Smart Fish Wealthlink Holdings Limited - Proxy Solicitation & Information Statement 2020

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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.

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CHINA ELECTRONICS HUADA TECHNOLOGY COMPANY LIMITED 中國電子華大科技有限公司

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)

(Stock Code: 00085)

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL OF 33.67% OF THE ISSUED SHARE CAPITAL OF CHINA ELECTRONICS OPTICS VALLEY UNION HOLDING COMPANY LIMITED

Financial Adviser to the Company

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Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

SOMERLEY CAPITAL LIMITED

Due to concern over large-scale group gatherings during the COVID-19 pandemic, no refreshment or drink will be served at the special general meeting of the Company.

A notice convening the special general meeting of the Company to be held at Plaza 3, Lower Lobby, Novotel Century Hong Kong, 238 Jaffe Road, Wanchai, Hong Kong on Tuesday, 27 October 2020 at 4:30 p.m. is set out on pages SGM-1 to SGM-2 of this circular. Whether or not you are able to attend the special general meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar and transfer office in Hong Kong, Tricor Abacus Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong not later than 48 hours before the time appointed for holding the special general meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the special general meeting or any adjourned meeting should you so wish and in such event, the form of proxy shall be deemed to be revoked.

A letter from the independent board committee of the Company containing its recommendation to the independent shareholders of the Company is set out on pages 17 to 18 of this circular. A letter from Somerley Capital Limited, the independent financial adviser, containing its advice to the independent board committee and the independent shareholders of the Company is set out on pages 19 to 55 of this circular.

30 September 2020

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Letter from Somerley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Appendix I – Financial Information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I – 1
Appendix II – Financial Information of the CEOVU Group . . . . . . . . . . . . . . . . . . . . . . . II – 1
Appendix III – Unaudited Pro Forma Financial Information
of the Remaining Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III – 1
Appendix IV – Management Discussion and Analysis of the Remaining Group . . . . . . . . IV – 1
Appendix V – Property Calculation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V – 1
Appendix VI – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI – 1
Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SGM – 1

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions shall have the following meanings:

“APA” Asia-Pacific Consulting and Appraisal Limited, an independent property valuer
“associate(s)” has the meaning ascribed to this term under the Listing Rules
“Board” the board of Directors
“Business Day” a day (other than a Saturday or Sunday or public holiday in Hong Kong or any day on which a black rainstorm warning signal or a tropical cyclone warning no. 8 or above is hoisted in Hong Kong at any time between 9:00 a.m. and 5:00 p.m.) on which licensed banks are open for business in Hong Kong
“CEC”
China Electronics Corporation Limited (中國電子信息產業集團有限公司), a state-owned enterprise established under the laws of the PRC and the ultimate controlling shareholder of the Company
“CEOVU” China Electronics Optics Valley Union Holding Company Limited (中電光谷聯合控股有限公司), a company incorporated in the Cayman Islands with limited liability and whose shares are listed on the Main Board of the Stock Exchange (Stock Code: 798)
“CEOVU Group” CEOVU and its subsidiaries
“Company”
China Electronics Huada Technology Company Limited (中國電子華大科技有限公司), a company incorporated in the Cayman Islands and continued in Bermuda with limited liability
“Completion” completion of the Disposal in accordance with the terms of the Sale and Purchase Agreement
“connected person” has the meaning ascribed to this term under the Listing Rules
“controlling shareholder” has the meaning ascribed to this term under the Listing Rules
“Director(s)”
the director(s) of the Company
“Disposal” the disposal of the Transfer Shares by the Seller to the Purchaser pursuant to the Sale and Purchase Agreement

“Executive” the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director

DEFINITIONS

“GO Waiver” a waiver from the Executive pursuant to the Takeovers Code to dispense the Purchaser (and parties acting in concert with it) from the obligation of making a mandatory general offer in respect of all the issued ordinary shares of HK$0.10 each in the share capital of CEOVU otherwise than those owned or acquired by the Purchaser (and parties acting in concert with it)

“Group” the Company and its subsidiaries

“HK$” Hong Kong dollars, the lawful currency of Hong Kong “Hong Kong” the Hong Kong Special Administrative Region of the PRC

“Independent Board Committee” a committee of the Directors consisting of only the independent non-executive Directors formed to advise the Independent Shareholders on the terms of the Sale and Purchase Agreement
“Independent Shareholders” Shareholders other than CEC and its associates
“Last Trading Day” 29 July 2020, being the trading day for the Transfer Shares immediately before the entering into of the Sale and Purchase Agreement
“Latest Practicable Date” 23 September 2020, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information for inclusion in this circular
“Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
“Long Stop Date” 31 December 2020, or such later date as the parties to the Sale and Purchase Agreement may agree in writing from time to time
“PRC” the People’s Republic of China, for the purpose of this circular, excluding Hong Kong, the Macao Special Administrative Region of the PRC and Taiwan
“Purchaser” China Electronics Information Service Company Limited (中國中電國際信息服務有限公司), a company established under the laws of the PRC with limited liability and is a wholly-owned subsidiary of CEC
“RMB” Renminbi, the lawful currency of the PRC “Remaining Group” the Group immediately after the Completion

DEFINITIONS

“SFC” The Securities and Futures Commission of Hong Kong “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“SGM” the special general meeting of the Company to be convened to consider and, if thought fit, to approve the Sale and Purchase Agreement and the transactions contemplated thereunder
“Sale and Purchase Agreement” the agreement dated 30 July 2020 entered into between the Seller and the Purchaser in relation to the Disposal
“Seller” CEC Media Holdings Limited, a company incorporated in the British Virgin Islands with limited liability and is a wholly-owned subsidiary of the Company
“Shareholder(s)” shareholder(s) of the Company “Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the Company
“Shenwan” Shenwan Hongyuan Capital (H.K.) Limited, a licensed corporation to conduct type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities under the SFO, being the financial adviser to the Company in respect of the Disposal
“Somerley” Somerley Capital Limited, a licensed corporation to conduct type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the terms of the Sale and Purchase Agreement
“Stock Exchange” The Stock Exchange of Hong Kong Limited “Takeovers Code” The Code on Takeovers and Mergers issued by the SFC “Transfer Share(s)” 2,550,000,000 ordinary shares of HK$0.10 each in the share capital of CEOVU and a “Transfer Share” shall be construed accordingly
“%” per cent.

LETTER FROM THE BOARD

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CHINA ELECTRONICS HUADA TECHNOLOGY COMPANY LIMITED 中國電子華大科技有限公司

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)

(Stock Code: 00085)

Non-executive Directors: Dong Haoran (Chairman) Liu Jinmei

Executive Directors: Yu Jian (Deputy Chairman) Liu Hongzhou (Managing Director)

Independent Non-executive Directors: Chan Kay Cheung Qiu Hongsheng Chow Chan Lum

Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Principal place of business in Hong Kong: Room 3403, 34th Floor China Resources Building 26 Harbour Road Wanchai Hong Kong

30 September 2020

To the Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL OF 33.67% OF THE ISSUED SHARE CAPITAL OF CHINA ELECTRONICS OPTICS VALLEY UNION HOLDING COMPANY LIMITED

INTRODUCTION

Reference is made to the announcement of the Company dated 30 July 2020 in relation to, among others, the entering into of the Sale and Purchase Agreement in respect of the Disposal.

An Independent Board Committee has been established to advise the Independent Shareholders in respect of the terms of the Sale and Purchase Agreement. In this respect, Somerley has been appointed as the independent financial adviser to the Independent Board Committee and the Independent Shareholders.

The purpose of this circular is to provide you with, among others, (i) details of the Disposal; (ii) the advice from Somerley, the independent financial adviser to the Independent Board Committee and the Independent Shareholders; (iii) the recommendation from the Independent Board Committee; and (iv) a notice of SGM.

LETTER FROM THE BOARD

THE SALE AND PURCHASE AGREEMENT

The principal terms of the Sale and Purchase Agreement are set forth below.

Date: 30 July 2020

Parties:

(i) The Seller; and
(ii) The Purchaser

Assets to be disposed

Pursuant to the Sale and Purchase Agreement, the Seller has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire the Transfer Shares, being ordinary shares of HK$0.10 each in the share capital of CEOVU representing 33.67% of the issued share capital of CEOVU. CEOVU is an associate company of the Group and the results and assets and liabilities of the CEOVU Group have been accounted for in the financial statements of the Group under equity method of accounting. Upon the Completion, CEOVU will cease to be an associate company of the Group.

Consideration

Pursuant to the Sale and Purchase Agreement, the consideration for the Disposal is HK$1,785.00 million and shall be paid by the Purchaser to the Seller on the Completion which will take place within 30 Business Days after all conditions precedent have been satisfied (unless otherwise waived by the Seller or the Purchaser if applicable and as the case may be).

The consideration for the Disposal was agreed between the Seller and the Purchaser after arm’s length negotiations and having taken into account the historical business performance, financial position and net asset value of the CEOVU Group, the prevailing market price of the Transfer Share and the factors set out in the section headed “Reasons for and benefits of the Disposal” below.

Use of proceeds

The gross proceeds from the Disposal are expected to be HK$1,785.00 million and the net proceeds (after deduction of related transaction expenses) are expected to be HK$1,779.00 million. The Company intends to use all the net proceeds for the repayment of its short-term bank borrowings.

LETTER FROM THE BOARD

Conditions precedent

The Completion is conditional upon the following conditions precedent having been satisfied or waived (if applicable and as the case may be):

(a) the Purchaser having obtained the GO Waiver from the Executive and the GO Waiver not having been cancelled or withdrawn;
(b) the Company having obtained the approval from the Independent Shareholders pursuant to the Listing Rules in relation to the Sale and Purchase Agreement and the transactions contemplated thereunder;
(c) the continued listing of CEOVU and trading of its shares on the Stock Exchange at the time of the Completion (save and except any suspension of trading of its shares for any period not exceeding 7 Business Days or any suspension of trading of its shares by reason of the Sale and Purchase Agreement and the transactions contemplated thereunder);
(d) there being no indication or notice from the Stock Exchange or the SFC with respect to cancellation or withdrawal of the listing status of CEOVU;
(e) all necessary authorisations, consents or approvals by any third parties or applicable regulatory authorities in connection with the Sale and Purchase Agreement and the transactions contemplated thereunder having been obtained by the Seller and the same remaining in full force and effect at the time of the Completion;
(f) all necessary authorisations, consents or approvals by any third parties or applicable regulatory authorities including without limitation to the consents and approvals of the relevant PRC regulatory authorities in connection with the Sale and Purchase Agreement and the transactions contemplated thereunder having been obtained by the Purchaser and the same remaining in full force and effect at the time of the Completion;
(g) all representations and warranties given by the Seller under the Sale and Purchase Agreement remaining true, accurate and not misleading in all material respects by reference to the facts and circumstances then existing, and there being no material breach of the Seller’s obligations under the Sale and Purchase Agreement at the time of the Completion; and
(h) all representations and warranties given by the Purchaser under the Sale and Purchase Agreement remaining true, accurate and not misleading in all material respects by reference to the facts and circumstances then existing, and there being no material breach of the Purchaser’s obligations under the Sale and Purchase Agreement at the time of the Completion.

LETTER FROM THE BOARD

Neither the Company, the Seller nor the Purchaser shall have the right to waive the conditions set out in paragraphs (a) to (f) above, while the Seller may waive condition under paragraph (h) and the Purchaser may waive condition under paragraph (g) above. If all the conditions precedent have not been satisfied (unless otherwise waived by the Seller or the Purchaser if applicable and as the case may be) on or before the Long Stop Date, the Sale and Purchase Agreement shall be terminated and in such case, all rights and obligations of the Seller and the Purchaser thereunder shall terminate and no party shall have any claim or action against the other without prejudice to any accrued rights and obligations of the parties prior to such termination.

If proceed to the Completion, acquisition of the Transfer Shares will trigger the mandatory general offer obligation on the part of the Purchaser under the Takeovers Code, and in this respect, the Company has been informed by the Purchaser that the Executive has granted the GO Waiver to the Purchaser.

The Completion

The Completion shall take place within 30 Business Days after all the above conditions precedent have been satisfied (unless otherwise waived by the Seller or the Purchaser if applicable and as the case may be) and the consideration for the Disposal in the amount of HK$1,785.00 million shall be paid by the Purchaser to the Seller and the Seller shall complete transfer of the Transfer Shares to the Purchaser.

INFORMATION OF THE CEOVU GROUP

CEOVU is a company incorporated in the Cayman Islands with limited liability and whose shares are listed on the Main Board of the Stock Exchange. CEOVU is an investment holding company. The CEOVU Group is committed to construct the leading platform for sharing industrial resources in the PRC, providing appropriate and overall solutions covering technology industrial park investment, development, business solicitation and operation, as well as providing ideal office, research, production sites and services to various kind of innovative enterprises, using entire life cycle of park zone intelligence management system as a foundation. It mainly includes:

i) Rental and sales of industrial parks: including sale and leasing of industrial park space;
ii) Industrial park operation services: including design and construction services, property management service, energy services, intelligent park services, incubator and office sharing services, financial services in parks, group catering and hotel services, real estate marketing and agency, apartment leasing as well as recreation and entertainment; and
iii) Industrial investment: any equity investment business relevant to industrial thematic park.

As of 31 December 2019, the CEOVU Group developed or operated various industrial parks in 30 cities, including Wuhan, Qingdao, Hefei, Shenyang, Xi’an, Chengdu, Shanghai, Tianjin, Shenzhen, Chongqing, Wenzhou, Ezhou, Huangshi, Huanggang, Chengmai (Hainan), Dongying, Luoyang, Changsha and Xianyang.

LETTER FROM THE BOARD

Set out below is the consolidated financial information of the CEOVU Group for each of the years ended 31 December 2018 and 2019 and the six months ended 30 June 2020 as extracted from 2018 annual report, 2019 annual report and 2020 interim report of CEOVU, respectively.

	Six months ended	Year ended	Year ended
	30 June 2020	31 December 2019	31 December 2018
	(Unaudited)	(Audited)	(Audited)
	RMB’000	RMB’000	RMB’000
Profit before taxation	168,371	956,735	903,693
Profit after taxation	102,954	594,183	590,916

The consolidated net assets of the CEOVU Group were RMB7,573.15 million as at 30 June 2020.

REASONS FOR AND BENEFITS OF THE DISPOSAL

In 2014, the Company acquired 100% of the equity interest in China Electronics Technology Development Co., Ltd. from CEC for a cash consideration of RMB600.00 million (equivalent to HK$753.95 million). In 2016, the Company transferred 100% of the equity interest in China Electronics Technology Development Co., Ltd. to CEOVU for a consideration of RMB699,854,600 (equivalent to HK$846.82 million), which was satisfied by the allotment of 1,058,530,083 new ordinary shares of HK$0.10 each in the share capital of CEOVU and at the same time, the Company also subscribed in cash for 1,491,469,917 new ordinary shares of HK$0.10 each in the share capital of CEOVU for HK$1,193.18 million resulting in the Group holding the Transfer Shares at a total acquisition cost, on a cash basis, of HK$1,947.13 million.

The Group’s investment in the Transfer Shares has been accounted for as an investment in associate in the Group’s consolidated statement of financial position. As the acquisition of the Transfer Shares has been substantially financed by borrowings, the Group has been paying interest on these borrowings, which amounted to HK$143.17 million, HK$92.59 million and HK$95.89 million and accounted for 47.90%, 1,071.40% and 43.23% of the Group’s cash flows generated from operations for the financial year ended 31 December 2017, 2018 and 2019, respectively. This financing cost had exerted significant pressure on the Group’s operating cash flows and restricted the cash available for operations and development of the Group’s principal activities. Given that the respective principal activities of the CEOVU Group and the Group are basically in different sectors and the synergetic effects generated between them are limited, investors consider that the Group’s business positioning is not clear and have reservations about participating in the Group’s fund raising plan, as a result of which the Group’s financing ability has been affected to a certain extent. In this regard, the Board intends to repay a substantial portion of the short-term bank borrowings by the proceeds arising out of disposing the Transfer Shares held by the Group, which will significantly reduce interest expenses in the future and improve the Group’s gearing ratio and net current liabilities position. The Disposal will also allow the Group to focus its resources on its core business areas. However, the Group has been unsuccessful in identifying any third party with an interest in acquiring the Transfer Shares. The Purchaser, a wholly-owned subsidiary of CEC, after arm’s length negotiations with the Group, agreed to acquire the

LETTER FROM THE BOARD

Transfer Shares held by the Group at the price of HK$0.70 per Transfer Share for a consideration of HK$1,785.00 million. The price of HK$0.70 per Transfer Share represents a premium of 41.41% over the closing price of HK$0.495 per Transfer Share as quoted on the Stock Exchange on the Last Trading Day. The Disposal will lay an important foundation for the Group’s business reorganisation and will be beneficial to the Group’s business and development in the future.

Having considered the factors set out above, the Board considers that it is a good opportunity to realise the Group’s investment in the Transfer Shares because:

(i) the price per Transfer Share represents a significant premium over the market price of the Transfer Share;
(ii) the Disposal will allow the Group to focus its resources on its core business areas;
(iii) the financial resources realised by the Disposal will strengthen the financial position of the Group; and
(iv) although the Disposal will result in an estimated accounting loss of HK$903.27 million to the Group, the cash loss will only be limited to HK$162.13 million calculated as the consideration for the Disposal of HK$1,785.00 million less the total acquisition cost, on a cash basis, for the Transfer Shares of HK$1,947.13 million.

The Board is of the view that the terms of the Sale and Purchase Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

FINANCIAL EFFECTS OF THE DISPOSAL

As set out in the unaudited pro forma consolidated statement of financial position of the Remaining Group in Appendix III to this circular, the carrying value of the Group’s investment in CEOVU is HK$2,615.89 million. Following the Completion, CEOVU will cease to be an associate company of the Group. After taking into account the consideration for the Disposal of HK$1,785.00 million, the carrying value of the Group’s investment in CEOVU as at 30 June 2020, the release of accumulated translation reserve as at 30 June 2020, and the related transaction costs and taxes, it is estimated that a loss of HK$827.25 million will be recorded. Assuming the Completion had taken place on 30 June 2020, the total assets as at 30 June 2020 would have decreased from HK$5,152.53 million to HK$4,315.64 million as a result of the Disposal, the Disposal will not have any effect on the total liabilities as at 30 June 2020, and the total equity as at 30 June 2020 would have decreased from HK$2,038.19 million to HK$1,201.30 million as a result of the Disposal.

As set out in the unaudited pro forma consolidated statement of profit or loss of the Remaining Group in Appendix III to this circular, assuming the Disposal had taken place on 1 January 2019, the profit for the year ended 31 December 2019 attributable to owners of the Company of HK$155.16 million would have changed to a loss of HK$873.62 million as a result of the Disposal.

LETTER FROM THE BOARD

The actual financial effects of the Disposal, which will be calculated based on the carrying value of the Group’s investment in CEOVU as at the date of the Completion, may be different and is subject to determination.

INFORMATION ON THE PARTIES

The Company

The Company is an investment holding company. The Group is principally engaged in the business of design and sale of integrated circuit chips.

CEC

CEC is a state-owned enterprise established under the laws of the PRC. Established in 1989 with the approval of the State Council of the PRC, CEC is a nationwide electronics and information technology conglomerate directly administered by the PRC government. CEC actively focuses on communications, consumer electronics products, semi-conductor and software sectors in the PRC. CEC is the ultimate controlling shareholder of the Company and is interested in 59.42% of the issued share capital of the Company.

The Seller

The Seller is a company incorporated in the British Virgin Islands with limited liability and is a wholly-owned subsidiary of the Company. It is an investment holding company primarily engaged in investment.

The Purchaser

The Purchaser is a company established under the laws of the PRC with limited liability and is a wholly-owned subsidiary of CEC. It is an investment holding company primarily engaged in investment.

LISTING RULES IMPLICATIONS

The Purchaser is a wholly-owned subsidiary of CEC, which is the ultimate controlling shareholder of the Company indirectly holding 59.42% of the issued share capital of the Company. The Purchaser is therefore a connected person of the Company under the Listing Rules. The Sale and Purchase Agreement and the transactions contemplated thereunder constitutes a connected transaction of the Company. As one or more of the applicable percentage ratios set out in Rule 14.07 of the Listing Rules in respect of the Sale and Purchase Agreement and the transactions contemplated thereunder exceed 75%, the Sale and Purchase Agreement and the transactions contemplated thereunder constitute a very substantial disposal and connected transaction of the Company under Chapter 14 and Chapter 14A of the Listing Rules respectively and is subject to the reporting, announcement, circular and independent shareholders’ approval requirements under the Listing Rules.

LETTER FROM THE BOARD

None of the Directors have a material interest in the Disposal. Accordingly, no Director was required to abstain from voting on the relevant board resolution.

WAIVER FROM STRICT COMPLIANCE WITH RULE 14.68(2)(a)(i) OF THE LISTING RULES

Rule 14.68(2)(a)(i) of the Listing Rules provides that a circular issued in relation to a very substantial disposal must contain on a disposal of a business, company or companies, financial information of either (A) the business, company or companies being disposed of, or (B) the listed issuer’s group with the business, company or companies being disposed of shown separately as (i) disposal group(s) or (ii) discontinued operation(s) for the relevant period (as defined in the note to Rule 4.06(1)(a) of the Listing Rules). The financial information must be prepared by the directors of the listed issuer using accounting policies of the listed issuer and must contain at least the income statement, balance sheet, cash flow statement and statement of changes in equity. The financial information must be reviewed by the listed issuer’s auditors or reporting accountants according to the relevant standards published by the Hong Kong Institute of Certified Public Accountants or the International Auditing and Assurance Standards Board of the International Federation of Accountants or the China Auditing Standards Board of the China Ministry of Finance. The circular must contain a statement that the financial information has been reviewed by the issuer’s auditors or reporting accountants and details of any modifications in the review report.

Further, Note 2 to Rule 14.68(2)(a)(i) of the Listing Rules provides that the Stock Exchange may be prepared to relax the requirements of the said rule if the assets of the company or companies being disposed of are not consolidated in the issuer’s accounts before the disposal.

The Company has applied for, and the Stock Exchange has granted, the waiver from strict compliance with Rule 14.68(2)(a)(i) of the Listing Rules on the following grounds:-

the Transfer Shares to be disposed of under the Sale and Purchase Agreement represented 33.67% of the issued share capital of CEOVU as at the date of the Sale and Purchase Agreement and the results and assets and liabilities of the CEOVU Group have been accounted for in the financial statements of the Group under equity method of accounting and not consolidated in the Group’s financial statements before the Disposal;
CEOVU is a company with its shares listed on the Main Board of the Stock Exchange and publishes its annual report and interim report on the websites of the Stock Exchange and CEOVU. The audited consolidated financial statements of the CEOVU Group for each of the years ended 31 December 2017, 2018 and 2019 as disclosed in its respective annual reports and published by CEOVU have been audited by CEOVU’s auditors in accordance with the International Standards on Auditing. The financial information of the CEOVU Group for the six months ended 30 June 2020 as disclosed in its 2020 interim report and published by CEOVU have been reviewed by CEOVU’s auditors in accordance with the International Standard on Review Engagements 2410;

LETTER FROM THE BOARD

the Company has discussed with its reporting accountants in relation to the review procedure of the financial information of the CEOVU Group under Rule 14.68(2)(a)(i) of the Listing Rules, and in view of the fact that (a) completion of the review procedure by the reporting accountants foregoing mentioned will be highly dependent on the timing of provision of information from the management of the CEOVU Group or other relevant parties in response to the request(s) of the reporting accountants of the Company, and (b) there is no assurance that the CEOVU Group or other relevant parties would be able to provide the requested information to the satisfaction of the reporting accountants of the Company in a timely manner because the CEOVU Group or other relevant parties will take time to reply or provide the requested information to the reporting accountants of the Company, it would be practically difficult, time consuming and unduly burdensome to conduct the review procedure foregoing mentioned and any unexpected delay in completion of the review procedure by the reporting accountants of the Company will cause delay on the part of the Company to despatch this circular; and
the Company will disclose in this circular, as alternative disclosure, a summary of the financial information of the CEOVU Group (a) for each of the years ended 31 December 2017, 2018 and 2019 to be extracted from the respective annual reports of CEOVU, and (b) for the six months ended 30 June 2020 to be extracted from the 2020 interim report of CEOVU. The Board considers that the summary of the financial information of the CEOVU Group disclosed in such form and manner contains sufficient information to enable the Shareholders to make a properly informed assessment in respect of the Disposal.

The audited financial information of the CEOVU Group for each of the years ended 31 December 2017, 2018 and 2019 which are extracted from the respective annual reports of CEOVU, and the reviewed financial information of the CEOVU Group for the six months ended 30 June 2020 which are extracted from the 2020 interim report of CEOVU are set out in the Appendix II to this circular.

WAIVER FROM STRICT COMPLIANCE WITH RULES 14.68(1), 14.66(11), 14A.70(7), 5.02, 5.02A(3) AND 5.03 OF THE LISTING RULES

In relation to valuation and disclosure of property interest or a company whose assets consist solely or mainly of property in a circular issued in relation to a very substantial disposal and connected transaction, the Listing Rules provide the following:-

Rule 14.68(1) of the Listing Rules provides that a circular issued in relation to a very substantial disposal must contain the information required under Rule 14.66;
Rule 14.66(11) of the Listing Rules provides that a circular relating to a major transaction must contain, where required by Chapter 5 of the Listing Rules, the information under that Chapter on the property interest being acquired or disposed by the listed issuer;

LETTER FROM THE BOARD

Rule 14A.70(7) of the Listing Rules provides that a circular for a connected transaction must contain at least, if the transaction involves the acquisition or disposal of any property interests or a company whose assets consist solely or mainly of property, a valuation and information on the property if required under Rule 5.03;
Rule 5.02 of the Listing Rules provides that for an acquisition or disposal of any property interest, or of a company whose assets consist solely or mainly of property, where any of the percentage ratios (as defined in Rule 14.04(9)) of the transaction is or is above 25%, then a valuation of and information on the property must be included in the circular issued to shareholders in connection with the acquisition or disposal (see Rule 14.66(11)) unless Rule 5.02A applies;
Rule 5.02A(3) of the Listing Rules provides that valuation of a property interest is not required if the company being acquired or disposed of is listed on the Stock Exchange, except if it is a connected transaction; and
Rule 5.03 of the Listing Rules provides that for a connected transaction involving an acquisition or a disposal of any property interest or of a company whose assets consist solely or mainly of property (including a company listed on the Stock Exchange), a valuation of and information on the property must be included in any circular issued to shareholders in connection with the acquisition or disposal (see Rule 14A.70(7)). The circular must include full text of valuation reports and the general information in Rule 5.10, if it applies.

The Company has applied for, and the Stock Exchange has granted, the waiver from strict compliance with Rules 14.68(1), 14.66(11), 14A.70(7), 5.02, 5.02A(3) and 5.03 of the Listing Rules on the following grounds:-

CEOVU is a company with its shares listed on the Stock Exchange whose assets consist mainly of property and despite the right of the Company to nominate 2 out of 9 directors of CEOVU pursuant to the transaction relating to the subscription of the shares of CEOVU as disclosed in the announcement of the Company dated 14 December 2015 and the circular dated 19 February 2016, these 2 directors (subsequently nominated by the Company through exercise of the right foregoing mentioned and appointed by CEOVU) have been exercising judgments for CEOVU independently of the Company and the Company is not in control of CEOVU or the CEOVU Group for provision of any land and/or properties information of the CEOVU Group for valuation and disclosure of such information by the Company in this circular in accordance with the Listing Rules;

LETTER FROM THE BOARD

according to CEOVU, the information relating to the land and/or properties of the CEOVU Group is confidential information of the CEOVU Group (and its joint venture partners, as the case may be) and disclosure of such information to any third parties (including the Company and its independent property valuer to perform valuation pursuant to Chapter 5 of the Listing Rules) will be subject to stringent internal approval of the CEOVU Group (and similar approvals of its joint venture partners, as the case may be) which will be lengthy and complicated due to the need to assess any adverse impacts or effects (including risks of accidental leakage of such confidential information and anything that might undermine the competitive position) that may cause to the CEOVU Group (or its joint venture partners, as the case may be) as a result of such disclosure and inclusion of such information in this circular not subject to the prior approval of the CEOVU Group, which process will be aggravated further by the huge number of land and/or properties of the CEOVU Group involved;
given that provision of such information by the CEOVU Group (and by its joint venture partners, as the case may be) is purely on a voluntary basis and it will take at least several months for the CEOVU Group (and its joint venture partners, as the case may be) to go through and complete their internal approval processes, it would be practically difficult, time consuming and unduly burdensome for the independent property valuer of the Company to carry out valuation of the land and/or properties of the CEOVU Group in accordance with Chapter 5 and Practice Note 12 of the Listing Rules, and any delay in the completion of the valuation process by the independent property valuer of the Company will cause delay on the part of the Company to despatch this circular; and
the Company will disclose in this circular, as alternative disclosure, the “Property Calculation Report” setting out (a) information on the land and/or properties of the CEOVU Group based on the information, materials, confirmations and representations provided by the CEOVU Group, and those information collected by the independent property valuer of the Company through making necessary enquiries with the CEOVU Group and site inspections, and (b) the reference values of the land and/or properties of the CEOVU Group calculated by the independent property valuer of the Company with inclusion of relevant property reference value calculation sheets.

Given that the reference values of the land and/or properties of the CEOVU Group prepared by the independent property valuer of the Company are subject to the limitations of (a) there being no independent verification carried out by the independent property valuer of the Company over the information, materials, confirmations and representations provided by the CEOVU Group, (b) no legal due diligence performed over the legal ownership and title(s) of the land and/or properties of the CEOVU Group and no reliance by the independent property valuer of the Company on any PRC legal opinion in arriving at their opinions of the relevant reference values of the land and/or properties of the CEOVU Group, and (c) all information provided by the CEOVU Group to the independent property valuer of the Company assumed to be complete and correct, the reference values in relation to the land and/or properties of the CEOVU Group prepared by the independent property valuer of the Company should not be regarded as or equivalent to any valuation of the land and/or properties of the CEOVU Group performed under Chapter 5 and Practice Note 12 of the Listing Rules, and the inclusion of the reference values and property reference value calculation sheets in this circular are for general reference purpose only for the Shareholders.

The “Property Calculation Report” prepared by the independent property valuer of the Company, APA, is set out in Appendix V to this circular.

LETTER FROM THE BOARD

SGM

A notice convening the SGM to be held at Plaza 3, Lower Lobby, Novotel Century Hong Kong, 238 Jaffe Road, Wanchai, Hong Kong on Tuesday, 27 October 2020 at 4:30 p.m. is set out on pages SGM-1 to SGM-2 of this circular. At the SGM, an ordinary resolution will be proposed to approve the Sale and Purchase Agreement and the transactions contemplated thereunder. Any connected person, and any Shareholder with a material interest in the transaction and its associates, will not vote. As such, CEC and its associates shall abstain from voting on the resolution approving the Sale and Purchase Agreement and the transactions contemplated thereunder. Pursuant to Rule 13.39(4) of the Listing Rules, the vote of the Independent Shareholders at the SGM shall be taken by poll.

A form of proxy for the SGM is enclosed with this circular. Whether or not you are able to attend the SGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar and transfer office in Hong Kong, Tricor Abacus Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong not later than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish and in such event, the form of proxy shall be deemed to be revoked.

In light of the COVID-19 pandemic, Shareholders may consider appointing the chairman of the SGM as his/her proxy to vote on the resolution, instead of attending the SGM in person.

BOOK CLOSURE PERIOD

Shareholders whose names appear on the register of members of the Company at the close of business on 21 October 2020 will be entitled to attend and vote at the SGM. The register of members of the Company will be closed from 21 October 2020 to 27 October 2020 (both days inclusive), during which period no transfer of Shares will be registered.

In order to be entitled to attend and vote at the SGM, all share certificates with completed transfer forms must be lodged with the Company’s branch share registrar and transfer office in Hong Kong, Tricor Abacus Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong not later than 4:30 p.m. on 20 October 2020.

RECOMMENDATION

Based on the relevant information disclosed herein, the Board is of the view that the terms of the Sale and Purchase Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Independent Shareholders to vote in favour of the resolution to be proposed at the SGM in relation to the Sale and Purchase Agreement and the transactions contemplated thereunder.

LETTER FROM THE BOARD

FURTHER INFORMATION

Your attention is also drawn to the financial and general information set out in the appendices to this circular.

Yours faithfully, For and on behalf of the Board

China Electronics Huada Technology Company Limited Dong Haoran Chairman

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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CHINA ELECTRONICS HUADA TECHNOLOGY COMPANY LIMITED 中國電子華大科技有限公司

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)

(Stock Code: 00085)

30 September 2020

To the Independent Shareholders

Dear Sirs or Madams,

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL OF 33.67% OF THE ISSUED SHARE CAPITAL OF CHINA ELECTRONICS OPTICS VALLEY UNION HOLDING COMPANY LIMITED

We refer to the circular of the Company dated 30 September 2020 (the “Circular”), of which this letter forms part. Capitalised terms used in this letter will have the same meanings as those defined in the Circular, unless the context otherwise requires.

In compliance with the Listing Rules, we have been appointed to advise the Independent Shareholders in relation to the terms of the Sale and Purchase Agreement. In this connection, Somerley has been appointed as the independent financial adviser to advise on these matters.

Your attention is drawn to the letter from the Board as set out on pages 4 to 16 of the Circular which contains, among others, details of the terms of the Sale and Purchase Agreement, the letter from Somerley as set out on pages 19 to 55 of the Circular which contains the advice from Somerley in respect of the terms of the Sale and Purchase Agreement, and the information set out in the appendices thereto.

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

We, having considered the terms of the Sale and Purchase Agreement and having taken into account the principal factors and reasons considered by Somerley as stated in its letter, consider that the terms of the Sale and Purchase Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the SGM in relation to the Sale and Purchase Agreement and the transactions contemplated thereunder, as detailed in the notice of SGM as set out on pages SGM-1 to SGM-2 of the Circular.

Yours faithfully, Independent Board Committee

China Electronics Huada Technology Company Limited Chan Kay Cheung Qiu Hongsheng Chow Chan Lum Independent Non-executive Directors

LETTER FROM SOMERLEY

Set out below is the letter of advice from Somerley to the Independent Board Committee and the Independent Shareholders in connection with the Disposal, which has been prepared for the purpose of inclusion in this circular.

SOMERLEY CAPITAL LIMITED

20th Floor China Building 29 Queen’s Road Central Hong Kong

30 September 2020

To: The Independent Board Committee and the Independent Shareholders of China Electronics Huada Technology Company Limited

Dear Sirs,

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL OF 33.67% OF THE ISSUED SHARE CAPITAL OF CHINA ELECTRONICS OPTICS VALLEY UNION HOLDING COMPANY LIMITED

INTRODUCTION

We refer to our appointment by the Company to advise the Independent Board Committee and the Independent Shareholders in connection with the Disposal. Details of the Disposal are set out in the letter from the Board contained in the circular of the Company to the Shareholders dated 30 September 2020 (the “ Circular ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context requires otherwise.

On 30 July 2020, the Seller, a wholly-owned subsidiary of the Company, entered into the Sale and Purchase Agreement with the Purchaser, a wholly-owned subsidiary of CEC, pursuant to which the Seller has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire, the Transfer Shares, being ordinary shares of HK$0.10 each in the share capital of CEOVU representing 33.67% of the issued share capital of CEOVU at a consideration of HK$1,785.0 million (the “ Consideration ”). Upon the Completion, CEOVU will cease to be an associate company of the Group.

