Red Star Macalline : CONNECTED TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

Basis for service fee cap:

The annual cap is determined after arm's length negotiation between the Company and Shanghai Red Star Win-Win Cloud with reference to (1)the historical transaction amounts, where the actual amount for 2020 was RMB38,301,200, the amounts of the transactions contemplated under the contracts signed and to be signed, and the future transaction plan; (2) the scope of the computer information system integration services; (3) the market price of the similar services provided by the independent third parties; (4) the impact of the contract signing time and performance progress on the expense recognition; (5) the actual need to vigorously promote the transactions under the Framework Agreement on Computer Information System Integration Services based on the target of the Company for promoting digital and intelligent construction; and (6) the buffer budgeted for the service fee cap to cope with the potential increase in the Company's related demand.

Payment method of the computer information system integration service fee:

The Company and/or its subsidiaries will separately enter into computer information system integration services contracts with Shanghai Red Star Win-Win Cloud as required after the Framework Agreement on Computer Information System Integration Services comes into effect. The amount of computer information system integration service fee, settlement method and relevant rights and obligations will be determined as agreed in the actually signed computer information system integration services contracts.

Liability in the event of breaches:

If the fault of one party results in losses to the other party, the defaulting party shall bear the corresponding economic liabilities. Any employee of one party who violates the relevant regulations in the PRC shall be dealt with by the relevant authorities in accordance with laws.

If the Company and Shanghai Red Star Win-Win Cloud are unable to perform the Framework Agreement on Computer Information System Integration Services due to force majeure, they shall be exempted from liability in part or in whole depending on the impact of the force majeure, except as otherwise provided by the PRC laws. If force majeure occurs after the delay of performance of the Framework Agreement on Computer Information System Integration Services by one party, the party shall not be exempted from liability.

Reasons for and benefits of the transactions under the Framework Agreement on Computer Information System Integration Services:

By the computer information system integration services provided by Shanghai Red Star Win-Win Cloud, the Directors believe that the Company would better communicate and understand projects requirements, and manage the progress and quality of projects, whilst Shanghai Red Star Win-Win Cloud can provide follow- up irregular services to ensure security and stability of system projects.

The Directors (including the independent non-executive Directors) consider that the Framework Agreement on Computer Information System Integration Services is on normal commercial terms that are fair and reasonable, and the Transactions contemplated thereunder are entered into in the ordinary and usual course of business of the Group and are in the interest of the Company and its shareholders as a whole.

Liability in the event of breaches:

Reasons for and benefits of the transactions under the Procurement Framework Agreement in respect of Decoration and Renovation Materials and Furnishings:

1. If there is no bidding procedure, the market price shall be adopted. The price can be determined by reference to comparable price of an independent third-party supplier in the market; and
2. If there is no comparable market price, an agreement price shall be used, and the price shall be determined by the two parties after arm's length negotiation. The agreement price refers to the price determined in accordance with "reasonable cost of the product + reasonable profit range of the market". The expected profit margin of the products provided by Betterhome Construction to RSM Holding shall be no lower than the profit margin charged from independent third parties.

If the fault of one party results in losses to the other party, the defaulting party shall bear the corresponding economic liabilities. Any employee of one party who violates the relevant regulations in the PRC shall be dealt with by the relevant authorities in accordance with laws.

If Betterhome Construction and RSM Holding are unable to perform the Procurement Framework Agreement in respect of Decoration and Renovation Materials and Furnishings due to force majeure, they shall be exempted from liability in part or in whole depending on the impact of the force majeure, except as otherwise provided by the PRC laws. If force majeure occurs after the delay of performance of the Procurement Framework Agreement in respect of Decoration and Renovation Materials and Furnishings by one party, the party shall not be exempted from liability.

The Directors believe that the decoration and renovation materials and furnishings procurement services provided by Betterhome Construction or its subsidiaries will help the Group to further expand the scale of decoration and decoration business, and improve the ability to undertake business, and lay a solid foundation for the long-term development of the Group's decoration and renovation engineering business and supply chain business, which will have a positive impact on the current and future performance.

