Kiu Hung International : (1) MAJOR TRANSACTION IN RELATION TO ACQUISITION OF 51% EQUITY INTERESTS IN THE TARGET COMPANY INVOLVING ISSUE OF THE CONVERTIBLE BONDS UNDER SPECIFIC MANDATE AND (2) NOTICE OF SPECIAL GENERAL MEETING

March 29, 2021 at 06:25 pm EDT

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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.

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares of Kiu Hung International Holdings Limited, you should at once hand this circular and 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 transferee.

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of the Company.

Kiu Hung International Holdings Limited ྆ඪ਷ყછٰϞࠢʮ̡

(Incorporated in the Cayman Islands with limited liability and continued in Bermuda with limited liability)

(Stock Code: 00381)

(1) MAJOR TRANSACTION IN RELATION TO ACQUISITION OF 51% EQUITY INTERESTS IN THE TARGET COMPANY INVOLVING ISSUE

OF THE CONVERTIBLE BONDS UNDER SPECIFIC MANDATE

AND

(2) NOTICE OF SPECIAL GENERAL MEETING

Capitalised terms used in this cover page shall have the same meanings as defined in this circular.

The notice convening the SGM of Kiu Hung International Holdings Limited (the ''Company'' ) to be held at Harbour Plaza Room I, B1/F, Harbour Plaza, North Point, 665 King's Road, North Point, Hong Kong on Monday, 19 April 2021 at 10:00 a.m. is set out on pages SGM-1 to SGM-2 of this circular.

Whether or not you are able to attend the SGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same at the Hong Kong branch share registrar of the Company, Tricor Tengis Limited at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish.

30 March 2021

CONTENTS

Page

DEFINITIONS ................................................................. 1

LETTER FROM THE BOARD ................................................. 6

APPENDIX I - FINANCIAL INFORMATION OF THE GROUP .......... I-1

APPENDIX II - ACCOUNTANT'S REPORT OF THE TARGET

COMPANY ............................................. II-1

MANAGEMENT DISCUSSION AND ANALYSIS OF
THE TARGET COMPANY .............................	III-1
UNAUDITED PRO FORMA FINANCIAL INFORMATION
OF THE ENLARGED GROUP .........................	IV-1
APPENDIX V -	UPDATED VALUATION REPORT .......................	V-1
APPENDIX VI -	VALUATION REPORT ...................................	VI-1
APPENDIX VII -	COMFORT LETTERS ON PROFIT FORECAST .........	VII-1
APPENDIX VIII-	GENERAL INFORMATION ..............................	VIII-1
SGM-1

APPENDIX III -

APPENDIX IV

NOTICE OF SPECIAL GENERAL MEETING .................................

- i -

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

''Acquisition''

the acquisition of the Sale Interests pursuant to the terms and conditions of the Sale and Purchase Agreement (as supplemented by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement);

''associate(s)''

''Board''

has the meaning ascribed to it under the Listing Rules; the board of Directors;

''Business Day(s)''

a day (other than a Saturday, a Sunday or a public holiday) on which licensed banks are generally open for business in Hong Kong throughout their normal business hours;

''BVI''

British Virgin Islands;

''Company''

Kiu Hung International Holdings Limited (Stock Code: 381), a company incorporated in the Cayman Islands with limited liability and continued in Bermuda with limited liability, the issued Shares of which are listed on the main board of the Stock Exchange;

''Completion''

the completion of the Acquisition pursuant to the terms and conditions of the Sale and Purchase Agreement (as supplemented by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement);

''Completion Date''

the third Business Day immediately following the date that the Conditions having been fulfilled or waived (as the case may be) by not later than the Long Stop Date;

''Condition(s)''

the conditions precedent of the Completion, details of which are set out in the paragraph headed ''Conditions Precedent'' of this circular;

''connected person(s)''

has the meaning ascribed to it under the Listing Rules;

''Consideration''

the total consideration payable by the Purchaser to the Vendor (or its nominee) for the Sale Interests, being HK$170 million;

''Conversion Price''

the conversion price of HK$2 per Conversion Share of the Convertible Bonds (subject to adjustment as set out and in accordance with the terms and conditions of the Convertible Bonds);

''Conversion Shares''

a maximum of 85,000,000 new Shares to be allotted and issued by the Company upon conversion of the Convertible Bonds at the Conversion Price;

''Convertible Bonds''

the aggregate of the 1st to 5th Tranche Convertible Bonds (as defined in the section headed ''Consideration'' in the letter from the Board to this circular) in the aggregate principal amount of up to HK$170,000,000 at the Conversion Price and for a conversion period of three years from the date of issue with zero coupon to be issued by the Company to the Vendor in accordance with the terms and conditions of the Sale and Purchase Agreement (as supplemented by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement) for satisfying the Consideration;

''Director(s)''

the director(s) of the Company;

''Enlarged Group''

the Group as enlarged by the Target Group upon Completion;

''Group''

the Company and its subsidiaries;

''Guarantor''

Mr. Lin;

''Hong Kong''

''Independent Third Party(ies)''

the Hong Kong Special Administrative Region of the PRC; the independent third party who is, to the best of the Directors' knowledge, information and belief having made all reasonable enquiry, independent of and not connected with the Company and its connected person(s);

''Joint Financial Advisers''

Chanceton Capital Partners Limited, a corporation licensed to carry on type 6 (advising on corporate finance) regulated activities under the SFO and Bison Corporate Finance Limited, a corporation licensed to carry on type 6 (advising on corporate finance) regulated activities under the SFO, being the joint financial advisers to the Company;

''Last Trading Day''

10 September 2019, being the last trading day immediately before the entering into of the Sale and Purchase Agreement;

''Latest Practicable Date''

26 March 2021, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein;

''Listing Rules''

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

''Long Stop Date''

31 May 2021 or such later date as the parties to the Sale and Purchase Agreement may agree in writing;

''Mr. Lin''

Mr. Lin Wei (林烽先生);

''mu''

Chinese Mu, one of which equals approximately 667 square meters;

''New Procurement

Agreements''

the Chinese herbs procurement agreements, entering into between the Target Company and new customers;

''PRC''

the People's Republic of China, and for the purpose of this circular, excluding Hong Kong, Macau Special Administrative Region and Taiwan;

''PRC GAAP''

Generally accepted accounting principles in PRC;

''Procurement Agreement''

the Chinese herbs procurement agreement, entering into between the Target Company and Sinopharm;

''Public Float Requirement''

the requirement under the Listing Rules applicable to the Company that not less than a specified percentage of the Shares which are listed on the Stock Exchange shall be held by the public for the purpose of the Listing Rules;

''Purchaser''

Fujian Green Forest Agricultural Technology Co., Ltd.* (福建綠森農業科技有限公司), a company incorporated in PRC with limited liability;

''Reorganisation''

Mr. Lin to transfer his 51% equity interests in the Target Company to the Vendor, and upon completion of such reorganisation, the Vendor will hold a 51% equity interests in the Target Company;

''Reporting Accountant''

Prism CPA Limited, independent Certified Public Accountants;

''RMB''

Renminbi, the lawful currency of the PRC;

''Sale and Purchase Agreement''

''Sale Interests''

the conditional sale and purchase agreement dated 11 September 2019, entered into among the Vendor, the Purchaser and the Guarantor in relation to the Acquisition; 51% equity interests in the Target Company;

''Second Supplemental

Agreement''

the second supplemental agreement dated 23 March 2021, entering into among the Vendor, the Purchaser and the Guarantor in the relation to the Acquisition;

''SFO''

the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong);

''SGM''

the special general meeting of the Company to be held for the Shareholders to consider and, if thought fit, approve the Acquisition, the Specific Mandate and the transactions contemplated thereunder;

''Share(s)''

ordinary share(s) of HK$0.01 each in the capital of the Company;

''Shareholders''

the holders of Shares;

''Sinopharm''

Sinopharm Holding Hunan Co., Ltd* (國藥控股湖南有限公司), a non-wholly owned subsidiary of Sinopharm Group Co., Ltd (a company listed on the Stock Exchange);

''Specific Mandate''

a specific mandate to be sought from the Shareholders who are entitled to vote and not required to be abstained from voting under the Listing Rules at the SGM to allot and issue the Conversion Shares upon exercising the conversion rights attached to the Convertible Bonds;

''Stock Exchange''

The Stock Exchange of Hong Kong Limited;

''Supplemental Agreement''

the supplemental agreement dated 20 July 2020, entered into among the Vendor, the Purchaser and the Guarantor in relation to the Acquisition;

''Supplemental Procurement

Agreements''

''Takeovers Code''

the supplemental Chinese herbs procurement agreements, entering into between the Target Company and Sinopharm; the Hong Kong Code on Takeovers and Mergers;

''Target Company''

Hubei Jincaotang Pharmaceutical Co., Ltd.* (湖北金草堂藥業有限公司), a company incorporated in PRC with limited liability;

''Third Supplemental

Agreement''

the third supplemental agreement dated 25 March 2021 entered into among the Vendor, the Purchaser and the Guarantor in the relation to the Acquisition to amend the Conversion Price to HK$2 per Conversion Share of the Convertible Bonds (subject to adjustment as set out and in accordance with the terms and conditions of the Convertible Bonds) in view of the Company's capital reorganisation, in particular, the share consolidation of every twenty (20) then existing issued and unissued Shares of HK$0.1 each into one (1) consolidated Share of HK$2 each, has become effective on 17 September 2020;

''Updated Valuation''

the valuation prepared by the Valuer regarding the valuation of the Target Company as at 30 June 2020;

''Updated Valuation Report''

the valuation report dated 30 March 2021 issued by the Valuer regarding the valuation of the Target Company as at 30 June 2020. A copy of the valuation report including assumptions, basis and methodology of the valuation, have been included in Appendix V in this circular;

''Valuation''

the valuation prepared by the Valuer regarding the valuation of the Target Company as at 31 August 2019;

''Valuation Report''

the valuation report dated 30 March 2021 issued by the Valuer regarding the valuation of the Target Company as at 31 August 2019. A copy of the valuation report including assumptions, basis and methodology of the valuation, have been included in Appendix VI in this circular;

''Valuer''

an independent professional valuation firm namely LCH (Asia-Pacific) Surveyors Limited;

''Vendor''

Sheen World International Holdings Limited, a company incorporated in BVI with limited liability;

''HK$''

''%''

Hong Kong dollars, the lawful currency of Hong Kong; percent.

For the purpose of this circular, unless otherwise indicated, the conversion of RMB into HK$ are calculated at the approximate exchange rate of RMB1.00 to HK$1.1. This exchange rate is for purpose of illustration only and does not constitute a representation that any amount has been, could have been, or may be, exchanged at this or another rate.

Kiu Hung International Holdings Limited ྆ඪ਷ყછٰϞࠢʮ̡

(Incorporated in the Cayman Islands with limited liability and continued in Bermuda with limited liability)

(Stock Code: 00381)

Executive Directors:	Registered office:
Mr. Zhang Qijun (Chairman)	Continental Buildings, 3rd Floor
Mr. Chen Jian	25 Church Street
Mr. Liu Mingqing	Hamilton HM12
Bermuda
Independent non-executive Directors:
Mr. Cheung Ho On	Head office and principal place
Mr. Kong Chun Wing	of business in Hong Kong:
Mr. Wang Xiao Ning	Flat E, 20th Floor Lucky Plaza
Mr. Lai Chi Yin, Samuel	315-321 Lockhart Road
Ms. Chen Yuxin	Wan Chai
Hong Kong
30 March 2021
To the Shareholders
Dear Sir or Madam,

(1) MAJOR TRANSACTION IN RELATION TO ACQUISITION OF 51% EQUITY INTERESTS IN THE TARGET COMPANY INVOLVING ISSUE

OF THE CONVERTIBLE BONDS UNDER SPECIFIC MANDATE

AND

(2) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

References are made to the announcements of the Company dated 11 September 2019, 21

October 2019, 23 October 2019, 15 November 2019, 11 February 2020, 20 July 2020, 23 March 2021 and 25 March 2021 respectively in relation to the Group's acquisition of 51% of equity interests in Target Company.

LETTER FROM THE BOARD

The Board is pleased to announce that on 11 September 2019 (after trading hours of the Stock Exchange), the Purchaser, a wholly-owned subsidiary of the Company, entered into the Sale and Purchase Agreement (as supplemented by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement) with the Vendor and the

Guarantor, pursuant to which, among other things, the Company conditionally agreed to acquire from the Vendor, and the Vendor has conditionally agreed to sell the Sale Interests, which shall represent 51% of the total equity interest in the Target Company.

The purposes of this circular are to provide you with, among other things, (i) further details of the Acquisition and the transactions contemplated thereunder; (ii) other information as required to be disclosed under the Listing Rules; and (iii) a notice of the SGM.

THE SALE AND PURCHASE AGREEMENT AND THE SUPPLEMENTAL AGREEMENTS

Date of the Sale and	11 September 2019
Purchase Agreement:
Date of the Supplemental	20 July 2020
Agreement:
Date of the Second	23 March 2021
Supplemental
Agreement:
Date of the Third	25 March 2021
Supplemental
Agreement:

Parties:	(1)	Fujian Green Forest Agricultural Technology Co., Ltd.*
(福建綠森農業科技有限公司), as the Purchaser
(2)	Sheen World International Holdings Limited, as the
Vendor
(3)	Lin Wei (林烽), as the Guarantor

As at the Latest Practicable Date, the Vendor is wholly-owned by Mr. Lin. To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, the Vendor and its ultimate beneficial owner and the Guarantor are Independent Third Parties.

Assets to be acquired

Pursuant to the Sale and Purchase Agreement (as supplemented by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement), the Company has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the Sale Interests. The Sale Interests represent 51% of the entire equity interests in the Target Company.

Consideration

The Consideration of the Sale Interests is HK$170 million, which shall be satisfied by the issue of the Convertible Bonds by the Company to the Vendor (or its nominee) in the following manners:

. as to HK$51 million by the issue of the 1st tranche convertible bonds (the ''1st Tranche Convertible Bonds'') in the principal amount of HK$51 million on Completion (the ''Initial Payment'');
. as to a maximum of HK$34 million (subject to adjustment under the paragraph headed ''Consideration adjustment involving guaranteed profits'') by the issue of the 2nd tranche convertible bonds (the ''2nd Tranche Convertible Bonds'') in the maximum principal amount of HK$34 million (the ''First Consideration Payable'') if the audited net profit after taxation (excluding extraordinary items) (the ''Actual Profits'') of the Target Company for the 6-month period after Completion (the ''First Relevant Period'') of RMB20 million (equivalent to approximately HK$22 million) is attained;
. as to a maximum of HK$34 million (subject to adjustment under the paragraph headed ''Consideration adjustment involving guaranteed profits'') by the issue of the 3rd tranche convertible bonds (the ''3rd Tranche Convertible Bonds'') in the maximum principal amount of HK$34 million (the ''Second Consideration Payable'') if the Actual Profits of the Target Company for the 6-month period after the First Relevant Period (the ''Second Relevant Period'') of RMB20 million (equivalent to approximately HK$22 million) is attained;
. as to a maximum of HK$34 million (subject to adjustment under the paragraph headed ''Consideration adjustment involving guaranteed profits'') by the issue of the 4th tranche convertible bonds (the ''4th Tranche Convertible Bonds'') in the maximum principal amount of HK$34 million (the ''Third Consideration Payable'') if the Actual Profits of the Target Company for the 6-month period after the Second Relevant Period (the ''Third Relevant Period'') of RMB21 million (equivalent to approximately HK$23.1 million) is attained; and
. as to a maximum of HK$17 million (subject to adjustment under the paragraph headed ''Consideration adjustment involving guaranteed profits'') by the issue of the 5th tranche convertible bonds (the ''5th Tranche Convertible Bonds'') in the maximum principal amount of HK$17 million (the ''Final Consideration Payable'') if the Actual Profits of the Target Company for the 6-month period after the Third Relevant Period (the ''Final Relevant Period'') of RMB21 million (equivalent to approximately HK$23.1 million) is attained. (any two or all of the First Relevant Period, Second Relevant Period, Third Relevant Period and Final Relevant Period is collectively known as the ''Relevant Periods''and each of them, the ''Relevant Period''and any two or all of the First Consideration Payable, Second Consideration Payable, Third Consideration Payable and the Final Consideration Payable collectively, the ''Consideration Payables''and each of them, the ''Consideration Payable''.)

Save for the differences in the principal amount and the Maturity Date due to the different timing in the settlement of the Consideration, all other terms of each of the 1st to 5th Tranche Convertible Bonds shall be the same. No application will be made for the listing of the Convertible Bonds on the Stock Exchange or any other stock or securities exchange. Subject to the result of the Consideration adjustments detailed under the paragraph headed ''Consideration adjustment involving guaranteed profits'' at each payment interval, application will be made by the Company for the listing of, and permission to deal in, the Conversion Shares by tranches under the Specific Mandate in accordance with the terms of the Sale and Purchase Agreement, the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement.

Payment terms of the Consideration comprise (i) the Initial Payment (representing 30% of the Consideration) to be settled upon Completion; and (ii) the provision by the Vendor and the Guarantor of the Aggregate Guaranteed Profit of RMB82 million (equivalent to approximately HK$90.20 million) in return for the Consideration Payables of HK$119 million (representing 70% of the Consideration) over the Relevant Periods. The Initial Payment was determined after arm's length negotiations between the Purchaser and the Vendor having made reference to payment terms of publicly available transactions of similar deal structures with the Acquisition (i.e. acquisition with guaranteed profits by the targets) disclosed by listed companies in Hong Kong since January 2020, which initial payments to total consideration were ranged from approximately 60% to 100%.

Based on the above and having considered (i) the 30% Initial Payment upon Completion is comparatively better than the researched publicly available transactions of similar deal structures with the Acquisition of other listed companies in Hong Kong; (ii) despite the Initial Payment will be released to the Vendor upon Completion, the Initial Payment will also be subject to Consideration adjustment such that the Vendor would be obliged to compensate the Purchaser if future financial performance of the Target Company could not meet the Guaranteed Profits in whole or in part; and (iii) the Aggregate Guaranteed Profit over the Relevant Periods of RMB82 million or represents an average annual guaranteed profit of RMB41 million was made reference to the forecast annual net profits of the Target Company of RMB46.36 million where the Updated Valuation was based. The allowance of approximately11.5% discount was the result of commercial negotiation between the parties to the Sale and Purchase Agreement in view of the unpredictable development of the COVID-19 epidemic.

The Convertible Bonds

The following summarises certain of the principal terms of the Convertible Bonds:

Principal amount:	HK$170,000,000
Maturity Date:	the date falling on the third anniversary of the date of issue
for each tranche of the Convertible Bonds
Interest rate:	the Convertible Bonds do not bear any interest

Conversion period:

the period commencing on the date of issue of the Convertible Bonds and expiring on the maturity date.

Conversion price:Conversion Shares:Conversion rights:

HK$2 per Conversion Share, subject to adjustments by the adjustment provisions summarised below.

the Conversion Price represents:

(a) a premium of approximately 316.67% to the closing price of HK$0.480 per Share as quoted on Stock Exchange on the date of the Sale and Purchase Agreement; and
(b) a premium of approximately 313.22% to the average closing price of approximately HK$0.484 per Share for the last five consecutive trading days as quoted on the Stock Exchange immediately preceding to the date of the Sale and Purchase Agreement.
(c) a premium of approximately 1,718.18% to the closing price of HK$0.110 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The Conversion Price was determined after arm's length negotiations between the Company and the Vendor with reference to the prevailing market price and recent trading performance of the Shares.

based on the Conversion Price of HK$2, a maximum of 85,000,000 Conversion Shares will be issued, representing approximately 11.16% of the existing issued share capital of the Company as at the Latest Practicable Date and approximately 10.04% of the Company's then issued share capital as enlarged by the issue of the Conversion Shares.

The allotment and issue of the Conversion Shares will not result in a change of control of the Company.

subject to the terms and conditions of the Convertible Bonds, the holder(s) of the Convertible Bonds shall be entitled to convert, in whole or in part, the Convertible Bonds into Conversion Shares. Any conversion shall be made in amounts of not less than a whole multiple of HK$100,000 on each conversion unless the amount of the outstanding Convertible Bonds is less than HK$100,000 in which case the whole (but not part only) of that amount shall be convertible.

If the issue of Conversion Shares following the exercise by a bondholder of the conversion rights attaching to the Convertible Bonds held by such bondholder would result in:

(i) Such bondholder and parties acting in concert with it

(within the meaning of the Takeover Code), taken

together, directly or indirectly controlling or being

interested in 30% or more of the entire issued voting

share capital of the Company (or such other percentage

as may from time to time be specified in the

Takeovers Code as being the level of triggering a

mandatory general offer) as at the date of conversion;

(ii) the Company not meeting the Public Float Requirement immediately after the conversion,

then the number of Conversion Shares to be issued pursuant to such conversion shall be limited to the maximum number of Shares issuable by the Company which would not in the reasonable opinion of the Company result in a breach of the Public Float Requirement or mandatory general offer being triggered under the Takeovers Code (as the case may be) and the balance of the conversion rights attaching to the Convertible Bonds which the bondholder sought to convert shall be suspended until such time when the Company is able to issue additional Share in satisfaction of the exercise of the said balance of conversion rights attaching to the Convertible Bonds and at the same time comply with the Public Float Requirement or without triggering a mandatory general offer under the Takeovers Code. The Company will seek advice from professional parties in forming its opinion in relation to the above to ensure the Company's rule compliance.

Redemption at maturity:

unless previously purchased or converted for the Conversion Shares, the Company shall on the maturity date redeem the outstanding principal amount of the Convertible Bonds.

Transfer restrictions:

holder(s) of the Convertible Bonds may freely transfer the Convertible Bonds to the transferee other than to connected person(s) which must be subject to compliance with any applicable requirements of the Stock Exchange, the Listing Rules, applicable laws and regulations, and with the prior written consent of the Company. Any assignment or transfer of the Convertible Bonds shall be in respect of the whole or any part (in multiples of HK$1,000,000) of the outstanding principal amount of the Convertible Bonds and the Company shall facilitate any such assignment or transfer of the Convertible Bonds.

Adjustments to the

Conversion Price:

the Conversion Price shall be adjusted and only be applicable for adjustment after Completion and upon occurrence of the following corporate activities if conducted by the Company:

(a) Consolidation or subdivision of the Shares:

If and whenever the Shares by reason of any consolidation or sub-division become of a different nominal amount, the Conversion Price in force immediately prior thereto shall be adjusted by multiplying it by the following fraction:

where:

A = the revised nominal amount; and
B = the former nominal amount.

Each such adjustment shall be effective from the close of business in Hong Kong on the date on which the consolidation or sub-division becomes effective.