The Purchaser is a wholly-owned subsidiary of CEC, which is the ultimate controlling shareholder of the Company indirectly holding 59.42% of the issued share capital of the Company. As such, the Purchaser is a connected person of the Company and the Disposal constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. As one or more of the applicable percentage ratios of the Disposal exceed 75%, the Disposal also constitutes a very substantial disposal of the Company under Chapter 14 of the Listing Rules. Therefore, the Disposal is subject to reporting, announcement, circular and independent shareholders’ approval requirements under the Listing Rules.

LETTER FROM SOMERLEY

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Chan Kay Cheung, Mr. Qiu Hongsheng and Mr. Chow Chan Lum, has been established to advise the Independent Shareholders on the terms of the Disposal and to make recommendation as to voting. We, Somerley, have been appointed to advise the Independent Board Committee and the Independent Shareholders in the same regard.

We are not associated with the Company, CEC, the Seller, the Purchaser or any of their close associates, associates or core connected persons (all as defined in the Listing Rules) and accordingly we are considered eligible to give independent advice on the above matters. Apart from normal professional fee payable to us in connection with this appointment, no arrangement exists whereby we will receive any fees or benefits from the Company, CEC, the Seller, the Purchaser or any of their close associates, associates or core connected persons.

In formulating our opinion and recommendation, we have reviewed, among other things, the Sale and Purchase Agreement, the interim report of the Company for the six months ended 30 June 2020 (the “ 2020 Interim Report ”), the annual reports of the Company for the years ended 31 December 2019 (the “ 2019 Annual Report ”), 2018 and 2017, the interim report of CEOVU for the six months ended 30 June 2020 (the “ CEOVU 2020 Interim Report ”), the annual reports of CEOVU for the years ended 31 December 2019 (the “ CEOVU 2019 Annual Report ”), 2018 and 2017, the unaudited pro forma financial information of the Remaining Group (the “ Pro Forma Financial Information ”) as set out in appendix III to the Circular, the property calculation report issued by APA, the independent property valuer, in relation to the calculation of the reference value of properties held by the CEOVU Group as at 30 June 2020 as set out in appendix V to the Circular and the information as set out in the Circular. We have also discussed with the management of the Group (the “ Management ”) about CEOVU and the future prospects of the Group. We have also interviewed and discussed with APA regarding the Calculation (as defined below).

We have relied on the information and facts supplied, and the opinions expressed, by the Directors and the Management and have assumed that they are true, accurate and complete. We have also sought and received confirmation from the Directors that no material facts have been omitted from the information supplied and opinions expressed to us. We have no reason to believe that any material information has been withheld from us, or to doubt the truth or accuracy of the information provided. We have relied on such information and consider that the information we have received is sufficient for us to reach an informed view. We have not, however, conducted any independent investigation into the business and affairs of the Group and the CEOVU Group, nor have we carried out any independent verification of the information supplied.

LETTER FROM SOMERLEY

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion and recommendation, we have taken into consideration the following principal factors and reasons:

1. Information of the Group

(a) Principal business of the Group

The Group is principally engaged in the business of design and sale of integrated circuit chips. As stated in the 2019 Annual Report, the Group is a leader of the security smart card chips industry in the PRC. The Group’s products are mainly used in sector of identity authentication, financial payment, government utilities as well as telecommunication. The Group has obtained 31 new patents, registered 1 new software copyright and 5 new integrated circuits layout designs for the year ended 31 December 2019.

The Group completed the acquisition of the 33.67% interest in CEOVU in 2016 and it is one of the major investments of the Group. The principal activities of the CEOVU Group mainly include (i) rental and sales of industrial parks; (ii) industrial park operation services; and (iii) industrial investment. The investment in CEOVU held by the Group is classified as investment in associates in the financial statements of the Group and the results and assets and liabilities of the CEOVU Group have been accounted for in the financial statements of the Group under equity method of accounting. Further details of the CEOVU Group are set out in the section headed “4. Information of the CEOVU Group” in this letter.

LETTER FROM SOMERLEY

(b) Financial performance of the Group

Set out in the table below is a summary of the Group’s financial performance for the years ended 31 December 2017, 2018 and 2019 and the six months ended 30 June 2019 and 2020.

Revenue Cost of sales Gross profit Other income Selling and marketing costs Administrative expenses Impairment losses on trade and other receivables Operating profit Net finance costs Share of results of associates Share of result of a joint venture Profit before taxation Taxation Profit for the period/year Profit attributable to the Shareholders	For the six months ended 30 June 2020 2019 (HK$ million) (HK$ million) 716.4 908.6 (462.6) (608.5) 253.8 300.1 14.3 24.4 (38.1) (43.5) (136.6) (165.4) (7.7) (8.1) 85.7 107.5 (47.3) (52.2) 38.2 16.9 – – 76.6 72.2 (7.8) 0.9 68.8 73.1 67.5 72.2	For the year ended 31 December 2019 2018 2017 (HK$ million) (HK$ million) (HK$ million) 1,695.5 1,687.0 1,453.0 (1,159.0) (1,156.3) (952.7) 536.5 530.7 500.3 34.9 32.8 133.2 (83.1) (90.3) (97.6) (345.8) (343.6) (332.9) (7.4) (20.2) (19.3) 135.1 109.4 183.7 (101.3) (92.0) (93.0) 121.0 126.7 129.8 – 0.2 (2.5) 154.8 144.3 218.0 2.8 (27.7) 3.9 157.6 116.6 221.9 155.2 113.3 220.1

Note: The above figures are subject to rounding adjustments.

LETTER FROM SOMERLEY

The revenue of the Group increased from HK$1,453.0 million for the year ended 31 December 2017 to HK$1,695.5 million for the year ended 31 December 2019, representing a compound annual growth rate (“ CAGR ”) of 8.0%. For the year ended 31 December 2018, the types of smart card chips that recorded growth in sales volume were mainly financial payment and social security products with unit price higher than the weighted average selling price. Revenue of the Group for the year ended 31 December 2018 was HK$1,687.0 million, representing an increase of 16.1% when comparing with that for the year ended 31 December 2017 of HK$1,453.0 million. For the year ended 31 December 2019, overall sales volume of the Group increased by 10.0% when comparing with that for the year ended 31 December 2018. As the recorded growth in sales volume for the year ended 31 December 2019 was mainly telecommunication card chips with unit price below the weighted average selling price, and along with the effect of decrease in selling price of smart card chips in general when comparing with that for the year ended 31 December 2018 resulting from further intensification of market price competition on the revenue during the year ended 31 December 2019, revenue of the Group for the year ended 31 December 2019 was HK$1,695.5 million, at a level similar to that of 2018. The revenue for the six months ended 30 June 2020 was HK$716.4 million, representing a decrease of 21.1% when comparing with that for the corresponding period in 2019. The decline was mainly because the decrease in sales volume of various types of smart card chips in the first half of 2020 mainly involved products with higher unit price and the impact of a general decline in the selling price of smart card chips when comparing with that for the corresponding period in 2019 as a result of further intensification in market price competition.

The gross profit for the year ended 31 December 2018 was HK$530.7 million, representing an increase of HK$30.4 million or 6.1% as compared with that for the year ended 31 December 2017 of HK$500.3 million. The gross profit margin decreased from 34.4% for the year ended 31 December 2017 to 31.5% for the year ended 31 December 2018. Through successfully conducting research of, applying and promoting different types of raw materials, the Group has not only relieved the problem of shortage of raw material, but also controlled and reduced cost to a certain extent, and partly offset the negative effect on the overall gross profit margin of the year ended 31 December 2018 brought by the decrease in selling price of financial payment chips as well as telecommunication and mobile payment chips when comparing with that for the year ended 31 December 2017 due to intensifying competition in the market. The gross profit and the gross profit margin for the year ended 31 December 2019 were HK$536.5 million and 31.6% respectively. The Group has successfully conducted research of and promoted the use of different types of raw materials, which has both mitigated the problem of shortage of raw materials and achieved cost reduction to a certain extent, and offset the negative impact of decrease in selling price of smart card chips when comparing with the year ended 31 December 2018 caused by intense market competition on the overall gross profit margin of the year. The gross profit and the gross profit margin for the six months ended 30 June 2020 were HK$253.8 million and 35.4% respectively. While the gross profit dropped by HK$46.3 million as compared to that for the corresponding period in 2019, the gross profit margin has improved by 2.4 percentage points, which was through adjusting the product mix of the Group’s smart card chips business and focusing on products with a better gross profit margin, and also strengthening cost control and striving to expand market shares of the Group’s products during the period.

LETTER FROM SOMERLEY

The share of results from associates represented primarily the profit contribution from CEOVU. The Group’s share of result from CEOVU for the year ended 31 December 2018 was HK$126.0 million, representing an increase of HK$1.9 million when comparing with that of HK$124.1 million for the year ended 31 December 2017. The Group’s share of result from CEOVU for the year ended 31 December 2019 however dropped to HK$120.2 million. The Group’s share of result from CEOVU for the six months ended 30 June 2020 was HK$38.2 million, representing an increase of HK$21.4 million as compared with that for the corresponding period in 2019 of HK$16.8 million. Further analysis of the financial performance of the CEOVU Group is set out in the sub-section headed “4(c) Financial performance of the CEOVU Group” in this letter.

The net finance costs for the year ended 31 December 2018 was HK$92.0 million, which was relatively similar to that for the year ended 31 December 2017 of HK$93.0 million. The average effective interest rate of the Group’s bank and other borrowings at 31 December 2018 was 4.15% per annum, representing an increase from that of 3.57% per annum at 31 December 2017. The net finance costs for the year ended 31 December 2019 increased to HK$101.3 million. The average effective interest rate of the Group’s bank and other borrowings at 31 December 2019 was 4.2% per annum. The net finance costs for the six months ended 30 June 2020 was HK$47.3 million, representing a decrease of HK$4.9 million as compared with that for the corresponding period in 2019 of HK$52.2 million.

For the profit attributable to the Shareholders, it declined by 48.5% from HK$220.1 million for the year ended 31 December 2017 to HK$113.3 million for the year ended 31 December 2018. Despite recording a growth in revenue for the year ended 31 December 2018, the decline in profit attributable to the Shareholders was mainly due to the absence of the recognition of a one-off gain before taxation from disposal of the Group’s navigation chips business of HK$102.5 million for the year ended 31 December 2017.

For the year ended 31 December 2019, the profit attributable to the Shareholders was HK$155.2 million, representing a year-on-year increase of 37.0% as compared with that for the year ended 31 December 2018. The improvement of the results was mainly attributable to (i) the decrease in impairment losses on trade and other receivables from HK$20.2 million for the year ended 31 December 2018 to HK$7.4 million for the year ended 31 December 2019; and (ii) the recognition of an income tax credit of HK$2.8 million for the year ended 31 December 2019 as compared with an income tax expense of HK$27.7 million for the year ended 31 December 2018.

For the six months ended 30 June 2020, the profit attributable to the Shareholders was HK$67.5 million, representing a decrease of HK$4.7 million as compared with that for the corresponding period in 2019 of HK$72.2 million. The deterioration of the results was mainly due to the combined effects of: (i) the decrease in revenue as mentioned above; (ii) the decrease in other income of HK$10.1 million chiefly due to absence of one-off gain arising from the disposal of a building in the PRC for the six months ended 30 June 2019; and (iii) the decrease in administrative expenses of 17.4% through the continuous implementation of stringent cost control measures by the Group.

LETTER FROM SOMERLEY

(c) Financial position of the Group

Set out below is a summary of the financial position of the Group as at 31 December 2017, 2018 and 2019 and 30 June 2020.

ASSETS Non-current assets Investment in associates Property, plant and equipment Others Current assets Inventories Trade and other receivables Short-term deposits and cash and cash equivalents Restricted cash Others Total assets EQUITY Capital and reserves attributable to the Shareholders Non-controlling interests LIABILITIES Non-current liabilities Lease liabilities Others Current liabilities Bank and other borrowings Trade and other payables Others Total equity and liabilities Net current liabilities	As at 30 June 2020 (HK$ million) 2,630.0 54.3 175.8 2,860.1 463.9 1,075.3 684.4 54.7 14.1 2,292.4 5,152.5 2,016.6 21.6 2,038.2 41.0 11.0 52.0 2,309.4 654.3 98.6 3,062.3 5,152.5 769.9	As at 31 December 2019 2018 (HK$ million) (HK$ million) 2,707.9 2,665.8 63.2 367.6 145.2 100.2 2,916.3 3,133.6 460.6 603.7 713.6 722.9 801.2 466.8 – – 14.2 42.1 1,989.6 1,835.5 4,905.9 4,969.1 2,036.7 1,922.4 20.1 18.8 2,056.8 1,941.2 32.2 – 12.9 24.5 45.1 24.5 2,188.0 2,295.3 537.5 638.5 78.5 69.6 2,804.0 3,003.4 4,905.9 4,969.1 814.4 1,167.9	2017 (HK$ million) 2,782.3 420.4 111.4
			3,314.1 406.1 767.3 384.8 – 202.5
			1,760.7 5,074.8

			2,025.5 16.4
			2,041.9 – 14.1
			14.1 2,314.5 634.8 69.5
			3,018.8 5,074.8

			1,258.1

Note: The above figures are subject to rounding adjustments.

LETTER FROM SOMERLEY

As at 30 June 2020, total assets of the Group were HK$5,152.5 million, representing an increase of HK$246.6 million from that as at 31 December 2019. The Group had a significant portion, around 51.0%, of its total assets as at 30 June 2020 represented by investment in associates, which substantially consisted of the 33.67% interest in CEOVU. As at 30 June 2020, the book value of the Group’s investment in CEOVU was HK$2,615.9 million while the corresponding fair value, based on the closing price of CEOVU ordinary share as quoted on the Stock Exchange on the same date, was HK$1,185.8 million.

The Group’s operations were largely financed by the Shareholders’ equity and bank and other borrowings. As at 30 June 2020, the entire bank and other borrowings of HK$2,309.4 million was due within one year. With the heavy short-term borrowings, the Group had a net current liability position of HK$769.9 million as at 30 June 2020. The gearing ratio, which is calculated as net debt (i.e. bank and other borrowings less short-term deposits, restricted cash and cash and cash equivalents) divided by the sum of total equity and net debt of the Group, as at 30 June 2020 was 43.5%, representing an increase of 3.2 percentage points from that of 40.3% as at 31 December 2019.

Net asset value (“ NAV ”) attributable to the Shareholders was HK$2,016.6 million as at 30 June 2020, representing a decrease of 1.0% from that as at 31 December 2019. The decrease in the NAV was mainly due to the combined effects of: (i) the profit attributable to the Shareholders for the six months ended 30 June 2020 of HK$67.5 million; (ii) the accrual of final dividend for the year ended 31 December 2019 of HK$46.7 million; and (iii) the decrease in reserves for the six months ended 30 June 2020 mainly due to exchange differences on translation of financial statements of HK$40.7 million.

2. Reasons for and benefits of the Disposal

As discussed in the letter from the Board contained in the Circular, the Company acquired 100% of the equity interest in China Electronics Technology Development Co., Ltd. from CEC for a cash consideration of RMB600.00 million (equivalent to HK$753.95 million) in 2014. In 2016, the Company transferred 100% of the equity interest in China Electronics Technology Development Co., Ltd. to CEOVU for a consideration of RMB699,854,600 (equivalent to HK$846.82 million), which was satisfied by the allotment of 1,058,530,083 new ordinary shares of HK$0.10 each in the share capital of CEOVU and at the same time, the Company also subscribed in cash for 1,491,469,917 new ordinary shares of HK$0.10 each in the share capital of CEOVU for HK$1,193.18 million resulting in the Group holding the Transfer Shares at a total acquisition cost, on a cash basis, of HK$1,947.13 million (together, the “ CEOVU Acquisition ”). The Group’s investment in the Transfer Shares has been accounted for as investment in associates in the Group’s consolidated statement of financial position.

LETTER FROM SOMERLEY

The acquisition of the Transfer Shares has been substantially financed by borrowings and the relevant interest payment has put significant pressure on the Group’s cashflow and drained the cash generated from operations in recent years. The table below sets out (i) the interest payment of the borrowings in relation to the acquisition of the Transfer Shares (the “ Interest Payment ”); (ii) dividends received from CEOVU; (iii) the net interest payment, being the difference between the Interest Payment and the dividends received from CEOVU (the “ Net Interest Payment ”); (iv) the cash flows generated from operations; and (v) the Interest Payment and the Net Interest Payment as a percentage of the cash flows generated from operations (the “ Interest Payment Percentage ” and “ Net Interest Payment Percentage ” respectively) of the Group during each of the years ended 31 December 2017, 2018 and 2019:

The Interest Payment_(Note 1)_ Dividends received from CEOVU The Net Interest Payment Cash flows generated from operations The Interest Payment Percentage The Net Interest Payment Percentage	For the year ended 31 December 2017 2018 2019 (HK$ ’000) (HK$ ’000) (HK$ ’000) (143,170) (92,590) (95,890) 51,000 51,000 63,750 (92,170) (41,590) (32,140) 298,903 8,642 221,793 47.9% 1,071.4% 43.2% 30.8% 481.3% 14.5%	Total (HK$’000) (331,650) 165,750 (165,900) 529,338 62.7% 31.3%

Notes:

The Company redeemed unsecured bonds with 4.70% coupon rate in the principal amount of RMB2,750.0 million in full in January 2017, which was originally issued to fund the Group’s investment in the Transfer Shares, and resulted in a higher interest payment for the year ended 31 December 2017 than that of other years as stated above.
The above figures are subject to rounding adjustments.

Based on the table above, we noted that the Interest Payment Percentages were in the range of 43.2% and 1,071.4% and the Net Interest Payment Percentages were in the range of 14.5% and 481.3% over the 3-year period. The average Interest Payment Percentage and the average Net Interest Payment Percentage were 62.7% and 31.3% respectively over the 3-year period. Accordingly, the Board is of the view that the financing cost of the investment in the Transfer Shares had exerted significant pressure on the Group’s operating cash flows and restricted the cash available for operations and development of the Group’s principal activities. Given that the respective principal activities of the CEOVU Group and the Group are basically in different sectors and the synergetic effects generated between them are limited, investors consider that the Group’s business positioning is not clear and have reservations about participating in the Group’s fund raising plan, as a result of which the Group’s financing ability has been affected to a certain extent.

LETTER FROM SOMERLEY

In view of this, the Board intends to repay a substantial portion of the short-term bank borrowings by the proceeds arising out of disposing of the Transfer Shares held by the Group, which will significantly reduce interest expenses in the future and improve the Group’s gearing ratio and net current liability position, which amounted to 43.5% and HK$769.9 million as at 30 June 2020 respectively. Based on the Pro Forma Financial Information, the Remaining Group would have become a net cash position and therefore the gearing ratio would have become not applicable upon the Completion. Furthermore, the Remaining Group’s cash and cash equivalents would have significantly improved due to the receipt of the net proceeds from the Disposal of HK$1,779.0 million (being the Consideration of HK$1,785.0 million minus the estimated related transaction expenses of HK$6.0 million) (the “ Net Proceeds ”) and the net current liabilities would have turned to net current assets of HK$1,009.1 million. For details, please refer to the sub-sections headed “(c) Gearing” and “(d) Liquidity” under the section headed “6. Financial effects of the Disposal on the Group” in this letter and the Pro Forma Financial Information as set out in appendix III to the Circular.

The Board is also of the view that the Disposal will also allow the Group to focus its resources on its core business areas. As stated in the 2019 Annual Report, the integrated circuits industry in 2020 is expected to see increasingly fierce competition in both domestic and international markets, with apparent trend of increasing industry chain costs and downward trend of product selling price further accelerating. Nevertheless, further application of the domestic-made substitutes and the state cryptographic algorithm in certain sectors of smart card chips market in 2020, as well as 5G and Internet of Things becoming the key development direction of new infrastructure, both of which will push up demand for higher information security and will bring market opportunities to the businesses of the Group. As such, since the liquidity and cash flow condition of the Group are expected to be improved upon the Completion, the Group’s capital capability to support its business development shall also improve in the future.

Lastly, it was stated in the letter from the Board contained in the Circular that the Group has been unsuccessful in identifying any third party with an interest in acquiring the Transfer Shares. We understood that the Company engaged a financial adviser to identify and approach potential investors in acquiring the Transfer Shares. Based on our discussion with the representative of the financial adviser, it was noted that they had approached, on a selective basis, a number of potential independent third party purchasers in respect of the disposal of the Transfer Shares but they had not received any feedback in this regard. The Purchaser, a wholly-owned subsidiary of CEC, after arm’s length negotiations with the Group, agreed to acquire the Transfer Shares held by the Group at the price of HK$0.70 per Transfer Share for a consideration of HK$1,785.0 million. The price of HK$0.70 per Transfer Share represents a premium of 41.41% over the closing price of HK$0.495 per Transfer Share as quoted on the Stock Exchange on the Last Trading Day. According to the Management, the Disposal will lay an important foundation for the Group’s business reorganisation and will be beneficial to the Group’s business and development in the future.

LETTER FROM SOMERLEY

3. Principal terms of the Sale and Purchase Agreement

Date

30 July 2020

Parties

(i) The Seller; and
(ii) The Purchaser

Subject

The Seller has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire the Transfer Shares, being ordinary shares of HK$0.10 each in the share capital of CEOVU representing 33.67% of the issued share capital of CEOVU.

Consideration

The consideration for the Disposal is HK$1,785.0 million and shall be paid by the Purchaser to the Seller on the Completion which will take place within 30 Business Days after all conditions precedent have been satisfied (unless otherwise waived by the Seller or the Purchaser if applicable and as the case may be).

Basis of determination of the Consideration

Use of proceeds

The gross proceeds from the Disposal are expected to be HK$1,785.0 million and the net proceeds (after deduction of related transaction expenses) are expected to be HK$1,779.0 million. The Company intends to use all the net proceeds for the repayment of its short-term bank borrowings.

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Conditions precedent

The Completion is conditional upon satisfaction of, among others, the followings conditions precedent:

(i) the Purchaser having obtained the GO Waiver from the Executive and the GO Waiver not having been cancelled or withdrawn;
(ii) the Company having obtained the approval from the Independent Shareholders pursuant to the Listing Rules in relation to the Sale and Purchase Agreement and the transactions contemplated thereunder;
(iii) the continued listing of CEOVU and trading of its shares on the Stock Exchange at the time of the Completion (save and except any suspension of trading of its shares for any period not exceeding 7 Business Days or any suspension of trading of its shares by reason of the Sale and Purchase Agreement and the transactions contemplated thereunder); and
(iv) there being no indication or notice from the Stock Exchange or the SFC with respect to cancellation or withdrawal of the listing status of CEOVU.

None of the conditions precedent above can be waived. Other conditions precedent to the Sale and Purchase Agreement are set out in the letter from the Board contained in the Circular. As at the Latest Practicable Date, save for the obtaining of the GO Waiver in condition (i) above, no other conditions precedent as set out in the Sale and Purchase Agreement has been satisfied or waived.

The Completion

The Completion shall take place within 30 Business Days after all the conditions precedent have been satisfied (unless otherwise waived by the Seller or the Purchaser if applicable and as the case may be) and the consideration for the Disposal in the amount of HK$1,785.0 million shall be paid by the Purchaser to the seller and the Seller shall complete transfer of the Transfer Shares to the Purchaser.

4. Information of the CEOVU Group

(a) Principal business of the CEOVU Group

The principal activities of the CEOVU Group mainly includes:

(i) Rental and sales of industrial parks: including sale and leasing of industrial park space;

LETTER FROM SOMERLEY

(ii) Industrial park operation services: including design and construction services, property management service, energy services, intelligent park services, incubator and office sharing services, financial services in parks, group catering and hotel services, real estate marketing and agency, apartment leasing as well as recreation and entertainment; and
(iii) Industrial investment: any equity investment business relevant to industrial thematic park.

As at 31 December 2019, the CEOVU Group’s industrial parks business covered 30 cities across the PRC with more than 40 projects ongoing. The CEOVU Group had land bank of 5.965 million square meters (“ sq.m. ”) in various cities, such as Chengdu, Changsha, Shanghai, Ningbo and Luoyang as at 31 December 2019, and the land bank slightly decreased to 5.836 million sq.m. as at 30 June 2020. The CEOVU Group had lettable floor space of 305,000 sq.m. for industrial park use as at 31 December 2019 and it further increased to 355,000 sq.m. as at 30 June 2020 with occupancy rate of over 80% as at 31 December 2019 and 30 June 2020. Furthermore, the CEOVU Group has secured new annual contracts amounting to RMB7,601.8 million for the year ended 31 December 2019, among which, the amount contracted for industrial park operation services was RMB5,597.5 million, representing 73.6% of the total contracted amount and the amount contracted for sales of industrial parks was RMB2,004.3 million, representing 26.4% of the total contracted amount. Set out below is the geographical presence of the CEOVU Group in the PRC as at 31 December 2019:

==> picture [424 x 297] intentionally omitted <==

----- Start of picture text -----

Shenyang
Beijing
Tianjin
Yinchuan Yan’an Dongying
Qingdao
Xixian
Xianyang Xi’an Luoyang
Huanggang Hefei Shanghai
Chengdu Xiaogan Ningbo
Chongqing Ezhou Huangshi
Changsha Wenzhou
Putian
Xiamen
Guangzhou
Zhuhai Shenzhen
Headquarters of CEOVU
Cities where the projects
Chengmai are located
Wuhan
----- End of picture text -----

LETTER FROM SOMERLEY

(b) Shareholding of CEOVU

Shares of CEOVU are listed on the Main Board of the Stock Exchange. The chart below sets out the simplified shareholding structure of CEOVU, based on publicly available information, as at the Latest Practicable Date:

==> picture [417 x 147] intentionally omitted <==

----- Start of picture text -----

The Company Mr. Huang Liping Other shareholders
33.67% 24.86% 41.47%
CEOVU
----- End of picture text -----

Source: The CEOVU 2020 Interim Report and the disclosure of interests

Note: The shareholding percentages in the chart above has not taken into account the treasury shares of CEOVU as at the Latest Practicable Date.

While the Company (through its wholly-owned subsidiary, CEC Media Holdings Limited) was the single largest shareholder of CEOVU, it only held 33.67% of the issued share capital of CEOVU as at the Latest Practicable Date. Mr. Huang Liping (“ Mr. Huang ”), the second largest shareholder of CEOVU holding 24.86% of the issued share capital of CEOVU, is the co-chairman, president and an executive director of CEOVU. As advised by the Management, Mr. Huang is independent of the Group except for his role in CEOVU as mentioned above. Also, the Company is not in control of the board of directors or management of CEOVU and the operations of the CEOVU are independent of that of the Group. Save for the Company and Mr. Huang, there were no other shareholder of CEOVU owned 10% or more of the issued share capital of CEOVU as at the Latest Practicable Date.

LETTER FROM SOMERLEY

(c) Financial performance of the CEOVU Group

Set out below is a summary of the financial performance of the CEOVU Group for the years ended 31 December 2017, 2018 and 2019 and for the six months ended 30 June 2019 and 2020 (the “ Review Period ”).

Revenue Sales of industrial parks Industrial park leasing Design and construction services Property management services Others Cost of sales Gross profit Other income and gains/ (losses) – net Selling and distribution expenses Administrative expenses Net (losses)/reversal of impairment on financial and contract assets Fair value gains on investment properties Other expenses Operating profit Finance costs – net Share of (losses)/profits of associates Share of profits of joint ventures Profit before income tax Income tax expense Profit for the period/year Profit/(Loss) for the period/year attributable to: Shareholders of CEOVU Non-controlling interests Dividends Dividends per share of CEOVU (HK cents) (equivalent to RMB cents)	For the six months ended 30 June 2020 2019 (RMB million) % of revenue (RMB million) % of revenue 340 37% 420 37% 96 10% 87 8% 163 18% 267 23% 242 26% 230 20% 82 9% 139 12% 923 100% 1,143 100% (681) (763) 242 380 29 105 (47) (54) (140) (184) (9) 3 118 40 (1) – 192 290 (63) (52) – (30) 39 12 168 220 (65) (101) 103 119 120 141 (17) (22) 103 119 – – – – – –	For the year ended 31 December 2019 2018 2017 (RMB million) % of revenue (RMB million) % of revenue (RMB million) % of revenue 1,656 49% 1,662 55% 1,722 64% 206 6% 166 6% 108 4% 681 20% 473 16% 392 15% 543 16% 448 15% 292 11% 291 9% 252 8% 179 6% 3,377 100% 3,001 100% 2,693 100% (2,302) (1,965) (1,706) 1,075 1,036 987 275 224 (22) (117) (86) (81) (335) (295) (259) (24) (3) – 156 57 247 – – – 1,030 933 872 (161) (110) (67) 45 64 22 43 17 3 957 904 830 (363) (313) (344) 594 591 486 569 542 446 25 49 40 594 591 486 173 162 129 2.50 2.50 2.00 2.28 2.13 1.67	For the year ended 31 December 2019 2018 2017 (RMB million) % of revenue (RMB million) % of revenue (RMB million) % of revenue 1,656 49% 1,662 55% 1,722 64% 206 6% 166 6% 108 4% 681 20% 473 16% 392 15% 543 16% 448 15% 292 11% 291 9% 252 8% 179 6% 3,377 100% 3,001 100% 2,693 100% (2,302) (1,965) (1,706) 1,075 1,036 987 275 224 (22) (117) (86) (81) (335) (295) (259) (24) (3) – 156 57 247 – – – 1,030 933 872 (161) (110) (67) 45 64 22 43 17 3 957 904 830 (363) (313) (344) 594 591 486 569 542 446 25 49 40 594 591 486 173 162 129 2.50 2.50 2.00 2.28 2.13 1.67
			100%

Note: The above figures are subject to rounding adjustments.

LETTER FROM SOMERLEY

The total revenue of the CEOVU Group increased from RMB2,693 million for the year ended 31 December 2017 to RMB3,377 million for the year ended 31 December 2019, representing a CAGR of 12.0%. As shown in the table above, sales of industrial parks accounted for the largest portion of the CEOVU Group’s revenue, which amounted to RMB1,656 million for the year ended 31 December 2019 but was lower than that of RMB1,722 million for the year ended 31 December 2017. The drop in the revenue of the sales of industrial parks was due to the lower booked sales area or recognised average selling price. The revenue of sales of industrial parks as a percentage of total revenue had a downward trend dropping from 64% for the year ended 31 December 2017 to 49% for the year ended 31 December 2019. The total revenue of the CEOVU Group for the six months ended 30 June 2020 was RMB923 million, representing a decrease of 19.2% from RMB1,143 million for the corresponding period in 2019. As shown in the table above, except for the slight increases in revenue of the industrial park leasing and property management services, which amounted to RMB96 million and RMB242 million respectively, representing increases of 10.3% and 5.2% respectively from that of the corresponding period in 2019, revenue of other business segments fell notably. In particular, revenue of sales of industrial parks and design and construction services fell from RMB420 million and RMB267 million for the six months ended 30 June 2019 to RMB340 million and RMB163 million for the six months ended 30 June 2020 respectively, representing decreases of 19.0% and 39.0% respectively. During the Review Period, revenue generated from the sales of industrial parks had no growth and showed signs of sluggish prospect. Meanwhile, revenue from all other business segments had increased notably during the Review Period, putting a heavier weighting to the CEOVU Group’s business.

As a result of the foregoing, gross profit of the CEOVU Group increased from RMB987 million for the year ended 31 December 2017 to RMB1,075 million for the year ended 31 December 2019, representing a CAGR of 4.4%. However, the gross profit margins dropped notably during the Review Period and they amounted to 36.7%, 34.5% and 31.8% for the years ended 31 December 2017, 2018 and 2019 respectively. Furthermore, gross profit of the Group for the six months ended 30 June 2020 amounted to RMB242 million, representing a decrease of RMB138 million or 36.3% as compared with that for the corresponding period in 2019. Gross profit margin for the six months ended 30 June 2020 was 26.2%, representing a further decrease of 7.1 percentage points from 33.3% for the corresponding period in 2019. The fall in gross profit margins was primarily due to the increasing scale of business segments, other than the sales of industrial parks, during the Review Period, which collectively had a lower gross profit margin than the gross profit margin of the sales of industrial parks and, hence, reduced the overall gross profit margins of the CEOVU Group.

Overall, the net profit of the CEOVU Group increased from RMB486 million for the year ended 31 December 2017 to RMB594 million for the year ended 31 December 2019, representing a CAGR of 10.6%, and whereas the net profit of the CEOVU Group decreased from RMB119 million for the six months ended 30 June 2019 to RMB103 million for the six months ended 30 June 2020. It should be noted that the net profit of the CEOVU Group during the Review Period was fuelled by, among others, various one-off and/or non-operating items such as fair value gains and disposal gains or losses (the “ Excluded Items ”). For illustrative purpose only, we set out in the table below a reconciliation of reported net profit to adjusted net profit or loss of the CEOVU Group after taking out these Excluded Items for the Review Period.

LETTER FROM SOMERLEY

Reported net profit for the period/year of the CEOVU Group Add/(Less): Fair value gains on investment properties Other income and (gains)/losses – net – Gain on disposal of investment properties – Fair value gains on financial assets at fair value through profit or loss – Government subsidies – Gains from deemed partial disposal – Loss on disposal of subsidiaries/a joint venture/ an associate, net – Net gain on transfer from investment in associates to financial assets at fair value through profit or loss – Income in relation to rental exemption for COVID-19 – Others Adjusted net (loss)/profit for the period/year of the CEOVU Group Notes:	For the six months ended 30 June 2020 2019 (RMB million) (RMB million) 103 119 (118) (40) – (6) – (82) (17) (11) – – – – – – (10) – (2) (6) (44) (26)	For the year ended 31 December 2019 2018 2017 (RMB million) (RMB million) (RMB million) 594 591 486 (156) (57) (247) (112) (47) (23) (82) – – (53) (27) (18) (28) (30) (29) 2 13 100 – (129) – – – – (2) (4) (8) 163 310 261

The above figures are subject to rounding adjustments.
The analysis above has not taken into account any potential tax implications, if any, attributable to the respective Excluded Items.

LETTER FROM SOMERLEY

As noted from the table above, if the respective Excluded Items were taken out from the reported net profits of the CEOVU Group, the reported net profits would have reduced to RMB261 million, RMB310 million and RMB163 million for the years ended 31 December 2017, 2018 and 2019 respectively. Similarly, the reported net profits would have become losses of RMB26 million and RMB44 million for the six months ended 30 June 2019 and 2020 respectively on the same basis. As such, the core financial performance of the CEOVU Group during the Review Period was worse than that as reported. Moreover, the adjusted net profit of the CEOVU Group would have only increased during the year ended 31 December 2018, representing a growth of 18.8% from that for the previous year, and it would have followed by a drop of 47.4% during the year ended 31 December 2019 and the adjusted net loss of the CEOVU Group during the six months ended 30 June 2020 would have further increased by 69.2% from that for the corresponding period in 2019.

The reported profit attributable to the shareholders of CEOVU exhibited a similar pattern as the reported profit of the CEOVU Group during the Review Period. While the reported profit attributable to the shareholders of CEOVU increased from RMB446 million for the year ended 31 December 2017 to RMB569 million for the year ended 31 December 2019, representing a CAGR of 13.0%, these amounts, after adjusted for the Excluded Items would have reduced in a similar manner as shown in the table above.

