Kinetic Development Group Limited — Capital/Financing Update 2022

Dec 23, 2022

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Kinetic Development Group Limited 力 量 發 展 集 團 有 限 公 司

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 1277)

CONNECTED TRANSACTION SUPPLEMENTAL AGREEMENT TO 2020 LOAN AGREEMENT

SUPPLEMENTAL AGREEMENT

Reference is made to the announcement of the Company dated 22 June 2020, in which it was disclosed that Kinetic (Qinhuangdao), an indirect wholly-owned subsidiary of the Company, as the Lender, and Guizhou Liliang, as the Borrower, entered into the 2020 Loan Agreement on 22 June 2020, pursuant to which the Lender agreed to provide the Loan to the Borrower in the principal amount of RMB57 million (equivalent to approximately HK$63 million) for a term of 2 years commencing from the Interest Calculation Date.

The Board announces that on 23 December 2022, Kinetic (Qinhuangdao) and Guizhou Liliang entered into the Supplemental Agreement to the 2020 Loan Agreement, pursuant to which, the parties agreed that the repayment date of the Loan be extended to 31 December 2023, with the interest rate to be raised to 2.5% above the 1-year loan market quoted interest rate announced by the National Interbank Funding Center. Other than the above, the other terms and conditions of the 2020 Loan Agreement continue to be in full force and effect.

LISTING RULES IMPLICATIONS

As of the date of this announcement, the Borrower is indirectly held as to 100% by Mr. Zhang Li, a former Director in the past 12 months and a substantial shareholder of the Company. Therefore, the Borrower is a connected person of the Company under Chapter 14A of the Listing Rules. Accordingly, the transaction contemplated under the Supplemental Agreement constitutes a connected transaction of the Company under the Listing Rules.

As the applicable percentage ratios calculated under Rule 14.07 of the Listing Rules in respect of the Connected Transaction are more than 0.1% but less than 5%, the Connected Transaction is subject to the announcement, reporting and annual review requirements but exempt from the circular (including independent financial advice) and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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THE SUPPLEMENTAL AGREEMENT

The principal terms of the Supplemental Agreement are set out below:

Date of Supplemental	23 December 2022
Agreement:
Parties:	(i)Kinetic (Qinhuangdao), as the Lender;
	(ii)Guizhou Liliang, as the Borrower
Subject matter:	Pursuant to the 2020 Loan Agreement, the Lender agreed to
	provide the Loan to the Borrower in the principal amount of
	RMB57 million (equivalent to approximately HK$63 million)
	for a term of 2 years commencing from the Interest Calculation
	Date.
	Pursuant to the Supplemental Agreement, the Lender agreed to
	extend the repayment date of the Loan to 31 December 2023,
	with the interest rate to be raised to 2.5% above the 1-year
	loan market quoted interest rate announced by the National
	Interbank Funding Center.
Principal amount:	RMB57 million (equivalent to approximately HK$63 million)
Term of the Loan:	From the Interest Calculation Date to 31 December 2023
Interest:	Pursuant to the 2020 Loan Agreement, the Loan shall bear
	interest from and including the Interest Calculation Date at 2%
	above the 1-year loan market quoted interest rate announced
	by the National Interbank Funding Center. The interest shall
	be paid once annually.
	Pursuant to the Supplemental Agreement, the Loan shall bear
	interest from and including the date of the Supplemental
	Agreement at 2.5% above the 1-year loan market quoted
	interest rate announced by the National Interbank Funding
	Center. The interest shall be paid together with the principal
	amount upon the expiry of the Supplemental Agreement.
Purpose:	The Loan shall be used by the Borrower for operation needs,
	repayment of borrowings and replenishment of working capital.
Repayment:	The principal amount of the Loan together with all the
	outstanding interest accrued thereon shall be repayable in full
	by the Borrower to the Lender upon expiration of the term of
	the Loan.

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During the term of the Loan, the Borrower may prepay the Loan provided that the Borrower shall notify the Lender ten (10) business days in advance.

REASONS FOR AND BENEFITS OF ENTERING INTO THE SUPPLEMENTAL AGREEMENT

The terms and conditions of the Supplemental Agreement are negotiated on an arm’s length basis between the Lender and Borrower. The Directors (including the independent non-executive Directors) consider that the Supplemental Agreement is entered into on normal commercial terms. Taking into account that (i) the Loan has been funded from the Group’s temporarily idle funds, which would not affect the working capital or daily operations of the Group; (ii) the expected return to be generated from the Loan as extended by the Supplemental Agreement, taking into account the higher interest negotiated with the Borrower under the Supplemental Agreement, would increase the Group’s revenue, and (iii) entering into the Supplemental Agreement facilitates the Borrower in expediting its business expansion, which in turn maintains a good foundation for the Group and the Borrower to seek further business cooperation opportunities if and when appropriate, the Directors (including the independent non-executive Directors) believe the transaction under the Supplemental Agreement is fair and reasonable and in the interests of the Company and its shareholders as a whole.

