Sinopharm Tech Holdings Limited — Proxy Solicitation & Information Statement 2011

Mar 30, 2011

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in China Vanguard Group Limited (the “ Company ”), you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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

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

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(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 8156)
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PROPOSED GRANT OF SPECIFIC MANDATE TO ISSUE SHARES AND

NOTICE OF EXTRAORINDARY GENERAL MEETING

A notice convening the EGM of the Company to be held at Room 2201, 22/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong on Wednesday, 27 April 2011 at 10:30 a.m. is set out on pages 19 to 20 of this circular. A form of proxy for use at the EGM is enclosed with this circular.

Whether or not you are able to attend the EGM, 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 Standard Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish and in such event, the proxy shall be deemed to be revoked.

This circular will remain on the “Latest Company Announcements” page of the GEM website at http:// www.hkgem.com for a minimum period of 7 days from the date of its posting and on the website of the Company at http://www.cvg.com.hk.

31 March 2011

* for identification purpose only

CHARACTERISTICS OF GEM

GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

i

CONTENTS

	Page
Characteristics of GEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	i
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
The Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
The Consideration Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Effect on the Shareholding Structure of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Information On Glory Man Group, Sky Wings Group, CDD and CCDDT . . . . . . . . . . . . . . .	14
Reasons for and Benefits of the Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Responsibility Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Notice of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19

ii

DEFINITIONS

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

“Acquisitions”	together, the acquisitions of the Glory Man Sale Shares and Sky
	Wings Sale Shares
“Acquisition Agreements”	together, the Glory Man Acquisition Agreement and the Sky
	Wings Acquisition Agreement
“Announcement”	the announcement dated 15 March 2011 made by the Company in
	relation to the Acquisitions
“BVI”	British Virgin Islands
“Board”	the board of Directors from time to time
“CCD”	China Culture Development Co., Ltd.北京中文發文化發展有
	限公司, a limited liability company incorporated in the PRC,
	currently holding 51% equity interest in CCDDT
“CCD Group”	CCD and its subsidiaries
“CCDDT”	China Culture Development Digital Technology Co., Ltd.北京中
	文發數字科技有限公司, a limited liability company established
	in the PRC. It is principally engaged in development and operation
	of technology platforms for IP protection in karaoke venues;
	collection of copyright/royalty fees on behalf of IP owners;
	and the provision of value-added services in the entertainment
	sector in the PRC. CCDDT is owned as to 49% and 51% by the
	Company and CCD respectively

“CCDDT Group”	together, CCDDT, Excellent Union and Lightsoft
“Chang Yuang”	Chang Yuang (China) Investment Limited, holding 56.375% of
	Glory Man, being an Independent Third Party
“Company”	China Vanguard Group Limited (眾彩科技股份有限公司*), an
	exempted company incorporated in the Cayman Islands with
	limited liability and the Shares of which are listed on GEM
“connected person”	has the meaning ascribed thereto in the GEM Listing Rules
“Consideration Shares”	together, GM Consideration Shares and SW Consideration Shares
“Directors”	the directors of the Company

1

DEFINITIONS

• “EGM” the extraordinary general meeting of the Company to be convened and held on Wednesday, 27 April 2011 at 10:30 a.m. to consider and, if thought fit, to approve, the proposed grant of the Specific Mandate; notice of which is set out in pages 19 to 20 of this circular

• “Excellent Union” Beijing Excellent Union Communication Co., Ltd.北京天合文化 集團有限公司, a limited liability company established in the PRC and owned 50% by CCDDT and 50% by an Independent Third Party

• “GEM” Growth Enterprise Market of the Stock Exchange “GEM Listing Rules” the Rules Governing the Listing Securities on GEM “GM Consideration Shares” the 175,000,000 new Shares to be issued by the Company to the Glory Man Vendors to satisfy part of the Glory Man Consideration

• “Glory Man” Glory Man Holdings Limited 榮民控股有限公司, a limited liability company incorporated in the BVI, which is owned as to 56.375% and 43.625% by Chang Yuang and Million Praise respectively

• “Glory Man Acquisition the sale and purchase agreement of the Glory Man Sale Shares Agreement” entered into by the Glory Man Vendors and the Purchaser dated 15 March 2011

• “Glory Man Consideration” the amount of the consideration payable by the Purchaser to the Glory Man Vendors for the purchase of the Glory Man Sale Shares under the Glory Man Acquisition Agreement, being HK$80,000,000

• “Glory Man Sale Shares” 20,000 ordinary share of US$1.00 in the issued share capital of Glory Man, representing its entire issued share capital

