Haichang Ocean Park : CONTINUING CONNECTED TRANSACTIONS PROPERTY LEASING AGREEMENTS

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HAICHANG OCEAN PARK HOLDINGS LTD.

ऎ׹ऎݱʮ෤છٰϞࠢʮ̡

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2255)

CONTINUING CONNECTED TRANSACTIONS

PROPERTY LEASING AGREEMENTS

The Board would like to announce that, on 21 December 2018 and 15 December 2018, the Group entered into two Property Leasing Agreements with each of the Connected Counterparties, pursuant to which certain ancillary commercial properties owned by the Group in Dalian, PRC, are leased by the Group to the Connected Counterparties for a term from 19 September 2018 to 18 September 2019 and from 1 January 2019 to 31 December 2019, respectively.

Mr. Qu, a non-executive Director and a controlling shareholder of the Company, holds approximately 62.27% and 60% equity interests in Haichang Corporation Development and Haichang Group Co, respectively. As East Water City is an indirect wholly-owned subsidiary of Haichang Corporation Development and Haichang Corporation Development is a wholly-owned subsidiary of Haichang Group Co, each of the Connected Counterparties is an associate of Mr. Qu and thus a connected person of the Company. Accordingly, the transactions contemplated under the Property Leasing Agreements constitute continuing connected transactions for the Company under Rule 14A.31 of the Listing Rules.

Since the Existing Leases and the Property Leasing Agreements are similar in nature, the Existing Leases and the Property Leasing Agreements are aggregated for the purpose of classification of connected transactions in accordance with Rule 14A.81 of the Listing Rules. As the highest applicable percentage ratio, as defined under the Listing Rules, in aggregate for the transactions under the Existing Leases and the Property Leasing Agreements is more than 0.1% but less than 5% on an annual basis and the highest annual cap is more than HK$3,000,000, the Property Leasing Agreements are subject to reporting, announcement and annual review requirements but exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.

DETAILS OF THE PROPERTY LEASING AGREEMENTS

The Board would like to announce that, on 21 December 2018 and 15 December 2018, the Group entered into two Property Leasing Agreements with each of the Connected Counterparties, pursuant to which certain ancillary commercial properties owned by the Group in Dalian, PRC, are leased by the Group to the Connected Counterparties for a term commencing from 19 September 2018 to 18 September 2019 and from 1 January 2019 to 31 December 2019, respectively. The details of the Property Leasing Agreements are as follows:

1.

Agreement One

Date:

21 December 2018

Parties:

• (1) Haichang China, as lessor; and

• (2) East Water City, as lessee.

Leased Properties:

Shop No. 701 in Dalian Laohutan Fishermen's Wharf, Zhongshan District, Dalian, with a GFA of approximately 1,717.25 sq.m.

Term:

For a term of one year commencing from 19 September 2018 to 18 September 2019.

East Water City may, by giving Haichang China a written notice not later than six months before the expiry of the term of the agreement, request renewal of the lease. If the renewal is agreed upon, Haichang China and East Water City shall enter into a new property leasing agreement for the renewal within one month from the date of the written notice.

Usage:

Office. The leased properties shall not be subleased or assigned to any other third party.

Rental:

RMB4.41 per sq.m. per day (exclusive of property management fee and utilities). Accordingly, the monthly rental payable is approximately RMB230,347.58.

Payable annually in advance and shall be paid on the forty-fifth day prior to the due date.

Rental Free Period:

Nil.

Property Management

Fee:

Payable to Haichang China or a property management company outside the Group to be appointed by Haichang China, subject to entering into a property management agreement.

Deposit:

RMB210,000 and shall be refunded with no interest to East Water City within three months upon the expiry of the term of the agreement.

2.

Agreement Two
Date:	15 December 2018
Parties:	(1) Haichang China, as lessor; and
(2) Haichang Corporation Development, as lessee.
Leased Properties:	The property located at No. 137 Huale Street, Zhongshan
District, Dalian, with a GFA of approximately 6,365.07
sq.m.
Term:	For a term of one year commencing from 1 January 2019 to
31 December 2019.
Usage:	Office. The leased properties shall not be used for other
purposes without authorisation, or be subleased to any other
third party.
Rental:	The monthly rental is RMB400,000 (exclusive of property
management fee and utilities).
Rental Free Period:	Nil.