(b) Capitalisation of profits or reserves (other than in lien of a cash dividend):
If and whenever the Company shall issue (other than in lieu of a cash dividend) any Shares credited as fully paid by way of capitalisation of profits or reserves (including any share premium account or, if any, capital redemption reserve fund), the Conversion Price in force immediately prior to such issue shall be adjusted by multiplying it by the following fraction:
A
B
where:
- A = the aggregate nominal amount of the issued
  Shares immediately before such issue; and
- B = the aggregate nominal amount of the issued
Shares immediately after such issue.
Each such adjustment shall be effective (if appropriate retroactively) from the commencement of the day next following the record date for such issue.
(c) Capital distribution to the Shareholders or grant to the Shareholders rights to acquire for cash assets of the Company or any of its subsidiaries:
If and whenever the Company shall make any capital distribution (except where, and to the extent that, the Conversion Price falls to be adjusted under subparagraph (b) above) to Bondholders (in their capacity as such) of Shares (whether on a reduction of capital or otherwise) or shall grant to such holders rights to acquire for cash assets of the Company or any of its subsidiaries, the Conversion Price in force immediately prior to such distribution or grant shall be adjusted by multiplying it by the following fraction:

A - B

where:

A= the market price of one Share on the date on

which the capital distribution or, as the case

may be, the grant is publicly announced or

(failing any such announcement) next preceding

the date of the capital distribution or, as the case

may be, of the grant; and

B= the fair market value on the day of such announcement or (as the case may require) the next preceding day, as determined in good faith by a reputable commercial bank or an authorized financial advisor or auditors of the Company for the time being, of the portion of the capital distribution or of such rights which is attributable to one Share.

Provided that:

(i) if in the opinion of the reputable commercial bank or the relevant authorized financial advisor or auditors of the Company (as the case may be), the use of the fair market value as aforesaid produces a result which is significantly inequitable, it may instead determine, and in such event, the above formula shall be construed as if B meant the amount of the said market price which should properly be attributed to the value of the capital distribution or rights; and

(ii) the provisions of this sub-paragraph (c) shall not apply in relation to the issue of Shares paid out of profits or reserves and issued in lieu of a cash dividend.

Each such adjustment shall be effective (if appropriate retroactively) from the commencement of the day next following the record date for the capital distribution or grant.

(d) Offer of new Shares for subscription by way of rights

issue or open offer, or a grant of options or warrants to

subscribe for new Shares, at a price which is less than

80% of the then market price per Share to

Shareholders:

If and whenever the Company shall offer to the

Shareholders to subscribe for any new Shares by way

of rights or public offering, or shall grant to the

Shareholders to subscribe for any new Shares by way

of any options or warrants, in each case at a price

which is less than 80 per cent of the market price on

the last dealing day preceding the date of the

announcement of the terms of the offer or grant, the

Conversion Price shall be adjusted by multiplying the

Conversion Price in force immediately on the last

dealing day preceding the date of the announcement by

the following fraction:

A+B

A+C where:

A= the number of Shares in issue immediately before the date of such announcement;
B= the number of Shares which the aggregate amount (if any) payable for the rights, or for the options or warrants or other rights issued by way of rights, and for the total number of Shares comprised therein would purchase at such market price per Share; and
C= the aggregate number of Share for subscription issued by the Company by way of offer, options or warrants.

Such adjustment shall become effective (if appropriate retroactively) from the commencement of the day next following the record date for the offer.

(e) (i) If and whenever the Company shall issue wholly for cash any securities which by their terms are convertible into or exchangeable for or carry rights of subscription for new Shares, and the total Effective Consideration per Share (as defined below) initially receivable for such securities is less than 80 per cent. of the market price at the date of the announcement of the terms of issue of such securities, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to the issue by a fraction of which the numerator is the number of Shares in issue immediately before the date of the issue plus the number of Shares which the total Effective Consideration receivable for the securities issued would purchase at such market price and the denominator is the number of Shares in issue immediately before the date of the issue plus the number of Shares to be issued upon conversion or exchange of, or the exercise of the subscription rights conferred by, such securities at the initial conversion or exchange rate or subscription price. Such adjustment shall become effective (if appropriate retrospectively)

from the close of business in Hong Kong on the Business Day next preceding whichever is the earlier of the date on which the issue is announced and the date on which the Company determines the conversion or exchange rate or subscription price.

(ii) If and whenever the rights of conversion or

exchange or subscription attached to any such

securities as are mentioned in section (i) of this

sub-paragraph (e) are modified so that the total

Effective Consideration per Share initially

receivable for such securities shall be less than

80 per cent. of the market price at the date of

announcement of the proposal to modify such

rights of conversion or exchange or subscription,

the Conversion Price shall be adjusted by

multiplying the Conversion Price in force

immediately prior to such modification by the

following fraction:

A+B

A+C where:

A = the number of Shares in issue immediately before the date of such modification

B= the number of Shares which the total Effective

Consideration receivable by the Company for the securities to be issued at the modified conversion or exchange price would purchase at the market price of one Share at the date of the announcement of such modification

C= the number of Shares to be issued upon conversion or exchange of or the exercise in full of the subscription rights conferred by such securities at the modified conversion or exchange rate or subscription price

Such adjustment shall become effective as at the date upon which such modification shall take effect. A right of conversion or exchange or subscription shall not be treated as modified for the foregoing purposes where it is adjusted to take account of rights or capitalisation issues and other events normally giving rise to adjustment of conversion or exchange terms.

For the purposes of this sub-paragraph (e) (i) and (ii), the ''total Effective Consideration'' receivable for the securities issued shall be deemed to be the consideration receivable by the Company for any such securities plus the additional minimum consideration (if any) to be received by the Company upon (and assuming) the conversion or exchange thereof or the exercise of such subscription rights, and the Effective Consideration per Share initially receivable for such securities shall be such aggregate consideration divided by the number of Shares to be issued upon (and assuming) such conversion or exchange at the initial conversion or exchange rate or the exercise of such subscription rights at the initial subscription price, in each case without any deduction for any commissions, discounts or expenses paid, allowed or incurred in connection with the issue.

(f) If and whenever the Company shall issue wholly for cash any Shares at a price per Share which is less than 80 per cent. of the market price at the date of the announcement of the terms of such issue, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before the date of such announcement by a fraction of which the numerator is the number of Shares in issue immediately before the date of such announcement plus the number of Shares which the aggregate amount payable for the issue would purchase at such market price and the denominator is the number of Shares in issue immediately before the date of such announcement plus the number of Shares so issued.

Such adjustment shall become effective on the date of the issue.

(g) If and whenever the Company shall issue Shares for the acquisition of asset at a total Effective Consideration per Share (as defined below) which is less than 80 per cent of the market price at the date of the announcement of the terms of such issue, the Conversion Price shall be adjusted by multiplying it by a fraction of which the numerator shall be the total Effective Consideration per Share and the denominator shall be such market price. Each such adjustment shall be effective (if appropriate retroactively) from the close of business in Hong Kong on the Business Day next preceding the date on which the Company determines the issue price for such Shares.

For the purpose of this sub-paragraph (g) ''total

Effective Consideration'' shall be the aggregate

consideration credited as being paid for such Shares

by the Company on acquisition of the relevant asset

without any deduction of any commissions, discounts

or expenses paid, allowed or incurred in connection

with the issue thereof, and the ''total Effective

Consideration per Share'' shall be the total Effective

Consideration divided by the number of Shares issued

as aforesaid.

Events of default:

if any of the events specified below occurs, the Company shall on demand of a holder(s) of the Convertible Bonds forthwith redeem the Convertible Bonds in full in cash or the holder(s) of the Convertible Bonds may convert the Convertible Bonds into Conversion Shares:

(a) the Company fails to pay the principal on the Convertible Bonds when due on the maturity date;
(b) the Company defaults in performance or observance or compliance with any of its other obligations set out in the Sale and Purchase Agreement which default is incapable of remedy or, if capable of remedy, is not in the reasonable opinion of the holder(s) of the Convertible Bonds remedied within 14 days after notice of such default shall have been given to the
Company by the holder of the Convertible Bonds;

(c) any present or future indebtedness of the Company for
or in respect of any bonds, debentures, notes or similar
instruments of indebtedness or any other monies
borrowed or raised becomes due and payable prior to
its stated maturity otherwise than at the option of the
Company, or is not paid when due or as the case may
be, within any applicable grace period and the amount
of such indebtedness exceeds the equivalent of
HK$10,000,000;
(d) a security holder takes possession or a receiver, manager or other similar officer is appointed of the whole or any material part of the undertaking, property, assets or revenues of the Company;
(e) the Company becomes insolvent or the Company shall initiate or consent to proceedings relating to itself under any applicable bankruptcy, composition or insolvency law or scheme of arrangement while insolvent and such proceedings shall not have been discharged or stayed within a period of 30 days;
(f) an order of court is made or an effective resolution of shareholders is passed for the winding up of the Company or the Company ceases or threatens to cease carrying on all or substantially all or a material part of its business or operations;
(g) a moratorium is agreed or declared in respect of any indebtedness of the Company or any governmental authority or agency seizes, compulsorily purchases, expropriates or nationalizes all or a substantial part of the assets of the Company;
(h) a distress, attachment, execution or other legal process is levied, enforced or sued out on or against all or any part of the property, assets or revenues of the Company and is not discharged or stayed within 45 days;
(i) proceedings shall have been initiated (that is, issued and served) against the Company under any applicable bankruptcy, composition or insolvency law or scheme of arrangement while insolvent and such proceedings shall not have been discharged or stayed within a period of 60 days;

(j) any warranty is or proves to have been incorrect or misleading in any material respect when made or deemed to be made, or there is a material breach by the Company of any warranty or obligation under the Sale and Purchase Agreement;
(k) any action, condition or thing (including the obtaining or effecting of any necessary consent, approval, authorisation, exemption, filing, licence, order, recording or registration) at any time required to be taken, fulfilled or done in order (i) to enable the Company lawfully to enter into, exercise its rights and perform and comply with its obligations under the Convertible Bonds; (ii) to ensure that those obligations are legally binding and enforceable and (iii) to make the Convertible Bonds admissible in evidence in the courts of Hong Kong is not taken, fulfilled or done by the requisite time or, if in the opinion of the holder of the Convertible Bonds such situation is capable of remedy, within 30 days of the time when the Company becomes (or ought reasonably to have become) aware of the same; or
(l) it is or will become unlawful for the Company to perform or comply with any one or more of its obligations under the Convertible Bonds.

Application for listing:

no application will be made for the listing of the Convertible Bonds on the Stock Exchange or any other stock or securities exchange. Application will be made by the Company for the listing of, and permission to deal in, the Conversion Shares.

Ranking:

the Conversion Shares shall rank pari passu with all other Shares in issue as at the date on which the conversion rights to be attached to the Convertible Bonds are exercised and be entitled to all dividends and other distributions the record date of which falls on a date on or after the such conversion date.

Consideration adjustment involving guaranteed profits

The Vendor and the Guarantor unconditionally and irrevocably guaranteed the Purchaser that the aggregate Actual Profits (the ''Aggregate Guaranteed Profits'') throughout the Relevant Periods shall be no less than RMB82 million (equivalent to approximately HK$90.20 million). The Aggregate Guaranteed Profits shall be split into four tranches for settlement throughout the Relevant Periods, as follow:

(i) the Actual Profits of the Target Company for First Relevant Period shall be not less than RMB20 million (the ''First Guaranteed Profits'');

(ii) the Actual Profits of the Target Company for the Second Relevant Period shall be not less than RMB20 million (the ''Second Guaranteed Profits'');

(iii) the Actual Profits of the Target Company for the Third Relevant Period shall be not less than RMB21 million (the ''Third Guaranteed Profits''); and
(iv) the Actual Profits of the Target Company for the Final Relevant Period shall be not less than RMB21 million (the ''Final Guaranteed Profits'').

The Actual Profits or loss in a Relevant Period shall have an accumulative effect and the Actual Profits/loss in a Relevant Period will be carried forward in determining the Aggregate Guaranteed Profits up to the next Relevant Period and the corresponding amount of the Consideration Payable to be satisfied by the Company to the Vendor.

The Company and the Vendor shall jointly procure an auditor to audit the financial statements of the Target Company within 2 months from the end of each Relevant Period and the auditor shall also issue a certificate for the Actual Profits of the Target Group to the Company and the Vendor (the ''Auditor's Certificate'') for each Relevant Period. The cost of issuing the Auditor's Certificates for each Relevant Period shall be borne by the Company.

The adjustment mechanism on the Consideration which may be downwardly adjusted based on any shortfall between actual profits and the guaranteed profits shall have an accumulative effect. Therefore, any accumulated actual loss incurred in previous Relevant Period(s) will be carried forward to the next Relevant Period to offset any Actual Profit generated in such next Relevant Period and vice versa, in determining whether the accumulated Actual Profits can meet the Aggregate Guaranteed Profits up to such next Relevant Period.

In the event the Actual Profits for the First Relevant Period is less than RMB20 million (equivalent to approximately HK$22 million) but more than HK$0, then the Company shall issue such portion of principal amount of the 1st Tranche Convertible Bonds to the Vendor (or its nominee) based on the follow formula:

First Consideration	Actual Profits for the First Relevant Period
x
Payable	First Guaranteed Profits
- 22 -

In the event the result of the above formula recorded a negative figure (i.e. a loss-making situation), then the 1st Tranche Convertible Bonds will not be issued to the Vendor and such negative figures will be carried forward in determining the Aggregate Guaranteed Profits up to the Second Relevant Period and the corresponding amount of the Second Consideration Payable to be satisfied by the Company to the Vendor. If the Actual Profits for the First Relevant Period exceed the First Guaranteed Profits, no upward adjustment will be allowed, however, the amount exceeding the First Guaranteed Profits will be carried forward in determining the Aggregate Guaranteed Profits up to the Second Relevant Period and the corresponding amount of the Second Consideration Payable to be satisfied by the Company to the Vendor.

In the event the Actual Profit(s) in a Relevant Period plus all previous accumulated Actual Profits/loss of all previous Relevant Period(s) is less than the amount of the Aggregate Guaranteed Profits up to such Relevant Period, then the Company shall issue such portion of the principal amount of the Consideration Payable(s) to the Vendor (or its nominee) for such Relevant Period based on the following formula:

Accumulated Actual Profits/Aggregate Consideration

Payable(s) up to suchloss up to such Relevant Period x -

All previous paid Consideration Payable(s)

Relevant Period

Aggregate Guaranteed Profits up to such Relevant Period

immediately prior to such Relevant Period

In the event result of the above formula in the Second Relevant Period and/or the Third Relevant Period recorded a negative figure, then no part of the 2nd Tranche Convertible Bonds and/or the 3rd Tranche Convertible Bonds will be issued to the Vendor and such negative figures will be carried forward in determining the Aggregate Guaranteed Profits up to the next Relevant Period and the corresponding amount of the Consideration Payable to be satisfied by the Company to the Vendor. If the accumulated Actual Profits up to a Relevant Period exceed the Aggregate Guaranteed Profits up to the same Relevant Period, no upward adjustment will be allowed, however, the amount exceeding the Aggregate Guaranteed Profits up to a Relevant Period will be carried forward in determining the Aggregate Guaranteed Profits up to the next Relevant Period and the corresponding amount of the Consideration Payable to be satisfied by the Company to the Vendor.

Pursuant to the Consideration adjustment mechanism, the ceiling of the maximum compensation shall be the accumulated amount of Consideration Payables received by the Vendor immediately before closing of the Final Relevant Period. In the event the result of the above formula in the Final Relevant Period recorded a negative figure, then no part of the 5th Tranche Convertible Bonds will be issued to the Vendor and the Vendor and the Guarantor shall compensate the Purchaser equals to such amount but subject to a maximum limit of HK$102,000,000 since the Final Consideration Payable will not be released to the Vendor. (i.e. (i) assuming that the Target Company has fulfilled the First, Second and Third Guaranteed Profits and received the First, Second and Third Consideration Payables in an aggregate sum of HK$102,000,000; and (ii) the Target Company has made lost in the Final Relevant Period to the extent that would eliminate all previous accumulated Actual Profits achieved and the Final Consideration Payable has not been released to the Vendor).

For the avoidance of doubt, the actual amount to be paid at a Relevant Period may exceed the above-mentioned maximum Consideration Payable of the same Relevant Period due to the cumulative nature of the Consideration adjustment. However, the maximum total payout by the Company upon the end of the Relevant Periods will be equal to the Consideration.

Further adjustment to the Initial Payment

In the event the accumulated Actual Profits throughout the Relevant Periods is less than the Aggregate Guaranteed Profits throughout the Relevant Periods but more than HK$0, then the Vendor and the Guarantor shall compensate the Purchaser the portion of the Initial Payment based on following formula:

(Aggregate Guaranteed Profits throughout the Relevant PeriodsInitial Payment x

- accumulated Actual Profits throughout the Relevant Periods)

Aggregate Guaranteed Profits

No upward adjustment to the Consideration is allowed in the event the accumulated Actual Profits throughout the Relevant Period is more than the Aggregate Guaranteed Profits throughout the Relevant Periods. The maximum possible amount of the compensation at the end of the Relevant Period is limited to the Initial Payment plus any accumulate Consideration Payables paid out i.e. HK$153,000,000 since the Final Consideration Payable will not be released to the Vendor in the event the financial performance of the Target Company is so unsatisfactory that would result in the maximum compensation situation.

Any compensation amount, if materialized, shall be compensated by the Vendor and the Guarantor to the Purchaser within fifteen (15) Business Days from the date of confirmation on the result of the fulfillment of the Aggregate Guaranteed Profits by the auditor and in the following order of priority:

. by reducing the principal amount of any issued and outstanding Convertible Bonds; and
. by way of cash and/or cash equivalent and/or any asset acceptable to the Group as to any outstanding balance of the compensation amount in the event the principal amount of any issued and outstanding Convertible Bonds is not sufficient to meet the compensation.

The Company will by way of formal announcements and in the upcoming annual reports update the Shareholders and potential investors regarding the fulfillment of the guaranteed profits as above-mentioned.

In the event that the Vendor and the Guarantor fails to pay the compensation amount in full in accordance with the terms of the Sale and Purchase Agreement (as supplemented by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement), the Vendor and the Guarantor shall continue to fulfill their obligation for compensation and pay late payment interest calculated on a daily basis until the date when compensation amount is fully paid. The daily interest rate shall be 0.05% of unpaid compensation amount.

Having considered that in the event the Target Company recorded zero profits throughout the Relevant Periods, no Consideration will be satisfied by the Purchaser to the Vendor, the Company is of the view that such Consideration adjustment mechanism would provide further protection to the interests of the Company and the Shareholders as a whole in this regards.

Basis of the Consideration

The Consideration was arrived at after arm's length negotiations between the Purchaser and the Vendor taking into account, among others, (i) future business prospects of the Target Company and health product industry; and (ii) the preliminary valuation of the Target Company of RMB302 million (equivalent to approximately HK$332.10 million) as at 31 August 2019 prepared by the Valuer adopting the market approach.

As disclosed in the Company's announcement dated 11 September 2019, the Consideration was initially made reference to the preliminary appraised value of the Target Company of RMB310 million (equivalent to approximately HK$341 million) as at 31 July 2019 prepared by the Valuer adopting market approach. Subsequently, as the financial statements of the Target Company as at 31 August 2019 are available, the valuation date has been updated to 31 August 2019 accordingly. Consistent with the preliminary valuation of the Target Company as at 31 July 2019, the forward P/E ratio under the Market Approach was also applied to arrive at the Valuation of RMB302 million (equivalent to approximately HK$332.1 million) as at 31 August 2019. Changes in the key parameters in the Valuation include (i) the increase in the forward P/E ratio from 11.06 to 11.10 with reference to the identified comparable companies; and (ii) the decrease in the projected net profit in the next 12 months from approximately RMB32.2 million to approximately RMB31.2 million, compared with the preliminary valuation as at 31 July 2019. As the Valuation did not have material differences when compared with the preliminary valuation as of 31 July 2019, the Directors considered it was appropriate to use the Valuation as one of the basis of Consideration in this regard.

However, due to various reasons including but not limited to the COVID-19 epidemic and additional time to prepare comprehensive information in the circular, the Acquisition progress has been hindered obviously. The Company is aware that the Valuation represents a valuation date of a prolonged period since the date of the Sale and Purchase Agreement, to re-assess whether there will be any changes in the business development of the Target Company and as a due diligence process, the Company has, right after China has relaxed from the peak period of the COVID-19 epidemic, (i) liaised with the Target Company to reassess the actual and expected future business performance of the Target Company based on the business development of the Target Company since August 2019 (including but not limited to the expected increase in future income stream from the entering into of the New Procurement Agreements); and (ii) requested the Valuer to perform a follow-up valuation on the Target Company as at 30 June 2020 based on an updated 12-months period financial forecast of the Target Company from 1 July 2020 to 30 June 2021 (the ''Updated Valuation'') instead of using the available actual financial information of the Target Company after considering that (i) operation of the Target Company had been unavoidably forced to temporarily suspend in February and March of 2020 due to the strict control measures implemented by the PRC government to prevent the spread of COVID-19 epidemic; (ii) the Target Company had entered into the New Procurement Agreements in January and February of 2020 which actual financialinformation of the Target Company could not fully reflect the economic benefits to be contributed from the New Procurement Agreements; and (iii) the Chinese Herbs Business and Decoction Business which contributed a majority of revenue and gross profit, commenced in November 2019, therefore the actual financial information for the period from 1 September 2019 to 31 August 2020 cannot fully reflect the profitability of the Target Company. The appraised valuation of the Target Company in the Updated Valuation Report adopting the same valuation approach with the forecasted trailing 12-month financial of the Target Company ending 30 June 2021 prepared by the management of the Target Company is RMB428 million (equivalent to approximately HK$470.8 million), representing an increase of approximately 41.72% when compared with the appraised value of the Target Company as of 31 August 2019 of RMB302 million (equivalent to approximately HK$332.1 million). Based on the above, the Company considers that the Updated Valuation can reflect the latest status of the Target Company.

However, having considered that (i) the initial intention of the Board for the decision to enter into the legally binding Sale and Purchase Agreement with the Vendor in September 2019 was to early capture the investment opportunity with the Vendor prior to the potential business high growth period of the Target Company given the optimistic view of the Board on the potential business development of the Target Company in particular, the expected expansion of business scale and the broadening of future clientele base bring from the gaining exposure to the PRC Chinese medicine market of the Target Company benefited from the commencement of cooperation between the Target Company and Sinopharm under the Procurement Agreement; (ii) the purpose of the Updated Valuation is to provide the management of the Company to understand the latest financial and business performance as well as future prospect of the Target Company throughout and after the peak period of the COVID-19 epidemic; and (iii) if the Consideration is to be determined with reference to the Updated Valuation would contradict to the initial intention of the Board to early capture the investment opportunity at a lower price and make the Acquisition no longer attractive to the Company, the Company and the Vendor has mutually agreed that the Consideration shall remain unchanged and the Company is of the view that the above-mentioned decision is fair and reasonable and to the interest of the Company and the Shareholders as a whole.

