Sinopharm Tech Holdings Limited — Proxy Solicitation & Information Statement 2019

Feb 28, 2019

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 You Champion Holdings Limited, 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.

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.

眾彩羽翔股份有限公司 China Vanguard You Champion Holdings Limited ( Formerly known as China Vanguard Group Limited )

(1) CONNECTED TRANSACTION IN RELATION TO PROPOSED AMENDMENTS TO THE TERMS OF THE CONVERTIBLE BONDS; (2) PROPOSED GRANT OF SPECIFIC MANDATE TO ISSUE OF CONVERSION SHARES; AND

(3) NOTICE OF EXTRAORDINARY GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

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

A letter from the Board is set out on pages 5 to 12 of this circular. A letter from the Independent Board Committee is set out on pages 13 to 14 of this circular. A letter from Gram Capital, being the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, is set out on pages 15 to 25 of this circular.

A notice convening the EGM of the Company to be held at Units 307-313, 3/F, Wireless Centre, Phase One Hong Kong Science Park, Pak Shek Kok, New Territories, Hong Kong on Tuesday, 19 March 2019 at 2:30 p.m. is set out on pages 32 to 33 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 and transfer office of the Company, Tricor Standard Limited at Level 22, Hopewell Centre, 183 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.

1 March 2019

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
Defnitions...................................................................................................................................	1
Letter from the Board................................................................................................................	5
Letter from the Independent Board Committee.....................................................................	13
Letter from Gram Capital.........................................................................................................	15
Appendix — General Information...............................................................................	26
Notice of EGM............................................................................................................................	32

– ii –

DEFINITIONS

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

• “Best Frontier”

• Best Frontier Investments Limited, a limited company incorporated in the British Virgin Islands

• “Board”

• the board of Directors

• “Bondholder(s)” holder(s) of the Convertible Bonds from time to time

• “Business Day”

any day (excluding a Saturday, a Sunday and any public holiday and any day on which a tropical cyclone warning no.8 or above or a “black” rainstorm warning signal is hoisted or remains hoisted in Hong Kong at any time between 9:00 a.m. and 12:00 noon and is not lowered or discontinued at or before 12:00 noon) on which licensed banks are generally open for business in Hong Kong throughout their normal business hours

• “Company”

• China Vanguard You Champion Holdings Limited, an exempted company incorporated in the Cayman Islands with limited liability and the Shares of which are listed on the GEM

• “connected person(s)”

has the meaning ascribed to it under the GEM Listing Rules

• “Conversion Price”

• the conversion price of the Convertible Bonds, initially being HK$2.39 per Conversion Share (subject to adjustment); As result of Share Subdivision became effective on 17 December 2014, the conversion price of the Convertible Bonds was adjusted to HK$0.598 per Conversion Share

• “Conversion Share(s)” 249,651,810 new Share(s) fall to be alloted and issued upon the exercise of the conversion rights attaching to the Convertible Bonds

• “Convertible Bonds” the 2% coupon convertible bonds due 2017 in the aggregate amount of HK$89,625,000 issued by the Company to the Subscriber pursuant to the Subscription Agreement; As completion of the Second Amendment Agreement, the 8% coupon convertible bonds due 2019 in the aggregate amount of HK$89,625,000 issued by the Company

– 1 –

DEFINITIONS

• “Director(s)” the director(s) of the Company

• “EGM” the extraordinary general meeting of the Company to be convened and held to consider, and if thought fit, to approve the Third Amendment Agreement, Proposed Amendments and the transactions contemplated thereunder, including the grant of the Specific Mandate to issue the Conversion Shares

• “First Amendment Agreement”

• the amendment agreement dated 18 January 2017 entered into between the Company and the Bondholder in relation to the amendments

• “GEM” GEM of the Stock Exchange

• “GEM Listing Rules” The Rules Governing the Listing of Securities on GEM

• “Group” the Company and its subsidiaries

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong

• “Hong Kong” the Hong Kong Special Administrative Region of the PRC

• “Independent Board Committee” an independent committee of the Board comprising all the independent non-executive Directors, formed for the purpose of advising the Independent Shareholders as to the terms of the Third Amendment Agreement, Proposed Amendments and the transactions contemplated thereunder, including the grant of the Specific Mandate to issue the Conversion Shares

• “Independent Financial Adviser” or “Gram Capital”

• Gram Capital Limited, a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO, being the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Third Amendment Agreement, Proposed Amendments and the transactions contemplated thereunder

• “Independent Shareholder(s)” Shareholder(s) other than those who have a material interest in the relevant resolutions to be proposed at the EGM

• “Integrated Asset Management”

• Integrated Asset Management (Asia) Limited, a limited company incorporated in the British Virgin Islands

– 2 –

DEFINITIONS

• “Latest Practicable Date”

• 22 February 2019, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular

• “Maturity Date” on 17 January 2019

• “PRC”

• The People’s Republic of China excluding Hong Kong, Macau Special Administrative Region of the PRC and Taiwan for the purpose of this circular

• “Proposed Amendments” the proposed amendments to the Convertible Bonds pursuant to the terms of the Third Amendment Agreement

• “Second Amendment Agreement”

• the second amendment agreement dated 18 January 2018 entered into between the Company and the Bondholder in relation to the amendments

• “SFO”

• Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong), as amended, supplemented and modified from time to time

• “Share(s)”

• ordinary share(s) of HK$0.0125 each in the share capital of the Company

• “Shareholder(s)”

holder(s) of the Share(s)

• “Share Subdivision”

• On 16 December 2014, the Company has obtained from the shareholders’ approval at the extraordinary general meeting in relation to the proposed share subdivision. Pursuant to which, with effect from 17 December 2014, each existing issued and unissued share of HK$0.05 each in the share capital of the Company was divided into four subdivided shares of HK$0.0125 each

• “Specific Mandate”

• the specific mandate to be granted to the Directors at the EGM for the allotment and issuance of the Conversion Shares to the Bondholder upon an exercise of the conversion rights.

