Nan Hai : CONNECTED TRANSACTION CAPITAL INJECTION INTO GUANGDONG DADI CINEMA CONSTRUCTION LIMITED

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

(Incorporated in Bermuda with limited liability)

(Stock Code: 680)

CONNECTED TRANSACTION

CAPITAL INJECTION INTO GUANGDONG DADI

CINEMA CONSTRUCTION LIMITED

CAPITAL INJECTION AGREEMENT

The Board hereby announces that on 24 December 2019 (after trading hours), Dadi Cinema (HK), Dadi Century, Ningbo Yishan and Guangdong Dadi entered into the Capital Injection Agreement in relation to the Capital Injection of RMB1,200,000,000 into the registered capital of Guangdong Dadi made by Dadi Cinema (HK) and Dadi Century. The registered capital of Guangdong Dadi will be increased from RMB1,146,427,999 to RMB2,346,427,999, of which Dadi Cinema (HK) and Dadi Century will inject RMB526,330,442 and RMB673,669,558 to Guangdong Dadi respectively by converting their respective shareholder's loans into equity. Upon completion of the Capital Injection, the equity interest of Dadi Cinema (HK), Dadi Century and Ningbo Yishan in Guangdong Dadi will be 41.74%, 53.42% and 4.84%, respectively. No further capital injection will be made by Ningbo Yishan under the Capital Injection Agreement.

• For identification purpose only

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LISTING RULES IMPLICATIONS

As at the date of this announcement, 20% interest in Ningbo Yishan is held by Ms. Liu, an executive Director of the Company, and 80% interest in Ningbo Yishan is held by Dadi Dreamworks, an associate of Ms. Liu. As such, Ningbo Yishan is an associate of Ms. Liu, and thus a connected person of the Company under Chapter 14A of the Listing Rules. Pursuant to the Capital Injection Agreement, the equity interest of Ningbo Yishan in Guangdong Dadi will be diluted from 9.9% to 4.84% upon completion of the Capital Injection. As such, the effective equity interest of the Group in Guangdong Dadi will be increased from 90.1% to 95.16%, which shall be deemed as an acquisition of 5.06% equity interest in Guangdong Dadi from Ningbo Yishan by the Group for a deemed consideration of RMB118,800,000 (which corresponds to 9.9% (being the equity interest of Ningbo Yishan in Guangdong Dadi prior to the Capital Injection) of RMB1,200,000,000) and shall constitute a connected transaction of the Company.

As the applicable percentage ratios in respect of the connected transaction contemplated under the Capital Injection Agreement exceed 0.1% but less than 5%, the transaction contemplated under the Capital Injection Agreement is subject to the reporting and announcement requirements but is exempt from the circular (including independent financial advice) and independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

1. CAPITAL INJECTION AGREEMENT
   The Board hereby announces that on 24 December 2019 (after trading hours), Dadi Cinema (HK), Dadi Century, Ningbo Yishan and Guangdong Dadi entered into the Capital Injection Agreement. The major terms and conditions of the Capital Injection Agreement are as follows:
   Date
   24 December 2019
   Parties
2. 1. Dadi Cinema (HK);
   2. Dadi Century;
   3. Ningbo Yishan; and
   4. Guangdong Dadi, as the target company.

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Capital Injection

Pursuant to the terms and conditions of the Capital Injection Agreement, Capital Injection of RMB1,200,000,000 into the registered capital of Guangdong Dadi shall be made by Dadi Cinema (HK) and Dadi Century. The registered capital of Guangdong Dadi will be increased from RMB1,146,427,999 to RMB2,346,427,999, of which Dadi Cinema (HK) and Dadi Century will inject RMB526,330,442 and RMB673,669,558 into Guangdong Dadi respectively by converting their respective shareholder's loans into equity. Upon completion of the Capital Injection, the equity interest of Dadi Cinema (HK), Dadi Century and Ningbo Yishan in Guangdong Dadi will be 41.74%, 53.42% and 4.84%, respectively. No further capital injection will be made by Ningbo Yishan under the Capital Injection Agreement.

Prior to and immediately after the Capital Injection, the registered capital of Guangdong Dadi and the shareholdings held by its shareholders are as follows:

Name of		Prior to the completion of		Capital Injection		After the completion of
shareholders		the Capital Injection		contemplated		the Capital Injection
		Registered						under the		Registered
		capital of						Capital Injection		capital of
		Guangdong Dadi			Shareholding		Agreement		Guangdong Dadi		Shareholding
		(RMB)		(%)			(RMB)		(RMB)		(%)
Dadi Cinema (HK)		453,052,800		39.52		526,330,442			979,383,242			41.74
Dadi Century		579,878,827		50.58		673,669,558			1,253,548,385			53.42
Ningbo Yishan		113,496,372			9.90		-		113,496,372			4.84
Total		1,146,427,999			100.00		1,200,000,000			2,346,427,999			100.00

Total Capital Injection

The Capital Injection into Guangdong Dadi in an aggregate amount of RMB1,200,000,000 was determined after arm's length negotiations among the parties with a view to lowering the debt-to-equity ratio.

