CWT International Limited - Proxy Solicitation & Information Statement 2017

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your Shares in Sinofert Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

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SINOFERT HOLDINGS LIMITED 中化化肥控股有限公司 *

(Incorporated in Bermuda with limited liability)

(Stock Code: 297)

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION DISPOSAL OF 20.52% EQUITY INTEREST IN QINGHAI SALT LAKE AND NOTICE OF SPECIAL GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

SOMERLEY CAPITAL LIMITED

A letter from the Board is set out on pages 4 to 12 of this circular. A letter from the Independent Board Committee containing its advice to the Independent Shareholders is set out on pages 13 to 14 of this circular. A letter from Somerley, the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 15 to 39 of this circular.

A notice convening the SGM of Sinofert Holdings Limited to be held at Salon II, Mezzanine Floor, Grand Hyatt Hong Kong, 1 Harbour Road, Wanchai, Hong Kong on 20 December 2017 at 2:15 p.m. (or immediately after the conclusion or adjournment of the special general meeting of the Company scheduled to be convened on the same day at 2:00 p.m. at the same venue, whichever is the later) is set out on pages 73 to 74 of this circular. Whether or not you are able to attend and vote at the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar and transfer office of the Company in Hong Kong, Tricor Secretaries Limited, Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible and in any event not later than 48 hours (excluding any part of a day that is a public holiday) before the time appointed for the holding of the meeting or any adjournment thereof. Completion and return of the form of proxy as instructed will not preclude you from subsequently attending and voting at the meeting or any adjourned meeting if you so wish.

For identification purposes only

1 December 2017

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . .	13
LETTER FROM SOMERLEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
APPENDIX I – FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . .	40
APPENDIX II – FINANCIAL INFORMATION OF QINGHAI SALT LAKE . . . .	42
APPENDIX III – MANAGEMENT DISCUSSION AND ANALYSIS OF
THE REMAINING GROUP . . . . . . . . . . . . . . . . . . . . . . . . . .	51
APPENDIX IV – UNAUDITED PRO FORMA FINANCIAL INFORMATION
OF THE REMAINING GROUP . . . . . . . . . . . . . . . . . . . . . . .	57
APPENDIX V – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . .	68
NOTICE OF SPECIAL GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	73

– i –

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions have the following meaning:

“associate(s)” has the same meaning ascribed to it under the Listing Rules
“Board” the board of Directors of the Company
“business day” any day other than a Saturday, Sunday or public holiday pursuant to the laws of the PRC
“Company”

Sinofert Holdings Limited, a company incorporated on 26 May 1994 in Bermuda with limited liability, the ordinary shares of which are listed on the Stock Exchange

“Completion” completion of the Disposal
“connected person” has the same meaning ascribed to it under the Listing Rules
“controlling shareholder” has the same meaning ascribed to it under the Listing Rules
“Director(s)” the director(s) of the Company
“Disposal” the proposed disposal of 571,578,484 shares of Qinghai Salt Lake, representing 20.52% of its total issued share capital
“Group” the Company and its subsidiaries
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong” The Hong Kong Special Administrative Region of the PRC
“Independent Board Committee” the independent board committee of the Company formed to advise the Independent Shareholders in respect of the Disposal, comprising all independent non-executive Directors, namely Mr. Ko Ming Tung, Edward, Mr. Lu Xin and Mr. Tse Hau Yin, Aloysius

– 1 –

DEFINITIONS

“Independent Financial Adviser” Somerley Capital Limited, a licensed corporation to or “Somerley” carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities as defined under the SFO, which has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Disposal
“Independent Shareholders” shareholders other than Sinochem Group and its associates
“Latest Practicable Date” 24 November 2017, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein
“Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
“Non-competition Undertaking” the Non-competition Undertaking entered into by Sinochem Group in favour of the Company on 6 June 2005
“PRC” or “China” the People’s Republic of China, which for the purposes of this circular only, excludes Hong Kong, Macao Special Administrative Region and Taiwan
“Qinghai Salt Lake” 青海鹽湖工業股份有限公司 (Qinghai Salt Lake Industry Co., Ltd.), a joint stock limited liability company established in the PRC whose shares are listed on the SZSE
“Remaining Group” the Group (excluding Qinghai Salt Lake) immediately after Completion
“RMB”
Renminbi, the lawful currency of the PRC
“SASAC”
State-owned Assets Supervision and Administration Commission of the State Council of the PRC
“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

– 2 –

DEFINITIONS

“SGM” the special general meeting of the Company to be held at Salon II, Mezzanine Floor, Grand Hyatt Hong Kong, 1 Harbour Road, Wanchai, Hong Kong on 20 December 2017 at 2:15 p.m. (or immediately after the conclusion or adjournment of the special general meeting of the Company scheduled to be convened on the same day at 2:00 p.m. at the same venue, whichever is the later), or any adjournment thereof, the notice of which is set out on pages 73 to 74 of this circular
“Share(s)” ordinary share(s) of HK$0.10 each in the capital of the Company
“Share Transfer Agreement” the share transfer agreement dated 24 October 2017 entered into between Sinochem Group (as purchaser) and Sinochem Fertilizer (as seller) in relation to the Disposal
“shareholder(s)” registered holder(s) of Share(s)
“Sinochem Corporation” 中國中化股份有限公司 (Sinochem Corporation), a joint stock company with limited liability established under the laws of the PRC, a subsidiary of Sinochem Group and the indirect controlling shareholder of the Company
“Sinochem Fertilizer” 中化化肥有限公司 (Sinochem Fertilizer Company Limited), a limited liability company incorporated in the PRC and an indirect wholly-owned subsidiary of the Company
“Sinochem Group” 中國中化集團公司 (Sinochem Group), a state-owned enterprise incorporated in the PRC and the ultimate controlling shareholder of the Company
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“subsidiary(ies)” has the same meaning ascribed to it under the Listing Rules
“SZSE” the Shenzhen Stock Exchange
“%”
percent

