Maoyan Entertainment : CONTINUING CONNECTED TRANSACTIONS REVISION OF ANNUAL CAP

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Maoyan Entertainment ፟଻࢈ᆀ

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1896)

CONTINUING CONNECTED TRANSACTIONS

REVISION OF ANNUAL CAP

On February 26, 2021, the Board resolved to revise the annual cap for the provision of the movie and TV series promotion and distribution services by the Group to the Represented Tencent Group under the Tencent Movie and TV Series Promotion and Distribution Framework Agreement.

LISTING RULES IMPLICATIONS

As at the date of this announcement, Tencent, through its wholly-owned subsidiary, Image Flag Investment (HK) Limited held more than 10% of the total issued share capital of the Company and is one of the substantial Shareholders, and thus Tencent and its associates (including the Represented Tencent Group) are connected persons of the Company. Therefore, the revision of annual cap under the Tencent Movie and TV Series Promotion and Distribution Framework Agreement for the year ending December 31, 2021 constitutes a connected transaction of the Company. As the highest applicable percentage ratio in respect of the proposed revised annual cap under the Tencent Movie and TV Series Promotion and Distribution Framework Agreement is more than 0.1%, but below 5%, the proposed revision of annual cap under the Tencent Movie and TV Series Promotion and Distribution Framework Agreement is therefore subject to annual reporting and announcement requirements, but exempt from circular (including independent financial advice) and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

INTRODUCTION

On February 26, 2021, the Board resolved to revise the annual cap for the provision of the movie and TV series promotion and distribution services by the Group to the Represented Tencent Group under the Tencent Movie and TV Series Promotion and Distribution Framework Agreement.

REVISED ANNUAL CAP AND HISTORICAL AMOUNTS

The proposed revised annual cap for the provision of the movie and TV series promotion and distribution services provided by the Group to the Represented Tencent Group under the Tencent Movie and TV Series Promotion and Distribution Framework Agreement is set out as follows:

Proposed

Original revised annual cap annual cap

(RMB in thousands)

For the year ending December 31, 2021

15,800

180,000

For avoidance of doubt, the annual caps for the provision of the movie and TV series promotion and distribution services provided by the Represented Tencent Group to the Group under the Tencent Movie and TV Series Promotion and Distribution Framework Agreement remain unchanged.

Historical transaction amounts of the movie and TV series promotion and distribution services provided by the Group to the Represented Tencent Group under the Tencent Movie and TV Series Promotion and Distribution Framework Agreement are set out as follows:

For the year ended December 31, 2018 2019 2020

(RMB in thousands)Consideration paid by the Represented Tencent Group to the Group for the movie and TV series promotion and distribution services under the Tencent Movie and TV Series Promotion and Distribution Framework Agreement

550

2,994

11,505

Basis of Cap

The Board determines the proposed revised annual cap based on the following reasons:

• • Due to the strategic cooperation of the Group with Tencent and since the formation of Tencent-Maoyan Alliance (ᙜ፟ᑌຑ), the Company has built an even more closer relationship with Tencent across many areas of businesses, including but not limited to, the movie and TV series promotion and distribution.

• • We have had certain preliminary discussions with Tencent and understood that they tentatively plan to engage us as the leading promoter and distributor to provide promotion and distribution services for at least two movies in 2021. The promotion service fees of the two movies under discussion would amount to approximately RMB50 million to RMB70 million, while their distribution service fees are based on a fixed rate of box offices they may have, which are expected to range from approximately RMB30 million to RMB50 million.

• • In addition, Tencent is also considering engage us to support their promotion and distribution services and thus would pay consideration to us. Such cooperation would involve approximately 5 to 15 movies or TV series and would generate service fees ranging approximately from RMB10 million to RMB50 million.

• • Besides, taking into account the gradual recovery of movie and TV series market in the PRC, we reserved certain headroom in the proposed revised annual cap.

OTHER UNCHANGED TERMS

Save for the proposed revision of the original annual cap as set out above, all other terms of the Tencent Movie and TV Series Promotion and Distribution Framework Agreement remain unchanged. Please refer to the following disclosure for reference.