• “Stock Exchange”

The Stock Exchange of Hong Kong Limited

• “Subscription Agreement”

the conditional subscription agreement dated 13 January 2014 and entered into between the Company and the Subscriber in relation to the subscription of the Convertible Bonds

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DEFINITIONS

“Subscriber” Integrated Asset Management (Asia) Limited “substantial Shareholder(s)” has the meaning ascribed thereto under the GEM Listing Rules “Third Amendment Agreement” the third amendment agreement dated 17 January 2019 entered into between the Company and the Bondholder in relation to the Proposed Amendments “%” per cent.

If there is any inconsistency in this circular between the Chinese and English versions, then English version shall prevail.

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LETTER FROM THE BOARD

眾彩羽翔股份有限公司 China Vanguard You Champion Holdings Limited

( Formerly known as China Vanguard Group Limited )

Executive Directors:

Madam CHEUNG Kwai Lan (Chairperson) Mr. CHAN Ting (Deputy Chairperson and Chief Executive Officer)

Non-executive Director: Mr. CHAN Tung Mei

Independent Non-executive Directors: Mr. TO Yan Ming Edmond Mr. YANG Qing Cai Dr. LIU Ta-pei

Registered office: P.O. Box 10008, Willow House, Cricket Square, Grand Cayman KY1-1001, Cayman Islands

Head office and principal place of business in Hong Kong: Units 307-313, 3/F Wireless Centre Phase One Hong Kong Science Park Pak Shek Kok, New Territories Hong Kong

1 March 2019

To the Shareholders

Dear Sir/Madam,

(1) CONNECTED TRANSACTION IN RELATION TO PROPOSED AMENDMENTS TO THE TERMS OF THE CONVERTIBLE BONDS; (2) PROPOSED GRANT OF SPECIFIC MANDATE TO ISSUE OF CONVERSION SHARES; AND

(3) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the announcement of the Company dated 17 January 2019, in relation to, among others, the Proposed Amendments involving the issuance of the Conversion Shares, which constitutes a connected transaction of the Company under Chapter 20 of the GEM Listing Rules. The Board proposes to seek the approval of the Independent Shareholders for the Third Amendment Agreement and the transactions contemplated thereunder, including Proposed Amendments involving the issuance of Conversion Shares falling to be issued upon the exercise of the conversion rights attaching to the Convertible Bonds under the Specific Mandate.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, the Bondholder is interested in 455,633,000 Shares, representing approximately 13.17% 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 be interested in 705,284,810 Shares, representing approximately 20.39% of the current issued Share capital of the Company and approximately 19.02% of the enlarged issued Share capital of the Company.

As at the Latest Practicable Date, the issued Share capital of the Company was 3,458,855,068 Shares. None of the Convertible Bonds have been redeemed nor converted.

The purpose of this circular is to provide you with, among others things:

1. details of the Third Amendment Agreement and the transactions contemplated thereunder;

2. the recommendations of the Independent Board Committee in relation to the Third Amendment Agreement, the Proposed Amendments and the transactions contemplated thereunder;

3. the recommendations of Gram Capital in relation to the Third Amendment Agreement, the Proposed Amendments and the transactions contemplated thereunder;

4. the notice of the EGM.

THE THIRD AMENDMENT AGREEMENT

On 17 January 2019 (after trading hours), the Company entered into the Third Amendment Agreement with Integrated Asset Management as the Bondholder, pursuant to which the Company and the Bondholder agreed to amend the term and condition of the Convertible Bonds as follows:

• (a) 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 Proposed Amendments, there are no other amendments to the terms of the Convertible Bonds.

The Board expects that the prior written consent will be received from the Bondholder before the maturity date of 17 July 2019 in case further extension is needed.

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LETTER FROM THE BOARD

Pursuant to the Third Amendment Agreement, the Proposed Amendments shall be subjected 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 Amendments having been obtained;

• (ii) the Stock Exchange approving the Proposed 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 of the Company at the EGM of all necessary resolutions to approve the Third Amendment Agreement and the Proposed Amendments.

None of the above conditions could be waived by the parties to the Third Amendment Agreement. As at the Latest Practicable Date, the condition i) above has been satisfied. Saved as disclosed, none of the above conditions have been fulfilled.

Adjusted Conversion Price per Conversion Share

The adjusted Conversion Price is remained at $0.359 per Share. The adjusted conversion price was determined after arm’s length negotiation between the Company and Integrated Asset Management. The extension of the maturity date of the Convertible Bonds for Integrated Asset Management which the adjusted conversion price remained at $0.359 will be beneficial to the Company by mitigating the pressure on its cashflows. Taking into account that (i) the adjusted conversion price remained at $0.359 for the extension of the maturity date of the Convertible Bonds which will be beneficial to the Company by mitigating the pressure on its cashflows; and (ii) the Group’s difficulties in obtaining bank borrowings or equity fund raising, the Board considers that the adjusted Conversion Price, which remained at HK$0.359 given that the Convertible Bonds continues to be interest bearing under the Third Amendment Agreement, to be justifiable and is in the interests of the Shareholders.

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 Amendments are effectively a new arrangement that involves issuance 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.

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LETTER FROM THE BOARD

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 Amendments contemplated under the Third Amendment Agreement pursuant to Rule 34.05 of the GEM Listing Rules.

As at the Latest Practicable Date, the Bondholder is interested in 455,633,000 Shares, representing approximately 13.17% 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 Amendments as contemplated under the Third Amendment Agreement constitutes a connected transaction of the Company under the GEM Listing Rules.

As the Proposed Amendments does not fall into any exemption under Rule 20.71 of the GEM Listing Rules, the Proposed Amendments is 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 Amendments and the transactions contemplated thereunder.

REASONS FOR THE PROPOSED AMENDMENTS

The Group is principally engaged in (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 owned by Mr. YAM Tak Cheung.

The Proposed 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. In view of the loss making position of the Group for year ended June 2018 and lack of available assets collateral, the Board considered that it is difficult for the Group to obtain bank borrowings

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LETTER FROM THE BOARD

at favourable terms. Per the financial statement as at 31 December 2018, the Company only had property, plant and equipment of approximately HK$2.6 million which represented the Company did not have available assets to be pledged as collateral for obtaining the bank borrowings. The Company has attempted to discuss with the bank in Shenzhen to consider any possibilities to obtain the bank borrowings, However, the bank replied that they could not grant the bank borrowings to the Company after reviewing the financial statement of the Company due to the loss making results of the Company from previous few years and lack of properties to be pledged as collateral. Therefore, the Board considered that it is difficult for the Group to obtain bank borrowings based on the above assessments.