• “Group” the Company and all of its subsidiaries from time to time

“Hong Kong”

the Hong Kong Special Administrative Region of the PRC

“Independent Third Party(ies)” any person(s) or company(ies) and their respective ultimate beneficial owner(s), to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, are third parties independent of the Company (as the case may be) and connected persons of Company (as the case may be)

2

DEFINITIONS

• “Issue Price” HK$0.40 per Consideration Share “Latest Practicable Date” 29 March 2011, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein

• “Lightsoft” Lightsoft Technology Development Co. Ltd. 重慶禮光博軟科 技發展有限公司, a limited liability company established in the PRC, which is owned as to 61% and 39% by CCDDT and seven Independent Third Parties respectively

• “Marigold” Marigold Worldwide Limited, holding 71.875% of Sky Wings, being an Independent Third Party

• “Million Praise” Million Praise Limited 萬嘉有限公司, holding 43.625% of Glory Man, being an Independent Third Party

• “PRC” the People’s Republic of China, which for the purpose of this circular, shall exclude Hong Kong, Macau Special Administrative Region and Taiwan

• “Purchaser” Champion Day Holdings Limited, a company incorporated in the BVI with limited liability, an indirect wholly-owned subsidiary of the Company

• “Pure Delight” Pure Delight Holdings Limited, holding 28.125% of Sky Wings, being an Independent Third Party

• “Share(s)” ordinary share(s) of par value of HK$0.01 each in the share capital of the Company

• “Share Option Scheme” the existing share option scheme of the Company adopted pursuant to the ordinary resolution passed by the Shareholders on 18 October 2002

• “Shareholder(s)” holder(s) of the Share(s) from time to time “SW Consideration Shares” the 112,500,000 new Shares to be issued by the Company to Pure Delight to satisfy part of the Sky Wings Consideration

• “Sky Wings Acquisition the sale and purchase agreement of the Sky Wings Sale Shares Agreement” entered into by the Sky Wings Vendors and the Purchaser dated 15 March 2011

3

DEFINITIONS

“Sky Wings Consideration”	the amount of the consideration payable by the Purchaser to
	the Sky Wings Vendors for the purchase of the Sky Wings Sale
	Shares under the Sky Wings Acquisition Agreement, being
	HK$160,000,000
“Sky Wings Sale Shares”	20,000 ordinary share of US$1.00 in the issued share capital of
	Sky Wings, representing its entire issued share capital
“Specific Mandate”	the specific mandate proposed to be granted to the Directors at the
	EGM to allot, issue and deal with the Consideration Shares
“Starful”	Starful Holdings Limited星科集團有限公司, a limited liability
	company incorporated in Hong Kong and wholly-owned by Glory
	Man, currently holding 10% equity interest in CCD
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Supreme Leading”	Supreme Leading Limited傑倡有限公司, a limited liability
	company incorporated in Hong Kong and wholly-owned by Sky
	Wings, currently holding 20% equity interest in CCD
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“RMB”	Renminbi, the lawful currency of the PRC
“US$”	United States dollars, the lawful currency of the United States of
	America
“%”	per cent.

4

LETTER FROM THE BOARD

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 8156)

Executive Directors:

Madam Cheung Kwai Lan Mr. Chan Tung Mei Mr. Chan Ting Ms. Chan Siu Sarah Mr. Lau Hin Kun

Registered office: Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Independent Non-Executive Directors:

Mr. Tian He Nian Mr. Zhang Xiu Fu Mr. To Yan Ming Edmond

Head office and principal place of business in Hong Kong: Room 2201, 22/F Hopewell Centre 183 Queen’s Road East Wanchai, Hong Kong

31 March 2011

To the Shareholders and, for information only, the holders of the options and holders of the warrants

Dear Sir or Madam,

PROPOSED GRAND OF SPECIFIC MANDATE TO ISSUE SHARES AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the Announcement. The Purchaser entered into the Glory Man Acquisition Agreement and the Sky Wings Acquisition Agreement with the Glory Man Vendors and the Sky Wings Vendors respectively to acquire an aggregate interest of 30% in CCD for total considerations of HK$240,000,000. Particulars of the Acquisition Agreements are disclosed in the Announcement.

* for identification purpose only

5

LETTER FROM THE BOARD

Pursuant to the Glory Man Acquisition Agreement, the Purchaser has conditionally agreed to purchase from the Glory Man Vendors 100% of the issued share capital of Glory Man at a consideration of HK$80,000,000, which will be satisfied by the Purchaser as to HK$10,000,000 in cash and as to HK$70,000,000 by the Purchaser procuring the Company to issue the GM Consideration Shares to Chang Yuang and Million Praise respectively (and/or its nominee(s)). Currently, Glory Man, through Starful, holds an equity interest of 10% in CCD. Completion of the Glory Man Acquisition Agreement is conditional upon the obtaining of the Specific Mandate and the fulfilment of other conditions precedent as set out in the section headed “Glory Man Acquisition” below.

