Milan Station : MAJOR TRANSACTION IN RELATION TO PROPOSED LEASE OF THE PREMISES

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Milan Station Holdings Limited, you should at once hand this circular and proxy form enclosed herein to the purchaser or transferee or to the bank or stockbroker 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.

MILAN STATION HOLDINGS LIMITED

米 蘭 站 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1150)

MAJOR TRANSACTION

IN RELATION TO PROPOSED LEASE OF THE PREMISES

Financial Adviser to the Company

A notice convening an EGM of Milan Station Holdings Limited to be held at Portion 2, 12/F., The Center, 99 Queen's Road Central, Central, Hong Kong at 11:00 a.m. on Wednesday, 7 October 2020 is set out on pages EGM-1 to EGM-3 of this circular. Whether or not you are able to attend the meeting, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of Milan Station Holdings Limited in Hong Kong, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong as soon as possible and in any event not less than 48 hours before the time fixed for the holding of the EGM. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned meeting thereof should you so wish and in such event, the instrument appointing a proxy shall be deemed to be revoked.

18 September 2020

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DEFINITIONS

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

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PRECAUTIONARY MEASURES FOR THE EGM

In light of the COVID-19 pandemic, and to better protect the safety and health of the Shareholders and other participants attending the EGM, the Company will implement the following precautionary measures at the venue of the EGM (the ''Venue''):

1. compulsory body temperature checks will be conducted on all persons attending the EGM at the waiting area outside the Venue before they are admitted to the Venue. Any person with a body temperature of over 37.3 degree celsius, or who has any flu- like symptoms, or is otherwise apparently unwell will not be admitted to the Venue;
2. all attendees must wear face masks at all times inside the Venue or at the waiting area outside the Venue;
3. all attendees of the EGM are required to fill in a travel and health declaration form to confirm that (i) he/she has no flu-like symptoms within 7 days immediately before the EGM; and (ii) within 14 days immediately before the EGM: (a) he/she has not travelled outside of Hong Kong; (b) he/she is/was not under compulsory quarantine or medical surveillance order by the Department of Health of Hong Kong; (c) he/she has not had/has close contact with confirmed case(s) and/or probable case(s) of COVID- 19 patient(s); and (d) he/she does/did not live with any person under home quarantine. Any person who fails to provide the required confirmation may be requested to leave or denied entry into the Venue;
4. seating at the Venue will be arranged in a manner to allow for appropriate social distancing. As a result, there may be limited capacity for Shareholders to attend the EGM. The Company may limit the number of attendees at the EGM as may be necessary to avoid over-crowding;
5. any attendee who does not follow any of the abovementioned measures will be refused admission to the Venue or requested to leave the Venue;
6. no refreshments or drinks will be served at the EGM to avoid close contact of attendees; and
7. all attendees are recommended to clean their hands with alcohol-based hand sanitizer before entering the Venue.

Shareholders are reminded that attendance at the EGM in person is not necessary for the purpose of exercising voting rights. The Shareholders may choose to vote by filling in and submitting the relevant proxy form of the EGM, and appoint the chairman of the meeting as a proxy to vote on relevant resolution at the EGM as instructed in accordance with the relevant proxy form instead of attending the EGM in person. For details, please refer to the proxy form of the EGM.

The Company will keep monitoring the evolving COVID-19 situation and may implement additional measures which, if any, will be announced closer to the date of the EGM.

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LETTER FROM THE BOARD

MILAN STATION HOLDINGS LIMITED

米 蘭 站 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

MAJOR TRANSACTION

IN RELATION TO PROPOSED LEASE OF THE PREMISES

INTRODUCTION

Reference is made to the announcement of the Company dated 28 August 2020 that the Company would like to relocate its retail store in Tsimshatsui, Kowloon, Hong Kong and intend to enter into the Tenancy Agreement, as tenant, with the Agent, as an agent of the Landlord, for the lease of the Premises after obtaining the shareholders' approval at the EGM.

The purpose of this circular is to provide you with, among other things, further information on the details of the Tenancy Agreement and the transaction contemplated thereunder and other information as required under the Listing Rules.

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LETTER FROM THE BOARD

and conditions of the Tenancy Agreement (exclusive of rates, government rent, management fee other outgoings). The aforesaid total consideration is calculated with reference to the saleable area of the Premises, a unit rent of approximately HK$2,418 per sq.m. of saleable area (which is subject to an increment of approximately 15% after the first two years of tenure) and a rent free period stated above.

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LETTER FROM THE BOARD

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LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE PROPOSED LEASE OF THE PREMISES

The Group is principally engaged in (i) retailing of handbags, fashion accessories and embellishments operation; (ii) retailing of spa and wellness products; and (iii) money lending business. As at the Latest Practicable Date, the Company operates five retail places under the brand name of ''Milan Station'' and seven retail places under the brand name of ''THANN'' in Hong Kong.

