China Vanguard You Champion : CONNECTED TRANSACTION PROPOSED AMENDMENTS TO THE TERMS OF THE CONVERTIBLE BONDS

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 contents of this announcement.

CONNECTED TRANSACTION

PROPOSED AMENDMENTS TO

THE TERMS OF THE CONVERTIBLE BONDS

Reference is made to the announcements (the "Announcements") of China Vanguard You Champion Holdings Limited (the "Company", together with its subsidiaries, the "Group") dated 13 January 2014, 17 January 2014, 18 January 2017 and 18 January 2018. Unless the context requires otherwise, capitalized terms used herein but not otherwise defined shall have the same meanings as those given to them in the Announcements.

On 13 January 2014, the Company entered into the Subscription Agreement with the Subscriber, as the Bondholder pursuant to which the Company conditionally agreed to issue the Convertible Bonds due 2017, in the aggregate principal amount of HK$89,625,000, to the Bondholder. On 17 January 2014, the Company completed to issue the Convertible Bonds to the Bondholder pursuant to the Subscription Agreement. On 18 January 2017 and 18 January 2018, the Company entered into the First Amendment Agreement and the Second Amendment Agreement with the Bondholder respectively to amend certain terms and conditions of the Convertible Bonds.

As at the date of this announcement, the issued Share capital of the Company was 3,290,855,068 Shares. None of the Convertible Bonds have been redeemed nor converted.

THE THIRD AMENDMENT AGREEMENT

The Board announces that on 17 January 2019 (after trading hours), the Company and the Bondholder entered into the Third Amendment Agreement. Principal terms of the Third Amendment Agreement are set out below:-

Date : 17 January 2019

Parties : The Company and the Bondholder

To the best of the Directors' knowledge, information and belief having made all reasonable enquires, that as the date of this announcement, the Bondholder is interested in 455,633,000 Shares, representing approximately 13.85% of the issued Share capital of the Company, being a substantial Shareholder and a connected person of the Company under Rule 20.07(1) of the GEM Listing Rules. Pursuant to the Second Amendment Agreement, if all conversion rights attaching to the Convertible Bonds in the principal amount of HK$89,625,000 are exercised by the Bondholder in full, for a maximum number of 249,651,810 Shares to be allotted and issued to the Bondholder and thereafter Bondholder will beinterested in 705,284,810 Shares, representing approximately 21.43% of the current issued Share capital of the Company and approximately 19.92% of the enlarged issued Share capital of the Company.

The Proposed Third Amendments

Pursuant to the Third Amendment Agreement, the Company and the Bondholder agreed to amend the term and condition of the Convertible Bonds as follows:

1.

The Maturity Date of the Convertible Bonds issued under the Subscription Agreement shall be extended for six months from 17 January 2019 to 17 July 2019. Further extended maturity date upon a prior written consent from the Bondholder shall be 17 January 2020.

Save and except for the aforesaid, there are no other amendments to the terms of the Convertible Bonds.

Conditions Precedent

Pursuant to the Third Amendment Agreement, the Proposed Third Amendments shall be subject to the following conditions precedent:-

• i) all necessary consents and approvals required to be obtained on part of the Company in respect of the Proposed Third Amendments having been obtained;

• ii) the Stock Exchange approving the Proposed Third Amendments including the listing on the Stock Exchange of Conversion Shares arising from the Convertible Bonds during the extended conversion period as mentioned above; and

• iii) passing by the Independent Shareholders at the EGM of all necessary resolutions to approve the Third Amendment Agreement and the Proposed Third Amendments.

None of the above conditions could be waived by the parties to the Third Amendment Agreement. As at the date of this announcement, none of the conditions have been fulfilled.

Specific Mandate for the Issuance of the Conversion Shares

Under the Third Amendment Agreement, the Adjusted Conversion Price is remained at HK$0.359 per Share, which can be converted into the maximum number of 249,651,810 Shares upon conversion of the Convertible Bonds in full. The total Conversion Shares of 249,651,810 at the adjusted Conversion Price of HK$0.359 will be allotted and issued by the Company. In view that the Proposed Third Amendments are effectively a new arrangement that involves issue of new shares, issuance of all of 249,651,810 Conversion Shares shall be subject to the Shareholders' approval. The Application will be made to the Listing Committee of the Stock Exchange for the granting of the listing of, and permission of deal in, the proposed issuance of the Conversion Shares falling to be allotted and issued under the Third Amendment Agreement.

Ranking of Conversion Shares

The Conversion Shares, when fully paid, issued and allotted, will rank pari passu in all respects with all Shares in issue as at the date of issuance of the Conversion Shares.

GEM LISTING RULES IMPLICATION

Pursuant to Rule 34.05 of the GEM Listing Rules, any alterations in the terms of convertible debt securities after issue must be approved by the Stock Exchange, except where the alterations take effect automatically under the existing terms of such convertible debt securities. The Company will apply to the Stock Exchange for its approval of the Proposed Third Amendments contemplated under the Third Amendment Agreement pursuant to Rule 34.05 of the GEM Listing Rules.

As at the date of this announcement, the Bondholder is interested in 455,633,000 Shares, representing approximately 13.85% of the issued Share capital of the Company. Accordingly, the Bondholder is a substantial Shareholder and a connected person of the Company under Rule 20.07(1) of the GEM Listing Rules. Accordingly, the Proposed Third Amendments as contemplated under the Third Amendment Agreement constitutes a connected transaction of the Company under the GEM Listing Rules.

