WH Group Limited — Proxy Solicitation & Information Statement 2018

May 24, 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

A notice convening the SGM of the Company to be held on Tuesday, 12 June 2018 at 3:00 p.m. at Taishan Room, Level 5, Island Shangri-La, Two Pacific Place, Supreme Court Road, Central, Hong Kong is set out on pages 51 to 53 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 28 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 29 to 45 of this circular.

25 May 2018

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter of Advice from Lego Corporate Finance Limited. . . . . . . . . . . . . . . . . . . . . . . . . . .	29
Appendix – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	46
Notice of Special General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	51

– i –

DEFINITIONS

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

“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 Shares”

the Awarded Shares will be awarded to Connected Selected Employees

• “connected person(s)”

has the meaning ascribed thereto under the Listing Rules

• “Connected Selected Employees”

Selected Employees who are Directors and/or directors of certain 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

– 1 –

DEFINITIONS

“Excluded Employee(s)”

“General Mandate”

“Group”

“HK$”

“Hong Kong”

• “Independent Selected Employees”

• “Independent Shareholders”

• “Latest Practicable Date” or “LPD”

(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

the general mandate granted by the Shareholders at the annual general meeting of the Company held on 26 September 2017

the Company and its Subsidiaries from time to time

Hong Kong dollar, the lawful currency of Hong Kong

the Hong Kong Special Administrative Region of the PRC

Employee(s), who are independent of the Company and connected persons of the Company (save as being employees of the members of the Group), selected by the Board for participation in the Share Award Scheme

Shareholders other than the Connected Selected Employees and their respective associates who are not required to abstain from voting at the SGM to approve the Award of Connected Awarded Shares

21 May 2018, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular

– 2 –

DEFINITIONS

“Lego” or	Lego Corporate Finance Limited, a corporation licensed
“Independent Financial	by the SFC to conduct Type 6 (advising on corporate
Adviser”	finance) regulated 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 Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“PRC”	the People’s Republic of China
“Remuneration Committee”	the remuneration committee of the Company
“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 at
	3:00 p.m. on Tuesday, 12 June 2018 at Taishan Room,
	Level 5, Island Shangri-La, Two Pacific Place, Supreme
	Court Road, Central, Hong Kong to consider and, if
	appropriate, to approve the resolution contained in the
	notice of SGM which is set out on pages 51 to 53 of this
	circular, or any adjournment thereof
“Share(s)”	ordinary shares with nominal value of HK$0.01 each 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)

– 3 –

DEFINITIONS

“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 “Shareholder(s)” holders of the Shares “Specific Mandate” the allotment and issue of Connected Awarded Shares pursuant to a specific mandate to be obtained from the Independent Shareholders at the SGM

“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

“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 are independent of the Company and connected persons of the Company

“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

“%”

per cent.

– 4 –

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 Kee Huen, Michael Mr. Han Chunjian Mr. Wong Hoi Kuen

Principal place of business in Hong Kong: Suites 3401-3413, 34/F, Two Pacific Place, 88 Queensway, Hong Kong 25 May 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 and 7 May 2018 in relation to the Award of an aggregate of 1,030,540,000 Awarded Shares to 38 Selected Employees under the Share Award Scheme, of which, (i) 126,840,000 Awarded Shares will 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 Connected Awarded Shares will be awarded to 9 Connected Selected Employees, subject to the approval by the Independent Shareholders at the SGM, by way of allotment and issue of new Shares pursuant to the Specific Mandate to be obtained from the Independent Shareholders at the SGM.

– 5 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with details of the Connected Awarded Shares and the advice from Lego to the Independent Shareholders in relation to the Award of the Connected Awarded Shares to the Connected Selected Employees.

DETAILS OF THE AWARD

On 26 January 2018, the Board resolved to award an aggregate of 1,030,540,000 Awarded Shares to 38 Selected Employees under the Share Award Scheme, of which, (i) 126,840,000 Awarded Shares will 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 Connected Awarded Shares will be awarded to 9 Connected Selected Employees by way of allotment and issue of new Shares pursuant to the Specific Mandate to be obtained from the Independent Shareholders at the SGM.