– 3 –

LETTER FROM THE BOARD

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SINOFERT HOLDINGS LIMITED 中化化肥控股有限公司 *

(Incorporated in Bermuda with limited liability)

(Stock Code: 297)

Executive Directors: QIN Hengde (Chief Executive Officer) Harry YANG

Non-executive Directors: ZHANG Wei (Chairman) YANG Lin Stephen Francis DOWDLE XIANG Dandan

Independent Non-executive Directors: KO Ming Tung, Edward LU Xin TSE Hau Yin, Aloysius

Registered office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Principal place of business: Unit 4705, 47th Floor Office Tower Convention Plaza 1 Harbour Road Wanchai Hong Kong

1 December 2017

To: the Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION DISPOSAL OF 20.52% EQUITY INTEREST IN QINGHAI SALT LAKE

INTRODUCTION

Reference is made to the announcements of the Company dated 17 and 24 October 2017 in relation to the proposed disposal of 20.52% equity interest in Qinghai Salt Lake by Sinochem Fertilizer, an indirect wholly-owned subsidiary of the Company, which constitutes a very substantial disposal and connected transaction of the Company and is subject to the reporting, announcement and Independent Shareholders’ approval requirements under the Listing Rules.

* For identification purposes only

– 4 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with (i) further information on the details of the Disposal; (ii) the letter of advice from the Independent Board Committee to the Independent Shareholders; (iii) the letter of advice from Somerley to the Independent Board Committee and the Independent Shareholders; (iv) the notice of the SGM; and (v) other information as required under the Listing Rules.

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION

On 24 October 2017 (after trading hours), Sinochem Fertilizer and Sinochem Group entered into the Share Transfer Agreement, pursuant to which Sinochem Fertilizer agreed to sell and Sinochem Group agreed to purchase 571,578,484 issued shares of Qinghai Salt Lake, representing 20.52% of its total issued share capital, at a consideration of RMB8,063,198,568.40, subject to the terms and conditions of the Share Transfer Agreement.

As at the Latest Practicable Date, Sinochem Fertilizer owns 571,578,484 issued shares of Qinghai Salt Lake, representing 20.52% of its total issued share capital. Upon Completion, Sinochem Fertilizer will cease to hold any shares of Qinghai Salt Lake and will no longer be a shareholder of Qinghai Salt Lake. The financial results of Qinghai Salt Lake will no longer be equity accounted for in the consolidated financial statements of the Company.

Completion of the Disposal is subject to the approval from the Independent Shareholders at the SGM and the fulfilment of the various conditions precedent as set out under the section headed “Conditions precedent of the Disposal” in this circular, including, among other things, obtaining the approval from SASAC with respect to the Disposal. Accordingly, the Disposal may or may not proceed. Shareholders and potential investors are therefore advised to exercise caution when dealing in the securities of the Company.

THE SHARE TRANSFER AGREEMENT

Date

24 October 2017

Parties

Purchaser: Sinochem Group Seller: Sinochem Fertilizer

Interest to be disposed

571,578,484 shares of Qinghai Salt Lake, representing 20.52% of its total issued share capital.

– 5 –

LETTER FROM THE BOARD

Consideration

The total consideration for the Disposal is RMB8,063,198,568.40.

The consideration was arrived at after arm’s length negotiations between Sinochem Group and the Company based primarily on the pricing mechanism stipulated in the relevant rules and regulations of SASAC governing disposal of listed shares by state-owned enterprises. The consideration of approximately RMB14.11 per share represents 90% of the 30-trading day average of the daily volume weighted average price of approximately RMB15.68 per share from 30 August 2017 to 17 October 2017 (being the date of the announcement of Qinghai Salt Lake in relation to its trading suspension pending the disclosure of the Disposal).

Payment

The consideration for the Disposal shall be paid by Sinochem Group to Sinochem Fertilizer in cash in two instalments as follows:

(a) within five business days of signing of the Share Transfer Agreement, Sinochem Group shall pay 30% of the consideration as deposit to Sinochem Fertilizer in cash; and
(b) within sixty business days after obtaining the approval from SASAC, Sinochem Group shall pay the remaining 70% of the consideration to Sinochem Fertilizer in cash.

As at the Latest Practicable Date, the Group has received the 30% of the consideration for the Disposal.

Conditions precedent of the Disposal

Completion is subject to and conditional upon satisfaction of the following conditions:

(i) Sinochem Fertilizer obtaining the appropriate internal approvals and authorizations with respect to the Disposal in accordance with its articles of association;
(ii) the Company obtaining the appropriate internal approvals and authorizations with respect to the Disposal in accordance with the relevant provisions of the Listing Rules and its bye-laws (including but without limitation the passing of the ordinary resolution by the Independent Shareholders at the SGM approving the Disposal);
(iii) Sinochem Group obtaining the appropriate internal approvals and authorizations with respect to its acquisition of shares of Qinghai Salt Lake in accordance with its articles of association; and
(iv) obtaining of the approval from SASAC with respect to the Disposal.

– 6 –

LETTER FROM THE BOARD

If the conditions of the Disposal are not satisfied by 30 June 2018, either party shall have the right to terminate the Share Transfer Agreement and all moneys paid by Sinochem Group (if any) to Sinochem Fertilizer shall be refunded in full to Sinochem Group.

