Pokfulam Development : DISCLOSEABLE AND CONNECTED TRANSACTION ACQUISITION OF EQUITY INTEREST IN ELEPHANT HOLDINGS LIMITED

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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.

POKFULAM DEVELOPMENT COMPANY LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 0225)

DISCLOSEABLE AND CONNECTED TRANSACTION

ACQUISITION OF EQUITY INTEREST IN

ELEPHANT HOLDINGS LIMITED

AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

Independent financial adviser to the Independent Board Committee and the Independent Shareholders of Pokfulam Development Company Limited in respect of the Connected Transaction

Capitalised terms used in the lower portion of this cover page and the inside cover page of this circular shall have the same respective meanings as those defined in the section headed "DEFINITIONS" of this circular.

A letter from the Board is set out on pages 4 to 11 of this circular. A letter from the Independent Board Committee is set out on page 12 of this circular. A letter from Veda Capital Limited, the Independent Financial Adviser, containing its recommendations to the Independent Board Committee and the Independent Shareholders is set out on pages 13 to 31 of this circular.

A notice of the EGM is set out on pages 41 to 42 of this circular. A form of proxy for use by the Shareholders in connection with the EGM is enclosed with this circular. Such form of proxy is also published on the respective websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.pokfulam.com.hk).

If you are not able or do not intend to attend the EGM in person but wish to exercise your right as a Shareholder, you are requested to complete and sign the form of proxy enclosed with this circular in accordance with the instructions printed thereon and return the same to the registered office of the Company at 23rd Floor, Beverly House, 93-107 Lockhart Road, Wanchai, Hong Kong as soon as possible but in any event not later than 48 hours (excluding the public holidays) before the time appointed for holding the EGM or its adjournment. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or its adjournment should you so wish and in such event, the form of proxy will be deemed to have been revoked.

10 December 2019

- i -

DEFINITIONS

In this circular, the following expressions shall have the meanings stated below unless the

context otherwise requires:

- 1 -

- 2 -

- 3 -

LETTER FROM THE BOARD

POKFULAM DEVELOPMENT COMPANY LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 0225)

DISCLOSEABLE AND CONNECTED TRANSACTION

ACQUISITION OF EQUITY INTEREST IN

ELEPHANT HOLDINGS LIMITED

AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the announcement of the Company dated 18 November 2019 (the "Announcement") in relation to the Acquisition. On 18 November 2019, the Company and the Vendor entered into the Agreement, pursuant to which the Company has conditionally agreed to purchase, and the Vendor has conditionally agreed to sell, 4,784 shares of the Target Company, a subsidiary of the Company, representing 47.84% of the entire share capital of the Target Company as at 18 November 2019, at a total consideration of HK$15,424,000.

- 4 -

LETTER FROM THE BOARD

The purpose of this circular is to provide you with (i) information relating to the Agreement and the transaction contemplated thereunder; (ii) the recommendations of the Independent Board Committee to the Independent Shareholders on the terms of the Agreement and the transaction contemplated thereunder; (iii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders on the terms and conditions of the Agreement and the transaction contemplated thereunder; and (iv) the notice convening the EGM.

THE ACQUISITION

Set out below is a summary of the principal terms of the Agreement:

Date

18 November 2019

Parties

1. the Company, as the purchaser; and
2. B.L. Wong (Holdings) Company Limited, as the vendor.

Assets to be acquired

Subject to the satisfaction or waiver (as the case may be) of the conditions precedent to the Agreement, the Company has conditionally agreed to purchase, and the Vendor has conditionally agreed to sell, 4,784 shares of the Target Company, representing 47.84% of the entire share capital of the Target Company as at 18 November 2019.

Consideration and payment terms

The consideration for the sale and purchase of the Sale Shares is HK$15,424,000, which will be satisfied by the internal resources of the Company and shall be settled in one lump sum at Completion.

Basis of the consideration

The consideration was determined by the parties after arm's length negotiations with reference to, among others, the net asset value of the Target Group (before the outstanding shareholder 's loan due by the Target Company to the Vendor has been waived or capitalised), the market value of the Property of HK$14,000,000 as at 31 October 2019 under valuation on market approach basis as shown in the Valuation Report and the outstanding shareholder 's loan due by the Target Company to the Vendor.

- 5 -

LETTER FROM THE BOARD

Reconciliation statement from the Target Group's net asset value to the consideration

In determining the consideration of the Acquisition, the net asset value of the Target Group was adjusted to reflect its fair value by adding the market value of the Property of HK$14,000,000 as at 31 October 2019 under valuation on market approach basis as shown in the Valuation Report because the carrying value of the Property was nil as at 30 September 2019. As at 18 November 2019, there was an outstanding shareholder 's loan of HK$1,800,000 due by the Target Company to the Vendor (the "Loan"). Upon negotiations between the Company and the Vendor and pursuant to the Agreement, the Vendor will dispose the Loan by waiving or capitalising the Loan on or before Completion as a condition precedent as mentioned below, and in return, the full amount of the Loan was added to the consideration of the Acquisition payable by the Company. Details of the said adjustment are set out in the below reconciliation statement from the net assets value of the Target Group to the consideration of the Acquisition, for illustrative purpose only:

HK$'000 (Approximately)

Based on the above, the Directors (including the independent non-executive Directors, whose views are set out in the letter from the Independent Board Committee after taking into account the advice of the Independent Financial Adviser) consider that the consideration is fair and reasonable and in the interests of the Group and the Shareholders as a whole.

- 6 -

LETTER FROM THE BOARD

Conditions Precedent

Completion shall be conditional upon satisfaction or waiver (as the case may be) of the following conditions:

1. the passing of all necessary resolution(s) by the Independent Shareholders of the Company at the EGM;
2. completion of the valuation of the Property by Cushman & Wakefield Limited;
3. all consents and approvals necessary to be obtained by any member of the Target Group and/or the Vendor for consummation of the Agreement and the transaction contemplated having been granted by the relevant governmental or regulatory authorities in Hong Kong, if any;
4. from the date of the Agreement and at any time before the Completion, that the representations, warranties and undertakings of the Vendor under the Agreement remain true, accurate and not misleading in any material respect; and
5. the outstanding shareholder 's loan due by the Target Company to the Vendor being waived or capitalised.

The Purchaser may, in its absolute discretion, waive the conditions precedent in paragraph (b), (d) and (e) above at any time by specific notice in writing to such effect to the Vendor.

As at the Latest Practicable Date, save for the conditions precedent in paragraph (b), all the conditions have not been fulfilled.

Reasons for the Acquisition

The Target Group is principally engaged in the business of trading of visual and sound equipment. It offers a variety of audiovisual solutions for commercial and professional use and commercial audiovisual products including professional audiovisual systems and luxury high fidelity audio systems. The Target Group is also expanding into the prospective growing market in high-endaudio-visual and sound systems in the PRC.

The Directors view that the Acquisition is in line with the long-term business strategy of the Group and is a good opportunity for the Group to consolidate its control in the Target Group and strengthen the Group's position in the industry of trading of visual and sound equipment for the following reasons:

1. the Target Group is expanding in the PRC market where the Company is of the view that there is a prospective growing market in high-endaudio-visual and sound systems and Hi-Fi luxury brand products, and the Target Group will continue to explore any potential market opportunities in the PRC;

- 7 -

LETTER FROM THE BOARD

1. the Acquisition will create synergy effect within the existing property investment business of the Group since the Group will enhance the application and installation of commercial audiovisual products of the Target Group to upgrade property holdings to be leased in the existing and future property projects of the Group, resulting in enhancement in the competitiveness of the Group in rental market and promotion in sale of the commercial audiovisual products of the Target Group, and thus bringing additional positive contribution to the Group in the long run; and
2. upon Completion, controlling interest of the Company in the Target Company will further increase, enabling the Company to consolidate its control in the Target Group and develop the business of the Target Group, which, in the view of the Directors, will enhance the long term financial performance of the Target Group and the Group and return to the Shareholders.

