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. (A joint stock limited company incorporated in the People s Republic of China with limited liability) (Stock Code: 3636) CONTINUING CONNECTED TRANSACTIONS REVISION OF EXISTING ANNUAL CAP OF CONTINUING CONNECTED TRANSACTION References are made to the prospectus of the Company dated 24 February 2014 and the announcement dated 17 December 2014 containing, among others, the non-exempt continuing connected transactions and their annual caps, as well as revisions of their annual caps stated in the Commodities Sale and Purchase Framework Agreement entered into between the Company and Poly Group. Due to the reasons as set out in this announcement, on 24 March 2016, the Board has decided to revise the existing annual cap of sales of tickets for the year ending 31 December 2016 in respect of the Commodities Sale and Purchase Framework Agreement entered into between the Company and Poly Group. COMMODITIES SALE AND PURCHASE FRAMEWORK AGREEMENT Pursuant to the Commodities Sale and Purchase Framework Agreement, the Company may from time to time sell commodities mainly including art products and theatre tickets to Poly Group and/or its associates. The Company now decides to revise the existing annual cap of sales of tickets in respect of Commodities Sale and Purchase Framework Agreement. 1. Revision of the Existing Annual Cap of Sales of Tickets for the Commodities Sale and Purchase Framework Agreement between the Company and Poly Group and its Reasons and Benefits (1) It is the ordinary and usual course of business of the Company to sell theatre tickets. There is a need for Poly Group and/or its associates to purchase theatre tickets for market promotion from time to time. (2) With continuing expansion of the business scale of Poly Group, the demand for theatre tickets of Poly Group has exceeded the original anticipation. (3) The above-mentioned provision of commodities sale and purchase services by the Company to Poly Group has been and will be conducted in line with the market practice and can exert the strength and advantage from both the Company and Poly Group. - 1 -
In light of the above, the Company has noted that the annual cap of sales of tickets under the Commodities Sale and Purchase Framework Agreement for the year ended 31 December 2016 set out in the announcement dated 17 December 2014 will not be sufficient for its business growth, and therefore proposes to revise such cap. 2. Principal Terms of the Commodities Sale and Purchase Framework Agreement The principal terms of the Commodities Sale and Purchase Framework Agreement are as follows: (1) the Commodities Sale and Purchase Framework Agreement is valid for a term of three years commencing on the date of listing of the Company (i.e. 6 March 2014) and can be renewed for another three years upon its expiry; (2) relevant subsidiaries of both parties will enter into separate underlying agreements which will set out the specific terms and conditions according to the principles provided in the Commodities Sale and Purchase Framework Agreement; and (3) the price of the commodities sold by the Company under the Commodities Sale and Purchase Framework Agreement will be determined through arm's length negotiations by parties thereto with reference to market price. 3. Existing Annual Caps and Revised Annual Cap Transactions under the following agreements Historical figures for the years 2011, 2012, 2013, 2014 and 2015 (RMB in thousands) Revised Existing caps for the years annual cap 2014, 2015 and 2016 for 2016 2011 2012 2013 2014 2015 2014 2015 2016 2016 Commodities Sale and Purchase Framework Agreement sales of tickets 1,000 1,400 3,611 4,965 5,655 5,000 6,000 7,000 12,000 Commodities Sale and Purchase Framework Agreement sales of art products 1,400 500 1,676 726 312 3,000 5,000 5,000 N/A Total 2,400 1,900 5,287 5,691 5,967 8,000 11,000 12,000 17,000-2 -
4. Basis of Determining the Revised Annual Cap In determining the above revised annual cap, the Directors have considered: (i) the historical figures, i.e. the revenue generated from the sales of theatre tickets provided by the Company to Poly Group and/or its associates for the year ended 31 December 2015 and the growing trend of historical figures of the Company; (ii) the anticipated receivable amount of theatre tickets under the existing Commodities Sale and Purchase Service Framework Agreement between the Company and Poly Group; (iii) the future level of demand of Poly Group and its associates for the theatre tickets; (iv) the future changes in market price due to increase in costs such as labour cost; and (v) the future expansion plan of the theatre circuit networks of the Company. 