Meituan Dianping : 2020 Interim Report

2020

Interim Report

CONTENTS

CORPORATE INFORMATION	2
KEY HIGHLIGHTS	4
CHAIRMAN'S STATEMENT	7
MANAGEMENT DISCUSSION AND ANALYSIS	12
OTHER INFORMATION	32
REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION	56
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT	57
INTERIM CONDENSED CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME/(LOSS)	58
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION	59
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	61
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS	63
NOTES TO THE INTERIM FINANCIAL INFORMATION	65
DEFINITIONS	103
GLOSSARY	110

CORPORATE INFORMATION

BOARD OF DIRECTORS	JOINT COMPANY SECRETARIES
Executive Directors	Xu Sijia (徐思嘉)
	Lau Yee Wa (劉綺華)
Wang Xing (王興) (Chairman of the Board)
Mu Rongjun (穆榮均)	AUTHORIZED REPRESENTATIVES
Wang Huiwen (王慧文)
	Wang Xing (王興)
Non-Executive Directors	Wang Huiwen (王慧文)
Lau Chi Ping Martin (劉熾平)	AUDITOR
Neil Nanpeng Shen (沈南鵬)
	PricewaterhouseCoopers
Independent Non-Executive Directors	Certified Public Accountants and
	Registered PIE Auditor
Orr Gordon Robert Halyburton	22/F, Prince's Building
Leng Xuesong (冷雪松)	Central
Shum Heung Yeung Harry (沈向洋)	Hong Kong
AUDIT COMMITTEE	REGISTERED OFFICE
Orr Gordon Robert Halyburton (Chairman)	PO Box 309, Ugland House
Leng Xuesong (冷雪松)	Grand Cayman, KY1-1104
Shum Heung Yeung Harry (沈向洋)	Cayman Islands
REMUNERATION COMMITTEE	HEAD OFFICE AND PRINCIPAL PLACE OF
	BUSINESS IN CHINA
Leng Xuesong (冷雪松) (Chairman)
Shum Heung Yeung Harry (沈向洋)	Block B&C, Hengjiweiye Building
Mu Rongjun (穆榮均)	No.4 Wang Jing East Road
	Chaoyang District
NOMINATION COMMITTEE	Beijing 100102
	China
Leng Xuesong (冷雪松) (Chairman)
Shum Heung Yeung Harry (沈向洋)	PRINCIPAL PLACE OF BUSINESS IN
Wang Huiwen (王慧文)	HONG KONG
CORPORATE GOVERNANCE COMMITTEE	Level 54, Hopewell Centre
	183 Queen's Road East
Leng Xuesong (冷雪松) (Chairman)	Hong Kong
Shum Heung Yeung Harry (沈向洋)
Orr Gordon Robert Halyburton

2

LEGAL ADVISORS

As to Hong Kong law (in alphabetical order): Davis Polk & Wardwell

18/F., The Hong Kong Club Building

3A Chater Road

Central

Hong Kong

Skadden, Arps, Slate, Meagher & Flom

42/F, Edinburgh Tower

The Landmark

15 Queen's Road Central

Hong Kong

As to the PRC law: Han Kun Law Offices Beijing office

9/F, Office Tower C1 Oriental Plaza No. 1 East Chang An Ave Beijing 100738, the PRC

As to Cayman Islands law:

Maples and Calder (Hong Kong) LLP

26th Floor, Central Plaza

18 Harbour Road, Wanchai

Hong Kong

COMPLIANCE ADVISOR

Guotai Junan Capital Limited

27/F, Low Block

Grand Millennium Plaza

181 Queen's Road Central

Hong Kong

CORPORATE INFORMATION

HONG KONG SHARE REGISTRAR

Computershare Hong Kong Investor Services

Limited

Shops 1712-1716, 17th Floor

Hopewell Centre

183 Queen's Road East

Wan Chai

Hong Kong

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

Maples Fund Services (Cayman) Limited

PO Box 1093, Boundary Hall

Cricket Square

Grand Cayman, KY1-1102

Cayman Islands

PRINCIPAL BANKER

China Merchants Bank, Beijing Branch, Shouti Sub-branch

1/F, Tengda Building

No. 168 Xizhimenwai Street Haidian District

Beijing

China

STOCK CODE

3690

COMPANY WEBSITE

about.meituan.com

MEITUAN DIANPING | 2020 INTERIM REPORT

3

KEY HIGHLIGHTS

FINANCIAL SUMMARY

		Unaudited
		Three Months Ended
	June 30, 2020	June 30, 2019
		As a		As a
		percentage		percentage	Year-over-
	Amount	of revenues	Amount	of revenues	year change
		(RMB in thousands, except for percentages)
Revenues	24,721,837	100.0%	22,703,137	100.0%	8.9%
Operating profit	2,174,645	8.8%	1,112,578	4.9%	95.5%
Profit for the period	2,210,181	8.9%	875,828	3.9%	152.4%
Non-IFRS Measures:
Adjusted EBITDA	2,610,255	10.6%	2,330,809	10.3%	12.0%
Adjusted net profit	2,718,478	11.0%	1,493,546	6.6%	82.0%
		Unaudited
		Six Months Ended
	June 30, 2020	June 30, 2019
		As a		As a
		percentage		percentage	Year-over-
	Amount	of revenues	Amount	of revenues	year change
		(RMB in thousands, except for percentages)
Revenues	41,475,724	100.0%	41,876,649	100.0%	(1.0%)
Operating profit/(loss)	459,115	1.1%	(191,064)	(0.5%)	NA
Profit/(loss) for the period	630,903	1.5%	(557,502)	(1.3%)	NA
Non-IFRS Measures:
Adjusted EBITDA	2,651,566	6.4%	2,789,683	6.7%	(5.0%)
Adjusted net profit	2,502,130	6.0%	444,417	1.1%	463.0%

4

KEY HIGHLIGHTS

FINANCIAL INFORMATION BY SEGMENT

	Unaudited
	Three Months Ended
	June 30,	June 30,	Year-over-
	2020		2019	year change
	(RMB in thousands, except for percentages)
Revenues:
Food delivery	14,544,095			12,844,720	13.2%
In-store, hotel & travel	4,543,982			5,245,308	(13.4%)
New initiatives and others	5,633,760			4,613,109	22.1%
Total revenues	24,721,837			22,703,137	8.9%
Operating profit/(loss):
Food delivery	1,253,421			756,347	65.7%
In-store, hotel & travel	1,891,563			2,147,499	(11.9%)
New initiatives and others	(1,459,539)			(1,645,735)	(11.3%)
Unallocated items1	489,200			(145,533)	NA
Total operating profit	2,174,645			1,112,578	95.5%
	Unaudited
	Six Months Ended
	June 30,	June 30,	Year-over-
	2020			2019	year change
	(RMB in thousands, except for percentages)
Revenues:
Food delivery	24,034,518			23,550,523	2.1%
In-store, hotel & travel	7,638,960			9,737,410	(21.6%)
New initiatives and others	9,802,246			8,588,716	14.1%
Total revenues	41,475,724			41,876,649	(1.0%)
Operating profit/(loss):
Food delivery	1,182,540			602,144	96.4%
In-store, hotel & travel	2,571,742			3,740,377	(31.2%)
New initiatives and others	(2,823,256)			(4,228,859)	(33.2%)
Unallocated items	(471,911)			(304,726)	54.9%
Total operating profit/(loss)	459,115			(191,064)	NA

1 Unallocated items include (i) share-based compensation, (ii) amortization of intangible assets resulting from acquisitions, (iii) fair value changes on other financial investments at fair value through profit or loss, (iv) other gains, net, and (v) impairment provision and restructuring expense for Mobike restructuring plan.

MEITUAN DIANPING | 2020 INTERIM REPORT

5

KEY HIGHLIGHTS

OPERATING METRICS

	Twelve Months Ended
	June 30,	June 30,	Year-over-
	2020	2019	year change
	(in millions, except for percentages)
Number of Transacting Users	457.3	422.6	8.2%
Number of Active Merchants	6.3	5.9	6.7%
	(units, except for percentages)
Average number of transactions per annual
Transacting User	25.7	25.5	0.5%
	Three Months Ended
	June 30,	June 30,	Year-over-
	2020	2019	year change
	(in millions, except for percentages)
Gross Transaction Volume of food delivery	108,827.1	93,082.3	16.9%
Number of food delivery transactions	2,228.9	2,085.1	6.9%
Number of domestic hotel room nights	78.0	94.0	(17.0%)

6

CHAIRMAN'S STATEMENT

To our Shareholders:

Since the beginning of this year, the world has been profoundly impacted by the outspread COVID-19, causing significant disruptions to people's daily lives and local commerce. We are very grateful that during the pandemic, our platform helped to ensure adequate food and necessity supply for consumers, supported local merchants to weather the storm, and contributed to the broader economic recovery. Our social responsibility was built in our mission that "we help people eat better, live better", since the day we founded the company. During the past six months, despite all the challenges and negative impacts that we faced, our business demonstrated resilience and strong recovery. In addition, we upgraded our product and service offerings, further optimized our on-demand delivery network, and continued to innovate.

Digitization for the local service industry is an inevitable trend. We help consumers and merchants to better adapt to the new era, and we are pleased to witness the transformation that it brings along the course. Thanks to our relentless investment with a long-term perspective, we have successfully established the world largest on- demand delivery network, which has become an indispensable infrastructure for the entire society nowadays. Our leading e-commerce platform has facilitated millions of business owners to improve efficiency through advanced operational tools and marketing solutions. Our consumers not only enjoy convenient food delivery services, but also gradually cultivated habits to order grocery and many other things besides food online. As a result, we reaffirmed our determination to improve the platform capabilities, enable local merchants to achieve sustainable growth, provide consumers with more pleasant experience, and reinforce our ecosystem to bring maximum value to the society.

On behalf of the Board, I am pleased to present the Group's interim results for the six months ended June 30, 2020.

BUSINESS REVIEW AND OUTLOOK

Company Financial Highlights

Total revenues for the second quarter of 2020 increased by 8.9% year-over-year to RMB24.7 billion from RMB22.7 billion for the same period of 2019. Operating profit improved to RMB2.2 billion in the second quarter of 2020, increasing by 95.5% year-over-year, while operating margin increased from 4.9% to 8.8%. Both adjusted EBITDA and adjusted net profit experienced positive year-over-year growth and improved to RMB2.6 billion and RMB2.7 billion, respectively. Our operating cash flow also turned to positive RMB5.6 billion for the second quarter of 2020 from negative RMB5.0 billion for the first quarter of 2020. We had cash and cash equivalents of RMB13.9 billion and short-term investments of RMB44.5 billion as of June 30, 2020, compared to the balances of RMB14.1 billion and RMB42.4 billion, respectively, as of March 31, 2020.

MEITUAN DIANPING | 2020 INTERIM REPORT

7

CHAIRMAN'S STATEMENT

Company Business Highlights

Food delivery

For the second quarter of 2020, GTV of our food delivery business increased by 16.9% year-over-year to RMB108.8 billion. The daily average number of food delivery transactions increased by 6.9% year-over-year to 24.5 million. The average value per order of our food delivery business increased by 9.4% year-over-year. Monetization rate of our food delivery business decreased to 13.4% for the second quarter of 2020 from 13.8% for the same period of 2019. As a result, revenues of food delivery business increased by 13.2% year-over-year to RMB14.5 billion for the second quarter of 2020. Operating profit from our food delivery business turned to positive RMB1.3 billion for the second quarter of 2020, compared to operating loss of RMB70.9 million for the first quarter of 2020, while operating margin turned to positive 8.6% from negative 0.7%. Moreover, operating profit from the food delivery business increased by 65.7% year-over-year, while operating margin improved by 2.7 percentage points year-over-year.

Despite the pandemic's continuous impact, we further demonstrated the unique competitiveness of our business model and validated the essential needs for food delivery services from both consumers and merchants. Especially, our immediate response to the COVID-19 new cases that occurred in Beijing showcased our increasing experience in managing the recurring outbreaks of COVID-19. To ensure the safety of our delivery riders and consumers, among other measures, we immediately organized nucleic acid testing for all of our delivery riders in Beijing, expanded the use of "intelligent lockers" in the city, and further upgraded our contactless delivery process. For merchants, we rolled out targeted support and commission rebate programs to help them better survive the COVID-19 new cases that occurred in Beijing. We also created a portal for merchants to upload their green COVID-19 testing results so as to provide consumers with extra food safety assurance.

In the second quarter of 2020, we continued to launch various promotional campaigns to stimulate the recovery of our food delivery business. For example, we rolled out the "June 18 Food Delivery Festival" and engaged around 4,000 reputable restaurants and brands to provide consumers with a wide variety of attractive promotions in the period. We were also spot-on in identifying consumers' behavioral changes and used targeted promotions to actively increase the consumption of afternoon tea and late-night snacks. Moreover, we have further stepped up the portion of subsidies allocated to targeted repeat consumers through our effective food delivery membership program. As a result, the order volume of our food delivery business experienced positive year-over-year growth in the second quarter of 2020, with the daily average number of food delivery transactions increasing by 6.9% year- over-year to 24.5 million.

On the merchant side, a further recovery in merchant operation and consumer consumption led to the strong marketing demand from merchants in the second quarter of 2020. Meanwhile, the pandemic has accelerated the restaurants' online migration, increasing the mix of high-quality merchants on our platform during the period. Notably, the number of newly-onboard branded merchants increased by more than 110% in the second quarter as compared to the prior year period. Their increased demand for online traffic has accelerated their adoption of our online marketing services. As a result, online marketing services revenues experienced rapid growth in the second quarter of 2020, increased by 62.2% year-over-year.

8

CHAIRMAN'S STATEMENT

On the delivery front, we further improved our delivery efficiency in the second quarter of 2020, attributable to the refinement of our proprietary dispatching system algorithms and the continuous improvement of the operation of our delivery network. In addition, the sufficient delivery capacity and the favorable weather condition across the country enabled us to reduce the amount of seasonal incentives paid to delivery riders on a quarter-over-quarter basis. These factors together have allowed us to better control delivery cost per order on both a quarter-over- quarter and a year-over-year basis. Meantime, the importance of our on-demand delivery network as a critical component of society's broader logistical infrastructure has been substantially elevated post the outbreak of COVID-19. Our delivery network helped to ensure continuity in people's daily lives during the pandemic and served as a stabilizing force for society by creating abundant employment opportunities. We will continue to explore diversified delivery models and invest in the cutting-edge technology for autonomous delivery to further improve our operating efficiency and enlarge our capacity while striving to serve the needs of our merchants and consumers in more service categories.

In-store, hotel & travel

Revenues from our in-store, hotel & travel businesses decreased by 13.4% year-over-year to RMB4.5 billion in the second quarter of 2020. Operating profit of our in-store, hotel & travel businesses decreased by 11.9% year- over-year, but increased by 178.1% quarter-over-quarter to RMB1.9 billion in the second quarter of 2020, while operating margin increased by 0.7 percentage points year-over-year and by 19.6 percentage points quarter-over- quarter to 41.6%.

During the second quarter of 2020, the in-store segment continued to recover at a slower pace than the food delivery business as consumers needed more time to rebuild confidence in certain discretionary in-store consumptions. In order to stimulate local services consumption and restore local economies, we cooperated with local governments to launch the "Safe Consumption Festival" in more than 60 cities and issued e-Vouchers during this quarter. These e-Vouchers were mainly for in-store dining initially, but we have since expanded them to cover hotels, shopping, and other local services. We also launched a series of promotional campaigns in the second quarter of 2020, including Labour Day promotions, Dragon Boat Festival promotions, and June 18 Marketing Festival promotions. These events covered all the aspects of our in-store services and helped to accelerate our collaborations with popular merchant brands to further improve our merchant base and offer consumers a wider variety of choices in turn. As a result, the recovery of transaction volume and merchants' marketing demand of our in-store segment was on the right track. The year-over-year decline in commission revenues and online marketing services revenues were significantly narrowed from the first quarter of 2020. Moreover, we published a new 2020 version of our reputable "Must List Series." This series has evolved into a comprehensive and professional local services guide over the years. During the COVID-19 pandemic, we noticed that consumers became more price- sensitive and conscious of hygiene factors, which further compounded the ability of our trusted Must List Series (2020 new version) to attract user traffic and guide consumers to quality merchants. It also created a positive feedback loop for merchants to upgrade their services and better meet the emerging needs of consumers.

MEITUAN DIANPING | 2020 INTERIM REPORT

9

CHAIRMAN'S STATEMENT

Our hotel business continued to be significantly affected by the pandemic, with the number of domestic room nights consumed on our platform in the second quarter of 2020 decreasing by 17% year-over-year. Nevertheless, we kept increasing our partnership with more hotels via our "Safe Stay" program to provide travelers with accommodation options that are more conducive to their desires and the quarantine environment. Meantime, in light of the increasing demand for intra-city and short-distance local travel, we also launched the "Safe Travel" program to help expedite the recovery of the industry. More notably, the pace of development for our high-star hotel partnerships also picked up, and we established a significant increase in relationships with these types of hotels in the second quarter of 2020 by increasing their non-lodging revenues through our "hotel + x" program. As a result, the contribution from high-end hotels further increased year-over-year.

New initiatives and others

Revenues from the new initiatives and others segment increased by 22.1% year-over-year to RMB5.6 billion in the second quarter of 2020. On a sequential basis, operating loss from the new initiatives and others segment expanded by 7.0% to RMB1.5 billion for the second quarter of 2020 from RMB1.4 billion for the first quarter of 2020, while operating margin improved by 6.8 percentage points to negative 25.9% for the second quarter of 2020 from negative 32.7% for the first quarter of 2020. Operating loss from the new initiatives and others segment narrowed by 11.3% on a year-over-year basis, while operating margin improved by 9.8 percentage points year- over-year.

The COVID-19 pandemic was a catalyst for several of our new initiatives, and we saw a noticeable shift in the online shopping behavior on the consumer side and accelerated online penetration of traditional offline service businesses during the pandemic. During the second quarter of 2020, we maintained the rapid expansion of our key businesses, especially grocery retail business. Our marketplace model "Meituan Instashopping" achieved stellar revenue growth during the second quarter of 2020 on a year-over-year basis as we expanded our product variety and SKU categories to significantly grow our merchant base. "Caidaquan," our relatively nascent fresh produce-focused brand under "Meituan Instashopping," enabled more than 300 traditional wet markets to sell online and operate digitally. Our self-operated model, "Meituan Grocery," not only significantly expanded its coverage in key cities, such as Beijing and Shenzhen, but also began operations in new cities, such as Guangzhou, in July 2020. During the second quarter of 2020, we also established a new business division for community group purchase services, rolling out the "Meituan Selected" service brand accordingly in Jinan, Shandong in July 2020, which offers carefully selected fresh produce and daily necessities at attractive prices for local consumers living in different communities. Group leaders are appointed by us in each community to promote our discounted grocery products via WeChat groups. Group members can place orders through our WeChat Mini Program and pick up their products the next day at self-pickup points located in nearby convenience stores.

For bike-sharing services, we replaced around 1.5 million old bikes with new "Meituan Bikes" during the second quarter of 2020. The average turnover rate per bike improved incrementally and the unit economics also improved. Additionally, we launched more than 290,000 electric bikes. During this period, the average turnover rate per electric bike achieved better unit economics as compared to traditional bikes and demonstrated a clear path to independent profitability.

10

CHAIRMAN'S STATEMENT

APPRECIATION

As we enter the second half of 2020, uncertainty remains ahead. However, we are more confident than ever before that we will be able to navigate through hard times and obstacles, as our perseverance and capability have already been proven. I shall start with my appreciation for all of our employees, consumers, merchants, delivery riders and business partners for their diligence and contribution. Also, I would like to express my sincere gratitude to our shareholders and stakeholders for their continuous support and trust. Going forward, we will continue to build and develop the infrastructure for services, continue to enhance our products and solutions, continue to invest resources in technology innovations, and continue to support the advancement of the whole society.

Wang Xing

Chairman

Hong Kong, August 21, 2020

MEITUAN DIANPING | 2020 INTERIM REPORT

11

MANAGEMENT DISCUSSION AND ANALYSIS

1. SECOND QUARTER OF 2020 COMPARED TO SECOND QUARTER OF 2019

The following table sets forth the comparative figures for the second quarter of 2020 and 2019:

	Unaudited
	Three Months Ended
	June 30,	June 30,
	2020	2019
	(RMB in thousands)
Revenues
Commission	15,911,364		15,429,574
Online marketing services	4,323,011		3,632,236
Interest revenue	201,730		201,883
Other services and sales	4,285,732		3,439,444
	24,721,837		22,703,137
Cost of revenues	(16,146,879)	(14,762,502)
Gross profit	8,574,958		7,940,635
Selling and marketing expenses	(4,172,332)	(4,149,110)
Research and development expenses	(2,376,737)	(2,032,330)
General and administrative expenses	(1,158,092)	(1,038,298)
Net provision for impairment losses on financial assets	(45,676)	(138,711)
Fair value changes on other financial investments
at fair value through profit or loss	346,689		(323,651)
Other gains, net	1,005,835		854,043
Operating profit	2,174,645		1,112,578
Finance income	40,352		21,541
Finance costs	(60,731)	(50,115)
Share of gains of investments accounted for using equity method	42,881		17,848
Profit before income tax	2,197,147		1,101,852
Income tax credits/(expenses)	13,034		(226,024)
Profit for the period	2,210,181		875,828
Non-IFRS measures:
Adjusted EBITDA	2,610,255		2,330,809
Adjusted net profit	2,718,478		1,493,546

12

MANAGEMENT DISCUSSION AND ANALYSIS

Revenues

Our revenues increased by 8.9% to RMB24.7 billion for the second quarter of 2020 from RMB22.7 billion for the same period of 2019. The increase was mainly driven by the solid revenue growth of our food delivery business and robust revenue growth of our new initiatives.

