Kong Sun : DISCLOSEABLE TRANSACTION DISPOSAL OF A SUBSIDIARY

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.

KONG SUN HOLDINGS LIMITED

江 山 控 股 有 限 公 司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 295)

DISCLOSEABLE TRANSACTION

DISPOSAL OF A SUBSIDIARY

THE DISPOSAL

On 21 September 2020, the Vendor, a wholly-owned subsidiary of the Company, the Purchaser and Zhiguang entered into the Agreement, pursuant to which the Vendor conditionally agreed to sell, and the Purchaser conditionally agreed to acquire, the entire equity interest in Zhiguang for a total consideration of RMB82,000,000, subject to adjustment based on the Transition Period Audit.

Upon Completion, Zhiguang will cease to be a subsidiary of the Company and its financial statement will cease to be consolidated into the Group's financial statements.

LISTING RULES IMPLICATIONS

As one of the applicable percentage ratios under Rule 14.07 of the Listing Rules in respect of the Disposal is more than 5% but all of them are lower than 25%, the transaction contemplated under the Agreement constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules and is therefore subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

Completion of the Disposal is conditional upon satisfaction of the Conditions Precedent. Accordingly, the Disposal may or may not proceed. Shareholders and potential investors should therefore exercise caution when dealing in the Shares.

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THE DISPOSAL

On 21 September 2020, the Vendor, the Purchaser and Zhiguang entered into the Agreement, pursuant to which the Vendor conditionally agreed to sell, and the Purchaser conditionally agreed to acquire, the entire equity interest in Zhiguang for a total consideration of RMB82,000,000, subject to adjustment based on the Transition Period Audit.

The principal terms of the Agreement are summarized as follows:

PRINCIPAL TERMS OF THE AGREEMENT

Date

21 September 2020

Parties

1. the Purchaser;
2. the Vendor, an indirect wholly-owned subsidiary of the Company; and
3. Zhiguang.

Consideration

The total consideration for the Disposal is RMB82,000,000 (the ''Initial Consideration''), which is subject to adjustment based on the Transition Period Audit.

The consideration for the Disposal shall be payable by the Purchaser to the Vendor in cash in the following manner:

1. prior to the Completion Date, an amount of RMB68,600,000 (the ''Initial Deposit''), representing 90% of the Initial Consideration less the Setoff Amount, shall be deposited by the Purchaser into the Escrow Account;
2. within five (5) business days of the later of the Completion Date and the issue of the payment notice by the Vendor to the Purchaser, the First Payment shall be released from the Escrow Account to the Vendor;
3. in the event (a) if the First Payment is less than the Initial Deposit, such excess shall be returned to the Purchaser from the Escrow Account; or (b) if the First Payment is more than the Initial Deposit, the shortfall shall be paid by the Purchaser to the Vendor;
4. within five (5) business days of the issue of payment notice by the Vendor to the Purchaser after certain rectification work having been completed and passed the inspection check by the Purchaser on or before the second anniversary of the day following the Completion Date, the Setoff Amount shall be paid by the Purchaser to the Vendor in accordance with the Agreement; all of such rectification work shall be completed within 2 years after the Completion Date; and

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1. within five (5) business days of the first anniversary of the day after the Completion Date and subject to the Vendor having completed certain rectification work required by the Purchaser, and the Vendor and Zhiguang having complied with their respective representations and warranties under the Agreement, the remaining balance of the consideration for the Disposal in the approximate amount of RMB8,200,000 or 10% of the Adjusted Consideration (if applicable) shall be paid by the Purchaser to the Vendor.

The Initial Consideration shall be adjusted on a dollar for dollar basis upon the occurrence of any of the following events during the period from the Reference Date to the Completion Account Date:

1. the amount of dividends distributed by the Vendor;
2. the amount of any increase or decrease in the registered capital of Zhiguang;
3. the value of assets which are sold or transferred outside the ordinary course of business of Zhiguang;
4. the amount of capital expenditure incurred outside the ordinary course of business of Zhiguang;
5. the amount of additional indebtedness incurred outside the ordinary course of business of Zhiguang;
6. the amount of losses resulting from leasing of assets or security or encumbrance created over the asset of Zhiguang outside the ordinary course of business of Zhiguang;
7. the amount of losses resulting from any action that would cause a material delay in Completion; or
8. the amount of losses resulting from the entering of an agreement or undertaking to any of the above events.

