Sinofert : Announcements and Notices - ANNOUNCEMENT - REVISION OF ANNUAL CAP FOR CONTINUING CONNECTED TRANSACTIONS UNDER THE AGRICHEMICAL FRAMEWORK AGREEMENT

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中化化肥控股有限公司 *

(Incorporated in Bermuda with limited liability)

Reference is made to the announcement of the Company dated 9 December 2016 in relation to, among other things, the Agrichemical Framework Agreement entered into between Sinochem Fertilizer, an indirect wholly-owned subsidiary of the Company, and Sinochem Group (for and on behalf of its associates). Pursuant to the Agrichemical Framework Agreement, the associates of Sinochem Group have been selling to and/or purchasing from, and will continue to sell to and/or purchase from, Sinochem Fertilizer certain agrichemical, seed and other related products during the period from 1 January 2017 to 31 December 2017 (both days inclusive).

The Company estimates that the transaction amount under the Agrichemical Framework Agreement for the year ending 31 December 2017 will exceed the Original Annual Cap. As such, the Company intends to revise the annual cap for the year ending 31 December 2017 for the transactions under the Agrichemical Framework Agreement. As at the date of this announcement, the transaction amount of the continuing connected transactions under the Agrichemical Framework Agreement has not exceeded the Original Annual Cap.

Sinochem Fertilizer is an indirect wholly-owned subsidiary of the Company. Sinochem Group is the ultimate controlling shareholder of the Company holding an effective interest of approximately 52.65% of the Company, and is therefore a connected person of the Company. Pursuant to Chapter 14A of the Listing Rules, the transactions contemplated under the Agrichemical Framework Agreement constitute continuing connected transactions of the Company. Given that the relevant applicable percentage ratios in respect of the revised annual cap for continuing connected transactions contemplated under the Agrichemical Framework Agreement are more than 0.1% but less than 5%, such transactions are subject to the reporting, announcement and annual review requirements but are exempt from the independent shareholders' approval requirement under the Listing Rules.

Reference is made to the announcement of the Company dated 9 December 2016 in relation to, among other things, the Agrichemical Framework Agreement entered into between Sinochem Fertilizer, an indirect wholly-owned subsidiary of the Company, and Sinochem Group (for and on behalf of its associates). Pursuant to the Agrichemical Framework Agreement, the associates of Sinochem Group have been selling to and/or purchasing from, and will continue to sell to and/or purchase from, Sinochem Fertilizer certain agrichemical, seed and other related products during the period from 1 January 2017 to 31 December 2017 (both days inclusive).

The Company estimates that the transaction amount under the Agrichemical Framework Agreement for the year ending 31 December 2017 will exceed the Original Annual Cap. As such, the Company intends to revise the annual cap for the year ending 31 December 2017 for the transactions under the Agrichemical Framework Agreement. As at the date of this announcement, the transaction amount of the continuing connected transactions under the Agrichemical Framework Agreement has not exceeded the Original Annual Cap.

9 December 2016

1. Sinochem Fertilizer

2. Sinochem Group (for and on behalf of its associates)

Pursuant to the Agrichemical Framework Agreement, the associates of Sinochem Group have been selling to and/or purchasing from, and will continue to sell to and/or purchase from, Sinochem Fertilizer certain agrichemical, seed and other related products.

Pursuant to the Agrichemical Framework Agreement, prices of agrichemical, seed and other related products shall be determined with reference to fair market prices of the products within the PRC at the time when Sinochem Fertilizer or the relevant associate of Sinochem Group submits its purchase plan for the relevant products.

In determining the fair market price for the purchase and sale of agrichemical, seed and other related products, the Group generally makes reference to weekly reports published by certain independent commodity information providers such as Baichuan (百 川 資 訊). Such reports, usually updated on a weekly basis and available to the Group by subscription, provide up to date information on market trend and prevailing market prices. The Group also refers to the China Pesticide Information Network, the website of the Institute for the Control of Agrochemicals, the Ministry of Agriculture of the PRC, for the regulatory updates and latest news of the agrichemical industry. In addition, the Group maintains regular contacts with producers, distributors and traders of agrichemical, seed and other related products, keeping abreast of the latest prices of agrichemical, seed and other related products.

With respect to the purchase of agrichemical, seed and other related products, the Group usually obtains reference prices from three or more suppliers before placing a purchase order with the relevant associate of Sinochem Group. The Group also takes into account the demand of its downstream customers when determining the prices of the transactions.