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 126,840,000 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, of which 108,300,000 Awarded Shares to 5 Independent Selected Employees are subject to lock-up period.

General Information

The information in relation to the allotment and issue of an aggregate of 1,030,540,000 new Awarded Shares to the Selected Employees is set out below:

Securities to be issued: 1,030,540,000 new Awarded Shares, as to 126,840,000 Awarded Shares to be allotted and issued to the Trustee to be held in trust for the Independent Selected Employees and as to 903,700,000 Awarded Shares to be allotted and issued to the Trustee to be held in trust for the Connected Selected Employees. Issue price: New Shares shall be allotted and issued to the Trustee at nominal value of HK$0.01 each. The aggregate nominal value of the Awarded Shares is HK$10,305,400.

– 6 –

LETTER FROM THE BOARD

Funds to be raised:

• 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.

Identity of the allottee(s):

• 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 38 Selected Employees, who are (i) Directors; (ii) employees of the members of the Group; and (iii) employees of Yota.

Vesting:

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.

• Market price of the Shares:

The closing price of the Shares as at 26 January 2018 as quoted on the Stock Exchange was HK$0.14 per Share.

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 Share.

The closing price of the Shares as at the Latest Practicable Date was HK$0.080 per Share.

The net asset value of the Company per Share according to the latest financial statements of the Company as included the interim report of the Company for the six months ended 30 September 2017 was HK$0.027.

– 7 –

LETTER FROM THE BOARD

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 Six-month 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.

Apart from two independent non-executive Directors, the Awarded Shares of all of the Connected Selected Employees are subject to lock-up. 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.

– 8 –

LETTER FROM THE BOARD

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 (a) the issue of the first tranche consideration Shares of 976,744,186 Shares and the second tranche consideration Shares of 418,604,651 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 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 (c) the issue of the first tranche consideration Shares of 593,246,187 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 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

– 9 –

LETTER FROM THE BOARD

As disclosed in the interim report of the Company for the six months ended 30 September 2017, 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.

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:

1. the seniority and the importance of the work position, taking into account the background and working experience of the Selected Employees;

2. the contribution of the Selected Employees;

3. the individual performance of the Selected Employees; and

4. the Group’s overall business objectives and future development plan.

– 10 –

LETTER FROM THE BOARD

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.

Award to the Connected Persons of the Company

Among those 38 Selected Employees, 9 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:

				Approximate
		Number of		percentage of
		Connected		the total
Name of Connected	Relationship	Awarded Shares		issued Shares
Selected Employees	with the Group	to be granted	Condition	as at the LPD
				(%)
Zhang Yi	Executive Director	800,000	with lock-up period	0.002%
(“Mr. Zhang”)
Chu Wei Ning	Executive Director	300,000,000	with lock-up period	0.852%
(“Ms. Chu”)	and a director of
	certain subsidiaries
	of the Company
Yeung Chun Wai, Anthony	Executive Director	300,000,000	with lock-up period	0.852%
(“Mr. Yeung”)	and a director of
	certain subsidiaries
	of the Company
Wong King Shiu, Daniel	Executive Director	800,000	with lock-up period	0.002%
	and a director of
	certain subsidiaries
	of the Company

– 11 –

LETTER FROM THE BOARD

Name of Connected Selected Employees Relationship with the Group Number of Connected Awarded Shares to be granted Condition Chan Chi Yuen Independent non-executive Director 800,000 with lock-up period Chan Kee Huen, Michael Independent non-executive Director 250,000 Wong Hoi Kuen Independent non-executive Director 800,000 with lock-up period Han Chunjian Independent non-executive Director 250,000 Sie Winston (“Mr. Sie”) Director of certain subsidiaries of the Company (Note) 300,000,000 with lock-up period Total 903,700,000

Approximate percentage of the total issued Shares as at the LPD (%) 0.002% 0.001% 0.002% 0.001% 0.852%

2.566%

Note: 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.

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.

– 12 –

LETTER FROM THE BOARD

Conditions

The allotment and issue of 903,700,000 Connected Awarded 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, 903,700,000 Connected Awarded Shares in due course.