The following table sets forth our revenues by segment and type in absolute amount for the second quarter of

2020 and 2019:

			Unaudited
		Three Months Ended June 30, 2020
			In-store,	New
	Food		hotel &	initiatives
	delivery		travel	and others	Total
			(RMB in thousands)
Revenues
Commission	12,719,014	2,092,858		1,099,492	15,911,364
Online marketing services	1,795,740	2,445,305		81,966	4,323,011
Other services and sales (including
interest revenue)	29,341	5,819		4,452,302	4,487,462
Total	14,544,095	4,543,982		5,633,760	24,721,837
			Unaudited
		Three Months Ended June 30, 2019
			In-store,	New
	Food		hotel &	initiatives
	delivery		travel	and others	Total
			(RMB in thousands)
Revenues
Commission	11,711,634	2,742,867		975,073	15,429,574
Online marketing services	1,107,070	2,478,018		47,148	3,632,236
Other services and sales (including
interest revenue)	26,016	24,423		3,590,888	3,641,327
Total	12,844,720	5,245,308		4,613,109	22,703,137

MEITUAN DIANPING | 2020 INTERIM REPORT

13

MANAGEMENT DISCUSSION AND ANALYSIS

Our revenues from the food delivery segment increased by 13.2% to RMB14.5 billion for the second quarter of 2020 from RMB12.8 billion for the same period of 2019. Commission revenues increased by 8.6% to RMB12.7 billion as a result of: (i) the increase in Gross Transaction Volume, which was driven by the increase in both order volume by 6.9% and average order value by 9.4% year-over-year as more Transacting Users ordered with higher ticket size or from branded restaurants, and (ii) the decrease in Monetization rate by 0.4 percentage points to 13.4% due to increased subsidies to Transacting Users and higher portion of orders from branded merchants on our platform. Online marketing services revenues increased by 62.2% to RMB1.8 billion, primarily due to the increase in the number of online marketing Active Merchants and the revenue contributed by each merchant.

Our revenues from the in-store, hotel & travel segment decreased by 13.4% to RMB4.5 billion for the second quarter of 2020 from RMB5.2 billion for the same period of 2019, mainly due to the decrease in commission revenues as the in-store dining, hotel and travel sectors had not fully recovered from the epidemic yet.

Our revenues from the new initiatives and others segment increased by 22.1% to RMB5.6 billion for the second quarter of 2020 from RMB4.6 billion for the same period of 2019, mainly due to the increase in revenues from the B2B food distribution services, micro loan business, Meituan Grocery and Meituan Instashopping as we expanded these businesses to satisfy customers' growing needs, partially offset by the decrease in revenues from car-hailing services as customers commuted less under the crowd control policies and the decrease in revenues from the restaurant management systems.

Costs and Expenses

The following table sets forth a breakdown of our costs and expenses by function for the periods indicated:

			Unaudited
		Three Months Ended
	June 30, 2020	June 30, 2019
		As a		As a
		percentage		percentage	Year-over-
	Amount	of revenues	Amount	of revenues	year change
	(RMB in thousands, except for percentages)
Costs and Expenses:
Cost of revenues	16,146,879	65.3%	14,762,502	65.0%	9.4%
Selling and marketing expenses	4,172,332	16.9%	4,149,110	18.3%	0.6%
Research and development expenses	2,376,737	9.6%	2,032,330	9.0%	16.9%
General and administrative expenses	1,158,092	4.7%	1,038,298	4.6%	11.5%
Net provision for impairment losses
on financial assets	45,676	0.2%	138,711	0.6%	(67.1%)

14

MANAGEMENT DISCUSSION AND ANALYSIS

Cost of Revenues

Our cost of revenues increased by 9.4% to RMB16.1 billion for the second quarter of 2020 from RMB14.8 billion for the same period of 2019, and remained flat as a percentage of revenues on a year-over-year basis. The increase in amount was primarily attributable to the increase of RMB727.3 million in food delivery rider costs, and the increase of RMB572.4 million in cost of goods sold due to the growth of our food delivery business, Meituan Instashopping, Meituan Grocery and B2B food distribution services, partially offset by the decrease of RMB347.1 million in car-hailingdriver-related costs.

Selling and Marketing Expenses

Our selling and marketing expenses was RMB4.2 billion for the second quarter of 2020 and RMB4.1 billion for the same period of 2019, and decreased by 1.4 percentage points to 16.9% from 18.3% as a percentage of revenues on a year-over-year basis. The RMB109.8 million increase in promotion and advertising expenses, mainly driven by our enlarged promotional campaigns, was partially offset by the RMB92.8 million decrease in Transacting User incentives across various businesses. We adjusted our marketing strategy in response to the pandemic so that our selling and marketing expenses as a percentage of revenues decreased.

Research and Development Expenses

Our research and development expenses increased to RMB2.4 billion for the second quarter of 2020 from RMB2.0 billion for the same period of 2019, and increased by 0.6 percentage points to 9.6% from 9.0% as a percentage of revenues. The increase in both amount and as a percentage of revenues were mainly driven by the increase in the number of employees.

General and Administrative Expenses

Our general and administrative expenses increased to RMB1.2 billion for the second quarter of 2020 from RMB1.0 billion for the same period of 2019, and remained flat as a percentage of revenues on a year-over- year basis. The increase was mainly driven by the increase in the number of employees.

Net Provision for Impairment Losses on Financial Assets

Our net provision for impairment losses on financial assets decreased to RMB45.7 million for the second quarter of 2020 from RMB138.7 million for the same period of 2019, and decreased by 0.4 percentage points to 0.2% as a percentage of revenues year-over-year, primarily due to improved micro loan assets.

Fair Value Changes on Other Financial Investments at Fair Value Through Profit or Loss

Our gain in fair value change on other financial investments at fair value through profit or loss was RMB346.7 million for the second quarter of 2020, compared to loss of RMB323.7 million for the second quarter of 2019. This was primarily due to the fair value change in one of our financial investments in listed entities.

MEITUAN DIANPING | 2020 INTERIM REPORT

15

MANAGEMENT DISCUSSION AND ANALYSIS

Other Gains, Net

Our other gains, net for the second quarter of 2020 increased by RMB151.8 million to RMB1.0 billion compared to the same period of 2019, primarily due to the increase in tax return and preference, partially offset by the decline in gains from treasury investments, disposal and remeasurement of equity investments.

Operating Profit

As a result of the foregoing, our operating profit and operating margin for the second quarter of 2020 was RMB2.2 billion and 8.8% respectively, compared to RMB1.1 billion and 4.9% for the same period of 2019.

Operating profit and margin by segment are set forth in the table below.

				Unaudited
			Three Months Ended
	June 30, 2020	June 30, 2019
			As a			As a
			percentage			percentage	Year-over-
	Amount	of revenues	Amount	of revenues	year change
	(RMB in thousands, except for percentages)
Food delivery	1,253,421		8.6%	756,347	5.9%	65.7%
In-store, hotel & travel	1,891,563		41.6%	2,147,499	40.9%	(11.9%)
New initiatives and others	(1,459,539)	(25.9%)	(1,645,735)	(35.7%)	(11.3%)
Unallocated items	489,200		NA	(145,533)	NA	NA
Total operating profit	2,174,645		8.8%	1,112,578	4.9%	95.5%

Our operating profit from the food delivery segment increased to RMB1.3 billion for the second quarter of 2020 from RMB756.3 million for the same period of 2019, mainly driven by growth in revenues and gross profit. Our operating margin for this segment increased by 2.7 percentage points to 8.6% from 5.9% on a year-over-year basis mainly attributable to: (i) higher average order value as a result of the higher portion of orders from branded restaurants, slightly offset by the higher subsidies given to Transacting Users to drive order volume growth and (ii) the change in revenues mix as online marketing revenues contributed a higher percentage of revenues.

16

MANAGEMENT DISCUSSION AND ANALYSIS

Our operating profit from the in-store, hotel & travel segment decreased by 11.9% to RMB1.9 billion for the second quarter of 2020 from RMB2.1 billion for the same period of 2019, mainly due to the decline in both commissions and online marketing revenues, partially offset by reduced Transacting User incentives and promotion and advertising expenses. Our operating margin for this segment increased by 0.7 percentage points to 41.6% from 40.9% on a year-over-year basis, mainly due to the decrease in Transacting User incentives resulting from the reduction of subsidies, partially offset by the increase in research and development expenses.

Our operating loss from the new initiatives and others segment narrowed to negative RMB1.5 billion for the second quarter of 2020 from negative RMB1.6 billion for the same period of 2019, primarily attributable to:

1. the decrease in operating loss from our bike-sharing services as Meituan Bikes had a longer life span and lower maintenance costs than the old bikes, and (ii) the increase in operating profit from the growth of micro loan business, partially offset by the increase in operating loss of our grocery retail business as a result of business expansion and the increase in loss from some other new initiatives. Our operating margin for this segment narrowed to negative 25.9% from negative 35.7% on a year-over-year basis, primarily attributable to the improved operating margin from bike-sharing services, restaurant management system, and micro loan business.

Profit before Income Tax

Primarily as a result of the foregoing, our profit before income tax for the second quarter of 2020 was RMB2.2 billion, compared to a profit of RMB1.1 billion for the same period of 2019.

Income Tax Credits/(Expenses)

We had income tax credits of RMB13.0 million for the second quarter of 2020, compared to income tax expenses of RMB226.0 million for the same period of 2019, primarily due to the decrease in profits from certain entities on a year-over-year basis.

Profit for the Period

As a result of the foregoing, we had a profit of RMB2.2 billion for the second quarter of 2020, compared to a profit of RMB875.8 million for the same period of 2019.

MEITUAN DIANPING | 2020 INTERIM REPORT

17

MANAGEMENT DISCUSSION AND ANALYSIS

2. SECOND QUARTER OF 2020 COMPARED TO FIRST QUARTER OF 2020

The following table sets forth the comparative figures for the second quarter of 2020 and the first quarter of 2020:

	Unaudited
	Three Months Ended
	June 30,	March 31,
	2020	2020
	(RMB in thousands)
Revenues
Commission	15,911,364		10,800,101
Online marketing services	4,323,011		2,864,409
Interest revenue	201,730		212,145
Other services and sales	4,285,732		2,877,232
	24,721,837		16,753,887
Cost of revenues	(16,146,879)	(11,557,421)
Gross profit	8,574,958		5,196,466
Selling and marketing expenses	(4,172,332)	(3,199,439)
Research and development expenses	(2,376,737)	(2,296,458)
General and administrative expenses	(1,158,092)	(1,069,741)
Net provision for impairment losses on financial assets	(45,676)	(237,542)
Fair value changes on other financial investments
at fair value through profit or loss	346,689		(508,261)
Other gains, net	1,005,835		399,445
Operating profit/(loss)	2,174,645		(1,715,530)
Finance income	40,352		57,930
Finance costs	(60,731)	(48,044)
Share of gains of investments accounted for using equity method	42,881		11,128
Profit/(loss) before income tax	2,197,147		(1,694,516)
Income tax credits	13,034		115,238
Profit/(loss) for the period	2,210,181		(1,579,278)
Non-IFRS measures:
Adjusted EBITDA	2,610,255		41,311
Adjusted net profit/(loss)	2,718,478		(216,348)

18

MANAGEMENT DISCUSSION AND ANALYSIS

Revenues

Our revenues increased by 47.6% to RMB24.7 billion for the second quarter of 2020 from RMB16.8 billion for the first quarter of 2020. All major revenue streams started to recover along with the gradual recovery from the COVID-19 pandemic.

The following table sets forth our revenues by segment and type in absolute amount for the second quarter of

2020 and the first quarter of 2020:

				Unaudited
		Three Months Ended June 30, 2020
				In-store,			New
	Food			hotel &			initiatives
	delivery			travel			and others	Total
				(RMB in thousands)
Revenues
Commission	12,719,014	2,092,858	1,099,492		15,911,364
Online marketing services	1,795,740	2,445,305	81,966		4,323,011
Other services and sales (including
interest revenue)	29,341	5,819	4,452,302		4,487,462
Total	14,544,095	4,543,982	5,633,760		24,721,837
				Unaudited
	Three Months Ended March 31, 2020
				In-store,			New
	Food			hotel &			initiatives
	delivery			travel			and others	Total
				(RMB in thousands)
Revenues
Commission	8,563,624	1,196,998	1,039,479		10,800,101
Online marketing services	919,519	1,886,831	58,059		2,864,409
Other services and sales (including
interest revenue)	7,280	11,149	3,070,948		3,089,377
Total	9,490,423	3,094,978	4,168,486		16,753,887

MEITUAN DIANPING | 2020 INTERIM REPORT

19

MANAGEMENT DISCUSSION AND ANALYSIS

Our revenues from the food delivery segment increased by 53.3% to RMB14.5 billion for the second quarter of 2020 from RMB9.5 billion for the first quarter of 2020. Commission revenues increased by 48.5% to RMB12.7 billion on a quarter-over-quarter basis, as a result of: (i) the increase in the number of food delivery transactions by 62.2%, driven by the increase in both food delivery user base and their purchase frequency, and (ii) the decrease in average order value by 6.1% caused by the resumption of small- and medium-sized merchants operations. Online marketing services revenues increased by 95.3% to RMB1.8 billion, primarily due to the increase in the number of online marketing Active Merchants and average revenue contributed by each merchant, driven by the increasing demand from merchants for online traffic during the recovery of the food delivery business.

Our revenues from the in-store, hotel & travel segment increased by 46.8% to RMB4.5 billion for the second quarter of 2020 from RMB3.1 billion for the first quarter of 2020. Commission revenues increased by 74.8% to RMB2.1 billion, driven by the recovery in consumers' in-store consumption. Online marketing service revenues increased by 29.6% to RMB2.4 billion due to increased spending on advertising by merchants as the pandemic became under control.

Our revenues from the new initiatives and others segment increased by 35.2% to RMB5.6 billion for the second quarter of 2020 from RMB4.2 billion for the first quarter of 2020, primarily due to the increase in the revenues from the B2B food distribution services, bike-sharing services, restaurant management systems, and car-hailing services, all of which were adversely affected by the pandemic in the first quarter of 2020, but gradually recovered in the second quarter of 2020.

Costs and Expenses

The following table sets forth a breakdown of our costs and expenses by function for the periods indicated:

			Unaudited
			Three Months Ended
	June 30, 2020	March 31, 2020
		As a		As a
		percentage		percentage	Quarter-over-
	Amount	of revenues	Amount	of revenues	quarter change
	(RMB in thousands, except for percentages)
Costs and Expenses:
Cost of revenues	16,146,879	65.3%	11,557,421	69.0%	39.7%
Selling and marketing expenses	4,172,332	16.9%	3,199,439	19.1%	30.4%
Research and development expenses	2,376,737	9.6%	2,296,458	13.7%	3.5%
General and administrative expenses	1,158,092	4.7%	1,069,741	6.4%	8.3%
Net provision for impairment losses
on financial assets	45,676	0.2%	237,542	1.4%	(80.8%)

20

MANAGEMENT DISCUSSION AND ANALYSIS

Cost of Revenues

Our cost of revenues increased by 39.7% to RMB16.1 billion for the second quarter of 2020 from RMB11.6 billion for the first quarter of 2020, but decreased to 65.3% from 69.0% as a percentage of revenues. The increase in amount was mainly attributable to: (i) the RMB3.0 billion increase in food delivery rider costs, which was driven by higher transaction volume, (ii) the RMB884.8 million increase in cost of goods sold, mainly driven by growth of B2B food distribution services, and (iii) the RMB184.7 million increase in payment processing costs. The decrease as a percentage of revenues on a quarter-over-quarter basis mainly resulted from: (i) improved gross margin of the food delivery business, driven by lower delivery cost per order, mainly due to lower delivery rider incentives under favorable weather conditions and the comparatively more sufficient capacity, (ii) improved gross margin of the in-store, hotel and travel segment due to improved operating leverage during the recovery of the pandemic, and (iii) lower gross margin due to revenues mix change of our new initiatives.

Selling and Marketing Expenses

Our selling and marketing expenses increased to RMB4.2 billion for the second quarter of 2020 from RMB3.2 billion for the first quarter of 2020, but decreased by 2.2 percentage points to 16.9% from 19.1% as a percentage of revenues on a quarter-over-quarter basis. The increase in amount was primarily attributable to:

1. the RMB693.1 million increase in Transacting User incentives across all major businesses as they gradually recovered from the pandemic, and (ii) the RMB164.1 million increase in promotion and advertising expenses due to enlarged promotional campaigns. The decrease as a percentage of revenues was mainly driven by the improved marketing efficiency and operating leverage.

Research and Development Expenses

Our research and development expenses increased to RMB2.4 billion for the second quarter of 2020 from RMB2.3 billion for the first quarter of 2020, but decreased by 4.1 percentage points to 9.6% from 13.7% as a percentage of revenues. The increase in amount was primarily attributable to increased employee benefits expenses driven by the increase in number of employees, but partially offset by the decrease in welfare expenses under the welfare relief policy. The decrease as a percentage of revenues was driven by the improved operating leverage.

General and Administrative Expenses

Our general and administrative expenses increased to RMB1.2 billion for the second quarter of 2020 from RMB1.1 billion for the first quarter of 2020, but decreased by 1.7 percentage points to 4.7% from 6.4% as a percentage of revenues. The increase in amount was primarily attributable to increased employee benefits expenses, driven by the increase in share-based compensation and the number of employees. The decrease as a percentage of revenues was driven by the improved operating leverage.

MEITUAN DIANPING | 2020 INTERIM REPORT

21

MANAGEMENT DISCUSSION AND ANALYSIS

Net Provision for Impairment Losses on Financial Assets

Our net provision for impairment losses on financial assets decreased to RMB45.7 million for the second quarter of 2020 from RMB237.5 million for the first quarter of 2020, and decreased by 1.2 percentage points to 0.2% as a percentage of revenues, primarily due to the relief from impairment risk as the society gradually recovered from the pandemic.

Fair Value Changes on Other Financial Investments at Fair Value Through Profit or Loss

Our gain in fair value change on other financial investments at fair value through profit or loss was RMB346.7 million for the second quarter of 2020, compared to loss of RMB508.3 million for the first quarter of 2020. This was primarily due to the fair value change in one of our financial investments in listed entities.

Other Gains, Net

Our other gains, net for the second quarter of 2020 increased by RMB606.4 million to RMB1.0 billion compared to the first quarter of 2020, mainly attributable to increased tax preference received in the second quarter of 2020 and a one-off donation to a special support fund that we made in the first quarter of 2020.

Operating Profit/(Loss)

As a result of the foregoing, our operating profit for the second quarter of 2020 was RMB2.2 billion, compared to an operating loss of RMB1.7 billion for the first quarter of 2020.

Operating profit/(loss) and operating margin by segment are set forth in the table below.

				Unaudited
			Three Months Ended
	June 30, 2020	March 31, 2020
			As a			As a	Quarter-
			percentage			percentage	over-quarter
	Amount	of revenues	Amount	of revenues	change
	(RMB in thousands, except for percentages)
Food delivery	1,253,421		8.6%	(70,881)	(0.7%)	NA
In-store, hotel & travel	1,891,563		41.6%	680,179	22.0%	178.1%
New initiatives and others	(1,459,539)	(25.9%)	(1,363,717)	(32.7%)	7.0%
Unallocated items	489,200		NA	(961,111)	NA	NA
Total operating profit/(loss)	2,174,645		8.8%	(1,715,530)	(10.2%)	NA

22

MANAGEMENT DISCUSSION AND ANALYSIS

Our operating profit from the food delivery segment turned to positive RMB1.3 billion for the second quarter of 2020 from negative RMB70.9 million for the first quarter of 2020, mainly attributable to increase in gross profit, partially offset by the increase in Transacting User incentives. The operating margin for this segment turned to positive 8.6% from negative 0.7% on a quarter-over-quarter basis, mainly due to: (i) lower delivery cost as a result of higher delivery efficiency due to larger scale orders, less delivery rider incentives under favorable weather conditions and more sufficient delivery capacity, partially offset by lower average order value as more small- and medium-sized merchants resumed operations and (ii) revenue mix change as online marketing revenues contributed a higher percentage of revenues.

Our operating profit from the in-store, hotel & travel segment increased by 178.1% to RMB1.9 billion for the second quarter of 2020 from RMB680.2 million for the first quarter of 2020, mainly due to the increase in gross profit as a result of partial recovery from the pandemic. The operating margin for this segment increase by 19.6 percentage points to 41.6% on a quarter-over-quarter basis, mainly due to the improved marketing efficiency and operating leverage.

Our operating loss from the new initiatives and others segment expanded by 7.0% to negative RMB1.5 billion for the second quarter of 2020 from negative RMB1.4 billion for the first quarter of 2020, primarily attributable to: (i) the increase in operating loss from Meituan Grocery, driven by the decrease in average order value and increase in business volume, (ii) the increase in operating loss from Meituan Instashopping and car-hailing services due to increased Transacting User incentives, partially offset by (iii) the decrease in operating loss from restaurant management systems, as well as (iv) the increase in operating profit from micro loan business. The operating margin for this segment narrowed by 6.8 percentage points to negative 25.9% from negative 32.7% on a quarter-over-quarter basis, mainly due to: (i) the decrease in provision for impairment losses on financial assets, and (ii) the improved operating leverage.

Profit/(Loss) before Income Tax

Primarily as a result of the foregoing, our profit before income tax for the second quarter of 2020 was RMB2.2 billion, compared to a loss of RMB1.7 billion for the first quarter of 2020.

Income Tax Credits

We had income tax credits of RMB13.0 million for the second quarter of 2020, compared to income tax credits of RMB115.2 million for the first quarter of 2020, primarily due to the increase in profits from certain entities on a quarter-over-quarter basis.

Profit/(Loss) for the Period

As a result of the foregoing, we had a profit of RMB2.2 billion for the second quarter of 2020, compared to a loss of RMB1.6 billion for the first quarter of 2020.

MEITUAN DIANPING | 2020 INTERIM REPORT

23

MANAGEMENT DISCUSSION AND ANALYSIS

3. RECONCILIATION OF NON-IFRS MEASURES TO THE NEAREST IFRS MEASURES

To supplement our consolidated results which are prepared and presented in accordance with IFRS, we also use adjusted EBITDA and adjusted net profit/(loss) as additional financial measures, which are not required by, or presented in accordance with IFRS. We believe that these non-IFRS measures facilitate comparisons of operating performance from period to period and company to company by eliminating potential impacts of items that our management does not consider to be indicative of our operating performance such as certain non-cash items and certain impact of investment transactions. The use of these non-IFRS measures has limitations as an analytical tool, and one should not consider them in isolation from, or as a substitute for analysis of, our results of operations or financial conditions as reported under IFRS. In addition, these non- IFRS financial measures may be defined differently from similar terms used by other companies.