As the Proposed Third Amendments do not fall into any exemption under Rule 20.71 of the GEM Listing Rules, the Proposed Third Amendments are subject to the reporting, announcement and the shareholders' approval requirements under Chapter 20 of the GEM Listing Rules. The Bondholder and its associates will abstain from voting in the EGM for approval of the Third Amendment Agreement, the Proposed Third Amendments and the transactions contemplated thereunder.

REASONS FOR THE PROPOSED THIRD AMENDMENTS

The Group's principal business activities are i) the provision of lottery-related services; ii) the provision of Internet Plus solution services; and (iii) other services (including catering services and consulting services).

The Bondholders is principally engaged in investment holding, which wholly is owned by Mr. YAM Tak Cheung.

The Proposed Third Amendments were arrived at after arm's length negotiation between the Company and the Bondholder. The Board considers that the extended time for the repayment to the Bondholder will be beneficial to the Company and its operations by mitigating the pressure on its cashflows. Based on the above, the Board is of the view that the terms of the Third Amendment Agreement and the Convertible Bonds (as amended by the Third Amendment Agreement) are fair and reasonable and are in the interest of the Company and its Shareholders as a whole.

CHANGES IN SHAREHOLDING STRUCTURE

The shareholding structure of the Company (i) as at the date of this announcement; (ii) for illustration purpose only, immediately after all the allotment and issuance of the Conversion Shares in full upon exercise of the conversion rights under the Convertible Bonds at HK$0.359 per Share, and there is no further allotment of Shares from the date of this announcement other than the Conversion Shares is as follows:

As at the date of this announcement

Immediately after all allotment and issuance of the Conversion Shares in full upon exercise of the conversion rights under the Convertible Bonds

Number of

SharesApproximate %

Number of

SharesApproximate %

Best Frontier and its concert parties (Note 1)

Integrated Asset Management and its concert parties (Note 2)

683,241,856 455,633,000

20.76% 13.85%

683,241,856 19.30%

705,284,810 19.92%

Public Shareholders - Other public Shareholders

2,151,980,212

65.39% 2,151,980,212 60.78%

Total

3,290,855,068 100.00% 3,540,506,878 100.00%

Notes:

• 1. 675,565,856 Shares were owned by Best Frontier which is owned as to 99.89% and 0.11% by Madam CHEUNG Kwai Lan and Mr. CHAN Tung Mei who are spouses to each other. In addition, Madam CHEUNG and Mr. CHAN directly beneficially holds 4,656,000 and 3,020,000 Shares respectively. Madam CHEUNG is the spouse of Mr. CHAN and so both of them are deemed to have interests in the Shares.

• 2. The 455,633,000 Shares were owned by Integrated Asset Management which was wholly-owned by Mr. YAM Tak Cheung. A 8% coupon convertible bonds in aggregate amount of HK$89,625,000 for a term of six months were issued to Integrated Asset Management pursuant to the first amendment agreement dated 18 January 2017 (the "CBs"). The Company received a written consent from Integrated Asset Management, of which the maturity date of the CBs would be extended for the further six months to 17 January 2018. A maximum number of 249,651,810 Shares would be allotted and issued to Integrated Asset Management upon conversion of the CBs in full. The adjusted conversion price is HK$0.359 per conversion share subject to adjustment.

An ordinary resolution was passed at the extraordinary general meeting of the Company held on 18 April 2018 in which the amendments to the terms of the CBs pursuant to a second amendment agreement would be effective from 18 January 2018. The maturity date of the CBs was extended for six months from 17 January 2018 to 17 July 2018, and further extended maturity date upon a prior written consent from Integrated Asset Management shall be 17 January 2019. Such written consent from Integrated Asset Management has been received by the Company. A maximum number of 249,651,810 Shares would be allotted and issued to Integrated Asset Management upon conversion of the CBs in full and thereafter the shareholding of Integrated Asset Management will be increased to approximately 21.43% of the current issued share capital of the Company and approximately 19.92% of the enlarged issued share capital of the Company.

Upon completion of the Third Amendment Agreement, a maximum number of 249,651,810 Shares will be allotted and issued to Integrated Asset Management upon conversion of the Convertible Bonds in full and thereafter the shareholding of Integrated Asset Management will be increased to approximately 21.43% of the current issued Share capital of the Company and approximately 19.92% of the enlarged issued Share capital of the Company. The adjusted Conversion Price is HK$0.359 per Conversion Share subject to adjustment.

GENERAL

The Third Amendment Agreement and the transactions contemplated thereunder, including the issue and allotment of Conversion Shares, are subject to, inter alia, the approval of Independent Shareholders at the EGM. A Specific Mandate for the issuance of new 249,651,810 Shares will be sought in the EGM to cater for the issuance of these Conversion Shares.

An Independent Board Committee (comprising all independent non-executive Directors) has been formed to advise the Independent Shareholders and the Company will appoint an independent financial adviser to advise the Independent Board Committee and the Independent Shareholders regarding the Proposed Third Amendments.

None of the Directors and their respective associates have material interest in the Third Amendment Agreement, the Proposed Third Amendments and the transactions contemplated thereunder and none were required to abstain from voting on the Board resolutions in relation to the Third Amendment Agreement, the Proposed Third Amendments and the transactions contemplated thereunder.

A circular containing, amongst other things, (i) further details of the Third Amendment Agreement; (ii) a letter from the Independent Board Committee to the Independent Shareholders; (iii) a letter of advice from the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Third Amendment Agreement; and (iv) a notice of the EGM is expected to be despatched to the Shareholders on or before 12 February 2019 in accordance with the GEM Listing Rules.