Citychamp Watch & Jewellery : (1) VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION; (2) SPECIAL DIVIDEND; AND (3) NOTICE OF EXTRAORDINARY GENERAL MEETING

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 or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Citychamp Watch & Jewellery Group Limited, you should at once hand this circular together with the accompanying form of proxy to the purchaser or the transferee, or to the bank, the licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or 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.

CITYCHAMP WATCH & JEWELLERY GROUP LIMITED ڿ۬ᙒ፶मᘒණྠϞࠢʮ̡

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 256)

(1) VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION;

(2) SPECIAL DIVIDEND; AND

(3) NOTICE OF EXTRAORDINARY GENERAL MEETING

Financial adviser to Citychamp Watch & Jewellery Group Limited

Independent financial adviser to the Independent Board Committee and the Independent Shareholders

Terms used in this cover page have the same meanings as defined in this circular.

A letter from the Board is set out on pages 8 to 37 of this circular and a letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on page 38 of this circular. A letter from Merdeka Corporate Finance Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 39 to 80 of this circular.

A notice convening the EGM to be held at 11:00 a.m. on Thursday, 25 March 2021 at Studio 1, 7/F, W Hong Kong, 1 Austin Road West, Kowloon, Hong Kong is set out on pages EGM-1 to EGM-3 of this circular. A form of proxy for use at the EGM or any adjournment thereof (as the case may be) is enclosed with this circular. Whether or not you intend to attend such meeting, please complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, Tricor Secretaries Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding such meeting. 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 (as the case may be) if you so wish.

25 February 2021

CONTENTS
Page
Definitions ...........................................................	1
Letter from the Board ..................................................	8
Letter from the Independent Board Committee ..............................	38
Letter from Merdeka Corporate Finance Limited ...........................	39

Appendix V

Notice of EGM ........................................................

Appendix	I	-	I-1
Appendix	IIA	-	IIA-1
Appendix	IIB	-	IIB-1
Appendix	IIC	-	Financial information of Jia Cheng ....................	IIC-1
Appendix	IID	-	Financial information of Joyful Surplus ................	IID-1
Appendix	IIE	-	Financial information of Sharptech ....................	IIE-1
Appendix	IIF	-	Financial information of Sure Best ....................	IIF-1
Appendix	IIG	-	Financial information of Unique Leader ................	IIG-1
Appendix	III	-	Unaudited pro forma financial information of
the Remaining Group ..............................	III-1
Appendix	IV	-	Management discussion and analysis of
the Remaining Group .............................	IV-1
-	General information .................................	V-1
EGM-1

Financial information of the Group ....................

Financial information of EB Brand ....................

Financial information of International Volant

...........

-i-

DEFINITIONS

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

"Accounting Date"

30 June 2020

"Accounts"

the consolidated accounts of the Company which contains the pro forma accounts of the Remaining Group and the Disposal Group as at the Accounting Date

"Announcement"

"Associates"

the announcement of the Company dated 16 December 2020 in relation to the Disposal and the Special Dividend has the meaning ascribed thereto under the Listing Rules, as amended from time to time

"Bendura Bank"

Bendura Bank AG, a fully-licensed bank headquartered in the principality of Liechtenstein

"Board"

the board of Directors

"Business"

the watches and other businesses currently conducted by each of International Volant Group, EBOHR Group, Jia Cheng Group, Joyful Surplus Group, Sharptech, Unique Leader and Sure Best

"Business Day(s)"

means a day (excluding Saturday, Sunday, Hong Kong public holidays and any day on which a tropical cyclone warning no. 8 or above is hoisted or remains hoisted between 9:00a.m. and 12:00 noon and is not lowered at or before 12:00 noon or on which a "black" rainstorm warning is hoisted or remains in effect between 9:00 a.m. and 12:00 noon) on which licensed banks in Hong Kong are generally open for business and a trading day on the Stock Exchange

"CHF"

Swiss Franc, the lawful currency of Switzerland and Liechtenstein

"Company"

Citychamp Watch & Jewellery Group Limited, a limited liability company incorporated in the Cayman Islands, the issued Shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 0256)

DEFINITIONS
"Completion"	completion of the sale and purchase of the Sale Shares
and the Sale Loans in accordance with the terms of the
Sale and Purchase Agreement
"Completion Accounts"	the consolidated accounts of the Company which contains
the pro forma accounts of the Remaining Group and the
Disposal Group as at the Cut-off Date
"Completion Date"	3 Business Days after the fulfilment of conditions
precedent in accordance with the Sale and Purchase
Agreement (or any other dates to be agreed among the
Parties in writing, but not later than the Long Stop Date)
"Condition(s)"	the condition(s) precedent for Completion
"Conditions Fulfilment Date"	28 February 2021 (or such other date as the Company and
the Purchaser agree in writing)
"Connected person(s)"	has the meaning ascribed to it under the Listing Rules
"Consideration"	the consideration payable to the Company comprising
Consideration for the Sale Shares and Consideration for
the Sale Loans, plus Interest
"COVID-19"	Novel coronavirus (COVID-19)
"Cut-off Date"	last day of the month prior to the Completion Date
"Director(s)"	the director(s) of the Company
"Disposal"	the disposal of the Sale Shares and the Sale Loans
pursuant to the terms and conditions of the Sale and
Purchase Agreement
"Disposal Group"	collectively, International Volant Group, EBOHR Group,
Jia Cheng Group, Joyful Surplus Group, Sharptech,
Unique Leader and Sure Best
"EB Brand"	EB Brand Limited, a company incorporated in Hong Kong
with limited liability and a direct wholly-owned
subsidiary of the Company as at the date of this circular
and immediately prior to Completion
"EB Brand Sale Loan"	all obligations, liabilities and debts owing or incurred by
EB Brand to the Company from time to time
-2-

DEFINITIONS

"EB Brand Sale Shares"

100 ordinary shares in the issued share capital of EB Brand

"EGM"

the extraordinary general meeting to be convened and held by the Company to consider and, if thought fit, approve the Sale and Purchase Agreement and the Disposal contemplated thereunder

"Encumbrances"

any mortgage, charge, pledge, lien (otherwise than arising by statute or operation of law), hypothecation or other encumbrance, priority or security interest, deferred purchase, title retention, leasing, sale-and-repurchase or sale-and-leaseback arrangement whatsoever over or in any property, assets or rights of whatsoever nature and includes any agreement for any of the same

"Euro"

the lawful currency of the European Union

"GBP"

British Pound Sterling, the lawful currency of the United Kingdom of Great Britain and Northern Ireland

"Group"

the Company and its subsidiaries

"Independent Board Committee"

"HK$"

"Hong Kong"

"Hong Kong Financial Reporting

Standards"

Hong Kong dollars, the lawful currency of Hong Kong the Hong Kong Special Administrative Region of the PRC the Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants a board committee which shall consist only of independent non-executive Directors, namely Dr. Kwong Chun Wai, Michael, Mr. Zhang Bin, Mr. Kam, Eddie Shing Cheuk and Mr. Li Ziqing

"Independent Shareholders"

any shareholder of the Company that is not required to abstain from voting at a general meeting to approve a connected transaction in accordance with the Listing Rules

"Independent Third Party(ies)"

third party(ies) independent of the Company and its connected persons

DEFINITIONS

"Interest"

Interest payable by the Purchaser to the Company for each of the Second Payment, Third Payment and Fourth Payment at 6% p.a. and for the purpose of each of the Payments, the Interest payable for each Payment shall be Interest x 365/elapsed days

"International Volant"

International Volant Limited, a company incorporated in Hong Kong with limited liability and a direct wholly-owned subsidiary of the Company as at the date of this circular and immediately prior to Completion

"International Volant Sale Loan"

"International Volant Sale Shares"

all obligations, liabilities and debts owing or incurred by International Volant to the Company from time to time 10,000 ordinary shares in the issued share capital of International Volant

"Jia Cheng"

Jia Cheng Investment Limited, a company incorporated in British Virgin Islands with limited liability and a direct wholly-owned subsidiary of the Company as at the date of this circular and immediately prior to Completion

"Jia Cheng Sale Loan"

all obligations, liabilities and debts owing or incurred by Jia Cheng to the Company from time to time

"Jia Cheng Sale Shares"

1 ordinary share in the issued share capital of Jia Cheng

"Joyful Surplus"

"Joyful Surplus Sale Loan"

Joyful Surplus International Limited, a company incorporated in Hong Kong with limited liability and a direct wholly-owned subsidiary of the Company as at the date of this circular and immediately prior to Completion all obligations, liabilities and debts owing or incurred by Joyful Surplus to the Company from time to time

"Joyful Surplus Sale Shares"

10,000 ordinary shares in the issued share capital of Joyful Surplus

"Latest Practicable Date"

18 February 2021, being the latest practicable date prior to the printing of this circular for ascertaining information contained herein

"Listing Rules"

the Rules Governing the Listing of Securities on the Stock Exchange

DEFINITIONS

"Long Stop Date"

30 June 2021 (or such other date as the Purchaser and the Company may agree in writing)

"Material Adverse Change"

any change (or effect) which has a material and adverse effect on the financial position, business or property, results of operations, business prospects or assets of the Disposal Group

"Merdeka"

Merdeka Corporate Finance Limited, a corporation licensed to carry on type 6 (advising on corporate finance) regulated activity under the SFO, is the independent financial adviser appointed to advise the Independent Board Committee and Independent Shareholders in respect of the Disposal

"Metasequoia Capital"

Hong Kong Metasequoia Capital Management Limited, a company incorporated in Hong Kong with limited liability and licensed to conduct Type 4 (advisory on securities) and Type 9 (asset management) regulated activities under the SFO

"Mr. Hon"

Mr. Hon Kwok Lung, the chairman and an executive Director as well as a controlling shareholder of the Company

"PRC" or "Mainland China"

the People's Republic of China which, for the purpose of this circular, excludes Hong Kong, Macau Special Administrative Region of the People's Republic of China and Taiwan

"Purchaser"

Tycoon Idea Global Limited, a company incorporated in British Virgin Islands with limited liability

"Purchaser's Guarantor"

Sincere View International Ltd., a company incorporated in British Virgin Islands with limited liability

"Remaining Group"

the Group immediately after Completion

"RMB"

Renminbi, the lawful currency of the PRC

"Sale and Purchase Agreement"

the sale and purchase agreement dated 16 December 2020 entered into among the Company, the Purchaser and the Purchaser's Guarantor in respect of the sale and purchase of the Sale Shares and the Sale Loans

DEFINITIONS

"Sale Shares"

"SFO"

"Sale Loans"

collectively, the International Volant Sale Loan, the EB Brand Sale Loan, the Jia Cheng Sale Loan, the Joyful Surplus Sale Loan, the Sharptech Sale Loan, the Unique Leader Sale Loan and the Sure Best Sale Loan collectively, the International Volant Sale Shares, the EB Brand Sale Shares, the Jia Cheng Sale Shares, the Joyful Surplus Sale Shares, the Sharptech Sale Shares, the Unique Leader Sale Shares and the Sure Best Sale Shares the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

"Share(s)"

ordinary share(s) of HK$0.10 each in the share capital of the Company

"Shareholder(s)"

holder(s) of ordinary shares in the share capital of the Company

"Sharptech"

Sharptech International Limited, a company incorporated in Hong Kong with limited liability and a direct wholly-owned subsidiary of the Company as at the date of this circular and immediately prior to Completion

"Sharptech Sale Loan"

all obligations, liabilities and debts owing or incurred by Sharptech to the Company from time to time

"Sharptech Sale Shares"

100 ordinary shares in the issued share capital of Sharptech

"Shun Heng"

Shun Heng Finance Holding (Hong Kong) Limited, which consists of two subsidiaries, namely, Shun Heng Securities Limited which holds Type 1 (dealing in securities) licence under the SFO, and Hong Kong Metasequoia Capital Management Limited which holds Type 4 (advisory on securities) and Type 9 (asset management) licences under the SFO

"Special Dividend"

the special cash dividend intended to be declared and paid by the Company to the Shareholders subject to the approval of the Shareholders at the EGM and Completion taking place

"Stock Exchange"

The Stock Exchange of Hong Kong Limited

DEFINITIONS
"Sure Best"	Sure Best Management Limited, a company incorporated
in Hong Kong with limited liability and a direct
wholly-owned subsidiary of the Company as at the date of
this circular and immediately prior to Completion
"Sure Best Sale Loan"	all obligations, liabilities and debts owing or incurred by
Sure Best to the Company from time to time
"Sure Best Sale Shares"	1 ordinary share in the issued share capital of Sure Best
"Target Companies"	collectively, International Volant, EB Brand, Jia Cheng,
Joyful Surplus, Sharptech, Unique Leader and Sure Best
"Unique Leader"	Unique Leader Limited, a company incorporated in Hong
Kong with limited liability and a direct wholly-owned
subsidiary of the Company as at the date of this circular
and immediately prior to Completion
"Unique Leader Sale Loan"	all obligations, liabilities and debts owing or incurred by
Unique Leader to the Company from time to time
"Unique Leader Sale Shares"	1 ordinary share in the issued share capital of Unique
Leader
"US$"	United States dollars, the lawful currency of the USA
"USA"	the United States of America
"%"	per cent.
-7-

CITYCHAMP WATCH & JEWELLERY GROUP LIMITED ڿ۬ᙒ፶मᘒණྠϞࠢʮ̡

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 256)

Executive Directors:	Registered Office:
Mr. HON Kwok Lung (Chairman)	P.O. Box 309
Mr. SHANG Jianguang (Chief Executive Officer)	Ugland House
Mr. SHI Tao	Grand Cayman, KY1-1104
Mr. LAM Toi Man	Cayman Islands
Mr. BI Bo
Ms. SIT Lai Hei	Principal Office:
Mr. HON Hau Wong	Units 1902-04, Level 19
Mr. Teguh HALIM	International Commerce Centre
1 Austin Road West, Kowloon
Independent Non-Executive Directors:	Hong Kong
Dr. KWONG Chun Wai, Michael
Mr. ZHANG Bin
Mr. KAM, Eddie Shing Cheuk
Mr. LI Ziqing
25 February 2021
To Shareholders
Dear Sir or Madam,

(1) VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION;

(2) SPECIAL DIVIDEND; AND

(3) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the announcement of the Company dated 16 December 2020 in relation to the Disposal and the Special Dividend. The Company announced that after trading hours of the Stock Exchange on 16 December 2020, the Company, the Purchaser and the Purchaser's Guarantor entered into the Sale and Purchase Agreement, pursuant to which the Company has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire, the Sale Shares and the Sale Loans of the Target Companies at consideration comprising (i) theconsideration for the Sale Shares of HK$1.5 billion; and (ii) the consideration for the Sale Loans of HK$2.03 billion (being the face value of the Sale Loans as at 30 June 2020), to be paid by the Purchaser (or its nominee(s)) to the Company (or its nominee(s)), subject to adjustment at Completion. The gross proceeds to be received by the Company from the Disposal shall be HK$3.53 billion, which will be settled in four ways by the Purchaser by (i) a cashier order issued by a licensed bank in Hong Kong, (ii) a banker's draft drawn against a licensed bank in Hong Kong, (iii) by telegraphic transfer to the designated bank accounts of the Company (or its nominee(s)) or as the Company may direct in writing, or (iv) by such other method as the Purchaser and the Company agree in writing. Subject to approval of the Shareholders of the necessary resolution(s) at the EGM and Completion having taken place, the Board proposes the payment of the Special Dividend to the Shareholders whose names appear on the register of members of the Company on a record date to be determined.

As the highest applicable percentage ratio under the Listing Rules in respect of the Disposal exceeds 75%, if materialized, the Disposal will constitute a very substantial disposal of the Company pursuant to Chapter 14 of the Listing Rules. As such, the transactions contemplated under the Disposal are subject to the reporting, announcement, circular and Shareholders' approval requirements under Chapter 14 of the Listing Rules. Also, as at the date of this circular, the Purchaser is indirectly owned by Mr. Hon and Ms. Lam Suk Ying, spouse of Mr. Hon, as to 80% and 20%, respectively. As Mr. Hon is the chairman of the Board and the controlling shareholder of the Company, the Purchaser is an Associate of Mr. Hon and thus a connected person of the Company. Accordingly, the Disposal also constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules and is subject to reporting, announcement, circular and Independent Shareholders' approval at the EGM.

The Independent Board Committee comprising all the independent non-executive Directors has been established to give advice and recommendation to the Independent Shareholders on the terms of the Sale and Purchase Agreement as well as on voting at the EGM regarding the Disposal. Merdeka has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

The purpose of this circular is to provide you with, among other things, (i) details of the Sale and Purchase Agreement and the Special Dividend; (ii) financial information of the Disposal Group; (iii) unaudited pro forma financial information of the Remaining Group; (iv) recommendation of the Independent Board Committee to the Independent Shareholders; (v) the letter of advice from Merdeka to the Independent Board Committee and the Independent Shareholders; and (vi) the notice of EGM, at which ordinary resolutions will be proposed to consider and, if thought fit, approve the Sale and Purchase Agreement and the transactions contemplated under the Disposal, and the Special Dividend respectively.

THE SALE AND PURCHASE AGREEMENT

Date

16 December 2020 (after trading hours)

Parties

Vendor:	the Company
Purchaser:	Tycoon Idea Global Limited, a company incorporated in British
Virgin Islands with limited liability
Purchaser's Guarantor:	Sincere View International Ltd., a company incorporated in British
Virgin Islands with limited liability
Assets to be disposed of

Subject to the terms and conditions of the Sale and Purchase Agreement, the Company, as the legal and beneficial owner, has conditionally agreed to sell the Sale Shares and the Sale Loans, and the Purchaser has conditionally agreed to purchase the Sale Shares and the Sale Loans, free from all Encumbrances and together with all rights and entitlements which the Company has in the Sale Shares and the Sale Loans with effect from the Completion Date.

The Sale Shares represent all the issued shares of each of International Volant, EB Brand, Jia Cheng, Joyful Surplus, Sharptech, Unique Leader and Sure Best. The Sale Loans represent the entire sum owing by the Disposal Group to the Company as at the Completion Date. As at the date of the Sale and Purchase Agreement, the amount of the Sale Loans is HK$2.03 billion. The Sale Loans are principally general working capital loans provided by the Company for operation of business of the Disposal Group.

Details of International Volant, EB Brand, Jia Cheng, Joyful Surplus, Sharptech, Unique Leader and Sure Best are set out in the section headed "Information on the Disposal Group" in "Letter from the Board" in this circular.

Consideration

The Consideration comprises (i) the consideration for the Sale Shares of HK$1.5 billion; and (ii) the consideration for the Sale Loans of HK$2.03 billion (being the face value of the Sale Loans as at 30 June 2020), to be paid by the Purchaser (or its nominee(s)) to the Company (or its nominee(s)), subject to adjustment at Completion. The gross proceeds to be received by the Company from the Disposal shall be HK$3.53 billion and shall be settled by the Purchaser in the following stages:

(a) the consideration for the Sale Shares being HK$1.5 billion shall be settled by way of cash at Completion;

(b) the consideration for the Sale Loans of HK$2.03 billion shall be settled in the following manner:

• (i) HK$400.0 million shall be offset by the Special Dividend at Completion ("First Payment");

• (ii) minimum of HK$0.2 billion and maximum of HK$1.6 billion, plus Interest within one year from the Completion Date ("Second Payment");

• (iii) minimum of HK$0.2 billion and maximum of HK$1.4 billion, plus Interest within the second year from the Completion Date ("Third Payment"); and

(iv) the remaining balance of up to HK$1.23 billion, plus Interest within the third year from the Completion Date ("Fourth Payment") (collectively, the "Payments") (note 1).

Note 1:

After the amendment of the financial figures of the consideration for the Sale Loans in the circular, there is now a discrepancy between the Announcement and the circular on the payment of the consideration for the Sale Loans. To clarify, the Fourth Payment should be the remaining balance up to HK$1.23 billion, in place of HK$1.4 billion as disclosed in the Announcement. Shareholders of the Company are reminded to refer to this circular for clarification.

The settlement of the consideration for the Sale Loans in four payments was arrived at after arm's length negotiations between the Company and the Purchaser on normal commercial terms. Given that the Company has yet to identify specific potential acquisition targets and taking into account the prevailing low and fluctuating market interest rates, the Company considers that the settlement of the consideration for the Sale Loans in four payments will yield stable interest and financial return to the benefit of and is in the best interests of the Company and the Shareholders as a whole. In addition, as the Company considers that the consideration for the Sale Shares is sufficient for current operations of the Remaining Group, the Company is of the view that the settlement of the consideration for the Sale Loans in four payments will be able to facilitate the use of proceeds from the Sale Loans over the next three years more effectively.

The Company has conducted an internal risk assessment on the Sale Loans arrangement. To the best knowledge, information, and belief of the Directors, having made all reasonable enquiries, both the Purchaser and the Purchaser's Guarantor have sufficient assets to repay the Sale Loans.

The Payments shall be settled in Hong Kong dollars by (i) a cashier order issued by a licensed bank in Hong Kong in favour of the Company, (ii) a banker's draft drawn against a licensed bank in Hong Kong, (iii) telegraphic transfer to the designated bank accounts of the Company (or its nominee(s)) (or as the Company may direct in writing), or (iv) such other method as the Purchaser and the Company agree in writing.

Adjustment of the Consideration

If the difference of either net asset value of the Disposal Group and each of the members of Remaining Group or Sale Loans of Disposal Group and Remaining Group as shown in the Accounts and Completion Accounts does not exceed 20.0%, no adjustment of the Consideration shall be made.

If the difference between either net asset value of the Disposal Group and Remaining Group or Sale Loans of Disposal Group and each of the members of Remaining Group as shown in the Accounts and Completion Accounts exceeds 20.0%, then the First Payment shall be adjusted based on the amount exceeding 20.0% to be settled by way of cash at Completion.

The threshold of 20.0% was arrived at after arm's length negotiations and was a commercial decision between the Company and the Purchaser. The reasons for setting the threshold at 20.0% are to give greater certainty on the amount of Consideration and to contain the risk of potential loss on the Disposal. The Directors believe that the said threshold is fair and reasonable and is in the interests of the Company and Shareholders as a whole.

Conditions precedent

Completion shall be subject to and conditional upon the following conditions:

• (1) the Company has obtained the Independent Shareholders' approval in relation to the Sale and Purchase Agreement and the Disposal contemplated thereunder in accordance with the requirements of the Listing Rules;

• (2) all necessary consents, authorisations, licenses and approvals for or in connection with the operation of the Business having been obtained, granted and not withdrawn or revoked by third parties (including without limitation, government bodies, stock exchange and other relevant authorities having jurisdiction over the transactions contemplated under the Disposal);

• (3) no Material Adverse Change has occurred before or on the Completion Date;

• (4) the Purchaser has been reasonably satisfied with the results of the legal, business, and financial due diligence reviews of the Disposal Group and each of its major business lines in respect of all material or substantive aspects;

• (5) no notice, order, judgment, action or legal proceedings by any court, arbitrator, governmental authority, statutory or regulatory authority restricting, prohibiting or criminalising any transaction under the Sale and Purchase Agreement or reasonably likely to have a material adverse effect on the right of the Purchaser to own the legal and beneficial title to the Sale Shares and the Sale Loans free from any Encumbrance has been received or noticed by the Company;

• (6) the Company's warranties made under the Sale and Purchase Agreement are true, accurate, and correct and not misleading and will at all times hereafter up to and including the Completion Date, remain to be true, accurate and correct and not misleading in all material respects; and

(7) the Purchaser's warranties made under the Sale and Purchase Agreement are true, accurate, and correct and not misleading and will at all times hereafter up to and including the Completion Date, remain to be true, accurate and correct and not misleading in all material respects.

