Sunshine Oilsands Ltd. — Capital/Financing Update 2020

Oct 16, 2020

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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.

This announcement appears for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of Sunshine Oilsands Ltd.

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SUNSHINE OILSANDS LTD. 陽光油砂有限公司 *

(a corporation incorporated under the Business Corporations Act of the Province of Alberta, Canada with limited liability)

(HKEX: 2012)

CONNECTED TRANSACTION PROPOSED CONVERSION OF CONVERTIBLE BONDS BY CONNECTED PERSON UNDER SPECIFIC MANDATE

APPLICATION FOR WHITEWASH WAIVER

AND

RESUMPTION OF TRADING

By Order of the Board of Sunshine Oilsands Ltd. Kwok Ping Sun Executive Chairman

Hong Kong, October 16, 2020 Calgary, October 15, 2020

As at the date of this announcement, the Board consists of Mr. Kwok Ping Sun and Ms. Gloria Pui Yun Ho as executive directors; Mr. Michael John Hibberd, Ms. Linna Liu and Ms. Xijuan Jiang as nonexecutive directors; and Mr. Yi He, Mr. Alfa Li and Mr. Guangzhong Xing as independent non-executive directors.

*For identification purposes only

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Hong Kong (October 16, 2020) and Calgary, Alberta (October 15, 2020) - The Board of Directors (the “ Board ”) of Sunshine Oilsands Ltd. (the “ Corporation ” or “ Sunshine ”) (HKEX: 2012) wishes to announce the following:

BACKGROUND

Reference is made to the Corporation’s announcement dated April 1, 2020 (the “ Announcement ”) and the circular dated April 24, 2020 (the “ Circular ”) in relation to, among other matters, the Subscription for the fixed rate convertible bonds in an aggregate principal amount of HK$72,000,000 issued by the Corporation (the “ Subscription ”); and the poll results announcement dated May 25, 2020 in relation to the poll results of the special general meeting held on May 25, 2020 by the Corporation for the purposes of, among other matters, approving the Subscription. Therefore, all necessary resolutions have been passed through at the special general meeting, i.e. the Subscription and the allotment and issuance of the Conversion Shares to the Subscriber under Specific Mandate as required by the Listing Rules. The Specific Mandate has already been granted. The Listing Committee has conditionally granted (subject to allotment) and has not withdrawn or revoked the approval of listing of and permission to deal in all the Conversion Shares which may fall to be allotted and issued upon the exercise of the Conversion Right. All the conditions precedent set out in the Subscription Agreement have been fulfilled. As at the date hereof, the Subscription of CB has been completed.

As at the date of this announcement, the Corporation has received notice for conversion from the Subscriber. As detailed in the section headed “ THE PRINCIPAL TERMS OF THE CB ” in the Announcement, the CB shall not be converted provided that upon exercise of the conversion rights, (i) the CB holder and parties acting in concert with it shall be interested (whether directly or indirectly) in 29.90% or more of the consequential enlarged issued share capital of the Corporation unless the CB holder has obtained a whitewash waiver from the SFC; (ii) any other percentage as may from time to time be specified in the Takeovers Code as being the level of triggering a mandatory general offer unless the CB holder has obtained a whitewash waiver from the SFC; or (iii) the Corporation shall fail to maintain a 25% public float. The Conversion is also subject to the Corporation’s written approval, other than that the Conversion is not subject to any other conditions. The Subscriber, as intended to convert the CB in whole, has made application to the SFC for a Whitewash Waiver. Should the Whitewash Waiver not be approved at the SGM or not be granted by the SFC, the Subscriber will not proceed with the Conversion.

TAKEOVERS CODE IMPLICATIONS AND APPLICATION FOR WHITEWASH WAIVER

As at the date hereof, the Subscriber (a company wholly-owned by Mr. Sun) and the Concert Group are interested in an aggregate of 38,579,335 Shares, representing approximately 29.78% of the issued share capital of the Corporation. In addition, Mr. Sun has been granted options under the Post-IPO Share Option Scheme entitling him to acquire 6,933,580 Shares (representing approximately 5.35% of the issued capital of the Corporation as at the date of this announcement) upon full exercise of these options. Mr. Sun has irrevocably undertaken to the Corporation that he will not trigger a mandatory offer obligation under Rule 26 of the Takeovers Code when exercising the options granted under the Post-IPO Share Option Scheme.

