Connected transaction sale of customised buildings

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China Electronics Optics Valley Union Holding Company Limited

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 798)

CONNECTED TRANSACTION

SALE OF CUSTOMISED BUILDINGS

The Board is pleased to announce that on 24 July 2020, Western Zhigu (an indirect non-wholly owned subsidiary of the Company) entered into the Western Zhigu Sale and Purchase Agreement with Xianyang IRICO, pursuant to which Xianyang IRICO agreed to purchase and Western Zhigu agreed to design and sell the Customised Buildings according to the design plans approved by the relevant government authorities and Xianyang IRICO, tailored to Xianyang IRICO's usage and functioning requirements.

LISTING RULES IMPLICATIONS

Xianyang IRICO is an indirect wholly-owned subsidiary of CEC, while CEC indirectly holds 2,550,000,000 Shares of the Company as at the date of this announcement (representing approximately 33.67% of the issued share capital of the Company). Therefore, CEC is a substantial shareholder of the Company, and Xianyang IRICO, being CEC's associate, is a connected person of the Company under Rule 14A.07(4) of the Listing Rules. Accordingly, the transactions contemplated under the Western Zhigu Sale and Purchase Agreement constitute a connected transaction of the Company under Chapter 14A of the Listing Rules.

Reference is made to the announcements of the Company on 18 October 2019 in relation to the Changsha Sale and Purchase and the Xianyang Sale and Purchase and the announcement of the Company on 22 November 2019 in relation to the Hunan Sale and Purchase. As (i) the Changsha Sale and Purchase, (ii) the Xianyang Sale and Purchase, (iii) the Hunan Sale and Purchase, and

1. the transactions contemplated under the Western Zhigu Sale and Purchase Agreement were entered into by the Group with associates of CEC within a 12-month period, they are required to be aggregated as a series of transactions pursuant to Rule 14A.81 of the Listing Rules. As the

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highest applicable percentage ratio calculated pursuant to the Listing Rules in respect of the Western Zhigu Sale and Purchase Agreement (on an aggregated basis) is more than 0.1% but all of the ratios are less than 5%, the transactions contemplated under the Western Zhigu Sale and Purchase Agreement are therefore subject to the reporting and announcement requirements under the Listing Rules but are exempt from the independent shareholders' approval requirements.

INTRODUCTION

The Board is pleased to announce that on 24 July 2020, Western Zhigu (an indirect non-wholly owned subsidiary of the Company) entered into the Western Zhigu Sale and Purchase Agreement with Xianyang IRICO, pursuant to which Xianyang IRICO agreed to purchase and Western Zhigu agreed to design and sell the Customised Buildings according to the design plans approved by the relevant government authorities and Xianyang IRICO, tailored to Xianyang IRICO's usage and functioning requirements.

THE WESTERN ZHIGU SALE AND PURCHASE AGREEMENT

A summary of the salient terms of the Western Zhigu Sale and Purchase Agreement is set out below:

Pursuant to the Western Zhigu Sale and Purchase Agreement, Xianyang IRICO agreed to purchase, and Western Zhigu agreed to design and sell, the Customised Buildings according to the design plans approved by the relevant government authorities and Xianyang IRICO.

The Customised Buildings are situated at Block A6 and Block A7 of the Western Zhigu Park Project with an estimated total gross floor area of 3,148.56 square metres. The delivery of the Customised Buildings is expected to take place on or before 15 August 2020. The actual delivery date is subject to the written notice issued by Western Zhigu to Xianyang IRICO.

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Consideration

The aggregated consideration of RMB13,853,664.00 (equivalent to approximately HK$15,354,569.96) shall be payable by Xianyang IRICO to Western Zhigu in the following manner:-

1. RMB2,770,732.80 (equivalent to approximately HK$3,070,913.99) (being 20% of the aggregated consideration) shall be paid by Xianyang IRICO to Western Zhigu as deposit within 10 calendar days upon signing of the Western Zhigu Sale and Purchase Agreement;
2. RMB2,770,732.80 (equivalent to approximately HK$3,070,913.99) (being 20% of the aggregated consideration) shall be paid by Xianyang IRICO to Western Zhigu before 30 July 2020;
3. RMB1,385,366.40 (equivalent to approximately HK$1,535,457.00) (being 10% of the aggregated consideration) shall be paid by Xianyang IRICO to Western Zhigu within 10 business days prior to the delivery of the Customised Buildings; and
4. the remaining balance of RMB6,926,832.00 (equivalent to approximately HK$7,677,284.98) (being 50% of the aggregated consideration) shall be paid by Xianyang IRICO to Western Zhigu before 30 December 2020 and at the same time, the deposit paid to Western Zhigu under sub-paragraph (1) above shall be transferred as the residual consideration of the Customised Buildings.