If any of the Conditions (which has not previously been waived by the Purchaser, other than condition (1) in the section headed "Conditions precedent" in this letter) has not been duly fulfilled to the satisfaction of the Purchaser on or before the Conditions Fulfilment Date (or any other date as agreed by the parties in writing), the Purchaser may by notice to the Company (in the event that the Company is unable or unwilling to comply with its obligations under the Sale and Purchase Agreement) or the Company may by notice to the Purchaser (in the event that the Purchaser is unable or unwilling to comply with its obligations under the Sale and Purchase Agreement):

• (a) waive the Conditions which have not been satisfied (other than condition (1) in the section headed "Conditions precedent" in this letter);

• (b) postpone the Completion Date to a date (being a Business Day) falling not more than 10 Business Days after the date set for Completion and if the Purchaser elects to postpone the Completion Date, then the provisions of the Sale and Purchase Agreement shall apply as if the date set for Completion were the date to which the Completion Date is so postponed; or

• (c) require the non-satisfaction of such Conditions or such part thereof to be rectified within 10 Business Days from the Company's receipt of the Purchaser's notice, failing which the Sale and Purchase Agreement shall be terminated by written notice of the Purchaser.

The Parties may mutually agree in writing to terminate the Sale and Purchase Agreement then all rights and obligations of the parties shall cease immediately upon termination according to terms and conditions of the Sale and Purchase Agreement.

Completion

Completion shall take place on the Completion Date when the parties shall exchange the respective documents and the business shall be transacted according to the terms and conditions of the Sale and Purchase Agreement.

As at the date of this circular, each member of the Disposal Group is directly wholly-owned by the Company. Upon Completion, the Company will cease to have any interest in the Disposal Group and the financial information of Disposal Group will no longer be consolidated into the Group's consolidated financial statements.

Completion shall take place as soon as practicable but in any event not later than the Long Stop Date.

SIMPLIFIED GROUP STRUCTURE BEFORE AND AFTER THE DISPOSAL

Set out below is the simplified group structure before and after the Disposal for Shareholders' reference.

Before Disposal

CITYCHAMP WATCH & JEWELLERY GROUP

LIMITED ߐ෾䩈䥦⨐ሦ䳶ൈᴹ䲀ޜਨ

(Stock Code: 256)

(incorporated in the Cayman Islands with limited liability)

Watches and timepieces businesses

(Eterna and Rotary)

100%

100%

84.69%

60%

100%

100%

100%

100%

100%

100%

Investment HoldingInvestment Holding

Bendura Bank AG and its subsidiaries ᇼൠ䢰㹼㛑ԭᴹ䲀ޜਨ ৺ަᆀޜਨ

Banking and financial businesses

Shun Heng Finance Holding

(Hong Kong) Limited and its subsidiaries

ؑӘ䠁㶽᧗㛑 俉⑟ ᴹ䲀ޜਨ ৺ަᆀޜਨ

Finance Business

Other minor subsidiaries of the Group

ަԆᵜ䳶ൈѻ䶎ѫ㾱ᆀޜਨ

Investment Holding

International Volant Limited and its subsidiaries

഻䳋伋䗵ᴹ䲀ޜਨ

৺ަᆀޜਨ

Investment HoldingInvestment Holding

Joyful Surplus International Limited and its subsidiaries 䮻ᗳ഻䳋ᴹ䲀ޜਨ৺ަᆀޜਨ

Watches and timepieces businesses

(Corum)

Distribution of watches and timepiecesInvestment Holding

100%

Unique Leader Limited 么䊀㹼ᴹ䲀ޜਨ

(HK)

Distribution of watches and timepiecesWatches and timepieces businesses

(Ernest Borel)

Real estate, enameled wire, banking and new energy business

Watches and timepieces businesses

(EBOHR)Manufacturing of watches and related accessories

Distribution of watches and timepieces

Zhuhai Rossini Watch Industry Limited and its subsidiaries

⨐⎧㖵㾯ቬ䥦ᾝᴹ䲀ޜਨ

৺ަᆀޜਨ

Watches and timepieces businesses

(Rossini)

After Disposal

CITYCHAMP WATCH &

JEWELLERY GROUP

LIMITED ߐ෾䩈䥦⨐ሦ䳶ൈᴹ䲀ޜਨ

(Stock Code: 256)

(incorporated in the Cayman Islands with limited liability)

Watches and timepieces businesses

Investment Holding

Real estate, enameled wire, banking and new energy business

Investment Holding

Bendura Bank AG and its subsidiaries ᇼൠ䢰㹼㛑ԭᴹ䲀ޜਨ ৺ަᆀޜਨ

Banking and financial businesses

Finance Business

Other minor subsidiaries of the Group

ަԆᵜ䳶ൈѻ䶎ѫ㾱ᆀޜਨ

Investment Holding

INFORMATION ON THE DISPOSAL GROUP

(Ernest Borel)

The Disposal Group comprises International Volant Group, EBOHR Group, Jia Cheng Group, Joyful Surplus Group, Sharptech, Unique Leader and Sure Best.

Set out below are brief description of the business of each member of the Disposal Group and summaries of certain unaudited financial information of each member of the Disposal Group for the three years ended 31 December 2017, 2018, 2019 and for nine months ended 30 September 2020 respectively:

International Volant Group

International Volant is a direct wholly-owned subsidiary of the Company and a company incorporated under the laws of Hong Kong with limited liability. As at the Latest Practicable Date, International Volant is an investment holding company. International Volant and its subsidiaries (collectively "International Volant Group") own the watch brands "Eterna" and "Rotary".

For the
period
ended 30
For the year ended 31 December	September
2017 2018 2019	2020
HK$'000 HK$'000 HK$'000	HK$'000
(unaudited) (unaudited) (unaudited)	(unaudited)

Profit/(Loss) before taxation	(257,049)	(95,657)	(41,380)	(33,371)
Profit/(Loss) after taxation	(241,298)	(95,549)	(41,530)	(33,456)
EBOHR Group

EB Brand is a direct wholly-owned subsidiary of the Company and a company incorporated under the laws of Hong Kong with limited liability. As at the Latest Practicable Date, EB Brand is an investment holding company and owns the entire issued shares in the capital of EBOHR Luxuries International Limited* (Աتၚۜ(ଉέ)Ϟࠢʮ̡) and its subsidiaries (collectively "EBOHR Group"). EBOHR Group is principally engaged in the manufacture and distribution of "EBOHR" brand watches and timepieces in the PRC.

Profit/(Loss) before taxation Profit/(Loss) after taxation

For the
period
ended 30
For the year ended 31 December	September
2017 2018 2019	2020
HK$'000 HK$'000 HK$'000	HK$'000
(unaudited) (unaudited) (unaudited)	(unaudited)
(10,249)
(7,938)

83,088 54,845

66,734 11,602

58,147 9,251

Jia Cheng Group

Jia Cheng is a direct wholly-owned subsidiary of the Company and a company incorporated in British Virgin Islands with limited liability. As at the Latest Practicable Date, Jia Cheng is an investment holding company which owns the entire issued shares in the capital of Actor Investments Limited, which owns 91% of issued shares in the capital of Zhuhai Rossini Watch Industry Limited* (मऎᖯГ̵፶ุϞࠢʮ̡) and its subsidiaries (collectively "Jia Cheng Group"). Jia Cheng Group is principally engaged in the manufacture and distribution of watches and timepieces in the PRC and owns the watch brand "Rossini".

For the
period
ended 30
For the year ended 31 December	September
2017 2018 2019	2020
HK$'000 HK$'000 HK$'000	HK$'000
(unaudited) (unaudited) (unaudited)	(unaudited)

Profit/(Loss) before taxation	353,889	345,705	218,073	42,460
Profit/(Loss) after taxation	297,525	277,818	176,056	24,643
Joyful Surplus Group

Joyful Surplus is a direct wholly-owned subsidiary of the Company and a company incorporated under the laws of Hong Kong with limited liability. As at the Latest Practicable Date, Joyful Surplus is an investment holding company. Joyful Surplus and its subsidiaries (collectively "Joyful Surplus Group") own the watch brand "Corum".

Profit/(Loss) before taxation Profit/(Loss) after taxation

For the
period
ended 30
For the year ended 31 December	September
2017 2018 2019	2020
HK$'000 HK$'000 HK$'000	HK$'000
(unaudited) (unaudited) (unaudited)	(unaudited)
(54,814)
(55,480)

(103,323) (104,661)

• (19,642) (41,794)

• (21,325) (42,648)

Sharptech

Sharptech is a direct wholly-owned subsidiary of the Company and a company incorporated under the laws of Hong Kong with limited liability. As at the Latest Practicable Date, Sharptech is principally engaged in distribution of watches and timepieces.

For the
period
ended 30
For the year ended 31 December	September
2017 2018 2019	2020
HK$'000 HK$'000 HK$'000	HK$'000
(unaudited) (unaudited) (unaudited)	(unaudited)

Profit/(Loss) before taxation	(28)	(242)	(96)	(1)
Profit/(Loss) after taxation	3	(242)	(96)	(1)
Unique Leader

Unique Leader is a direct wholly-owned subsidiary of the Company and a company incorporated under the laws of Hong Kong with limited liability. As at the Latest Practicable Date, Unique Leader is principally engaged in distribution of watches and timepieces.

Profit/(Loss) before taxation Profit/(Loss) after taxation

For the
period
ended 30
For the year ended 31 December	September
2017 2018 2019	2020
HK$'000 HK$'000 HK$'000	HK$'000
(unaudited) (unaudited) (unaudited)	(unaudited)
(970)
(970)

(25,784) (25,784)

• (1,096) (4,194)

• (1,096) (4,194)

Sure Best

Sure Best is a direct wholly-owned subsidiary of the Company and a company incorporated under the laws of Hong Kong with limited liability. As at the Latest Practicable Date, Sure Best is an investment holding company.

For the
period
ended 30
For the year ended 31 December	September
2017 2018 2019	2020
HK$'000 HK$'000 HK$'000	HK$'000
(unaudited) (unaudited) (unaudited)	(unaudited)

Profit/(Loss) before taxation	29,577	7,942	17,612	(2,274)
Profit/(Loss) after taxation	29,123	7,942	17,612	(2,274)

The Disposal Group has adversely affected the Group's results of operations for the past few years. In particular, the watch brands "Corum", "Eterna" and "Rotary" recorded a net loss after tax for the three years ended 31 December 2017, 2018 and 2019 and for the nine months ended 30 September 2020, being approximately HK$346.0 million, HK$116.9 million, HK$84.2 million and HK$88.9 million, respectively due to the negative externalities in the Asian macro environment, the delicate European political situation and the China-USA trade war, which resulted in the decrease of tourist travels. The profitability of the watch brand "EBOHR" has been decreasing due to the declining trend of sales from physical stores and that e-commerce sales did not perform well on the back of the continuous increase of online selling expenses. COVID-19 further intensified the declining trend of revenue of the watch brand "EBOHR". The profitability of the watch brand "Rossini" has been experiencing a decline in sales from physical stores and the sales were further affected by the drop in tourist arrivals since August 2019 due to the significant cut-down in the number of Hong Kong-Zhuhai-Macau tourists staying away from the continuous social disturbances in Hong Kong and COVID-19.

As at 30 September 2020, the net asset value of the Disposal Group was approximately HK$1.0 billion and the total asset value of the Disposal Group was approximately HK$4.5 billion.

Further financial information of the Disposal Group, as at 31 December 2017, 2018, 2019 and nine months ended 30 September 2020, is set out in Appendix IIA to Appendix IIG to this circular.

INFORMATION ON THE PURCHASER

Tycoon Idea Global Limited is an investment holding company incorporated in the British Virgin Islands with limited liability and wholly owned by Sincere View International Ltd.

INFORMATION ON THE PURCHASER'S GUARANTOR

Sincere View International Ltd. is an investment holding company incorporated in the British Virgin Islands with limited liability and is directly owned by Mr. Hon and Ms. Lam Suk Ying, spouse of Mr. Hon, as to 80% and 20%, respectively.

INFORMATION ON THE COMPANY AND THE REMAINING GROUP

The Company is a limited liability company incorporated in Cayman Islands. The principal activities of the Group include manufacturing and distribution of watches and timepieces, property investments, and banking and financial businesses. Upon completion of the Disposal, the Remaining Group's principal activity would be the banking and financial businesses. The Remaining Group would also indirectly hold approximately 64% equity interest in Ernest Borel Holdings Limited (Stock Code: 1856), a Hong Kong listed company which is engaged in the watches and timepieces businesses, and own properties in the PRC and Hong Kong that generate stable rental income. Set out below are summaries of certain unaudited financial information ofthe Remaining Group for the three years ended 31 December 2017, 2018, 2019 and nine months ended 30 September 2020 respectively:

Remaining

Watches and Timepieces Businesses

Property Investments

Banking and Financial Businesses

Unallocated

HK$'M

HK$'M

HK$'M

HK$'M

Total HK$'MFor the Period Ended

30 Sep 2020

Total Revenue

Net Profit/(Loss) after Tax For the Year Ended

77 (13)

5 285

-

5 34

(39)(Note1)

367 (13)

31 Dec 2019

Total Revenue

Net Profit/(Loss) after Tax For the Year Ended

142 (75)

7 457

-

8 173

(149)(Note1)

606 (43)

31 Dec 2018

Total Revenue

Net Profit/(Loss) after Tax For the Year Ended

43 (36)

8 484

-

3 165

(113)(Note1)

535 19

31 Dec 2017

Total Revenue

Net Profit/(Loss) after Tax

- -

17 382

-

1,245 138

(181)(Note1)

399 1,202

Note 1:

Unallocated amount comprises interest expenses to bank borrowings in relation to the watches and timepieces businesses during the track record period.

Banking and financial businesses

The Remaining Group's banking and financial businesses include (i) direct 84.69% equity interest in Bendura Bank, which provides a range of private banking services, in particular, in the areas of asset management and investment advice, transaction banking, and security issuance and investment funds; and (ii) direct 60% equity interest in Shun Heng. The Company intends to use the net proceeds of the Disposal to expand its banking and financial businesses of the Remaining Group, details of which are set out in the section headed "Future Plans and Intended

Use of Proceeds" below.

In September 2016, the Group completed the acquisition of 83.22% equity interest in Bendura Bank. As at the Latest Practicable Date, the Group's equity interest in Bendura Bank increases to 84.69% as a result of Bendura Bank's share repurchase and issue of shares to its employees as part of the share incentive scheme. In February 2017, the Group completed the acquisition of Shun Heng. As a result of the full year contribution from the Bendura Bank and the acquisition of Shun Heng, the banking and financial businesses recorded revenue of HK$382.0 million and net profit after tax of HK$138.0 million, compared to HK$109.0 million and HK$47.0 million, respectively, in 2016.

In 2018, the banking and financial businesses recorded an increase in revenue of HK$102.0 million to HK$484.0 million and an increase in net profit after tax of HK$27.0 million to HK$165.0 million, mainly due to the increase in contribution from Bendura Bank as a result of the interest rate hikes in the US and the resulting extra interest income from interbank deposits held in US Dollars and the increase in lending volume to clients.

In 2019, the banking and financial businesses recorded a decrease in revenue of HK$27.0 million, mainly because Bendura Bank was adversely affected by the negative interest rates in Swiss Francs and Euros, heavy regulatory pressure and the self-restraint measures imposed within the scope of Bendura Bank's de-risking strategy. However, net profit after tax recorded an increase of HK$8.0 million to HK$173.0 million, mainly due to Shun Heng reverted to profit from the previous year's loss.

For the nine months ended 30 September 2020, the banking and financial business recorded revenue of HK$285.0 million and net profit after tax of HK$34.0 million. During the period, Bendura Bank's net profit was affected by COVID-19 and a one-off impairment in total of CHF 3.07 million related to a note issued by Wirecard AG, a company listed in Frankfurt Stock Exchange which Bendura Bank originally had invested EUR 3.5 million in the note.

Watches and timepieces businesses

The Remaining Group would indirectly hold approximately 64.08% equity interest in Ernest Borel Holdings Limited (Stock Code: 1856), a Hong Kong listed company which is engaged in the watches and timepieces businesses. Ernest Borel Holdings Limited has an extensive distribution network which covers retail markets in the PRC, Hong Kong, Macau and South Asian countries.

As the Company acquired controlling equity interest in Ernest Borel Holdings Limited in September 2018, the Remaining Group did not record any revenue and net profit after tax from the watches and timepieces businesses in 2017. The Remaining Group's watches and timepieces businesses recorded revenue of HK$43.0 million and net loss after tax of HK$36.0 million in 2018, as Ernest Borel Holdings Limited's decline in revenue could not offset its operating costs.

In 2019, Ernest Borel Holdings Limited's revenue increased from HK$43.0 million to HK$142.0 million and net loss after tax increased from HK$36.0 million to HK$75.0 million, mainly due to the full year contribution from the acquisition of Ernest Borel Holdings Limited and a decrease in sales from its core market in the PRC.

For the nine months ended 30 September 2020, Ernest Borel Holdings Limited recorded revenue of HK$77.0 million and net loss after tax of HK$13.0 million, mainly because the outbreak of COVID-19 significantly reduced the consumer sentiment in Hong Kong and the PRC.

Upon completion of the Disposal, Mr. Hon will control the entire interests in the Disposal Group, which is principally engaged in the watches and timepieces businesses. The Directors are of the view that that there will be no material competition and there will be a clear business delineation between the Remaining Group and Mr. Hon for the following reasons:

(1) No material competition

• • The Disposal Group and the Remaining Group differ in brand positioning, distribution channels and product pricing. In terms of brand position, the brands of the Disposal Group include local proprietary brands, namely "EBOHR" and "Rossini", which target at the affordable entry level luxury market in the PRC; foreign proprietary brands, namely "Corum" and "Eterna", which are luxury or heritage brands; and foreign proprietary brand, namely "Rotary", which is an affordable luxury brand. Meanwhile, the Remaining Group holds a foreign proprietary heritage brand, namely "Ernest Borel";

• • In terms of distribution channels, "EBOHR" and "Rossini" brands are sold through self-operated retail networks, mostly located in shopping malls across the PRC. "Corum", "Eterna" and "Rotary" brands are sold through retailers in the overseas markets. "Ernest Borel" brand is sold through retailers mainly across the PRC. Based on management accounts in 2019, the Remaining Group's sales of watches and timepieces to the PRC amounted to approximately HK$120.0 million, compared to that of the Disposal Group of approximately HK$1.7 billion; and

• • In terms of product pricing, the average prices for "EBOHR" and "Rossini" brands range from approximately HK$1,000 to HK$4,000. The average prices for "Corum" and "Eterna" brands range from HK$20,000 to HK$500,000. The average price for "Ernest Borel" brand ranges from HK$3,000 to HK$10,000. The average price for "Rotary" brand ranges from HK$2,000 to HK$4,000.

(2) Clear business delineation

• • The Remaining Group will principally engage in the banking and financial businesses after the completion of the Disposal. There is no strong synergy between the watches and timepieces businesses and the banking and financial businesses.

Upon completion of the Disposal, except for the disclosure above, there is no competing interest between each of the Directors and his respective close associates and the Remaining Group as would be required to be disclosed under rule 8.10 of the Listing Rules as if each of them was a controlling shareholder.

Property investment business

The Remaining Group would own residential, commercial and industrial properties in the PRC and Hong Kong that generate stable rental income. For the three years ended 31 December 2017, 2018, 2019 and nine months ended 30 September 2020, the property investment business generated rental income of approximately HK$16.9 million, HK$8.3 million, HK$7.0 million and HK$4.8 million, respectively. The decrease in rental income for the year ended 31 December 2018 was in line with the reduction of investment property portfolio resulting from the disposal of Seti Timber Industry (Shenzhen) Co., Ltd. and its subsidiaries in 2017. The rental income for the year ended 31 December 2019 and nine months ended 30 September 2020 remained stable.

As at 30 September 2020, the net asset value of the Remaining Group was approximately HK$3.6 billion and the total asset value of the Remaining Group was approximately HK$14.7 billion.

Further information on the combined financial and business performance of the Remaining Group for each of the years ended 31 December 2017, 2018 and 2019 and for the nine months ended 30 September 2020 is set out in the section headed "Management discussion and analysis of the Remaining Group" in Appendix IV to this circular.

REASONS FOR AND BENEFITS OF THE DISPOSAL

The Disposal Group's profit contribution to the Group has recorded a rapid drop for the past few years for reasons set out in the section headed "Information on the Disposal Group" above. The outlook of the watches and timepieces market will remain uncertain given the various challenges such as the changing consumer consumption patterns, rising marketcompetition and increasing marketing and promotion costs to maintain brand awareness amid the intensifying market competition.

Based on the current financial position and unfavorable watches and timepieces market conditions, the Disposal Group has limited opportunities of obtaining new financing or refinancing. The Disposal Group's watches and timepieces businesses require significant working capital for its business operations. For the three financial years ended 31 December 2017, 2018 and 2019 and for nine months ended 30 September 2020, the Company had invested more than HK$397.9 million in the Disposal Group as general working capital loans to support its operation and development of its watches and timepieces businesses. The said investment has been in the past largely financed by internal resources and bank loans

As shown in the section headed "2. Statement of Indebtedness" contained in Appendix I in this circular, as at 31 December 2020, the Group had outstanding bank loans of approximately HK$1.6 billion, which were repayable within one year. The Disposal will significantly strengthen the Remaining Group's financial position as a result of: (1) the disposal of the Sale Loans of HK$2.03 billion as at the date of the Sale and Purchase Agreement, which are principally general working capital loans; and (2) approximately HK$1.2 billion of proceeds from the Disposal for the repayment of bank loans of the Remaining Group.

For Shareholders' reference only, as at the date immediately after the completion of the Disposal, the amount of cash held by the Remaining Group will be approximately HK$4.0 billion after deduction of Special Dividend, which amounts to approximately 27.4% of the estimated total assets of the Remaining Group. After repaying approximately HK$1.2 billion of bank loans, the Remaining Group will only have approximately HK$23.8 million of bank loans, compared to HK$1.3 billion as at 30 September 2020. The Remaining Group's annual bank loan interest expenses will be reduced from approximately HK$50.0 million to approximately HK$1.0 million upon Disposal. Apart from reducing the interest expenses, the Remaining Group will also receive interest income from the remaining balance of the Consideration for the Sale Loans. Accordingly, the Disposal will significantly improve the profitability of the Remaining Group.