Pursuant to the Sky Wings Acquisition Agreement, the Purchaser has conditionally agreed to purchase from the Sky Wings Vendors 100% of the issued share capital of Sky Wings at a consideration of HK$160,000,000, which will be satisfied by the Purchaser as to HK$115,000,000 in cash and as to HK$45,000,000 by the Purchaser procuring the Company to issue the SW Consideration Shares to Pure Delight (and/or its nominee(s)). Currently, Sky Wings, through Supreme Leading, holds an equity interest of 20% in CCD. Completion of the Sky Wings Acquisition Agreement is conditional upon the obtaining of the Specific Mandate and the fulfilment of other conditions precedent set out in the section headed “Sky Wings Acquisition” below.

At the forthcoming EGM, resolutions will be proposed to seek the Shareholders’ approval for the granting of the Specific Mandate.

The purpose of this circular is to (i) provide you with further information relating to the Acquisition Agreements; and (ii) give you a notice convening the EGM at which necessary resolution will be proposed to seek your approval of the Specific Mandate.

THE ACQUISITIONS

Glory Man Acquisition

Glory Man Acquisition Agreement

Date: 15 March 2011

Parties:

Purchaser: Champion Day Vendors: Chang Yuang, a 56.375% shareholder of Glory Man; and Million Praise, a 43.625% shareholder of Glory Man.

Chang Yuang and Million Praise are collectively referred to as the “ Glory Man Vendors ”.

6

LETTER FROM THE BOARD

Assets to be acquired

Pursuant to the Glory Man Acquisition Agreement, the Purchaser has conditionally agreed to acquire and the Glory Man Vendors have conditionally agreed to sell the Glory Man Sale Shares, representing 100% of the entire issued share capital of Glory Man as at the date of this circular. Currently, Glory Man, through Starful, holds an equity interest of 10% in CCD.

Consideration

The total consideration for the Glory Man Sale Shares is HK$80,000,000 and shall be payable in the following manner:

• (i) as to HK$10,000,000 in cash to be paid by the Purchaser to Chang Yuang upon Glory Man Completion; and

• (ii) as to HK$70,000,000 by the Purchaser procuring the Company to allot and issue GM Consideration Shares to the Glory Man Vendors (and/or its nominee(s)) in the following manner:

• as to HK$35,100,000 of the GM Consideration Shares (equivalent to 87,750,000 new Shares) to Chang Yuang; and

• as to HK$34,900,000 of the GM Consideration Shares (equivalent to 87,250,000 new Shares) to Million Praise.

The GM Consideration Shares will be issued on Glory Man Completion Date but the release of the GM Consideration Shares to the Glory Man Vendors will be as follows:

• (1) circa 1/3 of the GM Consideration Shares, rounded to the nearest board lot, will be released to the Glory Man Vendors two (2) months after Glory Man Completion Date;

• (2) circa 1/3 of the GM Consideration Shares, rounded to the nearest board lot, will be released to the Glory Man Vendors four (4) months after the Glory Man Completion Date; and

• (3) the remaining circa 1/3 of the GM Consideration Shares, representing the balance of the GM Consideration Shares, will be released to the Glory Man Vendors six (6) months after the Glory Man Completion Date.

For the avoidance of doubt, the Glory Man Vendors shall at all times be entitled to all the rights attaching to the GM Consideration Shares including, without limitation, all dividends and other distributions in respect of the GM Consideration Shares and may exercise all voting and other rights which they may have in respect of the GM Consideration Shares.

The Glory Man Consideration was arrived at after arm’s length negotiations between the parties.

7

LETTER FROM THE BOARD

Conditions precedent

Glory Man Completion is subject to the following conditions having been fulfilled or waived (as the case may be)(“ Glory Man CP ”):

1. the representations and warranties of each Glory Man Vendors in the Glory Man Acquisition Agreement remain true, accurate and complete in all material respects and are not misleading as of the Glory Man Completion with the same effect as though made on and as of the date of the Glory Man Acquisition Agreement, and a certificate to such effect is delivered by each of the Glory Man Vendors;

2. there has been no material adverse change in the financial position, prospects, liabilities, assets or business in the Glory Man Group and the CCD Group since the execution of the Glory Man Acquisition Agreement, and that no event has occurred since such date that has or potentially may have a material adverse effect on the financial position, prospects, liabilities, assets or business in the Glory Man Group and the CCD Group;

3. the Purchaser being satisfied with the results of the due diligence review;