LISTING RULES IMPLICATIONS

As of the date of this announcement, the Borrower is indirectly held as to 100% by Mr. Zhang Li, a former Director in the past 12 months and a substantial shareholder of the Company. Therefore, the Borrower is a connected person of the Company under Chapter 14A of the Listing Rules. Accordingly, the transaction contemplated under the Supplemental Agreement constitutes a connected transaction of the Company under the Listing Rules.

As the applicable percentage ratios calculated under Rule 14.07 of the Listing Rules in respect of the Connected Transaction are more than 0.1% but less than 5%, the Connected Transaction is subject to the announcement, reporting and annual review requirements but exempt from the circular (including independent financial advice) and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Ms. Zhang Lin, a non-executive Director, being an associate to Mr. Zhang Li who has material interest under the Supplemental Agreement, had abstained from voting at the Board meeting approving the Supplemental Agreement and the transactions thereunder.

GENERAL INFORMATION

The Group is principally engaged in the extraction and sales of coal products.

Kinetic (Qinhuangdao) is principally engaged in the wholesale and retail of coal products.

Guizhou Liliang is indirectly held as to 100% by Mr. Zhang Li and is principally engaged in the investment of mine products.

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DEFINITIONS

“2020 Loan Agreement”	the loan agreement entered into between Kinetic (Qinhuangdao)
	and Guizhou Liliang on 22 June 2020, pursuant to which,
	the Lender agreed to provide the Loan to the Borrower
	in the principal amount of RMB57 million (equivalent
	to approximately HK$63 million) for a term of 2 years
	commencing from the Interest Calculation Date;
“Board”	the board of Directors;
“Borrower” or	貴州力量能源有限公司(Guizhou Liliang Energy Co., Ltd.), a
“Guizhou Liliang”	company incorporated in the PRC with limited liability on 27
	September 2011;
“Company”	Kinetic Development Group Limited (formerly known as
	Kinetic Mines and Energy Limited), a company incorporated in
	the Cayman Islands with limited liability, the shares of which
	are listed on the Stock Exchange;
“Connected person(s)”	has the meaning ascribed to it under the Listing Rules;
“Connected Transaction”	the connected transaction under the Supplemental Agreement;
“Director(s)”	the director(s) of the Company;
“Group”	the Company and its subsidiaries;
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong;
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC;
“Interest Calculation Date”	the date on which the Loan is remitted to the bank account of
	the Borrower by the Lender;
“Kinetic (Qinhuangdao)” or	力量（秦皇島）能源有限公司(Kinetic (Qinhuangdao) Energy
“Lender”	Co., Ltd.), a company incorporated in the PRC with limited
	liability on 4 August 2011 and an indirect wholly-owned
	subsidiary of the Company;
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange;
“Loan”	a loan of RMB57 million (equivalent to approximately HK$63
	million) granted by the Lender to the Borrower pursuant to the
	2020 Loan Agreement (as supplemented by the Supplemental
	Agreement);

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“PRC” the People’s Republic of China which, for the purpose of this announcement, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan; “RMB” Renminbi, the lawful currency of the PRC; “Shareholder(s)” holder(s) of share(s) of USD0.001 each in the share capital of the Company; “Stock Exchange” The Stock Exchange of Hong Kong Limited; “substantial shareholder” has the meaning ascribed to this term under the Listing Rules; “Supplemental Agreement” A supplemental agreement to the 2020 Loan Agreement entered into between the Lender and the Borrower on 23 December 2022; “%” per cent.

For the purposes of illustration only, any amount denominated in RMB in this announcement was translated into HK$ at the rate of RMB1 = HK$1.11. Such translations should not be construed as a presentation that the amounts in question have been, could have been or could be, converted at any particular rate at all.

By order of the Board Kinetic Development Group Limited Ju Wenzhong Chairman and Executive Director

Hong Kong, 23 December 2022

As at the date of this announcement, the Board comprises seven directors, of whom three are executive Directors, namely Mr. Ju Wenzhong (Chairman), Mr. Li Bo (Chief Executive Officer) and Mr. Ji Kunpeng; one is a non-executive Director, namely Ms. Zhang Lin and three are independent non-executive Directors, namely Ms. Liu Peilian, Mr. Chen Liangnuan and Ms. Xue Hui.

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