AGGREGATE ANNUAL CAPS AND THE BASIS FOR DETERMINATION

Reference is made to the Announcements. As disclosed in the Announcements, Haichang China as lessor and Haichang Corporation Development as lessee on 18 April 2016 entered into the Existing Lease A for a term from 1 January 2016 to 31 December 2018; Yantai Fishermen as lessor and Yantai Tourism Development as lessee on 22 September 2017 entered into the Existing Lease B for a term from 19 September 2017 to 18 September 2020. Details of which are set out as follows:

Date of AgreementMonthlyParties

Location

GFA (sq.m.)

Rental (RMB)

18 April 2016

Haichang China,

Dalian

6,365.07 or 400,000

as lessor 6,026.96

Haichang Corporation

Development, as lessee

22 September 2017 Yantai Fishermen, as lessor

Yantai 1,373.58 120,743

(first year)

Yantai Tourism

127,010 (second year)

Development, as lessee

133,277 (third year)

Since the Existing Leases and the Property Leasing Agreements are similar in nature and each of the Connected Counterparties is an associate of Mr. Qu, the transactions contemplated under the Existing Lease and the Property Leasing Agreements are aggregated pursuant to Rule 14A.81 of the Listing Rules. The aggregate annual caps for the Existing Leases and the Property Leasing Agreements are set out as follows:

For the year	For the year	For the year
ending	ending	ending
31 December 2018	31 December 2019	31 December 2020
Property Leasing	RMB900,000	RMB6,900,000
Agreements	(equivalent to	(equivalent to
approximately	approximately
HK$1,020,330)	HK$7,822,530)
Existing Leases	RMB6,300,000	RMB1,600,000	RMB1,200,000
(equivalent to	(equivalent to	(equivalent to
approximately	approximately	approximately
HK$7,142,310)	HK$1,813,920)	HK$1,360,440)
Total	RMB7,200,000	RMB8,500,000	RMB1,200,000
(equivalent to	(equivalent to	(equivalent to
approximately	approximately	approximately
HK$8,162,640)	HK$9,636,450)	HK$1,360,440)

The annual caps are determined by the Directors with reference to the rental amounts to be received by the Group pursuant to the Property Leasing Agreements and the Existing Leases. The rental amounts under the Property Leasing Agreements are determined with reference to the prevailing market rates of rentals for comparable properties in the PRC as of the date of the agreements. The Directors, including the independent non-executive Directors, considered that the annual caps are fair and reasonable and in the interests of the Group and its shareholders as a whole.

REASONS AND BENEFITS FOR ENTERING INTO THE PROPERTY LEASING AGREEMENTS

In addition to the operation of theme parks in the PRC, the Group also derives its revenue from leasing out certain of its ancillary commercial properties as part of its business. In order to better utilise the Group's assets and to generate revenue for the Group, the Group would put its ancillary commercial properties for lease in the market. The Directors considered that the Property Leasing Agreements will allow the Group to utilise its ancillary commercial properties to create an additional source of income and thus will increase its revenue and enhance its profitability. Based on the above, the Directors are of the view that entering into the Property Leasing Agreements is beneficial to the Group's business development and is thus in the interest of the Group.

The terms of the Property Leasing Agreements are determined after arm's length negotiations between the relevant subsidiaries of the Company and the Connected Counterparties. The rental amounts under the Property Leasing Agreements are determined with reference to the prevailing market rates of rentals for comparable properties in the PRC close to the date of the Property Leasing Agreements. The Directors, including the independent non-executive Directors, are of the view that the Property Leasing Agreements are entered into in the ordinary and usual course of business of the Group and that the terms of the Property Leasing Agreements are on normal commercial terms or better, fair and reasonable, and in the interests of the Company and its shareholders as a whole.