Design Capital Limited — Capital/Financing Update 2018

May 18, 2018

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

KING STONE ENERGY GROUP LIMITED 金山能源集團有限公司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 00663)

DISCLOSEABLE TRANSACTION: PROVISION OF FINANCIAL ASSISTANCE

PROVISION OF FINANCIAL ASSISTANCE

On 14 February 2018, the Company as lender has entered into the Loan Agreement with the Borrower pursuant to which the Company has advanced a loan in the principal amount of JPY500,000,000 (equivalent to approximately HK$35,000,000) to the Borrower for a term of three months. On 18 May 2018, the Company and the Borrower entered into the Supplemental Loan Agreement to extend (the “ Extension ”) the Loan for a further term of six months.

LISTING RULES IMPLICATIONS

The Loan Agreement did not constitute a notifiable transaction on the Company under the Listing Rules. However, as one of the applicable percentage ratios under Rule 14.07 of the Listing Rules in respect of the Loan granted to the Borrower under the Loan Agreement as extended by the Supplemental Loan Agreement exceeds 5% but is below 25%, the grant of the Loan and the Extension constitutes a disclosable transaction for the Company under Chapter 14 of the Listing Rules and is subject to the reporting and announcement requirements under the Listing Rules.

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PROVISION OF FINANCIAL ASSISTANCE

On 14 February 2018, the Company as lender has entered into the Loan Agreement with the Borrower pursuant to which the Company has advanced a loan in the principal amount of JPY500,000,000 (equivalent to approximately HK$35,000,000) to the Borrower for a term of three months. On 18 May 2018, the Company and the Borrower entered into the Supplemental Loan Agreement to extend the Loan for a further term of six months.

LOAN AGREEMENT AND SUPPLEMENTAL LOAN AGREEMENT

Date of the Loan Agreement	:	14 February 2018
Lender	:	The Company
Borrower	:	Kuni Umi Energy Co., Ltd.
KUAM	:	KUAM
Guarantor	:	STI
Principal amount of Loan	:	JPY500,000,000 (equivalent to approximately HK$35,000,000)
Interest rate	:	8% per annum
Repayment date	:	Three months after drawdown, and extended to a further term
		of six months under the Supplemental Loan Agreement
Security	:	(i) KUAM Share Pledge
		(ii) STI Share Pledge
		(iii) Receivables Assignment
		(iv) Personal Guarantee

The Guarantor has agreed to provide a guarantee in favour of the Company, to secure, among others, the due and punctual payment of the all amounts which are now or may at any time be or become from time to time due or owing, actually or contingently, to the Company by the Borrower in relation to the Loan.

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Pursuant to the Supplemental Loan Agreement, save and except for the extension of the repayment date of the Loan to nine months after the drawdown of the Loan, all the other terms of the Loan Agreement shall remain valid.

INFORMATION ON THE BORROWER

The Borrower is a company organised and existed under the laws of Japan. The Borrower is principally engaged in development, operation and management of middle-scale solar energy projects in Japan. To the best of the Director’s knowledge and information the Borrower is owned as to 67.69% by STI and as to 32.31% by KUAM.

Save and except that: (i) Mr. Xu Zhuliang and Ms. He Qing, both being Directors, and Mr. Ip Wing Wai, a director in a subsidiary of the Company, are also directors of the Borrower; and (ii) Mr. Wang Xingye, the director of STI, is also a director of certain subsidiaries of the Company, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, the Borrower and its ultimate beneficial owners (including STI and KUAM) are Independent Third Parties.

REASONS FOR AND BENEFITS OF ENTERING INTO THE LOAN AGREEMENT AND THE SUPPLEMENTAL LOAN AGREEMENT

The Group is principally engaged in exploring and drilling natural gas and oil in the United States of America, silver mining and provision of asset financing services in the PRC.

As announced by the Company dated 29 December 2017, the Company has been considering for a possible expansion of its business in the renewable energy market in Japan by way of a proposed subscription for new shares in the Borrower. During the negotiation process, in view of the business prospect of the Borrower and the cash position of the Group, the Company entered into the Loan Agreement for the advance of the Loan to the Borrower which would provide a stable return to the Company and a better utilisation of the Group’s liquid fund pending the final investment decision on the Borrower’s business.

The terms of the Loan Agreement (including the interest rate and the Extension) were arrived at after arm’s length negotiations between the Company and the Borrower with reference to, among others, the financial position of the Borrower and the security provided by the Borrower.