The Company has compared the 12-month forecast financial information of the Target Company for the period from 1 September 2019 to 31 August 2020 adopted in the Valuation with the actual financial performance of the Target Company for the same period, details of which are set out below:

Forecast figures	Actual figures	Differences
RMB'000	RMB'000	(%)
Revenue	90,991	73,746	-19.00%
Net profit after tax	31,218	27,638	-11.47%

Based on the above table, the Company is aware that there exists a shortfall between the actual financial performance of the Target Company with the forecast figures for the same periods in terms of revenue and net profit. The Company has enquired the Target Company and was given to understand that such shortfall was mainly due to the negative impact on theoutbreak of the COVID-19 epidemic in China in early 2020 to the business operation of the Target Company, in particular, Hubei Province is one of the most severely affected areas. The Hubei Provincial government had implemented strict epidemic prevention and control on Hubei Province from late January 2020 until early April 2020, such measures including but not limited to traffic control and crowd control, corporate operation control. In order to cooperate with the government's epidemic prevention measures and in light of the fact that Target Company's staff were unable to return to work after the Lunar New Year holiday due to the strict control measures implemented in the PRC, the management of the Target Company was of no choice but to temporarily suspend the operation of the Target Company in February and March of 2020. Therefore, the original forecasted revenue of approximately RMB15.12 million in February 2020 and March 2020 could not be achieved by the Target Company. Since the resumption of operations in early April 2020, the business performance of the Target Company has gradually in line with the forecasted financial performance of the Target Company throughout the remaining forecast period.

As the Target Company has completed its annual audit for the year ended 31 December 2020, the Company has also compared the audited financial information of the Target Company for the year ended 31 December 2020 with the forecast financial figures for the same period extracted from the updated financial projections of the Target Company in preparing the Updated Valuation, details of which are set out below:

Forecast figures	Actual figures	Differences
RMB'000	RMB'000	(%)
Revenue	90,052	93,963	+4.34%
Net profit after tax	35,324	35,335	+0.03%

Based on the outcome of the above table, the Company is of the view that the business performance of the Target Company is in line with the forecasted financial performance of the Target Company. Apart from reviewing the audited result of the Target Company for the year ended 31 December 2020, the Company has obtained and reviewed the latest production schedule, budget plan and meeting notes between the Target Company and its' customers and noted that the schedule and budget plan are in line with the Procurement Agreement and New Procurement Agreements. The Company has also observed publicly available news released by Zhushan local government and noted that Zhushan local government remained positive and proactive in promoting agricultural poverty alleviation in Zhushan and the Company did not aware of any new policy released by the Zhushan local government which may have a negative impact to the business of the Target Company. Based on the above, the Company is of the view that the Target Company could achieve the trailing 12-month net profit of RMB46 million for the 12 months ending 30 June 2021 which the Updated Valuation was based.

Valuation

In preparing the Valuation, the Valuer has applied the forward P/E ratio under market approach and adopted certain assumptions. Certain principal assumptions extracted from the Valuation that the Board would like to highlight are as follows:

. The Valuation was performed based on the forward P/E ratio under market approach with the forecasted trailing 12-month financial of the Target Company ended 31 August 2020 (the ''Forecasted Financial'') prepared by the management of the Target Company. After considering (i) historical financial performance of the Target Company for the year ended 31 December 2018 did not reflect the full capacity of the Target Company's production base resulted from the strategic move to temporarily downscaling the business of the plantation, initial processing and sale of Anoetochilus Formosanus (the ''Anoetochilus Formosanus Business'') in 2018 initiated by the management of the Target Company with the intention to prepare for the diversification of product mix under the Procurement Agreement; and (ii) the business of procure, initial processing and sale of other species of Chinese herbs (the ''Chinese Herbs Business'') and the business of procure, medium processing and sale of Chinese herbs decoction pieces and related products (the ''Decoction Business'') to Sinopharm under the Procurement Agreement (as supplemented by the Supplemental Procurement Agreements) commenced in November 2019, forward P/E ratio is more capable of factoring in the future profitability and growth potential of the Target Company;
. Size premium has been added to arrive the forward P/E ratio to incorporate the difference in size between the identified comparable companies and the Target Company (Details of the basis and calculation are stated under the sub-heading ''Selection of comparable companies and relevant size adjustment in determining the forward P/E multiple'' in the ''Letter from the Board'');
. The forward P/E ratio of 11.10 after adjustments on the size and exclusion of outliers is adopted to derive the Valuation (Details of the basis and calculation are stated under the sub-heading ''Selection of comparable companies and relevant size adjustment in determining the forward P/E multiple'' in the ''Letter from the Board''); and
. The discount on lack of marketability of 31% and the control premium of 27% were adopted respectively (Details of the basis are stated under the sub-heading ''Discount on Lack of Marketability (DLOM)'' and the ''Control Premium'' respectively in the ''Letter from the Board'');

The Directors are aware of and have performed the following actions and assessment in order to comply with the ''guidance note on directors' duties in the context of valuations in corporate transactions involving listed companies'' issued by the SFC on 15 May 2017:

Qualification of the Valuer

The Board has reviewed the corporation information and personnel background of the Valuer The signatory of the Valuation Report, Ms. Elsa Ng Hung Mui has over 20 years experiences in the valuation industry. She has extensive experience in handling valuations of various assets including agricultural property assets, financial assets, and mineral extraction resources. Currently, she is a fellow member of the HKIS and a registered professional surveyor in the General Practice Division in Hong Kong. The Directors are of the view that Ms. Elsa Ng Hung Mui and the Valuer are qualified to prepare the Valuation Report.

Valuation methodology including the adoption of forward P/E multiple

Prior to preparing the Valuation for assessment by the Valuer, the Board, together with other professional parties involved in the Acquisition, have conducted an on-site due diligence exercise on the Target Company and have enquired and understood the business model and business plan with the management of the Target Company. The Company has also requested and reviewed the supporting documents including but not limited to the Procurement Agreement, confirmation of the monthly procurement schedule signed by Sinopharm and the Target Company, the execution plan of purchasing raw Chinese herbs for the Chinese Herbs Business and Decoction Business, details of the Traditional Chinese Medicine Industry Poverty Alleviation Cooperation Programme, financial statements and relevant accounting schedules and ledgers of the Target Company as well as the Forecasted Financial.

Apart from assessing documents of the Target Company, the Company has requested and the Target Company has arranged face-to-face communications among the Company, the Target Company with representatives of Zhushan local government and Sinopharm respectively to have a better understanding on the details of the Chinese Medicine Industry Poverty Alleviation Cooperation Programme and the Procurement Agreements.

Details of the business model and business development of the Target Company, the Chinese Medicine Industry Poverty Alleviation Cooperation Programme and the Procurement Agreement are disclosed in the section headed ''INFORMATION ON THE TARGET COMPANY'' in the letter from the Board to this circular.

In assessing the fairness and reasonableness of the Valuation methodology, the Directors have reviewed the Valuation Report and have discussed with the Valuer on the methodology adopted in arriving at the Valuation. The Directors noted that the Valuer has considered three generally accepted business enterprise appraisal approaches, namely, the asset-based approach, the income approach and the market approach, in arriving at the Valuation. As advised by the Valuer, market approach was adopted as the business nature of the Target Company is not capital intensive nor asset heavy and (i) the asset-based approach is not appropriate for the Target Company because, among other things, the asset-based approach does not take into account the profits-generating capabilities of the Target Company in the future and it tends to understate the value of an income-generating business of the Target Company, which is mainlyattributable to its ability to generate income through selling its Chinese medicine products in the past and in the future rather than the value of or replacement costs of its assets. Therefore, the asset-based approach is incapable to reliably reflect the value of the Target Company's equity interests; and (ii) the income approach is also not appropriate for the Target Company as a long term cashflow forecast and detailed financial projection are usually required for the income approach which involves substantive subjective judgment and assumptions to be made on the cashflow forecast and financial projections of the Target Company, however, given the fact that the Target Company would only commence the Chinese Herbs Business and the Decoction Business in November 2019 which were expected to contribute more than 70% of the sales revenue and almost 90% of the gross profit, meaning no historical business performance could be made reference to in connection with the Chinese Herbs Business and the Decoction Business and as such, a reliable judgement and assumptions to prepare such a long-term financial projections of the Target Company may not be available in this regard. The Directors concur with the rationales of the Valuer in adopting market approach for the Valuation in this regard.

To further understand and assess how the Valuer determines the appraised value of the Target Company under market approach, the Directors have reviewed the Valuation Report and noted that the Valuer has made reference to the Forecasted Financial and applied the forward P/E multiple (''Forward Multiple(s)'') under market approach in preparing the Valuation. As such, the Company has enquired the Valuer as to the reasonableness in preparing market approach using Forward Multiple for the Target Company and was advised that a multiple is meaningful only if the profit on which it is based is indicative of future profit potential. Where this is not the case, one should either exclude exceptional items if using historical profits or use forecasted rather than historical profits.

As further explained by the Valuer, empirical evidence shows that forward-looking multiples are more accurate predictors of value, especially considering also that the Chinese Herbs Business and the Decoction Business only commenced in November 2019 which cannot be reflected at all in historical profits. In this regard, the Valuer has provided further information to the Directors and explained that Jing Liu, Doron Nissim, and Jacob Thomas, professors of finance of world-class universities, for example, compared the characteristics and performance of historical and forward industry multiples for a subset of trading companies (Jing Liu, Doron Nissim, and Jacob K. Thomas, ''Equity valuation using multiples,'' Journal of Accounting Research, Volume 40, Number 1, pp. 135-72). They found that the 1-year forward earnings-to-price (E/P) ratios have shown less dispersion than historical E/P ratios against the industry mean and that forward-looking multiples promoted greater accuracy in pricing. Similarly, Moonchul Kim and Jay Ritter, professors of finance of world-class universities, compared the pricing power of historical and forecast earnings for initial public offerings, and they found that the latter had better results with less average prediction errors (Moonchul Kim and Jay R. Ritter, ''Valuing IPOs,'' Journal of Financial Economics, Volume 53, Number 3, pp. 409-37).

The Directors noted that although the Chinese Herbs Business and the Decoction Business of the Target Company were commenced in November 2019, the newly commenced businesses were expected to contribute more than 70% of the revenue and almost 90% of the gross profit incurred in the coming 12-month period from the date of the Valuation with reference to theterms of the Procurement Agreement and the Forecasted Financial which the Directors have performed assessment and due diligence on the assumptions. (Details of the assumptions of the Forecasted Financial and assessment by the Board are disclosed in the section headed ''Assumptions adopted in the Forecasted Financial'' in the letter from the Board to this circular). Therefore, the Directors are of the view that historical profits of the Target Company, being solely contributed from the Anoetochilus Formosanus Business, were considered incapable of factoring in the future profit potential of the Chinese Herbs Business and the Decoction Business, which is forecasted to contribute a majority of the revenue to the Target Company and achieve a comparatively higher gross margin than the Anoetochilus Formosanus Business. Therefore, the Directors considered it would be more meaningful to adopt Forward Multiples under the market approach in this regard.

Besides obtaining explanation from the Valuer on the justification in adopting market approach using Forward Multiples in the Valuation, the Company has, on best effort basis, researched and reviewed details of certain publicly available transactions which have adopted the same valuation methodology with the Valuation from the website of the Stock Exchange and noted that the basis for adopting market approach using Forward Multiples for those transactions were in line with the explanation of the Valuer (i.e. to reflect future profit potential of the targets due to new business plans/developments to be implemented where historical performance of those targets could not reflect the potential financial performance from such business plans/developments).

As further advised by the Valuer, the concept behind the use of the Forward Multiples is that companies are more comparable when they have reached a more mature phase. According to the financial projections of the Target Company, starting from the 2nd year after the Valuation Date, the revenues and net profits of the Target Company are forecasted to increase by approximately 2.7% per annum, which is mainly due to expected inflation. As such, the forecasted profit in the next 12 months was considered to be sufficiently normalized and stable.

Based on the above, the Forward Multiple has been adopted as this more forward-looking measure can factor in the Procurement Agreements and supplemental agreements entered by the Target Company and the Target Company's recent participation in the Chinese Herbs Business and the Decoction Business and thus is more indicative of future profit potential of the Target Company.

Considering that (i) the adoption of market approach using the forward P/E ratio can better reflect current market expectations and consensus on future growth potentials of companies in the relevant industry; (ii) the historical profits of the Target Company did not reflect any performance, profitability and potential of the Chinese Herbs Business and the Decoction Business while the Target Company is expected to derive sustainable and significant profits from operations of the Chinese Herbs Business and the Decoction Business starting from November 2019; (iii) there exists a reasonable number of guideline publicly traded companies available in the market, the Company and Valuer are of the view that it is justifiable to evaluate the value of the Target Company by adopting market approach using Forward Multiples and the Chinese Herbs Business and the Decoction Business can be fairly estimated based on the forward P/E ratio.

Regarding the reason for applying forecasted annual growth rate of approximately 2.7% in the financial projections of the Target Company, notwithstanding that the Company is optimistic about the potential business growth of the Target Company, the management of the Company had, in negotiating the financial projections of the Target Company where the Consideration was based at the time of entering into of the Sale and Purchase Agreement in September 2019, bargained with the management of the Target Company and the management of the Target Company had agreed to adopt a conservative approach to only (i) made reference to the historical performance of the Anoectochilus Formosanus Business; (ii) made reference to the contracted sale amount of the Chinese medicinal herbs and decoction pieces products to be contributed pursuant to the Procurement Agreement; and (iii) assigned a forecast annual growth rate of 2.7% which was based on (a) the terms of the Procurement Agreement allowing purchase prices to be adjusted in accordance with any changes in future market prices of the contracted Chinese herbs; (b) the flat historical financial performance of the Anoectochilus Formosanus Business; and (c) the researched year-on-year change in China's consumer price index in September 2019 of 2.7%, to avoid making too optimistic growth assumptions which uncertainties may arise as to whether the Target Company could achieve the said optimistic projected business growth given the flat historical financial performance of the Anoectochilus Formosanus Business and that the Target Company would only commence the Chinese Herbs

Business and the Decoction Business in November 2019.

Subsequent to the entering into of the Sale and Purchase Agreement, the Target Company has achieved the following business developments which had not been taken into account in the financial projections of the Target Company in determining the Consideration:

. the launching of ''Traditional Chinese Medicine Industry Poverty Alleviation Cooperation Programme'' between the Zhushan local government and the Target
Company for a term of 10 years until September 2029. As a result of the commencement of the programme, not only revenue stream of the Target Company has been broadened by supplying Chinese herb seedlings to the Zhushan local government and local agricultural cooperative, the Target Company could also be provided with a sufficient supply of stable quality raw materials from local farmers and agricultural cooperative at a more stable price as the Target Company and the local government of Zhushan has been jointly providing and will continue to jointly provide support and guidance to those local farmers and agricultural cooperative and the Zhushan local government has been introducing and will continue to introduce appropriate policies to support the business development of local Chinese medication enterprises and alleviate poverty through employment in Zhushan, throughout the terms of the programme; and
. the entering into of the New Procurement Agreements between January 2020 and
February 2020 for terms ranged from 35 months to 36 months with an aggregate contract value of approximately RMB91.6 million, and the New Procurement Agreements has been contributing revenue to the Target Company since the first half of 2020.

Given the above and despite the result of the Updated Valuation, having taken into account the subsequent business development of the Target Company, has indicated that the fair value of the Target Company as of 30 June 2020 was RMB428 million, representing an increase of approximately 41.72% when compared with the fair value of the Target Companyas of 31 August 2019 of RMB302 million (equivalent to approximately HK$332.2 million) at the time when determining the Consideration, the Company has successfully bargained with the Vendor to remain the Consideration unchanged.

For illustrative purposes, when comparing the trailing 12-month revenue and net profit of the Target Company up to and including 31 August 2020 in the original financial projections adopted in the Valuation of approximately RMB91 million and RMB31.2 million respectively with the trailing 12-month revenue and net profit of the Target Company ending 31 August 2021 in the updated financial projections (having taken into account the business development of the Target Company after the date of the Sale and Purchase Agreement) adopted in the Updated Valuation of approximately RMB115.9 million and RMB46.6 million respectively, the annual growth rates, in terms of revenue and net profit, were approximately 27.4% and approximately 49.4% respectively which were beyond the original forecast annual growth rate of 2.7%.

Having considered (i) the projected annual growth rate of 2.7% according to the financial projections of the Target Company at the time when entering into of the Sale and Purchase Agreement was the adoption of a more conservative approach notwithstanding that the Company is optimistic about the potential business growth of the Target Company; (ii) the annual growth rate was indeed well beyond 2.7% according to the updated financial projections of the Target Company (having taken into account the business development of the Target Company after the date of the Sale and Purchase Agreement as mentioned above) adopted in the Updated Valuation; (iii) the Consideration remain unchanged; and (iv) the entire Consideration is subject to Consideration adjustment mentioned in the section headed ''Consideration adjustment involving guaranteed profits'' in the letter from the Board of this circular, the Company is of the view that the Acquisition and the Consideration is fair and reasonable and is in the interest of the Company and the Shareholders as a whole.

In addition, the Valuer further explained that the P/E multiple considers the cost structure as well as the profitability of a company, which are considered primary indicators affecting the value of a company. It is a common valuation method for the assessment of the value of companies with profitable businesses. Capturing all operating variations between companies, it is effective for companies in the same sector. Generally, both historical and forecasted earnings are more easily available. This multiple is more suitable when earnings are representative of future earnings and the trend in those earnings.

Based on the above explanations from the Valuer and assessment by the Directors, the Directors are of the view that the approach adopted by the Valuer for the Valuation (including the adoption of Forward Multiples) is justifiable in this regard.

Selection of comparable companies and relevant size adjustment in determining the forward P/E multiple

In relation to the comparable companies, the Board understands from the Valuer that in the course of identifying the comparable companies to determine the forward P/E ratio, the Valuer has selected 7 suitable comparable companies, via Bloomberg, based on the following criteria:

The companies are principally engaged in the provision of traditional Chinese medicine similar to the Target Company;

. The companies have sufficient listing and operating histories;
. The financial information of the companies is available to the public; and
. The companies are with available forecasted earnings.

As advised by the Valuer, among the publicly available information, the Valuer was not aware of any listed comparable companies that could directly compare with the Target Company's Anoetochilus Formosanus Business. As the Target Company was going to commence the Chinese Herbs Business and Decoction Business in November 2019 which were expected to generate a majority of the forecasted revenue of the Target Company, the Valuer then expanded the search criteria to include listed comparable companies involved in providing traditional Chinese medicine and has reviewed the business description of the list of searched comparable companies and the major geographical and operational segments of the searched comparable companies. As such, the Valuer and the Company considered the comparable companies are fair and form a representative industry benchmark of the provision of traditional Chinese medicine in the geographical region the Target Company is principally engaged in.

Details of the comparable companies are as follows:

Comparable CompaniesStock Code of Comparable CompaniesBusiness nature

Market Capitalization

(in RMBHistorical trailing 12-month netForecasted trailing 12-month net

million) as at sales (in RMB sales (in RMB

31/8/2019

million)million)

Zhangzhou Pientzehuang

Pharmaceutical Co., Ltd.

600436 CH

manufactures and markets

Chinese traditional medicines, including Pientzehuang, Pientzehuang capsules, Pientzehuang lozenge, cough syrup, and other related products.

60,157

5,257 6,767

Jiangsu Kanion

Pharmaceutical Co., Ltd.

600557 CHmanufactures and markets

Chinese traditional pharmaceutical preparations and healthcare products. The company's products include capsules, electuaries, pills, and liquid medicines.

10,203

4,242 5,310

Hunan Hansen

Pharmaceutical Co., Ltd

002412 CHdevelops, produces and sells gastroenterologic, bone-healing, cardiovascular, and cerebrovascular Chinese medicine. The company's products are in the form of syrup, capsule, and injection.

5,042

913 1,105

China Shineway

Pharmaceutical Group Limited

2877 HK

develops, manufactures, and sells modern Chinese medicines in the Peoples Republic of China. The company also produces and sells a series of western pharmaceuticals.

5,510

2,633 3,090

Market CapitalizationComparable CompaniesStock Code of Comparable Companies

(in RMBHistorical trailing 12-month netForecasted trailing 12-month net

million) as at sales (in RMB sales (in RMBBusiness nature

31/8/2019

million)million)

Beijing Tongrentang Co.,

600085 CH

Ltd.

develops, manufactures, and markets Chinese traditional medicines and medicinal wines. The company also operates pharmaceutical retail businesses and provides consulting services.

38,127

14,098 15,707

Tong Ren Tang Technologies 1666 HK

manufactures medical products.

9,948

4,731 4,960

Co. Ltd.

The company produces Chinese patent medicines, biological preparations, antibiotics, biochemical medicines, and other products. Tong Ren Tang Technologies also operates import and export businesses.

Consun Pharmaceutical

1681 HK

Group Limited

research, manufacturing and sale of modern Chinese medicines and medical contrast medium in the People's Republic of China.

3,392

1,916 2,177

Source: bloomberg

The principal businesses of the adopted comparable companies are summarized as follows:

1. 600436 CH (Zhangzhou Pientzehuang Pharmaceutical Co Ltd)

Zhangzhou Pientzehuang Pharmaceutical Co., Ltd. manufactures and markets Chinese traditional medicines, including Pientzehuang, Pientzehuang capsules, Pientzehuang lozenge, cough syrup, and other related products. The company was incorporated in 1956 as Zhangzhou Pharmaceutical Factory firstly in Zhangzhou City. It has gained reputation of its Chinese medicines among Asia, because it owns a precious formula of Chinese herbal medicine namely Pian Zai Zhang, which was innovated in Ming dynasty and was one of the only 4 varieties of Chinese herbal formulas protected by China nationally.

The company owns manufacturing bases to cultivate and process the important medical raw materials for Pian Zai Zhang formula, including 7 unique breeding bases of moschus berezovskii* (林麝) in Shanxi Province and Sichuan Province to process musk* (麝香), several united cultivating bases of notoginseng* (三七), golden lotus* (金錢蓮), dendrobium officinale* (鐵皮石斛) and magnolia* (厚朴). The important components for Pian Zai Zhang series products include musk, bezoar* (牛黃), snake gall* (蛇膽) and notoginseng.

