Arts Optical International : Supplemental Announcement and Completion of the Discloseable Transaction in relation to the Acquisition of 55% Equity Interest in the Target Company

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement.

ARTS OPTICAL INTERNATIONAL HOLDINGS LIMITED

雅 視 光 學 集 團 有 限 公 司 *

(Incorporated in Bermuda with limited liability)

(Stock Code: 1120)

SUPPLEMENTAL ANNOUNCEMENT

AND COMPLETION OF

THE DISCLOSEABLE TRANSACTION

IN RELATION TO THE ACQUISITION OF

55% EQUITY INTEREST IN THE TARGET COMPANY

Reference is made to the announcement of Arts Optical International Holdings Limited (the "Company") dated 24th March, 2021 (the "Announcement") in relation to a discloseable transaction for the acquisition of 55% equity interest in the Target Company. Unless otherwise defined, capitalised terms used herein shall have the same meanings as those defined in the Announcement.

COMPLETION OF THE ACQUISITION

The Board is pleased to announce that all the conditions precedent set out in the Equity Transfer Agreement have been fulfilled and Completion took place on 26th April, 2021.

The Company would also like to provide supplemental information to the Announcement as follows:

THE VALUATION

The independent valuer, Jiangsu Lixin Huiyuan Real Estate Land Resources Valuation Company Limited* (江蘇立信慧源房地產土地資產評估有限公司) (the "Valuer"), has

conducted the Valuation on the Sellers which forms part of the basis for determining the Consideration. During its preliminary valuation, the Valuer considered the cost-based approach (which is similar to an asset-based approach) and income approach which involves the use of discounted cash flows. Given the cost-based approach is a general way of determining the value of an individual asset by quantifying the amount of money required to replace the future servicing capability of that asset, and such approach could not capture the future earning potential of the business, the Valuer adopted the income approach for determining the value of the Sellers, being RMB106.9 million (equivalent to approximately HK$127.4 million).

• For identification purpose only

- 1 -

With respect to the income approach, the Valuer had taken into account the historical revenue and growth trend of Seller I, and the business operations of the Sellers (including Seller I, Seller II and Seller III) when preparing the profit forecast in performing the Valuation. Although the income approach could not be applied to Seller II and Seller III as both were operating at a loss for the years ended 2019 and 2020, the Sellers' assets (such as machines and equipment, factory interiors, intellectual properties and inventories but excluding the liabilities of the Sellers) will be injected into the Target Company to be operated thereunder.

Given the Valuation adopted an income approach involving the use of discounted cash flows, such valuation constitutes a profit forecast under Rule 14.61 of the Listing Rules. Accordingly, the requirements under Rules 14.60A and 14.62 of the Listing Rules apply.

Pursuant to the valuation report prepared by the Valuer (the "Valuation Report"), details of the principal assumptions, including the commercial assumptions upon which the profit forecast is based, are set out as follows:

1. there will be no material change in the relevant laws and policies currently in force and the macro-economic condition in the PRC; there will also be no material change to the existing political, economic and social environment in which the Sellers have operations;
2. the Sellers will continue to operate as a going concern;
3. the operator of the Sellers will act responsibly and the management is capable of assuming their duties;
4. the Sellers will comply with all the applicable laws and regulations;
5. the accounting policies to be adopted by the Sellers in the future are substantially consistent with those in preparing the Valuation Report in all material respects;
6. the Sellers will have steady cash inflows and outflows subsequent to the Valuation;
7. the scope and mode of business of the Sellers after the Valuation will remain the same as that currently adopted at the time of the Valuation and based on the same management approach and standard as currently in effect;
8. there will be no material change to the exchange rates, interest rates, taxes and other levies following the Valuation; and
9. there will be no force majeure or unforeseeable factor that could have a significant adverse impact on the Sellers.

- 2 -

Confirmations

In accordance with Rule 14.62(2) of the Listing Rules, the Company has engaged its reporting accountant, RSM Hong Kong ("RSM"), to report on the calculations upon which the Valuation Report was based.

RSM confirms that they have reviewed the calculations of the discounted cash flows using the income approach upon which the Valuation prepared by the Valuer was based, which do not involve the adoption of accounting policies.