Based on the above, the Directors (including the independent non-executive Directors, whose views are set out in the letter from the Independent Board Committee after taking into account the advice of the Independent Financial Adviser) consider that the terms of the Agreement are on normal commercial terms, fair and reasonable and in the interests of the Group and the Shareholders as a whole, notwithstanding that the Acquisition is not in the ordinary and usual course of business of the Group.

Information on the Group, the Vendor and the Target Group

The Group is principally engaged in the businesses of property investment and management, property development, trading of visual and sound equipment, securities trading and investment holding, mainly focusing in Hong Kong.

The Vendor is a limited liability company established in Hong Kong and is principally engaged in the business of building construction and investments in Hong Kong.

As at 18 November 2019, the Target Company is a subsidiary of the Company and the Target Group is principally engaged in the business of trading of visual and sound equipment. Immediately upon Completion, the Target Company will remain as a subsidiary of the Company, and the consolidated financial results of the Target Group will remain consolidated into the consolidated financial statements of the Company.

- 8 -

LETTER FROM THE BOARD

Financial Information of the Target Company

Set out below is the unaudited consolidated financial information of the Target Group for the two financial years ended 30 September 2018 and 2019:

As at 30 September 2019, the net asset value of the Target Group was approximately HK$12,678,000 and the net asset value of the Target Group before the outstanding shareholder 's loan due by the Target Company to the Vendor has been waived or capitalised was approximately HK$14,478,000. According to the information provided by the Vendor, the original acquisition cost of the Sale Shares was approximately HK$1,901,000.

So far as the Company is aware, as at 18 November 2019, the Company, the Vendor, Mr. Wong Tat Chang, Abraham, the Director, and Lui Hang Ying, an independent third party of the Company, held 51.96%, 47.84%, 0.1% and 0.1% of the entire share capital of the Target Company respectively. Pursuant to the articles of association of the Target Company, the qualification of Mr. Wong Tat Chang, Abraham as a director of the Target Company shall be the holding of at least five shares in the Target Company and therefore he remains as a shareholder of the Target Company. Upon Completion, the Company will hold 99.8% of the entire share capital of the Target Company and the financial results of the Target Group will be further consolidated into the financial results of the Group.

The Listing Rules Implications

As at 18 November 2019, the Vendor was beneficially owned equally by the Executive Directors. Hence, the Vendor is a connected person of the Company under Chapter 14A of the Listing Rules. As one or more of the applicable percentage ratios are more than 5% but less than 25%, the Acquisition constitutes a discloseable and connected transaction of the Company and is subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

The Executive Directors were interested in the transaction contemplated under the Agreement and have abstained from voting to approve the Agreement and the transaction contemplated thereunder at the Board meeting.

The Independent Board Committee, comprising all independent non-executive Directors, has been formed to advise the Independent Shareholders on the terms of the Agreement and the transaction contemplated thereunder. As disclosed in the Announcement, Merdeka Corporate Finance Limited ("Merdeka") had been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the Agreement and the transaction contemplated thereunder. In light of the current resources of Merdeka and the timetable, Merdeka and

- 9 -

LETTER FROM THE BOARD

the Company had mutually agreed to terminate their independent financial adviser agreement with effect from 22 November 2019. Veda Capital has been appointed as the Independent Financial Adviser with effect from 25 November 2019 to fill the vacancy following the resignation of Merdeka and to advise the Independent Board Committee and the Independent Shareholders as to whether the terms and conditions of the Agreement and the transaction contemplated thereunder are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Group and the Shareholders as a whole.

CLOSURE OF REGISTER OF MEMBERS

The EGM is scheduled to be held on Tuesday, 31 December 2019. For determining the Shareholders' entitlement to attend and vote at the EGM, the Register of Members will be closed from Tuesday, 24 December 2019 to Tuesday, 31 December 2019 (both days inclusive), during which period no transfer of shares will be effected. In order to be eligible to attend and vote at the EGM, non-registered Shareholders must lodge all transfer documents accompanied by the relevant share certificates with the Company's share registrar, Tricor Standard Limited at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong not later than 4:30 p.m. on Monday, 23 December 2019.

EGM

A notice of the EGM is set out on pages 41 to 42 of this circular.

A form of proxy for use by the Shareholders in connection with the EGM is enclosed with this circular. If you are not able or do not intend to attend the EGM but wish to exercise your right as a Shareholder, you are requested to complete and sign the form of proxy and return it to the registered office of the Company, 23rd Floor, Beverly House, 93-107 Lockhart Road, Wanchai, Hong Kong in accordance with the instructions printed thereon as soon as possible but in any event not later than 48 hours (excluding the public holidays) before the time appointed for holding the EGM or its adjournment. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or its adjournment should you so wish and in such event, the form of proxy will be deemed to have been revoked.

Mr. Wong Tat Chang, Abraham, Mr. Wong Tat Kee, David and Mr. Wong Tat Sum, Samuel and their associates, in aggregate holding 81,218,666 Shares, representing approximately 73.7% of the issued share capital of the Company as at the Latest Practicable Date, will abstain from voting in respect of the resolutions relating to the Agreement and the transaction contemplated thereunder.

- 10 -

LETTER FROM THE BOARD

VOTING BY WAY OF POLL AT THE EGM

Pursuant to Rule 13.39(4) of the Listing Rules, all votes at the EGM will be taken by poll except where the chairman, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. Therefore, the chairman of the EGM will demand a poll for each and every resolution put forward at the EGM pursuant to Article 71 of the Articles of Association. An announcement on the poll vote results will be published by the Company after the EGM in the manner prescribed under Rule 13.39(5) of the Listing Rules.

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.

RECOMMENDATION

The Board (including the Independent Board Committee, whose views are set out in the letter from the Independent Board Committee after taking into account the advice of the Independent Financial Adviser) considers that the terms of the Agreement are on normal commercial terms, fair and reasonable and in the interests of the Group and the Shareholders as a whole, notwithstanding that the Acquisition is not in the ordinary and usual course of business of the Group. Accordingly, the Board recommends the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Agreement and the transaction contemplated thereunder.

GENERAL

Your attention is drawn to: (i) the recommendation from the Independent Board Committee set out on page 12 of this circular; (ii) the letter from the Independent Financial Adviser set out on pages 13 to 31 of this circular; and (iii) the additional information set out in the appendices to this circular.

MISCELLANEOUS

The English text of this circular shall prevail over the Chinese text for the purpose of interpretation.

Your faithfully,

For and on behalf of

Pokfulam Development Company Limited

Wong Tat Chang, Abraham

Chairman, Managing Director and Executive Director

- 11 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

POKFULAM DEVELOPMENT COMPANY LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 0225)

10 December 2019

To the Independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION

ACQUISITION OF EQUITY INTEREST IN

ELEPHANT HOLDINGS LIMITED

We have been appointed as members of the Independent Board Committee to give our advice on the Agreement, details of which are set out in the letter from the Board included in the circular to the Shareholders dated 10 December 2019 (the "Circular"), of which this letter forms a part. Terms used herewith shall have the same meanings as those defined in the Circular unless the context otherwise requires.

Veda Capital Limited has been appointed as the Independent Financial Adviser to advise us on the Agreement and the transaction contemplated thereunder. The letter from Veda Capital Limited is set out on pages 13 to 31 of the Circular.

Having considered the terms and conditions of the Agreement, the advice given by Veda Capital Limited and the principal factors and reasons taken into consideration by them in arriving at their advice, we are of the opinion that the Agreement and the transaction contemplated thereunder are in the interests of the Group and the Shareholders as a whole, and the terms and conditions of the Agreement are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned, notwithstanding that the Acquisition is not in the ordinary and usual course of business of the Group. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM for approving the Agreement and the transaction contemplated thereunder.

- 12 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter from Veda Capital Limited setting out the advice to the Independent Board Committee and the Independent Shareholders in respect of the terms of the Agreement and the transactions contemplated thereunder, which has been prepared for the purpose of inclusion in this circular.

Room 1106, 11/F.