2. 600557 CH (Jiangsu Kanion Pharmaceutical Co Ltd)
Jiangsu Kanion Pharmaceutical Co., Ltd. manufactures and markets Chinese traditional pharmaceutical preparations and healthcare products. The company's products include capsules, electuaries, pills, and liquid medicines. The company was incorporated in 1975 in Jiangsu Province, mainly engaged in developing, producing and selling Chinese prepared medicines, herbal decoction pieces and injections.
By 2019, the company had totally 203 varieties of products registered officially, of which 43 varieties have been included in the National Essential Drugs List, and 105 varieties have been covered by the National Medical Insurance Drug Catalogue. The products owned by the company include Guizhi Fuling Tablets* (桂枝茯苓片), Tianshu Tablets* (天舒片), Xiaoyao Tablets* (逍遙片), Rhodiola Rosea Tablet* (大株紅景天片) etc. In 2019, approximately 45% of the total revenue of the company was derived from Chinese oral medicines.
3. 002412 CH (Hunan Hansen Pharmaceutical Co., Ltd)
The company was incorporated in 1969 in Hunan Province, operated as Yiyang pharmaceutical factory firstly. It owns over 40 years' experience in producing traditional Chinese prepared medicines. The principal business of the company is producing and selling Chinese prepared medicines. By 2019, the company had 197 official registrations of production, of which 129 varieties had been listed in the National Medical Insurance.
In 2019, approximately 87% of revenue was from Chinese herbal medicines providing solutions for the areas of digestive system, cardiovascular and cerebrovascular, respiratory and trauma.
4. 2877 HK (China Shineway Pharmaceutical Group Ltd)
China Shineway Pharmaceutical Group Limited develops, manufactures, and sells modern Chinese medicines in the People's Republic of China. The company was incorporated in 1974 and its headquarter is located in Hebei Province in China. The main business of the company is developing, producing and selling TCM (Traditional Chinese Medicine) injections and formula granules. The company was the first one to be approved by the Yunnan Medical Products Administration for the production and clinical use of TCM formula granules. The major products of the company have successfully been listed in the National Guideline for Chinese Medicine Diagnosis and Treatment in Viral Myocarditis, ranked among the top ten in Chinese Medicine Clinical Evidence Evaluation Index.
The company also has diversified varieties of Chinese medicines, by 2019, there were a total of more than 110 products regularly manufactured by the company, including 18 products admitted in the National Essential Drugs List and 23 products were included in the National Low-priced Medicine Catalogue. The products cover 5

major therapeutic areas, including cardiovascular and cerebrovascular, respiratory system, digestive system, pediatric medications and orthopedic medications. In 2019, the company recorded 54.7% of its total revenue from oral Chinese medicines.

5. 600085 CH (Beijing Tongrentang Co Ltd)
Beijing Tongrentang Co., Ltd. develops, manufactures, and markets Chinese traditional medicines and medicinal wines. The company is held by its parent company namely Tong Ren Tang Group Co., Ltd., which built its first pharmacy under Tong Ren Tang trademark since 1669 in Qing dynasty. The company was incorporated in 1997 in China, with the business of producing, marketing and selling Chinese herbal decoction and prepared medicines under Tong Ren Tang through its branched pharmacies.
In 2019, the company had 78.71% of the total revenue from patent medicines and decoction pieces. The top 5 products contributing the most revenue in 2019 were Angong Niuhuang Wan series* (安宮牛黃系列), Tongren Niuhuang Qingxin series* (同仁牛黄清心系列), Tongren Dahuoluo Dan series* (同仁大活絡系列), Liu Wei Di Huang Wan series* (六味地黄系列), Jin Gui Shen Chi Wan series* (金匱腎氣系列).
6. 1666 HK (Tong Ren Tang Technologies Co Ltd)
Tong Ren Tang Technologies Co. Ltd. manufactures medical products. The company produces Chinese patent medicines, biological preparations, antibiotics, biochemical medicines, and other products. The main business of the company is manufacturing and selling Chinese prepared medicines and Chinese decoction pieces through its subsidiaries under the trademark of Tong Ren Tang. By 2019, the company had totally 46 principal subsidiaries operated as the bases of cultivating, processing and selling Chinese medicinal raw materials. The company sold Chinese medicinal raw materials and prepared medicines both overseas and in China. The company's main products include Liu Wei Di Huang Wan* (六味地黄丸), Niu Huang Jie Du Pian* (牛黄解毒片), Ganmao Qingre Keli* (感冒清熱顆粒) and Jin Guii Shen Chi Wan* (金匱腎氣丸) etc.
By 2019, the company had several major bases, such as Beijing Tong Ren Tang Medicine Processing Base ( 北京同仁堂中藥加工基地) located in Daxing Biomedicine Industrial Base in Beijing, Beijing Tong Ren Tang Yanbian Chinese Medicinal Raw Materials Base (北京同仁堂延邊中藥材基地), Beijing Tong Ren Tang Anhui Chinese Medicinal Raw Materials Base (北京同仁堂安徽中藥材) and the 2 newly built manufacturing bases located in Tangshan City.
7. 1681 HK (Consun Pharmaceutical Group Ltd)
Consun Pharmaceutical Group Limited is a pharmaceutical company engaged in the research, manufacturing and sale of modern Chinese medicines and medical contrast medium in the People's Republic of China. The company was incorporated in 1997, mainly engaged in the developing, manufacturing and selling of Chinese prepared medicines in the area of nephrology, bone injury, skin, hepatobiliary and maternal

and child. The company has 2 bases of manufacturing located in Inner Mongolia and Guangzhou Province, respectively. In 2019, the revenue from producing and selling medicines occupied around 90% of total revenue.

The company also has high diversity of products, owning 147 varieties of which 70 varieties of products have been admitted to the National Medical Insurance Drug Catalogue, including the major products of the company such as Uremic Clearance Granule* (尿毒清顆粒), Yishen Huashi Particles* (益腎化濕顆粒), Iron-dextrin Oral Solution* (右旋糖酐鐵口服液) and Centirizine Hydrochloride Oral Solution* (鹽酸西替利真口服溶液) by 2019.

Although the Chinese Herbs Business and the Decoction Business of the Target Company was newly commenced without sufficient track record, the Target Company has incurred proven positive earnings records since the commencement and the Target Company is expected to derive sustainable profits from operations especially the Chinese Herbs Business and the Decoction Business. With a reasonable number of guideline publicly traded companies available in the market, the forecasted earnings of these comparable companies engaging in similar Chinese herbs and decoction businesses can act as a representative industry benchmark of the future profitability and growth potential of the Target Company.

As advised by the Valuer, as the above-mentioned comparable companies are listed companies and the Target Company is a private company, it is typical for the comparable companies to have larger market capitalization, sales and scale, as well as longer operating history than the Target Company. As the comparable companies are listed companies which are considered to be more mature and sizable than the Target Company, size premium has been added when arriving at the P/E multiple to incorporate the difference in size between the identified comparable companies and the Target Company. The size premium was referenced to Duff & Phelps Cost of Capital Navigator. The Company was given to understand that Duff & Phelps is a global advisor that protects, restores and maximizes value for clients in the areas of valuation, corporate finance, investigations, disputes, cyber security, compliance and regulatory matters, and other governance-related issues. They work with clients across diverse sectors, mitigating risk to assets, operations and people.

Upon further enquiry, the Company was given to understand that the adjustment was made by adding the difference in size premium between the comparable company and the Target Company, to the reciprocal of the multiple. The reciprocal of the adjusted result would represent the multiple of the comparable company as if it were at the same size as the Target Company. The comparable companies (i) with negative forecasted net margin; (ii) without available forecasted earnings in the next 12 months; or (iii) with their adjusted P/E multiples as outliers, were excluded in calculating the average multiple as the adopted P/E ratio. The adjustment was made based on the following formula:

P 1

AdjustedRatio =1+ Adopted Size Premium

EP Ratio

Where the Adopted Size Premium of each of the comparable companies is derived by the following formula:

Adopted Size Premium = the Target Company's Size Premium (i.e. 5.22%) - Size Premium for each of the comparable companies (with the Size Premium of the Target Company and the comparable companies obtained with reference to Duff & Phelps Cost of Capital Navigator)

According to the representations made by Duff & Phelps, the CRSP Deciles Size Premia include 10 portfolios (i.e., deciles) sorted from largest to smallest by market capitalization for which size premia are calculated. Decile 1 is comprised of the largest companies, and decile 10 is comprised of the smallest companies. The CRSP Deciles Size Study provides a single way to match the subject company's market capitalization with the appropriate size premium. The CRSP Deciles Size Study provides the traditional ''risk premia over CAPM'', commonly referred to as ''size premia''. Size premia represent the difference between historical (observed) excess return and the excess return predicted by the Capital Asset Pricing Model (CAPM). Size premia can be added to cost of capital estimation models as an adjustment for the additional risk of smaller companies relative to large companies. The size premium of 5.22% was referenced to the smallest decile with the market capitalization ranged between US$2.455 million and US$321.578 million. This size premium applied to the Target Company was considered to be within generally accepted and commonly adopted range for business enterprise valuations of private companies. In addition, the concluded Valuation of the Target Company at RMB 302 million as at 31 August 2019 as well as the concluded Updated Valuation of the Target Company at RMB428 million as at 30 June 2020 also fall within the range indicated by the smallest decile upon which the size premium was based.

As advised by the Valuer, the above-mentioned formula is a common practice considered by valuers in determining adjusted P/E multiples.

Details of the comparable companies and the process of determining the size adjustments are shown as follows:

Reciprocal of Forward

P/E ratio Market Before size Capitalization adjustment (in US$

Difference in size premiumComparable Companiesextracted from million) as at or adopted sizeDuff & Phelps 31/8/2019

premium

(A) (B) (C)

600436 CH

Approx. 0.03

600557 CH

Approx. 0.06

002412 CH

Approx. 0.04

2877 HK

Approx. 0.11

600085 CH

Approx. 0.03

1666 HK

Approx. 0.07

1681 HK

Approx. 0.17

8,406 1,426 705 770 5,327 1,390 474

4.41% Approx. 0.07
3.64% Approx. 0.09
2.76% Approx. 0.07
3.42% Approx. 0.14
4.37% Approx. 0.08
3.64% Approx. 0.10
2.76% Approx. 0.20

No. of
Reciprocal of	Standard
Forward P/E	Forward P/E	Deviations
ratio After size	ratio After size	away from
adjustment	adjustment	Mean	Outlier
(A+C)	1/(A+C)
13.9	0.93	Yes
10.5	0.00	No
14.6	1.12	Yes
6.9	1.01	Yes
13.1	0.72	No
9.6	0.26	No
5.1	1.51	Yes

The outliers were identified based on the distance from other observations, which was measured by the difference from the average of all comparable companies in terms of standard deviations. Referring to the above table and as advised by the Valuer, comparable companies with the largest two and the smallest two forward P/E ratios after size adjustment were regarded as outliers. Also, these outliers lie at least nearly one standard deviation away from the mean. In general, the further away from the mean, the more extreme the forward P/E ratio of the particular comparable companies is. Both 600085 CH (13.14x) and 600436 CH (13.90x) have higher P/E multiples than the average of all comparable companies after size adjustment. However, the P/E multiple of 600436 CH was even higher than that of 600085 CH, implying a larger difference from the average than 600085 CH as well. In terms of standard deviations, the P/E multiple of 600436 CH was higher than the average by almost 1 standard deviation while the P/E multiple of 600085 CH was higher than the average by approximately 0.7 standard deviations only. In this sense, only 600436 CH was regarded as an outlier but 600085

CH was adopted in arriving at the adopted P/E multiple.

As further explained by the Valuer, the P/E multiples indicated by all of the 7 comparable companies ranged from approximately 5.1x to 14.6x, with an average of 10.5x. However, the distribution of the 7 comparable companies has exhibited a negative skew, meaning the distribution has a tail which extends towards the lower values, and the data points are more concentrated at the higher end. In particular, the smallest multiple, i.e. 5.1x, lies about 1.5 standard deviations from the average while the largest multiple, i.e. 14.6x, lies only about 1.1

standard deviations from the average. Excluding the smallest P/E multiple of 5.1x would result in the average P/E multiple of 6 comparable companies at 11.4x. If the maximum and minimum P/E multiples of 5.1x and 14.6x are both excluded as outliers, the average P/E multiple of the remaining 5 comparable companies would increase to about 10.8x, from the original average of all of the 7 comparable companies at 10.5x.

After excluding the maximum and minimum multiples as outliers, the P/E multiples indicated by the remaining 5 comparable companies ranged from approximately 6.9x to 13.9x, with an average of 10.8x. Similarly, the remaining data points are more concentrated at the higher end with the currently lowest multiple, i.e. 6.9x (the 2nd lowest in all of the 7 comparable companies) significantly deviating from the other observations. In particular, the currently lowest multiple, i.e. 6.9x, lies about 1.4 standard deviations from the average of the remaining 5 comparable companies while the currently highest multiple, i.e. 13.9x, lies only about 1.1 standard deviations from the average of the remaining 5 comparable companies.

As such, it is still considered reasonable to make reference to the range of P/E multiples of all the 7 comparable companies first. Subsequently, in view of the negative skewness of the distribution of the P/E multiples and the exclusion of outliers to mitigate the distortion by more extreme data, the adoption of the 3 comparable companies around the central tendency of the distribution was considered fair and reasonable. Depending on the number of P/E multiples regarded as outliers excluded in calculating the average, the number of comparable companies eventually considered to arrive at the average adopted P/E multiple would vary. Nonetheless, even after removing the outliers, the resulted average P/E ratio of 11.1x does not differ significantly from the original average of all the 7 comparable companies at 10.5x.

As further advised, although only 3 comparable companies were eventually adopted in calculating the average and the 3 comparable companies were much larger than the Target Company in terms of market capitalization and business scale, however, as the comparable companies are listed companies and the Target Company is a private company, it is typical for the comparable companies to have larger market capitalization, sales and scale, as well as longer operating history and more mature operations than the Target Company. In light of the above, size premium has been considered and adopted by the Valuer when arriving at the P/E multiple to incorporate the difference in size between the identified comparable companies and the Target Company. All other factors held constant, the larger the difference between the company size of the comparable company and the Target Company, the more significant the resulted P/E multiple of that particular comparable company would be lowered correspondingly after the size adjustment.

Moreover, the P/E multiples of the 3 comparable companies are more concentrated with less dispersion and the resulted average forward P/E ratio of 11.1x falls within the reasonable range of P/E multiples indicated by all of the 7 comparable companies. Based on the above explanations from Valuer and upon further enquiries and assessment by the Directors, the Directors are given to understand that (i) all comparable companies were identified based on fair and reasonable criteria; (ii) all comparable companies are sourced from Bloomberg which is a well-known global media and financial data and analytics conglomerate; (iii) the 3 comparable companies fully fulfilled the selection criteria and not regarded as outlier; (iv) the 3 comparable companies and the Target Company are domiciled in China and derive their revenue mainly from China; (v) the 3 comparable companies and the Target Company are engaged in the provision of traditional Chinese medicines; and (vi) most of the major customers of the 3 comparable companies and the Target Company are listed companies, therefore, the Directors are of the view that the samples size of 3 comparable companies adopted in the Valuation is appropriate and representative in this regard.

All in all, the Directors consider that (i) the selection criteria set by the Valuer is fair and reasonable; (ii) the basis of calculation of the forward P/E multiples (including the adjustment of size premium) is justifiable; (iii) the samples size of 3 comparable companies adopted in the Valuation in arriving at the adopted forward P/E multiples is appropriate and representative, the result of which represents a more concentrated with less dispersion and falls within the reasonable range of P/E multiples indicated by all of the 7 comparable companies.

Discount on Lack of Marketability (''DLOM'')

The Board is given to understand that, the ownership interests in closely held companies are typically not readily marketable, and not as liquid and as easily converted to cash compared to similar interests in the public companies. Therefore, a share of stock in a privately held company is usually worth less than an otherwise comparable share in a publicly held company. With reference to the 2019 edition of the Mergerstat Review, a marketability discount of 31% was adopted in arriving at the market value of the Target Company as at the date of the Valuation since the Target Company is a private company.

Upon enquiry, it was advised that the Mergerstat Review was published by Factset Mergerstat LLC (''Factset Mergerstat''), an information provider providing merger and acquisition (''M&A'') information for the local, regional, national, and international financial news media, and offering daily M&A transaction data, in-depth historical deal information, and trend analysis for various M&A market sectors and industries. Factset Mergerstat engages in publishing annual, monthly, and weekly M&A publications, and provides M&A and private equity information through its online database. Factset Mergerstat compiles statistics on publicly announced mergers, acquisitions and divestitures involving operating entities. Factset Mergerstat has tracked these statistics and published its findings for over 45 years. The 2019 edition marks the 37th publication of Mergerstat Review. Transaction information is gathered throughout each day using a variety of electronic and print sources. The Mergerstat Review includes formal transfers of ownership of at least 5% of a company's equity and where at least one of the parties is a United States entity.

The Mergerstat Review computes the price offered as a multiple of the acquired company's earnings (''P/E'') when both the price and the earnings are disclosed. Factset Mergerstat excludes negative P/E multiples and P/E multiples larger than 100. The median P/Es offered for public companies and private companies from 2009 to 2018 was studied in the Mergerstat Review. Over the last 10 years, the median P/Es offered for public companies ranged from 19.5 to 26.7 while the median P/Es offered for private companies ranged from 12.5 to 19.7 over the same period. A total of 1750 and 526 acquisitions of public and private companies from 2009 to 2018 were examined respectively in the Mergerstat Review. The DLOM was the percentage difference between the median P/Es offered for public companies and private companies. The Mergerstat Review was adopted for arriving at the DLOM since there is a lack of similar studies in other countries and there is no conclusive evidence that suggests any significant relationships between the DLOM and country of domicile or between the DLOM and industry. Therefore, the use of the average discount on the median P/Es offered for private companies compared with public companies as the DLOM was considered fair and reasonable for the valuation of the Target Company.

Control Premium (''CP'')

Regarding the control premium, the Board understands from the Valuer that, the share prices of the selected comparable companies are deemed to be non-controlling interest when applying the market approach. A controlling ownership interest is typically more valuable than a pro-rata share of a minority interest as the minority owner does not have control over important business decision. With reference to the Control Premium Study (2nd Quarter 2019 ) published by Factset Mergerstat LLC (the ''Control Premium Study''), the Valuer has adopted a control premium of approximately 27% which was the 12-month median premium extracted from the Control Premium Study in estimating the entire equity interests in the Target Company as at the date of the Valuation.

Upon enquiry, it was advised that the Control Premium Study examined completed transactions whereby 50.01% or more of a company was acquired and the target company was publicly traded. The control premium is the percentage difference computed by comparing the per share total consideration price for one share of the target company's common stock to the target company's preannouncement common stock price per share unaffected by the acquisition announcement. For the trailing 12-month period from the 3rd quarter of 2018 to the 2nd quarter of 2019, 571 transactions (both United States and international) were covered by the Control Premium Study, with the 12-month median CP (excluding negative premiums) of approximately 27%. The Control Premium Study was adopted for arriving at the CP since it examines worldwide transactions and there is no conclusive evidence that suggests any significant relationships between the CP and country of domicile or between the CP and industry. Therefore, considering that (i) a trailing 12-month period can ensure more extensive and sufficient transactions were adopted to arrive at a more normalized and less fluctuating premium; (ii) the median measure is less vulnerable to the impact of extreme premiums compared with the average measure in view of the wide range of observed premiums; (iii) the adopted control premium of 27% was considered to be within generally accepted and commonly adopted range; and (iv) the 3-month median premium as at the 2nd quarter of 2019 was approximately 28% which was not significantly different from the adopted control premium, the use of the 12-month median premium as the CP was considered fair and reasonable for the valuation of the Target Company.

Subsequent reassessment on the valuation of the Target Company

The Company is aware that the Valuation represents a valuation date of a prolonged period prior to the Latest Practicable Date. Therefore, the Company has (i) liaised with the Target Company to reassess the actual and expected future business performance of the Target Company based on the business development of the Target Company since August 2019 (including but not limited to the expected increase in future income stream from the entering into of the New Procurement Agreements); and (ii) the Valuer on the revision of the existing valuation based on the latest development of the Target Company. The Updated Valuation was adopting the same valuation approach with the forecasted trailing 12-month financial of the Target Company ended 30 June 2021 prepared by the management of the Target Company which involved projections of profits, earnings and cash flow and are regarded as profit forecast under Rule 14.61 of the Listing Rules. After considering (i) the historical financial performance of the Target Company for the 12 months ended 30 June 2020 did not fully reflectthe income potential of the Chinese Herbs Business and the Decoction Business with Sinopharm under the Procurement Agreement (as supplemented by the Supplemental Procurement Agreements) which commenced only in November 2019; and (ii) the business of the Target Company in the first half of 2020 was disrupted by the outbreak of the COVID-19 and the nationwide lockdown imposed when China was being hit worst by the COVID-19, resulting in minimal operations and income particularly in February and March 2020, the adoption of the forward P/E ratio is still considered suitable for the Updated Valuation. The Valuer has indicated that the Updated Valuation is RMB428 million (equivalent to approximately HK$470.8 million), representing an increase of approximately 41.72% when compared with the appraised value of the Target Company as of 31 August 2019 of RMB302 million (equivalent to approximately HK$332.1 million). However, the Company and the Vendor have mutually agreed that the Consideration will not be adjusted.

Following tables set out the differences of data/parameters used in the Valuation and the Updated Valuation:

The Valuation	Updated Valuation
(31 August 2019)	(30 June 2020)
Forecasted net profit (note 1)	RMB31.2 million	RMB46.4 million
Adopted P/E ratio (note 2)	Approx. 11.10	Approx.10.05
Adopted DLOM	31%	31%
Adopted CP (note 3)	27%	33%
Valuation	RMB302 million	RMB428 million
Note(s):

1. the difference between forecasted net profit of RMB46.4 million used in the update forecast compared
with forecasted net profit of RMB31.2 million used in the previous forecast is mainly attributed to (i)
the inclusion of expected future financial benefits arising from the New Procurement Agreements; (ii) the different 12-month financial forecast period applied to reflect the latest development of the Target Company for the purpose of preparing the Updated Valuation.