4. all approvals, consents, authorizations and licenses (so far as necessary) required to be obtained on the part of the Glory Man Vendors in relation to the transactions contemplated under the Glory Man Acquisition Agreement having been obtained;

5. all approvals, consents, authorizations and licenses (so far as necessary) required to be obtained on the part of the Purchaser in relation to the transactions contemplated under the Glory Man Acquisition Agreement having been obtained;

6. if applicable, all approvals, waiver of rights or consents being obtained from the existing convertible bonds holders of the Company to enable the transactions contemplated under the Glory Man Acquisition Agreement to proceed without resulting in any breach or termination or acceleration of obligations under such convertible bonds;

7. the Shareholders approving the Specific Mandate for the issuance of the GM Consideration Shares and the GEM Listing Committee of the Stock Exchange granting listing of and permission to deal in the GM Consideration Shares; and

8. the obtaining of a BVI legal opinion (in form and substance satisfactory to the Purchaser) from a firm of BVI legal advisers appointed by the Glory Man Vendors and acceptable to the Purchaser in relation to the Glory Man Acquisition Agreement and the transactions contemplated hereby (including but not limited to (a) the due incorporation and good standing of Glory Man; (b) the ownership of the Glory Man’s share capital being consistent with the details stated in the Glory Man Acquisition Agreement.

8

LETTER FROM THE BOARD

The conditions precedent set out in paragraphs (6) to (8) may not be waived. The Company may waive any of the Glory Man CP (either in whole or in part) set out in paragraphs (1) to (5) at any time by notice in writing to the Glory Man Vendors.

The Glory Man Vendors shall use their best endeavours to procure the fulfilment of the Glory Man CP as soon as practicable, and in any event on or before six (6) months after the date of the Glory Man Acquisition Agreement (or such other date as the Purchaser and the Glory Man Vendors may agree in writing).

Completion

Glory Man Completion shall take place on the third business days once all the Glory Man CP has been fulfilled or waived (as the case might be).

Long Stop Date

If any of the conditions for the Glory Man Completion has not been satisfied (or, as the case may be, waived by the Purchaser) on or before 4:00 p.m. after six (6) months from the date of signing of the Glory Man Acquisition Agreement (or such date as mutually agreed by the Glory Man Vendors and the Purchaser), the Glory Man Acquisition Agreement shall cease and determine.

Sky Wings Acquisition

Sky Wings Acquisition Agreement

Date: 15 March 2011

Parties:

Purchaser: Champion Day Vendors: Marigold, a 71.875% shareholder of Sky Wings; and Pure Delight, a 28.125% shareholder of Sky Wings.

Marigold and Pure Delight are collectively referred to as the “ Sky Wings Vendors ”.

9

LETTER FROM THE BOARD

Assets to be acquired

Pursuant to the Sky Wings Acquisition Agreement, the Purchaser has conditionally agreed to acquire and the Sky Wings Vendors have conditionally agreed to sell the Sky Wings Sale Shares, representing 100% of the entire issued share capital of Sky Wings as at the date of this circular. Currently, Sky Wings, through Supreme Leading, holds an equity interest of 20% in CCD.

Consideration

The total consideration for the Sky Wings Sale Shares is HK$160,000,000 and shall be payable in the following manner:

• (i) as to HK$115,000,000 in cash to be paid by the Purchaser to Marigold upon Sky Wings Completion; and

• (ii) as to HK$45,000,000 by the Purchaser procuring the Company to allot and issue SW Consideration Shares (equivalent to 112,500,000 new Shares) to the Pure Delight (and/or its nominee(s)).

The SW Consideration Shares will be issued on Sky Wings Completion Date but the release of the SW Consideration Shares to the Pure Delight will be as follows:

• (1) circa 1/3 of the SW Consideration Shares, rounded to the nearest board lot, will be released to Pure Delight two (2) months after Sky Wings Completion Date;

• (2) circa 1/3 of the SW Consideration Shares, rounded to the nearest board lot, will be released to Pure Delight four (4) months after the Sky Wings Completion Date; and

• (3) the remaining circa 1/3 of the SW Consideration Shares, representing the balance of the SW Consideration Shares, will be released to Pure Delight six (6) months after the Sky Wings Completion Date.

For the avoidance of doubt, Pure Delight shall at all times be entitled to all the rights attaching to the SW Consideration Shares including, without limitation, all dividends and other distributions in respect of the SW Consideration Shares and may exercise all voting and other rights which they may have in respect of the SW Consideration Shares.

The Sky Wings Consideration was arrived at after arm’s length negotiations between the parties.

