Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement.

CHINA TIAN YUAN HEALTHCARE GROUP LIMITED

中國天元醫療集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 557)

DISCLOSEABLE TRANSACTION -

ACQUISITION OF 100% EQUITY INTEREST IN

THE TARGET COMPANY

THE SALE AND PURCHASE AGREEMENT

The Board is pleased to announce that on 31 December 2019 (after trading hours), the Purchaser (a wholly-owned subsidiary of the Company) entered into the Sale and Purchase Agreement with the Vendor, pursuant to which the Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the entire equity interest of the Target Company for a consideration of RMB30,000,000 (equivalent to approximately HK$33,600,000). Completion of the Sale and Purchase Agreement is conditional upon, among others, the Conditions Precedent as set out in the Sale and Purchase Agreement being satisfied or waived, where applicable.

As at the date of this announcement, the Vendor directly holds the entire equity interest of the Target Company, which in turn directly holds the entire equity interest of Company A. Company A directly holds 60.8077% of the entire equity interest of Shanghai Rifu, which in turn directly holds the entire equity interest of Shanghai Hospital.

Shanghai Hospital is principally engaged in the plastic surgery operation in Shanghai Province of the PRC.

Upon Completion, the Target Company will become an indirect wholly-owned subsidiary of the Company and the financial results of the Target Group will be consolidated into the financial statements of the Company.

1

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios (as defined in the Listing Rules) in respect of the Acquisition are more than 5% but all are less than 25%, the Acquisition constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules and is therefore subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.

WARNING

The Completion is conditional upon the satisfaction of certain conditions precedent stipulated in the Sale and Purchase Agreement. There is no assurance that any of such conditions will be fulfilled. Accordingly, the Acquisition may or may not proceed. Shareholders and potential investors should exercise caution when dealing in the securities of the Company.

INTRODUCTION

The Board is pleased to announce that on 31 December 2019 (after trading hours), the Purchaser (a wholly-owned subsidiary of the Company) entered into the Sale and Purchase Agreement with the Vendor, pursuant to which the Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the entire equity interest of the Target Company for a consideration of RMB30,000,000 (equivalent to approximately HK$33,600,000). Completion is conditional upon, among others, the Conditions Precedent as set out in the Sale and Purchase Agreement being satisfied or waived, where applicable.

As at the date of this announcement, the Vendor directly holds the entire equity interest of the Target Company, which in turn directly holds the entire equity interest of Company A. Company A directly holds 60.8077% of the entire equity interest of Shanghai Rifu, which in turn directly holds the entire equity interest of Shanghai Hospital.

As at the date of this announcement, Shanghai Rifu is also owned as to 39.1923% by Company B, which in turn is wholly owned by the Vendor.

THE SALE AND PURCHASE AGREEMENT

The principal terms of the Sale and Purchase Agreement are set out as below:

Date

31 December 2019 (after trading hours)

Parties

  1. the Purchaser; and
  2. the Vendor.

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, the Vendor is a third party independent of the Company and its connected persons as defined under the Listing Rules.

2

Subject Matter

Pursuant to the Sale and Purchase Agreement, the Purchaser conditionally agreed to acquire, and the Vendor conditionally agreed to sell, the entire equity interest of the Target Company free from any encumbrance with all rights attaching thereto at any time on or after Completion.

Further information of the Target Group is set out in the section headed "Information of the Target Group" below.

Consideration and payment terms

Pursuant to the Sale and Purchase Agreement, the total Consideration of the Acquisition shall be RMB30,000,000 (equivalent to approximately HK$33,600,000), which shall be paid on the Completion Date.

The Consideration of the Acquisition will be settled by the internal resources of the Company.

