25.1% equity interest in Yota should have been approximately US$64,185,000 (in other words, US$4,185,000 more than the VSA Consideration);
(iii) the business prospects of Yota;
(iv) YOTA is an international brand and is well-known for having the dualscreen mobile devices technologies. The Group successfully launched Yota 3 in China in October 2017 with the help of R&D team of Yota. The Company believes that YotaPhone and the business of Yota have great prospect; and
(v) the means of settlement of the VSA Consideration in full by the allotment and issue of the VSA Consideration Shares. The payment by way of allotment and issue of VSA Consideration Shares allows the Company to preserve its cash flow.

Based on the above, the Directors consider that the VSA Consideration is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

As at the Latest Practicable Date, the VSA was still in process. The Listing Department informed the Company that based on the information provided, it has made a ruling in its decision letter dated 27 June 2018 that the VSA constitutes a reverse takeover and an attempt to achieve a listing of Yota and a means to circumvent the new listing requirements under Rule 14.06(6) of the Listing Rules. The Company submitted a review application to the Listing Committee on 9 July 2018 to have such ruling reviewed by the Listing Committee pursuant to Rule 2B.06(1) of the Listing Rules.

Further details of the VSA are set out in the announcements of the Company dated 5 July 2018 and 9 July 2018. The Company will publish further announcements in relation to the VSA as and when appropriate.

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LETTER FROM THE BOARD

As mentioned in this circular, the Company granted the Awards to the Selected Employees according to their seniority and contributions to the mobile technologies business and the grant of the Awarded Shares is to recognise the Selected Employees for their past contributions as well as to incentivise their continual supports to the Group and their efforts in promoting the Group’s longterm growth and development. The Company granted the Awards to Mr. Sie for the same reasons and on the same basis. The factors taken into account by the Company in granting the Awards to Mr. Sie have been fully and clearly set out in this circular. The Board is of the view that the grant of the Connected Awarded Shares to Mr. Sie is fair and reasonable and is in the interest of the Company and the Shareholders as a whole. The Board’s view would not be affected by the VSA.

(2) As set out in the annual report of the Company for the year ended 31 March 2018 published on the websites of the Company and the Stock Exchange, Mr. Yeung, an executive Director, and Ms. Lui Lai Yan (‘‘Ms. Lui’’), the spouse of Mr. Yeung, did not comply with the requirement under rule A.3(a) and B.8 of the Model Code. To the best knowledge of the Company, Mr. Yeung sold an aggregate of 40,000,000 Pre-Adjusted Shares to the market during blackout period (from 29 April 2017 to 28 June 2017) on 5 May and 17 May 2017, Ms. Lui bought an aggregate of 7,725,000 Pre-Adjusted Shares from the market during blackout period (from 28 October 2017 to 29 November 2017) on 2, 9, 10, 13, 16, 17, 23, 24 and 28 November 2017. Such dealings were made in breach of rule A.3(a) and B.8 of the Model Code.

On the other hand, to the best knowledge of the Company, during the period from 21 December 2016 to 29 September 2017, Mr. Yeung bought an aggregate of 107,125,000 Pre-Adjusted Shares and sold an aggregate of 254,155,172 PreAdjusted Shares, resulting in a net disposal of 147,030,172 Pre-Adjusted Shares. During the period from 29 November 2016 to 22 September 2017, Ms. Lui bought an aggregate of 20,475,000 Pre-Adjusted Shares and sold an aggregate of 83,575,000 Pre-Adjusted Shares, resulting in a net disposal of 63,100,000 PreAdjusted Shares. Such dealings were made in breach of rule B.8 of the Model Code.

Mr. Yeung reported that the non-compliance of rule A.3(a) and B.8 of the Model Code was inadvertent and he had no intention whatsoever to commit such breaches. Mr. Yeung has confirmed that he will apply closer scrutiny towards rule A.3(a) and B.8 of the Model Code to avoid committing similar breaches in the future. As a remedial action, Mr. Yeung proposed that he will employ an assistant who will be responsible for the compliance in the Model Code, as well as the compliance with the disclosure of interests obligations under the SFO.

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LETTER FROM THE BOARD

term growth and development. The Company granted the Awards to Mr. Yeung for the same reasons and on the same basis. The factors taken into account by the Company in granting the Awards to Mr. Yeung have been fully and clearly set out in this circular. The Board is of the view that the grant of the Connected Awarded Shares to Mr. Yeung is fair and reasonable and is in the interest of the Company and the Shareholders as a whole. The Board’s view would not be affected by his breach of the Model Code.

(3) As set out in the annual report of the Company for the year ended 31 March 2018 published on the websites of the Company and the Stock Exchange, Mr. Zhang did not comply with the requirement under rule B.8 of the Model Code when his controlled company, One Faith Investments Limited, bought 66,775,000 PreAdjusted Shares between 6 March and 28 April 2017. Mr. Zhang reported that he was well aware of the requirement under rule B.8 of the Model Code, however the aforementioned dealings were carried out by his staff without his prior instructions and approvals. Mr. Zhang has confirmed that he will act in strict compliance with rule B.8 of the Model Code in the future.

As a remedial action, Mr. Zhang will handle his accounts in person or ask the staff to handle his accounts only under his instructions.

As mentioned in this circular, the Company granted the Awards to the Selected Employees according to their seniority and contributions to the mobile technologies business and the grant of the Awarded Shares is to recognise the Selected Employees for their past contributions as well as to incentivise their continual supports to the Group and their efforts in promoting the Group’s longterm growth and development. The Company granted the Awards to Mr. Zhang for the same reasons and on the same basis. The factors taken into account by the Company in granting the Awards to Mr. Zhang have been fully and clearly set out in this circular. The Board is of the view that the grant of the Connected Awarded Shares to Mr. Zhang is fair and reasonable and is in the interest of the Company and the Shareholders as a whole. The Board’s view would not be affected by his breach of the Model Code.

Financial effects of the grant of the Connected Awarded Shares

The financial effect on the Group’s consolidated financial statements is based on the fair value of approximately HK$126.52 million as at the date of grant in respect of the new Connected Awarded Shares (except for the financial effect on cash flow). Details of the financial effect are set out below:

Earnings

According to the annual report of the Company for the year ended 31 March 2018, the Group recorded consolidated audited net loss attributable to the owners of the Company of approximately HK$294.51 million for the year ended 31 March 2018. The allotment and issue of the Connected Awarded Shares will further increase the net loss of the Group after

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LETTER FROM THE BOARD

deducting the expenses relating to the allotment and issue of the Connected Awarded Shares of approximately HK$49.66 million in aggregate, which is calculated using the closing price of the Adjusted Shares of HK$0.55 per Adjusted Share as at the Latest Practicable Date.

Net asset value

According to the annual report of the Company for the year ended 31 March 2018, the Group’s net asset value attributable to owners of the Company of approximately HK$884.17 million and the Group’s net asset value per Pre-Adjusted Share was approximately HK$0.0251. Upon the allotment and issue of the Connected Awarded Shares, the share capital and the reserves of the Group would increase by the amount equivalent to the fair value in respect of the Connected Awarded Shares, and the same amount will be recognised in the Group’s consolidated statement of profit and loss as expenses. The total assets of the Company would remain unchanged.