10

LETTER FROM THE BOARD

Conditions precedent

Sky Wings Completion is subject to the following conditions having been fulfilled or waived (as the case may be)(“ Sky Wings CP ”):

1. the representations and warranties of each Sky Wings Vendors in the Sky Wings Acquisition Agreement remain true, accurate and complete in all material respects and are not misleading as of the Sky Wings Completion with the same effect as though made on and as of the date of the Sky Wings Acquisition Agreement, and a certificate to such effect is delivered by each of the Sky Wings Vendors;

2. there has been no material adverse change in the financial position, prospects, liabilities, assets or business in the Sky Wings Group and the CCD Group since the execution of the Sky Wings Acquisition Agreement, and that no event has occurred since such date that has or potentially may have a material adverse effect on the financial position, prospects, liabilities, assets or business in the Sky Wings Group and the CCD Group;

3. the Purchaser being satisfied with the results of the due diligence review;

4. all approvals, consents, authorizations and licenses (so far as necessary) required to be obtained on the part of the Sky Wings Vendors in relation to the transactions contemplated under the Sky Wings Acquisition Agreement having been obtained;

5. all approvals, consents, authorizations and licenses (so far as necessary) required to be obtained on the part of the Purchaser in relation to the transactions contemplated under the Sky Wings Acquisition Agreement having been obtained;

6. if applicable, all approvals, waiver of rights or consents being obtained from the existing convertible bonds holders of the Company to enable the transactions contemplated under the Sky Wings Acquisition Agreement to proceed without resulting in any breach or termination or acceleration of obligations under such convertible bonds;

7. the Shareholders approving the Specific Mandate for the issuance of the SW Consideration Shares and the GEM Listing Committee of the Stock Exchange granting listing of and permission to deal in the SW Consideration Shares; and

8. the obtaining of a BVI legal opinion (in form and substance satisfactory to the Purchaser) from a firm of BVI legal advisers appointed by the Sky Wings Vendors and acceptable to the Purchaser in relation to the Sky Wings Acquisition Agreement and the transactions contemplated hereby (including but not limited to (a) the due incorporation and good standing of Sky Wings; (b) the ownership of the Sky Wings’ share capital being consistent with the details stated in the Sky Wings Acquisition Agreement.

11

LETTER FROM THE BOARD

The conditions precedent set out in paragraphs (6) to (8) may not be waived. The Company may waive any of the Sky Wings CP (either in whole or in part) set out in paragraphs (1) to (5) at any time by notice in writing to the Sky Wings Vendors.

The Sky Wings Vendors shall use their best endeavours to procure the fulfilment of the Sky Wings CP as soon as practicable, and in any event on or before six (6) months after the date of the Sky Wings Acquisition Agreement (or such other date as the Purchaser and the Sky Wings Vendors may agree in writing).

Completion

Sky Wings Completion shall take place on the third business days once all the Sky Wings CP has been fulfilled or waived (as the case might be).

Long Stop Date

If any of the conditions for the Sky Wings Completion has not been satisfied (or, as the case may be, waived by the Purchaser) on or before 4:00 p.m. after six (6) months from the date of signing of the Sky Wings Acquisition Agreement (or such date as mutually agreed by the Sky Wings Vendors and the Purchaser), the Sky Wings Acquisition Agreement shall cease and determine.

THE CONSIDERATION SHARES

Based on the closing price per Share of HK$0.380 quoted on the Stock Exchange on 14 March 2011 (“ Last Trading Date ”), being the last trading day immediately before the signing of the Acquisition Agreements, the aggregate market value of the Consideration Shares is approximately HK$109,250,000. The Issue Price was arrived at after arm’s length negotiations and represents:

• (i) a premium of approximately 25.0% to the closing price of HK$0.320 per Share as quoted on the Stock Exchange as at the Latest Practicable Date;

• (ii) a premium of approximately 5.26% to the closing price of HK$0.380 per Share as quoted on the Stock Exchange on the Last Trading Date, being the last trading day of the Company immediately before the date of the Acquisition Agreements;

• (iii) a premium of approximately 3.90% to the average of the closing prices of approximately HK$0.385 per Share as quoted on the Stock Exchange for the last five trading days of the Company immediately before the date of the Acquisition Agreements;

• (iv) a premium of approximately 6.38% to the average of the closing prices of approximately HK$0.376 per Share as quoted on the Stock Exchange for the last ten trading days of the Company immediately before the date of the Acquisition Agreements; and

• (v) a discount of approximately 34.96% to the audited net asset value of the Company as at 30 June 2010 of approximately HK$0.615 per Share based on 3,211,893,839 Shares in issue as at the date of the Announcement.