After the completion of the Disposal, the Remaining Group's principal activity will be the banking and financial businesses. The performance of the banking and financial businesses have been fairly stable in the past few years. In particular, Bendura Bank has developed organically as shown by the improving level in assets under management and stable profitability. Given the prudent asset allocation policy adopted by Bendura Bank and the prudent investment attitude of its clients, Bendura Bank is expected to demonstrate resilience and sustainability even in the current volatile financial market situation. The cash inflow from the Disposal will enhance the Remaining Group's financial position by reducing its indebtedness and enable it to deploy more resources in the banking and financial businesses, which are critical to stay competitive locally and internationally and generate long-term growth. The Company has strong confidence in the wealth and asset management sector and will seize opportunities arising from the increasing wealth and asset management needs. The Board is of the view that the proceeds from the Disposal, together with its existing internal resources, will support the Remaining Group's development of its banking and financial businesses and generate higher returns to theShareholders. Further information on the Remaining Group's intended use of the net proceeds of the Disposal is disclosed in the section headed "Future Plans and Intended Use of Proceeds" below.

Given that there is no strong synergy between the watches and timepieces businesses and the banking and financial businesses, the Disposal will streamline the Company's business to focus on the banking and financial businesses to make it more specialized, competitive and professional to generate higher profits to the Shareholders and unveil the hidden value of the Remaining Group's banking and financial businesses. The Board is of the view that the Disposal represents a valuable opportunity for the Group to capitalize on the substantial cash inflow to strengthen its financial position and focus on the banking and financial businesses, as well as the pursuit of selective strategic and acquisition opportunities.

Based on the above, all the Directors are of the view that the terms of the Sale and Purchase Agreement are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

BASIS OF CONSIDERATION AND SETTLEMENT OF SALE LOANS

The Consideration was arrived at after arm's length negotiations between the Company and the Purchaser on normal commercial terms and making reference to (i) the net asset value of the Disposal Group of approximately HK$1.3 billion and the face value of the Sale Loans of approximately HK$2.0 billion as at 30 June 2020; (ii) potential change of net asset value of the Disposal Group from 1 July 2020 to the Completion Date; and (iii) the business prospects of the Disposal Group and other factors set out in the section headed "Reasons for and Benefits of the Disposal" above.

As set out in the section headed "Information on the Disposal Group" above, each member of the Disposal Group recorded either a loss or deterioration in profit after taxation over the period of the three financial years ended 31 December 2017, 2018 and 2019 and up to nine months ended 30 September 2020. Coupled with the uncertain outlook of the Disposal Group's watches and timepieces businesses, the Board is of the view that it is not appropriate to value the Consideration with reference to the price-earnings multiples of the market peers listed in Hong Kong.

The Disposal Group had property, plant and equipment with carrying value of approximately HK$751.6 million as at 30 September 2020, comprising land and buildings of approximately HK$486.4 million and plant and equipment of approximately HK$265.2 million. As the land and buildings are the operating property premises of the Disposal Group, they are carried at cost on the books of the Disposal Group. Based on the management's estimation with reference to comparable properties provided by independent professional valuers, the aggregate market value of these land and buildings does not differ significantly from the aforesaid carrying value. The independent professional valuers used around 3-5 comparable properties for the valuation. Based on the valuation conducted by the independent professional valuers, the aggregate market value of the land and buildings of the Disposal Group is around HK$507.0

million, which is within the range of the market value of comparable properties of around HK$480.0 million - HK$540.0 million. These properties are the operating assets of the Disposal Group and it is not practicable for the Company to realise these operating property premises while there are substantive operations. The Company currently has no plan to realise these operating property premises. Further, in the event that the Disposal is not able to proceed in accordance with its terms and conditions, the Directors do not expect that the Company could be able to realise these operating property premises in the foreseeable future while the business of the Disposal Group is still operating as a going concern.

Based on the net asset value of the Disposal Group as at 30 June 2020, the Consideration represents an implied price-to-book ratio of approximately 1.16 times, which is within the range of the price-to-book ratios of the comparable companies and higher than the median and similar to the average of the price-to-book ratios of the comparable companies. Such comparable companies include Apollo Future Mobility Group Limited (stock code: 860), Asia Commercial Holdings Limited (stock code: 104), Emperor Watch & Jewellery Limited (stock code: 887), Hanvey Group Holdings Ltd. (stock code: 8219), Hengdeli Holdings Limited (stock code: 3389), Luxxu Group Ltd. (stock code: 1327), Oriental Watch Holdings Limited (stock code: 398), Prosper One International Holdings Company Limited (stock code: 1470), Sincere Watch (Hong Kong) Limited (stock code: 444), Stelux Holdings International Limited (stock code: 84), Time Watch Investments Ltd. (stock code: 2033), Universe Entertainment & Culture Group Company Limited (stock code: 1046) and Ernest Borel Holdings Ltd. (stock code: 1856). The price-to-book ratios of the said comparable companies ranged from approximately 0.11 times to approximately 6.87 times as at the Latest Practicable Date. The Directors believe that it is not necessary to include a premium in evaluating the value of the Disposal Group, given the current financial position of the Disposal Group and the unfavourable watches and timepieces market conditions.

The settlement of the consideration for the Sale Loans in four payments was arrived at after arm's length negotiations between the Company and the Purchaser on normal commercial terms. Given that the Company has yet to identify specific potential acquisition targets and taking into account of the prevailing low and fluctuating market interest rates, the Company considers that the settlement of the consideration for the Sale Loans in four payments will yield stable interest and financial return to the benefit of and is in the best interests of the Company and the Shareholders as a whole. In addition, as the Company considers that the consideration for the Sale Shares is sufficient for current operations of the Remaining Group, the Company is of the view that the settlement of the consideration for the Sale Loans in four payments will be able to facilitate the use of proceeds from the Sale Loans over the next three years more effectively.

The Company has conducted an internal risk assessment on the Sale Loans arrangement:

(i) the Company has conducted research on whether the Purchaser and the Purchaser's

Guarantor has any equity investment in any stock exchanges and, if any, the estimated market value; and

(ii) as Mr. Hon is the ultimate beneficial owner of the Purchaser, the Company has also conducted research on the major properties and investment held by him and the estimated market value.

Based on the internal risk assessment conducted by the Company above, and to the best knowledge, information, and belief of the Directors, having made all reasonable enquiries, the Company considers that both the Purchaser and the Purchaser's Guarantor have sufficient assets to repay the Sale Loans:

• (i) the Purchaser's Guarantor directly has approximately 1.0% equity interest in Min Xin Holdings Limited (stock code: 222, listed on Stock Exchange) and approximately 31.65% equity interest in the Company which are free of pledge. As at 31 December 2020, the market value of the share interest owned by the Purchaser's Guarantor amounted to approximately HK$2.4 billion;

• (ii) Mr. Hon is the ultimate beneficial owner of the Purchaser. He has approximately 34.0% equity interest in Citychamp Dartong Company Limited (a company listed on Shanghai Stock Exchange, stock code: 600067) and has approximately 28.0% equity interest in Cordlife Group Limited (a company listed on the Singapore Stock Exchange, stock code: P8A), both of which are free of pledge. As at 31 December 2020, the market value of the share interests owned by Mr. Hon amounted to approximately HK$2.4 billion.

Based on the current financial situation of the Disposal Group, the Disposal Group will not be able to repay the Sale Loans. Therefore, the Disposal enables the transfer of the Sale Loans to the Purchaser. Although there is no pledge/ security for the settlement of the Consideration for the Sale Loans in four payments, based on the internal risk assessment on the Purchaser and the Purchaser's Guarantor conducted by the Company, it is considered that both the Purchaser and the Purchaser's Guarantor have sufficient assets to repay the Sale Loans. From time to time, the Company will assess the financial status of the Purchaser and the Purchaser's Guarantor to ensure payment of the Consideration for the Sale Loans. The status of the settlement of the Consideration for the Sale Loans will be reported in the interim report and annual report of the Company.

As Mr. Hon remains to be the ultimate controlling shareholder of the Company after the Disposal, the settlement of the Consideration for the Sale Loans in four payments aligns with the interests of the Company and the Shareholders (including Mr. Hon).

Based on the internal risk assessment conducted by the Company, the expected interest income to be generated from the settlement of the Consideration for the Sale Loans in four payments, the Company's business expansion plans and the general benefits from the Disposal, the Company considers that the credit risk in relation to the Consideration for the Sale Loans is limited, and that the settlement of Consideration for the Sale Loans in four payments is fair and reasonable and in the best interests of the Company and the Shareholders as a whole.

Based on the above, the Directors consider that the Consideration and the terms and conditions of the Sale and Purchase Agreement are fair and reasonable and are in the interest of the Company and its Shareholders as a whole.

FUTURE PLANS AND INTENDED USE OF PROCEEDS

For the banking and financial businesses, Bendura Bank will continue to rely mainly on its commission based and interest-related businesses in the years ahead. Bendura Bank intends to maintain the broad diversification of its loan portfolio. In 2019, Bendura Bank's loan commitments accounted for only 16% of its total assets. Bendura Bank's strategy will be to increase this percentage gradually over the next two financial years.

The Remaining Group intends to strengthen Bendura Bank's capital base to support the sustainable growth of its credit business and to expand its geographical coverage and product coverage, in particular, wealth and asset management products, in Hong Kong, the PRC, East Asia and Western Europe. The Remaining Group also intends to strengthen its asset management business through the establishment of strategic alliance with independent financial consultants in Hong Kong, the Mainland China, Switzerland and Liechtenstein. The Remaining Group will consider the following factors for the selection of potential independent financial consultants for forming strategic alliance: (a) the ability to add value to the existing business operations of the Remaining Group; (b) the business scale and potential; and (c) the operating history and financial track records of growth. As at the date of this circular, no potential independent financial consultants has been identified by the Company.

In addition, the Remaining Group intends to pursue selective strategic investment and acquisition opportunities related to the banking and financial businesses in Hong Kong and overseas. The Remaining Group will consider the following factors for identifying potential acquisition target(s): (a) the ability to achieve synergies with the existing business operations of the Remaining Group; (b) the business scale and potential; and (c) the operating history and financial track records of growth. The Remaining Group will also place special emphasis on whether the potential acquisition target(s) can diversify its market segments which provides substantial and sustainable growth for the Remaining Group. As at the date of this circular, no potential acquisition target(s) has been identified by the Company.

For the watches and timepieces businesses, the Remaining Group intends to expand Ernest Borel Holding Limited's product range by adding new watches designs, and broaden its marketing channels by engaging new emerging marketing platforms, such as engine search, social platforms, self-media promotion and event marketing in the coming years. The Remaining Group will continue to closely monitor and allocate its operating costs and resources in respect of sales, distribution and administrative expenses, and adopt suitable marketing tactics.

At the Latest Practicable Date, the Remaining Group has no intention to expand its property investment business, and expects the rental income to remain stable.

The net proceeds of the Disposal of approximately HK$1.9 billion (i.e. the aggregate of the consideration for the Sale Shares and the First Payment), after deducting the transaction costs, will be used by the Group in the following manner:

• (i) approximately 60.0% or HK$1.2 billion for the repayment of bank loans of the Remaining Group within one month after Completion. Details of the bank loans to be repaid are set out below:

  CreditorAs at 30 June 2020 Maturity date under current payment schedule

  Loan Balance

  As at Latest Practicable Date

  Maturity date under

  Outstanding current payment OutstandingBalance schedule HK$' million

  Balance HK$' million

  Hang Seng Bank(Note 1)

  Hang Seng Bank(Note 1)

  Hang Seng Bank(Note 1)

  Hang Seng Bank(Note 1)

  Hang Seng Bank(Note 1)

  Hang Seng Bank(Note 1) Bank of China

  • due within 1-3 months

  • due within 4-6 months

  • due within 7-9 months

  • due within 10-12 months

  • due within 1-2 years

  • due over 2 years

  • due within 10-12 months

    CITIC Bank

  • due within 1-2 years

  Nil due within 0-3 months 133.4

  81.4 due within 4-6 months 81.4

  133.4 due within 7-9 months 81.4

  81.4 due within 10-12 months 81.4

  377.6 due within 1-2 years 325.6

  244.1 due over 2 years

  Nil

  183.0 due within 0-3 months 183.0

  200.0 due within 10-12 months 170.0

  Total

  1,300.9

  Total 1,056.2

  Note 1:

  The bank loans comprise a syndicated loan granted to the Company by Hang Seng Bank Limited and a syndicate of banks pursuant to a facility agreement dated 16 July 2019. Details of which are set out in announcement of the Company dated 16 July 2019.

• (ii) not less than approximately 30.0% or HK$570.0 million for the distribution of Special Dividend to the Shareholders (representing Special Dividend of not less than HK$0.13 per Share based on the number of outstanding Shares as at the Latest Practicable Date); and

(iii) remaining balance of approximately HK$130.0 million for general working capital of the Remaining Group as shown in the table below:

HK$'M
Audit Fee	6.0
Office Rental	25.0
Directors' Remuneration	13.0
Entertainment & Travelling	12.0
Legal & Professional Fee	9.0
Staff Cost	30.0
Other Administration Expenses	3.0
Purchase of fixed assets	10.0
Other capital investments	22.0
130.0

The remaining net proceeds of the Disposal of approximately HK$1.6 billion (i.e. the aggregate of the Second Payment, Third Payment and Fourth Payment) will be used by the Group over the next three years in the following manner:

• (i) approximately HK$550.0 million to strengthen Bendura Bank's capital base to support the sustainable growth of its credit business and to expand its geographical coverage and product coverage in Hong Kong, the PRC, East Asia and Western Europe;

• (ii) approximately HK$150.0 million to strengthen its asset management business through the establishment of strategic alliance with independent financial consultants in Hong Kong, the Mainland China, Switzerland and Liechtenstein;

• (iii) approximately HK$700.0 million for the pursuit of selective strategic investment and acquisition opportunities related to the banking and financial businesses in Hong Kong and overseas; and

(iv) remaining HK$200.0 million for general working capital of the Remaining Group as shown in the table below:

HK$'M
Audit Fee	8.0
Office Rental	30.0
Directors' Remuneration	18.0
Entertainment & Travelling	17.0
Legal & Professional Fee	12.0
Staff Cost	50.0
Other Administration Expenses	15.0
Purchase of fixed assets	25.0
Other capital investments	25.0
200.0

It should be noted that the actual cash inflow to be generated from the Disposal and received by the Company will depend on the financial position of the Disposal Group as at Completion and the exchange rates between CHF, GBP, RMB and HK$ as at 30 September 2020.

Payment of the Special Dividend is subject to, among other things, approval of the necessary resolution at the EGM and Completion having been taken place (please see the section headed "Special Dividend" below). The declaration of the Special Dividend will be effective upon Completion. The principal reason for the proposed Special Dividend is to allow Shareholders to enjoy the return on the Company's disposal of the Disposal Group.

RISK FACTORS

The following are certain risks related to the Remaining Group's businesses. Investors and potential investors of the Company are reminded that these risks are inter-related and may affect the operations and performance of the Remaining Group.

Ineffective control on the quality and growth of the Remaining Group's banking and financial assets may adversely affect its business, financial condition and results of operations

The Remaining Group's financial condition and results of operations may be affected by its ability to maintain or improve the quality and growth of its banking and financial assets. The Company has adopted stringent risk management measures to limit its credit risk exposure. However, there can be no assurance that these measures are sufficient to protect the Remaining Group against deterioration of the quality of its banking and financial assets in the current volatilities of the worldwide economy. Any deterioration of the Remaining Group's asset qualitymay lead to increases in its non-performing assets, allowances for impairment losses, and assets written-off due to impairment.

Fluctuations in interest income and commission and fee income may affect the growth and performance of the Remaining Group's banking and financial businesses

In spite of increasingly strict regulatory requirements and strong competition, Bendura Bank has managed to grow its assets under management, loan portfolio and total assets. However, the Remaining Group's growth and performance in the banking and financial businesses may be affected by fluctuations in interest income, net commission and fee income and potential impairment loss on financial assets caused by fluctuations in interest rates and the global market. In particular, the reduced payment operation services and the decreased income from foreign exchange transactions for clients and treasury activities may lead to a decline in net commission and fee income and income from financial transactions, respectively.

Future acquisitions may not be successful and the Remaining Group may face difficulties in integrating acquired operations with its existing businesses

The Remaining Group intends to pursue selective strategic investment and acquisition opportunities related to the banking and financial businesses in Hong Kong and overseas in order to generate higher returns to the Shareholders. However, there can be no assurance that the Remaining Group will be able to identify suitable opportunities. Acquisitions involve uncertainties and risks, such as potential ongoing financial obligations, unforeseen or hidden liabilities and failure to achieve the intended objectives. The Remaining Group may also face difficulties in integrating acquired operations with its existing businesses due to various factors, such as the risks of operating in new markets, unfamiliarity with new regulatory regimes and differences in corporate cultures.

Challenging macro environment conditions and the economic growth downturn may adversely affect the sales or growth of the Remaining Group's watches and timepieces businesses

The Remaining Group would indirectly hold approximately 64% equity interest in Ernest Borel Holdings Limited (Stock Code: 1856), a Hong Kong listed company which is engaged in the watches and timepieces businesses. Consumer confidence is affected by, among other factors, general business conditions, stock market and real estate market conditions, as well as by current and expected future global or regional macroeconomic conditions such as employment rates, inflation and interest rates. The Remaining Group will cater to market needs, adjust business strategy timely, strengthen marketing and enhance customer service and maintenance sector to improve competitiveness effectively. At the same time, the Remaining Group will follow the global development strategy of watch brands, and actively expand overseas markets to reduce the risk of dependence on a single market.

FINANCIAL EFFECTS OF THE DISPOSAL

The Group expects to record an unaudited profit before tax as a result of the Disposal of approximately HK$16.0 million, being the difference between the Consideration and (i) the unaudited carrying value of the disposed assets attributable to Shareholders as at 30 June 2020 and (ii) the estimated transaction costs to be incurred from the Disposal, subject to adjustment as at the Completion Date. The above figures are for illustrative purpose only. The actual gain in connection with the Disposal will be determined based on the net proceeds received, the financial position of the Disposal Group at Completion and subject to the review and final audit by the auditors of the Company.

Based on the unaudited pro forma financial information of the Remaining Group as set out in Appendix III to this circular, assuming the Disposal had been completed on 30 June 2020 and the financial performance and cash flows of the Remaining Group for the year ended 31 December 2019 as if the Disposal had been completed on 1 January 2019:

• (i) the total assets of the Group as at 30 June 2020 would have been decreased by approximately HK$1.3 billion from approximately HK$18.3 billion to approximately HK$17.0 billion;

• (ii) total liabilities of the Group as at 30 June 2020 would have been decreased by approximately HK$915.0 million from approximately HK$13.9 billion to approximately HK$13.0 billion; and

• (iii) the Remaining Group's debt-to-equity ratio (total borrowings divided by Shareholders' equity) as at 30 June 2020 would have improved from approximately 43.4% to approximately 36.1%.

Further information on the unaudited pro forma financial information of the Remaining Group is set out in Appendix III in this circular.

Except for the transaction costs as illustrated above, the other expenses items included in the calculation of loss before tax as a result of the Disposal are non-cash in nature. In addition, all of these expenses will have no continuing impact on the Remaining Group's business operations. The Directors are of the view that the Remaining Group will have a healthier financial position and the Disposal will bring continuous benefits to the Shareholders despite the loss to be recorded by the Group on the Disposal.

SPECIAL DIVIDEND

The Board proposes that, subject to the fulfilment of conditions set out below, the Special Dividend of not less than HK$0.13 per Share in the capital of the Company will be paid to the Shareholders:

• (i) the passing of an ordinary resolution by the Shareholders at the EGM approving the declaration and payment of the Special Dividend;

• (ii) if applicable, the Directors being satisfied that there are no reasonable grounds for believing that immediately following payment of the Special Dividend, the Company would be unable to pay its liabilities as they fall due in the ordinary course of business in compliance with the Companies Law of the Cayman Islands; and

• (iii) Completion having taken place.

If the above conditions are fulfilled, the Special Dividend will be paid to the Shareholders whose names appear on the register of members of the Company on the record date to be announced upon Completion. The declaration of the Special Dividend will be effective upon Completion and it should take around four to six weeks after Completion for the Company to pay the Special Dividend. Details of the record date, the payment date and closure of register of members of the Company for determining the Shareholders' entitlement to the Special Dividend will be made by the Company upon Completion in accordance with Rule 13.66 of the Listing Rules.

Based on 4,351,888,206 Shares in issue as at the Latest Practicable Date, the total sum of the dividend payment will be approximately HK$570.0 million.

Warning: The payment of the Special Dividend is subject to approval of the Shareholders at the EGM and Completion taking place. Completion is conditional on a number of conditions being fulfilled. Accordingly, the Special Dividend is a possibility only and may or may not be materialised. Shareholders and investors of the Company are therefore advised to exercise caution in dealing in the securities of the Company.

LISTING RULES IMPLICATIONS

The Disposal constitutes a very substantial disposal of the Company which is subject to the reporting, announcement, circular and Shareholders' approval requirements under Chapter 14 of the Listing Rules. As at the date of this circular, the Purchaser is indirectly owned by Mr. Hon and Ms. Lam Suk Ying, spouse of Mr. Hon, as to 80.0% and 20.0% respectively. As Mr. Hon is the chairman of the Board and the controlling shareholder of the Company, the Purchaser is an associate of Mr. Hon and thus a connected person of the Company. Accordingly, the Disposal also constitutes a connected transaction of the Company and is subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

As at the Latest Practicable Date, Mr. Hon held 3,022,263,515 Shares, representing approximately 69.45% of the existing issued share capital of the Company. Mr. Hon also confirms and undertakes that (i) he will be the sole beneficial owner of these 3,022,263,515 Shares on the record date of the EGM; and (ii) the voting rights of these 3,022,263,515 Shares will not be exercised at the EGM. Mr. Hon, his associates and deemed connected persons as defined under Rule 14A.21 of the Listing Rules had abstained from voting on the Board resolution approving the Disposal. Mr. Hon, his associates and deemed connected persons as defined under Rule 14A.21 of the Listing Rules will abstain from voting in respect of resolution nos. 1 and 2 relating to the Sale and Purchase Agreement and the transactions contemplated thereunder and the proposed distribution of the Special Dividend, respectively, at the EGM. Save for Mr. Hon his associates and deemed connected persons as defined under Rule 14A.21 of the Listing Rules, to the best of the Directors' knowledge, information and belief and having made all reasonable enquiries, no other Shareholders have material interest and are required to abstain from voting at the EGM in respect of the Sale and Purchase Agreement and the transactions contemplated thereunder.