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Based on the terms of the Subscription Agreement, the issue price for the CB is HK$72,000,000 (being 100% of the principal amount of the CB). Based on the initial Conversion Price of HK$0.632 per Share (subject to adjustment of conversion price as defined under the section “Definition” in this announcement, as at the date hereof, there is no adjustment to the conversion price in respect of the Proposed Conversion), a maximum of 113,924,051 new Shares will be allotted and issued upon full conversion of the CB to the Subscriber, representing (i) approximately 87.94% of the existing issued share capital of the Corporation as at the date of this announcement; and (ii) approximately 46.79% of the issued share capital of the Corporation as enlarged by the issuance of the Conversion Shares (assuming there is no repurchase of Shares or issuance of other new Shares). The interest of the Subscriber and its Concert Group will increase to 152,503,386 Shares in aggregate (representing approximately 62.64% of the issued capital of the Corporation as enlarged by the allotment and issuance of the Conversion Shares, assuming there is no other change to the issued share capital of the Corporation).

Under Rule 26.1 of the Takeovers Code, the acquisition of voting rights in the Corporation by the Concert Group from less than 30% to 30% or more will trigger an obligation on the Concert Group to make a general offer for all the securities of the Corporation other than those already owned or agreed to be acquired by the Concert Group, unless (i) the Conversion is approved by more than 50% of the vote cast by the Independent Shareholders at the SGM by way of poll; and (ii) the Whitewash Waiver is granted by the Executive and approved by at least 75% of the vote cast by the Independent Shareholders at the SGM by way of poll.

The Subscriber (on behalf of Mr. Sun and each member of the Concert Group) has to make an application to the Executive for the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code in respect of the issue of the Conversion Shares pursuant to the Subscription. The Whitewash Waiver, in order to be granted by the Executive, would be subject to, among other things, the Proposed Conversion approving by more than 50% of the votes cast by Independent Shareholders and the approval by at least 75% of the votes cast by the Independent Shareholders at the SGM by way of poll.

The Concert Group and those parties who are interested in the Whitewash Waiver and/or the Conversion shall abstain from voting on the resolutions to be proposed at the SGM to approve, among others, the same.

CHANGE IN THE SHAREHOLDING STRUCTURE OF THE CORPORATION

As at the date of this announcement:

• (1) The Corporation has 129,554,630 Class “A” Common Voting Shares in issue;

• (2) The Corporation has 9,056,001 share options (the “ Share Options ”) under the Post IPO Share Option Scheme outstanding;

• (3) The Corporation issued convertible bonds (the ‘‘ 2019 CB ’’) in an aggregate principal amount of USD$10,450,000 on June 17, 2019 to LionRock Soleil L.P., which is an independent third-party. The 2019 CB bears an interest rate of 10% per annum. The holders of the 2019 CB have the rights to convert the 2019 CB into Shares at the conversion price of HK$4.09 per Share (adjusted on a post share-consolidation basis)

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at any time up to 2 years from the issue date. Should the independent third-party exercise the 2019 CB, 19,979,685 shares will be issued representing 15.42% of the shareholding as the date hereof;

• (4) The Corporation issued CB in an aggregate principal amount of HK$72,000,000 to the Subscriber on April 1, 2020. The CB bears an interest rate of 8% per annum. Subject to the terms of the Subscription Agreement, the Subscriber has the rights to convert the CB in whole or in part into Shares at an initial conversion price of HK$0.632 per Share (subject to adjustment) at any time up to March 31, 2022; and

• (5) Save for the Share Options, the CB and the 2019 CB mentioned above, the Corporation doesn’t have any other convertible securities, options, warrants or other derivatives outstanding which are convertible or exchangeable into Shares.

The table below depicts the shareholding structure of the Corporation, assuming there is no change in the issued share capital of the Corporation, (i) as at the date of this announcement; (ii) immediately after full conversion of the Convertible Bonds based on the initial Conversion Price; (iii) immediately after full conversion of the CB and 2019 CB and (iv) immediately after full conversion of the CB, 2019 CB and the exercise of all options held by Directors:

The Subscriber1 Tai Feng Investments Ltd1 Mr. Sun1 Other Directors Michael J Hibberd2 Xijuan Jiang3 Gloria Ho4 The Subscriber and parties acting in concert with it Independent non- executive directors: Yi He Guangzhong Xing 2019 CB Holder: LionRock Soleil L.P.5 Other Public Shareholders6 Total

