China Traditional Chinese Medicine : VOLUNTARY ANNOUNCEMENT INVESTMENT IN LONGZHONG PHARMACEUTICAL BY WAY OF EQUITY TRANSFER

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CHINA TRADITIONAL CHINESE MEDICINE HOLDINGS CO. LIMITED

中國中藥 控股 有 限公 司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 570)

VOLUNTARY ANNOUNCEMENT

INVESTMENT IN LONGZHONG PHARMACEUTICAL BY WAY OF EQUITY

TRANSFER

This announcement is made by China Traditional Chinese Medicine Holdings Co. Limited (the "Company", together with its subsidiaries, the "Group") on a voluntary basis to keep its shareholders and potential investors informed of the latest business development of the Group.

The Company, through Guangdong Yifang Pharmaceutical Co., Ltd. ("Guangdong Yifang"), a 87.3%-owned subsidiary of the Company, entered into an investment agreements with the Gansu Provincial Hospital of TCM, the shareholder of Longzhong Pharmaceutical Co., Ltd. ("Longzhong Pharmaceutical") on 30 December 2019, pursuant to which Guangdong Yifang agreed to acquire 51% equity interest of Longzhong Pharmaceutical held by Gansu Provicial Hospital of TCM for RMB

138.71 million. After completion of the equity transfer, Guangdong Yifang will hold 51% equity interest in Longzhong Pharmaceutical, while Gansu Provincial Hospital of TCM and Gansu Pharmaceutical Investment Group Co., Ltd ("Gansu Pharmaceutical Investment") will hold 35% and 14% equity interest respectively.

Gansu province is a major Chinese medicinal herbs production and distribution center in China, a national comprehensive trial area for the development of traditional Chinese medicine ("TCM") industry, and one of the popular areas of TCM company investment. There are supporting policy and good market environment in the development of TCM industry. Longzhong Pharmaceutical is established by the Gansu Provincial Hospital of TCM, in order to realize the corporatization and market-oriented operation for its formula preparation center. It is mainly engaged in the manufacture of the hospital-made

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formula and the processing of decoction pieces. Acquiring Longzhong Pharmaceutical is able to achieve the corporation between the Company and the hospital. On one hand, this investment can help the Group enter into the market of hospital-made formula manufacture. On the other hand, it is beneficial to further strengthen the competitiveness of the Group on concentrated TCM granules, TCM finished drugs, and TCM decoction pieces business, so as to achieve the full TCM supply chain lay out of the Group in Gansu province.

By order of the Board

China Traditional Chinese Medicine Holdings Co. Limited

WU Xian

Chairman

Hong Kong, 31 December 2019

As at the date of this announcement, the Board comprises twelve Directors, of which Mr. WU Xian, Mr. WANG Xiaochun and Mr. YANG Wenming are executive Directors; Mr. YANG Shanhua, Ms. LI Ru, Mr. YANG Binghua, Mr. WANG Kan and Mr. KUI Kaipin are non-executive Directors; and Mr. XIE Rong, Mr. YU Tze Shan Hailson, Mr. QIN Ling and Mr. LI Weidong are independent non- executive Directors.

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