2. The difference of the adopted P/E ratio was arising from the differences of forward P/E ratios of the comparable companies from the same data source as of the two valuation dates respectively, as follow:

Forward P/E	Forward P/E
ratio After size	ratio After size
adjustment	adjustment
Stock Code of Comparable Companies	(31 August 2019)	(30 June 2020)
600557 CH	10.54	10.22
Not adopted as it was
2877 HK	resulted as outlier*	5.74
600085 CH	13.14	14.29
1666 HK	9.62	9.93
Average forward P/E ratio adopted	11.10	10.05

* As advised by the Valuer, there are only 6 comparable companies with available forecasted earnings from Bloomberg as at 30 June 2020, instead of 7 comparable companies as at 31 August 2019. Outliers with larger deviations from the mean were excluded but also to ensure there are sufficient comparable companies in the calculation of the average P/E multiple adopted. The comparable company China Shineway Pharmaceutical Group Ltd (2877 HK) was excluded as

outlier in the Valuation as at 31 August 2019 but instead, was included in the calculation of the adopted forward P/E multiple in the Updated Valuation as at 30 June 2020. The P/E ratio of China Shineway Pharmaceutical Group Ltd deviated away from the mean by less standard deviation as at 30 June 2020 compared to 31 August 2019. As such, the difference in value was considered as normal market data fluctuation between the 2 different valuation dates.

3. The difference of the adopted CP was arising from the differences of the referenced CP obtained from the same data source as at the two valuation dates respectively. As such, the difference in value was considered as normal market data fluctuation between the 2 different valuation dates.

A copy of the Valuation Report and the Updated Valuation Report, including details of the assumptions, basis and methodology of the Valuation and the Updated Valuation, have been included in Appendix VI and Appendix V in this circular, respectively.

Assumptions adopted in the Forecasted Financial

The Board has reviewed the bases and assumptions adopted in the Forecasted Financial of the Target Company including but not limited to revenue, cost of sales, sales expenses, administrative expenses, tax expense. Set out below are certain bases and assumptions adopted in the Forecasted Financial that the Board considers significant and the assessment by the Board:

1. Revenue

. The forecasted revenue of the Target Company is derived from the Anoectochilus Formosanus Business, the Chinese Herbs Business and the Decoction Business;
. The Target Company keeps its existing scale of Anoectochilus Formosanus Business with moderate growth;
. The Anoectochilus Formosanus Business is subject to seasonal effect and the majority of the revenue of the Target Company is generated in winter;
. The Chinese Herbs Business and the Decoction Business commence in November 2019.
. The forecasted revenue of the Chinese Herbs Business and Decoction Business were projected base on the terms of the Procurement Agreement including the selling price and quantities and monthly procurement schedule of the contracted products;

Board assessment:

The Board has conducted site visit to the Target Company and enquired and understood the business model and business plan with the management of the Target Company. Furthermore, the Board has requested and reviewed monthly financial statements of the Target Company for each of the years ended 31 December 2017, 31 December 2018 and 31 December 2019 and noted that the revenue from the Anoectochilus Formosanus Business recorded in the last quarter of each of the year 2017, 2018 and 2019 represented approximately 86%, 88% and 47% of the annual revenue contributed from the Anoectochilus Formosanus Businessrespectively and concur with the assumption that the Anoectochilus Formosanus Business is subject to seasonal effect and the majority of the revenue of the Target Company is generated in winter.

In respect of the forecasted revenue of the Anoectochilus Formosanus Business, the Board has reviewed and compared the forecasted revenue of the Anoectochilus Formosanus Business with the Target Company's historical revenue of the Anoectochilus Formosanus Business and is of the view that the forecasted revenue of the Anoectochilus Formosanus Business match with the historical revenue of the Anoectochilus Formosanus Business and considered the forecasted revenue is fair and reasonable.

In relation to the commencement of the Chinese Herbs Business and the Decoction Business, the Board has obtained and reviewed the relevant operating and financial documentations, including (i) the Procurement Agreement; (ii) confirmation of the monthly procurement schedule; (iii) goods delivery notes; (iv) monthly goods receipt statement between the Target Company and Sinopharm; and (v) key financial figures of the Target Company in January 2020 and noted that the Target Company has successfully fulfilled its duties of supplying the Chinese herbs. The Board has also appointed representatives to visit the Target Company and examine the substance of the Target Company in commencing the Chinese Herbs Business and the Decoction Business and were given to understand that the products delivered by the Target Company in November 2019 have passed the quality assurance procedure of Sinopharm.

Having considered (i) the Target Company has commenced the Chinese Herbs Business and the Decoction Business; (ii) the Target Company is capable to fulfill the terms and conditions of the Procurement Agreement and the monthly delivery schedule; (iii) the requested operating and financial documentations of the Target Company in relation to the commencement of the Chinese Herbs Business and the Decoction Business in November 2019 match with the monthly delivery schedule; and (iv) the information of the monthly delivery schedule match with the forecast revenue. The Directors are of the view that the forecast revenue of the Chinese Herbs Business and the Decoction Business is fair and reasonable.

2. Forecasted cost of sales

. The forecasted cost of sales of the Anoectochilus Formosanus Business includes raw material cost, labour cost, utility expenses and equipment depreciation, and repair and maintenance expense;
. The forecasted cost of sales of the Anoectochilus Formosanus Business was estimated with reference to the historical cost of sales of the Target Company as the Target Company targeted to keep its existing scale of the Anoectochilus Formosanus Business without significant expansion;
. The forecasted cost of sales of the Chinese Herbs Business and the Decoction Business include raw material cost, labour cost, utility expenses and equipment depreciation, and repair and maintenance expense with raw material cost accounted for a majority of the cost;

. The forecasted raw material cost of Chinese Herbs Business and the Decoction Business were estimated based on negotiation result among the Target Company, the local government and the farmers on the purchase price of the raw Chinese herbs;
. The forecasted raw material cost of Chinese Herbs Business and the Decoction Business were referenced to the redhead letter issued by Yishui Town People's Government on 8 January 2020 which has set out poverty protection purchase price for the Chinese herbs with at most 3% annual adjustment on the price;
. The other cost of sales of the Chinese Herbs Business and the Decoction Business were estimated based on experience and expertise of the management of the Target Company;
. The forecasted cost of sales to revenue ratio of the Anoectochilus Formosanus Business was estimated to be approximately 80%;
. The forecasted cost of sales to revenue ratio of the Chinese Herbs Business was estimated to be approximately 90%;
. The forecasted cost of sales to revenue ratio of the Decoction Business was estimated to be approximately 40% as the selling price of Chinese herbs decoction pieces are generally higher than the Chinese herbs products due to the more complicated processing procedure, while the unit purchase price of raw root type Chinese herbs, being the raw material of the Decoction Business is much cheaper than raw leaf type Chinese herbs, being the raw material of the Chinese Herbs Business;
. The overall forecasted cost of sales to revenue ratio was estimated to be approximately 53.5%.

Board assessment:

In respect of the forecasted cost of sales of the Anoectochilus Formosanus Business, the

Board has reviewed and compared the forecasted cost of sales to revenue ratio of the Anoectochilus Formosanus Business with the Target Company's historical cost of sales to revenue ratio of the Anoectochilus Formosanus Business and is of the view that the forecasted cost of sales of the Anoectochilus Formosanus Business match with the historical cost of sales of the Anoectochilus Formosanus Business (approximately 80% to revenue) and considered the forecasted cost of sales of the Anoectochilus Formosanus Business is fair and reasonable.

Regarding the forecasted cost of sales of the Chinese Herbs Business and the Decoction Business, the Board have discussed with the management of the Target Company to understand the execution plan of the Target Company on the Chinese Herbs Business and the Decoction Business and have requested and obtained documentations indicating (i) the availability of the farmers and there were sufficient supply of raw Chinese herbs to the Target Company; (ii) the purchase price of raw Chinese herbs and (iii) the redhead letter issued by Yishui Town People's Government on 8 January 2020. Having reviewed the documentations and havingassessed the expertise background of the management of the Target Company, the Directors are of the view that the forecast cost of sales of the Chinese Herbs Business and the Decoction Business is fair and reasonable.

3. Forecasted sales expenses
- . The forecasted sales expenses mainly comprise marketing expense, packaging and sales commission.
- . The forecasted sales expense was estimated with reference to the historical sales expenses to revenue ratio of approximately 0.25%.
4. Forecasted administrative expenses
- . The forecasted administrative expenses mainly comprise staff remuneration, office expenses, office utility expenses, research and development expenses, car rental, depreciation and amortization.
- . The forecasted administrative expenses do not have rental expenses as the office and plant currently consumed by the Target Company was provided by the local government of Zhushan County without consideration.
- . The forecasted administrative expense was estimated with reference to the historical administrative expenses (excluding depreciation and amortization) to revenue ratio of approximately 5.6% plus depreciation and amortization in accordance with such schedules.
5. Forecasted tax expenses
- . No taxation is provided for the Anoetochilus Formosanus Business in the Forecasted Financial since the income from the Anoetochilus Formosanus Business is in line with the scope of corporate income tax exemption and can enjoy the corresponding preferential policies;
- . A lower profit tax rate of 15% is provided for the Chinese Herbs Business and the Decoction Business since the Target Company has been issued a High-tech Enterprise Certificate* (高新技術企業證書).
Board assessment:
The Board has reviewed the High-tech Enterprise Certificate and obtained a legal opinion from the Company's PRC legal adviser regarding tax implication on the business of the Target Company. The Directors are of the view that the tax estimation provided by the management of the Target Company is fair and reasonable.
The Company aware that at the time when entering into the Sale and Purchase Agreement, the Target Company has been conducting the Anoectochilus Formosanus Business and the Target Company has only entered into the Procurement Agreement to commence the Chinese Herbs Business and the Decoction Business, which the profitability of the Chinese Herbs

Business and the Decoction Business were uncertain. As such, the Company has discussed and understood the business model of the Chinese Herbs Business and the Decoction Business (details were disclosed under the paragraph headed ''Business Model'' in this circular) in reviewing the financial projections of the Target Company.

The Company was given to understand that cost of sales of the Chinese Herbs Business and the Decoction Business include raw material cost, labour cost, utility expenses and equipment depreciation, and repair and maintenance expense with raw material cost accounted for majority of the cost. Regarding raw material cost, the Company has been provided with the Traditional Chinese Medicine Industry Poverty Alleviation Cooperation Agreement entered into between the local government of Zhushan and the Target Company for a term of 10 years until September 2029 and the subsequent correspondences confirming the purchase prices and price adjustment mechanism of raw materials from local farmers and agricultural cooperatives. The Company has also, together with representatives of the target company and relevant professional parties involved in the Acquisition, visited and discussed with the responsible person of the local government of Zhushan in charge of the Traditional Chinese Medicine Industry Poverty Alleviation Cooperation Programme to have an in-depth understanding on the programme including but not limited to the purpose of the programme, execution plan of the programme and relevant roles of the Target Company, the local government and the farmers and agricultural cooperatives. The Company has also obtained understanding from the Target Company on the utilisation rate and other essential expenses to produce the products under the Chinese Herbs Business and the Decoction Business. The Company believes the management of the Target Company has sufficient expertise and technical know-how to estimate the above (details of the expertise of the Target Company were disclosed in the paragraph headed ''expertise'' in this circular). Based on the above, majority of the cost of sales could be reasonably ascertained.

Regarding the forecast revenue of the Chinese Herbs Business and the Decoction Business, revenue was projected merely based on the contracted term of the Procurement Agreement without making any aggressive assumptions.

Based on the above, the Company is of the view that the uncertain profitability of the Chinese Herbs Business and the Decoction Business has been reasonably accounted for in this regard.

In both the Valuation and the Updated Valuation, forward P/E multiples have been adopted. In deriving the adopted forward P/E multiples from the identified comparable companies, uncertain profitability is also intrinsic in the forecasted earnings of the comparable companies for the next future financial period applied. As companies with a going concern are usually expected to grow in the future, the forward P/E multiples are typically more conservative compared to the historical P/E multiples. In addition to the uncertain profitability implicit in the forecasted earnings of the comparable companies, both the Valuation and the Updated Valuation have factored in additional uncertainty or greater risk associated with privately held companies and companies of smaller size, two features which newly set up companies or businesses like the Target Company are generally considered to share incommon, by means of the adoption of the discount on lack of marketability and the size adjustment made to the adopted forward P/E multiples with the highest size premium corresponding to the smallest decile adopted for the Target Company.

In view of the size adjustment and discount of lack of marketability adopted, the Valuation and Updated Valuation are considered to have taken into account the uncertain profitability of the Chinese Herbs Business and the Decoction Business to arrive at the appraised value of the Target Company.

Based on the aforesaid, the Directors (including the independent non-executive Directors) are of the view that the bases and assumptions adopted in the Forecasted Financial of the Target Company and the Consideration is fair and reasonable and on normal commercial terms and that the entering into of the Sale and Purchase Agreement is in the interests of the Company and the Shareholders as a whole.

Due diligence

The Group has conducted relevant due diligence on the financial, business and taxation aspects of the Target Company. The due diligence conducted by the Board includes, among others, (i) the review of the accountants' reports on the Target Company as set out in Appendices II & IV prepared by independent certified public accountants appointed by the Company to understand the financial aspects of the Target Company including the material assets and liabilities and financial performance of the Target Company; (ii) the review of the legal opinion prepared by the PRC legal adviser to confirm the tax issue of the Target Company; (iii) the review of the Valuation Report and the Updated Valuation Report, including but not limited to the valuation methodology adopted by the Valuer, as set out in Appendices V & VI to this circular; and (iv) performing site visit together with Financial Adviser, independent certified public accountants and the Valuer to assess the operation of the Target Company.

In light of the above mentioned, the Directors consider that they have performed sufficient due diligence and have sufficient understanding on the Target Company and the Acquisition.

Conditions Precedent

Completion of the Acquisition is conditional upon the fulfillment of the following Conditions on or before the Long Stop Date:

(a) the Purchaser being satisfied with the result of the due diligence review of the Target Company;
(b) all necessary consents, licences and approvals required to be obtained on the part of the Vendor and the Target Company in respect of the Sale and Purchase Agreement, the Supplemental Agreement, the Second Supplemental Agreement, the Third Supplemental Agreement and the transactions contemplated thereby have been obtained and remain in full force and effect;

(c) all necessary consents, licences and approvals required to be obtained on the part of the Purchaser in respect of the Sale and Purchase Agreement, the Supplemental Agreement, the Second Supplemental Agreement, the Third Supplemental Agreement and the transactions contemplated thereby have been obtained and remain in full force and effect;
(d) the representations, warranties and undertakings given by the Vendor have remained true and accurate in all respects and not misleading;
(e) the Purchaser having obtained a PRC legal opinion (in the form and substance to the reasonable satisfaction of the Purchaser) from a qualified PRC lawyer appointed by the Purchaser in respect of the transactions contemplated under the Sale and Purchase Agreement, the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement including but not limited to the due incorporation and subsistence of the Target Company, the legality and validity of the sale of the Sales Shares contemplated under the Sale and Purchase Agreement;
(f) the Purchaser having obtained a valuation report (in the form and substance satisfactory to the Purchaser) from an independent professional valuer appointed by the Purchaser with the valuation of the Target Company of not less than HK$334 million;
(g) the passing by the Shareholders at the SGM to be convened and held of the necessary ordinary resolution(s) to approve, among other things, the Sale and Purchase Agreement, the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement and the transactions contemplated thereunder, including but not limited to the issue of the Convertible Bonds and the allotment and issue of the Conversion Shares under the Specific Mandate);
(h) the Purchaser being reasonably satisfied that there has not been any material adverse change on the Target Company since the date of the Sale and Purchase Agreement;
(i) the Stock Exchange granting or agreeing to grant the approval for the listing of and permission to deal in the Conversion Shares of the 1st Tranche Convertible Bonds; and
(j) having completed the Reorganisation pursuant to the Sale and Purchase Agreement, the Supplemental Agreement, the Second Supplemental Agreement, the Third Supplemental Agreement and all government approvals, filing and licenses relevant to the Reorganisation having been obtained and/or completed.

The Purchaser may in its absolute discretion at any time waive any of the Conditions (a), (d) and (h), by notice in writing to the Vendor. All other Conditions are incapable of being waived by either the Purchaser or the Vendor.

If any of the above conditions have not been fulfilled or waived (as the case may be) by the Long Stop Date, the Sale and Purchase Agreement (as supplemented by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement) shall cease and determine and thereafter neither party to the Sale and Purchase Agreement shall have any obligations and liabilities thereunder.

Guarantee

The Guarantor unconditionally and irrevocably guarantees to the Purchaser to procure the due and punctual performance by the Vendor of all the obligations expressed to be imposed on or assumed by it under the Sale and Purchase Agreement, the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement and undertakes to indemnify and keep effectively indemnified the Purchaser (if necessary by the payment of cash on first demand) against all liabilities, losses, damages, costs and expenses stipulated under the Sale and Purchase Agreement, the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement or otherwise which the Purchaser may suffer or incur in connection with any default or delay on the part of the Vendor in the performance of such obligations provided that the Guarantor shall be discharged or released from its obligations under the Sale and Purchase Agreement, the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement after the issue of the 4th Tranche Convertible Bonds or the fulfilment of the obligation for the compensation amount in the event that the principal amount of any issued and outstanding Convertibles Bonds is not sufficient to meet the compensation.

Completion

Subject to the fulfilment or waiver (as the case maybe) of the Conditions (a) to (j) set out above, Completion shall take place on the Completion Date (i.e. the third Business Day after the Conditions (a) to (j) have been fulfilled or waived (or such other date as the parties may agree)).

INFORMATION OF THE VENDOR, THE GUARANTOR

Vendor is a company incorporated in BVI with limited liability and is principally engaged in investment holding. As at the Latest Practicable Date, the Vendor is wholly-owned by Mr. Lin.

Mr. Lin graduated from Xiamen Huatian Foreign Studies College. After graduation, Mr. Lin worked as a researcher in a pharmaceutical technology development company and the deputy director of the project technology department in a Chinese herbal medicine company in Sichuan. Mr. Lin established the Target Company in 2014, and has been focusing on R&D, planting, product processing and sales of rare medicinal plants such as anoectochilus.

INFORMATION ON THE TARGET COMPANY

The Target Company is a company established under the laws of the PRC with limited liability on 24 September 2014 with registered capital of RMB30,000,000. As at the Latest Practicable Date, it is owned as to (i) 51% by Mr. Lin; and (ii) 49% by Mr. Guo Dong Li, being an Independent Third Party. The Target Company is principally engaged in the development of seeding cultivation and plantation technology of Chinese herbs as well as processing and sale of Chinese herbs products. The production base of the Target Company is situated at Zhushan County, Shiyan City, Hubei Province with forest lands with an aggregate total area of 8,757 Chinese mu with production plants and equipment constructed nearby. The Target Company has been awarded Hubei Province Forestry Industrialization Key Leading Enterprise, and Superior Integrity Unit* (星級統計誠信單位) and has been receiving continuous support from PRC local government of Zhushan County.

Business Model

Anoectochilus Formosanus Business

Since the commencement of business in 2015 to the year ended 31 December 2018, the product of the Target Company was solely anoectochilus formosanus (金線蓮). Due to the biological characteristics of anoectochilus formosanus, it is only suitable for planting from spring to summer times while harvesting and sale from autumn times. The Anoectochilus Formosanus Business is subject to seasonal effect and a majority of the revenue of the Target Company are generated in the winter times. The cost of sales of the Anoectochilus Formosanus Business includes raw material cost, labour cost, utility expenses and equipment depreciation, and repair and maintenance expense.

Chinese Herbs Business

In order to broaden the product mix of the Target Company and to mitigate the business risk of over reliance on a single product with an aim to assist the local government of Zhushan County to drive the local economy and employment, the Target Company has been cooperating with the local government of Zhushan County and professional agricultural cooperatives and Chinese herbs companies in the developing the plantation techniques of other species of Chinese herbs as well as to expand and standardize Chinese herbs market since 2017. As a result of the cooperation with the local government of Zhushan County and other professional agricultural organizations, the Target Company has successfully developed plantation techniques of honeysuckle* (金銀花), a Chinese herb suitable to cultivate and plant in autumn and winter, and has secured the sale of honeysuckle products and other species of Chinese herbs, including white peony* (白芍), huanglian* (黃連), cork* (黃柏), forsythia* (連翹). The products of the Chinese Herbs Business are mainly leaf type Chinese herbs. The operation of the Chinese Herbs Business involve certain procedures, in particular (i) procure and collect suitable raw Chinese herbs from farmers; (ii) undergo initial processing on the raw Chinese herbs. Details of the initial processing are as follow:

Flow Chart of initial processing on the raw Chinese herbs

Raw Chinese herbs

Product name, speciﬁcation, batch number, quantity and certiﬁcate

Drying

Moisture, temperature, time

Net Medicinal

Materials

Nature and moisture

Packaging

Packing quantity, label information

Stock in

Process line

Main Control point

The cost of sales of the Chinese Herbs Business includes raw material cost, labour cost, utility expenses and equipment depreciation, and repair and maintenance expense, while raw material cost accounted for a majority of the cost. The delivery of these products has taken place and started to generate an income stream to the Target Company from the last quarter of 2019.

As at the latest Practicable Date, the Target Company has entered into the Procurement Agreement (as supplemented by the Supplemental Procurement Agreements) with Sinopharm and the delivery of these products has taken place from the last quarter of 2019. In addition to the Procurement Agreement (as supplemented by the Supplemental Procurement Agreements), the Target Company has entered into New Procurement Agreements with four new customers in January and February of 2020.

Decoction Business

Apart from the Chinese Herbs Business, the Target Company commenced the Decoction Business to broaden the product mix of the Target Company and mitigate the business risk of over reliance on a single product. The products of the Decoction Business, including licorice decoction pieces* (甘草飲片), curcuma decoction pieces* (莪朮飲片) and turmeric decoction pieces* (黃姜飲片) are mainly root type Chinese herbs. The operation of the Decoction Business involves certain procedures, in particular (i) procure and collect suitable raw Chinese herbs from farmers; (ii) undergo medium processing on the raw Chinese herbs. Details of the medium processing are as follow:

Flow Chart of medium processing on the raw Chinese herbs

Raw Chinese herbs

Product name, speciﬁcation, batch number, quantity and certiﬁcate

Drying

Moisture, temperature, time

Net Medicinal

Materials

Softening

Softening method, temperature, time and softening degree

Slicing

Sheet size, thickness and uniformity

Drying

Moisture, temperature, time

Packaging

Packing quantity, label information

Stock in

Process line

Main Control point

The cost of sales of the Decoction Business includes raw material cost, labour cost, utility expenses and equipment depreciation, and repair and maintenance expense, while raw material cost accounted for a majority of the cost. The delivery of these products has taken place and started to generate an income stream to the Target Company from the last quarter of 2019.