Basis of consideration determination

The Consideration of the Acquisition was agreed between the Vendor and the Purchaser after arm's length negotiations on normal commercial terms with reference to, among others, (i) the business development opportunity and prospects of the Target Group; (ii) the valuation (the "Valuation")

dated 8 November 2019 prepared by Beijing Zhongqin Yongli Assets Valuation Co., Ltd* (北京 中勤永勵資產評估有限責任公司), an independent valuer (the "Independent Valuer"), showing

that the appraised fair value of the entire equity interest of Shanghai Rifu as at 30 June 2019 being approximately RMB60,717,500 by adopting the discounted future estimated cash flows method (income approach); and (iii) the factors set out in the section headed "Reasons for and benefits of the Acquisition" below.

The Directors consider the Consideration to be fair and reasonable and on normal commercial terms and are in the interests of the Company and the Shareholders as a whole.

Conditions Precedent

Completion is conditional upon the fulfilment (or where applicable, waiver thereof by the Purchaser) of the following conditions on or before the Long Stop Date:

  1. the representations and warranties provided by the Vendor under the Sale and Purchase Agreement having remained true, accurate and not misleading as at the Completion Date and at all times throughout the period from the date of the Sale and Purchase Agreement and at the Completion Date;
  2. there are no events that may have a material adverse effect on the financial position, prospects, assets or business of the Target Group until the Completion Date and as at the Completion Date;
  3. all necessary pre-approvals have been obtained, including but not limited to: (a) any approval by the National Health Commission of the People's Republic of China*(中國衛生健康 委員會) and its branches for the Acquisition (if required); and (b) any approval by the relevant competent commercial and business administration authorities of the parties for the Acquisition (if required);

3

  1. there are no legal procedures, contracts, agreements or other arrangements resulting from the Vendor's fault that may result in the transaction being banned, restricted, or otherwise impeded, wholly or primarily, or any other third parties may otherwise object to this transaction, claim or seek other remedies, or any other third parties may impose restrictions or conditions on the transaction or otherwise interfere with the transaction, and there are no laws or regulations, court rulings or judgments, arbitral awards, policies or any government orders prohibiting or restricting any party from entering into any transactions contemplated under the Sale and Purchase Agreement;
  2. on and before the Long Stop Date, the Stock Exchange and/or the SFC do not have any verbal and/or written comment on any announcement(s) and/or circular(s) that has been released and to be released in connection with the transactions contemplated under the Sale and Purchase Agreement required under the Listing Rules and the publication of the said disclosure on the Stock Exchange's website or by any other means; or in the event that the Stock Exchange and/or the SFC have any verbal and/or written comment on any announcement(s) and/ or circular(s) that has been released and to be released in connection with the transactions contemplated under the Sale and Purchase Agreement required under the Listing Rules and the publication of the said disclosure on the Stock Exchange's website or by any other means on or before the Long Stop Date, the Company has made corresponding response(s) and/or amendment(s), which results in the Stock Exchange and/or SFC advising that they have no further verbal and/or written comment(s) on the said disclosure on or before the Long Stop Date; and
  3. the Purchaser being satisfied with the result of the legal and financial due diligence investigation in respect of the Target Group.

If any of the Conditions Precedent set out above are not fulfilled (or waived, where applicable, in accordance with the terms of the Sale and Purchase Agreement) on or before the Long Stop Date, the Sale and Purchase Agreement shall lapse and be of no further effect (except the confidentiality obligations and certain clauses as specified therein).

Post-Completion Undertaking

After the Completion, each of Shanghai Rifu and Shanghai Hospital shall form a board of directors and the Purchaser shall be entitled to nominate two board seats of each of the board of Shanghai Rifu and Shanghai Hospital, where the Vendor shall be entitled to nominate one board seat of each of the board of Shanghai Rifu and Shanghai Hospital.

The Vendor and the Purchaser shall procure Shanghai Rifu and Shanghai Hospital to effect the amendment of their respective articles of associations in relation to, inter alia, the board composition of Shanghai Rifu and Shanghai Hospital within 30 days after the Completion.

Completion

The Completion shall take place on the fifth (5th) Business Day after the day on which all of the Conditions Precedent to the Sale and Purchase Agreement having been fulfilled (or waived, where applicable), or such other day as the parties to the Sale and Purchase Agreement may mutually agree in writing.