As at the date of this announcement Immediately upon full conversion of CB Immediately upon full conversion of CB and 2019 CB (for illustrative purposes only) Immediately upon full conversion of CB and 2019 CB, and all exercisable share options have been exercised (for illustrative purposes only) No. of Shares % No. of Shares % No. of Shares % No. of Shares % 10,338,000 7.98% 124,262,051 51.04% 124,262,051 47.17% 124,262,051 45.61% 8,556,750 6.60% 8,556,750 3.51% 8,556,750 3.25% 8,556,750 3.14% 17,413,790 13.44% 17,413,790 7.15% 17,413,790 6.61% 24,347,370 8.94% 2,165,981 1.67% 2,165,981 0.89% 2,165,981 0.82% 3,099,561 1.14% 104,814 0.08% 104,814 0.04% 104,814 0.04% 124,814 0.05% - - - 400,000 0.15% 38,579,335 29.78% 152,503,386 62.64% 152,503,386 57.89% 160,790,546 59.02% 139,682 0.11% 139,682 139,682 0.05% 256,349 0.09% - - - 66,667 0.02% - - 19,979,685 7.58% 19,979,685 7.33% 90,835,613 70.11% 90,835,613 37.31% 90,835,613 34.48% 91,354,454 33.53% 129,554,630 100.00% 243,478,681 100.00% 263,458,366 100.00% 272,447,701 100.00%

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Notes:

• 1) Mr. Sun is the Executive Chairman and a Substantial Shareholder of the Corporation. He is interested or deemed to be interested in an aggregate of 36,308,540 Shares (representing approximately 28.03% of the share capital of the Corporation as at the date of this announcement), including (i) 10,338,000 Shares held by the Subscriber, a company directly and wholly-owned by Mr. Sun; (ii) 8,556,750 Shares directly held by Tai Feng Investments Limited, another company directly and wholly-owned by him and (iii) 17,413,790 Shares beneficially held by him. As at the date of this announcement, Mr. Sun has share options to subscribe for an aggregate 6,933,580 Shares granted by the Corporation under the Post-IPO Share Option Scheme of the Corporation.

• 2) Mr. Michael J Hibberd is the Non-Executive Vice-Chairman of the Corporation and is presumed to be acting in concert with the Subscriber under the Takeovers code.

• 3) Ms. Xijuan Jiang is a Non-Executive Director of the Corporation and is presumed to be acting in concert with the Subscriber under the Takeovers code.

• 4) Ms. Gloria Ho is an Executive Director of the Corporation and is presumed to be acting in concert with the Subscriber under the Takeovers code.

• 5) LionRock Soleil L.P., an independent third-party, is the holder of the 2019 CB issued by the Corporation. It will remain a public shareholder upon full conversion of CB.

• 6) Certain percentage figures included in the above table have been subject to rounding adjustments. Accordingly, figures shown as totals may not be an arithmetic aggregation of the figures preceding them.

• 7) As at the date of this announcement, the Corporation has 9,056,001 options outstanding under the PostIPO Share Option Scheme, of which: a) 518,841 Options were not held by the Directors but are all exercisable, and b) 8,537,160 Options were granted to the Directors as shown below:

	Name	Number of Securities Underlying Unexercised Options (#)	Number of Options exercisable as at the date hereof	Option Exercise Price (HKD)	Option Expiration Date
1	Kwok Ping Sun	91,360	91,360	29.6	23-Sep-21
		842,220	842,220	29.6	23-Sep-21
		6,000,000	6,000,000	11.8	5-Jul-23
2	Gloria Ho	100,000	100,000	0.41	3-Dec-21
		300,000	300,000	11.8	5-Jul-23
3	Michael John Hibberd	933,580	933,580	29.6	23-Sep-21
4	Xijuan Jiang	20,000	20,000	17.5	17-Aug-21
5	Yi He8	20,000	20,000	17.5	17-Aug-21
		30,000	30,000	15.5	3-Apr-22
		100,000	66,667	3.65	9-Sep-24
6	Linna Liu	-	-	-	-
7	Guangzhong Xing	100,000	66,667	3.65	9-Sep-24
8	Alfa Li	-	-	-	-
Subtotal		8,537,160	8,470,494

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Name	Number of Securities Underlying Unexercised Options (#)	Number of Options exercisable as at the date hereof	Option Exercise Price (HKD)	Option Expiration Date

• 8) Mr. David Yi He is an Independent Non-Executive Director of the Corporation and also holds 139,682 shares in the Corporation as at the date of this announcement.

