Common use of REASONS FOR THE TRANSACTIONS Clause in Contracts

REASONS FOR THE TRANSACTIONS. The principal activities of the Group are the manufacture and supply of ethylene oxide, ethylene glycol, polypropylene, methyl tert-butyl ether and surfactants in the PRC. The Group is also engaged in the provision of processing services for polypropylene, methyl tert-butyl ether and surfactants to its customers and the production and supply of other chemical products such as C4, pentene and industrial gases, namely oxygen, nitrogen gas and argon in the PRC. Jiafu New Material, a company established in the PRC with limited liability, is a wholly-owned subsidiary of Jiahua Energy Chemical Co. and Jiahua Energy Chemical Co. is a limited liability company established in the PRC and is principally engaged in the business of production and trading of desalinated water, steam, chlorine gas and sulfuric acid. Jiahua Energy Chemical Co. is currently listed on the Shanghai Stock Exchange (stock code: 600273). Other than Jiahua, there are no other shareholders who individually hold 10% or above interests in Jiahua Energy Chemical Co.. Reasons for entering into Sanjiang Chemical Toluene Sales Agreement The entering into of the Sanjiang Chemical Toluene Sales Agreement will enable the Group to extend its business relationships between the Group and Jiahua Energy Chemical Co. and its wholly-owned subsidiary, Jiafu New Material, and further bring synergies to the parties. In addition, as the production base of the Group is situated close to that of Jiahua Energy Chemical Co. and its wholly-owned subsidiary, Jiafu New Material, the delivery costs of goods to be borne by the Group can be reduced. The Sanjiang Chemical Toluene Sales Agreement is non-exclusive and non-compulsory in nature, which allows the Group to maximize the usage of its relevant production facilities for toluene production at the time of having spare capacity. In view of the foregoing reasons, the Group entered into the Sanjiang Chemical Toluene Sales Agreement with Jiafu New Material. The Directors (including the independent non-executive Directors) are of the view that the terms and conditions of Sanjiang Chemical Toluene Sales Agreement are fair and reasonable and on normal commercial terms and in the ordinary and usual course of business of the Group and that the entering into Sanjiang Chemical Toluene Sales Agreement is in the interests of the Company and its Shareholders as a whole. LISTING RULES IMPLICATION Jiafu New Material, a company established in the PRC with limited liability, is a wholly-owned subsidiary of Jiahua Energy Chemical Co. and Jiahua Energy Chemical Co. is owned as to approximately 36.77% by Xxxxxx, which is ultimately controlled by Xx. Xxxx and Xx. Xxx. As Xx. Xxx is the wife of Xx. Xxxx and is an executive Director and Xx. Xxxx is a controlling Shareholder of the Company, each of Jiahua Energy Chemical Co. and Jiafu New Material is therefore an associate of Xx. Xxxx and Xx. Xxx and is thus a connected person of the Company and the transactions contemplated under Sanjiang Chemical Toluene Sales Agreement constitute continuing connected transaction(s) of the Company under Chapter 14A of the Listing Rules. As the applicable ratios in respect of the consideration under the Sanjiang Chemical Toluene Sales Agreement are less than 5%, the Sanjiang Chemical Toluene Sales Agreement and the transactions contemplated thereunder are therefore subject to reporting and announcement requirements but are exempt from the circular (including independent financial advice) and the independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

REASONS FOR THE TRANSACTIONS. The principal activities of the Group are the manufacture and supply of ethylene oxide, ethylene glycol, polypropylene, methyl tert-butyl ether and surfactants in the PRC. The Group is was also engaged in the provision of processing services for polypropylene, methyl tert-butyl ether and surfactants to its customers and the production and supply of other chemical products such as C4, pentene and industrial gases, namely oxygen, nitrogen gas and argon in the PRC. Jiafu Jiahua New Material, a company established in the PRC with limited liability, is a directly wholly-owned subsidiary of Jiahua Energy Chemical Co. and Jiahua Energy Chemical Co. is a limited liability company established in the PRC and is principally engaged in the business of production and trading of desalinated water, steam, chlorine gas and sulfuric acid. Jiahua Energy Chemical Co. is currently listed on the Shanghai Stock Exchange (stock code: 600273). Other than Jiahua, there are no other shareholders who individually hold more than 10% or above interests in Jiahua Energy Chemical Co.. Reasons for entering into Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement The entering into of the Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement will enable the Group to extend its business relationships between the Group and Jiahua Energy Chemical Co. and its wholly-owned subsidiary, Jiafu Jiahua New Material, and further bring synergies to the parties. In addition, as the production base of the Group is situated close to that of Jiahua Energy Chemical Co. and its wholly-owned subsidiary, Jiafu Jiahua New Material, the delivery costs of goods to be borne by the Group can be reduced. The Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement is non-exclusive and non-compulsory in nature, which allows