The following tables set forth the reconciliations of our non-IFRS financial measures for the three months ended June 30, 2020 and 2019, the three months ended March 31, 2020, and the six months ended June 30, 2020 and 2019 to the nearest measures prepared in accordance with IFRS.

24

MANAGEMENT DISCUSSION AND ANALYSIS

			Unaudited
	Three Months Ended
	June 30,	June 30,	March 31,
	2020	2019		2020
	(RMB in thousands)
Profit/(loss) for the period	2,210,181		875,828		(1,579,278)
Adjusted for:
Share-based compensation expenses	705,420		515,501		691,676
Fair value (gains)/losses on investments(1)	(347,393)	278,157			508,261
(Gains) on disposal of investments
and subsidiaries	-	(160,884)		-
(Gains) from the remeasurement of investments	-	(176,880)		-
Amortization of intangible assets
resulting from acquisitions	160,857		165,548			160,857
Impairment and expense reversal for
Mobike restructuring plan	(2,953)	(5,124)		(238)
Tax effects on non-IFRS adjustments	(7,634)	1,400			2,374
Adjusted net profit/(loss)	2,718,478		1,493,546		(216,348)
Adjusted for:
Income tax (credits)/expenses, except for tax
effects on non-IFRS adjustments	(5,400)	224,624		(117,612)
Share of (gains) of investments accounted
for using equity method	(42,881)	(17,848)		(11,128)
Finance income	(40,352)	(21,541)		(57,930)
Finance costs	60,731		50,115		48,044
Other (gains) except for (gains)/losses
related to fair value change,
disposal and remeasurement
of investments and subsidiaries	(1,005,131)	(470,785)		(399,445)
Amortization of software and others	93,615		131,093		131,636
Depreciation on property, plant and equipment	831,195		941,605		664,094
Adjusted EBITDA	2,610,255		2,330,809		41,311

1. Represents gains or losses from fair value changes on investments, including (i) fair value changes on other financial investments at fair value through profit or loss, and (ii) dilution gain.

MEITUAN DIANPING | 2020 INTERIM REPORT

25

MANAGEMENT DISCUSSION AND ANALYSIS

	Unaudited
	Six Months Ended
	June 30,	June 30,
	2020			2019
	(RMB in thousands)
Profit/(loss) for the period	630,903			(557,502)
Adjusted for:
Share-based compensation expenses	1,397,096			953,569
Fair value losses on investments	160,868			66,999
(Gains) on disposal of investments and subsidiaries	-	(159,394)
(Gains) from the remeasurement of investments	-	(176,880)
Amortization of intangible assets resulting from acquisitions	321,714			331,096
Impairment and expense reversal for Mobike restructuring plan	(3,191)		(5,124)
Tax effects on non-IFRS adjustments	(5,260)		(8,347)
Adjusted net profit	2,502,130			444,417
Adjusted for:
Income tax (credits)/expenses, except for tax effects
on non-IFRS adjustments	(123,012)		377,690
Share of (gains) of investments accounted for using
equity method	(54,009)		(25,378)
Finance income	(98,282)		(74,463)
Finance costs	108,775			96,936
Other (gains) except for (gains)/losses related
to fair value change, disposal and remeasurement
of investments and subsidiaries	(1,404,576)		(705,540)
Amortization of software and others	225,251			262,004
Depreciation on property, plant and equipment	1,495,289			2,414,017
Adjusted EBITDA	2,651,566			2,789,683

26

MANAGEMENT DISCUSSION AND ANALYSIS

4. LIQUIDITY AND CAPITAL RESOURCES

We had historically funded our cash requirements principally from capital contribution from shareholders and financing through issuance and sale of equity securities. We had cash and cash equivalents of RMB13.9 billion and short-term treasury investments of RMB44.5 billion as of June 30, 2020.

The following table sets forth our cash flows for the periods indicated:

	Unaudited	Unaudited
	Three Months	Six Months
	Ended	Ended
	June 30, 2020	June 30, 2020
	(RMB in thousands)
Net cash generated from operating activities	5,584,234		545,338
Net cash (used in)/generated from investing activities	(4,934,774)	798,777
Net cash used in financing activities	(843,129)	(913,004)
Net (decrease)/increase in cash and cash equivalents	(193,669)	431,111
Cash and cash equivalents at the beginning of the period	14,137,828		13,396,185
Exchange (loss)/gain on cash and cash equivalents	(9,103)	107,760
Cash and cash equivalents at the end of the period	13,935,056		13,935,056

Net Cash Generated from Operating Activities

Net cash generated from operating activities represents the cash generated from our operations minus the income tax paid. Cash generated from our operations primarily consisted of our profit for the second quarter of 2020, as adjusted by non-cash items and changes in working capital.

For the second quarter of 2020, net cash generated from operating activities was RMB5.6 billion, which was primarily attributable to our profit before income tax of RMB2.2 billion, as adjusted by (i) non-cash items, which primarily comprised depreciation and amortization of RMB1.1 billion, and share-based payments of RMB705.4 million, and (ii) changes in working capital, which primarily comprised an increase in other payables and accruals of RMB2.8 billion, an increase in payables to merchants of RMB2.3 billion and an increase in trade payables of RMB1.3 billion, partially offset by an increase in restricted cash of RMB2.7 billion and an increase in prepayments, deposits and other assets of RMB1.8 billion.

MEITUAN DIANPING | 2020 INTERIM REPORT

27

MANAGEMENT DISCUSSION AND ANALYSIS

Net Cash (Used in)/Generated from Investing Activities

For the second quarter of 2020, net cash used in investing activities was RMB4.9 billion, which was mainly attributable to purchase of treasury investments of RMB57.1 billion, purchase of property, plant and equipment of RMB2.3 billion, and acquisition of equity investments of RMB556.9 million, partially offset by proceeds from disposals of treasury investments of RMB54.1 billion, gains received from treasury investments of RMB483.3 million, and proceeds from disposals of equity investments of RMB295.1 million.

Net Cash Used in Financing Activities

For the second quarter of 2020, net cash used in financing activities was RMB843.1 million, which was mainly attributable to repayments of borrowings of RMB1.8 billion and lease payments of RMB216.9 million, partially offset by proceeds from borrowings of RMB1.1 billion.

Gearing ratio

As of June 30, 2020, our gearing ratio, calculated as total borrowings divided by total equity attributable to equity holders of the Company, was approximately 3.5%.

1. INDEBTEDNESS
   As of June 30, 2020, we had total borrowings of RMB3.3 billion. The maturity profile of our borrowings are disclosed in Note 27 to the interim financial information.
2. CONTINGENT LIABILITIES
   As of June 30, 2020, we did not have any material contingent liabilities.
3. CAPITAL EXPENDITURES AND LONG-TERM INVESTMENTS

	Unaudited
	Six Months Ended
	June 30, 2020	June 30, 2019
	(RMB in thousands)
Purchase of property, plant and equipment	2,984,545			1,463,481
Purchase of intangible assets	8,447			7,662
Payments for business combinations	-	449,764
Acquisition of investments accounted for using the equity method	-	1,025
Acquisition of other financial investments measured at fair value	1,190,123			338,893
Prepayment for investments	96,385			14,607
Total	4,279,500			2,275,432

28

MANAGEMENT DISCUSSION AND ANALYSIS

The increase of RMB2.0 billion in our total capital expenditures and long-term investments from the first half of 2019 to the first half of 2020 was primarily due to (i) the increase of RMB1.5 billion in our purchase of bikes and vehicles; and (ii) the increase of RMB851.2 million in our other financial investments.

1. OFF-BALANCESHEET COMMITMENTS AND ARRANGEMENTS
   As of June 30, 2020, we had no off-balance sheet commitments.
2. MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES AND AFFILIATED COMPANIES
   During the six months ended June 30, 2020, we did not have any material acquisitions or disposals of subsidiaries, associates, joint ventures and affiliated companies.
3. EMPLOYEE AND REMUNERATION POLICY
   As of June 30, 2020, we had 57,566 full-time employees. Substantially all of our employees are based in China, primarily at our headquarters in Beijing and Shanghai, with the rest in Xiamen, Shijiazhuang, Yangzhou, Chengdu and other cities.
   Our success depends on our ability to attract, retain and motivate qualified personnel. As part of our recruiting and retention strategy, we offer employees competitive salaries, performance-based cash bonuses and certain other incentives. The total remuneration expenses, for the first half of 2020 were RMB9.3 billion.
   As required under the PRC regulations, we participate in housing fund and various employee social security plans that are organized by applicable local municipal and provincial governments, including housing, pension, medical, maternity, work-related injury and unemployment benefit plans, under which we make contributions at specified percentages of the salaries of our employees as required in accordance with government regulations. We also purchase commercial health and accidental insurance for our employees. Bonuses are generally discretionary and based in part on employee performance and in part on the overall performance of our business. We have granted and plan to continue to grant share-based incentive awards to our employees in the future to incentivize their contributions to our growth and development.
4. FOREIGN EXCHANGE RISK
   The functional currency of the Company is US dollars whereas the functional currency of the subsidiaries operating in the PRC is Renminbi. As of June 30, 2020, our cash and cash equivalent balance was mainly denominated in US dollars and Renminbi. We manage foreign exchange risk by performing regular reviews of our net foreign exchange exposures and try to minimize these exposures through natural hedges, wherever possible and may enter into forward foreign exchange contracts, when necessary. We operate mainly in the PRC with most of the transactions settled in Renminbi. Management considers that the business is not exposed to any significant foreign exchange risk as there are no significant financial assets or liabilities denominated in the currencies other than the respective functional currencies of our entities. As of June 30, 2020, we did not have significant foreign currency exposure from our operations.

MEITUAN DIANPING | 2020 INTERIM REPORT

29

MANAGEMENT DISCUSSION AND ANALYSIS

12. THE OUTBREAK RISK OF THE NOVEL CORONAVIRUS (COVID-19)

In December 2019, a novel strain of coronavirus temporarily named COVID-19 by the World Health Organization was reported to have surfaced in Wuhan, China. After the outbreak of the COVID-19 epidemic in China, strict epidemic prevention and control measures were adopted in China in order to prevent further spread of the disease. Commercial activities were restricted, tourism activities and public transportation were controlled and public places were closed in the affected regions. The aforementioned restrictive measures and consumers' concerns about hygiene have drastically reduced consumers' demands for local lifestyle services, and a considerable number of local lifestyle merchants have suspended their operations or postponed to resume operations. The above situations may cause serious interference to our operations and adversely affect our business. At the same time, the further outbreak of the COVID-19 epidemic around the world may exacerbate market volatility and have continuous negative economic impact on China and the global market, and may raise concerns about China's economic and global economic prospects. The degree of impact of the above COVID-19 on our business will depend on future evolvement of the situation, including, among other things, the latest news about the severity of the coronavirus and the effect of suppressing or treating the coronavirus on the human body. Due to the significant uncertainty and unpredictability of these factors, it is currently difficult to reasonably estimate the duration of interference with our business and its related financial impact.

Since the outbreak of COVID-19, we have adopted a number of the following positive measures to address COVID-19 epidemic as set forth in detail in the 2019 Environmental, Social and Governance Report. The positive measures have demonstrated effective control and prevention of the spread of COVID-19, provided active support and assistance to our merchants' operations and assurance to our customers. Highlight of the relevant measures and updates as follows:

On the consumer side, we (1) introduced and rolled out "contact free" delivery services; (2) ensured adequate supply and delivery service for food, medicine and daily necessities; (3) guaranteed timely refund on hotel booking cancellations without penalty; (4) provided food supply for medical staffs; (5) assisted local governments in virus transmission tracking; (6) launched various campaigns to help restore consumer confidence.

On the merchant side, we (1) established a dedicated fund to support local service merchants across the country; (2) partnered with banks to provide over RMB20 billion loans with favorable interest rates to eligible merchants; (3) for food delivery merchants, we waived commissions, refunded part of the commission for future marketing usage, and provided free traffic support and subsidies for merchants; (4) for in-store merchants, we waived commissions nationwide and extended subscription based services for eligible merchants; (5) for hotel & travel, we provided subsidies, anti-pandemic supplies and hotel management systems to eligible hotel merchants.

On the delivery rider side, we (1) implemented strict health surveillance procedures for delivery riders; (2) provided subsidies, antiseptic tools and instructions on pandemic prevention for delivery riders.

30

MANAGEMENT DISCUSSION AND ANALYSIS

1. SIGNIFICANT INVESTMENT HELD
   As of June 30, 2020, we had no significant investment held.
2. PLEDGE OF ASSETS
   As of June 30, 2020, the Company had securitized certain loan receivables for asset-backed securities. Details are set out in Note 27 to the interim financial information.
3. INTERIM DIVIDENDS
   The Board does not recommend the distribution of an interim dividend for the six months ended June 30, 2020.
4. FUTURE PLANS FOR MATERIAL INVESTMENTS AND CAPITAL ASSETS
   Save as disclosed in this report, as of June 30, 2020, we did not have other plans for material investments and capital assets.
5. CHARGES ON ASSETS
   As of June 30, 2020, we did not have any charges on its assets.

MEITUAN DIANPING | 2020 INTERIM REPORT

31

OTHER INFORMATION

DIRECTORS' AND CHIEF EXECUTIVES' INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY

As of June 30, 2020, the interests and short positions of the Directors and the chief executives of the Company in the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which have been notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which were taken or deemed to have taken under such provisions of the SFO), or which were recorded in the register required to be kept pursuant to section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code as set out in Appendix 10 of the Listing Rules were as follows:

Interests of Directors and Chief Executives in the Company

				Approximate
				percentage
			Number	of interest in
Name of Director or			and class	each class
chief executive	Nature of interest(1)	Relevant company	of securities	of Shares(7)
WANG Xing(2)	Beneficiary and founder	Trust	489,600,000	66.56%
	of a Trust (L)		Class A Shares
	Interest in controlled	Songtao Limited	489,600,000	66.56%
	corporation (L)		Class A Shares
	Interest in controlled	Crown Holdings	489,600,000	66.56%
	corporation (L)		Class A Shares
	Interest in controlled	Shared Patience	83,588,783	11.36%
	corporation (L)		Class A Shares
			318	0.00%
			Class B Shares
MU Rongjun(3)	Beneficiary and founder	Trust	118,650,000	16.13%
	of a Trust (L)		Class A Shares
	Interest in controlled	Day One Holdings Limited	118,650,000	16.13%
	corporation (L)		Class A Shares
	Interest in controlled	Charmway Enterprises	118,650,000	16.13%
	corporation (L)		Class A Shares
	Interest in controlled	Shared Vision	7,330,000	1.00%
	corporation (L)		Class A Shares
			333,334	0.00%
			Class B Shares
	Beneficial interest (L)	-	5,666,666	0.11%
			Class B Shares

32

OTHER INFORMATION

				Approximate
				percentage
			Number	of interest in
Name of Director or			and class	each class
chief executive	Nature of interest(1)	Relevant company	of securities	of Shares(7)
WANG Huiwen(4)	Beneficiary and founder	Trust	36,400,000	4.95%
	of a Trust (L)		Class A Shares
			2,134,660	0.04%
			Class B Shares
	Interest in controlled	Aim Mars Investment Limited	36,400,000	4.95%
	corporation (L)		Class A Shares
			2,134,660	0.04%
			Class B Shares
	Interest in controlled	Kevin Sunny	36,400,000	4.95%
	corporation (L)		Class A Shares
			2,134,660	0.04%
			Class B Shares
	Interest in controlled	Galileo Space Limited	2,963,001	0.06%
	corporation (L)		Class B Shares
	Beneficial interest (L)	-	15,180,939	0.30%
			Class B Shares
SHEN Nanpeng Neil(5)	Interest in controlled	Sequoia Capital China Funds,	417,230,593	8.15%
	corporations (L)	Sequoia Capital Global	Class B Shares
		Growth Funds and Other
		Controlled Entities
	Beneficial interest (L)	-	7,782,112	0.15%
			Class B Shares
ORR Gordon Robert	Beneficial interest (L)	-	60,000	0.00%
Halyburton(6)			Class B Shares
LENG Xuesong(6)	Beneficial interest (L)	-	60,000	0.00%
			Class B Shares
SHUM Heung Yeung	Beneficial interest (L)	-	60,000	0.00%
Harry(6)			Class B Shares

MEITUAN DIANPING | 2020 INTERIM REPORT

33

OTHER INFORMATION

Notes:

1. The letter "L" denotes the person's Long Position in such Shares.
2. Crown Holdings is wholly owned by Songtao Limited. The entire interest in Songtao Limited is held through a trust which was established by Wang Xing (as settlor) for the benefit of Wang Xing and his family. Wang Xing is deemed to be interested in the 489,600,000 Class A Shares held by Crown Holdings under the SFO. Shared Patience is wholly owned by Wang Xing.
3. Charmway Enterprises is wholly owned by Day One Holdings Limited. The entire interest in Day One Holdings Limited is held through a trust which was established by Mu Rongjun (as settlor) for the benefit of Mu Rongjun and his family. Mu Rongjun is deemed to be interested in the 118,650,000 Class A Shares held by Charmway Enterprises under the SFO. Shared Vision is wholly owned by Mu Rongjun. Mu Rongjun was granted RSUs equivalent to 1,000,000 Class B Shares and options with respect to 5,000,000 Class B Shares under the Pre-IPO ESOP subject to vesting/exercise. As at June 30, 2020, 333,334 Class B Shares were issued to Shared Vision with respect to the vesting of 333,334 RSUs granted to Mu Rongjun under the Pre-IPO ESOP.
4. Kevin Sunny is wholly owned by Aim Mars Investment Limited. The entire interest in Aim Mars Investment Limited is held through a trust established by Wang Huiwen (as settlor) for the benefit of Wang Huiwen and his family. Wang Huiwen is deemed to be interested in the 36,400,000 Class A Shares held by Aim Mars Investment Limited under the SFO. Galileo Space Limited is wholly-controlled by Wang Huiwen. Wang Huiwen was granted RSUs equivalent to 15,700,000 Class B Shares, and options with respect to 7,578,600 Class B Shares under the Pre-IPO ESOP. As at June 30, 2020, (i) 972,160 Class B Shares were issued to Kevin Sunny with respect to the exercise of 972,160 share options; and 1,162,500 Class B Shares were issued to Kevin Sunny with respect to the vesting 1,162,500 RSUs under the Pre-IPO ESOP; (ii) 1,550,500 Class B Shares were issued to Galileo Space Limited with respect to the exercise of 1,550,500 share options; and 4,412,501 Class B Shares were issued to Galileo Space Limited with respect to the vesting 4,412,501 RSUs under the Pre-IPO ESOP;
5. Sequoia Capital China Funds refers to Sequoia Capital China I, L.P., Sequoia Capital China Partners Fund I, L.P., Sequoia Capital China Principals Fund I, L.P., Sequoia Capital China II, L.P., Sequoia Capital China Partners Fund II, L.P., Sequoia Capital China Principals Fund II, L.P., Sequoia Capital 2010 CV Holdco, Ltd., SCC Venture V Holdco I, Ltd., SCC Venture VI Holdco, Ltd., SCC Venture VI Holdco B, Ltd., SCC Growth 2010-Top Holdco, Ltd., Sequoia Capital 2010 CGF Holdco, Ltd., SCC Growth IV Holdco A, Ltd. and Sequoia Capital China Growth Fund IV, L.P. (which hold approximately 0.85%, 0.10%, 0.13%, 2.60%, 0.07%, 0.44%, 0.67%, 0.01%, 0.04%, 0.01%, 0.89%, 0.14%, 0.02% and 0.13%, respectively, of the outstanding Shares), and Sequoia Capital Global Growth Funds refers to Sequoia Capital Global Growth Fund, L.P., Sequoia Capital Global Growth Principals Fund, L.P. and SC GGFII Holdco, Ltd. (which hold approximately 0.39%, 0.01% and 0.55%, respectively, of the outstanding Shares). The Sequoia Capital China Funds and the Sequoia Capital Global Growth Funds may act together with respect of the holding, disposal and casting of voting rights of the Shares.

34

OTHER INFORMATION

The general partner of each of Sequoia Capital China I, L.P., Sequoia Capital China Partners Fund I, L.P. and Sequoia Capital China Principals Fund I, L.P. is Sequoia Capital China Management I, L.P. ("SCC Management I"). The general partner of each of Sequoia Capital China II, L.P., Sequoia Capital China Partners Fund II, L.P. and Sequoia Capital China Principals Fund II, L.P. is Sequoia Capital China Management II, L.P. ("SCC Management II"). The sole shareholder of Sequoia Capital 2010 CV Holdco, Ltd. is Sequoia Capital China Venture 2010 Fund, L.P., whose general partner is SC China Venture 2010 Management, L.P. ("SCCV 2010 Management"). The sole shareholder of SCC Venture V Holdco I, Ltd. is Sequoia Capital China Venture Fund V, L.P., whose general partner is SC China Venture V Management, L.P. ("SCCV V Management"). The sole shareholder of each of SCC Venture VI Holdco, Ltd. and SCC Venture VI Holdco B, Ltd. is Sequoia Capital China Venture Fund VI, L.P., whose general partner is SC China Venture VI Management, L.P. ("SCCV VI Management"). The controlling shareholder of SCC Growth 2010-Top Holdco, Ltd. and the sole shareholder of Sequoia Capital 2010 CGF Holdco, Ltd. is Sequoia Capital China Growth 2010 Fund, L.P. ("China Growth Fund 2010"), whose general partner is SC China Growth 2010 Management, L.P. ("SCCGF 2010 Management"). In respect of the casting of votes held by China Growth Fund 2010 in SCC Growth 2010-Top Holdco, Ltd., China Growth Fund 2010 is accustomed to act in accordance with the instructions of Sequoia Capital China Growth Fund I, L.P, whose general partner is Sequoia Capital China Growth Fund Management I, L.P. ("SCCGF Management I"). The sole shareholder of SCC Growth IV Holdco A, Ltd. is Sequoia Capital China Growth Fund IV, L.P., whose general partner is SC China Growth IV Management, L.P. ("SCCGF IV Management" and, together with SCC Management I, SCC Management II, SCCV 2010 Management, SCCV V Management, SCCV VI Management, SCCGF 2010 Management and SCCGF Management I, collectively, the "General Partners"). The general partner of each of the General Partners is SC China Holding Limited, which is a wholly owned subsidiary of SNP China Enterprises Limited. Neil Nanpeng Shen is the sole shareholder of SNP China Enterprises Limited, and has a beneficial interest of 7,782,112 Class B Shares. Other Controlled Entities refers to URM Management Limited and N&J Investment Holdings Limited (which hold approximately 0.0012% and 0.08%, respectively, of the outstanding Shares) and are controlled by Neil Nanpeng Shen.