The consolidated net asset value per Pre-Adjusted Share attributable to owners of the Company would decrease to approximately HK$0.0237 subject to all other things remaining unchanged.

Cash flow

According to the annual report of the Company for the year ended 31 March 2018, the Group had cash and cash equivalents of approximately HK$33.271 million as at 31 March 2018. The allotment and issue of the Connected Awarded Shares will have no effect on the cash flow of the Group other than the expenses relating to the allotment and issue of the Connected Awarded Shares.

LISTING RULES IMPLICATION

As 8 Connected Selected Employees are Directors and/or directors of certain subsidiaries of the Company and accordingly connected persons (as defined in Chapter 14A of Listing Rules) of the Company, the allotment and issue of 90,290,000 Adjusted Shares to the Connected Selected Employees under the Share Award Scheme shall constitute a connected transaction on the part of the Company under Chapter 14A of the Listing Rules and shall be subject to, among others, the approval by the Independent Shareholders at the SGM of the resolutions (the full text of which is set out in the notice of the SGM at page 52 to 54 of this circular) on the grant of the Specific Mandate to the Directors in respect of the relevant Awarded Shares to the relevant Connected Selected Employee and the grant of Connected Awarded Shares to the relevant Connected Selected Employee.

Pursuant to the Listing Rules, the resolutions proposed at the SGM will be taken by way of poll and an announcement on the poll vote results of the SGM will be made by the Company after the SGM.

Pursuant to Rule 14A.36 of the Listing Rules, any Shareholder with a material interest in the relevant connected transaction is required to abstain from voting on the relevant resolutions at the SGM.

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LETTER FROM THE BOARD

Pursuant to Chapter 14A of the Listing Rules, the Connected Selected Employees and their associates held a total of 542,249,438 Adjusted Shares, representing approximately 15.394% of the Adjusted Shares in issue as at the Latest Practicable Date, are required to abstain from voting on all the resolutions at the SGM to approve the Specific Mandate in respect of the Connected Awarded Shares and the grant of the Connected Awarded Shares.

Save for the above, to the best of the Directors’ knowledge, information and belief, no other Shareholders has a material interest in the Award of Connected Awarded Shares and accordingly none of them is required to abstain from voting on the resolutions to approve the allotment and issue of the Connected Awarded Shares and the Award of the Connected Awarded Shares at the SGM.

All Directors have abstained from voting on the relevant board resolution on the Award of the Awarded Shares to them under the Share Award Scheme. Pursuant to Rule 13.39(6)(c) of the Listing Rules, in the event that all independent non-executive directors of an issuer have a material interest in the relevant transaction or arrangement, no independent board committee can be formed.

As all of the independent non-executive Directors are Selected Employees, the Company is of the view that each of the independent non-executive Directors is regarded as having a material interest in the Award of the Connected Awarded Shares under the Share Award Scheme. Accordingly, (i) no independent board committee has been formed, and (ii) the Independent Financial Adviser has been appointed to only advise the Independent Shareholders in relation to the Award of the Connected Awarded Shares to the Connected Selected Employees.

SGM

A notice convening the SGM to be held on Monday, 8 October 2018 at 3: 00 p.m. at Monaco Room, Basement 1, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong is set out on pages 52 to 54 of this circular. Pursuant to Rule 13.39(4) of the Listing Rules, any vote of shareholders at a general meeting must be taken by poll except where the chairman, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. Accordingly, all resolutions will be put to vote by way of poll at the SGM. An announcement on the poll vote results will be made by the Company after the SGM in the manner prescribed under Rule 13.39(5) of the Listing Rules.

A form of proxy for the SGM is also despatched together with this circular. Whether or not you are able to attend the SGM, you are requested to complete, sign and return the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the branch share registrar of the Company in Hong Kong, Tricor Secretaries Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the enclosed form of proxy will not preclude you from attending and voting in person at such meeting or any adjournment meeting should you so wish.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors consider that the allotment and issue of the Connected Awarded Shares and the grant of the Connected Awarded Shares to the Connected Selected Employees is fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the SGM to approve the grant of the Specific Mandate for the allotment and issue of the Connected Awarded Shares, and the grant of the Connected Awarded Shares to the Connected Selected Employees.

Your attention is drawn to the letter from Lego, which contains its advice to the Independent Shareholders in relation to the Award of the Connected Awarded Shares and the principal factors and reasons considered by it in arriving at its opinions. The text of the letter from Lego is set out on pages 32 to 46 of this circular.

GENERAL

Your attention is drawn to the general information set out in the appendix to this circular.

Yours faithfully By order of the Board China Baoli Technologies Holdings Limited Zhang Yi Chairman

The English translation of Chinese names or words are for information purpose only, and should not be regarded as the official English translation of such Chinese names or words.

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

The following is the full text of the letter of advice from Lego Corporate Finance Limited, the independent financial adviser to the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular, setting out its advice to the Independent Shareholders in respect of the issue of new Shares to connected persons under the Share Award Scheme.

19 September 2018

To the Independent Shareholders

Dear Sirs or Madams,

CONNECTED TRANSACTION ISSUE OF NEW SHARES TO CONNECTED PERSONS UNDER THE SHARE AWARD SCHEME

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Shareholders in respect of the issue of Connected Awarded Shares to the Connected Selected Employees, details of which are set out in the ‘‘Letter from the Board’’ (the ‘‘Letter from the Board’’) contained in the circular issued by the Company to the Shareholders dated 19 September 2018 (the ‘‘Circular’’), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

On 26 January 2018, the Board resolved to award the Awarded Shares to certain Connected Selected Employees under the Share Award Scheme and the grant of the Awards to the 9 Connected Selected Employees was duly passed by the Independent Shareholders by way of poll in accordance with the requirements of the Listing Rules at the Previous SGM convened and held on 12 June 2018. As at the Latest Practicable Date, the allotment and issue of Awarded Shares to the Connected Selected Employees pursuant to the Previous Specific Mandate has not yet been completed.

Some recent developments of the Group and public disclosures made by the Company subsequent to the despatch of the Previous Circular involved certain Connected Selected Employees. The information in relation to such recent development and public disclosures might or might not have affected the voting intention of the Independent Shareholders on the Award of the Connected Awarded Shares to the Connected Selected Employees at the Previous SGM. Nonetheless, ordinary resolutions will be proposed again at the SGM to approve the Award of the Connected Awarded Shares to the Connected Selected Employees. Mr. Wong Hoi Kuen, who used to be one of the Connected Selected Employees, resigned as director of the Company with effect from 16 July 2018. The relevant Awards made to him automatically lapsed forthwith.

As 8 Connected Selected Employees are Directors and/or directors of certain subsidiaries of the Company and accordingly connected persons of the Company, the allotment and issue of 90,290,000 Adjusted Shares to the Connected Selected Employees

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

under the Share Award Scheme shall constitute a connected transaction on the part of the Company under Chapter 14A of the Listing Rules and is subject to the reporting, announcement and Independent Shareholders’ approval requirement.

Pursuant to Rule 14A.36 of the Listing Rules, any Shareholder with a material interest in the relevant connected transaction is required to abstain from voting on the relevant resolution at the SGM, as such, the Connected Selected Employees and their associates held 542,249,438 Adjusted Shares, representing approximately 15.394% of the Adjusted Shares in issue as at the Latest Practicable Date, are required to abstain from voting on all the resolutions at the SGM to approve the Specific Mandate in respect of the Connected Awarded Shares and the grant of the Connected Awarded Shares.