• 9) Save as disclosed above, none of the Directors have any relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Corporation as at the date of this announcement.

Each of the Subscriber and the Concert Group members has confirmed that, as at the date of this announcement:

• i) save as disclosed in the section headed “ CHANGE IN THE SHAREHOLDING STRUCTURE OF THE CORPORATION ” set out in this announcement, the Subscriber and the Concert Group do not hold, own, have control or direction over any other voting rights, rights over Shares, any outstanding options, warrants, or any securities that are convertible into Shares or any derivatives in respect of the securities of the Corporation, or hold any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Corporation;

• ii) save for the issuance contemplated under the Subscription Agreement, none of the Subscriber or any Concert Group member has acquired or entered into any agreement or arrangement to acquire any voting rights in the Corporation within six months prior to the date of this announcement;

• iii) none of the Subscriber or any Concert Group member has received any irrevocable commitment or arrangements to vote for or against the resolution to be proposed at the SGM to approve the Whitewash Waiver and the Conversion;

• iv) there is no arrangement including but not limited to those referred to in Note 8 to Rule 22 of the Takeovers Code (whether by way of option, indemnity or otherwise) in relation to the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Corporation and the Subscriber which might be material to the Whitewash Waiver and the Conversion;

• v) there is no agreement or arrangement to which any members of the Concert Group is a party which relates to circumstances in which it may or may not invoke or seek a pre-condition or a condition to the Whitewash Waiver and the Conversion;

• vi) neither the Subscriber nor the Concert Group member has borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Corporation;

• vii) apart from the consideration payable to the Corporation for the Subscription of the CB pursuant to the Subscription Agreement, there is no other consideration, compensation or benefit in whatever form that has been or will be paid by the Subscriber or Concert Group member to the Corporation in connection with the Subscription;

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• viii) apart from the Subscription Agreement, there was no understanding, arrangement, agreement or special deal (as defined under Rule 25 of the Takeovers Code) between the Subscriber or the Concert Group member on one hand and the Corporation on the other hand; and

• ix) there was no understanding, arrangement, agreement or special deal (as defined under Rule 25 of the Takeovers Code) between any Shareholders; and (a) the Subscriber or the Concert Group member; or (b) the Corporation, its subsidiaries or associated companies.

INFORMATION ABOUT THE SUBSCRIBER

The Subscriber is a company incorporated in the British Virgin Islands with limited liability on August 31, 2012 whose issued shares are entirely beneficially owned by Mr. Sun, the Executive Chairman and a Substantial Shareholder of the Corporation. The Subscriber is principally engaged in investment holding. As at the date of this announcement, Mr. Sun is the sole director of the Subscriber.

INFORMATION ABOUT SUNSHINE

The Corporation is a Calgary based public corporation, listed on the Stock Exchange since March 1, 2012 and is focused on the development of its significant holdings of oil sands leases in the Athabasca oil sands region. It relies heavily on its ability to obtain various forms of financing and cash flow from operations to fund administration expenses and future exploration and development cost of its projects.

Summary of published financial results of the Corporation for the second quarter ended 30 June, 2020 is set out below:

	June 30,		December 31,	December 31,	December	31,
	2020		2019		2018
($000s)	CAD	HKD1	CAD	HKD2	CAD	HKD3
Cash	470	2,673	1,254	7,518	583	3,347
Trade and other receivables	13,168	74,903	16,519	99,035	13,457	77,250
Prepaid expense and deposits	5,704	32,446	6,934	41,571	3,208	18,416
Exploration and evaluation assets	270,508	1,538,726	270,014	1,618,789	269,218	1,545,454
Property, plant and equipment	476,887	2,712,668	479,055	2,872,032	492,815	2,829,018
Total liabilities	618,047	3,515,626	601,773	3,607,752	527,328	3,027,141
Shareholders’ equity	153,514	873,231	175,755	1,053,687	251,953	1,446,343
($000s except
		Q2 2020			Q1 2020
per share & bbl/d)
		CAD	HKD1		CAD	HKD4
Bitumen sales (bbl/d)		-		-	871	4,760
Petroleum sales
		-		-	3,840	20,984
Royalties		-		-	6	33
Diluent
		46		262	1,236	6,754