(d) Financial position of the CEOVU Group

Set out below is a summary of financial position of the CEOVU Group as at 31 December 2017, 2018 and 2019 and 30 June 2020.

Non-current assets Property, plant and equipment Investment properties Investments in associates Investments in joint ventures Other non-current assets Current assets Properties under development Completed properties held for sale Trade and other receivables Contract assets Cash and cash equivalents Other current assets	As at 30 June 2020 (RMB million) 441 4,063 1,555 222 566 6,847 2,609 3,216 1,641 1,584 1,613 723	As at 31 December 2019 2018 2017 (RMB million) (RMB million) (RMB million) 441 454 354 3,651 2,566 2,318 1,554 1,518 1,268 183 190 143 559 509 136 6,388 5,237 4,219 2,509 2,357 1,969 3,067 2,399 2,297 1,857 1,921 1,869 1,605 785 – 1,653 1,927 2,134 536 554 881

LETTER FROM SOMERLEY

Current liabilities Trade and other payables Corporate bonds Bank and other borrowings Other current liabilities Net current assets Non-current liabilities Corporate bonds Bank and other borrowings Lease liabilities Deferred taxation liabilities Non-current portion of deferred income Equity Equity attributable to the shareholders of CEOVU Non-controlling interests	As at 30 June 2020 (RMB million) 11,386 3,330 1,350 2,956 713 8,349 3,037 – 1,205 498 467 141 2,311 6,555 1,018 7,573	As at 31 December 2019 2018 2017 (RMB million) (RMB million) (RMB million) 11,227 9,943 9,150 3,463 2,368 2,213 1,280 1,069 26 1,911 1,878 1,358 784 724 307 7,438 6,039 3,904 3,789 3,904 5,246 – 796 1,373 1,538 1,048 912 497 – – 442 328 269 108 42 50 2,585 2,214 2,604 6,608 6,102 6,004 984 825 857 7,592 6,927 6,861

Note: The above figures are subject to rounding adjustments.

The CEOVU Group had a significant property asset base consisting of investment properties, properties under development and completed properties held for sale, which amounted to RMB4,063 million, RMB2,609 million and RMB3,216 million and accounted for 22.3%, 14.3% and 17.6% of the total assets of the CEOVU Group as at 30 June 2020 respectively. As at 31 December 2019, the investment properties comprised two residential property projects and two industrial parks in Hubei province with a total gross floor area of 206,471 sq.m.. Completed properties held for sale and properties under development were mostly industrial park development projects held by the CEOVU Group for sale or under development. Contract assets of the CEOVU Group amounted to RMB1,584 million as at 30 June 2020, accounting for 8.7% of the CEOVU Group’s total assets, were related to sales of certain properties and construction services provided by the CEOVU Group.

LETTER FROM SOMERLEY

Cash and cash equivalents were RMB1,613 million as at 30 June 2020, which had dropped consistently during the Review Period from RMB2,134 million as at 31 December 2017, whilst the current ratio of the CEOVU Group dropped from 2.3 times as at 31 December 2017 to 1.4 times as at 30 June 2020. Furthermore, net current assets amounted to RMB3,037 million as at 30 June 2020, representing a decrease of RMB2,209 million from that as at 31 December 2017. Overall, there is a notable decrease in cash and cash equivalents together with a significant drop in net current assets of the CEOVU Group throughout the Review Period.

The CEOVU Group’s operations had been largely financed by bank and other borrowings and corporate bonds (the “ Borrowings ”) as well as shareholders’ equity. The CEOVU Group issued corporate bonds in May 2019 and August 2017 with (i) maturities of 270 days and 3 years; (ii) face values of RMB500 million and RMB800 million; and (iii) annual effective interest rates of 5.83% and 6.74%, respectively. During the Review Period, the Borrowings had increased significantly from RMB3,669 million as at 31 December 2017 to RMB5,511 million as at 30 June 2020. The CEOVU Group’s net gearing ratio, which is calculated as interest-bearing debt (being the sum of the Borrowings and interests payable) less total cash (“ Net Debt ”) to total capital (being total equity plus the Net Debt), was 32.4% as at 30 June 2020, representing an increase of 13.3 percentage points from that as at 31 December 2017. Furthermore, the operating cash flows of the CEOVU Group were unstable in recent years. While cash inflows from operating activities of RMB278 million and RMB390 million were generated for the years ended 31 December 2017 and 2019 respectively, cash outflows used in operating activities of RMB354 million and RMB520 million were recorded for the year ended 31 December 2018 and the six months ended 30 June 2020 respectively. The increasing Borrowings and net gearing ratio as well as the irregular operating cashflow pattern indicate that the CEOVU Group’s financial risk is increasing.

Equity attributable to the shareholders of CEOVU grew in general in Review Period from RMB6,004 million as at 31 December 2017 to RMB6,555 million as at 30 June 2020, representing a CAGR of 3.6%. As at 30 June 2020, the NAV attributable to shareholder of CEOVU per share of CEOVU was RMB0.88, which is calculated based on the equity attributable to the shareholders of CEOVU of RMB6,555 million as at 30 June 2020 divided by 7,574,352,000 shares of CEOVU in issue after subtracting 152,998,000 treasury shares on the same date.

LETTER FROM SOMERLEY

5. Assessment of the consideration for the Disposal

(a) Historical share price performance of CEOVU

Set out in the chart below is the daily closing price and trading volume of the shares of CEOVU on the Stock Exchange during the period from 1 July 2016, being the date immediately after the completion of the CEOVU Acquisition, up to and including the Latest Practicable Date (the “ Share Price Review Period ”).

==> picture [412 x 239] intentionally omitted <==

----- Start of picture text -----

1 250,000
Transfer Price = HK$0.70
0.9
0.8 200,000
0.7
(K) (L) (N) (P)
0.6 150,000
0.5
0.4 100,000
0.3 (A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (M) (O) (Q)
0.2 50,000
0.1
0 -
Tra ding volume (’000 shares)ding volume ('000 shares) SS hare p riir ce (H K$)K$) TraTra nsfer Pri cc e
2016 2016 2016 2017 2017 2017 2018 2018 2018 2019 2019 2019 2020 2020 2020
4Jul 4Sep 4Nov 4Jan 4Mar 4May 20174Jul 20174Sep 20174Nov 4Jan 4Mar 4May 20184Jul 20184Sep 20184Nov 4Jan 4Mar 4May 20194Jul 20194Sep 20194Nov 4Jan 4Mar 20204May 4Jul 20204Sep Date
Latest Practable
Share price (HK$)
Trading volume ('000s shares)
----- End of picture text -----

Source: Bloomberg and the Stock Exchange website

LETTER FROM SOMERLEY

During the Share Price Review Period, CEOVU published a number of announcements (as summarised below) that we considered to be crucial in shaping the market price of the shares of CEOVU.

Date of

announcement Description of the announcement

(A) 18 August 2016 Announcement of interim results for the six months ended 30 June 2016
(B) 25 January 2017 Announcement of a discloseable transaction in relation to disposal of 50% equity interest in China Electronics Technology Development Co., Ltd.
(C) 23 March 2017 Announcement of annual results for the year ended 31 December 2016
(D) 14 June 2017 Voluntary announcement in relation to unusual price and trading volume movement and intention to conduct on-market share repurchase
(E) 9 August 2017 Announcement of positive profit alert
(F) 17 August 2017
Announcement of interim results for the six months ended 30 June 2017
(G) 1 November 2017 Announcement of a discloseable transaction regarding the entering into the cooperation agreement in relation to the formation of joint venture company and the establishment of fund
(H) 22 March 2018 Announcement of annual results for the year ended 31 December 2017
(I) 23 August 2018 Announcement of interim results for the six months ended 30 June 2018
(J) 31 August 2018 Announcement of a discloseable transaction in relation to acquisition of 35% equity interest of China Electronics Wenzhou Industrial Park Development Co., Ltd.
(K) 27 September 2018 Announcement of a connected transaction in relation to acquisition of 60% equity interest in Shenzhen CEC I-Valley Operation Co., Ltd.
(L) 31 October 2018 Announcement of a discloseable transaction in relation to formation of joint venture

LETTER FROM SOMERLEY

Date of announcement Description of the announcement

(M) 21 March 2019 Announcement of annual results for the year ended 31 December 2018
(N) 21 August 2019 Announcement of interim results for the six months ended 30 June 2019
(O) 24 March 2020 Announcement of annual results for the year ended 31 December 2019
(P) 7 May 2020 Announcement of update on the annual results for the year ended 31 December 2019
(Q) 21 August 2020 Announcement of interim results for the six months ended 30 June 2020

During the period from 1 July 2016 to the Last Trading Day (the “ Pre-Announcement Period ”), the shares of CEOVU closed between HK$0.29 and HK$0.94, and it is noted that 66% of the time during the Pre-Announcement Period traded below the transfer price of HK$0.70 per Transfer Share (the “ Transfer Price ”).

The closing share price of CEOVU saw a general downward trend at the beginning of the Pre-Announcement Period which dropped from HK$0.86 to HK$0.29 by the end of November 2018. In the mid-way along the first downward trend, share price of CEOVU only showed some signs of recovery after the publication of the positive profit alert announcement on 9 August 2017, which drove the share price of CEOVU to increase from HK$0.68 to HK$0.84 in around midSeptember 2017 before the sustained drop in share price of CEOVU continued.

Since the share price of CEOVU had reached the lowest point during the Pre-Announcement Period at HK$0.29 by the end of November 2018, it rebounded and trended upwards until it reached HK$0.65 in around mid-July 2019. During the course of the aforesaid trend, CEOVU published its annual results announcement for the year ended 31 December 2018 on 21 March 2019 and the share price of CEOVU had surged significantly thereafter to HK$0.62 in around midApril 2019.

Upon the end of the upward trend during the first half of 2019, the share price of CEOVU began to form yet another downward trend since around mid-July 2019. CEOVU published the interim results announcement for the six months ended 30 June 2019 on 21 August 2019 and the share price of CEOVU dropped further until it had reached the recent low of HK$0.33 before the share price of CEOVU started to pick up again reaching HK$0.56 in around mid-May 2020 after the publication of both the annual results announcement for the year ended 31 December 2019 and its update on 24 March 2020 and 7 May 2020 respectively. Since then, the share price of CEOVU fluctuated at around HK$0.50 until the Last Trading Day.

Out of the 1,004 trading days during the Pre-Announcement Period, 663 trading day of the shares price of CEOVU closed below or equal to the Transfer Price of HK$0.70. Moreover, the closing share price of CEOVU has not exceeded the Transfer Price of HK$0.70 since February 2018 during the Pre-Announcement Period.

LETTER FROM SOMERLEY

(b) Historical share price performance of CEOVU and NAV per CEOVU share compared to the Transfer Price of HK$0.70

Comparisons of the Transfer Price of HK$0.70 with the recent closing prices of the shares of CEOVU and NAV per share of CEOVU are set out as follow:

		Premium/(Discount)
		of the Transfer Price
		of HK$0.70 per share
		of CEOVU over/(to)
	Closing price or	the closing price or
	average closing price	average closing price
	of the shares of CEOVU	of the shares of
	or the NAV per share	CEOVU or the NAV
	of CEOVU	per share of CEOVU
Last Trading Day	HK$0.495	41.4%
10 trading days_(Note 1)_	HK$0.487	43.7%
30 trading days_(Note 1)_	HK$0.491	42.6%
90 trading days_(Note 1)_	HK$0.439	59.5%
180 trading days_(Note 1)_	HK$0.445	57.3%
The Latest Practicable Date	HK$0.510	37.3%
Unaudited NAV attributable to	RMB0.88	(28.6)%
the shareholders per share of	(equivalent to
CEOVU as at 30 June 2020	approximately
(Note 2)	HK$0.98)

Source: Bloomberg, the Stock Exchange website and the CEOVU 2020 Interim Report

Notes:

Up to and including the Last Trading Day.
It is calculated based on the total number of issued shares of CEOVU as at 30 June 2020 of 7,574,352,000 shares after subtracting the treasury shares of CEOVU as at 30 June 2020 of 152,998,000 shares.

The Transfer Price of HK$0.70 represents a premium of about 41.4% to 59.5% over the closing share price of CEOVU on the Last Trading Day and the average closing share price of CEOVU for the 10-, 30-, 90- and 180-trading days (up to and including the Last Trading Day) before the release of the announcement in relation to the Disposal. The closing share price of CEOVU as at the Latest Practicable Date and the corresponding premium were HK$0.510 and 37.3% respectively. Lastly, the Transfer Price represents a discount of 28.6% to the NAV attributable to the shareholders of CEOVU per share as at 30 June 2020.

LETTER FROM SOMERLEY

(c) Comparable Companies

The CEOVU Group is principally engaged in, among others, development and sales of properties, leasing of industrial park and provision of property management services in the PRC. In order to assess the fairness and reasonableness of the Consideration, we have also carried out analysis by comparing peer companies listed on the mainboard of the Stock Exchange with market capitalisation between HK$1 billion and HK$10 billion and revenue generated mainly from property development in the PRC (the “ Comparable Companies ”). Given the principal business activities and the asset-based nature of the CEOVU Group and the Comparable Companies, we opted to compare the price-to-book multiple (the “ P/B Multiple ”) of the Comparable Companies against that as implied by the Consideration. For reference purpose, we also reviewed the price-to-earnings multiple (the “ P/E Multiple ”) of the Comparable Companies against that as implied by the Consideration.

Based on the above criteria, we identified the Comparable Companies as set out in the table below together with their respective P/B Multiples and P/E Multiples.

		Market
		capitalisation
		as at the
		Latest
		Practicable	P/B	P/E
Company name	Stock code	Date	Multiple	Multiple
		(HK$ million)	(Note 1)	(Note 2)
			(times)	(times)
Ronshine China Holdings Limited	3301	9,721	0.54	4.20
Zhuguang Holdings Group Company Limited	1176	9,569	1.45	18.74
Cosmopolitan International Holdings Limited	120	9,369	Not	Not
			meaningful	applicable
			(Note 3)	(Note 4)
Beijing North Star Company Limited	588	9,032	0.22	10.31
Redsun Properties Group Limited	1996	8,801	0.56	5.65
Fantasia Holdings Group Co., Limited	1777	8,654	0.58	8.98
Shui On Land Limited	272	8,143	0.19	Not
				applicable
				(Note 4)
Skyfame Realty (Holdings) Limited	59	7,849	1.93	9.62
Dexin China Holdings Company Limited	2019	7,834	1.29	5.59

LETTER FROM SOMERLEY

		Market
		capitalisation
		as at the
		Latest
		Practicable	P/B	P/E
Company name	Stock code	Date	Multiple	Multiple
		(HK$ million)	(Note 1)	(Note 2)
			(times)	(times)
Road King Infrastructure Limited	1098	7,403	0.40	2.86
Joy City Property Limited	207	6,831	0.22	7.04
Greenland Hong Kong Holdings Limited	337	6,645	0.48	2.47
China South City Holdings Limited	1668	6,312	0.18	2.40
Tian An China Investments Company Limited	28	6,078	0.26	8.77
Beijing Capital Land Ltd.	2868	5,934	0.32	2.99
Yida China Holdings Limited	3639	5,556	0.41	11.13
DaFa Properties Group Limited	6111	5,340	1.38	14.07
JY Grandmark Holdings Limited	2231	5,021	1.64	9.34
China VAST Industrial Urban Development	6166	4,954	0.75	6.83
Company Limited
Guorui Properties Limited	2329	3,956	0.29	7.08
CEOVU	798	3,674	0.50	6.03
Yincheng International Holding Co., Ltd.	1902	3,545	1.23	12.97
Sunshine 100 China Holdings Ltd.	2608	3,318	0.33	2.03
Modern Land (China) Co., Limited	1107	3,214	0.45	4.32
China Sandi Holdings Limited	910	3,052	0.68	7.02
Minmetals Land Limited	230	3,012	0.36	16.47

LETTER FROM SOMERLEY

		Market
		capitalisation
		as at the
		Latest
		Practicable	P/B	P/E
Company name	Stock code	Date	Multiple	Multiple
		(HK$ million)	(Note 1)	(Note 2)
			(times)	(times)
Polytec Asset Holdings Limited	208	2,974	0.22	42.67
Sansheng Holdings (Group) Co. Ltd.	2183	2,863	1.93	8.74
Jingrui Holdings Limited	1862	2,828	0.49	2.78
HKC (Holdings) Limited	190	2,218	0.17	11.74
Guangdong-Hong Kong Greater Bay Area	1396	2,178	0.37	Not
Holdings Limited				applicable
				(Note 4)
International Business Settlement Holdings	147	2,012	Not	Not
Limited			meaningful	applicable
			(Note 3)	(Note 4)
Ground International Development Limited	989	1,971	Not	Not
			meaningful	applicable
			(Note 3)	(Note 4)
China New City Commercial Development Ltd.	1321	1,950	0.30	15.08
Glorious Property Holdings Limited	845	1,909	0.32	3.68
Xinming China Holdings Limited	2699	1,897	0.94	Not
				applicable
				(Note 4)
Lerthai Group Limited	112	1,876	0.42	Not
				applicable
				(Note 4)

LETTER FROM SOMERLEY

		Market
		capitalisation
		as at the
		Latest
		Practicable	P/B	P/E
Company name	Stock code	Date	Multiple	Multiple
		(HK$ million)	(Note 1)	(Note 2)
			(times)	(times)
TFG International Group Limited	542	1,445	Not	Not
			meaningful	applicable
			(Note 3)	(Note 4)
Hailan Holdings Limited	2278	1,380	0.66	42.52
Ever Reach Group (Holdings) Company Limited	3616	1,152	0.83	3.44
		Average	0.65	9.92
		Median	0.47	7.06
		Maximum	1.93	42.67
		Minimum	0.17	2.03
The Disposal		5,088	0.71	8.25
		(Note 5)	(Note 6)	(Note 7)

Source: Bloomberg, financial statements of the respective Comparable Companies

Notes:

The P/B Multiples of the Comparable Companies are calculated based on the market capitalisation of the Comparable Companies as at the Latest Practicable Date (except for CEOVU, which is based on the market capitalisation as at the Last Trading Day and adjusted for the 152.998 million treasury shares repurchased by CEOVU) divided by the NAV attributable to the shareholders of the corresponding Comparable Companies as shown in the latest published financial statements.
The P/E Multiples of the Comparable Companies are calculated based on the market capitalisation of the Comparable Companies as at the Latest Practicable Date (except for CEOVU, which is based on the market capitalisation as at the Last Trading Day and adjusted for the 152,998,000 treasury shares repurchased by CEOVU) divided by the earnings of the respective Comparable Companies for the trailing 12 months based on the latest financial statements.
Comparable Companies with P/B Multiples greater than or equal to 2.00 times or less than zero are rendered not meaningful as they are deemed as outliers and are excluded from the above analysis.
Since the respective Comparable Companies recorded losses attributable to their shareholders during the trailing 12 months, their P/E Multiples are not applicable.
The implied market capitalisation of CEOVU is calculated based on the Transfer Price of HK$0.70 multiplies by the total issued shares of CEOVU of 7,574,352,000 shares less the 152,998,000 treasury shares repurchased by CEOVU.

LETTER FROM SOMERLEY

The implied P/B Multiple of the Disposal of 0.71 times is calculated based on the Transfer Price of HK$0.70 divided by the NAV attributable to the shareholders of CEOVU per share as at 30 June 2020 of RMB0.88 (equivalent to approximately HK$0.98), which is calculated by dividing the NAV attributable to the shareholders of CEOVU of RMB6,555 million as at 30 June 2020 by the net number of shares of CEOVU of 7,421,354,000 in issue (being the total issued shares of CEOVU of 7,574,352,000 shares less the 152,998,000 treasury shares repurchased by CEOVU).
The implied P/E Multiple of the Disposal of 8.25 times is calculated based on the Transfer Price of HK$0.70 divided by the earnings per share of CEOVU for the trailing 12 months based on the CEOVU 2019 Annual Report and the CEOVU 2020 Interim Report and the net number of shares of CEOVU of 7,421,354,000 in issue (being the total issued shares of CEOVU of 7,574,352,000 shares less the 152,998,000 treasury shares repurchased by CEOVU).

As set out in the table above, the P/B Multiples of the Comparable Companies ranged from 0.17 times to 1.93 times and have an average and a median of 0.65 times and 0.47 times respectively. The implied P/B Multiple of the Disposal of 0.71 times is higher than the average and the median of the P/B Multiples of the Comparable Companies and is within range of that of the Comparable Companies.

As set out in the table above, for reference purpose only, the P/E Multiples of the Comparable Companies ranged from 2.03 times to 42.67 times and have an average and a median of 9.92 times and 7.06 times respectively. The implied P/E Multiple of the Disposal of 8.25 times is slightly lower than the average but it is higher than the median of the P/E Multiples of the Comparable Companies and is within range of that of the Comparable Companies.

(d) The reference value of the land and/or properties of the CEOVU Group

(i) Information on APA

For reference purpose only, the Company engaged APA, an independent property valuer, to conduct a calculation of the reference value of land and/or properties held by the CEOVU Group (the “ Calculation ”). The full text of the property calculation report (the “ Property Calculation Report ”) of the land and/or properties of the CEOVU Group as at 30 June 2020 (the “ Calculation Date ”) is set out in appendix V to the Circular.

We have reviewed the Property Calculation Report and certain Calculation workings of APA and interviewed the relevant staff of APA with particular attention to: (i) APA’s terms of engagement with the Company; (ii) APA’s qualification and experience in relation to the preparation of the Calculation; and (iii) the steps and due diligence measures taken by APA in performing the Calculation.

LETTER FROM SOMERLEY

In our review of the engagement letter between the Company and APA, we are satisfied that the terms of engagement between the Company and APA are appropriate to the opinion APA is required to give. APA has confirmed that it is independent from the Group, the CEOVU Group and CEC and their respective core connected persons, close associates and associates. We further understand that APA is certified with the relevant professional qualifications required to perform the Calculation and the person-in-charge of the Calculation has over 20 years of experience in conducting valuation of properties in the PRC. We noted that APA mainly carried out its due diligence through management interviews and conducted its own proprietary research and has relied on publicly available information obtained through its own research as well as the financial information provided by the management of the Group and the CEOVU Group. APA also performed site inspections on all the lands and/or properties included in the Property Calculation Report.

(ii) Calculation methodology

In arriving at its opinion of reference value, we noted that in performing the calculation for the properties interests of the CEOVU Group, APA has categorised the various groups of properties of the CEOVU Group and adopted the following methodologies to each of the groups (details of the properties under each group of properties held by the CEOVU Group can be found in the Property Calculation Report):

(a) For the completed properties held for owner occupation or for sale by the CEOVU Group in the PRC (i.e. Group I as set out in the Property Calculation Report), APA adopted the comparison approach assuming sale of property interests in their existing states with the benefit of immediate vacant possession and by making reference to comparable sales transactions as available in the market (the “ Comparison Approach ”).
(b) For completed properties held by the CEOVU Group for investment (i.e. Group II as set out in the Property Calculation Report), APA adopted income approach by taking into account the net rental income of the properties derived from the existing leases and/or achievable in the existing market with due allowance for the reversionary income potential of the leases, which have been then capitalised to determine the fair value at an appropriate capitalisation rate (the “ Income Approach ”). Where appropriate, reference has also been made to the comparable sales transactions as available in the relevant market.
(c) For property interests that are currently under development and held for future development (i.e. Groups III and IV as set out in the Property Calculation Report), APA has assumed that they will be developed and completed in accordance with the latest development proposals provided to APA by the CEOVU Group. In arriving at its opinion of reference values, APA has adopted the Comparison Approach by making reference to comparable sales evidence as available in the relevant market and has also taken into account the information on accrued construction costs and professional fees provided by the CEOVU Group according to the different stages of construction of the properties as at the Calculation Date.

LETTER FROM SOMERLEY

We have discussed with APA about the rationale of adopting the abovementioned methodologies in calculating the land and/or properties of the CEOVU Group. According to APA, the Comparison Approach is widely accepted as the market transactions are the best indicator and assumed that evidence of relevant transactions in the market place can be extrapolated to similar properties, subject to allowances for variable factors such as location, time, size, age and maintenance standard. For assessing the reference value of the properties held by the CEOVU Group for investment, APA considered the Income Approach to be most appropriate calculation method, having regard to the income driven nature of these properties.

After considering the reasons for APA’s choice of adopting the methodologies for calculating the land and/or properties of the CEOVU Group and the current status of each category of the land and/or properties of the CEOVU Group, we are of the opinion that the methodologies used are reasonable and acceptable in establishing the reference values of the land and/or properties of the CEOVU Group as at the Calculation Date.

(iii) Calculation bases and assumptions

In arriving at its opinion of reference value of the completed properties (i.e. Group I as set out in the Property Calculation Report) under the Comparison Approach, APA generally starts the process by collecting and analysing the recent transactions of the market comparables located in the vicinity of the corresponding properties. In particular, APA selected market comparable transactions that (i) were located in the same district or, if not available, nearby districts; and (ii) were conducted during the month of the Calculation Date, or if not available, as close as the Calculation Date. The collected comparables were then adjusted to reflect the difference between the comparables and the corresponding properties in terms of, among others, location, time, size, age and maintenance standard. We have reviewed and discussed about APA’s workings on the selection of the market comparables and the relevant adjustments made. We are of the view that the basis of selection of market comparables and the adjustments, including various factors (i.e. date of transaction, location, time, size, age and maintenance standard) taken into account, made for reflecting the difference between the selected comparables and the corresponding properties are reasonable and relevant for the purpose of establishing the reference value of the land and/or properties of the CEOVU Group under the Comparison Approach. The reference value of the land and/or properties of the CEOVU Group after applying the Comparison Approach was then derived from the estimated average unit price per gross floor area and gross floor area of the corresponding properties.

LETTER FROM SOMERLEY

In arriving at the opinion of the reference value of the completed properties held for investment (i.e. Group II as set out in the Property Calculation Report) under the Income Approach, the income stream adopted was based on the existing unexpired contractual tenancies of the properties, whilst vacant units are assumed to be let at their respective market rents as at the Calculation Date. Upon expiry of the existing tenancies, each unit was assumed to be let at its market rents as at the Calculation Date. APA then applied a capitalisation rate which is based on the yields achieved in market rent transactions and market sales transactions. The Comparison Approach was also used to support the appraised reference value for the completed properties held for investment in Group II as set out in the Property Calculation Report.

In arriving at the opinion of the reference value of the properties currently under development (i.e. Groups III and IV as set out in the Property Calculation Report), APA adopted the Comparison Approach and took into account the accrued construction costs and professional fees relevant to the stage of construction as at the Calculation Date and the remainder of the costs and fees expected to be incurred for completing the development. APA obtained the budgeted construction costs and related professional fees associated with the respective properties from the CEOVU Group and performed cross-checking with the construction costs and related professional fees of properties in similar stage of construction from APA’s proprietary data base. APA did not find any material inconsistency between the construction costs provided by the CEOVU Group and those of other similar developments.

Taking into account the above, we consider that the bases and assumptions adopted by APA for the methodologies discussed above are reasonable.

Based on the Property Calculation Report, the total reference value of the land and/or properties attributable to the CEOVU Group as at the Calculation Date was approximately RMB11,539.5 million (equivalent to approximately HK$12,821.6 million).

LETTER FROM SOMERLEY

6. Financial effects of the Disposal on the Group

As at 30 June 2020, the carrying value of the Group’s investment in the Transfer Shares in the Group’s consolidated statement of financial position was HK$2,615.9 million, which is currently being equity accounted for as an associate company of the Group. Following the Completion, CEOVU will cease to be an associate company of the Group. We set out below the analysis on the financial effects of the Disposal on the Group with reference to the Pro Forma Financial Information as set out in appendix III to the Circular, which has been prepared for illustrative purposes based on the assumptions as set out therein.

(a) Earnings

As set out in the Pro Forma Financial Information, on the assumption that the Disposal had taken place on 1 January 2019, the Group would have incurred an estimated one-off loss on the Disposal of HK$908.6 million, which is calculated based on (i) the Consideration of HK$1,785.0 million; (ii) the carrying value of the Transfer Shares as at 1 January 2019 of HK$2,695.5 million; (iii) the release of accumulated translation reserve as at 1 January 2019 of HK$7.9 million, which is reclassified to profit or loss upon the Completion; and (iv) the estimated transaction costs in relation to the Disposal of HK$6.0 million (the “ Disposal Expense ”).

Furthermore, upon the Completion, the Company will no longer have any interest in CEOVU. CEOVU will cease to be an associate company of the Group and the financial results of the CEOVU Group will no longer be shared in the consolidated statement of profit or loss of the Group. For the year ended 31 December 2019, the profit of the Group was HK$157.6 million and the results of the CEOVU Group shared by the Group was HK$120.2 million.

On the assumption that the Disposal had taken place on 1 January 2019, the profit attributable to the Shareholders of HK$155.2 million for the year ended 31 December 2019 would have become a loss attributable to the Shareholders of HK$873.6 million. Having said the above, save for the absence of the share of result from the CEOVU Group, the adverse impact on the Group’s profitability as shown in the Pro Forma Financial Information is only due to the Disposal, which is a one-off in nature. Moreover, as mentioned in the section headed “2. Reasons for and benefits of the Disposal”, the Company intends to use all the net proceeds from the Disposal for the repayment of its short-term bank borrowings and this will reduce the interest expenses of the Group.

Shareholders are reminded that the actual loss to be recognised following the Completion shall be determined with reference to various factors such as the net assets of the CEOVU Group attributable to the Group and the accumulated translation reserve following the Completion, which may be different from the abovementioned amounts.

LETTER FROM SOMERLEY

(b) NAV

Upon the Completion, the Group will no longer have any interest in CEOVU and CEOVU will cease to be an associate company of the Group. As 30 June 2020, the NAV of the Group attributable to the Shareholders was HK$2,016.6 million and the carrying value of the Group’s investment in the Transfer Shares in the Group’s consolidated statement of financial position was HK$2,615.9 million.

As set out in the Pro Forma Financial Information, on the assumption that completion of the Disposal had taken place on 30 June 2020, the NAV attributable to the Shareholders of HK$2,016.6 million would have reduced by HK$836.9 million to HK$1,179.7 million as at 30 June 2020 after taking into account (i) the Consideration of HK$1,785.0 million; (ii) carrying amount of the Transfer Shares of HK$2,615.9 million as at 30 June 2020; and (iii) the Disposal Expense of HK$6.0 million.

(c) Gearing

As at 30 June 2020, the Group had a gearing ratio of 43.5%, which is calculated as net debt (being bank and other borrowings less short-term deposits, restricted cash and cash and cash equivalents (together, the “ Total Cash ”)) divided by the sum of total equity and net debt of the Group. As set out in the Pro Forma Financial Information, on the assumption that the Completion had taken place on 30 June 2020, the Group would have received the Net Proceeds of HK$1,779.0 million (being the Consideration less the Disposal Expense) and the Total Cash would have become HK$2,518.1 million. As such, having taken into consideration of the Group’s bank and other borrowings of HK$2,309.4 million as at 30 June 2020, the Group would have become a net cash position and, hence, the gearing ratio would have been not applicable.

(d) Liquidity

As set out in the Pro Forma Financial Information, on the assumption that Completion had taken place on 30 June 2020, the Group would have received the Net Proceeds of HK$1,779.0 million and the Total Cash would have increased from HK$739.1 million to HK$2,518.1 million. Furthermore, the Group’s net current liabilities of HK$769.9 million as at 30 June 2020 would have become net current assets of HK$1,009.1 million. Similarly, the current ratio as at 30 June 2020 would have improved notably from 0.75 times to 1.33 times. As a result of the aforesaid, the Disposal would have significantly improved the liquidity position of the Group.

LETTER FROM SOMERLEY

DISCUSSION AND ANALYSIS

The Group is principally engaged in the business of design and sale of integrated circuit chips. The Company is a leader of the security smart card chips industry in the PRC. The Group’s products are mainly used in sectors of identity authentication, financial payment, government utilities as well as telecommunication. The Group completed the acquisition of the 33.67% interest in CEOVU in 2016 and it is one of the major investments of the Group. The principal activities of the CEOVU Group mainly include (i) rental and sales of industrial parks; (ii) industrial park operation services; and (iii) industrial investment. The investment in CEOVU held by the Group is classified as an investment in associates in the financial statements of the Group and the results and assets and liabilities of the CEOVU Group have been accounted for in the financial statements of the Group under equity method of accounting. Given that the respective principal activities of the CEOVU Group and the Group are different and the synergetic effect between them is limited, the disposal of CEOVU is not expected to significantly affect the Group’s principal operations.

The financial performance of the CEOVU Group has not been satisfactory in recent years. While there were growths in the top-line, the revenue of sales of industrial parks, being the key business activity of the CEOVU Group with the highest gross profit margin among its business segments, has been decreasing in terms of both the amount and the relative percentage to total revenue. Furthermore, the core profits of the CEOVU Group, being the reported net profits less the Excluded Items which are one-off and/or non-operating in nature, would amount to RMB261 million, RMB310 million and RMB163 million for the years ended 31 December 2017, 2018 and 2019 respectively and represented an overall downward trend. Similarly, the reported net profits of the CEOVU Group would become core losses of RMB26 million and RMB44 million for the six months ended 30 June 2019 and 2020 respectively if the Excluded Items were taken out. Overall, the core financial performance of the CEOVU Group was worse than the reported figures. Furthermore, the financial risk of the CEOVU Group is increasing as evidenced by the dwindling cash and net current assets as well as rising borrowings and gearing.

While the CEOVU Group has contributed a considerable amount of profit to the Group in recent years, the cash contribution (i.e. the dividends) of CEOVU has only able to cover part of the associated financing costs. The acquisition of the Transfer Shares in 2016 has been substantially financed by borrowings and the relevant interest payment was more than the dividend from CEOVU. Therefore, the interest payment has put significant pressure on the Group’s cashflow and drained the cash generated from operations in recent years. It also restricted the cash available for operations and development of the Group’s principal activities. It is the intention of the Board to repay a substantial portion of the short-term bank borrowings by the proceeds arising out of disposing of the Transfer Shares held by the Group, which will significantly reduce interest payments in the future and improve the Group’s gearing ratio and net current liability position. The Disposal will also provide the Group with capital capability to support its business development and allow the Group to focus its resources on its core business areas.

LETTER FROM SOMERLEY

The Consideration was agreed between the Seller and the Purchaser after arm’s length negotiations and having taken into account a number of factors including the historical business performance, financial position and net asset value of the CEOVU Group, the prevailing market price of the Transfer Share. The Consideration is HK$1,785.0 million, which is equivalent to HK$0.70 for each Transfer Share. The share price of CEOVU, since completion of the acquisition of the Transfer Shares in June 2016, has followed a downward trend in general and has been remained below the Transfer Price for over two years since early 2018. The Transfer Price of HK$0.70 represents significant premiums of over 40% over the closing share price of CEOVU in recent months.

Although the Transfer Price is at a discount to the NAV per CEOVU share, it represents an implied P/B Multiple of 0.71 times, which is higher than the average and the median of the P/B Multiples of the Comparable Companies of 0.65 times and 0.47 times respectively. For reference purpose only, the implied P/E Multiple of the Disposal of 8.25 times is slightly lower than the average but it is higher than the median of the P/E Multiples of the Comparable Companies of 9.92 times and 7.06 times respectively. Given the principal business activities of the CEOVU Group, which are largely assets-based in nature, the P/B Multiple is considered a more relevant and an appropriate parameter for assessing the Consideration.