In view of the above, the Sequoia Capital China Funds and the Sequoia Capital Global Growth Funds are deemed to be interested in the Shares held by each other and by Neil Nanpeng Shen and Other Controlled Entities and vice versa; and is therefore each deemed to be interested in 7.26% interest in the share capital of the Company (or 8.30% of the total issued Class B Shares).

1. Each of the independent non-executive Directors, namely Orr Gordon Robert Halyburton, Leng Xuesong and Shum Heung Yeung Harry was granted RSUs equivalent to 60,000 Class B Shares under the Post-IPO Share Award Scheme.
2. As at June 30, 2020, the Company had 5,853,665,710 issued Shares in total, comprising of 735,568,783 Class A Shares and 5,118,096,927 Class B Shares. The above calculation is based on the total number of relevant class of Shares or the total number of Shares in issue as of June 30, 2020.

Interests of Directors and Chief Executives in Associated Corporations of the Company

None of the Directors or chief executives of the Company had interests and short positions in shares, underlying shares or debentures in associated corporations of the Company as of June 30, 2020.

Save as disclosed above, as of June 30, 2020, none of the Directors or the chief executives of the Company had or was deemed to have any interest or short position in the Shares, underlying shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) that was required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have taken under such provisions of the SFO), or required to be recorded in the register required to be kept under Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

MEITUAN DIANPING | 2020 INTERIM REPORT

35

OTHER INFORMATION

SUBSTANTIAL SHAREHOLDERS' INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES AND DEBENTURES OF THE COMPANY

As of June 30, 2020, to the best knowledge of the Directors, the following persons had interests or short positions in the Shares or underlying Shares which fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO:

			Approximate
			percentage of
		Number and	interest in
		class of	each class
Name of Substantial Shareholder	Capacity/Nature of interest	Shares held	of Shares(5)
Class A Shares - Wang Xing
Crown Holdings(1)	Beneficial interest	489,600,000	66.56%
		Class A Shares
Share Patience(1)	Beneficial interest	83,588,783	11.36%
		Class A Shares
Songtao Limited(1)	Interest in controlled corporation	489,600,000	66.56%
		Class A Shares
TMF (Cayman) Ltd.	Trustee	489,600,000	66.56%
		Class A Shares
Wang Xing	Beneficiary of a trust(1)	489,600,000	66.56%
		Class A Shares
	Founder of a trust(1)	489,600,000	66.56%
		Class A Shares
	Interest in controlled corporation(1)	83,588,783	11.36%
		Class A Shares
Class A Shares - Mu Rongjun
Charmway Enterprises(2)	Beneficial interest	118,650,000	16.13%
		Class A Shares
Shared Vision(2)	Beneficial interest	7,330,000	1.00%
		Class A Shares
Day One Holdings Limited(2)	Interest in controlled corporation	118,650,000	16.13%
		Class A Shares
TMF (Cayman) Ltd	Trustee	118,650,000	16.13%
		Class A Shares

36

OTHER INFORMATION

			Approximate
			percentage of
		Number and	interest in
		class of	each class
Name of Substantial Shareholder	Capacity/Nature of interest	Shares held	of Shares(5)
Mu Rongjun	Beneficiary of a trust(2)	118,650,000	16.13%
		Class A Shares
	Founder of a trust(2)	118,650,000	16.13%
		Class A Shares
	Interest in controlled corporation(2)	7,330,000	1.00%
		Class A Shares
Class B Shares - Tencent
Huai River Investment Limited(3)	Beneficial interest	623,420,905	12.18%
		Class B Shares
Tencent Mobility Limited(3)	Beneficial interest	389,413,655	7.61%
		Class B Shares
Morespark Limited(3)	Beneficial interest	8,850,245	0.17%
		Class B Shares
Great Summer Limited(3)	Beneficial interest	25,000,000	0.49%
		Class B Shares
TPP Follow-on I Holding B Limited(3)	Beneficial interest	3,150,931	0.06%
		Class B Shares
TPP Follow-on I Holding C Limited(3)	Beneficial interest	4,473,024	0.09%
		Class B Shares
THL A Limited	Beneficial interest	149,261	0.00%
		Class B Shares
THL A25 Limited	Beneficial interest	1,927	0.00%
		Class B Shares
Class B Shares - Sequoia
Sequoia Capital China Funds,	Beneficial interest	417,230,593	8.15%
Sequoia Capital Global Growth		Class B Shares
Funds and Other Controlled	Other	7,782,112	0.15%
Entities (4)		Class B Shares

Notes:

1. Crown Holdings is wholly owned by Songtao Limited which is in turn wholly owned by TMF (Cayman) Ltd. The entire interest in Songtao Limited is held by TMF (Cayman) Ltd. as trustee for a trust established by Wang Xing (as settlor) for the benefit of Wang Xing and his family. Wang Xing is deemed to be interested in the 489,600,000 Class A Shares held by Crown Holdings under the SFO. Shared Patience is wholly owned by Wang Xing.

MEITUAN DIANPING | 2020 INTERIM REPORT

37

OTHER INFORMATION

1. Charmway Enterprises is wholly owned by Day One Holdings Limited which is in turn wholly owned by TMF (Cayman) Ltd. The entire interest in Day One Holdings Limited is held by TMF (Cayman) Ltd. as trustee for a trust established by Mu Rongjun (as settlor) for the benefit of Mu Rongjun and his family. Mu Rongjun is deemed to be interested in the 118,650,000 Class A Shares held by Charmway Enterprises under the SFO. Shared Vision is wholly owned by Mu Rongjun.
2. Huai River Investment Limited, a company incorporated under the laws of the British Virgin Islands, Tencent Mobility Limited, a company incorporated under the laws of Hong Kong, Morespark Limited, a company incorporated under the laws of Hong Kong and Great Summer Limited, a company incorporated under the laws of the British Virgin Islands, are direct wholly owned subsidiaries of Tencent. TPP Follow-on I Holding B Limited and TPP Follow-on I Holding C Limited, companies incorporated under the laws of the Cayman Islands, are beneficially owned by Tencent. THL A Limited and THL A25 Limited, companies incorporated under the laws of the British Virgin Islands, are beneficially owned by Tencent.
3. Sequoia Capital China Funds refers to Sequoia Capital China I, L.P., Sequoia Capital China Partners Fund I, L.P., Sequoia Capital China Principals Fund I, L.P., Sequoia Capital China II, L.P., Sequoia Capital China Partners Fund II, L.P., Sequoia Capital China Principals Fund II, L.P., Sequoia Capital 2010 CV Holdco, Ltd., SCC Venture V Holdco I, Ltd., SCC Venture VI Holdco, Ltd., SCC Venture VI Holdco B, Ltd., SCC Growth 2010-Top Holdco, Ltd., Sequoia Capital 2010 CGF Holdco, Ltd., SCC Growth IV Holdco A, Ltd. and Sequoia Capital China Growth Fund IV, L.P. (which hold approximately 0.85%, 0.10%, 0.13%, 2.60%, 0.07%, 0.44%, 0.67%, 0.01%, 0.04%, 0.01%, 0.89%, 0.14%, 0.02% and 0.13%, respectively, of the outstanding Shares), and Sequoia Capital Global Growth Funds refers to Sequoia Capital Global Growth Fund, L.P., Sequoia Capital Global Growth Principals Fund, L.P. and SC GGFII Holdco, Ltd. (which hold approximately 0.39%, 0.01% and 0.55%, respectively, of the outstanding Shares). The Sequoia Capital China Funds and the Sequoia Capital Global Growth Funds may act together with respect of the holding, disposal and casting of voting rights of the Shares.
   The general partner of each of Sequoia Capital China I, L.P., Sequoia Capital China Partners Fund I, L.P. and Sequoia Capital China Principals Fund I, L.P. is Sequoia Capital China Management I, L.P. ("SCC Management I"). The general partner of each of Sequoia Capital China II, L.P., Sequoia Capital China Partners Fund II, L.P. and Sequoia Capital China Principals Fund II, L.P. is Sequoia Capital China Management II, L.P. ("SCC Management II"). The sole shareholder of Sequoia Capital 2010 CV Holdco, Ltd. is Sequoia Capital China Venture 2010 Fund, L.P. ("China Venture 2010 Fund"), whose general partner is SC China Venture 2010 Management, L.P. ("SCCV 2010 Management"). The sole shareholder of SCC Venture V Holdco I, Ltd. is Sequoia Capital China Venture Fund V, L.P. ("China Venture Fund V"), whose general partner is SC China Venture V Management, L.P. ("SCCV V Management"). The sole shareholder of each of SCC Venture VI Holdco, Ltd. and SCC Venture VI Holdco B, Ltd. is Sequoia Capital China Venture Fund VI, L.P. ("China Venture Fund VI"), whose general partner is SC China Venture VI Management, L.P. ("SCCV VI Management"). The controlling shareholder of SCC Growth 2010-Top Holdco, Ltd. and the sole shareholder of Sequoia Capital 2010 CGF Holdco, Ltd. is Sequoia Capital China Growth 2010 Fund, L.P. ("China Growth Fund 2010"), whose general partner is SC China Growth 2010 Management, L.P. ("SCCGF 2010 Management"). In respect of the casting of votes held by China Growth Fund 2010 in SCC Growth 2010-Top Holdco, Ltd., China Growth Fund 2010 is accustomed to act in accordance with the instructions of Sequoia Capital China Growth Fund I, L.P. ("China Growth Fund I"), whose general partner is Sequoia Capital China Growth Fund Management I, L.P. ("SCCGF Management I"). The sole shareholder of SCC Growth IV Holdco A, Ltd. is Sequoia Capital China Growth Fund IV, L.P., whose general partner is SC China Growth IV Management, L.P. ("SCCGF IV Management" and, together with SCC Management I, SCC Management II, SCCV 2010 Management, SCCV V Management, SCCV VI Management, SCCGF 2010 Management and SCCGF Management I, collectively, the "General Partners"). The general partner of each of the General Partners is SC China Holding Limited, which is a wholly owned subsidiary of SNP China Enterprises Limited. Neil Nanpeng Shen is the sole shareholder of SNP China Enterprises Limited, and has a beneficial interest of 7,782,112 Class B Shares. In addition, Neil Nanpeng Shen is interested in more than 33.3% limited partnership interest in Sequoia Capital China Partners Fund I, L.P. Other Controlled Entities refers to URM Management Limited and N&J Investment Holdings Limited (which hold approximately 0.0012% and 0.08%, respectively, of the outstanding Shares) and are controlled by Neil Nanpeng Shen. Therefore, each of China Venture 2010 Fund, China Venture Fund V, China Venture Fund VI, China Growth Fund I, China Growth Fund 2010, the General Partners, SC China Holding Limited, SNP China Enterprises Limited and Neil Nanpeng Shen is deemed to be interested in 7.26% interest in the share capital of the Company (or 8.30% of the total issued Class B Shares).

38

OTHER INFORMATION

The general partner of Sequoia Capital Global Growth Fund, L.P. and Sequoia Capital Global Growth Principals Fund, L.P. is SCGGF Management, L.P., whose general partner is SC US (TTGP), Ltd. Therefore, each of SCGGF Management, L.P. and SC US (TTGP), Ltd. is deemed to be interested in the 0.40% interest in the share capital of the Company (or 0.46% of the total issued Class B Shares).

The controlling shareholder of SC GGFII Holdco, Ltd. is Sequoia Capital Global Growth Fund II, L.P. The general partner of Sequoia Capital Global Growth Fund II, L.P is SC Global Growth II Management, L.P., whose general partner is SC US (TTGP), Ltd. Therefore, each of Sequoia Capital Global Growth Fund II, L.P., SC Global Growth II Management, L.P. and SC US (TTGP), Ltd. is deemed to be interested in the 0.55% interest in the share capital of the Company (or 0.63% of the total issued Class B Shares).

1. As at June 30, 2020, the Company had 5,853,665,710 issued Shares in total, comprising of 735,568,783 Class A Shares and 5,118,096,927 Class B Shares. The above calculation is based on the total number of relevant class of Shares or the total number of Shares in issue as of June 30, 2020.

PRE-IPO ESOP

The Pre-IPO ESOP was approved and adopted pursuant to the written resolutions of all shareholders of the Company dated October 6, 2015 as amended from time to time. The Pre-ESOP commenced on October 6, 2015 and will expire on the tenth anniversary of the commencement date. The purpose of the Pre-IPO ESOP is to promote the success and enhance the value of the Company by linking the personal interests of the Directors, employees and consultants to those of the shareholders of the Company and by providing such individuals with an incentive for outstanding performance to generate superior returns to the shareholders of the Company. The Pre- IPO ESOP is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Directors, employees and consultants upon whose judgment, interest, contribution and special effort the successful conduct of the Company's operation is largely dependent.

MEITUAN DIANPING | 2020 INTERIM REPORT

39

OTHER INFORMATION

Outstanding Share Options Granted under the Pre-IPO ESOP

The Company has not granted further share options under the Pre-IPO ESOP after the Listing Date. The table below shows the details of movements of share options granted to the Directors and other employees under the Pre-IPO ESOP:

Number

Number

Weighted

Number

of Shares

of options

average price

of Shares

underlying

exercised

of Class

Number

underlying

options

during the

B Shares

of options

options

outstanding

Reporting

immediately

Number of

cancelled

outstanding

as of

Period and

before the

options lapsed

during the

as of

January 1,

the exercise

date of

during the

Reporting

June 30,

Name

Date of Grant

Vesting Period(1)

Exercise Price

2020

price

exercise

Reporting Period

Period e

2020

Directors

Mu Rongjun

July 1, 2017 to

6 years

US$3.86

5,000,000

0

0

0

0

5,000,000

July 1, 2018

- US$5.18

Wang Huiwen

February 1, 2015 to

4-6 years

US$1.005

5,055,940

0

0

0

0

5,055,940

July 1, 2018

- US$5.18

Other Employees

May 31, 2006 to

0.5 to 6 years

US$0.000017

62,912,454

11,589,621

HKD116.975

4,349

3,533,368

47,785,116

August 1, 2018

- US$5.18

US$0.000017

- US$5.18

Total

72,968,394

11,589,621

HKD116.975

4,349

3,533,368

57,841,056

Note:

1. The exercise period of the share options granted under the Pre-IPO ESOP shall be any time after the end of the vesting period and before the 10th anniversary of the grant date, subject to the terms of the Pre-IPO ESOP and the share option award agreements signed by the grantees.

40

OTHER INFORMATION

Outstanding RSUs Granted under the Pre-IPO ESOP

The Company has not granted further RSUs under the Pre-IPO ESOP after the Listing Date. The table below shows the details of movements of RSUs granted to the Directors and other employees under the Pre-IPO ESOP.

Number of

Number of

Shares

Shares

underlying

underlying

RSUs

RSUs

outstanding

RSUs vested

RSUs cancelled

RSUs lapsed

outstanding

as of

during the

during the

during the

as of

January 1,

Reporting

Reporting

Reporting

June 30,

Name

Date of Grant

Vesting Period

2020

Period

Period

Period

2020

Directors

Mu Rongjun

July 1, 2017

6 years

666,666

0

0

0

666,666

Wang Huiwen

January 1, 2016

4 to 6 years

10,124,999

0

0

0

10,124,999

to July 1, 2018

Other Employees

December 29, 2010

0 to 6 years

81,642,506

23,314,908

4,800,635

0

53,526,963

to August 2, 2018

Total

92,434,171

23,314,908

4,800,635

0

64,318,628

POST-IPO SHARE OPTION SCHEME

A post-IPO employee share option scheme (the "Post-IPO Share Option Scheme") was approved and adopted by all the then shareholders of the Company on August 30, 2018 as amended from time to time. The Post-IPO Share Option Scheme shall be valid and effective for a period of ten years commencing on the Listing Date. The terms of the Post-IPO Share Option Scheme are governed by Chapter 17 of the Listing Rules. The purpose of the Post- IPO Share Option Scheme is to provide selected participants with the opportunity to acquire proprietary interests in the Company and to encourage selected participants to work towards enhancing the value of our Company and its Shares for the benefit of the Company and Shareholders as a whole. The Post-IPO ESOP will provide the Company with a flexible means of retaining, incentivising, rewarding, remunerating, compensating and/or providing benefits to selected participants.

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41

OTHER INFORMATION

Outstanding Share Options Granted under the Post-IPO Share Option Scheme

The table below shows the details of movement of share options granted under the Post-IPO Share Option Scheme:

Number

Weighted

Closing price

Number

Number

of options

Average

Number

of the Shares

of Shares

of Shares

exercised

price of

of Shares

immediately

underlying

underlying

during the

Class B

Number of

Number

underlying

before the

options

options

Reporting

Shares

options

of options

options

date on

outstanding

granted

Period

immediately

lapsed

cancelled

outstanding

which the

as of

during the

and the

before

during the

during the

as of

options were

Vesting

Exercise

January 1,

Reporting

exercise

the date

Reporting

Reporting

June 30,

Name

Date of Grant

granted

Period

Price

2020

Period

price

of exercise

Period

Period

2020

Other Employees

July 5, 2019

HK$70.0

4 years(1)

HK$69.1

740,000

0

0

0

0

0

740,000

Other Employees

April 24,2020

HK$100.0

5.2 years(2)

HK$100.15

0

1,356,000

0

0

0

0

1,356,000

Total

740,000

1,356,000

0

0

0

0

2,096,000

Notes:

1. The share options are exercisable in installments from the commencement of the relevant vesting period until July 5, 2029. Subject to the terms of the Post-IPO Share Option Scheme and the share option award agreements signed by the grantees, the first 25% of the options can be exercised 1 year after the grant date, and each 25% of the total options will become exercisable in each subsequent year.
2. The share options are exercisable in installments from the commencement of the relevant vesting period until April 24, 2030. Subject to the terms of the Post-IPO Share Option Scheme and the share option award agreements signed by the grantees, the first 1/6 of the options can be exercised on June 30, 2020 and each 1/6 of the total options will become exercisable in each subsequent year.

42

OTHER INFORMATION

POST-IPO SHARE AWARD SCHEME

The Company has also adopted a share award scheme (the "Post-IPO Share Award Scheme") pursuant to the written resolutions of the then shareholders passed on August 30, 2018.

The purpose of the Post-IPO Share Award Scheme is to align the interests of an employee, director (including executive Directors, non-executive Directors and independent non-executive Directors), officer, consultant, advisor, distributor, contractor, customer, supplier, agent, business partner, joint venture business partner or service provider of any member of the Group or any affiliate (an "Eligible Person" and, collectively, "Eligible Persons") with those of the Group through ownership of Class B Shares, dividends and other distributions paid on Shares and/or the increase in value of the Shares, and to encourage and retain Eligible Persons to make contributions to the long- term growth and profits of the Group.

The Post-IPO Share Award Scheme shall terminate on the earlier of:

1. the end of the period of ten years commencing on the Listing Date except in respect of any non-vested Award Shares granted hereunder prior to the expiration of the Post-IPO Share Award Scheme, for the purpose of giving effect to the vesting of such Award Shares or otherwise as may be required in accordance with the provisions of the Post-IPO Share Award Scheme; and
2. such date of early termination as determined by the Board, provided that such termination shall not affect any subsisting rights of any selected participant under the rules of the Post-IPO Share Award Scheme, provided further that for the avoidance of doubt, the change in the subsisting rights of a selected participant in this paragraph refers solely to any change in the rights in respect of the Award Shares already granted to a selected participant.

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43

OTHER INFORMATION

Outstanding RSUs Granted under the Post-IPO Share Award Scheme

The table below shows the details of RSUs granted to the Directors and other employees under the Post-IPO Share Award Scheme:

Number of

Number of

Shares

Number of

Shares

underlying

Shares

underlying

RSUs

underlying

RSUs

RSUs

RSUs

outstanding

RSUs granted

RSUs vested

cancelled

lapsed

outstanding

as of

during the

during the

during the

during the

as of

January 1,

Reporting

Reporting

Reporting

Reporting

June 30,

Name

Date of Grant

Vesting Period

2020

Period

Period(1)

Period

Period

2020

Directors

Orr Gordon Robert

November 23, 2018

6.25% to vest in

41,250

0

7,500

0

0

33,750

Halyburton

each quarter

commencing

from December

20, 2018 until

September 20,

2022

Leng Xuesong

November 23, 2018

6.25% to vest in

41,250

0

7,500

0

0

33,750

each quarter

commencing

from December

20, 2018 until

September 20,

2022

Shum Heung Yeung

November 23, 2018

6.25% to vest in

41,250

0

7,500

0

0

33,750

Harry

each quarter

commencing

from December

20, 2018 until

September 20,

2022

Other Employees

October 4, 2018

4 to 5.2 years

50,584,766

15,318,466

10,338,612

1,889,671

0

53,674,949

to April 24, 2020

Total

50,708,516

15,318,466

10,361,112

1,889,671

0

53,776,199

Note:

1. Including the RSUs which have vested before the Reporting Period but the Shares were issued to the grantees during the Reporting Period.