The Directors (including the independent non-executive Directors) consider that the Procurement Framework Agreement in respect of Decoration and Renovation Materials and Furnishings is on normal commercial terms that are fair and reasonable, and the Transactions contemplated thereunder are entered into in the ordinary and usual course of business of the Group and are in the interest of the Company and its shareholders as a whole.

Term of services:

Scope of services under the Design Services Framework Agreement:

Service fee cap:

Basis for service fee cap:

From 17 April 2021 to 16 April 2022

The engineering design services provided by Shanghai Red Star Macalline to RSM Holding or its subsidiaries are as follows:

1. Civil engineering design: general plan, architecture, structure drawing, water supply and drainage, electrical, fire protection, HVAC, underground garage, building fire monitoring and ventilation scheme, construction drawing design, outdoor pipeline comprehensive design, construction site coordination, etc.; and
2. Secondary design: Scheme design and construction drawing design services for interior decoration of the public area of the project, landscape of the square within the red line, signs of indoor, outdoor, basement and related public areas, signage of traffic facilities, parking space marking engineering design, facade curtain wall, roof signage, entrance and exit door signage, atrium steel structure, exterior facade floodlight lighting, weak electric intelligent system, interior space decorative art layout, guide and information release software design, secondary electromechanical, BIM design and consulting services, etc.

The cap of the fees for the above-mentioned design services during the term of services is RMB120,000,000.

The service fee cap is determined after arm's length negotiation between RSM Holding and Shanghai Red Star Macalline with reference to (1)the historical transaction amount for 2020, which was RMB38,801,400, the amounts of the transactions contemplated under the contracts signed and to be signed, and the future transaction plan; (2) the market price of the similar services provided by the independent third parties; (3) the impact of the contract signing time and performance progress on the expense recognition; (4) the actual need to vigorously promote the transactions under the Design Services Framework Agreement based on the target of the Company for developing home decoration business; and (5) the buffer budgeted for the service fee cap to cope with the potential increase in RSM Holding's related demand.

Payment method of the design service fee:

Liability in the event of breaches:

Reasons for and benefits of the transactions under the Design Services Framework Agreement:

RSM Holding and/or its subsidiaries will separately enter into design contracts with Shanghai Red Star Macalline as required after the Design Services Framework Agreement comes into effect. The amount of design service fee, settlement method and relevant rights and obligations will be determined as agreed in the actually signed design contracts.

If the fault of Shanghai Red Star Macalline results in losses to RSM Holding, Shanghai Red Star Macalline shall bear the corresponding economic liabilities. Any employee of Shanghai Red Star Macalline who violates the relevant regulations in the PRC shall be dealt with by the relevant authorities in accordance with laws.

If RSM Holding and Shanghai Red Star Macalline are unable to perform the Design Services Framework Agreement due to force majeure, they shall be exempted from liability in part or in whole depending on the impact of the force majeure, except as otherwise provided by the PRC laws. If force majeure occurs after the delay of performance of the Design Services Framework Agreement by one party, the party shall not be exempted from liability.

By the engineering services provided by Shanghai Red Star Macalline, the Directors believe that the Group will be able to ensure the satisfactory quality of the design works required for the commercial buildings managed by RSM Holding and its subsidiaries. The Directors also believe that the design services framework agreement would enable the Group to better manage the quality of the relevant commercial buildings and lay a solid foundation for the long-term development of such commercial buildings.

The Directors (including the independent non-executive Directors) consider that the Design Services Framework Agreement is on normal commercial terms that are fair and reasonable, and the Transactions contemplated thereunder are entered into in the ordinary and usual course of business of the Group and are in the interest of the Company and its shareholders as a whole.