The financial effects of the Disposal on the Group are expected to be mixed. On one hand, it is anticipated that both the gearing and working capital of the Remaining Group will improve upon the Completion as the consideration for the Disposal will be entirely satisfied in cash. The Remaining Group will change from a net debt position to a net cash position and from net current liabilities to net current assets. Similarly, current ratio will improve notably. On the other hand, both the earnings and the NAV attributable to the Shareholders are expected to decrease mainly as a result of the loss on the Disposal. Having considered the loss on the Disposal is one-off in nature and does not have a continuing effect to the Group and the terms of the Disposal and other factors as discussed in this letter, we consider the anticipated decreases in the earnings and the NAV attributable to the Shareholders are acceptable.

LETTER FROM SOMERLEY

OPINION AND RECOMMENDATION

Having considered the above principal factors and reasons, we consider that the Disposal, though not in the ordinary and usual course of business of the Group, is in the interests of the Company and the Shareholders as a whole, and that the terms of the Sale and Purchase Agreement are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned. We therefore advise the Independent Board Committee to recommend, and we ourselves recommend, the Independent Shareholders to approve the relevant resolution to be proposed at the SGM.

Yours faithfully, for and on behalf of SOMERLEY CAPITAL LIMITED Danny Cheng Director

Mr. Danny Cheng is a licensed person registered with the Securities and Futures Commission and as a responsible officer of Somerley to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO and has over 15 years of experience in corporate finance industry.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED FINANCIAL INFORMATION OF THE GROUP FOR EACH OF THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019 AND THE SIX MONTHS ENDED 30 JUNE 2020

Financial information of the Group for each of the years ended 31 December 2017, 2018 and 2019 and the six months ended 30 June 2020 is disclosed on pages 85 to 175 of the annual report of the Company for the year ended 31 December 2017 published on 26 April 2018, pages 86 to 183 of the annual report of the Company for the year ended 31 December 2018 published on 29 April 2019, pages 58 to 147 of the annual report of the Company for the year ended 31 December 2019 published on 15 May 2020, and pages 4 to 26 of the interim report of the Company for the six months ended 30 June 2020 published on 16 September 2020 respectively, which are available on the website of the Stock Exchange (www.hkexnews.hk) and the website of the Company (www.cecht.com.cn).

The links to the annual reports of the Company for each of the years ended 31 December 2017, 2018 and 2019, and the interim report of the Company for the six months ended 30 June 2020 respectively, are set out below:

2017:

http://www1.hkexnews.hk/listedco/listconews/sehk/2018/0426/ltn201804262086.pdf

2018:

http://www1.hkexnews.hk/listedco/listconews/sehk/2019/0429/ltn20190429619.pdf

2019:

http://www1.hkexnews.hk/listedco/listconews/sehk/2020/0515/2020051500514.pdf

2020:

http://www1.hkexnews.hk/listedco/listconews/sehk/2020/0916/2020091600772.pdf

INDEBTEDNESS

Borrowings

At 31 July 2020, being the latest practicable date for the purpose of this statement of indebtedness prior to the date of this circular, the Group had outstanding bank and other borrowings of HK$2,340.6 million. Among these borrowings, HK$54.9 million were secured by deposits of the Group and HK$2,285.7 million were unsecured.

Lease liabilities

At 31 July 2020, the Group has lease liabilities of HK$65.6 million.

Save as aforesaid and apart from intra-group liabilities, the Group did not have any loan capital issued and outstanding or agreed to be issued, loans or other similar indebtedness, liabilities under acceptances or acceptable credits, mortgages, charges, debentures, lease liabilities, obligations under hire purchase contracts or guarantees or other material contingent liabilities at 31 July 2020.

I-1

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

GEARING RATIO

As at 30 June 2020, the gearing ratio of the Group (calculated as net debt divided by total equity and net debt of the Group) was 43.5%. As set out in Appendix III to this circular, assuming 30 June 2020 is the date of the Completion, the Remaining Group will be in a net cash position and gearing ratio is not applicable.

WORKING CAPITAL

Taking into account the expected completion of the Disposal, the financial resources available to the Remaining Group, including the internally generated funds, the available committed borrowing facilities and the financial support provided by CEC, the Board is of the opinion that in the absence of unforeseeable circumstances, the Remaining Group will have sufficient working capital available for its requirements, that is for at least the next 12 months from the date of this circular.

FINANCIAL AND TRADING PROSPECTS

Looking ahead, due to the impact of the global COVID-19 pandemic, there is uncertainty in the market demand for the domestic smart card chips in the second half of the year, and the market demand may continue to lag behind depending on the development of the pandemic. However, certain sectors of the smart card chips market will continue to be driven by the further application of the domestic-made substitutes and the state cryptographic algorithm, while 5G and Internet of Things will become the key development directions of new infrastructure which will increase demand for higher information security. The Group believes that both factors will bring market opportunities for the Group’s businesses. The Group will continue to closely track the domestic market demands, actively explore potential customers, strengthen the establishment of sales channels and continue to expand the security chips market, and strive to provide diversified and high-quality products that meet the needs of customers and the market.

I-2

FINANCIAL INFORMATION OF THE CEOVU GROUP

APPENDIX II

Set out below are the financial information of the CEOVU Group which comprises (i) the consolidated statements of financial position of the CEOVU Group as at 31 December 2017, 2018 and 2019, and the consolidated statements of profit or loss, the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows of the CEOVU Group for each of the years ended 31 December 2017, 2018 and 2019 which were extracted from the annual reports of CEOVU for the years ended 31 December 2017, 2018 and 2019, respectively, and (ii) the consolidated statement of financial position of the CEOVU Group as at 30 June 2020, and the consolidated statement of profit or loss, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows of the CEOVU Group for the six months ended 30 June 2020 which were extracted from the interim report of CEOVU for the six months ended 30 June 2020. In the opinions of the independent auditor of CEOVU as stated in the respective annual reports of CEOVU, the consolidated financial statements for each of the years ended 31 December 2017, 2018 and 2019 give a true and fair view of the consolidated financial positions of the CEOVU Group as at 31 December 2017, 2018 and 2019, and its consolidated financial performances and consolidated cash flows for each of the years then ended.

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

Revenue Cost of sales Gross profit Other income and (losses)/gains – net Selling and distribution expenses Administrative expenses Other expenses Net impairment losses on financial and contract assets Fair value gains on investment properties Operating profit Finance income Finance costs Net finance costs Share of profits of associates Share of profits of joint ventures Profit before income tax Income tax expense Profit for the year/period Profit for the year/period attributable to: – Owners of CEOVU – Non-controlling interests Profit for the year/period	For the year ended 31 December 2017 2018 2019 (Audited) (Audited) (Audited) RMB’000 RMB’000 RMB’000 2,692,899 3,001,137 3,376,865 (1,705,765) (1,965,066) (2,301,582) 987,134 1,036,071 1,075,283 (22,271) 223,890 275,181 (81,311) (86,107) (116,908) (258,376) (295,294) (335,194) – – – – (3,480) (23,903) 246,581 57,411 155,677 871,757 932,491 1,030,136 50,187 67,680 101,538 (117,691) (177,591) (262,710) (67,504) (109,911) (161,172) 22,436 64,336 45,297 2,813 16,777 42,474 829,502 903,693 956,735 (343,815) (312,777) (362,552) 485,687 590,916 594,183 446,260 541,486 569,272 39,427 49,430 24,911 485,687 590,916 594,183	For the six months ended 30 June 2020 (Unaudited) RMB’000 923,241 (681,240) 242,001 28,723 (46,802) (140,030) (767) (9,179) 117,677 191,623 23,996 (87,094) (63,098) 544 39,302 168,371 (65,417) 102,954 120,104 (17,150) 102,954

II-1

FINANCIAL INFORMATION OF THE CEOVU GROUP

APPENDIX II

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Profit for the year/period Other comprehensive income: Items that will not be reclassified subsequently to profit or loss: – Revaluation of property, plant and equipment upon transfer to investment properties, net of tax Items that may be reclassified to profit or loss: – Currency translation differences Other comprehensive income for the year/period, net of tax Total comprehensive income for the year/period Total comprehensive income for the year/period is attributable to: Owners of CEOVU Non-controlling interests Total comprehensive income for the year/period	For the year ended 31 December 2017 2018 2019 (Audited) (Audited) (Audited) RMB’000 RMB’000 RMB’000 485,687 590,916 594,183 2,918 14,878 – 176,864 (177,136) 5,648 179,782 (162,258) 5,648 665,469 428,658 599,831 626,042 379,228 574,920 39,427 49,430 24,911 665,469 428,658 599,831	For the six months ended 30 June 2020 (Unaudited) RMB’000 102,954 – (1,046) (1,046) 101,908 119,058 (17,150) 101,908

II-2

FINANCIAL INFORMATION OF THE CEOVU GROUP

APPENDIX II

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Non-current assets Property, plant and equipment Right-of-use assets Investment properties Land use rights Intangible assets Investments in associates Investments in joint ventures Financial assets at fair value through profit or loss Available-for-sale financial assets Trade and other receivables Deferred income tax assets Current assets Properties under development Completed properties held for sale Inventories and contracting work-in-progress Trade and other receivables Current income tax assets Financial assets at fair value through profit or loss Available-for-sale financial assets Contract assets Deposits in banks with original maturities over three months Restricted cash Cash and cash equivalents Current liabilities Contract liabilities Trade and other payables Corporate bonds Bank and other borrowings Lease liabilities Dividends payable Current income tax liabilities Current portion of deferred income Net current assets Total assets less current liabilities	At 31 December 2017 2018 (Audited) (Audited) RMB’000 RMB’000 354,267 454,026 – – 2,317,890 2,566,060 3,464 3,394 6,297 6,475 1,267,909 1,517,876 143,431 190,117 – 235,127 12,000 – 75,833 231,581 37,515 32,714 4,218,606 5,237,370 1,969,272 2,356,821 2,296,780 2,399,282 308,844 72,832 1,868,990 1,921,211 11,132 15,406 – 30,500 180,000 – – 785,452 72,228 15,637 308,628 418,883 2,133,597 1,927,200 9,149,471 9,943,224 – 366,293 2,213,237 2,368,346 26,368 1,069,185 1,357,880 1,878,085 – – – – 300,614 352,261 5,565 4,706 3,903,664 6,038,876 5,245,807 3,904,348 9,464,413 9,141,718	2019 (Audited) RMB’000 440,962 73,850 3,651,261 – 35,834 1,554,483 182,591 307,926 – 82,367 59,396 6,388,670 2,508,986 3,066,529 70,020 1,857,070 – 75,000 – 1,605,396 41,226 349,146 1,653,463 11,226,836 337,243 3,462,790 1,280,239 1,911,461 69,692 – 364,928 11,944 7,438,297 3,788,539 10,177,209	At 30 June 2020 (Unaudited) RMB’000 441,219 69,742 4,063,064 – 36,389 1,554,879 221,893 307,926 – 75,666 76,294
			6,847,072
			2,608,505 3,215,505 74,576 1,640,991 36,567 134,800 – 1,584,366 141,762 336,006 1,613,059
			11,386,137
			155,869 3,329,772 1,349,643 2,955,724 69,073 172,500 300,332 15,748
			8,348,661
			3,037,476
			9,884,548

II-3

APPENDIX II

FINANCIAL INFORMATION OF THE CEOVU GROUP

Non-current liabilities Corporate bonds Bank and other borrowings Lease liabilities Deferred income tax liabilities Non-current portion of deferred income Net assets Equity Share capital Treasury shares Reserves Retained earnings Total equity attributable to owners of CEOVU Non-controlling interests Total equity Total equity and non-current liabilities	At 31 December 2017 2018 (Audited) (Audited) RMB’000 RMB’000 1,372,780 795,739 911,623 1,048,543 – – 269,184 327,645 50,081 42,355 2,603,668 2,214,282 6,860,745 6,927,436 634,716 626,839 (122,469) (132,417) 3,390,702 3,051,428 2,100,562 2,556,537 6,003,511 6,102,387 857,234 825,049 6,860,745 6,927,436 9,464,413 9,141,718	2019 (Audited) RMB’000 – 1,538,039 496,976 442,412 107,491 2,584,918 7,592,291 623,048 (121,056) 2,897,733 3,208,519 6,608,244 984,047 7,592,291 10,177,209	At 30 June 2020 (Unaudited) RMB’000 – 1,205,049 497,821 466,789 141,736 2,311,395 7,573,153 623,048 (121,056) 2,896,687 3,156,123 6,554,802 1,018,351 7,573,153 9,884,548

II-4

FINANCIAL INFORMATION OF THE CEOVU GROUP

APPENDIX II

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

			Audited Attributable to owners of CEOVU	Audited Attributable to owners of CEOVU	Audited Attributable to owners of CEOVU	Audited Attributable to owners of CEOVU			Total equity RMB’000 6,082,916 665,469
Share capital RMB’000 658,680 – – – – – – – (23,964) (23,964) 634,716	Treasury shares RMB’000 (110,105) – – – – – – (189,695) 177,331 (12,364) (122,469)	Share premium RMB’000 2,497,414 – – – – – (143,122) – (153,367) (296,489) 2,200,925	Exchange reserve RMB’000 35,941 176,864 – – – – – – – – 212,805	Property revaluation reserve RMB’000 31,976 2,918 – – – – – – – – 34,894	Statutory reserve RMB’000 299,616 – 39,573 – – – – – – 39,573 339,189	Other reserves RMB’000 583,955 – – – – 18,934 – – – 18,934 602,889	Total reserves RMB’000 3,448,902 179,782 39,573 – – 18,934 (143,122) – (153,367) (237,982) 3,390,702	Retained earnings RMB’000 1,693,875 446,260 (39,573) – – – – – – (39,573) 2,100,562
									– 53,130 143,777 253,170 (148,022) (189,695) –
									112,360
									6,860,745

II-5

FINANCIAL INFORMATION OF THE CEOVU GROUP

APPENDIX II

Audited

			Attributable to o	Attributable to o	wners of CEOVU	wners of CEOVU			Total equity RMB’000 6,860,745 (49,778) 9,630
Share capital RMB’000 634,716 – – 634,716 – – – – – – – – (7,877) – (7,877) 626,839	Treasury shares RMB’000 (122,469) – – (122,469) – – – – – – – (54,828) 44,880 – (9,948) (132,417)	Share premium RMB’000 2,200,925 – – 2,200,925 – – – – – – (129,370) – (37,003) – (166,373) 2,034,552	Exchange reserve RMB’000 212,805 – – 212,805 (177,136) – – – – – – – – – – 35,669	Property revaluation reserve RMB’000 34,894 – – 34,894 14,878 – – – – – – – – – – 49,772	Statutory reserve RMB’000 339,189 – – 339,189 – 45,699 – – – – – – – (432) 45,267 384,456	Other reserves RMB’000 602,889 – – 602,889 – – – – – (53,074) – – – (2,836) (55,910) 546,979	Total reserves RMB’000 3,390,702 – – 3,390,702 (162,258) 45,699 – – – (53,074) (129,370) – (37,003) (3,268) (177,016) 3,051,428	Retained earnings RMB’000 2,100,562 (47,147) 7,335 2,060,750 541,486 (45,699) – – – – – – – – (45,699) 2,556,537
									6,820,597 428,658
									– 40,789 68,496 (3,022) (233,500) (136,570) (54,828) – (3,184)
									(321,819)
									6,927,436

II-6

FINANCIAL INFORMATION OF THE CEOVU GROUP

APPENDIX II

Audited

			Attributable to o	Attributable to o	wners of CEOVU	wners of CEOVU			Total equity RMB’000 6,927,436 133,634
Share capital RMB’000 626,839 – 626,839 – – – – – – – (3,791) – (3,791) 623,048	Treasury shares RMB’000 (132,417) – (132,417) – – – – – – (4,400) 15,761 – 11,361 (121,056)	Share premium RMB’000 2,034,552 – 2,034,552 – – – – – (166,640) – (11,970) – (178,610) 1,855,942	Exchange reserve RMB’000 35,669 – 35,669 5,648 – – – – – – – – – 41,317	Property revaluation reserve RMB’000 49,772 – 49,772 – – – – – – – – – – 49,772	Statutory reserve RMB’000 384,456 – 384,456 – 28,976 – – – – – – – 28,976 413,432	Other reserves RMB’000 546,979 – 546,979 – – – – (8,079) – – – (1,630) (9,709) 537,270	Total reserves RMB’000 3,051,428 – 3,051,428 5,648 28,976 – – (8,079) (166,640) – (11,970) (1,630) (159,343) 2,897,733	Retained earnings RMB’000 2,556,537 111,686 2,668,223 569,272 (28,976) – – – – – – – (28,976) 3,208,519
									7,061,070 599,831
									– 50,000 69,058 (9,800) (169,930) (4,400) – (3,538)
									(68,610)
									7,592,291

II-7

APPENDIX II

FINANCIAL INFORMATION OF THE CEOVU GROUP

			Unaudited Attributable to owners of CEOVU	Unaudited Attributable to owners of CEOVU	Unaudited Attributable to owners of CEOVU	Unaudited Attributable to owners of CEOVU			Total equity RMB’000 7,592,291 101,908
Share capital RMB’000 623,048 – – – – 623,048	Treasury shares RMB’000 (121,056) – – – – (121,056)	Share premium RMB’000 1,855,942 – – – – 1,855,942	Exchange reserve RMB’000 41,317 (1,046) – – – 40,271	Property revaluation reserve RMB’000 49,772 – – – – 49,772	Statutory reserve RMB’000 413,432 – – – – 413,432	Other reserves RMB’000 537,270 – – – – 537,270	Total reserves RMB’000 2,897,733 (1,046) – – – 2,896,687	Retained earnings RMB’000 3,208,519 120,104 – (172,500) (172,500) 3,156,123
									55,054 (176,100)
									(121,046)
									7,573,153

II-8

FINANCIAL INFORMATION OF THE CEOVU GROUP

APPENDIX II

CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flows from operating activities Cash generated from/(used in) operations_(Note (a))_ Income tax paid Cash flows generated from/(used in) operating activities Cash flows from investing activities Acquisition of subsidiaries, net of cash (paid)/received Proceeds from disposal of subsidiaries, net of cash received Interest received Proceeds from disposal of investment properties Proceeds from disposal of property, plant and equipment Proceeds from disposal of financial assets at fair value through profit or loss Purchase of financial assets at fair value through profit or loss Investments in associates Investments in joint ventures Dividends received Proceeds from disposal of an associate Proceeds from de-registration of an associate Proceeds from disposal of joint ventures Proceeds from disposal of certain equity interests Proceeds from capital deduction from a joint venture Withdraw of prepayments for acquisition of certain equity interests Withdraw of prepayment for acquisition of certain properties Purchase of property, plant and equipment Purchase of investment properties Proceeds from disposal of prepayments for acquisition of certain equity interests Prepayments for acquisition of certain equity interests Prepayments for acquisition of certain properties Purchase of intangible assets Proceeds used in construction of investment properties (Increase)/decrease in deposits in banks with original maturities over three months Loans to related parties and third parties Loans repaid from related parties and third parties (Increase)/decrease in restricted cash Cash flows (used in)/generated from investing activities	For the year ended 31 December 2017 2018 2019 (Audited) (Audited) (Audited) RMB’000 RMB’000 RMB’000 558,249 (155,570) 662,801 (280,136) (198,568) (273,099) 278,113 (354,138) 389,702 (34,632) 34,066 22,324 84,793 7,466 81,654 51,332 74,103 101,538 81,767 103,420 157,168 19,753 811 7,492 6,000 695,420 97,501 (182,000) (545,921) (132,643) (279,083) (289,744) (99,545) (103,888) (364,018) – – 44,903 20,000 – – 45,460 – – – 40,000 – – – 7,200 – – 29,346 – 70,000 – – 44,000 – – (16,202) (69,719) (76,976) (20,028) (95,869) (275,957) – 81,628 – – (600) – (58,300) (67,895) – (802) (1,323) (31,285) – – – (72,228) 56,591 (25,589) (493,159) (1,048,557) (160,422) 289,800 645,823 306,731 (5,010) 5,010 – (577,887) (697,859) 37,451	For the six months ended 30 June 2020 (Unaudited) RMB’000 (363,175) (156,695) (519,870) – – 23,313 – 3,953 481,550 (541,350) – – – 44,000 260 – – – – – (48,293) – – – – (2,611) (56,832) – (263,429) 345,392 – (14,047)

II-9

FINANCIAL INFORMATION OF THE CEOVU GROUP

APPENDIX II

Cash flows from financing activities Proceeds from bank and other borrowings Proceeds from issue of corporate bonds (Increase)/decrease in restricted cash Repayment of corporate bonds Repayment of bank and other borrowings Increase in deposits in banks with original maturities over three months Proceeds from loans due to related parties and third parties Repayment of loans due to related parties and third parties Payments for repurchase of shares Interest paid Dividends paid to the owners of CEOVU Dividends paid to non-controlling interests Capital injection by non-controlling interests Consideration paid for acquisition further equity interests in subsidiaries from non-controlling interests Proceeds from partially disposal of a subsidiary without change of control Partial capital reduction by non-controlling interests Principal elements of lease payments Cash flows generated from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year/period Effect of foreign exchange rate changes Cash and cash equivalents at end of the year/period	For the year ended 31 December 2017 2018 2019 (Audited) (Audited) (Audited) RMB’000 RMB’000 RMB’000 1,959,683 2,554,380 2,562,700 792,445 440,000 450,000 (87,009) 33,553 (85,689) – – (1,100,000) (2,191,736) (1,907,940) (2,045,021) – – – 513,669 365,295 – (206,000) (80,501) – (189,695) (54,828) (4,400) (187,631) (218,424) (335,101) (143,122) (129,370) (166,640) (4,900) (7,200) (3,290) 145,217 68,496 69,058 (98,270) (233,500) (9,800) 350,000 – – – (3,022) – – – (39,396) 652,651 826,939 (707,579) 352,877 (225,058) (280,426) 1,812,583 2,133,597 1,927,200 (31,863) 18,661 6,689 2,133,597 1,927,200 1,653,463	For the six months ended 30 June 2020 (Unaudited) RMB’000 1,772,400 500,000 (30,551) (450,000) (1,065,810) (100,536) – (40,000) – (108,454) – – 55,054 – – – (37,305) 494,798 (39,119) 1,653,463 (1,285) 1,613,059

II-10

FINANCIAL INFORMATION OF THE CEOVU GROUP

APPENDIX II

Note (a):

Cash generated from/(used in) operations

Profit before income tax
Adjustments for:
Depreciation
Amortisation
Gain on disposals of investment properties
Gains from deemed partially disposal
Gains on disposals of property, plant and
equipment
Finance income
Finance costs
Loss/(gain) on disposal of subsidiaries
Loss on disposal of a joint venture
Fair value gains on investment properties
Fair value gains on financial assets at fair value
through profit or loss
Gain on transfer an associate to financial assets at
fair value through profit or loss
Loss on disposal of an associate
Net impairment losses on financial and contract
assets
Share of profits of associates
Share of profits of joint ventures
Changes in working capital (excluding the effects of
acquisition and currency translation differences on
subsidiaries):
(Increase)/decrease in restricted cash
Increase in properties under development,
completed properties held for sale and
inventories and contracting work-in-progress
Increase in contract assets and trade and other
receivables
Increase in contract liabilities, deferred income and
trade and other payables
Cash generated from/(used in) operations

For the year ended 31 December
2017
2018
2019
(Audited)
(Audited)
(Audited)
RMB’000
RMB’000
RMB’000
829,502
903,693
956,735
34,332
67,520
112,208
895
1,215
1,953
(22,761)
(46,745)
(112,493)
(29,474)
(29,950)
(28,222)
(7,253)
(458)
(181)
(50,187)
(67,680)
(101,538)
119,610
177,669
263,209
8,118
12,658
(25,693)
91,423
–
–
(246,581)
(57,411)
(155,677)
–
–
(82,157)
–
(129,063)
–
–
–
27,597
–
3,480
23,903
(22,436)
(64,336)
(45,297)
(2,813)
(16,777)
(42,474)
(7,705)
(148,818)
155,426
(184,079)
(312,668)
(920,467)
(59,191)
(845,186)
(499,769)
106,849
397,287
1,135,738
558,249
(155,570)
662,801

II-11

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

INTRODUCTION

The following is an illustrative unaudited pro forma financial information of the Remaining Group (the “Unaudited Pro Forma Financial Information of the Remaining Group”) which have been prepared by the Board in accordance with paragraph 4.29 of the Listing Rules and on the basis as set out in the accompanying notes below to illustrate:

(a) the financial position of the Remaining Group as at 30 June 2020 as if the Completion had taken place on 30 June 2020; and
(b) the financial performance and cash flows of the Remaining Group for the year ended 31 December 2019 as if the Completion had taken place on 1 January 2019.

The Unaudited Pro Forma Financial Information of the Remaining Group has been prepared for illustrative purposes only and because of its hypothetical nature, it may not purport to represent the true picture of the financial position of the Remaining Group as at 30 June 2020 or at any future date had the Completion been taken place on 30 June 2020, or the financial performance and cash flows of the Remaining Group for the year ended 31 December 2019 or for any future period had the Completion been taken place on 1 January 2019.

The unaudited pro forma consolidated statement of financial position of the Remaining Group is prepared based on the unaudited consolidated statement of financial position of the Group as at 30 June 2020 as extracted from the 2020 interim report of the Company after giving effect to the pro forma adjustments relating to the Disposal as explained in the accompanying notes, as if the Completion had taken place on 30 June 2020.

The unaudited pro forma consolidated statement of profit or loss, the unaudited pro forma consolidated statement of comprehensive income and the unaudited pro forma consolidated statement of cash flows of the Remaining Group for the year ended 31 December 2019 are prepared based on the audited consolidated financial statements of the Group for the year ended 31 December 2019 as extracted from the 2019 annual report of the Company after giving effect to the pro forma adjustments relating to the Disposal as explained in the accompanying notes, as if the Completion had taken place on 1 January 2019.

III-1

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Unaudited pro forma consolidated statement of financial position of the Remaining Group

Unaudited
consolidated
statement of
financial position
of the Group
as at
30 June 2020
HK$’000
(Note 1(a))
ASSETS
Non-current assets
Property, plant and equipment
54,327
Right-of-use assets
68,536
Investment properties
47,546
Intangible assets
13,796
Investment in associates
2,630,019
Trade and other receivables
1,499
Deferred tax assets
44,331
2,860,054
Current assets
Inventories
463,949
Trade and other receivables
1,075,254
Financial assets at fair value through
profit or loss
14,100
Short-term deposits
251,795
Restricted cash
54,740
Cash and cash equivalents
432,635
2,292,473
Total assets
5,152,527

Pro forma
adjustments
Unaudited
pro forma
consolidated
statement of
financial position
of the
Remaining
Group as at
30 June 2020
HK$’000
HK$’000
(Note 2)
–
54,327
–
68,536
–
47,546
–
13,796
(2,615,885)
14,134
–
1,499
–
44,331
(2,615,885)
244,169
–
463,949
–
1,075,254
–
14,100
–
251,795
–
54,740
1,779,000
2,211,635
1,779,000
4,071,473
(836,885)
4,315,642

III-2

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Unaudited pro forma consolidated statement of financial position of the Remaining Group (continued)

EQUITY AND LIABILITIES Equity attributable to the owners of the Company Share capital and premium Reserves Retained earnings Non-controlling interests Total equity Liabilities Non-current liabilities Lease liabilities Deferred tax liabilities Current liabilities Deferred government grants Contract liabilities Trade and other payables Bank and other borrowings Lease liabilities Income tax payable Total liabilities Total equity and liabilities	Unaudited consolidated statement of financial position of the Group as at 30 June 2020 HK$’000 (Note 1(a)) 825,454 (791,830) 1,982,991 2,016,615 21,575 2,038,190 40,971 11,009 51,980 53,227 6,872 654,341 2,309,402 26,332 12,183 3,062,357 3,114,337 5,152,527	Pro forma adjustments HK$’000 (Note 2) – (21,795) (815,090) (836,885) – (836,885) – – – – – – – – – – – (836,885)	Unaudited pro forma consolidated statement of financial position of the Remaining Group as at 30 June 2020 HK$’000 825,454 (813,625) 1,167,901 1,179,730 21,575 1,201,305 40,971 11,009 51,980 53,227 6,872 654,341 2,309,402 26,332 12,183 3,062,357 3,114,337 4,315,642

III-3

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Unaudited pro forma consolidated statement of profit or loss of the Remaining Group

Revenue Cost of sales Gross profit Other income/(other loss) – net Selling and marketing costs Administrative expenses Impairment losses on trade and other receivables Operating profit/(loss) Finance income Finance costs Finance costs – net Share of results of associates Profit/(loss) before taxation Taxation Profit/(loss) for the year Profit/(loss) for the year attributable to: Owners of the Company Non-controlling interests	Audited consolidated statement of profit or loss of the Group for the year ended 31 December 2019 HK$’000 (Note 1(b)) 1,695,486 (1,158,987) 536,499 34,910 (83,154) (345,756) (7,402) 135,097 2,074 (103,381) (101,307) 121,000 154,790 2,796 157,586 155,159 2,427 157,586	Pro forma adjustments HK$’000 HK$’000 (Note 3) (Note 3) – – – – – – – (908,590) – – – – – – – (908,590) – – – – – – (120,191) – (120,191) (908,590) – – (120,191) (908,590) (120,191) (908,590) – – (120,191) (908,590)	Unaudited pro forma consolidated statement of profit or loss of the Remaining Group for the year ended 31 December 2019 HK$’000 1,695,486 (1,158,987) 536,499 (873,680) (83,154) (345,756) (7,402) (773,493) 2,074 (103,381) (101,307) 809 (873,991) 2,796 (871,195) (873,622) 2,427 (871,195)

III-4

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Unaudited pro forma consolidated statement of comprehensive income of the Remaining Group

Audited
consolidated
statement of
comprehensive
income of the
Group
for the year
ended
31 December
2019
HK$’000
(Note 1(b))
Profit/(loss) for the year
157,586
Other comprehensive
income for the year,
net of taxation:
Items that may be subsequently
reclassified to profit or loss:
Exchange differences on
translation of financial statements
(44,670)
Total comprehensive income
for the year
112,916
Total comprehensive
income for the year attributable to:
Owners of the Company
111,649
Non-controlling interests
1,267
112,916

Pro forma adjustments
Unaudited
pro forma
consolidated
statement of
comprehensive
income of the
Remaining
Group
for the year
ended
31 December
2019
HK$’000
HK$’000
HK$’000
(Note 3)
(Note 3)
(120,191)
(908,590)
(871,195)
(2,153)
–
(46,823)
(122,344)
(908,590)
(918,018)
(122,344)
(908,590)
(919,285)
–
–
1,267
(122,344)
(908,590)
(918,018)

III-5

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

Unaudited pro forma consolidated statement of cash flows of the Remaining Group

Cash flows from operating activities Profit/(loss) before taxation Adjustments for: Depreciation of property, plant and equipment Depreciation of right-of-use assets Amortisation of intangible assets Interest income Interest expenses Gains on disposal of property, plant and equipment Loss on disposal of an associate Share of results of associate(s) Impairment losses on trade and other receivables Provision for inventories Changes in fair value of investment property Fair value gains on financial assets at fair value through profit or loss Gains on disposal of financial assets at fair value through profit or loss Operating cash flows before changes in working capital Inventories Trade and other receivables Deferred government grants Changes in contract liabilities Trade and other payables Cash flows generated from operations Interest paid Income tax paid Net cash flows generated from operating activities	Audited consolidated statement of cash flows of the Group for the year ended 31 December 2019 HK$’000 (Note 1(b)) 154,790 36,620 21,670 7,589 (11,893) 103,381 (9,175) – (121,000) 7,402 28,586 (522) (957) (1,722) 214,769 114,480 (7,010) (416) (7,014) (93,016) 221,793 (101,326) (14,617) 105,850	Pro forma adjustments HK$’000 HK$’000 (Note 3, 4) (Note 3) (120,191) (908,590) – – – – – – – – – – – – – 908,590 120,191 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –	Unaudited pro forma consolidated statement of cash flows of the Remaining Group for the year ended 31 December 2019 HK$’000 (873,991) 36,620 21,670 7,589 (11,893) 103,381 (9,175) 908,590 (809) 7,402 28,586 (522) (957) (1,722) 214,769 114,480 (7,010) (416) (7,014) (93,016) 221,793 (101,326) (14,617) 105,850

III-6

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Unaudited pro forma consolidated statement of cash flows of the Remaining Group (continued)

Cash flows from investing activities Interest received Purchase of property, plant and equipment, and intangible assets Payment for financial assets at fair value through profit or loss Proceeds from disposal of financial assets at fair value through profit or loss Increase in short-term deposits Proceeds from disposal of property, plant and equipment Proceeds from disposal of land use rights Net proceeds from disposal of an associate Dividends received Net cash flows generated from investing activities Cash flows from financing activities Proceeds from bank and other borrowings Repayment of bank and other borrowings Dividend paid Principal portion of lease payments Net cash flows used in financing activities Net increase in cash and cash equivalents Effect of exchange rate changes Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year	Audited consolidated statement of cash flows of the Group for the year ended 31 December 2019 HK$’000 (Note 1(b)) 10,151 (18,407) (62,500) 92,632 (359,691) 276,031 11,253 – 63,760 13,229 2,380,682 (2,438,795) (40,597) (20,364) (119,074) 5 (25,311) 375,525 350,219	Pro forma adjustments HK$’000 HK$’000 (Note 3, 4) (Note 3) – – – – – – – – – – – – – – – 1,779,000 (63,750) – (63,750) 1,779,000 – – – – – – – – – – (63,750) 1,779,000 – – – – (63,750) 1,779,000	Unaudited pro forma consolidated statement of cash flows of the Remaining Group for the year ended 31 December 2019 HK$’000 10,151 (18,407) (62,500) 92,632 (359,691) 276,031 11,253 1,779,000 10 1,728,479 2,380,682 (2,438,795) (40,597) (20,364) (119,074) 1,715,255 (25,311) 375,525 2,065,469

III-7

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Notes to the Unaudited Pro Forma Financial Information of the Remaining Group

(a) The amounts are extracted from the unaudited consolidated statement of financial position of the Group as at 30 June 2020 as set out in the 2020 interim report of the Company.
(b) The amounts are extracted from the audited consolidated statement of profits or loss, the audited consolidated statement of comprehensive income and the audited consolidated statement of cash flows of the Group for the year ended 31 December 2019 as set out in the 2019 annual report of the Company.
The following pro forma adjustments have been made to the unaudited pro forma consolidated statement of financial position of the Remaining Group, assuming the Completion had taken place on 30 June 2020 and for the purpose of the Unaudited Pro Forma Financial Information of the Remaining Group:

Note Consideration (i) Carrying value of the investment in CEOVU as at 30 June 2020 (ii) Release of accumulated translation reserve as at 30 June 2020 (ii) Less: Estimated transaction costs attributable to the Disposal (iii) Estimated loss on the Disposal	HK$’000 1,785,000 (2,615,885) 9,634 (821,251) (6,000) (827,251)

Notes:

(i) Pursuant to the Sale and Purchase Agreement, the consideration for the Disposal is HK$1,785,000,000 and will be settled by the Purchaser on the Completion.
(ii) The amount represents the carrying value of the Group’s investment in CEOVU amounting to HK$2,615,885,000 as at 30 June 2020. The accumulated translation reserve of the Group’s investment in CEOVU amounting to HK$9,634,000 as at 30 June 2020 is reclassified to profit or loss on the Completion.
(iii) The estimated transaction costs directly incurred for the Disposal amounting to HK$6,000,000 will be borne by the Group and are assumed to be settled in cash. The net receipt from the Disposal is HK$1,779,000,000.
(iv) The pro forma adjustment to the Group’s reserves as at 30 June 2020 amounting to HK$21,795,000 includes the release of accumulated translation reserve as at 30 June 2020 amounting to HK$9,634,000 as illustrated above, as well as the reclassification of the Group’s share of CEOVU’s accumulated post-tax revaluation of property, plant and equipment from the property revaluation reserve to the retained earnings amounting to HK$12,161,000 on the Completion.
(v) The pro forma adjustment to the Group’s retained earnings as at 30 June 2020 amounting to HK$815,090,000 includes the estimated loss on the Disposal amounting to HK$827,251,000, as well as the reclassification of the Group’s share of CEOVU’s accumulated post-tax revaluation of property, plant and equipment from the property revaluation reserve to the retained earnings amounting to HK$12,161,000 on the Completion.

