China Electronics Optics Valley Union : Announcements and Notices -

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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

FORMATION OF A JOINT VENTURE COMPANY

The Board hereby announces that the Industrial Park Subsidiary (a non-wholly owned subsidiary of the Company), Luzhou Co and CESTC entered into the JV Articles in respect of the formation of the JV Company.

Pursuant to the JV Articles, Luzhou Co, CESTC and the Industrial Park Subsidiary had on 25 November 2021 formed the JV Company, which is owned by Luzhou Co, CESTC and the Industrial Park Subsidiary as to 49%, 36% and 15%, respectively. The JV Company will be engaged in the construction and operation of a modern digital city in Luzhou with innovative application of information technology, and the management of operational data.

LISTING RULES IMPLICATIONS

CESTC was a subsidiary of CEC while CEC indirectly holds 2,550,000,000 Shares of the Company as at the date of the signing of the JV Articles (representing approximately 33.67% of the issued share capital of the Company). Therefore, CEC is a substantial shareholder of the Company, and CESTC, being CEC's associate, was a connected person of the Company under the Listing Rules.

As the highest applicable percentage ratio pursuant to the Listing Rules in respect of the formation of the JV Company was more than 0.1% but all of the ratios were less than 5%, the formation of the JV Company as contemplated under the JV Articles was subject to the announcement and annual review requirements but was exempt from the independent shareholders' approval requirement under the Listing Rules.

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INTRODUCTION

The Board hereby announces that the Industrial Park Subsidiary (a non-wholly owned subsidiary of the Company), Luzhou Co and CESTC entered into the JV Articles on 25 November 2021 in respect of the formation of the JV Company.

THE JV ARTICLES

A summary of the salient terms of the JV Articles is set out below:

Date:	25 November 2021
Parties:	(a)	Luzhou Co
	(b)	CESTC
	(c)	the Industrial Park Subsidiary

CESTC was a subsidiary of CEC while CEC indirectly holds 2,550,000,000 Shares of the Company as at the signing of the JV Articles (representing approximately 33.67% of the issued share capital of the Company). Therefore, CEC was a substantial shareholder of the Company, and CESTC, being CEC's associate, was a connected person of the Company under the Listing Rules.

To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries, Luzhou Co and its ultimate beneficial owner(s) were Independent Third Parties.

Formation of the JV Company

Pursuant to the JV Articles, Luzhou Co, CESTC and the Industrial Park Subsidiary has formed the JV Company in Luzhou in the Sichuan Province.

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Capital contributions

The registered capital of the JV Company is RMB20 million (equivalent to approximately HK$24,416,000 million) and pursuant to the JV Articles, Luzhou Co, CESTC and the Industrial Park Subsidiary agreed to make capital contributions to the JV Company in the following manner:

	Capital
	contribution to be	Percentage of
	contributed by	equity interest in
Name of party	each Party	the JV Company
	(RMB)
Luzhou Co	9,800,000	49%
CESTC	7,200,000	36%
Industrial Park Subsidiary	3,000,000	15%

The amount of the capital contribution to be injected by the Parties into the JV Company was determined after arm's length negotiations among the Parties with reference to the JV Company's funding needs for its future business development and the agreed share by each Party and shall be paid in cash in the following manner:

1. the first tranche shall be payable by 31 December 2021, whereby Luzhou Co, CESTC and the Industrial Park Subsidiary shall contribute RMB4,900,000, RMB3,600,000 and RMB1,500,000, respectively, to the JV Company; and
2. the remainder of the capital contribution amount comprising RMB4,900,000 payable by Luzhou Co, RMB3,600,000 payable by CESTC and RMB1,500,000 payable by the Industrial Park Subsidiary shall be injected into the JV Company by 30 June 2024.

The Group's portion of the capital contribution is expected to be funded by the Group's internal funds.

Upon establishment of the JV Company, it will be held as to 15% by the Group and, accordingly, be accounted for as an associate of the Company.

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Ownership of the JV Company

The Parties, as holders of equity interests in the JV Company, shall be entitled to rights of equity holders in proportion to their respective contributions in the JV Company. Pursuant to the JV Articles, at the equity holders' meeting of the JV Company, general matters shall be approved by two-thirds of the votes of the holders of equity interests, whereas certain important matters (including amendment to the JV Company's articles of association, alteration of its registered capital, the amalgamation or dissolution of the JV Company, and distribution of dividends) shall require the unanimous approval of the holders of equity interest in the JV Company.