The Company has successfully placed a total of 168,000,000 placing shares in January 2019 and received net proceeds of approximately HK$39.5 million from the Placing and intends to utilise for general working capital of the Group. The Placing can enlarge the shareholder and capital base of the Company and strengthen its financial position. Taking into consideration the above, the Board considered that it will increase the possibilities of repaying the Convertible Bonds through the equity financing since the Company’s financial position is strengthened and the Company’s business is developed in a steady growth way.

The Company will seek for any possibilities to raise fund through the debt or equity financing continuously for the repayment of the Convertible Bonds. Also, the Company will discuss with the Bondholder to consider any possibilities to convert all or part of the Convertible Bonds. In case further extension is needed on the maturity date of 17 July 2019, the Company will discuss with the Bondholder and expects that the prior written consent will be received before the maturity date of 17 July 2019.

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.

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LETTER FROM THE BOARD

CHANGES IN SHAREHOLDING STRUCTURE

The shareholding structure of the Company (i) as at the Latest Practicable Date; (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 Latest Practicable Date other than the Conversion Shares is as follows:

Best Frontier and its concert parties_(Note 1) Integrated Asset Management and its concert parties(Note 2)_ Public Shareholders — Other public Shareholders Total	As at the Latest Practicable Date Number of Approximate Shares % 683,241,856 19.75% 455,633,000 13.17% 2,319,980,212 67.08% 3,458,855,068 100.00%	Immediately after all allotment and issuance of the Conversion Shares in full upon exercise of the conversion rights under the Convertible Bonds Number of Approximate Shares % 683,241,856 18.42% 705,284,810 19.02% 2,319,980,212 62.56% 3,708,506,878 100.00%	Immediately after all allotment and issuance of the Conversion Shares in full upon exercise of the conversion rights under the Convertible Bonds Number of Approximate Shares % 683,241,856 18.42% 705,284,810 19.02% 2,319,980,212 62.56% 3,708,506,878 100.00%
			100.00%

Notes:

1. 675,565,856 Shares are 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. 455,633,000 Shares are owned by Integrated Asset Management which is 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 was issued to Integrated Asset Management pursuant to the First Amendment Agreement dated 18 January 2017 (“ the Bonds ”). The Company received a written consent from the Integrated Asset Management, of which the maturity date of the Bonds 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 Bonds in full. The adjusted Conversion Price is HK$0.359 per Conversion Share subject to adjustment.

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LETTER FROM THE BOARD

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 the 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 20.39% of the current issued share capital of the Company and approximately 19.02% 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 20.39% of the current issued Share capital of the Company and approximately 19.02% 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 has also appointed Gram Capital to advise the Independent Board Committee and the Independent Shareholders regarding the Proposed Amendments.

None of the Directors and their respective associates have material interest in the Third Amendment Agreement, the Proposed 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 Amendments and the transactions contemplated thereunder.

EXTRAORDINARY GENERAL MEETING

The resolutions to be proposed at the forthcoming EGM are set out in full in the notice of the EGM on pages 32 to 33 of this circular. A form of proxy for use at the EGM is enclosed with this circular.

If you intend to appoint a proxy to attend the EGM, you are requested to complete the proxy form and return it to the Company’s Hong Kong branch share registrar and transfer office, Tricor Standard Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the EGM or adjourned meeting (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting at the EGM or any adjournments thereof if you so wish.

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LETTER FROM THE BOARD

Pursuant to Rule 17.47(4) of the GEM Listing Rules, any vote of the Shareholders at a general meeting must be taken by poll except where the chairman, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. Therefore, all resolutions set out in the notice of EGM will be voted by way of poll at the EGM. The Company will announce the results of poll in the manner prescribed under Rule 17.47(5) of the GEM Listing Rules.

RECOMMENDATIONS

Having considered the above-mentioned benefits to the Group, the Directors (including the Independent Non-executive Directors) consider that the Third Amendment Agreement are on normal commercial terms and the transactions contemplated under the Third Amendment Agreement (including the issuance of the Conversion Shares) is in the interests of the Company and the Shareholders as a whole and are fair and reasonable to the Company. Accordingly, the Directors (including the Independent Non-executive Directors) recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve the Third Amendment Agreement and the transactions contemplated thereunder, including the Specific Mandate for the allotment and issuance of the Conversion Shares falling to be issued upon the exercise of the conversion rights attaching to the Convertible Bonds.

ADDITIONAL INFORMATION

Your attention is drawn to the (i) letter from the Independent Board Committee set out in this circular and (ii) letter from Gram Capital set out in this circular, which contains among other matters, its advice to the Independent Board Committee and the Independent Shareholders in connection with the Third Amendment Agreement and the transactions contemplated thereunder and the principal factors considered by it in arriving at its recommendation.

Your attention is also drawn to the additional information contained in the appendix to this circular.

Yours faithfully, By Order of the Board CHINA VANGUARD YOU CHAMPION HOLDINGS LIMITED 眾彩羽翔股份有限公司 CHAN Ting Executive Director and Chief Executive Officer

Hong Kong, 1 March 2019

– 12 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

眾彩羽翔股份有限公司 China Vanguard You Champion Holdings Limited

( Formerly known as China Vanguard Group Limited )

1 March 2019

To the Independent Shareholders

Dear Sir or Madam,

(1) CONNECTED TRANSACTION IN RELATION TO PROPOSED AMENDMENTS TO THE TERMS OF THE CONVERTIBLE BONDS; AND

(2) PROPOSED GRANT OF SPECIFIC MANDATE TO ISSUE OF CONVERSION SHARES

INTRODUCTION

We refer to the circular of the Company dated 1 March 2019 to (the “ Circular ”), of which this letter forms part. Capitalized terms used herein shall have the same meaning as those defined in the Circular unless the context otherwise requires.

We have been appointed by the Board to advise you on the terms of the Third Amendment Agreement, Proposed Amendments and the transaction contemplated thereunder, and the Specific Mandate are fair and reasonable so far as the Independent Shareholder are concerned.