Upon Completion, the Target Company will become an indirect wholly-owned subsidiary of the Company and the financial results of the Target Group will be consolidated into the financial statements of the Company.

4

INFORMATION OF THE GROUP

The Company is an investment holding company. The Group is principally engaged in investment holding, the provision of hotel reservation and hospitality related services, securities and fund investment, money lending and related business and healthcare business.

INFORMATION OF THE PURCHASER

The Purchaser is an investment holding company incorporated in Hong Kong with limited liability and is a wholly-owned subsidiary of the Company.

INFORMATION OF THE TARGET GROUP

  1. The Target Group
    The Target Group comprises of the Target Company and its subsidiaries, namely, Company A, Shanghai Rifu and Shanghai Hospital. Shanghai Hospital is owned as to 100% by Shanghai Rifu. Shanghai Rifu is owned as to 60.8077% and 39.1923% by Company A and Company B respectively. Company A is wholly owned by the Target Company, which in turn is wholly owned by the Vendor as at the date of this announcement.
  2. The Target Company
    The Target Company is a company incorporated in the British Virgin Islands with limited liability. As at the date of this announcement, the Target Company is principally engaged in investment holding. The Target Company has no material assets and liabilities as at the date of this announcement. As at the date of this announcement, the Target Company has not generated any revenue and profit since its incorporation. Save for its direct or indirect shareholding in Company A, Shanghai Rifu and Shanghai Hospital, the Target Company has no any other business activities since its incorporation.
  3. Company A
    Company A is a company established in the PRC with limited liability. As at the date of this announcement, Company A is principally engaged in investment holding. Company A has no material assets and liabilities as at the date of this announcement. As at the date of this announcement, Company A has not generated any revenue and profit since its incorporation. Save for its direct or indirect shareholding in Shanghai Rifu and Shanghai Hospital, Company A has no any other business activities since its incorporation.
  4. Shanghai Rifu
    Shanghai Rifu is a company established in the PRC with limited liability on 9 September 2016. As at the date of this announcement, Shanghai Rifu wholly owns Shanghai Hospital.

5

  1. Shanghai Hospital
    Shanghai Hospital is a company established in the PRC with limited liability on 14 October 2005. Shanghai Hospital is principally engaged in the plastic surgery operation in Shanghai Province of the PRC.
    As at the date of this announcement, Shanghai Hospital is a specialized plastic surgery* (整 形外科專業) hospital in Shanghai Province of the PRC. Shanghai Hospital operates class 1 to class 3 plastic surgery operations* (第一至三級美容外科項目) and facial bone contouring technique* (面部骨骼轮廓整形技術) plastic surgery operations in the PRC, and provides
    high quality services to the public customers. Shanghai Hospital has obtained the medical institution practicing license* (醫療執業許可證) in the PRC to carry out its plastic surgery services in the PRC. Shanghai Hospital has been providing plastic surgery services, including but not limited to, Chinese medical aesthetic services, aesthetic dentistry, facial contouring surgery, etc. As at the date of this announcement, the Shanghai Hospital has 38 medical professionals and medical staffs and over 60 supporting staffs in the sales and marketing
    and administrative departments. The Shanghai Hospital received the "2019 Top 5 facial contouring hospital" (2019年度五大輪廓名院) award in the 2019 the fifth SoYoung Asia aesthetic medical industry award ceremony (2019第五屆新氧亞太醫美行業頒獎典禮).

6

Set out below is the shareholding structure of the Target Group as at the date of this announcement immediately before Completion:

Vendor

100%

Target Company

100%

Company A

60.8077%

Shanghai Rifu

100%

Shanghai Hospital

Set out below is the shareholding structure of the Target Group immediately following the Completion:

Company

100%

Purchaser

100%

Target Company

100%

Company A

60.8077%

Shanghai Rifu

100%

Shanghai Hospital

7

FINANCIAL INFORMATION OF THE TARGET GROUP

The Target Company and Company A are principally engaged in investment holding. Shanghai Rifu is the holding company of Shanghai Hospital. Shanghai Hospital is the principal operating subsidiary of the Target Group as at the date of this announcement.