Details of Awarded Shares

The aggregate of 903,700,000 Connected Awarded Shares to be allotted and issued by the Company to the Connected Selected Employees represent approximately 2.566% of the total number of Shares in issue as at the Latest Practicable Date and approximately 2.501% of the total number of Shares in issue as enlarged by the allotment and issue of the Connected Awarded Shares (assuming no issue or buy back of Shares other than the issue of the Connected Awarded Shares).

Based on the closing price of HK$0.14 per Share as quoted on the Stock Exchange as at 26 January 2018, the market values of 126,840,000 Awarded Shares to the Independent Selected Employees and the 903,700,000 Connected Awarded Shares as at such date were HK$17,757,600 and HK$126,518,000, respectively.

The total value of the Awarded Shares based on the closing price of the Shares as at the Latest Practicable Date was HK$82,443,200.

– 13 –

LETTER FROM THE BOARD

The value of the Connected Awarded Shares based on the closing price of the Shares as at the Latest Practicable Date to each of the Connected Selected Employees 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 Wong Hoi Kuen Han Chunjian Mr. Sie Total:	Number of Connected Awarded Shares 800,000 300,000,000 300,000,000 800,000 800,000 250,000 800,000 250,000 300,000,000 903,700,000	Value of the Connected Awarded Shares (HK$) 64,000 24,000,000 24,000,000 64,000 64,000 20,000 64,000 20,000 24,000,000 72,296,000

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.

– 14 –

LETTER FROM THE BOARD

The shareholding structure of the Company as at the Latest Practicable Date and immediately after the allotment and issue of the Connected Awarded Shares (assuming no other change in the issued share capital of the Company other than the allotment and issue of the Connected Awarded Shares) is as follows:

Name of shareholder Lui Lai Yan (Note 1) Mr. Yeung (Note 1) Rising Elite Global Limited (Note 1) Nova Investment Group Limited (Note 1) Sub-total Mr. Zhang (Note 2) One Faith Investments Limited (Note 2) Sub-total Ms. Chu (Note 3) Wong King Shiu, Daniel (Note 3) Chan Chi Yuen (Note 3) Chan Kee Huen, Michael (Note 3) Han Chunjian (Note 3) Wong Hoi Kuen (Note 3) Public Shareholders Other Selected Employees Other public shareholders Sub-total Total	As at Latest Practicable Date Number % 152,000,000 0.432% 871,462,205 2.474% 90,000,000 0.255% 1,521,007,187 4.318% 2,634,469,392 7.479% – 0.000% 2,153,475,000 6.113% 2,153,475,000 6.113% – 0.000% 200,000 0.001% 4,750,000 0.013% – 0.000% – 0.000% – 0.000% 932,115,000 2.646% 29,500,121,249 83.748% 30,432,236,249 86.394% 35,225,130,641 100%	Immediately after the issuance of the Connected Awarded Shares (assuming no other change in the issued share capital of the Company) Number % 152,000,000 0.421% 1,171,462,205 3.242% 90,000,000 0.249% 1,521,007,187 4.210% 2,934,469,392 8.122% 800,000 0.002% 2,153,475,000 5.961% 2,154,275,000 5.963% 300,000,000 0.830% 1,000,000 0.003% 5,550,000 0.015% 250,000 0.001% 250,000 0.001% 800,000 0.002% 1,232,115,000 3.410% 29,500,121,249 81.653% 30,732,236,249 85.063% 36,128,830,641 100%	Immediately after the issuance of the Connected Awarded Shares (assuming no other change in the issued share capital of the Company) Number % 152,000,000 0.421% 1,171,462,205 3.242% 90,000,000 0.249% 1,521,007,187 4.210% 2,934,469,392 8.122% 800,000 0.002% 2,153,475,000 5.961% 2,154,275,000 5.963% 300,000,000 0.830% 1,000,000 0.003% 5,550,000 0.015% 250,000 0.001% 250,000 0.001% 800,000 0.002% 1,232,115,000 3.410% 29,500,121,249 81.653% 30,732,236,249 85.063% 36,128,830,641 100%
			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, Mr. Han Chunjian and Mr. Wong Hoi Kuen is a Director.