Details of the advice of Gram Capital, together with the principal factors and reasons taken into consideration in arriving at such advice, are set out on pages 15 to 25 of the Circular. Your attention is also drawn to the letter from the Board set out on pages 5 to 12 of the Circular and the additional information set out in the appendix of the Circular.

– 13 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

RECOMMENDATION

Having considered the terms and conditions of the Third Amendment Agreement, the principal factors and reasons considered by, and the advice of Gram Capital, we are of the view that the Third Amendment Agreement and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole and are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Third Amendment Agreement and the transactions contemplated thereunder, and the Specific Mandate.

Mr. TO Yan Ming Edmond

Yours faithfully, For and on behalf of Independent Board Committee Mr. YANG Qing Cai

Dr. LIU Ta-pei

– 14 –

LETTER FROM GRAM CAPITAL

Set out below is the text of a letter received from Gram Capital, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Proposed Amendments for the purpose of inclusion in this circular.

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Room 1209, 12/F. Nan Fung Tower 88 Connaught Road Central/ 173 Des Voeux Road Central Hong Kong

1 March 2019

• To: The independent board committee and the independent shareholders

of China Vanguard You Champion Holdings Limited

Dear Sir/ Madam,

CONNECTED TRANSACTION PROPOSED AMENDMENTS TO THE TERMS OF THE CONVERTIBLE BONDS

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Proposed Amendments, details of which are set out in the letter from the Board (the “ Board Letter ”) contained in the circular dated 1 March 2019 issued by the Company to the Shareholders (the “ Circular ”), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

On 13 January 2014, the Company entered into the Subscription Agreement with Integrated Asset Management (i.e. the Bondholder) pursuant to which the Company conditionally agreed to issue the Convertible Bonds in the aggregate principal amount of HK$89,625,000 to Integrated Asset Management. On 17 January 2014, the Company completed to issue the Convertible Bonds to Integrated Asset Management 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 Integrated Asset Management respectively to amend certain terms and conditions of the Convertible Bonds.

On 17 January 2019 (after trading hours), the Company entered into the Third Amendment Agreement with Integrated Asset Management, pursuant to which the Company and Integrated Asset Management agreed to further amend certain term and conditions of the Convertible Bonds (i.e. the Proposed Amendments).

– 15 –

LETTER FROM GRAM CAPITAL

With reference to the Board Letter, the Proposed Amendments are subject to the reporting, announcement and the shareholders’ approval requirements under Chapter 20 of the GEM Listing Rules.

The Independent Board Committee comprising Mr. To Yan Ming Edmond, Mr. Yang Qing Cai and Dr. Liu Ta-pei (all being independent non-executive Directors) has been established to advise the Independent Shareholders on (i) whether the terms of the Proposed Amendments are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the Proposed Amendments are in the interests of the Company and the Shareholders as a whole; and (iii) how the Independent Shareholders should vote in respect of the resolution(s) to approve the Proposed Amendments at the EGM. We, Gram Capital Limited, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained or referred to in the Circular and the information and representations as provided to us by the Directors. We have assumed that all information and representations that have been provided by the Directors, for which they are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so as at the Latest Practicable Date. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company, its advisers and/or the Directors, which have been provided to us. Our opinion is based on the Directors’ representation and confirmation that there is no undisclosed private agreement/ arrangement or implied understanding with anyone concerning the Proposed Amendments. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with Rule 17.92 of the GEM Listing Rules.

The 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 the 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 the Circular misleading. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter of advice.

– 16 –

LETTER FROM GRAM CAPITAL

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent indepth investigation into the business and affairs of the Company, Integrated Asset Management or their respective subsidiaries or associates, nor have we considered the taxation implication on the Group or the Shareholders as a result of the Proposed Amendments. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change our opinion and we have no obligation to update this opinion to take into account events occurring after the Latest Practicable Date or to update, revise or reaffirm our opinion. In addition, nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company.

Lastly, where information in this letter has been extracted from published or otherwise publicly available sources, it is the responsibility of Gram Capital to ensure that such information has been correctly extracted from the relevant sources while we are not obligated to conduct any independent in-depth investigation into the accuracy and completeness of those information.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Proposed Amendments, we have taken into consideration the following principal factors and reasons:

1. Background of and reasons for the Proposed Amendments

Information on the Group

With reference to the Board Letter, the Group’s principal business activities are (i) the provision of lottery-related services; (ii) the provision of Internet Plus solution services; and (iii) others services (including catering services and consulting services).

– 17 –

LETTER FROM GRAM CAPITAL

Set out below are the consolidated financial information of the Group for the six months ended 31 December 2018 and the two years ended 30 June 2018 as extracted from the interim report of the Company for the six months ended 31 December 2018 (the “ 2018/19 Interim Report ”) and the annual report of the Company for the year ended 30 June 2018 (the “ 2017/18 Annual Report ”):

For the	six months ended For the year ended For the year ended	six months ended For the year ended For the year ended	six months ended For the year ended For the year ended	Year-on-year
	31 December	30 June	30 June	change from
	2018	2018	2017	2017 to 2018
	HK$’000	HK$’000	HK$’000	%
	(unaudited)	(audited)	(audited)
			(restated)
Revenue	12,375	25,347	26,359	(3.84)
Loss for the year/ period	20,028	71,585	181,240	(60.50)
	As at	As at	As at	Year-on-year
	31 December	30 June	30 June	change from
	2018	2018	2017	2017 to 2018
	HK$’000	HK$’000	HK$’000	%
	(unaudited)	(audited)	(audited)
			(restated)
Bank balances and cash	4,763	4,719	14,302	(67.00)
Net assets/(liabilities)	(78,508)	(59,999)	10,593	N/A

As shown in the table above, the Group recorded revenue and loss of approximately HK$25.35 million and HK$71.59 million respectively for the year ended 30 June 2018 (“ FY2017/18 ”), representing a decrease of approximately 3.84% and 60.50% respectively as compared to those for the year ended 30 June 2017 (“ FY2016/17 ”). With reference to the 2017/18 Annual Report and as advised by the Directors, the decrease in loss for FY2017/18 were mainly due to the effects of cost controls measures taken by the Group and less provision for doubtful receivables and impairment losses on assets made for the FY2017/18 as compared with those for FY2016/17.