Basis for service fee cap:

Payment method of the fees for the decoration and renovation engineering and construction services:

Pricing principles for service fee:

The annual cap is determined after arm's length negotiation between the Company and RSM Holding with reference to (1) the actual amount for the transaction between the Company and RSM Holding for 2020, which was RMB153,826,200, the amounts of the transactions contemplated under the contracts signed and to be signed, and the future transaction plan; (2) the market price and the normal gross margin range of building construction in the market; (3) the impact of the contract signing time and performance progress on the expense recognition; (4) the actual need to vigorously promote the transactions under the Service Framework Agreement in respect of Decoration and Renovation Engineering and Construction based on the target of the Company for developing home decoration business; and (5) the buffer budgeted for the service fee cap to cope with the potential increase in RSM Holding's related demand.

RSM Holding or its subsidiaries will separately enter into project construction contracts with the Company if they choose to accept the decoration and renovation engineering and construction services provided by the Company after the Service Framework Agreement in respect of Decoration and Renovation Engineering and Construction comes into effect. The amount of purchase, settlement method and relevant rights and obligations will be determined as agreed in the specific contracts.

The prices of the decoration and renovation engineering and construction services under the Service Framework Agreement in respect of Decoration and Renovation Engineering and Construction shall be determined according to the following general principles and order:

1. In principle, the bidding procedure is adopted for pricing. RSM Holding will select suppliers by invitation to tender, and the suppliers shall bid independently according to the project situations. During the tendering process, the Company shall strictly comply with the "Law of the People's Republic of China on Tendering and Bidding" and the requirements set forth in the tender documents prepared by RSM Holding. The relevant departments of the Company will determine the tender price with reference to recent quotations and relevant market information to ensure that the tender price (and tender terms) provided by the Company are fair and reasonable and not superior to the prices and terms provided by the Company to independent third parties;
2. If there is no bidding procedure, the market price shall be adopted. The price can be determined by reference to comparable price of an independent third-party supplier in the market;

Liability in the event of breaches:

Reasons for and benefits of the transactions under the Service Framework Agreement in respect of Decoration and Renovation Engineering and Construction:

1. If there is no comparable market price, an agreement price shall be used, and the price shall be determined by the two parties through fair negotiation. The agreement price refers to the price determined in accordance with "reasonable cost of the project + reasonable profit range of the market". The expected profit margin of the services provided by the Company to RSM Holding shall be no lower than the profit margin charged from independent third parties;
2. If relevant laws and regulations have specific requirements on the pricing of the decoration and renovation engineering and construction services, the relevant laws and regulations shall prevail.

If the fault of one party results in losses to the other party, the defaulting party shall bear the corresponding economic liabilities. Any employee of one party who violates the relevant regulations in the PRC shall be dealt with by the relevant authorities in accordance with laws.

If the Company and RSM Holding are unable to perform the Service Framework Agreement in respect of Decoration and Renovation Engineering and Construction due to force majeure, they shall be exempted from liability in part or in whole depending on the impact of the force majeure, except as otherwise provided by the PRC laws. If force majeure occurs after the delay of performance of the Service Framework Agreement in respect of Decoration and Renovation Engineering and Construction by one party, the party shall not be exempted from liability.

The Directors believe that the decoration and renovation engineering and construction services provided by the Group will help the Group to further expand the scale of decoration and decoration business, and improve the ability to undertake business, and lay a solid foundation for the long-term development of the Group's decoration and decoration engineering business and supply chain business, which will have a positive impact on the current and future performance.

The Directors (including the independent non-executive Directors) consider that the Service Framework Agreement in respect of Decoration and Renovation Engineering and Construction is on normal commercial terms that are fair and reasonable, and the Transactions contemplated thereunder are entered into in the ordinary and usual course of business of the Group and are in the interest of the Company and its shareholders as a whole.