the Group to maximize the usage of its relevant production facilities for toluene gas production at the time of having spare capacity. In view of the foregoing reasons, the Group entered into the Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement with Jiafu Jiahua New Material. The Directors (including the independent non-executive Directors) are of the view that the terms and conditions of Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement are fair and reasonable and on normal commercial terms and in the ordinary and usual course of business of the Group and that the entering into Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement is in the interests of the Company and its Shareholders as a whole. LISTING RULES IMPLICATION Jiafu Jiahua New Material, a company established in the PRC with limited liability, is a directly wholly-owned subsidiary of Jiahua Energy Chemical Co. and Jiahua Energy Chemical Co. is owned as to approximately 36.77% by Xxxxxx, which is ultimately controlled by Xx. Xxxx and Xx. Xxx. As Xx. Xxx is the wife of Xx. Xxxx and is an executive Director and Xx. Xxxx is a controlling Shareholder of the Company, each of Jiahua Energy Chemical Co. and Jiafu Jiahua New Material is therefore an associate of Xx. Xxxx and Xx. Xxx and is thus a connected person of the Company and the transactions contemplated under Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement constitute continuing connected transaction(s) of the Company under Chapter 14A of the Listing Rules. As the applicable ratios in respect of the consideration under the Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement are less than 5%, the Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement and the transactions contemplated thereunder are therefore subject to reporting and announcement requirements but are exempt from the circular (including independent financial advice) and the independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

REASONS FOR THE TRANSACTIONS. The principal activities of the Group are the manufacture and supply of ethylene oxide, ethylene glycol, polypropylene, methyl tert-butyl ether and surfactants in the PRC. The Group is was also engaged in the provision of processing services for polypropylene, methyl tert-butyl ether and surfactants to its customers and the production and supply of other chemical products such as C4, pentene and industrial gases, namely oxygen, nitrogen gas and argon in the PRC. Jiafu Jiahua New Material, a company established in the PRC with limited liability, is a directly wholly-owned subsidiary of Jiahua Energy Chemical Co. and Jiahua Energy Chemical Co. is a limited liability company established in the PRC and is principally engaged in the business of production and trading of desalinated water, steam, chlorine gas and sulfuric acid. Jiahua Energy Chemical Co. is currently listed on the Shanghai Stock Exchange (stock code: 600273). Other than Jiahua, there are no other shareholders who individually hold more than 10% or above interests in Jiahua Energy Chemical Co.. Reasons for entering into Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement The entering into of the Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement will enable the Group to extend its business relationships between the Group and Jiahua Energy Chemical Co. and its wholly-owned subsidiary, Jiafu Jiahua New Material, and further bring synergies to the parties. In addition, as the production base of the Group is situated close to that of Jiahua Energy Chemical Co. and its wholly-owned subsidiary, Jiafu Jiahua New Material, the delivery costs of goods to be borne by the Group can be reduced. The Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement is non-exclusive and non-compulsory in nature, which allows the Group to maximize the usage of its relevant production facilities for toluene gas production at the time of having spare capacity. In view of the foregoing reasons, the Group entered into the Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement with Jiafu Jiahua New Material. The Directors (including the independent non-executive Directors) are of the view that the terms and conditions of Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement are fair and reasonable and on normal commercial terms and in the ordinary and usual course of business of the Group and that the entering into Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement is in the interests of the Company and its Shareholders as a whole. LISTING RULES IMPLICATION Jiafu Jiahua New Material, a company established in the PRC with limited liability, is a directly wholly-owned subsidiary of Jiahua Energy Chemical Co. and Jiahua Energy Chemical Co. is owned as to approximately 36.7740.86% by Xxxxxx, which is ultimately controlled by Xx. Xxxx and Xx. Xxx. As Xx. Xxx is the wife of Xx. Xxxx and is an executive Director and Xx. Xxxx is a controlling Shareholder of the Company, each of Jiahua Energy Chemical Co. and Jiafu New Material is therefore an associate of Xx. Xxxx and Xx. Xxx and is thus a connected person of the Company and the transactions contemplated under Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement constitute continuing connected transaction(s) of the Company under Chapter 14A of the Listing Rules. Pursuant to Rule 14A.81 of the Listing Rules, the proposed annual caps under (a) the Sanjiang Chemical Nitrogen Gas Sales Agreement of amount RMB1,900,000 for