Business of the JV Company

The JV Company will be engaged in the construction and operation of a modern digital city with innovative application of information technology, and the management of operational data.

Operation of the JV Company

The board of directors of the JV Company shall consist of seven members, of which three shall be nominated by Luzhou Co (and among them one shall be the chairman of the board of directors of the JV Company), two shall be nominated by CESTC, one shall be nominated by the Industrial Park Subsidiary, and one shall be elected by the employees of the JV Company. Pursuant to the JV Articles, all matters considered at the board meeting of the JV Company shall require the approval of all the directors of the JV Company. Further, there shall be three supervisors, of which Luzhou Co, CESTC shall each nominate one supervisor, and the employees of JV Company shall elect one employee-representative supervisor.

REASONS FOR AND BENEFITS OF THE FORMATION OF THE JV COMPANY

The Directors believe that through the formation of the JV Company, the Group could integrate its resources and experience in its operation of industrial park with the network of Luzhou Co and the experience of CESTC in developing innovative information system and operating modern digital cities, which would enable the Group to take part and gain further insight in the development of a new digital economy. It is expected that such cooperation could further accelerate the expansion of the Group's operation into the development and operation of modern digital cities, and is therefore in line with the development strategy of the Group in establishing its core capabilities and becoming an industry leader in the area of innovative development process of digital services.

In light of the above, the Board (including the independent non-executive Directors) considers that the terms of the JV Articles and the formation of the JV Company were fair and reasonable and entered into on normal commercial terms or better after arm's length negotiations between the relevant parties, in the ordinary and usual course of business of the Group, and were in the interests of the Company and the shareholders of the Company as a whole.

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INFORMATION ON THE INDUSTRIAL PARK SUBSIDIARY AND THE GROUP

The Industrial Park Subsidiary is a member of the Group and is held as to 65% by CEC Technology and 35% by 西南雲海大數據產業投資有限公司 ("Xinan Co", Xinan Yunhai Big Data Enterprises Investment Co., Ltd.*). The Industrial Park Subsidiary is principally engaged in the procurement of business operations within industrial parks. Insofar as the Company is aware, Xinan Co, a company principally engaged in the investment and operation of big data and smart city related industries and is wholly-owned by 瀘州市高新投資集團有限公司(Luzhou Hi-tech Investment Co., Ltd.*), which is in turn ultimately controlled by the 瀘州市國有資產監督管理委員會 (State-owned Assets Supervision and Administration Commission of the Luzhou Government).

CEC Technology is a subsidiary of the Company and is held by OVU HK (a wholly-owned subsidiary of the Company) as to 50% and by Excellence Real Estate Group Limited* (卓越置業集團 有限公司) as to 50%. Insofar as the Company is aware, Excellence Real Estate Group Limited is principally engaged in the development and operation of large commercial and residential integrated real estate and its ultimate beneficial owners are two individuals named Li Hua (李華) and Li Xiaoping (李曉平).

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.

INFORMATION ON LUZHOU CO AND ITS ULTIMATE BENEFICIAL OWNER

Insofar as the Company is aware, Luzhou Co is an investment platform of the People's Government of Luzhou, and is ultimately beneficially held by the 瀘州市人民政府國有資產監督管理委員會 (State-owned Assets Supervision and Administration Commission of the Luzhou Government) and the 四川省財政廳 (Department of Finance of Sichuan). Luzhou Co is principally engaged in the provision of big data services, public utilities management services, and information technology consultancy services.

INFORMATION ON CESTC AND ITS ULTIMATE BENEFICIAL OWNERS

Insofar as the Company is aware, CESTC is a non-wholly owned subsidiary of Shenzhen SED Industry Co., Ltd. (深圳市桑達實業股份有限公司) and is, as at the date of this announcement, held as to approximately 96.72% by Shenzhen SED Industry Co., Ltd. and as to approximately 3.28% by Hunan Wanjian Real Estate Development Co., Ltd.* (湖南萬建房地產開發有限公司). CESTC is principally engaged in the development of innovative information technology, and the construction and operation of modern digital cities.

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