Completion of the Capital Injection shall take place on the date upon which all procedures with the relevant competent authorities in the PRC in respect of the Capital Injection are completed by Guangdong Dadi. Pursuant to the Capital Injection Agreement, Dadi Cinema (HK) and Dadi Century shall inject capital by converting their respective shareholder's loans into equity. Such conversion will be completed by 31 December 2020.

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1. REASONS FOR AND BENEFITS OF THE CAPITAL INJECTION
   The Directors consider that the Capital Injection is beneficial to the Group as it will strengthen the capital base and enhance competitiveness of Guangdong Dadi, strive for long-term business development and hence create better returns for its shareholders.
   The Directors (including the independent non-executive Directors) are of the view that although the Capital Injection Agreement was not entered into in the ordinary and usual course of business of the Group, the terms of the Capital Injection Agreement are on normal commercial terms, which are fair and reasonable and in the interests of the Group and the Shareholders as a whole.

1. FINANCIAL EFFECT OF THE CAPITAL INJECTION
   Upon completion of the Capital Injection, Guangdong Dadi will be owned as to 41.74%, 53.42% and 4.84% by Dadi Cinema (HK), Dadi Century and Ningbo Yishan respectively. Given Dadi Cinema (HK) and Dadi Century are indirect wholly-owned subsidiaries of the Company, the effective equity interest of the Group in Guangdong Dadi will be increased from 90.1% to 95.16% upon completion of the Capital Injection, representing an increase of 5.06%. Guangdong Dadi will remain as a subsidiary of the Company and its financial results will continue to be consolidated in the Company's financial statements. The Company considers that the Capital Injection will not have any material financial impact on the Group.

IV. INFORMATION OF THE PARTIES

1. The Company
   The Company is an investment holding company whose securities are listed and traded on the Main Board of the Stock Exchange. The Group is principally engaged in (i) culture and media services (mainly in cinemas business on a nationwide basis in the PRC and other media related businesses); (ii) property development; and (iii) enterprise cloud services. In the meantime, the Group has also tapped into the business sectors in news media business and innovative business.
2. Dadi Cinema (HK)
   Dadi Cinema (HK) is a company incorporated in Hong Kong with limited liability and an indirect wholly-owned subsidiary of the Company. It is principally engaged in investment holding and film distribution and production.
3. Dadi Century
   Dadi Century is a company incorporated in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company. Its principal scope of business is film planning.

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1. Ningbo Yishan
   Ningbo Yishan is a limited partnership established in the PRC. It is principally engaged in investment management. 20% interest in Ningbo Yishan is held by Ms. Liu, an executive Director of the Company, and 80% interest in Ningbo Yishan is held by Dadi Dreamworks, an associate of Ms. Liu. Dadi Dreamworks is a general partner of Ningbo Yishan. Dadi Dreamworks is used as a platform for employees of Guangdong Dadi who have made significant contributions to Guangdong Dadi to hold its equity interests they acquired pursuant to the Incentive Scheme (as defined in the announcement of the Company dated 11 November 2016). As referred to in the Company's announcement dated 11 November 2016 and circular dated 19 December 2016, 10% equity interest in Guangdong Dadi was purchased for a total consideration of RMB150,000,000.
2. Guangdong Dadi
   Guangdong Dadi is a company incorporated in the PRC with limited liability and an indirect non-wholly owned subsidiary of the Company. It is principally engaged in the business of cinema construction and operation, derivatives sales and related advertisement sales.
   The unaudited consolidated financial information of Guangdong Dadi and its subsidiaries is as follows:

	For the	For the
	year ended	year ended
	31 December	31 December
	2018	2017
	(HK$'000)	(HK$'000)
Net (loss)/profit before taxation	(67,587)	(185,454)
Net (loss)/profit after taxation	(76,121)	(168,097)

According to the unaudited consolidated financial statements of Guangdong Dadi, the consolidated net assets of Guangdong Dadi and its subsidiaries as at 31 December 2018 were approximately HK$1,167,501,000.