Completion

Upon satisfaction of the conditions, both Sinochem Fertilizer and Sinochem Group shall actively assist and cooperate with Qinghai Salt Lake on its share transfer registration applications with the relevant state-owned property rights registration authority, and Sinochem Fertilizer shall cooperate with Sinochem Group to complete the share transfer registration with China Securities Depository and Clearing Corporation Limited Shenzhen Branch. Completion shall take place on the date when the share transfer registration with China Securities Depository and Clearing Corporation Limited Shenzhen Branch is completed.

The gain or loss (including but without limitation dividend distribution, bonus shares, capitalization of capital reserves and etc.) in connection with the shares of Qinghai Salt Lake during the period from the date of signing of the Share Transfer Agreement to the date of Completion shall be vested to or borne by Sinochem Fertilizer. If for whatever reason Sinochem Group has obtained proceeds of the shares of Qinghai Salt Lake during such period, Sinochem Group shall return the proceeds to Sinochem Fertilizer for free immediately after the date of Completion.

INFORMATION ON QINGHAI SALT LAKE

Qinghai Salt Lake is a joint stock limited liability company established in the PRC whose shares are traded on the SZSE. Its principal activities are the development, production and sale of potassium chloride, and the comprehensive development and utilization of salt lake resources. Its other businesses include the production of cement, commercial chain and hotel businesses. According to the announcement dated 3 August 2017 published by Qinghai Salt Lake on the SZSE, Qinghai Salt Lake is discussing the proposals such as asset and debt restructuring and debt for equity swap. As at the Latest Practicable Date, the proposals are under preparation and planning with no specific transaction counterparty being determined. There are uncertainties as to whether the proposals can materialize.

Based on the reviewed financial statements of Qinghai Salt Lake as set out in Appendix II to this circular prepared in accordance with the same accounting policies as those adopted by the Group in preparation of its consolidated financial statements, the net assets value of Qinghai Salt Lake as at 31 December 2014, 31 December 2015, 31 December 2016 and 30 June 2017 were approximately RMB19,280 million, RMB24,482 million, RMB26,372 million and RMB25,998 million, respectively, and the profit/loss of Qinghai Salt Lake for the years ended 31 December 2014, 31 December 2015 and 31 December 2016 and the six months ended 30 June 2017 were as follows:

– 7 –

LETTER FROM THE BOARD

						For the six
		For the	year ended 31 December			months ended
		2014	2015		2016	30 June 2017
		(RMB million)	(RMB million)	_(RMB _	million)	(RMB million)
Profit/(loss)	before taxation	1,720	762		489	(486)
Profit/(loss)	after taxation	1,331	544		210	(521)

REASONS FOR AND BENEFITS OF THE DISPOSAL

The Group’s new strategic development direction is to adapt to the modern agricultural development trend, with a core focus on integration of various agricultural inputs and services. The Group will provide agricultural services directly to end users, enhance research and development, and continuously promote products upgrades, so as to gradually form a competitive product portfolio, thereby enhancing the Group’s overall competitiveness.

Although the shares of Qinghai Salt Lake was an important potassium chloride asset previously acquired by Sinochem Fertilizer under its global resource strategy, Sinochem Fertilizer has currently adjusted its development strategy and positioning, and the holding of shares of Qinghai Salt Lake has become a resource constraint towards the promotion of the Group’s new strategy. As at 30 September 2017, the carrying value of equity interest in Qinghai Salt Lake is approximately RMB7,987 million which accounted for approximately 37% of the Group’s total assets value. To this end, the Group intends to sell its shares in Qinghai Salt Lake to release a large amount of capital, and received cash proceeds of approximately RMB8,063 million from the Disposal. The proceeds received can be used to implement the strategic transformation of the Group’s business model, contribute to the Group’s cash flow and financial position, and in the long-run, further create value for the Company’s shareholders.

The promulgation of new regulations by the China Securities Regulatory Commission and the SZSE in May 2017, which imposed certain restrictions on the disposal of equity interest in listed companies by their substantial shareholders, brought difficulties to the Group in finding potential buyers. Eventually, the offer from Sinochem Group was the only offer received by the Group.

The Group and Sinochem Group are fully aware of the undertakings of Sinochem Group under the Non-competition Undertaking dated 6 June 2005. Pursuant to the Non-competition Undertaking, Sinochem Group has undertaken to the Company that it will not and will procure its subsidiaries not to, without the prior written consent of the Company, develop, operate or assist in operating, participate in or conduct any business which may compete with the fertilizer business carried out by the Group, either on its own or jointly with or on behalf of any other person or company in the PRC. Following Completion, Sinochem Group will hold approximately 20.52% equity interest in Qinghai Salt Lake, whose principal activities include the development, production and sale of potassium chloride, a type of fertilizer, in the PRC.

– 8 –

LETTER FROM THE BOARD

After taking into account the reasons for the Disposal as disclosed above, the Board decided to give the written consent with respect to the transfer of shares in Qinghai Salt Lake to Sinochem Group pursuant to the Non-competition Undertaking by entering into the Share Transfer Agreement with Sinochem Group. The Company will further issue a written consent to Sinochem Group on or before the date of Completion, allowing it to participate in the business of Qinghai Salt Lake only through its shareholding in Qinghai Salt Lake. In making such decision, the Board has also taken into account the Company’s option and right of first refusal with respect to the equity interest in Qinghai Salt Lake upon Completion under the Non-competition Undertaking. Pursuant to the Non-competition Undertaking, the Company shall have an option to require Sinochem Group to sell its equity interest in any business which may compete with the business of the Group (e.g. Qinghai Salt Lake upon Completion) at fair market value, and Sinochem Group may not dispose of such equity interest to any party without the prior written consent of the Company. Furthermore, Sinochem Group should inform the Company immediately upon any intention to transfer such equity interest and the Company shall have a right of first refusal. An independent board committee of the Company, comprising at least two independent non-executive Directors, would be formed to decide whether to acquire such equity interest.

