Kingsoft Corporation Limited Enters into Framework Agreement with Xiaomi for Comprehensive Services, Joint Operation of Games, and Product Procurement

Kingsoft Corporation Limited dated 30 December 2022 in relation to the framework agreement entered into between The Company and Xiaomi to regulate the various ongoing transactions between the two parties for the three years ending 31 December 2025. The Group has set up a stable long-term business relationship with Xiaomi Group. On 30 December 2022, The Company and Xiaomi entered into a framework agreement to regulate the various ongoing transactions between the two parties for the three years ending 31 December 2025.

In order to renew the transactions under the existing framework agreement for the next three years ending 31 December 2028, The Company and Xiaomi entered into the Framework Agreement, pursuant to which: (i) The Group will provide various comprehensive services to Xiaomi Group, mainly including the promotion services, the mailbox customized development services and licensing and subscription services; (ii) The Group will jointly operate games provided by The Group with Xiaomi Group; (iii) Xiaomi Group will provide various comprehensive services to The Group, mainly including the promotion services, and the catering services and other ancillary services; and (iv) Xiaomi Group will provide products to The Group, for a term of three years ending 31 December 2028. Xiaomi is an associate of Mr. Jun LEI, a Director and substantial shareholder of The Company. Mr. Jun LEI holds a majority of voting power in Xiaomi.

As such, Xiaomi is a connected person of The Company. Therefore, the entering into the Framework Agreement between The Company and Xiaomi and the transactions contemplated thereunder will become continuing connected transactions of The Company under the Listing Rules. As each of the highest percentage ratios (as defined in the Listing Rules) in respect of the proposed annual caps for (1) the fees payable by Xiaomi Group to The Group in connection with the provision of promotion services, the mailbox customized development services and licensing and subscription services by The Group; (2) the fees payable by Xiaomi Group to The Group in connection with the joint operation of games provided by The Group; and (3) the fees payable by The Group to Xiaomi Group in connection with the provision of promotion services, and catering services and other ancillary services by Xiaomi Group for the three years ending 31 December 2028 exceeds 0.1% but is less than 5%, such transactions and the respective proposed annual caps are subject to the reporting, announcement, annual review requirements but exempt from the independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

With respect to the provision of products by Xiaomi Group under the Framework Agreement, as all the percentage ratios (as defined under the Listing Rules) applicable thereto are less than 0.1%, such transactions are fully exempt from the connected transaction requirements under Chapter 14A of the Listing Rules. In view of his interest in Xiaomi, Mr. Jun LEI has abstained from voting on the Board resolution approving the Framework Agreement. Save as disclosed above, none of the Directors has a material interest in the transactions contemplated under the Framework Agreement and none of them has abstained from voting on the relevant Board resolution.

The principal terms of the Framework Agreement are summarised as follows: Date: 30 December 2025. Parties: (1) The Company; and (2) Xiaomi. Term: three years commencing from 1 January 2026 and ending on 31 December 2028.

Scope of the cooperation and pricing principle: I. Comprehensive services provided by The Group (i) Provision of promotion services: The Group will provide Xiaomi Group the promotion services for the sale of products of Xiaomi Group via The Group's products and websites, and the provision of advertising traffic to Xiaomi Group and/or Xiaomi Group's customers. The fees for the promotion services provided by The Group shall be determined based on the following principles: (a) the fees shall be determined among arm's length negotiation between the two parties with reference to various factors including the position of the promotion, the features selected, the term of the promotion, website traffic and data flow of The Group's products and websites, the comparable services offered by independent third parties (if any), the historical prices applicable between the parties (if any), and the costs to be incurred by both parties; and (b) such fees should also be applicable to all clients for the same kind of services. The Company does not have a pre-determined formula for the fee proposal.

The sales department of The Group is responsible for the initial determination of the pricing of the promotion services. When Xiaomi Group approaches The Group in respect of the potential services, the sales department of The Group will recommend a fee proposal with primary reference to the position of the advertisement and the features selected. Other factors, such as the term of the promotion, website traffic and data flow of The Group's products and websites and the costs to be incurred by both parties will also be considered.

If there is any applicable comparable services offered by independent third parties and the historical prices applicable between the parties, it will be also be considered. Generally, the fees charged for the promotion services will be higher when: (i) the website traffic and data flow of the websites where the advertisement is placed are relatively heavier; (ii) the size of the advertisement is larger; (iii) the click rate of the advertisement is higher; and/or (iv) the promotion encounters a peak advertising season or the term of the promotion is longer. In addition to the above factors, there are no specific range of mark-up to be included in the fee.

Upon final review by the sales director and chief marketing officer of the relevant subsidiary of The Company who are independent of Xiaomi Group, the fee proposal will be proposed to Xiaomi Group for consideration and negotiation. (ii) Provision of mailbox customised development services: The Group will provide Xiaomi Group the mailbox customized development services, including but not limited to adapting the mailbox to new mobile models of Xiaomi Group, making adjustments to the mailbox based on the needs of operators in target regions, developing the mailbox based on new functions expected by Xiaomi Group and localizing the mailbox based on languages in different countries and regions.