GENERAL

The Independent Board Committee comprising all the independent non-executive Directors, namely Dr. Kwong Chun Wai, Michael, Mr. Zhang Bin, Mr. Kam, Eddie Shing Cheuk and Mr. Li Ziqing, has been established by the Company to provide recommendation to the Independent Shareholders in respect of the Disposal. Merdeka has been appointed as independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

EGM

The EGM will be held at 11:00 a.m. on Thursday, 25 March 2021 at Studio 1, 7/F, W Hong Kong, 1 Austin Road West, Kowloon, Hong Kong to consider and, if thought fit, approve the Sale and Purchase Agreement and the transactions contemplated thereunder. A notice convening the EGM is set out on pages EGM-1 to EGM-3 of 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 return the same to the Company's branch share registrar in Hong Kong, Tricor Secretaries Limited, Level 54, Hopewell Centre, 183 Queen's Road East, 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 (as the case may be). Completion and return of the form of proxy shall not preclude you from attending and voting in person at the EGM or any adjournment meeting thereof (as the case may be) if you so wish.

In order to determine the list of shareholders who will be entitled to attend and vote at the EGM, the register of members of the Company will be closed for registration of transfer of Shares from 22 March 2021 to 25 March 2021, both days inclusive, during which period no transfer of Shares will be effected. Shareholders whose name appear on the register of members of the Company on 21 March 2021 shall be entitled to attend and vote at the EGM. In order for the Shareholders to qualify for attending and voting at the EGM, all properly completed transferdocuments, accompanied by the relevant Share certificates, must be lodged for registration at the Company's branch share registrar in Hong Kong, Tricor Secretaries Limited, Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong, for registration on or before 4:30 p.m. on 19 March 2021 for such purpose.

The resolutions to approve the Sale and Purchase Agreement and the transactions contemplated thereunder, and the Special Dividend at the EGM will be taken by way of poll and an announcement will be made by the Company after the EGM on the results of the EGM.

RECOMMENDATIONS

Your attention is drawn to the letter from the Independent Board Committee set out on page 38 of this circular which contains its recommendation to the Independent Shareholders on the terms of the Sale and Purchase Agreement and voting at the EGM. Your attention is also drawn to the letter of advice from Merdeka set out on pages 39 to 80 of this circular which contains its advices to the Independent Board Committee and the Independent Shareholders in relation to the Disposal.

The Directors consider that the terms of the Sale and Purchase Agreement are fair and reasonable, and the Disposal and the Special Dividend are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to consider and, if thought fit, approve the Sale and Purchase Agreement and transactions contemplated thereunder, and the Special Dividend.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

Yours faithfully,

For and on behalf of

Citychamp Watch & Jewellery Group Limited

Hon Kwok Lung

Chairman

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

CITYCHAMP WATCH & JEWELLERY GROUP LIMITED ڿ۬ᙒ፶मᘒණྠϞࠢʮ̡

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 256)

25 February 2021

To the Independent Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION

We refer to the circular of the Company to the Shareholders dated 25 February 2021 (the

"Circular"), in which this letter forms part. Unless the context requires otherwise, capitalised terms used in this letter will have the same meanings given to them in the section headed "Definitions" of the Circular.

We have been appointed as members of the Independent Board Committee to provide recommendation to the Independent Shareholders on the terms of the Sale and Purchase Agreement.

We wish to draw your attention to "Letter from the Board" as set out on pages 8 to 37 of this circular, and "Letter from Merdeka", the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders on the terms of the Sale and Purchase Agreement, as set out on pages 39 to 80 of this circular.

Having considered the advice of Merdeka and its recommendation as stated in "Letter from Merdeka", despite the Disposal is not in the ordinary and usual course of business of the Company, we consider that (i) the terms of the Sale and Purchase Agreement and the Disposal are fair and reasonable, and on normal commercial terms; and (ii) the Disposal is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of ordinary resolution no. 1 in relation to the Sale and Purchase Agreement to be proposed at the EGM.

Yours faithfully,

Independent Board Committee Citychamp Watch & Jewellery Group Limited

Dr. KWONG Chun Wai, Michael	Mr. ZHANG Bin	Mr. KAM, Eddie Shing Cheuk	Mr. LI Ziqing
Independent	Independent	Independent	Independent
Non-Executive Director	Non-Executive Director	Non-Executive Director	Non-Executive Director

The following is the full text of the letter from Merdeka which sets out its advice to the Independent Board Committee and the Independent Shareholders in relation to the Disposal for inclusion in this circular.

Room 1108-1110, 11/F.

Wing On Centre

111 Connaught Road Central

Hong Kong

25 February 2021

To: The Independent Board Committee and the Independent Shareholders of

Citychamp Watch & Jewellery Group Limited

Dear Sirs/Madams,

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION

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 Disposal, details of which are set out in the letter from the Board (the "Board Letter") contained in the circular of the Company dated 25 February 2021 (the "Circular"), of which this letter forms part. Capitalized terms used in this letter shall have the same meanings as those defined in the Circular unless the context requires otherwise.

Reference is made to the announcement of the Company dated 16 December 2020 in relation to the Disposal and the Special Dividend. The Company announced that, on 16 December 2020, the Company, the Purchaser and the Purchaser's Guarantor entered into the Sale and Purchase Agreement, pursuant to which the Company has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire, the Sale Shares and the Sale Loans at the Consideration of HK$3.53 billion, being the sum of the consideration for the Sale Shares of HK$1.50 billion and the consideration for the Sale Loans of HK$2.03 billion.

Upon Completion, the Company will cease to have any interest in the Disposal Group. As mentioned in the Board Letter, the Remaining Group will be principally engaged in banking and financial businesses. The Remaining Group would also indirectly hold approximately 64.08% equity interest in Ernest Borel Holdings Limited (Stock Code: 1856), a Hong Kong listed company which is engaged in the watches and timepieces businesses, and owns properties in China and Hong Kong that generate stable rental income.

In addition, subject to approval of the Shareholders at the EGM and Completion having taken place, the Board intends to declare the payment of the Special Dividend of not less than HK$0.13 per Share to the Shareholders whose names appear on the register of members of the Company on a record date to be determined. Details of the record date, the payment date and closure of register of members of the Company for determining the Shareholders' entitlement to the Special Dividend will be made by the Company upon Completion in accordance with Rule 13.66 of the Listing Rules.

LISTING RULES IMPLICATION

As stated in the Board Letter, as the highest applicable percentage ratio under the Listing Rules in respect of the Disposal exceeds 75%, if materialized, the Disposal will constitute a very substantial disposal of the Company pursuant to Chapter 14 of the Listing Rules. As such, the transactions contemplated under the Disposal are subject to, amongst other things, circular and Shareholders' approval requirements under Chapter 14 of the Listing Rules. Also, as at the Latest Practicable Date, the Purchaser is indirectly owned by Mr. Hon and Ms. Lam Suk Ying (being spouse of Mr. Hon), as to 80% and 20% respectively. As Mr. Hon is the chairman of the Board and controlling shareholder of the Company, the Purchaser is an associate of Mr. Hon and thus a connected person of the Company. Accordingly, the Disposal also constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules and is subject to, amongst other things, circular and Independent Shareholders' approval at the EGM.

The Independent Board Committee, comprising all independent non-executive Directors, namely Dr. Kwong Chun Wai Michael, Mr. Zhang Bin, Mr. Kam, Eddie Shing Cheuk and Mr. Li Ziqing, has been established by the Company to provide advice and recommendation to the Independent Shareholders in respect of the Disposal as to (i) whether the terms of the Sale and Purchase Agreement and the Disposal are fair and reasonable; (ii) whether the Disposal is on normal commercial terms or better and in the ordinary and usual course of business of the Company; (iii) whether the Disposal is in the interests of the Company and the Shareholders as a whole; and (iv) how the Independent Shareholders should vote in respect of the resolution relating to the Sale and Purchase Agreement to be proposed at the EGM, taking into account our recommendation. We, Merdeka, have been appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in this regard.

OUR INDEPENDENCE

As at the Latest Practicable Date, we did not have any relationships with or interests in the Company or any other parties that could reasonably be regarded as relevant to the independence of us. In the last two years, there was no engagement between the Group and us. Apart from normal professional fees paid or payable to us in connection with this appointment as the Independent Financial Adviser, no arrangements exist whereby we had received any fees or benefits from the Group, or their respective substantial shareholder(s) or connected person(s), as defined under the Listing Rules. Accordingly, we are qualified to give independent advice in this case.

BASIS OF OUR ADVICE

In putting forth our recommendation, we have relied on the information, opinions, facts and representations supplied to us by the Directors and/or the representatives of the Company and contained in or referred to in the Circular. We have reviewed, amongst other things, (i) the Sale and Purchase Agreement; (ii) the annual reports of the Company for the year ended 31 December 2018 (the "2018 Annual Report") and for the year ended 31 December 2019 ("2019 Annual Report"); (iii) the interim report of the Company for the six months ended 30 June 2020 (the "2020 Interim Report"); (iv) other information as set out in the Circular; (v) relevant information provided by the representatives of the Company; and (vi) relevant market data and information available from public sources.

We have assumed that all such information, opinions, facts and representations, which have been provided to us by the Directors and/or the representatives of the Company, for which they are fully responsible, are true, accurate and complete in all respects as at the Latest Practicable Date. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Company and/or the management of the Company and/or the representations of the Company. The Company has also confirmed to us that no material facts have been omitted from the information supplied and we have no reason to suspect that any material information has been withheld by the Company or is misleading. We consider that we have sufficient information currently available to reach an informed view and to provide a reasonable basis for our recommendation. We have not, however, carried out any independent verification of the information provided by the Directors and the representatives of the Company, nor have we conducted any independent investigation into the business, affairs, operations, financial position or future prospects of the Group.

Our opinion is based on 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. This letter is issued to the Independent Board Committee and the Independent Shareholders, solely in connection for their consideration of the Sale and Purchase Agreement and the transactions contemplated thereunder, and except for its inclusion in this Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purpose without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinions and recommendations to the Independent Board Committee and the Independent Shareholders in respect of whether the Disposal is in the interests of the Company and the Shareholders as a whole and fair and reasonable so far as the Independent Shareholders are concerned, we have taken into account the principal factors and reasons set out below.

1. Information of the Group

1.1 Principal Business of the Group

As understood from the Board Letter, the Company is a limited company incorporated in Cayman Islands. The principal activities of the Group include (i) watches and timepieces business (the "Watch Businesses"), (ii) banking and financial businesses (the "Banking Businesses"); and (iii) property investments businesses (the "Property Investment") (together with the Watch Businesses, being the "Non-Banking Businesses").

The Group's Watch Businesses is principally the manufacture and distribution of watches and timepieces. As referred to the 2020 Interim Report, we noted that the watch brands under the Group's Watch Businesses include "Rossini", "EBOHR", "Corum", "Eterna", "Rotary" and "Ernest Borel".

"Rossini" and "EBOHR" have been classified as local proprietary brands and "Corum", "Eterna", "Rotary" and "Ernest Borel" have been classified as other foreign proprietary brands.

The Group's Banking Businesses includes (i) its direct holding of 84.69% equity interest in Bendura Bank, which provides a range of private banking services, in particular, in the areas of asset management and investment advice, transaction banking, and security issuance and investment funds; and (ii) its holding of 60% equity interest in Shun Heng Finance Holding (Hong Kong) Limited, through its two subsidiaries, namely Shun Heng Securities Limited and Hong Kong Metasequoia Capital Management Limited, holds Type 1 (dealing in securities), Type 4 (advisory on securities) and Type 9 (asset management) licenses under the SFO (collectively, the "Shun Heng Finance Group").

The Group's Property Investment includes its investment in properties located in Mainland China and Hong Kong which have been leased out, with stable rental returns to the Group.

As further noted in the 2020 Interim Report, for the Banking Businesses, the Group's revenue mainly comprises net interest income, net service fees and commission income and net trading income; and for the Non-Banking Businesses, the Group's revenue mainly represents the net invoiced value of goods sold, after allowance for returns and trade discounts and rental income received and receivables.

1.2 Financial Information of the Group

Set out below a summary of the audited financial results of the Group for the year ended 31 December 2017 ("FY2017"), 31 December 2018 ("FY2018") and 31 December 2019 ("FY2019") as extracted from the 2018 Annual Report and the 2019 Annual Report respectively, and the unaudited financial results for the six months ended 30 June 2019 ("HY2019") and 30 June 2020 ("HY2020") as extracted from the 2020 Interim Report.

For the six months

For the year ended 31 December ended 30 June

2019

2018

2017 2020 2019

HK$000 (audited)

HK$000 (audited)

HK$000 HK$000 HK$000 (audited) (unaudited) (unaudited)Revenue

• - Non-Banking Businesses Watch Businesses Property Investment

• - Banking Businesses

2,716,265 2,259,652 2,249,737 9,915 456,613

Gross profit

(Non-Banking

Businesses)

1,255,622

Gross profit (Banking

Businesses) Profit/(loss) before income tax for the year/period Profit/(loss) for the year/period

456,613

142,637 71,181

Total assets

• - Cash and deposits

• - Due from banks

• - Inventories

• - Property, plant and equipment

Total liabilities Total equity

796,114	1,422,324
597,003	1,187,923
592,947	1,182,778
4,056	5,145
199,111	234,401
306,976	688,365
199,111	234,401
(86,094)	149,873
(92,475)	109,989
As at 30
2017	2018	2019	June 2020
HK$000	HK$000	HK$000	HK$000
(audited)	(audited)	(audited)	(unaudited)
21,855,671	20,258,229	19,597,081	18,322,906
7,420,678	7,701,743	4,897,246	2,423,047
5,921,878	3,387,836	4,901,198	6,352,552
2,027,191	2,314,545	2,257,966	2,149,872
1,027,303	1,036,736	1,148,049	1,112,297
16,707,545	15,448,738	14,936,192	13,897,638
5,148,126	4,809,491	4,660,889	4,425,268
- 43 -

2,444,364 9,586 483,899

• 2,937,849 2,982,701

• 2,453,950 2,600,431

2,583,495 16,936 382,270

1,431,382

1,373,937

• 483,899 382,270

• 347,112 1,432,764

• 241,448 1,211,198

As at 31 December

For the year ended 31 December 2017, 2018 and 2019

As illustrated above, revenue of the Group was mainly generated from the Non-Banking Businesses, which accounts for over 80% for each of FY2017, FY2018 and FY2019. It is also noted that the Group's total revenue, as well as the revenue from the Non-Banking Businesses, have experienced a decreasing trend for the past three years.

Total revenue of the Group amounted to approximately HK$2,982.70 million for FY2017, then decreased by approximately 1.50% to approximately HK$2,937.85 million for FY2018, and further dropped by approximately 7.54% to approximately HK$2,716.27 million for FY2019. Revenue from the Non-Banking Businesses amounted to approximately HK$2,600.43 million, approximately 2,453.95 million and approximately HK$2,259.65 million for FY2017, FY2018 and FY2019, respectively. As advised by the representatives of the Company, the decrease in the revenue of Non-Banking Businesses was principally due to the continuing decline of sales of "Rossini" brand watches, "EBOHR" brand watches and other foreign proprietary brands watches.

On the contrary, the revenue from the Banking Businesses increased by approximately 26.59% for FY2018 as compared to FY2017 figures and remained at a relatively stable level for FY2019. As advised by the representatives of the Company, the betterment of revenue of the Banking Businesses was attributable to (i) the then interest rate hiked in the USA in 2018 which led to extra interest income from interbank deposits held in US dollars; and (ii) an increase in lending volume to clients.

In addition, gross profit for the Non-Banking Businesses for FY2019 amounted to approximately HK$1,255.62 million, representing a decrease of approximately 12.28% in comparison to approximately HK$1,431.38 million for FY2018 (FY2017: approximately HK$1,373.94 million), while gross profit for the Banking Businesses remained at stable level for FY2019 (i.e. approximately HK$456.61 million) in comparison to approximately HK$483.90 million for FY2018 (FY2017: approximately HK$382.27 million).

Net profit of the Group was substantially decreased by approximately 80.07% to approximately HK$241.45 million for FY2018 on a year-on-year basis, and as noted from the 2018 Annual Report, such substantial reduction in net profit was mainly due to a one-off gain on disposal of the entire equity interest in a wholly owned subsidiary by the Company for FY2017. Net profit of the Group was further decreased by approximately 70.52% to approximately HK$71.18 million for FY2019 as compared to net profit for FY2018. As advised by the representatives of the Company, the drop in net profit for FY2019 was due to decline in sales of watches and timepieces in the PRC, Hong Kong and overseas markets, as well as the social disturbances which had been sustained almost throughout the second half of 2019 in Hong Kong.

For the six months ended 30 June 2019 and 2020

For HY2020, the revenue of the Group amounted to approximately HK$796.11 million, representing a substantial drop of approximately 44.03% as compared to that of approximately HK$1,422.32 million for HY2019. As advised by the representatives of the Company, such decrease is mainly due to a substantial drop in the revenue of Watch Businesses by approximately 49.87% for HY2020 as compared to HY2019. As referred to the 2020 Interim Report, we noted that both revenue from sales of "Rossini" brand watches and "EBOHR" brand watches for HY2020 recorded a year-on-year decrease of approximately 50.80% and approximately 48.20%, respectively, and the revenue from other foreign proprietary brands watches and timepieces (i.e. "Corum", "Eterna" and "Rotary") for HY2020 also recorded a year-on-year decrease of approximately 63.58%.

It is noted from the above summary table that the profitability of Banking Businesses was relatively stable as compared to that of the Non-Banking Businesses. Gross profit from the Non-Banking Businesses for HY2020 dropped considerably by approximately 55.40% to approximately HK$306.98 million (HY2019: approximately HK$688.37 million), while gross profit from the Banking Businesses decreased by approximately 15.06% to approximately HK$199.11 million for the same period (HY2019: approximately HK$234.40 million).

Furthermore, the Group recorded net loss of approximately HK$92.48 million for HY2020 as compared to net profit of approximately HK$109.99 million for HY2019. As advised by the representatives of the Company, the net loss position of the Group for HY2020 is mainly due to outbreak of the COVID-19 which led to social distancing and lockdown measures amongst countries, which have adversely affected the tourism-related businesses, for example, the Watches Businesses.

As at 31 December 2017, 2018, 2019 and 30 June 2020

Total assets of the Group had recorded approximately HK$21,855.67 million as at 31 December 2017, and experienced a gentle decline afterwards. As at 31 December 2019, total assets of the Group amounted to approximately HK$19,597.08 million, representing a decrease of approximately 3.26% as compared to HK$20,258.23 million as at 31 December 2018, and further decreased by approximately 6.50% to approximately HK$18,322.91 million as at 30 June 2020. As at 30 June 2020, total assets of the Group principally comprised of cash and deposits, due from banks and inventories, which amounted to approximately HK$2,423.05 million, approximately HK$6,352,55 million and approximately HK$2,149.88 million, respectively.

As depicted in the above table, the amount of total liabilities of the Group has been decreasing in recent years. Total liabilities of the Group amounted to approximately HK$16,707.55 million as at 31 December 2017, then decreased by approximately 7.53% to approximately HK$15,448.74 million as at 31 December 2018, and further decreased by approximately 3.32% to approximately HK$14,936.19 million as at 31 December 2019. As at 30 June 2020, total liabilities of the Group amounted to approximately HK$13,897.64 million. According to the 2020 Interim Report, as at 30 June 2020, total liabilities of the Group mainly comprised (i) other amounts due to clients (mainly bank deposits) of approximately HK$11,160.34 million; and (ii) bank borrowings of approximately HK$1,744.99 million.

Total equity of the Group amounted to approximately HK$5,148.13 million, approximately HK$4,809.49 million and approximately HK$4,660.89 million as at 31 December 2017, 2018 and 2019 respectively. As at 30 June 2020, total equity of the Group was approximately HK$4,425.27 million.

2. Information on the Purchaser and the Purchaser's Guarantor

As stated in the Board Letter, the Purchaser, namely Tycoon Idea Global Limited, is an investment holding company incorporated in the British Virgin Islands with limited liability and wholly owned by the Purchaser's Guarantor.

The Purchaser's Guarantor, namely Sincere View International Limited, is an investment holding company incorporated in British Virgin Islands with limited liability and is directly owned by Mr. Hon and Ms. Lam Suk Ying, being spouse of Mr. Hon, as to 80% and 20% respectively. As at the Latest Practicable Date, the Purchaser's Guarantor directly holds 1,377,261,515 Shares, representing approximately 31.65% of entire issued share capital of the Company.

3. Information on the Disposal Group

The Disposal Group comprises of International Volant Group, EBOHR Group, Jia Cheng Group, Joyful Surplus Group, Sharptech, Unique Leader and Sure Best. Please refer to the section headed "SIMPLIFIED GROUP STRUCTURE BEFORE AND AFTER THE DISPOSAL" in the Board Letter for details of the structure of the Group before and after Completion.

Set out below are the brief description of the principal business and certain unaudited financial information of each member of the Disposal Group as extracted from the Appendix IIA to the Appendix IIG to the Circular.

3.1 International Volant Group

International Volant is a direct wholly-owned subsidiary of the Company and is incorporated under the laws of Hong Kong with limited liability. As at the LatestPracticable Date, International Volant is an investment holding company and together with its subsidiaries (collectively, the "International Volant Group") own the watch brands "Eterna" and "Rotary", both of which are classified as other foreign proprietary brands.

As advised by the representatives of the Company, "Eterna" is a luxury or heritage foreign proprietary brand with average price range from approximately HK$20,000 to approximately HK$500,000. The principal revenue source for "Eterna" is the sales through retailers in overseas markets in Europe. The principal customers of "Eterna" are local customers in aforesaid geographic area.

As further advised by the representatives of the Company, "Rotary" is an affordable luxury foreign proprietary brand with average price range from approximately HK$2,000 to approximately HK$4,000, and the principal revenue source for "Rotary" is the sales through retailers in the oversea markets in Europe. The principal customers of "Rotary" are the local customers in aforesaid geographic areas.

Set out below is a summary of the unaudited financial results of International Volant Group for the three years ended 31 December 2019, and the nine months ended 30 September 2019 and 2020, respectively.

For the nine months
For the year ended 31 December	ended 30 September
2017 2018 2019	2019 2020
HK$'000 HK$'000 HK$'000	HK$'000 HK$'000

(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)

Revenue	167,905	172,910	129,199	86,231	51,784
(Loss) before income
tax	(257,049)	(95,657)	(41,380)	(37,001)	(33,371)
(Loss) after income
tax	(241,298)	(95,549)	(41,530)	(37,153)	(33,456)

As at 30 September 2020, the net liabilities value and total asset value of International Volant Group were approximately HK$717.60 million and approximately HK$612.36 million, respectively.

As illustrated above, revenue of International Volant Group amounted to approximately HK$167.91 million, approximately HK$172.91 million and approximately HK$129.20 million for FY2017, FY2018 and FY2019, respectively. For the nine months ended 30 September 2019 and 2020, revenue of International Volant Group were approximately HK$86.23 million and approximately HK$51.78 million. As advised by the representatives of the Company, revenue of International Volant Group was principally contributed by the sales of "Eterna" and "Rotary" brand watches and the decline in revenue for FY2019 was primarily due to the delicate situation in European market, especially, the European political situation and the economic and political Brexit-related factors.