As set out in the annual report of the Company for the year ended 31 December 2019 (the ''2019 Annual Report''), the management of the Group has been monitoring and continued to strength its core business and seek for better growth prospects and returns. The Group continued to actively integrate traditional retail networks, enrich product portfolio to cater for consumers' changing preferences and actively identify business with profitability capabilities. The Group kept abreast of the changes in the rental market and reviewed and adjusted the store portfolio from time to time to ensure that the site selected for the stores met the requirements for cost effectiveness.

Milan TST is currently occupying the Existing Premises in Chatham Road, Tsimshatsui, Kowloon for its retail of handbags and fashion accessories business and the lease of which will be expired on 14 October 2020. Therefore, the Company has an imminent need to renew the current tenancy of the Existing Premises or seek other premises for continuance of its business. In evaluating the options of renewal of tenancy of the Existing Premises or leasing a new retail store location, the Directors consider that (i) the Premises is located in proximity area in Tsimshatsui where the Group has been familiar with and store of the Group in Tsimshatsui has been one of the largest revenue contributors to the Group recently; (ii) the location of the Premises is at the heart of the shopping area in Tsimshatsui and more accessible by public transport from other area in Kowloon and Hong Kong Island; (iii) the area of the Premises is comparable to the total area of the Existing Premises and the previous store of the Group in Central (closed in April 2020) which allows the Group to position the Premises as a flagship store to capture customers from Kowloon and Hong Kong Island and offer products under its two brand names ''Milan Station'' and ''THANN'' in a single store serving its business strategy to integrate its retail network; and (iv) costs relating to relocation and renovation of the Premises which is expected to be approxiamtely HK$1.3 million. Save for the aforesaid costs and professional fees payable to, among others, financial adviser, auditors and valuer, in relation to the lease (which might also be incurred for lease of other premises), the Company does not expect to incur other material costs for the lease of the Premises.

The Company has assessed the major costs, e.g. relocation and renovation costs as well as a higher monthly rent (as compared to the total rent of the Existing Premises and the premises previous leased by the Group in Central), incidental to the lease of the Premises, which is expected to be around HK$1.7 million for each year during the term of the Tenancy Agreement. Having compared to the Group's revenue of approximately HK$231.6 million for the year ended 31 December 2019 and approxiamtely HK$82.5 million for the six months ended 30 June 2020 (unaudited) and historical gross profit margin, the Company considers that such incidental costs is immaterial.

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LETTER FROM THE BOARD

The terms of the Tenancy Agreement, including the rent, were arrived after arm's length negotiations between the Group and the Landlord after taking into consideration the prevailing market rent of comparable property in the vicinity of the Premises and had made reference to the valuation report (a copy of which is set out in Appendix II to this circular) on the market rent of the Premises. The Company has compared the base rent under the Tenancy Agreement with the recent leases of retail stores close to Nathan Road in Tsimshatsui like the Premises as identified by the valuer when preparing the aforesaid valuation report. The monthly rents per saleable area of these rental transactions range from approximately HK$1,380 per sq.m. to approximately HK$3,299 per sq.m. and the base rent of the Premises under the Tenancy Agreement of approximately HK$2,418 per sq.m. is within the range.

According to the interim report of the Company for the six months ended 30 June 2020 (the ''2020 Interim Report''), the Group had an unaudited cash and cash equivalents of approximately HK$11.1 million as at 30 June 2020. The Company expects the rent to be initially funded through the internal resources of the Group and supplemented by proceeds from fund- raising activities. According to the announcement of the Company dated 28 August 2020 in relation to the proposed rights issue, the Company intend to apply part of the net proceeds from the proposed rights issue, being approximately HK$4.0 million, for opening a retail store in Hong Kong of which substantial portion will be applied for the settlement of rental expense for at least 12 months under the Tenancy Agreement. Notwithstanding the impact of COVID-19 in the first half of 2020, the Group recorded an unaudited loss of approxiamtely HK$2.1 million for the six months ended 30 June 2020 and yet recorded a net increase in cash and cash equivalents of approxiamtely HK$2.7 million, mainly due to non-cash items such as share based payment expenses of approximately HK$1.3 million and change in value of financial assets classifed as fair value through profit or loss of approximately HK$1.8 million. The Company expects a recovery in business environment when impact of COVID-19 is mitigated in future and its performance would then be improved. On this basis, the Company considers that it would have sufficient internal resources to cover the base rents for remaining term under the Tenancy Agreement. Nevertheless, should the Group not generate sufficient income for its rental and other expenses, the Company will have to obtain equity or debt financing subject to the then capital market condition.