44

OTHER INFORMATION

WEIGHTED VOTING RIGHTS

The Company is controlled through weighted voting rights. Each Class A Share has 10 votes per share and each Class B Share has one vote per share except with respect to resolutions regarding a limited number of Reserved Matters, where each Share has one vote. The Company's WVR Structure enables the WVR Beneficiaries to exercise voting control over the Company notwithstanding the WVR Beneficiaries do not hold a majority economic interest in the share capital of the Company. This allows the Company to benefit from the continuing vision and leadership of the WVR Beneficiaries who control the Company with a view to its long-term prospects and strategy.

Shareholders and prospective investors are advised to be aware of the potential risks of investing in companies with WVR Structures, in particular that interests of the WVR Beneficiaries may not necessarily always be aligned with those of the Shareholders as a whole, and that the WVR Beneficiaries will be in a position to exert significant influence over the affairs of the Company and the outcome of Shareholders' resolutions, irrespective of how other Shareholders vote. Shareholders and prospective investors should make the decision to invest in the Company only after due and careful consideration.

As at the Date of this Interim Report, the WVR Beneficiaries are Wang Xing, Mu Rongjun and Wang Huiwen. Wang Xing beneficially owned 573,188,783 Class A Shares, representing approximately 45.86% of the voting rights in the Company with respect to Shareholders' resolutions relating to matters other than the Reserved Matters. The Class A Shares beneficially owned by Wang Xing are held by (i) Crown Holdings, a company indirectly wholly owned by a trust established by Wang Xing (as settlor) for the benefit of Wang Xing and his family; and (ii) Shared Patience, a company directly wholly owned by Wang Xing. Mu Rongjun beneficially owned 125,980,000 Class A Shares, representing approximately 10.08% of the voting rights in the Company with respect to Shareholders' resolutions relating to matters other than the Reserved Matters. The Class A Shares beneficially owned by Mu Rongjun are held by (i) Charmway Enterprises, a company indirectly wholly owned by a trust established by Mu Rongjun (as settlor) for the benefit of Mu Rongjun and his family; and (ii) Shared Vision, a company directly wholly owned by Mu Rongjun. Wang Huiwen beneficially owned 36,400,000 Class A Shares, representing approximately 2.91% of the voting rights in the Company with respect to Shareholders' resolutions relating to matters other than the Reserved Matters. The Class A Shares beneficially owned by Wang Huiwen are held by Kevin Sunny, a company indirectly wholly owned by a trust established by Wang Huiwen (as settlor) for the benefit of Wang Huiwen and his family.

Class A Shares may be converted into Class B Shares on a one to one ratio. As at the Date of this Interim Report, upon the conversion of all the issued and outstanding Class A Shares into Class B Shares, the Company will issue 735,568,783 Class B Shares, representing approximately 14.30% the total number of issued Class B Shares as at the Date of this Interim Report.

The weighted voting rights attached to our Class A Shares will cease when none of the WVR Beneficiaries have beneficial ownership of any of our Class A Shares, in accordance with Listing Rule 8A.22. This may occur:

1. upon the occurrence of any of the circumstances set out in Listing Rule 8A.17, in particular where a WVR Beneficiary is: (1) deceased; (2) no longer a member of the Board; (3) deemed by the Stock Exchange to be incapacitated for the purpose of performing his duties as a director; or (4) deemed by the Stock Exchange to no longer meet the requirements of a director set out in the Listing Rules;

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OTHER INFORMATION

1. when the Class A Shareholders have transferred to another person the beneficial ownership of, or economic interest in, all of the Class A Shares or the control over the voting rights attached to them, other than in the circumstances permitted by Listing Rule 8A.18;
2. where a vehicle holding Class A Shares on behalf of a WVR Beneficiary no longer complies with Listing Rule 8A.18(2); or
3. when all of the Class A Shares have been converted to Class B Shares.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

The Company is committed to maintaining and promoting stringent corporate governance standards. The principle of the Company's corporate governance is to promote effective internal control measures and to enhance the transparency and accountability of the Board to all shareholders.

The Company has adopted the principles and code provisions of the CG Code as set out in Appendix 14 to the Listing Rules as the basis of the Company's corporate governance practices.

Save for code provision A.2.1, the Company has complied with all the code provisions as set out in the CG Code where applicable during the Reporting Period.

Pursuant to code provision A.2.1 of the CG Code, companies listed on the Stock Exchange are expected to comply with, but may choose to deviate from the requirement that the responsibilities between the chairman and the chief executive officer should be segregated and should not be performed by the same individual. The Company does not have a separate chairman and chief executive officer and Wang Xing currently performs these two roles. The Board believes that vesting the roles of both chairman and chief executive officer in the same person has the benefit of ensuring consistent leadership within the Group and enables more effective and efficient overall strategic planning for the Group. The Board considers that the balance of power and authority for the present arrangement will not be impaired and this structure will enable the Company to make and implement decisions promptly and effectively. The Board will continue to review and consider segregating the roles of chairman of the Board and the chief executive officer of the Company at an appropriate time when it is appropriate by taking into account the circumstances of the Group as a whole.

COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the Model Code as the code of conduct regarding the Directors' dealings in the securities of the Company. The provisions under the Listing Rules in relation to compliance with the Model Code by the Directors regarding securities transactions have been applicable to the Company during the Reporting Period.

Having made specific enquiry of all the Directors of the Company, all the Directors confirmed that they have strictly complied with the provision of the Model Code throughout the Reporting Period.

46

OTHER INFORMATION

PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's securities listed on the Stock Exchange during the first half of 2020.

CHANGES OF DIRECTORS' INFORMATION UNDER RULE 13.51B(1) OF THE LISTING RULES

Below is the changes of Directors' information required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules since the date of the 2019 Annual Report:

Directors' Updated Information

Neil Nanpeng Shen ceased to be a non-executive director of China Renaissance Holdings Limited (HKEx Stock Code: 1911) since June 2020 and a non-executive director of 360 Security Technology Inc. (SHSE Stock Code: 601360) since May 2020.

Shum Heung Yeung Harry resigned as Executive Vice President from Microsoft Corporation in March 2020.

Save for the information disclosed herein, there is no other information required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules.

BIOGRAPHICAL INFORMATION OF THE DIRECTORS

During the Annual General Meeting of the Company dated May 20, 2020, Orr Gordon Robert Halyburton, Leng Xuesong and Shum Heung Yeung Harry were re-elected as the independent non-executive Directors of the Company. For details, please refer the announcements and circular of the Company dated April 17 and May 20, 2020.

Please refer to below biographical details of the directors.

Executive Directors

Wang Xing (王興), aged 41, is a Co-founder, an executive Director, the Chief Executive Officer and Chairman of the Board. Wang Xing is responsible for the overall strategic planning, business direction and management of the Company. He oversees the senior management team. Wang Xing founded meituan.com in 2010 and currently holds directorship in various subsidiaries, Consolidated Affiliated Entities and operating entities of the Company.

Wang Xing has over 10 years of managerial and operational experience in the internet industry. Prior to co-founding the Company, he co-founded xiaonei.com (校內網), China's first college social network website in December 2005 and worked there as chief executive officer from December 2005 to April 2007. xiaonei.com (校內網) was sold to China InterActive Corp in October 2006 which was later renamed as Renren Inc. (NYSE Ticker: RENN). Wang Xing also co-founded fanfou.com (飯否網), a social media company specializing in microblogging, in May 2007 and was responsible for the management and operation of this company from May 2007 to July 2009.

Wang Xing received his bachelor's degree in electronic engineering from Tsinghua University in July 2001 and his master's degree in electrical engineering from University of Delaware in January 2005.

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OTHER INFORMATION

Mu Rongjun (穆榮均), aged 40, is a Co-founder, an executive Director and a Senior Vice President of the Company. He is responsible for the financial services and corporate affairs of the Company.

Mu Rongjun has over 10 years of managerial and operational experience in the internet industry. Prior to co- founding the Company, he worked as senior software engineer and project manager in Baidu, Inc. (NASDAQ Ticker: BIDU), the leading Chinese language internet search provider, from July 2005 to May 2007. Mu Rongjun was also a co-founder and the engineering director of fanfou.com (飯否網), a social media company specializing in microblogging, from May 2007 to July 2009.

Mu Rongjun received his bachelor's degree in automation engineering from Tsinghua University in July 2002 and his master's degree in computer science and technology from Tsinghua University in July 2005.

Wang Huiwen (王慧文), aged 41, is a Co-founder, an executive Director and a Senior Vice President of the Company. He is responsible for the on-demand delivery and certain new initiatives of the Company. He will withdraw from his day-to-day management duties in the Company in December 2020. Wang Huiwen will continue to perform his director's duties by devoting himself to the strategic planning, organizational growth and talent development of the Company after withdrawing from his day-to-day duties.

Wang Huiwen has over 10 years of managerial and operational experience in the internet industry. Prior to co- founding the Company, he co-founded xiaonei.com (校內網), China's first college social network website, in December 2005 and worked there as co-founder from December 2005 to October 2006. xiaonei.com (校內網) was sold to China InterActive Corp in October 2006 which was later renamed as Renren Inc. (NYSE Ticker: RENN). In January 2009, Wang Huiwen co-founded taofang.com (淘房網) and worked there from June 2008 to October 2010.

Wang Huiwen received his bachelor's degree in electronic engineering from Tsinghua University in July 2001.

Non-executive Directors

Lau Chi Ping Martin (劉熾平), aged 47, is a non-executive Director. He was appointed as Director in October 2017 and is responsible for providing advice on business and investment strategies, general market trends, and other matters subject to the Board guidance and approval.

Lau Chi Ping Martin joined Tencent (HKEx Stock Code: 700) in February 2005 as the Chief Strategy and Investment Officer. In February 2006, Lau Chi Ping Martin was promoted as the president of Tencent to manage the day-today operation of Tencent. In March 2007, he was appointed as an executive director of Tencent. Prior to joining Tencent, Lau Chi Ping Martin was an executive director at Goldman Sachs (Asia) L.L.C.'s investment banking division and the Chief Operating Officer of its Telecom, Media and Technology Group. Prior to that, he worked at McKinsey & Company, Inc. as a management consultant.

Lau Chi Ping Martin received a Bachelor of Science degree in Electrical Engineering from the University of Michigan in July 1994, a Master of Science degree in Electrical Engineering from Stanford University in July 1995 and an MBA degree from Kellogg Graduate School of Management, Northwestern University in June 1998.

48

OTHER INFORMATION

In July 2011, Lau Chi Ping Martin was appointed as a non-executive director of Kingsoft Corporation Limited (HKEx Stock Code: 3888), an internet based software developer, distributor and software service provider listed in Hong Kong. In March 2014, Lau Chi Ping Martin was appointed as a director of JD.com, Inc. (NASDAQ Ticker: JD). In March 2014, Lau Chi Ping Martin was appointed as a director of Leju Holdings Limited (NYSE Ticker: LEJU). In July 2016, Lau Chi Ping was appointed as a director of Tencent Music Entertainment Group (formerly known as China Music Corporation) (NYSE Ticker: TME). In December 2017, Lau Chi Ping Martin was appointed as a director of Vipshop Holdings Limited (NYSE Ticker: VIPS), an online discount retailer company listed on the New York Stock Exchange.

Neil Nanpeng Shen (沈南鵬), aged 52, is a non-executive Director. He was appointed as Director in October 2015 and is responsible for providing advice on investment and business strategies, financial discipline, and other matters subject to the Board guidance and approval.

Neil Nanpeng Shen founded Sequoia Capital China in September 2005 and has been serving as the founding managing partner since then. Prior to founding Sequoia Capital China, he co-founded Trip.com Group Ltd. (NASDAQ Ticker: TCOM), formerly Ctrip.com International, Ltd. (NASDAQ Ticker: CTRP), or Ctrip, a leading travel service provider in China, in 1999. Neil Nanpeng Shen served as Ctrip's president from August 2003 to October 2005 and its chief financial officer from 2000 to October 2005. Neil Nanpeng Shen also co-founded and served as non- executive Co-Chairman of Homeinns Hotel Group, a leading economy hotel chain in China, which commenced operations in July 2002.

Neil Nanpeng Shen received his bachelor's degree in applied mathematics from Shanghai Jiao Tong University in July 1988 and his master's degree from Yale University in November 1992.

Neil Nanpeng Shen has been an independent non-executive director of Trip.com Group Ltd. (NASDAQ Ticker: TCOM), formerly Ctrip.com International, Ltd. (NASDAQ Ticker: CTRP) since October 2008, a non-executive director of Noah Holdings Limited (NYSE Ticker: NOAH) since January 2016, a non-executive director of BTG Hotels Group Co., Ltd. (SHSE Stock Code: 600258) since January 2017 and an independent non-executive director of Pinduoduo Inc. (NASDAQ Ticker: PDD) since April 2018.

Neil Nanpeng Shen served as a non-executive director of China Renaissance Holdings Limited (HKEx Stock Code: 1911) from June 2018 to June 2020 and a non-executive director of 360 Security Technology Inc. (SHSE Stock Code: 601360) from February 2018 to May 2020.

Independent Non-executive Directors

Orr Gordon Robert Halyburton, aged 57, is an independent non-executive Director. He was appointed as Director in September 2018 is responsible for providing independent advice on financial and accounting affairs and corporate governance matters, and other matters subject to the Board guidance and approval.

Orr Gordon Robert Halyburton joined McKinsey & Company in 1986 and served as senior partner of McKinsey & Company from July 1998 until August 2015 when he retired. He was a member of McKinsey's global shareholder board from July 2003 until June 2015.

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OTHER INFORMATION

Orr Gordon Robert Halyburton acquired extensive corporate governance experience during his position as a senior partner of McKinsey & Company, as well as a director and member of board committees in Lenovo Group Limited (HKEx Stock Code: 992) and Swire Pacific Limited (HKEx Stock Code: 00019 and 00087). His corporate governance experience includes, among others, (i) reviewing, monitoring and making recommendations as to the companies' policies, practices and compliance; (ii) proposing measures to ensure effective communication between the board and shareholders; (iii) opining on proposed connected transactions; and (iv) understanding requirements of the Listing Rules and directors' duty to act in the best interest of the company and the shareholders as a whole.

Orr Gordon Robert Halyburton received his bachelor's degree in engineering science from Oxford University in June 1984 and his master's degree in business administration from Harvard University in June 1986.

Orr Gordon Robert Halyburton has been an independent non-executive director of EQT AB (Stockholm Stock Code: EQT) since September 2019. He was appointed as a non-executive director of Lenovo Group Limited (HKEx Stock Code: 992) in September 2015 and redesignated as an independent non-executive director in September 2016. He has also been an independent non-executive director of Swire Pacific Limited (HKEx Stock Code: 00019 and 00087) since August 2015. He is also the vice chairman of China-Britain Business Council.

Leng Xuesong (冷雪松), aged 51, is an independent non-executive Director. He was appointed as Director in September 2018 and is responsible for providing independent advice on finance, executive compensation and corporate governance matters, and other matters subject to the Board guidance and approval.

Leng Xuesong joined Warburg Pincus, an international private equity firm, in September 1999 as an associate and served as managing director when he left in August 2007. From September 2007 to December 2014, he served as managing director at General Atlantic LLC, where he focused on investment opportunities in North Asia. In January 2015, Leng Xuesong founded Lupin Capital, a China-focused private equity fund.

Leng Xuesong acquired extensive corporate governance experience through his position as managing director of private equity funds and as non-executive director of various listed companies in Hong Kong and the US. He has accumulated corporate governance experience in (i) reviewing, monitoring and providing recommendations as to the companies' policies and compliance; (ii) facilitating effective communication between the board and shareholders; and (iii) understanding requirements of the Listing Rules and directors' duty to act in the best interest of the company and the shareholders as a whole.

Leng Xuesong received his bachelor's degree in international industrial trade from Shanghai Jiao Tong University in July 1992 and his master's degree in business administration from the Wharton School of the University of Pennsylvania in May 1999.

Leng Xuesong served as non-executive director of China Huiyuan Juice Group Limited (HKEx Stock Code: 1886)

from September 2006 to August 2007 and Zhongsheng Group Holdings Limited (HKEx Stock Code: 881) from August 2008 to June 2015. He served as non-executive director of Wuxi Pharmatech (Cayman) Inc. (NYSE Ticker: WX) from March 2008 to December 2015 and Soufun Holdings Ltd. (NYSE Ticker: SFUN) from September 2010 to December 2014. He also serves as non-executive director of China Index Holdings Limited (NASDAQ Ticker: CIH) from July 2019 till now.

50

OTHER INFORMATION

Shum Heung Yeung Harry (沈向洋), aged 53, is an independent non-executive Director. He was appointed as Director in September 2018 and is responsible for providing independent advice on technology innovation, the global technology and internet industry trends, and other matters subject to the Board guidance and approval.

Shum Heung Yeung Harry joined Microsoft Research in November 1996 as a researcher based in Redmond, Washington. In November 1998, he moved to Beijing as one of the founding members of Microsoft Research China (later renamed Microsoft Research Asia) and spent nine years there first as a researcher, subsequently moving on to become managing director of Microsoft Research Asia and a distinguished engineer of Microsoft Corporation. From October 2007 to November 2013, Shum Heung Yeung Harry served as the corporate vice president responsible for Bing search product development. From November 2013 to March 2020, he served as the executive vice president of Microsoft Corporation. He has also become an independent non-executive director of Youdao, Inc. (NYSE Ticker: DAO) since October 2019.

Shum Heung Yeung Harry has acquired corporate governance experience in his capacity as the executive vice president of Microsoft Corporation. His key corporate governance experience includes (i) making recommendations as to internal control systems and policies; (ii) regular communication with the board of directors; and (iii) implementing corporate governance measures.

Shum Heung Yeung Harry received his Ph.D. in Robotics from Carnegie Mellon University in August 1996. He was elected into the National Academy of Engineering of United States in February 2017.

USE OF NET PROCEEDS FROM LISTING

The net proceeds from the IPO were approximately RMB28,516.2 million, after deducting the underwriting fees, commissions and related total expenses paid and payable by us in connection thereto ("IPO Proceeds"). From the Listing Date up to June 30, 2020, we have not utilized any IPO Proceeds. We will gradually utilize the IPO Proceeds for the following purposes consistent with those set out in the section headed "Future Plans and Use of Proceeds" in the Prospectus, namely:

• approximately 35% to upgrade our technology and enhance our research and development capabilities;
• approximately 35% to development new services and products;
• approximately 20% to selectively pursue acquisitions or investments in assets and businesses which are complementary to our business and are in line with our strategies; and
• approximately 10% for working capital and general corporate purpose.

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OTHER INFORMATION

Since we are an offshore holding company, we will need to make capital contributions and loans to our PRC subsidiaries or through loans to our Consolidated Affiliated Entities such that the IPO Proceeds can be used in the manner described above. Such capital contributions and loans are subject to a number of limitations and approval processes under PRC laws and regulations. There are no costs associated with registering loans or capital contributions with relevant PRC authorities, other than nominal processing charges. Under PRC laws and regulations, the PRC governmental authorities are required to process such approvals, filings or registrations or deny our application within a prescribed period, which are usually less than 90 days. The actual time taken, however, may be longer due to administrative delay. We cannot assure you that we can obtain the approvals from the relevant governmental authorities, or complete the registration and filing procedures required to use our the IPO Proceeds as described above, in each case on a timely basis, or at all. This is because PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the IPO Proceeds to make loans or additional capital contributions to our PRC subsidiaries or Consolidated Affiliated Entities, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

AUDIT COMMITTEE AND REVIEW OF FINANCIAL STATEMENTS

The Company has established an Audit Committee in compliance with Rule 3.21 of the Listing Rules and the CG Code. The primary duties of the Audit Committee are to review and supervise the financial reporting process and internal controls system of the Group, review and approve connected transactions and to advise the Board. The Audit Committee comprises three independent non-executive Directors, namely, Orr Gordon Robert Halyburton, Leng Xuesong and Shum Heung Yeung Harry. Orr Gordon Robert Halyburton is the chairman of the Audit Committee.

The Audit Committee has reviewed the unaudited interim results of the Group for the six months ended June 30, 2020. The Audit Committee has also discussed matters with respect to the accounting policies and practices adopted by the Company and internal control with senior management members and the external auditor of the Company, PricewaterhouseCoopers.

The interim financial report of the Group for the six months ended June 30, 2020 has been reviewed by the Audit Committee of the Company and by the Company's external auditor in accordance with Hong Kong Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by the HKICPA.

OTHER BOARD COMMITTEES

In addition to the Audit Committee, the Company has also established a corporate governance committee, a nomination committee and a remuneration committee.

52

OTHER INFORMATION

CORPORATE GOVERNANCE COMMITTEE

The Company has established a corporate governance committee (the "Corporate Governance Committee") in compliance with Rule 8A.30 of the Listing Rules and the CG Code. The primary duties of the Corporate Governance Committee are to ensure that the Company is operated and managed for the benefit of all shareholders and to ensure the Company's compliance with the Listing Rules and safeguards relating to the weighted voting rights structure of the Company.

The Corporate Governance Committee comprises three independent non-executive Directors, namely Leng Xuesong, Orr Gordon Robert Halyburton and Shum Heung Yeung Harry. Leng Xuesong is the chairman of the Corporate Governance Committee.

On March 25, 2020, the Corporate Governance Committee held a meeting, considered, approved and reviewed the following matters:

1. reviewing and monitoring the training and continuous professional development of Directors and senior management;
2. reviewing and monitoring the code of conduct applicable to employees and Directors;
3. the re-appointment of the Company's compliance advisor;
4. the disclosure in the Corporate Governance Report and the Company's compliance with the CG Code;
5. the Conflict of Interest Declaration Policy of the Company and any potential conflict of interest between the Company and the WVR beneficiaries;
6. all risks related to the Company's WVR Structure, including connected transactions between the Company and its subsidiary or Consolidated Affiliated Entity on the one hand and any WVR Beneficiary on the other;
7. the written confirmation provided by the WVR Beneficiaries that they have complied with Rules 8A.14, 8A.15, 8A.18 and 8A.24 of the Listing Rules throughout the period from the Listing Date to December 31, 2019;
8. reviewing the Company's various policies and practices on corporate governance; and
9. reviewing and monitoring the Company policies and practices on compliance with legal and regulatory requirements.

