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 disclaim 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) DISCLOSEABLE TRANSACTION The Board announces that on 29 January 2015 after trading hours, CE Open as vendor and ZKBF as purchaser entered into a sale and purchase agreement, pursuant to which the Vendor shall sell and the Purchaser shall purchase 20% equity interest of Loongson at a total consideration of RMB200,000,000, equivalent to approximately HK$256,213,000, which shall be settled by way of cash. Loongson’s principal business is dedicated to central processing unit design, production, sales and services in the PRC. As at the date of this announcement, the Vendor is the registered owner holding 20% equity interest of Loongson, which is a nominee of South Sea Investment, holding such equity interest in favour of South Sea Investment. As the applicable percentage ratios for the Disposal under the Listing Rules are more than 5% but below 25%, the Disposal constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules and is subject to the reporting and announcement requirements under the Listing Rules. INTRODUCTION On 29 January 2015 after trading hours, the Vendor and the Purchaser entered into the SPA, pursuant to which the Vendor shall sell and the Purchaser shall acquire the Equity Interest at the Consideration. THE DISPOSAL Main terms of the SPA Date 29 January 2015 * For identification purpose only –1– Parties CE Open as vendor; and ZKBF as purchaser (To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, ZKBF is a third party independent of the Company and connected persons of the Company.) Consideration The Consideration shall be payable by the Purchaser to the Vendor in cash as follows: (a) RMB50,000,000 shall be paid by the Purchaser within fifteen (15) Business Days upon signing the SPA; and (b) RMB150,000,000 shall be paid by the Purchaser within three (3) Business Days upon the Application Date. The Consideration was determined after arm’s length negotiations between the parties by reference to a valuation report prepared by an independent PRC valuer. As per the valuation report, the fair market value of the Equity Interest as at 31 October 2014 was approximately RMB158,887,000. As a result, the Consideration represents a premium of approximately 25.9% over the fair market value of the Equity Interest. Having considered the above, the Directors consider that the Consideration is fair and reasonable and in the interests of the Company and the Shareholders as a whole. Conditions precedent Effective Date shall be taken place immediately upon: (1) The resolutions for approving the transfer of the Equity Interest at the general meeting of Loongson; (2) All other equity holders of Loongson giving up their pre-emptive rights in the Equity Interest; and (3) The internal approval of the sale and purchase of the Equity Interest obtained by CE Open and ZKBF respectively. Completion Completion is conditional upon completion of all mandatory procedures in changing the ownership of the Equity Interest from the Vendor to the Purchaser and full payment of the Consideration. –2– Information on Loongson Loongson is a company incorporated in the PRC, having paid-up registered capital of RMB210,000,000. As at the date of this announcement, CE Open is registered owner of the Equity Interest, which is a nominee of South Sea Investment, i.e. South Sea Investment is the beneficial owner of the Equity Interest. Loongson’s principally business is dedicated to central processing unit design, production, sales and services in the PRC. Information on the Group and Reason for the Disposal The Group is principally engaged in property development, culture and media business and its listed subsidiary, Sino-i, is engaged in corporate IT application services. The Company acquired the Equity Interest in November 2009 for the purpose of investment, at the consideration of RMB100,000,000. The carrying value of the Equity Interest as at 31 December 2013 was approximately RMB81,963,000 (equivalent to approximately HK$105,000,000). As per the audited financial statements of Loongson for the year ended 31 December 2012, the turnover and net loss were approximately RMB90,190,000 (equivalent to approximately HK$110,989,000) and approximately RMB20,595,000 (equivalent to approximately HK$25,345,000) respectively (both at the exchange rate of HK$1 = RMB0.8126 used in the audited financial statements for the year ended 31 December 2012). As per the audited financial statements of Loongson for the year ended 31 December 2013, the turnover and net loss were approximately RMB42,657,000 (equivalent to approximately HK$53,874,000) and approximately RMB36,392,000 (equivalent to approximately HK$45,961,000) respectively (both at the exchange rate of HK$1 = RMB0.7918 used in the audited financial statements for the year ended 31 December 2013). As per the unaudited financial statements of Loongson for the year ended 31 December 2014, the turnover and net loss were approximately RMB64,350,000 (equivalent to approximately HK$80,882,000) and approximately RMB15,724,000 (equivalent to approximately HK$19,764,000) respectively (both at the exchange rate of HK$1 = RMB0.7956 used in the unaudited financial statements for the year ended 31 December 2014). In view of the consecutive loss recorded by Loongson and the carrying value of the Equity Interest is lower than the cost of investment, the Group has intended to dispose of the Equity Interest so as to minimize its effect on the financial performance of the Group. The Group eventually has successfully