The Transition Period Audit report will be issued within seven (7) calendar days of the Completion Account Date. The Vendor and the Purchaser shall agree upon the amount to be adjusted based on the Transition Period Audit report within five (5) business days after its date of issuance. If no agreement can be reached, the Vendor and the Purchaser shall enter into negotiation to agree on a later deadline to agree on such adjusted amount. As at the date of this announcement, neither the events mentioned in (i) to (viii) above has occurred nor there is any plan and/or agreement being contemplated in relation to the events mentioned in

(i) to (viii) above.

Shareholder's Loan

As at the date of this announcement, Zhiguang had an aggregate outstanding indebtedness due to the Vendor and its related parties which are subsidiaries of the Company in the amount of approximately RMB182,434,000. On the date of the Agreement, the Vendor, such related parties and Zhiguang entered into a debt confirmation agreement in respect of the restructuring and offset of the outstanding debts due by Zhiguang to achieve the effect that there will only be the Shareholder's Loan, and the Shareholder's Loan shall be repaid by

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Zhiguang to the Vendor within 15 business days of the Completion Date. The Shareholder's Loan as at the Completion Date shall be determined based on the Transition Period Audit and agreed between the Purchaser and the Vendor. At Completion, the Vendor and such related parties shall enter into a supplemental debt confirmation agreement to confirm the amount of the Shareholder's Loan; and the Purchaser shall execute a letter of support in favour of the Vendor that it will procure Zhiguang to repay the Shareholder's Loan in the case that it defaults in the repayment.

Basis of the consideration for the Disposal

The consideration for the Disposal was determined upon arm's length negotiations between the Vendor and the Purchaser with reference to (i) the unaudited net asset value of Zhiguang of approximately RMB169,001,000 as at 31 August 2020; and (ii) the loss-making position of Zhiguang.

Conditions Precedent

Completion of the Disposal is subject to the satisfaction of the following Conditions Precedent:

1. the equity pledge provided by the Vendor to secure the Finance Lease having been discharged and released in full;
2. each party to the Agreement having completed the preparation for handover including numbering the properties and collating the handover documents of Zhiguang;
3. the Vendor having adduced evidence to the Purchaser in respect of the payment of the relevant tax that is required to be paid by Zhiguang before the Reference Date;
4. the Purchaser having deposited the First Payment into the Escrow Account; and
5. the Purchaser and the Vendor having agreed to the Transition Period Audit results.

Parties to the Agreement may waive any of the Conditions Precedent (except for the Conditions Precedent (i), (ii), (iii) and (v)) in writing. As at the date of this announcement, none of the Conditions Precedent has been satisfied.

If any of the Conditions Precedent cannot be fulfilled or waived (as the case may be) on or before 31 May 2021, the Agreement shall lapse and cease to have effect.

Completion

Subject to the Conditions Precedent having been fulfilled, Completion will take place on the Completion Date.

Default Penalty

If the Purchaser fails to fulfil its obligation to pay the consideration pursuant to the terms of the Agreement, the Purchaser will be liable to pay to the Vendor a daily default payment of 0.05% of the relevant amount due, and if the default continues for more than 30 days, the

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Vendor will be entitled to, among other things, terminate the Agreement, require the Purchaser to return the relevant equity interest that has been transferred to the Purchaser and seek for damages from the Purchaser for all losses incurred by the Vendor.

Termination of the guarantee provided by the Vendor

Pursuant to the Agreement, by no later than 6 months after the Completion Date, the Purchaser shall procure the release of the guarantee provided by the Vendor and its affiliates for securing the Finance Lease. In the event that the Purchaser does not procure completion of the release of such guarantee, the Vendor shall also have a unilateral right to terminate the Agreement and seek for damages from the Purchaser for any losses and default penalty incurred thereunder. The default amount is calculated at 0.05% per day based on the principal of guarantee amount.

