China Vanguard You Champion : (1)DISCLOSEABLE TRANSACTION - IN RELATION TO THE ACQUISITION OF THE TARGET COMPANY INVOLVING THE ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE; AND (2)CONTINUING CONNECTED TRANSACTION - PURSUANT TO RULE 20.58 OF THE GEM LISTING RULES

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

This announcement is for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of the Company.

(1) DISCLOSEABLE TRANSACTION

IN RELATION TO THE ACQUISITION OF THE TARGET COMPANY

INVOLVING THE ISSUE OF CONSIDERATION SHARES

UNDER SPECIFIC MANDATE;

AND

(2) CONTINUING CONNECTED TRANSACTION PURSUANT TO RULE 20.58 OF THE GEM LISTING RULES

THE ACQUISITION

On 4 January 2019 (after trading hours), the Purchaser, a wholly-owned subsidiary of the Company, and Sinopharm Traditional Chinese Medicine Overseas Holdings Limited as the Vendor entered into the Sale and Purchase Agreement pursuant to which the Vendor has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire, the Sale Shares, which represents 100% of the equity interest in the Target Company, for a consideration of HK$139.10 million, which will be settled by the allotment and issue of Consideration Shares by the Company to the Vendor under the specific mandate at the issue price of HK$0.214 per Consideration Share. The Consideration Shares represent (i) approximately 19.75% of the issued share capital of the Company as at the date of this announcement; and (ii) approximately 16.49% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares, subject to Completion and assuming that there will be no change in the issued share capital of the Company save for the allotment and issue of the Consideration Shares.

As at the date of this announcement, the Target Company is wholly-owned by the Vendor. Upon Completion, the Target Company will be legally and beneficially owned as to 100% by the Group and hence, it will become a wholly-owned subsidiary of the Company and the financial results of which will be consolidated into the consolidated financial statements of theGroup.

GEM LISTING RULES IMPLICATIONS

As the highest of the applicable percentage ratios (as defined in the GEM Listing Rules) in respect of the Acquisition are more than 5% but less than 25%, the Acquisition constitutes a discloseable transaction for the Company and is subject to the announcement and reporting requirements under Chapter 19 of the GEM Listing Rules.

The Consideration Shares will be allotted and issued pursuant to the specific mandate. The EGM will be convened for the Shareholders to consider and, if thought fit, approve the grant of the specific mandate for the allotment and issue of the Consideration Shares.

To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, no Shareholder has a material interest in the Sale and Purchase Agreement and the transactions contemplated thereunder (including the allotment and issue of Consideration Shares under the specific mandate). As such, no Shareholder will be required to abstain from voting on the resolution(s) to approve the grant of the specific mandate at the EGM.

An application will be made by the Company to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares.

As Completion is subject to the satisfaction of the conditions precedent to the Sale and Purchase Agreement. There is no assurance for any of such conditions precedent will be fulfilled. Therefore, the transactions contemplated under the Sale and Purchase Agreement may or may not proceed. Shareholders and potential investors of the Company should exercise caution when dealing in the shares or any securities of the Company.

CONTINUING CONNECTED TRANSACTION PURSUANT TO RULE 20.58 OF THE GEM LISTING RULES

On 12 November 2018, Sinopharm Health, a non-wholly-owned subsidiary of the Target Company and Sino-TCM entered into the Management Service Agreement pursuant to which Sinopharm Health shall provide business management and consulting services to Sino-TCM. It is expected that the transactions contemplated under the Management Service Agreement will continue upon Completion.

Upon Completion, Sinopharm Health will become a wholly-owned subsidiary of the Company. The Vendor is wholly-owned by Sino-TCM and the Vendor will, upon Completion and the allotment and issue of the Consideration Shares, become a substantial shareholder of the Company. As such, the Vendor and Sino-TCM will each be a connected person of the Company upon Completion. The continuing transactions under the Management Service Agreement will become continuing connected transactions of the Company under Chapter 20 of the GEM Listing Rules.

Pursuant to Rule 20.58 of the GEM Listing Rules, the Company is required to comply with the annual reporting and disclosure requirements under Chapter 20 of the GEM Listing Rules regarding the Management Service Agreement. The Company will comply in full with all applicable reporting, disclosure and, if applicable, independent Shareholders' approval requirements under Chapter 20 of the GEM Listing Rules upon any renewal or variation of the Management Service Agreement.

INTRODUCTION

On 4 January 2019 (after trading hours), the Purchaser, a wholly-owned subsidiary of the Company, and the Vendor entered into the Sale and Purchase Agreement, details of the principal terms of which are set out below:

THE ACQUISITION

Parties

Purchaser:China Vanguard Corporate Management Limited (眾彩企業管理有限公 司), a wholly-owned subsidiary of the Company

Vendor:

Sinopharm Traditional Chinese Medicine Overseas Holdings Limited (國藥 藥材海外控股有限公司)，a wholly-owned subsidiary of Sino-TCM

To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, as at the date of this announcement, the Vendor and its ultimate beneficial owners are third parties independent of the Company and its connected persons.