With respect to the sale of agrichemical, seed and other related products, the Group will take into account the purchase prices from its upstream suppliers, and the terms (including the prices) of the sale of agrichemical, seed and other related products by Sinochem Fertilizer to the relevant associate of Sinochem Group will be no less favourable to the Group than those entered into by the Group with independent third parties.

The purchase and sale prices will be reported to the manager of the distribution business department of Sinochem Fertilizer, and then submitted to the person in charge of purchase and sale of agrichemical of Sinochem Fertilizer for approval.

As the purchase and sale process involves reference to industry reports as well as up to date market prices as mentioned above, the Company considers that the methods and procedures adopted above can ensure that the transactions will be conducted on normal commercial terms and not prejudicial to the interests of the Company and its minority shareholders.

Sinochem Fertilizer shall enter into specific agreements with the relevant associate of Sinochem Group pursuant to the Agrichemical Framework Agreement in relation to the type, quantities, price and delivery schedule of the agrichemical, seed and other related products. Payments for agrichemical, seed and other related products shall mainly be settled by way of payment on delivery or advance payment.

The term of the Agrichemical Framework Agreement is from 1 January 2017 to 31 December 2017 (both days inclusive). Both parties may, on mutual agreement, renew the Agrichemical Framework Agreement with the same terms upon the expiry thereof.

Sinochem Fertilizer is in the process of negotiating the renewal of the Agrichemical Framework Agreement with Sinochem Group, and the Company will make further announcement in this regard in due course.

Given that transaction amount of the continuing connected transactions under the Agrichemical Framework Agreement for the ten months ended 31 October 2017 has amounted to RMB8,837,000, and it is expected that the demand of Sinochem Fertilizer will continue to increase during the remaining term of the Agrichemical Framework Agreement, the Company estimates that the transaction amount under the Agrichemical Framework Agreement for the year ending 31 December 2017 will exceed the Original Annual Cap. As such, the Company intends to revise the annual cap for the year ending 31 December 2017 for the transactions under the Agrichemical Framework Agreement from RMB11,250,000 to RMB15,250,000 (including the annual cap of RMB15,050,000 for the purchase of agrichemical, seed and other related products by Sinochem Fertilizer from the associates of Sinochem Group, and the annual cap of RMB200,000 for the sale of agrichemical, seed and other related products by Sinochem Fertilizer to the associates of Sinochem Group). Such revised annual cap is determined based on the current transaction amount, and the projected type, volume and market price of agrichemical, seed and other related products.

The historical amounts of the purchase of agrichemical, seed and other related products by Sinochem Fertilizer from the associates of Sinochem Group for the two years ended 31 December 2016 and the ten months ended 31 October 2017 were approximately RMB9,886,000, RMB9,059,000 and RMB8,837,000, respectively. No historical transaction of the sale of agrichemical, seed and other related products by Sinochem Fertilizer to the associates of Sinochem Group was conducted for the two years ended 31 December 2016 and the ten months ended 31 October 2017.

As at the date of this announcement, the transaction amount of the continuing connected transactions under the Agrichemical Framework Agreement has not exceeded the Original Annual Cap.

The associates of Sinochem Group can provide high quality agrichemical, seed and other related products and offer excellent after-sale services, and the products provided are highly recognized and demanded by the market; moreover, Sinofert Fertilizer has procurement channels for quality agrichemical raw materials, and can expand its revenue sources through providing the required agrichemical raw materials for the associates of Sinochem Group. As such, Sinofert Fertilizer entered into the Agrichemical Framework Agreement with Sinochem Group (for and on behalf of its associates).

The Directors, including the independent non-executive Directors, are of the view that the continuing connected transactions contemplated under the Agrichemical Framework Agreement have been conducted on normal commercial terms, were entered into in the ordinary and usual course of business of the Group, are fair and reasonable and in the interests of the Company and its shareholders as a whole, and that the revised annual cap for the continuing connected transactions contemplated under the Agrichemical Framework Agreement is fair and reasonable.

Mr. Zhang Wei and Mr. Yang Lin, being Directors of the Company and management members of Sinochem Group, have abstained from voting on the relevant Board resolutions passed to approve the transactions contemplated under the Agrichemical Framework Agreement and the revised annual cap for the year ending 31 December 2017.