The unaudited consolidated total asset value and net liabilities value of Shanghai Rifu and Shanghai Hospital (collectively, the "Shanghai Rifu Group") as at 30 September 2019 according to the management accounts of the Shanghai Rifu Group are approximately RMB17,110,000 and RMB21,810,000.

The unaudited consolidated financial information of the Shanghai Rifu Group for the years ended 31 December 2017 and 31 December 2018 according to the management accounts of the Shanghai Rifu Group are set out below:

For the

For the

year ended

year ended

31 December

31 December

2018

2017

RMB(' 000)

RMB(' 000)

(unaudited)

(unaudited)

Loss before tax

14,988

2,004

Loss after tax

14,988

2,013

INFORMATION ON THE VENDOR

The Vendor is an independent individual and a financial investor. To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, the Vendor is a third party independent of the Company and its connected persons as defined under the Listing Rules.

REASONS FOR AND BENEFITS OF THE ACQUISITION

Through the Acquisition, the Group will acquire the controlling interest in Shanghai Hospital. Shanghai Hospital is expected to continue to generate revenue primarily from its provision of plastic surgery services in the PRC.

The Group is of the view that, since the current regulation of the medical beauty industry in the PRC is getting more stringent, Shanghai Hospital which has an approximately 5,000 square meter operation area and 38 medical professionals and medical staffs and over 60 supporting staffs in the sales and marketing and administrative departments, will gradually show its competitive strength in the medical beauty industry in the PRC. Also, the Group is of the view that there is room for growth in customer spending in the medical beauty industry in the PRC in the future.

Through the Group's experience in the management of PRIP Communications Limited, and the importation of the Korean DA branding to the market in the PRC, and its experience in the investment in Shanghai Hospital, the Group will further develop the provision of management and marketing services to other plastic surgery hospitals in the PRC in the future.

8

The Group has been continuously exploring the healthcare and plastic surgery sector in the PRC. Therefore, the Acquisition is in line with the Company's expansion strategy in the healthcare business sector and an opportunity to strengthen its existing principal business in the healthcare business segment. The Directors are confident that the Acquisition is beneficial to the Group's business performance and is in line with its development strategy in the medical beauty industry. The Directors believed that plastic surgery business will bring synergy to the Group and is beneficial to the future development of the Group. Based on the above, the Directors consider that the terms of the Sale and Purchase Agreement and the transaction contemplated thereunder are normal commercial terms that are fair and reasonable and in the interests of the Company and its Shareholders as a whole.

PROFIT FORECAST REQUIREMENT UNDER THE LISTING RULES

According to the Valuation Report, the Valuation was based on the discounted future estimated cash flows method approach (income approach). Since the Valuation was based on a discounted future estimated cash flow approach, the Valuation constitutes a profit forecast for the purpose of Rule 14.61 of the Listing Rules and, accordingly, the requirements under Rules 14.60A and 14.62 of the Listing Rules are applicable to the Acquisition.

The details of the principal assumptions (including commercial assumptions) upon which the Valuation is based are as follows:

  1. the specific purpose of the Valuation as stated in the Valuation Report;
  2. based on the actual amount of stock as at the valuation reference date, the prevailing market price of the related assets is based upon the effective price in the PRC as at the valuation reference date;
  3. the current use of the appraised assets remains unchanged and the Target Group will continue to operate;
  4. there will be no material change to the national macroeconomic policies and the external economic environment after the valuation reference date;
  5. the basic information and financial information provided by Shanghai Rifu are true, accurate and complete;
  6. the management of the appraised enterprise performs its duties responsibly for the operation of the enterprise and competently implements effective management of the relevant assets. The appraised enterprise did not violate any national laws or regulations during its operation;
  7. the Valuation does not take into account the impact of future possible security, guarantee or the additional prices that a special transaction party may pay on the value of the appraised enterprise, and the impact of the changes of the national macroeconomic policies and force majeure on value of the assets;
  8. the scope of Valuation is only based on the assessment declaration form provided by the assessed unit, and does not consider the contingent assets and contingent liabilities which may exist outside the list provided by the appraised enterprise;
  9. the Valuation does not take into account the premium or discount arising from controlling and minority interests, nor the impacts of the liquidity on the value of the appraised target.