5. Consideration by the Board in respect of the Revision of Annual Cap The Company will endeavour to carry out adequate supervision over the transaction amount of the sales of tickets under the Commodities Sale and Purchase Framework Agreement entered into between the Company and Poly Group against the relevant annual cap in future with a view of ensuring that necessary measures and appropriate actions for the compliance with applicable requirements under the Hong Kong Listing Rules will be promptly taken. The Directors (including independent non-executive Directors) of the Company consider that the Commodities Sale and Purchase Framework Agreement between the Company and Poly Group have been entered into in the ordinary and usual course of business of the Company and conducted on normal commercial terms, and the revised annual cap of sales of tickets is fair and reasonable and in the interests of the shareholders of the Company as a whole. 6. Implications under the Hong Kong Listing Rules Given that Poly Group is a controlling shareholder of the Company, it constitutes a connected person of the Company pursuant to Chapter 14A of the Hong Kong Listing Rules. Therefore, the Commodities Sale and Purchase Framework Agreement entered into between the Company and Poly Group constitutes a continuing connected transaction of the Company under the Hong Kong Listing Rules. As the highest applicable percentage ratio in respect of the revised annual cap for the sales of tickets under the Commodities Sale and Purchase Framework Agreement is more than 0.1% but less than 5%, the continuing connected transactions under the Commodities Sale and Purchase Framework Agreement would be subject to the reporting, announcement and annual review requirements under Chapter 14A of the Hong Kong Listing Rules but exempted from the independent shareholders approval requirement. - 3 -
7. Interests of Directors in the Commodities Sale and Purchase Framework Agreement As the Directors Mr. Wang Lin (vice general manager of Poly Group) and Mr. Zhao Zigao (head of the corporate development department of Poly Group) are the directors or senior management of Poly Group, they are considered to be connected with the transactions contemplated under the Commodities Sale and Purchase Framework Agreement, hence they have abstained from voting on the Board resolution for approving such revised annual cap. Save as disclosed above, none of the Directors has any material interest in the Commodities Sale and Purchase Framework Agreement, and none of them were required to abstain from voting on the Board resolution for considering and approving such revised annual cap. INFORMATION ON THE PARTIES Information on the Company The Company is a joint stock company incorporated in the PRC on 14 December 2010 with limited liability and a leading culture and art enterprise in the PRC with diversified business operations. The Company is mainly engaged in art business and auction, performance and theatre management and cinema investment and management. Information on Poly Group Established in 1992, Poly Group is a large state-owned enterprise under the direct supervision and administration of State-owned Assets Supervision and Administration Commission of the State Council of the PRC. Apart from culture and arts business, in which Poly Group is engaged through the Company, Poly Group is primarily engaged in military and civilian trade and business, real estate development, investment and exploitation in the mineral resource field and the manufacture of civilian explosive equipment and blasting service. DEFINITIONS In this announcement, the following terms have the meanings set out below, unless the context otherwise requires: associate(s) Board Director(s) Company has the meaning ascribed to it under the Hong Kong Listing Rules the board of Directors of the Company the director(s) of the Company Poly Culture Group Corporation Limited, a joint stock limited company incorporated in the PRC on 14 December 2010, the H shares of which are listed on The Stock Exchange of Hong Kong Limited with the stock code of 03636-4 -
connected person(s) Hong Kong Hong Kong Listing Rules Poly Group PRC RMB has the meaning ascribed to it under the Hong Kong Listing Rules the Hong Kong Special Administrative Region of the PRC the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited China Poly Group Corporation ( 中國保利集團公司 ), a state-owned company incorporated in the PRC and the controlling shareholder of the Company, and (where the context requires) including its subsidiaries the People s Republic of China the lawful currency of the PRC By the order of the Board Poly Culture Group Corporation Limited Xu Niansha Chairman Beijing, the PRC 24 March 2016 As at the date of this announcement, the executive Directors are Mr. Xu Niansha, Mr. Li Nan, Mr. Zhang Xi and Mr. Jiang Yingchun; the non-executive Directors are Mr. Wang Lin and Mr. Zhao Zigao; and the independent non-executive Directors are Mr. Li Boqian, Ms. Li Xiaohui and Mr. Yip Wai Ming. - 5 -