Reasons for and benefits of the transactions under the Changzhou Lease Contract:

Because Changzhou Hongxing Furniture Decoration Mall is a sole proprietorship enterprise established by Mr. Che Jianxing in his personal capacity, in accordance with applicable Chinese laws, the transfer of the properties to the Group through the transfer of assets will have a tax impact on Changzhou Hongxing Furniture Decoration Mall and the impact will ultimately be transferred to the purchase price of the properties concerned. Therefore, we decided to lease the properties from Changzhou Hongxing Furniture Decoration Mall, in order to manage and operation Changzhou Furniture Decoration Mall. Continuing the lease of these properties will save considerable time and cost. It is commercially necessary and advantageous to enter into a Changzhou lease agreement, which will avoid any disruption to business operations and have a positive impact on current and future results.

夥)), respectively. Shanghai Red Star Win-Win Cloud is engaged in the businesses of technology development, technology services, technology consultancy, technology transfer, cloud service platform, computer data processing, computer network engineering (except those for special approval), computer maintenance services, computer system integration, design, production, agency and publication of advertisements, enterprise management consulting, marketing planning, telecommunications business, electronic equipment leasing, computer software and hardware development, sales of computer software and auxiliary equipment, electronic products, digital products and electronic equipment, import and export of goods or technologies (except for the import and export of goods and technologies prohibited by the State or involving administrative approval) in the fields of cloud computing technology, computer technology, electronic technology and digital technology.

DEFINITIONS

"Associate(s)"

"Betterhome Construction"

"Board"

"Changzhou Lease Contract"

has the meaning ascribed thereto under the Listing Rules

Betterhome Construction Technology Co., Ltd. (家倍得建築 科技有限公司), a limited liability company established in the PRC and a subsidiary of the Company

The Board of the Directors of the Company

The Changzhou Lease Contract signed by and between Changzhou Meikailong and Changzhou Hongxing Furniture Decoration Mall on 30 March 2021

"Changzhou Meikailong"

"Changzhou Hongxing Furniture Decoration Mall"

"Company"

"connected person"

"controlling shareholder"

"Director(s)"

"Design Services Framework Agreement"

"Framework Agreement on

Computer Information System Integration Services"

"Group"

"Independent Third Party(ies)"

"Listing Rules"

"PRC"

"Procurement Framework

Agreement in respect of

Decoration and Renovation

Materials and Furnishings"

"RMB"

Changzhou Meikailong International Computer & Household Electric Appliance Decoration City, a company incorporated in the PRC and a wholly-owned subsidiary of the Company

Changzhou Hongxing Furniture Decoration Mall, a company established in the PRC

Red Star Macalline Group Corporation Ltd., a sino-foreign joint stock company incorporated in the PRC with limited liability, whose H shares are listed on the main board of the Stock Exchange and A shares are listed on the Shanghai Stock Exchange

has the meaning ascribed thereto under the Listing Rules

has the meaning ascribed thereto under the Listing Rules

Director(s) of the Company

The Design Services Framework Agreement entered into by RSM Holding and Shanghai Red Star Macalline on 30 March 2021

The Framework Agreement on Computer Information System Integration Services entered into by the Company and Shanghai Red Star Win-Win Cloud on 30 March 2021

the Company and its subsidiaries

persons who, to the knowledge of the Directors after having made all reasonable enquiries, are not connected persons of the Company

the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

the People's Republic of China

The Procurement Framework Agreement in respect of Decoration and Renovation Materials and Furnishings entered into by Betterhome Construction and RSM Holding on 30 March 2021

Renminbi, the lawful currency of the PRC

"Service Framework

Agreement in respect of

Decoration and Renovation

Engineering and Construction"

"Shanghai Red Star Macalline"

The Service Framework Agreement in respect of Decoration and Renovation Engineering and Construction entered into by the Company and RSM Holding on 30 March 2021

Shanghai Red Star Macalline Building Design Company Limited* (上海紅星美凱龍建築設計有限公司), a limited

liability company established in the PRC and an indirect wholly-owned subsidiary of the Company