International Volant Group recorded net loss of approximately HK$241.30 million, approximately HK$95.55 million and approximately HK$41.53 million for FY2017, FY2018 and FY2019 respectively, and approximately HK$37.15 million and approximately HK$33.46 million for the nine months ended 30 September 2019 and 2020, respectively. As advised by the representatives of the Company, the continuous net loss of International Volant Group was primarily caused by economic factors and the consumer's cautiousness on non-essential spending created by Brexit which affected the European market.

3.2 EBOHR Group

EB Brand is a direct wholly-owned subsidiary of the Company and is incorporated under the laws of Hong Kong with limited liability. As at the Latest Practicable Date, EB Brand is an investment holding company and owns the entire issued shares in the capital of EBOHR Luxuries International Limited and its subsidiaries (collectively, the "EBOHR Group"). EBOHR Group is principally engaged in the manufacture and distribution of "EBOHR" brand watches and timepieces in the PRC, which is classified as local proprietary brand.

As advised by the representatives of the Company, "EBOHR" is an affordable entry level luxury brand with the average price range from approximately HK$1,000 to approximately HK$4,000. The revenue source for "EBOHR" is principally the sales through self-operated retail networks, mostly located in shopping malls across the PRC, and e-commerce. The principal customers of "EBOHR" are local customers in aforesaid geographic areas.

Set out below is a summary of the unaudited financial results of EBOHR Group for the three years ended 31 December 2019, and the nine months ended 30 September 2019 and 2020, respectively.

For the nine months
For the year ended 31 December	ended 30 September
2017 2018 2019	2019 2020
HK$'000 HK$'000 HK$'000	HK$'000 HK$'000
(unaudited) (unaudited) (unaudited)	(unaudited) (unaudited)

Revenue	805,155	729,930	575,134	448,251	256,648
Profit/(Loss) before
income tax	83,088	66,734	11,602	27,774	(10,249)
Profit/(Loss) after
income tax	54,845	58,147	9,251	25,748	(7,938)

As at 30 September 2020, the net asset value and total asset value of EBOHR Group were approximately HK$767.94 million and approximately HK$1,044.68 million, respectively.

As illustrated above, revenue of EBOHR Group amounted to approximately HK$805.16 million, approximately HK$729.93 million and approximately HK$575.13 million for FY2017, FY2018 and FY2019 respectively. For the nine months ended 30 September 2019 and 2020, revenue of EBOHR Group was approximately HK$448.25 million and approximately HK$256.65 million, respectively. As advised by the representatives of the Company, the revenue of EBOHR Group was principally contributed by the sales of "EBOHR" brand watches.

Net profit of EBOHR Group for FY2019 represented a decrease of approximately 84.09% as compared to net profit for FY2018, and represented a decrease of approximately 83.13% as compared to net profit for FY2017. For the nine months ended 30 September 2019 and 2020, EBOHR Group recorded net profit of approximately HK$25.75 million and net loss of approximately HK$7.94 million, respectively.

As advised by the representatives of the Company, the drop in revenue and net profit of EBOHR Group since FY2017 was primarily due to (i) the continuous decline in sales from physical stores; (ii) unsatisfying e-commerce sales performance raised by the increasing online selling expenses; and (iii) depreciation expenses and administrative expenses relating to the new headquarters.

As advised by the representatives of the Company, we understood that, for the FY2019, the proportion to total "EBOHR" brand watch sales contributed by physical stores sales and e-commerce sales was approximately 72.20% and approximately 27.80% respectively. The representatives of the Company further advised that the decreasing profitability of "EBOHR" brand watches was due to the declining trend of sales from physical stores and under-performance of the sales of e-commerce which was resulted from the continuous increase of online selling expenses. In addition, due to the recurrent waves of the COVID-19 pandemic in Mainland China and Hong Kong, the Group expects that the sales of "EBOHR" brand watches through physical stores and e-commerce could further decrease in the near future.

3.3 Jia Cheng Group

Jia Cheng is a direct wholly-owned subsidiary of the Company and is incorporated in British Virgin Islands with limited liability. As at the Latest Practicable Date, Jia Cheng is an investment holding company which owns the entire issued shares in the capital of Actor Investments Limited, which owns 91% of issued shares in the capital of Zhuhai Rossini Watch Industry Limited and its subsidiaries (collectively, the "Jia Cheng Group"). Jia Cheng Group is principally engaged in the manufacture and distribution of watches and timepieces in the PRC and owns the watch brand "Rossini", which is classified as local proprietary brand.

As advised by the representatives of the Company, "Rossini" is an affordable entry level luxury brand with average price range from approximately HK$1,000 to approximately HK$4,000. The revenue source for "Rossini" is principally the sales throughself-operated retail networks, mostly located in the shopping malls across the PRC, and e-commerce. The principal customers of "Rossini" are local customers and escorted tourists in aforesaid geographic areas.

Set out below a summary of the unaudited financial results of Jia Cheng Group for the three years ended 31 December 2019, and the nine months ended 30 September 2019 and 2020, respectively.

For the nine months
For the year ended 31 December	ended 30 September
2017 2018 2019	2019 2020
HK$'000 HK$'000 HK$'000	HK$'000 HK$'000

(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)

Revenue	1,294,136	1,348,065	1,240,626	963,351	594,862
Profit before income tax	353,889	345,705	218,073	181,325	42,460
Profit after income tax	297,525	277,818	176,056	146,091	24,643

As at 30 September 2020, the net asset value and total asset value of Jia Cheng Group were approximately HK$1,517.36 million and approximately HK$2,120.30 million, respectively.

As illustrated above, revenue of Jia Cheng Group amounted to approximately HK$1,294.14 million, approximately HK$1,348.07 million and approximately HK$1,240.63 million for FY2017, FY2018 and FY2019, respectively. For the nine months ended 30 September 2019 and 2020, revenue of Jia Cheng Group was approximately HK$963.35 million and approximately HK$594.86 million, respectively.

Net profit of Jia Cheng Group slightly decreased by approximately 6.62% to approximately HK$277.82 million for FY2018 and further dropped by approximately 36.63% to approximately HK$176.06 million for FY2019. For the nine months ended 30 September 2020, net profit of Jia Cheng Group amount to approximately HK$24.64 million, representing a substantial decrease of approximately 83.13% as compared to the previous year.

As noted from the 2019 Annual Report, the proportion of the total sales of "Rossini" brand watches contributed by physical stores sales, e-commerce sales and other types of sales were approximately 51.90%, 39.50% and 8.60%. The representatives of the Company advised that aforesaid decline in Jia Cheng Group's revenue was mainly due to (i) declining in sales from physical stores of the watch brand "Rossini"; and (ii) significant drop in tourist arrivals from Mainland China since August 2019. Further, we noted from the 2020 Interim Report that the COVID-19 pandemic reduced the overall watch demand and significantly affected tourism industry, therefore, sales of "Rossini" brand watches from e-commerce and industrial tourism was also inevitably affected.

3.4 Joyful Surplus Group

Joyful Surplus is a direct wholly-owned subsidiary of the Company and is incorporated under the laws of Hong Kong with limited liability. As at the Latest Practicable Date, Joyful Surplus is an investment holding company. Joyful Surplus and its subsidiaries (collectively, the "Joyful Surplus Group") own the watch brand "Corum", which is classified as other foreign proprietary brand.

As advised by the representatives of the Company, "Corum" is a luxury or heritage foreign proprietary brand with average price range from approximately HK$20,000 to approximately HK$500,000. The revenue source for "Corum" is principally the sales through physical stores in Europe, the USA and Hong Kong, and the principal customers of "Corum" are local customers in aforesaid geographic areas.

Set out below a summary of the unaudited financial results of Joyful Surplus Group for the three years ended 31 December 2019, and the nine months ended 30 September 2019 and 2020, respectively.

For the nine months
For the year ended 31 December	ended 30 September
2017 2018 2019	2019 2020
HK$'000 HK$'000 HK$'000	HK$'000 HK$'000

(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)

Revenue	352,759	312,130	273,373	186,981	67,549
(Loss) before income tax	(103,323)	(19,642)	(41,794)	(35,332)	(54,814)
(Loss) after income tax	(104,661)	(21,325)	(42,648)	(35,972)	(55,480)

As at 30 September 2020, the net liabilities value and total asset value of Joyful Surplus Group were approximately HK$638.94 million and approximately HK$674.44 million, respectively.

As illustrated above, revenue of Joyful Surplus Group amounted to approximately HK$352.76 million, approximately HK$312.13 million and approximately HK$273.37 million for FY2017, FY2018 and FY2019, respectively. For the nine months ended 30 September 2019 and 2020, revenue of Joyful Surplus Group was approximately HK$186.98 million and approximately HK$67.55 million, respectively.

Net loss of Joyful Surplus Group amounted to approximately HK$104.66 million for FY2017, approximately HK$21.33 million for FY2018 and approximately HK$42.65 million for FY2019. For the nine months ended 30 September 2020, net loss of Joyful Surplus Group was approximately HK$55.48 million, representing an increase of approximately 54.23% as compared to net loss of approximately HK$35.97 million for the corresponding period in 2019. As advised by the representatives of the Company, the negative externalities in the Asian macro environment have considerably damaged theoverall sales performance of "Corum", which was further deteriorated by the social disturbances policy that maintained throughout the second half of 2019 in Hong Kong, and the China-USA trade war.

3.5 Sharptech

Sharptech is a direct wholly-owned subsidiary of the Company and is incorporated under the laws of Hong Kong with limited liability. As at the Latest Practicable Date, Sharptech is principally engaged in distribution of watches and timepieces.

Set out below a summary of the unaudited financial results of Sharptech for the three years ended 31 December 2019, and the nine months ended 30 September 2019 and 2020, respectively.

For the nine months
For the year ended 31 December	ended 30 September
2017 2018 2019	2019 2020
HK$'000 HK$'000 HK$'000	HK$'000 HK$'000

(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)

Revenue	497	185	-	-	-
Profit/(Loss) before
income tax	(28)	(242)	(96)	(96)	(1)
Profit/(Loss) after
income tax	3	(242)	(96)	(96)	(1)

As at 30 September 2020, the net liabilities value and total asset value of Sharptech were approximately HK$92,000 and approximately HK$453,000, respectively.

As illustrated above, revenue of Sharptech amounted to approximately HK$497,000 and approximately HK$185,000 for FY2017 and FY2018. And Sharpech did not record any revenue for FY2019, and the nine months ended 30 September 2019 and 2020, respectively.

Sharptech recorded net profit of HK$3,000 for FY2017. Since FY2018, Sharptech have been recording net loss, which amounted to approximately HK$242,000 and approximately HK$96,000 for FY2018 and FY2019, respectively. For the nine months ended 30 September 2019 and 2020, net loss of Sharptech was approximately HK$96,000 and approximately HK$1,000, respectively.

3.6 Unique Leader

Unique Leader is a direct wholly-owned subsidiary of the Company and is incorporated under the laws of Hong Kong with limited liability. As at the Latest Practicable Date, Unique Leader is principally engaged in distribution of watches and timepieces.

Set out below a summary of the unaudited financial results of Unique Leader for the three years ended 31 December 2019, and the nine months ended 30 September 2019 and 2020, respectively.

For the nine months
For the year ended 31 December	ended 30 September
2017 2018 2019	2019 2020
HK$'000 HK$'000 HK$'000	HK$'000 HK$'000

(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)

Revenue	1,596	1,833	3,437	743	-
(Loss) before income tax	(25,784)	(1,096)	(4,194)	(3,620)	(970)
(Loss) after income tax	(25,784)	(1,096)	(4,194)	(3,620)	(970)

As at 30 September 2020, the net liabilities value and total asset value of Unique Leader were approximately HK$66.13 million and approximately HK$63.53 million, respectively.

As illustrated above, revenue of Unique Leader amounted to approximately HK$1.60 million, approximately HK$1.83 million and approximately HK$3.44 million for FY2017, FY2018 and FY2019, respectively. Unique Leader recorded revenue of approximately HK$743,000 for the nine months ended 30 September 2019, and did not record any revenue for the nine months ended 30 September 2020.

Net loss of Unique Leader was approximately HK$25.78 million, approximately HK$1.10 million and approximately HK$4.19 million for FY2017, FY2018 and FY2019, respectively. For the nine months ended 30 September 2019 and 2020, net loss amounted to approximately HK$3.62 million, approximately HK$0.97 million, respectively.

3.7 Sure Best

Sure Best is a direct wholly-owned subsidiary of the Company and is incorporated under the laws of Hong Kong with limited liability. As at the Latest Practicable Date, Sure Best is principally engaged in investment holding, which holds 25% equity interest of a company that is one of the leading quartz watch original equipment manufacturers in the PRC and is engaged in manufacturing of watches and related accessories in the PRC.

Set out below a summary of the unaudited financial results of Sure Best for the three years ended 31 December 2019, and the nine months ended 30 September 2019 and 2020, respectively.

For the nine months
For the year ended 31 December	ended 30 September
2017 2018 2019	2019 2020
HK$'000 HK$'000 HK$'000	HK$'000 HK$'000
(unaudited) (unaudited) (unaudited)	(unaudited) (unaudited)

Revenue	99,015	-	-	-	-
Profit/(Loss) before
income tax	29,577	7,942	17,612	11,183	(2,274)
Profit/(Loss) after
income tax	29,123	7,942	17,612	11,183	(2,274)

As at 30 September 2020, the net asset value and total asset value of Sure Best were approximately HK$132.45 million and approximately HK$137.46 million, respectively.

As illustrated above, Sure Best recorded revenue of approximately HK$99.02 million for FY2017, and did not record any revenue for FY2018, FY2019, and for the nine months 30 September 2019 and 2020, respectively. As advised by the representatives of the Company, the main reason for nil revenue being recorded by Sure Best since FY2018 is due to Sure Best's disposal of its entire interest in a subsidiary at the end of 2017.

Sure Best recorded net profit of approximately HK$29.12 million, approximately HK$7.94 million and approximately HK$17.61 million for each of FY2017, FY2018 and FY2019. For the nine months ended 30 September 2020, Sure Best recorded net loss of approximately HK$2.27 million as compared to net profit of approximately HK$11.18 million for the nine months ended 30 September 2019. As advised by the representatives of the Company, although Sure Best did not record any revenue since FY2018, Sure Best recorded net profit for FY2018, FY2019 and nine months ended 30 September 2019 as well as net loss for the nine months ended 30 September 2020 due to its share of profit or loss of an associate company, and the main reason for net loss recorded by Sure Best for the nine months ended 30 September 2020 is the outbreak of the COVID-19 pandemic in the first half of 2020, which significantly reduced consumers' spending sentiment and hence affected Sure Best's associate company's sales of watches and related accessories in the PRC.

For illustrative purposes, as at 30 September 2020, the net asset value and the total asset value of the Disposal Group was approximately HK$1 billion and approximately HK$4.50 billion.

4. Information on the Remaining Group

4.1 Principal Business of the Remaining Group

As mentioned in the Board Letter, upon Completion, the Remaining Group's principal activity would be the Banking Businesses, which include its (i) direct holding of 84.69% equity interest in Bendura Bank, which provides a range of private banking services, in particular, in the areas of asset management and investment advice, transaction banking, security issuance and investment funds; and (ii) direct holding of 60% equity interest in the Shun Heng Finance Group.

In accordance to the 2019 Annual Report, the revenue of Shun Heng Finance Group was approximately HK$3.36 million for FY2019, and based on the total revenue of the Remaining Group as referred to the unaudited financial information of the Remaining Group in the Board Letter, we understood that revenue from Shun Heng Finance Group would account for an insignificant proportion of the Remaining Group's total revenue.

In addition, the Remaining Group would also indirectly hold approximately 64.08% equity interest in Ernest Borel Holdings Limited (Stock Code: 1856). According to the annual report of Ernest Borel Holdings Limited for FY2019, Ernest Borel Holdings Limited is engaged in the design, production, marketing and sale of mechanical and quartz premium watches, under its own brand "Ernest Borel". The extensive distribution network of Ernest Borel Holdings Limited covers retail markets in the PRC, the Macau Special Administrative Region of the PRC, Hong Kong and other markets (the "Remaining Watch Business"). As at 31 December 2019, Ernest Borel Holdings Limited has more than 772 points of sale. As mentioned in the Board Letter, "Ernest Borel" is a foreign proprietary heritage brand, which is sold through retailers predominantly across the PRC. The average price of watch brand "Ernest Borel" ranges from HK$3,000 to HK$10,000.

Given that the Remaining Group will be predominantly engaged in the Banking Businesses, and the Remaining Watch Business would only accounts for approximately 20.98% of the revenue of the Remaining Group for the nine months period ended 30 September 2020, and having considered that (i) the brand positionings of the Disposal Group and the Remaining Group are different; (ii) the distribution channels of the watches and timepieces of the Disposal Group are different from that of the Remaining Group; (iii) the pricing strategy of each watch brand under the Disposal Group is different from "Ernest Borel", being the watch brand of the Remaining Group; and (iv) there is a clear business delineation between the Disposal Group and the Remaining Group, we concur with the Directors' view that there will be no material competition between the Disposal Group and the Remaining Group.

Furthermore, the Remaining Group would also own residential, commercial and industrial properties in the PRC and Hong Kong that generate stable rental income. Based on the unaudited financial information of the Remaining Group as set out in the Board Letter, we noted that rental income from the Property Investment would account for an insignificant proportion of the Remaining Group's total revenue.

Please refer to the section headed "SIMPLIFIED GROUP STRUCTURE BEFORE AND AFTER THE DISPOSAL" in the Board Letter for details of the group structure of the Remaining Group.

Given that the Remaining Group would be mainly engage in the Banking Businesses and the proceeds from the Disposal would also be utilized on the Banking Businesses, we have accordingly performed our analysis on the future prospects with respect to the business of Bendura Bank, being the major revenue contribution segment of the Remaining Group. Please refer to the section headed "5. OUTLOOK - 5.2 Outlook of the Remaining Group" set out below in this letter for details.

4.2 Financial information of the Remaining Group

Set out below is a summary table of certain financial information of the Remaining Group for each of FY2018 and FY2019, and for the nine months ended 30 September 2019 and 2020 as extracted from "MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP" as set out in the Appendix IV in the Circular for reference:

For the year ended	For the nine months
31 December	ended 30 September
2018 2019	2019 2020
HK$' million (approx.) HK$' million (approx.)	HK$' million (approx.) HK$' million (approx.)
(unaudited) (unaudited)	(unaudited) (unaudited)

Revenue

535

(100.00%)

606

(100.00%)

434

(100.00%)

367 (100.00%)

• - Banking Businesses

• - Remaining Watch Business

• - Property Investment

484 43 8

(90.47%)

(8.04%)

457 142

(75.41%)

(23.43%)

(1.50%)

7

(1.16%)

336 92 6

(77.42%)

285 (77.66%)

(21.20%)

77 (20.98%)

(1.38%)

5 (1.36%)

For the nine months
ended 30 September
2018	2019	2019	2020
HK$'	HK$'	HK$'	HK$'
million	million	million	million
(approx.)	(approx.)	(approx.)	(approx.)
(unaudited)	(unaudited)	(unaudited)	(unaudited)
Profit/(Loss) after
income tax	19	(43)	(10)	(13)
- Banking
Businesses	165	173	111	34
- Remaining Watch
Business	(36)	(75)	(40)	(13)
- Property
Investment	3	8	5	5
- Unallocated (Note)	(113)	(149)	(86)	(39)

For the year ended

31 December

Note: Unallocated amount comprises interest expenses to bank borrowings in relation to the watches and timepieces businesses during the track record period.

As illustrated above, upon Completion, total revenue of the Remaining Group would amount to approximately HK$535 million and approximately HK$606 million for two years ended 31 December 2018 and 2019, respectively, and approximately HK$434 million and approximately HK$367 million for the nine months ended 30 September 2019 and 2020, respectively.

Revenue from the Banking Businesses would amount to approximately HK$484 million for FY2018, and would decrease by approximately 5.58% to approximately HK$457 million for FY2019. For the nine months ended 30 September 2019 and 2020, revenue from the Banking Businesses would be approximately HK$336 million and approximately HK$285 million, respectively. The revenue of the Banking Businesses would contribute at least 75% of the Remaining Group's total revenue for the abovementioned financial periods.

Revenue of the Remaining Watch Business would amount to approximately HK$43 million for FY2018 and approximately HK$142 million for FY2019, and would amount to approximately HK$92 million and approximately HK$77 million for the nine months ended 30 September 2019 and 2020, respectively.

Revenue from the Property Investment would amount to approximately HK$8 million for FY2018 and approximately HK$7 million for FY2019, and would amount to approximately HK$6 million and approximately HK$5 million for the nine months ended 30 September 2019 and 2020, respectively.

Assuming the Disposal had completed, the Remaining Group would record net profit of approximately HK$19 million for FY2018 and net loss of approximately HK$43 million for FY2019, and would record net loss of approximately HK$10 million and approximately HK$13 million for the nine months ended 30 September 2019 and 2020, respectively.

As at 30 September 2020, the net asset value of the Remaining Group was approximately HK$3.60 billion and the total asset value of the Remaining Group was approximately HK$14.70 billion.

5. Outlook

5.1 Outlook of the Disposal Group

Considering that the Disposal Group is principally engaged in (i) sales of watches and timepieces under local proprietary brands (i.e. "Rossini" and "EBOHR") in the PRC; (ii) sales of watches and timepieces under foreign proprietary brands (i.e. "Eterna" and "Rotary") in Europe; (iii) principally sales of watches and timepieces under foreign proprietary brand (i.e. "Corum") in Hong Kong, Europe and the USA; and (iv) distribution of watches and timepieces, hence, the Directors are of the view that the outlook of the Disposal Group depends on the factors, including but not limited to, (i) the recovery of demand of PRC's tourists on mid-end/luxury products; (ii) the recovery of tourist arrivals and economy of Hong Kong; and (iii) the recovery of tourist arrivals of Europe and the USA.

As referred to the section "3. INFORMATION ON THE DISPOSAL GROUP" above, the Disposal Group's profit contribution to the Group has recorded a rapid drop for the past few years. In particular, due to the negative externalities in the Asian macro environment, the delicate European political situation and the China-USA trade war, which resulted in the decrease of tourist travels in the relevant geographic business areas of the watch brands of the Disposal Group (i.e. Asia, Europe, and the USA), the performance of foreign proprietary brands (i.e. "Eterna", "Rotary" and "Corum") have been deteriorating for FY2017, FY2018 and FY2019.

According to public data in relation to the International Visitors Arrivals Program available on the official website of the National Travel and Tourism Office of the USA, we noted that the number of international visitors to the USA turned to a declining trend since the year of 2018. In addition, World Tourism Organization (the "UNWTO") believes that tourism is among the hardest hit of all economic sectors by the COVID-19 pandemic and the number of international tourist arrivals around the world coming to America would fall by 20% to 30% in 2020 when compared with 2019 figures. According to the official website of UNWTO, UNWTO is the United Nations agency responsible for the promotion of responsible, sustainable and universally accessible tourism.