III-8

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

The following pro forma adjustments have been made to the unaudited pro forma consolidated statement of profit or loss of the Remaining Group, the unaudited pro forma consolidated statement of comprehensive income of the Remaining Group and the unaudited pro forma consolidated statement of cash flows of the Remaining Group, assuming the Completion had taken place on 1 January 2019 and for the purpose of the Unaudited Pro Forma Financial Information of the Remaining Group:
(a) The pro forma adjustments represent the exclusion of the share of result of CEOVU amounting to HK$120,191,000, and the share of exchange differences on translation of financial statements of the CEOVU Group amounting to HK$2,153,000.
(b) The pro forma adjustment represents the estimated loss on the Disposal, assuming the Completion had taken place on 1 January 2019 and is calculated as follows:

Note Consideration (i) Carrying value of the investment in CEOVU as at 1 January 2019 (ii) Release of accumulated translation reserve as at 1 January 2019 (ii) Less: Estimated transaction costs attributable to the Disposal (iii) Estimated loss on the Disposal Notes:	HK$’000 1,785,000 (2,695,459) 7,869 (902,590) (6,000) (908,590)

(i) Pursuant to the Sale and Purchase Agreement, the consideration for the Disposal is HK$1,785,000,000 and will be settled by the Purchaser on the Completion.
(ii) The amount represents the carrying value of the Group’s investment in CEOVU amounting to HK$2,695,459,000 as at 1 January 2019. The accumulated translation reserve of the Group’s investment in CEOVU amounting to HK$7,869,000 as at 1 January 2019 is reclassified to profit or loss on the Completion.
(iii) The estimated transaction costs directly incurred for the Disposal amounting to HK$6,000,000 will be borne by the Group and are assumed to be settled in cash. The net receipt from the Disposal is HK$1,779,000,000.
The pro forma adjustment represents the exclusion of the dividend received from CEOVU amounting to HK$63,750,000 during the year ended 31 December 2019 which assuming the Completion had taken place on 1 January 2019.

III-9

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Apart from the above, no pro forma adjustments have been made to the unaudited pro forma consolidated statement of financial position of the Remaining Group to reflect any trading results or other transactions of the Group entered subsequent to 30 June 2020. Similarly, no other pro forma adjustments have been made to the unaudited pro forma consolidated statement of profit or loss of the Remaining Group, the unaudited pro forma consolidated statement of comprehensive income of the Remaining Group, and the unaudited pro forma consolidated statement of cash flows of the Remaining Group to reflect any trading results or other transactions of the Group entered subsequent to 1 January 2019.

Since the carrying value of the Group’s investment in CEOVU and release of accumulated translation reserve on the Completion may be different from the amounts disclosed in the Unaudited Pro Forma Financial Information of the Remaining Group, the actual loss on the Disposal may be different from the amounts presented herein.

III-10

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

The following is the text of a report on the Unaudited Pro Forma Financial Information of the Remaining Group received from PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

==> picture [78 x 56] intentionally omitted <==

INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

To the Directors of China Electronics Huada Technology Company Limited

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of China Electronics Huada Technology Company Limited (the “Company”) and its subsidiaries (collectively the “Group”) excluding China Electronics Optics Valley Union Holding Company Limited and its subsidiaries (the “Disposal Group”) by the directors of the Company (the “Directors”) for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma consolidated statement of financial position as at 30 June 2020, the unaudited pro forma consolidated statement of profit or loss for the year ended 31 December 2019, the unaudited pro forma consolidated statement of comprehensive income for the year ended 31 December 2019 and the unaudited pro forma consolidated statement of cash flow for the year ended 31 December 2019, and related notes (the “Unaudited Pro Forma Financial Information”) as set out on pages III-1 to III-10 of the Company’s circular dated 30 September 2020, in connection with the proposed disposal of the Disposal Group (the “Transaction”) by the Company. The applicable criteria on the basis of which the Directors have compiled the Unaudited Pro Forma Financial Information are described on pages III-1 to III-10 of the Circular.

The Unaudited Pro Forma Financial Information has been compiled by the Directors to illustrate the impact of the Transaction on the Group’s financial position as at 30 June 2020 and the Group’s financial performance and cash flows for the year ended 31 December 2019 as if the Transaction had taken place at 30 June 2020 and 1 January 2019 respectively. As part of this process, information about the Group’s financial position, has been extracted by the Directors from the Group’s financial statements for the six months ended 30 June 2020, on which a review report has been published, and information about the Group’s financial performance and cash flows has been extracted by the Directors from the Group’s financial statements for the year ended 31 December 2019, on which an audit report has been published.

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

The Directors are responsible for compiling the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

III-11

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the “ Code of Ethics for Professional Accountants” issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

Our firm applies Hong Kong Standard on Quality Control 1 issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420, “ Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus ”, issued by the HKICPA. This standard requires that the reporting accountant plans and performs procedures to obtain reasonable assurance about whether the Directors have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial Information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the Unaudited Pro Forma Financial Information.

The purpose of unaudited pro forma financial information included in a circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Transaction at 30 June 2020 and 1 January 2019 respectively would have been as presented.

A reasonable assurance engagement to report on whether the unaudited pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors in the compilation of the unaudited pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

The related pro forma adjustments give appropriate effect to those criteria; and

III-12

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

The unaudited pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the company, the event or transaction in respect of which the unaudited pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the unaudited pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled by the Directors on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 30 September 2020

III-13

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

Prior to the Disposal, the Group is principally engaged in the business of design and sale of integrated circuit chips. Upon the Completion, CEOVU will cease to be an associate company of the Group. There will be no change in the principal activities of the Remaining Group following the Completion.

For the purpose of this circular and for illustration purpose only, the management discussion and analysis of the Remaining Group below is made with the exclusion of the CEOVU Group. The management discussion and analysis of the Remaining Group for each of the years ended 31 December 2017, 2018 and 2019 and the six months ended 30 June 2020 are set out below.

BUSINESS REVIEW

For the year ended 31 December 2017

Results overview

During the year, the Remaining Group’s continuing operations comprised the design and sale of integrated circuit chips. The Remaining Group discontinued its development and management of electronic information technology industrial parks operation in June 2016. The analysis below reports only on the continuing operations of the Remaining Group.

Revenue of the Remaining Group for the year ended 31 December 2017 amounted to HK$1,453.0 million, representing an increase of 6.9% when comparing with the corresponding period of last year.

Integrated circuits design operation

The Remaining Group’s integrated circuits design operation comprises the design of security smart card chips and the development of application system. Currently, the Remaining Group’s products are mainly used in sectors such as identity authentication, financial payment, government utilities, telecommunication and mobile payment. For the year ended 31 December 2017, the Remaining Group has obtained 78 new patents, registered 9 new computer software copyrights, and registered 9 new integrated circuits layout designs.

IV-1

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX IV

In 2017, the global smart cards market entered into a steady development stage, and the domestic smart card chips market was highly competitive. Driven by the policy on the issuance of state cryptographic algorithm powered bank cards, the market demand for domestic financial payment chips grew continuously, and coupled with the Remaining Group’s successful participation in bank card projects of various major domestic banks, market share of and sales volume of the financial payment chips of the Remaining Group increased significantly when comparing with the corresponding period of last year. Meanwhile, as the demand increased, sales volume of the identity authentication chips increased when comparing with the corresponding period of last year. On the other hand, due to the constraint of the foundry manufacturers’ production capacities, the Remaining Group’s supply of telecommunication and mobile payment chips was in shortage, leading to a slight drop in the sales volume of the Remaining Group’s telecommunication and mobile payment chips despite rising demand in the overseas market. As the domestic social security cards issuance coverage rate has increased in recent years, the demand for new cards has decreased, and sales volume of the domestic social security cards has dropped slightly when comparing with the corresponding period of last year. For the year ended 31 December 2017, overall sales volume of the Remaining Group increased slightly by 1.7% when comparing with the corresponding period of last year. Since the types of smart card chips that recorded growth for the year ended 31 December 2017 were mainly products with higher unit price, the impact of the general decrease in selling prices of smart card chips when comparing with the corresponding period of last year caused by further intensified competition in market price on the revenue of the year was compensated. Revenue of the Remaining Group for the year ended 31 December 2017 was HK$1,453.0 million, representing an increase of 6.9% when comparing with the corresponding period of last year.

With the intensified competition in the market of financial payment chips and telecommunication and mobile payment chips, selling price of these products dropped in general as compared with those in 2016. In addition, the cost of production of smart card chips remains to be high due to the rising cost of raw materials and the constraint of the foundry manufacturers’ production capacities. All these factors have led to a decrease in the Remaining Group’s overall gross profit margin in 2017 to 34.4% (2016: 37.2%).

Selling and marketing costs for the year ended 31 December 2017 amounted to HK$97.6 million (2016: HK$101.5 million). As a percentage to revenue, selling and marketing costs decreased to 6.7% from 7.5% of the corresponding period of last year. The main reason for the decrease in 2017 was the continuous implementation of the reorganisation of the Remaining Group’s personnel structure and the disposal of its navigation chips business, decrease in marketing staff, and the implementation of stringent cost control measures during the year.

Administrative expenses for the year ended 31 December 2017 amounted to HK$352.1 million, representing a decrease of 14.5% when comparing with the corresponding period of last year, which was primarily due to the decrease in research and development costs during the year. In 2017, the Remaining Group continued to implement the integration and centralised planning of resources for research and development, disposed of its navigation chips business and implemented stringent cost control measures, resulting in a decrease in the research and development costs as a percentage of the revenue.

IV-2

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX IV

Research and development costs for the year ended 31 December 2017 was HK$224.9 million (2016: HK$276.8 million), which represented 15.5% of the revenue for the year ended 31 December 2017 (2016: 20.4%). Research and development during the year primarily focused on areas such as the continuous running-in of existing process, continuous improvements in product functions and performance, advanced research of new process, enhancement of product security technology, research in application of security chips in the Internet of Things and the development of application systems and solutions.

Other income and gains

For the year ended 31 December 2017, the Remaining Group disposed of its navigation chips business and recognised a gain before taxation of HK$102.5 million.

Government grants recognised as income decreased by 78.2% to HK$20.7 million for the year ended 31 December 2017 resulted from less government subsidies received for research and development costs incurred in the year.

For the year ended 31 December 2018

Results overview

Revenue of the Remaining Group for the year ended 31 December 2018 amounted to HK$1,687.0 million, representing an increase of 16.1% when comparing with the corresponding period of last year.

Integrated circuits design operation

The Remaining Group’s integrated circuits design operation comprises the design of security smart card chips and the development of application system. Currently, the Remaining Group’s products are mainly used in sectors such as identity authentication, financial payment, government utilities, telecommunication and mobile payment. For the year ended 31 December 2018, the Remaining Group has obtained 63 new patents, registered 4 new software copyrights and 6 new integrated circuits layout designs.

IV-3

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX IV

In 2018, the economic growth in the PRC slowed down, but the domestic market of integrated circuits still flourished with strong demand. Yet, product selling price continued to fall due to fiercer competition in the industry. In particular, driven by the maturity of domestic-made chip technology and the policy on the issuance of state cryptographic algorithm powered bank cards, the market demand for domestic-made financial payment chips grew rapidly, which also led to intensifying competition and falling product selling price. In 2018, the Remaining Group successful participated in bank card projects of various major domestic banks, sales volume of the financial payment chips of the Remaining Group increased significantly when comparing with the corresponding period of last year. Meanwhile, as the replacement process of the second-generation social security cards progressed, the issuance of the second-generation social security cards accelerated, and coupled with the supply of the third-generation social security cards in the first tranche of pilot cities has began in 2018, sales volume of the social security card chips increased when comparing with the corresponding period of last year. Sales volume of identity authentication as well as telecommunication and mobile payment smart card chips remained stable and decreased slightly respectively when comparing with the corresponding period of last year. Sales volume of logic card chips decreased significantly when comparing with the corresponding period of last year due to changes in business planning. For the year ended 31 December 2018, overall sales volume of the Remaining Group decreased by 1.8% when comparing with the corresponding period of last year. Since the types of smart card chips that recorded growth in sales volume for the year ended 31 December 2018 were mainly financial payment and social security products with unit price higher than the weighted average selling price, revenue of the Remaining Group for the year ended 31 December 2018 was HK$1,687.0 million, representing an increase of 16.1% when comparing with the corresponding period of last year.

Through successfully conducting research of, applying and promoting different types of raw materials, the Remaining Group has not only relieved the problem of shortage of raw material, but also controlled and reduced cost to a certain extent, and partly offset the negative effect on the overall gross profit margin of the year brought by the decrease in selling price of financial payment chips as well as telecommunication and mobile payment chips when comparing with the corresponding period of last year due to intensifying competition in the market. For the year ended 31 December 2018, the overall gross profit margin was 31.5%, representing a drop of 2.9 percentage points from 34.4% of the corresponding period of last year.

Selling and marketing costs for the year ended 31 December 2018 amounted to HK$90.3 million (2017: HK$97.6 million). The percentage of selling and marketing costs to revenue decreased to 5.4% from 6.7% of the corresponding period of last year. The decrease was mainly attributable to the continuous implementation by the Remaining Group of stringent cost control measures during the year.

Administrative expenses for the year ended 31 December 2018 amounted to HK$343.6 million, representing an increase of 3.2% when comparing with the corresponding period of last year. The percentage of administrative expenses to revenue decreased to 20.4% from 22.9% of the corresponding period of last year. The Remaining Group continued to implement stringent cost control measures during the year.

IV-4

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX IV

Research and development costs for the year ended 31 December 2018 amounted to HK$211.8 million (2017: HK$224.9 million). The percentage of research and development costs to revenue was 12.6% (2017: 15.5%). The Remaining Group continued to implement the integration and centralised planning of research and development resources as well as stringent cost control measures during the year. Research and development during the year primarily focused on the continuous improvements in product functions and performance, advanced research of new process, enhancement of product security technology, research in application of security chips in the Internet of Things sector and the development of application systems and solutions.

Other income

Government grants recognised as income decreased by 30.0% to HK$14.5 million for the year ended 31 December 2018 resulted from less government subsidies received for research and development costs incurred in the year.

For the year ended 31 December 2019

Results overview

Revenue of the Remaining Group for the year ended 31 December 2019 amounted to HK$1,695.5 million, at a level similar to that of last year.

Integrated circuits design operation

The Remaining Group’s integrated circuits design operation comprises the design of security smart card chips and the development of application system. Currently, the Remaining Group’s products are mainly used in the sector of identity authentication, financial payment, government utilities and telecommunication. For the year ended 31 December 2019, the Remaining Group has obtained 31 new patents, registered 1 new software copyright and 5 new integrated circuits layout designs.

IV-5

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX IV

The year of 2019 saw many complex situations and development in the international arenas, slowing down the growth of global market for integrated circuits. Meanwhile, the market demand for domestic-made smart card chips grew steadily due to the further application of the domestic-made substitutes and the state cryptographic algorithm. In particular, as driven by the maturity of domestic-made chip technology and the policy on the issuance of bank cards with the state cryptographic algorithm, the market demand for domestic-made bank card chips soared. However, product selling prices continued to drop as a result of intensification of competition. In 2019, the Remaining Group successfully participated in bank card projects of various major domestic banks and recorded a significant increase in sales volume of bank card chips when comparing with last year. The market demand for telecommunication card chips remained steady amid fierce competition. Sales volume of telecommunication card chips for the year increased when comparing with last year. In 2019, the market demand for social security cards was steady, sales volume of social security card chips for the year increased slightly when comparing with last year. During the year, sales volume of identity authentication products was about the same as last year, while sales volume of some of the other smart card chips decreased significantly due to changes in business planning. For the year ended 31 December 2019, overall sales volume of the Remaining Group increased by 10.0% when comparing with last year. As the recorded growth in sales volume for the year was mainly telecommunication card chips with unit price below the weighted average selling price, and along with the effect of decrease in selling price of smart card chips in general when comparing with last year resulting from further intensification of market price competition on the revenue during the year, revenue of the Remaining Group for the year ended 31 December 2019 was HK$1,695.5 million, at a level similar to that of last year.

The Remaining Group has successfully conducted research of and promoted the use of different types of raw materials, which has both mitigated the problem of shortage of raw materials and achieved cost reduction to a certain extent, and offset the negative impact of decrease in selling price of smart card chips when comparing with last year caused by intense market competition on the overall gross profit margin of the year. Overall gross profit margin for the year ended 31 December 2019 was 31.6%, at a level similar to that of last year.

Selling and marketing costs for the year ended 31 December 2019 amounted to HK$83.2 million (2018: HK$90.3 million). The percentage of selling and marketing costs to revenue decreased to 4.9% from 5.4% of last year. The decrease was mainly attributable to the continuous implementation by the Remaining Group of stringent cost control measures during the year.

Administrative expenses for the year ended 31 December 2019 amounted to HK$345.8 million (2018: HK$343.6 million). The percentage of administrative expenses to revenue was 20.4%, at a level similar to that of last year. The Remaining Group continued to implement stringent cost control measures during the year.

Research and development costs for the year ended 31 December 2019 amounted to HK$221.7 million (2018: HK$211.8 million). The percentage of research and development costs to revenue was 13.1% (2018: 12.6%). Research and development of the Remaining Group during the year primarily focused on the research and development of security chip products as well as the continuous improvements in smart card product functions and performance, advanced research of new process, enhancement of product security certification level, enhancement of product security technology, research in application of security chips in the Internet of Things sector and the development of application systems and solutions, etc.

IV-6

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX IV

Other income

Government grants recognised as income decreased by 29.9% to HK$10.2 million for the year ended 31 December 2019 resulted from less government subsidies received for research and development costs incurred in the year.

For the year ended 31 December 2019, the Remaining Group recognised a gain on disposal of a building in the PRC of HK$9.1 million following the termination of the agreement to purchase Block C of China Electronics Information Security Technology Research and Development Foundation in the PRC.

Taxation

Income tax credit for the year ended 31 December 2019 amounted to HK$2.8 million (2018: income tax expense of HK$27.7 million). The income tax credit in current year was mainly due to a decrease of current taxation and deferred taxation of HK$15.0 million for the withholding tax on distributed profits and undistributed profits from a subsidiary in the PRC when comparing with last year and derecognition of deferred tax assets of HK$11.2 million for previous year’s tax losses in 2018.

For the six months ended 30 June 2020

Results overview

Revenue of the Remaining Group for the six months ended 30 June 2020 amounted to HK$716.4 million, representing a decrease of 21.1% when comparing with the corresponding period of last year.

Integrated circuits design operation

The Remaining Group’s integrated circuits design operation comprises the design of security smart card chips and the development of application system. Currently, the Remaining Group’s products are mainly used in sectors of identity authentication, financial payment, government utilities and telecommunication. For the six months ended 30 June 2020, the Remaining Group has obtained 7 new patents and registered 2 new integrated circuits layout designs.

In the first half of 2020, the market demand for domestic-made bank card chips continued to grow as domestic-made bank card chips were increasingly recognized by various banks, and the sales volume of bank card chips increased when comparing with the corresponding period of last year. The sales of telecommunication card chips was better in early 2020 due to the growing demand in late 2019, and hence the overall sales volume in the first half of 2020 increased slightly when comparing with the corresponding period of last year. During the period, sales volume of identity authentication products was broadly comparable to the level of the corresponding period of last year. As a result of the COVID-19 pandemic, the sales volume of social security card chips declined significantly in the first half of 2020 when comparing with the corresponding period of last year due to stagnant demand in the social security cards market as a result of the crowd control in medical institutions and restrictions on the resumption of work and production during the pandemic in various industries. For the six months ended 30 June 2020, the Remaining Group’s total sales volume increased by 2.0% when comparing with the corresponding period of last year.

IV-7

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX IV

As the decrease in sales volume of various types of smart card chips in the first half of 2020 mainly involved products with higher unit price, and along with the impact of a general decline in the selling price of smart card chips when comparing with the corresponding period of last year as a result of further intensification in market price competition on the revenue during the period, the Remaining Group’s revenue for the six months ended 30 June 2020 was HK$716.4 million, representing a decrease of 21.1% when comparing with the corresponding period of last year.

In the first half of 2020, the Remaining Group, through adjusting the product mix of its smart card chips business and focusing on products with a better gross profit margin, while also strengthening cost control and striving to expand market share of its products, had offset the impact of a decline in the selling price of smart card chip products on the gross profit margin during the period. Overall gross profit margin has increased by 2.4 percentage points to 35.4% for the six months ended 30 June 2020.

Selling and marketing costs for the six months ended 30 June 2020 amounted to HK$38.1 million (2019: HK$43.5 million). The percentage of selling and marketing costs to revenue increased to 5.3% from 4.8% of the corresponding period of last year. The increase was mainly attributable to the fact that the progress achieved through the continuous implementation of stringent cost control measures by the Remaining Group during the period was more than offset by the loss of revenue due to the COVID-19 pandemic.

Administrative expenses for the six months ended 30 June 2020 amounted to HK$136.6 million, representing a decrease of 17.4% when comparing with the corresponding period of last year. The percentage of administrative expenses to revenue was 19.1% (2019: 18.2%). The increase was mainly attributable to the fact that the progress achieved through the continuous implementation of stringent cost control measures by the Remaining Group during the period was more than offset by the loss of revenue due to the COVID-19 pandemic.

Research and development costs for the six months ended 30 June 2020 amounted to HK$90.0 million (2019: HK$106.0 million). The percentage of research and development costs to revenue was 12.6% (2019: 11.7%). Research and development of the Remaining Group during the period primarily focused on the research and development of security chip products as well as the continuous improvements in smart card product performance, enhancement of product security certification level, research in application of security chips in the Internet of Things sector and the development of application systems and solutions, etc.

Other income

Other income decreased by 41.3% to HK$14.3 million for the six months ended 30 June 2020 primarily due to the fact that for the six months ended 30 June 2019, the Remaining Group had recognised a one-off gain before taxation of HK$9.1 million arising from the disposal of a building in the PRC.

IV-8

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX IV

FINANCIAL RESOURCES AND LIQUIDITY

The Remaining Group generally finances its working capital and funding requirements through internal resources, bank and other borrowings, and issuance of corporate bonds. At 31 December 2017, the Remaining Group had cash and cash equivalents amounted to HK$373.8 million, of which 96.8% was denominated in Renminbi, 2.3% in United States dollars and 0.9% in Hong Kong dollars (2016: HK$911.9 million, of which 93.0% was denominated in Renminbi, 6.4% in Hong Kong dollars and 0.6% in United States dollars).

At 31 December 2017, the Remaining Group had bank and other borrowings of HK$2,314.5 million, of which 95.6% were denominated in Renminbi and 4.4% in Hong Kong dollars (2016: HK$477.6 million, of which 74.8% were denominated in Renminbi and 25.2% in Hong Kong dollars). Among these borrowings, (i) all were unsecured (2016: HK$120.2 million were secured by short-term deposits of the Remaining Group and HK$357.4 million were unsecured), and (ii) HK$2,214.5 million and HK$100.0 million were borrowed at fixed interest rates and variable interest rates respectively (2016: HK$357.3 million and HK$120.3 million were borrowed at fixed interest rates and variable interest rates respectively). At 31 December 2017, committed borrowing facilities available to the Remaining Group but not drawn amounted to HK$1,124.4 million.

In January 2017, the Company redeemed the 4.70% unsecured bonds due 2017 in the principal amount of RMB2,750.0 million in full.

The Remaining Group’s revenue are mainly denominated in Renminbi and payments are denominated in Renminbi and Hong Kong dollars. The Remaining Group will make use of hedging contracts, when appropriate, to hedge the risk of foreign exchange fluctuation arising from its operations.

At 31 December 2017, the Remaining Group had net current liabilities of HK$1,258.1 million (2016: HK$1,239.5 million). The gearing ratio, which is calculated as net debt divided by total equity and net debt of the Remaining Group, was 48.7% (2016: 61.1%).

The Remaining Group generally finances its working capital and funding requirements through internal resources, and bank and other borrowings. At 31 December 2018, the Remaining Group had cash and cash equivalents amounted to HK$375.5 million, of which 90.2% was denominated in Renminbi, 8.0% in Hong Kong dollars and 1.8% in United States dollars (2017: HK$373.8 million, of which 96.8% was denominated in Renminbi, 2.3% in United States dollars and 0.9% in Hong Kong dollars).

At 31 December 2018, the Remaining Group had bank and other borrowings of HK$2,295.3 million, of which 97.5% were denominated in Renminbi and 2.5% in Hong Kong dollars (2017: HK$2,314.5 million, of which 95.6% were denominated in Renminbi and 4.4% in Hong Kong dollars). Among these borrowings, (i) HK$57.5 million were secured by deposits of the Remaining Group and HK$2,237.8 million were unsecured (2017: all were unsecured), and (ii) HK$2,237.8 million and HK$57.5 million were borrowed at fixed interest rates and variable interest rates respectively (2017: HK$2,214.5 million and HK$100.0 million were borrowed at fixed interest rates and variable interest rates respectively). At 31 December 2018, committed borrowing facilities available to the Remaining Group but not drawn amounted to HK$2,746.1 million.

IV-9

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX IV

At 31 December 2018, the Remaining Group had net current liabilities of HK$1,167.9 million (2017: HK$1,258.1 million). The gearing ratio, which is calculated as net debt divided by total equity and net debt of the Remaining Group, was 49.7% (2017: 48.7%).

The Remaining Group generally finances its working capital and funding requirements through internal resources, and bank and other borrowings. At 31 December 2019, the Remaining Group had cash and cash equivalents amounted to HK$350.2 million, of which 97.0% was denominated in Renminbi, 2.3% in United States dollars and 0.7% in Hong Kong dollars (2018: HK$375.5 million, of which 90.2% was denominated in Renminbi, 8.0% in Hong Kong dollars and 1.8% in United States dollars).

At 31 December 2019, the Remaining Group had bank and other borrowings of HK$2,188.0 million, all were denominated in Renminbi (2018: HK$2,295.3 million, of which 97.5% were denominated in Renminbi and 2.5% in Hong Kong dollars). Among these borrowings, (i) all were unsecured (2018: HK$57.5 million were secured by deposits of the Remaining Group and HK$2,237.8 million were unsecured), and (ii) all were borrowed at fixed interest rates (2018: HK$2,237.8 million and HK$57.5 million were borrowed at fixed interest rates and variable interest rates respectively). At 31 December 2019, committed borrowing facilities available to the Remaining Group but not drawn amounted to HK$881.3 million.

At 31 December 2019, the Remaining Group had net current liabilities of HK$814.5 million (2018: HK$1,167.9 million). The gearing ratio, which is calculated as net debt divided by total equity and net debt of the Remaining Group, was 40.3% (2018: 49.7%).

The Remaining Group generally finances its working capital and funding requirements through internal resources, and bank and other borrowings. At 30 June 2020, the Remaining Group had cash and cash equivalents amounted to HK$432.6 million, of which 98.1% was denominated in Renminbi, 1.0% in United States dollars and 0.9% in Hong Kong dollars (31 December 2019: HK$350.2 million, of which 97.0% was denominated in Renminbi, 2.3% in United States dollars and 0.7% in Hong Kong dollars).

IV-10

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX IV

At 30 June 2020, the Remaining Group had bank and other borrowings of HK$2,309.4 million, all were denominated in Renminbi (31 December 2019: HK$2,188.0 million, all were denominated in Renminbi). Among these borrowings, (i) HK$54.2 million were secured by deposits of the Remaining Group and HK$2,255.2 million were unsecured (31 December 2019: all were unsecured), and (ii) all were borrowed at fixed interest rates (31 December 2019: all were borrowed at fixed interest rates). At 30 June 2020, committed borrowing facilities available to the Remaining Group but not drawn amounted to HK$870.2 million.

At 30 June 2020, the Remaining Group had net current liabilities of HK$769.9 million (31 December 2019: HK$814.5 million). The gearing ratio, which is calculated as net debt divided by total equity and net debt of the Remaining Group, was 43.5% (31 December 2019: 40.3%).

MATERIAL DISPOSAL

On 3 March 2017, CEC Huada Electronic Design Co., Ltd, a wholly-owned subsidiary of the Company, entered into an agreement to dispose of its navigation chips business for a cash consideration of RMB100.0 million to Shenzhen Huada Beidou Technology Company Limited (the “Business Transfer”). The Business Transfer was completed in May 2017. The Remaining Group recognised a gain before taxation of HK$102.5 million.

Save as disclosed in the above, the Remaining Group had not held any other significant investments nor made any material acquisitions or disposals of subsidiaries or associate companies during each of the years ended 31 December 2017, 2018 and 2019 and the six months ended 30 June 2020.

PLEDGE OF ASSETS

As at 31 December 2017, the Remaining Group did not pledge any assets as collateral for its borrowings.

As at 31 December 2018, certain assets of the Remaining Group with an aggregate carrying value of HK$62.8 million were pledged as collateral for its borrowings.

As at 31 December 2019, the Remaining Group did not pledge any assets as collateral for its borrowings.

As at 30 June 2020, certain assets of the Remaining Group with an aggregate carrying value of HK$54.7 million were pledged as collateral for its borrowings.

IV-11

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

As at 31 December 2017, 2018 and 2019 and 30 June 2020, the Remaining Group did not have any material outstanding capital commitments for the acquisition of fixed assets and intangible assets.

As at 31 December 2017, 2018 and 2019 and 30 June 2020, the Remaining Group did not have any material contingent liabilities.

EMPLOYEE AND REMUNERATION POLICIES

The Remaining Group had approximately 360, 370, 370 and 370 employees as at 31 December 2017, 2018 and 2019 and 30 June 2020, respectively, the majority of whom were based in the PRC.

For each of the years ended 31 December 2017, 2018 and 2019 and the six months ended 30 June 2020, the employee benefit expenses of the Remaining Group were HK$178.7 million, HK$161.2 million, HK$161.0 million and HK$88.4 million, respectively.

The Remaining Group recognises the importance of high caliber and competent staff and has a strict recruitment policy and performance appraisal scheme. Remuneration policies are largely in line with industry practices, and are formulated on the basis of performance and experience and will be reviewed regularly. Bonuses and other merit payments are linked with performance of the Remaining Group and of the individuals as incentive to optimise performance.

IV-12

APPENDIX V

PROPERTY CALCULATION REPORT

The following is the text of a letter, summary of reference values and property reference value calculation sheet prepared for the purpose of incorporation in this circular received from Asia-Pacific Consulting and Appraisal Limited, an independent property valuer, in connection with its calculation as at 30 June 2020 of the property interests held by China Electronics Optics Valley Union Holding Company Limited.

==> picture [119 x 57] intentionally omitted <==

Asia-Pacific Consulting and Appraisal Limited

Flat/Rm A, 12/F, Kiu Fu Commercial Building 300 Lockhart Road Wan Chai Hong Kong

30 September 2020

The Board of Directors

China Electronics Huada Technology Company Limited

Room 3403, 34th Floor China Resources Building 26 Harbour Road, Wanchai Hong Kong

Dear Sirs,

Pursuant to the Sale and Purchase Agreement dated 30 July 2020, CEC Media Holdings Limited, a wholly-owned subsidiary of China Electronics Huada Technology Company Limited (the “Company”), has agreed to sell 33.67% of the issued share capital of China Electronics Optics Valley Union Holding Company Limited (the “CEOVU”). In accordance with your instructions to calculate the property interests held by CEOVU and its subsidiaries (hereinafter together referred to as the “CEOVU Group”) in the People’s Republic of China (the “PRC”), we confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion on the reference values of such property interests as at 30 June 2020 (the “Calculation Date”).

V-1

PROPERTY CALCULATION REPORT

APPENDIX V

For the purpose of this report, we classified these buildings as the property interest relating to “property activities” which mean holding (directly or indirectly) and/or development of properties for letting or retention as investments, or the purchase or development of properties for subsequent sale, or for subsequent letting or retention as investments. Except for this, the remaining properties are classified as “non-property activities”. In this report, the property interests we calculated are those property interests relating to “property activities” of the CEOVU Group. Furthermore, we have adopted the below guidance on what constitutes a property interest:-

(a) one or more units in the same building or complex;
(b) one or more properties located at the same address or lot number;
(c) one or more properties comprising an integrated facility;
(d) one or more properties, structures or facilities comprising a property development project (even if there are different phases);
(e) one or more properties held for investment within one complex;
(f) one or more properties, structures or facilities located contiguously each other or located on adjoining lots and used for the same or similar operational/business purposes; or
(g) a project or phases of development presented to the public as one whole project or forming a single operating entity.

We have calculated the properties held by the CEOVU Group for owner-occupation or for sale and for future development by the comparison approach assuming sale of the property interests in their existing states with the benefit of immediate vacant possession and by making reference to comparable sales transactions as available in the market. This approach rests on the wide acceptance of the market transactions as the best indicator and pre-supposes that evidence of relevant transactions in the market place can be extrapolated to similar properties, subject to allowances for variable factors.

V-2

APPENDIX V

PROPERTY CALCULATION REPORT

We have calculated the completed properties held by the CEOVU Group for investment by the income approach by taking into account the net rental income of the properties derived from the existing leases and/or achievable in the existing market with due allowance for the reversionary income potential of the leases, which have been then capitalized to determine the reference value at an appropriate capitalization rate. Where appropriate, reference has also been made to the comparable sales transactions as available in the relevant market.

In calculating the property interests that are currently under development, we have assumed that they will be developed and completed in accordance with the latest development proposals provided to us by the CEOVU Group. In arriving at our opinion of calculation results, we have adopted the comparison approach by making reference to comparable sales evidence as available in the relevant market and have also taken into account the accrued construction cost and professional fees relevant to the stage of construction as at the Calculation Date and the remainder of the cost and fees expected to be incurred for completing the development. We have relied on the accrued construction cost and professional fees information provided by the CEOVU Group according to the different stages of construction of the properties as at the Calculation Date, and we did not find any material inconsistency from those of other similar developments.

Our calculation has been made on the assumption that the seller sells the property interests in the market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement, which could serve to affect the values of the property interests.

No allowance has been made in our report for any charge, mortgage or amount owing on any neither of the property interests calculated nor for any expense or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature, which could affect their value.

We have relied to a very considerable extent on the information given by the CEOVU Group and have accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements, particulars of occupancy, lettings, and all other relevant matters.