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OTHER INFORMATION

QUALIFICATION REQUIREMENTS

Updates in Relation to the Qualification Requirements

On December 11, 2001, the State Council promulgated the Regulations for the Administration of Foreign-Invested Telecommunications Enterprises (the "FITE Regulations"), which were amended on September 10, 2008 and February 6, 2016. According to the FITE Regulations and the existing Special Administrative Measures for Entry of Foreign Investment (Negative List) (2020 Version), which became effective on July 23, 2020, foreign investors are not allowed to hold more than 50% of the equity interests in a company providing certain categories of value- added telecommunications services, including internet content provision services. In addition, a foreign investor who invests in a value-added telecommunications business in the PRC must possess prior experience in operating value-added telecommunications businesses and a proven track record of business operations overseas (the "Qualification Requirements"). Currently none of the applicable PRC laws, regulations or rules provides clear guidance or interpretation on the Qualification Requirements. According to our consultation with the Ministry of Industry and Information Technology (the "MIIT") in May 2018, it confirms that there is no clear guidance about how a foreign investor could meet the Qualification Requirements, and it applies a relatively strict standard for identifying whether foreign investors meet the Qualification Requirements.

Efforts and Actions Undertaken to Comply with the Qualification Requirements

Despite the lack of clear guidance or interpretation on the Qualification Requirements, we have been gradually building up our track record of overseas telecommunications business operations for the purposes of being qualified, as early as possible, to acquire the entire equity interests in the Onshore Holdcos or any of our Consolidated Affiliated Entities when the relevant PRC laws allow foreign investors to invest and to hold entire equity interests in enterprises which engage in the value-added telecommunications business. For the purposes of meeting the Qualification Requirements, we have established and accumulated overseas operation experience, for example:

1. Dianping (Hong Kong) Limited, Meituan Limited and Xigua Limited have been incorporated in Hong Kong in August 2010, November 2010 and September 2015, respectively, for the purposes of establishing and expanding the Company's operations overseas.
2. Xigua Limited has rented an office for the expansion of our business overseas. It has employed local employees in Hong Kong and obtained a travel agents license on November 7, 2018. It has also purchased fourth domain names outside of the PRC for display and promotion of our services since June 2015.
3. Dianping (Hong Kong) Limited has employed local employees in Hong Kong.

MATERIAL LITIGATION

During the Reporting Period, the Company was not involved in any material litigation or arbitration. Nor were the Directors aware of any material litigation or claims that were pending or threatened against the Company.

54

OTHER INFORMATION

EVENTS AFTER THE END OF REPORTING PERIOD

On July 1, 2020, the Company invested US$500 million to acquire approximately 15% convertible redeemable preferred shares of Li Auto Inc.("Li Auto"). On July 30, 2020, Li Auto has successfully listed on the Nasdaq and all the convertible redeemable preferred shares held by the Company automatically converted into Li Auto's Class A ordinary shares. The Company also entered into a share subscription agreement to make an additional investment of US$300 million in Class A shares of Li Auto in the concurrent private placement of global offering. Other than disclosed above, there was no significant events that might affect the Company since the end of the six months ended June 30, 2020.

MEITUAN DIANPING | 2020 INTERIM REPORT

55

REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION

To the Board of Directors of Meituan Dianping (incorporated in the Cayman Islands with limited liability)

INTRODUCTION

We have reviewed the interim financial information set out on pages 57 to 102, which comprises the interim condensed consolidated statement of financial position of Meituan Dianping (the "Company") and its subsidiaries (together, the "Group") as of June 30, 2020 and the interim condensed consolidated income statement, the interim condensed consolidated statement of comprehensive income/(loss), the interim condensed consolidated statement of changes in equity and the interim condensed consolidated statement of cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and International Accounting Standard 34 "Interim Financial Reporting". The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with International Accounting Standard 34 "Interim Financial Reporting". Our responsibility is to express a conclusion on this interim financial information based on our review and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

SCOPE OF REVIEW

We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information of the Group is not prepared, in all material respects, in accordance with International Accounting Standard 34 "Interim Financial Reporting".

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, August 21, 2020

56

INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT

			Unaudited
			Six months ended June 30,
	Note	2020		2019
			RMB' 000		RMB' 000
Revenues
Commission	7	26,711,465		28,594,292
Online marketing services	7	7,187,420		6,493,037
Interest revenue	7	413,875		360,473
Other services and sales	7	7,162,964		6,428,847
		41,475,724		41,876,649
Cost of revenues	8	(27,704,300)	(28,866,674)
Gross profit		13,771,424		13,009,975
Selling and marketing expenses	8	(7,371,771)	(7,855,222)
Research and development expenses	8	(4,673,195)	(4,068,430)
General and administrative expenses	8	(2,227,833)	(2,050,511)
Net provision for impairment losses on financial assets		(283,218)	(201,691)
Fair value changes on other financial investments at fair value through
profit or loss	17	(161,572)	(158,359)
Other gains, net	9	1,405,280		1,133,174
Operating profit/(loss)		459,115		(191,064)
Finance income	10	98,282		74,463
Finance costs	10	(108,775)	(96,936)
Share of gains of investments accounted for using equity method		54,009		25,378
Profit/(loss) before income tax		502,631		(188,159)
Income tax credits/(expenses)	12	128,272		(369,343)
Profit/(loss) for the period		630,903		(557,502)
Profit/(loss) for the period attributable to:
Equity holders of the Company		631,411		(554,362)
Non-controlling interests		(508)	(3,140)
		630,903		(557,502)
Earnings/(loss) per share for profit/(loss) for the period attributable
to the equity holders of the Company
Basic earnings/(loss) per share (RMB)	13	0.11		(0.10)
Diluted earnings/(loss) per share (RMB)	13	0.11		(0.10)

The accompanying notes on pages 65 to 102 form an integral part of this interim financial information.

MEITUAN DIANPING | 2020 INTERIM REPORT

57

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME/(LOSS)

			Unaudited
			Six months ended June 30,
		2020				2019
	Note		RMB' 000			RMB' 000
Other comprehensive income:
Items that may be reclassified to profit or loss
Share of other comprehensive income of investments accounted
for using the equity method	23	2,711				-
Items that may not be reclassified to profit or loss
Currency translation differences		647,370				47,893
Other comprehensive income for the period, net of tax		650,081				47,893
Total comprehensive income/(loss) for the period		1,280,984				(509,609)
Total comprehensive income/(loss) for the period
is attributable to:
Equity holders of the Company		1,281,492				(506,395)
Non-controlling interests		(508)			(3,214)
		1,280,984				(509,609)

The accompanying notes on pages 65 to 102 form an integral part of this interim financial information.

58

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

			Unaudited		Audited
			As of		As of
			June 30,		December 31,
		2020		2019
	Note		RMB' 000		RMB' 000
ASSETS
Non-current assets
Property, plant and equipment	14	7,445,625		5,376,217
Intangible assets	15	32,162,824		32,699,575
Deferred tax assets	16	518,210		590,054
Long-term treasury investments	18	1,625,332		200,275
Other financial investments at fair value through profit or loss	17	8,246,687		7,166,122
Investments accounted for using the equity method	11	2,351,252		2,283,590
Prepayments, deposits and other assets	19	2,050,728		1,562,037
		54,400,658		49,877,870
Current assets
Inventories	20	284,411		275,227
Trade receivables	21	859,730		676,762
Prepayments, deposits and other assets	19	11,071,779		9,591,157
Short-term treasury investments	18	44,522,946		49,435,599
Restricted cash		8,509,705		8,760,115
Cash and cash equivalents		13,935,056		13,396,185
		79,183,627		82,135,045
Total assets		133,584,285		132,012,915
EQUITY
Share capital	22	393		389
Share premium	22	262,367,560		260,359,929
Other reserves	23	(4,136,865)	(4,447,252)
Accumulated losses		(163,169,210)	(163,800,621)
Equity attributable to equity holders of the Company		95,061,878		92,112,445
Non-controlling interests		(58,559)	(58,051)
Total equity		95,003,319		92,054,394

MEITUAN DIANPING | 2020 INTERIM REPORT

59

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)

			Unaudited		Audited
			As of		As of
			June 30,		December 31,
		2020		2019
	Note		RMB' 000		RMB' 000
LIABILITIES
Non-current liabilities
Deferred tax liabilities	16	1,220,070		1,388,469
Financial liabilities at fair value through profit or loss		40,950			-
Deferred revenues	24	280,541		389,028
Borrowings	27		-	466,676
Lease liabilities		1,021,196		992,233
Other non-current liabilities		152,390		129,552
		2,715,147		3,365,958
Current liabilities
Trade payables	25	7,332,014		6,766,253
Payables to merchants		6,366,529		7,495,262
Advances from transacting users		3,181,943		3,855,559
Deposits from transacting users		2,353,451		2,491,947
Other payables and accruals	26	8,492,212		7,237,412
Borrowings	27	3,323,694		3,552,587
Deferred revenues	24	4,171,251		4,567,171
Lease liabilities		628,976		534,566
Income tax liabilities		15,749		91,806
		35,865,819		36,592,563
Total liabilities		38,580,966		39,958,521
Total equity and liabilities		133,584,285		132,012,915

The notes on pages 65 to 102 are an integral part of this interim financial information.

On behalf of the Board
Wang Xing	Mu Rongjun
Director	Director

60

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

														Unaudited
					Attributable to equity holders of the Company
																					Non-
			Share		Share	Other	Accumulated					controlling
	Note		capital		premium	reserves		losses	Sub-total	interests	Total
			RMB'000		RMB'000	RMB'000		RMB'000	RMB'000	RMB'000	RMB'000
As of January 1, 2020		389	260,359,929	(4,447,252)	(163,800,621)	92,112,445	(58,051)	92,054,394
Comprehensive income
Profit/(loss) for the period			-		-	-	631,411	631,411	(508)	630,903
Other comprehensive income
Share of other comprehensive income
of investments accounted for using
the equity method	23		-		-	2,711		-	2,711	-	2,711
Currency translation differences	23		-		-	647,370		-	647,370	-	647,370
Total comprehensive income			-		-	650,081	631,411	1,281,492	(508)	1,280,984
Transaction with owners in their
capacity as owners
Share-based compensation expenses	28		-		-	1,393,787		-	1,393,787	-	1,393,787
Exercise of option and RSU vesting		4	2,007,631	(1,733,481)		-	274,154	-	274,154
Total transaction with owners in their
capacity as owners		4		2,007,631			(339,694)		-	1,667,941	-	1,667,941
As of June 30, 2020		393		262,367,560			(4,136,865)	(163,169,210)	95,061,878	(58,559)	95,003,319

MEITUAN DIANPING | 2020 INTERIM REPORT

61

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)

													Unaudited
				Attributable to equity holders of the Company
																					Non-
		Share		Share	Other	Accumulated					controlling
	Note	capital		premium	reserves		losses	Sub-total	interests	Total
		RMB'000		RMB'000	RMB'000		RMB'000	RMB'000	RMB'000	RMB'000
As of January 1, 2019		384	258,284,687	(5,741,347)	(166,039,390)	86,504,334	5,438	86,509,772
Comprehensive loss
Loss for the period		-		-	-	(554,362)	(554,362)	(3,140)	(557,502)
Other comprehensive loss
Currency translation differences	23	-		-	47,967		-	47,967	(74)	47,893
Total comprehensive loss		-		-	47,967	(554,362)	(506,395)	(3,214)	(509,609)
Transaction with owners in their
capacity as owners
Share-based compensation expenses	28	-		-	952,221		-	952,221	-	952,221
Exercise of option and RSU vesting		4	1,297,814	(1,126,859)		-	170,959	-	170,959
Total transaction with owners in their
capacity as owners		4		1,297,814			(174,638)		-	1,123,180	-	1,123,180
As of June 30, 2019		388		259,582,501			(5,868,018)	(166,593,752)	87,121,119	2,224	87,123,343

The accompanying notes on pages 65 to 102 form an integral part of this interim financial information.

62

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

		Unaudited
		Six months ended June 30,
	2020		2019
Note		RMB' 000		RMB' 000
Cash flows from operating activities
Cash generated from/(used in) operations	636,052		(22,179)
Income tax paid	(90,714)	(127,598)
Net cash flows generated from/(used in) operating activities	545,338		(149,777)
Cash flows from investing activities
Purchase of property, plant and equipment	(2,984,545)	(1,463,481)
Proceeds from disposals of property, plant and equipment	141,601		13,842
Purchase of intangible assets	(8,447)	(7,662)
Proceeds from disposals of intangible assets		-	1,938
Payments for business combinations, net of cash acquired		-	(449,764)
Purchase of treasury investments	(89,623,882)	(93,727,052)
Proceeds from disposals of treasury investments	93,389,672		87,301,456
Acquisition of investments accounted for using the equity method		-	(1,025)
Proceeds from disposals of equity investments and refunds of
prepayment for investments	295,137		323,377
Acquisition of other financial investments measured at fair value	(1,190,123)	(338,893)
Gains received from treasury investments	821,471		566,346
Dividends received	17,197		9,701
Decrease in loan to related party	37,081			-
Increase in prepayment for investments	(96,385)	(14,607)
Net cash flows generated from/(used in) investing activities	798,777		(7,785,824)

MEITUAN DIANPING | 2020 INTERIM REPORT

63

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

		Unaudited
		Six months ended June 30,
	2020		2019
Note		RMB' 000		RMB' 000
Cash flows from financing activities
Proceeds from borrowings, excluding asset-backed
securities ("ABS")	2,467,000		1,800,000
Repayments of borrowings, excluding ABS	(2,540,000)	(600,000)
Proceeds from ABS, net		-	467,000
Repayments of ABS	(623,138)		-
Finance costs paid	(101,092)	(100,424)
Proceeds from exercise of option	220,440		131,499
Repurchase of ordinary shares	(90)		-
Lease payments	(377,074)	(398,845)
Increase in financial liabilities	40,950			-
Net cash flows (used in)/generated from financing activities	(913,004)	1,299,230
Net increase/(decrease) in cash and cash equivalents	431,111		(6,636,371)
Cash and cash equivalents at the beginning of the period	13,396,185		17,043,692
Exchange gain/(loss) on cash and cash equivalents	107,760		(198,448)
Cash and cash equivalents reclassified from the assets classified as
held for sale		-	28,377
Cash and cash equivalents at the end of the period	13,935,056		10,237,250

The accompanying notes on pages 65 to 102 form an integral part of this interim financial information.

64

NOTES TO THE INTERIM FINANCIAL INFORMATION

1. GENERAL INFORMATION
   Meituan Dianping (formerly known as Internet Plus Holdings Ltd.) ("the Company") was incorporated in the Cayman Islands on September 25, 2015 as an exempted company with limited liability. The registered office is at PO Box 309, Ugland House, Grand Cayman, KYl-1104, Cayman Islands.
   The Company is an investment holding company. The Company and its subsidiaries, including structured entities (collectively, the "Group"), provide platform which uses technology to connect consumers and merchants and offers diversified daily services, including food delivery, in-store dining, hotel and travel booking and other services.
   The Company's Class B Shares have been listed on the Main Board of the Hong Kong Stock Exchange since September 20, 2018 (the "Listing").
   The interim condensed consolidated financial information comprises the interim condensed consolidated statement of financial position as of June 30, 2020, the interim condensed consolidated income statement and the interim condensed consolidated statement of comprehensive income/(loss), the interim condensed consolidated statement of changes in equity and the interim condensed consolidated statement of cash flows for the six months period then ended, and a summary of significant accounting policies and other explanatory notes (the "Interim Financial Information"). The Interim Financial Information is presented in Renminbi ("RMB"), unless otherwise stated.
2. BASIS OF PREPARATION
   This condensed consolidated interim financial report for the six months period ended June 30, 2020 has been prepared in accordance with Accounting Standard IAS 34 Interim Financial Reporting.
   The Interim Financial Information does not include all the notes of the type normally included in an annual financial statements. Accordingly, it should be read in conjunction with the annual consolidated financial statements of the Group for the year ended December 31, 2019, which have been prepared in accordance with International Financial Reporting Standards, as set out in the 2019 annual report of the Group dated March 30, 2020 (the "2019 Financial Statements").

MEITUAN DIANPING | 2020 INTERIM REPORT

65

NOTES TO THE INTERIM FINANCIAL INFORMATION

3 SIGNIFICANT ACCOUNTING POLICIES

Except as described below, the accounting policies adopted in the preparation of the interim condensed consolidated financial information are consistent with those followed in the preparation of the 2019 Financial Statements.

1. New and amended standards adopted by the Group

The Group has adopted the following new and amended standards which are relevant to the Group's operations and are mandatory for the financial year beginning on or after January 1, 2020:

IAS 1 and IAS 8 (Amendment)	Definition of material
IFRS 3 (Amendment)	Definition of a business
IFRS 9, IAS 39 and IFRS 17 (Amendment)	Interest rate benchmark reform
Revised Conceptual Framework	Revised Conceptual Framework for Financial Reporting

The adoption of the above new and amended standards did not have any significant financial impact on these consolidated financial statements.

1. New and amended standards that have been issued but are not effective
   The following new and amended standards have been issued, but are not effective for the Group's financial year beginning on 1 January 2020 and have not been early adopted by the Group's management. These standards are not expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions:

		Effective for
		annual periods
		beginning
		on or after
IAS 28 and IFRS 10	Sale or Contribution of Assets Between an Investor and	A date to be
(Amendment)	its Associate or Joint Venture	determined by
		the IASB
IFRS 17	Insurance Contracts	January 1, 2023
IAS 1 (Amendment)	Classification of liabilities as current or non-current	January 1, 2022

The Group is in the process of assessing potential impact of the above new standards and amendments to standards that is relevant to the Group upon initial application. According to the preliminary assessment made by the Directors of the Company, management does not anticipate any significant impact on the Group's financial positions and results of operations upon adopting the above new standards and amendments to existing standards. The management of the Group plans to adopt these new standards and amendments to existing standards when they become effective.

66

NOTES TO THE INTERIM FINANCIAL INFORMATION

1. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
   The preparation of the Interim Financial Information requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
   In preparing the Interim Financial Information, the significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the 2019 Financial Statements.
2. FINANCIAL RISK MANAGEMENT
   The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow and fair value interest rate risk, and price risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group's financial performance. Risk management is carried out by the senior management of the Group.
3. 1. Financial risk factors
      The interim condensed consolidated financial information does not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's financial information as set out in the 2019 Financial Statements.
      There have been no changes in the risk management policies during the six months ended June 30, 2020.
   2. Fair value estimation
   3. 1. Fair value hierarchy
         The table below analyzes the Group's financial instruments carried at fair value as of June 30, 2020 and December 31, 2019 by level of the inputs to valuation techniques used to measure fair value. Such inputs are categorized into three levels within a fair value hierarchy as follows:
      2. • Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
         • Inputs other than quoted prices included within level 1 that are observable for the assets or liabilities, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and
         • Inputs for the assets or liabilities that are not based on observable market data (that is, unobservable inputs) (level 3).

MEITUAN DIANPING | 2020 INTERIM REPORT

67

NOTES TO THE INTERIM FINANCIAL INFORMATION

5 FINANCIAL RISK MANAGEMENT (Continued)

1. Fair value estimation (Continued)
2. 1. Fair value hierarchy (Continued)
      The following table presents the Group's assets that are measured at fair value as of June 30, 2020.

		Level 1	Level 2	Level 3		Total
		RMB' 000	RMB' 000	RMB' 000		RMB' 000
As of June 30, 2020
Financial assets
Short-term treasury investments at
fair value through profit or loss
(Note 18)		-	-	31,411,307	31,411,307
Long-term treasury investments at
fair value through profit or loss
(Note 18)		-	-	620,225	620,225
Other financial investments at fair
value through profit or loss
(Note 17)	1,920,340*		-	6,326,347	8,246,687
	1,920,340*	-	38,357,879	40,278,219

The following table presents the Group's assets that are measured at fair value as of December 31, 2019.

	Level 1	Level 2	Level 3		Total
	RMB' 000	RMB' 000	RMB' 000		RMB' 000
As of December 31, 2019
Financial assets
Short-term treasury investments at
fair value through profit or loss
(Note 18)	-	-	23,988,182	23,988,182
Other financial investments at fair
value through profit or loss
(Note 17)	2,076,995*		-	5,089,127	7,166,122
	2,076,995*		-	29,077,309	31,154,304

• This presents an investment in a listed company with observable quoted price.

The Group's policy is to recognize transfers into and transfers out of fair value hierarchy levels as of the end of the reporting period.

68

NOTES TO THE INTERIM FINANCIAL INFORMATION

5 FINANCIAL RISK MANAGEMENT (Continued)

1. Fair value estimation (Continued)
2. 1. Valuation techniques used to determine fair values
      Specific valuation techniques used to value financial instruments include:
   2. • The use of quoted market prices or dealer quotes for similar instruments; and
      • The discounted cash flow model and unobservable inputs mainly including assumptions of expected future cash flows and discount rate; and
      • The latest round financing, i.e. the prior transaction price or the third-party pricing information; and
      • A combination of observable and unobservable inputs, including risk-free rate, expected volatility, discount rate for lack of marketability, market multiples, etc.

There was no change to valuation techniques during the six months ended June 30, 2020.

All of the resulting fair value estimates are included in level 3, where the fair values have been determined based on present values and the discount rates used were adjusted for counterparty or own credit risk.

MEITUAN DIANPING | 2020 INTERIM REPORT

69

NOTES TO THE INTERIM FINANCIAL INFORMATION

5 FINANCIAL RISK MANAGEMENT (Continued)

1. Fair value estimation (Continued)
2. 1. Fair value measurements using significant unobservable inputs (level 3)
      The following table presents the changes in level 3 items including short-term treasury investments at fair value through profit or loss, long-term treasury investments at fair value through profit or loss and investments in unlisted companies for the six months ended June 30, 2020 and 2019.