In particular, according to the figures from the US National Travel and Tourism Office, in 2020, the number of Chinese tourists to the USA fell sharply for the first time since 2003, which was due to the arise of the political tensions between the USA and China and have been further escalated upon the outbreak of the COVID-19 pandemic. As shown in the figures, the number of Chinese tourists to the USA has recorded a 5.5% drop in arrivals from China in 2018, and the decline is expected to last in foreseeable future. As the Chinese are the world's highest-spending foreign visitors in the USA, it is also expected that the tourism industry of the USA will be adversely affected.

According to the data published on Eurostat, which is the official statistical office of European Union ("EU") (https://ec.europa.eu/eurostat), the real Gross Domestic Product (the "GDP") of European has been decreasing from approximately 2.8% in 2017 to approximately 1.6% in 2019. According to the report of "Regional Economic Outlook for Europe - Whatever It Takes: Europe's Response to COVID-19" published by International Monetary Fund (the "IMF") on October 2020, IMF forecasts that the outlook of Europe for 2020 remains bleak and the recovery will be protracted and uneven. IMF believes the European economy is projected to contract by 7% in 2020 and rebound by 4.7% in 2021, headline inflation is projected to soften to 2% in 2020, being 1 percentage point below its 2019 level before edging up to 2.4% in 2021. The outlook of Europe is exceptionally uncertain. The ongoing resurgence of infections across Europe presents perhaps the greatest downside risk at this stage.

Facing the deep recession in Europe, EU Commission believes the road for Europe to recovery is still paved with uncertainty, in the absence of a vaccine and treatment options for the COVID-19 pandemic, any sustained increase in the number of infections or further major economic outbreaks would worsen the economic outlook. Based on the figures published by "Our World in Data" on 8 January 2021, total vaccinations percentage of most of European counties are still below 1%, and hence it is expected that European's bloc-wide vaccine procurement plan may fail to secure enough doses to enable a rapid start to inoculations. As provision of a vaccine and treatment options for the COVID-19 pandemic is the key factor for the recovery of European economy, it is expected that the current total vaccinations situation of Europe would have added the uncertainties to the recovery of European economy in the foreseeable future.

Regarding visitor arrivals to Hong Kong, as referred to Hong Kong Monthly Digest of Statistics as of November 2020, we noted that substantial part of the visitors to Hong Kong are from Mainland China, which accounts for over 70% of the total visitors to Hong Kong for each of 2017, 2018 and the first half of 2019. However, the number of Mainland China's visitors to Hong Kong started to decrease since July 2019. In addition, according to the market summary published by Hong Kong Tourism Board updated as of May 2020, total visitors to Hong Kong was ever recorded over 90% year-on-year plunge in 2020 due to outbreak of the COVID-19 pandemic. Save as aforesaid plunge in visitor arrivals, the GDP of Hong Kong has been decreasing since 2017. According to the "Gross Domestic Product - third quarter 2020", published by the Census and Statistics Department of Hong Kong Government, Hong Kong's GDP on a quarterly basis is decreasing since the first quarter of

2018, and has continuously recorded negative growth since the second half of 2019. Furthermore, as noted from a blog wrote by Financial Secretary of the Government of Hong Kong published on 13 December 2020, year of 2021 will be another year full of uncertainty, apart from the local and global epidemic situation; Hong Kong also has to pay attention to China-US relationship and other geopolitical development.

As advised by the representatives of the Company, Mainland China is the backbone of the Watch Businesses of the Disposal Group. In light of this, we have also made reference to the provisional data of PRC's GDP growth rate, which were prepared by the IMF and published on the IMF's official website. We noted that the PRC's GDP growth rate has been decreasing from 9.5% in 2011 to approximately 6.1% in 2019 and is expected to further drop to approximately 1.9% in 2020. Although the PRC's GDP is forecasted to rebound to approximately 8.2% in 2021, IMF believes PRC's GDP will slide down to approximately 5.8% in 2022 and maintain a gentle downward trend till 2025. Given the aforesaid economy estimation of the PRC and the ongoing tension between PRC and the US, the general economic condition in the PRC in the medium term is likely to be subdued, which has added uncertainties to the recovery of demand of PRC's citizens and tourists on mid-end/luxury products, which would directly affect the Disposal Group's Watch Businesses in the PRC in foreseeable future.

Having considered that (i) the continuous decrease in the number of visitor arrivals in the USA since the year of 2018, in particular of the number of Chinese visitors; (ii) the recovery of Europe in the foreseeable future remains uncertain due to the low total vaccination ratio of most of member countries of Europe; (iii) total visitors arrivals to Hong Kong from Mainland China has been considerably hard hit since second half of 2019; (iv) the recent unsatisfying GDP statistics of both Hong Kong and the PRC; and (v) the sluggish growth anticipation of GDP in the PRC, we are of view that the outlook of the luxury retail market, in particular of the Watch Businesses, will remain ambiguous in the near future.

5.2 Outlook of the Remaining Group

Upon Completion, the Banking Businesses will be the principal activity of the Remaining Group, of which the performance has demonstrated a relatively stable trend in the past few years. As advised by the representatives of the Company, Bendura Bank would be the major revenue and profit contributor to the Remaining Group's Banking Businesses, which has developed organically as shown by the improving level in assets under management and stable profitability despite the outbreak of the COVID-19 pandemic and a challenging global economic environment.

As set out in the 2019 Annual Report, it is noted Bendura Bank focuses its banking activities in the regions of Eastern Europe and Asia. In particular, Bendura Bank has started a representative office in Hong Kong and successfully expanding existing client relationships and established new clients. As advised by the representatives of the Company, it is the bank's strategy to establish a footprint in the PRC in the mid-term.

Accordingly, we have performed our researches on the business outlook in relation to the asset and wealth management industry, where most of the revenue and profits of the Remaining Group are derived from.

As noted from a publication "Asset management industry - a next step towards further consolidation" published by Deloitte in November 2020, investment management segment has shown high growth in terms of assets under management ("AuM") in the past. Total AuM increased with an annual growth rate of 14.50% between 2010 and 2014 and with 10% for the period from 2015 to 2019. This growth is the result of net inflows in funds, as well as a favorable market environment. It is expected that there is a further increase in growth for the investment management industry in the near future, which is driven by (i) an increase in appetite for long term personal savings; and (ii) attracting new clients by offering new investments - private equity investments and more cross border activities.

According to a spotlight publication "Asset Management Outlook to 2025" by Bloomberg, it is expected that the global AuM will have a growth of 21% between now and the end of 2025. Geographically, Asia Pacific countries are expected to show the fastest growth to 2025, with Europe (ex-UK) and the USA a couple of percentage points behind the average. The reason for the USA's AuM growth rate being behind the average of Asia Pacific countries may be its large fund size, which is over $400 billion in AuM. It is believed that the large proportion of USA's fund size may hold back the growth of USA's AuM. Meanwhile, the Brexit would exert a dominant influence over the period till 2025 and is believed to be one of the strongest negative factors for AuM growth in UK.

We also made reference to another publication, namely "Asset and Wealth management trends 2020: Are managers ready for stormier seas?", by PricewatehouseCoopers ("PwC") on 11 March 2020 and noted that AuM has been sustained by the tailwind of strong market returns, of which PwC expects that the global AuM to reach US$145 trillion by 2025. Increasing affluence and expanding populations in fast-growth markets are also creating fresh investment opportunities and increasing demand for asset and wealth management services. And large markets such as China, which are now opening to foreign managers, present particular possibilities.

Further, according to the publication "Wealth Management - Global - After the Storm" by Morgan Stanley, AuM growth of emerging market is likely to slow in the short term, but in future, it is expected that a stronger rebound relative to developed markets will be driven primarily by net new money on the back of GDP growth. It is believed that the concentration of AuM growth in emerging markets will have a meaningful impact on priorities for the industry, and recommends global wealth managers should continue to assess opportunities to participate in emerging market growth, particularly in Mainland China.

Regarding the potential future performance of Mainland China's market, according to the National Bureau of Statistics of the PRC, per capita disposable income of urban households in the PRC increased from RMB28,844 in 2014 to RMB42,359 in 2019, which indicates the growing consumption of domestic residents. As a result of accumulated personal wealth of domestic residents, it is believed that customers in PRC have been looking for more diversified personal financial products and services. There have been significant growth opportunities in the PRC personal finance market due to the increasing consumer demand for more diversified retail banking products and services, such as residential mortgage loans, credit cards, wealth management services, personal consumer loans and other consumer finance products.

Save as aforesaid potential growing trend of AuM in future, we also noted that the COVID-19 pandemic has relatively lower influence on banking and financial industry. With reference to a report namely "Autumn 2020 Economic Forecast" published by EU Commission on 5 November 2020. In 2020, the COVID-19 outbreak and associated lockdown measures took a severe and unprecedented toll on the European economy, economic activity fell abruptly: in the first half of the year, with real GDP fell at double-digit rate in the European. The COVID-19 pandemic has affected large parts of the economy within the area, while financial markets remained relatively calm over the first half of 2020. Thanks to the comprehensive monetary policy easing by the US Federal Reserve and the continuation of European Central Bank's pandemic emergency purchase programme, bond markets continued to price in low credit and interest risk and equity markets have remained quite resilient despite the COVID-19 related economic damages and the resurgence of the pandemic in Europe.

Having considered that (i) the strong growth performance in global AuM in the past decade; (ii) global AuM being expected to continue to increase by the end of 2025; (iii) an increasing anticipation on more diversified personal financial products and services of the PRC's customers; and (iv) supporting policies launched by the US Federal Reserve and European Central Bank to maintain the stability of bond and equity markets in Europe and the COVID-19 pandemic has less impact on banking and financial businesses, we are of the view that the outlook of asset and wealth management industry and the Banking Businesses is relatively positive and stable in future.

6. Reasons for and Benefits of the Disposal and Use of Proceeds

6.1 Reduction of financial leverage and mitigation of interest burden

The Group's Watch Businesses in the PRC and the overseas markets are capital intensive in nature due to, including but not limited to, (i) the business requirement of stocking up inventories in large quantity; and (ii) the relatively short suppliers' credit terms. For the three years ended 31 December 2019 and for the nine months ended 30 September 2020, the Company had invested an aggregate amount of more than HK$397.90 million in the Disposal Group as general working capital loans, which were mainly drawn to support and develop the Watch Businesses, and the said investment has been in the pastlargely financed by internal resources and bank loans. As referred to the section headed "FINANCIAL INFORMATION OF THE GROUP" as set out in the Appendix I to the Circular, the Group had outstanding borrowings of approximately HK$1.61 billion as at 31 December 2020, comprising of bank and other borrowings, secured and guaranteed of approximately HK$1.58 billion, amounts due to Directors of approximately HK$22 million and amounts due to Shareholders of approximately HK$12 million.

As referred to the Board Letter, we noted that approximately HK$1.20 billion of net proceeds from the Disposal will be used for the repayment of bank loans of the Remaining Group within one month after Completion, and upon repayment of aforesaid bank loans, the outstanding bank loans of the Remaining Group would be approximately HK$23.80 million as compared to HK$1.30 billion as at 30 September 2020, the annual bank loan interest expenses of the Remaining Group would be significantly reduce from approximately HK$50 million to approximately HK$1 million. On the other hand, the proposed arrangement of the Sale Loans in four-tranche payments would enable the Remaining Group to receive a decent interest income given the Sale Loans Interest Rate will be applied to the Second Payment, the Third Payment and/or the Fourth Payment (as the case may be).

As the Disposal would (i) enable the Remaining Group to reduce its outstanding loan amount by disposing of the Sale Loans of HK$2.03 billion; (ii) generate interest income to the Remaining Group by allowing the Purchaser to repay the Sale Loans in four-tranche payments; and (iii) part of the proceeds from the Disposal will be used by the Company to repay the bank loans of the Remaining Group, we concur with the Directors' view that the Disposal will reduce the financial leverage and strengthen the financial position and profitability of the Remaining Group.

6.2 Realizing the Disposal Group's value before possible further deterioration of its asset quality

Based on the financial information of the Disposal Group as illustrated under the section headed "3. INFORMATION ON THE DISPOSAL GROUP" above, we noted that the net profit attributable to the Company by each member of the Disposal Group has been decreasing in past few years. In specific, EBOHR Group and Sure Best had recorded a loss attributable to the Company of approximately HK$7.94 million and approximately HK$2.27 million for nine months ended 30 September 2020, reflecting a deterioration of financial situation from a net profit position to a net loss position, while International Volant Group, Joyful Surplus Group, Sharptech and Unique Leader have continuously recorded a loss attributable to the Company for the past years. The Directors believe that the unsatisfying financial performance of the Disposal Group is principally due to several factors, including but not limited to, the declining trend of sales from physical stores and e-commerce channels, the challenging global economic environment, and an unexpected outbreak of the COVID-19 pandemic that leads to a substantial drop in tourist arrivals to the relevant geographic areas of the watch brands owned by the Disposal Group. Given that it is full of uncertainties for the aforementioned geographic areas in relation to the recovery of theireconomy and number of travelers' arrivals (details of our analysis have been set out in "5. OUTLOOK - 5.1 Outlook of the Disposal Group" above), we concur with the Directors' view that the sales growth of the Watch Businesses in the PRC and overseas markets will remain unclear in the near future, and the Group might have to incur further losses and/or deploy more resources into the Watch Businesses due to the overall rigorous operating environment within the retail sector. In light of the above, we consider the Disposal is strategic, commercially justifiable, and in the interests of the Company and the Shareholders as a whole.

6.3 Reallocating the Remaining Group's recourses on a relatively high potential growth segment

After the completion of the Disposal, the Remaining Group's principal activity will be the Banking Businesses, which have been fairly stable in the past few years. As referred to the 2019 Annual Report, the amount of asset under management by Bendura Bank increases from approximately CHF3,575 million for FY2017 to approximately CHF3,672 million for FY2019, representing an increase of approximately 2.71% and as advised by the representatives of the Company, such amount was approximately CHF3,500 million as at 30 November 2020. Although the operation and performance have been slightly affected by the COVID-19 pandemic and a global challenging economic environment, Bendura Bank has developed organically as shown by the improving level in assets under management and stable profitability. Given that the performance of the Banking Businesses have met the Directors' expectation, the Directors anticipate that the Banking Businesses continue to perform as the main driver of revenue and profitability of the Group in the years to come and will further become an important component of the Remaining Group's business portfolio in the foreseeable future.

Furthermore, the Directors believe, and we concur, that after releasing the capital locked up for the development of the Disposal Group, the Remaining Group will be able to capitalize on the Group' investment on watch brands "Eterna", "Rotary", "EBOHR", "Rossini" and "Corum", and reallocate its resources to the Banking Businesses and Bendura Bank for the purpose to seek a relatively higher return in future. Also, the Directors expect that the Disposal would equip the Remaining Group with sufficient working capital to improve competitiveness among its competitors. In the medium term, it is anticipated that the Company will expand the footprint of Bendura Bank into the PRC, where most numbers of wealthy people are resided.

Taking into consideration (i) the convincing prospects of the asset and wealth management industry as set out in the "5. OUTLOOK - 5.2 Outlook of the Remaining Group" above; (ii) the satisfactory historical performance of the Banking Businesses; (iii) the relatively stable performance of Bendura Bank under the COVID-19 pandemic in comparison to the Watch Businesses; and (iv) the Company can focus on achieving the medium term business proposal of Bendura Bank upon Completion, we consider the Disposal is strategical and reasonable, and in the interests of the Company and the Shareholders as a whole.

Although there is no strong synergy between the Watch Businesses and the Banking Businesses, the Disposal will streamline the Company's business to focus on the Banking Businesses. Having considered abovementioned factors, we concur with the Board's view that the Disposal represents a valuable opportunity for the Group to capitalize on the cash inflow to strengthen its financial position and focus on the Banking Businesses, as well as the pursuit of selective strategic and potential acquisitions in future.

7. Principal Terms of the Sale and Purchase Agreement

Date	:	16 December 2020 (after trading hours)
Parties
Vendor	:	the Company
Purchaser	:	Tycoon Idea Global Limited, a company incorporated
in British Virgin Islands with limited liability
Purchaser's Guarantor	:	Sincere View International Ltd., a company
incorporated in British Virgin Islands with limited
liability
7.1 Assets to be disposed of

Subject to the terms and conditions of the Sale and Purchase Agreement, the Company, as the legal and beneficial owner, has conditionally agreed to sell the Sale Shares and the Sale Loans, and the Purchaser has conditionally agreed to purchase the Sale Shares and the Sale Loans, free from all Encumbrances and together with all rights and entitlements which the Company has in the Sale Shares and the Sale Loans with effect from the Completion Date.

The Sale Shares represent all the issued shares of each of International Volant, EB Brand, Jia Cheng, Joyful Surplus, Sharptech, Unique Leader and Sure Best. The Sale Loans represent the entire sum owing by the Disposal Group to the Company as at the Completion Date. As at the date of the Sale and Purchase Agreement, the amount of the Sale Loans is HK$2.03 billion. The Sale Loans are principally general working capital loans provided by the Company for operation of business of the Disposal Group. Please refer to the details of the Disposal Group as set out in the section headed "3. INFORMATION ON THE DISPOSAL GROUP" above.

7.2 Consideration

The Consideration of HK$3.53 billion comprises (i) the consideration for the Sale Shares of HK$1.5 billion; and (ii) the consideration for the Sale Loans of HK$2.03 billion (being the face value of the Sale Loans as at 30 June 2020), to be paid by the Purchaser (or its nominee(s)) to the Company (or its nominee(s)), subject to adjustment at Completion.

The consideration for the Sale Shares of HK$1.5 billion shall be settled by way of cash at Completion.

The consideration for the Sale Loans of HK$2.03 billion shall be settled by four tranches of payments (the "Payments") as following manner: i) as to HK$400 million of the consideration for the Sale Loans to be offset by the Special Dividend at Completion (the "First Payment"); (ii) as to minimum of HK$0.2 billion and maximum of HK$1.6 billion, plus an interest rate of 6% per annum (the "Sale Loans Interest Rate") within one year from the Completion Date (the "Second Payment"); (iii) minimum of HK$0.2 billion and maximum of HK$1.4 billion, plus Sale Loans Interest Rate within the second year from the Completion Date (the "Third Payment"); and (iv) the remaining balance of up to HK$1.23 billion, plus Sale Loans Interest Rate within the third year from the Completion Date (the "Fourth Payment").

The settlement of the consideration for the Sale Loans in aforesaid Payments was arrived at after arm's length negotiations between the Company and the Purchaser on normal commercial terms. Given that the Company has yet to identify specific potential acquisition targets and taking into account the prevailing low and fluctuating market interest rates, the Company considers that the settlement of the consideration for Sale Loans in aforesaid Payments will yield stable interest and financial return to the benefit of and is in the best interests of the Company and the Shareholders as a whole. In addition, as the Company also considers that the consideration for Sale Shares of HK$1.5 billion is sufficient for current operations of the Remaining Group, the Company is of the view that the settlement of the consideration for Sale Loans in aforesaid Payments will be able to facilitate the use of proceeds from the Sale Loans over the next three years more effectively.

In order to assess the risk on the Sale Loans arrangement, the Company has conducted research on Mr. Hon, the Purchaser and/or the Purchaser's Guarantor's equity investments and major properties investment. In this regard, we have performed our independent research on the equity investment held by the Purchaser and the Purchaser's Guarantor's. Based on the public information, we noted that Mr. Hon, who is interested in 80% of the Purchaser's Guarantor, indirectly holds (i) 33.95% equity interest in Citychamp Dartong Co., Ltd. (Stock Code: 600067.CH), a Shanghai Stock Exchange listed company with market capitalization of approximately RMB5.16 billion (equivalent to approximately HK$6.19 billion) as at the Latest Practicable Date; (ii) 28.13% equity interest of Cordlife Group Limited (Stock Code: CLGL.SP), a Singapore Exchange listed company with market capitalization of approximately SGD95.47 million (equivalent to approximately HK$559.16 million) as at the Latest Practicable Date; and (iii) 69.45% equity interest of the Company with market capitalization of approximately HK$6.66 billion as at the Latest PracticableDate. As advised by the representatives of the Company, shares of the aforesaid listed companies are free of pledge as at the Latest Practicable Date, and the Company will assess the financial status of Mr. Hon, the Purchaser and the Purchaser's Guarantor from time to time to ensure payment of the Consideration for the Sale Loans. After taking into account of (i) the remaining Sale Loans (after deducting the First Payment by way of Special Dividend) and an interest payment of approximately HK$97,800,000 (which is calculated with reference to total amount of the Second Payment, Third Payment and Fourth Payment and under the assumption that the Purchaser fully settles the entire payments within the first year from the Completion Date); and (ii) a regular assessment on the financial status of Mr. Hon, the Purchaser and the Purchaser's Guarantor, we are of the view that the Purchaser and the Purchaser's Guarantor possess the repayment ability for the settlement of the Sale Loans.

In addition, despite that there is no pledge/ security for the settlement of the Sale Loans, given that Mr. Hon remains to be the ultimate controlling shareholder of the Company after the Disposal, the settlement of the Sale Loans aligns with the interests of the Company and the Shareholders (including Mr. Hon).

Hence, we concur with the Directors' view that both the Purchaser and the Purchaser's Guarantor have sufficient capability to repay the Sale Loans and together with the terms of Payments and the Sale Loans Interest Rate, are in the interest of the Company and its Shareholders as a whole.

7.3 Adjustment of the Consideration

If the difference of either net asset value of the Disposal Group and each of the members of Remaining Group or Sale Loans of Disposal Group and Remaining Group as shown in the Accounts and Completion Accounts does not exceed 20%, no adjustment of the Consideration shall be made.

If the difference between either net asset value of the Disposal Group and Remaining Group or Sale Loans of Disposal Group and each of the members of Remaining Group as shown in the Accounts and Completion Accounts exceeds 20%, then the First Payment shall be adjusted based on the amount exceeding 20% to be settled by way of cash at Completion.

7.4 Basis of the Consideration

As mentioned in the Board Letter, the Consideration was arrived at after arm's length negotiations between the Company and the Purchaser on normal commercial terms and making reference to (i) the net asset value of the Disposal Group of HK$1.29 billion and the face value of the Sale Loans of HK$2.03 billion as at 30 June 2020; (ii) potential change of net asset value of the Disposal Group from 1 July 2020 to the Completion Date; and (iii) the business prospects of the Disposal Group and other factors set out in the section headed "REASONS FOR AND BENEFITS OF THE DISPOSAL " in the Board Letter.

As at 30 September 2020, the Disposal Group had property, plant and equity with carry value of HK$751.60 million, comprising land and buildings of approximately HK$486.40 million and plant and equipment of approximately HK$265.20 million. The land and buildings of the Disposal Group are designated for production purposes and have been recorded in the books of the Disposal Group under the cost approach. In order to estimate the market value of land and buildings of the Disposal Group, the management of the Company made reference to the indicative value prepared by independent valuers based on comparable properties and noted that the aggregate market value of the land and buildings of the Disposal Group (the "Disposal Group Properties") does not differ significantly from the aforesaid carrying value.