Wing On Centre

111 Connaught Road Central

Hong Kong

10 December 2019

To: Independent Board Committee and the Independent Shareholders of Pokfulam Development Company Limited

Dear Sirs/Madams,

DISCLOSEABLE AND CONNECTED TRANSACTION

ACQUISITION OF EQUITY INTEREST IN

ELEPHANT HOLDINGS LIMITED

INTRODUCTION

We refer to our appointment to advise the Independent Board Committee and the Independent Shareholders in respect of the Agreement and the transactions contemplated thereunder (the "Acquisition"), details of which are set out in the "Letter from the Board" of the circular issued by the Company dated 10 December 2019 (the "Circular") to the Shareholders, of which this letter forms part. Capitalised terms used in this letter shall have the same meanings ascribed to them in the Circular unless the context otherwise requires.

Reference is made to the announcement of the Company dated 18 November 2019 (the "Announcement"). On 18 November 2019, the Company entered into the Agreement as the purchaser with B.L. Wong (Holdings) Company Limited as the Vendor, pursuant to which the Company has conditionally agreed to purchase, and the Vendor has conditionally agreed to sell, 4,784 shares of the Target Company, a non-wholly owned subsidiary of the Company, representing 47.84% of the entire share capital of the Target Company at a total consideration of HK$15,424,000. Immediately upon Completion, the Company will directly hold 99.8% of the entire share capital of the Target Company and the Target Company will remain as a non-wholly owned subsidiary of the Company, and the consolidated financial results of the Target Group will remain consolidated into the consolidated financial statements of the Company.

As set out in the "Letter from the Board" of the Circular (the "Board Letter"), as one of the applicable percentage ratios in respect of the Acquisition is greater than 5% but less than 25%, as calculated under Rule 14.07 of the Listing Rules, the Acquisition constitutes a discloseable transaction for the Company and is subject to the notification and publication requirements under Chapter 14 of the Listing Rules.

- 13 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at the Latest Practicable Date, the Vendor is beneficially owned equally by the Executive Directors. The Vendor is therefore an associate of a connected person of the Company under Chapter 14A of the Listing Rules. The Acquisition constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules, which will be subject to reporting, announcement and the Independent Shareholders' approval at the EGM.

The Executive Directors were interested in the transaction contemplated under the Agreement and have abstained from voting to approve the Agreement and the transactions contemplated thereunder at the Board meeting.

The Independent Board Committee, comprising Mdm. Lam Hsieh Lee Chin, Linda, Mr. Li Kwok Sing, Aubrey, Mr. Sit Hoi Wah, Kenneth and Mr. Seto Gin Chung, John, all being independent non-executive Directors, has been formed to advise the Independent Shareholders on the terms of the Agreement and the transaction contemplated thereunder.

Veda Capital Limited has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders as to (i) whether the terms and conditions of the Agreement and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Group and the Shareholders as a whole; and (ii) how the Independent Shareholders should vote in respect of the relevant resolution(s) to approve the Acquisition at the EGM.

As at the Latest Practicable Date, 80,633,866 Shares are beneficially owned by the discretionary trusts, of which Messrs. Wong Tat Chang, Abraham, Mr. Wong Tat Kee, David and Mr. Wong Tat Sum, Samuel are beneficiaries and the number of shares in each of the above companies are duplicated for each of the Executive Directors. Therefore, (i) Messrs. Wong Tat Chang, Abraham and his associates together holding 81,084,666 Shares (representing approximately 73.6% of the total issued share capital of the Company); (ii) Mr. Wong Tat Kee, David and his associates together holding 80,633,866 Shares (representing approximately 73.2% of the total issued share capital of the Company); and

1. Mr. Wong Tat Sum, Samuel and his associates together holding 81,218,666 Shares (representing approximately 73.7% of the total issued share capital of the Company), will all abstain from voting on the resolution(s) to be proposed at the EGM to approve the Agreement and the transactions contemplated thereunder.

OUR INDEPENDENCE

As at the Latest Practicable Date, we did not have any relationship with, or interest in, or other services provided to, the Company or any other parties that could reasonably be regarded as relevant to our independence in the past two years. Given our independent role and normal professional fees received from the Company under this engagement, we consider it would not affect our independence to form our opinion in this letter.

Apart from normal professional fees payable to us in connection with this appointment as the independent financial adviser in relation to the Acquisition, no arrangements existed whereby we had received or would receive any fees or benefits from the Company or any other parties that could reasonably be regarded as relevant to our independence. Accordingly, we consider that we are independent pursuant to Rule 13.84 of the Listing Rules.

- 14 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION

In formulating our opinion and recommendations to the Independent Board Committee and the Independent Shareholders, we have relied on (i) the information and facts contained or referred to in the Circular; (ii) the information supplied by the Group and its advisers; (iii) the opinions expressed by and the representations of the management of the Company; and (iv) our review of the relevant public information. We have assumed that all statements, information and representations made or referred to in the Circular and all information and representations which have been provided by the Company and its advisers, the Directors and the management of the Company, for which they are solely and wholly responsible, were true at the time they were made and continue to be true as at the Latest Practicable Date. We have also assumed that all statements of belief, opinion and intention made by the Directors in the Circular were reasonably made after due and careful enquiry and were based on honestly-held opinions. The Shareholders will be notified of material changes as soon as possible, if any, to the information and representations provided and made to us after the Latest Practicable Date and up to and including the date of the EGM.

The Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries that, to the best of their knowledge and belief, there are no omission of other facts that would make any statements in the Circular misleading. We have no reason to believe that any information and representations relied on by us in forming our opinion is untrue, inaccurate or misleading, nor are we aware of any omission of any material facts that would render the information provided and the representations made to us untrue, inaccurate or misleading. We have not, however, conducted any independent in-depth investigation into the business affairs, financial position or future prospects of the Group, nor have we carried out any independent verification of the information provided by the Directors and the management of the Company.

This letter is issued to the Independent Board Committee and the Independent Shareholders, solely in connection for their consideration of the Agreement and the transaction contemplated thereunder, and except for its inclusion in the 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 assessing and arriving at our advice and recommendation with regard to the Acquisition, we have taken into account the principal factors and reasons set out below.

Background of the Group, the Vendor and the Target Group

1. Information on the Group

As set out in the Board Letter, the Group is principally engaged in the businesses of property investment and management, property development, trading of visual and sound equipment, securities trading and investment holding, mainly focusing in Hong Kong.

- 15 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have set out the key financial information of the Group for the two years ended 30 September 2018 and 2019, as extracted from the annual reports of the Company for the year ended 30 September 2018 (the "2018 Annual Report") and 30 September 2019 (the "2019 Annual Report").

The table below sets out the summary financial information of the Group as extracted from the 2018 Annual Report and the 2019 Annual Report.

As illustrated above, the Group's revenue increased from approximately HK$135.54 million for the year ended 30 September 2018 to approximately HK$139.22 million for the year ended 30 September 2019, representing an increase of approximately 2.72%. We noted from the 2019 Annual Report that rental income from the Group's residential properties showed an increase of 2.4%. Such increase in revenue was mainly attributable to the increase in rental revenue from the Group's properties in Scenic Villas and Kennedy Court on Shiu Fai Terrace. Revenue from the Group's office and industrial properties had shown a 5% increase over that of the previous year, which was in line with the local segment trends. Also, the Target Group contributed around 22% to the Group's revenue and brought a positive impact on the Group's segment results.

The Group's profit attributable to owners of the Company decreased from approximately HK$480.77 million for the year ended 30 September 2018 to approximately HK$136.85 million for the year ended 30 September 2019, representing a decrease of approximately 71.53%. We noted from the 2019 Annual Report that such decrease in the Group's profit attributable to owners of the Company was mainly attributable a smaller increase in fair value of investment properties of approximately HK$65.89 million for the year ended 30 September 2019 compared to an increase in fair value of investment properties of approximately HK$420.94 million for the year ended 30 September 2018.