– 15 –

LETTER FROM THE BOARD

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.

==> picture [378 x 224] intentionally omitted <==

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

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

– 16 –

LETTER FROM THE BOARD

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-screen smartphone for the PRC market. The IPs and technologies surrounding the dual-screen 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 dualscreen 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.

– 17 –

LETTER FROM THE BOARD

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.

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.

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LETTER FROM THE BOARD

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.

Mr. Wong Hoi Kuen was appointed as an independent non-executive Director on 13 February 2006. He is a practising certified public accountant in Hong Kong and a chartered accountant in the United Kingdom. Mr. Wong is a fellow member of both the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants and an associate member of the Institute of Chartered Accountants in England and Wales. His professional experience enables him to provide independent opinions on business decisions made by the management of the Company.

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.

– 19 –

LETTER FROM THE BOARD

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 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.

– 20 –

LETTER FROM THE BOARD

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, Mr. Wong Hoi Kuen and Mr. Han Chunjian, who are the independent non-executive 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	1 year 8 months	Responsible for the Group’s overall development,
	Executive Director		investor and public relations, board governance and
			supervision of key management issues
Ms. Chu	Chief Executive Officer and	2 years 10 months	Responsible for the Group’s overall business
	Executive Director		development, 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	2 years 10 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
Wong King Shiu,	Executive Director	6 years 4 month	Responsible for the Group’s strategic planning,
Daniel			business development and strategic management
			in relation to other business other than mobile
			technologies business
Chan Chi Yuen	Independent	12 years	Participate in the Board’s decision-making process
	Non-executive Director		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	9 months	Participate in the Board’s decision-making process
Michael	Non-executive Director		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

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LETTER FROM THE BOARD

Name of Connected Year of services Selected Employees Position up to the LPD Responsibilities Han Chunjian Independent 9 months Participate in the Board’s decision-making process and Non-executive Director provide independent opinions Wong Hoi Kuen Independent 12 years 3 months Participate in the Board’s decision-making process Non-executive Director and provide independent opinions, ensure proper functioning of the Company’s audit and nomination committees, monitor appropriate corporate governance and internal control of the Group Mr. Sie Director of certain subsidiaries 1 year 10 months Responsible for the business development of the of the Company Group’s 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 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 dualscreen 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:

1. 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.

– 22 –

LETTER FROM THE BOARD

1. 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.

Recently, 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.

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.

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.

– 23 –

LETTER FROM THE BOARD

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.

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.

– 24 –

LETTER FROM THE BOARD

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 interim report of the Company for the six months ended 30 September 2017, the Group recorded consolidated unaudited net loss attributable to the owners of the Company of approximately HK$92.93 million for the six months ended 30 September 2017. The allotment and issue of the Connected Awarded Shares will further increase the net loss of the Group after deducting the expenses relating to the allotment and issue of the Connected Awarded Shares of approximately HK$72.30 million in aggregate, which is calculated using the closing price of the Shares of HK$0.08 per Share as at the Latest Practicable Date.

Net asset value

According to the interim report of the Company for the six months ended 30 September 2017, the Group’s net asset value attributable to owners of the Company of approximately HK$937.00 million and the Group’s net asset value per Share was approximately HK$0.027. 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 Share attributable to owners of the Company would decrease to approximately HK$0.026 subject to all other things remaining unchanged.

Cash flow

According to the interim report of the Company for the six months ended 30 September 2017, the Group had cash and cash equivalents of approximately HK$89.93 million as at 30 September 2017. 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.

– 25 –

LETTER FROM THE BOARD

LISTING RULES IMPLICATION

As 9 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 903,700,000 Connected Awarded 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 following resolution (the full text of which is set out in the notice of the SGM at page 51 to 53 of this circular);

• (1) the grant of the Specific Mandate for the allotment and issue of the Connected Awarded Shares to the Trustee; and

• (2) the grant of Connected Awarded Shares to each of the Connected Selected Employees.

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.