Principal Terms

We entered into the Tencent Movie and TV Series Promotion and Distribution Framework Agreement with Tencent Computer (for itself and on behalf of the Represented Tencent Group) on January 9, 2019 and a supplemental agreement on March 24, 2020, pursuant to which (i) we will provide movie and TV series (for the avoidance of doubt, in relation to this agreement, TV series refers to all audio and/or video programs, whether played through TV stations, websites, mobile applications or other channels) promotion and distribution services to the Represented Tencent Group, and service fees will be paid to us in respect of such services; and (ii) the Represented Tencent Group will also provide such services to us, and we will pay services to them:

• • Movies and TV series promotion services: we will plan and coordinate various marketing and promotional activities to optimize the performance of movies and TV series, including but not limited to, conducting marketing and publicity campaigns as well as organizing fans gatherings and road shows.

• • Movies and TV series distribution services: we will coordinate the distribution of marketing materials to cinemas and TV stations, configure marketing strategies and release plans, monitor box office performance and market feedback of movies and TV series.

The initial term of the Tencent Movie and TV Series Promotion and Distribution Framework Agreement commenced on February 4, 2019 and will end on December 31, 2021, subject to renewal upon the mutual agreement of both parties.

Separate underlying agreements will be entered into which will set out the precise scope of services, service fees, payment method and other details of the service arrangement in the manner provided in the Tencent Movie and TV Series Promotion and Distribution Framework Agreement. The definitive terms of each of such agreements will be determined on a case-by-case basis and on fair and reasonable basis after arm's length negotiation between the parties taking into account various factors such as the prospects of relevant movies and TV series, and the Group's resources contribution, costs and expenses incurred in providing such promotion and distribution services.

Pricing Policies

For both (i) the movie and TV series promotion and distribution services provided by the Group to the Represented Tencent Group and (ii) such services provided by the Represented Tencent Group to the Group, both parties have agreed that the fees for services contemplated under the Tencent Movie and TV Series Promotion and Distribution Framework Agreement will be determined on a case-by-case basis and on a fair and reasonable basis, in particular:

• • Movie and TV series promotion services: the service fees for movie and TV series promotion services will be determined with reference to many factors including the types of resources deployed, estimated cost of the resources, the prevailing market price for the resources, the total budget of movie and TV series for promotion services, etc.

• • Movie and TV series distribution services: the service fees for movie and TV series distribution service will either be:

  • i. a predetermined fixed amount with reference to the expected box office or sales revenue agreed by both parties; or

  • ii. calculated based on the box office of movies or sales revenue of TV series in accordance with the following formula:

    for movies: distribution service fees = revenue-sharing box office * distribution service fees rate

    for TV series: distribution service fees = sales revenue * distribution service fees rate

    Note: The revenue-sharing box office refers to the box office of the movie distributed after deduction of value-added tax, National Film Development Fund Contribution and the revenue distribution to cinemas. The value-added tax and National Film Development Fund Contribution represent a fix percentage of the box office, while the revenue distribution to cinemas shall represent an agreed proportion of net box office, which equals to the box office after deduction of value-added tax and National Film Development Fund Contribution, to be paid to cinemas. Sales revenue shall refer to the total purchase price of the TV series paid. The distribution service fees rate will be determined with reference to prevailing market rates.

Prior to entering into any definitive agreement pursuant to the Tencent Movie and TV Series Promotion and Distribution Framework Agreement, we will assess and compare the fee structure and pricing terms (if applicable) proposed by members of the Represented Tencent Group with the prevailing market rates. We will only enter into definitive agreements in respect of movie and TV series promotion and distribution services with such members of the Represented Tencent Group when the fee structure and pricing terms, as a whole, is in line or better than the prevailing market rates and the definitive agreement is in the best interest of our Company and our Shareholders as a whole.

As the Company provides, as well as engages other service providers to provide, the promotion and distribution services for movies and TV series, the Company is able to obtain the prevailing market rate and estimate the costs for various types of resources, which will be used to compare with the price offered by the Represented Tencent Group for similar services.