9

Confirmations

PKF Hong Kong Limited ("PKF"), Certified Public Accountants, has reviewed and reported on the calculations of the discounted future estimated cash flows upon which the Valuation prepared by the Independent Valuer was based on and is of the opinion that, so far as the calculations are concerned, the discounted future estimated cash flows have been properly compiled in all material respects in accordance with the bases and assumptions adopted. The discounted future estimated cash flows do not involve the adoption of any accounting policies.

The Board has reviewed and considered the Valuation including the bases and assumptions upon which the Valuation was based. The Board has also considered the letter from PKF. On the basis of the foregoing, the Board is of the opinion that the Valuation adopted by the Valuer has been made after due and careful enquiry.

A letter from PKF dated 31 December 2019 with respect to the profit forecast as required under Rule 14.62(2) of the Listing Rules and a letter from the Board dated 31 December 2019 in compliance with Rule 14.62(3) of the Listing Rules will be submitted to the Stock Exchange together with this announcement, the texts of which are included in Appendix I and Appendix II to this announcement, respectively.

Experts and Consents

The qualifications of the experts who have given their opinions and advices in this announcement are as follows:

Name

Qualification

PKF Hong Kong Limited

Certified Public Accountants

Beijing Zhongqin Yongli Assets Valuation Co., Ltd*

(北京中勤永勵資產評估有限責任公司)

Independent Valuer

To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, each of the experts is a third party independent of the Group and its connected persons as defined under the Listing Rules.

As at the date of this announcement, each of the experts does not have any shareholding in any member of the Group, or any right (whether legally enforceable or not) to subscribe for, or to nominate persons to subscribe for securities in any member of the Group.

Each of the experts has given and has not withdrawn its written consent to the publication of this announcement with the inclusion of its opinion and advice and all references to its name in the form and context in which they are included.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios (as defined in the Listing Rules) in respect of the Acquisition are more than 5% but all are less than 25%, the Acquisition constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules and is therefore subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.

10

The Completion is conditional upon the satisfaction of certain conditions precedent stipulated in the Sale and Purchase Agreement. There is no assurance that any of such conditions will be fulfilled. Accordingly, the Acquisition may or may not proceed. Shareholders and potential investors should exercise caution when dealing in the securities of the Company.

DEFINITIONS

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

"Acquisition"

"Board"

"BVI"

"Company"

"Company A"

"Company B"

the acquisition of the entire equity interest in the Target Company by the Purchaser from the Vendor pursuant to the Sale and Purchase Agreement

the board of Directors of the Company

the British Virgin Islands

China Tian Yuan Healthcare Group Limited, a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 557)

Zhuhai Hengqin Hanyuemei Healthcare Technology Limited* (珠海橫 琴韓悅美醫療技術有限公司), a company established in the PRC with

limited liability and its entire equity interest is wholly owned by the Target Company as at the date of this announcement

Zhuhai Hengqin Changchunteng Asset Management Co., Ltd*（珠海橫 琴常春藤資產管理有限公司）, a company established in the PRC with

limited liability and its entire equity interest is wholly owned by the Vendor as at the date of this announcement

"Completion"

"Completion Date"

completion of the Acquisition in accordance with terms and conditions of the Sale and Purchase Agreement

The fifth (5th) Business Day after the day on which all of the Conditions Precedent has been fulfilled or on any other date as may be agreed by the Company and the Vendor

"Conditions Precedent"