On the above basis, the Directors (including the independent non-executive Directors) are of the view that the Disposal is conducted by the Company in its ordinary and usual course of business, on normal commercial terms, is fair and reasonable and in the interests of the Company and its shareholders as a whole. Mr. Zhang Wei and Mr. Yang Lin, being Directors of the Company and management members of Sinochem Group, are regarded as having a material interest in the Disposal and therefore had abstained from voting on the Board resolution passed to approve the Disposal.

FINANCIAL EFFECTS OF THE DISPOSAL

If the Disposal is approved by the Independent Shareholders, the equity interest in Qinghai Salt Lake will be classified from interests in associates to non-current assets held for sale in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations , and will no longer be equity accounted for in the consolidated financial statements of the Company. Upon Completion, such non-current assets held for sale will be derecognized in the consolidated financial statements of the Company.

The gain or loss of the Group as a result of the Disposal represents the consideration to be received by the Group from the Disposal of approximately RMB8,063 million, less the estimated transaction costs for the Disposal of approximately RMB15 million, the carrying value of the 20.52% equity interest in Qinghai Salt Lake as at the date of Completion, and the capital and other reserves in relation to the Group’s share of Qinghai Salt Lake’s net assets changes of approximately RMB711 million (other than profit or loss or other comprehensive income and distributions received) which were recognized by the Group in previous years. Based on the carrying value of the equity interest in Qinghai Salt Lake as at 30 September 2017 of approximately RMB7,987 million, the estimated loss of the Group as a result of the Disposal is approximately RMB650 million.

The actual gain or loss in connection with the Disposal may be different from the above and will be assessed after Completion.

– 9 –

LETTER FROM THE BOARD

Earnings

According to the unaudited pro forma financial information of the Remaining Group as set out in Appendix IV to this circular, assuming Completion had taken place on 1 January 2017, the loss attributable to owners of the Company for the six months ended 30 June 2017 would amount to approximately RMB729 million from a profit of approximately RMB13 million as a result of the Disposal.

Assets and liabilities

According to the unaudited pro forma financial information of the Remaining Group as set out in Appendix IV to this circular, assuming Completion had taken place on 30 June 2017, the total assets of the Remaining Group as at 30 June 2017 would decrease from approximately RMB21,243 million to approximately RMB21,220 million, the total liabilities of the Remaining Group as at 30 June 2017 would remain unchanged, and the net assets of the Remaining Group as at 30 June 2017 would decrease from approximately RMB8,214 million to approximately RMB8,191 million due to the Disposal. For the avoidance of doubt, in assessing the aforementioned financial impact on the total assets, total liabilities and net assets of the Remaining Group, the Company has not taken into account its intention to repay outstanding loans of the Group with part of the proceeds received from the Disposal as set out below.

USE OF PROCEEDS

The Group will receive cash proceeds of approximately RMB8,063 million from the Disposal. The Group intends to use approximately RMB4,000 million for repaying the Group’s outstanding loans with due dates between 3 November 2017 and 20 September 2019. The remaining proceeds will be used to satisfy the requirements for the Group’s future strategic development and normal business operations. According to the requirements under the “13th Five-Year” Development Plan of the National Development and Reform Commission with respect to the zero growth of fertilizer usage in the PRC, it is anticipated that the modern agricultural development will focus on improving the efficiency of agricultural inputs such as fertilizers, seeds and pesticides and enhancing the scientific and automated planting management. To cope with this development trend, in addition to the traditional fertilizer products, the Group will introduce and conduct research and development on high-quality and efficient fertilizer products and agricultural inputs, and offer to farmers such services as guidance for agricultural planting and related financing, so as to form an integrated “product + service” business model combining upstream and downstream businesses. It is expected that (i) approximately RMB1,000 million to RMB2,000 million will be used for developing and expanding the Group’s current businesses by way of capital expenditure and/or investments, focusing on modern agricultural development; (ii) approximately RMB800 million will be used for potential acquisitions in connection with the Group’s compound fertilizer business; (iii) approximately RMB850 million has been set aside for research and development and also enhancement of the Group’s existing facilities; and (iv) the remaining balance will be used for general working capital purpose. Before identifying any projects for investment, any surplus funds

– 10 –

LETTER FROM THE BOARD

from the proceeds may be deposited with banks or finance institutions in accordance with the cash management policies of the Group so as to ensure proper returns from the surplus funds.

INFORMATION ON THE COMPANY AND SINOCHEM GROUP

The Company is principally engaged in the production, procurement and sale of fertilizers and related products in the PRC. The main business comprises research and development, production, procurement, distribution and agricultural services of fertilizers and forms a vertically integrated business model combining upstream and downstream businesses.

Sinochem Fertilizer is engaged in the production, import, export, distribution, wholesale and retail of fertilizer raw materials and products, as well as research and development and services in the field of fertilizer-related business and products.

Sinochem Group is a key state-controlled enterprise established in 1950. Sinochem Group’s core businesses include: the businesses of energy, chemical, agriculture, real estate and finance, etc.

LISTING RULES IMPLICATIONS

Given that one or more of the applicable percentage ratios in respect of the Disposal are more than 75%, the Disposal constitutes a very substantial disposal for the Company pursuant to Rule 14.06(4) of the Listing Rules and is therefore subject to the reporting, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

Furthermore, Sinochem Group is the ultimate controlling shareholder of the Company holding an effective interest of approximately 52.65% in the Company, and is therefore a connected person of the Company. As such, the Disposal constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. Accordingly, the Disposal is conditional upon the approval of the Independent Shareholders at the SGM.

SGM

A resolution approving the Disposal shall be proposed at the SGM.