The consideration was determined based on the estimated total gross floor area of the Customised Buildings and the unit price per square metre, which was arrived at after arm's length negotiations among the parties with reference to the current market unit price of other buildings in the proximity that are similar to the Customised Buildings.

The parties further agreed that, since the consideration was determined, inter alia, based on the estimated total gross floor area, it may be adjusted in the event of any discrepancy between the estimated total gross floor area and the actual total gross floor area. The actual total gross floor area is to be determined upon inspection of the Customised Buildings after construction by qualified surveying institutions. The adjusted consideration is to be determined by a sum representing the price of the actual total gross floor area. The adjusted amount shall be paid by Xianyang IRICO to Western Zhigu (in case of a higher adjusted consideration) or be refunded by Western Zhigu to Xianyang IRICO (in case of a lower adjusted consideration) within 10 calendar days upon confirming the adjusted consideration.

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INFORMATION ON XIANYANG IRICO AND ITS ULTIMATE BENEFICIAL OWNER

Xianyang IRICO is a company incorporated in the PRC with limited liability on 17 June 2013 and is principally engaged in research, development, service and transfer of electronic information technology; information industry, real estate industry, commerce and trade business and asset (non- monetary assets) operation and management services with its self-owned capital. Xianyang IRICO is an indirect wholly-owned subsidiary of CEC and is, insofar as the Board is aware, held:

1. as to approximately 72.08% by 中國電子有限公司 (China Electronics Co., Ltd.*), a wholly- owned subsidiary of CEC; and
2. as to approximately 27.92% by IRICO Group, an indirect wholly-owned subsidiary of the CEC.

CEC is a substantial shareholder of the Company and is a state-owned company whose ultimate beneficial owner is the State Council of the PRC. It is committed to establishing itself as a national leader of the network safety and informatisation industry, and regards network safety as its core business and core capacity. Its main business covers network security, new display, integrated circuits, high-tech electronics, information services and other electronic information industry fields featuring national strategy, foundation and guidance.

INFORMATION ON WESTERN ZHIGU AND ITS ULTIMATE BENEFICIAL OWNER

Western Zhigu is a limited liability company set up by Wuhan Optics Valley Union, Xianyang Investment and IRICO Group pursuant to a joint venture agreement dated 22 December 2017 entered into between Wuhan Optics Valley Union, Xianyang Investment and IRICO Group.

Western Zhigu is principally engaged in developing and designing industrial parks, such as the Western Zhigu Park Project and providing property management services in the PRC.

Western Zhigu is an indirect non-wholly owned subsidiary of the Company and is held:

1. as to 50% by Wuhan Optics Valley Union, an indirect wholly-owned subsidiary of the Company;
2. as to 30% by Xianyang Investment, which is a wholly-owned subsidiary of 咸陽市財政局高新 區分局 (the High-tech Zone Branch of the Finance Bureau in Xianyang*); and
3. as to 20% by IRICO Group, an indirect wholly-owned subsidiary of CEC.

Xianyang Investment, being a state-owned company whose ultimate beneficial owner is the High-tech Zone Branch of the Finance Bureau in Xianyang, is principally engaged in investing and developing medical projects, science and technology projects and urban infrastructure projects.

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INFORMATION ON THE GROUP

The Group is an industrial park integrated operation service provider in the PRC. Leveraging on the industrial resources of CEC and based on integrated life cycle operation services of the Group, the Group constructed an industrial medium that is "State enterprise-led and innovated by joint efforts by small, medium and big enterprises" to establish an industrial resource sharing platform that carries features such as clustered industry, intelligent service and investment networks.