Assets to be acquired

Pursuant to the Sale and Purchase Agreement, the Vendor has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire, the Sale Shares, which represents 100% of the equity interest in the Target Company.

As at the date of this announcement, the Target Company is wholly-owned by the Vendor. Upon Completion, the equity interest of Target Company will be legally and beneficially owned as to 100% by the Group and hence, it will become a wholly-owned subsidiary of the Company and the financial results of which will be consolidated into the consolidated financial statements of the Group.

Consideration

The Consideration for the Sale Shares is HK$139.10 million, which shall be satisfied wholly by the allotment and issue of 650,000,000 Consideration Shares, credited as fully paid, to the Vendor or the entity/wholly-owned subsidiary of Sino-TCM as agreed by the Vendor and the Purchaser at the issue price of HK$0.214 per Consideration Share within 30 trading days following Completion (or such other date as the Purchaser and the Vendor may agree).

The Consideration was determined after arm's length negotiation between the Purchaser and the Vendor taking into consideration (i) the guaranteed net profits after taxation of HK$23 million of the Target Company for each of the three years ending 31 December 2019, 2020 and 2021 by the Vendor; (ii) the price-to-earnings ratios of other companies listed in Hong Kong which engaged in similar business of the Target Group; and (iii) the benefits to be derived by the Group from the Acquisition as described under the paragraph headed "Reasons for and benefits of the Acquisition" in this announcement.

Consideration Shares

The issue price of HK$0.214 per Consideration Share represents:

(i) a discount of approximately 16.08% to the closing price of HK$0.255 per Share as quoted on the Stock Exchange on 4 January 2019, being the date of the Sale and Purchase Agreement; and

(ii)a discount of approximately 17.69% to the average closing price of HK$0.26 per Share as quoted on the Stock Exchange for the last five consecutive trading days immediately prior to the date of the Sale and Purchase Agreement.

The issue price per Consideration Share was arrived at upon arm's length negotiation between the Purchaser and the Vendor with reference to the prevailing market price of the Shares.

The Consideration Shares represent (i) approximately 19.75% of the issued share capital of the Company as at the date of this announcement; and (ii) approximately 16.49% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares, subject to Completion and assuming that there will be no change in the issued share capital of the Company save for the allotment and issue of the Consideration Shares. The aggregate nominal value of the Consideration Shares is HK$8,125,000.

The Consideration Shares will be allotted and issued pursuant to the specific mandate to be sought from the Shareholders at the EGM and shall, on the date of allotment and issue, rank pari passu in all respects with the Shares in issue.

An application will be made by the Company to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares.

Lock-up of the Consideration Shares

The Consideration Shares, upon the allotment and issue, will be subject to lock-up arrangement and held by the Purchaser in accordance with the terms and conditions of the Sale and Purchase Agreement. The Consideration Shares shall be released from the lock-up arrangement upon satisfaction of the Guaranteed Profit (as referred to in the below section headed "Profit guarantee") by the Target Company. For the avoidance of doubt, the lock-up period of the Consideration Shares shall not be less than three years since the allotment and issue thereof.

In the event that the aggregate Net Profit does not meet the Guaranteed Profit, the Consideration Shares will be released from the lock-up arrangement only after the cash compensation is made by the Vendor to the Purchaser in accordance with the Sale and Purchase Agreement. In the event that the Vendor fails to compensate the Purchaser in accordance with the Sale and Purchase Agreement, the Purchaser shall have the right to sell the locked-up Consideration Shares in return for such compensation amount in cash.

Conditions precedent

Completion of the sale and purchase of the Sale Shares shall be conditional upon fulfilment of the following conditions precedent:

• (i) there being no material change to the operation and financial position of the Target Group from the end date of the latest accounts of the Target Company to Completion;

• (ii) the issuance of a valuation report by a qualified valuer showing the value of the Sale Shares of not less than HK$139,100,000;

• (iii) the Purchaser being satisfied with the results of the due diligence review of the Target Group conducted in accordance with the relevant accounting standards and laws and regulations and there being no material adverse change;

• (iv) all necessary approvals and authorisations in connection with the Sale and Purchase Agreement having been obtained by the Purchaser, including but not limited to the passing by the Shareholders at the EGM to approve the grant of the specific mandate for the allotment and issue of the Consideration Shares;

• (v) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Consideration Shares;

• (vi) all necessary authorisations in connection with the Sale and Purchase Agreement having been obtained by the Vendor (including but not limited to the authorisation for the transfer of the Sale Shares); and

• (vii) the warranties given by the Vendor in accordance with the terms and conditions as set out in the Sale and Purchase Agreement remaining true and accurate and not misleading from the date of the Sale and Purchase Agreement to Completion.

The Vendor and the Purchaser may at any time waive any or all of the above conditions precedent to the Sale and Purchase Agreement (save for conditions (i) to (v) as set out above). In the event that any of the above conditions precedent (except for those being waived, if any) is not fulfilled on or before the Long Stop Date (or such other date as the Purchaser and the Vendor may agree in writing), the Sale and Purchase Agreement shall terminate and be of no further effect.