The Directors have reviewed the assumptions upon which the valuation of the Sellers was prepared and have considered the report from RSM. The Directors confirm that the valuation of the Sellers has been made after due and careful enquiry.

A report from RSM and a letter from the Board both dated 26th April, 2021 have been submitted to the Stock Exchange, the texts of which are included in Appendix I and Appendix II to this announcement.

Experts and consents

The qualifications of the experts who have given their statements in this announcement are as follows:

To the best of the Directors' knowledge, information and belief and after having made all reasonable enquiries, each of the Valuer and RSM is a third party independent of the Group and its connected person(s).

To the best of the Directors' knowledge, information and belief, as at the date of this announcement, none of the Valuer or RSM has any shareholding, directly or indirectly, in any member of the Group, or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any securities in any member of the Group.

- 3 -

Each of the Valuer and RSM has given and has not withdrawn its written consent to the publication of this announcement with the inclusion of its name, statements and all references to its name (including its qualification) in the form and context in which they appear in this announcement.

By Order of the Board

Ng Hoi Ying, Michael

Chairman

Hong Kong, 26th April, 2021

As at the date of this announcement, the Board comprises five directors, two of whom are executive directors, namely Mr. Ng Hoi Ying, Michael and Mr. Ng Kim Ying, and three are independent non-executive directors, namely Mr. Wong Chi Wai, Mr. Chung Hil Lan Eric and Mr. Lam Yu Lung.

- 4 -

司 (DANYANG ZHONGYANG GLASSES COMPANY LIMITED) ("SELLER III") (COLLECTIVELY REFERRED TO AS THE "SELLERS")

Because the Valuation relates to the discounted future estimated cash flows, no accounting policies of the Company have been adopted in its preparation. The Assumptions include hypothetical assumptions about future events and management actions which cannot be confirmed and verified in the same way as past results and these may or may not occur. Even if the events and actions anticipated do occur, actual results are still likely to be different from those used in the Valuation and the variation may be material. Accordingly we have not reviewed, considered or conducted any work on the completeness, reasonableness and the validity of the Assumptions and do not express any opinion whatsoever thereon.

Opinion

In our opinion, based on the foregoing, the discounted future estimated cash flows, so far as the calculations are concerned, has been properly compiled, in all material respects, in accordance with the Assumptions made by the Directors.

Yours faithfully,

RSM Hong Kong

Certified Public Accountants

Hong Kong

- 7 -

APPENDIX II - LETTER FROM THE BOARD

26th April, 2021

Listing Division

The Stock Exchange of Hong Kong Limited

12/F, Two Exchange Square

8 Connaught Place, Central, Hong Kong

Dear Sirs,

We refer to the announcement of the Company dated 24th March, 2021 (the "Announcement"), of which this letter forms part. Unless the context otherwise requires, terms defined in the Announcement shall have the same meanings when used herein.

Reference is made to the valuation report (the "Valuation Report") dated 31st March,

2021 prepared by Jiangsu Lixin Huiyuan Real Estate Land Resources Valuation Company Limited* (江蘇立信慧源房地產土地資產評估有限公司), an independent valuer (the

"Valuer"), in relation to the valuation of Danyang Colorful Optical Glass Company Limited* (丹陽市五彩光學眼鏡有限公司), Danyang Zhongjiang Glasses Company Limited* (丹陽市中江光學眼鏡有限公司) and Danyang Zhongyang Glasses Company Limited* (丹陽中洋光學眼鏡有限公司) (collectively, the "Companies"). As the Valuation

adopted an income approach which is based on the discounted future estimated cash flows of the Companies, the Valuation constitutes a profit forecast under Rule 14.61 of the Listing Rules.

We have reviewed the bases and assumptions upon which the Valuation has been prepared, and has reviewed the Valuation prepared by the Valuer. We have also considered the report from the reporting accountant of the Company, RSM Hong Kong, regarding their report on the calculation of the discounted future estimated cash flows in connection with the Valuation.

Based on the aforesaid, we confirm that the profit forecast as contained in the Valuation Report have been made after due and careful enquiry.

Yours faithfully,

For and on behalf of the board of directors

Arts Optical International Holdings Limited

Ng Hoi Ying, Michael

Chairman

• For identification purpose only

- 8 -