Sales cycle and target customers

Since the commencement of business from 2015 to 2018, the Target Company mainly focus on the Anoectochilus Formosanus Business. The Target Company sources its clients via the business network of the management of the Target Company. The Target Company also cooperates with CCTV mall (央視網商城) to help the Target Company plan and launch different kinds of marketing campaigns including but not limited to launching product launch press conference to promote and increase public awareness of the Target Company's products. The Target Company also leverages on the resources of CCTV mall to explore clients. For each of the year ended 31 December 2017 and 2018, the Anoectochilus Formosanus Business of the Target Company mainly sold its products to bio-tech enterprises in the PRC. The Target Company also packaged its products into gift pack and sold to distributors and individuals. For each of the year ended 31 December 2017 and 2018, the proportion of revenue derived from launching marketing campaigns to total revenue were approximately 22% and 20%, respectively.

Subsequent to the entering into of the Procurement Agreement, the Target Company has commenced the Chinese Herbs Business and the Decoction Business since November 2019 and Sinopharm has become a major customer of the Target Company accounted for approximately 46% of the total revenue of the Target Company for the year ended 31 December 2019. Given the successful commencement of the Chinese Herbs Business and the Decoction Business as well as the successful introduction of Sinopharm into Zhushan County via the entering into of the Procurement Agreement (supplemented by the Supplemental Procurement Agreement) which was being seen as an important milestone to drive the local economy and employment, the Target Company's relationship with the local government has been getting closer. The Target Company has been selling Chinese herbs seedling, including honeysuckle and anoectochilus formosanus seedlings to the Zhushan local government and local agricultural cooperative established with the approval of the Zhushan local government since the second half of 2019. The Zhushan local government is also a strategic partner of the Target Company and the Zhushan local government and the Target Company entered into ''Traditional Chinese Medicine Industry Poverty Alleviation Cooperation Programme'' for a term of 10 years until September 2029. Pursuant to the programme, the Zhushan local government (i) organizes different local agricultural cooperatives, large Chinese medicinal producers and farmers to plant the Chinese herbs, including honeysuckle and anoectochilus formosanus; (ii) assists the Target Company in the overall coordination and planning of the entire industrial chain ofvarious Chinese herbs within its jurisdiction, and provides the Target Company with corresponding policy support for the Chinese herb industry; and (iii)_unifies the supply of seedlings, planting standards, purchase of raw materials, etc of the Chinese herb industry, including honeysuckle and anoectochilus formosanus. The Target Company is responsible for (i) providing qualified Chinese herbs seedling, including honeysuckle and anoectochilus formosanus; (ii) providing free technical guidance and training on the planting and management of Chinese herbs including honeysuckle and anoectochilus formosanus to the local agricultural cooperatives, farmers or poor households under the jurisdiction of the Zhushan local government; (iii) purchasing the Chinese herbs from the local agricultural cooperatives, farmers and poor households within the jurisdiction of the Zhushan local government. Besides, the Zhushan local government sets out the poverty protection purchase price for the Chinese herbs with at most 3% annual adjustment on the price which has been disclosed in the redhead letter issued by Yishui Town People's Government on 8 January 2020. The flow of the operation is as follows:

Seedling Providers

Supply of seedlings (note 1)

Supply of qualified seedlings (note 2)

Target Company

Provision of policy support and assist in overall coordination and planning of the entire industrial chain

Zhushan local government

Value added services (note 4)

Stock in

Provision of free technical guidance

and training on the planting

Sales of raw Chinese herbs (note 3)Distribution of seedlings and organization of the plantation of Chinese herbs

Sales of products (note 5)

Customers

Local agricultural cooperatives, farmers and poor households

Notes and sequences of the flows of revenue recognition and operations of the Target Company:

1. The Target Company purchases seedlings from seedling providers.
2. The Target Company sells qualified seedlings to Zhushan local government after screening and further nurturing with special plantation technique.
3. The Target Company purchases raw Chinese herbs from local agricultural cooperatives, farmers and poor households with poverty protection prices
4. The Target Company undergoes initial/medium processing on the raw Chinese herbs
5. The Target Company sells the products to customers and recognizes the revenue after successfully delivering the promised products to the customers.

The poverty protection purchase price provides the Target Company with a consistent supply of raw material at a stable price, meanwhile the farmer can earn a stable income by supplying the raw material to the Target Company. Apart from the ''Traditional Chinese Medicine Industry Poverty Alleviation Cooperation Programme'' and the poverty protection purchase price, the Zhushan local government regularly organizes business events and introduces different companies to the Target Company in order to (i) facilitate the cooperation between those companies and the Target Company; (ii) accelerate the development of the Zhushan economy.

Benefited from the exposure to the Chinese medicine market in the PRC of the cooperation between the Target Company and Sinopharm, for the six months ended 30 June 2020, the Target Company has further entered into New Procurement Agreements with 2 existing customers and 2 new customers where 1 of the new customers (Customer A of the New Procurement Agreements under section headed ''REASONS FOR AND BENEFITS OF THE ACQUISITION'' in this circular) is a sizeable PRC based pharmaceutical and bio-tech enterprise with operation base of over 46,000 m2 and plantation bases of 17,000 mu according to publicly available information.

Expertise

Since the establishment of the Target Company in 2014, the Target Company had been working with Huazhong Agricultural University (華中農業大學) and China State Institute of Pharmaceutical Industry (中國醫藥工業研究總院) on the research and development of plantation technology and application of different species of Chinese herbs for more than three years. The Target Company currently possesses 42 utility model or invention patents. 28 utility model or invention patents including, among others the seedling cultivation, formula and preparation of the final goods, dehydration and drying method, beverage production, are related to Anoectochilus Formosanus Business. 8 utility models or invention patents are related to the fertilization, irrigation, weeding, soil loosening of honeysuckle. The remaining utility model or invention patents are related to steam sterilizer, greenhouse water curtain system, food therapy, etc. The Target Company utilize the utility models and invention patents for their operation and production in order to achieve higher efficiency and better output. The Target Company has been awarded Hi-Tech enterprises certificate (高新技術企業證書) in November 2018.

With reference to the public announcement by Hubei Forestry Bureau (湖北省林業局) (http://lyj.hubei.gov.cn) on 28 November 2018, the Target Company was successfully re-elected as one of the leading enterprises (重點龍頭企業) in Hubei pursuant to the requirement under the Hubei Province Forestry Industrialization Key Provincial-level Leading Enterprises Declaration, Recognition and Moni toring Management Measures* (湖北省林業產業化省級重點龍頭企業申報認定和監測管理辦法) effective from the date of the announcement until December 2021. And going forward, with the cooperation with Sinopharm, the Target Company is aiming to expand its business scale and positioning itself as an interprovincial Chinese medi-tech enterprise.

Set out below are certain audited key financial figures of the Target Company for each of the years ended 31 December 2018, 31 December 2019 and 31 December 2020, which were prepared in accordance with the HKFRS:

For the year	For the year	For the year
ended	ended	ended
31 December	31 December	31 December
2018	2019	2020
Approx.	Approx.	Approx.
RMB'000	RMB'000	RMB'000
(Audited)	(Audited)	(Audited)
Revenue	19,600	29,740	93,963
Net profit before taxation	3,682	8,730	39,204
Net profit after taxation (Note 1)	3,682	8,730	35,335
Notes:

1. According to the information on the website of the Hubei Provincial Electronic Taxation Bureau of the State Administration of Taxation and the legal opinion issued by a PRC legal adviser, the Anoectochilus Formosanus Business of the Target Company is exempted and not subject to any tax in PRC.
2. As at 31 December 2020, the audited net asset value of the Target Company was approximately RMB61.9 million (equivalent to approximately HK$68.1 million).
3. The increase in profit before and after tax for the year ended 31 December 2019 and for the year ended 31 December 2020 were primarily attributable to, amongst other factors,
- i. the commencement of the Chinese Herbs Business and the Decoction Business since November 2019; and
- ii. The entering into of the Procurement Agreement, the Supplemental Procurement Agreements between the Target Company and Sinopharm, and the entering into of the New Procurement Agreement between the Target Company and new customers.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Group is principally engaged in (i) manufacturing and trading of toys and gifts; (ii) exploration of natural resources; and (iii) investment in various potential businesses including fruit plantation, leisure and culture. The Purchaser is a wholly-owned subsidiary of the Company, which is principally engaged in investment holding.

The Group always aims to strengthen its business and increase the Shareholders' values. Having considered the shift and increasing emphasis on the healthy life style trend in China and the prospect of the Target Company, the Company is of the view that the Acquisition is an attractive opportunity for the Group to enhance the business portfolio and enable the Group to benefit from the positive earnings contribution brought by the Target Company.

The Target Company recorded revenue of approximately RMB94 million for the year ended 31 December 2020, representing an increase of approximately RMB64.2 million or approximately 216% as compared with the revenue of approximately RMB29.7 million for the year ended 31 December 2019. Such increase in revenue was primarily due to the commencement of the Chinese Herbs Business and the Decoction Business since November 2019, the Procurement Agreement (as supplemented by the Supplemental Procurement Agreements) entered into between the Target Company and Sinopharm and the New Procurement Agreements entered into between the Target Company and the new customers. The major terms of the Procurement Agreement (as supplemented by the Supplemental Procurement Agreements) and the New Procurement Agreements are as follow:

Approximate Contract Sum

(excluding

VAT) and

(Guaranteed Contract

Customers	Amount)	Period
RMB'000	Month
Procurement Agreement
Sinopharm	65,800	60
Sub-total	65,800
New Procurement Agreements
Customer A	14,973	35.5
Customer B	19,554	36
Customer C	28,649	35
Customer D	28,378	35
Sub-total	91,554

Despite the Target Company has a short historical record on the Chinese Herbs Business and the Decoction Business, no matter of the Chinese Herb Business and the Decoction Business are in the same industry of the Anoectochilus Formosanus Business that the management of the Target Company can utilize their knowledge and skills of the Anoectochilus Formosanus Business when operating the Chinese Herbs Business and the Decoction Business. Furthermore, with the effort of the Target Company, both the terms of the Procurement Agreement with Sinopharm (supplemented by the Supplemental Procurement Agreement) and the New Procurement Agreements with new customers are sustainable and has provided safe guard to the Target Company with a term of five year with guaranteed purchase amount.

The Target Company has been awarded Hubei Province Forestry Industrialization Key Leading Enterprise, and the Superior Integrity Unit* (星級統計誠信單位) and has been receiving continuous support from PRC local government of Zhushan County.

Moreover, the Consideration was further secured by the Aggregate Guaranteed Profits. In the event that Target Company recorded zero profits throughout the Relevant Periods, no Consideration will be satisfied by the Purchaser to the Vendor, the Company is of the view that such Consideration adjustment mechanism would provide further protection to the interests of the Company and the Shareholders as a whole. Besides, The conversion price of the Convertible Bonds represents a high premium over the current share price of the Company.

The Directors has conducted business review and feasibility study on the operation of the Target Company which included, among others, requested and obtained relevant operating and financial documentationss, interviewed the management of the Target Company, performed site visit and engaged the consultancy firm to conduct the industry research. The Company has also (i) appointed an independent valuer for the valuation on the Target Company; (ii) engaged the Reporting Accountant to perform the audit works on the Target Company; and (iii) engaged a PRC legal adviser to conduct legal due diligence on the Target Company.

Having considered the above and the results of the due diligence exercises conducted by the Company, the Directors are not aware of any material adverse problems which may prevent the Completion and believe that entering into of the Sale and Purchase Agreement (as supplemented by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement) will provide a great opportunity to the Group to provide sustainable growth to the Company, thus potentially greater return for the Shareholders.

The Directors further consider that the entering into of the Sale and Purchase Agreement (as supplemented by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement) will not change the nature of the Group's principal business but will enhance the Group's business portfolio. In view of the above, the Directors consider that the terms of the Sale and Purchase Agreement (as supplemented by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement) are on normal commercial terms and are fair and reasonable and the Sale and Purchase Agreement (as supplemented by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement) is in the interests of the Company and the Shareholders as a whole.

EFFECT ON SHAREHOLDING STRUCTURE OF THE COMPANY

Reference is made to the announcements of the Company 3 November 2020, 20 November 2020 and 22 January 2021 in relation to the proposed issue of new Shares (the ''Loan Cap Shares'') under a specific mandate of the Company for capitalizing certain outstanding debts owing to the creditors by the Company (the ''Debt Capitalisation''). Completion of the Debt Capitalisation is subject to the approval by the Shareholders at the special general meeting to be convened by the Company and the granting of the listing of, and permission to deal in the Loan Cap Shares by the Stock Exchange. As at the Latest Practicable Date, the Debt Capitalisation has yet to be completed as the Company is in the process of finalizing certain information to be included in the circular for Shareholders' approval at the forthcoming special general meeting of the Company.

In light of the proposed issue of the Convertibles Bonds under the Acquisition and the Debt Capitalisation, the shareholding structure of the Company (i) as at the Latest Practicable Date; (ii) immediately upon the allotment and issuance of the maximum Conversion Shares upon full exercise of the conversion right attaching to the Convertible Bonds; and (iii) immediately upon the allotment and issuance of the maximum Conversion Shares upon full exercise of the conversion right attaching to the Convertible Bonds and the allotment and issue of the Loan Cap Shares are set out below:

Shareholders

Immediately after the
full conversion of the
Immediately after	Convertible Bonds and
As at the	full conversion of the	the allotment and issue of the
Latest Practicable Date	Convertible Bonds	Loan Cap Shares
Approximate	Approximate	Approximate
No of Shares %	No of Shares %	No of Shares %

Mr. Zhang Qijun (Note 1)	33,500	0.004%	33,500	0.004%	33,500	0.003%
Mr. Liu Mingqing (Note 2)	5,600,000	0.735%	5,600,000	0.662%	5,600,000	0.453%
Mr. Cheng Ho On (Note 3)	8,500	0.001%	8,500	0.001%	8,500	0.001%
Vendor (or its nominee)	-	-	85,000,000.00	10.042%	85,000,000.00	6.872%
Creditors (Note 4)	-	-	-	-	390,440,579.00	31.567%
Public Shareholder	755,777,079	99.259%	755,777,079	89.291%	755,777,079	61.104%
Total	761,419,079	100.000%	846,419,079	100.000%	1,236,859,658.00	100.000%
Note:

1. Being the executive director and the chairman of the Company.
2. Being the executive director of the Company.
3. Being the independent non-executive director of the Company.
4. None of the Creditors will become a substantial Shareholder immediately after the allotment and issue of the Loan Cap Shares.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios in respect of the Acquisition calculated in accordance with Rule 14.07 of the Listing Rules exceed 25% but less than 100%, the Acquisition constitutes a major transaction for the Company under the Listing Rules.

The Sale and Purchase Agreement (as supplemented by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement) and the transactions contemplated thereunder (including the Specific Mandate to be sought for the allotment and issue of the Conversion Shares) are subject to the announcement and Shareholders' approval by way of poll at the SGM.

As no Shareholder has any material interest in the Acquisition which is different from other Shareholders, no Shareholder is required to abstain from voting at the SGM in respect of the approval of the Sale and Purchase Agreement, the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement and the transactions contemplated thereunder.

FINANCIAL IMPACT OF THE PROPOSED ACQUISITION TO THE GROUP

Upon completion of the Acquisition, the Company will hold a total of 51% equity interests in the Target Company and the financial results of the Target Company will be consolidated into the financial statements of the Group. The accompanying unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group as set out in Appendix IV to this circular is prepared as if the Acquisition had been completed on 30 June 2020 to illustrate the effect of the Acquisition.

Asset and liabilities

Based on the unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group as set out in Appendix IV to this circular (assuming that the Acquisition had been completed on 30 June 2020), the total assets of the Group would have increased from approximately HK$808.8 million to approximately HK$979.9 million on a pro forma basis, the total liabilities of the Group would have increased by HK$138.2 million on a pro forma basis, and the net assets of the Group would have increased from approximately HK$311.7 million to approximately HK$344.7 million on a pro forma basis.

Earnings

Further details of the financial effect of the Acquisition together with the bases in preparing the unaudited pro forma financial information are set out in Appendix IV to this circular.

SPECIAL GENERAL MEETING

The SGM will be held at Harbour Plaza Room I, B1/F, Harbour Plaza, North Point, 665 King's Road, North Point, Hong Kong on Monday, 19 April 2021 at 10:00 a.m., during which resolution will be proposed to the Shareholders to consider and, if thought fit, to approve the Sale and Purchase Agreement, the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement and the transactions contemplated thereunder.

The notice of the SGM is set out on pages SGM-1 and SGM-2 of this circular. A form of proxy for use at the SGM is enclosed. Whether or not the Shareholders are able to attend the SGM, the Shareholders are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the office of the Company's branch share registrar in Hong Kong, Tricor Tengis Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong or via the designated URL (https://emeeting.tricor.hk) by using the username and password provided on the notification letter sent by the Company as soon as possible but in any event not less than 48 hours before the time appointed for holding the SGMor any adjournment thereof. Completion and return of the form of proxy will not preclude the Shareholders from attending and voting in person at the SGM or any adjournment thereof should the Shareholders so wish.

RECOMMENDATION

The Directors believe that the terms of the Acquisition are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend that all Shareholders to vote in favour of the resolution to be proposed at the SGM.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendices to this circular.

Yours faithfully,

For and on behalf of the Board

Kiu Hung International Holdings Limited

Zhang Qijun

Chairman

I. FINANCIAL INFORMATION OF THE GROUP

The financial information of the Group for each of the year ended 31 December 2017, 2018 and 2019 and six months ended 30 June 2020 are disclosed in the following documents which have been published on the website of the Stock Exchange atwww.hkexnews.hkand the Company's website athttp://www.kh381.com/ :

. Interim report of the Company for the six months ended 30 June 2020 published on28 September 2020 (hyperlink: https://www1.hkexnews.hk/listedco/listconews/sehk/ 2020/0928/2020092800807.pdf);
. Annual report of the Company for the year ended 31 December 2019 published on 5June 2020 (hyperlink: https://www1.hkexnews.hk/listedco/listconews/sehk/2020/ 0605/2020060500904.pdf);
. Annual report of the Company for the year ended 31 December 2018 published on29 April 2019 (hyperlink: https://www1.hkexnews.hk/listedco/listconews/sehk/2019/ 0429/ltn201904291625.pdf); and
. Annual report of the Company for the year ended 31 December 2017 published on30 April 2018 (hyperlink: http://www.hkexnews.hk/listedco/listconews/SEHK/2018/ 0430/LTN20180430299.pdf).

II. INDEBTEDNESS STATEMENT

As at the close of business on 31 January 2021, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had approximately HK$218.42 million outstanding indebtedness comprising the following debts:

(i) HK$60 million borrowings were guaranteed, and were secured by the Group's certain properties;

(ii) HK$54 million borrowings were not guaranteed and unsecured;
(iii) Obligation under finance leases of HK$417,000; and
(iv) Promissory notes of HK$104 million.

The carrying values of the Group's assets pledged to secure its borrowings amounted to approximately HK$73.90 million as at 31 January 2021.

As at 31 January 2021, the Group had no significant contingent liabilities.

Save as aforesaid and apart from intra-group liabilities and normal trade payables, as at the close of business on 31 January 2021, the Group did not have any debt securities issued and outstanding, and authorised or otherwise created but unissued, or term loans, bank overdrafts, liabilities under acceptances (other than normal trade bills) or acceptance credits, hire purchase commitments or other borrowings, mortgages, charges, guarantees or contingent liabilities.

III. WORKING CAPITAL

The Directors, after due and careful enquiry, are of the opinion that, taking into account the internal financial resources and credit facilities available to the Group and the effects of the Acquisition, and in the absence of unforeseen circumstances, the Group will have sufficient working capital for its present requirements for a period of at least 12 months from the date of this circular.

IV. MATERIAL ADVERSE CHANGE

Reference is made to the interim report for the six months ended 30 June 2020 dated 28 August 2020 regarding the performance of the Group for the six months ended 30 June 2020. Save as disclosed in the publication above, as at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2019, being the date to which the latest published audited consolidated financial statements of the Company were made up.

V. FINANCIAL AND TRADING PROSPECT OF THE GROUP

As disclosed in the Company's annual report for the year ended 31 December 2019, the Group has been reviewing its operations and exploring other investment opportunities that have earning potentials in order to expand its existing operations and diversify its businesses and income base to maximize the interests of the Group and the Shareholders as a whole.

Upon completion of the Acquisition, the Company will hold a total of 51% equity interests in the Target Company and the financial results of the Target Company will be consolidated into the financial statements of the Group. The Company can enjoy the potential growth of the Target Company attributable to the commencement of the Chinese Herbs Business and the Decoction Business and the dividend income from the Company's investment in the Target Company. The Directors are of the view that the Acquisition is maximizing the interests of the Group and the Shareholders as a whole. The Board has no intention, arrangement, agreement, understanding or negotiation on any potential transaction which involve disposal/termination/scaling-down of the Company's existing business.

The Board considers the prospect of the Group's business segment as follows:

a. Toys and gifts items:

The Board considered that the overall market environment for the manufacturing and trading of toys and gifts items sector was poor because of COVID-19 and Sino-US tensions. As COVID-19 infections have been contained, the government allowed the reopening of the factory and provided support for the retail markets, the Board had faith in the future performance of the toys and gifts sector;

b. Exploration:

The Board considered that this business segment may not be able to contribute income stream to the Group in near future after the disposal of 80% equity interest of the Inner Mongolia Mingrunfeng Energy Co., Limited (PRC) and 80% equity interest of the Inner Mongolia Run Heng Mining Company Limited (PRC) on 15 December 2018. The Board will closely monitor the development of China's mining environment and formulate appropriate business strategy towards its investment in the exploration rights with an aim to maximize Shareholder's value;

c. Fruit Plantation:

With the increasing public awareness of healthcare due to the spread of the COVID-19 and increasing demand for natural health products in the PRC, the Board considered the demand for Noni-fruit, to a certain extent, could be benefited. The Board had a strong faith in the Noni-fruit industry.

d. Leisure:

The Board considered that the competition in the tea industry becomes more fierce as the traditional sales model is facing keen competition from those online platforms. The Company had begun to fine-tune its operation model to meet its customers' need. For the wine related business, the Company has adopted a strategy to look for potential cooperators in producing and distributing the yellow wine products due to the insufficient working capital. For the outbound tourism business, the Company has instructed its legal adviser to take legal action against the vendor of Eagle Praise Group to rescind the various agreements entered into with the vendor on the ground of fraudulent misrepresentations made by the vendor and its representative.

e. Culture:

The Board will closely monitor the opportunity of the investment in valuable ceramics with an aim to maximize Shareholder's value;

On 29 July 2020, the Company entered into a memorandum of understanding with China

Commerce Huaxia Asset Management Co., Ltd.* (中商華夏資產管理有限公司) in connection with the possible acquisition of certain equity interests in China Commerce Fule Construction Co., Ltd.* (中商富樂建設有限公司) which is principally engaged in among others, general construction contracting for housing and building projects, property development and management, project investments and sales of construction materials. As at the Latest Practicable Date, the Company is still under negotiation with China Commerce Huaxia Asset Management Co., Ltd.*.