12

LETTER FROM THE BOARD

The Issue Price was determined between the parties on an arm’s length basis with reference to various factors including the closing prices and the net asset value per Share as shown above. The Directors (including the independent non-executive Directors) consider that the Issue Price is fair and reasonable.

Based on the Issue Price of HK$0.40 per Consideration Share, the Consideration Shares represent approximately 8.94% of the total issued share capital of the Company as at the date of this circular and approximately 8.20% of the enlarged issued share capital of the Company.

The Consideration Shares, when allotted and issued, shall rank pari passu in all respects with the Shares in issue on the date of allotment and issue of the Consideration Shares including the right to all dividends, distributions and other payments made or to be made, the record date for which falls on or after the date of such allotment and issue.

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

EFFECT ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

Assuming that there will be no change in the shareholding structure of the Company immediately before completion of the issue of the Consideration Shares, the shareholding structure of the Company as at the date of this circular and after the date of completion for each acquisition will be as follows:

Shareholders Substantial Shareholders and Directors Best Frontier Investments Limited_(Note 1) Cheung Kwai Lan(Note 2) Chan Tung Mei(Notes 1 & 2)_ Lau Hin Kun Sub-total Million Praise Chang Yuang Pure Delight Public	As at the Latest Practicable Date No. of Shares Approximate % 1,823,457,322 56.68 1,825,527,322 56.75 1,825,527,322 56.75 1,410,000 0.04 1,826,937,322 56.79 – – – – – – 1,389,956,517 43.21 3,216,893,839 100.00	Immediately after the allotment and issue of the Consideration Shares No. of Shares Approximate % 1,823,457,322 52.03 1,825,527,322 52.09 1,825,527,322 52.09 1,410,000 0.04 1,826,937,322 52.13 87,250,000 2.49 87,750,000 2.51 112,500,000 3.21 1,389,956,517 39.66 3,504,393,839 100.00	Immediately after the allotment and issue of the Consideration Shares No. of Shares Approximate % 1,823,457,322 52.03 1,825,527,322 52.09 1,825,527,322 52.09 1,410,000 0.04 1,826,937,322 52.13 87,250,000 2.49 87,750,000 2.51 112,500,000 3.21 1,389,956,517 39.66 3,504,393,839 100.00
			52.13 2.49 2.51 3.21 39.66
			100.00

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LETTER FROM THE BOARD

Notes:

1. The 1,823,457,322 Shares are owned by Best Frontier Investments Limited which is owned as to 99.89% and 0.11% by Madam Cheung Kwai Lan and Mr. Chan Tung Mei respectively, who are spouse to each other. Accordingly, Madam Cheung Kwai Lan is deemed to be interested in the Shares held by Best Frontier and Mr. Chan Tung Mei is deemed to be interested in all 1,823,457,322 Shares by virtue of being the spouse of Madam Cheung Kwai Lan under the SFO.

2. The 2,070,000 Shares are owned by Madam Cheung Kwai Lan who is the spouse of Mr. Chan Tung Mei. Accordingly, Mr. Chan Tung Mei is deemed to be interested in the Shares under the SFO.

As at the date of this circular, save for (1) the 83,050,000 options granted under the Share Option Scheme; (2) the US$925,000 convertible notes which are exercisable up to and including 28 November 2012 being convertible into 13,771,363 Shares; and (3) the 65,000,000 warrants of the Company issued on 26 August 2010 and 11 January 2011 which are exercisable up to and including 26 August 2011 and 11 January 2012 respectively, the Company has no outstanding convertible securities or options which are convertible into Shares.

INFORMATION ON GLORY MAN GROUP, SKY WINGS GROUP, CCD AND CCDDT

Glory Man

Glory Man is an investment holding company incorporated on 12 August 2010 in the BVI with limited liability. Starful is an investment holding company incorporated on 27 May 2009 in Hong Kong with limited liability. Currently, Starful directly holds 10% equity interest of CCD. Starful has had no operation since its incorporation. Upon Glory Man Completion, Glory Man and Starful will become wholly-owned subsidiaries of the Company.

Set out in the below is the unaudited financial information on the Glory Man Group for the period from 12 August 2010 (being date of incorporation) up to 31 December 2010 prepared in accordance with the Hong Kong Financial Reporting Standards:

For the period from 18 August 2010 (being date of incorporation) to 31 December 2010 (HK$’000) – Operating profit before taxation – Operating profit for the period

The unaudited net assets of the Glory Man Group as at 31 December 2010 were approximately HK$11,505,000.

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LETTER FROM THE BOARD

Sky Wings

Sky Wings is an investment holding company incorporated on 20 January 2011 in the BVI with limited liability. Supreme Leading is an investment holding company incorporated on 23 March 2009 in Hong Kong with limited liability. Currently, Supreme Leading directly holds 20% equity interest of CCD. Supreme Leading has had no operation since its incorporation. Upon Sky Wings Completion, Sky Wings and Supreme Leading will become wholly-owned subsidiaries of the Company.