Taking into account the background of the Borrower and the expected interest income, the Directors consider that the terms of the Loan Agreement and the Extension are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

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LISTING RULES IMPLICATIONS

The Loan Agreement did not constitute a notifiable transaction on the Company under the Listing Rules. However, as one of the applicable percentage ratios under Rule 14.07 of the Listing Rules in respect of the Loan granted to the Borrower under the Loan Agreement as extended by the Supplemental Loan Agreement exceeds 5% but is below 25%, the grant of the Loan and the Extension constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules and is subject to the reporting and announcement requirements under the Listing Rules.

DEFINITIONS

In this announcement, the following expressions have the following meanings:

“Board”	the board of Directors
“Borrower”	Kuni Umi Energy Co., Ltd., a company organised and
	existed under the laws of Japan
“Company”	King Stone Energy Group Limited, a company incorporated
	in Hong Kong with limited liability, the issued Shares of
	which are listed on Main Board of the Stock Exchange (stock
	code: 663)
“Director(s)”	the director(s) of the Company
“Extension”	the extension of the term of the Loan for six months under
	the Supplemental Loan Agreement
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent Third Party(ies)”	party(ies) who is/are independent of the Company and its
	connected person(s) (as defined in the Listing Rules)
“KUAM”	Kuni Umi Asset Management Co., Ltd., a company
	organised and existed under the laws of Japan

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“KUAM Share Pledge” the share pledge dated 14 February 2018 over the 10,500 shares in the issued share capital of the Borrower beneficially owned by KUAM, representing 32.31% of the entire issued share capital of the Borrower executed by KUAM in favour of the Company as security for the performance of the Borrower’s obligations under the Loan Agreement

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

“Loan” the term loan in the principal amount of JPY500,000,000 (equivalent to approximately HK$35,000,000) advanced by the Company to the Borrower subject to and upon the terms and conditions of the Loan Agreement

“Loan Agreement” the loan agreement dated 14 February 2018 and entered into between the Company as lender and the Borrower as borrower in relation to the Loan “Personal Guarantee” the personal guarantee dated 14 February 2018 and executed by a shareholder of STI in favour of the Company as security for the performance of the Borrower’s obligations under the Loan Agreement “PRC” the People’s Republic of China, which for the purpose of this announcement shall exclude Hong Kong, Taiwan and Macau Special Administrative Region “Receivables” the receivables in the aggregate amount of JPY662,700,430 (equivalent to approximately HK$46,389,030) owed by the Borrower to STI as at 30 April 2018 “Receivables Assignment” the assignment dated 18 May 2018 and executed by STI in favour of the Company for the assignment of the Receivables as security for the performance of the Borrower’s obligations under the Loan Agreement

“Share(s)” ordinary share(s) in the issued share capital of the Company “Shareholders” holder(s) of the Share(s)

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“STI” Shine Treasure International Ltd., a company incorporated in the British Virgin Islands “STI Share Pledge” the share pledge dated 14 February 2018 over the 22,000 shares in the issued share capital of the Borrower beneficially owned by STI, representing 67.69% of the entire issued share capital of the Borrower executed by STI in favour of the Company as security for the performance of the Borrower’s obligations under the Loan Agreement

“Stock Exchange” The Stock Exchange of Hong Kong Limited “Supplemental Loan Agreement” the supplemental loan agreement dated 18 May 2018 and entered into between the Company and the Borrower “HK$” Hong Kong dollars, the lawful currency of Hong Kong “JPY” Japanese Yen, the lawful currency of Japan “%” per cent.

By order of the Board King Stone Energy Group Limited Zhong Hao Executive Director

Hong Kong, 18 May 2018

In this announcement, for the purpose of illustration only, amounts quoted in JPY have been converted into HK$ at the rate of JPY100 to HK$7.00. Such exchange rate has been used, where applicable, for the purpose of illustration only and does not constitute a representation that any amounts were or may have been exchanged at this or any other rates or at all.

As at the date of this announcement, the executive Directors are Ms. Gloria Chang Wong, Mr. Zong Hao, Mr. Xu Zhuliang, Mr. Benjamin Clark Danielson and Ms. He Qing, and the independent nonexecutive Directors are Mr. Chiu Sui Keung, Mr. Lu Binghui, Mr. Lee Ping and Mr. Liu Shengming.

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