- 16 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Group's total assets and total liabilities as at 30 September 2019 amounted to approximately HK$5,705.54 million (2018: approximately HK$5,588.66 million) and approximately HK$163.21 million (2018: approximately HK$141.40 million), respectively. This represented an increase of approximately 2.09% as at 30 September 2019 in total assets of approximately HK$116.88 million, primarily attributable to the increase in the fair value of the investment properties as well as gains in the Group's (i) debt instruments at fair value through other comprehensive income; (ii) financial assets at fair value through profit or loss; and (iii) equity instrument designated at fair value through other comprehensive income as a result of the adoption of a new and amended Hong Kong Financial Reporting Standard that was effective from 1 October 2018. The increase in total liabilities of approximately HK$21.81 million was primarily attributable to (i) a bank loan of HK$15.00 million drawn by the Group; and (ii) an increase in the Group's other payables.

The Target Group

The Vendor is a limited liability company established in Hong Kong and is principally engaged in the business of building construction and investments in Hong Kong.

As at the Latest Practicable Date, the Target Company is a non-wholly owned subsidiary of the Company and the Target Group is principally engaged in the business of trading of visual and sound equipment. As advised by the management of the Company, the Target Group supplies visual and sound equipment to both direct customers and distributors in Hong Kong. As at the Latest Practicable Date, one of the distributors, which supplies to the People's Republic of China ("PRC") market, contributes approximately 9% of the Target Company's revenue for the year ended 30 September 2019. Whilst as discussed with the management of the Target Company, it is believe that the PRC market has been a new driver of revenue growth of visual and sound equipment as the domestic consumption market in the PRC is much bigger than the local market in Hong Kong, and the Target Company will continue to expand the sales and distribution of its products in the PRC in the future.

- 17 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Immediately upon Completion, the Target Company will remain as a non-wholly owned subsidiary of the Company, and the consolidated financial results of the Target Company will remain consolidated into the consolidated financial statements of the Company apart from any remaining non-controlling interests.

Financial Information of the Target Group

Set out below is the unaudited consolidated financial information of the Target Group for the two financial years ended 30 September 2018 and 2019:

As at 30 September 2019, the net asset value of the Target Group was approximately HK$12,678,000 and the net asset value of the Target Group before all outstanding shareholder 's loan due by the Target Company to the Vendor (the

• Shareholder 's Loan") has been waived or capitalised was HK$14,478,000. According to the information provided by the Vendor, the original acquisition cost of the Sale Shares was approximately HK$1,901,000 in 1984.

So far as the Company is aware, as at 18 November 2019, the Company, the Vendor, Mr. Wong Tat Chang, Abraham, being the Director and Lui Hang Ying (an independent third party of the Company) held 51.96%, 47.84%, 0.1% and 0.1% of the entire share capital of the Target Company respectively. Pursuant to the articles of association of the Target Company, the qualification of Mr. Wong Tat Chang, Abraham as a director of the Target Company shall be the holding of at least five shares in the Target Company and therefore he remains as a shareholder of the Target Company. Upon Completion, the Company will hold 99.8% of the entire share capital of the Target Company and the financial results of the Target Group will be further consolidated into the financial results of the Group.

- 18 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1. Reasons for and benefits of the Acquisition

As set out in the Board Letter, the Directors are of the view that the Acquisition is in line with the long term business strategy of the Group and will strengthen the Group's position in the industry of trading of visual and sound equipment. Upon Completion, controlling interest of the Company in the Target Company will further increase, enabling the Company to consolidate its control in the Target Group and develop the business of the Target Group and create synergy effect with the existing business of the Group. The Acquisition will also create synergy effect within the existing property investment business of the Group through enhanced application and installation of the visual and sound equipment of the Target Group in the existing and future property projects of the Group.

As discussed with the management of the Target Company and the Company, the Target Group offers a variety of audiovisual solutions for commercial and professional use such as digital displays and signage, public address systems, CCTV systems, professional audiovisual systems and also luxury high fidelity audio systems from brands such as Audio Note, Einstein, Roksan and WBT. As further noted from the 2019 Annual Report, the Target Company has also been expanding its Hi-Fi,audio-visual and sound systems portfolio into the PRC market via distributors which the Company is of the view that there is a prospective growing market in high-endaudio-visual and sound systems in the PRC, and the luxury brands of the Hi-Fi products will become more prevalent in the high-end audio market in the PRC.

The Group will continue to upgrade its property holdings to enhance their competitiveness in the rental market. Smart-home features and other modern amenities will be installed in the Group's residential properties once they become vacant upon lease expiration. The Group has been actively expanding its investment property portfolio and meanwhile, the Target Company has been continuing to make investments in its IT-infrastructure and engineering capacity to become more competitive in bidding for large scale audiovisual system installation projects. The Target Group's commercial audiovisual products synergises well with the Company's property projects as property developments generally require digital signage, CCTV and other audiovisual systems.

As advised by the management of the Company, the Target Group will continue to explore any potential market opportunities in the PRC, by way of sourcing more distributors or directly entering the PRC market, in order to strengthen the Target Group's commercial audiovisual products segment upon Completion.

Overview of the audiovisual market

According to a survey conducted by Hong Kong Trade Development Council ("HKTDC") (source: https://www.hktdc.com/) in June 2019 titled "HKTDC Hong Kong Electronics Fair Survey Spring 2019: Positive Sentiment on the Rise", product-wise, electronics and electrical accessories, as well as digital imaging and audio-visual items, were expected to be in high demand for the rest of the year. In the longer term, the prospects for electronics compatible with smart home applications look promising, partly on account of the rapid development of the

- 19 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Internet of Things. As for emerging markets, Mainland China was seen as the most appealing for the industry over the next two years, with a rating of 3.94, which was well above the other non-traditional markets - Latin America (3.75), ASEAN (3.73), India (3.6) and the Middle East (3.53). Sales of electronics and electrical accessories are likely to achieve the fastest growth in 2019, according to more than one-fourth of all respondents (27%), nearly double the 14% reported at the autumn fair in 2018 which digital imaging items were also seen as set to be in strong demand, a proposition backed by some 13% of respondents, followed closely by audio-visual products (12%) and home appliances (10%).

We have further conducted a research on the entertainment and media market, in particular for the audiovisual system market. As noted in the "Global Entertainment & Media Outlook 2019-2023" issued by Pricewaterhouse Coopers International Limited of which being a recognizable and reputable independent global audit service provider (source: https://www.pwc.com/gx/en/) in 2019, audio consumption is another segment that is booming in a more individualized environment, one in which consumers are spending an increasing amount of their time. This trend is reflected by the continuing growth of new platforms and widespread merger and acquisition activity. Further indications of the move to active individualized consumption can be seen in the rise of the smart home and the connected car.

According to "Credit Suisse's Global Wealth Report 2019" issued by Credit Suisse, which is a global international financial services company, advising clients in all aspects of finance, in October 2019 (source: https://www.credit-suisse.com), the PRC had approximately 4.4 million millionaires, approximately 10% of the global total and in 2019 overtook the US to become the country with the most people, approximately 100 million, in the top 10% of the global wealth distribution. The number of millionaires in the PRC is projected to grow to approximately 6.9 million, an increase of approximately 55% from 2019, by 2024.

In addition, according to a premium products survey conducted by Nielsen Corporation, a global marketing research firm with headquarters in New York, the United States of America in April 2019 (source: https://www.nielsen.com/us/en/), personal electronics is the top premium product that PRC consumers are most willing to buy. Also according to research conducted by Nielsen, approximately 49% of PRC consumers purchase premium products online from overseas brands and retailers compared to the global average of approximately 24%. The PRC Government also recently raised the annual quota on cross-bordere-commerce purchases for individual buyers from RMB20,000 to RMB26,000 and raised the limit on single transactions from RMB2,000 to RMB5,000.

- 20 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

According to a report by IHS Markit, a London-based global information provider (source: https://ihsmarkit.com/index.html), the global video surveillance system market was valued at approximately USD47.40 billion in 2018, and is expected to reach a value of approximately USD86.06 billion by 2024 at a projected compound annual growth rate of approximately 10.35%. In 2018, the PRC accounted for 45% of global professional video surveillance equipment revenues, growing at an average annual growth rate of approximately 13.3% between 2012 and 2017 and approximately 13.5% in 2018 compared to the global market's average annual rate growth of approximately 2.6% over the same timeframe.