INFORMATION ON THE PARTIES

Zhiguang

Zhiguang was established in the PRC on 10 July 2014. It is principally engaged in the development, construction and operation of the Zhiguang Project. The construction of Zhiguang Project has been completed and started power generation and the power plant has been connected to the power grid.

The unaudited financial results of Zhiguang for the two years immediately preceding the date of this announcement are as follows:

	For the year ended
	31 December
	2018	2019
	(Unaudited)	(Unaudited)
	RMB'000	RMB'000
Net loss before tax	5,184	3,624
Net loss after tax	5,184	3,624

The unaudited net asset value of Zhiguang as at 31 December 2019 and 31 August 2020 was approximately RMB187,209,000 and RMB169,001,000, respectively.

The Vendor

The Vendor is an indirect wholly-owned subsidiary of the Company and is principally engaged in the investment in and operation of solar power plants, provision of solar power plant operation and maintenance services, provision of financial services, trading of liquefied natural gas and asset management. As at the date of this announcement, Zhiguang is a direct wholly-owned subsidiary of the Vendor.

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The Company and the Purchaser

The Company is principally engaged in the investment in and operation of solar power plants, provision of solar power plant operation and maintenance services, provision of financial services, trading of liquefied natural gas and asset management.

The Purchaser is a company established in the PRC and whose shares are listed on Shanghai Stock Exchange with the stock code of 600886. It is principally engaged in the investment, construction, operation and management of energy projects with a focus on electricity generation. The ultimate beneficial owner of the Purchaser is 國務院國有資產監督管理委員

會 (the State-Owned Assets Supervision and Administration Commission of the State Council*).

To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, each of the Purchaser and its ultimate beneficial owner is a third party independent of the Company and connected persons of the Company.

REASONS AND BENEFITS FOR THE DISPOSAL

The Company has been proactively considering innovative business opportunities, which could strengthen the Group's core business and reduce its finance costs. The Disposal represents the Group's long-termasset-light strategy. The Directors consider that it is a good opportunity for the Group to realise its investment in Zhiguang so as to better allocate the Group's resources, optimise its operation model, enhance the efficiency of equipment in solar power plants and accelerate its pace in transforming to asset-light model.

In addition, the Disposal will lower the Group's gearing ratio given the net proceeds from the Disposal will be applied for repaying the existing debts.

Based on the foregoing, the Directors are of the view that the Disposal and the terms of the Agreement, including the consideration, were entered into on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

FINANCIAL EFFECT OF THE DISPOSAL

Upon Completion, Zhiguang will cease to be a subsidiary of the Company and its financial statement will cease to be consolidated into the Group's financial statements.

Subject to final audit, it is expected that the Group will realise a net loss on the Disposal of not more than approximately RMB145,000,000, which is calculated by reference to the difference between (i) the consideration for the Disposal of RMB82,000,000 and net asset value of Zhiguang and its goodwill of approximately RMB169,001,000 and RMB56,244,000, respectively as at 31 August 2020 and (ii) the related transaction costs, taxes and expenses of the Disposal. Despite the net loss on the Disposal, having taking into consideration of the reasons for the Disposal as stated under the paragraph headed ''Reasons and Benefits for the Disposal'' above, the Company is of the view that the Disposal will be in the interests of the Company and the Shareholders as a whole as it will lower the Group's gearing ratio.

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USE OF PROCEEDS

The net proceeds from the Disposal after deducting the taxation and transaction costs are estimated to be approximately RMB260,000,000. The Group intends to apply the net proceeds from the Disposal to repay its existing indebtedness.

LISTING RULES IMPLICATIONS

As one of the applicable percentage ratios under Rule 14.07 of the Listing Rules in respect of the Disposal is more than 5% but all of them are lower than 25%, the transaction contemplated under the Agreement constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules and is therefore subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

Completion of the Disposal is conditional upon satisfaction of the Conditions Precedent. Accordingly, the Disposal may or may not proceed. Shareholders and potential investors should therefore exercise caution when dealing in the Shares.