As the independent financial adviser, our role is to give an independent opinion to the Independent Shareholders.

As at the Latest Practicable Date, Lego did not have any relationships or interests with the Company that could reasonably be regarded as relevant to the independence of Lego. In the last two years, Lego has acted as the independent financial adviser to the Independent Shareholders in relation to the Award of the Connected Awarded Shares to the Connected Selected Employees. For further details, please refer to the Previous Circular. Apart from normal professional fees paid or payable to us in connection with this appointment as the independent financial adviser, no arrangement exists whereby we have received or will receive any fees or benefits from the Company. Accordingly, we are qualified to give independent advice in respect of the issue of Connected Awarded Shares to the Connected Selected Employees and the transactions contemplated thereafter.

BASIS OF OUR OPINION

In formulating our opinion and recommendation, we have relied on (i) the information and facts contained or referred to in the Circular; (ii) the information provided by the Group and its advisers; (iii) the opinions expressed by and the representations of the Directors and the management of the Group; and (iv) our review of the relevant public information. We have assumed that all the information provided and representations and opinions expressed to us or contained or referred to in the Circular were true, accurate and complete in all respects as at the date thereof and may be relied upon. We have also assumed that all statements contained and representations made or referred to in the Circular are true at the time they were made and continue to be true as at the date of the Circular and all such statements of belief, opinions and intention of the Directors and the management of the Group and those as set out or referred to in the Circular were reasonably made after due and careful enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors, the management of the Group, and/or the advisers of the Company. We have also sought and received confirmation from the Directors that no material facts have been withheld or omitted from the information provided and referred to in the Circular and that all information or representations provided to us by the Directors and the management of the Group are true, accurate, complete and not misleading in all material respects at the time they were made and continue to be so until the Latest Practicable Date. The Company

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

shall inform the Independent Shareholders as soon as possible if there is any material change to such information in accordance with Rule 13.80 of the Listing Rules on or before the SGM.

We consider that we have reviewed the relevant 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 any independent verification of the information provided, representations made or opinion expressed by the Directors and the management of the Group, nor have we conducted any form of in-depth investigation into the business, affairs, operations, financial position or future prospects of the Company or any of their respective subsidiaries or associates.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our recommendation, we have taken into account the principal factors and reasons:

Background of and reasons for the Award of the Connected Awarded Shares

1.1. Information on the Group

The Company is principally engaged in mobile technologies business, tourism and hospitality business, gamma ray irradiation service, and securities trading and investment.

The following table is a summary of the audited financial information of the Group for the financial years ended 31 March 2017 and 2018, as extracted from the annual report of the Company for the year ended 31 March 2018 (the ‘‘2018 Annual Report’’).

	For the year	ended	Year-
	31 March		on-year
	2018	2017	change (%)
	HK$’000	HK$’000
	(Audited)	(Audited)
Turnover	53,482	37,343	43.2
— Gamma ray irradiation services	5,090	5,315	(4.2)
— Tourism and hospitality business	7,467	32,028	(76.7)
— Mobile technologies business	40,925	—	N/A
Loss for the year	299,694	379,469	21.0

As illustrated in the table above, the turnover of the Group amounted to approximately HK$53.5 million for the year ended 31 March 2018, representing an increase of approximately 43.2% as compared to that of approximately HK$37.3 million for the year ended 31 March 2017. Such increase was mainly due to the increase in revenue generated from mobile technologies business from nil to approximately

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

HK$40.9 million with the launch of Yota 3 at the end of October 2017, being mainly offset by the decrease in the revenue of approximately HK$24.6 million in tourism and hospitality business.

The turnover of tourism and hospitality business substantially decreased by approximately 76.7% from approximately HK$32.0 million for the year ended 31 March 2017 to approximately HK$7.5 million for the year ended 31 March 2018. According to the 2018 Annual Report, such decrease was mainly attributable to the wound down of the cruise ship operation and suspension of its passenger service of the Group.

The Group recorded net loss of approximately HK$299.7 million for the year ended 31 March 2018, representing a decrease of approximately 21.0% as compared to that of approximately HK$379.5 million for the year ended 31 March 2017. According to the 2018 Annual Report, the decrease in net loss was mainly attributable to the decrease in loss of securities trading and investment business of approximately HK$138.8 million for the year ended 31 March 2018 as compared to the year ended 31 March 2017.

According to the 2018 Annual Report, the Group will stay focused on the mobile technologies business as the Directors believe that mobile phone and related applications could improve the Group’s growth and profitability, and deliver longterm benefits to the Group. China’s smartphone market remains the largest in the world, while the competition has become increasingly fierce. In such a competitive landscape, mobile phones with innovative technologies and differentiated features would stand out in the market and achieve business success. The Group will steadily increase its investment in research and development and strive to make technical breakthroughs so as to continuously improve the user experience. The Group will also develop comprehensive marketing strategies to increase its market share in the Greater China and explore the promising business opportunities from all over the world.

1.2. Reasons for the award of the Connected Awarded Shares

According to the Letter from the Board, the Company has allocated significant resources to the development of mobile technologies business since the acquisition of 30% equity interest in Yota, a company engaged in the design, research and development, production and marketing and sales of smartphones and other connectivity devices and was granted an exclusive intellectual property license to market and sell any connectivity devices and ancillary products in the Greater PRC. Pursuant to the Intellectual Property License Agreement, the Company has been granted an exclusive license to market and sell any connectivity devices and ancillary products in the Greater PRC region. The Yota team in Russia is responsible for the technology development of the EPD screens and the integration of the dual screen functions. The Intellectual Property License Agreement also specifies that Yota has to dedicate a project management and technical support team to assist in the development and manufacturing of Yota 3. The Company and its PRC subsidiaries are mainly

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

responsible for the funding, localization, ODM, supply chain management, identifications of suitable content partners and the sales and marketing of Yota 3 in the PRC market.

According to the Letter from the Board, we understand that the Selected Employees have made significant contributions to the development of the mobile technologies business of the Company, from the development of a new generation of the dual screen phones to the sales and marketing and strategic cooperation with various partners. Some of the Selected Employees are from Yota Russia and Finland who work as consultants to assist in the research and development of dual-screen smartphone for the PRC market. The IPs and technologies surrounding the dualscreen feature of the smartphone is a unique technology with strong technical barrier.

As discussed with the management of the Company, the success of mobile technologies business is not purely subject to the success of hardware and physical attributes, it also requires the support of software and after sales services to ensure security, reliability and continuity of the devices, which require continual support by the manufacturer with ongoing firmware and security updates. As such, the Award will provide incentives to the Selected Employees and to retain talents for the continual operation and development of the Group.

