Media Asia Group Holdings Limited

03/15/2017 | Press release | Distributed by Public on 03/15/2017 04:20

REVISION OF ANNUAL CAP FOR CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE FILM LIBRARY LICENCE AGREEMENTS

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.

REVISION OF ANNUAL CAP FOR CONTINUING CONNECTED TRANSACTIONS IN RELATION TO

THE FILM LIBRARY LICENCE AGREEMENTS

Reference is made to the announcement of the Company dated 31 July 2014 in relation to the Film Library Licence Agreements.

The Group has recently entered into the New Agreement, a licence agreement with a Chinese new media operator for sub-licensing of films in the Film Library Licence Agreements and expects to receive a substantial portion of contract sum of the New Agreement before 31 July 2017. Accordingly, the aggregate amount of royalties payable by the Company to eSun under the Film Library Licence Agreements for the year ending 31 July 2017 is expected to exceed the Original Annual Cap. In this circumstance, the Directors resolved to revise the annual cap for the continuing connected transactions under the Film Library Licence Agreements for the financial year ending 31 July 2017 to HK$24,000,000.

As all the applicable percentage ratios (as defined in the GEM Listing Rules) in respect of the Revised Annual Cap are less than 5%, the relevant continuing connected transactions are subject to the reporting, announcement and annual review requirements and are exempt from approval by independent shareholders under Rule 20.74(2) of the GEM Listing Rules.

Reference is made to the announcement of the Company dated 31 July 2014 in relation to the Film Library Licence Agreements.

THE FILM LIBRARY LICENCE AGREEMENTS

On 31 July 2014, the Company (as licensee) entered into the Media Asia Distribution (BVI) Film Library Licence Agreement with Media Asia Distribution (BVI) (as licensor) and eSun (as the designated representative of the licensor), and the Media Asia Distribution (HK) Film Library Licence Agreement with Media Asia Distribution (HK) (as licensor) and eSun (as the designated representative of the licensor) for a period of three years from 1 August 2014 to 31 July 2017.

Pursuant to the Film Library Licence Agreements, the respective licensors have agreed to license to the Company the rights to exploit certain films in the territories as specified in the relevant Film Library Licence Agreements and the Company shall pay 85% of the net receipts earned in respect of exploitation of the rights granted to it as royalties. The licensors appoint eSun as their agent for the purposes of collecting and distributing monies paid and payable in respect of the exploitation of the rights granted to the Company under the Film Library Licence Agreements.

REVISION OF ANNUAL CAP

The annual caps for the continuing connected transactions under the Film Library Licence Agreements were HK$15,000,000 and HK$17,000,000 respectively for the two financial years ended 31 July 2015 and 2016 and is HK$10,000,000 for the financial year ending 31 July 2017, which has not been exceeded as at the date of this announcement.

The Group has recently entered into a licence agreement (the "New Agreement") with a Chinese new media operator for sub-licensing of films in the Film Library Licence Agreements. The contract sum of the New Agreement is higher than the projected revenue stream for determination of the Original Annual Cap. The Company expects to receive a substantial portion of contract sum of the New Agreement upon fulfillment of certain conditions of the New Agreement before 31 July 2017. Accordingly, the aggregate amount of royalties payable by the Company to eSun under the Film Library Licence Agreements for the year ending 31 July 2017 is expected to exceed the Original Annual Cap. In this circumstance, the Directors resolved to revise the annual cap for the financial year ending 31 July 2017 to HK$24,000,000.

The Revised Annual Cap is determined with reference to:

  1. the historical transaction amounts;

  2. the projected revenue stream that could be generated by the Group in the exploitation of the relevant films licensed under the Film Library Licence Agreements, including the estimated contract sum to be received under the New Agreement; and

  3. the rate of royalties stipulated in the Film Library Licence Agreements.

The historical transaction amounts in respect of the continuing connected transactions under the Film Library Licence Agreements for the two financial years ended 31 July 2015 and 2016 were HK$12,946,000 and HK$6,463,000 respectively.

The Directors (including independent non-executive Directors) consider that the continuing connected transactions under the Film Library Licence Agreements are conducted on normal commercial terms and in the ordinary course of business of the Group, and the terms and the Revised Annual Cap are fair and reasonable and in the interests of the Company and its shareholders as a whole.

Dr. Lam Kin Ngok, Peter, who is the ultimate controlling shareholder of eSun, may be regarded as having material interests in the continuing connected transactions under the Film Library Licence Agreements and therefore has abstained from voting on the Board resolutions approving the Revised Annual Cap.