We have obtained the preliminary valuation reports of the Disposal Group Properties and noted that the aggregate market value of the Disposal Group Properties is approximate to the carrying value of land and buildings as at 30 September 2020 of approximately HK$486.40 million. The Disposal Group Properties consist of two properties located in the PRC (i.e. Zhuhai and Shenzhen) (the "Disposal Group PRC Properties") and three properties located in Switzerland (the "Disposal Group Switzerland Properties"). As advised by the representatives of the Company, the Group evaluates the Disposal Group Switzerland Properties every few years for the preparation of annual report of the Group and the carrying value of the Disposal Group Switzerland Properties remained comparatively stable for the past years.

The Disposal Group PRC Properties contributes considerably of the value of the Disposal Group Properties. We acknowledged that the valuer estimated the market value of Disposal Group PRC Properties by using depreciated replacement cost approach. Based on the working summary obtained by us, we noted that each of the Disposal Group PRC Properties comprises of both fair values of building, and land, separately. For the determination of fair value of building, the valuer made reference to the official construction cost guideline published by the Shenzhen local government and public bidding information of construction projects that are in similar nature as the Zhuhai properties. While for the fair value of land, we understood that the valuer made reference to auctioned land comparables which have been granted for similar land use rights as the Disposal Group PRC Properties (as the case may be). In order to assess the similarities of comparable properties that adopted by the valuer for the assessment of the Disposal Group PRC Properties, we have performed our independent research on each of the comparable properties and noted that (i) the land use rights of each of the comparable properties is similar to the Disposal Group PRC Properties (as the case may be); and (ii) the geographic location of the comparable properties for estimation of fair value of land is proximity to the Disposal Group PRC Properties (as the case may be). Given abovementioned, we are of the view that the valuation of the Disposal Group Properties is fair and reasonable.

7.5 Conditions Precedent and Completion

In relation to the detailed Conditions precedent to the Sale and Purchase Agreement, please refer to the sub-section headed "Conditions precedent" in the Board Letter.

Completion shall take place on the Completion Date when the parties shall exchange the respective documents and the business shall be transacted according to the terms and conditions of the Sale and Purchase Agreement. Completion shall take place as soon as practicable but in any event not later than the Long Stop Date.

7.6 Our analysis on the Consideration

In assessing the fair and reasonableness of the Consideration for the Disposal, we have conducted a comparable analysis through identifying comparable companies under the selection criteria which includes (i) companies that are engaged in similar principal businesses as the Disposal Group (i.e. engaged in watches related business and with not less than 50% of the total revenue being generated from the aforesaid business); and (ii) companies that are listed on the Stock Exchange. Accordingly, we have identified 13 comparable companies (the "Comparable Companies") on our best effort and exhaustive basis. Although each of the Comparable Companies involved in the comparable analysis may have different market capitalization, profitability, and financial positioning as compared with those of the Disposal Group, having considered that not less than 50% of total revenue of each Comparable Companies is from watches related business, we consider the principal business amongst the Comparable Companies are similar and comparable to the Disposal Group, and therefore are of the view that the exhaustive list of the Comparable Companies can provide the Shareholders with a market reference of the underlying business, and is fair and representative for our analysis on the Consideration.

As the capital market changes rapidly, we consider that recent price-to-earnings ratios and price-to-book ratios (the "PBR") of the Comparables Companies can serve as reliable benchmarks, which entail the recent market conditions as well as market sentiment at the time of proposing the terms of the Sale and Purchase Agreement. As the Consideration is determined with reference to the net asset value of the Disposal Group and the face value of the Sale Loans as at 30 June 2020 and as referred to the Announcement, we noted each of International Volant Group, EBOHR Group, Joyful Surplus Group, Sharptech, Unique Leader and Sure Best recorded net loss for the six months ended 30 June 2020, therefore we consider price-to-earnings ratio comparison is not suitable to assess the Consideration.

In addition, as each member of the Disposal Group is in the same industry, and as noted from the Announcement, the net asset value of the Disposal Group amounted to HK$1.29 billion as at 30 June 2020 (the "Implied NAV"), the implied PBR of the Disposal Group would be approximately 1.16 times (the "Implied PBR"), which is calculated based on the Consideration for the Sale Shares of HK$1.50 billion and the Implied NAV of HK$1.29 billion as at 30 June 2020. We have excluded the Sale Loans of HK$2.03 billion given that the Sale Loans are disposed to the Purchaser on a dollar-to-dollar basis.

In light of this, we consider the Comparable Companies' PBR to be an appropriate basis to assess the fairness of the PBR of the Disposal Group so as to assess the Consideration for the Sale Shares.

Stock codeCompany name

Principle activities

Market capitalisation as at the Date of the

Sale and Purchase Agreement i.e. 16

December 2020 (HK$' million)

Net asset value (HK$' million)

PBR

(note 1)

(note 2)

• 860-HK Apollo Future Mobility

  Group Limited

  Retail and wholesale of jewellery products and watches; manufacture and sales of electric vehicles and related components, money lending, securities investments, property investment and mining

  4,969.09

  3,808.98 1.30

• 104-HK Asia Commercial Holdings

  Limited

  Trade of watches (retail and wholesale), property leasing and gourmet business

  179.31

  387.90 0.46

• 887-HK Emperor Watch & Jewellery

  Limited

  Sales of watches and jewellery, and commission income for sales of watches

  691.50

  4,343.91 0.16

• 8219-HK Hanvey Group Holdings

Ltd.

Principally engaged in the design and development, manufacturing and distribution of watch products on original design manufacturing basis across the globe

69

51.17 1.35

Stock codeCompany name

Principle activitiesMarket capitalisation as at the Date of the

Sale and Purchase Agreement i.e. 16

December 2020 (HK$' million)

Net asset value (HK$' million)

PBR

(note 1)

(note 2)

• 3389-HK Hengdeli Holdings LimitedSale of internationally renowned brand watches, comprehensive related customer services and maintenance in Hong Kong, Macau, Taiwan and Malaysia and etc

  1,375.49

  4,783.31 0.29 (note 3)

• 1327-HK Luxxu Group Ltd.

  Principally engaged in the manufacture and sales of own-branded watches and jewelleries

  45.62

  410.40 0.11 (note 3)

• 398-HK Oriental Watch Holdings

  Limited

• 1470-HK Prosper One International

  Holdings Company Limited

  Sales of watchesPrincipally engaged in retail and wholesale of watches in Hong Kong

  1,315.87

  2,093.24 0.63

  80

  27.03 2.96

• 444-HK Sincere Watch (Hong Kong)

Limited

Distribution of branded luxury watches, timepieces and accessories in Hong Kong, Macau, Taiwan, Korea and the PRC, dining business and property investment

453.30

815.30 0.56

Stock codeCompany name

Principle activitiesMarket capitalisation as at the Date of the

Sale and Purchase Agreement i.e. 16

December 2020 (HK$' million)

Net asset value (HK$' million)

PBR

(note 1)

(note 2)

• 84-HK Stelux Holdings

  International LimitedPrincipally engaged in retail watches in Hong Kong, Macau and the PRC, and watch wholesale trading

  86.86

  503.28 0.17

• 2033-HK Time Watch Investments

  Ltd.

  Manufacture, wholesale and sales of watches

  1,663.96

  2,193.19 0.76

• 1856-HK Ernest Borel Holdings Ltd.

  Design, production, marketing and sale of mechanical and quartz premium watches

  920.71

  134.11 6.87

• 280-HK King Fook Holdings Ltd.

Disposal Group

Gold ornament, jewellery, watch and gift retailing, bullion trading and diamond wholesaling

Source: Official website of the Stock Exchange

255.82

647.53 0.40

Maximum 6.87

Minimum 0.11

Average 1.18

Median 0.63

1,500

(being the Consideration for the Sale

Shares)

1,290 1.16

(being the net asset value of the Disposal Group as at 30 June 2020)

(note 4)

Notes:

• 1. The market capitalization is based on the closing price as quoted on the Stock Exchange on 16 December 2020 (being the date of the Sale and Purchase Agreement).

• 2. The net asset value was extracted from the latest published results of the respective companies (i.e. interim or annual reports) prior to 16 December 2020 (being the date of the Sale and Purchase Agreement).

• 3. The amount is converted at the exchange rate of RMB1 to HK$1.18 as at 16 December 2020 (being the date of the Sale and Purchase Agreement).

• 4. The Implied PBR represents the Consideration of the Sale Shares divided by the net asset value of the Disposal Group as at 30 June 2020.

As illustrated in above table, we noted that the PBR of the Comparable Companies range from approximately 0.11 times to approximately 6.87 times with median and average of approximately 0.63 times and approximately 1.18 times, respectively. The Implied PBR is approximately 1.16 times, which is (i) within the range of the PBR of the Comparable Companies; (ii) higher than the median of the PBR of the Comparable Companies; and (iii) similar to the average of the PBR of the Comparable Companies.

In consideration of (i) the Comparable Companies are principally engaged in the similar business as the Disposal Group; (ii) the Disposal Group's Implied PBR is at the similar level to better than the Comparable Companies' PBR; (iii) the Disposal Group is loss-making and likely to have deteriorated further due to the ongoing COVID-19 pandemic and the uncertainty on the global economy recovery; and (iv) the cash inflow from the Sale Shares can be utilized on the Banking Businesses which is undergoing an increasing demand of such service, we are of the view that the Consideration for the Sale Shares is fair and reasonable from the perspective of PBR valuation, and is in interests to the Company and the Shareholders as a whole.

In addition to above, we noted that the payment in relation to the Disposal involves Sale Loans' arrangement which consists the Sale Loans Interest Rate of 6% per annum. As noted from the Board Letter, the Sale Loans Interest Rate is payable by the Purchaser to the Vendor for the Second Payment, Third Payment and/or Four Payment (as the case may be), and as advised by the representatives of the Company, the Sale Loans Interest Rate is determined after arm's length negotiations amongst the parties to the Sale and Purchase Agreement with reference to the prevailing market interest. In this regard, we have performed our researches on comparable interest rates of loans and financial assistances (the "Comparables Interests") based on the selection criteria including (i) loan(s)/financial assistance(s) with principal amount of over HK$100 million; (ii) loan(s)/financial assistance(s) was not granted by a commercial bank; and (iii) loan(s)/financial assistance(s) was granted by/from a company listed on the Stock Exchange during a period from 1 August 2020 to 16 December 2020 (being the date of the Sale of Purchase Agreement) (the "Interests Review Period"). We consider that the Interests Review Period is adequate, fair and reasonable in providing a general reference for the recent market trend in relation to the key terms of the Comparables Interests under similar market conditions, given thatthe timeframe is sufficient in generating a reasonable and meaningful amount of comparable interest rates for the purpose of our assessment on the Sale Loans Interest Rate. To the best of our knowledge and as far as we are aware of, we have identified 17 Comparables Interests, and we consider that such Comparables Interests can provide a reference on recent interest rate of loan(s)/financial assistance(s) granted by/from a Hong Kong-listed company during the Interests Review Period. Therefore, we consider that the Comparables Interests listed below are exhaustive based on the above criteria and are fair and representative.

TypeDateCompany nameStock code

Interest rateTermPrincipal amount Guarantee (HK$' million) (Yes/No)

Loan

14-Dec-2020

Asia Pacific Silk Road

767

• 6% 36 months

  119 Yes

  Investment Company Limited

  Loan

  1-Dec-2020 BOCOM International

  3329

• 8% 364 days

  Holdings Company

  387.50 Yes (note 1)

  Limited

  Loan

  • 20-Nov-20 Hospital Corporation of

    3869

    4.79%

    1 year

    China Limited

    118.67 (note 2)

    YesLoan

  • 19-Nov-20 Sun Hung Kai & Co.

    86

• 7.38% 48 months

  378

  Yes

  • Limited

• (note 3)

  Loan

  • 16-Nov-20 Sany Heavy Equipment

    631

    • 3.85% 180 days

• International Holdings

  118.67 (note 2)

  Yes

  Company LimitedLoan

• 6-Nov-20 Sun Hung Kai & Co.

86

• 10.22% 3 years

359.05

Yes

Limited

• (note 4)

  Loan

  • 30-Sep-20 Shangdong Gold Mining

    1787

• 4.50% 3 months

  • 387.50 No

    • Co. Ltd.

      Loan

    • 4-Sep-20 Kunming Dianchi Water

      3768

• 7% 12 months

  • 415.35 No

  • Treatment Co., Ltd.

    (note 2)

    Loan

  • 2-Sep-20 Beijing Capital Land Ltd. 2868

• 4.75% 3 years

  211.83 No (note 2)Loan

  • 19-Aug-20 China Strategic Holdings

    235

• 10% 3 months

  300

  Yes

  • Limited

    Loan

  • 4-Aug-20 CST Group Limited

  985

• 7% 2 years

  230 No

  Financial assistance

  18-Nov-20

  China Tonghai

  952

• 8.25% 14 days

190 No

International Financial Limited

TypeDateCompany nameStock code

Interest rateTermPrincipal amount Guarantee (HK$' million) (Yes/No)

Financial assistance

12-Nov-20

Differ Group Holdings

6878

Company Limited

• 10% no fixed repayment date

  872.09 NoFinancial assistance

  28-Sep-20

  Viva China Holdings

  8032

• 4% 12 months

  Limited

  565.52 (note 5)

  Yes

  Financial assistance

  17-Aug-20

  Sinofert Holdings

  297

• 3.85% 24 months

Limited

1,186.70 (note 2)

Yes

Financial assistance

• 8-Apr-20 China East Education

  667

  7%

  Holdings Limited

  till 31 December 2021

  154.27 (note 2)

  YesFinancial assistance

• 8-Apr-20 China East Education

667

7%

Holdings Limited

till 31 December 2021

308.54 Yes (note 2)

Maximum 10.22%

Minimum 3.85%

Average 6.68%

Median 7%

Source: official website of the Stock Exchange

Notes:

• 1. The amount is converted at the exchange rate of US$1 to HK$7.75.

• 2. The amount is converted at the exchange rate of RMB1 to HK$1.18 as at 16 December 2020 (being the date of the Sale and Purchase Agreement).

• 3. The percentage rate per annum is the aggregate of (i) HIBOR; and (ii) 7% per annum. As at 16 December 2020, the 3-month HIBOR was approximately 0.38%.

• 4. The percentage rate per annum is the aggregate of (i) 10% per annum; and (ii) LIBOR. As at 16 December 2020, the 3-month LIBOR was approximately 0.22%.

• 5. The amount is converted at the exchange rate of GBP1 to HK$10.47 as at 16 December 2020 (being the date of the Sale and Purchase Agreement).

As shown in above table, the Comparables Interests range from a minimum of 3.85% to a maximum of approximately 10.22%, with an average of approximately 6.68% and a median of 7%. The Sale Loans Interest Rate of 6% is (i) within the range of Comparables Interest; and (ii) falls slight below the average of approximately 6.68% and the median of 7%.

Also, we noted that (i) the Purchaser's Guarantor will provide guarantee to the repayment of the Sale Loans, and (ii) upon an internal risk assessment, the Directors are of the view that the Purchaser and the Purchaser's Guarantor possess sufficient assets to repay of the Sale Loans. Because of that, we have further selected the loan(s)/financial assistance(s) that have included provision of guarantee(s) or security, from above list of Comparables Interests, and summarized a list with certain information as below (the "Guarantee Comparables Interests"):

TypeDateCompany nameStock code

Interest rateTermPrincipal amount (HK$' million)

Loan

14-Dec-2020

Asia Pacific Silk Road

767

6% 36 months 119

Investment Company Limited

Loan

1-Dec-2020 BOCOM International

3329

8% 364 days 387.50

Holdings Company

Limited

Loan

• 20-Nov-20 Hospital Corporation of

  3869

  4.79%

  1 year 118.67

  China Limited

  Loan

• 19-Nov-20 Sun Hung Kai & Co.

  86

  7.38% 48 months 378

  Limited

  Loan

• 16-Nov-20 Sany Heavy Equipment

  631

  3.85% 180 days 118.67

  International Holdings

  Company LimitedLoan

• 6-Nov-20 Sun Hung Kai & Co.

  86

  10.22%

  3 years 359.05

  Limited

Loan

19-Aug-20

China Strategic Holdings

235

10% 3 months 300

Limited

Financial assistance

28-Sep-20

Viva China Holdings

8032

4% 12 months 565.52

Limited

Financial assistance

17-Aug-20

Sinofert Holdings Limited 297

3.85% 24 months

1,186.70

TypeDateCompany nameStock code

Interest rateTermPrincipal amount (HK$' million)

Financial assistance

• 8-Apr-20 China East Education

  667

  7%

  Holdings Limited

  till 31 154.27 December 2021

  Financial assistance

• 8-Apr-20 China East Education

667

7%

Holdings Limited

till 31 308.54 December 2021

Maximum 10.22%

Minimum 3.85%

Average 6.55%

Median 7%

As illustrated above, the Guarantee Comparables Interests range from a minimum of 3.85% to a maximum of approximately 10.22%, with an average of approximately 6.55% and a median of 7%. The Sale Loans Interest Rate of 6% per annum is (i) within the range of Guarantee Comparables Interests; and (ii) slightly below the average of approximately 6.55% and the median of 7%.

We have performed a more in-depth analysis by obtaining the lists of bank borrowings of the Group as at 31 December 2020 and Bendura Bank's loan interest rates charged to its clients as at 31 December 2020 and understood that, the Sale Loans Interest Rate of 6% is (i) higher than the interest rates received by Bendura Bank which range from 0.93% to 1.50% for loan services offered to its clients; and (ii) higher than the interest rates for loans granted by local commercial bank(s) to the Group as at 31 December 2020, which range from HIBOR interest plus 1.50% to plus 3.30%. As further advised by the representatives of the Company, we noted that the Group's current deposits have been placed with local commercial banks with zero interest rate. Hence, the Sale Loans Interest Rate of 6% is also higher than the interest rate offered by local commercial banks to the Group for current deposits.

Therefore, we concur with the Directors' view that the Sale Loans Interest Rate of 6% per annum is fair and reasonable, and the proposed arrangement for the Sale Loans would enable the Remaining Group to generate a better than market interest income in future, which is in the interest of the Company and its Shareholders as a whole.

Having considered that (i) the Implied PBR is within the range of the PBR of the Comparables; (ii) the Sale Loans Interest Rate is within the range of Comparables Interests and the range of Guarantee Comparables Interests; (iii) the Sale Loans Interest Rate is higher than the deposit rates offered by local commercial banks to the Group and the interest rates offered by Bendura Bank to its clients; (iv) the Sale Loans Interest Rate is higher than the interest rates for the loans granted by local commercial banks to the Group as at 31 December 2020; and (v) the Sale Loans Interest Rate would enable the Remaining Group to generate an interest income of approximately HK$97,800,000 on the assumption that the Purchaser would fully settle the balance of Sale Loans in the first year from the Completion Date, we concur with the Director's view that the terms of pursuant to the Sale and Purchase Agreement and the transactions are on normal commercial terms or better and fair and reasonable, and in the interests of the Company and the Shareholders as a whole.

8. Intended use of proceeds

As noted in the Board Letter, the Company will receive the net proceeds of the Disposal of HK$3.50 billion (being the aggregate amount of the consideration for the Sale Shares, the First Payment, the Second Payment, the Third Payment and the Fourth Payment). It should be noted that the actual cash inflow to be generated from the Disposal and received by the Company will depend on the financial position of the Disposal Group as at Completion and the exchange rates amongst CHF, GBP, RMB and Hong Kong dollar as at 30 September 2020.

8.1 The proceeds from the Sale Shares consideration and the First Payment

The aggregate proceeds from the consideration for the Sale Shares and the First Payment is approximately HK$1.90 billion.

As stated in the Board Letter, approximately 60% or approximately HK$1.20 billion will be used for the repayment of bank loans of the Remaining Group. It is expected that the debts of the Remaining Group will be settled within one month after Completion and thereby the interest burden of the Remaining Group will be decreased.

In addition, subject to approval of the necessary resolution at the EGM by the Shareholders and Completion having taken place, the Company also intends to apply not less than approximately 30% or approximately HK$570 million for the distribution of Special Dividend to the Shareholders (representing Special Dividend of not less than HK$0.13 per Share based on the number of outstanding Shares as at the Latest Practicable Date). In the event that the distribution of the Special Dividend is approved by the Shareholders, it represents an opportunity for the Shareholders to realize a portion of the value of their investments in the Group.

The remaining balance of the net proceeds of approximately HK$130 million will be used for general working capital of the Remaining Group. Please refer to the section headed "FUTURE PLANS AND INTENDED USE OF PROCEEDS" in the Board Letter for detailed breakdown.

8.2 The proceeds from the Second Payment, the Third Payment and the Fourth Payment

As further mentioned in the Board Letter, the aggregate proceeds of the Second Payment, the Third Payment and the Fourth Payment is approximately HK$1.60 billion and will be used by the Group over the next three years in the following manner: (i) approximately HK$550 million to strengthen Bendura Bank's capital base to support the sustainable growth of its credit business and to expand its geographical coverage and product coverage in Hong Kong, the PRC, East Asia and Western Europe; (ii) approximately HK$150 million to strengthen Bendura Bank's asset management business; and (iii) approximately HK$700 million for the pursuit of selective strategic investment and acquisition opportunities in relation to the Banking Business in Hong Kong and overseas; and (iv) remaining HK$200 million for general working capital of the Remaining Group. Please refer to the section headed "FUTURE PLANS AND INTENDED USE OF PROCEEDS" in the Board Letter for detailed breakdown.

After taking into account that the aforesaid intended use of proceeds upon Completion will (i) reduce the Remaining Group's interest burden and gearing ratio; (ii) distribute the Special Dividend to the Shareholders; (iii) enhance the Remaining Group's working capital; (iv) provide flexibility for the Remaining Group to develop its Banking Businesses; and (v) enable the Remaining Group to pursue selective strategic investment and acquisition opportunities related to the Banking Businesses, we concur with the Directors' view that the intended use of proceeds is strategic, reasonable and in the interests of the Company and the Shareholders as a whole.

9. Financial Effects of the Disposal

Upon Completion, the Disposal Group will cease to be subsidiaries of the Company and financial results of each member of Disposal Group will no longer be consolidated into the financial statements of the Remaining Group.

Based on the unaudited pro forma financial information of the Remaining Group as set out in the Appendix III to the Circular, assuming the Disposal had been completed on 30 June 2020, the total assets of the Group would have been decreased by approximately HK$1,331.67 million from approximately HK$18,322.91 million as at 30 June 2020 to approximately HK$16,991.24 million, and total liabilities of the Group would have been decreased by approximately HK$914.66 million from approximately HK$13,897.64 million as at 30 June 2020 to approximately HK$12,982.98 million. The gearing ratio of the Remaining Group (which is calculated with reference to (i) the sum of borrowings, amounts due to directors and amounts due to a shareholder; and (ii) the Shareholder's equity) would be improved from approximately 43.38% to approximately 36.12%.