Set out in the below is the unaudited financial information on the Sky Wings Group for the period from 20 January 2011 (being date of incorporation) up to 31 January 2011 prepared in accordance with the Hong Kong Financial Reporting Standards:

For the period from 20 January 2011 (being date of incorporation) to 31 January 2011 (HK$’000) – Operating profit before taxation – Operating profit for the period

The unaudited net assets of the Sky Wings Group as at 31 January 2011 were approximately HK$20,773,000.

CCD and CCDDT

CCD is a limited liability company established in the PRC and its major asset is its 51% equity interest in CCDDT. The Group currently holds 9.991% equity interest in CCD.

CCDDT is a sino-foreign joint venture established in the PRC principally engaged in development and operation of technology platforms for IP protection in karaoke venues, collection of copyright/royalty fees on behalf of IP owners (via Excellent Union) and the provision of value-added services in karaoke venues in the PRC. The Group currently holds a 54.10% effective equity interest in CCDDT.

Prior to the Acquisitions, CCD is accounted for as an available-for-sale financial assets and CCDDT is accounted for as a jointly-controlled entity of the Group. After completion of the Acquisitions, CCD will be accounted for as an investment in associate company and CCDDT will continue to be accounted for as a jointly-controlled entity of the Group.

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LETTER FROM THE BOARD

Set out in the below is the unaudited financial information on CCD for the two financial year ended 31 December 2009 and 31 December 2010 prepared in accordance with the PRC GAAP:

	For the year ended	For the year ended
	31 December
	2009	2010
	(RMB’000)	(RMB’000)
Operating loss before taxation	9,967	10,416
Operating loss for the period	11,073	11,079

The unaudited net assets of CCD as at 31 December 2010 were approximately RMB 87,640,000.

REASONS FOR AND BENEFITS OF THE ACQUISTIONS

In January 2011, the Supreme People Court, The Supreme People’s Procuratorate of the PRC, the Ministry of Public Security and the Ministry of Justice jointly issued an opinion (the “Opinion”) which categorized infringement of intellectual property rights as criminal offences under section 217 of PRC’s Criminal Law. The Company believes the issue of this Opinion will greatly facilitate the copyright/royalty collection efforts thereby significantly enhance CCDDT’s business performance.

The copyright/royalty collection business of CCDDT has progressed steadily. Lightsoft, a non wholly-owned subsidiary of CCDDT, has developed a first-of-its kind VOD equipment that is capable of providing value-added services such as advertising and lottery sales in karaoke venues. The Company continues to believe the potential and future development of the businesses of CCDDT Group.

The Company currently holds an effective interest of 54.10% in CCDDT. After completion of the Acquisitions, the Company will increase its total effective interest in CCDDT to 69.39%.

The Board takes the view that it is in the Company’s interest and benefits to increase its effective interest in the CCDDT business and the consideration for the Acquisitions were the result of arms-length commercial negotiation taking into account, including but not exclusive to, the historical pricing for the CCDDT acquisition (completion of which took place on 11 April 2008, the “ 2008 Acquisition ”), the Company’s share price and the operational progress made by CCDDT. In the 2008 Acquisition, the Group acquired an indirect 49% interest in CCDDT for a total consideration of US$200,000,000 (equivalent to HK$1,560,900,000 then) which was satisfied by the issuance of 2,262,173,906 Shares at an issue price of HK$0.69 per Share. For details of the 2008 Acquisition please refer to the announcement and circular issued by the Company on 17 January 2008 and 14 March 2008 respectively.

To the best of the Directors’ knowledge, information and believe, having made all reasonable enquiries, save for the ultimate beneficial owner of Marigold being the same as one of the vendors of the 2008 Acquisition (holding 2% of the Grand Promise International Limited), all other vendors of the 2008 Acquisition and the current vendors have no relationship.

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LETTER FROM THE BOARD

Taking into account the benefits of the Acquisitions, the Board is of the view that the terms of the Acquisitions are fair and reasonable and the Acquisitions are in the interests of the Group and the Shareholders as a whole.

EGM

A notice convening the EGM to be held at Room 2201, 22/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong on Wednesday, 27 April 2011 at 10:30 a.m. is set out on pages 19 to 20 of this circular. Ordinary resolutions will be proposed at the EGM to approve the granting of the Specific Mandate.