						Other financial
						investments
						at fair value
		Short-term	Long-term	through
		treasury	treasury	profit or loss
		investments	investments
		at fair value	at fair value	Investments
		through	through	in unlisted
		profit or loss	profit or loss	companies	Total
		RMB'000	RMB'000	RMB'000	RMB'000
As of January 1, 2020	23,988,182		-	5,089,127		29,077,309
Additions	78,870,635		620,389	1,189,947		80,680,971
Disposals	(71,904,239)	(6,205)	-	(71,910,444)
Changes in fair value	360,431		180	(4,917)	355,694
Currency translation differences	96,298		5,861	52,190		154,349
As of June 30, 2020	31,411,307		620,225	6,326,347		38,357,879
Net unrealized gains/(losses) for the period	40,698		180	(4,917)	35,961

70

NOTES TO THE INTERIM FINANCIAL INFORMATION

5 FINANCIAL RISK MANAGEMENT (Continued)

1. Fair value estimation (Continued)
2. 1. Fair value measurements using significant unobservable inputs (level 3) (Continued)

			Other financial
			investments
			at fair value
			through profit
	Short-term	or loss
	treasury
	investments at	Investments
	fair value through	in unlisted
	profit or loss	companies	Total
	RMB' 000	RMB' 000	RMB' 000
As of January 1, 2019	15,067,960		4,904,247	19,972,207
Additions	72,947,026		338,893	73,285,919
Disposals/settlements	(69,088,532)	(219)	(69,088,751)
Reclassifications	-	319,373	319,373
Changes in fair value	282,534		(17,546)	264,988
Currency translation differences	9,585		4,880	14,465
As of June 30, 2019	19,218,573		5,549,628	24,768,201
Net unrealized gains/(losses) for
the period	130,077		(17,765)	112,312

1. Valuation process, inputs and relationships to fair value
   The Group has a team that manages the valuation of level 3 instruments for financial reporting purposes. The team manages the valuation exercise of the investments on a case by case basis. At least once every year, the team would use valuation techniques to determine the fair value of the Group's level 3 instruments. External valuation experts will be involved when necessary.
   As these level 3 instruments are not traded in an active market, their fair values have been determined by using various applicable valuation techniques, including discounted cash flows and market approach etc.

MEITUAN DIANPING | 2020 INTERIM REPORT

71

NOTES TO THE INTERIM FINANCIAL INFORMATION

5 FINANCIAL RISK MANAGEMENT (Continued)

1. Fair value estimation (Continued)
2. 1. Valuation process, inputs and relationships to fair value (Continued)

				Range of inputs
	Fair value as of	Fair value as of		As of	As of
	June 30,	December 31,	Un-observable	June 30,	December 31,	Relationship of unobservable
Description	2020	2019	inputs	2020	2019	inputs to fair value
	RMB'000	RMB'000
Investments in unlisted	6,326,347	5,089,127	Expected	40%-45%	40%-55%	The higher the expected
companies			volatility			volatility, the lower the fair value
			Discount for lack	23%	15%-25%	The higher the DLOM, the lower
			of marketability			the fair value
			("DLOM")
Short-term treasury	31,411,307	23,988,182	Expected rate	(4.2%)-5.2%	1.7%-7%	The higher the expected rate of
investments at fair			of return			return, the higher the fair value
value through
profit or loss
Long-term treasury	620,225	-	Expected rate	0%-16.7%	N/A	The higher the expected rate of
investments at fair			of return			return, the higher the fair value
value through
profit or loss

6 SEGMENT REPORTING

6.1 Segment reporting

The Group's business activities, for which discrete financial information is available, are regularly reviewed and evaluated by the CODM. The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive directors of the Company that make strategic decisions. As a result of this evaluation, the Group determined that it has operating segments as follows:

The CODM assesses the performance of the operating segments mainly based on segment revenues and cost of revenues and operating expenses of each operating segment. Thus, segment result would present revenues, cost of revenues and operating expenses and operating profit/(loss) for each segment, which is in line with CODM's performance review.

Food delivery

The food delivery segment offers food ordering and delivery service through the Group's platform. Revenues from the food delivery segment are primarily derived from (a) platform service to merchants to display the food information and connect transacting users; (b) food delivery service; (c) online marketing services in various advertising formats provided to merchants.

72

NOTES TO THE INTERIM FINANCIAL INFORMATION

6 SEGMENT REPORTING (Continued)

6.1 Segment reporting (Continued) In-store,hotel & travel

The in-store, hotel & travel segment offers merchants to sell vouchers, coupons, tickets and reservations on the Group's platform. Revenues from the in-store, hotel & travel segment are primarily derived from (a) commissions from merchants for vouchers, coupons, tickets and reservations sold on the Group's platform; and (b) online marketing services to merchants, including performance-based and display-based marketing services, as well as marketing services provided under annual plans.

New initiatives and others

Revenues from the new initiatives and others segment are primarily derived from (a) B2B food distribution services; (b) micro loan business; (c) Meituan Instashopping; (d) car-hailing services.

The CODM assesses the performance of operating segments mainly based on segment revenues and segment cost of revenues and operating expenses. The revenues from external customers reported to CODM are measured as segment revenues, which is the revenues derived from customers in each segment.

The Group's cost of revenues and operating expenses for the food delivery segment primarily consists of (a) food delivery rider costs; (b) employee benefits expenses; (c) transacting user incentives; (d) payment processing costs.

The Group's cost of revenues and operating expenses for the in-store, hotel & travel segment primarily consists of (a) employee benefits expenses; (b) transacting user incentives; (c) promotion and advertising; (d) depreciation of property, plant and equipment; (e) bandwidth and server custody fees.

The Group's cost of revenues and operating expenses for the new initiatives and others segment primarily consists of (a) cost of goods sold; (b) employee benefits expenses; (c) car-hailing driver related costs; (d) depreciation of property, plant and equipment.

There were no separate segment assets and segment liabilities information provided to the CODM, as CODM does not use this information to allocate resources to or evaluate the performance of the operating segments.

The revenue is mainly generated in China.

MEITUAN DIANPING | 2020 INTERIM REPORT

73

NOTES TO THE INTERIM FINANCIAL INFORMATION

6 SEGMENT REPORTING (Continued)

6.1 Segment reporting (Continued)

The segment information provided to the Group's CODM for the reportable segments for the relevant periods is as follows:

							Unaudited
					Six months ended June 30, 2020
					In-store,	New	Unallocated
			Food	hotel &	initiatives	item
			delivery	travel	and others	(Note i)	Total
			RMB' 000	RMB' 000	RMB' 000	RMB' 000	RMB' 000
Commission	21,282,638		3,289,856		2,138,971		-	26,711,465
Online marketing services	2,715,259		4,332,136		140,025		-	7,187,420
Other services and sales
(including interest revenue)	36,621		16,968		7,523,250		-	7,576,839
Revenues in total	24,034,518		7,638,960		9,802,246		-	41,475,724
Cost of revenues and operating
expenses	(22,851,978)	(5,067,218)	(12,625,502)	(471,911)	(41,016,609)
Operating profit/(loss)	1,182,540		2,571,742		(2,823,256)	(471,911)	459,115
							Unaudited
					Six months ended June 30, 2019
					In-store,	New	Unallocated
			Food	hotel &	initiatives	item
			delivery	travel	and others	(Note i)	Total
			RMB' 000	RMB' 000	RMB' 000	RMB' 000	RMB' 000
Commission	21,632,175		5,168,087		1,794,030		-	28,594,292
Online marketing services	1,867,796		4,534,423		90,818		-	6,493,037
Other services and sales
(including interest revenue)	50,552		34,900		6,703,868	-	6,789,320
Revenues in total	23,550,523		9,737,410		8,588,716		-	41,876,649
Cost of revenues and operating
expenses	(22,948,379)	(5,997,033)	(12,817,575)	(304,726)	(42,067,713)
Operating profit/(loss)	602,144		3,740,377		(4,228,859)	(304,726)	(191,064)

74

NOTES TO THE INTERIM FINANCIAL INFORMATION

6 SEGMENT REPORTING (Continued)

6.1 Segment reporting (Continued)

1. Unallocated items are cost of revenues and operating expenses which could not be categorized into a segment. These items include (i) share-based compensation, (ii) amortization of intangible assets resulting from acquisitions, (iii) fair value changes on other financial investments at fair value through profit or loss, (iv) other gains, net, and (v) impairment provision and restructuring expense for Mobike restructuring plan.

The reconciliation of operating profit/(loss) to profit/(loss) before income tax of respective period during the six months ended June 30, 2020 and 2019 is shown in the consolidated income statement.

There is no concentration risk as no revenue from a single external customer was more than 10% of the Group's total revenue for the six months ended June 30, 2020 and 2019.

6.2 Segment assets

As of June 30, 2020 and December 31, 2019, substantially all of the non-current assets of the Group were located in the PRC.

7	REVENUES BY TYPE
			Unaudited
			Six months ended June 30,
		2020		2019
			RMB' 000		RMB' 000
	Commission	26,711,465		28,594,292
	Online marketing services	7,187,420		6,493,037
	Other services and sales (including interest revenue)	7,576,839		6,789,320
		41,475,724		41,876,649

Further disaggregation of revenues are included in Note 6.

MEITUAN DIANPING | 2020 INTERIM REPORT

75

NOTES TO THE INTERIM FINANCIAL INFORMATION

8	EXPENSES BY NATURE
			Unaudited
			Six months ended June 30,
		2020	2019
			RMB' 000		RMB' 000
	Food delivery rider costs	16,987,123	17,745,098
	Employee benefits expenses	9,329,956	8,495,505
	Cost of goods sold	3,476,551	3,062,898
	Transacting User incentives	2,556,502	3,008,945
	Other outsourcing labor costs	1,745,562	1,344,524
	Depreciation of property, plant and equipment	1,495,289	2,414,017
	Payment processing costs	913,469	937,859
	Promotion and advertising	889,770	744,177
	Car-hailing driver related costs	727,002	1,558,401
	Amortization of intangible assets	546,965	593,100
	Bandwidth and server custody fees	419,766	362,929
	Online traffic costs	168,932	172,657
	Rental, facility and utilities	127,517	139,906
	Professional fees	105,212	97,331
	Tax surcharge expenses	34,677	100,407
	Auditor's remuneration
	- Audit and audit-related services	27,903	22,782
	- Non-audit services	460	1,299
	Others (Note i)	2,424,443	2,039,002
	Total cost of revenues, selling and marketing expenses, research and
	development expenses and general and administrative expenses	41,977,099	42,840,837

1. Others mainly comprise message and verification fees, transportation fees, travelling and entertainment expenses and bike maintenance and relocation fees.

76

NOTES TO THE INTERIM FINANCIAL INFORMATION

9	OTHER GAINS, NET
			Unaudited
			Six months ended June 30,
		2020				2019
			RMB' 000			RMB' 000
	Subsidies and tax preference	960,875				65,320
	Fair value changes of treasury investments measured at fair value through
	profit or loss	360,611				282,534
	Interest income from treasury investments measured at amortized cost	283,451				454,973
	Foreign exchange gains/(losses), net	13,190				(84,053)
	Dilution gain	704				91,360
	Gains from the remeasurement of investments		-			176,880
	Gains from the disposal of investments		-			160,884
	Loss from the disposal of subsidiaries		-			(1,490)
	Donation	(200,199)			(2,380)
	Others	(13,352)			(10,854)
		1,405,280				1,133,174

10 FINANCE INCOME/(COSTS)

		Unaudited
		Six months ended June 30,
	2020			2019
		RMB' 000			RMB' 000
Finance income
Interest income from bank deposits	98,282			74,463
Finance costs
Interest expense on bank borrowings	(63,003)			(40,046)
Interest in respect of lease liabilities	(35,845)			(46,624)
Bank charges and others	(9,927)			(10,266)
Total	(108,775)			(96,936)

MEITUAN DIANPING | 2020 INTERIM REPORT

77

NOTES TO THE INTERIM FINANCIAL INFORMATION

11 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

		Unaudited		Audited
		As of		As of
		June 30,		December 31,
	2020		2019
		RMB' 000		RMB' 000
Associates	2,337,093		2,269,638
Joint ventures	14,159		13,952
	2,351,252		2,283,590

12 INCOME TAX CREDITS/(EXPENSES)

The income tax credits/(expenses) of the Group during all the periods presented are analyzed as follows:

		Unaudited
		Six months ended June 30,
	2020				2019
		RMB' 000			RMB' 000
Current income tax	29,201				(233,829)
Deferred income tax (Note 16)	99,071				(135,514)
Total income tax credits/(expenses) - Net	128,272				(369,343)

Income tax credits/(expenses) are recognized based on management's best knowledge of the income tax rates that would be applicable to the full financial year.

13 EARNINGS/(LOSS) PER SHARE

1. Basic earnings/(loss) per share for the six months ended June 30, 2020 and 2019 were calculated by dividing the earnings/(loss) attributable to the Company's equity holders by the weighted average number of ordinary shares in issue during the reporting period.

		Unaudited
		Six months ended June 30,
	2020				2019
Earnings/(loss) attributable to equity holders of the Company
(RMB' 000)	631,411				(554,362)
Weighted average number of ordinary shares in issue (thousand)	5,820,039				5,738,107
Basic earnings/(loss) per share (RMB)	0.11				(0.10)

78

NOTES TO THE INTERIM FINANCIAL INFORMATION

13 EARNINGS/(LOSS) PER SHARE (Continued)

1. Diluted earnings/(loss) per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has two categories of dilutive potential ordinary shares: share options and RSUs. As the Group incurred losses for the six months ended June 30, 2019, the dilutive potential ordinary shares were not included in the calculation of diluted loss per share as their inclusion would be anti-dilution. Accordingly, diluted loss per share for the six months ended June 30, 2019 was the same as basic loss per share of the respective periods.

		Unaudited
		Six months ended June 30,
	2020				2019
Earnings/(loss) attributable to equity holders of the Company
(RMB' 000)	631,411				(554,362)
Weighted average number of ordinary shares in issue (thousand)	5,820,039				5,738,107
Adjustments for RSUs and share options granted to employees
(thousand)	156,749				-
Weighted average number of ordinary shares used as the
denominator in calculating diluted earnings/(loss) per share
(thousand)	5,976,788				5,738,107
Diluted earnings/(loss) per share (RMB)	0.11				(0.10)

MEITUAN DIANPING | 2020 INTERIM REPORT

79

NOTES TO THE INTERIM FINANCIAL INFORMATION

14	PROPERTY, PLANT AND EQUIPMENT
														Unaudited
			Computer	Furniture and	Bikes and		Leasehold	Assets under	Right-of-use
			equipment		appliances	vehicles	improvements		construction	assets	Others	Total
			RMB'000		RMB'000	RMB'000		RMB'000		RMB'000	RMB'000	RMB'000	RMB'000
	Cost
	As of January 1, 2020	4,505,983	86,706	5,781,823	322,642	141,368	2,166,794	-	13,005,316
	Additions	405,316	22,045	1,865,144		-	895,124	487,429	-	3,675,058
	Disposals	(24,332)	(1,972)	(1,414,896)	(2,278)		-	(230,173)	(1,131)	(1,674,782)
	Transfers		-		-	645,304	36,567	(821,992)	-	140,121	-
	Currency translation differences	(1)		-	-		-		-	4	-	3
	As of June 30, 2020	4,886,966			106,779			6,877,375			356,931			214,500	2,424,054	138,990	15,005,595
	Accumulated depreciation
	As of January 1, 2020	(2,288,342)	(15,805)	(4,497,479)	(206,251)		-	(605,780)	-	(7,613,657)
	Depreciation	(612,116)	(9,153)	(432,084)	(52,073)		-	(383,349)	(6,514)	(1,495,289)
	Disposals	19,333			1,361			1,329,549			27				-	214,070			78	1,564,418
	Currency translation differences		-		-	-		-		-	-	-	-
	As of June 30, 2020	(2,881,125)	(23,597)	(3,600,014)	(258,297)		-	(775,059)	(6,436)	(7,544,528)
	Impairment
	As of January 1, 2020 and
	June 30, 2020		-		-	(7,497)		-	(7,945)	-	-	(15,442)
	Net carrying amount
	As of January 1, 2020	2,217,641			70,901			1,276,847			116,391			133,423	1,561,014			-	5,376,217
	As of June 30, 2020	2,005,841			83,182			3,269,864			98,634			206,555	1,648,995			132,554	7,445,625

80

NOTES TO THE INTERIM FINANCIAL INFORMATION

14	PROPERTY, PLANT AND EQUIPMENT (Continued)
																	Unaudited
			Computer	Furniture and	Bikes and		Leasehold	Assets under	Right-of-use
			equipment		appliances	vehicles	improvements		construction	assets	Total
			RMB'000		RMB'000	RMB'000		RMB'000		RMB'000	RMB'000	RMB'000
	Cost
	As of January 1, 2019	3,198,019				100,342				5,152,325				182,058				194,512				-	8,827,256
	Additions	963,542				53,293				120,090				5,236				100,653				2,286,539				3,529,353
	Disposals	(33,846)	(36,136)	(167,518)	(20,034)		-	(311,570)	(569,104)
	Transfers	-		-	1,215				81,268				(137,302)	-	(54,819)
	Assets transferred from
	derecognition of held for sale	-		-	249,778					-		-	-	249,778
	Currency translation
	differences	-	(1)	926					-		-	-	925
	As of June 30, 2019	4,127,715				117,498				5,356,816				248,528				157,863				1,974,969				11,983,389
	Accumulated depreciation
	As of January 1, 2019	(1,231,642)	(47,329)	(3,420,977)	(77,979)		-	-	(4,777,927)
	Depreciation	(525,705)	(35,243)	(1,344,521)	(74,958)		-	(433,590)	(2,414,017)
	Disposals	21,945				18,641				91,683				2,792					-	125,817				260,878
	Assets transferred from
	derecognition of held for sale	-		-	(107,828)		-		-	-	(107,828)
	Currency translation
	differences	-		-	(300)		-		-	-	(300)
	As of June 30, 2019	(1,735,402)	(63,931)	(4,781,943)	(150,145)		-	(307,773)	(7,039,194)
	Impairment
	As of January 1, 2019	-		-	(70,514)		-		-	-	(70,514)
	Additions	-		-	(8,181)		-		-	-	(8,181)
	Disposals	-		-	71,198					-		-	-	71,198
	Assets transferred from
	derecognition of held for sale	-		-	(141,950)		-		-	-	(141,950)
	As of June 30, 2019	-		-	(149,447)		-		-	-	(149,447)
	Net carrying amount
	As of January 1, 2019	1,966,377				53,013				1,660,834				104,079				194,512				-	3,978,815
	As of June 30, 2019	2,392,313				53,567				425,426				98,383				157,863				1,667,196				4,794,748

MEITUAN DIANPING | 2020 INTERIM REPORT

81

NOTES TO THE INTERIM FINANCIAL INFORMATION

15	INTANGIBLE ASSETS
													Unaudited
					User			Online
			Trade	generated	Software	payment		Technology				Supplier
			name	content	and others	licenses	and licenses	User list	relationship	Goodwill	Total
			RMB'000	RMB'000	RMB'000	RMB'000		RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
	Cost
	As of January 1, 2020	5,006,300		490,000	1,877,633	390,000	849,830	907,000	28,700	27,849,022	37,398,485
	Additions		-	-	13,163	-		-	-	-	-	13,163
	Disposals		-	-	(12,647)	-		-	-	-	-	(12,647)
	As of June 30, 2020	5,006,300		490,000			1,878,149	390,000	849,830	907,000	28,700	27,849,022	37,399,001
	Accumulated
	Amortization
	As of January 1, 2020	(768,984)	(416,500)	(1,178,322)	(88,833)	(389,525)	(351,016)	(11,473)	-	(3,204,653)
	Amortization	(92,329)	(49,000)	(225,251)	(13,000)	(74,675)	(90,700)	(2,010)	-	(546,965)
	Disposals		-	-	9,698	-		-	-	-	-	9,698
	As of June 30, 2020	(861,313)	(465,500)	(1,393,875)	(101,833)	(464,200)	(441,716)	(13,483)	-	(3,741,920)
	Impairment
	As of January 1, 2020
	and June 30, 2020	(1,347,510)	-	-	-	(3,238)	-	(88)	(143,421)	(1,494,257)
	Net carrying amount
	As of January 1, 2020	2,889,806		73,500			699,311	301,167	457,067	555,984	17,139	27,705,601	32,699,575
	As of June 30, 2020	2,797,477		24,500			484,274	288,167	382,392	465,284	15,129	27,705,601	32,162,824

The Group normally performs goodwill impairment test in the fourth quarter of each year, and there is no indicator for impairment of goodwill as of June 30, 2020. For details of goodwill impairment assessment for the year ended December 31, 2019, please refer to the 2019 Financial Statements.