According to the Letter from the Board, after the launch of Yota 3 in the PRC, the Company has been deeply encouraged by the potential of Yota 3 in the PRC market and the purchasing power of the Chinese buyers. The Group is now even more confident about the prospect of YotaPhone and Yota. The efforts of the Group are coming to fruition and the Group is beginning to yield favourable financial performance in its mobile technologies business. Yota is an international brand and is well-known for having the dual-screen mobile devices technologies. The Company believes that YotaPhone also has great prospect in other parts of the world. Yota currently operates with a licensing model as its business strategy where royalties is its main income source. Moreover, most high technology companies tend to incur losses during their initial stage of development before generating any sustainable profit as they focus on developing new products and building up their market shares, as it was the case in Yota where significant amount of research and development expenses have been incurred since its commencement of operation. The Group considers that as Yota 3 was launched at the end of October 2017, it would take time to build brand recognition in the PRC’s competitive smartphone industry. The financial performance of mobile technologies business has been improving, and the Group needs to retain its talented employees who can assist the Group to continue to expand its market share in the PRC and make the most out of the exclusive intellectual property license to market and sell the Yota 3 and ancillary products in the PRC.

Moreover, even though the mobile technologies business segment loss was approximately HK$141.6 million for the year ended 31 March 2018, the Group believes that Yota has high growth potential and ubiquitous demand with the increasing popularity of reading on mobile devices and the Group will continue to put its main focus in the mobile technologies business as it believes that mobile phone and

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

related applications could improve the Group’s profitability and would deliver longterm benefits to the Group. Given the current gloomy business environment of the existing businesses of the Group, the Group considers that the transformation of business to the mobile technologies business is vital to the survival and future development of the Group. We noted that the Group entered into distribution agreements with Shenzhen Aisidi Co. Ltd. (‘‘Aisidi’’) and JD.com (collectively the ‘‘Distribution Agreements’’), pursuant to which Aisidi intends to order a targeted minimum order quantity of Yota 3 and JD.com, one of the leading online retailers channel in the PRC, agrees to distribute YotaPhone. We have also conducted independent research on Yota 3 and noted that there are more than 5,200 positive customers reviews posted on JD.com. We consider these are references to the forthcoming financial performance generated by Yota 3. According to the 2018 Annual Report, mobile technologies business is the main revenue stream for the Group, comprising approximately 76.52% of the total revenue of the Group.

The Company considers that the Award of the Awarded Shares to the Selected Employees is to recognise and reward their contributions and therefore retain talents, which is crucial for the long-term health and success of the Group. We understand from the Company that the Share Award Scheme forms part of the incentive schemes of the Group and the number of Awarded Shares was determined according to their seniority and contributions to the mobile technologies business and expected future contributions by the Connected Selected Employees. The grant of Awarded Shares has been reviewed and approved by the Remuneration Committee.

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

The Connected Selected Employees consist of 8 connected persons, including 4 executive Directors, 3 independent non-executive Directors, and 1 director of certain subsidiaries of the Company. Set out below summarises the information of the Connected Selected Employees and the Connected Awarded Shares to be granted to them:

			Approximate
			percentage of
		Market value	Connected
		of the	Awarded
	Number of	Connected	Shares to the
	Connected	Awarded	total issued
	Awarded	Shares as at	Shares as at
Connected Selected Employees	Shares	LPD	the LPD
		(Appro. HK$)
		(Note)
Mr. Zhang	80,000	44,000	0.002%
Executive Director
Ms. Chu	30,000,000	16,500,000	0.852%
Executive Director
Mr. Yeung	30,000,000	16,500,000	0.852%
Executive Director
Wong King Shiu, Daniel	80,000	44,000	0.002%
Executive Director
Chan Chi Yuen	80,000	44,000	0.002%
Independent Non-executive Director
Chan Kee Huen, Michael	25,000	13,750	0.001%
Independent Non-executive Director
Han Chunjian	25,000	13,750	0.001%
Independent Non-executive Director
Sie Winston	30,000,000	16,500,000	0.852%
Director of certain subsidiaries of
the Company

Note: The market values of the Connected Awarded Shares are calculated based on the closing market price per Share of HK$0.55 as at LPD.

All of the Connected Selected Employees have extensive experience in various industries. The Selected Employees are instrumental to make the transformation of the Company to become more technology focused and they could lead the development of the Group in the best interests of the Company and the Shareholders. In particular, these Connected Selected Employees possess corporate finance, investment, management and accounting expertise to enable the Group to seek for financing in capital market to develop its mobile technologies business. In particular, as disclosed in the Letter from the Board, the good relationship of certain of the Connected Selected Employees with the telecommunications operators can bring in opportunities

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

to the Group to enhance the future sales and marketing of the dual-screen devices. The Connected Selected Employees’ expertise in strategic investment and business development can also bring in new investment opportunities to the Group.

We note that among Connected Selected Employees, Ms. Chu, Mr. Yeung and Mr. Sie are awarded with larger number of Connected Awarded Shares than other Connected Selected Employees. Ms. Chu, Mr. Yeung and Mr. Sie joined the Group in July 2015, July 2015 and June 2016, respectively. We understand from the Company that Ms. Chu has past experience in mobile technologies, and despite Mr. Yeung and Mr. Sie do not have experience in the mobile technologies business prior to joining the Group, we were advised by the Company that they have made remarkable contributions to the development of the mobile technologies business together with other members of the management team and staff, including their involvement in (i) the successful acquisition of 30% equity interest of Yota and an exclusive intellectual property licence to market and sell ‘‘YOTAPHONE’’ in the Greater China Region for 7 years announced in April 2016; (ii) the framework agreement in relation to the strategic cooperation with Shanghai Yuewen Information Technology Co., Ltd. as announced in July 2017; (iii) the launch of the third generation of dual-screen smartphone, Yota 3, in October 2017 at one of the leading online retailers channel JD.com in the PRC; and/or (iv) the cooperation in relation to the development of the YotaPhone with People’s Government of Tongnan County of Chongqing City in the PRC (‘‘Tongnan Government’’). Furthermore, in terms of mobile technologies business, the Connected Selected Employees set up the R&D team in China for developing the mobile technologies business. Apart from the research, these Connected Selected Employees were involved in the marketing and sale of Yota devices in China, and Baoli Yota (SZ) has also formed alliances with other content providers such as Shanghai Yuewen (上海閱文), Migu (咪咕), Ireader (掌閱) and JDRead (京東閱讀) to build a mobile reading ecosystem in the China market. According to the Letter from the Board, the Group’s transformation into the mobile technologies business is essential to the Group’s future sustainability, given the gloomy performance of the Group’s tourism and hospitality business. As such, the contributions made by the new management have not just growth potentials but have also re-engineered the Group in broader and long-term context by introducing a more competitive strategic focus and positioning of the Group’s businesses.

We have reviewed Ms. Chu’s and Mr. Yeung’s professional background information set out in the 2018 Annual Report, and a corporate brochure provided by the Company, with Mr. Sie’s professional background information therein. After considering that (i) Ms. Chu has extensive experience in the venture capital, direct investment, investment banking and business operations; (ii) Mr. Yeung has extensive experience and track records in corporate restructuring and rescuing, consulting, corporate finance and business negotiation with a well-versed business and network and (iii) Mr. Sie has a strong network in PRC and Hong Kong markets and extensive experience in equity and fund business, the Company considers the new management team is capable of adding value to the Company’s business by leveraging their professional expertise, experience and business network, and therefore retention of

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

whom is crucial to the future development of the Group. Details of responsibilities and contributions of the Connected Selected Employees in the Group are set out in the Letter from the Board.

