CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE FACILITY AGREEMENT

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China Electronics Optics Valley Union Holding Company Limited

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 798)

CONTINUING CONNECTED TRANSACTIONS

IN RELATION TO

THE FACILITY AGREEMENT

THE FACILITY AGREEMENT

The Board hereby announces that on 29 October 2021, Wuhan OVU (an indirect wholly-owned subsidiary of the Company) entered into the Facility Agreement with CEC Finance, pursuant to which CEC Finance has agreed to provide a Revolving Facility of up to RMB110,000,000 (equivalent to approximately HK$133,771,000) to Wuhan OVU for the period from 29 October 2021 to 10 September 2022.

LISTING RULES IMPLICATIONS

As at the date of this announcement, CEC indirectly holds 2,550,000,000 shares of the Company (representing approximately 33.67% of the issued share capital of the Company). Therefore, CEC is a substantial shareholder of the Company. CEC Finance, being a subsidiary of CEC, is therefore a connected person of the Company under the Rule 14A.07(4) of the Listing Rules. Accordingly, the transactions contemplated under the Facility Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

Since the highest applicable percentage ratio calculated in accordance with the Listing Rules in respect of the Facility Agreement exceeds 0.1% but all of them are less than 5%, the Facility Agreement and the transactions contemplated thereunder are subject to reporting, annual review and announcement requirements but are exempt from the independent shareholders' approval requirement under Rule 14A.76(2) of the Listing Rules.

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INTRODUCTION

The Board hereby announces that on 29 October 2021, Wuhan OVU (an indirect wholly-owned subsidiary of the Company) entered into the Facility Agreement with CEC Finance, pursuant to which CEC Finance has agreed to provide a Revolving Facility of up to RMB110,000,000 (equivalent to approximately HK$133,771,000) to Wuhan OVU for the period from 29 October 2021 to 10 September 2022.

THE FACILITY AGREEMENT

A summary of the salient terms of the Facility Agreement is set out below:

Date:	29 October 2021
Parties:	(1) CEC Finance (as lender); and
	(2) Wuhan OVU (as borrower)
Revolving Facility:	A revolving facility of up to RMB110,000,000 (equivalent to
	approximately HK$133,771,000) shall be made available to Wuhan
	OVU by CEC Finance. The Revolving Facility is available for one
	or multiple drawings during the Availability Period. For the
	avoidance of doubt, the repaid principal amounts of the
	Revolving Facility (if any) shall be available for drawing during
	the Availability Period
Availability Period:	The Revolving Facility is available for drawings during the
	availability period from 29 October 2021 to 10 September 2022
Interest rate:	An interest rate of 4.6% per annum shall be charged by CEC
	Finance on the outstanding amount of the Revolving Facility which
	interest shall accrue day-to-day and be calculated on the basis of
	360 days per annum. Such interest rate is determined with reference
	to the one-year loan prime rate (LPR) published by the National
	Interbank Funding Center and the interest rates for loan facilities of
	the same tenure and type as offered by major commercial banks in
	the PRC
Purpose:	For the credit services provided by CEC Finance to Wuhan OVU in
	relation to short-term liquidity loans, acceptance and payment of
	commercial bills of exchange, discounting of commercial bills of
	exchange and guarantees for non-financing purposes

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Security:	The Revolving Facility is secured by (i) the Huangshi OVU Charge
	and (ii) the OV Financial Harbour Development Charge, details of
	which are set out in the section headed "Security Documents" in
	this announcement
Other terms:	Wuhan OVU shall apply in writing to CEC Finance for each
	drawdown (each a "Single Loan") of the Revolving Facility (which
	shall not exceed the maximum amount of the Revolving Facility),
	and shall enter into separate agreements (the "Specific
	Agreements") which set out the specific terms (including the
	repayment date(s)) and conditions of each drawdown according to
	the principles laid down by the Facility Agreement
SECURITY DOCUMENTS

Pursuant to the Facility Agreement, CEC Finance and Wuhan OVU have agreed that, in order to secure Wuhan OVU's repayment obligations of the aggregate outstanding amount(s) owed by Wuhan OVU to CEC Finance contemplated under the Facility Agreement (and the Specific Agreements), the following security documents have been entered into by the relevant parties:

The Huangshi OVU Charge

On 29 October 2021, Huangshi OVU (as chargor) and CEC Finance (as chargee) entered into a charge agreement pursuant to which a charge over 54 units in the office buildings for research and development located in No.185 Jinshan Boulevard, Golden Hill Development Zone, Huangshi, Hubei, the PRC of an aggregate gross floor area of approximately 21,071.71 sq.m. (the "Huangshi OVU Charge"), is granted by Huangshi OVU in favour of CEC Finance. Pursuant to the valuation report issued by an independent property valuer in the PRC, the appraised value of such charged assets amount to RMB105,042,500 (equivalent to approximately HK$127,742,184.25).