We have not carried out detailed measurements to verify the correctness of the areas in respect of the properties but have assumed that the areas shown on the information and description handed to us are correct. All information and description have been used as reference only and all dimensions, measurements and areas are approximations. No on-site measurement has been taken.

We have inspected the exterior and, where possible, the interior of the properties. However, we have not carried out investigation to determine the suitability of the ground conditions and services for any development thereon. Our calculation has been prepared on the assumption that these aspects are satisfactory and that no unexpected cost and delay will be incurred during construction. Moreover, no structural survey has been made, but in the course of our inspection, we did not note any serious defect. We are not, however, able to report whether the property is free of rot, infestation or any other structural defect. No tests were carried out on any of the services.

V-3

APPENDIX V

PROPERTY CALCULATION REPORT

Inspection of the properties was carried out in August 2020 by Mr. David Cheng, Jack Li, Jasper Jia, Jill Shang and various valuation assistant. David Cheng is a member of Royal Institution of Chartered Surveyor and has 20 years’ experience in the property valuation in the PRC; Jack Li is a member of Royal Institution of Chartered Surveyor and a Certified Public Valuer and has 5 years’ experience in the property valuation in the PRC; Ms. Jasper Jia who is a member of Royal Institution of Chartered Surveyor and has 13 years’ experience in the property valuation in the PRC; Jill Shang is a Certified Public Valuer and has 3 years’ experience in the property valuation in the PRC.

We have had no reason to doubt the truth and accuracy of the information provided to us by the CEOVU Group. We have also sought confirmation from the CEOVU Group that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to arrive an informed view, and we have no reason to suspect that any material information has been withheld.

All monetary figures stated in this report are in Renminbi (RMB).

Our summary of reference values and property reference value calculation sheet are attached below for your attention.

Given that the reference values of the land and/or properties information of the CEOVU Group prepared by us are subject to the following limitations:- (a) there is no independent verification by us over the information provided by the CEOVU Group, (b) there is no legal due diligence performed over the legal ownership and title(s) of the land and/or properties of the CEOVU Group and no reliance by us on any PRC legal opinion in arriving at our opinions of the relevant reference value(s), and (c) all information provided by the CEOVU Group to us is assumed to be complete and correct, the reference value(s) in relation to the land and/or properties of the CEOVU Group should therefore not be regarded as or equivalent to any valuation of the CEOVU Group properties performed by us under Chapter 5 and Practice Note 12 of the Listing Rules, and inclusion of the reference values of the land and/or properties of the CEOVU Group in this circular is for general reference purpose only for the shareholders of the Company.

Yours faithfully, For and on behalf of

Asia-Pacific Consulting and Appraisal Limited David G. D. Cheng

MRICS

Executive Director

Note: David G.D. Cheng is a Chartered Surveyor who has 20 years’ experience in the valuation of assets in the Greater China Region, the Asia-Pacific region, the United States and Canada.

V-4

PROPERTY CALCULATION REPORT

APPENDIX V

SUMMARY OF REFERENCE VALUES

Abbreviation:

Group I: Completed properties held for owner occupation or for sale by the CEOVU Group in the PRC Group II: Completed properties held for investment by the CEOVU Group in the PRC Group III: Properties held under development by the CEOVU Group in the PRC Group IV: Properties held for future development by the CEOVU Group in the PRC –: Not Applicable

						Total
		Reference value	Reference value	Reference value	Reference value	reference value
		in existing state	in existing state	in existing state	in existing state	in existing state
		as at	as at	as at	as at	as at
		the Calculation	the Calculation	the Calculation	the Calculation	the Calculation
No.	Property	Date	Date	Date	Date	Date
		RMB	RMB	RMB	RMB	RMB
		Group I:	Group II:	Group III:	Group IV:	Total of the
						property:
1.	Portions of Optics Valley Software Park, east of	134,900,000	334,900,000	–	–	469,800,000
	Guanshan Avenue and south of Nanhu South
	Road, East Lake Hi-Tech Development Zone,					100% Interest
	Wuhan, Hubei Province, the PRC (光谷軟件園)					attributable
						to the CEOVU
						Group:
						469,800,000
2.	Various office units in Phases I and II of	148,000,000	164,400,000	–	–	312,400,000
	Financial Harbour, No. 77 Guanggu Avenue,
	East Lake Hi-tech Development Zone, Wuhan,					100% Interest
	Hubei Province, the PRC (金融港)					attributable
						to the CEOVU
						Group:
						312,400,000
3.	Portions of Creative Capital, No. 16 Yezhihu	1,533,300,000	570,400,000	–	–	2,103,700,000
	West Road, Hongshan District, Wuhan,
	Hubei Province, the PRC (創意天地)					100% Interest
						attributable
						to the CEOVU
						Group:
						2,103,700,000

V-5

PROPERTY CALCULATION REPORT

APPENDIX V

						Total
		Reference value	Reference value	Reference value	Reference value	reference value
		in existing state	in existing state	in existing state	in existing state	in existing state
		as at	as at	as at	as at	as at
		the Calculation	the Calculation	the Calculation	the Calculation	the Calculation
No.	Property	Date	Date	Date	Date	Date
		RMB	RMB	RMB	RMB	RMB
		Group I:	Group II:	Group III:	Group IV:	Total of the
						property:
4.	Portions of Wuhan Innocenter (Huisheng)	177,000,000	170,300,000	–	4,600,000	351,900,000
	located at Liangshantou Village, Liufang Street,
	Jiangxia District, Wuhan, Hubei Province,					100% Interest
	the PRC (武漢研創中心(滙盛))					attributable
						to the CEOVU
						Group:
						351,900,000
5.	Portions of Wuhan Innocenter (Minghong)	59,200,000	97,500,000	–	4,700,000	161,400,000
	located at Liangshantou Village, Liufang Street,
	Jiangxia District, Wuhan,					100% Interest
	Hubei Province, the PRC (武漢研創中心(鳴鴻))					attributable
						to the CEOVU
						Group:
						161,400,000
6.	Units 1-101, 1-201, 1-301 and 1-401, Block 1,	7,840,000	22,500,000	–	–	30,340,000
	Joint Enterprise Center, North Harbour
	Industrial Park (Lido Technology) ,					100% Interest
	No. 17 Wenzhi Street, Hongshan District,					attributable
	Wuhan, Hubei Province,					to the CEOVU
	the PRC (北港工業園（麗島科技))					Group:
						30,340,000
7.	Units 1-101, 1-201, 1-301, 1-301 overhead layer	–	25,300,000	–	–	25,300,000
	and 2-301, 2-401, 2-501, Block 2, Joint
	Enterprise Center, North Harbour Industrial					100% Interest
	Park (Lido Property) , No. 17 Wenzhi Street,					attributable
	Hongshan District, Wuhan,					to the CEOVU
	Hubei Province, the PRC (北港工業園					Group:
	(麗島物業))					25,300,000

V-6

PROPERTY CALCULATION REPORT

APPENDIX V

						Total
		Reference value	Reference value	Reference value	Reference value	reference value
		in existing state	in existing state	in existing state	in existing state	in existing state
		as at	as at	as at	as at	as at
		the Calculation	the Calculation	the Calculation	the Calculation	the Calculation
No.	Property	Date	Date	Date	Date	Date
		RMB	RMB	RMB	RMB	RMB
		Group I:	Group II:	Group III:	Group IV:	Total of the
						property:
8.	80 underground car parking spaces, a clubhouse	14,400,000	37,000,000	–	–	51,400,000
	and retail outlet No. C-18, Lido Garden, No. 497
	Luoshi Road, Hongshan District, Wuhan,					100% Interest
	Hubei Province, the PRC (麗島花園)					attributable
						to the CEOVU
						Group:
						51,400,000
9.	Retail outlet No.6-1-1 and 53 underground car	22,500,000	–	–	–	22,500,000
	parking spaces, Lido 2046, No.175 Xiongchu
	Road, Hongshan District, Wuhan, Hubei					100% Interest
	Province, the PRC (麗島2046)					attributable
						to the CEOVU
						Group:
						22,500,000
10.	258 underground car parking spaces, Up Mason,	19,600,000	–	–	–	19,600,000
	No. 318 Minzu Avenue, East Lake Hi-Tech
	Development Zone, Wuhan, Hubei Province,					100% Interest
	the PRC (麗島美生)					attributable
						to the CEOVU
						Group:
						19,600,000
11.	Portions of Huangshi OVU Science and	171,900,000	35,700,000	117,600,000	12,800,000	338,000,000
	Technology City, Baoshan Road and Jinshan
	Boulevard, Golden Hill New Industrial Zone,					100% Interest
	Huangshi, Hubei Province, the PRC (黃石聯合					attributable
	科技城)					to the CEOVU
						Group:
						338,000,000

V-7

PROPERTY CALCULATION REPORT

APPENDIX V

						Total
		Reference value	Reference value	Reference value	Reference value	reference value
		in existing state	in existing state	in existing state	in existing state	in existing state
		as at	as at	as at	as at	as at
		the Calculation	the Calculation	the Calculation	the Calculation	the Calculation
No.	Property	Date	Date	Date	Date	Date
		RMB	RMB	RMB	RMB	RMB
		Group I:	Group II:	Group III:	Group IV:	Total of the
						property:
12.	Portions of Lido Top View, No. 76 Hangzhou	15,600,000	147,300,000	–	–	162,900,000
	West Road, Huangshi Economic Development
	Zone, Huangshi, Hubei Province, the PRC (麗島					100% Interest
	半山華府)					attributable
						to the CEOVU
						Group:
						162,900,000
13.	Portions of Ezhou OVU Science and Technology	199,800,000	–	37,000,000	34,000,000	270,800,000
	City, Gaoxin Third Road, Hubei Gedian
	High-Technology Industrial Development Zone,					80% Interest
	Ezhou, Hubei Province, the PRC (鄂州光谷聯合					attributable
	科技城)					to the CEOVU
						Group:
						216,640,000
14.	Portions of Huanggang OVU Science and	30,800,000	36,200,000	–	19,000,000	86,000,000
	Technology City, northeastern corner of Xingang
	North Road and Zhonghuan Road, Huangzhou					70% Interest
	District, Huanggang, Hubei Province, the PRC					attributable
	(黃岡光谷聯合科技城)					to the CEOVU
						Group:
						60,200,000
15.	Various units and 3,615 underground car parking	1,371,000,000	350,000,000	–	–	1,721,000,000
	spaces in Phases I and II of Hefei Financial
	Harbour, south of Nanjing Road and west of					100% Interest
	Huizhou Avenue, Binhu New District, Hefei,					attributable
	Anhui Province, the PRC (合肥金融港)					to the CEOVU
						Group:
						1,721,000,000

V-8

APPENDIX V

PROPERTY CALCULATION REPORT

						Total
		Reference value	Reference value	Reference value	Reference value	reference value
		in existing state	in existing state	in existing state	in existing state	in existing state
		as at	as at	as at	as at	as at
		the Calculation	the Calculation	the Calculation	the Calculation	the Calculation
No.	Property	Date	Date	Date	Date	Date
		RMB	RMB	RMB	RMB	RMB
		Group I:	Group II:	Group III:	Group IV:	Total of the
						property:
16.	Luoyang China Electronics Optics Valley	–	–	162,000,000	–	162,000,000
	Information Harbour located at the northwest
	side of Guanlin Road and Longshan Avenue,					70% Interest
	Luolong District, Luoyang, Henan Province, the					attributable
	PRC (洛陽中電光谷信息港)					to the CEOVU
						Group:
						113,400,000
17.	Portions of Changsha Information Security	83,490,000	–	332,000,000	–	415,490,000
	Industrial Park, Yuelu Avenue, High-tech
	District, Changsha, Hunan Province, the PRC					100% Interest
	(長沙信息安全產業園)					attributable
						to the CEOVU
						Group:
						415,490,000
18.	Shenyang Maker Corporation, No. 12 Qixing	–	–	80,900,000	–	80,900,000
	Avenue, Shenbei New District, Shenyang,
	Liaoning Province, the PRC (瀋陽創客公社)					100% Interest
						attributable
						to the CEOVU
						Group:
						80,900,000
19.	Portions of Shenyang OVU Science and	7,200,000	–	–	10,900,000	18,100,000
	Technology City, intersection of Shengjing
	Avenue and Fourth Ring Road, Shenbei New					100% Interest
	District, Shenyang, Liaoning Province, the PRC					attributable
	(瀋陽光谷聯合科技城)					to the CEOVU
						Group:
						18,100,000

V-9

PROPERTY CALCULATION REPORT

APPENDIX V

						Total
		Reference value	Reference value	Reference value	Reference value	reference value
		in existing state	in existing state	in existing state	in existing state	in existing state
		as at	as at	as at	as at	as at
		the Calculation	the Calculation	the Calculation	the Calculation	the Calculation
No.	Property	Date	Date	Date	Date	Date
		RMB	RMB	RMB	RMB	RMB
		Group I:	Group II:	Group III:	Group IV:	Total of the
						property:
20.	Portions of Shenyang CEOVU Information	214,800,000	–	–	3,900,000	218,700,000
	Harbour, Nos. 80, 82, 84 and 86 Qixing Street,
	Shenbei New District, Shenyang,					100% Interest
	Liaoning Province, the PRC					attributable
	(瀋陽中電光谷信息港)					to the CEOVU
						Group:
						218,700,000
21.	Portions of Qingdao OVU International Marine	180,400,000	365,600,000	45,000,000	–	591,000,000
	Information Harbour, No. 396
	Emeishan Road, Huangdao District,					100% Interest
	Qingdao, Shandong Province,					attributable
	the PRC (青島光谷國際海洋信息港)					to the CEOVU
						Group:
						591,000,000
22.	Portions of Qingdao Research and	59,900,000	338,700,000	–	–	398,600,000
	Innovation Center, west of Jiangshan South
	Road, Huangdao District, Qingdao,					100% Interest
	Shandong Province, the PRC (青島研創中心)					attributable
						to the CEOVU
						Group:
						398,600,000
23.	Qingdao Marine & Science Park, south of	–	–	132,000,000	14,000,000	146,000,000
	Changjiang West Road, west of Jiangshan South
	Road, north of Binhai Avenue, Huangdao					100% Interest
	District, Qingdao, Shandong Province, the PRC					attributable
	(青島海洋科技園)					to the CEOVU
						Group:
						146,000,000

V-10

PROPERTY CALCULATION REPORT

APPENDIX V

						Total
		Reference value	Reference value	Reference value	Reference value	reference value
		in existing state	in existing state	in existing state	in existing state	in existing state
		as at	as at	as at	as at	as at
		the Calculation	the Calculation	the Calculation	the Calculation	the Calculation
No.	Property	Date	Date	Date	Date	Date
		RMB	RMB	RMB	RMB	RMB
		Group I:	Group II:	Group III:	Group IV:	Total of the
						property:
24.	Portions of Xi’an Industrial Park located at the	381,150,000	305,880,000	109,000,000	27,900,000	823,930,000
	west of Caotanshi Road, north of
	Shangji Road, Xi’an, Shaanxi Province,					73.91% Interest
	the PRC (西安產業園)					attributable
						to the CEOVU
						Group:
						608,970,000
25.	Portions of Chengdu Chip Valley, Group 1 of	300,000	223,900,000	155,000,000	569,900,000	949,100,000
	Fengle Community, Dongsheng Street, Group 7
	of Guangrong Community, Peng Town,					80% Interest
	Shuangliu District, Chengdu,					attributable
	Sichuan Province, the PRC (成都芯谷)					to the CEOVU
						Group:
						759,280,000
26.	Shanghai Logistic Enterprise Community,	–	–	198,000,000	17,000,000	215,000,000
	Lot 114/1, 101 Street, Songjiang Industrial Park,
	Songjiang District, Shanghai, the PRC					100% Interest
	(上海物聯港)					attributable
						to the CEOVU
						Group:
						215,000,000
27.	Portions of Wenzhou Industrial Park,	129,660,000	–	123,000,000	-	252,660,000
	Jinhai Park, Wenzhou Economic and
	Technological Development Zone, Wenzhou,					95% Interest
	Zhejiang Province, the PRC (温州產業園)					attributable
						to the CEOVU
						Group:
						240,030,000

V-11

PROPERTY CALCULATION REPORT

APPENDIX V

						Total
		Reference value	Reference value	Reference value	Reference value	reference value
		in existing state	in existing state	in existing state	in existing state	in existing state
		as at	as at	as at	as at	as at
		the Calculation	the Calculation	the Calculation	the Calculation	the Calculation
No.	Property	Date	Date	Date	Date	Date
		RMB	RMB	RMB	RMB	RMB
		Group I:	Group II:	Group III:	Group IV:	Total of the
						property:
28.	Hainan Resort Software Community,	1,064,300,000	696,900,000	–	228,500,000	1,989,700,000
	Southern section situated at 0.7km of
	the Eastern Extension of Nan Yi Ring Road,					10% Interest
	Chengmai County Old Town Economic					attributable
	Development Zone, Hainan Province, the PRC					to the CEOVU
	(海南生態軟件園)					Group:
						198,970,000
29.	Ningbo Hangzhouwan Center, Blue Coast,	–	–	3,724,300,000	225,700,000	3,950,000,000
	Hangzhouwan New District,
	Ningbo, Zhejiang Province, the PRC					31% Interest
	(寧波杭州灣中心、蔚藍海岸)					attributable
						to the CEOVU
						Group:
						1,224,500,000
30.	Western Zhigu Park, east of Gaoke Third Road,	–	–	248,000,000	–	248,000,000
	south of Beiwei Second Road, west of
	Gaoke Second Road and north of					50% Interest
	Xinghuo Avenue in Xianyang					attributable
	High-Tech Industrial Development Zone,					to the CEOVU
	Qindu District, Xianyang, Shaanxi Province,					Group:
	the PRC (西部智谷產業園)					124,000,000
31.	Zhuhai Hengqin Zhishuyun, east of	–	–	465,000,000	–	465,000,000
	Fubang Road, south of Xingsheng Third Road,
	west of Fuguo Road and north of					30% Interest
	Xingsheng Second Road, Hengqin New District,					attributable
	Zhuhai, Guangdong Province,					to the CEOVU
	the PRC (珠海橫琴智數雲)					Group:
						139,500,000
	Total	6,027,040,000	3,922,480,000	5,928,800,000	1,172,900,000	17,051,220,000

Total reference value attributable to the CEOVU Group: RMB11,539,520,000

V-12

PROPERTY CALCULATION REPORT

APPENDIX V

PROPERTY REFERENCE VALUE CALCULATION SHEET

Reference value in
Particulars of existing state as at the
No. Property[1] Description and tenure[1] occupancy[1] Calculation Date RMB
1. Portions of Optics Valley Optics Valley Software Park is a business Portions of the property 469,800,000 Software Park, east of park erected on 4 parcels of land with a total are occupied by various Guanshan Avenue and site area of approximately 488,642.52 sq.m. tenants, while the rest of 100% Interest south of Nanhu South which accommodates exhibition centers, the property is vacant or attributable to the Road, East Lake Hi-Tech offices and ancillary facilities in seven occupied by the CEOVU CEOVU Group: Development Zone, phases. As advised by the CEOVU Group, Group. 469,800,000 Wuhan, Optics Valley Software Park was completed Hubei Province, in various stages between 2009 and 2013. the PRC (光谷軟件園) The property comprises Blocks A, B, C, D of Exhibition Center, Building Nos. 1-2 of Phase V, various office units in Building A3 of Phase III and 1,001 car parking spaces in Optics Valley Software Park together having a total gross floor area of approximately 60,304.12 sq.m.

The land use rights of the property have been granted for four concurrent terms expiring on 4 May 2052, 6 May 2059 and 30 November 2059 respectively for industrial use.

Notes:

Information and descriptions are provided by the CEOVU Group.
According to the information provided by the CEOVU Group, the gross floor area of the property is set out as below:

Part Usage Portions of Optics Office Valley Software Park Commercial Car parking spaces Grand-total:	Gross Floor Area *(sq.m.)* 21,092.87 4,764.81 34,446.44 60,304.12	Nos. of car parking *(lots)* 1,001
		1,001

V-13

PROPERTY CALCULATION REPORT

APPENDIX V

Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit price of these properties ranges from RMB8,700 to RMB9,000 for office units and RMB130,000 per lot for car parking spaces. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
b. For commercial part, the unit rent of the comparable transactions basis ranges from RMB5.3 to RMB5.9 per sq.m. per day, and we have applied a market rent of RMB5.1 per sq.m. per day.

For office part, the unit rent of the comparable transactions basis ranges from RMB2.2 to RMB2.3 per sq.m. per day, and we have applied a market rent of RMB2.3 per sq.m. per day.

c. Based on our research on retail market of the same area of the property, considering the location, risks and characteristics of retail units of the property, we have applied a market yield of 6.25% as the capitalization rate for commercial part in the calculation.
- Based on our research on office market of the same area of the property, considering the location, risks and characteristics of office units of the property, we have applied a market yield of 6.5% as the capitalization rate for office part in the calculation.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	134,900,000
Group II - held for investment by the CEOVU Group	334,900,000
Group III - held under development by the CEOVU Group	–
Group IV - held for future development by the CEOVU Group	–
Grand-total:	469,800,000

V-14

PROPERTY CALCULATION REPORT

APPENDIX V

PROPERTY REFERENCE VALUE CALCULATION SHEET

No. Property[1] Description and tenure[1]

Various office units in Financial Harbour is a business park Phases I and II of accommodates office and ancillary facilities. Financial Harbour, No. It comprises two phases: Phase I occupies a 77 Guanggu Avenue, parcel of land with a site area of East Lake Hi-tech approximately 145,855.98 sq.m. and Phase Development Zone, II occupies a parcel of land with a site area Wuhan, of approximately 231,310.24 sq.m. As Hubei Province, advised by the CEOVU Group, Financial the PRC (金融港) Harbour was completed in 2012 and 2015.

Reference value Particulars of in existing state as at occupancy[1] the Calculation Date RMB Portions of the property 312,400,000 are occupied by various tenants, while the rest of 100% Interest the property is vacant or attributable to the occupied by the CEOVU CEOVU Group: Group. 312,400,000

The property comprises various office and apartment units and 388 car parking spaces together having a total gross floor area of approximately 46,899.05 sq.m. in Financial Harbour.

The land use rights of the property have been granted for a term expiring on 17 May 2056 and 22 September 2059 respectively for industrial use.

Notes:

Information and descriptions are provided by the CEOVU Group.
According to the information provided by the CEOVU Group, the gross floor area of the property is set out as below:

Part Usage Portions of Office Financial Harbour Apartment Car parking spaces Grand-total:	Gross Floor Area *(sq.m.)* 22,218.66 8,993.56 15,686.83 46,899.05	Nos. of car parking *(lots)* 388
		388

V-15

PROPERTY CALCULATION REPORT

APPENDIX V

Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit price of these properties ranges from RMB7,700 to RMB8,700 for office units, RMB130,000 per lot for car parking spaces. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
b. For office part, the unit rent of the comparable transactions basis ranges from RMB2.0 to RMB2.1 per sq.m. per day, and we have applied a market rent of RMB2.0 per sq.m. per day.

For apartment part, the unit rent of the comparable transactions basis ranges from RMB1.0 to RMB1.2 per sq.m. per day, and we have applied a market rent of RMB1.1 per sq.m. per day.

c. Based on our research on office market of the same area of the property, considering the location, risks and characteristics of retail units of the property, we have applied a market yield of 6.5% as the capitalization rate for commercial part in the calculation.
- Based on our research on apartment market of the same area of the property, considering the location, risks and characteristics of office units of the property, we have applied a market yield of 5.0% as the capitalization rate for office part in the calculation.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

Group Group I - held for owner occupation or for sale by the CEOVU Group Group II - held for investment by the CEOVU Group Group III - held under development by the CEOVU Group Group IV - held for future development by the CEOVU Group Grand-total:	Reference value in existing state as at the Calculation Date *(RMB)* 148,000,000 164,400,000 – – 312,400,000

V-16

PROPERTY CALCULATION REPORT

APPENDIX V

PROPERTY REFERENCE VALUE CALCULATION SHEET

No. Property[1] Description and tenure[1]

Portions of Creative Creative Capital occupies a parcel of land Capital, No. 16 Yezhihu with a site area of 193,899.68 sq.m. and was West Road, Hongshan completed between 2014 and 2016. District, Wuhan, Hubei Province, The property comprises various retail and the PRC (創意天地) office units and 1,641 car parking spaces together having a total gross floor area of 186,128.11 sq.m. of Creative Capital.
Reference value
Particulars of in existing state as at occupancy[1] the Calculation Date RMB
Portions of the property 2,103,700,000 are occupied by various tenants, while the rest of 100% Interest the property is vacant or attributable to the occupied by the CEOVU CEOVU Group: Group. 2,103,700,000

The land use rights of the property have been granted for a term expiring on 8 July 2050 for office, retail and car parking uses.

Notes:

Information and descriptions are provided by the CEOVU Group.
According to the information provided by the CEOVU Group, the gross floor area of the property is set out as below:

Part Usage Portions of Office Creative Capital Retail Car parking spaces Grand-total:	Gross Floor Area *(sq.m.)* 77,051.77 55,576.34 53,500.00 186,128.11	Nos. of car parking *(lots)* 1,641
		1,641

Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit price of these properties ranges from RMB11,000 to RMB12,000 for office units, ranges from RMB25,000 to RMB30,000 for retail units, and RMB144,000 per lot for car parking spaces. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
b. For commercial part, the unit rent of the comparable transactions basis ranges from RMB3.3 to RMB3.9 per sq.m. per day, and we have applied a market rent of RMB3.1 per sq.m. per day.

For office part, the unit rent of the comparable transactions basis ranges from RMB1.7 to RMB2.1 per sq.m. per day, and we have applied a market rent of RMB1.9 per sq.m. per day.

V-17

PROPERTY CALCULATION REPORT

APPENDIX V

c. Based on our research on retail market of the same area of the property, considering the location, risks and characteristics of retail units of the property, we have applied a market yield of 4.5% as the capitalization rate for commercial part in the calculation.
- Based on our research on office market of the same area of the property, considering the location, risks and characteristics of office units of the property, we have applied a market yield of 6.5% as the capitalization rate for office part in the calculation.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

Group Group I - held for owner occupation or for sale by the CEOVU Group Group II - held for investment by the CEOVU Group Group III - held under development by the CEOVU Group Group IV - held for future development by the CEOVU Group Grand-total:	Reference value in existing state as at the Calculation Date *(RMB)* 1,533,300,000 570,400,000 – – 2,103,700,000

V-18

PROPERTY CALCULATION REPORT

APPENDIX V

PROPERTY REFERENCE VALUE CALCULATION SHEET

				Reference value in
			Particulars of	existing state as at the
No.	Property1	Description and tenure1	occupancy1	Calculation Date
				RMB
4.	Portions of Wuhan	Wuhan Innocenter (Huisheng) occupies a	Portions of Part A are	351,900,000
	Innocenter (Huisheng)	parcel of land with a site area of	occupied by various
	located at Liangshantou	approximately 110,175.50 sq.m. which will	tenants, while the rest of	100% Interest
	Village, Liufang Street,	be developed into a business park	Part A is vacant or	attributable to the
	Jiangxia District, Wuhan,	accommodates office and ancillary facilities	occupied by the CEOVU	CEOVU Group:
	Hubei Province,	in three phases. Phases I and II of Wuhan	Group.	351,900,000
	the PRC	Innocenter (Huisheng) occupy a total
	(武漢研創中心(滙盛))	apportioned land area of approximately	Part B is vacant for
		97,158.29 sq.m. and were completed	future development.
		between 2012 and 2013; Phase III of Wuhan
		Innocenter (Huisheng) occupies an
		apportioned land area of approximately
		13,017.21 sq.m. which is vacant for future
		development.

The property comprises: (i) Building nos.1 to 3, 4 and 6 of Phase I with a total gross floor area of approximately 8,480.61 sq.m. and Building nos. 14 to 20, 22, 23, 25 to 28 and 29 of Phase II with a total gross floor area of approximately 49,139.74 sq.m. (“Part A”); and (ii) the construction work of Phase III of Wuhan Innocenter (Huisheng) has not commenced (“Part B”).

The land use rights of the property have been granted for a term expiring on 6 July 2057 for industrial use.

Notes:

Information and descriptions are provided by the CEOVU Group.

V-19

PROPERTY CALCULATION REPORT

APPENDIX V

According to the information provided by the CEOVU Group, the gross floor area of Part A of the property is set out as below:

Part Usage Phase I Office Ancillary Sub-total: Phase II Office Car parking spaces Sub-total: Grand-total:	Gross Floor Area *(sq.m.)* 7,597.09 883.52 8,480.61 39,580.32 9,559.42 49,139.74 57,620.35	Nos. of car parking *(lots)* 288
		288

Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit price of these properties ranges from RMB8,400 to RMB8,500 for office units, and monthly rent of RMB180 per lot for car parking spaces. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
b. For office part, the unit rent of the comparable transactions basis ranges from RMB1.27 to RMB1.33 per sq.m. per day, and we have applied a market rent of RMB1.20 per sq.m. per day.
c. Based on our research on office market of the same area of the property, considering the location, risks and characteristics of office units of the property, we have applied a market yield of 6.0% as the capitalization rate for office part in the calculation.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	177,000,000
Group II - held for investment by the CEOVU Group	170,300,000
Group III - held under development by the CEOVU Group	–
Group IV - held for future development by the CEOVU Group	4,600,000
Grand-total:	351,900,000

V-20

PROPERTY CALCULATION REPORT

APPENDIX V

PROPERTY REFERENCE VALUE CALCULATION SHEET

				Reference value in
			Particulars of	existing state as at the
No.	Property1	Description and tenure1	occupancy1	Calculation Date
				RMB
5.	Portions of Wuhan	Wuhan Innocenter (Minghong) occupies a	Portions of Part A are	161,400,000
	Innocenter (Minghong)	parcel of land with a site area of	occupied by various
	located at Liangshantou	approximately 85,613.97 sq.m. which will	tenants, while the rest of	100% Interest
	Village, Liufang Street,	be developed into a business park	Part A is vacant or	attributable to the
	Jiangxia District, Wuhan,	accommodates office and ancillary facilities	occupied by the CEOVU	CEOVU Group:
	Hubei Province,	in two phases. Phase I of Wuhan Innocenter	Group.	161,400,000
	the PRC (武漢研創中心	(Minghong) occupies an apportioned land
	(鳴鴻))	area of approximately 72,105.96 sq.m. and	Part B is vacant for
		was completed between 2012 and 2013;	future development.
		Phase III of Wuhan Innocenter (Minghong)
		occupies an apportioned land area of
		approximately 13,508.01 sq.m. which is
		vacant for future development.
		The property comprises: (i) Building nos.
		13, 15, 17 to 19 and 21 of Phase I with a
		total gross floor area of approximately
		25,281.90 sq.m. (“Part A”); and (ii) the
		construction work of Phase III of Wuhan
		Innocenter (Minghong) has not commenced
		(“Part B”).
		The land use rights of the property have
		been granted for a term expiring on 6 July
		2057 for industrial use.

Notes:

Information and descriptions are provided by the CEOVU Group.
According to the information provided by the CEOVU Group, the gross floor area of Part A of the property is set out as below:

Part Usage Phase I Office Ancillary Grand-total:	Gross Floor Area *(sq.m.)* 22,630.65 2,651.25
	25,281.90

V-21

PROPERTY CALCULATION REPORT

APPENDIX V

Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit price of these properties ranges from RMB8,400 to RMB8,500 for office units. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
b. For office part, the unit rent of the comparable transactions basis ranges from RMB1.27 to RMB1.33 per sq.m. per day, and we have applied a market rent of RMB1.20 per sq.m. per day.
c. Based on our research on office market of the same area of the property, considering the location, risks and characteristics of office units of the property, we have applied a market yield of 6.0% as the capitalization rate for office part in the calculation.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

below:
	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	59,200,000
Group II - held for investment by the CEOVU Group	97,500,000
Group III - held under development by the CEOVU Group	–
Group IV - held for future development by the CEOVU Group	4,700,000
Grand-total:	161,400,000

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PROPERTY REFERENCE VALUE CALCULATION SHEET

Reference value in Particulars of existing state as at the No. Property[1] Description and tenure[1] occupancy[1] Calculation Date RMB 6. Units 1-101, 1-201, North Harbour Industrial Park (Lido The property is occupied 30,340,000 1-301 and 1-401, Block Technology) is a business park which by various tenants. 1, Joint Enterprise accommodates office completed in 2007. 100% Interest Center, North Harbour attributable to the Industrial Park (Lido The property comprises Units 1-101, CEOVU Group: Technology), No. 17 1-201, 1-301 and 1-401 of a 4-storey 30,340,000 Wenzhi Street, Hongshan office building with a total gross floor area District, Wuhan, of 3,683.1 sq.m. Hubei Province, the PRC (北港工業園 (麗島科技))

Notes:

Information and descriptions are provided by the CEOVU Group.
Our calculation has been made on the following basis and analysis:
a. For office part, the unit rent of the comparable transactions basis ranges from RMB1.87 to RMB2.00 per sq.m. per day, and we have applied a market rent of RMB1.53 per sq.m. per day.
b. Based on our research on office market of the same area of the property, considering the location, risks and characteristics of office units of the property, we have applied a market yield of 7.0% as the capitalization rate for office part in the calculation.
c. As advised by the CEOVU Group, Unit 1-101 of the property with a total gross floor area of 784.39 sq.m. has been pre sold to a third party at a consideration of RMB7,840,000 and has not been virtually transferred. In arriving at our opinion on the reference value of the property, we have taken into account the contracted prices of such portion.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	7,840,000
Group II - held for investment by the CEOVU Group	22,500,000
Group III - held under development by the CEOVU Group	–
Group IV - held for future development by the CEOVU Group	–
Grand-total:	30,340,000

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PROPERTY CALCULATION REPORT

APPENDIX V

PROPERTY REFERENCE VALUE CALCULATION SHEET

				Reference value in
			Particulars of	existing state as at the
No.	Property1	Description and tenure1	occupancy1	Calculation Date
				RMB
7.	Units 1-101, 1-201,	North Harbour Industrial Park (Lido	The property is occupied	25,300,000
	1-301, 1-301 overhead	Property) is a business park which	by various tenants.
	layer and 2-301, 2-401,	accommodates office completed in 2007.		100% Interest
	2-501, Block 2, Joint			attributable to the
	Enterprise Center, North	The property comprises 4 office units on		CEOVU Group:
	Harbour Industrial Park	Levels 1 to 5 of a 5-storey office building		25,300,000
	(Lido Property), No. 17	with a total gross floor area of 3,545.60
	Wenzhi Street, Hongshan	sq.m.
	District, Wuhan,
	Hubei Province,
	the PRC (北港工業園
	(麗島物業))

Notes:

Information and descriptions are provided by the CEOVU Group.
Our calculation has been made on the following basis and analysis:
a. For office part, the unit rent of the comparable transactions basis ranges from RMB1.87 to RMB2.00 per sq.m. per day, and we have applied a market rent of RMB1.53 per sq.m. per day.
b. Based on our research on office market of the same area of the property, considering the location, risks and characteristics of office units of the property, we have applied a market yield of 7.0% as the capitalization rate for office part in the calculation.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	–
Group II - held for investment by the CEOVU Group	25,300,000
Group III - held under development by the CEOVU Group	–
Group IV - held for future development by the CEOVU Group	–
Grand-total:	25,300,000

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PROPERTY CALCULATION REPORT

APPENDIX V

PROPERTY REFERENCE VALUE CALCULATION SHEET

Reference value in Particulars of existing state as at the No. Property[1] Description and tenure[1] occupancy[1] Calculation Date RMB 8. 80 underground car Lido Garden is a residential development The property is currently 51,400,000 parking spaces, a completed in 2007. vacant. clubhouse and retail 100% Interest outlet No. C-18, Lido The property comprises a clubhouse and a attributable to the Garden, No. 497 Luoshi retail outlet of Lido Garden with a total CEOVU Group: Road, Hongshan gross floor area of 6,831.98 sq.m. and 80 51,400,000 District, Wuhan, underground car parking spaces. Hubei Province, the PRC (麗島花園) The land use rights of the property have been granted for a term expiring on 28 April 2069 for residential use.