Ms. Chu, Mr. Yeung and Mr. Sie are currently in charge of executive functions in the Company or its subsidiaries and they are the key personnel providing support for business development and daily operations of the Group. Their expertise and experience will be valuable and essential to the future development of the Group. The Company considers the progress of the transformation is vital to the survival and further development of the Group. The success of the transformation depends very much on the contribution of those three directors. Therefore, they have been granted Awarded Shares that are significantly higher than other Selected Employees.

According to the representation of the management, Ms. Chu, Mr. Yeung and Mr. Sie have significantly contributed to a series of major developments in connection with the Group’s business transformation, of which Ms. Chu and Mr. Yeung were involved in the successful acquisition of 30% equity interest of Yota and an exclusive intellectual property licence to market and sell ‘‘YOTAPHONE’’ in the Greater PRC Region for 7 years since 2016 and/or has assisted the Company in completing the acquisition of a further 10% interest of Yota on 29 March 2018.

Ms. Chu, Mr. Yeung and Mr. Sie were significantly involved in the originating, planning and negotiating of the execution of the agreements by using their network and extensive experience in investment, equity and business negotiation. Apart from the Distribution Agreements as mentioned above, we have also reviewed certain strategic cooperation agreements, such as the framework agreement with Shanghai Yuewen Information Technology Co., Ltd., Migu Digital Media Co. Ltd. and Yulong Computer Communication Technology (Shenzhen) Co., Ltd., in connection with formation of alliances with the content providers to build a mobile reading ecosystem in the PRC market.

In addition, building up a mobile technologies business is not an easy task and it requires a lot of funding to support the expansion of the business. With Ms. Chu’s, Mr. Yeung’s and Mr. Sie’s background, they could assist the Company in fund raising by looking for and meeting with different strategic and financial partners in order to explore collaboration and cooperation opportunities. According to the announcement of the Company on 21 March 2017, the Company placed new shares under general mandate and the net proceeds of such was approximately HK$98,002,450 (the ‘‘Placing’’). The Company has used the proceeds from such placing to develop the mobile technologies business, of which approximately HK$53.4 million and HK$6.0 million has been used on the research and development and sales and marketing of Yota 3, respectively. We have also reviewed the investment agreement with Tongnan Government, in which the Tongnan Government agreed to co-financing with the Company to establish a high-end production base for Yota phone with planned investment sum of RMB1 billion. As advised by the Directors, the Placing and the agreement with Tongnan Government, leveraging the background experience of Ms.

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

Chu, Mr. Yeung and Mr. Sie, are initiated and negotiated and completed by them, and they expect the investment in mobile technologies business will stimulate the sales of Yota 3.

In addition, we understand from the Company that the reason of issuing the Connected Awarded Shares to independent non-executive Directors is to express the Company’s gratitude towards their valuable contributions to the Company. We also note that Mr. Chan Chi Yuen is awarded with 80,000 Connected Awarded Shares, whilst Mr. Chan Kee Huen, Michael and Mr. Han Chunjian are awarded with 25,000 Connected Awarded Shares respectively. We further enquired the Company in this regard and are given to understand that the number of Connected Awarded Shares for Mr. Chan Kee Huen, Michael and Mr. Han Chunjian were arrived on a pro-rata basis and rounded to 25,000 Adjusted Shares, since they were appointed by the Group in August 2017, while Mr. Chan Chi Yuen has served as independent non-executive Director for the year ended 31 March 2017.

We have also discussed with the management of the Company regarding the award of the Awarded Shares as an incentive scheme. According to the management of the Company, they have considered several methods of providing incentives to the Selected Employees, including but not limited to performance bonus. We understand from the Company that as the Company’s mobile technologies business is still at the developing stage, the Company needs to maintain a stable and large cashflow to continuously expand the business. Therefore, after careful consideration of the various alternatives, the Company considers the award of the Awarded Shares to be the most appropriate. As opposed to the other alternatives, it will enable the Company to prevent cash outflow while allowing added incentives to the Selected Employees to be in line with the Shareholders. In addition, the economic benefits of the award of the Awarded Shares are dependent on the improvement in the performances of the Group and hence the Selected Employees will benefit when all the other Shareholders also benefit. As such, the Directors are of the view that the award of the Awarded Shares will further align the interests of the Selected Employees with the Company together with the Shareholders.

In view of the foregoing reasons and possible benefits of the award of the Awarded Shares to the Selected Employees, we are of the opinion that the award of the Awarded Shares to the Selected Employees is in the interests of the Company and the Shareholders as a whole.

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

2. Principal terms of the award of the Connected Awarded Shares

The grant of the Connected Awarded Shares to the Connected Selected Employees shall be subject to (a) the grant of the listing approval by the Stock Exchange in respect of the Connected Awarded Shares; and (b) the approval by the Independent Shareholders at the SGM in respect of the issue and allotment of the Connected Awarded Shares and the Specific Mandate.

(a) Vesting period of the Connected Awarded Shares

All the Connected Awarded Shares shall vest upon the allotment and issue of the Connected Awarded Shares. Upon issue and allotment of the new Shares, the independent Trustee will hold the new Shares in trust for the Connected Selected Employees and such new Connected Awarded Shares shall be transferred to the Connected Selected Employees at nil consideration.

(b) Lock-up period of the Connected Awarded Shares

Apart from two independent non-executive Directors, the Connected Awarded Shares of all of the Connected Selected Employees are subject to lock up, and they shall undertake to the Company that (i) from the issue date to the date falling six months after the issue date of the Connected Awarded Shares (both dates inclusive) (the ‘‘First Six month Period’’), each of them shall not transfer or dispose of the Connected Awarded Shares held by each of them; and (ii) from the next day immediately after the First Six-month Period to the date falling twelve months after the issue date of the Connected Awarded Shares (both dates inclusive), each of them shall not transfer or dispose of 50% of the Connected Awarded Shares held by each of them.

(c) Market price of the Connected Awarded Shares

Based on the closing price of HK$1.40 per Adjusted Share (after taking into consideration the effect of the Share Consolidation) as quoted on the Stock Exchange as at 26 January 2018, being the date of the Board resolved to approve the award of the Connected Awarded Shares, the aggregate value of the Connected Awarded Shares is approximately HK$126.4 million.

Based on the closing price of HK$0.55 per Adjusted Share as at the LPD, the aggregate value of the Connected Awarded Shares is approximately HK$49.66 million.

No fund will be raised by the Company as a result of the issue and allotment of the Connected Awarded Shares.

3. Assessment of fairness and reasonableness of the principal terms

To assess the fairness and reasonableness of the terms of the issue and allotment of the Connected Awarded Shares, we have, to our best effort and knowledge, identified 10 comparable companies which are listed on the Main Board of the Stock Exchange and had

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

announced the grant of awarded shares to their respective employees and/or directors which include connected persons in the four months period immediately before the Board resolved to grant the Awarded Shares (i.e. period from 1 October 2017 to 26 January 2018). We consider that such period represents the market norm of comparable companies granting the awarded shares before the grant of the Awarded Shares and the length of the aforesaid period covers sufficient number of comparable companies to reflect the current market practice in respect of the allotment of awarded shares. To the best of our effort, we have set out below a comparison of the issue and allotment of the awarded shares.