"Consideration"

the conditions precedent under the Sale and Purchase Agreement as set out in the section headed "Conditions Precedent " in this announcement

the consideration in the sum of RMB30,000,000 (equivalent to approximately HK$33,600,000), payable by the Purchaser to the Vendor under the Sale and Purchase Agreement for the Acquisition

11

"Director(s)" "Group" "Listing Rules" "Long Stop Date"

"PRC"

"Purchaser"

"HK$"

"RMB"

"Sale and Purchase

Agreement"

"Shanghai Rifu"

"Shanghai Hospital"

"Share(s)"

"Shareholders" "SFC"

"Stock Exchange" "Target Company"

the directors of the Company

the Company and its subsidiaries

the Rules Governing the Listing of Securities on the Stock Exchange

the date falling 90 days after the date of the Sale and Purchase Agreement, or another date as agreed by the Purchaser and the Vendor in writing

the People's Republic of China which for the purpose of this announcement, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

Chancery Limited, a company incorporated in Hong Kong with limited liability and is a wholly-owned subsidiary of the Company

Hong Kong dollar(s), the lawful currency of Hong Kong

Renminbi, the lawful currency of the PRC

the Sale and Purchase Agreement dated 31 December 2019 entered into between the Vendor and the Purchaser in respect of the Acquisition

Shanghai Rifu Industrial Limited*（上海日复實業有限公司）, a company established in the PRC with limited liability and is owned as to 60.8077% and 39.1923% by Company A and Company B respectively as at the date of this announcement

Shanghai Yuyue Meilianchen Healthcare Beauty Hospital Limited*（上海 愉悅美聯臣醫療美容醫院有限公司）, a company established in the PRC

with limited liability, a wholly owned subsidiary of the Shanghai Rifu as at the date of this announcement

ordinary share(s) of HK$1 each in the issued share capital of the Company

holders of the issued Shares

The Securities and Futures Commission of Hong Kong

The Stock Exchange of Hong Kong Limited

Bright Zone Holdings Limited, a company incorporated in the BVI with limited liability

12

"Target Group"

"Valuation Report"

"Vendor"

"%"

collectively, the Target Company and its subsidiaries, namely, Company A, Shanghai Rifu and Shanghai Hospital

the valuation report of Shanghai Rifu dated 8 November 2019 on the valuation of 100% equity interest of Shanghai Rifu as at 30 June 2019 conducted by the Independent Valuer

Mr. Ruan Fei* (阮霏), an independent individual

Per cent

In this announcement, the translation of RMB into Hong Kong dollars is based on the exchange rate of RMB1.00 to HK$1.12 for information purposes only. Such translations should not be construed as representations that the relevant amounts have been, could have been, or could be, converted at these or any other rates or at all.

By order of the Board

China Tian Yuan Healthcare Group Limited

Jiang Yulin

Chairman

Hong Kong, 31 December 2019

As at the date of this announcement, the Board is composed of eight directors of which Mr. Jiang Yulin (chairman) and Ms. Zhang Xian are the executive directors, Ms. He Mei, Mr. Zhang Yupeng and Mr. Zhou Yuan are the non-executive directors and Mr. Hu Baihe, Mr. Yuen Kwok Kuen and Mr. Guo Jingbin are the independent non-executive directors.

  • For identification purpose only

13

APPENDIX I - LETTER FROM PKF HONG KONG LIMITED

Independent auditor's assurance report on the calculations of discounted future estimated cash flows in connection with the business valuation of Shanghai Rifu Industrial Limited ("Shanghai Rifu")

To the directors of China Tian Yuan Healthcare Group Limited

We have completed our assurance engagement to report on the calculations of the discounted

future estimated cash flows on which the business valuation (the "Valuation") dated 8 November 2019 prepared by 北京中勤永勵資產評估有限責任公司 in respect of the appraisal of the fair

value of the entire equity interests in Shanghai Rifu as at 30 June 2019 is based. The Valuation is in connection with the acquisition of the entire equity interests in Bright Zone Holdings Limited by China Tian Yuan Healthcare Group Limited (the "Company") as set out in the Company's announcement dated 31 December 2019 (the "Announcement"). The Valuation based on the discounted future estimated cash flows is regarded as a profit forecast under Rule 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules").