Notes:

Information and descriptions are provided by the CEOVU Group.
Our calculation has been made on the following basis and analysis:
a. For commercial part, the unit rent of the comparable transactions basis ranges from RMB1.78 to RMB1.9 per sq.m. per day, and we have applied a market rent of RMB1.61 per sq.m. per day.
b. Based on our research on office market of the same area of the property, considering the location, risks and characteristics of commercial units of the property, we have applied a market yield of 5.0% as the capitalization rate for commercial part in the calculation.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	14,400,000
Group II - held for investment by the CEOVU Group	37,000,000
Group III - held under development by the CEOVU Group	–
Group IV - held for future development by the CEOVU Group	–
Grand-total:	51,400,000

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PROPERTY CALCULATION REPORT

APPENDIX V

PROPERTY REFERENCE VALUE CALCULATION SHEET

				Reference value in
			Particulars of	existing state as at the
No.	Property1	Description and tenure1	occupancy1	Calculation Date
				RMB
9.	Retail outlet No.6-1-1	Lido 2046 is a residential development	The property is currently	22,500,000
	and 53 underground car	completed in 2016.	vacant.
	parking spaces, Lido			100% Interest
	2046, No. 175 Xiongchu	The property comprises a retail outlet with a		attributable to the
	Road, Hongshan District,	total gross floor area of approximately		CEOVU Group:
	Wuhan,	520.42 sq.m. and 53 underground car		22,500,000
	Hubei Province,	parking spaces of Lido 2046.
	the PRC (麗島2046)
		The land use rights of the property have
		been granted for a term expiring on 8
		February 2080 for residential use.

Notes:

Information and descriptions are provided by the CEOVU Group.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	22,500,000
Group II - held for investment by the CEOVU Group	–
Group III - held under development by the CEOVU Group	–
Group IV - held for future development by the CEOVU Group	–
Grand-total:	22,500,000

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PROPERTY CALCULATION REPORT

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PROPERTY REFERENCE VALUE CALCULATION SHEET

				Reference value in
			Particulars of	existing state as at the
No.	Property1	Description and tenure1	occupancy1	Calculation Date
				RMB
10.	258 underground car	Up Mason is a residential development	The property is currently	19,600,000
	parking spaces, Up	completed in 2013.	vacant.
	Mason, No. 318 Minzu			100% Interest
	Avenue, East Lake	The property comprises 258 underground		attributable to the
	Hi-Tech Development	car parking spaces of Up Mason.		CEOVU Group:
	Zone, Wuhan,			19,600,000
	Hubei Province,	The land use rights of the property have
	the PRC (麗島美生)	been granted for a term expiring on 11 July
		2077 for residential use.

Notes:

Information and descriptions are provided by the CEOVU Group.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	19,600,000
Group II - held for investment by the CEOVU Group	–
Group III - held under development by the CEOVU Group	–
Group IV - held for future development by the CEOVU Group	–
Grand-total:	19,600,000

V-27

PROPERTY CALCULATION REPORT

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PROPERTY REFERENCE VALUE CALCULATION SHEET

No. Property[1] Description and tenure[1] 11. Portions of Huangshi Huangshi OVU Science and Technology OVU Science and City occupies a parcel of land with total site Technology City, area of approximately 175,337 sq.m., which Baoshan Road and will be developed into a business park in Jinshan Boulevard, three phases. Phases I and II occupy a total Golden Hill New apportioned land area of approximately Industrial Zone, 110,131.76 sq.m., portions of Phase I have Huangshi, been completed in 2014. Phase III occupies Hubei Province, an apportioned land area of approximately the PRC 65,205.24 sq.m. which is vacant for future (黃石聯合科技城) development.

Reference value in Particulars of existing state as at the occupancy[1] Calculation Date RMB Portions of Part A are 338,000,000 occupied by various tenants, while the rest of 100% Interest Part A is vacant or attributable to the occupied by the CEOVU CEOVU Group: Group. 338,000,000 Part B is currently under construction.

Part C is vacant for future development.

The property comprises: (i) 64 office units, ancillary and underground area of Phase I with a total gross floor area of approximately 43,318.47 sq.m. (“Part A”); (ii) the whole Phase II of Huangshi OVU Science and Technology City with a total planned gross floor area of approximately 37,710.53 sq.m. (“Part B”) is under construction; and (iii) the construction work of Phase III occupying an apportioned land area of approximately 65,205.24 sq.m. has not commenced (“Part C”).

As advised by the CEOVU Group, Part B of the property is scheduled to be completed in October 2020. The total construction cost of Part B is estimated to be approximately RMB144,000,000, of which RMB110,000,000 had been paid up to the Calculation Date.

The land use rights of the property have been granted for a term expiring on 9 March 2063 for industrial use.

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PROPERTY CALCULATION REPORT

APPENDIX V

Notes:

Information and descriptions are provided by the CEOVU Group.
According to the information provided by the CEOVU Group, the gross floor area of Part A of the property is set out as below:

Part Usage Phase I Office Ancillary and underground area Grand-total:	Gross Floor Area *(sq.m.)* 38,519.76 4,798.71
	43,318.47

Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit price of these properties ranges from RMB4,280 to RMB5,631 for high-rise office buildings and unit price of RMB10,000 for office villas. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
b. For office part, the unit rent of the comparable transactions basis ranges from RMB1.03 to RMB1.22 per sq.m. per day, and we have applied a market rent of RMB0.89 per sq.m. per day.
c. Based on our research on office market of the same area of the property, considering the location, risks and characteristics of office units of the property, we have applied a market yield of 5.0% as the capitalization rate for office part in the calculation.
As advised by the CEOVU Group, Phase III occupies an apportioned land area of approximately 65,205.24 sq.m. and is vacant for future development. The construction work of Phase III has not commenced.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	171,900,000
Group II - held for investment by the CEOVU Group	35,700,000
Group III - held under development by the CEOVU Group	117,600,000
Group IV - held for future development by the CEOVU Group	12,800,000
Grand-total:	338,000,000

V-29

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PROPERTY REFERENCE VALUE CALCULATION SHEET

Reference value in
Particulars of existing state as at the
No. Property[1] Description and tenure[1] occupancy[1] Calculation Date RMB
1. Portions of Lido Top The property comprises various retail and Portions of the property 162,900,000 View, No. 76 Hangzhou residential units with a total gross floor area are occupied by various West Road, Huangshi of approximately 16,912.34 sq.m., which tenants, while the rest of 100% Interest Economic Development was completed between 2014 and 2016. the property is vacant or attributable to the Zone, Huangshi, occupied by the CEOVU CEOVU Group: Hubei Province, The land use rights of the property have Group. 162,900,000 the PRC been granted for four concurrent terms (麗島半山華府) expiring on 30 August 2045 and 30 November 2046 for commercial use and 30 August 2075 and 30 November 2076 for residential use respectively.

Notes:

Information and descriptions are provided by the CEOVU Group.
According to the information provided by the CEOVU Group, the gross floor area of the property is set out as below:

Part Usage Portions of Retail Lido Top View Residential Grand-total:	Gross Floor Area *(sq.m.)* 15,754.85 1,157.49 16,912.34

Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences of the property provided by the CEOVU Group. The unit price of these properties ranges from RMB9,000 to RMB10,000 for residential units, and ranges from RMB15,000 to RMB16,000 for retail units. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
b. For commercial part, the unit rent of the comparable transactions basis ranges from RMB1.9 to RMB2.3 per sq.m. per day, and we have applied a market rent of RMB2.1 per sq.m. per day.

For office part, the unit rent of the comparable transactions basis ranges from RMB1.0 to RMB1.2 per sq.m. per day, and we have applied a market rent of RMB0.9 per sq.m. per day.

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PROPERTY CALCULATION REPORT

APPENDIX V

c. Based on our research on retail market of the same area of the property, considering the location, risks and characteristics of retail units of the property, we have applied a market yield of 3.75% as the capitalization rate for commercial part in the calculation.
- Based on our research on office market of the same area of the property, considering the location, risks and characteristics of office units of the property, we have applied a market yield of 5.0% as the capitalization rate for office part in the calculation.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	15,600,000
Group II - held for investment by the CEOVU Group	147,300,000
Group III - held under development by the CEOVU Group	–
Group IV - held for future development by the CEOVU Group	–
Grand-total:	162,900,000

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PROPERTY CALCULATION REPORT

APPENDIX V

PROPERTY REFERENCE VALUE CALCULATION SHEET

Property[1] Description and tenure[1]

No.

Portions of Ezhou OVU Ezhou OVU Science and Technology City Science and Technology occupies 3 parcels of land with total site City, Gaoxin Third Road, area of approximately 413,092.40 sq.m., Hubei Gedian Highwhich will be developed into a business park Technology Industrial in three blocks. Development Zone, Ezhou, Block C and Block D of Ezhou OVU Hubei Province, Science and Technology City occupy 2 the PRC parcels of land with total site area of (鄂州光谷聯合科技城) approximately 271,451.70 sq.m. and were completed between 2013 and 2019.
Ezhou OVU Science and Technology City occupies 3 parcels of land with total site area of approximately 413,092.40 sq.m., which will be developed into a business park in three blocks.

Reference value in Particulars of existing state as at the occupancy[1] Calculation Date RMB Part A is vacant or 270,800,000 occupied by the CEOVU Group. 80% Interest attributable to the Part B is currently under CEOVU Group: construction. 216,640,000

Part C is vacant for future development.

Block B of Ezhou OVU Science and Technology City occupies a parcel of land with total site area of approximately 141,640.70 sq.m., of which the apportioned land area of approximately 22,420.80 sq.m. is under construction and the remaining portion is vacant for future development.

The property comprises: (i) Building nos. C2-3-2, C6-2, C7-2 and C7-3 of Block C with a total gross floor area of approximately 23,877.86 sq.m. and Building nos. D1-3-1, D1-1-3 and D1-1-1 of Block D with a total gross floor area of approximately 13,755.49 sq.m. (“Part A”); (ii) Block B occupies an apportioned land area of approximately 22,420.80 sq.m. and have a total planned gross floor area of approximately 33,064.66 sq.m. (“Part B”); and (iii) the construction work of Phase III occupying an apportioned land area of approximately 119,219.90 sq.m. has not commenced (“Part C”).

As advised by the CEOVU Group, Part B of the property is scheduled to be completed in October 2020. The total construction cost of Part B is estimated to be approximately RMB57,000,000, of which RMB30,000,000 had been paid up to the Calculation Date.

The land use rights of the property have been granted for a term expiring on 24 March 2063 for industrial use.

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PROPERTY CALCULATION REPORT

APPENDIX V

Notes:

Information and descriptions are provided by the CEOVU Group.
According to the information provided by the CEOVU Group, the gross floor area of Part A of the property is set out as below:

Part Usage Block C Office Workshop Sub-total: Block D Office Ancillary and underground area Sub-total: Grand-total:	Gross Floor Area *(sq.m.)* 20,193.64 3,684.22
	23,877.86
	10,576.44 3,179.05
	13,755.49
	37,633.35

Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit price of RMB5,700 for office units and unit price of RMB3,900 for workshop. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
As advised by the CEOVU Group, Part C occupies an apportioned land area of approximately 119,219.90 sq.m. The construction work of Part C has not commenced.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	199,800,000
Group II - held for investment by the CEOVU Group	–
Group III - held under development by the CEOVU Group	37,000,000
Group IV - held for future development by the CEOVU Group	34,000,000
Grand-total:	270,800,000

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PROPERTY REFERENCE VALUE CALCULATION SHEET

No. Property[1]

Description and tenure[1]

Portions of Huanggang Huanggang OVU Science and Technology OVU Science and City occupies 3 parcels of land with total Technology City, site area of approximately 194,685.30 sq.m., northeastern corner of which will be developed into a business park Xingang North Road and in three phases. Phases I and II occupy 2 Zhonghuan Road, parcels of land with a site area of Huangzhou District, approximately 75,479.20 sq.m. and Huanggang, 49,431.30 sq.m. respectively. Portions of Hubei Province, Phases I and II were completed between the PRC 2017 and 2018. Phase III occupies a parcel (黃岡光谷聯合科技城) of land with a site area of approximately 69,774.80 sq.m. which is vacant for future development.

Reference value in Particulars of existing state as at the occupancy[1] Calculation Date RMB Portions of Part A are 86,000,000 occupied by various tenants, while the rest of 70% Interest Part A is vacant or attributable to the occupied by the CEOVU CEOVU Group: Group. 60,200,000

Part B is vacant for future development.

The property comprises: (i) Building A4, S1, B1, B1a, B2 and no.101 of Building G3 of Phase I together having a total gross floor area of approximately 14,933.62 sq.m. and no.101 of Building D20 of Phase II with a total gross floor area of approximately 4,739.76 sq.m. (“Part A”); and (ii) the rest of Phases I and II with a total apportioned land area of approximately 47,378.64 sq.m. and the whole of Phase III (“Part B”). Part B is currently vacant for future development and the construction work of it has not commenced.

The land use rights of the property have been granted for a term expiring on 28 August 2065 and 27 August 2068 for industrial use.

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PROPERTY CALCULATION REPORT

APPENDIX V

Notes:

Information and descriptions are provided by the CEOVU Group.
According to the information provided by the CEOVU Group, the gross floor area of Part A of the property is set out as below:

Part Usage Phase I Office Ancillary Workshop Dormitory and canteen Sub-total: Phase II Workshop Grand-total:	Gross Floor Area *(sq.m.)* 2,534.83 1,130.58 1,137.38 10,130.83
	14,933.62
	4,739.76
	19,673.38

Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit price of these properties ranges from RMB3,600 to RMB3,800 for office units and workshop. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
b. For dormitory part, the unit rent of the comparable transactions basis ranges from RMB0.85 to RMB1.14 per sq.m. per day, and we have applied a market rent of RMB0.77 per sq.m. per day.
c. Based on our research on office market of the same area of the property, considering the location, risks and characteristics of dormitory units of the property, we have applied a market yield of 7.5% as the capitalization rate for dormitory part in the calculation.
As advised by the CEOVU Group, Part B comprises the rest of Phases I and II with a total apportioned land area of approximately 47,378.64 sq.m. and the whole of Phase III with a site area of approximately 69,774.80 sq.m. Part B is vacant for future development and the construction work has not commenced.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	30,800,000
Group II - held for investment by the CEOVU Group	36,200,000
Group III - held under development by the CEOVU Group	–
Group IV - held for future development by the CEOVU Group	19,000,000
Grand-total:	86,000,000

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PROPERTY REFERENCE VALUE CALCULATION SHEET

Reference value in Particulars of existing state as at the No. Property[1] Description and tenure[1] occupancy[1] Calculation Date RMB 15. Various units and 3,615 Hefei Financial Harbour is a business park Portions of the property 1,721,000,000 underground car parking which accommodates office and ancillary are occupied by various spaces in Phases I and II facilities which occupies a parcel of land tenants, while the rest of 100% Interest of Hefei Financial with a site area of approximately 114,435 the property is vacant or attributable to the Harbour, south of sq.m. and was completed between 2016 and occupied by the CEOVU CEOVU Group: Nanjing Road and west 2020. Group. 1,721,000,000 of Huizhou Avenue, Binhu New District, The property has a total gross floor area of Hefei, approximately 257,432.49 sq.m. Anhui Province, the PRC (合肥金融港) The land use rights of the property have been granted for a term expiring on 2 October 2053 for commercial and financial uses.

Notes:

Information and descriptions are provided by the CEOVU Group.
According to the information provided by the CEOVU Group, the gross floor area of the property is set out as below:

Part Usage Phase I Commercial Office Car parking spaces Sub-total: Phase II Commercial Office Car parking spaces Sub-total: Grand-total:	Gross Floor Area *(sq.m.)* 3,621.07 23,772.46 41,450.91 68,844.44 6,190.66 124,340.19 58,057.20 188,588.05 257,432.49	Nos. of car parking *(lots)* 1,099 2,516
		3,615

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PROPERTY CALCULATION REPORT

APPENDIX V

Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit price of the property of Hefei Financial Harbour ranges from RMB7,500 to RMB8,100 for office units, ranges from RMB9,000 to RMB9,400 for commercial units and RMB86,000 per lot for car parking spaces. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
b. For commercial part, the unit rent of the comparable transactions basis ranges from RMB1.4 to RMB1.6 per sq.m. per day, and we have applied a market rent of RMB1.5 per sq.m. per day.
- For office part, the unit rent of the comparable transactions basis ranges from RMB3.2 to RMB3.3 per sq.m. per day, and we have applied a market rent of RMB3.6 per sq.m. per day.
c. Based on our research on retail market of the same area of the property, considering the location, risks and characteristics of retail units of the property, we have applied a market yield of 6.0% as the capitalization rate for commercial part in the calculation.

Based on our research on office market of the same area of the property, considering the location, risks and characteristics of office units of the property, we have applied a market yield of 6.5% as the capitalization rate for office part in the calculation.

For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	1,371,000,000
Group II - held for investment by the CEOVU Group	350,000,000
Group III - held under development by the CEOVU Group	–
Group IV - held for future development by the CEOVU Group	–
Grand-total:	1,721,000,000

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PROPERTY REFERENCE VALUE CALCULATION SHEET

No. Property[1] Description and tenure[1]

Reference value in Particulars of existing state as at the occupancy[1] Calculation Date RMB

Luoyang China Luoyang China Electronics Optics Valley The property is currently 162,000,000 Electronics Optics Valley Information Harbour occupies a parcel of under construction. Information Harbour land with a site area of approximately 70% Interest located at the northwest 101,020.69 sq.m. which will be developed attributable to the side of Guanlin Road and into a business park accommodates office CEOVU Group: Longshan Avenue, and ancillary facilities which are currently 113,400,000 Luolong District, under construction. Luoyang, The property comprises the whole of Henan Province, Luoyang China Electronics Optics Valley the PRC (洛陽中電光谷信息港) Information Harbour with a total planned gross floor area of approximately 98,397.65 sq.m. As advised by the CEOVU Group, the property is scheduled to be completed in 2021. The total construction cost of the property is estimated to be approximately RMB276,000,000, of which RMB105,000,000 had been paid up to the Calculation Date. The land use rights of the property have been granted for a term expiring on 13 August 2068 for industrial use.

Notes:

Information and descriptions are provided by the CEOVU Group.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	–
Group II - held for investment by the CEOVU Group	–
Group III - held under development by the CEOVU Group	162,000,000
Group IV - held for future development by the CEOVU Group	–
Grand-total:	162,000,000

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PROPERTY REFERENCE VALUE CALCULATION SHEET

Reference value in
Particulars of existing state as at the
No. Property[1] Description and tenure[1] occupancy[1] Calculation Date RMB
1. Portions of Changsha Changsha Information Security Industrial Part A is vacant or 415,490,000 Information Security Park occupies a parcel of land with a site occupied by the CEOVU Industrial Park, Yuelu area of approximately 129,549.79 sq.m. Group. 100% Interest Avenue, High-tech which will be developed into a business park attributable to the District, Changsha, accommodates office and ancillary facilities Part B is currently under CEOVU Group: Hunan Province, in four blocks. Block A occupies an construction. 415,490,000 the PRC apportioned land area of approximately (長沙信息安全產業園) 36,495.12 sq.m. and was completed in 2013; Blocks B, C and D occupy a total apportioned land area of approximately 93,054.67 sq.m. and are currently under construction.

The property comprises: (i) 759 car parking spaces of Block A with a total gross floor area of approximately 25,103.93 sq.m. (“Part A”); and (ii) the whole of Blocks B, C and D with a total planned gross floor area of approximately 371,989.03 sq.m. (“Part B”).

As advised by the CEOVU Group, Part B of the property is scheduled to be completed in December 2022. The total construction cost of Part B is estimated to be approximately RMB1,178,000,000, of which RMB199,000,000 had been paid up to the Calculation Date.

The land use rights of the property have been granted for a term expiring on 26 December 2067 for industrial use.

Notes:

Information and descriptions are provided by the CEOVU Group.

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PROPERTY CALCULATION REPORT

APPENDIX V

Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit price of car parking spaces ranges from RMB100,000 to RMB120,000 per lot. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	83,490,000
Group II - held for investment by the CEOVU Group	–
Group III - held under development by the CEOVU Group	332,000,000
Group IV - held for future development by the CEOVU Group	–
Grand-total:	415,490,000

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PROPERTY REFERENCE VALUE CALCULATION SHEET

				Reference value in
			Particulars of	existing state as at the
No.	Property1	Description and tenure1	occupancy1	Calculation Date
				RMB
18.	Shenyang Maker	Shenyang Maker Corporation occupies a	The property is currently	80,900,000
	Corporation, No. 12	parcel of land with a site area of	under construction.
	Qixing Avenue, Shenbei	approximately 15,422 sq.m. which will be		100% Interest
	New District,	developed into a business park		attributable to the
	Shenyang,	accommodates office and ancillary facilities		CEOVU Group:
	Liaoning Province,	and are currently under construction.		80,900,000
	the PRC
	(瀋陽創客公社)	The property comprises the whole of
		Shenyang Maker Corporation. Upon
		completion, it will have a total gross floor
		area of approximately 47,635.09 sq.m., the
		details of which are set out below:

Usage Residential Commercial Car parking spaces Grand-total:	Gross Floor Area *(sq.m.)* 11,075.06 25,821.77 10,738.26 47,635.09	Nos. of car parking *(lots)* 300
		300

As advised by the CEOVU Group, the property is scheduled to be completed in December 2020. The total construction cost of the property is estimated to be approximately RMB237,000,000, of which RMB76,000,000 had been paid up to the Calculation Date.

The land use rights of the property have been granted for a term expiring on 17 October 2058 for commercial use.

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PROPERTY CALCULATION REPORT

APPENDIX V

Notes:

Information and descriptions are provided by the CEOVU Group.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	–
Group II - held for investment by the CEOVU Group	–
Group III - held under development by the CEOVU Group	80,900,000
Group IV - held for future development by the CEOVU Group	–
Grand-total:	80,900,000

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PROPERTY REFERENCE VALUE CALCULATION SHEET

Reference value in
Particulars of existing state as at the
No. Property[1] Description and tenure[1] occupancy[1] Calculation Date RMB
1. Portions of Shenyang Shenyang OVU Science and Technology Part A is vacant or 18,100,000 OVU Science and City is a business park which accommodates occupied by the Technology City, office and ancillary facilities in phases CEOVU Group. 100% Interest intersection of Shengjing which occupy 3 parcels of land with a total attributable to the Avenue and Fourth Ring site area of approximately 139,950 sq.m. Part B is vacant for CEOVU Group: Road, Shenbei New future development. 18,100,000 District, Phases I A7-1 and A7-2 of Shenyang OVU Shenyang, Science and Technology City were Liaoning Province, completed in 2017. Phases I A1-A4 and B17 the PRC of Shenyang OVU Science and Technology (瀋陽光谷聯合科技城) City occupies a total apportioned land area of approximately 26,600 sq.m. and the construction work has not commenced.

The property comprises: (i) portions of Phases I A7-1 and A7-2 with a total gross floor area of approximately 1,715.14 sq.m. (“Part A”); and (ii) Phases I A1-A4 and B17 with a total apportioned land area of approximately 26,600 sq.m. (“Part B”).

The land use rights of the property have been granted for terms expiring on 4 February 2063, 18 February 2063 and 27 November 2065 for industrial use.

Notes:

Information and descriptions are provided by the CEOVU Group.

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APPENDIX V

PROPERTY CALCULATION REPORT

According to the information provided by the CEOVU Group, the gross floor area of Part A of the property is set out as below:

Part	Usage	Gross Floor Area
		*(sq.m.)*
Phases I A7-1, A7-2	Workshop	1,715.14

Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences of the property provided by the CEOVU Group. The unit price of these properties ranges from RMB3,400 to RMB5,000 for workshop units. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
As advised by the CEOVU Group, Part B comprises an apportioned land area of approximately 26,600 sq.m. and is currently vacant for future development.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

below:
	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	7,200,000
Group II - held for investment by the CEOVU Group	–
Group III - held under development by the CEOVU Group	–
Group IV - held for future development by the CEOVU Group	10,900,000
Grand-total:	18,100,000

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PROPERTY REFERENCE VALUE CALCULATION SHEET

No. Property[1] Description and tenure[1]

Portions of Shenyang Shenyang CEOVU Information Harbour CEOVU Information occupies 4 parcels of land with a total site Harbour, Nos. 80, 82, 84 area of approximately 223,116 sq.m. which and 86 Qixing Street, will be developed into a business park Shenbei New District, accommodates office and ancillary facilities Shenyang, in four phases, of which Phase I (A, B, C) Liaoning Province, and Phase II (D) were completed between the PRC 2017 and 2019; and the construction work (瀋陽中電光谷信息港) of the rest has not commenced.
Reference value in
Particulars of existing state as at the occupancy[1] Calculation Date RMB
Portions of Part A are 218,700,000 vacant or occupied by the CEOVU Group 100% Interest attributable to the
Part B is vacant for CEOVU Group: future development. 218,700,000
The property comprises: (i) the unsold portion of Phase I (A, B, C) and Phase II (D) with a total gross floor area of approximately 63,305.93 sq.m. (“Part A”); and (ii) the rest of Shenyang CEOVU Information Harbour with a total apportioned land area of approximately 11,443 sq.m. is vacant for future development (“Part B”).

The land use right of the property have been granted for terms expiring on 13 January 2067 and 8 November 2068 for industrial use.

Notes:

Information and descriptions are provided by the CEOVU Group.

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APPENDIX V

PROPERTY CALCULATION REPORT

According to the information provided by the CEOVU Group, the gross floor area of Part A of the property is set out as below:

Part	Usage	Gross Floor Area
		*(sq.m.)*
Phases I (A,B,C),
II (D)	Workshop	63,305.93

Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences of the property provided by the CEOVU Group. The unit price of these properties ranges from RMB3,300 to RMB3,500 for workshop units. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
As advised by the CEOVU Group, Part B comprises a total apportioned land area of approximately 11,443 sq.m. and is currently vacant for future development.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	214,800,000
Group II - held for investment by the CEOVU Group	–
Group III - held under development by the CEOVU Group	–
Group IV - held for future development by the CEOVU Group	3,900,000
Grand-total:	218,700,000

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PROPERTY REFERENCE VALUE CALCULATION SHEET

Reference value in Particulars of existing state as at the No. Property[1] Description and tenure[1] occupancy[1] Calculation Date RMB 21. Portions of Qingdao Qingdao OVU International Marine Portions of Zone 1.1 to 591,000,000 OVU International Information Harbour occupies a parcel of Zone 1.6 are occupied by Marine Information land with a site area of approximately various tenants, while the 100% Interest Harbour, No. 396 211,196.30 sq.m. which is developed into a rest of Zone 1.1 to Zone attributable to the Emeishan Road, business park with office and ancillary 1.6 is vacant or occupied CEOVU Group: Huangdao District, facilities in seven zones. Zone 1.1, 1.2, 1.3, by the CEOVU Group. 591,000,000 Qingdao, Shandong 1.4, 1.5 and 1.6 occupy a total apportioned Province, land area of approximately 172,054.72 sq.m. Zone 1.7 is currently the PRC (青島光谷 and has been completed between 2013 and under construction. 國際海洋信息港) 2020; Zone 1.7 occupies an apportioned land area of approximately 39,141.58 sq.m. which is currently under construction.

The property comprises: (i) portions of Zone 1.1 to Zone 1.6 with a total gross floor area of approximately 65,955.68 sq.m. The details of Zone 1.1 to Zone 1.6 are set out in note 2; and (ii) Zone 1.7 with a total planned gross floor area of approximately 184,262.08 sq.m.

As advised by the CEOVU Group, Zone 1.7 is scheduled to be completed in June 2023. The total construction cost of the property is estimated to be approximately RMB278,220,000, of which RMB43,663,061 had been paid up to the Calculation Date.

The land use rights of the property have been granted for a term expiring on 21 February 2062 for industrial use.

Notes:

Information and descriptions are provided by the CEOVU Group.

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APPENDIX V

PROPERTY CALCULATION REPORT

According to the information provided by the CEOVU Group, the gross floor area of Zone 1.1 to Zone 1.6 is set out as below:

Part Usage Zone 1.1 to Zone 1.6 Office Ancillary Grand-total:	Gross Floor Area *(sq.m.)* 62,792.20 3,163.48 65,955.68

Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences of the property provided by the CEOVU Group. The unit price of these properties ranges from RMB7,929 to RMB8,480 for office units. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
b. For commercial part, the unit rent of the comparable transactions basis ranges from RMB1.6 to RMB2.0 per sq.m. per day, and we have applied a market rent of RMB1.8 per sq.m. per day.
- For office part, the unit rent of the comparable transactions basis ranges from RMB1.5 to RMB1.8 per sq.m. per day, and we have applied a market rent of RMB1.6 per sq.m. per day.

For residential part, the unit rent of the comparable transactions basis ranges from RMB0.7 to RMB0.9 per sq.m. per day, and we have applied a market rent of RMB0.8 per sq.m. per day.

c. Based on our research on retail market of the same area of the property, considering the location, risks and characteristics of retail units of the property, we have applied a market yield of 6.5% as the capitalization rate for commercial part in the calculation.

Based on our research on office market of the same area of the property, considering the location, risks and characteristics of office units of the property, we have applied a market yield of 6.25% as the capitalization rate for office part in the calculation.

For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	180,400,000
Group II - held for investment by the CEOVU Group	365,600,000
Group III - held under development by the CEOVU Group	45,000,000
Group IV - held for future development by the CEOVU Group	–
Grand-total:	591,000,000

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PROPERTY REFERENCE VALUE CALCULATION SHEET

Reference value in
Particulars of existing state as at the
No. Property[1] Description and tenure[1] occupancy[1] Calculation Date RMB
1. Portions of Qingdao Qingdao Research and Innovation Center Portions of the property 398,600,000 Research and occupies 2 parcels of land with a total site are occupied by various Innovation Center, west area of approximately 62,285.40 sq.m. tenants, while the rest is 100% Interest of Jiangshan South Road, which is developed into a business park vacant or occupied by the attributable to the Huangdao District, accommodates office and ancillary facilities CEOVU Group. CEOVU Group: Qingdao, and was completed between 2017 and 2019. 398,600,000 Shandong Province, the PRC (青島研創中心) The property comprises: (i) various residential units with a total gross floor area of approximately 21,857.87 sq.m. (“Part A”); and (ii) various commercial units with a total gross floor area of approximately 30,113.08 sq.m. (“Part B”).

The land use right of Part B has been granted for a term expiring on 31 January 2063 for industrial use.

Notes:

Information and descriptions are provided by the CEOVU Group.
As advised by the CEOVU Group, Qingdao Research and Innovation Center is erected on the land mentioned above.
According to the information provided by the CEOVU Group, the gross floor area of Qingdao Research and Innovation Center is set out as below:

Part Usage Part A Residential Commercial Sub-total: Part B Office Commercial Sub-total: Grand-total:	Gross Floor Area *(sq.m.)* 18,464.69 3,393.18 21,857.87 27,630.99 2,482.09 30,113.08 51,970.95

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PROPERTY CALCULATION REPORT

APPENDIX V

Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences of the property provided by the CEOVU Group. The unit price of these properties ranges from RMB7,929 to RMB8,480 for office units. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
b. For commercial part, the unit rent of the comparable transactions basis ranges from RMB1.6 to RMB2.0 per sq.m. per day, and we have applied a market rent of RMB1.8 per sq.m. per day.

For office part, the unit rent of the comparable transactions basis ranges from RMB1.5 to RMB1.8 per sq.m. per day, and we have applied a market rent of RMB1.6 per sq.m. per day.

For residential part, the unit rent of the comparable transactions basis ranges from RMB0.7 to RMB0.9 per sq.m. per day, and we have applied a market rent of RMB0.8 per sq.m. per day.

c. Based on our research on retail market of the same area of the property, considering the location, risks and characteristics of retail units of the property, we have applied a market yield of 6.5% as the capitalization rate for commercial part in the calculation.

Based on our research on office market of the same area of the property, considering the location, risks and characteristics of office units of the property, we have applied a market yield of 6.25% as the capitalization rate for office part in the calculation.

Based on our research on residential market of the same area of the property, considering the location, risks and characteristics of residential units of the property, we have applied a market yield of 5% as the capitalization rate for residential part in the calculation.

For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	59,900,000
Group II - held for investment by the CEOVU Group	338,700,000
Group III - held under development by the CEOVU Group	–
Group IV - held for future development by the CEOVU Group	–
Grand-total:	398,600,000

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PROPERTY REFERENCE VALUE CALCULATION SHEET

No. Property[1]

Description and tenure[1]

Qingdao Marine & Qingdao Marine & Science Park occupies Science Park, south of 2 parcels of land with a total site area of Changjiang West Road, approximately 138,541.80 sq.m. which will west of Jiangshan South be developed into a business park with Road, north of Binhai office and ancillary facilities. Phase I of Avenue, Huangdao Qingdao Marine & Science Park occupies an District, Qingdao, apportioned land area of approximately Shandong Province, 99,882.65 sq.m. which are currently under the PRC construction. (青島海洋科技園)

Reference value in Particulars of existing state as at the occupancy[1] Calculation Date RMB Phase I is currently under 146,000,000 construction. 100% Interest Phase II is vacant for attributable to the future development. CEOVU Group: 146,000,000

The property comprises: (i) Phase I with a total planned gross floor area of approximately 78,704.49 sq.m.; and (ii) Phase II of Qingdao Marine & Science Park with a total apportioned land area of approximately 38,659.15 sq.m. The construction work of Phase II has not commenced.

As advised by the CEOVU Group, Phase I is scheduled to be completed in 2021. The total construction cost of Phase I is estimated to be approximately RMB393,000,000, of which RMB143,000,000 had been paid up to the Calculation Date.

The land use rights of the property have been granted for a term expiring on 25 November 2062 for industrial use.

Notes:

Information and descriptions are provided by the CEOVU Group.

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APPENDIX V

PROPERTY CALCULATION REPORT

For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	–
Group II - held for investment by the CEOVU Group	–
Group III - held under development by the CEOVU Group	132,000,000
Group IV - held for future development by the CEOVU Group	14,000,000
Grand-total:	146,000,000

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APPENDIX V

PROPERTY REFERENCE VALUE CALCULATION SHEET

Reference value in Particulars of existing state as at the Description and tenure[[1]] occupancy[1] Calculation Date RMB Xi’an Industrial Park occupies 2 parcels of Portions of Part A is 823,930,000 land with a total site area of approximately occupied by various 134,537.96 sq.m., which will be developed tenants, while the rest of 73.91% Interest into a business park in 4 phases. Phases Part A is vacant or attributable to the Chuang I, Chuang II and Yun I occupy a occupied by the CEOVU CEOVU Group: total apportioned land area of approximately Group. 608,970,000 111,518.09 sq.m., portions of the above phases have been completed between 2017 Part B is currently under and 2018, while the rest is currently under construction. construction or vacant for future development. Phase Yun II occupies a parcel Part C is vacant for of land with a site area of approximately future development. 23,019.87 sq.m. which is vacant for future development.