	Date of			Lock-up
Company name	announcement	Awardee(s)	Vest date/period	period
Yunfeng Financial	26 January	2 connected persons	7 days	N/A
Group Limited	2018
(0376)
KWG Property	19 January	28 awardees,	1/3 on 19 January 2019	N/A
Holding	2018	including	1/3 on 19 January 2020
Limited (1813)		10 connected	1/3 on 19 January 2021
		persons
Jingrui Holdings	1 January	9 awardees,	1/3 on 1 January 2019	N/A
Limited (1862)	2018	including	1/3 on 1 January 2020
		4 connected	1/3 on 1 January 2021
		persons
Galaxy	27 December	certain awardees,	30.8% on 27 December 2018	N/A
Entertainment	2017	including	30.8% on 27 December 2019
Group Limited		5 connected	38.4% on 27 December 2020
(0027)		persons
SITC	22 December	518 awardees,	22 December 2020	N/A
International	2017	including
Holdings		9 connected
Company		persons
Limited (1308)
Li Ning Company	20 December	certain awardees,	20% on 1 September 2019	N/A
Limited (2331)	2017	including	40% on 1 September 2020
		1 connected	40% on 1 September 2021
		person
Huan Yue	13 December	100 awardees,	in three tranches in each of	N/A
Interactive	2017	including	2017, 2018 and 2019
Holdings		9 connected	respectively
Limited (0505)		persons
Alibaba Pictures	27 October	304 awardees,	not disclosed	N/A
Group Limited	2017	including
(1060)		2 connected
		persons

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

Date of

Date of Lock-up Company name announcement Awardee(s) Vest date/period period Da Ming 20 October 96 awardees, On 27 October 2017 N/A International 2017 including certain Holdings connected Limited (1090) persons and certain family members/relatives of certain connected persons Esprit Holdings 3 October certain awardees, 50% on 3 October 2019 N/A Limited (0330) 2017 including 50% on 3 October 2020 2 connected persons

The vesting periods of comparable shares award schemes range from immediate vesting up to around 3 years 8 months. As set out in the Letter from the Board, all Awarded Shares shall be vested upon the issue and allotment of the Awarded Shares, which falls into the range of the comparable shares award schemes.

We also note that there is no share award scheme with a lock-up period, therefore we are of the view that the one year lock-up undertaking requirement for the Connected Selected Employees who are awarded with 80,000 or more Connected Awarded Shares is comparable. In addition, as disclosed in ‘‘Reasons for the award of the Connected Awarded Shares’’, one of the reasons for granting the Connected Awarded Shares to Ms. Chu, Mr. Yeung and Mr. Sie was to reward their significant contributions to the major developments of the Group since their joining of the Group. With the lock-up period of the Connected Awarded Shares, the results of the launch of Yota 3 shall be reflected in the share price of the Shares to align their interests with the Shareholders. Moreover, we have reviewed the Distribution Agreements, and noted that the contracted period is less than one year, which is in line with the representation of the management that the Yota 3’s life cycle is approximately 1 year. In view of this, we are in the opinion that the upcoming one year (starting from 26 January 2018, the date which the Board resolved to grant the Awarded Shares) is critical for mobile technologies business of the Company as (i) such key employees are required to support the launch of Yota 3 to leverage on the foundation built earlier; and (ii) the Group will continue to put its main focus in mobile technologies business, and thus the Company must retain such Connected Selected Employees in this regard. The lock-up undertakings can effectively align their interests of the Connected Selected Employees with the Independent Shareholders to foster the development of the Group as the final realizable value of the Connected Awarded Shares are dependent on the future price performance of the Shares, which also benefits the Group and Independent Shareholders as a whole.

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

As explained in the section headed ‘‘Reasons for the Award of the Connected Awarded Shares’’, two of Connected Selected Employees who are awarded with 25,000 Connected Shares have served the Company for less than one full financial year and therefore are awarded with relatively less Connected Awarded Shares subject to pro-rata calculation. In such, we are of the view that it is fair and reasonable to only impose the lock-up undertakings on the 6 Connected Selected Employees.

In view of (i) the ‘‘Reasons for the award of the Connected Awarded Shares’’; (ii) the lock-up period of the Awarded Shares (save as those granted to two independent nonexecutive Directors) which is similar to vesting period; (iii) the vesting period is within the range of the comparable companies; and (iv) the grant of Awarded Shares prevents cash outflow as opposed to other alternatives such as performance bonus, we are of the view that such arrangement is in the interest of the Company and its shareholders.

4. Financial effects of the award of the Connected Awarded Shares

After granting of the Connected Awarded Shares to the Connected Selected Employees, the value of such Connected Awarded Shares would be allocated and charged as expenses in the Group’s consolidated statement of profit and loss. There will be no material effect on the cash flow of the Group other than expenses relating to the allotment and issue of the Connected Awarded Shares. No new funds will be raised as a result of the allotment and issue of the Connected Awarded Shares.

5. Immaterial effect on the shareholding interests of the existing public Shareholders

Upon allotment and issue of the aggregate of 90,290,000 Connected Awarded Shares to the Selected Employees (assuming that there is no other change in the issue share capital of the Company) in full, the shareholding interests of existing public shareholders will be diluted from approximately 84.606% to approximately 82.491%.

Given that the dilution effect on the shareholdings of the Independent Shareholders is immaterial and having considered the reasons as detailed in the section headed ‘‘1.2. Reasons for the award of the Connected Awarded Shares’’ above, we are of the view that the shareholding dilution to the Independent Shareholders is acceptable so far as the Independent Shareholders are concerned.

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

RECOMMENDATIONS

Having considered the principal factors and reasons described above, we are of the opinion that although the allotment and issue of the Connected Awarded Shares is not in the ordinary and usual course of business of the Group, the terms of the issue and allotment of the Connected Awarded Shares are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned, and are in the interest of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Shareholders to vote in favour of the resolutions to be proposed at the SGM to approve the issue and allotment of the Connected Awarded Shares to the Connected Selected Employees.

Yours faithfully, for and on behalf of Lego Corporate Finance Limited Gary Mui Chief Executive Officer

Mr. Gary Mui is a licensed person registered with the Securities and Futures Commission and a responsible officer of Lego Corporate Finance Limited to carry out Type 6 (advising on corporate finance) regulated activity under the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong). He has over 19 years of experience in the finance and investment banking industry.

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APPENDIX

GENERAL INFORMAION

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 inquiries, 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. DISCLOSURE OF INTERESTS OF DIRECTORS

As at the Latest Practicable Date, the interests or short positions of the Directors or chief executive of the Company in the Adjusted Shares, underlying shares or debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code in Appendix 10 of the Listing Rules were as follows:

Long positions in the Adjusted Shares, underlying shares and debentures of the Company

					Approximate
					percentage of
					the total
			Number of		issued
		Number of	underlying		Adjusted
		Adjusted	Adjusted		Shares as at
Name of Director	Nature of interest	Shares held	Shares held	Total	the LPD
					(%)
					(Note 3)
Mr. Zhang	Interest in controlled	215,347,500	—	215,347,500	6.113%
	corporation (Note 1)
Ms. Chu	Beneficial owner	—	—	—	—
Mr. Yeung	Beneficial owner	61,213,720	—	61,213,720	1.738%
	Interest in controlled	161,100,718	—	161,100,718	4.573%
	corporation (Note 2)
	Interest of spouse	15,200,000	—	15,200,000	0.432%
Wong King Shiu,	Beneficial owner	20,000	—	20,000	0.001%
Daniel
Chan Chi Yuen	Beneficial owner	475,000	—	475,000	0.013%

Notes:

(1) These Adjusted Shares are held by One Faith Investments Limited, which is beneficially and whollyowned by Mr. Zhang.