Reasons for the Transaction

For the movie and TV series promotion and distribution services provided by the Group to the Represented Tencent Group

The Represented Tencent Group is an active player in the movies and TV series production industry in the PRC and is engaged in production of high-quality movies and TV series, which has demand for movies and TV series promotion and distribution services. We are a leading platform of Internet-empowered entertainment services, and we provide promotion and distribution services to a large number of business partners in the PRC (which includes the Represented Tencent Group).

For the movie and TV series promotion and distribution services provided by the Represented Tencent Group to the Group

Due to the formation of Tencent-Maoyan Alliance (ᙜ፟ᑌຑ) in 2019, the Company has built an even closer cooperation with Tencent in many fields including promotion and distribution of movies and TV series. As the Represented Tencent Group has abundant platform and media resources, the Company wishes to leverage such resources in promotion and distribution of movie and TV series. In addition, some of the Represented Tencent Group's resources are quite unique and can be supplemental to the traditional resources the Company uses in hand. Therefore, the Company enters into the supplemental agreement to include the new cooperation under the Tencent Movie and TV Series Promotion and Distribution Framework Agreement to accommodate potential transactions with the Represented Tencent Group.

INTERNAL CONTROL

In order to ensure that the terms under relevant framework agreements for the continuing connected transactions are fair and reasonable, or no less favorable than terms available to or from independent third parties, comply with the annual caps and pricing policies under relevant framework agreements, and are carried out under normal commercial terms, the Company has adopted the following internal control procedures:

• • the Company has adopted and implemented a management system on connected transactions. The Board and various other internal departments of the Company including but not limited to the finance department and compliance and legal department are jointly responsible for evaluating the terms under framework and definitive agreements for the continuing connected transactions, in particular, the fairness of the pricing policies and annual caps under each agreement, the management of the Company also reviews the pricing policies of the framework agreements annually. In addition, various other internal departments of the Company monitor the fulfilment status and the transaction updates under the framework agreement as necessary from time to time, and the reporting team (the "Reporting Team") within the finance department is responsible for monitoring the transaction amounts of the continuing connected transactions to ensure that the annual caps under the framework agreements are complied with, and that any definitive agreement under the relevant framework agreements shall be entered into by the Company with the prior approval of the Reporting Team.

• • the independent non-executive Directors and auditors of the Company will conduct annual review of the continuing connected transactions under the framework agreements and provide annual confirmation to ensure that in accordance with Rules 14A.55 and 14A.56 the Listing Rules that the transactions are conducted in accordance with the terms of the agreements, on normal commercial terms and in accordance with the relevant pricing policies; the audit committee of the Company will review the Company's financial controls, risk management and internal control systems; and when considering any renewal or revisions to the framework agreements, the Company will then comply with the Listing Rules as applicable.

• • when considering service fees for the services to be provided by the Group to the connected persons, the Group will constantly research into prevailing market conditions and practices and make reference to the pricing and terms between the Group and independent third parties for similar transactions, to make sure that the pricing and terms offered by the above connected persons from mutual commercial negotiations (as the case may be), are fair, reasonable and are no less favorable than those offered by independent third parties.

OPINION FROM THE BOARD

The Directors (including the independent non-executive Directors) are of the view that the revisions of the aforementioned annual cap under the Tencent Movie and TV Series Promotion and Distribution Framework Agreement for the year ending December 31, 2021 was determined after arm's length negotiation, and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable and in the interests of the Company and its Shareholders as a whole. Such transactions are and will be conducted in the ordinary and usual course of business of the Company.

As Mr. Cheng Wu, being our Director, holds senior management positions in the Represented Tencent Group, he has therefore abstained from voting on the relevant Board resolutions approving the proposed revision of the aforementioned annual cap under the Tencent Movie and TV Series Promotion and Distribution Framework Agreement. Save as disclosed above, none of the other Directors has material interests in the transactions contemplated thereunder.