The markets for various different types of commercial and professional audiovisual systems are generally trending upwards with the PRC being the largest consumer market for most commercial and professional audiovisual products and system. The PRC is also the largest consumer market for personal electronics and PRC consumers have shown a high preference for higher end luxury goods from overseas brands and suppliers. Based on the above, we are of the opinion that the Target Group's industry is expected to present favorable business opportunities to the Group after the Completion.

On the basis above, we are of the view that the Acquisition will allow the Group to capture more opportunities derived by the growth in demand of commercial and professional audiovisual products and system in the PRC, and the Acquisition will enable the Group to achieve higher growth by capturing more sales. We therefore concur with the Directors that the Acquisition would benefit the Group's development in the view of the potential market demand.

Despite that the Target Group incurred a net loss for the financial year ended 30 September 2018 and 2019, the Target Group recorded gross margins of approximately 31.5% and 40.0% for the financial year ended 30 September 2018 and 2019 respectively which also represented an increase of approximately 35.0% in terms of the gross profit margins and an approximately 27.0% increase in gross margin ratio. As advised by the management of the Company, the recent net loss of the Target Company is mainly attributable to (i) a relatively hefty cost of operations of approximately HK$11.30 million for the year ended 30 September 2019; (ii) the trade war between the US and the PRC has inevitably caused a level of economic uncertainty and impaired business confidence and dampened consumer confidence in the community, which in particular has led to the slowdown in sales of luxury goods since the luxury goods consumption is directly related to consumer confidence; and (iii) larger scale projects entered into in 2018 and 2019 are yet to be completed resulting in all the costs of said projects being incurred in 2018 and 2019 whilst the revenue from said projects will be paid upon completion in the future.

Prior to the Completion of the Agreement, any potential transactions between the Target Company and the Company such as provision of services, leasing of properties, licensing of intellectual property rights or providing financial assistance may constitute connected transactions or continuing connected transactions and would be subject to the reporting, annual review and disclosure requirements, and Shareholders' approval requirements under Chapter 14A of the Listing Rules based on relevant percentage ratios under Chapter 14A of the Listing Rules in such situation.

- 21 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As mentioned above, the management of the Company considers the Target Group's commercial audiovisual products and services synergises well with the Company's property projects as property developments generally require a variety of commercial audiovisual products and services such as digital signage, CCTV or other audiovisual systems which any potential continuing service engagement and purchase order from the Target Company may constitute the aforesaid continuing connected transactions in the future prior to Completion. Meanwhile, amounts for the sharing of administrative services and other office functions between the Target Company and the Company would also be subjected to annual cap requirements on an annual basis according to the relevant percentage ratios under Chapter 14A of the Listing Rules.

As there are significant synergies between the Group and the Target Group, it is more cost effective and efficient for the Group to utilise the products and audio services of the Target Group rather than seeking independent third parties that would use up the Group's time and resources to perform necessary due diligence in order to ensure the quality of products and services of any independent supplier to meet the Group's needs and requirements. As such upon Completion of the Agreement, the Target Company will no longer be considered a connected person to the Company and any future transactions between the Target Company and the Company and their respective associates will not constitute connected transactions of the Company under Chapter 14A of the Listing Rules thereby streamlining the Group's procurement of any audiovisual products and services for any potential future property projects.

Therefore, we are of the view, in line with management of the Company, that the continuous co-operation between the Group and the Target Group can (i) eliminate unnecessary expenses that would be potentially incurred by the Group seeking products and services from independent third parties; and (ii) avoid any potential costs of the Group in terms of professional fees and time required for processing any connected transactions or continuing connected transactions should the situation arise.

1. Principal terms of the Agreement
2. 1. Assets to be acquired

Subject to the satisfaction or waiver (as the case may be) of the conditions precedent to the Agreement, the Company has conditionally agreed to purchase, and the Vendor has conditionally agreed to sell, 4,784 shares of the Target Company, representing 47.84% of the entire share capital of the Target Company as at the Latest Practicable Date.

1. Consideration and payment terms

The consideration for the sale and purchase of the Sale Shares is HK$15,424,000, which will be satisfied by the internal resources of the Company and shall be settled in one lump sum at Completion.

- 22 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The consideration was determined by the parties after arm's length negotiations with reference to, among others, the net asset value of the Target Group (before the outstanding shareholder's loan due by the Target Company to Vender has been waived or capitalised), the market value of the Property of HK$14,000,000 as at 31 October 2019 under valuation on market approach basis as shown in the Valuation Report and the outstanding shareholder 's loan due by the Target Company to the Vendor. The Directors, (excluding the independent non-executive Directors who will express their opinion after considering the advice from the Independent Financial Advisor), consider that the consideration is fair and reasonable and in the interests of the Group and the Shareholders as a whole.

1. Reconciliation from the Target Group net assets value to Consideration

In relation to the Consideration of the Acquisition, the following major factors and assumptions have been taken into account by the management of the Company in the determination of the Consideration. Moreover, the Valuer was engaged by the Company to conduct the Valuation for the purpose of further assessing the fairness and reasonableness of the Consideration for the Target Group as the Property serves as a major asset of the Target Company. The Valuation as at 31 October 2019 assessed by the Valuer was HK$14.00 million.

Steps for determining the Consideration is as follows:

1. The unaudited net asset value of the Target Group before all outstanding Shareholder Loan has been waived or capitalised of approximately HK$14.48 million (the "NAV before Shareholder Loan");
2. Eliminating the carrying value of the Property which is nil as 30 September 2019 due to the accumulated deprecations over years;
3. adding approximately HK$14.00 million which represented the fair value of the Property then held by the Target Company as per the Valuation to arrive at approximately HK$28.48 million on the entire equity interest of the Target Group;
4. Adjusting for the 47.84% of the equity interest of the Target Group;
5. adding approximately HK$1.80 million which represented the value of the outstanding amount of the shareholder 's loan owed by the Target Company to the Vendor as at 18 November 2019; and
6. The Consideration of HK$15.42 million represents the adjusted net asset value of the Target Group (the "Reconciliated NAV").

- 23 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The table below sets forth below is the reconciliation statement from the adjusted net asset value of the Target Group to Consideration, which is for illustrative purposes only:

- 24 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

IV. The valuation of the Property

In assessing the fairness and reasonableness of the Consideration, we have considered the valuation of the Property (the "Valuation"), further details of which are set out in Appendix I to the Circular prepared by Cushman & Wakefield Limited (the "Valuer").

1. Information about the Property
   The following table sets forth the a summary about the Property:

1. The Valuer

The Property was valued by Cushman & Wakefield Limited, an independent property valuer appointed by the Company. To ascertain the Valuer is suitably qualified possessing related experiences and competence to undertake the Valuation, we have reviewed and enquired into (i) the terms of engagement stipulated under the mandate letter entered into between the Valuer and the Company in relation to the Valuation that comply with the Listing Rules and the HKIS Valuation Standards published by the Hong Kong Institute of Surveyors; (ii) the Valuer 's qualifications and experiences that are relevant to the Valuation; (iii) the due diligence measures taken by the Valuer in respect of the Valuation mainly including (a) site inspection (including the exterior and the interior of the Property);

1. making relevant enquiries on copies of the title documents relating to the property interests which were shown to the Valuer; and (iv) the independence of the Valuer to the Company which the Valuer confirmed that it is independent from any member of the Group or the Target Group.