the year ending 31 December 2021; and (b) the (5) Sanjiang Chemical Gas and Miscellaneous Materials Sales Agreement of amount RMB30,000,000 for the three years ending 31 December 2023 as set out in the Announcement, are aggregated as (i) they were entered into between Sanjiang Chemical, as supplier, and members of a connected person (i.e. Jiahua Energy Chemical Co. and Jiahua New Material), as customers; and (ii) they are of a similar nature relating to the supply of nitrogen gas by Sanjiang Chemical to members of the same connected person (i.e. Jiahua Energy Chemical Co. and Jiahua New Material) with similar pricing mechanism and, therefore, total proposed annual cap under the Sanjiang Chemical Nitrogen Gas Sales Agreement and the (5) Sanjiang Chemical Gas and Miscellaneous Materials Sales Agreement is RMB31,900,000 for the year ending 31 December 2021. As one or more of the applicable ratios in respect of the consideration aggregated proposed annual cap under the Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement and the (5) Sanjiang Chemical Gas and Miscellaneous Materials Sales Agreement of amount RMB31,900,000 for the year ending 31 December 2021 are more than 0.1% but less than 5%, the transactions contemplated under the Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement and the transactions contemplated thereunder (5) Sanjiang Chemical Gas and Miscellaneous Materials Sales Agreement are therefore subject to reporting the reporting, announcement and announcement annual review requirements but are exempt from the circular (including independent financial advice) and the independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

REASONS FOR THE TRANSACTIONS. The principal activities of the Group are the manufacture and supply of ethylene oxide, ethylene glycol, polypropylene, methyl tert-butyl ether and surfactants in the PRC. The Group is was also engaged in the provision of processing services for polypropylene, methyl tert-butyl ether and surfactants to its customers and the production and supply of other chemical products such as C4, pentene and industrial gases, namely oxygen, nitrogen gas and argon in the PRC. Jiafu Jiahua New Material, a company established in the PRC with limited liability, is a directly wholly-owned subsidiary of Jiahua Energy Chemical Co. and Jiahua Energy Chemical Co. is a limited liability company established in the PRC and is principally engaged in the business of production and trading of desalinated water, steam, chlorine gas and sulfuric acid. Jiahua Energy Chemical Co. is currently listed on the Shanghai Stock Exchange (stock code: 600273). Other than Jiahua, there are no other shareholders who individually hold more than 10% or above interests in Jiahua Energy Chemical Co.. Reasons for entering into Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement The entering into of the Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement will enable the Group to extend its business relationships between the Group and Jiahua Energy Chemical Co. and its wholly-owned subsidiary, Jiafu Jiahua New Material, and further bring synergies to the parties. In addition, as the production base of the Group is situated close to that of Jiahua Energy Chemical Co. and its wholly-owned subsidiary, Jiafu Jiahua New Material, the delivery costs of goods to be borne by the Group can be reduced. The Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement is non-exclusive and non-compulsory in nature, which allows the Group to maximize the usage of its relevant production facilities for toluene gas production at the time of having spare capacity. In view of the foregoing reasons, the Group entered into the Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement with Jiafu Jiahua New Material. The Directors (including the independent non-executive Directors) are of the view that the terms and conditions of Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement are fair and reasonable and on normal commercial terms and in the ordinary and usual course of business of the Group and that the entering into Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement is in the interests of the Company and its Shareholders as a whole. LISTING RULES IMPLICATION Jiafu Jiahua New Material, a company established in the PRC with limited liability, is a directly wholly-owned subsidiary of Jiahua Energy Chemical Co. and Jiahua Energy Chemical Co. is owned as to approximately 36.7735.98% by Xxxxxx, which is ultimately controlled by Xx. Xxxx and Xx. Xxx. As Xx. Xxx is the wife of Xx. Xxxx and is an executive Director and Xx. Xxxx is a controlling Shareholder of the Company, each of Jiahua Energy Chemical Co. and Jiafu Jiahua New Material is therefore an associate of Xx. Xxxx and Xx. Xxx and is thus a connected person of the Company and the transactions contemplated under Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement constitute continuing connected transaction(s) of the Company under Chapter 14A of the Listing Rules. As the applicable ratios in respect of the consideration under the Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement are less than 5%, the Sanjiang Chemical Toluene Nitrogen Gas Sales Agreement and the transactions contemplated thereunder are therefore subject to reporting and announcement requirements but are exempt from the circular (including independent financial advice) and the independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.