LISTING RULES IMPLICATIONS

As at the date of this announcement, Tencent, through its wholly-owned subsidiary, Image Flag Investment (HK) Limited held more than 10% of the total issued share capital of the Company and is one of the substantial Shareholders, and thus Tencent and its associates (including the Represented Tencent Group) are connected persons of the Company. Therefore, the revision of annual cap under the Tencent Movie and TV Series Promotion and Distribution Framework Agreement for the year ending December 31, 2021 constitutes a connected transaction of the Company. As the highest applicable percentage ratio in respect of the highest proposed revised annual cap under the Tencent Movie and TV Series Promotion and Distribution Framework Agreement is more than 0.1%, but below 5%, the proposed revision of annual cap under the Tencent Movie and TV Series Promotion and Distribution Framework Agreement is therefore subject to annual reporting and announcement requirements, but exempt from circular (including independent financial advice) and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

INFORMATION ON THE PARTIES

The Group is a leading platform providing innovative Internet-empowered entertainment services in China, offering online entertainment ticketing services, entertainment content services, e-commerce services and advertising services and others.

Tencent is principally engaged in the provision of Internet value-added services to users in the PRC.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following terms shall have the following meanings.

"associate(s)"	has the meaning ascribed to it under the Listing Rules;
"Board"	the board of directors of the Company;
"Company", "we" or "us"	Maoyan Entertainment, a company incorporated in the Cayman
Islands with limited liability, whose shares are listed on the Main
Board of the Stock Exchange with stock code 1896;
"connected person(s)"	has the meaning ascribed to it under the Listing Rules;
"Consolidated Affiliated	entities whose financial results have been consolidated and
Entities"	accounted for as subsidiaries of our Company by virtue of the
contractual arrangements of the Company;
"Director(s)"	the director(s) of the Company;
"Group"	our Company and its subsidiaries and the Consolidated Affiliated
Entities, from time to time;
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC;
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock
Exchange;
"PRC"	the People's Republic of China, for the purpose of this
announcement, excluding Hong Kong, Macau Special
Administrative Region and Taiwan;
"Represented Tencent	Tencent and its subsidiaries but excluding China Literature
Group"	Limited and its subsidiaries, and Tencent Music Entertainment
Group and its subsidiaries;
"RMB"	Renminbi, the lawful currency of the PRC;
"Shares"	ordinary share(s) in the share capital of the Company with a par
value of US$0.00002 each;
"Shareholders"	holders of the Shares;
"Stock Exchange" or	The Stock Exchange of Hong Kong Limited;
"Hong Kong Stock
Exchange"
8

"Tencent"	Tencent Holdings Limited, a company incorporated in the
Cayman Islands with limited liability and whose shares are listed
on the Main Board of the Stock Exchange under the stock code
700;
"Tencent Computer"	Shenzhen Tencent Computer Systems Company Limited (ଉέ̹
ᙜৃࠇၑዚӻ୕Ϟࠢʮ̡), a company established in the PRC on
November 11, 1998 and a wholly-owned subsidiary of Tencent;
"Tencent Movie and	A framework agreement entered into between the Company and
TV Series Promotion and	the Tencent Computer (for itself and on behalf of the Represented
Distribution Framework	Tencent Group) on January 9, 2019 and amended on March 24,
Agreement"	2020, pursuant to which (i) we will provide movie and TV series
promotion and distribution services to the Represented Tencent
Group, and service fees will be paid to us in respect of such
services; and (ii) the Represented Tencent Group will also provide
such services to us, and we will pay services to them; and
"%"	per cent.
Hong Kong, February 26, 2021

By order of the Board

MAOYAN ENTERTAINMENT

Zheng Zhihao Executive Director

As at the date of this announcement, the board of directors of the Company comprises Mr. Zheng Zhihao as executive Director, Mr. Wang Changtian, Ms. Li Xiaoping, Ms. Wang Jian, Mr. Cheng Wu, Mr. Chen Shaohui, Mr. Lin Ning and Mr. Tang Lichun, Troy as non-executive Directors, and Mr. Wang Hua, Mr. Chan Charles Sheung Wai, Mr. Yin Hong and Ms. Liu Lin as independent non-executive Directors.