- 25 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on the aforesaid due diligence review and our interview with the Valuer and given the fact that (i) the Valuer is an established independent property valuer with over 100 years of history and is among the largest commercial real estate services firms in the world which has completed various assignments for companies listed on the Stock Exchange; (ii) the principal valuer of the Valuation (including preparation of the Valuation Report) is an Executive Director and Head of the Valuation and Advisory Services of Hong Kong of the Valuer with more than 30 years of experience in the valuation of properties in Hong Kong. The principal valuer is currently a Fellow of The Hong Kong Institute of Surveyors, a Member of The Royal Institution of Chartered Surveyors, a Registered Professional Surveyor (RPS) in General Practice Division as well as a member of China Institute of Real Estate Appraisers and Agents (MCIREA), we are satisfied with the scope of work of the Valuer as well as Valuer 's qualifications and experiences that are sufficient and relevant to the Valuation, and therefore consider that Valuer is well experienced and competent in performing the Valuation and preparing the Valuation Report.

We have also reviewed the terms of engagement letter of the Valuer and noted that the purpose of which is to prepare the Valuation Report and provide the Company with the opinion of market value on the Property as at 31 October 2019. The engagement letter also contains standard valuation scopes that are typical of property valuations carried out by an independent property valuer. There is no limitation of the scope of work which might have an adverse impact on the degree of assurance given by the Valuer in the Valuation Report. We also understand from the Valuer that it has carried out on-site inspection and relied on and obtained sufficient information to reach a view of the valuation for the market value of the Property (the "Valuation") as at 31 October 2019.

1. Valuation bases and assumptions

During our review, we noted that the valuation on the Property was conducted based on the key assumptions that, among others, (i) the title owner of the Property has an enforceable title of the Property interest and has free and uninterrupted rights to occupy, use, sell, lease, charge, mortgage or otherwise dispose of Property without the need of seeking further approval from and paying additional premium to the government for the unexpired land use term as granted;

1. the design and construction of the Property is in compliance with the local planning regulations and requirements, and had been duly examined and approved by the relevant authorities. The Valuer advised that the above are the assumptions generally adopted in property valuations. We have, in such regard, conducted independent research and noted that the above assumptions have been commonly adopted in the valuations of assets including properties of other listed companies in Hong Kong.

- 26 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1. Valuation methodologies

We noted from the Valuation Report that in performing the Valuation, the Valuer has adopted the market approach by making reference to comparable market transactions realised on actual sales of comparable properties as available in the relevant market (the "Comparables"). The Valuer has identified transactions based on the criteria that (i) such transaction had been completed during the month of the Valuation Date, or if not available, as close as the date of the Valuation approximately within the preceding year, and the completion had been registered in the Land Registry which the Valuer has relied on; and (ii) the Comparables are comparable after taking into consideration of factors such as location, time, size, age and condition, which were analysed and carefully weighed against all the respective advantages and disadvantages in order to arrive at a fair comparison of market value. As confirmed by the Valuer, the Comparables represent relevant comparables having met all of the corresponding predetermined selection criteria.

We noted that the Comparable selected by the Valuer are located in the same or similar area of the Property in Hong Kong and have the same nature as the Property with similar size which are used only for industrial purposes, thus we are of the view that the comparables are fair and representative samples. A unit rate of approximately HK$5,907.2 per sq.ft. (not including the portion of roof having an area of approximately 12 sq.ft.) was adopted by the Valuer for the Valuation which is within the range of the Comparables and below the average of the unit rate of the Comparables of approximately HK$6,347.0 per sq.ft..

Furthermore, we have discussed with the Valuer on the rationale of adopting the market approach for valuing the Property. As advised by the Valuer, market approach was considered as an appropriate method in assessing the value of the Property given the availability of the market information of the Comparables, which is considered to be the best indicator of the fair value of the Property. It is advised by the Valuer that it is a common market practice to conduct valuation of properties in Hong Kong via market approach. Based on our independent research, it is noted that market approach has been commonly adopted for valuing assets including properties of other listed companies in Hong Kong.

In the Valuation Report, it is set forth that, in valuing the property interest, the Valuer has complied with all the requirements set out in Chapter 5 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and The HKIS Valuation Standards 2017 issued by The Hong Kong Institute of Surveyors.

Based on the above, we consider that the bases, assumption and methodologies adopted in arriving at the Valuation are fair and reasonable.

- 27 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1. Evaluation of the Consideration
2. 1. Market comparable analysis

In assessing the fairness and reasonableness of the Consideration, we have also considered comparing the price-to-earnings ratio (the "P/E ratio") and the price-to-book ratios (the "P/B ratio") of the Acquisition against that of the companies which are listed on the Stock Exchange and are engaged in similar businesses to those of the Target Group. However, the Target Group recorded net loss before and after taxation for the two financial years ended 30 September 2018 and 2019. Accordingly, P/E ratio analysis is not applicable in this case for comparison purposes. Nevertheless, P/B ratio is one of the most widely used and accepted methods for valuing a business and is commonly used benchmarks in valuing a company. The P/B Ratio is calculated based on the net asset values attributable to the owners of the company from the most recent financial year and therefore we have attempted to conduct an analysis with reference to the P/B Ratio.

Considering the unique characteristics of the Target Company, there was a lack of market comparables or transactions available to derive an indicative value with sufficient level of accuracy. Nevertheless, we have attempted to identify comparable companies on a best effort basis based on the following criteria: (i) the shares of which are listed on the GEM and Main Board of the Stock Exchange; (ii) engaged in principal business similar to the Target Group business and generated over 50% of its total revenue for the latest completed financial year from the operation of trading of visual and sound equipment as well as audiovisual system installation projects. However, there are nil comparable companies matching the above criteria. We have extended our search criteria to the provision of multimedia audio-visual solutions and related system integration services. In this regard, we could only identify one comparable company (the "Comparable Company"). We consider the sample size was too small to give a fair reference to the Shareholders for the indication to assess the valuation of the Consideration. Therefore, we consider the Comparable Company serves as a general reference to the analysis of the P/B ratio only.

- 28 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Notes:

1. The market capitalisation is based on the closing price as quoted on the Stock Exchange on 18 November 2019, being the date of the Agreement and the number of issued shares of the Comparable Company on 18 November 2019 (i.e. 1,000,000,000).
2. The P/B ratio is calculated based on the market capitalisations of the respective Comparable Company as at 18 November 2019 and the number of issued shares of the Comparable Company on 18 November 2019 divided by the latest published net assets attributable to shareholders of the respective Comparable Company as extracted from its respective latest published financial results.

In respect of the P/B ratio of the Target Company, which is calculated based on the Consideration of approximately HK$15.42 million and divided by and the Reconciliated NAV of approximately HK$15.42 million as at 30 September 2019 would be approximately 1.0 times (the "Implied P/B ratio"). As shown in the table above, the P/B ratio of the Comparable Company is approximately 2.47 while the Implied P/B ratio is only 1.0 which is significantly lower.

On the other hand, as discussed the above section headed "Reconciliation from the Target Group net assets value to Consideration", the Consideration was determined with reference to (i) the Valuation; (ii) the outstanding amount of the shareholder 's loan owed to the Vendor by the Target Company; and (iii) the Reconciliated NAV of the Target Group as at 30 September 2019 which the Consideration is equivalent to the Reconciliated NAV.

As the value of the Property serves as the major asset to the Target Group, in order to reflect the net book value of the Property of the Target Group as at 30 September 2019 to its fair value as at 31 October 2019 for the purpose to serve as a fair basis for the Consideration, the Reconciliated NAV shall be determined by taking into account the appraised value of the Property as set out in the Valuation Report. This adjustment is mainly due to the impact of accounting treatment of the Property, the fair value of all assets and liabilities held by Target Group should be duly considered. Since the Consideration is equivalent to the Reconciliated NAV and we consider that the adjustments set out above are the relevant types of adjustments with reference to, among other thing, latest valuation of the property interest of the Target Group, it is customary for arriving at the Reconciliated NAV of the Target Group.

Taking into account of (i) the Target Group's future prospects as discussed in the above section headed "Reasons for and benefits of the Acquisition"; (ii) the Valuation Report is a fair reference for Independent Shareholders to assess the fairness and reasonableness of the Consideration of the Acquisition; and (iii) the evaluation of the Consideration as discussed above, we are of the view that the Consideration is fair and reasonable.