As at 31 December 2018, the Group recorded bank balances and cash and net liabilities of approximately HK$4.76 million and HK$78.51 million respectively.

Information on Integrated Asset Management

With reference to the Board Letter, Integrated Asset Management is principally engaged in investment holding and is wholly owned by Mr. Yam Tak Cheung.

– 18 –

LETTER FROM GRAM CAPITAL

Reasons for the Proposed Amendments

As advised by the Directors, if the Convertible Bonds were not extended and converted, it would expire on 17 January 2019 and the Company would be obligated to repay the outstanding principal amount of the Convertible Bonds (being HK$89,625,000) together with all unpaid interests accrued immediately. With reference to the Board Letter, the Proposed Amendments were arrived at after arm’s length negotiation between the Company and Integrated Asset Management. The Board considers that the extended time for the repayment to Integrated Asset Management will be beneficial to the Company and its operations by mitigating the pressure on its cash flows.

As mentioned above, the Group had bank balances and cash of approximately HK$4.76 million as at 31 December 2018, which would be insufficient to repay the outstanding principal amount of the Convertible Bonds (being HK$89,625,000) together with the unpaid interests accrued. Upon our further enquiry, the Directors also confirmed that the Group has insufficient internal resources as at the Latest Practicable Date for repayment of the Convertible Bonds.

As advised by the Directors, apart from the Proposed Amendments, the Directors considered other financing alternatives in order to repay the outstanding principal amount of the Convertible Bonds and mitigating the pressure on the Group’s cash flows. For our due diligence purpose, we noted that:

• With reference to the announcement of the Company dated 22 January 2019, the Company completed a placing of new shares by Chung Lee Securities Co., Limited (as the placing agent) on 22 January 2019 (the “ Placing ”), pursuant to which the a total of 168,000,000 new Shares were placed to an independent third party placee to raise approximately HK$39.5 million for general working capital of the Group.

• With reference to the 2018/19 Interim Report, 2017/18 Annual Report and the annual report of the Company for the year ended 30 June 2017, the amount due to a Director(s） of the Group increased from approximately HK$0.73 million as at 30 June 2016 to approximately HK$15.08 million as at 30 June 2017, approximately HK$39.78 million as at 30 June 2018 and approximately HK$51.98 million as at 31 Deceber 2018. Upon our enquiry, the Directors advised us that the Company attempted and obtained loans from its Directors, namely Madam Cheung Kwai Lan and Mr. Chan Ting. With reference to the 2018/19 Interim Report and as advised by the Directors, such loans (approximately HK$51.98 million as at 31 December 2018) from the Directors are unsecured, interest free and have no fixed repayment term.

Nevertheless, in view of the continuous loss making position of the Group, the Directors advised us that (i) it was difficult for the Group to obtain bank borrowings due to lack of available assets for collateral; and (ii) it was difficult for the Company to procure further underwriters or placing agents to raise fund through equity fund raising methods (the “ Directors’ View on Financing Alternatives ”). Accordingly, the Directors did not consider the other debt financing or equity financing (save for the aforesaid Placing and loans form the Directors) to be feasible financing alternatives in order to repay the outstanding principal amount of the Convertible Bonds.

– 19 –

LETTER FROM GRAM CAPITAL

With reference to the 2018/19 Interim Report, the Group had total assets of approximately HK$171.71 million (of which goodwill amounted to approximately HK$124.28 million, while property, plant and equipment only amounted to approximately HK$2.61 million), bank balances and cash of approximately HK$4.76 million and net liabilities of approximately HK$78.51 million as at 31 December 2018. We also noted that the Group recorded loss for three consecutive financial years since the year ended 30 June 2016. In light of (i) the poor financial condition of the Group as highlighted above (such as consecutive loss positions and lack of valuable tangible assets, low bank balances and cash, and net liabilities position as at 31 December 2018); (ii) that with reference to the Board Letter, the Company attempted but failed to obtain bank borrowings with a bank in Shenzhen, we consider the Directors’ View on Financing Alternatives to be justifiable.

With reference to the Board Letter, the Company will seek for any possibilities to raise fund through the debt or equity financing continuously for the repayment of the Convertible Bonds. The Company will also discuss with the Bondholder to consider any possibilities to convert all or part of the Convertible Bonds. In case further extension is needed on the maturity date of 17 July 2019, the Company will discuss with the Bondholder and expects that a prior written consent will be received before the maturity date of 17 July 2019.

Having considered the above factors, in particular (i) that it was difficult for the Company/ the Group to obtain other debt financing or equity financing (save for the aforesaid Placing and loans form the Directors); (ii) our independent work done on the Group’s financial position (such as consecutive loss positions and lack of valuable tangible assets, low bank balances and cash, and net liabilities position as at 31 December 2018); and (iii) the Directors’ confirmation that the Group had insufficient internal resources as at the Latest Practicable Date for repayment of the Convertible Bonds, we are of the view that although the Proposed Amendments are not in the ordinary and usual course of business of the Group, they are in the interest of the Company and the Shareholders as a whole.

2. Principal terms of the Third Amendment Agreement

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

• 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.

– 20 –

LETTER FROM GRAM CAPITAL

Analysis on the adjusted Conversion Price

The adjusted Conversion Price (the “ Adjusted Conversion Price ”), which remained at HK$0.359 per Conversion Share pursuant to the Third Amendment Agreement, represents:

• (a) a premium of approximately 76.85% to the closing price per Share of HK$0.203 as quoted on the Stock Exchange on the Latest Practicable Date;

• (b) a premium of approximately 52.12% to the closing price per Share of HK$0.236 as quoted on the Stock Exchange on 17 January 2019, being the date of the Third Amendment Agreement;

• (c) a premium of approximately 48.96% to the average closing price per Share of approximately HK$0.241 as quoted on the Stock Exchange for the last five consecutive trading dates up to and including 17 January 2019, being the date of the Third Amendment Agreement;

• (d) a premium of approximately 39.15% over the average closing price per Share of approximately HK$0.258 as quoted on the Stock Exchange for the last twenty consecutive trading dates up to and including 17 January 2019, being the date of the Third Amendment Agreement; and

• (e) a discount of approximately 53.38% to the closing price per Share of HK$0.77 as quoted on the Stock Exchange on 17 January 2018, being the date of the Second Amendment Agreement.