DEFINITIONS

In this announcement, the following expressions shall have the meanings set out below unless the context requires otherwise:

''Adjusted Consideration''	the adjusted consideration as a result of the adjustment of
	the Initial Consideration based on the Transition Period
	Audit
''Agreement''	the equity transfer agreement dated 21 September 2020
	entered into by and among the Purchaser, the Vendor and
	Zhiguang in relation to the Disposal
''Company''	Kong Sun Holdings Limited, a company incorporated in
	Hong Kong with limited liability, the Shares of which are
	listed on the main board of the Stock Exchange

''Completion''

''Completion Account Date''

''Completion Date''

''Conditions Precedent'' ''connected person(s)'' ''Director(s)''

completion of the Disposal

the date falling on the last calendar day of the preceding calendar month of Completion

the date of issuing the new business license of Zhiguang in respect of the transfer of entire equity interest in Zhiguang from the Vendor to the Purchaser

the conditions precedent to completion of the Disposal

has the meaning ascribed to it under the Listing Rules

director(s) of the Company

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''Disposal''

''Escrow Account''

''Finance Lease''

''First Payment''

''Group''

''Hebei Finance''

''Hong Kong'' ''Listing Rules''

''MW''

''PRC''

''Purchaser''

''Reference Date'' ''RMB'' ''Setoff Amount''

''Share(s)''

''Shareholders''

''Shareholder's Loan''

''Stock Exchange''

''Transition Period Audit''

the sale of entire equity interest in Zhiguang by the Vendor to the Purchaser

a bank account jointly controlled and operated by the Purchaser and the Vendor

the finance lease under the agreement dated 25 April 2017 entered into between Zhiguang and Hebei Finance

an amount equal to 90% of the Adjusted Consideration less the Setoff Amount

the Company and its subsidiaries

河北省金融租賃有限公司 (Hebei Finance Lease Co., Ltd.*), a company established in the PRC with limited liability

the Hong Kong Special Administrative Region of the PRC

the Rules Governing the Listing of Securities on the Stock Exchange

mega watts

the People's Republic of China

國投電力控股股份有限公司 (Guotou Electric Holding Co., Ltd.*), a company established in the PRC and listed on Shanghai Stock Exchange

31 May 2020

Renminbi, the lawful currency of the PRC

a maximum amount of RMB5,200,000 payable by the Purchaser to the Vendor subject to certain rectification work being completed and passed the inspection check

ordinary shares of the Company

holders of the Shares

the outstanding loans, advances, interests (if any) and other sums owed by Zhiguang to the Vendor

The Stock Exchange of Hong Kong Limited

an audit to be performed by an independent auditor with respect to Zhiguang from the Reference Date to the Completion Account Date

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''Vendor''	江山永泰投資控股有限公司 (Kong Sun Yongtai Investment
	Holdings Limited*), a company established in the PRC with
	limited liability and an indirect wholly-owned subsidiary of
	the Company
''Zhiguang''	靖邊縣智光新能源開發有限公司 (Jingbian Zhiguang New
	Energy Development Co., Ltd.*), a company established in
	the PRC with limited liability and an indirect wholly-owned
	subsidiary of the Company as at the date of this
	announcement
''Zhiguang Project''	a 50 MW solar power plant owned by Zhiguang in Yulin
	City, Shannxi Province, PRC
''%''	per cent.
	By Order of the Board of Directors of
	Kong Sun Holdings Limited
	Mr. Jin Yanbing
	Executive Director

Hong Kong, 21 September 2020

As of the date of this announcement, the Board comprises two executive Directors, Mr. Jin Yanbing and Mr. Qin Hongfu, one non-executive Director, Mr. Jiang Hengwen and three independent non-executive Directors, Mr. Lang Wangkai, Ms. Wang Fang and Ms. Wu Wennan.

• For identification purposes only

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