Pursuant to Chapter 14A of the Listing Rules, the Connected Selected Employees and their associates (holding approximately 15.891% of the Shares in issue as at the Latest Practicable Date) are required to abstain from voting on the resolution at the SGM to approve the allotment and issue 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 resolution to approve the allotment and issue of the Connected Awarded Shares and the Award of the Connected Awarded Shares at the SGM.

– 26 –

LETTER FROM THE BOARD

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 Tuesday, 12 June 2018 at 3:00 p.m. at Taishan Room, Level 5, Island Shangri-La, Two Pacific Place, Supreme Court Road, Central, Hong Kong is set out on pages 51 to 53 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.

– 27 –

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 resolution 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 29 to 45 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.

– 28 –

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 into 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.

25 May 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 dated 25 May 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 an aggregate of 1,030,540,000 Awarded Shares to 38 Selected Employees under the Share Award Scheme, of which, (i) 126,840,000 Awarded Shares will 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 Connected Awarded Shares will be awarded to 9 Connected Selected Employees by way of allotment and issue of new Shares pursuant to the Specific Mandate to be obtained from the Independent Shareholders at the SGM.

As 9 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 903,700,000 Connected Awarded 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 is subject to the reporting, announcement, circular and Independent Shareholders’ approval requirement.

– 29 –

LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

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 (holding approximately 15.891% of the Shares in issue as at the Latest Practicable Date) are required to abstain from voting on the resolution at the SGM of the Company to approve the allotment and issue 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, there was no engagement between the Group and Lego. 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 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.

– 30 –

LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

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 following principal factors and reasons:

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

1.1. Information on the Group

The Group 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 2016 and 2017, as extracted from the annual report of the Company for the year ended 31 March 2017 (the “ 2017 Annual Report ”) and the unaudited financial information of the Group for the six months ended 30 September 2016 and 2017, as extracted from the interim report of the Company for the six months ended 30 September 2017 (the “ 2017 Interim Report ”).

	For the six	months ended	For the year ended	For the year ended
	30 September		31 March
	2017	2016	2017	2016
	HK$’000	HK$’000	HK$’000	HK$’000
	(Unaudited)	(Unaudited)	(Audited)	(Audited)
Turnover	3,764	23,138	37,343	105,020
– Gamma ray irradiation services	2,137	2,440	5,315	6,095
– Tourism and hospitality
business	1,627	20,698	32,028	98,925
– Mobile technologies business	–	–	–	–
Loss for the period/year	97,269	244,849	379,469	77,789

– 31 –

LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

As illustrated in the table above, the turnover of the Group amounted to approximately HK$37.3 million for the year ended 31 March 2017, representing a decrease of approximately 64.4% as compared to that of approximately HK$105.0 million for the year ended 31 March 2016. Such decrease was mainly due to (i) the decline in revenue in both gamma ray irradiation services and tourism and hospitality business; and (ii) the Group did not record revenue for mobile technologies business as the setting up of the business was still in progress.

The turnover of gamma ray irradiation services decreased by approximately 12.8% from approximately HK$6.1 million for the year ended 31 March 2016 to approximately HK$5.3 million for the year ended 31 March 2017. According to the 2017 Annual Report, such decrease was primarily attributable to the market competition and challenging market environment for food irradiation and medical devices sterilisation services.

The turnover of tourism and hospitality business substantially decreased by approximately 67.6% from approximately HK$98.9 million for the year ended 31 March 2016 to approximately HK$32.0 million for the year ended 31 March 2017. According to the 2017 Annual Report, such decrease was mainly attributable to the slowdown of regional economic growth, the growing pressure on operating expenses of the cruise ship and decrease in number of visitors in Hong Kong.

The Group recorded net loss of approximately HK$379.5 million for the year ended 31 March 2017, representing an increase of approximately 387.8% as compared to that of approximately HK$77.8 million for the year ended 31 March 2016. According to the 2017 Annual Report, the increase in net loss was mainly attributable to (i) significant realised and unrealised loss from the securities trading and investment business of approximately HK$141.0 million; (ii) loss from the tourism and hospitality business of approximately HK$94.6 million due to abovementioned reasons; (iii) share-based payment expenses related to the share options granted during the year of approximately HK$29.3 million; (iv) share of loss of an associate of approximately HK$20.7 million; and (v) loss from mobile technologies business of approximately HK$19.4 million.