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Transportation	-4	-23	2,379	13,000
Operating costs	1,940	11,035	4,679	25,568
Finance cost
	-6,501	-36,980	6,149	33,601
Net loss/(gain)	-14,591	-82,998	41,770	228,251
Per share - basic and diluted
	-0.16	-1	0.32	2
Capital expenditures1	431	2,452	299	1,634
Total assets
	771,561	4,388,857	773,605	4,227,350
Working capital deficiency2	260,532	1,481,980	262,004	1,431,716
Shareholders’ equity	153,514	873,231	134,418	734,525

Note:

1. Based on the Bank of Canada's nominal noon exchange rate (30 June 2020) of HKD$1.00 =CAD 0.1758

2. Based on the Bank of Canada's nominal noon exchange rate (31 December 2019) of HKD$1.00 =CAD 0.1668

3. Based on the Bank of Canada's nominal noon exchange rate (31 December 2018) of HKD$1.00 =CAD 0.1742

4. Based on the Bank of Canada's nominal noon exchange rate (31 March 2020) of HKD$1.00 =CAD 0.1830

Unfavourable market conditions faced by the Corporation

Recently, the Corporation’s liquidity has seriously deteriorated as a result of the economic hit brought about by COVID-19, causing drastic drop in oil demand and pricing; access to the funding was also obstructed due to the sluggish financial market. On March 31, 2020, the Board decided to temporarily suspend production. The suspension further tightened the Corporation’s operating income and cash flow. The Corporation was therefore in urgent financing need to sustain its day-to-day operation and administration expenses, and to meet its debt repayment obligations due in June, July and August 2020. As stated in the 2020 interim results, the Corporation recorded a cash and cash equivalents balance to CDN470,000, representing a 63% decline from CDN1,254,000 as at December 31, 2020. The operating cash flow for the three months ended June 30, 2020 recorded a net outflow of CDN2.0 million versus a net inflow of CDN0.7 million for the same period in 2019. The Corporation incurred a working capital deficiency of CDN260.5 million as at June 30, 2020.

Limitation on financing alternative

Before the execution of the CB transaction, the Corporation’s management has already exhausted all available methods of raising funds, i.e. high yield debt issuance, bank loans, equity financing, none of which was successful due to the deterioration of financial performance of the Corporation and recent poor market sentiment as the result of the impact of COVD-19. After considering the above, and after arms’ length negotiation and careful consideration, in order to meet the urgent funding needs, the Corporation discussed and came up with a proposal with the Chairman Kwok Ping Sun, being the Chairman, Executive Director and Substantial Shareholder of the Corporation, whereby the Corporation will issue CB to Chairman Sun on terms stipulated in the Subscription Agreement.

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REASONS FOR CONVERSION AND APPLICATION FOR WHITEWASH WAIVER

Having taken into account the unfavorable market conditions faced by the Corporation and the limitation on financing alternative, the Corporation would be delighted to accept the Proposed Conversion from the Subscriber. And, thereafter, the Subscriber applied for the Whitewash Wavier.

Benefits from the Conversion

If the Whitewash Waiver is not granted by the Executive, the Subscriber will not proceed with the Conversion. It is believed that it would be detrimental for the Corporation and its Shareholders given the various benefits of the Conversion in the following:

• (i) The financing cost for the Corporation is significantly lowered as the CB interest at 8.0% per annum can be saved upon the Conversion which is a substantial amount in view of the current liquidity position of the Corporation as at June 30, 2020;

• (ii) Given the Corporation’s current debt-to-equity ratio was 402.60% as at June 30, 2020, compared to 342.39% as at December 31, 2019. Upon the Conversion, the debt-to-equity ratio is expected to be lowered to 377.13%. The lowered gearing would enable the Corporation to be more persuasive in debt financing discussions in order to obtain additional funds and meet the funding needs of the Corporation after completion of the Conversion;

• (iii) In view of the funding needs to continuously sustain the monthly operational costs especially during the market downturn, the Corporation’s management has recently been engaged in discussions with financial institutions and institutional investors for funding opportunities. The feedback from the prospective institutional investors is that the shareholding structure of the Corporation is very fragmented, in particular, the largest shareholder is not a controlling shareholder. Therefore, they believe that the largest shareholder failed to demonstrate a high level of confidence and commitment in developing the business of the Corporation with a long-term perspective. After the Conversion, the Subscriber and its concert parties would become the controlling shareholder having 62.64% of the stake. The Corporation would then have a stronger position to present its shareholder support and commitment in fundraising negotiations; and

• (iv) The Subscriber would be encouraged to even more actively participate in the operational turnaround of the Corporation with greater share ownership after the Conversion. There will be a better shareholder interest alignment. The Independent Shareholders are also given the opportunity to witness and benefit from the future developments of the Corporation together with the Subscriber.