The Directors, after taking into account the abovementioned commercial rationale for strategic relocation to the Premises as a flagship store and the aforesaid incidental costs, considered that the transactions contemplated under the Tenancy Agreement are in the ordinary and usual course of business of the Group and on normal commercial terms after arm's length negotiations between the parties, and the terms of the transactions contemplated under the Tenancy Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE TRANSACTION CONTEMPLATED UNDER THE TENANCY AGREEMENT

Pursuant to HKFRS 16, the entering into of the Tenancy Agreement as a lessee will require the Group to recognise a right-of-use asset. Therefore, the entering into of the Tenancy Agreement will be regarded as an acquisition of asset by the Group under the Listing Rules. Set out below is the accounting treatment of the Group in relation to the right-of-use asset:

The right-of-use asset is initially measured at the amount of the lease liability plus any initial direct costs incurred by the lessee. Adjustments may also be required for lease incentives, payments at or prior to commencement and restoration obligations or similar. After lease commencement, a lessee shall measure the right-of-use asset using a cost model, unless:

1. the right-of-use asset is an investment property and the lessee fair values its investment property under HKAS 40; or
2. the right-of-use asset relates to a class of plant, property and equipment to which the lessee applies HKAS 16's revaluation model, in which case all right-of-use asset relating to that class of plant, property and equipment can be revalued.

Under the cost model a right-of-use asset is measured at cost less accumulated depreciation and accumulated impairment. The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in the lease if that can be readily determined. If that rate cannot be readily determined, the lessee shall use their incremental borrowing rate.

The value of right-of-use asset recognised by the Company under the Tenancy Agreement amounted to approximately HK$9.8 million. Upon entering into of the Tenancy Agreement, along with the recognition of the right-of-use asset, a lease liability amounting to approximately HK$9.5 million will be recognised. Since the Premises will be occupied for running the Group's general retail store, the Group's total lease expenses are expected to increase as a result of entering into the Tenancy Agreement. In connection with the lease under the Tenancy Agreement, the Group will also be liable to certain charges such as management fee, government rates and rent. The management fee is currently expected to be HK$12,010 per calendar month; the government rates is currently expected to be HK$94,500 per quarter; and government rent is currently expected to be nil respectively. As such the earnings of the Group will also be affected by these charges.

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LETTER FROM THE BOARD

According to HKFRS 16, the turnover rents under the Tenancy Agreement is considered as variable lease payments linked to future performance of the Group which the Company could not reliably estimate. Variable lease payments that reflect changes in market rental rates are initially measured using the market rental rates as at the commencement date. Accordingly, the turnover rents do not depend on an index or a rate are excluded from the measurement of lease liabilities and right-of-use assets. The turnover rents under the Tenancy Agreement, if incurred, will be recognised as rental expenses of the Group. Pursuant to HKFRS 16, a lessee is required to allocate the consideration to those components on the basis of the relative stand-alone price of each lease component and the aggregate stand-alone price of the non-lease components. Since the amounts of aforesaid government rates, rent and management fees are separately listed in the Tenancy Agreement, the Company could practically allocate the consideration of non-lease components and recognise it as expenses. The Board, after discussion with its auditors, is of the view that the above treatments are in line with HKFRS 16 and its current accounting policies.

INFORMATION ON THE PARTIES

The Company was incorporated in the Cayman Islands with limited liability whose shares are listed on the Main Board of the Stock Exchange. The Company is principally engaged in (i) retailing of handbags, fashion accessories and embellishments operation; (ii) retailing of spa and wellness products; and (iii) money lending business.

Milan TST, a wholly-owned subsidiary of the Company, is principally engaged in the retailing of handbags, fashion accessories and embellishments operation in the Existing Premises.

The Landlord is a company principally engaged in property investment activities which is indirectly held as to 50% by each of Sinoland Credit Limited and Sino Land (the issued shares of which are listed on the Stock Exchange). The Agent is a company principally engaged in property agency activities which is respectively held as to 50% by Sino Land and 50% by Deansky Investments Limited (a company which Mr. Robert Ng Chee Siong (an executive director and the chairman of Sino Land and an executive director and the chairman of Tsim Sha Tsui Properties) has control). Sino Land is held as to approximately 54.82% by Tsim Sha Tsui Properties (the issued shares of which are listed on the Stock Exchange). Sinoland Credit Limited is owned as to 50% by each of Sino Land and Mr. Robert Ng Chee Siong respectively.

To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, the Landlord, the Agent and their ultimate beneficial owners are Independent Third Parties.

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LETTER FROM THE BOARD

IMPLICATIONS UNDER THE LISTING RULES

Pursuant to HKFRS 16, the entering into of the Tenancy Agreement by Milan TST, as tenant, will require the Group to recognise a right-of-use asset in relation to the Premises. Therefore, the entering into of the Tenancy Agreement will be regarded as an acquisition of asset by the Group under the Listing Rules. The value of right-of-use asset to be recognised by the Company under the Tenancy Agreement amounts to approximately HK$9.8 million.

As the highest applicable percentage ratio as defined under the Listing Rules in respect of the acquisition of right-of-use asset to be recognised by the Company pursuant to HKFRS 16 based on the consideration under the Tenancy Agreement is 25% or more but is less than 100%, the Tenancy Agreement, if entered, will constitute a major transaction of the Company and is subject to the notification, announcement, circular and shareholders' approval requirements under Chapter 14 of the Listing Rules.

To the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, no Shareholder or any of their respective associates have any material interest in the Tenancy Agreement. As such, no Shareholder would be required to abstain from voting at the EGM on the resolution to approve the same.