82

NOTES TO THE INTERIM FINANCIAL INFORMATION

15	INTANGIBLE ASSETS (Continued)
											Unaudited
				User			Online
		Trade	generated	Software	payment	Technology			Supplier
		name	content	and others	licenses	and licenses	User list	relationship	Goodwill	Total
		RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
	Cost
	As of January 1, 2019	5,006,300		490,000		1,865,688	390,000	849,830	907,000	28,700	27,861,023	37,398,541
	Additions	-	-	7,662	-	-	-	-	-	7,662
	Disposals	-	-	(2,284)	-	-	-	-	-	(2,284)
	As of June 30, 2019	5,006,300		490,000		1,871,066	390,000	849,830	907,000	28,700	27,861,023	37,403,919
	Accumulated
	Amortization
	As of January 1, 2019	(565,565)	(318,500)		(652,138)	(62,833)	(240,174)	(169,616)	(7,453)	-	(2,016,279)
	Amortization	(101,710)	(49,000)		(262,004)	(13,000)	(74,676)	(90,700)	(2,010)	-	(593,100)
	Disposals	-	-	346	-	-	-	-	-	346
	As of June 30, 2019	(667,275)	(367,500)		(913,796)	(75,833)	(314,850)	(260,316)	(9,463)	-	(2,609,033)
	Impairment
	As of January 1, 2019
	and June 30, 2019	(1,347,510)	-	-	-	(3,238)	-	(88)	(155,422)	(1,506,258)
	Net carrying amount
	As of January 1, 2019	3,093,225		171,500		1,213,550	327,167	606,418	737,384	21,159	27,705,601	33,876,004
	As of June 30, 2019	2,991,515		122,500		957,270	314,167	531,742	646,684	19,149	27,705,601	33,288,628

MEITUAN DIANPING | 2020 INTERIM REPORT

83

NOTES TO THE INTERIM FINANCIAL INFORMATION

16 DEFERRED INCOME TAXES

The following amounts, determined after appropriate offsetting, are shown in the consolidated statement of financial position:

1. Deferred tax assets

		Unaudited		Audited
		As of		As of
		June 30,		December 31,
	2020		2019
		RMB' 000		RMB' 000
The balance comprises temporary differences attributable to:
- Tax losses	683,440		848,365
- Others	229,601		35,820
Total gross deferred tax assets	913,041		884,185
Set-off of deferred tax assets pursuant to set-off provisions	(394,831)	(294,131)
Net deferred tax assets	518,210		590,054

(b) Deferred tax liabilities

		Unaudited		Audited
		As of		As of
		June 30,		December 31,
	2020		2019
		RMB' 000		RMB' 000
The balance comprises temporary differences attributable to:
- Intangible assets arising from business combinations	(682,039)	(750,046)
- Investments accounted for using the equity method
or at fair value	(457,260)	(438,363)
- Deferred revenues	(417,136)	(469,175)
- Others	(58,466)	(25,016)
Total gross deferred tax liabilities	(1,614,901)	(1,682,600)
Set-off of deferred tax liabilities pursuant to set-off provisions	394,831		294,131
Net deferred tax liabilities	(1,220,070)	(1,388,469)

84

NOTES TO THE INTERIM FINANCIAL INFORMATION

16 DEFERRED INCOME TAXES (Continued)

The movement on the gross deferred tax assets is as follows:

			Unaudited
	Tax losses	Others	Total
	RMB' 000	RMB' 000	RMB' 000
As of January 1, 2020	848,365		35,820	884,185
(Charged)/credited to consolidated income statement	(164,925)	193,781	28,856
As of June 30, 2020	683,440		229,601	913,041
As of January 1, 2019	1,373,351		142,294	1,515,645
(Charged)/credited to consolidated income statement	(623,498)	153,027	(470,471)
As of June 30, 2019	749,853		295,321	1,045,174

The movement on the gross deferred tax liabilities is as follows:

					Unaudited
			Investments
			using the
			equity
	Intangible	method or	Deferred
	assets	at fair value	revenues	Others	Total
	RMB' 000	RMB' 000	RMB' 000	RMB' 000	RMB' 000
As of January 1, 2020	(750,046)	(438,363)	(469,175)	(25,016)	(1,682,600)
Credited/(charged) to consolidated
income statement	68,007		(16,381)	52,039		(33,450)	70,215
Charged to other comprehensive loss	-	(2,516)	-	-	(2,516)
As of June 30, 2020	(682,039)	(457,260)	(417,136)	(58,466)	(1,614,901)
As of January 1, 2019	(886,398)	(416,830)	(862,290)	(100,955)	(2,266,473)
Credited/(charged) to consolidated
income statement	68,138		(7,957)	186,843	87,933			334,957
Charged to other comprehensive loss	-	(1,180)	-	-	(1,180)
As of June 30, 2019	(818,260)	(425,967)	(675,447)	(13,022)	(1,932,696)

MEITUAN DIANPING | 2020 INTERIM REPORT

85

NOTES TO THE INTERIM FINANCIAL INFORMATION

1. DEFERRED INCOME TAXES (Continued)
   The Group only recognizes deferred tax assets for cumulative tax losses if it is probable that future taxable amounts will be available to utilize those tax losses. Management will continue to assess the recognition of deferred tax assets in future reporting periods. As of June 30, 2020 and December 31, 2019, the Group did not recognize deferred tax assets of RMB6.6 billion and RMB6.6 billion in respect of cumulative tax losses amounting to RMB29.4 billion and RMB28.7 billion. These tax losses will expire from 2020 to 2024, and certain subsidiaries of the Group may extend to 2029 if they can maintain the "high and new technology enterprises" qualification at that time.
2. OTHER FINANCIAL INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

		Unaudited			Audited
		As of			As of
		June 30,			December 31,
	2020				2019
		RMB' 000			RMB' 000
Other financial investments at fair value through profit or loss	8,246,687				7,166,122
		Unaudited
		Six months ended June 30,
	2020				2019
		RMB' 000		RMB' 000
At the beginning of the period	7,166,122				6,241,972
Additions	1,189,947				338,893
Changes in fair value	(161,572)			(158,359)
Disposals		-		(219)
Reclassifications		-		319,373
Currency translation differences	52,190				4,880
At the end of the period	8,246,687				6,746,540

The Group made investments in certain companies through convertible redeemable preferred shares or ordinary shares with preferential rights and maintained significant influence in these companies. The Group also has interests in certain investee companies in form of ordinary shares without significant influence, which are managed and their performance are evaluated on a fair value basis. The Group designated these instruments as other financial investments at fair value through profit or loss.

86

NOTES TO THE INTERIM FINANCIAL INFORMATION

18 TREASURY INVESTMENTS

		Unaudited		Audited
		As of		As of
		June 30,		December 31,
	2020		2019
		RMB' 000		RMB' 000
Long-term treasury investments measured at
- Amortized cost	1,005,107		200,275
- Fair value through profit or loss	620,225			-
	1,625,332		200,275
Short-term treasury investments measured at
- Amortized cost	13,111,639		25,447,417
- Fair value through profit or loss	31,411,307		23,988,182
	44,522,946		49,435,599

Treasury investments measured at amortized cost are large-denomination negotiable certificates of term deposits, fixed rate certificate of deposits and term deposits.

Treasury investments measured at fair value through profit or loss are wealth management products.

MEITUAN DIANPING | 2020 INTERIM REPORT

87

NOTES TO THE INTERIM FINANCIAL INFORMATION

19 PREPAYMENTS, DEPOSITS AND OTHER ASSETS

		Unaudited		Audited
		As of		As of
		June 30,		December 31,
	2020		2019
		RMB' 000		RMB' 000
Non-current
Prepayments for fixed assets	1,180,799		159,703
Recoverable value-added tax	391,353		972,099
Prepayment for investments	297,044		282,044
Rental deposits	166,117		135,813
Others	15,415		12,378
	2,050,728		1,562,037
Current
Loan receivables (Note i)	5,091,418		5,387,552
Tax prepayments	2,060,044		1,534,292
Receivables related to share options and RSUs	1,612,206		86,273
Amounts due from related parties (Note 31)	493,746		324,741
Contract assets	409,256		373,609
Prepayments to merchants	255,518		408,248
Deposits	133,369		147,940
Prepayments for channel marketing fee	128,463		102,593
Receivables from third-party payment service providers	94,149		303,868
Receivables from investment disposal		-	287,577
Others	793,610		634,464
	11,071,779		9,591,157

1. Loan receivables are derived from micro loan business. Loan receivables are recorded initially at fair value and subsequently measured at amortized cost using the effective interest method, less loss allowance. The loan periods extended by the Group to the merchants or individuals are generally within 12 months.

For prepayments, deposits and other assets (excluding loan receivables, tax prepayments and recoverable value-added tax), management makes periodic collective assessments as well as individual assessments on the recoverability of other receivables and prepayments to merchants based on historical settlement records and past experiences. Impairment on prepayments, deposits and other assets is measured as either 12-month expected credit losses or lifetime expected credit losses, depending on whether there has been a significant increase in credit risk since initial recognition. If a significant increase in credit risk of a receivable has occurred since initial recognition, then impairment is measured as lifetime expected credit losses.

As of June 30, 2020 and December 31, 2019, the carrying value of prepayments, deposits and other assets was primarily denominated in RMB.

88

NOTES TO THE INTERIM FINANCIAL INFORMATION

20 INVENTORIES
		Unaudited		Audited
		As of		As of
		June 30,		December 31,
	2020		2019
		RMB' 000		RMB' 000
Raw materials	80,264		98,047
Finished goods	267,536		265,975
	347,800		364,022
Less: provision for impairment	(63,389)	(88,795)
	284,411		275,227

21 TRADE RECEIVABLES

		Unaudited		Audited
		As of		As of
		June 30,		December 31,
	2020		2019
		RMB' 000		RMB' 000
Trade receivables	1,016,262		832,616
Less: allowance for impairment	(156,532)	(155,854)
	859,730		676,762

The Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the assets. The provision matrix is determined based on historical observed default rates over the expected life of the contract assets and trade receivables with similar credit risk characteristics and is adjusted for forward-looking estimates. At each reporting date the historical observed default rates are updated and changes in the forward-looking estimates are analyzed.

MEITUAN DIANPING | 2020 INTERIM REPORT

89

NOTES TO THE INTERIM FINANCIAL INFORMATION

21 TRADE RECEIVABLES (Continued)

Movements on the Group's loss allowance of trade receivables are as follows:

		Unaudited
		Six months ended June 30,
	2020				2019
		RMB' 000			RMB' 000
At the beginning of the period	(155,854)			(124,069)
Provision	(66,800)			(53,181)
Assets transferred from derecognition of held for sale		-			(16,840)
Reversal	48,538				17,507
Receivables written off during the period as uncollectable	17,584				3,934
At the end of the period	(156,532)			(172,649)

The Group considered that the carrying amounts of the trade receivables balances approximated their fair value as of June 30, 2020 and December 31, 2019.

The Group allows a credit period of 30 to 180 days to its customers. Aging analysis of trade receivables (net off loss allowance of trade receivables) based on invoice date is as follows:

		Unaudited		Audited
		As of		As of
		June 30,		December 31,
	2020		2019
		RMB' 000		RMB' 000
Trade receivables
Up to 3 months	702,512		544,784
3 to 6 months	104,923		87,114
6 months to 1 year	45,225		34,574
Over 1 year	7,070		10,290
	859,730		676,762

The majority of the Group's trade receivables were denominated in RMB.

The maximum exposure to credit risk as of June 30, 2020 and December 31, 2019 was the carrying value of the trade receivables. The Group did not hold any collateral as security.

90

NOTES TO THE INTERIM FINANCIAL INFORMATION

22 SHARE CAPITAL AND SHARE PREMIUM

As of June 30, 2020 and 2019, the authorized share capital of the Company comprises 10,000,000,000 ordinary shares with par value of USD0.00001 per share.

Issued:

						Unaudited
				Nominal
		Number of	value of
		ordinary	ordinary	Share	Share
		shares	shares	capital	premium		Total
		'000	USD' 000	RMB' 000	RMB' 000		RMB' 000
As of January 1, 2020	5,808,666		58		389		260,359,929	260,360,318
Exercise of option and RSU vesting	51,939		1		4		2,007,631	2,007,635
As of June 30, 2020	5,860,605		59	393	262,367,560	262,367,953
As of January 1, 2019	5,727,447		57	384	258,284,687	258,285,071
Exercise of option and RSU vesting	55,484		1	4	1,297,814	1,297,818
As of June 30, 2019	5,782,931		58	388	259,582,501	259,582,889

23 OTHER RESERVES

									Unaudited
							Share-based	Currency
			Capital	compensation	translation
			Reserve			reserve	reserve	Others	Total
			RMB'000			RMB'000	RMB'000	RMB'000	RMB'000
As of January 1, 2020	20	3,161,201	(7,439,014)	(169,459)	(4,447,252)
Share-based compensation expenses			-	1,393,787	-	-	1,393,787
Exercise of option and RSU vesting			-	(1,733,481)	-	-	(1,733,481)
Share of OCI of investments accounted for
using the equity method			-			-	-	2,711	2,711
Currency translation differences			-			-	647,370	-	647,370
As of June 30, 2020	20		2,821,507	(6,791,644)	(166,748)	(4,136,865)
As of January 1, 2019	20		2,594,722	(8,118,061)	(218,028)	(5,741,347)
Share-based compensation expenses			-	952,221	-	-	952,221
Exercise of option and RSU vesting			-	(1,126,859)	-	-	(1,126,859)
Currency translation differences			-			-	47,967	-	47,967
As of June 30, 2019	20		2,420,084	(8,070,094)	(218,028)	(5,868,018)

MEITUAN DIANPING | 2020 INTERIM REPORT

91

NOTES TO THE INTERIM FINANCIAL INFORMATION

24 DEFERRED REVENUES
		Unaudited		Audited
		As of		As of
		June 30,		December 31,
	2020		2019
		RMB' 000		RMB' 000
Non-current
Business cooperation agreement with Maoyan	277,833		388,967
Others	2,708		61
	280,541		389,028
Current
Online marketing services	3,909,155		4,299,191
Business cooperation agreement with Maoyan	222,267		222,267
Mobike monthly pass	39,204		44,010
Others	625		1,703
	4,171,251		4,567,171
	4,451,792		4,956,199

25 TRADE PAYABLES

		Unaudited		Audited
		As of		As of
		June 30,		December 31,
	2020		2019
		RMB' 000		RMB' 000
Trade payables	7,332,014		6,766,253

92

NOTES TO THE INTERIM FINANCIAL INFORMATION

25 TRADE PAYABLES (Continued)

As of June 30, 2020 and December 31, 2019, the aging analysis of the trade payables based on invoice date were as follows:

			Unaudited			Audited
			As of			As of
			June 30,			December 31,
			2020		2019
			RMB' 000			RMB' 000
Trade payables
Up to 3 months			7,136,697		6,353,368
3 to 6 months			70,330		237,151
6 months to 1 year			59,233		119,630
Over 1 year			65,754		56,104
			7,332,014		6,766,253
The majority of the Group's trade payables were denominated in RMB.
26 OTHER PAYABLES AND ACCRUALS
			Unaudited			Audited
			As of			As of
			June 30,			December 31,
			2020		2019
			RMB' 000			RMB' 000
Salaries and benefits payable			2,304,821		2,881,176
Other tax payable			2,195,421		881,567
Deposits			2,024,130		1,803,783
Amounts due to related parties (Note 31)			461,667		351,249
Amounts collected for third parties			414,846		312,191
Accrued expenses			193,262		205,715
Advances from customers			91,251		104,252
Payables for acquisition			61,364		55,718
Others			745,450		641,761
			8,492,212		7,237,412

MEITUAN DIANPING | 2020 INTERIM REPORT

93

NOTES TO THE INTERIM FINANCIAL INFORMATION

27 BORROWINGS

		Unaudited		Audited
		As of		As of
		June 30,		December 31,
	2020		2019
		RMB' 000		RMB' 000
Included in non-current liabilities
Asset-backed securities (b)		-	466,676
Included in current liabilities
Bank loan - unsecured (a)	3,117,000		3,190,000
Asset-backed securities (b)	206,694		362,587
	3,323,694		3,552,587

1. As of June 30, 2020, the balance of bank borrowing is RMB3.1 billion, and bear annual average interest rate of 4.134% (2019: 5.199%).
   For the six months ended June 30, 2020, the weighted average effective interest rate for bank borrowings was 4.520% (2019: 5.242%).
2. Asset-backedsecurities ("ABS") of RMB467 million as of December 31, 2019 were reclassified to current liabilities, and no new ABS were issued during the six months ended June 30, 2020. ABS of RMB207 million will be repayable within one year as of June 30, 2020.

28 SHARE-BASED PAYMENTS

For background of share-based payments, please refer to the 2019 Financial Statements.

On October 6, 2015, the board of Directors of the Company approved the establishment of the Company's 2015 Share Incentive Plan ("2015 Share Incentive Plan"), an equity-settledshare-based compensation plan with the purpose of attracting, motivating, retaining and rewarding certain employees, consultants, and Directors. The 2015 Share Incentive Plan is valid and effective for 10 years from the date of approval by the board of Directors. The Group has reserved 598,483,347 ordinary shares under the 2015 Share Incentive Plan, and permits the awards of options and RSUs of the Company's ordinary shares.

All the share options and RSUs under the 2015 Share Incentive Plan were granted between May 31, 2006 and August 2, 2018 and the Company will not grant further share options and RSUs under the 2015 Share Incentive Plan after the Listing.

94

NOTES TO THE INTERIM FINANCIAL INFORMATION

28 SHARE-BASED PAYMENTS (Continued)

On August 30, 2018, a new share option scheme ("Post-IPO Share Option Scheme") and a new share award scheme ("Post-IPO Share Award Scheme") had been approved by the shareholders of the Company. The total number of Class B Shares which may be issued upon exercise of all options to be granted under the Post-IPO Share Option Scheme and any other schemes is 475,568,628 Class B Shares. The aggregate number of Class B Shares underlying all grants made pursuant to the Post-IPO Share Award Scheme (excluding Award Shares which have been forfeited in accordance with the Post-IPO Share Award Scheme) will not exceed 272,336,228 Shares without Shareholders' approval (the "Post-IPO Share Award Scheme Limit") subject to an annual limit of 3% of the total number of issued Shares at the relevant time.

As of June 30, 2020, the Group has authorised and reserved a total of 680,377,705 ordinary shares under the 2015 Share Incentive Plan, Post-IPO Share Option Scheme and Post-IPO Share Award Scheme for awards of options and RSUs of the Company's ordinary shares.

Share options

Options granted typically expire in 10 years from the respective grant dates. For previously granted options that were near its expiration date (i.e., 10 years after grant date) in 2018 and 2019, their expiration date was extended to October 5, 2025. The options have graded vesting terms, and vest in tranches from the grant date over 4 years, on condition that employees remain in service without any performance requirements.

The options may be exercised at any time after they have vested subject to the terms of the award agreement and are exercisable for a maximum period of 10 years after the date of grant.

MEITUAN DIANPING | 2020 INTERIM REPORT

95

NOTES TO THE INTERIM FINANCIAL INFORMATION

28 SHARE-BASED PAYMENTS (Continued) Share options (Continued)

Movements in the number of share options granted and their related weighted average exercise prices are as follows:

		Unaudited
					Weighted
					average
		Number	exercise
		of share	price per
		options	share option
					(HKD)
Outstanding as of January 1, 2020	73,710,007			27.81
Granted during the period	1,356,000			100.15
Forfeited during the period	(3,537,717)		34.04
Exercised during the period	(12,532,358)		24.21
Outstanding as of June 30, 2020	58,995,932			29.86
Vested and exercisable as of June 30, 2020	31,130,114			23.69
Outstanding as of January 1, 2019	116,321,663			22.69
Forfeited during the period	(6,850,099)		25.75
Exercised during the period	(22,103,782)		9.00
Outstanding as of June 30, 2019	87,367,782			25.98
Vested and exercisable as of June 30, 2019	38,131,937			19.33

The weighted average remaining contractual life of outstanding share options was 7 years and 7 years as of June 30, 2020 and December 31, 2019, respectively. The weighted average price of the shares at the time these options were exercised was HKD120.66 per share (equivalent to approximately RMB109.47 per share) for the six months ended June 30, 2020.

96

NOTES TO THE INTERIM FINANCIAL INFORMATION

28 SHARE-BASED PAYMENTS (Continued) Fair value of share options

The Group has used the discounted cash flow method to determine the underlying equity fair value of the Company and adopted option-pricing model and equity allocation model to determine the fair value of the underlying ordinary shares. Key assumptions, such as discount rate and projections of future performance, are determined by the Group with best estimate.

Based on fair value of the underlying ordinary shares, the Group has used Black-Scholes model to determine the fair value of the share option as of the grant date. Key assumptions for the six months ended June 30, 2020 are set as below. There was no option granted for the six months ended June 30, 2019.

	Unaudited
	Six months ended
	June 30, 2020
Risk-free interest rates	0.52%
Expected term - years	6.4
Expected volatility	45%
Fair value of ordinary shares (HKD)	43.20
Exercise price (HKD)	100.15
Dividend yield	-

The weighted average fair value of granted options was HKD43.20 per share, for the six months ended June 30, 2020.

RSUs

The Company also grants RSUs to the Company's employees, consultants, and Directors under the 2015 Share Incentive Plan and Post-IPO Share Awards Plan. The RSUs awarded vest in tranches from the grant date over a certain service period, on condition that employees remain in service without any performance requirements. Once the vesting conditions underlying the respective RSUs are met, the RSUs are considered duly and validly issued to the holder, and free of restrictions on transfer.

MEITUAN DIANPING | 2020 INTERIM REPORT

97

NOTES TO THE INTERIM FINANCIAL INFORMATION

28 SHARE-BASED PAYMENTS (Continued) RSUs (Continued)

Movements in the number of RSUs granted and the respective weighted average grant date fair value are as follows:

		Unaudited
				Weighted
				average grant
		Number of	date fair value
		RSUs	per RSU
				(HKD)
Outstanding as of January 1, 2020	142,875,991		47.26
Granted during the period	15,318,466		103.08
Vested during the period	(39,407,464)	43.60
Forfeited during the period	(6,690,306)	42.95
Outstanding as of June 30, 2020	112,096,687		56.25
Outstanding as of January 1, 2019	164,133,960		35.87
Granted during the period	3,497,792		53.85
Vested during the period	(33,212,125)	31.70
Forfeited during the period	(15,398,732)	42.73
Outstanding as of June 30, 2019	119,020,895		36.79

The fair value of each RSU at the grant dates is determined by reference to the fair value of the underlying ordinary shares on the date of grant.

98

NOTES TO THE INTERIM FINANCIAL INFORMATION

28 SHARE-BASED PAYMENTS (Continued) RSUs (Continued)

The total share-based compensation expenses recognized in the consolidated income statement are RMB1,397 million and RMB954 million for the six months ended June 30, 2020 and 2019, respectively. The following table sets forth a breakdown of the share-based compensation expenses by nature:

		Unaudited
		Six months ended June 30,
	2020				2019
		RMB' 000			RMB' 000
Share options	74,121				154,602
RSUs	1,319,666				797,619
Others	3,309				1,348
	1,397,096				953,569

1. DIVIDENDS
   No dividends have been paid or declared by the Company during each of the six months ended June 30, 2020 and 2019.
2. COMMITMENTS Capital commitments

		Unaudited		Audited
		As of		As of
		June 30,		December 31,
	2020		2019
		RMB' 000		RMB' 000
Property, plant and equipment	1,403,301		23,749
Investments	689,796			-
	2,093,097		23,749

MEITUAN DIANPING | 2020 INTERIM REPORT

99