FY Financial (Shenzhen) Co., Ltd. announced on 16 June 2023 entered into the Factoring Agreement with Yinte Nadi, pursuant to which the Company has agreed to provide accounts receivable factoring service for Yinte Nadi with a factoring principal amount of up to RMB31,000,000, in return for factoring interest income; and transfer of the legal title of accounts receivables created in the ordinary and usual course of business of Yinte Nadi with its customer(s) (i.e. debtor(s) of Yinte Nadi) from Yinte Nadi to the Company. If there is any event of default of the terms of the Factoring Agreement, the Company may exercise its right of recourse and demand for repurchase of the accounts receivables by Yinte Nadi. In such event, Yinte Nadi shall be liable to pay the factoring expenses, default compensation and the outstanding factoring principal amount to the Company. The principal terms of the Factoring Agreement are set out as follows: Date of agreement: 16 June 2023, Parties: the Company (as factor) and Yinte Nadi (as seller). Type of facility: One-off and with recourse, Financing term: 16 June 2023 to 15 June 2024 (or the date on which the factoring principal amount and factoring expenses are fully settled, whichever is the later). Transfer of accounts Subject to the terms and conditions of the Factoring receivables: Agreement, the accounts receivables of Yinte Nadi as referred to in the underlying transaction documents entered into between the parties pursuant to the Factoring Agreement shall be assigned to the Company. Factoring principal amount: A maximum amount of up to RMB31,000,000 (the "Factoring Limit"). The factoring principal amount will be calculated by the aggregate amount of accounts receivables to be assigned to the Company times the factoring ratio in accordance with the terms of the Factoring Agreement and, in any event, shall not exceed the Factoring Limit. Repayment of the factoring The factoring principal amount is repayable in full on or principal amount: before 15 June 2024 pursuant to the terms and conditions of the Factoring Agreement and the underlying transaction documents entered into between the parties. The Factoring Agreement would enable the Group to earn factoring interest income. The terms of the Factoring Agreement were agreed between the Company and Yinte Nadi after arm's length negotiations between the parties and are on normal commercial terms with reference to other comparable transactions the Group conducted with Independent Third Parties, the lending capacity of the Company, the credit assessment on Yinte Nadi and the outstanding amount of accounts receivables to be assigned to the Company by Yinte Nadi. Adopting the Company's prudent approach in selecting factoring customers, the Company has critically assessed the quality of the accountable receivables of Yinte Nadi by considering the background of its debtors, their repayment history and their financial position. The Company took into consideration that the Factoring Agreement is with recourse and with a guarantee provided by the guarantor, on which the Company performed a credit assessment with satisfactory results. After applying the set of criteria the Group uses to assess the likelihood of repayment by the borrower and the collectability of principal and interest, the Company considers the credit assessment of Yinte Nadi to be satisfactory, and that the credit risk on the Factoring Agreement is relatively low. As the provision of factoring services is one of the Group's principal businesses, the
Directors consider that the entering into of the Factoring Agreement is in the ordinary and usual course of business of the Company and will generate revenue and cashflow stream from the factoring interest received.