EGM

The EGM will be convened and held for the Shareholders to, among other things, consider and, if thought fit, approve the Tenancy Agreement and the transactions contemplated thereunder. The voting in respect of the Tenancy Agreement and the transactions contemplated thereunder at the EGM will be conducted by way of poll.

A notice convening the EGM to be held at Portion 2, 12/F., The Center, 99 Queen's Road Central, Central, Hong Kong on Wednesday, 7 October 2020 at 11:00 a.m. is set out on pages EGM-1 to EGM-3 of this circular for the purpose of considering and, if thought fit, approving the ordinary resolutions set out therein.

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, you are requested to complete the accompanying form of proxy, in accordance with the instructions printed thereon and deposit the same at the share registrar of the Company, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, 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 will not preclude you from attending and voting in person at the EGM or any adjournment thereof (as the case may be) should you so wish, and in such event, the instrument appointing a proxy shall be deemed to be revoked.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors (including the independent non-executive Directors) consider that the terms of the Tenancy Agreement and the transactions contemplated thereunder are on normal commercial terms and are fair and reasonable, and in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the relevant resolutions for the Tenancy Agreement and the transactions contemplated thereunder.

FURTHER INFORMATION

Your attention is drawn to the financial information and general information of the Group as set out in the appendices to this circular. As the Group is undergoing a fundraising activity by way of rights issue to supplement its working capital and part of the proceeds from rights issue will be applied as the rent under the Tenancy Agreement, please also refer to the announcement of the Company dated 28 August 2020 in relation to the proposed rights issue for details.

Yours faithfully,

By order of the Board

Milan Station Holdings Limited

HU Bo

Executive Director

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1. FINANCIAL INFORMATION OF THE GROUP

Details of the audited financial information of the Group for each of the years ended 31 December 2017, 2018 and 2019 are disclosed in the following annual reports of the Company for the years ended 31 December 2017, 2018 and 2019, respectively, and details of the unaudited interim financial information of the Group for the six months ended 30 June 2020 are disclosed in the 2020 Interim Report, which have been published and are available on the websites of the Stock Exchange (www.hkexnews.hk):

1. the annual report of the Company for the year ended 31 December 2017 published on 27 April 2017 (pages 45 to 122) in relation to the financial information of the Group for the same year (https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0427/ ltn201804272748.pdf);
2. the annual report of the Company for the year ended 31 December 2018 published on 30 April 2018 (pages 39 to 128) in relation to the financial information of the Group for the same year (https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0430/ ltn20190430587.pdf);
3. the annual report of the Company for the year ended 31 December 2019 published on 29 April 2019 (pages 39 to 124) in relation to the financial information of the Group for the same year (https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0429/ 2020042900830.pdf); and
4. the 2020 Interim Report published on 2 September 2020 in relation to the financial information of the Group for the same period (https://www1.hkexnews.hk/listedco/ listconews/sehk/2020/0902/2020090202180.pdf).

2. STATEMENT OF INDEBTEDNESS

As at the close of business on 31 July 2020, being the latest practicable date for the purpose of this indebtedness statement prior to the publication of this circular, the Group had (i) total lease liabilities of approximately HK$9,260,000, (ii) amount due to non-controlling interest of approximately HK$3,960,000 which is unsecured, interest free and repayable on demand and

1. other payable of approximately HK$1,000,000 which is unsecured, interest free and repayable on demand as at that date.

Contingent liabilities

As at the Latest Practicable Date, there has been involved in the litigation on the Group's received the judgement by District Court dated and filed on 10 July 2020 and statutory demand dated 28 August 2020, pursuant to which the District Court ordered, among others, that the Group shall pay the plaintiff of the judgement sum amount of approximately HK$1,725,000 and interest therein at the rate of 8% per annum on the judgment sum of approximately HK$40,000 and mentioned in the paragraph headed ''6. MATERIAL LITIGATION'' in Appendix III to this circular.

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Save as disclosed above, as at the close of business on 31 July 2020, the Group did not have any outstanding loan capital issued and outstanding or agreed to be issued, overdrafts, debt securities and other borrowings, mortgages, charges or lease liabilities, contingent liabilities or guarantees.

The Directors confirmed that the Group do not have any plans for material external debt financing and no material changes in the indebtedness and contingent liabilities of the Group since 31 July 2020 up to and including the Latest Practicable Date.

3. MATERIAL ADVERSE CHANGE

Except (i) the unaudited revenue of the Group decreased by approximately 39.7% from approximately HK$136.9 million for the six months ended 30 June 2019 to approximately HK$82.5 million for the six months ended 30 June 2020; (ii) the number of ''Milan Station'' retail shop decreased to five; (iii) the unaudited loss attributable to owners of the Company decreased from approxiamtely HK$8.7 million for the six months ended 30 June 2019 to approximately HK$1.6 million for the six months ended 30 June 2020 (details of which are set out in the 2020 Interim Report; and (iv) the litigation mentioned in the paragraph headed ''6. MATERIAL LITIGATION'' in Appendix III to this circular), the Directors are of the opinion that there are no material adverse changes in the financial or trading position of the Group since the date to which the latest published audited accounts of the Company have been made up.