On 15 October 2020, the Company entered into a memorandum of understanding with Mianyang Liaofan Shande Senior Care Services Ltd.* (綿陽了凡善德養老服務有限公司 ) in connection with the possible establishment of a joint venture in the PRC. As for the registered capital of the joint venture, the Company will contribute capital in cash, accounting for 85% of the registered capital of the joint venture, while Mianyang Liaofan Shande Senior CareServices Ltd. will contribute capital in cash, accounting for 15% of the registered capital of the joint venture. As at the Latest Practicable Date, the Company is still under negotiation with Mianyang Liaofan Shande Senior Care Services Ltd.*

Going forward, the Company will carefully review and assess its existing operation while continuing to explore other investment opportunities that have earning potentials in order to expand its existing operations and diversify its businesses and income base to maximize the interests of the Group and the Shareholders as a whole.

ACCOUNTANTS' REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF KIU HUNG INTERNATIONAL HOLDINGS LIMITED

Introduction

We report on the historical financial information of Hubei Jincaotang Pharmaceutical Co.,

Ltd* (湖北金草堂藥業有限公司) (the ''Target Company'') set out on pages II-1 to II-31, which comprises the statements of financial position of the Target Company as at 31 December 2018, 2019 and 2020, and the statements of profit or loss and other comprehensive income, the statements of changes in equity and statements of cash flows of the Target Company for the years ended 31 December 2018, 2019 and 2020 (the ''Track Record Periods'') and a summary of significant accounting policies and other explanatory information (together, the ''Historical Financial Information''). The Historical Financial Information set out on pages II-3 to II-31 forms an integral part of this report, which has been prepared for inclusion in the circular of Kiu Hung International Holdings Limited (the ''Company'') dated 30 March 2021 (the ''Circular'') in connection with the proposed acquisition of 51% of the issued share capital of the Target Company (the ''Proposed Acquisition'').

Directors' responsibility for the Historical Financial Information

The directors of the Target Company are responsible for the preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in Note 2 to the Historical Financial Information, and for such internal control as the directors of the Target Company determine is necessary to enable the preparation of Historical Financial Information that is free from material misstatement, whether due to fraud or error.

Reporting accountants' responsibility

Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200 ''Accountants' Reports on Historical Financial Information in Investment Circulars'' issued by the Hong Kong Institute of Certified Public Accountants (the ''HKICPA''). This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement.

Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountants' judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountants consider internal control relevant to the Target

English name for identification purpose

Company's preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in Note 2 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Target Company's internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors of the Target Company, as well as evaluating the overall presentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the Historical Financial Information gives, for the purposes of the accountants' report, a true and fair view of the Target Company's financial position as at 31 December 2018 and 2019 and 2020 and of its financial performance and cash flows for the Track Record Periods in accordance with the basis of preparation and presentation set out in Note 2 to the Historical Financial Information.

Report on matters under the Rules Governing the Listing of Securities of the Stock Exchange and the Companies (Winding Up and Miscellaneous Provisions) Ordinance

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements of the Target Company as defined on page 4 have been made.

Dividends

We refer to note 12 to the Historical Financial Information which states that no dividend has been paid by the Target Company in respect of the Track Record Periods.

Prism CPA Limited

Certified Public Accountants Lee Kwok Lun

Practising Certificate Number: P06294 Hong Kong

30 March 2021

HISTORICAL FINANCIAL INFORMATION OF THE TARGET COMPANY

Preparation of Historical Financial Information

Set out below is the Historical Financial Information which forms an integral part of this accountants' report.

The financial statements of the Target Company for the Track Record Periods, on which the Historical Financial Information is based, were prepared by the directors of the Target Company in accordance with the accounting policies which conform with Hong Kong Financial Reporting Standards (''HKFRSs'') issued by the HKICPA and were audited by Prism CPA Limited in accordance with Hong Kong Standards on Auditing issued by the HKICPA (the ''Underlying Financial Statements'')

The Historical Financial Information is presented in Renminbi (''RMB''), which is also the functional currency of the Target Company, and all values are rounded to the nearest thousand (RMB'000) except when otherwise indicated.

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 December

Notes 2018 2019 2020

RMB'000 RMB'000 RMB'000

Revenue	5	19,600	29,740	93,963
Cost of sales	(15,287)	(20,949)	(50,023)
Gross profit	4,313	8,791	43,940
Other income	7	997	1,568	-
Selling expenses	(131)	(23)	(2,057)
Administrative expenses	(1,421)	(1,606)	(2,645)
Other operating expense	(76)	-	-
Finance cost	8	-	-	(34)
Profit before tax	3,682	8,730	39,204
Income tax expense	9	-	-	(3,869)
Profit and total comprehensive income
for the year	10	3,682	8,730	35,335
- II-3 -

STATEMENTS OF FINANCIAL POSITION

2020
RMB'000
Non-current assets
Plant and equipment	14	18,388	16,379	23,975
Current assets
Inventories	15	10,278	12,758	15,132
Trade and other receivables	16	4,850	15,885	13,077
Bank balances and cash	17	396	569	18,471
15,524	29,212	46,680
Current liabilities
Trade and other payables	18	12,160	10,437	8,516
Short-term borrowings	19	3,968	8,640	290
16,128	19,077	8,806
Net current (liabilities) assets	(604)	10,135	37,874
Total assets less current liabilities	17,784	26,514	61,849
Net assets	17,784	26,514	61,849
Capital and reserves
Share capital	20	30,000	30,000	30,000
Retained earnings	(13,149)	(5,292)	26,509
Statutory reserves	933	1,806	5,340
Total equity	17,784	26,514	61,849
- II-4 -

As at 31 December 2018 2019

Notes

RMB'000 RMB'000

STATEMENTS OF CHANGES IN EQUITY

Share	Retained	Statutory
capital	earnings	reserves	Total
RMB'000	RMB'000	RMB'000	RMB'000
At 1 January 2018	30,000	(16,463)	565	14,102
Profit and total comprehensive income
for the year	-	3,682	-	3,682
Transfer to statutory reserves	-	(368)	368	-
As at 31 December 2018 and
1 January 2019	30,000	(13,149)	933	17,784
Profit and total comprehensive income
for the year	-	8,730	-	8,730
Transfer to statutory reserves	-	(873)	873	-
As at 31 December 2019 and
1 January 2020	30,000	(5,292)	1,806	26,514
Profit and total comprehensive income
for the year	-	35,335	-	35,335
Transfer to statutory reserves	-	(3,534)	3,534	-
As at 31 December 2020	30,000	26,509	5,340	61,849
- II-5 -

STATEMENTS OF CASH FLOWS

OPERATING ACTIVITIES

For the year ended 31 December 2018 2019 2020

RMB'000 RMB'000 RMB'000

Profit before tax	3,682	8,730	39,204
Adjustment for:
Depreciation	1,691	1,663	2,155
Finance cost	-	-	34
Gain on disposal of plant and equipment	(48)	-	-
Written-off of plant and equipment	-	362	-
Operating cash flows before movements
in working capital	5,325	10,755	41,393
(Increase) decrease in inventories	(8,143)	(2,480)	(2,374)
(Increase) decrease in trade and other receivables	1,554	(11,035)	2,808
Increase (decrease) in trade and other payables	1,709	(1,723)	(1,921)
Cash generated from (used in) operations	445	(4,483)	39,906
Tax paid	-	-	(3,869)
NET CASH GENERATED FROM (USED IN)
OPERATING ACTIVITIES	445	(4,483)	36,037
INVESTING ACTIVITIES
Proceeds from sale of motor vehicles	90	-	-
Acquisition of plant and equipment	(12)	(16)	(9,751)
NET CASH USED IN INVESTING ACTIVITIES	78	(16)	(9,751)
FINANCING ACTIVITIES
New borrowings raised	-	8,172	-
Repayment of borrowings	(378)	(3,500)	(8,350)
Interest expense paid	-	-	(34)
NET CASH GENERATED FROM (USED IN)
FINANCING ACTIVITIES	(378)	4,672	(8,384)
NET INCREASE IN CASH AND CASH
EQUIVALENTS	145	173	17,902
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE YEAR/PERIOD	251	396	569
CASH AND CASH EQUIVALENTS AT THE END
OF THE YEAR, REPRESENTED BY BANK
BALANCES AND CASH	396	569	18,471

NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1. GENERAL INFORMATION

Hubei Jincaotang Pharmaceutical Co., Ltd* (湖北金草堂藥業有限公司) (the ''Target Company'') was established in the People's Republic of China (the ''PRC'') on 24 September 2014 with limited liability. The address of its registered office is No. 20, Zongheng Avenue Village, Chengguan Township, Zhushan County, Shijiao City, Hubei Province, People's Republic of China.

The principal business of the Target Company is mainly engaged in the development, processing and sale of Chinese herbs products. There has been no significant change in the Target Company's principal business during the Track Record Periods.

The Historical Financial Information and Interim Comparative Historical Financial Information are presented in RMB, which is also the functional currency of the Target Company.

2. BASIS OF PREPARATION AND PRESENTATION OF HISTORICAL FINANCIAL INFORMATION

For the purpose of preparing and presenting the Historical Financial Information for the Track Record Periods, the Target Company has consistently applied Hong Kong Accounting Standards (''HKASs''), HKFRSs, amendments and interpretations issued by the HKICPA, which are effective for the accounting period beginning on 1 January 2019, including HKFRS 16 ''Leases'' using the modified retrospective approach (including practical expedient permitted by HKFRS 16) and HKFRS 15 ''Revenue from Contracts with Customers'' which are effective for the accounting period beginning on 1 January 2018, throughout the Track Record Periods except that the Target Company adopted HKFRS 9 ''Financial Instruments'' on 1 January 2018 and HKAS 39 ''Financial Instruments: Recognition and Measurement'' for the years ended 31 December 2017. The accounting policies for these HKFRSs are set out in Note 3 as below.

2.1 HKFRS 9 ''Financial Instruments''

At 1 January 2018, the Target Company has applied HKFRS 9 and the related consequential

amendments to other HKFRSs. HKFRS 9 introduces new requirements for (1) the classification and

measurement of financial assets and financial liabilities, (2) expected credit losses (''ECL'') for financial

assets and (3) general hedge accounting.

The Target Company has applied HKFRS 9 in accordance with the transition provisions set out in

HKFRS 9. i.e. applied the classification and measurement requirements (including impairment under ECL

model) retrospectively to instruments that have not been derecognised as at 1 January 2018 (date of initial

application) and has not applied the requirements to instruments that have already been derecognised as at 1

January 2018.

According, certain comparative information for the years ended 31 December 2018 and 2019 may not

be comparable to information for the year ended 31 December 2017 as such information was prepared under

HKAS39.

Summary of effects arising from initial application HKFRS 9

The table below illustrates the classification and measurement of financial assets under HKFRS 9 and HKAS 39 at the date of initial application, 1 January 2018.

Financial assets

Loans and receivables - Trade and other receivables

At amortised cost

- Trade and other receivables

Carrying	Carrying
amount at	amount at
31 December	Adoption of	Adoption of	1 January
2017	HKFRS 9 -	HKFRS 9 -	2018
(HKAS 39)	Reclassification	Remeasurement	(HKFRS 9)
RMB'000	RMB'000	RMB'000	RMB'000
6,050	(6,050)	-	-
-	6,050	-	6,404

2.1.1 Classification of financial instruments

The application of HKFRS 9 on 1 January 2018 has no impact on the consolidated financial position of the Target Company with regard to classification of financial instruments. All financial assets classified as loans and receivable and financial liabilities measured at amortised cost under HKAS 39 continued to be measured at amortised cost under HKFRS 9.

2.1.2 Loss allowance for expected credit losses (''ECL'')

As at 1 January 2018, the directors of the Target Company have reviewed and assessed the Target Company's existing financial assets for impairment using reasonable and supportable information that is available without undue cost or effort in accordance with the requirement of HKFRS 9. No additional ECL allowance is recognised as the amount involved is insignificant.

The Target Company has not applied the following new and amendments to HKFRSs that have been issued but are not yet effective, in the Historical Financial Information:

HKFRS 17	Insurance Contracts2
Amendments to HKFRS 10 and HKAS 28	Sale or Contribution of Assets between an Investor and
its Associate or Joint Venture3
Amendments to HKFRS 3	Definition of a Business4
Amendments to HKAS 1 and HKAS 8	Definition of Material1
Amendments to HKFRS 9, HKAS 39 and	Interest Rate Benchmark Reform1
HKFRS 7
Conceptual Framework for Financial	Revised Conceptual Framework for Financial Reporting1
Reporting 2018
Amendments to HKFRS 16	Covid-19-Related Rent Concessions5

1	Effective for annual periods beginning on or after 1 January 2020.
2	Effective for annual periods beginning on or after 1 January 2021.
3	Effective for annual periods beginning on or after a date to be determined.
4	Effective for business combinations and asset acquisitions for which the acquisition date is on or
after the beginning of the first annual period beginning on or after 1 January 2020.
5	Effective for annual periods beginning on or after 1 June 2020.

The Target Company is in the process of making an assessment of the impact of these new and revised HKFRSs upon initial application. So far, the Target Company considers that these new and revised HKFRSs may result in changes in accounting policies but are unlikely to have a significant impact on the Target Company's results of operations and financial position.

3. SIGNIFICANT ACCOUNTING POLICIES

The Historical Financial Information has been prepared in accordance with the accounting policies which conform with HKFRSs issued by the HKICPA. In addition, the Historical Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on the Main Board of The Stock Exchange of Hong Kong Limited (the ''Stock Exchange'') and by the Hong Kong Companies Ordinance.

The Historical Financial Information has been prepared on the historical cost basis as explained in the accounting policies set out below. Historical cost is generally based on the fair value of the consideration given in exchange of goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Target Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these Historical Financial Information is determined on such a basis, except for share-based payment transactions that are within the scope of HKFRS 2 Share-based Payment, leasing transactions that are within the scope of HKAS 16, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 Inventories or value in use in HKAS 36 Impairment of Assets.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
. Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
. Level 3 inputs are unobservable inputs for the asset or liability.

The principal accounting policies are set out below.

Revenue recognition

Revenue is recognised to depict the transfer of promised goods and services to customers at an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services to a customer. Specifically, the Target Company uses a five-step approach to recognise revenue:

. Step 1: Identify the contract(s) with a customer
. Step 2: Identify the performance obligations in the contract
. Step 3: Determine the transaction price
. Step 4: Allocate the transaction price to the performance obligations in the contract
. Step 5: Recognise revenue when (or as) the Target Company satisfies a performance obligation.

The Target Company recognised revenue when (or as) a performance obligation is satisfied, i.e. when ''control'' of the goods or services underlying the particular performance obligation is transferred to customers.

A performance obligation represents a good or service (or a bundle of goods or services) that is distinct or a series of distinct goods or services that are substantially the same.

A contract asset represents the Target Company's right to consideration in exchange for goods or services that the Target Company has transferred to a customer that is not yet unconditional. It is assessed for impairment in accordance with HKFRS 9. In contrast, a receivable represents the Target Company's unconditional right to consideration, i.e. only the passage of time is required before payment of that consideration is due.

A contract liability represents the Company's obligation to transfer goods or services to a customer for which the Target Company has received consideration from the customer. A contract liability would also be recognised if the Target Company has an unconditional right to receive consideration before the Target Company recognises the related revenue. In such cases, a corresponding receivable would also be recognised.

For a single contract with the customer, either a net contract asset or a net contract liability is presented. For multiple contracts, contract assets and contract liabilities of unrelated contracts are not presented on a net basis.

Sales of goods

Revenue from sales of Chinese herb products is recognised at the point when the control of the goods is transferred to the customers (generally on delivery of goods).

A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Retirement benefits costs

Payments to defined contribution retirement benefits schemes are recognised as an expense when employees have rendered service entitling them to the contributions.

Short-term employee benefits

Short-term employee benefits are recognised at the undiscounted amount of the benefits expected to be paid as and when employees rendered the services. All short-term employee benefits are recognised as an expense unless another HKFRS requires or permits the inclusion of the benefit in the cost of an asset.

A liability is recognised for benefits accruing to employees (such as wages and salaries and annual leave and sick leave) after deducting any amount already paid.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from ''profit before taxation'' as reported in the statement of profit or loss and other comprehensive income because of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Target Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Target Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax is recognised in profit or loss.

Plant and equipment

Plant and equipment are stated in the statements of financial position at cost less subsequent accumulated depreciation and accumulated impairment losses, if any.

Depreciation is recognised so as to write off the cost of assets over their estimated useful lives, using the straight line method for the plant and equipment. The estimated useful lives and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

Cash and cash equivalents

Bank balances and cash in the statements of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less. For the purpose of the statements of cash flows, cash and cash equivalents consist of bank balances and cash, as defined above.

Impairment on plant and equipment

At the end of each reporting period, the Target Company reviews the carrying amounts of its plant and equipment to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the relevant asset is estimated in order to determine the extent of the impairment loss, if any.

The recoverable amount of plant and equipment are estimated individually. When it is not possible to estimate the recoverable amount of an asset individually, the Target Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset (or a cash-generating unit) for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating) unit is estimated to be less than its carrying amount, the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or the cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or a cash-generating unit) in prior years.

A reversal of an impairment loss is recognised immediately in profit or loss.

Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instruments. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Financial assets and financial liabilities are initially measured at fair value except for trade receivables arising from contracts with customers which are initially measured in accordance with HKFRS 15. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating interest income and interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts and payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Financial assets

Before the application of HKFRS 9 on 1 January 2018

The Target Company's financial assets are classified as loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables and bank balances and cash) are measured at amortised cost using the effective interest method, less any identified impairment losses.

Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial.

Impairment of loans and receivables

Loans and receivables are assessed for indicators of impairment at the end of each reporting period. Loans and receivables are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the loans and receivables, the estimated future cash flows have been affected.

Objective evidence of impairment could include:

. significant financial difficulty of the issuer or counterparty; or
. breach of contract, such as a default or delinquency in interest or principal payments; or
. it becoming probable that the borrower will enter bankruptcy or financial reorganization.

For certain categories of financial assets, such as trade receivables, assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Target Company's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the respective credit period, observable changes in national or local economic conditions that correlate with default on receivables.

The amount of the impairment loss recognised is the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the financial asset's original effective interest rate.

The carrying amount of the loans and receivables is reduced by the impairment loss directly with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Derecognition of financial assets (policies under HKFRS 9 applicable from 1 January 2018 and policies under HKAS 39 applicable before 1 January 2018)

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Target Company's statement of financial position) when:

- the rights to receive cash flows from the asset have expired; or
- the Target Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Target Company has transferred substantially all the risks and rewards of the asset, or (b) the Target Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Target Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards ofthe asset nor transferred control of the asset, the Target Company continues to recognise the transferred asset to the extent of the Target Company's continuing involvement. In that case, the Target Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Target Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Target Company could be required to repay.

After the application of HKFRS 9 on 1 January 2018

Classification and subsequent measurement of financial assets

All recognised financial assets that are within the scope of HKFRS 9 are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.

Financial assets that meet the following conditions are subsequently measured at amortised cost:

. the financial asset is held within a business model whose objective is to hold the financial assets in order to collect contractual cash flows; and

the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment.

(i) Amortised cost and effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period.

For financial assets other than purchased or originated credit-impaired financial assets (i.e. assets that are credit-impaired on initial recognition), the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding expected credit losses, through the expected life of the debt instrument, or, where appropriate, a shorter period, to the gross carrying amount of the debt instrument on initial recognition. For purchased or originated credit-impaired financial assets, a credit-adjusted effective interest rate is calculated by discounting the estimated future cash flows, including expected credit losses, to the amortised cost of the debt instrument on initial recognition.

The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance.

Interest income is recognised using the effective interest method for debt instruments measured subsequently at amortised cost. For financial assets other than purchased or originated credit-impaired financial assets, interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit-impaired (see below). For financial assets that have subsequently become credit-impaired, interest income is recognised by applying the effective interest rate to the amortised cost of the financial asset.

If, in subsequent reporting periods, the credit risk on the credit-impaired financial instrument improves so that the financial asset is no longer credit-impaired, interest income is recognised by applying the effective interest rate to the gross carrying amount of the financial asset.

Impairment of financial assets

The Target Company recognises a loss allowance for ECL on financial assets which are subject to impairment under HKFRS 9 (including trade and other receivables and bank balances). The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition.

Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12m ECL represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessment are done based on the Target Company's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions.

The Target Company always recognises lifetime ECL for other receivables. The ECL on these assets are assessed individually and/or collectively using a provision matrix with appropriate grouping.

For all other instruments, the Target Company measures the loss allowance equal to 12m ECL, unless when there has been a significant increase in credit risk since initial recognition, the Target Company recognises lifetime ECL. The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition.

Significant increase in credit risk

In assessing whether the credit risk has increased significantly since initial recognition, the Target Company compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Target Company considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.

In particular, the following information is taken into account when assessing whether credit risk has increased significantly:

. an actual or expected significant deterioration in the financial instrument's external (if available) or internal credit rating;
. existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor's ability to meet its debt obligations;
. an actual or expected significant deterioration in the operating results of the debtor;
. an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor's ability to meet its debt obligations.

Irrespective of the outcome of the above assessment, the Target Company presumes that the credit risk has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Target Company has reasonable and supportable information that demonstrates otherwise.

Despite the foregoing, the Target Company assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. A financial instrument is determined to have low credit risk if i) the financial instrument has a low risk of default, ii) the borrower has a strong capacity to meet its contractual cash flow obligations in the near term, and iii) adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations. The Target Company considers a financial asset to have low credit risk when the asset has external creditrating of 'investment grade' in accordance with the globally understood definition or if an external rating is not available, the asset has an internal rating of 'performing'. Performing means that the counterparty has a strong financial position and there are no past due amounts.

For financial guarantee contracts, the date that the Target Company becomes a party to the irrevocable commitment is considered to be the date of initial recognition for the purposes of assessing the financial instrument for impairment. In assessing whether there has been a significant increase in the credit risk since initial recognition of a financial guarantee contract, the Target Company considers the changes in the risk that the specified debtor will default on the contract.

The Target Company regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due.

Definition of default

The Target Company considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates that receivables that meet either of the following criteria are generally not recoverable: . when there is a breach of financial covenants by the debtor; or .

information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full (without taking into account any collaterals held by the Group). The Target Company considers that default has occurred when a financial asset is more than 60 days past due unless the Target Company has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.