Based on the unaudited pro forma financial information of the Remaining Group as set out in the Appendix III to the Circular, the Group recorded audited profit before income tax of approximately HK$142.64 million for FY2019, and assuming the Disposal had been completed on 1 January 2019, the unaudited loss before income tax of the Remaining Group would havebeen approximately HK$148.85 million as a result of the Disposal. As noted from the Appendix III to the Circular, the change from profit to loss of the Remaining Group is mainly due to (i) the exclusion of assets (including goodwill) and liabilities of the Disposal Group as at 1 January 2019, (ii) the exclusion of non-controlling interests of the Disposal Group as at 1 January 2019; and (iii) the exclusion of the Sale Loans as at 1 January 2019 assigned to the Purchaser as if the Disposal has been completed on 1 January 2019.

Except for the transaction costs as illustrated above, the other expenses items included in the calculation of loss before tax as a result of the Disposal are non-cash in nature. In addition, all of these expenses will have no continuing impact on the Remaining Group's business operations. The Directors are of the view that the Remaining Group will have a healthier financial position and the Disposal will bring continuous benefits to the Shareholders despite the loss to be recorded by the Group on the Disposal.

RECOMMENDATION

Having considered the above principal factors and reasons, we consider that the Disposal, though not in the ordinary and usual course of business of the Group, is in the interests of the Company and the Shareholders as a whole, and that the terms of the Sale and Purchase Agreement are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the relevant resolutions at the EGM so as to approve the relevant resolution to be proposed at the EGM.

Yours faithfully,

For and on behalf of Merdeka Corporate Finance Limited

Tina Hung

Wallace So

Director

DirectorMs. Tina Hung is a Responsible Officer under the SFO to engage in Type 6 (advising on corporate finance) regulated activity and has over 25 years of experience in corporate finance.

Mr. Wallace So is a Responsible Officer under the SFO to engage in Type 6 (advising on corporate finance) regulated activity and has over 9 years of experience in corporate finance.

1. FINANCIAL INFORMATION OF THE GROUP

Details of the financial information of the Group for each of the three financial years ended 31 December 2017, 2018 and 2019, and the six months ended 30 June 2020 are disclosed in the annual reports of the Company for the years ended 2017 (pages 157-332), 2018 (pages 181- 356), 2019 (pages 141-316) and the interim report of the Company for the six months ended 30 June 2020 (pages 34-72). The said annual reports and interim report have been published on the website of the Stock Exchange (www.hkex.com.hk) and the website of the Company:

• • 2017 annual report:https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0423/ltn20180423887.pdf

• • 2018 annual report:https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0425/ltn201904251527.pdf

• • 2019 annual report:https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0428/2020042800742.pdf

• • 2020 interim report:https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0928/2020092800833.pdf

2. STATEMENT OF INDEBTEDNESS

As at the close of business on 31 December 2020, being the latest practicable date for the purpose of preparing the indebtedness statement prior to the printing of this Circular, the Group had outstanding borrowings of approximately HK$1,610,435,000, details of which are set out below:

The Group
HK$'000
Bank and other borrowings, secured and guaranteed
Bank overdraft	52,711
Import trade loans	9,384
Bank borrowings	1,514,332
1,576,427
Amounts due to directors	22,008
Amounts due to shareholders	12,000
Securities
The bank and other borrowings of the Group were secured by:

• (i) corporate guarantees provided by certain subsidiaries within the Group;

• (ii) subordination deeds signed by the Directors of the Group;

• (iii) guarantee provided by the government of certain country;

• (iv) entire equity interest of certain subsidiaries within the Group;

• (v) legal charges over certain of the Group's land and buildings and investment properties within the Group;

• (vi) personal guarantee provided by an non-controlling interest shareholders of a subsidiary of the Group and certain independent third parties; and

• (vii) certain assets of the non-controlling interest shareholders of a subsidiary of the Group and certain independent third parties.

Guarantees

As at 31 December 2020, the Group has provided a corporate guarantee in respect of banking facility up to HK$55,000,000 granted to an associate. The corporate guarantee is ending on the expiry of the term of the revolving loan facility and as at 31 December 2020, the loan drawdown by the associate amounted to HK$25,000,000.

Lease liabilities

The lease liabilities as at 31 December 2020 were approximately HK$57,204,000.

Save as disclosed above and apart from intra-group liabilities and normal trade payables, due to banks and clients, irrevocable commitments, contract volume and fiduciary transactions with third party banks, credit card commitments in the ordinary course of business, as at the close of business on 31 December 2020, the Group did not have any outstanding loan capital issued and outstanding or agreed to be issued, bank overdrafts, charges or debentures, mortgages, loans, or other similar indebtedness or any finance lease commitments, hire purchase commitments, liabilities under acceptances (other than normal trade bills), acceptance credits or any guarantees or other material contingent liabilities.

For the purpose of this statement of indebtedness, foreign currency amounts have been translated into HK$ at the appropriate exchange rates prevailing as at the close of business on 31 December 2020.

The Directors are not aware of any material change in respect of the indebtedness or other contingent liabilities of the Group since 31 December 2020 up to the Latest Practicable Date.

3. WORKING CAPITAL STATEMENT

The Directors are of the opinion that, after due and careful enquiry and taking into account the existing bank balances and cash, internal resources, available credit facilities and the effect of the completion of the Disposal, the Group will have sufficient working capital for its present requirements for at least 12 months from the date of this circular.

4. MATERIAL ADVERSE CHANGE

The Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2019, the date to which the latest published audited consolidated financial statements of the Company were made up.

Set out below are the financial information of EB Brand Limited ("EB Brand") which comprises the unaudited consolidated statements of financial position as at 31 December 2017, 2018 and 2019 and 30 September 2020 and the unaudited consolidated statements of comprehensive income, unaudited consolidated statements of changes in equity and unaudited consolidated statements of cash flows for each of the years then ended and the nine months ended 30 September 2019 and 2020 and explanatory notes ("Financial Information"). The Financial Information has been reviewed by the independent auditor of the Company, BDO Limited, in accordance with the Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" and with reference to Practice Note 750 "Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal" issued by the Hong Kong Institute of Certified Public Accountants. Based on their review, nothing has come to their attention that causes them to believe that the Financial Information of EB Brand is not prepared, in all material respects, in accordance with the basis of preparation set out in Note 2 to the Financial Information of EB

Brand.

- IIA-1 -

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020

Nine months ended
Year ended 31 December	30 September
2017 2018 2019	2019 2020
HK$'000 HK$'000 HK$'000	HK$'000 HK$'000

Revenue

Sales of goods	805,155	729,930	575,134	448,251	256,648
Cost of sales	(371,365)	(313,403)	(256,981)	(186,172)	(115,935)
Gross profit	433,790	416,527	318,153	262,079	140,713
Rental income	-	1,255	2,875	2,121	3,110
Other income and other net
gains or losses	1,073	15,441	7,897	7,632	5,790
Selling and distribution
expenses	(278,438)	(274,305)	(234,803)	(178,594)	(108,149)
Administrative expenses	(68,961)	(85,869)	(75,975)	(60,419)	(47,345)
Finance costs	(4,376)	(6,315)	(6,545)	(5,045)	(4,368)
Profit/(loss) before
income tax	83,088	66,734	11,602	27,774	(10,249)
Income tax
(expense)/credit	(28,243)	(8,587)	(2,351)	(2,026)	2,311
Profit/(loss) for the
year/period	54,845	58,147	9,251	25,748	(7,938)
- IIA-2 -

Nine months ended

Year ended 31 December 30 September 2017 2018 2019 2019 2020

HK$'000 HK$'000 HK$'000 HK$'000 HK$'000

Other comprehensive income

Items that will not be subsequently reclassified to profit or loss

• - Revaluation gain upon transfer of owner occupied land and buildings to investment properties

• - Deferred tax arising from transfer of owner occupied land and buildings to investments properties Item that may be subsequently reclassified to profit or loss - Exchange differences on translation to presentation currency

-

-

58,595

57,128

(22,212)

(46,823)

-

-

(12,238)

-

-

-

-

• (23,684) 12,445

  Other comprehensive income for the year/period

  58,595

  (11,907)

  (12,238)

• (23,684) 12,445

Total comprehensive income for the year/period

• 113,440 46,240

(2,987) 2,064 4,507

- IIA-3 -

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 December 2017, 2018 and 2019 and 30 September 2020

As at 31 DecemberAs at 30 September

ASSETS AND LIABILITIES
Non-current assets
Property, plant and equipment	308,282	277,524
Prepaid land lease payments	8,087	7,476
Investment properties	-	53,813
316,369	338,813
Current assets
Inventories	507,713	490,871
Trade receivables	125,477	105,806
Prepaid land lease payments	202	192
Other assets	64,160	70,103
Due from remaining group	568	568
Income tax recoverable	-	-
Cash and deposits	53,395	58,245
751,515	725,785
Current liabilities
Trade payables	62,861	66,028
Contract liabilities	-	-
Other liabilities	125,963	102,900
Lease liabilities	-	-
Borrowings	138,113	91,099
Income tax payables	7,235	2,631
Due to remaining group	13,312	13,312
347,484	275,970
- IIA-4 -

2017 2018	2019	2020
HK$'000 HK$'000	HK$'000	HK$'000
266,578	249,919
-	-
52,578	52,613
319,156	302,532
464,234	440,919
91,661	83,307
-	-
97,164	102,581
67,888	72,318
-	598
14,381	42,429
735,328	742,152
42,386	27,693
4,979	4,246
75,296	80,083
1,146	316
139,704	136,699
2,753	68
1,312	5,843
267,576	254,948

As at 30

As at 31 December September 2017 2018 2019 2020

HK$'000 HK$'000 HK$'000 HK$'000

Net current assets	404,031	449,815	467,752	487,204
Total assets less current liabilities	720,400	788,628	786,908	789,736
Non-current liabilities
Deferred tax liabilities	-	22,212	21,800	21,800
Lease liabilities	-	-	1,679	-
-	22,212	23,479	21,800
Net assets	720,400	766,416	763,429	767,936
EQUITY
Equity attributable to owners of
the Company
Share capital	1	1	1	1
Reserves	720,399	766,415	763,428	767,935
Total equity	720,400	766,416	763,429	767,936
- IIA-5 -

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020

Share capital HK$'000

Revaluation reserve for property,

Other reserve* HK$'000

Statutory reserve* HK$'000

Exchangeplant andreserve* equipment*

HK$'000

HK$'000

Retained profits* HK$'000

Total equity HK$'000

Balance at 1 January 2017

1

(521)

22,051

(42,607)

• - 734,712

713,636

Transactions with owners Dividend paid

-

-

-

-

-

• (106,676) (106,676)

  Total transactions with owners

  -

  -

  -

  -

  -

• (106,676) (106,676)

Comprehensive income Profit for the year

Other comprehensive income Exchange differences on translation to presentation currency

-

-

-

-

-

54,845 54,845

-

-

-

58,595

-

- 58,595

Total comprehensive income for the year

-

-

-

58,595

-

• 54,845 113,440

  Balance at 31 December 2017

  1

  (521)

  22,051

  15,988

  -

• 682,881 720,400

- IIA-6 -

Share capital HK$'000

Revaluation reserve for property,

Other reserve* HK$'000

Statutory reserve* HK$'000

Exchangeplant andreserve* equipment*

HK$'000

HK$'000

Retained profits* HK$'000

Total equity HK$'000

Balance at 31 December 2017 and 1 January 2018

Impact on initial application of

HKFRS 9

1

(521)

22,051

15,988

• - 682,881

720,400

-

-

-

-

-

(224)

(224)

At 1 January 2018, as stated

1

(521)

22,051

15,988

-

• 682,657 720,176

  Comprehensive income Profit for the year

  Other comprehensive income Exchange differences on translation to presentation currency

  Revaluation gain upon transfer of owner occupied land and buildings to investment properties

  Deferred tax arising from transfer of owner occupied land and buildings to investments properties

  -

  -

  -

  -

  -

  -

  • - (46,823)

  -

• 58,147 58,147

-

• - (46,823)

  -

  -

  -

  -

  57,128

  -

  57,128

  -

  -

  -

  -

  (22,212)

• - (22,212)

Total comprehensive income for the year

-

-

-

(46,823)

34,916

• 58,147 46,240

  Balance at 31 December 2018

  1

  (521)

  22,051

  (30,835)

  34,916

• 740,804 766,416

- IIA-7 -

Share capital HK$'000

Revaluation reserve for property,

Other reserve* HK$'000

Statutory reserve* HK$'000

Exchangeplant andreserve* equipment*

HK$'000

HK$'000

Retained profits* HK$'000

Total equity HK$'000

Balance at 1 January 2019

1

(521)

22,051

(30,835)

34,916 740,804 766,416

Comprehensive income Profit for the year

Other comprehensive income Exchange differences on translation to presentation currency

-

-

-

-

-

9,251 9,251

-

-

-

(12,238)

-

- (12,238)

Total comprehensive income for the year

-

-

-

(12,238)

-

• 9,251 (2,987)

  Balance at 31 December 2019

  1

  (521)

  22,051

  (43,073)

  34,916

• 750,055 763,429

  Balance at 1 January 2019

  1

  (521)

  22,051

  (30,835)

  34,916

• 740,804 766,416

  Comprehensive income Profit for the period

  Other comprehensive income Exchange differences on translation to presentation currency

  -

  -

  -

  -

  -

• 25,748 25,748

-

-

-

(23,684)

-

-

(23,684)

Total comprehensive income for the period

-

-

-

(23,684)

-

25,748

2,064

Balance at 30 September 2019

1

(521)

22,051

• (54,519) 34,916

• 766,552 768,480

- IIA-8 -

Revaluation reserve for property,

Share	Other	Statutory	Exchange	plant and	Retained	Total
capital	reserve*	reserve*	reserve*	equipment*	profits*	equity
HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
Balance at 1 January 2020	1	(521)	22,051	(43,073)	34,916	750,055	763,429
Comprehensive income
Loss for the period	-	-	-	-	-	(7,938)	(7,938)
Other comprehensive income
Exchange differences on
translation to presentation
currency	-	-	-	12,445	-	-	12,445
Total comprehensive income for
the period	-	-	-	12,445	-	(7,938)	4,507
Balance at 30 September 2020	1	(521)	22,051	(30,628)	34,916	742,117	767,936

*These reserve accounts comprise the consolidated reserves in the unaudited consolidated statement of financial position.

- IIA-9 -

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020

Cash flows from operating activities

Profit/(loss) before income tax Adjustments for:

Depreciation and amortisation

Provision for/(reversal of)

impairment losses

Net deficit on revaluation of investment properties Interest income

Finance costs

(Gain)/loss on disposal of property, plant and equipment

Nine months ended
Year ended 31 December	30 September
2017 2018 2019	2019 2020
HK$'000 HK$'000 HK$'000	HK$'000 HK$'000

83,088

37,674 33,478

- (636) 4,376

(5)

66,734

44,773 3,277

4,001 (237) 6,315

(21)

11,602

38,455

(33)

242 (464) 6,545

46

• 27,774 (10,249)

• 29,789 24,339

• 2,982 4,750

-

-

(141) (2,949) 5,045 4,368

(89) 45

Operating profit before working capital changes (Increase)/decrease in trade receivables (Increase)/decrease in inventories Decrease/(increase) in other assets (Decrease)/increase in trade payables Increase/(decrease) in contract liabilities (Decrease)/Increase in other liabilities

157,975

(15,708)

(3,134)

30,523

(8,650)

-

(144,953)

124,842 10,971 10,140

(7,587)

3,686

-

(31,176)

56,393 13,973 20,179

(28,170)

(22,749)

4,979

(21,055)

65,360 20,304 7,391 5,106 16,338 33,901

• (58,556) (3,904)

• (19,668) (15,099)

4,566

(13,443)

(845)

584

- IIA-10 -

Nine months ended

Year ended 31 December 30 September 2017 2018 2019 2019 2020

HK$'000 HK$'000 HK$'000 HK$'000 HK$'000

Cash generated from operations Income tax paid

16,053 (31,677)

110,876 (28,795)

23,550 (3,820)

1,988 40,047 (2,627) (952)

Net cash (used in)/generated from operating activities

Cash flows from investing activities

Proceeds from disposal of property, plant and equipment

Purchases of property, plant and equipment

Interest received Decrease/(increase) in due from remaining group

(15,624)

1,630

(120,760)

636 4,226

82,081

143

(31,844)

237

-

19,730

263

(20,953)

464

(68,314)

(639) 39,095

97

69

(16,303)

141

(8,478) 2,949

- (3,045)

Net cash used in investing activities

(114,268)

(31,464)

(88,540) (16,065) (8,505)Cash flows from financing activities Increase/(decrease) in due to remaining group

Interest paid

Proceeds from borrowings Repayment of principal portion of the lease liabilities

Repayments of borrowings Dividends paid to owners of the Company

Net cash generated from/

(used in) financing activities

23,267

(4,376) 144,120

3,252 (6,315) 91,096

-

-

• (30,025) (130,951)

(106,676)

26,310

-

(42,918)

(17,209) 13,553

(6,545) 139,700

9,095

• (5,045) (4,368)

• 54,915 51,264

  (1,235)

• (843) (2,496)

(89,408) (54,915) (56,960)

-

25,303

-

7,665

-

(3,465)

- IIA-11 -

Nine months ended

Year ended 31 December 30 September 2017 2018 2019 2019 2020

HK$'000 HK$'000 HK$'000 HK$'000 HK$'000

Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year/period

Effect of foreign exchange rate changes, net

(103,582)

150,042

6,935

7,699

53,395

(2,849)

(43,507) (9,039) 27,125

58,245 58,245 14,381

(357)

(1,574) 923

Cash and cash equivalents at the end of the year/period

53,395

58,245

14,381

47,632 42,429

Analysis of balances of cash and cash equivalents Cash and deposits

53,395

58,245

14,381

47,632 42,429

- IIA-12 -

NOTES TO THE UNAUDITED FINANCIAL INFORMATION OF EB BRAND

1 GENERAL INFORMATION

On 16 December 2020, Citychamp Watch & Jewellery Group Limited (the "Company") entered into a sale and purchase agreement (the "Agreement") with Tycoon Idea Global Limited (the "Purchaser"), which is indirectly owned by Mr. Hon Kwok Lung ("Mr. Hon"), the chairman and an executive director and Ms. Lam Suk Ying, spouse of Mr. Hon, as to 80% and 20%, respectively. Pursuant to the Agreement, the Company conditionally agreed to sell, and the Purchaser conditionally agreed to acquire the entire issued share capital and shareholder's loan of EB Brand.

EB Brand is an investment holding company. EB Brand owns the entire issued shares in the capital of EBOHR Luxuries International Limited (Աتၚۜ(ଉέ) Ϟࠢʮ̡) and its subsidiaries (collectively "EBOHR Group"). EBOHR Group is principally engaged in the manufacture and distribution of "EBOHR" brand watches and timepieces in the People's Republic of China. Upon the completion, the Company will cease to have control over EB Brand.

Financial Information of EB Brand is presented in Hong Kong dollars, which is also the function currency of EB Brand.

2 BASIS OF PREPARATION

The Unaudited Financial Information for the years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020 (the "Relevant Periods") (the "Unaudited Financial Information") has been prepared in accordance with paragraph 68(2)(a)(i) of Chapter 14 of the Listing Rules, and solely for the purpose of inclusion in this circular.

The Unaudited Financial Information for the Relevant Periods has been prepared in accordance with the same accounting policies as set out in the annual report of the Company for the Relevant Periods. The consolidated financial statements of the Company have been prepared in accordance with the Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA").

The Unaudited Financial Information does not contain sufficient information to constitute a complete set of financial statements as defined in Hong Kong Accounting Standard 1 (Revised) "Presentation of Financial Statements" or an interim financial report as defined in Hong Kong Accounting Standard 34 "Interim Financial Reporting", issued by the HKICPA and should be read in connection with the relevant published annual report of the Company for the Relevant Periods.

3 RELATED PARTY TRANSACTIONS

(a) EB Brand had carried out the following material transactions with related parties during the years/periods:

Nine months ended

Year ended 31 December 30 September 2017 2018 2019 2019 2020

HK$'000 HK$'000 HK$'000 HK$'000 HK$'000

Sales to disposal group	119,750	133,351	96,430	48,029	25,154
Purchase from disposal group	127,258	130,026	94,373	46,824	24,785
Sales to remaining group	-	-	-	-	5
Interest expense to disposal
group	-	1,812	1,010	960	-
Interest income from remaining
group	-	-	879	-	-

The above transactions were entered into in the normal course of business at terms mutually agreed by the relevant parties.

- IIA-13 -

(b) Year/period end balances with related parties are as follows:

As at
30 September
2017	2018	2019	2020
HK$'000	HK$'000	HK$'000	HK$'000
Receivables from related parties
- Due from related company*	33,561	33,561	21,561	21,561
- Due from disposal group*	5,027	4,882	4,836	4,724
- Due from remaining group	568	568	67,888	72,318
Payables to related parties
- Due to disposal group*	24,020	28,468	11,147	18,763
- Due to remaining group	13,312	13,312	1,312	5,843

As at 31 December

At 31 December 2019, due from remaining group of RMB60,000,000 (equivalent to HK$67,320,000) were unsecured, interest bearing at 5.5% per annum and repayable on demand. Save as the aforementioned, the remaining balance of due from related company, disposal group, and remaining group were unsecured, interest-free and repayable on demand. As at 31 December 2017 and 2018 and 30 September 2020, these balances of due from related company, disposal group and remaining group were unsecured, interest-free and repayable on demand.

At 31 December 2018, due to disposal group of RMB25,000,000 (equivalent to HK$28,468,000) were unsecured, interest bearing at 4.35% per annum and repayable on demand. At 31 December 2019, due to disposal group of RMB10,000,000 (equivalent to HK$11,147,000) were unsecured, interest bearing at 4.35% per annum and repayable on demand. Save as the aforementioned, due to remaining group as at 31 December 2018 and 2019 were unsecured, interest-free and repayable on demand. As at 31 December 2017 and 30 September 2020, these balances of due to disposal group and remaining group were unsecured, interest-free and repayable on demand.

*These balances have been included in other assets or other liabilities in the unaudited consolidated statement of financial position.

- IIA-14 -

APPENDIX IIB FINANCIAL INFORMATION OF INTERNATIONAL VOLANT

Set out below are the financial information of International Volant Limited ("International Volant") which comprises the unaudited consolidated statements of financial position as at 31 December 2017, 2018 and 2019 and 30 September 2020 and the unaudited consolidated statements of comprehensive income, unaudited consolidated statements of changes in equity and unaudited consolidated statements of cash flows for each of the years then ended and the nine months ended 30 September 2019 and 2020 and explanatory notes ("Financial Information"). The Financial Information has been reviewed by the independent auditor of the Company, BDO Limited, in accordance with the Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" and with reference to Practice Note 750 "Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal" issued by the Hong Kong Institute of Certified Public Accountants. Based on their review, nothing has come to their attention that causes them to believe that the Financial Information of International Volant is not prepared, in all material respects, in accordance with the basis of preparation set out in Note 2 to the Financial

Information of International Volant.

- IIB-1 -