- 29 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(VI) Conditions Precedent

Completion shall be conditional upon satisfaction or waiver (as the case may be) of the following conditions:

1. the passing of all necessary resolution(s) by the Independent Shareholders of the Company at the EGM;
2. completion of the valuation of the Property by Cushman & Wakefield Limited;
3. all consents and approvals necessary to be obtained by any member of the Target Group and/or the Vendor for consummation of the Agreement and the transaction contemplated having been granted by the relevant governmental or regulatory authorities in Hong Kong, if any;
4. from the date of this Agreement and at any time before the Completion, that the representations, warranties and undertakings of the Vendor under the Agreement remain true, accurate and not misleading in any material respect; and
5. the outstanding shareholder 's loan due by the Target Company to the Vendor being waived or capitalised.

The Purchaser may, in its absolute discretion, waive the conditions precedent in paragraph (b), (d) and (e) above at any time by specific notice in writing to such effect to the Vendor.

Completion of the Agreement shall take place on 24 January 2020 or such other date as the vendor and the Purchaser may agree in writing after all the conditions precedents in the Agreement have been fulfilled.

Further details of the Agreement are set out under the section headed "The Acquisition" in the Letter from the Board.

VII. Financial effects of the Acquisition

As at the Latest Practicable Date, the Target Group was already a non-wholly owned subsidiary of the Company and the Target Group's consolidated financial results are already consolidated into the consolidated financial statements of the Company aside from any non-controlling interest. Immediately upon Completion, the Target Company will remain as a non-wholly owned subsidiary of the Company, and the financial results of the Target Group already consolidated into the financial results of the Company will remain consolidated into the consolidated financial results of the Company.

- 30 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Immediately upon Completion there will be a reduction in the cash position and the working capital of the Company in the amount of the Consideration as the Consideration will be fully settled in cash.

After Completion, the financial results of the Target Group will be further consolidated into the financial results of the Group reconsolidating approximately 47.84% of non-controlling interest leaving approximately 0.02% of non-controlling interest remaining.

Apart from the above mentioned, there will be no other relevant material changes to the Company's consolidated financial results.

RECOMMENDATION

Having considered the above principal factors and reasons, we are of the view that although the Acquisition is not in the ordinary and usual course of business of the Group, the terms of the Agreement are on normal commercial terms and are fair and reasonable so far as the Company and the Independent Shareholders are concerned, and are in the interests of Company and the Independent Shareholders as a whole. Accordingly, we would recommend (i) the Independent Board Committee to advise the Independent Shareholders; and (ii) the Independent Shareholders, to vote in favor of the relevant resolution(s) to be proposed at the EGM in this regard.

Yours Faithfully,

For and on behalf of

Veda Capital Limited

Notes: Mr. Hans Wong is a Responsible Officer under the SFO to engage in Type 6 (advising on corporate finance) regulated activity and has over 24 years of experience in investment banking and corporate finance.

Ms. Tina Hung is a Responsible Officer under the SFO to engage in Type 6 (advising on corporate finance) regulated activity and has over 24 years of experience in corporate finance.

- 31 -

The following is the text of a letter and a valuation report prepared for the purpose of incorporation in this circular received from Cushman & Wakefield Limited, an independent property valuer, in connection with its opinion of the value of the property as at 31 October 2019.

16/F

Jardine House

1 Connaught Place Central

Hong Kong

15 November 2019

The Directors

Pokfulam Development Company Limited

23/F, Beverly House

93-107 Lockhart Road

Wanchai

Hong Kong

Dear Sirs,

Re: Portion on 10th Floor and Portion on Roof "10", Tung Kin Factory Building, 196-202 Tsat Tsz Mui Road, North Point, Hong Kong.

Instructions, Purpose & Valuation Date

In accordance with the instructions of Pokfulam Development Company Limited (the "Company") and/or its subsidiaries (collectively the "Group") for Cushman & Wakefield Limited ("C&W") to prepare a market valuation of the property situated in Hong Kong for the purpose of public disclosure in relation to the Proposed Discloseable and Connected Transaction of the Company (as more particularly described in the attached valuation report), we confirm that we have inspected the property, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the value of the property as at 31 October 2019 (the "Valuation Date").

Basis of Valuation

Our valuation of the property represents its market value which in accordance with the HKIS Valuation Standards 2017 published by the Hong Kong Institute of Surveyors is defined as "the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion".

We confirm that the valuation is undertaken in accordance with the requirements set out in Chapter 5 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and The HKIS Valuation Standards 2017 issued by The Hong Kong Institute of Surveyors.

Our valuation of the property is on an entirety interest basis.

- 32 -

Valuation Assumptions

Our valuation excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, special considerations or concessions granted by anyone associated with the sale, or any element of value available only to a specific owner or purchaser.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property nor any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property is free from encumbrances, restrictions and outgoings of any onerous nature which could affect its value.

Valuation Method

We have valued the property by market approach assuming sale of the property in its existing state by making reference to comparable sales transactions as available in the relevant market.

Source of Information

We have relied to a very considerable extent on the information given by the Group and have accepted advice given to us on such matters as planning approvals, statutory notices, easements, tenure, identification of land and buildings, particulars of occupancy, site and floor areas, tenancy details, site and floor plans and all other relevant matters.

Dimensions and measurements are based on the copies of documents or other information provided to us by the Group and are therefore only approximations. No on-site measurement has been carried out. We have no reason to doubt the truth and accuracy of the information provided to us by the Group which is material to the valuation. We were also advised by the Group that no material facts have been omitted from the information provided.

Title Investigation

We have not been provided with copies of the title documents relating to the property but have caused searches to be made at the Land Registry. However, we have not searched the original documents to verify ownership or to ascertain any amendments. All documents have been used for reference only and all dimensions, measurements and areas are approximate.

- 33 -

Site Inspection

Our valuer, Shirley Kwong (Probationer of HKIS) inspected the exterior and where possible the interior of the property on 31 October 2019. However, no structural survey has been made. We are not, however, able to report whether the property is free of rot, infestation or any other structural defects. No test was carried out on any of the services. Unless otherwise stated, we have not been able to carry out detailed on-site measurements to verify the site and floor areas of the property and we have assumed that the areas shown on the documents handed to us are correct.

Confirmation of Independence

We hereby confirm that C&W and the undersigned have no pecuniary or other interests that could conflict with the proper valuation of the property or could reasonably be regarded as being capable of affecting our ability to give an unbiased opinion.

We enclose herewith our valuation report for your attention.

Yours faithfully,

For and on behalf of

Cushman & Wakefield Limited

K. B. Wong

MRICS, FHKIS, RPS(GP)

Executive Director

Valuation & Advisory Services

Note: Mr. K. B. Wong is a Registered Professional Surveyor (General Practice) who has over 30 years' experience in valuation of properties in Hong Kong. Mr. Wong is competent and has sufficient current knowledge of the market and the skill to undertake the valuation.

- 34 -

VALUATION REPORT

Property held for Owner Occupation

- 35 -

Notes:

1. The registered owner of the property is Elephant Holdings Limited (formerly named as "Elephant Radio Company Limited") which is a subsidiary of the Company.
2. The property is subject to a Mortgage to secure overdraft in favour of The Bank of East Asia Ltd. for a consideration of HK$100,000 vide Memorial No. UB477993 dated 23 February 1965.
3. The property is subject to a Further Charge in favour of The Bank of East Asia Limited for a consideration of HK$200,000 vide Memorial No. UB995583 dated 16 May 1973.
4. The property is subject to an Order No. UBCS/05-17/0026/10 under Section 24(1) of the Buildings Ordinance with Plan issued by the Building Authority vide Memorial No. 13062401330015 dated 24 December 2012 (Re: for Common Part(s) only). In the course of our valuation, we have disregarded any reinstatement cost required for the compliance with the said Order.
5. The property falls within a land use zone for "Residential (Group E)" purpose under Approved North Point Outline Zoning Plan No. S/H8/26 dated 15 August 2017.
6. In undertaking our valuation, we have made reference to sales prices of comparable properties with a price range of HK$5,885 to HK$6,976 psf on saleable area. The unit rate assumed by us in our valuation is consistent with the relevant comparables after adjustments of location, size, age, time, condition and other relevant factors.

