CECEP COSTIN New Materials : Announcements and Notices - Inside Information and Update on Financial Situation

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CECEP COSTIN NEW MATERIALS GROUP LIMITED

中國節能海東青新材料集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2228) INSIDE INFORMATION AND UPDATE ON FINANCIAL SITUATION

This announcement is made by CECEP COSTIN New Materials Group Limited (the "Company" together with its subsidiaries, the "COSTIN Group") pursuant to Rules 13.09 and 13.19 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and the provisions of inside information under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong).

UPDATE ON FINANCIAL SITUATION

Reference is made to the Company's announcements dated 22 and 30 August 2016, 22 and 30

September 2016, 14, 20 and 27 October 2016, 11 and 29 November 2016 and 13 and 16 December 2016 (the "Announcements"). Unless otherwise defined, capitalized terms used in this announcement shall have the same meanings as defined in the Announcements.

In addition to the defaults in repayments of borrowings as disclosed in the Announcements, certain subsidiaries of the Company in the PRC were unable to repay certain borrowings of approximately RMB105.0 million that have fallen due and resulted in the defaults in repayments. As certain previously outstanding bank borrowings were offset by certain pledged deposits made by these PRC subsidiaries against such borrowings, the total amount of borrowings that have fallen due owed by the Company's subsidiaries in the PRC is approximately RMB690.8 million as at the date of this announcement. As a result of such defaults in payments to the PRC creditors, the total amount of bank balances of the Group being frozen by these PRC creditors amounted to approximately RMB1.1 million as at the date of this announcement and cannot be withdrawn. The total amount of borrowings that have fallen due owed by the Company and its subsidiaries in Hong Kong is approximately HK$224.9 million as at the date of this announcement as certain previously outstanding bank borrowings were offset by certain bank deposits made by these Hong Kong subsidiaries against such

borrowings. As a result of such defaults in payments to the Hong Kong creditors, the total amount of bank balances of the Group being frozen by these Hong Kong creditors amounted to approximately HK$0.3 million as at the date of this announcement and cannot be withdrawn. The Company is currently assessing the impact of the above and any potential default on other borrowings. As a result, it may further trigger cross-default of other borrowings, which may in turn have material adverse impact on the financial position of the COSTIN Group.

CORPORATE GUARANTEES PROVIDED TO COMPANIES NOT WITHIN THE COSTIN GROUP

The Board recently discovered that Xinhua Co., a PRC subsidiary of the Company, had provided corporate guarantees in favour of companies not within the COSTIN Group, with the aggregate maximum guarantee amounts of approximately RMB196.5 million (the "Guarantees").

In addition, the Board has recently received two judgement letters (判決書) issued by the PRC courts ordering that Xinhua Co. be jointly liable to repay, as one of the guarantors, approximately RMB15.5 million (together with accrued interest until full payment) and RMB0.3 million (together with accrued interest until full payment), respectively to certain banks in the PRC (the "Judgements") for corporate guarantees in the aggregate maximum amount of approximately RMB38.4 million, being part of the maximum guarantee amount provided under the Guarantees, given in favour of certain companies not within the COSTIN Group.

The Board is currently trying to ascertain the situation and seeking legal opinions regarding the Judgements and the Guarantees.

The Company will keep its shareholders and investors informed of developments in relation to the borrowings, the Investigation, the COSTIN Group's financial position and other matters by way of further announcement(s) as and when appropriate.

SUSPENSION OF TRADING OF THE SHARES

At the request of the Company, trading in the shares of the Company on the Stock Exchange has been suspended with effect from 3:17 p.m. on 15 August 2016. Trading in the shares of the Company will continue to be suspended until further notice and full satisfaction of the Resumption Conditions and such other further conditions that may be imposed by the Stock Exchange.

Shareholders of the Company and potential investors are advised to exercise caution when dealing in the shares of the Company.

By order of the Board

CECEP COSTIN New Materials Group Limited Chan Kwok Yuen Elvis

Company Secretary

Hong Kong, 5 January 2017

As at the date of this announcement, the Board comprises four executive Directors, Mr. Wang Li, Mr. Chim Wai Kong (suspended), Mr. Chim Wai Shing Jackson and Mr. Xue Mangmang; two non- executive Directors, Mr. Zeng Wu and Ms. Ma Yun; and three independent non-executive Directors, Mr. Feng Xue Ben, Mr. Wong Siu Hong and Mr. Xu Qinghua.