4. WORKING CAPITAL

The Directors are of the opinion that, taking into account the Group's available financial resources and the expected proceeds from the proposed rights issue (details of which are referred to the announcement of the Company dated 28 August 2020), the Group will have sufficient working capital for its present requirements, that is for at least 12 months from the date of publication of this circular, in the absence of unforeseeable circumstances.

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

For the year ended 31 December 2019, the Group recorded a revenue of approximately HK$231.6 million representing a decrease of approximately 12.4% as compared to approximately HK$264.3 million for the previous year. Such decrease was mainly due to the decrease in sales of handbags to approximately HK$201.4 million representing a decrease of approximately 16.5% as compared to approximately HK$241.1 million for the previous year. Gross profit margin of the Group was stable for the year ended 31 December 2019 as to approximately 20.6% as compared to approximately 19.5% for the previous year. As a result of decrease in selling, administrative and other operating expenses, the loss for the year attributable to owners of the Company decreased to approximately HK$23.5 million for the year ended 31 December 2019 as compared to approximately HK$40.0 million for the previous year.

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During the year ended 31 December 2019, the Group had six ''Milan Station'' retail stores and seven ''THANN'' retail stores in Hong Kong and the online sales platform directly managed by the Group and the product sales in other new sales channels. During the year, the Group continued to devote more human resources to the management of merchandise quality, and strengthened the product certification programs with the finer division of labor to ensure that all the products were inspected by professional team. These measures helped the Group to maintain the ''Milan Station'' brand reputation and earn market recognition, pursuant to which it strengthened the Group's leading position in the luxury handbags trading industry under the adverse operating environment.

According to the 2019 Annual Report, the Hong Kong economy went through a difficult year in 2019 where the real GDP contracted by approximately 1.2%, the first annual decline since 2009. Nevertheless, due to the Hong Kong retail market have been facing a recession during the first half year in 2019 with the sluggish domestic demand and cautious private consumption sentiment and the outbreak of social incidents on the second half year in 2019, according to the Report on Monthly Survey of Retail Sales published by The Census and Statistics Department, the value of total retail sales in December 2019, provisionally estimated at HK$36.2 billion, decreased by approximately 19.4% compared with the same month in 2018. For 2019 as a whole, the value of total retail sales was provisionally estimated at HK$431.2 billion, decreased by approximately 11.1% in value and 12.3% in volume compared with 2018. Retail outlets selling items that feature prominently in visitors' shopping expenditure witnessed particularly noticeable sales declines in the second half of 2019. Furthermore, according to the statistics from Hong Kong Tourism Board, the number of visits by PRC tourists to Hong Kong in the year of 2019 recorded negative growth of approximately 14.2% as compared with the same period in 2018, of which same-day visitors and overnight visitors decreased by approximately 11.5% and 18.5% respectively, represented the retail business and total tourism expenditure severely affected by the sizable fall in mainland Chinese tourists arrivals.

According to the 2020 Interim Report, the first half of 2020 marked a particularly challenging time for the Hong Kong economy, especially to the retail industry. Following a series of disturbance in society, COVID-19 epidemic that developed lightning fast into global pandemic since February 2020 gave overturning changes to local market. Inbound tourism was hard-hit by the regulation of compulsory quarantine imposed by the Hong Kong Government since February. According to the monthly report issued by the Hong Kong Tourism Board, the number of visitor arrivals from January to June 2020 recorded a dramatical decrease of 89.9% as compared to 2019.

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During the first half of 2020, the Group recorded decrease in revenue as compared to same period in 2019 mainly due to the outbreak of COVID-19 epidemic in 2020 and the contagion of COVID-19 has spread worldwide, and the number of ''Milan Station'' retail shops of the Group decreased to five. As the selling, administrative and other operating expenses of the Group were reduced for the six months ended 30 June 2020, the unaudited loss attributable to owners of the Company decreased from approxiamtely HK$8.7 million for the six months ended 30 June 2019 to approximately HK$1.6 million for the six months ended 30 June 2020.

Despite the challenging social environment, the Group shall continue to monitor the effects from the potential global issues and social incidents in order to strength our core business and seek for better growth prospects and returns, while developing the trading of luxury watches market and at the same time take a prudent approach to develop the PRC market. The Group will continue to pursue opportunities to keep up with the evolving marketplace and optimize its corporate strategy of creating long-term value for shareholders.

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The following is the text of a letter and property valuation report prepared for the purpose of incorporation in this circular received from Peak Vision Appraisals Limited, an independent property valuer, in connection with its opinion of market rent of the Premises as at 31 July 2020.