REASONS FOR AND BENEFITS OF THE WESTERN ZHIGU SALE AND PURCHASE AGREEMENT

The Customised Buildings are situated at Block A6 and Block A7 of the Western Zhigu Park Project with an estimated total gross floor area of 3,148.56 square metres. The Western Zhigu Park Project is one of the Group's large-scale projects under development. It is positioned as an international and intellectualized new industrial park catering the research and development of strategic emerging industries, particularly the electronic information industry, as its core, supported with intellectual manufacturing, new materials, innovative research and development offices, and complimentary residential and commercial properties. It is expected that the implementation of the Western Zhigu Park Project will expand the Group's professional advantages in the construction of large-scale industrial parks, with the focus on electronic information industry services, intellectual manufacturing, new materials, innovative research and development offices, etc.

As Western Zhigu is principally engaged in developing and designing industrial parks, such as the Western Zhigu Park Project and providing property management services in the PRC, the transactions contemplated under the Western Zhigu Sale and Purchase Agreement are in the ordinary course of business of the Group.

In light of the above and having considered the basis of determination of the consideration, the Directors (including the independent non-executive Directors) consider that the terms of the Western Zhigu Sale and Purchase Agreement and the transactions contemplated thereunder are fair and reasonable, entered into on normal commercial terms or better and in the ordinary and usual course of business of the Group, and are in the interests of the Company and its shareholders as a whole.

LISTING RULES IMPLICATIONS

Xianyang IRICO is an indirect wholly-owned subsidiary of CEC, while CEC indirectly holds 2,550,000,000 Shares of the Company as at the date of this announcement (representing approximately 33.67% of the issued share capital of the Company). Therefore, CEC is a substantial shareholder of the Company, and Xianyang IRICO, being CEC's associate, is a connected person of the Company under Rule 14A.07(4) of the Listing Rules. Accordingly, the transactions contemplated under the Western Zhigu Sale and Purchase Agreement constitute a connected transaction of the Company under Chapter 14A of the Listing Rules.

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Reference is made to the announcements of the Company on 18 October 2019 in relation to the Changsha Sale and Purchase and the Xianyang Sale and Purchase and the announcement of the Company on 22 November 2019 in relation to the Hunan Sale and Purchase. As (i) the Changsha Sale and Purchase, (ii) the Xianyang Sale and Purchase, (iii) the Hunan Sale and Purchase, and (iv) the transactions contemplated under the Western Zhigu Sale and Purchase Agreement were entered into by the Group with associates of CEC within a 12-month period, they are required to be aggregated as a series of transactions pursuant to Rule 14A.81 of the Listing Rules. As the highest applicable percentage ratio calculated pursuant to the Listing Rules in respect of the Western Zhigu Sale and Purchase Agreement (on an aggregated basis) is more than 0.1% but all of the ratios are less than 5%, the transactions contemplated under the Western Zhigu Sale and Purchase Agreement are therefore subject to the reporting and announcement requirements under the Listing Rules but are exempt from the independent shareholders' approval requirements.

Mr. Xie Qinghua (being an executive Director) and Ms. Wang Qiuju (being a non-executive Director) had abstained from voting on the relevant Board resolutions to approve the Western Zhigu Sale and Purchase Agreement for the reason of their respective positions in and/or relationship with the Group. Save as disclosed, no other Directors had any material interest in the Western Zhigu Sale and Purchase Agreement.

DEFINITIONS

In this announcement, the following expressions shall have the meanings set out below unless the context requires otherwise:-

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For the purpose of this announcement, unless otherwise indicated, the exchange rate of RMB1.00 = HK$1.10834 has been used, where applicable, for purpose of illustration only and it does not constitute any representation that any amount has been, could have been or may be exchanged at that rate or at any other rate.

By Order of the Board

China Electronics Optics Valley Union Holding Company Limited

Huang Liping

Co-chairman

Wuhan, Hubei, the People's Republic of China

24 July 2020

As at the date of this announcement, the directors of the Company are Mr. Huang Liping, Mr. Xie Qinghua and Mr. Hu Bin as executive directors; Ms. Wang Qiuju, Mr. Zhang Jie and Ms. Sun Ying as non-executive directors; Mr. Qi Min, Mr. Qiu Hongsheng and Ms. Chan Ching Har Eliza as independent non-executive directors.

• For identification purpose only

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