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APPENDIX

GENERAL INFORMAION

(2) 9,000,000 Adjusted Shares are held by Rising Elite Global Limited and 152,100,718 Adjusted Shares are held by Nova Investment Group Limited, which are beneficially and wholly-owned by Mr. Yeung.
(3) Representing the issued and fully paid-up capital of the Company as at the Latest Practicable Date comprising 3,522,513,064 Adjusted Shares.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company and their respective associates had interests or short positions in the Adjusted Shares, underlying shares and/or debentures (as the case may be) of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of SFO (including interests or short positions which are taken or deemed to have under such provisions of the SFO), or recorded in the register maintained by the Company pursuant to Section 352 of the SFO or which were notified to the Company and the Stock Exchange pursuant to the Model Code in Appendix 10 of the Listing Rules.

3. DIRECTORS’ INTERESTS

(a) None of the Directors has any direct or indirect interest in any assets which have been, since 31 March 2018, being the date to which the latest published audited financial statements of the Company were made up, acquired or disposed of by or leased to, or which are proposed to be acquired or disposed of by, or leased to, any member of the Group.
(b) None of the Directors was materially interested in any contract or arrangement subsisting at the Latest Practicable Date and which was significant in relation to the business of the Group.
(c) None of the Directors or chief executive of the Company and their respective close associates (as defined in the Listing Rules) has any competing interests which would be required to be disclosed under Rule 8.10 of the Listing Rules if each of them was a controlling Shareholder of the Company.

4. SERVICE CONTRACTS

None of the Directors has any existing or proposed service contract with any member of the Group which is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

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APPENDIX

GENERAL INFORMAION

5. DISCLOSURE OF INTERESTS OF SUBSTANTIAL SHAREHOLDERS

Long positions in the Adjusted Shares, underlying shares and debentures of the Company

As at the Latest Practicable Date, so far as was known to the Directors, the persons or entities, other than a Director or chief executive of the Company, who had an interest or a short position in the Adjusted Shares or the underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were recorded in the register required to be kept by the Company under Section 336 of the SFO were as follows:

		Number of	Approximate
		Adjusted	percentage of
		Shares/	issued share
		Underlying	capital of the
Name of		Adjusted	Company as at
Shareholder	Nature of interest	Shares held	the LPD
Lui Lai Yan	Beneficial owner	15,200,000	0.432%
	Interest of spouse (Note 1)	222,314,438	6.311%
Che Gaofeng	Interest in controlled	182,500,000	5.181%
	corporation (Note 2)
Guo Lin Feng	Interest in controlled	180,802,500	5.133%
	corporation (Note 3)
Liu Shiyuan	Interest in controlled	200,000,000	5.678%
	corporation (Note 4)
Liu Yaoting	Interest in controlled	200,000,000	5.678%
	corporation (Note 5)
Wang Guoqiang	Interest in controlled	206,250,000	5.855%
	corporation (Note 6)

Notes:

(1) Of which, (a) 61,213,720 Adjusted Shares are directly held by her spouse, Mr. Yeung (an executive Director); and (b) 9,000,000 Adjusted Shares and 152,100,718 Adjusted Shares are directly held by Rising Elite Global Limited and Nova Investment Group Limited respectively, which are wholly-owned by Mr. Yeung.
(2) These Adjusted Shares are held by Lasting Path Limited which is wholly-owned by Mr. Che Gaofeng.
(3) These Adjusted Shares are held by Onmost Success Limited which is wholly-owned by Mr. Guo Lin Feng.

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APPENDIX

GENERAL INFORMAION

(4) These Adjusted Shares are held by Gain Dynasty Enterprises Limited which is wholly-owned by Ms. Liu Shiyuan.
(5) These Adjusted Shares are held by Ever Wave Limited which is wholly-owned by Mr. Liu Yaoting.
(6) These Adjusted Shares are held by Hongfu Developments Limited which is wholly-owned by Mr. Wang Guoqiang.

Save as disclosed above, as at the Latest Practicable Date, so far as was known to the Directors and chief executive of the Company, the Company has not been notified by any persons (other than a Director or chief executive of the Company) who had an interest or a short position in the Adjusted Shares or the underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were recorded in the register required to be kept by the Company under Section 336 of the SFO.

6. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors confirmed that there was not any material adverse change in the financial or trading position of the Group since 31 March 2018, the date to which the latest published audited consolidated financial statements of the Company were made up.

7. MATERIAL LITIGATION

No member of the Group was engaged in any litigation or claims of material importance, and no such litigation or claim of material importance was known to the Directors to be pending or threatened by or against any members of the Group, as at the Latest Practicable Date.

8. QUALIFICATION AND CONSENT OF EXPERT

The following is the qualification of the expert who has given opinion or advice, which are contained or referred to in this circular:

Name Qualification Lego Corporate A corporation licensed by the SFC to conduct Type 6 Finance Limited (advising on corporate finance) regulated activities under the SFO

As at the Latest Practicable Date, Lego did not have (i) any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group and (ii) any direct or indirect interest in any assets which had, since 31 March 2018 (being the date to which the latest published audited consolidated financial statements of the Company were made up), 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.

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APPENDIX

GENERAL INFORMAION

Lego has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and references to its name in the form and context in which it appears.

9. DOCUMENTS AVAILABLE FOR INSPECTION

The following documents will be available for inspection during normal business hours at the registered address of the Company in Hong Kong at Suites 3103–3104, 31/F, Oxford House, Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong from the date of this circular up to and including the date of the SGM:

(a) a copy of the Share Award Scheme;
(b) the letter from Lego to the Independent Shareholders in respect of the issue of Connected Awarded Shares under the Share Award Scheme; and
(c) the letter of consent referred to the paragraph headed ‘‘Qualification and Consent of Expert’’ in this appendix.