GENERAL

Pursuant to the Takeovers Code, the Independent Board Committee comprising all nonexecutive director(s) of the Corporation who have no direct or indirect interest in the Whitewash Waiver and the Conversion, has been formed to advise the Independent Shareholders in respect of the Whitewash Waiver and the Conversion.

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The Independent Board Committee has appointed Donvex Capital Limited as the Independent Financial Adviser (the “ Independent Financial Adviser ”) to advise the Independent Board Committee and the Independent Shareholders in relation to the Whitewash Waiver and the Conversion.

A SGM will be held to approve, among other things, the Conversion, the Whitewash Waiver and the Conversion.

The Subscriber and the Concert Group members and their respective associates and Shareholders who are involved in or interested in the Subscription, the Conversion and the Whitewash Waiver shall abstain from voting in respect of the resolution(s) to approve the Whitewash Waiver and the Conversion at the SGM.

As at the date of this announcement, save for the Subscriber and the Concert Group member and their respective associates as disclosed herein, no other Shareholder is involved in or interested in the Subscription (including Whitewash Waiver and the Conversion that is required to abstain from voting in respect of the resolution(s) to approve the Whitewash Waiver and the Conversion at the SGM.

A circular containing, among others, (i) full details of the Subscription, the Conversion and the Whitewash Waiver; (ii) a letter of recommendations from the Independent Board Committee to the Independent Shareholders in respect of the Conversion and the Whitewash Waiver; (iii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Whitewash Waiver and the Conversion; and (iv) a notice convening the SGM, will be despatched to the Shareholders within 21 days from the date of this announcement in compliance with Rule 8.2 of the Takeovers Code.

As at the date of this announcement, the Corporation does not believe that the Whitewash Waiver and the Conversion give rise to any concerns in relation to compliance with other applicable rules or regulations (including the Listing Rules). If a concern should arise after the release of this announcement, the Corporation will endeavor to resolve the matter to the satisfaction of the relevant authority as soon as possible but in any event before the dispatch of the circular. The Corporation notes that the Executive may or may not grant the Whitewash Waiver if the Whitewash Waiver does not comply with other applicable rules and regulations.

RESUMPTION OF TRADING

At the request of the Corporation, trading in the Shares has been halted with effect from 9:00 a.m. on October 5, 2020 pending the release of this announcement. Application has been made for the resumption of trading in the Shares with effect from 9:00 a.m. on October 16, 2020.

Shareholders and investors are advised to exercise caution when dealing in the securities of the Corporation and if they are in any doubt about their position, they should consult their professional advisors.

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DEFINITIONS

In this announcement, unless the context otherwise requires, the following words and expressions shall have the following meanings when used herein:

“acting in concert” has the same meaning as ascribed to it under the Takeovers Code “adjustment of conversion If and whenever the Corporation shall issue wholly for cash price” any new Shares (other than Shares issued on the exercise of Conversion Right or on the exercise of any other rights of conversion into, or subscription for, Shares) or the issue or grant of options, warrants or other rights to subscribe or purchase Shares, at a price per Share which is less than the Conversion Price, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such issue by the following fraction:

(P+Q)/R

P is the number of Shares in issue immediately before the issue of such additional Shares or the grant of such options, warrants or other rights to subscribe for or purchase any Shares;

Q is the number of Shares which the aggregate consideration (if any) receivable for the issue of such additional Shares would be able to purchase at the Conversion Price in force immediately before such issue (representing the aggregate consideration divided by the Conversion Price); and

R is the number of Shares in issue immediately after the issue of such additional Shares.