In view of Sinochem Group’s interests in the Disposal, Sinochem Group and its associates are required to abstain and shall abstain from voting on the resolution to be proposed at the SGM to approve the Disposal.

A notice convening the SGM to be held at Salon II, Mezzanine Floor, Grand Hyatt Hong Kong, 1 Harbour Road, Wanchai, Hong Kong on 20 December 2017 at 2:15 p.m. (or immediately after the conclusion or adjournment of the special general meeting of the Company scheduled to be convened on the same day at 2:00 p.m. at the same venue, whichever is the later) is set out on pages 73 to 74 of this circular.

– 11 –

LETTER FROM THE BOARD

A form of proxy for the SGM is enclosed herewith. Whether or not shareholders are able to attend and vote at the SGM, they are requested to complete the enclosed form of proxy and return the same to the branch share registrar and transfer office of the Company in Hong Kong, Tricor Secretaries Limited, Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong in accordance with the instructions printed thereon as soon as possible and in any event not later than 48 hours (excluding any part of a day that is a public holiday) before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the form of proxy as instructed will not prevent shareholders from subsequently attending and voting at the SGM or any adjourned meeting if they so wish.

RECOMMENDATION

The Directors (including the independent non-executive Directors) consider that the Disposal is entered into by the Group in its ordinary and usual course of business, on normal commercial terms, is fair and reasonable and in the interests of the Company and the shareholders as a whole. The Directors therefore recommend the Independent Shareholders to vote in favour of the relevant resolution set out in the notice of the SGM.

FURTHER INFORMATION

The Independent Board Committee comprising three independent non-executive Directors has been formed to advise the Independent Shareholders in respect of the Disposal. Somerley has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard. Accordingly, your attention is drawn to the letter from the Independent Board Committee set out on pages 13 to 14 of this circular, which contains its advice to the Independent Shareholders and the letter from Somerley set out on pages 15 to 39 of this circular, which contains its advice to the Independent Board Committee and the Independent Shareholders.

Your attention is also drawn to the additional information set out in the appendices to this circular.

Yours faithfully, For and on behalf of the Board of

Sinofert Holdings Limited Qin Hengde

Executive Director and Chief Executive Officer

– 12 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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SINOFERT HOLDINGS LIMITED 中化化肥控股有限公司 *

(Incorporated in Bermuda with limited liability)

(Stock Code: 297)

1 December 2017

To: the Independent Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION DISPOSAL OF 20.52% EQUITY INTEREST IN QINGHAI SALT LAKE

We refer to the circular of the Company dated 1 December 2017 (the “ Circular ”) to the shareholders, of which this letter forms part. Terms defined in the Circular have the same meanings in this letter unless the context otherwise requires.

In compliance with the Listing Rules, we have been appointed to advise the Independent Shareholders as to whether, in our opinion, the Disposal is entered into by the Group in its ordinary and usual course of business, on normal commercial terms, in the interests of the Company and the shareholders as a whole and is fair and reasonable so far as the Independent Shareholders are concerned. In this connection, Somerley has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Disposal.

We wish to draw your attention to the letter from the Board set out on pages 4 to 12 of the Circular, and the letter from Somerley to the Independent Board Committee and the Independent Shareholders set out on pages 15 to 39 of the Circular which contains its opinion in respect of the Disposal.

* For identification purposes only

– 13 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account the advice of Somerley and its recommendation in relation thereto, we consider that the Disposal is entered into by the Group in its ordinary and usual course of business, on normal commercial terms, in the interests of the Company and the shareholders as a whole and is fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend that you vote in favour of the relevant resolution set out in the notice of the SGM.

Yours faithfully, Independent Board Committee of Sinofert Holdings Limited TSE Hau Yin, Aloysius KO Ming Tung, Edward LU Xin

– 14 –

LETTER FROM SOMERLEY

The following is the text of the letter of advice from Somerley to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

SOMERLEY CAPITAL LIMITED

20th Floor China Building 29 Queen’s Road Central Hong Kong

1 December 2017

To: the Independent Board Committee and the Independent Shareholders

Dear Sirs,

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION DISPOSAL OF 20.52% EQUITY INTEREST IN QINGHAI SALT LAKE

INTRODUCTION

We refer to our appointment to advise the Independent Board Committee and the Independent Shareholders in relation to the Disposal. Details of the Disposal are contained in the circular of the Company to the Shareholders dated 1 December 2017 (the “ Circular ”), of which this letter forms part. Unless the context otherwise requires, capitalised terms used in this letter shall have the same meanings as those defined in the Circular.

On 24 October 2017 (after trading hours), Sinochem Fertilizer, an indirect wholly-owned subsidiary of the Company, and Sinochem Group entered into the Share Transfer Agreement, pursuant to which Sinochem Fertilizer agreed to sell, and Sinochem Group agreed to purchase, 571,578,484 issued shares of Qinghai Salt Lake, representing approximately 20.52% of its total issued share capital, at a consideration of approximately RMB8,063.2 million, subject to the terms and conditions of the Share Transfer Agreement.

Furthermore, Sinochem Group is the ultimate controlling shareholder of the Company holding an effective interest of approximately 52.65% in the Company, and is therefore a connected person of the Company. As such, the Disposal constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. Accordingly, the Disposal is conditional upon, among others, approval by the Independent Shareholders at the SGM. In

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view of Sinochem Group’s interests in the Disposal, Sinochem Group and its associates are required to abstain from voting on the resolution to be proposed at the SGM to approve the Disposal.

The Independent Board Committee, comprising all the independent non-executive Directors, namely Mr. Ko Ming Tung, Edward, Mr. Lu Xin and Mr. Tse Hau Yin, Aloysius, has been established to advise the Independent Shareholders in relation to the Disposal. We, Somerley, have been appointed by the Company as the Independent Financial Adviser in this regard.