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

According to the 2017 Interim Report, the turnover of the Group decreased by approximately 83.7% from approximately HK$23.1 million for the six months ended 30 September 2016 to approximately HK$3.8 million for the six months ended 30 September 2017. Such decrease was mainly due to the soaring operating expenses of cruise ship caused by increasing fuel costs and higher crew expenses and the expiration of a lease agreement in relation to the leisure facilities onboard, resulted in a substantial decrease in turnover of approximately 92.1% in tourism and hospitality business as compared to the previous period.

According to the 2017 Annual Report, the Group will strengthen its strategic shift of 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.

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 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 dual-screen feature of the smartphone is a unique technology with strong technical barrier.

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

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 Company believes that Yota’s financial performance will improve, 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.

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

Moreover, even though the mobile technologies business was still at developing stage and not yet record revenue for the six months ended 30 September 2017, the Group will continue to put its main focus in the mobile technologies business as it believes that mobile phone and related applications could improve the Group’s profitability and would deliver long-term 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. We have also noted the unaudited turnover of the Group for the period from 1 April 2017 to 31 January 2018, and it is noted that the turnover of mobile technologies business accounts for a more significant proportion of revenue than other segments of the Company, which was mainly generated from the sale of Yota 3.

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 growth 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 9 connected persons, including 4 executive Directors, 4 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 Connected
			Awarded Shares
	Number of	Market value	to the total
	Connected	of the Connected	issued Shares
Connected Selected Employees	Awarded Shares	Awarded Shares	as at the LPD
		(Appro. HK$’000)
		(Note)
Mr. Zhang	800,000	112	0.002%
Executive Director
Ms. Chu	300,000,000	42,000	0.852%
Executive Director and
a director of certain subsidiaries
of the Company
Mr. Yeung	300,000,000	42,000	0.852%
Executive Director and
a director of certain subsidiaries
of the Company
Wong King Shiu, Daniel	800,000	112	0.002%
Executive Director and
a director of certain subsidiaries
of the Company
Chan Chi Yuen	800,000	112	0.002%
Independent non-
executive Director
Chan Kee Huen, Michael	250,000	35	0.001%
Independent non-
executive Director
Wong Hoi Kuen	800,000	112	0.002%
Independent non-
executive Director
Han Chunjian	250,000	35	0.001%
Independent non-
executive Director
Mr. Sie	300,000,000	42,000	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$0.14 as at 26 January 2018, the date the Board resolved to conditionally grant the Connected Awarded Shares.

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

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, the 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 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 the 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, Baoli Yota Technologies (Shenzhen) Limited 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

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

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 2017 Annual Report, and a corporate brochure provided by the Company, with Mr. Sie’s professional background information therein. 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 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 recently assisted the Company in completing the acquisition of a further 10% interest of Yota on 29 March 2018.

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

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, Migu, 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 HK$98,002,450 (the “ Placing ”), the Company has used the proceeds from the Placing to develop the mobile technologies business, of which approximately HK$53.4 million and HK$6 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. 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.

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

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 contribution to the Company. We also note that each of Mr. Chan Chi Yuen and Mr. Wong Hoi Kuen are awarded with 800,000 Connected Awarded Shares, whilst Mr. Chan Kee Huen, Michael and Mr. Han Chunjian are awarded with 250,000 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 250,000 Shares, since they were appointed by the Group in August 2017, while Mr. Chan Chi Yuen and Mr. Wong Hoi Kuen have served as Independent Non-executive Directors 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 for 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 allotment and issue 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 allotment and issue 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$0.14 per Share 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 market value of the Connected Awarded Shares is approximately HK$126.5 million. No fund will be raised by the Company as a result of the allotment and issue of the Connected Awarded Shares.