No. Property[1] Description and tenure[[1]]

Portions of Xi’an Industrial Park located at the west of Caotanshi Road, north of Shangji Road, Xi’an, Shaanxi Province, the PRC (西安產業園)

The property comprises: (i) Building#9,#1,#6,#7,#8 of Phase Yun I, and Building#5 of Phase Chuang I together having a total gross floor area of approximately 109,528.11 sq.m. (“Part A”); (ii) a portion of Phase Chuang II with an apportioned land area of approximately 33,713.04 sq.m. which is currently under construction (“Part B”); and (iii) the rest of Phase Yun I with an apportioned land area of approximately 62,815.17 sq.m. and Phase Yun II with an apportioned land area of approximately 23,019.87 sq.m., which are vacant for future development (“Part C”).

The land use rights of the property have been granted for a term expiring on 30 October 2062 and 21 October 2062 for industrial use.

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APPENDIX V

Notes:

Information and descriptions are provided by the CEOVU Group.
According to the information provided by the CEOVU Group, the gross floor area of Part A of the property is set out as below:

Part Usage Phase Yun I Office Commercial 4S shop Sub-total: Phase Chuang I Office Phases Chuang I &Yun I Car parking spaces Grand-total:	Gross Floor Area *(sq.m.)* 51,904.48 838.80 7,680.73 60,424.01 17,212.40 31,891.70 109,528.11	Nos. of car parking *(lot)* 712 712

Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences of the property provided by the CEOVU Group. The unit price of these properties ranges from RMB6,029 to RMB6,700 for office units, and RMB100,000 per lot for car parking spaces. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
b. For commercial part, the unit rent of the comparable transactions basis ranges from RMB2.2 to RMB3.17 per sq.m. per day, and we have applied a market rent of RMB2.27 per sq.m. per day.

For office part, the unit rent of the comparable transactions basis ranges from RMB1.23 to RMB1.5 per sq.m. per day, and we have applied a market rent of RMB1.3 per sq.m. per day.

For 4s shop part, the unit rent of the comparable transactions basis ranges from RMB4 to RMB4.1 per sq.m. per day, and we have applied a market rent of RMB4.09 per sq.m. per day.

c. Based on our research on retail market of the same area of the property, considering the location, risks and characteristics of retail units of the property, we have applied a market yield of 7% as the capitalization rate for commercial part in the calculation.

Based on our research on office market of the same area of the property, considering the location, risks and characteristics of office units of the property, we have applied a market yield of 7% as the capitalization rate for office part in the calculation.

Based on our research on residential market of the same area of the property, considering the location, risks and characteristics of residential units of the property, we have applied a market yield of 7% as the capitalization rate for residential part in the calculation.

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APPENDIX V

As advised by the CEOVU Group, Part C comprises an apportioned land area of approximately 62,815.17 sq.m. of Phase Yun I and an apportioned land area of approximately 23,019.87 sq.m. of Phase Yun II, which are vacant for future development and the construction work has not commenced.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	381,150,000
Group II - held for investment by the CEOVU Group	305,880,000
Group III - held under development by the CEOVU Group	109,000,000
Group IV - held for future development by the CEOVU Group	27,900,000
Grand-total:	823,930,000

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PROPERTY CALCULATION REPORT

APPENDIX V

PROPERTY REFERENCE VALUE CALCULATION SHEET

Reference value in Particulars of existing state as at the No. Property[1] Description and tenure[1] occupancy[1] Calculation Date RMB 25. Portions of Chengdu Chengdu Chip Valley occupies 7 parcels of Portions of Part A are 949,100,000 Chip Valley, Group 1 land with a total site area of approximately occupied by various of Fengle Community, 283,792.56 sq.m. which will be developed tenants, while the rest of 80% Interest Dongsheng Street, into an industrial park accommodates office Part A is vacant or attributable to the Group 7 of Guangrong and ancillary facilities in two phases. occupied by the CEOVU CEOVU Group: Community, Peng Town, Group. 759,280,000 Shuangliu District, Block A of Phase I occupies an apportioned Chengdu, Sichuan land area of approximately 28,956.36 sq.m. Part B is currently under Province, which was completed in 2020. Block B of construction. the PRC Phase I occupies an apportioned land area of (成都芯谷) approximately 31,074.13 sq.m. which is Part C is vacant for currently under construction, and Block C of future development. Phase I occupies an apportioned land area of approximately 30,913.82 sq.m. which is vacant for future development.

Phase II of Chengdu Chip Valley occupies an apportioned land area of approximately 192,848.25 sq.m. which is vacant for future development.

The property comprises: (i) various office units of Block A with a total gross floor area of approximately 29,241.67 sq.m. and 239 car parking spaces of Block A with a total gross floor area of approximately 8,545.61 sq.m. (“Part A”); (ii) Block B of Phase I of Chengdu Chip Valley with a total planned gross floor area of approximately 63,743.19 sq.m. (“Part B”); and (iii) Block C of Phase I with a total planned gross floor area of approximately 59,547.75 sq.m. and the land of Phase II of Chengdu Chip Valley (“Part C”).

As advised by the CEOVU Group, Part B of the property is scheduled to be completed in October 2020. The total construction cost of Part B is estimated to be approximately RMB260,730,000, of which RMB52,690,000 had been paid up to the Calculation Date.

The land use rights of the property have been granted for various terms expiring on 24 May 2058 and 20 December 2058 respectively for commercial use.

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APPENDIX V

Notes:

Information and descriptions are provided by the CEOVU Group.
Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences of the property provided by the CEOVU Group. The unit price of these properties ranges from RMB9,000 to RMB11,000 for office units, and ranges from RMB80,000 to RMB85,000 per lot for car parking space. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
b. For office part, the unit rent of the comparable transactions basis ranges from RMB1.5 to RMB1.7 per sq.m. per day, and we have applied a market rent of RMB1.3 per sq.m. per day.
- For car parking spaces part, the unit rent of the comparable transactions basis ranges from RMB10.0 to RMB11.7 per lot per day, and we have applied a market rent of RMB8.3 per lot per day.
c. Based on our research on office market of the same area of the property, considering the location, risks and characteristics of office units of the property, we have applied a market yield of 6.0% as the capitalization rate for office part in the calculation.

Based on our research on car parking space market of the same area of the property, considering the location, risks and characteristics of parking units of the property, we have applied a market yield of 4.0% as the capitalization rate for car parking spaces part in the calculation.

For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	300,000
Group II - held for investment by the CEOVU Group	223,900,000
Group III - held under development by the CEOVU Group	155,000,000
Group IV - held for future development by the CEOVU Group	569,900,000
Grand-total:	949,100,000

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PROPERTY CALCULATION REPORT

APPENDIX V

PROPERTY REFERENCE VALUE CALCULATION SHEET

Reference value in
Particulars of existing state as at the
No. Property[1] Description and tenure[1] occupancy[1] Calculation Date RMB
1. Shanghai Logistic Shanghai Logistic Enterprise Community Phase I of the property is 215,000,000 Enterprise Community, occupies a parcel of land with a site area of currently under Lot 114/1, 101 Street, approximately 83,646.50 sq.m. which will construction. 100% Interest Songjiang Industrial be developed into a business park attributable to the Park, Songjiang District, accommodates office and ancillary facilities Phase II of the property CEOVU Group: Shanghai, the PRC in two phases. is vacant for future 215,000,000 (上海物聯港) development. Phase I occupies an apportioned land area of approximately 71,557.20 sq.m. and is currently under construction; Phase II occupies an apportioned land area of approximately 12,089.30 sq.m. which is vacant for future development.

The property comprises: (i) Phase I is currently under construction and have a total planned gross floor area of approximately 190,747.46 sq.m.; and (ii) Phase II occupies an apportioned land area of approximately 12,089.30 sq.m. which is vacant for future development.

As advised by the CEOVU Group, Phase I of the property is scheduled to be completed in December 2021. The total construction cost of Phase I is estimated to be approximately RMB913,000,000, of which RMB81,000,000 had been paid up to the Calculation Date.

The land use rights of the property have been granted for a term expiring on 27 May 2062 for scientific and research uses.

Notes:

Information and descriptions are provided by the CEOVU Group.

V-58

APPENDIX V

PROPERTY CALCULATION REPORT

For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	–
Group II - held for investment by the CEOVU Group	–
Group III - held under development by the CEOVU Group	198,000,000
Group IV - held for future development by the CEOVU Group	17,000,000
Grand-total:	215,000,000

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PROPERTY CALCULATION REPORT

APPENDIX V

PROPERTY REFERENCE VALUE CALCULATION SHEET

No. Property[1]

Portions of Wenzhou Industrial Park, Jinhai Park, Wenzhou Economic and Technological Development Zone, Wenzhou, Zhejiang Province, the PRC (温州產業園)

Description and tenure[1]

Wenzhou Industrial Park occupies 2 parcels of land with a site area of approximately 168,610.36 sq.m. which will be developed into an industrial park accommodates office and ancillary facilities in four phases. Phases I and II occupy a total apportioned land area of approximately 77,951.32 sq.m. and were completed in September 2019. Phases III and IV occupy a total apportioned land area of approximately 90,659.04 sq.m. which is currently under construction.

Reference value in Particulars of existing state as at the occupancy[1] Calculation Date RMB Part A is vacant or 252,660,000 occupied by the CEOVU Group. 95% Interest attributable to the Part B is currently under CEOVU Group: construction. 240,030,000

The property comprises: (i) various office units of Phases I and II with a total gross floor area of approximately 120,655.39 sq.m. (“Part A”); and (ii) Phases III and IV with a total planned gross floor area of Wenzhou Industrial Park approximately 154,903.45 sq.m. (“Part B”).

As advised by the CEOVU Group, (i) Phase III of Part B is scheduled to be completed in December 2020. The total construction cost for Phase III of Part B is estimated to be approximately RMB39,650,000, of which RMB30,270,000 had been paid up to the Calculation Date; and (ii) Phase IV of Part B is scheduled to be completed in June 2021. The total construction cost for Phase IV of Part B is estimated to be approximately RMB374,210,000, of which RMB30,160,000 had been paid up to the Calculation Date.

The land use rights of the property have been granted for a term expiring on 25 April 2066 for industrial use.

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PROPERTY CALCULATION REPORT

APPENDIX V

Notes:

Information and descriptions are provided by the CEOVU Group.
Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences of the property provide by the CEOVU Group. The unit price of these properties ranges from RMB3,450 to RMB7,520 for office units. Appropriate adjustment and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	129,660,000
Group II - held for investment by the CEOVU Group	–
Group III - held under development by the CEOVU Group	123,000,000
Group IV - held for future development by the CEOVU Group	–
Grand-total:	252,660,000

V-61

PROPERTY CALCULATION REPORT

APPENDIX V

PROPERTY REFERENCE VALUE CALCULATION SHEET

				Reference value in
			Particulars of	existing state as at the
No.	Property1	Description and tenure1	occupancy1	Calculation Date
				RMB
28.	Hainan Resort Software	Hainan Resort Software Community	Portions of Part A are	1,989,700,000
	Community, Southern	occupies 16 parcels of land with a total site	occupied by various
	section situated at 0.7km	area of approximately 1,052,090.87 sq.m.	tenants, while the rest of	10% Interest
	of the Eastern Extension	which will be developed into a software	Part A is vacant or	attributable
	of Nan Yi Ring Road,	park accommodates business building, office	occupied by the CEOVU	to the CEOVU
	Chengmai County Old	and ancillary facilities in two phases.	Group.	Group:
	Town Economic			198,970,000
	Development Zone,	Phase I occupies an apportioned land area of	Part B is vacant for
	Hainan Province,	approximately 405,317.38 sq.m. which was	future development.
	the PRC	completed in various stages between 2010
	(海南生態軟件園)	and 2017. Phase II of Hainan Resort
		Software Community occupies an
		apportioned land area of approximately
		646,773.49 sq.m. which is vacant for future
		development.

The property comprises: (i) various office and commercial units of Phase I with a total gross floor area of approximately 196,540.58 sq.m. and 1,248 car parking spaces with a total gross floor area of approximately 47,696.95 sq.m. (“Part A”); and (ii) Phase II with a total site area of approximately 287,461.98 sq.m. which is vacant for future development (“Part B”).

The land use rights of the property have been granted for various terms expiring on 20 May 2050, 20 June 2050, 1 November 2051, 30 October 2053, 30 May 2059 and 18 May 2055 for commercial use.

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PROPERTY CALCULATION REPORT

APPENDIX V

Notes:

Information and descriptions are provided by the CEOVU Group.
Our calculation has been made on the following basis and analysis:
a. We have identified and analyzed various relevant sales evidences of the property provided by the CEOVU Group. The unit price of these properties ranges from RMB8,000 to RMB11,000 for office units, ranges from RMB8,500 to RMB9,500 for residential units, ranges from RMB15,000 to RMB20,000 for commercial units, and ranges from RMB30,000 to RMB45,000 per lot for car parking space. Appropriate adjustments and analysis are considered to the differences in size and other characters between the sold and unsold property to arrive at an assumed unit rate for the property.
b. For office part, the unit rent of the comparable transactions basis ranges from RMB1.6 to RMB2.0 per sq.m. per day, and we have applied a market rent ranges from RMB1.1 to RMB1.3 per sq.m. per day.

For commercial part, the unit rent of the comparable transactions basis ranges from RMB1.3 to RMB2.2 per sq.m. per day, and we have applied a market rent of RMB2.3 per sq.m. per day.

For car parking spaces part, the unit rent of the comparable transactions basis ranges from RMB5.0 to RMB6.7 per lot per day, and we have applied a market rent of RMB5.0 per lot per day.

c. Based on our research on office market of the same area of the property, considering the location, risks and characteristics of office units of the property, we have applied a market yield of 5.75% as the capitalization rate for office part in the calculation.

Based on our research on commercial market of the same area of the property, considering the location, risks and characteristics of commercial units of the property, we have applied a market yield of 5.75% as the capitalization rate for commercial part in the calculation.

Based on our research on car parking space market of the same area of the property, considering the location, risks and characteristics of car parking spaces of the property, we have applied a market yield of 4.0% as the capitalization rate for car parking spaces in the calculation.

As advised by the CEOVU Group, Part B occupies an apportioned land area of approximately 287,461.98 sq.m.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	1,064,300,000
Group II - held for investment by the CEOVU Group	696,900,000
Group III - held under development by the CEOVU Group	–
Group IV - held for future development by the CEOVU Group	228,500,000
Grand-total:	1,989,700,000

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PROPERTY CALCULATION REPORT

APPENDIX V

PROPERTY REFERENCE VALUE CALCULATION SHEET

Property[1]

No.

Ningbo Hangzhouwan Center, Blue Coast, Hangzhouwan New District, Ningbo, Zhejiang Province, the PRC (寧波杭州灣中心、蔚藍海岸)

Description and tenure[1]

Ningbo Hangzhouwan Center, Blue Coast occupies 9 parcels of land with a total site area of approximately 403,898.00 sq.m. which will be developed into an information port accommodates residential building, commercial building, office and ancillary facilities in six phases. Phase I of Ningbo Hangzhouwan Center, Blue Coast, occupies an apportioned land area of approximately 70,607.00 sq.m. is currently under construction. Phase II apportioned land area of approximately 104,768.00 sq.m. is currently under construction. Phase III occupies an apportioned land area of approximately 99,725.00 sq.m. which is currently under construction. Phase IV occupies an apportioned land area of approximately 95,339.25 sq.m. which is currently under construction. Phases V and VI occupy apportioned lands area of approximately 24,807.00 sq.m. and 8,651.75 sq.m. respectively.

Reference value in Particulars of existing state as at the occupancy[1] Calculation Date RMB Part A is currently under 3,950,000,000 construction. 31% Interest Part B is vacant for attributable future development. to the CEOVU Group: 1,224,500,000

The property comprises:

(i) various residential, office and

commercial units of Phases I to IV with a total planned gross floor area of approximately 1,197,888.47 sq.m. are currently under construction (“Part A”); and (ii) Phases V and VI are vacant for future development and have a total planned gross floor area of approximately 218,548.94 sq.m. (“Part B”).

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PROPERTY CALCULATION REPORT

APPENDIX V

No. Property[1]

Description and tenure[1]

Particulars of occupancy[1]

Reference value in existing state as at the Calculation Date RMB

As advised by the CEOVU Group, (a) Phase I with a total planned gross floor area of approximately 295,488.68 sq.m. is scheduled to be completed in December 2021. The total construction cost of Phase I is estimated to be approximately RMB1,467,000,000, of which RMB344,000,000 had been paid up to the Calculation Date; (b) Phase II with a total planned gross floor area approximately 269,489.82 sq.m. is scheduled to be completed in May 2021. The total construction cost of Phase II is estimated to be approximately RMB1,088,000,000, of which RMB391,000,000 had been paid up to the Calculation Date; (c) Phase III is currently under construction and have a total planned gross floor area of approximately 277,888.89 sq.m. is scheduled to be completed in June 2022. The total construction cost of Phase III is estimated to be approximately RMB1,252,000,000, of which RMB209,000,000 had been paid up to the Calculation Date; and (d) Phase IV with a total planned gross floor area of approximately 355,021.08 sq.m. is scheduled to be completed in September 2021. The total construction cost of Phase IV is estimated to be approximately RMB1,413,600,000, of which RMB404,000,000 had been paid up to the Calculation Date.

The land use rights of the property have been granted for a various term expiring on 28 November 2057 and 11 June 2058 for commercial use; for a various term expiring on 28 November 2087 and 11 June 2088 for residential use.

V-65

PROPERTY CALCULATION REPORT

APPENDIX V

Notes:

Information and descriptions are provided by the CEOVU Group.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	–
Group II - held for investment by the CEOVU Group	–
Group III - held under development by the CEOVU Group	3,724,300,000
Group IV - held for future development by the CEOVU Group	225,700,000
Grand-total:	3,950,000,000

V-66

PROPERTY CALCULATION REPORT

APPENDIX V

PROPERTY REFERENCE VALUE CALCULATION SHEET

No. Property[1] Description and tenure[1]

Reference value in Particulars of existing state as at the occupancy[1] Calculation Date RMB

Western Zhigu Park, east Western Zhigu Park occupies a parcel of The property is currently 248,000,000 of Gaoke Third Road, land with a total site area of approximately under construction. south of Beiwei Second 173,134.57 sq.m. which will be developed 50% Interest Road, west of Gaoke into a business park with office and attributable Second Road and north ancillary facilities which are currently under to the CEOVU of Xinghuo Avenue in construction. Group: Xianyang 124,000,000 High-Tech Industrial The property comprises the whole of Development Zone, Western Zhigu Park with a total planned Qindu District, gross floor area of approximately Xianyang, 180,234.18 sq.m. Shaanxi Province, the PRC (西部智谷產業 As advised by the CEOVU Group, the 園) property is scheduled to be completed in 2021. The total construction cost of the property is estimated to be approximately RMB543,000,000, of which RMB146,000,000 had been paid up to the Calculation Date.

The land use rights of the property have been granted for a term of 50 years for industrial use.

Notes:

Information and descriptions are provided by the CEOVU Group.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	–
Group II - held for investment by the CEOVU Group	–
Group III - held under development by the CEOVU Group	248,000,000
Group IV - held for future development by the CEOVU Group	–
Grand-total:	248,000,000

V-67

PROPERTY CALCULATION REPORT

APPENDIX V

PROPERTY REFERENCE VALUE CALCULATION SHEET

				Reference value in
			Particulars of	existing state as at the
No.	Property1	Description and tenure1	occupancy1	Calculation Date
				RMB
31.	Zhuhai Hengqin	Zhuhai Hengqin Zhishuyun occupies a	The property is currently	465,000,000
	Zhishuyun,	parcel of land with a site area of	under construction.
	east of Fubang Road,	approximately 11,913.82 sq.m. which will		30% Interest
	south of Xingsheng	be developed into an office building with		attributable
	Third Road,	ancillary facilities which are currently under		to the CEOVU
	west of Fuguo Road	construction.		Group:
	and north of			139,500,000
	Xingsheng Second Road,	The property comprises the whole of
	Hengqin New District,	Zhuhai Hengqin Zhishuyun with a total
	Zhuhai,	planned gross floor area of approximately
	Guangdong Province,	67,977.00 sq.m.
	the PRC
	(珠海橫琴智數雲)	As advised by the CEOVU Group, the
		property is scheduled to be completed in
		2022. The total construction cost of the
		property is estimated to be approximately
		RMB913,000,000, of which
		RMB81,000,000 had been paid up to the
		Calculation Date.

The land use rights of the property have been granted for a term of 40 years expiring on 6 April 2057 for business finance and other commercial services uses.

V-68

PROPERTY CALCULATION REPORT

APPENDIX V

Notes:

Information and descriptions are provided by the CEOVU Group.
For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the reference value of each group as at the Calculation Date in its existing state is set out as below:

	Reference value in
	existing state as at the
Group	Calculation Date
	*(RMB)*
Group I - held for owner occupation or for sale by the CEOVU Group	–
Group II - held for investment by the CEOVU Group	–
Group III - held under development by the CEOVU Group	465,000,000
Group IV - held for future development by the CEOVU Group	–
Grand-total:	465,000,000

V-69

GENERAL INFORMATION

APPENDIX VI

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.

DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, (1) Mr. Dong Haoran, a non-executive Director and the Chairman of the Board, had personal interest (long position) in 4,672,420 shares of the Company; and (2) Ms. Liu Jinmei, a non-executive Director, had personal interest (long position) in 197,250 shares of the Company. Save as disclosed herein, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to notify 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 deemed or taken to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to notify the Company and the Stock Exchange.

Mr. Dong Haoran, a non-executive Director and the Chairman of the Board, is the chairman of Huada Semiconductor Co., Ltd (“Huada Semiconductor”) and a director of China Electronics Corporation (BVI) Holdings Company Limited (“CEC (BVI)”). Mr. Yu Jian, an executive Director and the Deputy Chairman of the Board, is the chief accountant of Huada Semiconductor and a director of CEC (BVI). Details of the shareholdings of Huada Semiconductor and CEC (BVI) in the Company are set out in the paragraph headed “Substantial Shareholders” in this appendix. Save as disclosed herein, none of the Directors is a director or employee of a company which has, or is deemed to have, an interest or a 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.

None of the Directors was materially interested in any contract or arrangement subsisting as at the Latest Practicable Date which is significant in relation to the business of the Group taken as a whole.

Since 31 December 2019 (being the date to which the latest published audited consolidated financial statements of the Group were made up) and up to the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

VI-1

GENERAL INFORMATION

APPENDIX VI

SUBSTANTIAL SHAREHOLDERS

So far as is known to the Board and the chief executive of the Company, as at the Latest Practicable Date, the following persons had, or were deemed to have, interests or short positions in the shares or the 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:

		Percentage or
	Number or	attributable
	attributable number	percentage of issued
	of shares of the	share capital of the
Name of Shareholder	Company interested	Company
CEC (BVI)	812,500,000	40.03%
Huada Semiconductor_(Note 1)_	1,206,180,000	59.42%
CEC_(Note 2)_	1,206,180,000	59.42%

All the interests disclosed above represent long position in the shares of the Company.

Notes:

(1) Huada Semiconductor holds 100% equity interest in CEC (BVI). Pursuant to the SFO, Huada Semiconductor is deemed to be interested in the 812,500,000 shares of the Company held by CEC (BVI).
(2) CEC holds 100% equity interest in Huada Semiconductor. Pursuant to the SFO, CEC is deemed to be interested in the shares of the Company held by Huada Semiconductor.

Save as disclosed above, there is no person known to the Board or the chief executive of the Company who, as at the Latest Practicable Date, had, or was deemed to have, an interest or short position in the shares or the 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, or who was, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group, or any option in respect of such capital.

DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into, or proposed to enter into, any service contract with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

VI-2

GENERAL INFORMATION

APPENDIX VI

EXPERTS AND CONSENTS

The following are the qualifications of the experts whose name/advices and/or reports are contained in this circular:

Name	Qualification
APA	Property valuer
PricewaterhouseCoopers	Certified Public Accountants
Shenwan	A licensed corporation to conduct type 1 (dealing in securities), type
	4 (advising on securities) and type 6 (advising on corporate finance)
	regulated activities under the SFO
Somerley	A licensed corporation to conduct type 1 (dealing in securities) and
	type 6 (advising on corporate finance) regulated activities under the
	SFO

Each of APA, PricewaterhouseCoopers, Shenwan and Somerley (collectively the ‘‘Experts’’) has given and has not withdrawn its written consent to the issue of this circular with the inclusion of, where applicable, its letter(s) of advices and/or report(s) and/or references to its name in the form and context in which they respectively appear.

Each of the Experts was not beneficially interested in the share capital of any member of the Group and did not have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group as at the Latest Practicable Date.

Since 31 December 2019 (being the date to which the latest published audited consolidated financial statements of the Group were made up) and up to the Latest Practicable Date, none of the Experts had any direct or indirect interest in any assets which had been acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

COMPETING INTERESTS

As at the Latest Practicable Date, Mr. Dong Haoran, a non-executive Director and the Chairman of the Board, is the chairman of Huada Semiconductor and a director of CEC Chitsing Technology Co., Ltd. Mr. Yu Jian, an executive Director and the Deputy Chairman of the Board, is the chairman of the supervisory committee of Shanghai Belling Corp., Ltd (“Shanghai Belling”). Ms. Liu Jinmei, a non-executive Director, is a director of Shanghai Belling. Currently, Huada Semiconductor, CEC Chitsing Technology Co., Ltd and Shanghai Belling have subsidiaries or associates engaging in integrated circuits related businesses which compete or are likely to compete, either directly or indirectly, with the business of the Group.

VI-3

GENERAL INFORMATION

APPENDIX VI

The abovementioned competing businesses are operated and managed by independent management and administration. The Board exercises independent judgment and is always acting in the interests of the Company and the Shareholders as a whole. Accordingly, the Group is capable of carrying on its business independently of, and at arm’s length from, the competing businesses mentioned above.

Apart from the above, none of the Directors nor their respective associates is or was interested in any business, apart from the Group’s business, that competes or competed or is or was likely to compete, either directly or indirectly, with the Group’s business.

LITIGATION

So far as the Board is aware, as at the Latest Practicable Date, no member of the Group was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance is known to the Board to be pending or threatened against any member of the Group.

MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Board confirmed that there was no material adverse change in the financial or trading position of the Group since 31 December 2019, being the date to which the latest published audited financial statements of the Group were made up.

MISCELLANEOUS

(a) The company secretary of the Company is Mr. Ng Kui Kwan. Mr. Ng is a member of the Institute of Chartered Accountants in England and Wales and a member of the Hong Kong Institute of Certified Public Accountants.
(b) The registered office of the Company is at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. The principal place of business of the Company in Hong Kong is at Room 3403, 34th Floor, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong.
(c) Tricor Abacus Limited, the Company’s branch share registrar and transfer office in Hong Kong, is at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(d) The English text of this circular and form of proxy shall prevail over its Chinese text.

VI-4

GENERAL INFORMATION

APPENDIX VI

MATERIAL CONTRACT

The following contract (not being contract entered into in the ordinary course of business) has been entered into by members of the Group within the two years immediately preceding the date of this circular, and is or may be material:

(a) the Sale and Purchase Agreement.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the principal place of business of the Company in Hong Kong at Room 3403, 34th Floor, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong during normal business hours on any business day from the date of this circular and up to the holding of the SGM:

(a) the bye-laws of the Company;
(b) the letter from the Independent Board Committee, the text of which is set out on pages 17 to 18 of this circular;
(c) the letter from Somerley, the text of which is set out on pages 19 to 55 of this circular;
(d) the report from PricewaterhouseCoopers on the Unaudited Pro Forma Financial Information of the Remaining Group, the text of which is set out in Appendix III to this circular;
(e) the property calculation report on the property interests of the CEOVU Group prepared by APA, the text of which are set out in Appendix V to this circular;
(f) the written consents referred to in the section headed “Experts and Consents” in this appendix;
(g) the material contract referred to in the section headed “Material Contract” in this appendix;
(h) the annual reports of the Company for the financial year ended 31 December 2018 and 31 December 2019; and
(i) this circular.

VI-5

NOTICE OF SGM

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CHINA ELECTRONICS HUADA TECHNOLOGY COMPANY LIMITED 中國電子華大科技有限公司

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)

(Stock Code: 00085)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting (the “Meeting”) of China Electronics Huada Technology Company Limited (the “Company”) will be held at Plaza 3, Lower Lobby, Novotel Century Hong Kong, 238 Jaffe Road, Wanchai, Hong Kong on Tuesday, 27 October 2020 at 4:30 p.m. for the purpose of considering and, if thought fit, passing, with or without amendments, the following resolution as an ordinary resolution:

“ THAT the sale and purchase agreement dated 30 July 2020 and entered into between CEC Media Holdings Limited (“CEC Media”), as seller and China Electronics Information Service Company Limited (中國中電國際信息服務有限公司), as purchaser (the “Sale and Purchase Agreement”, details of which are set out in the circular of the Company dated 30 September 2020), in respect of the sale and purchase of 33.67% of the issued share capital of China Electronics Optics Valley Union Holding Company Limited, at a consideration of HK$1,785.00 million, be and is hereby approved, and any one director of the Company and/or CEC Media be and is hereby authorised to do all such acts and things and execute all such documents for and on behalf of the Company and/or CEC Media which he considers necessary or expedient to give effect to the Sale and Purchase Agreement and the transactions contemplated thereunder.”

By order of the Board

China Electronics Huada Technology Company Limited Ng Kui Kwan Company Secretary

Hong Kong, 30 September 2020

SGM-1

NOTICE OF SGM

Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Principal place of business in Hong Kong: Room 3403, 34th Floor China Resources Building 26 Harbour Road Wanchai Hong Kong

Notes:

The register of members of the Company will be closed from 21 October 2020 to 27 October 2020, both days inclusive, during which period no transfer of shares of the Company will be registered. In order to be entitled to attend and vote at the Meeting, all share certificates with completed transfer forms must be lodged with the Company’s branch share registrar and transfer office in Hong Kong, Tricor Abacus Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong not later than 4:30 p.m. on 20 October 2020.
Any shareholder of the Company entitled to attend and vote at the Meeting convened by the above notice is entitled to appoint another person as his proxy to attend and vote instead of him. A shareholder who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at the Meeting. A proxy need not be a shareholder of the Company but must be present in person at the Meeting to represent the shareholder. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed. In light of the COVID-19 pandemic, shareholder of the Company may consider appointing the chairman of the Meeting as his/her proxy to vote on the resolution, instead of attending the Meeting in person. Due to concern over large-scale group gatherings during the COVID-19 pandemic, no refreshment or drink will be served at the Meeting. Any person who does not comply with the precautionary measures to be taken at the Meeting, or is subject to any HKSAR Government prescribed quarantine may be denied entry into the meeting venue.
In order to be valid, the form of proxy must be duly completed and signed in accordance with the instructions printed thereon and returned together with the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power or authority, to the Company’s branch share registrar and transfer office in Hong Kong, Tricor Abacus Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong not later than 48 hours before the time appointed for holding the Meeting or any adjournment thereof. Completion and return of a form of proxy will not preclude a shareholder from attending and voting in person at the Meeting or any adjournment thereof, should he so wish and in such event, the form of proxy shall be deemed to be revoked.
In the case of joint registered holders of any shares, any one of such joint holders may vote at the Meeting, either personally or by proxy, in respect of such shares as if he was solely entitled thereto, but if more than one of such joint holders are present at the Meeting, either personally or by proxy, that one of the said persons so present whose name stands first in the register of members of the Company in respect of the joint holding shall alone be entitled to vote in respect thereof.

SGM-2

AI assistant

Smart Fish Wealthlink Holdings Limited — Proxy Solicitation & Information Statement 2020

48979_rns_2020-09-29_ab25f06a-271b-41da-8b5a-1da6f2375919.pdf

CHINA ELECTRONICS HUADA TECHNOLOGY COMPANY LIMITED 中國電子華大科技有限公司

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL OF 33.67% OF THE ISSUED SHARE CAPITAL OF CHINA ELECTRONICS OPTICS VALLEY UNION HOLDING COMPANY LIMITED

SOMERLEY CAPITAL LIMITED

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

CHINA ELECTRONICS HUADA TECHNOLOGY COMPANY LIMITED 中國電子華大科技有限公司

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL OF 33.67% OF THE ISSUED SHARE CAPITAL OF CHINA ELECTRONICS OPTICS VALLEY UNION HOLDING COMPANY LIMITED

INTRODUCTION

THE SALE AND PURCHASE AGREEMENT

Parties:

Assets to be disposed

Consideration

Use of proceeds

Conditions precedent

LETTER FROM THE BOARD

The Completion

INFORMATION OF THE CEOVU GROUP

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE DISPOSAL

LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE DISPOSAL

INFORMATION ON THE PARTIES

The Company

CEC

The Seller

The Purchaser

LISTING RULES IMPLICATIONS

WAIVER FROM STRICT COMPLIANCE WITH RULE 14.68(2)(a)(i) OF THE LISTING RULES

LETTER FROM THE BOARD

WAIVER FROM STRICT COMPLIANCE WITH RULES 14.68(1), 14.66(11), 14A.70(7), 5.02, 5.02A(3) AND 5.03 OF THE LISTING RULES

LETTER FROM THE BOARD

LETTER FROM THE BOARD

SGM

BOOK CLOSURE PERIOD

RECOMMENDATION

FURTHER INFORMATION

China Electronics Huada Technology Company Limited Dong Haoran Chairman

CHINA ELECTRONICS HUADA TECHNOLOGY COMPANY LIMITED 中國電子華大科技有限公司

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL OF 33.67% OF THE ISSUED SHARE CAPITAL OF CHINA ELECTRONICS OPTICS VALLEY UNION HOLDING COMPANY LIMITED

Yours faithfully, Independent Board Committee

SOMERLEY CAPITAL LIMITED

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL OF 33.67% OF THE ISSUED SHARE CAPITAL OF CHINA ELECTRONICS OPTICS VALLEY UNION HOLDING COMPANY LIMITED

INTRODUCTION

LETTER FROM SOMERLEY

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Information of the Group

(a) Principal business of the Group

(b) Financial performance of the Group

LETTER FROM SOMERLEY

(c) Financial position of the Group

LETTER FROM SOMERLEY

2. Reasons for and benefits of the Disposal

LETTER FROM SOMERLEY

LETTER FROM SOMERLEY

3. Principal terms of the Sale and Purchase Agreement

Date

Parties

Subject

Consideration

Basis of determination of the Consideration

Use of proceeds

Conditions precedent

The Completion

4. Information of the CEOVU Group

(a) Principal business of the CEOVU Group

LETTER FROM SOMERLEY

(b) Shareholding of CEOVU

LETTER FROM SOMERLEY

(c) Financial performance of the CEOVU Group

LETTER FROM SOMERLEY

LETTER FROM SOMERLEY

(d) Financial position of the CEOVU Group

LETTER FROM SOMERLEY

LETTER FROM SOMERLEY

5. Assessment of the consideration for the Disposal

Smart Fish Wealthlink Holdings Limited Proxy Solicitation & Information Statement 2020