During the past two years, Somerley has acted as independent financial adviser to the independent board committee and independent shareholders of the Company in relation to certain continuing connected transactions of the Group, details of which were set out in the circulars of the Company dated 4 February 2016, 23 January 2017 and 20 November 2017. The past engagements were limited to providing independent advisory services to the independent board committee and independent shareholders of the Company pursuant to the Listing Rules. Under the past engagements, Somerley received normal professional fees from the Company. As at the Latest Practicable Date, there were no relationships or interests between (a) Somerley and (b) the Group, Sinochem Group and their respective subsidiaries and associates that could reasonably be regarded as a hindrance to our independence as defined under Rule 13.84 of the Listing Rules to act as the Independent Financial Adviser.

In formulating our opinion and recommendation, we have relied on the information and facts supplied, and the opinions expressed, by the Directors and management of the Group and have assumed that they are true, accurate and complete in all material aspects and will remain so up to the time of the SGM. We have reviewed, among other things, the Share Transfer Agreement, the annual reports of the Company for the years ended 31 December 2015 and 2016, the interim report of the Company for the six months ended 30 June 2017, and the information contained in the Circular. We have reviewed the trading performance of the shares of Qinghai Salt Lake on the SZSE, and conducted a site visit to Qinghai Salt Lake’s operations in Qinghai province, the PRC. We have sought and received confirmation from the Directors that no material facts have been omitted from the information supplied and opinions expressed to us. We have no reason to believe that any material information has been withheld from us, or to doubt the truth, accuracy or completeness of the information provided. We have relied on such information and consider that the information we have received is sufficient for us to reach an informed view. We have, however, not conducted any independent investigation into the business and affairs of the Group, Sinochem Group or Qinghai Salt Lake, nor have we carried out any independent verification of the information supplied.

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PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation on the Disposal, we have taken the following principal factors and reasons into consideration:

1. Business and financial information on the Group

1.1 Overview of the Group and background to the Disposal

The Group is principally engaged in the production, procurement and sale of fertilizers and related products in the PRC. Its main business comprises research and development, production, procurement, distribution and agricultural services in relation to fertilizers, and forms a vertically integrated business model combining upstream and downstream businesses. As set out in the Company’s 2016 annual report, the Group is, in terms of revenue, one of the largest fertilizer manufacturers and distribution service providers in the PRC, and the largest supplier of imported fertilizer in the PRC in 2016. The Shares are listed on the Main Board of the Stock Exchange, with a market capitalisation of approximately HK$8.4 billion as at the Latest Practicable Date. The ultimate controlling shareholder of the Company is Sinochem Group, a state-owned enterprise established in 1950. Sinochem Group held an effective interest of approximately 52.65% in the Company as at the Latest Practicable Date.

In 2008, the Group, through Sinochem Fertilizer, completed an acquisition of approximately 18.49% of the then equity interest in 青海鹽湖工業股份有限公司 (Qinghai Salt Lake Potash Co. Ltd.) (“ Salt Lake Potash ”) from Sinochem Group (the “ 2008 Acquisition ”). The Group’s equity interest in Salt Lake Potash was diluted to approximately 8.94% in 2011 after Salt Lake Potash issued new shares as part of an acquisition, after which it was renamed as Qinghai Salt Lake. In 2015, the Group acquired a further approximately 15.01% of the then issued share capital of Qinghai Salt Lake from Sinochem Corporation (the “ 2015 Acquisition ”, together with 2008 Acquisition, the “ Previous Acquisitions ”). Following certain subsequent share issuances by Qinghai Salt Lake, the Group held approximately 20.52% of the issued share capital of Qinghai Salt Lake as at the Latest Practicable Date.

Qinghai Salt Lake has been one of the Group’s potash suppliers. We are advised by the management of the Group, for the years ended 31 December 2014, 2015 and 2016 and for the six months ended 30 June 2017 that the purchases by the Group from Qinghai Salt Lake amounted to approximately RMB560.9 million, RMB1,115.5 million, RMB894.8 million and RMB703.4 million respectively, representing approximately 2.0%, 5.0%, 7.7% and 8.8% of the Group’s total purchases in each respective period. As advised by the management of the Group, the increasing purchases from Qinghai Salt Lake were principally due to reduced imports of overseas fertilizer products in the past two years, and a corresponding increased reliance on domestic suppliers.

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1.2 Financial information

Financial results

Set out below is a summary of the consolidated financial results of the Group for the three years ended 31 December 2014, 2015 and 2016, and for the six months ended 30 June 2016 and 2017, as extracted and summarised from the annual and interim reports of the Company:

	For the six months	For the six months
	ended	30 June	For the year ended 31		December
	2017	2016	2016	2015	2014
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
	(unaudited)	(unaudited)	(audited)	(audited)	(audited)
Revenue	10,469,328	8,908,822	14,959,092	26,121,488	28,311,086
Gross profit	904,516	354,899	241,162	1,669,088	1,418,101
Share of results of associates	(130,109) 27,575		(8,290)	32,220	133,660
Profit/(loss) for the period/
year	8,400	(495,260)	(4,822,426)	202,547	135,422
Profit for the period/year
attributable to
shareholders of the
Company	12,990	(432,134)	(4,635,885)	220,855	229,339
Earnings/(losses) per Share
*(RMB)*	0.0018	(0.0615)	(0.66)	0.0314	0.0326
Dividend for the period/year	–	–	–	59,014	59,415
Per Share				HK$0.0097	HK$0.0104

Revenue of the Group primarily represents sales of potash, nitrogen, phosphate and compound fertilizer in the PRC. As shown above, after a slight decrease in 2015, revenue of the Group recorded a significant drop in 2016 to approximately RMB14,959.1 million in 2016, or a drop of approximately 42.7% compared to 2015, mainly due to a decline in sales volumes and selling price of various fertilizer products in the PRC, as a result of the drop in price of agricultural products and an oversupply of fertilizers in the PRC, according to the Company’s 2016 annual report. For the six months ended 30 June 2017, the Group generated a revenue of approximately RMB10,469.3 million, approximately 17.5% higher than that of 2016, primarily due to the increase in sales volumes of fertilizers in the first half of 2017 as a result of a reduced oversupply situation in the fertilizer industry in the PRC, according to the Company’s 2017 interim report.