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

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 11 comparable companies which are listed on the Main Board of the Stock Exchange and had 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 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 is 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 2018	2 connected persons	7 days	N/A
Group Limited (0376)
KWG Property	19 January 2018	28 awardees, including	1/3on 19 January 2019	N/A
Holding Limited (1813)		10 connected persons	1/3on 19 January 2020
			1/3on 19 January 2021
Jingrui Holdings	1 January 2018	9 awardees, including 4	1/3on 1 January 2019	N/A
Limited (1862)		connected persons	1/3on 1 January 2020
			1/3on 1 January 2021
Galaxy Entertainment	27 December 2017	Certain awardees,	30.8% on	N/A
Group Limited (0027)		including 5 connected	27 December 2018
		persons	30.8% on
			27 December 2019
			38.4% on
			27 December 2020
SITC International	22 December 2017	518 awardees, including	22 December 2020	N/A
Holdings Company		9 connected persons
Limited (1308)
Li Ning Company	20 December 2017	1 connected person	20% on	N/A
Limited (2331)			1 September 2019
			40% on
			1 September 2020
			40% on
			1 September 2021

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LETTER OF ADVICE FROM LEGO CORPORATE FINANCE LIMITED

	Date of			Lock-up
Company name	announcement	Awardee(s)	Vest date/period	period
Huan Yue Interactive	13 December 2017	100 awardees, including	in three tranches in each	N/A
Holdings Limited (0505)		9 connected persons	of 2017, 2018 and
			2019 respectively
Wison Engineering Services	14 November 2017	200 awardees, including	Immediately	N/A
Co. Ltd (2236)		3 connected persons
Alibaba Pictures	27 October 2017	304 awardees, including	Immediately	N/A
Group Limited (1060)		2 connected persons
Da Ming International	20 October 2017	96 awardees, including	On 27 October 2017	N/A
Holdings Limited (1090)		certain connected
		persons
Esprit Holdings	3 October 2017	selected employees	50% on 3 October 2019	N/A
Limited (0330)		(including 2 connected	50% on 3 October 2020
		persons)

The vesting periods of the 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 allotment and issue 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 800,000 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 is for their significant contribution 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. 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; (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 lockup 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 realisable 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 250,000 Connected Awarded 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 7 Connected Selected Employees.

In view of (i) the “Reasons for the Award of the Connected Awarded Shares”; (ii) the lockup period of the Awarded Shares (save as those granted to two independent non-executive Directors) which is similar to vesting period; and (iii) the vesting period is within the range of the comparable companies, 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 income statement for the year ended 31 March 2019. 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 interest of the existing public Shareholders

Upon allotment and issue of the aggregate of 1,030,540,000 Awarded Shares to the Selected Employees (assuming that there is no other change in the issued share capital of the Company) in full, the shareholding interests of existing public shareholders will be diluted from approximately 83.75% to approximately 81.65%.

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 “3. 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 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 allotment and issue 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 resolution 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.

– 45 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors having made all reasonable 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 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 Shares, underlying shares and debentures of the Company

					Approximate
					percentage of
			Number of		the total
		Number of	underlying		issued Shares
Name of Director	Nature of interest	Shares held	Shares held	Total	as at the LPD
					(%)
					(Note 3)
Mr. Zhang	Interest in controlled	2,153,475,000	–	2,153,475,000	6.113%
	corporation (Note 1)
Ms. Chu	Beneficial owner	–	300,000,000	300,000,000	0.852%
Mr. Yeung	Beneficial owner	871,462,205	200,000,000	1,071,462,205	3.042%
	Interest in controlled	1,611,007,187	–	1,611,007,187	4.573%
	corporation (Note 2)
	Interest of spouse	152,000,000	–	152,000,000	0.432%
Wong King Shiu, Daniel	Beneficial owner	200,000	–	200,000	0.001%
Chan Chi Yuen	Beneficial owner	4,750,000	–	4,750,000	0.013%

– 46 –

GENERAL INFORMATION

APPENDIX

Notes:

• (1) These Shares are held by One Faith Investments Limited, which is beneficially and wholly-owned by Mr. Zhang.

• (2) 90,000,000 Shares are held by Rising Elite Global Limited and 1,521,007,187 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 35,225,130,641 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 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 2017, 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.

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GENERAL INFORMATION

APPENDIX

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).