INFORMATION OF THE GROUP AND THE CONNECTED PERSONS

The Company is an exempted company incorporated in the Cayman Islands and continued in Bermuda with limited liability. The principal activity of the Company is investment holding. The principal activities of the Group include film production and distribution; organisation, management and production of concerts and live performances; artiste management; production and distribution of television programs; music production and publishing; licensing of media contents; provision of consultancy services in planning and management of culture, entertainment and live performance projects.

Media Asia Distribution (BVI) is principally engaged in film distribution, licensing of film rights and film investment and Media Asia Distribution (HK) is principally engaged in film distribution and film library management, both of them are wholly-owned subsidiaries of eSun.

eSun is an exempted company incorporated in Bermuda with limited liability. eSun acts as an investment holding company and the principal activities of its subsidiaries include the development and operation of and investment in media and entertainment, music production and distribution, investment in and production and distribution of television programs, films and video format products, cinema operation, the sale of cosmetic products, property development for sale and property investment for rental purposes as well as the development and operation of and investment in cultural, leisure, entertainment and related facilities.

GEM LISTING RULES IMPLICATIONS

Pursuant to the GEM Listing Rules, if the Company revises the annual cap for continuing connected transactions, the Company is required to re-comply with the relevant provisions under Chapter 20 of the GEM Listing Rules.

As at the date of this announcement, eSun is the controlling shareholder of the Company indirectly holding approximately 67.56% of the issued share capital of the Company and therefore a connected person of the Company. Each of Media Asia Distribution (BVI) and Media Asia Distribution (HK) is wholly-owned subsidiary of eSun and therefore is a connected person of the Company under the GEM Listing Rules. Accordingly, the transactions contemplated under the Film Library Licence Agreements constitute continuing connected transactions of the Company under the GEM Listing Rules.

As all the applicable percentage ratios (as defined in the GEM Listing Rules) in respect of the Revised Annual Cap are less than 5%, the relevant continuing connected transactions are subject to the reporting, announcement and annual review requirements and are exempt from approval by independent shareholders under Rule 20.74(2) of the GEM Listing Rules.

DEFINITIONS

In this announcement, the following expressions shall have the meanings set out below unless the context requires otherwise:

"Board"

the board of Directors

"Company"

Media Asia Group Holdings Limited, an exempted company incorporated in the Cayman Islands and continued in Bermuda with limited liability, the shares of which are listed and traded on the GEM (Stock Code: 8075)

"Director(s)"

the director(s) of the Company

"eSun"

eSun Holdings Limited, an exempted company incorporated in Bermuda with limited liability, the shares of which are listed and traded on the Main Board of the Stock Exchange (Stock Code: 571) and the controlling shareholder of the Company

"Film Library Licence Agreements"

(a) the Media Asia Distribution (BVI) Film Library Licence Agreement; and (b) the Media Asia Distribution (HK) Film Library Licence Agreement, each a "Film Library Licence Agreement"

"GEM"

the Growth Enterprise Market of the Stock Exchange

"GEM Listing Rules"

the Rules Governing the Listing of Securities on the GEM

"Group"

the Company and its subsidiaries

"HK$"

Hong Kong dollars, the lawful currency of Hong Kong

"Hong Kong"

the Hong Kong Special Administrative Region of the People's Republic of China

"Media Asia Distribution (BVI)"

Media Asia Distribution Ltd., a company established under the laws of the British Virgin Islands with limited liability and a wholly- owned subsidiary of eSun

"Media Asia Distribution (BVI) Film Library Licence Agreement"

the licence agreement dated 31 July 2014 entered into among the Company, Media Asia Distribution (BVI) and eSun in respect of the grant of licence by Media Asia Distribution (BVI) to the Company of certain films

"Media Asia Distribution (HK)"

Media Asia Distribution (HK) Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of eSun

"Media Asia Distribution (HK) Film Library Licence Agreement"

the licence agreement dated 31 July 2014 entered into among the Company, Media Asia Distribution (HK) and eSun in respect of the grant of licence by Media Asia Distribution (HK) to the Company of certain films

"Original Annual Cap"

the original annual cap for the continuing connected transactions under the Film Library Licence Agreements for the year ending 31 July 2017, being HK$10,000,000

"Revised Annual Cap"

the revised annual cap for the continuing connected transactions under the Film Library Licence Agreements for the year ending 31 July 2017, being HK$24,000,000