Ko Yo Chemical : Business Update

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Ko Yo Chemical (Group) Limited

玖 源 化 工 (集 團) 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 00827)

BUSINESS UPDATE

This announcement is made by Ko Yo Chemical (Group) Limited (the "Company", together with its subsidiaries, the "Group") on a voluntary basis.

The Company wishes to update the shareholders and potential investors of the Company on the recent developments of the negotiations with the relevant banks on the renewals of certain loans extended to the Group:

1. On 24 September 2019, Dazhou Ko Yo Chemical Co., Ltd. ("Dazhou Koyo"), a wholly owned subsidiary of the Company, entered into a supplemental loan agreement with China Minsheng Bank ("Minsheng Bank") for the principal loan amount of RMB49,000,000, repayable on 26 July 2020 ("Dazhou Loan"), which was secured by a pledged deposit in the sum of RMB9,000,000 (the "Pledged Deposit"), and guaranteed by a number of guarantors. Minsheng Bank instituted legal action against Dazhou Koyo as a result of the legal action filed by a supplier of Dazhou Koyo (which has since been liquidated) for the failure of Dazhou Koyo to settle a sum of approximately RMB3,490,000 being the consideration payable for the purchase of the yet to be delivered equipment. During the renewal process of the Dazhou Loan, the Company became aware that one of the guarantors declined to continue to provide guarantee for the Dazhou Loan. As at the date of this announcement, the Company is negotiating with Minsheng Bank to renew the Dazhou Loan, and Minsheng Bank is withholding any further legal actions pending the negotiations of the renewal of the Dazhou Loan.
2. On 22 December 2017, Sichuan Ko Yo Agrochem Co., Ltd. ("Koyo Agrochem"), a wholly owned subsidiary of the Company, entered into a loan agreement with the Bank of Communications Limited ("BOCOM") for an aggregate principal loan amount of RMB68,000,000 ("Agrochem Loan A") for a term of six months, which shall be subject to renewal every six months. During the review of the Agrochem Loan A, the Company became aware that one of the guarantors declined to continue to provide guarantee in respect of the Agrochem Loan A. As a result of the change in guarantor, BOCOM

initiated legal action against Koyo Agrochem and all the guarantors. As at the date of this announcement, the Company is negotiating with BOCOM to renew the Agrochem Loan A, and BOCOM is withholding any further legal actions pending the negotiations of the renewal of the Agrochem Loan A.

C. On 4 May 2016, Koyo Agrochem entered into a loan agreement with the Bank of Shanghai Co., Ltd. Chengdu Branch ("Bank of Shanghai") for an aggregate principal loan amount of RMB60,000,000 ("Agrochem Loan B") for a term of one year, which shall be subject to renewal every year. During the review of the Agrochem Loan B, the Company became aware that one of the guarantors declined to continue to provide guarantee in respect of the Agrochem Loan B. As a result of the change in guarantor, Bank of Shanghai initiated legal action against Koyo Agrochem and all the guarantors; and the legal action was subsequently dismissed on 11 December 2019. As at the date of this announcement, the Company is negotiating with Bank of Shanghai to renew the Agrochem Loan B.

1. Reference is made to the announcements dated 19 October 2018, 31 October 2018 and 1 April 2019 of the Company, in relation to, among others, the three loan agreements entered into between, among others, Dazhou Koyo and the Bank of Dalian Co., Ltd. ("Bank of Dalian") for the aggregate principal loan amount of RMB80,000,000 (the "Loans"). On 25 March 2020, Dazhou Koyo and the Bank of Dalian entered into agreements to renew the Loans, pursuant to which the maturity dates of the Loans were extended to 24 March 2021.

As at the date of this announcement, the Company is negotiating with Minsheng Bank, BOCOM and Bank of Shanghai to renew the terms of the Dazhou Loan, the Agrochem Loan A and the Agrochem Loan B. The Company considers that the above matters will not have any material adverse impact on the overall financial and operation conditions of the Group regardless the outcome of the above-mentioned actions. Further announcement will be made to update on the progress of the matters as and when appropriate.

By Order of the Board

Ko Yo Chemical (Group) Limited

Chairman

Tang Guoqiang

Hong Kong, 15 September 2020

As at the date of this announcement, the Board comprises three executive directors, being Mr. Tang Guoqiang, Mr. Shi Jianmin and Mr. Zhang Weihua; and three independent non-executive directors being Mr. Hu Xiaoping, Mr. Shi Lei and Mr. Xu Congcai.

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