1. LISTING RULES IMPLICATIONS
   As at the date of this announcement, 20% interest in Ningbo Yishan is held by Ms. Liu, an executive Director of the Company, and 80% interest in Ningbo Yishan is held by Dadi Dreamworks, an associate of Ms. Liu. As such, Ningbo Yishan is an associate of Ms. Liu, and thus a connected person of the Company under Chapter 14A of the Listing Rules. Pursuant to the Capital Injection Agreement, the equity interest of Ningbo Yishan in Guangdong Dadi will be diluted from 9.9% to 4.84% upon completion of the Capital Injection. As such, the effective equity interest of the Group in Guangdong Dadi will be increased from 90.1% to 95.16%, which shall be deemed as an acquisition of 5.06% equity interest in Guangdong Dadi from Ningbo Yishan by the Group for a

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deemed consideration of RMB118,800,000 (which corresponds to 9.9% (being the equity interest of Ningbo Yishan in Guangdong Dadi prior to the Capital Injection) of RMB1,200,000,000) and shall constitute a connected transaction of the Company.

As the applicable percentage ratios in respect of the connected transaction contemplated under the Capital Injection Agreement exceed 0.1% but less than 5%, the Transaction is subject to the reporting and announcement requirements but is exempt from the circular (including independent financial advice) and independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

VI. APPROVAL BY THE BOARD

Since Ms. Liu has a material interest in the Capital Injection, she has abstained from voting on the Board resolution to approve the Capital Injection.

Save as disclosed above, none of the Directors has a material interest in the Capital Injection or are required to abstain from voting on the relevant Board resolution to approve the Capital Injection Agreement and the transaction contemplated thereunder.

VII. DEFINITIONS

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

''associate'' ''Board'' ''Capital Injection''

has the meaning ascribed thereto in the Listing Rules

the board of Directors

the capital injection into Guangdong Dadi in an aggregate amount of RMB1,200,000,000 made by Dadi Cinema (HK) and Dadi Century pursuant to the Capital Injection Agreement

''Capital Injection	the capital injection agreement dated 24 December 2019
Agreement''	entered into among Guangdong Dadi, Dadi Cinema (HK),
	Dadi Century and Ningbo Yishan
''Company''	Nan Hai Corporation Limited, a company incorporated in
	Bermuda with limited liability, the shares of which are
	listed and traded on the Main Board of the Stock Exchange
	(stock code: 680)
''connected person(s)''	has the meaning ascribed thereto in the Listing Rules

''connected transaction'' has the meaning ascribed thereto in the Listing Rules

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''Dadi Century''

''Dadi Cinema (HK)''

''Dadi Dreamworks''

''Director(s)'' ''Group'' ''Guangdong Dadi''

''HK$''

''Hong Kong'' ''Listing Rules''

''Ms. Liu''

''Ningbo Yishan''

''PRC''

''RMB''

''Shareholder(s)'' ''Stock Exchange'' ''subsidiary''

大地時代電影文化傳播(北京)有限公司 (Dadi Century Film Culture Media (Beijing) Company Limited*), a company established in the PRC with limited liability, an indirect wholly-owned subsidiary of the Company

Dadi Cinema (HK) Limited, a company incorporated in Hong Kong with limited liability, an indirect wholly-owned subsidiary of the Company

北京大地夢工廠投資合夥企業(有限合夥) (Beijing Dadi Dreamworks Investment Partnership (Limited Partnership)*), a limited partnership established in the PRC

the director(s) of the Company

the Company and its subsidiaries

廣東大地影院建設有限公司 (Guangdong Dadi Cinema Construction Limited*), a company established in the PRC with limited liability, an indirect non-wholly owned subsidiary of the Company

Hong Kong dollars, the lawful currency of Hong Kong

the Hong Kong Special Administrative Region of the PRC

the Rules Governing the Listing of Securities on the Stock Exchange

Ms. Liu Rong, an executive Director of the Company

寧波移山影視投資管理合夥企業(有限合夥) (Ningbo Yishan Cinema Investment Partnership (Limited Partnership)*), a limited partnership established in the PRC, a connected person of the Company

the People's Republic of China, for the purposes of this announcement, excluding Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

Renminbi, the lawful currency of the PRC

the holder(s) of shares of the Company

The Stock Exchange of Hong Kong Limited

has the meaning ascribed thereto in the Listing Rules

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''Transaction''	the transaction under the Capital Injection Agreement
''%''	per cent.

* For identification purpose only

By Order of the Board

Nan Hai Corporation Limited

Liu Rong

Executive Director and Chief Executive Officer

Hong Kong, 24 December 2019

As at the date of this announcement, the Directors are as follows:

Executive Directors:	Non-executive Director:	Independent non-executive Directors:
Mr. Yu Pun Hoi	Mr. Lam Bing Kwan	Mr. Lau Yip Leung
Ms. Liu Rong		Mr. Xiao Sui Ning
		Mr. Ho Yeung Nang

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