“associate(s)” has the same meaning as ascribed to it under the Takeovers Code “Board” the board of Directors “Business Day” A business day is a day on which the Stock Exchange is open for the transaction of business “CB” or “Convertible Bonds” the fixed rate convertible bonds issued pursuant to the Subscription Agreement “Concert Group” the Subscriber and the parties acting in concert with it, including Mr. Kwok Ping Sun and his wholly-owned company, Tai Feng Investments Limited, Ms. Gloria Ho, Mr. Michael J Hibberd and Ms. Xijuan Jiang (excluding independent non-executive Directors) “Completion” completion of the Subscription of CB pursuant to the terms of the Subscription Agreement “connected person(s)” Has the meanings as ascribed thereto under the Listing Rules “controlling shareholder” Has the meaning as ascribed to it in the Listing Rules

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HK$0.632 per Share, subject to adjustment from time to time under the terms and conditions of the Subscription Agreement

“Conversion Price” HK$0.632 per Share, subject to adjustment from time to time under the terms and conditions of the Subscription Agreement “Conversion” or “Proposed The Subscriber’s proposal for converting all the CB at Conversion” Conversion Price “Conversion Rights” the rights attached to the CB to convert the whole or part

• the rights attached to the CB to convert the whole or part thereof into Conversion Shares

• “Conversion Share(s)” A total of 113,924,051 new Share(s) (subject to adjustments from time to time under the terms and conditions of the Subscription Agreement) to be allotted and issued by the Corporation upon the exercise of the Conversion Rights

• “Director(s)” “Executive(s)”

• “Group”

• “HK$”

• “Hong Kong”

• the Directors of the Corporation

• means the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director the Corporation and its subsidiaries Hong Kong dollars, the lawful currency of Hong Kong the Hong Kong Special Administrative Region of the People Republic of China

• “independent third party(ies)” independent third parties who is/are not connected person(s) of the Corporation and is/are independent of and not connected with the Corporation and its Directors, Chief Executives, and Substantial Shareholders of the Corporation or any of its subsidiaries or their respective associates

• “Issuance” the issuance of CB to the Subscriber under the Subscription Agreement

• “Independent Board an independent committee of the Board established by the Committee” Board comprising all non-executive Director(s) who have no direct or indirect interest in the Whitewash Waiver and the Conversion, including Mr. Yi He, Mr. Guangzhong Xing, Mr. Alfa Li and Ms. Linna Liu, to advise the Independent Shareholders as to whether the Whitewash Waiver and the Conversion are on normal commercial terms, fair and reasonable and in the interests of the Corporation and the Shareholders as a whole. Mr. Michael J Hibberd and Ms. Xijuan Jiang are presumed to be acting in concert with the Subscriber and therefore considered to have an interest in the conversion and the whitewash waiver, therefore they are excluded from the Independent Board Committee

“Independent Financial Adviser”

• Donvex Capital Limited, a corporation licensed to carry out Type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser appointed by the Independent Board Committee to advise the Independent Board Committee and the Independent Shareholders in respect of terms of the Whitewash Waiver and the Conversion

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“Independent Shareholders”

Shareholders other than the Subscriber, its associates and the Concert Group and those who are involved or interested in the Whitewash Waiver and/or the Conversion and those who are required to abstain from voting at the SGM to consider the approval of the Whitewash Waiver and the Conversion

• "Kwok Ping Sun" or

• "Chairman Sun" or “Mr. Sun”

• Mr. Kwok Ping Sun, being the Chairman, executive Director and Substantial Shareholder (as defined under the Listing Rules) of the Corporation; and as at the date of hereof, directly or indirectly interested in 36,308,540 Shares of the Corporation, representing approximately 28.03% of the issued share capital of the Corporation

• “Last Trading Day”

• “Listing Committee”

• “Listing Rules”

• “PRC”

• “SFC”

• “SFO”

• “Share(s)”

• “Share Options” or "Options"

• September 30, 2020, being the last trading day of the Shares immediately prior to the issuance of this announcement

• the listing sub-committee of the board of directors of the Stock Exchange

• the Rules Governing the Listing of Securities on the Stock Exchange

• The People’s Republic of China, but (solely for the purpose of the Subscription Agreement) excluding Hong Kong and Macau Special Administrative Regions and Taiwan Regions the Securities and Futures Commission the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• the Class “A” C ommon V oting S hare(s) in the issued share capital of the Corporation

• the share option(s) to subscribe for Share(s) under the Post IPO Share Option Scheme

• “Post-IPO Share Option the Post-IPO Share Option Scheme adopted by the Scheme” Corporation on January 26, 2012 and this Scheme was subsequently amended by (i) a resolution passed at the Corporation’s annual general and special meeting of Shareholders held on May 7, 2013; and (ii) a resolution of the Board on June 13, 2013. Apart from this Share Option Scheme, the Group has no other share option scheme currently in force

“Shareholder(s)”

• “SGM”

• “Specific Mandate”

• holder(s) of the Class "A" Common Voting Share(s)