18 September 2020

The Board of Directors

Milan Station Holdings Limited Room 13, 6th Floor, Block A Hong Kong Industrial Centre 489-491 Castle Peak Road Kowloon

Hong Kong

Dear Sirs,

Re: Market rent assessment of Shop Nos. A, B, C1, C2 and D on the Ground Floor of The Camphora, Nos. 51 & 52 Haiphong Road, Tsim Sha Tsui, Kowloon

In accordance with the instruction from Milan Station Holdings Limited (the ''Company'') for us to assess the market rent of the captioned property located in the Hong Kong Special Administrative Region (''Hong Kong''), we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for providing you with our opinion of market rent of the property as at 31 July 2020 (the ''Valuation Date'') for public documentation purpose.

This letter, forming part of our valuation report, identifies the property being valued, explains the basis and methodology of our valuation and lists out the assumptions and title investigations, which we have made in the course of our valuation, as well as the limiting conditions.

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Our valuation is our opinion of market rent which is defined to mean ''the estimated amount for which a property would be leased on the valuation date between a willing lessor and a willing lessee on normal lease terms in an arm's-length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently, and without compulsion''.

In arriving at the market rent of the property, we have adopted the direct comparison method assuming the property is capable of being leased in its existing state with the benefit of vacant possession and by making reference to comparable letting evidence as available in the relevant market. The property is assumed to be let in the open market in its existing state for a term of 2 to 3 years under normal terms and conditions with rental exclusive of government rates, rent, management fees and all other outgoings.

Our valuation has been made on the assumption that the property is leased on the open market in its existing state without the benefit of deferred terms contracts, joint ventures, management agreements or any similar arrangements which could serve to affect the rent of the property. In addition, no account has been taken for any option or right of pre-emption which would concern or affect the leasing of the property.

The property was inspected during August 2020 by Mr. Lee Chern Sung, an associate director of our firm who has over 5 years of experience in the inspection of properties in Hong Kong and the abroad and Mr. Tony M. W. Cheng, a manager of our firm who has 10 years of experience in the inspection of properties in Hong Kong and the PRC. We have inspected the exterior and, where possible, the interior of the property. In the course of our inspections, we did not note any serious defects. However, no structural survey has been made and we are therefore unable to report whether the property is free from rot, infestation or any other defects. No tests were carried out in the course of our inspections.

We have caused a title search to be made at the Land Registry in respect of the property. However, we have not searched the original documents to verify the ownership or to ascertain the existence of any amendments

We have not carried out on-site measurements to verify the correctness of the floor areas of the property but have assumed that the floor areas shown on the documents and floor plans available to us are correct. Dimensions, measurements and areas included in the attached property valuation report are based on information contained in the documents provided to us and are, therefore, only approximations.

We have relied to a considerable extent on the information provided by the Company and have accepted advice on such matters as planning approvals, statutory notices, easements, tenures, floor areas and all other relevant materials regarding the property.

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We have had no reason to doubt the truth and accuracy of the information provided to us by the Company. We were also advised by the Company that no material facts have been omitted from the information provided. We consider that we have been provided with sufficient information to reach an informed view, and we have no reason to suspect that any material information has been withheld. The management of the Company has reviewed and confirmed the factual content and has agreed to the assumptions and limiting conditions of this report.

In valuing the market rent of the property, we have complied with all the requirements set out in Chapter 5 of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited, The HKIS Valuation Standards 2017 issued by the Hong Kong Institute of Surveyors, the International Valuation Standards (Effective 31 January 2020) published by the International Valuation Standards Council, where applicable, and under generally accepted valuation procedures and practices.

Our valuation has been prepared based on economic, market and other conditions as they existed on, and information made available to us as of the Valuation Date only. It has come to our attention that since the Valuation Date, the outbreak of Coronavirus Disease (COVID-19) has caused significant disruption to economic activities around the world. It is uncertain how long the disruption will last and to what extent it will affect the economy and it may cause volatility and uncertainty that the input parameters and assumptions adopted in our valuation may change significantly and unexpectedly over short period of time. It should therefore be noted that any market volatility, policy, geopolitical and social changes or other circumstances after the Valuation Date may affect the market rent of the property after the Valuation Date.

Unless otherwise stated, all monetary amounts stated in this valuation report are in Hong Kong Dollars (HK$).

We hereby confirm that we have no material connection or involvement with the Company, the property or the value reported herein and that we are in a position to provide an objective and unbiased valuation.

Our property valuation report is enclosed herewith.

Yours faithfully,

For and on behalf of

Peak Vision Appraisals Limited

Nick C. L. Kung

MRICS, MHKIS, RPS (G.P.), RICS Registered Valuer, MCIREA

Director

Note: Mr. Nick C. L. Kung is a RICS Registered Valuer and a Registered Professional Surveyor who has over 20 years of experience in the valuation of properties in Hong Kong and the abroad.