The Group’s share of results from Qinghai Salt Lake declined since 2015. Due to the reduction in the Group’s estimation of the present value of future cash flows expected to be generated by Qinghai Salt Lake, the Group made a significant impairment on its interest in Qinghai Salt Lake of approximately RMB2,830 million in 2016. For the first half of 2017, the Group shared a loss from Qinghai Salt Lake as a result of further deterioration in operating performance of Qinghai Salt Lake, which

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recorded a loss of approximately RMB520.6 million for this period. Coupled with the above, the Group recorded a low profit margin of less than 1% in both 2014 and 2015, and incurred a significant loss of approximately RMB4,822.4 million in 2016. Due to the abovementioned increase in sales volume during the first half of 2017, and an improvement in the Group’s operating efficiency, the Group recorded a marginal profit in the first half of 2017, despite the Group sharing in a loss from Qinghai Salt Lake as outlined above.

For details of the financial performance of Qinghai Salt Lake, please refer to the section below headed “Business and financial information of Qinghai Salt Lake”.

Financial position

Set out below is a summary of the consolidated financial position of the Group as at 31 December 2016 and 30 June 2017, as extracted and summarised from the 2017 interim report of the Company:

	As at 30	As at 31
	June	December
	2017	2016
	RMB’000	RMB’000
	(unaudited)	(audited)
Interests in associates	8,568,688	8,707,156
Other non-current assets	6,213,694	6,327,076
Total non-current assets	14,782,382	15,034,232
Total current assets	6,460,648	7,830,861
Total assets	21,243,030	22,865,093
Interest-bearing borrowings	4,014,195	2,540,000
Other current liabilities	5,164,610	8,189,306
Total current liabilities	9,178,805	10,729,306
Interest-bearing borrowings	3,494,360	3,493,185
Other non-current liabilities	355,748	373,029
Total non-current liabilities	3,850,108	3,866,214
Total liabilities	13,028,913	14,595,520
Total equity	8,214,117	8,269,573
Equity attributable to shareholders of the Company	8,356,645	8,407,511

The Group recorded total assets of approximately RMB21,243.0 million as at 30 June 2017, of which approximately RMB8,568.7 million (or 40.3% of the total) represented the Group’s interests in associates. Such balance mainly comprised the Group’s interest in Qinghai Salt Lake of approximately RMB8,071.0 million,

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representing the single largest asset of the Group. Other assets of the Group as at 30 June 2017 included inventories of approximately RMB3,712.0 million, property, plant and equipment of approximately RMB3,379.8 million and bank balances and cash of approximately RMB490.9 million.

As at 30 June 2017, the Group recorded total liabilities of approximately RMB13,028.9 million, which mainly comprised interest-bearing borrowings of approximately RMB7,508.6 million and trade and bills payables of approximately RMB3,763.2 million. Equity attributable to the shareholders of the Company was approximately RMB8,356.6 million as at 30 June 2017. The debt-to-equity ratio of the Group, calculated on the basis of total interest-bearing debt divided by total equity (the “ Gearing Ratio ”), was 91.4% on 30 June 2017, representing a significant increase as compared to the Gearing Ratio of approximately 73.0% as at 31 December 2016.

2. Reasons for and benefits of the Disposal

When the Group first acquired shares of Qinghai Salt Lake in March 2008, it was primarily for the strategic purpose of (i) acquiring direct access to potassium resources, (ii) transforming the Company into a leading integrated agro-chemical company in China, and (iii) benefiting from Qinghai Salt Lake’s growth profile.

The Group had been sourcing potash from Qinghai Salt Lake before it first became a shareholder in 2008. Although the Group has two board seats on Qinghai Salt Lake, it has never been the single largest shareholder of Qinghai Salt Lake nor has it ever controlled the board of Qinghai Salt Lake. Based on our discussion with the management of the Group, Qinghai Salt Lake enters into supply agreements with the Group on an annual basis, and the Group does not expect such supply relationship to change after Completion.

As stated in the letter from the Board in the Circular, according to the “13th Five-Year” Development Plan of the National Development and Reform Commission, which adopted a zero-growth policy in relation to the fertilizer usage in the PRC, it is anticipated that modern agricultural development will focus on improving the efficiency of agricultural inputs such as seeds and pesticides, and enhance scientific and automated planting management. To cope with the above, in addition to traditional fertilizer products, the Group will introduce and conduct research and development on high-quality and efficient fertilizer products and agricultural inputs, and offer to farmers such services as guidance for agricultural planting and related financing, so as to form an integrated “product + service” business model combining upstream and downstream businesses. The Disposal is expected to release the capital required for implementing the strategic development of the Group’s business model, which includes funding possible capital expenditure and/or investments relating to the development of its existing businesses, and various projects to enhance current facilities and research and development initiatives. Out of the total proceeds from the Disposal of approximately RMB8,063.2 million, the Group has allocated approximately half to undertake the above strategic plan. The other half of the proceeds would be used to repay outstanding loans, which is expected to substantially reduce the Gearing Ratio, which increased from approximately 20.4% as at 31 December 2014 to approximately 73.0% as at

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31 December 2016, and further increased to 91.4% as at 30 June 2017. Details of the use of proceeds from the Disposal are set out in the section below headed “Financial effects of the Disposal −Liquidity and gearing”.

