Design Capital : UPDATE ON USE OF NET PROCEEDS AND SUPPLEMENTAL ANNOUNCEMENT IN RELATION TO THE ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2019 AND THE ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2020

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.

Design Capital Limited

設 計 都 會 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1545)

UPDATE ON USE OF NET PROCEEDS

AND

SUPPLEMENTAL ANNOUNCEMENT IN RELATION TO

THE ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2019

AND THE ANNOUNCEMENT OF INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

Reference is made to (i) the annual report of Design Capital Limited (the ''Company'', and, together with its subsidiaries, the ''Group'') for the year ended 31 December 2019 (the ''2019 Annual Report''), (ii) the announcement of interim results for the six months ended 30 June 2020 dated 21 August 2020 (the ''2020 Interim Results'') and (iii) the prospectus of the Company dated 11 April 2019 (the ''Prospectus'').

USE OF NET PROCEEDS FROM LISTING

Regarding the information disclosed under the sections headed ''Use of Net Proceeds from Listing'' in the 2019 Annual Report and the 2020 Interim Results, the board (the ''Board'') of directors of the Company (the ''Directors'') would like to provide additional information in relation to the use of net proceeds from the listing of the Company's securities on The Stock Exchange of Hong Kong Limited (the ''Stock Exchange'') on 25 April 2019 (''Net Proceeds'') as follows:

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Original

Expected timeline

Expected timeline

allocation of

Revised

Total

for utilising

for utilising

Net Proceeds

allocation

Amount

remaining

remaining

as disclosed

based on the

utilised from

Unutilised

Net Proceeds

Net Proceeds

in the

actual Net

Listing to 30

balance as at

as disclosed

as at date of this

Percentage

Prospectus

Proceeds

June 2020

30 June 2020

in Prospectus

announcement

%

Approximate

Approximate

Approximate

Approximate

HK$'000

HK$'000

HK$'000

HK$'000

U.S. furniture sales segment:

procurement of inventory

62.1%

79,700

65,351

29,698

35,653

On or before

On or before

31 December 2021

31

December 2021

increase our sales and marketing

8.4%

10,800

8,840

2,824

6,016

On or before

On or before

efforts to further enhance

31 December 2021

31

December 2021

brand loyalty, reputation and

brand recognition

storage of new products to be

3.5%

4,400

3,683

674

3,009

On or before

On or before

procured

31 December 2021

31

December 2021

Furniture sales segment:

paying the rental expenses,

10.3%

13,200

10,839

-

10,839

On or before

On or before

overhead expenses and capital

31 December 2021

31

December 2022

expenditure for opening two

(Note 1)

new points of sale in

Singapore under the brands

''OM'' and ''Lifestorey''

procurement of inventory

2.9%

3,800

3,052

-

3,052

On or before

On or before

for our new points of sale

31 December 2020

31

December 2021

(Note 1)

enhancing our brand awareness

2.5%

3,100

2,631

-

2,631

On or before

On or before

including brand building

31 December 2021

31

December 2023

campaign

(Note 1)

expansion of our warehouse

2.0%

2,600

2,105

-

2,105

On or before

On or before

in Singapore

31 December 2021

31

December 2022

(Note 1)

General working capital

8.3%

10,700

8,734

494

8,240

N/A

On or before

of our Group

31

December 2023

(Note 2)

Total

100.0%

128,300

105,235

33,690

71,545

Note 1 As disclosed in the Prospectus, points of sale under the brands ''OM'' and ''Lifestorey'' are expected to be opened in the central area of Singapore in the fourth quarter of 2019, and the west of Singapore in the fourth quarter of 2020, respectively and each new point of sale is expected to be approximately 10,000 sq.ft.. However due to challenging operating environment in Singapore in view of the economic slowdown in the second half of 2019 and impact of the Novel Coronavirus (''COVID-19'') in 2020 resulting in a global recession in the second quarter of 2020, the Group is closely monitoring the market and economic situation, assessing the long term impact of COVID-19 on our physical showrooms and currently reviewing the opening of the two additional showrooms. As the market is volatile and uncertain and it may take some time before the economy stabilises, the Group has decided to temporarily delay the application of the unutilised Net Proceeds for the furniture sales segment in Singapore, and will make responsible decisions to ensure that the furniture sales segment can contribute to the Group's performance. If there is any decision to open new showrooms, the Group expects that it is likely that the Net Proceeds in relation to the furniture sales segment will only be utilised by the end of 2023 on the assumption that two new points of sale would be opened in 2021 and 2022 respectively.