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Property Valuation Report

Notes:

1. The property is assumed to be let in the open market in its existing state for a standard term of 2 to 3 years under normal terms and conditions with monthly rental exclusive of government rates, rent, management fee and all other outgoings.
2. According to the Land Registry Search conducted on 24 August 2020, the Building is subject to the following encumbrances:
3. 1. The registered owner of the Building is Region One Investment Limited vide Memorial No. UB7081022 dated 1 May 1997 for a consideration of HK$223,000,000.
   2. Notice No. ''UMB/5OD102/1501-287/0001'' by the Building Authority under Section 30B(3) of the Buildings Ordinance vide Memorial No. 17121401430044 dated 22 July 2016.
   3. Notice No. ''UMW/5OD102/1501-287/0001'' by the Building Authority under Section 30C(3) of the Buildings Ordinance vide Memorial No. 17121401430055 dated 22 July 2016.
4. The property is zoned as ''Commercial'' under Approved Tsim Sha Tsui Outline Zoning Plan No. S/K1/28 dated December 2013.

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1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. INTEREST IN SECURITIES

1. Directors' and chief executive's interests

Save as disclosed below, as at the Latest Practicable Date, none of the Directors and chief executives of the Company had any interest or short position in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); (b) pursuant to section 352 of the SFO, to be entered in the register of the Company referred to therein; or (c) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

- III-1-

1. Interests of substantial shareholders

Save as disclosed below, as at the Latest Practicable Date, none of the shareholders (other than Directors or chief executive of the Company) who had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company pursuant to Divisions 2 and 3 of Part XV of the SFO, or which were required to be recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO.

- III-2-

Notes:

1. The long positions represent the maximum number of rights shares underwritten by Astrum Capital Management Limited, as underwriter, in relation to the proposed rights issue (details of which are set out in the annoucnement of the Company dated 28 August 2020) and the short positions are due to the underwriter has a right to require another person to take delivery of the underlying shares.
2. Astrum Capital Management Limited is wholly-owned by Major Harvest Investments Limited which in turn is wholly-owned by Astrum Financial Holdings Limited. Astrum Financial Holdings Limited is owned as to approximately 66.59% by Autumn Ocean Limited which in turn is wholly-owned by Mr. Pan Chik. Ms. Liu Ming Lai Lorna is the spouse of Mr. Pan Chik and therefore is deemed to be interested in the same number of Shares held by Mr. Pan Chik.

3. DIRECTORS' SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into or proposed to

enter into any service contract with the Company or any of its subsidiaries which is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

4. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and their respective close associates was interested in any business which competed, or might compete, either directly or indirectly, with the business of the Group pursuant to Rule 8.10 of the Listing Rules.

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5. DIRECTORS' INTERESTS IN CONTRACTS AND ASSETS OF THE GROUP

Save as a lease agreement dated 10 June 2020 entered into between the Group and Excel Trend Limited (a company wholly-owned by Mr. Yiu Kwan Tat, the former Chairman and an Executive Director) in relation to the leasing of the premises situated at Areas E and F on the Ground Floor of Percival House, No. 83 Percival Street, Causeway Bay, Hong Kong for retail uses (details of which are set out in announcement of the Company dated 10 June 2020), as at the Latest Practicable Date:

1. none of the Directors was materially interested in any contract or arrangement subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group; and
2. none of the directors had any direct and indirect interest in any assets which had been acquired or disposed of by or leased to, or which were proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2019, being the date to which the latest published audited financial statements of the Company were made up.

6. MATERIAL LITIGATION

As at the Latest Practicable Date, save as a civil case in which Milan Station Properties Holdings Limited, a wholly-owned subsidiary of the Company, and a third party are required by District Court of Hong Kong to pay approxiamtely HK$1.7 million to the plaintiff (details of which are set out in the annoucnement of the Company dated 10 September 2020), no member of the Group was engaged in any litigation or claims of material importance nor was any litigation or claims of material importance known to the Directors to be pending or threatened against any member of the Group.

7. MATERIAL CONTRACTS

The Group did not enter into any contract which was or might be material other than those entered into in the ordinary course of business carried on or intended to be carried on by the Company or any of its subsidiaries within the two years immediately preceding and including the Latest Practicable Date.

- III-4-

8. EXPERT AND CONSENT

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

As at the Latest Practicable Date, the above expert:

1. has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter or opinions or advice and references to its name, in the form and context in which they appear;
2. did not have any shareholding, directly or indirectly, in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group; and
3. did not have any direct or indirect interest in any assets which had been acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2019, being the date to which the latest published audited consolidated financial statements of the Company were made up.

9. GENERAL

1. The registered office of the Company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.
2. The headquarters and principal place of business of the Company in Hong Kong is Room 13, 6/F, Block A, Hong Kong Industrial Centre 489-491 Castle Peak Road, Kowloon, Hong Kong.
3. The Hong Kong branch share registrar and transfer office of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong.
4. The secretary of the Company is Mr. Yung Kai Wing. He is a Certified Public Accountant of the Hong Kong Institute of Certified Public Accountants.
5. In the event of inconsistency, the English text of this circular shall prevail over the Chinese text.