• the special general meeting of the Corporation to be convened and held to consider, and if thought fit, approve the Whitewash Waiver and the Conversion

• the specific mandate granted to the Board at the special general meeting held on May 25, 2020

• “Subscription Agreement” the subscription agreement dated March 31,2020 (Hong Kong Time) in respect of the Subscription of CB and entered into between the Corporation and the Subscriber

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“Subscriber” or “Prime Union”	Prime Union Enterprises Limited, a company incorporated
	in the British Virgin Islands with limited liability and is wholly
	owned by Mr. Sun
“Subscription”	the subscription by the Subscriber for the CB on the terms
	and subject to the conditions under the Subscription
	Agreement
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Substantial Shareholder”	has the meaning ascribed to it in the Listing Rules
“Takeovers Code”	the Code on Takeovers and Mergers issued by the SFC as
	amended from time to time
“Whitewash Waiver”	a waiver to be granted by the Executive pursuant to Note 1
	on dispensations from Rule 26 of the Takeovers Code in
	respect of the obligations of the Subscriber to make a
	mandatory general offer for all the Shares not already
	owned by the Subscriber and parties acting in concert with
	it under Rule 26.1 of the Takeovers Code, which may
	otherwise arise as a result of the Conversion
“%”	per cent.

ABOUT SUNSHINE OILSANDS LTD.

The Corporation is a Calgary based public corporation listed on the Hong Kong Stock Exchange since March 1, 2012. The Corporation is focused on the development of its significant holdings of oil sands leases in the Athabasca oil sands region. The Corporation owns interests in approximately one million acres of oil sands and petroleum and natural gas leases in the Athabasca region. The Corporation is currently focused on executing milestone undertakings in the West Ells project area. West Ells has an initial production target of 5,000 barrels per day.

For further enquiries, please contact: Mr. Kwok Ping Sun Executive Chairman Tel: (852) 3188 9298

Email: investorrelations@sunshineoilsands.com Website: www.sunshineoilsands.com

FORWARD LOOKING INFORMATION

This announcement contains forward-looking information relating to, among other things, the plans and expectations of the Corporation. Such forward-looking information is subject to various risks, uncertainties and other factors. All statements other than statements and information of historical fact are forward-looking statements. The use of words such as “estimate”, “forecast”, “expect”, “project”, “plan”, “target”, “vision”, “goal”, “outlook”, “may”, “will”, “should”, “believe”, “intend”, “anticipate”, “potential”, and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on the Corporation’s experience, current beliefs, assumptions, information and perception of

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historical trends available to the Corporation, and are subject to a variety of risks and uncertainties including, but not limited to those associated with resource definition and expected reserves and contingent and prospective resources estimates, unanticipated costs and expenses, regulatory approval, fluctuating oil and gas prices, expected future production, the ability to access sufficient capital to finance future development and credit risks, changes in Alberta’s regulatory framework, including changes to regulatory approval process and landuse designations, royalty, tax, environmental, greenhouse gas, carbon and other laws or regulations and the impact thereof and the costs associated with compliance. Although the Corporation believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned that the assumptions and factors discussed in this announcement are not exhaustive and readers are not to place undue reliance on forward-looking statements as the Corporation’s actual results may differ materially from those expressed or implied. The Corporation disclaims any intention or obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, subsequent to the date of this announcement, except as required under applicable securities legislation including the Takeovers Code. The forward-looking statements speak only as of the date of this announcement and are expressly qualified by these cautionary statements. Readers are cautioned that the foregoing lists are not exhaustive and are made as at the date hereof. For a full discussion of the Corporation’s material risk factors, see the Corporation’s annual information form for the year ended December 31, 2019 and risk factors described in other documents we file from time to time with securities regulatory authorities, all of which are available on the Hong Kong Stock Exchange at www.hkexnews.hk, on the SEDAR website at www.sedar.com or on the Corporation’s website at www.sunshineoilsands.com.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this announcement (other than that relating to the Subscriber and the Concert Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this announcement (other than those expressed by the Subscriber and the Concert Group) have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statement in this announcement misleading.

The sole director of the Subscriber, namely Mr. Kwok Ping Sun, accepts full responsibility for the accuracy of the information contained in this announcement (other than that relating to the Corporation) and confirms, having made all reasonable enquiries, that to the best of his knowledge, opinions expressed in this announcement (other than those expressed by the Directors and the Corporation) have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statement in this announcement misleading.