- 36 -

1. DISCLOSURE OF INTERESTS

1. Interests of Directors and chief executive in the Shares, underlying shares and debentures of the Company

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the Shares, underlying shares and debentures of the Company and 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 referred to therein; or (c) pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (the "Model Code") to be notified to the Company and the Stock Exchange, were as follows:

Long position in the Shares and underlying shares of the Company

Notes:

1. Mr. Wong Tat Sum, Samuel, an executive Director, is deemed to be interested in 28,800 Shares, being the interest held beneficially by his wife.
2. Shares included in other interests are beneficially owned by the discretionary trusts, of which Messrs. Wong Tat Chang, Abraham, Wong Tat Kee, David and Wong Tat Sum, Samuel are beneficiaries and the number of shares in each of the above companies are duplicated for each of these three Executive Directors.
3. The percentage represents the total number of Shares interested divided by the number of issued Shares of 110,179,385 as at the Latest Practicable Date.

- 37 -

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had any interests and short positions in the Shares, underlying shares and debentures of the Company and 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); or (b) pursuant to section 352 of the SFO, to be recorded in the register referred to therein; or (c) pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

As at the Latest Practicable Date, save as disclosed above, none of the Directors was a director or employee of a company which had an interest or short position in the Shares or underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO.

As at the Latest Practicable Date, none of the Directors or chief executive of the Company or their spouses or children under 18 years of age were granted or had exercised any right to subscribe for any equity or debt securities of the Company or any of its associated corporations (within the meaning of Part XV of the SFO).

1. Substantial Shareholders' and other persons' interests in the Shares, underlying shares and debentures of the Company

As at the Latest Practicable Date, other than the Directors and chief executive of the Company as disclosed above, the Company had not been notified by any entity or person of interests or short positions in the Shares and underlying shares of the Company which was required to be recorded in the register pursuant to section 336 of the SFO.

2. COMPETING INTEREST

As at the Latest Practicable Date, Mr. Li Kwok Sing, Aubrey and Mr. Seto Gin Chung, John had been an independent non-executive director of Kowloon Development Company Limited ("KDCL") (a company whose issued shares are listed and traded on the Stock Exchange). KDCL was engaged in property investment and property development businesses. As such, Mr. Li Kwok Sing, Aubrey and Mr. Seto Gin Chung, John were regarded as being interested in such businesses which competed or were likely to compete with the Group. However, such businesses were managed by a separate publicly listed company with independent management and its board composition is different and separate from the Company. Saved as disclosed above, as at the Latest Practicable Date, none of the Directors or the controlling Shareholders of the Company and their respective associates has any interest in a business, apart from the business of the Company, which competes or may compete with the business of the Company or has any other conflict of interest with the Company which would be required to be disclosed under Rule 8.10 of the Listing Rules.

- 38 -

3. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with the Company or any member of the Group which does not expire or is not terminable by the Group within one year without payment of compensation, other than statutory compensation.

4. DIRECTORS' INTEREST IN ASSETS

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any assets which had been acquired or disposed of by, or leased to any member of the Group, or are proposed to be acquired or disposed of by, or leased to any member of the Group since 30 September 2019, being the date to which the latest published audited financial statement of the Group was made up.

5. DIRECTORS' INTEREST IN CONTRACTS

None of the Directors is materially interested in any contract or arrangement entered into by the Company or any of its subsidiaries which contract or arrangement is subsisting at the Latest Practicable Date and which is significant in relation to the business of the Group taken as a whole.

6. CONSENT AND QUALIFICATION OF EXPERT

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

As at the Latest Practicable Date, Veda Capital did not have any shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

Veda Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name and letter in the form and context in which they appear respectively.

The letter and recommendation given by Veda Capital are given as of the date of this circular for incorporation herein.

- 39 -

Veda Capital has, or has had, no direct or indirect interest in any assets which have been acquired or disposed of by, or leased to, any member of the Group or are proposed to be acquired of by, or leased to, any member of the Group since 30 September 2019, being the date to which the latest published audited financial statement of the Group was made up.

7. MATERIAL ADVERSE CHANGE

Save as disclosed in this circular and as at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 30 September 2019, being the date to which the latest published audited accounts of the Company were made up.

8. DOCUMENTS FOR INSPECTION

Copy of the following documents will be available for inspection at the office of Messrs. Chungs Lawyers at 28/F Henley Building, 5 Queen's Road Central, Central, Hong Kong during normal business hours from 9:00 a.m.to 5:00 p.m. on any weekday (except public holidays) for a period of 14 days from the date hereof:

1. the Agreement;
2. the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out on page 12 of this circular;
3. the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 13 to 31 of this circular;
4. the written consent of the expert as referred to in the section headed "6. Consent and Qualification of Expert" in this appendix; and
5. this circular.

- 40 -

NOTICE OF EGM

POKFULAM DEVELOPMENT COMPANY LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 0225)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of Pokfulam Development Company Limited (the "Company" and the "EGM", respectively) will be held at Director 's Room, World Trade Centre Club Hong Kong, 38th Floor, World Trade Centre, 280 Gloucester Road, Causeway Bay, Hong Kong on Tuesday, 31 December 2019 at 4:00 p.m. (or immediately after the annual general meeting of the Company) (or its adjournment) for the following purposes:

As ordinary business:

"THAT:

1. the Agreement (as defined in the circular of the Company dated 10 December 2019) and the transaction contemplated thereunder be and are hereby approved, confirmed and ratified; and
2. any one director of the Company be and are hereby authorised to do all such acts and things as they consider necessary and to sign and execute (or where execution under the common seal of the Company is required, execute under seal) all such documents and/or deeds with or without amendments and/or to take all such steps as he/she may consider necessary, appropriate, desirable or expedient to carry out or give effect to or otherwise in connection with the Agreement and the transaction contemplated hereunder."

By Order of the Board

Pokfulam Development Company Limited

Hui Sui Yuen

Company Secretary

Hong Kong, 10 December 2019

- 41 -

NOTICE OF EGM

Notes:

1. For determining the entitlement to attend and vote at the EGM, the register of members of the Company (the "Register of Members") will be closed from Tuesday, 24 December 2019 to Tuesday, 31 December 2019 (both days inclusive), during which period no transfer of Shares will be effected. In order to be eligible to attend and vote at the EGM, all transfer documents accompanied by the relevant share certificates must be lodged with the Company's share registrar, Tricor Standard Limited at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong not later than 4:30 p.m. on Monday, 23 December 2019.
2. Any member of the Company (the "Member") entitled to attend and vote at the EGM convened by the above notice (the "Notice") is entitled to appoint one or (if he/she/it holds more than 1 Share) more proxies to attend and, on a poll, vote instead of him/her/it. A proxy need not be a Member. If more than one proxy is so appointed, the appointment shall specify the number of Shares in respect of which such proxy is so appointed. All forms of proxies together with any power of attorney or other authority (if any) under which it is signed or a notarially certified copy of that power or authority, must be deposited with the registered office of the Company, 23rd Floor, Beverly House, 93-107 Lockhart Road, Wanchai, Hong Kong not later than 48 hours (excluding the public holidays) before the time appointed for the Meeting or its adjournment.
3. In compliance with Rule 13.39(4) of the Listing Rules, voting on all proposed resolutions set out in the Notice will be decided by way of a poll. The Company will announce the results of the poll in the manner prescribed under Rule 13.39(5) of the Listing Rules.
4. In the case of joint holders of a Share, any one of such joint holders may vote at the EGM, either personally or by proxy, in respect of such Share as if he/she/it were solely entitled thereto; but if more than one of such joint holders are 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 in respect of such Share shall alone be entitled to vote in respect thereof.
5. The translation into Chinese language of this Notice is for reference only. In case of any inconsistency, the English version shall prevail.

- 42 -