solicited the Purchaser who is willing to offer the Consideration which will generate a premium of approximately RMB118,037,000 (equivalent to approximately HK$151,213,000) (representing approximately 144% premium over the carrying value). In view of high premium in the Disposal and the Consideration will bring an improvement in cash flow of the Group, the Directors (including the independent nonexecutive Directors) are of the view that the terms of the Disposal are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. –3– Information on ZKBF The Purchaser is a limited partnership established in the PRC in 2014. The main business scope of the Purchaser is: asset management, investment management, investment advisory service, equity investment, corporate asset restructuring, mergers and acquisitions and corporate restructuring, financial advisory service, custodian security interest management, fund investment, domestic business, investment in tangible business, management service for legitimate approved projects and projects approved by governing authorities. Financial effect of the Disposal By taking into account of (i) deduction of the carrying value of the Equity Interest shown in the audited financial statements of the Group as at 31 December 2013 of approximately RMB81,963,000 (equivalent to approximately HK$105,000,000); and (ii) a gain recognized in accordance with the accounting principles from release of the accumulated exchange reserve as at 31 December 2013 of approximately HK$12,850,000 (such accumulated exchange reserve was due to appreciation of RMB in exchange of Hong Kong dollars in relation to the carrying value of the Equity Interest), the Company is expected to result a gain on the Disposal of approximately HK$164,063,000. Use of proceeds from the Disposal The Company intends to use the sales proceeds to be derived from the Disposal for general working capital, but the details of usage of the sales proceeds has yet determined. Listing Rules implications in relation to the Disposal As the applicable percentage ratios for the Disposal under the Listing Rules are more than 5% but below 25%, the Disposal constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules and is subject to the reporting and announcement requirements under the Listing Rules. DEFINITIONS In this announcement, the following expressions shall, unless the context requires otherwise, have the following meanings: ‘‘Application Date’’ the date on which Loongson submits application to the company registration authority for the change of registered owner of the Equity Interest, i.e. from the Vendor to the Purchaser ‘‘Board’’ the board of Directors of the Company ‘‘Business Days’’ weekdays other than Saturday, Sunday and public holiday in the PRC ‘‘CE Open’’/‘‘Vendor’’ 北京中企開源信息技術有限公司 (Beijing CE Open Source Software Co., Ltd.), a limited liability company established in the PRC, a nominee of South Sea Investment, holding the Equity Interest in favour of South Sea Investment –4– ‘‘Company’’ Nan Hai Corporation Limited, a company incorporated in Bermuda with limited liability, the issued Shares of which are listed on the Stock Exchange (stock code: 680) ‘‘Consideration’’ the total consideration for RMB200,000,000 (equivalent HK$256,213,000) ‘‘Directors’’ the directors of the Company ‘‘Disposal’’ disposal of the Equity Interest by the Vendor to the Purchaser pursuant to the SPA ‘‘Effective Date’’ the effective date of the SPA on which certain conditions precedent are satisfied ‘‘Equity Interest’’ 20% equity interest in Loongson ‘‘Group’’ the Company and its subsidiaries ‘‘Hong Kong’’/‘‘HK’’ the Hong Kong Special Administrative Region of the PRC ‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange ‘‘Loongson’’ 龍芯中科技術有限公司(Loongson Technology Co., Ltd.), a company incorporated in the PRC and an associate of the Company ‘‘PRC’’ the People’s Republic of China, excluding Hong Kong, the Macao Special Administrative Region of the PRC and Taiwan for the purpose of this announcement ‘‘Sino-i’’ Sino-i Technology Limited, a company incorporated in Hong Kong with limited liability and listed on the Stock Exchange (stock code: 250) ‘‘SPA’’ the sale and purchase agreement dated 29 January 2015 in relation to the Disposal ‘‘Shares’’ ordinary shares of the Company ‘‘Shareholders’’ holders of the Shares ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited ‘‘South Sea Investment’’ South Sea Investment Company Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Company, is an ultimate beneficial owner of the Equity Interest –5– the Disposal, being to approximately ‘‘ZKBF’’/‘‘Purchaser’’ 林芝縣中科百孚股權投資有限合夥企業 (Lin Zhi County Zhong Ke Bai Fu Equity Investment Limited Partnership), an enterprise incorporated in the PRC ‘‘HK$’’ Hong Kong dollar, the lawful currency of Hong Kong ‘‘RMB’’ Renminbi, the lawful currency of the PRC ‘‘%’’ per cent. For the purpose of this announcement, unless otherwise indicated, the exchange rates of HK$1 = RMB0.7806 has been used for currency translation, where applicable. Such exchange rates is for the purpose of illustration only and do not constitute a representation that any amounts in HK$ and RMB have been, could have been or may be converted at such or any other rates. By Order of the Board Nan Hai Corporation Limited Chen Dan Director Hong Kong, 29 January 2015 As at the date of this announcement, the Directors are as follows: Executive Directors: Mr. Yu Pun Hoi Ms. Chen Dan Ms. Liu Rong Non-executive Directors: Mr. Wang Gang Mr. Lam Bing Kwan –6– Independent non-executive Directors: Prof. Jiang Ping Mr. Hu Bin Mr. Lau Yip Leung