– 21 –

LETTER FROM GRAM CAPITAL

In order to assess the fairness and reasonableness of the Adjusted Conversion Price, we reviewed the daily closing price of the Shares as quoted on the Stock Exchange from 1 January 2018 up to and including 17 January 2019 (the “ Review Period ”), being a period of approximately one year prior to and including the date of the Third Amendment Agreement. The comparison of daily closing prices of the Shares and the Adjusted Conversion Price is illustrated as follows:

==> picture [421 x 230] intentionally omitted <==

----- Start of picture text -----

HK$ Historical daily closing price per Share
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2019
Closing Price Adjusted Conversinon Price
----- End of picture text -----

Source: the Stock Exchange’s website

During the Review Period, the lowest and highest closing prices of the Shares as quoted on the Stock Exchange were HK$0.235 recorded on 19 October 2018 and HK$0.85 per Share recorded on 13 February 2018 and 19 April 2018 respectively. The Adjusted Conversion Price of HK$0.359 is within the range of the lowest and highest closing prices of the Shares as quoted on the Stock Exchange during the Review Period.

The closing price of Shares fluctuated since the start of the Review Period and until early May 2018. Since then, the closing price of Shares was on a general decreasing trend until reaching its trough at HK$0.235 in mid-October 2018. The closing price of Shares surged in early November 2018 and reached HK$0.435 on 12 November 2018. After that, the closing price of Shares decreased again. The closing prices of Shares were lower than the Adjusted Conversion Price of HK$0.359 from 20 November 2018 to 17 January 2019 (being the date of the Third Amendment Agreement).

– 22 –

LETTER FROM GRAM CAPITAL

As part of our analysis, we further identified subscription/placing of convertible bonds/notes for cash (the “ CB Comparables ”) which were announced by companies listed on the Stock Exchange from 18 November 2018 up to 17 January 2019, being an approximate two months period immediately before the date of the Third Amendment Agreement. An approximate twomonth period is adopted for analysis so as to reflect the recent trend of subscription/placing of convertible bonds/notes by different companies under the same/similar market condition. To the best of our knowledge and as far as we are aware of, we found 10 transactions which met the said criteria and they are exhaustive as far as we are aware of. Shareholders should note that the businesses, operations and prospects of the Company are not the same as the subject companies of the CB Comparables.

				Conversion price
				premium/(discount)
				of the issue
				price to closing
				price per share
				on the date
				of agreement
				in relation to
				the respective
				subscription/
				placing of
	Date of	Maturity	Interest rate	convertible
Company name (stock code)	announcement	(Years)	per annum (%)	bonds/notes
Carnival Group International	21 November 2018	2	8	10.17
Holdings Limited (996)	(Note 1)	(Note 2)		(Note 3)
Sino Energy International Holdings	30 November 2018	2	8	35.91
Group Limited (1096)
China Oceanwide Holdings Limited (715)	12 December 2018	5	6	86.84
		(Note 4)
Shougang Concord Century Holdings Limited (103)	18 December 2018	3	4	83.33
		(Note 5)
Hospital Corporation of China Limited (3869)	21 December 2018	5	Information not available	13.64
Kaisa Group Holdings Ltd. (1638)	30 December 2018	2.5	10.5	128.31
		(Note 6)
China Ruifeng Renewable Energy	31 December 2018	2	8	(13.39)
Holdings Limited (527)		(Note_7)_
China YuHua Education Corporation Limited (6169)	10 January 2019	1	3	7.96
		(Note 8)
TUS International Limited (872)	11 January 2019	6	Nil	(14.31)
Lenovo Group Limited (992)	15 January 2019	5	3.375	39.93
	Maximum	6	10.5	128.31
	Minimum	1	Nil	(14.31)
	Average	3.35	5.65	37.84
The Proposed Amendments	17 January 2019	0.5	8	52.12
		(Note 9)		(Note 10)

– 23 –

LETTER FROM GRAM CAPITAL

Notes:

1. With reference to the announcement of the company dated 1 February 2019, the company entered into a supplemental agreement to amend and supplement certain terms of the original agreement which include, among others, the initial conversion price mechanism.

2. Can be extended by one year with the written consent of the bondholder

3. Calculated based on the minimum initial conversion price of HK$0.13 per share (the initial conversion price is the higher of (i) the average closing price per share for the 20 consecutive trading days immediately before and excluding the date of special general meeting approving the transaction and (ii) HK$0.13) and the closing price of shares on the date of the supplemental agreement

4. Approximately 5 years

5. Can be extended by one year twice subject to the bondholder’s sole discretion

6. Approximately 2.5 years

7. Can be extended by one year upon mutual agreement by the bondholder and issuer

8. Approximately 1 year

9. 0.5 year from the date of the Third Amendment Agreement. With prior written consent from the Bondholder, the maturity date will be further extended by 6 months.

10. Premium of the Adjusted Conversion Price to the closing price of Shares on the date of the Third Amendment Agreement

We noted from the above table that the conversion prices of the CB Comparables ranged from a discount of approximately 14.31% to a premium of approximately 128.31% to/ over the respective closing prices of their shares on the date of agreement in relation to the respective subscription/ placing of convertible bonds/ notes (the “ Discount/Premium Market Range ”). The Adjusted Conversion Price, which represents a premium of approximately 52.12% to the closing price of the Shares on the date of Third Amendment Agreement (the “ Agreement Date Premium ”), falls within the Discount/ Premium Market Range. Despite that the Discount/ Premium Market Range is relatively wide, having also considered that the Agreement Date Premium is not deviated from the average conversion price premium/discount of the CB Comparables, we are of the opinion that the Adjusted Conversion Price is in line with the recent market practice.

Having taken into account, in particular, that (i) the Adjusted Conversion Price falls within the range of the lowest and highest closing prices of the Shares as quoted on the Stock Exchange during the Review Period; and (ii) the Adjusted Conversion Price is in line with the recent market practice, we consider the Adjusted Conversion Price, which remained at HK$0.359 under the Third Amendment Agreement, to be justifiable.