The OV Financial Harbour Development Charge

On 29 October 2021, OV Financial Harbour Development (as chargor) and CEC Finance (as chargee) entered into a charge agreement pursuant to which a charge over the first and second floor of Exhibition Centre, Phase One of Financial Back-office Service Center Base Construction Project* (金 融後台服務中心基地建設項目), 77 Guanggu Avenue, East Lake New Technology Development Zone, Wuhan, Hubei, the PRC, with an aggregate gross floor area of approximately 2,414.06 sq.m. (the "OV Financial Harbour Development Charge"), is granted by OV Financial Harbour Development in favour of CEC Finance. Pursuant to the valuation report issued by an independent property valuer in the PRC the appraised value of such charged assets amount to RMB45,258,800 (equivalent to approximately HK$55,039,226.68).

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ANNUAL CAPS AND BASIS OF DETERMINATION

No historical transaction amount is available as CEC Finance had not previously provided any credit facilities which were secured by the Group's asset(s) to Wuhan OVU.

The credit limit of RMB110,000,000 (equivalent to approximately HK$133,771,000) under the Facility Agreement is set as the annual caps (the "Annual Caps") in respect of the Facility Agreement for each of the period from 29 October 2021 to 31 December 2021 and the period from 1 January 2022 to 10 September 2022.

In determining the Annual Caps, the Directors have taken into account (a) the bank balances and cash of the Wuhan OVU Group as at 30 September 2021; and (b) the financial needs of the Wuhan OVU Group in respect of its business operations for the period from 29 October 2021 to 10 September 2022, as estimated based on the operating cash flow of the Wuhan OVU Group.

INTERNAL CONTROL MEASURES

The Group has adopted the following internal control measures in relation to the utilization of the Revolving Facility by Wuhan OVU:

1. Wuhan OVU is required to obtain internal approval from the Company before entering into any Specific Agreement in relation to the Revolving Facility. Before entering into any Specific Agreement, Wuhan OVU will make enquiries with at least three major commercial banks about their offers (including interest rates) in respect of the credit facilities of the same tenure and type;
2. regular checks will be conducted to review and assess whether the relevant continuing connected transactions are conducted in accordance with the terms of the Specific Agreement and the Facility Agreement and that the interest charged by CEC Finance for a transaction contemplated under a Specific Agreement is fair and reasonable;
3. meetings of the finance department of the Company, with the attendance of audit, legal, finance and other related departments, will be convened on a monthly basis, to keep abreast of the Single Loan(s) granted by CEC Finance to Wuhan OVU and to reasonably formulate recommendations on financing arrangements of the Company for the next month, which shall also be reported to the management of the Company;
4. the finance department of the Company will prepare quarterly reports and annual reports in relation to the relevant transactions contemplated under the Facility Agreement. Such reports will be submitted to the Board regularly and be provided to the independent auditor of the Company for their review; and

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1. to ensure proper and complete separation of duties, no common staff, senior management or director of the Group and CEC Finance (and its subsidiaries) will be involved in the internal control procedures. The Company will conduct an annual review of the above internal control measures and report the review results to the Board.

The independent non-executive Directors and the independent auditor of the Company will also conduct an annual review on the terms of the relevant transactions. Accordingly, the Directors consider that the internal control mechanism is effective to ensure that the transactions contemplated under the Facility Agreement will be conducted on normal commercial terms and not prejudicial to the interests of the Company and its shareholders as a whole.

The Board considers that the internal control procedures adopted by Wuhan OVU in respect of the transactions contemplated under the Facility Agreement are appropriate and that they will give sufficient assurance to the shareholders that the transactions under the Facility Agreement will be appropriately monitored by the Company.

REASONS FOR AND BENEFITS OF ENTERING INTO THE FACILITY AGREEMENT

As disclosed in this announcement, Wuhan OVU is principally engaged in (i) development, sales and leasing services of industrial park properties; and (ii) industrial park operation services (including design and construction services, property management services and digital park services etc.) in the PRC. Wuhan OVU requires efficient and reliable credit facilities for its daily business operations for the purposes of obtaining the services with regards to acceptance and payment of commercial bills of exchange, issuance of letters of guarantee, discounting of commercial bills of exchange, and other international trade finance services. By entering into the Facility Agreement, the Group is able to secure, through an additional channel, drawdown loans at interest rates not higher than those offered by major commercial banks in the PRC of the same tenure and type, which is expected to enhance the Group's bargaining power for external financings and save its costs of financing overall, as well as to maintain a sufficient level of liquidity and financial flexibility of the Company.

In light of the above, the Directors (including the independent non-executive Directors) consider that Facility Agreement has been negotiated on arm's length basis and is on normal commercial terms or better and in the ordinary and usual course of business of the Group, and the terms of the Facility Agreement and the transactions contemplated thereunder and the Annual Caps are fair and reasonable and in the interests of the Company and its shareholders as a whole.

INFORMATION ON CEC FINANCE AND ITS ULTIMATE BENEFICIAL OWNERS

CEC Finance is a company incorporated in the PRC with limited liability on 21 April 1988 and is principally engaged in the provision of various financial services such as deposit services, loan services and settlement services. CEC Finance is a non-wholly owned subsidiary of CEC and is, insofar as the Board is aware, held:

1. as to approximately 61.38% by CEC;

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