On 9 May 2016, Nan Hai Corporation Limited (SE stock code: 00680.HK) announced that, its core business, Dadi Cinema, will issue convertible bonds in the aggregate amount of RMB1.0 billion to SAC Finance Company Limited, which is a wholly-owned subsidiary of Alibaba Pictures (01060.HK), through Dadi Cinema (HK) Limited, which is the controlling parent of Dadi Cinema in Hong Kong. The subscription funds will be applied towards the operation, investments and mergers and acquisitions of cinemas, and the repayment of bank borrowings.

According to this agreement, SAC Finance may convert the principal of the bonds into equity investments in Dadi Cinema (HK) Limited or its wholly-owned subsidiaries during the agreed period. Based on the initial conversion price agreed by the parties, SAC Finance will realize the investments in 4.76% equity interest in Dadi Cinema (HK) or 廣東大地影院建設 (Guangdong Dadi Cinema Construction).

Dadi Cinema has developed rapidly since its incorporation, and has become a leading theatre chain in the PRC with almost ten years’ endeavor. Up to the end of April 2016, Dadi Cinema operated 313 cinemas with a total of 1,662 cinema halls, covering 28 provinces and 150 cities in the PRC. The number of contracted backlog was over 310 cinemas. In 2015, the cinemas of Dadi Cinema recorded an admission of 71.58 million audiences with its box office before tax amounting to RMB2.2 billion, representing an increase of 47% over the corresponding period last year, which is ranking second among cinema investment management companies throughout China.

As a flagship in the cultural and entertainment business sectors of the Alibaba Group, the Alibaba Pictures Group is a vertically integrated entertainment powerhouse, with a strong presence in online movie ticketing, content production and internet promotion and distribution.

The basis for cooperation between Dadi Cinema and Alibaba Pictures has already been formed. Prior to this, Dadi Cinema had entered into a strategic collaboration agreement with the Alibaba Pictures Group to promote all-round strategic collaboration in respect of online ticketing, joint sale of movies and ticket vending machines. Commenting on this collaboration, Dadi Cinema’s General Manager Yu Xin said, “The Chinese film industry continues to make innovative breakthroughs; against this backdrop, collaboration in the form of equity joint venture will facilitate the in-depth cooperation in respect of film distribution, sale of movies, joint membership operation and big data construction between the parties, and thus push forward the overall development of the industry jointly. In the future, the collaboration will be extended into other sectors including online retail, cloud technology and financial services. In the future, Dadi will continue to actively explore more opportunities for in-depth cooperation with strategic partners in an open and coordinated manner.”

Zhang Qiang, the CEO of Alibaba Pictures, indicated that, cinema is not only one of the most important consumption scenes in the entertainment industry, but also a core application scene of the internet in the film industry. It is integral to the overall entertainment platform established by Alibaba Pictures. “We hope to leverage on our own internet capability and resources to explore various business models through collaboration with our excellent partner, Dadi Cinema, and in turn facilitate the overall development of the film industry.”

The collaboration in the form of equity joint venture between Alibaba Pictures and Dadi Cinema is also based on recognition of the offline and high quality film screening resources owned by Dadi Cinema and the favourable growing trend of Dadi Cinema. Dadi Cinema has committed to become a leader in the Chinese film industry since its establishment. 2016 is the year of Dadi Cinema Group’s comprehensiveimplementation of “Film+” strategy. Dadi Cinema has been optimizing its development under a user-oriented approach, adhering to step toward platform by means of big data analysis, upstream extension and alliance across different industries, with a view to create an ecosystem of theatre experience integrated with diversified operation of “Film + Innovative Internet”, “Film + Innovative Retail” as well as “Film + Innovative Catering”.

This collaboration will promote in-depth upgrading of “Film + Internet” strategy and will create a new business development model for the Chinese film industry.

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About Nan Hai Corporation Limited

Nan Hai Corporation Limited (“Nan Hai Corporation”) is a company listed on the Hong Kong Stock Exchange (stock code: 00680.HK). The Company is principally engaged in three major businesses, namely culture and media, property development and corporate IT application services through Dadi Media (HK) Limited and its subsidiaries, Dadi Cinema Investment Limited and its subsidiaries, Nan Hai Development Limited and its subsidiaries, and Sino-i Technology Limited (stock code: 00250.HK).