– 24 –

LETTER FROM GRAM CAPITAL

Analysis on the interest rate

As shown in the table above, the CB Comparables have an annual interest rate of nil to 10.5% (the “ Interest Market Range ”). Pursuant to the Third Amendment Agreement, the interest rate born by the Convertible Bonds remained at 8% per annum (the “ Adjusted Interest Rate ”). The Adjusted Interest Rate is within the Interest Market Range. Accordingly, we consider the Adjusted Interest Rate to be justifiable.

For further details and terms of the Proposed Amendments, please refer to the section headed “The Third Amendment Agreement” of the Board Letter.

Taking into account the principal terms of the Third Amendment Agreement as highlighted above, we are of the view that the terms of the Third Amendment Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

3. Possible dilution effect on the shareholding interests of the public Shareholders

With reference to the shareholding table in the section headed “Changes in shareholding structure” of the Board Letter, the shareholding interests of the existing public Shareholders would be diluted by approximately 4.52 percentage point (the “ Dilution ”) immediately after all allotment and issuance of the Conversion Shares in full upon exercise of the conversion rights under the Convertible Bonds. Taking into account (i) the aforementioned reasons for the Proposed Amendments; and (ii) the terms of the Third Amendment Agreement being fair and reasonable, we are of the view that the Dilution is justifiable.

RECOMMENDATION

Having taken into consideration of the factors and reasons as stated above, we are of the opinion that (i) the terms of the Proposed Amendments are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) although the Proposed Amendments are not in the ordinary and usual course of business of the Group, they are in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution(s) to be proposed at the EGM to approve the Proposed Amendments and we recommend the Independent Shareholders to vote in favour of the resolution(s) in this regard.

Yours faithfully, For and on behalf of

Gram Capital Limited Graham Lam Managing Director

– 25 –

GENERAL INFORMATION

APPENDIX

1. 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.

2. DISCLOSURE OF INTERESTS

(a) Directors’ and Chief Executive’s Interests and Short Positions in the Shares of the Company and its associated corporations

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive in the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which were taken or deemed to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules to be notified to the Company and the Stock Exchange, were as follows:

– 26 –

GENERAL INFORMATION

APPENDIX

Long position in the Shares and underlying Shares of the Company or any of its associates corporation

The Company/ Name of Associated Name of Directors Corporation Madam CHEUNG Kwai Lan The Company (“Madam CHEUNG”) (Note) Mr. CHAN Tung Mei The Company (“Mr. CHAN”) (Note) Madam CHEUNG Best Frontier (Note 1) Mr. CHAN Best Frontier (Note 1) Mr. YANG Qing Cai The Company	Number of Shares Held Interest in Approximate Controlled Personal Family Percentage of Corporation Interest Interest Total Interest Shareholding 675,565,856 4,656,000 3,020,000 683,241,856 19.75% — 3,020,000 680,221,856 683,241,856 19.75% — 909 1 910 — — 1 909 910 — — 475,000 — 475,000 0.01%

Note:

675,565,856 Shares are owned by Best Frontier which is owned as to 99.89% and 0.11% by Madam CHEUNG and Mr. CHAN who are spouses to each other. In addition, Madam CHEUNG and Mr. CHAN directly hold 4,656,000 Shares and 3,020,000 Shares respectively. Accordingly, Madam CHEUNG is the spouse of Mr. CHAN and so both of them are deemed to be interested in the Shares.

– 27 –

GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had or was deemed to have any interests or short positions in any Shares, debentures or underlying Shares of the Company and its associated corporations (within the meaning of Part XV of the SFO) that are required to be notified to the Company and the Stock Exchange pursuant to Division 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or which were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by the Directors, to be notified to the Company and the Stock Exchange.

(b) Substantial Shareholders’ Interests and Short Positions in the Shares, Underlying Shares and Debentures of the Company

As at the Latest Practicable Date, according to the register kept by the Company pursuant to section 336 of SFO, and so far as is known to any Directors or chief executive of the Company, the following persons (other than the Directors or chief executive of the Company) had, or was deemed or taken to have, an interest or short position in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, were as follow:

Long Positions in the Shares

			Approximate
		Number of issued	Percentage
Name of Shareholders	Capacity	Shares Held	of the Shareholding
Best Frontier &	Benefcial Owner	683,241,856	19.75%
its concert parties
(Note 1)
Integrated Asset Management	Benefcial Owner	455,633,000	13.17%
& its concert parties_(Note 2)_
Mr. TSE Siu Hoi	Benefcial Owner	308,650,000	8.92%

Notes:

1. 675,565,856 Shares are 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.

– 28 –

GENERAL INFORMATION

APPENDIX

1. 455,633,000 Shares are owned by Integrated Asset Management which is 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 was issued to Integrated Asset Management pursuant to the First Amendment Agreement dated 18 January 2017 (“ the Bonds ”). The Company received a written consent from the Integrated Asset Management, of which the maturity date of the Bonds 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 Bonds 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 20.39% of the current issued share capital of the Company and approximately 19.02% 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 20.39% of the current issued Share capital of the Company and approximately 19.02% of the enlarged issued Share capital of the Company. The adjusted Conversion Price is HK$0.359 per Conversion Share subject to adjustment.

Save as disclosed above, as at the Latest Practicable Date, the Directors or chief executive of the Company were not aware of any person (other than a Director or chief executive of the Company) who had an interest or short position in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Division 2 an 3 of Part XV of the SFO, or which recorded in the register required to be kept by the Company under section 336 of the SFO.

3. COMPETING INTERESTS

As at the Latest Practicable Date, none of Directors, the substantial shareholders nor the controlling shareholders of the Company or any of their respective close associates (as defined the GEM Listing Rules) have any interest in any business which competes or is likely to compete, directly or indirectly, with the business of the Group.

– 29 –

GENERAL INFORMATION

APPENDIX

4. DIRECTORS’ SERVICE CONTRACTS

All the Executive Directors and Non-executive Director have entered into a service contract with the Company with effect from the date of appointment and will continue thereafter unless and until terminated by either party by giving not less than six months’ notice in writing served by either party on the other. All the Independent Non-executive Directors have not entered into any service contracts with the Company but are subject to retirement by rotation and reelection in accordance with the articles of association of the Company.