The Glory Man Vendors and the Sky Wings Vendors, their ultimate beneficial owners and their respective associates, to the extent that they hold Shares as at the date of EGM will abstain from voting on the ordinary resolution for the approval of the Specific Mandate at the EGM. Save for the above, to the best knowledge of the Directors, no other Shareholders are required to abstain from voting on the ordinary resolution for the approval of the Specific Mandate at the EGM and such approval shall be obtained by way of poll pursuant to Rule 17.47(4) of the Listing Rules.

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, 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 Standard Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish and in such event, the proxy shall be deemed to be revoked.

An announcement will be made by the Company after the EGM on the results of the EGM.

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company.

The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors consider that the granting of the Specific Mandate is in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the relevant resolution to be proposed at the EGM.

Yours faithfully

For and on behalf of the Board of China Vanguard Group Limited 眾彩科技股份有限公司[*] Chan Siu Sarah Director

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NOTICE OF EGM

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 8156)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of China Vanguard Group Limited (the “ Company ”) will be held at Room 2201, 22/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong on Wednesday, 27 April 2011 at 10:30 a.m., for the purpose of considering and, if thought fit, passing the following resolution:

AS ORDINARY RESOLUTIONS:

“ THAT :

1. conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of, and permission to deal in, 175,000,000 shares (the “ GM Consideration Shares ”) of HK$0.01 each in the capital of the Company, the directors of the Company be and are hereby authorised to allot and issue the GM Consideration Shares at HK$0.40 per GM Consideration Share in accordance with the terms and conditions of the sale and purchase agreement dated 15 March 2011 entered between Champion Day Holdings Limited (the “ Purchaser ”) and Chang Yuang (China) Investment Limited and Million Praise Limited (the “ Glory Man Vendors ”) (a copy of which has been produced to the Meeting, signed by the chairman of the meeting for the purposes of identification) and that the GM Consideration Shares shall, when allotted and issued, be credited as fully paid and rank pari passu in all respects with all other shares of the Company in issue on the date of such allotments and issues, be and the same is hereby approved;

2. conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of, and permission to deal in, 112,500,000 shares (the “ SW Consideration Shares ”) of HK$0.01 each in the capital of the Company, the directors of the Company be and are hereby authorised to allot and issue the SW Consideration Shares at HK$0.40 per SW Consideration Share in accordance with the terms and conditions of the sale and purchase agreement dated 15 March 2011 entered between the Purchaser and Marigold Worldwide Limited and Pure Delight Holdings Limited (the “ Sky Wings Vendors ”) (a copy of which has been produced to the Meeting, signed by the chairman of the meeting for the purposes of identification), and that the SW Consideration Shares shall, when allotted and issued, be credited as fully paid and rank pari passu in all respects with all other shares of the Company in issue on the date of such allotments and issues, be and the same is hereby approved; and

* for identification purpose only

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NOTICE OF EGM

1. any one director of the Company (each a “ Director ”) be and is hereby generally and unconditionally authorised in the best interests of the Company to do such act, including without limitation, the issue and allotment of the GM Consideration Shares and the SW Consideration Shares, and execute all such documents for and on behalf of the Company by hand, or in case of execution of documents under seal, to do so jointly with any of a second Director, a duly authorized representative of the Directors or the secretary of the Company as he/they shall consider necessary, appropriate, desirable or expedient in relation to the issue and allotment of the GM Consideration Shares and the SW Consideration Shares.”

Yours faithfully

For and on behalf of the Board of China Vanguard Group Limited 眾彩科技股份有限公司 * Chan Siu Sarah

Director

Hong Kong, 31 March 2011

Registered office: Head office and principal place Cricket Square of business in Hong Kong: Hutchins Drive Room 2201, 22/F P.O. Box 2681 Hopewell Centre Grand Cayman KY1-1111 183 Queen’s Road East Cayman Islands Wanchai, Hong Kong

Notes:

1. A member entitled to attend and vote at the extraordinary general meeting convened by the above notice is entitled to appoint one or, if he is a holder of more than one share, more proxies to attend and, subject to the provisions of the articles of association of the Company, to vote on his behalf. A proxy need not be a member of the Company but must be present in person at the extraordinary general meeting to represent the member. If more than one proxy is so appointed, the appointment shall specify the number and class of Shares in respect of which each such proxy is so appointed.

2. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney authorised in writing, or if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person duly authorised to sign the same.

3. In order to be valid, the form of proxy must be deposited together with a power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority, at the Company’s branch share registrar in Hong Kong, Tricor Standard Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time for holding the extraordinary general meeting or any adjournment thereof. Completion and return of a form of proxy will not preclude a shareholder of the Company from attending in person and voting at the extraordinary general meeting or any adjournment thereof, should he/she/it so wish and in such event, the proxy shall be deemed to be revoked.

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