As part of its strategic review, the Group is also exploring other options in terms of using its Net Proceeds to pursue other growth opportunities in the furniture retail segment including investing in enhancing its IT infrastructure and e-commerce capability and optimising the use of its current showrooms by enhancing the showroom design and layouts and its product lines and bringing in new brands. The Company shall make announcement if there is a concrete plan on change of the intention of use of proceeds for this part accordingly.

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Note 2 In view of the global recession that has rocked the global economies as a result of COVID-19, the Group is prudent in conserving cash flow and will be using its general working capital cautiously towards building its human resources, back-end, office and IT infrastructure to support the growth of its post COVID-19 business in line with what has been disclosed in the Prospectus.

Barring any unforeseen circumstances, the Group intends to utilise the general working capital of our Group on or before 31 December 2023.

In conclusion, the Group will closely monitor the volatile and dynamic market conditions, perform strategic reviews on its furniture retail segment, evaluate all strategic options to address post COVID-19 environment and shall utilise the remaining Net Proceeds cautiously as and when appropriate. The expected timeline as stated in this announcement is based on the Board's best estimation with reference to the present and future market conditions barring unforeseen circumstances, and may be subject to revision based on future development of market conditions.

Save as disclosed above, during the year ended 31 December 2019 and the six months ended 30 June 2020, the actual application for the Net Proceeds were used and intended to be used by the Company in line with plans as set out in the Prospectus. Should there be any material change in the intended use of Net Proceeds, the Company will make appropriate announcement in due course.

DEED OF NON-COMPETITION

As disclosed in the Prospectus, Nobel Design International Limited, Mr. Goon Eu Jin Terence and Ms. Wee Ai Quey (the ''Controlling Shareholders'') have entered into a deed of non-competition in favour of the Group on 29 March 2019 (the ''Deed of Non- Competition'').

Further to the information disclosed in the 2019 Annual Report, the Board wishes to provide the following supplemental information regarding the compliance of the Deed of Non-Competition by the Controlling Shareholders.

In order to further avoid potential conflicts of interests and ensure compliance of the Deed of Non-Competition, the following measures have been implemented by the Company:

1. the independent non-executive Directors have reviewed the compliance with the Deed of Non-Competition by each of the Controlling Shareholder during the year ended 31 December 2019, and confirmed that to the best of their knowledge, the Deed of Non- Competition has been duly complied with by each of the Controlling Shareholder for the year ended 31 December 2019;
2. no competing business was reported by the Controlling Shareholders for the year ended 31 December 2019, as such there was no matter that required review by the independent non-executive Directors relating to the compliance and enforcement of the Deed of Non-Competition; and
3. each of the Controlling Shareholder has confirmed to the Company that they have complied with their undertaking under the Deed of Non-Competition for the year ended 31 December 2019.

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Save as disclosed in this announcement, the contents of the 2019 Annual Report and the 2020 Interim Results remain unchanged.

By Order of the Board

Design Capital Limited

Goon Eu Jin Terence

Chairman and Executive Director

Hong Kong, 11 September 2020

As at the date of this announcement, the Board comprises Goon Eu Jin Terence, Wee Ai Quey and Ong Ciu Hwa as executive Directors, Kho Chuan Thye Patrick and Lim Sooi Kheng Patrick as non-executive Directors, and Lim Boon Cheng, Ng Chee Kwong, Colin and Wee Kang Keng as independent non-executive Directors.

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