Directors' responsibility for the discounted future estimated cash flows

The directors of the Company are responsible for the preparation of the discounted future estimated cash flows in accordance with the bases and assumptions determined by the directors (the "Assumptions"). This responsibility includes carrying out appropriate procedures relevant to the preparation of the discounted future estimated cash flows for the Valuation and applying an appropriate basis of preparation; and making estimates that are reasonable in the circumstances.

Our independence and quality control

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

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

14

Auditor's responsibilities

It is our responsibility to report, as required by paragraph 14.62(2) of the Listing Rules, on the calculations of the discounted future estimated cash flows on which the Valuation is based. We are not reporting on the appropriateness and validity of the bases and assumptions on which the discounted future estimated cash flows are based and our work does not constitute any valuation of Shanghai Rifu.

We conducted our work in accordance with the Hong Kong Standard on Assurance Engagements 3000 (Revised) "Assurance Engagements Other Than Audits or Reviews of Historical Financial Information" issued by the HKICPA. This standard requires that we plan and perform the assurance engagement to obtain reasonable assurance on whether the discounted future estimated cash flows, so far as the calculations are concerned, have been properly compiled in accordance with the Assumptions. We reviewed the arithmetical calculations and the compilation of the discounted future estimated cash flows in accordance with the Assumptions.

The discounted future estimated cash flows do not involve the adoption of accounting policies. The discounted future estimated cash flows depend on future events and on a number of assumptions which cannot be confirmed and verified in the same way as past results and not all of which may remain valid throughout the period. Our work has been undertaken for the purpose of reporting solely to you under paragraph 14.62(2) of the Listing Rules and for no other purpose. We accept no responsibility to any other person in respect of our work, or arising out of or in connection with our work.

Opinion

In our opinion, based on the foregoing, so far as the calculations are concerned, the discounted future estimated cash flows have been properly compiled in all material respects in accordance with the Assumptions made by the directors of the Company.

PKF Hong Kong Limited

Certified Public Accountants

Hong Kong, 31 December 2019

15

APPENDIX II - LETTER FROM THE BOARD

The Stock Exchange of Hong Kong Limited

12/F, Two Exchange Square,

8 Connaught Place,

Central, Hong Kong

Dear Sirs,

Re: Discloseable Transaction- Acquisition of 100% Equity Interest in a Subsidiary

We refer to the determination of market value of Shanghai Rifu Industrial Limited* (上海日复 實業有限公司) ("Rifu") dated 8 November 2019 (the "Valuation Report") prepared by Beijing Zhongqin Yongli Assets Valuation Co., Ltd ("Zhongqin Yongli") in relation to the valuation of Rifu as at 30 June 2019 (the "Valuation"). The Valuation was performed based on the income approach which taken into account the discounted cash flow forecast of Rifu, (the "Forecast"), and therefore constitutes a profit forecast under Rule 14.61 of the Listing Rules.

We have reviewed and considered the Forecast including the bases and assumptions upon which the Forecast was based and reviewed and considered the Valuation for which Zhongqin Yongli is responsible. We have also considered the report dated 31 December 2019 from PKF Hong Kong Limited, so far as the calculations are concerned, whether the Forecast have been properly complied in all material respects in accordance with the bases and assumptions adopted by the Zhongqin Yongli as set out in the Valuation. We have noted that the Forecast in the Valuation are mathematically accurate.

On the basis of the foregoing, we are of the opinion that the Forecast prepared by the Zhongqin Yongli has been made after due and careful enquiry.

Yours faithfully,

By Order of the Board

China Tian Yuan Healthcare Group Limited

Zhang Xian

Chief Executive Officer

  • For identification purpose only

16

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