As at the Latest Practicable Date, none of the Directors had entered into or proposed to enter into, a service contract with any member of the Group excluding contracts expiring or determinable by such member of the Group within one year without payment of compensation, other than statutory compensation.

5. DIRECTORS’ INTERESTS IN CONTRACT OR ARRANGEMENT

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement subsisting which was significant in relation to the business of the Group, nor has any Director had any direct or indirect interest in any assets which have been acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group since 30 June 2018, being the date to which the latest published audited financial statements of the Group were made up.

6. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors confirmed that there had not been any material adverse change in the financial or trading position or prospects of the Group since 30 June 2018, being the date to which the latest published audited financial statements of the Group were made up.

7. QUALIFICATION AND CONSENT OF EXPERT

The following is the qualification of the expert who has given opinions or advice which are contained in this circular:

Qualifications

Name Gram Capital Limited A licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO

Gram Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion therein of its letter and/or reference to its name, in the form and context in which they appear.

– 30 –

GENERAL INFORMATION

APPENDIX

As at the Latest Practicable Date, Gram Capital was not beneficially interested in the share capital of any member of the Group nor had any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group, nor did it have any interest, directly or indirectly, in any asset which had been, since 30 June 2018, being the date to which the latest published audited financial statements of the Group were made up, acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection at the office of the Company at Units 307-313, 3/F, Phase One Hong Kong Science Park, Wireless Centre, Pak Shek Kok, New Territories, Hong Kong, during 10:00 a.m. to 4:00 p.m. on any Business Day from the date of this circular up to and including the date of the EGM:

• (a) Subscription Agreement.

• (b) First Amendment Agreement;

• (c) Second Amendment Agreement;

• (d) Third Amendment Agreement;

• (e) the written consent of the expert referred to in the paragraph headed “Qualification and Consent of Expert” in this Appendix;

• (f) the letter from the Independent Board Committee, the text of which is set out on pages 13 to 14 in this circular;

• (g) the letter of advice from Gram Capital to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 15 to 25 in this circular; and

• (h) this circular.

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NOTICE OF EGM

眾彩羽翔股份有限公司 China Vanguard You Champion Holdings Limited

( Formerly known as China Vanguard Group Limited )

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ EGM ”) of the China Vanguard Group Limited (the “ Company ”) will be held at Units 307-313, 3/F, Wireless Centre, Phase One Hong Kong Science Park, Pak Shek Kok, New Territories, Hong Kong on Tuesday, 19 March 2019 at 2:30 p.m., for the purpose of considering and, if thought fit, passing the following resolution:

ORDINARY RESOLUTION

“ THAT ”

• (a) the third amendment agreement dated 17 January 2019 (the “ Third Amendment Agreement ”) entered into between the Company and a holder of the convertible bonds issued by, in relation to the proposed amendment of the term and condition of the 8% coupon convertible bonds due 17 January 2019 in the aggregate amount of HK$89,625,000 (the “ Convertible Bonds ”) (details relating to the Third Amendment Agreement are set out in the circular of the Company dated 1 March 2019, and a copy of the Third Amendment Agreement has been produced to the EGM and marked “A” and initialed by the chairman of the EGM for the purpose of identification), be and are hereby approved, confirmed and ratified;

• (b) subject to The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) consenting to the alteration to the terms and conditions of the Convertible Bonds and the Stock Exchange granting approval for the listing of, and permission to deal in, the shares of the Company that may be issued pursuant to the alteration to the terms and conditions of the Convertible Bonds (the “ Conversion Shares ” and each a “ Conversion Share ”), the directors of the Company (the “ Directors ”) be and are hereby granted a specific mandate (the “ Specific Mandate ”) to allot, issue and otherwise deal with the Conversion Shares which may be allotted and issued by the Company upon the exercise of the conversion right attaching to the Convertible Bonds in the principal amount of HK$89,625,000 at the adjusted conversion price of HK$0.359 per Conversion Share in accordance with the terms and conditions of the Convertible Bonds under the Third Amendment Agreement, provided that the Specific Mandate shall be in addition to and shall not prejudice nor revoke the existing general mandate granted to the Directors by the shareholders of the Company in the annual general meeting of the Company held on 20 November 2018, and to do all such things and acts and execute all such documents in connection with the issue and allotment of the Conversion Shares; and

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NOTICE OF EGM

• (c) any one Director be and is hereby authorised to do all such further acts and things and to sign and execute all such other or further documents and to take all such steps which, in the opinion of such Director, may be necessary, appropriate, desirable or expedient to implement and/or give effect to the terms of, or the transactions contemplated by, the Third Amendment Agreement and to agree to such variation, amendments or waiver of matters relating thereto as are, in the opinion of such Director, in the interests of the Company.”

By order of the Board CHINA VANGUARD YOU CHAMPION HOLDINGS LIMITED 眾彩羽翔股份有限公司 CHAN Ting Executive Director and Chief Executive Officer

Hong Kong, 1 March 2019

Registered Office: Head office and principal place of P.O. Box 10008, business in Hong Kong: Willow House, Units 307-313, 3/F, Wireless Centre Cricket Square, Phase One Hong Kong Science Park Grand Cayman KY1-1001, Pak Shek Kok, New Territories Cayman Islands Hong Kong

Notes:

1. A shareholder of the Company entitled to attend and vote at the EGM (or at any adjournment thereof) is entitled to appoint another person as his/her/its proxy to attend and vote in his/her/its stead in accordance with the articles of association of the Company. A proxy need not be a shareholder of the Company. A form of proxy for use at the EGM is enclosed.

2. In order to be valid, this form of proxy together with the 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 Hong Kong branch share registrar and transfer office of the Company, Tricor Standard Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return a form of proxy will not preclude a shareholder of the Company from attending in person and voting at the EGM or any adjournment thereof, should he/she/it so wish and in such event, the proxy shall be deemed to be revoked.

3. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the vote(s) of other joint holder(s), and for this purpose, seniority will be determined by the order in which the names stand in the register of members of the Company in respect of such shares.

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