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NOTICE OF SPECIAL GENERAL MEETING

==> picture [35 x 53] intentionally omitted <==

China Baoli Technologies Holdings Limited 中國寶力科技控股有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 164)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting (the ‘‘SGM’’) of the shareholders of China Baoli Technologies Holdings Limited (the ‘‘Company’’) will be held on Monday, 8 October 2018 at 3: 00 p.m. at Monaco Room, Basement 1, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong for the following purposes:

To consider and, if thought fit, pass with or without amendments, the following resolutions as ordinary resolutions:

a. ‘‘THAT the grant of the specific mandate regarding the allotment and issue of new shares of the Company of par value HK$0.10 each (the ‘‘Shares’’) to the trustee to hold on trust for selected employees who are Directors and/or directors of certain subsidiaries of the Company, accordingly connected persons (as defined in Chapter 14A of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited) of the Company, and are selected by the board of directors of the Company for participation in the share award scheme adopted by the Company on 15 January 2018 (the ‘‘Share Award Scheme’’) (a copy of which has been produced at the SGM marked ‘‘A’’ and signed by the chairman of the SGM for the purpose of identification) (the ‘‘Specific Mandate’’) to the directors of the Company (the ‘‘Directors’’) in respect of 80,000 awarded Shares to Mr. Zhang Yi, the grant of 80,000 awarded Shares pursuant to the Share Award Scheme to Mr. Zhang Yi and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;’’
b. ‘‘THAT the grant of the Specific Mandate to the Directors in respect of 30,000,000 awarded Shares to Ms. Chu Wei Ning, the grant of 30,000,000 awarded Shares pursuant to the Share Award Scheme to Ms. Chu Wei Ning and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;’’
c. ‘‘THAT the grant of the Specific Mandate to the Directors in respect of 30,000,000 awarded Shares to Mr. Yeung Chun Wai, Anthony, the grant of 30,000,000 awarded Shares pursuant to the Share Award Scheme to Mr. Yeung Chun Wai, Anthony and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;’’

– 52 –

NOTICE OF SPECIAL GENERAL MEETING

d. ‘‘THAT the grant of the Specific Mandate to the Directors in respect of 80,000 awarded Shares to Mr. Wong King Shiu, Daniel, the grant of 80,000 awarded Shares pursuant to the Share Award Scheme to Mr. Wong King Shiu, Daniel and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;’’
e. ‘‘THAT the grant of the Specific Mandate to the Directors in respect of 80,000 awarded Shares to Mr. Chan Chi Yuen, the grant of 80,000 awarded Shares pursuant to the Share Award Scheme to Mr. Chan Chi Yuen and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;’’
f. ‘‘THAT the grant of the Specific Mandate to the Directors in respect of 25,000 awarded Shares to Mr. Chan Kee Huen, Michael, the grant of 25,000 awarded Shares pursuant to the Share Award Scheme to Mr. Chan Kee Huen, Michael and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;’’
g. ‘‘THAT the grant of the Specific Mandate to the Directors in respect of 25,000 awarded Shares to Mr. Han Chunjian, the grant of 25,000 awarded Shares pursuant to the Share Award Scheme to Mr. Han Chunjian and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;’’ and
h. ‘‘THAT the grant of the Specific Mandate to the Directors in respect of 30,000,000 awarded Shares to Mr. Sie Winston, the grant of 30,000,000 awarded Shares pursuant to the Share Award Scheme to Mr. Sie Winston and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified.’’

By order of the Board China Baoli Technologies Holdings Limited Zhang Yi Chairman

Hong Kong, 19 September 2018

Notes:

Any shareholder entitled to attend and vote at the SGM shall be entitled to appoint another person as his/ her proxy to attend and vote instead of him/her. A proxy need not be a shareholder of the Company. A shareholder who is the holder of two or more Shares may appoint more than one proxy to attend and vote on the same occasion.
Where there are joint registered holders of any Share(s), any one of such joint holders may attend and vote at the SGM, either in person or by proxy in respect of such Share(s) as if he/she were solely entitled thereto, but if more than one of such joint holders are present at the SGM or any adjournment thereof (as the case may be), the more senior shall alone be entitled to vote, whether in person or by proxy. For this purpose, seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.

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NOTICE OF SPECIAL GENERAL MEETING

In order to be valid, a form of proxy in the prescribed form together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of that power or authority must be deposited at the branch share registrar of the Company in Hong Kong, Tricor Secretaries Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time fixed for holding the SGM or any adjournment thereof (as the case may be).
Completion and return of the form of proxy will not preclude members from attending and voting at the SGM or any adjournment thereof (as the case may be) should they so wish and in such event, the form of proxy shall be deemed to be revoked.
The register of members of the Company will be closed from Wednesday, 3 October 2018 to Monday, 8 October 2018, both days inclusive, during which period no transfer of shares will be registered. In order to determine the identity of the shareholders who are entitled to attend and vote at the SGM, all duly completed transfer forms accompanied by the relevant share certificates must be lodged with the branch share registrar of the Company in Hong Kong, Tricor Secretaries Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not later than 4: 30 p.m. on Tuesday, 2 October 2018.

– 54 –

AI assistant

WH Group Limited — Proxy Solicitation & Information Statement 2018

49096_rns_2018-09-18_2e0d2e23-5f95-417f-bc84-fbec783bd9b0.pdf

China Baoli Technologies Holdings Limited 中國寶力科技控股有限公司

CONNECTED TRANSACTION

PROPOSED ISSUE OF NEW SHARES TO CONNECTED PERSONS UNDER THE SHARE AWARD SCHEME PURSUANT TO SPECIFIC MANDATE AND

NOTICE OF SPECIAL GENERAL MEETING

CONTENTS

DEFINITIONS

DEFINITIONS

China Baoli Technologies Holdings Limited 中國寶力科技控股有限公司

(Stock Code: 164)

CONNECTED TRANSACTION

PROPOSED ISSUE OF NEW SHARES TO CONNECTED PERSONS UNDER THE SHARE AWARD SCHEME PURSUANT TO SPECIFIC MANDATE AND

NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

DETAILS OF THE AWARD

General Information

LETTER FROM THE BOARD

Basis of the Award

Award to the Connected Persons of the Company

Conditions

Details of Awarded Shares

LETTER FROM THE BOARD

Reasons for the Award

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Further information

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Financial effects of the grant of the Connected Awarded Shares

Earnings

LETTER FROM THE BOARD

Net asset value

Cash flow

LISTING RULES IMPLICATION

SGM

RECOMMENDATION

GENERAL

To the Independent Shareholders

CONNECTED TRANSACTION ISSUE OF NEW SHARES TO CONNECTED PERSONS UNDER THE SHARE AWARD SCHEME

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1.1. Information on the Group

1.2. Reasons for the award of the Connected Awarded Shares

2. Principal terms of the award of the Connected Awarded Shares

(a) Vesting period of the Connected Awarded Shares

(b) Lock-up period of the Connected Awarded Shares

(c) Market price of the Connected Awarded Shares

3. Assessment of fairness and reasonableness of the principal terms

Date of

4. Financial effects of the award of the Connected Awarded Shares

5. Immaterial effect on the shareholding interests of the existing public Shareholders

RECOMMENDATIONS

GENERAL INFORMAION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS OF DIRECTORS

Long positions in the Adjusted Shares, underlying shares and debentures of the Company

3. DIRECTORS’ INTERESTS

4. SERVICE CONTRACTS

5. DISCLOSURE OF INTERESTS OF SUBSTANTIAL SHAREHOLDERS

Long positions in the Adjusted Shares, underlying shares and debentures of the Company

6. MATERIAL ADVERSE CHANGE

7. MATERIAL LITIGATION

8. QUALIFICATION AND CONSENT OF EXPERT

9. DOCUMENTS AVAILABLE FOR INSPECTION

China Baoli Technologies Holdings Limited 中國寶力科技控股有限公司

NOTICE OF SPECIAL GENERAL MEETING

By order of the Board China Baoli Technologies Holdings Limited Zhang Yi Chairman

Hong Kong, 19 September 2018

NOTICE OF SPECIAL GENERAL MEETING

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WH Group Limited Proxy Solicitation & Information Statement 2018