5. DISCLOSURE OF INTERESTS OF SUBSTANTIAL SHAREHOLDERS

Long positions in the 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 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:

			Approximate
			percentage of
		Number of	issued share
		Shares/	capital of
Name of		underlying	the Company
Shareholder	Nature of interest	Shares held	as at the LPD
Lui Lai Yan	Beneficial owner	152,000,000	0.432%
	Interest of spouse (Note 1)	2,482,469,392	7.047%
Che Gaofeng	Interest in controlled	1,825,000,000	5.181%
	corporation (Note 2)
Guo Lin Feng	Interest in controlled	1,808,025,000	5.133%
	corporation (Note 3)
Liu Shiyuan	Interest in controlled	2,000,000,000	5.678%
	corporation (Note 4)
Liu Yaoting	Interest in controlled	2,000,000,000	5.678%
	corporation (Note 5)
Wang Guoqiang	Interest in controlled	2,062,500,000	5.855%
	corporation (Note 6)

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GENERAL INFORMATION

APPENDIX

Notes:

• (1) Of which, (a) 871,462,205 Shares are directly held by her spouse, Mr. Yeung (an executive Director); and (b) 90,000,000 Shares and 1,521,007,187 Shares are directly held by Rising Elite Global Limited and Nova Investment Group Limited respectively, which are wholly-owned by Mr. Yeung.

• (2) These Shares are held by Lasting Path Limited which is wholly-owned by Mr. Che Gaofeng.

• (3) These Shares are held by Onmost Success Limited which is wholly-owned by Mr. Guo Lin Feng.

• (4) These Shares are held by Gain Dynasty Enterprises Limited which is wholly-owned by Ms. Liu Shiyuan.

• (5) These Shares are held by Ever Wave Limited which is wholly-owned by Mr. Liu Yaoting.

• (6) These 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 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 2017, 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.

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GENERAL INFORMATION

APPENDIX

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 2017 (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.

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 3401-3413, 34/F, Two Pacific Place, 88 Queensway, 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 [31 x 45] 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 at 3:00 p.m. on Tuesday, 12 June 2018 at Taishan Room, Level 5, Island Shangri-La, Two Pacific Place, Supreme Court Road, Central, Hong Kong for the following purposes:

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

“ THAT

• (a) the grant of specific mandate to the directors of the Company (the “ Directors ”) regarding the allotment and issue of an aggregate of 903,700,000 new shares of the Company to Bank of Communications Trustee Limited 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 Listing Rules) of the Company, and are selected by the Board 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) and the transactions contemplated thereunder be and are hereby approved and confirmed;

• (b) the grant of 800,000 awarded shares pursuant to the Share Award Scheme to Mr. Zhang Yi is hereby approved and confirmed;

• (c) the grant of 300,000,000 awarded shares pursuant to the Share Award Scheme to Ms. Chu Wei Ning is hereby approved and confirmed;

• (d) the grant of 300,000,000 awarded shares pursuant to the Share Award Scheme to Mr. Yeung Chun Wai, Anthony is hereby approved and confirmed;

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NOTICE OF SPECIAL GENERAL MEETING

• (e) the grant of 800,000 awarded shares pursuant to the Share Award Scheme to Mr. Wong King Shiu, Daniel is hereby approved and confirmed;

• (f) the grant of 800,000 awarded shares pursuant to the Share Award Scheme to Mr. Chan Chi Yuen is hereby approved and confirmed;

• (g) the grant of 250,000 awarded shares pursuant to the Share Award Scheme to Mr. Chan Kee Huen, Michael is hereby approved and confirmed;

• (h) the grant of 800,000 awarded shares pursuant to the Share Award Scheme to Mr. Wong Hoi Kuen is hereby approved and confirmed;

• (i) the grant of 250,000 awarded shares pursuant to the Share Award Scheme to Mr. Han Chunjian is hereby approved and confirmed; and

• (j) the grant of 300,000,000 awarded shares pursuant to the Share Award Scheme to Mr. Sie Winston is hereby approved and confirmed.

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

Hong Kong, 25 May 2018

Notes:

1. 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.

2. 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

1. 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).

2. 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.

3. The register of members of the Company will be closed from Thursday, 7 June 2018 to Tuesday, 12 June 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 Wednesday, 6 June 2018.

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