Irrespective of the above, the Target Company considers that default has occurred when a financial asset is more than 90 days past due unless the Target Company has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.

Credit-impaired financial assets

A financial asset is credit-impaired when one or more events of default that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit impaired includes observable data about the following events:

(a) significant financial difficulty of the issuer or the borrower;
(b) a breach of contract, such as a default or past due event;
(c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrowers financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;
(d) it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or
(e) the disappearance of an active market for that financial asset because of financial difficulties.

Write-off policy

The Target Company writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, for example, when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings. Financial assets written off may still be subject to enforcement activities under the Target Company's recovery procedures, taking into account legal advice where appropriate. A write-off constitutes a derecognition event. Any subsequent recoveries are recognised in profit or loss.

Measurement and recognition of ECL

The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information.

Generally, the ECL is the difference between all contractual cash flows that are due to the Target Company in accordance with the contract and the cash flows that the Target Company expects to receive, discounted at the effective interest rate determined at initial recognition.

Where ECL is measured on a collective basis or cater for cases where evidence at the individual instrument level may not yet be available, the financial instruments are grouped on the basis:

. nature of financial instruments;
. past-due status;
. nature, size and industry of debtors; and
. external credit ratings where available

The grouping is regularly reviewed by management to ensure the constituents of each group continue to share similar credit risk characteristics.

Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit impaired, in which case interest income is calculated based on amortised cost of the financial asset.

The Target Company recognises an impairment gain or loss in profit or loss for all financial instruments by adjusting their carrying amount, with the exception of other receivables, where the corresponding adjustment is recognised through a loss allowance account.

Derecognition of financial assets

The Target Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Target Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Target Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset, the difference between the asset's carrying amount and the consideration received and receivable is recognised in profit or loss.

Financial liabilities and equity instruments

Classification as debt or equity

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of a group entity after deducting all of its liabilities. Equity instruments issued by the group entities are recognised at the proceeds received, net of direct issue costs.

Financial liabilities at amortised cost

Financial liabilities including trade and other payables are subsequently measured at amortised cost, using the effective interest method.

Derecognition of financial liabilities

The Target Company derecognises financial liabilities when, and only when, the Target Company's obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Provisions

Provisions are recognised when the Target Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

Foreign currencies

In preparing the financial statements of the Target Company, transactions in currencies other than the functional currency of that entity (foreign currencies) are recognised at the rates of exchanges prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

In the application of the Target Company's accounting policies, which are described in note 3, the directors of the Target Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Depreciation of plant and equipment

The Target Company depreciates the plant and equipment over their estimated useful life, using the straight line method. The estimated useful life reflects the directors' estimates of the periods that the Target Company intends to derive future economic benefits from the use of the Target Company's plant and equipment. The residual values reflect the directors' estimated amount that the Target Company would currently obtain from disposal of the assets, after deducting the estimated costs of disposal, if the assets were already of the age and in the condition expected at the end of its useful life. As at 31 December 2018, 31 December 2019, 31 December 2020, the carrying amounts of plant and equipment are approximately RMB18,388,000, RMB16,379,000 and RMB23,975,000 respectively.

Estimated impairment of plant and equipment

The Target Company assesses annually whether plant and equipment have any indication of impairment, in accordance with relevant accounting policies. The recoverable amounts of plant and equipment have been determined based on value-in-use calculations if there is indication of impairment. The calculations and valuations require the use of judgement and estimates on future operating cash flows and discount rates adopted. As at 31 December 2018, 31 December 2019, 31 December 2020, the carrying amounts of plant and equipment are approximately RMB18,388,000, RMB16,379,000 and RMB23,975,000 respectively, no impairment losses was recognised for the Track Record Periods.

Allowance for inventories

The management of the Target Company reviews the ageing of the inventories at the end of the each reporting period of Track Record Periods, and makes allowance for obsolete and slow-moving inventory items identified that are no longer saleable in the market. The identification of obsolete inventories requires the use of estimation of the net realisable value of items of inventory and judgements on the conditions and usefulness of items of inventories. Where the expected net realisable value is lower than the cost of certain items, a write-down of inventories may arise. As at 31 December 2018, 31 December 2019, 31 December 2020, the carrying amounts of inventories were RMB10,278,000, RMB12,758,000 and RMB15,132,000 respectively, no allowance for inventories was recognised for the Track Record Periods.

Allowance recognised in respect of trade and receivables

The impairment provisions for trade receivables, other receivables and contract assets are based on assumptions about ECL. The Target Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the number of days that an individual receivable is outstanding as well as the Target Company's historical experience and forward-looking information at the end of the reporting period. Changes in these assumptions and estimates could materially affect the result of the assessment and it may be necessary to make additional impairment charge to the statement of profit or loss and other comprehensive income. As at 31 December 2018, 31 December 2019, 31 December 2020, the carrying amounts of trade and receivables were RMB4,850,000, RMB14,706,000 and RMB12,969,000 respectively. And, as at 31 December 2019 and 31 December 2020, loss allowances for ECL of trade and receivables are RMB5,527 and RMB30 respectively.

5. REVENUE
Revenue for the year ended 31 December 2018, 2019 and 2020
(i) Disaggregation of revenue from contracts with customers
Revenue from contracts with customers within the scope of HKFRS 15
Sales of Chinese herbs products
Geographical market
PRC
Timing of revenue recognition At a point in time
Revenue represents the amounts received and receivable from sales of Chinese herb products, net of sales allowances for return, discounts and sales related tax.
All of the Target Company's revenue from sale of Chinese herb products for the year ended 31 December 2018, 2019 and 2020 was recognised at a point in time when the Chinese herbs products has been delivered and the Target Company has received the payment or the right to receive payment has been established. As at the end of the Relevant Periods, the remaining performance obligations (unsatisified or partially unsatisified) were expected to be recognized within one year. As permitted under HKFRS15, the transaction price allocated to those unsatisfied contracts is not disclosed.

6. SEGMENT INFORMATION


2018	2019	2020
RMB'000	RMB'000	RMB'000
19,600	29,740	93,963
19,600	29,740	93,963
19,600	29,740	93,963

For the year ended 31 December
The Target Company's revenue and contribution to results are derived from the management and operation petrol stations, which is regarded as a single reportable segment in a manner consistent with the way in which information is reported internally to the directors for purposes of resource arrangement and performance assessment. In addition, all the assets employed by the Target Company are located in PRC. Accordingly, no operating segment information is presented, other than the entity-wide disclosures.
Entity-wide disclosures
Geographical information

All of the Target Company's external revenue is derived from the customers based in the PRC (country of domicile) and all of the Target Company's non-current assets are located in the PRC, no geographical information is presented.

Information about major customers

For the year ended 31 December 2018, 2019 and 2020, the revenue derived from the largest external customer accounted for 40%, 46% and 65% respectively of the Target Company's total revenue.

7. OTHER INCOME

For the year ended 31 December

2018	2019	2020
RMB'000	RMB'000	RMB'000
Government grants (note)	945	1,520	-
Gain on disposal of plant and equipment	48	1	-
Others	4	47	-
997	1,568	-

Note: The income is the government grants received from local government authorities for the funding of development of Chinese herbs products which were immediately recognised as other income for the Track Record Periods as the Target Company fulfilled the relevant granting criteria.

8. FINANCE COST
For the year ended 31 December
2018
2019
2020
RMB'000
RMB'000
RMB'000
Interest expenses on borrowing
- - 34
9. INCOME TAX EXPENSE
Under the Law of the PRC on Enterprise Income Tax (the ''EIT Law'') and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% for the Track Record Periods.
The tax charge for the Track Record Periods can be reconciled to the profit before tax per the statement of profit or loss and other comprehensive income as follows:

For the year ended 31 December

2018	2019	2020
RMB'000	RMB'000	RMB'000
Profit before tax	3,682	8,730	39,204
Tax calculated at the statutory tax rate	921	1,833	9,801
Tax effect of income not taxable for tax purpose	(921)	(1,833)	(5,932)
Income tax expense for the year	-	-	3,869

No deferred tax has been recognised in the Historical Financial Information as the amount involved is insignificant.

10. PROFIT FOR THE YEAR/PERIOD
Profit before tax for the Track Record Periods has been arrived at after charging:
For the year ended 31 December
2018
2019
2020
RMB'000
RMB'000
RMB'000
Staff costs
Salaries, wages and other benefits (include directors'
remuneration)
Contribution to retirement benefits scheme (excluding director's remuneration)
Total staff costsDepreciation of plant and equipment Gain on disposal of plant and equipment
531 47 578 1,691 48
705 1,152
59 99
764 1,251
1,663 2,155
-
-
11. DIRECTORS' REMUNERATION AND FIVE HIGHEST PAID EMPLOYEES
The aggregate amounts of remuneration of directors of the Target Company for the year ended 31 December
2018, 2019 and 2020, disclosed pursuant to the Rules Governing The Listing of Securities on the Stock Exchange (the ''Listing Rules''), section 383(1)(a), (b), (c) and (f) of the Hong Kong Companies Ordinance and Part 2 of the Companies (Disclosure of Information about Benefits of Directors) Regulation, are as follows:

For the year ended 31 December

2018	2019	2020
RMB'000	RMB'000	RMB'000
Fees	-	-	-
Salaries, allowances and benefits in kind	108	126	540
108	126	540

An analysis of the headcounts of the five highest paid employees within the Target Group for the for the year ended 31 December 2018, 2019 and 2020 is as follows:

For the year ended 31 December

2020
Director	2	2	1
Supervisor	3	3	4
Non-director and non-supervisor	-	-	-
5	5	5

2018 2019

Details of the remuneration of the non-director and non-supervisor, five highest paid employees are as follows:

For the year ended 31 December

Salaries, allowances and benefits in kind

2018	2019	2020
RMB'000	RMB'000	RMB'000
162	180	273

The remuneration of the above five highest paid non-director and non-supervisor employees for the year ended 31 December 2018, 2019 and 2020 was below RMB900,000.

12. DIVIDEND
No dividend was paid or proposed by the Target Company during the Track Record Periods.
13. EARNINGS PER SHARE
No earnings per share is presented as its inclusion, for the purpose of this report, is not considered meaningful.

14.

PLANT AND EQUIPMENT

Furniture,
Motor	fixtures and
vehicles	Plant	equipment	Total
RMB'000	RMB'000	RMB'000	RMB'000
COST
As at 1 January 2018	64	13,122	7,978	21,164
Additions	-	-	12	12
Disposals	(64)	-	-	(64)
Written-off	-	-	(20)	(20)
As at 31 December 2018 and
1 January 2019	-	13,122	7,970	21,092
Additions	-	-	16	16
Written-off	-	(400)	-	(400)
As at 31 December 2019 and
1 January 2020	-	12,722	7,986	20,708
Additions	-	4,600	5,151	9,751
As at 31 December 2020	-	17,322	13,137	30,459
ACCUMULATED DEPRECIATION
As at 1 January 2018	22	569	464	1,055
Charge for the year	-	623	1,068	1,691
Eliminated on written-off	(22)	-	(20)	(42)
As at 31 December 2018 and 1 January
2019	-	1,192	1,512	2,704
Charge for the year	-	623	1,040	1,663
Eliminated on Written-off	-	(38)	-	(38)
As at 31 December 2019,
1 January 2020	-	1,777	2,552	4,329
Charge for the year	-	825	1,330	2,155
As at 31 December 2019	-	2,602	3,882	6,484
NET CARRYING VALUES
As at 31 December 2018	-	11,930	6,458	18,388
As at 31 December 2019	-	10,945	5,434	16,379
As at 31 December 2020	-	14,720	9,255	23,975
- II-23 -

Plant and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:

15.

Motor vehicles	6 years
Plant	20 years with 5% residual value
Furniture, fixtures and equipment	3-10 years with 5% residual value
INVENTORIES

As at 31 December

2018

2019

2020

RMB'000

Finished goods

10,278

12,758

15,132

16. TRADE AND OTHER RECEIVABLES

As at 31 December

2018

2019

2020

RMB'000

Receivables at amortised cost: - Trade receivables

4,850

14,706

12,969

Less: loss allowance for trade receivables

4,850

14,706

12,969

Other receivables Prepayments

- -

- 1,179

- 108

4,850

15,885

13,077

As at 31 December 2018, 2019 and 2020, the gross amount of trade receivables arising from contracts with customers amounted to approximately RMB4,850,000, RMB14,706,000 and RMB12,969,000 respectively.

The Target Company normally allows a credit period of not more than 120 days to its customers, although an extension of the credit period is not uncommon for customers who have a long term relationship with the Target Company. The Target Company seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by senior management. In view of this and the fact that the Target Company's trade receivables relate to a large number of diversified customers, there is no significant concentration of credit risk.

The following is an aged analysis of trade receivables, net of loss allowance for trade receivables, presented based on the invoice date, which approximates revenue recognition date at the end of each reporting period.

As at 31 December

2018	2019	2020
RMB'000	RMB'000	RMB'000
Within 90 days	-	-	12,869
91 to 180 days	-	6,415	-
181 days to 1 year	4,850	4,741	-
Over 1 year	-	3,550	100
4,850	14,706	12,969

The Target Company measures the loss allowance for trade receivables at an amount equal to lifetime ECL. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor's current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date.

As the Target Company's historical credit loss experience does not indicate significantly different loss patterns for different customer segments, the allowance based on past due status is not further distinguished between the Company's different customer bases.

The Target Company recognised lifetime ECL for trade receivables based on the aging of customers collectively that are not individually significant as follows:

Weighted average expected loss rate

As at 31 December 2018

Gross carrying amount RMB'000

Loss allowance RMB'000

Within 3 months 3 months to 1 year

- 30%

4,850 1,455

Weighted average expected loss rate

As at 31 December 2019

Gross carrying amount RMB'000

Loss allowance RMB'000

Within 3 months 3 months to 1 year Over 1 year

- 30% 40%

3,550 1,065

11,156 4,462

14,706 5,527

Weighted average expected loss rate

As at 31 December 2020

Gross carrying amount RMB'000

Loss allowance RMB'000

Within 3 months 3 months to 1 year

- 30%

12,869 100

12,969

- 30 30

17. BANK BALANCES AND CASH

Bank balances an cash mainly represent cash at bank. Cash at bank carried interest at average market rates based on daily bank deposit rates. The cash at bank is deposited with a credit worthy banks with no recent history of default.

18. TRADE AND OTHER PAYABLES

As at 31 December

2018	2019	2020
RMB'000	RMB'000	RMB'000
Trade payables	-	2,874	2,014
Other payables	12,146	7,549	6,241
Accruals	14	14	261
12,160	10,437	8,516

The following is an aged analysis of trade payables presented based on the invoice date at the end of the reporting period:

As at 31 December

2018	2019	2020
RMB'000	RMB'000	RMB'000
Within 30 days	-	-	1,784
31-90 days	-	-	-
Over 90 days	-	2,874	230
-	2,874	2,014

The average credit period granted is 30 days. The Target Company has financial risk management in place to ensure that all payables are settled within the credit timeframe.

19. SHORT-TERM BORROWINGS

As at 31 December

2018

2019

2020

RMB'000

Bank borrowing Other borrowing

468 3,500 3,968

468 8,172 8,640

290 -

290

As at 31 December 2018, 2019 and 2020, the borrowings carried interest at 6%, subsidised by government and as at 31 December 2020, the borrowings carried at fixed rates is 6%.

Other borrowing includes the borrowing from related parties, the above transaction was entered with the related party on terms mutually agreed by individual parties. In the opinion of the directors of the Target Company, this related parties' transactions were conducted on normal commercial terms and in the ordinary and usual course of the Target Company's business.

20. SHARE CAPITAL

Number of

ordinary

shares Amount

RMB

Issued capital

As at 31 December 2018, 31 December 2019 and 31 December 2019

30,000,000

21. RELATED PARTY TRANSACTIONS AND BALANCES
Transactions with related parties
Saved as disclosed elsewhere in the Historical Financial Information of the Target Company, the Target Company did not have any material transactions with any related parties.
22. CAPITAL RISK MANAGEMENT
The Target Company manages its capital to ensure that the Target Company will be able to continue as a going concern while optimisation the return to stakeholders through the optimisation of the debt and equity balance.
The capital structure of the Target Company consists of debts, which includes trade and other payables, short -term borrowing and long-term liabilities and equity attributable to owner of the Target Company.
The directors of the Target Company review the capital structure on a regular basis. As part of this review, the directors of the Target Company consider the cost of capital and the risks associated with the capital. In the opinion of the directors of the Target Company, the Target Company will balance its overall capital structure through new share issues as well as raising of debts.

23. FINANCIAL INSTRUMENTS

Categories of financial instruments

As at 31 December

2018

2019

2020

RMB'000

Financial assets

Financial assets at amortised cost/loans and receivables

(including cash and cash equivalents)

5,246

15,275 31,440

Financial liabilities

Financial liabilities stated at amortised cost

16,128

19,077 8,806

Financial risk management objectives and policies

The Target Company's major financial assets and liabilities include trade and other receivables, bank balances and cash, trade and other payables and short-term borrowings. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments included interest rate risk, credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Interest rate risk

The Target Company is exposed to cash flow interest rate risk in relation to variable-rate cash and cash equivalents and variable-rate borrowings to independent third parties. The management monitors interest rate exposure and will consider hedging significant interest rate risk should the need arise.

Sensitivity analysis

The management considers that the Target Company's exposure to cash flow interest rate risk on variable-rate bank balances and variable-rate loans as a result of the change of market interest rate is insignificant due to low interest rates on bank balances and insignificant balance of variable-rate loans at the end of the reporting period, thus no sensitivity analysis is prepared for cash flow interest rate risk.

Credit risk

For other non-trade related receivables, the Target Company has assessed whether there has been a significant increase in credit risk since initial recognition. If there has been a significant increase in credit risk, the Target Company will measure the loss allowance based on lifetime rather than 12-month ECL.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.

The Target Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the Target Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forwarding-looking information. Especially the following indicators are incorporated:

. Internal credit rating;
. External credit rating;
. Actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the borrower's ability to meet its obligations;
. Actual or expected significant changes in the operating results of individual property owner or the borrower;
. Significant increases in credit risk on the other financial instruments of the individual property owner or the same borrower; or
. Significant changes in the expected performance and behaviour of the borrower, including changes in the payment status of borrowers in the Target Company and changes in the operating results of the borrower.

The Target Company's exposure to credit risk

In order to minimise credit risk, the management of the Target Company has delegated a team to develop and maintain the Target Company's credit risk grading to categorise exposures according to their degree of risk of default. The credit rating information is supplied by independent rating agencies where available and, if not available, the operation management committee uses other publicly available financial information and the Target Company's own trading records to rate its major customers and other debtors. The Target Company's exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.

The Target Company's current credit risk grading framework comprises the following categories

Basis for recognisingCategory

Description

ECL

Performing

For financial assets where there has low risk of default or has not been a significant increase in credit risk since initial recognition and that are not credit impaired (refer to as Stage 1)

12-month ECLDoubtful

For financial assets where there has been a significant increase in credit risk since initial recognition but that are not credit impaired (refer to as Stage 2)

Lifetime ECL - not credit impaired

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Kiu Hung International Holdings Limited published this content on 30 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 March 2021 22:24:05 UTC.

Market Closed - Hong Kong S.E. Other stock markets 04:08:20 2024-04-26 am EDT			5-day change	1st Jan Change
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Apr. 05	Kiu Hung International Holdings Limited Appoints Yang Ling as an Executive Director	CI
Mar. 28	Kiu Hung International Holdings Limited Reports Earnings Results for the Full Year Ended December 31, 2023	CI

Kiu Hung International Holdings Limited Appoints Yang Ling as an Executive Director	Apr. 05	CI
Kiu Hung International Holdings Limited Reports Earnings Results for the Full Year Ended December 31, 2023	Mar. 28	CI
Kiu Hung International Sells CBs Worth HK$45 Million	Feb. 07	MT
Kiu Hung International Proposes 2-For-1 Share Consolidation Scheme	Dec. 07	MT
Kiu Hung International Extends Long Stop Date for HK$45 Million Bond Sale	23-10-23	MT
Kiu Hung International Holdings Limited Appoints Sun Wei Wei as Executive Director	23-09-05	CI
Kiu Hung International Holdings Limited Reports Earnings Results for the Half Year Ended June 30, 2023	23-08-31	CI
Kiu Hung International Holdings Limited announced that it expects to receive HKD 45 million in funding	23-08-28	CI
Kiu Hung International Concludes Debt-Equity Swap	23-06-26	MT
Kiu Hung International Holdings Limited Announces Appointment of Wei Yu as Independent Non-Executive Director	23-06-19	CI
Kiu Hung International Holdings Limited Announces Retirement of Kong Chun Wing as Independent Non-Executive Director	23-06-15	CI
Kiu Hung International Holdings Limited Auditor Raises 'Going Concern' Doubt	23-04-27	CI
Kiu Hung International Holdings Limited Resignation of Lai Yee Man as Executive Director	23-04-17	CI
Kiu Hung International Shareholders to Vote on Proposed Share Consolidation	23-04-06	MT
Kiu Hung International Holdings Limited Reports Earnings Results for the Full Year Ended December 31, 2022	23-03-31	CI
Kiu Hung International Holdings Limited Announces Change of Address of Registered Office in Bermuda	23-01-12	CI
Kiu Hung International Eyes Potential Acquisition in MOU	22-10-24	MT
Kiu Hung Scraps Potential Acquisition Deal	22-09-27	MT
Kiu Hung International Signs MOU for Potential Stake Acquisition	22-09-09	MT
Kiu Hung International Holdings Limited Reports Earnings Results for the Half Year Ended June 30, 2022	22-08-31	CI
Kiu Hung International Holdings Limited Announces Resignation of Cheng Ho on as Independent Non-Executive Director, Effective August 12, 2022	22-08-12	CI
Kiu Hung International Holdings Limited Change of Address of Registered Office	22-05-20	CI
Kiu Hung International Holdings Limited Auditor Raises 'Going Concern' Doubt	22-05-12	CI
Kiu Hung International Holdings Limited Reports Earnings Results for the Full Year Ended December 31, 2021	22-03-31	CI
Kiu Hung International Arm in Talks for Potential Ceramics Business Partnership in Chinese Province	21-12-14	MT

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KIU HUNG INTERNATIONAL HOLDINGS LIMITED	-25.56%	1.66M
ZAPF CREATION AG	-4.38%	210M
MATRIX HOLDINGS LIMITED	-21.00%	76.31M
AURORA WORLD CORPORATION	-3.47%	50.63M

Kiu Hung International Holdings Limited

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