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10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours from 9:00 a.m. to 6:00 p.m. (except Saturdays, Sundays and public holidays) at Room 13, 6/F, Block A, Hong Kong Industrial Centre, 489-491 Castle Peak Road, Kowloon, Hong Kong, for a period of 14 days from the date of this circular (both days inclusive):

1. the memorandum and articles of association of the Company;
2. the annual report of the Company for the year ended 31 December 2017;
3. the annual report of the Company for the year ended 31 December 2018;
4. the annual report of the Company for the year ended 31 December 2019;
5. the interim report of the Company for the six months ended 30 June 2020;
6. the letter from the Board, the text of which is set out on pages 5 to 13 of this circular;
7. the valuation report prepared by Peak Vision Appraisals Limited, the text of which is set out in Appendix II to this circular;
8. the written consent referred to in the section headed ''8. Expert and consent'' in this appendix III; and
9. this circular.

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NOTICE OF EGM

MILAN STATION HOLDINGS LIMITED

米 蘭 站 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1150)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the ''EGM'') of Milan Station Holdings Limited (the ''Company'') will be held at Portion 2, 12/F., The Center, 99 Queen's Road Central, Central, Hong Kong on Wednesday, 7 October 2020 at 11:00 a.m. for the purpose of considering and, if thought fit, passing the following resolutions which will be proposed with or without amendment as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

1. ''THAT:

1. the tenancy agreement (''Tenancy Agreement'') will be entered into between Sino Real Estate Agency Limited（信和地產代理有限公司）, a company incorporated in Hong Kong with limited liability, being agent of landlord (Region One Investment Limited（一域投資有限公司）) of Shop NOS. A, B, C1, C2 and D on the ground floor of The Camphora, 51 and 52 Haiphong Road, Kowloon, Hong Kong (the ''Premises''), and Milan Station (TST) Limited（米蘭 站（尖沙咀）有限公司）, a wholly-owned subsidiary of the Company, being tenant of the Premises, in relation to the proposed lease of the Premises, a copy of which having been produced to the EGM marked ''A'' and signed by the chairman of the EGM for identification purpose, be and is hereby approved, confirmed and ratified and the transactions contemplated thereunder be and are hereby approved;

- EGM-1-

NOTICE OF EGM

1. any one of the director(s) of the Company be and is hereby authorised to do and execute all such acts, matters, deeds, documents and things as he considers to be necessary, expedient or desirable for the purposes of giving effect to or in connection with the Tenancy Agreement and all transactions contemplated thereunder, and to agree to such variation, amendments or waiver or matters relating thereto (including any variation, amendments or waiver of such documents or any terms thereof, which are not fundamentally different from those as provided in the Tenancy Agreement) as are, in the opinion of such director, in the interest of the Company and its shareholders as a whole.''

Notes:

1. A member entitled to attend and vote at the EGM is entitled to appoint more than one proxy to attend and vote in his stead. A proxy need not be a member of the Company.
2. In order to be valid, form(s) of proxy, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of that power of attorney or authority, must be deposited at the office of the Company's share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong, not less than 48 hours before the time fixed for the holding of the EGM or any adjournment thereof.

- EGM-2-

NOTICE OF EGM

1. The register of members of the Company will be closed from Wednesday, 30 September 2020 to Wednesday, 7 October 2020, both days inclusive, for the purpose of determining Shareholders' entitlement to attend and vote at the EGM, during which period no transfer of Shares will be registered. In order to qualify for attending and voting at the EGM, Shareholders should ensure that all transfer documents, accompanied by the relevant share certificates, are lodged with the Company's share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong, by no later than 4: 30 p.m. on Tuesday, 29 September 2020.
2. Where there are joint registered holders of any share, any one of such persons may vote at the EGM, either personally or by proxy, in respect of such share as if he were solely entitled thereto; but should there be more than one of such joint holders present at the EGM personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof.
3. Voting of the ordinary resolution set out in this notice will be by way of poll.
4. If Typhoon Signal No. 8 or above remains hoisted, or ''extreme conditions'' caused by super typhoon or a Black Rainstorm Warning Signal is in force at or at any time after 8: 00 a.m. on the date of the EGM, the EGM will be postponed or adjourned. The Company will post an announcement on the HKExnews website at www.hkexnews.hk to notify shareholders of the date, time and place of the rescheduled meeting.
5. In view of the recent development of the COVID-19 pandemic, and in order to better protect the safety and health of the Shareholders, the Company will not serve refreshments at the EGM to avoid the coming into close contact amongst participants at the EGM. The Company wishes to remind the Shareholders and other participants who will attend the EGM in person to take personal precautions and abide by the requirements of pandemic precaution and control at the venue of the EGM. The Company also advises the Shareholders to attend and vote at the EGM by way of non-physical presence. The Shareholders may choose to vote by filling in and submitting the relevant proxy form of the EGM, and appoint the chairman of the EGM as a proxy to vote on relevant resolution as instructed in accordance with the relevant proxy form instead of attending the EGM in person. For details, please refer to the proxy form of the EGM. The Company will keep monitoring the evolving COVID-19 situation and may implement additional measures which, if any, will be announced closer to the date of the EGM.

The EGM will be held as scheduled when an Amber or a Red Rainstorm Warning Signal is in force. Shareholders should decide on their own whether they would attend the EGM under bad weather condition bearing in mind their own situations.

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