While Qinghai Salt Lake’s annual revenue grew from approximately RMB3.1 billion in 2007 to approximately RMB10.4 billion in 2016, its recent contribution to Group’s result was not satisfactory. As further elaborated in the section below headed “Business and financial information of Qinghai Salt Lake”, the financial results of Qinghai Salt Lake have deteriorated in recent years, principally due to a significant decline in the selling price of potassium chloride and the worsening operating loss from sales of chemical products. In particular, the net profit of Qinghai Salt Lake has been decreasing in the past two financial years, and a net loss was recorded in the first half of 2017. An impairment loss of approximately RMB2,830 million was recognised by the Group in 2016 in respect of its investment in Qinghai Salt Lake, a major factor contributing to the Group’s substantial net loss in 2016. The uncertainties surrounding the future performance of Qinghai Salt Lake, an associate that the Group does not control, constitute a significant risk factor for the future performance of the Group.

Considering the above, we concur with the Directors that the Disposal would allow the Group to release required capital to focus on a new strategic direction and to reduce the debt level. As the above rationale for the Disposal align with the new strategic direction of the Group, we consider that the entering into of the Share Transfer Agreement is in the ordinary and usual course of business of the Group.

3. Principal terms of the Share Transfer Agreement

Set out below are the principal terms of the Share Transfer Agreement:

3.1 Subject matter

Pursuant to the Share Transfer Agreement entered into between Sinochem Group and Sinochem Fertilizer on 24 October 2017, Sinochem Fertilizer agreed to sell its entire holding of 571,578,484 shares of Qinghai Salt Lake, representing approximately 20.52% of its total issued share capital.

3.2 Consideration

The total consideration for the Disposal is approximately RMB8,063.2 million, or approximately RMB14.11 per share of Qinghai Salt Lake, based primarily on the pricing mechanism stipulated in the SASAC Interim Measures (as defined below). The consideration of approximately RMB14.11 per share equals 90% of the 30-trading day average of the daily volume weighted average price of approximately RMB15.68 per share from 30 August 2017 to 17 October 2017 (being the date of the announcement of Qinghai Salt Lake in relation to its trading suspension pending the disclosure of the Disposal).

We understand that pursuant to Article 24 of “Interim measures for the administration of state-owned shareholders’ transfer of their shares of listed companies”（國有股東轉讓所持上市公司股份管理暫行辦法）promulgated by SASAC (as retrieved from SASAC’s website at

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http://www.sasac.gov.cn/n2588035/n2588320/n2588335/c4259834/content.html on the Latest Practicable Date) (the “ SASAC Interim Measures ”), the price for the transfer of the shares of listed companies from the state-owned enterprises shall be determined based on the daily volume weighted average closing price of the listed shares for the previous 30 trading days preceding the date of the indicative announcement published by the target company. In case a discount is considered, the transfer price after discount shall not be lower than 90% of the above-mentioned daily volume weighted average closing price. As confirmed with the management of the Group, the pricing mechanism of the Disposal complies with the applicable SASAC Interim Measures.

3.3 Payment

The consideration for the Disposal shall be paid by Sinochem Group to Sinochem Fertilizer in cash in two instalments as follows:

(i) within five business days of signing of the Share Transfer Agreement, Sinochem Group shall pay 30% of the consideration as refundable deposit to Sinochem Fertilizer in cash; and
(ii) within sixty business days after obtaining the approval from SASAC, Sinochem Group shall pay the remaining 70% of the consideration to Sinochem Fertilizer in cash.

The management of the Group has confirmed to us that the Group has received the 30% of the consideration for the Disposal as at the Latest Practicable Date.

3.4 Conditions precedent to the Disposal

Completion is subject to and conditional upon satisfaction of the following conditions:

(i) Sinochem Fertilizer obtaining the appropriate internal approvals and authorisations with respect to the Disposal in accordance with its articles of association;
(ii) the Company obtaining the appropriate internal approvals and authorisations with respect to the Disposal in accordance with the relevant provisions of the Listing Rules and its bye-laws (including but without limitation the passing of the ordinary resolution by the Independent Shareholders at the SGM approving the Disposal);
(iii) Sinochem Group obtaining the appropriate internal approvals and authorisations with respect to its acquisition of shares of Qinghai Salt Lake in accordance with its articles of association; and
(iv) obtaining of the approval from SASAC with respect to the Disposal.

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Based on our understanding from the Company, none of the conditions precedent to the completion of the Share Transfer Agreement are waiveable. As at the Latest Practicable Date, the above conditions precedent (i) and (iii) have been fulfilled.

3.5 Completion

3.6 Non-competition Undertaking

On 6 June 2005, Sinochem Group entered into the Non-competition Undertaking, pursuant to which Sinochem Group has undertaken to the Company that Sinochem Group will not and will procure its subsidiaries not to, without the prior written consent of the Company, develop, operate or assist in operating, participate in or conduct any business which may compete with the fertilizer business carried out by the Group, either on its own or jointly with or on behalf of any other person or company in the PRC. We are advised by management of the Group that the Company will issue a written consent to Sinochem Group on or before the date of Completion, allowing it to participate in the business of Qinghai Salt Lake only through its shareholding in Qinghai Salt Lake.

Following Completion, Sinochem Group will hold an approximately 20.52% equity interest in Qinghai Salt Lake, a major potash producer in the PRC. As described in the letter from the Board in the Circular and pursuant to the Non-competition Undertaking, the Company shall have an option (the “ Option ”) requiring Sinochem Group to sell its then entire shareholding in any business which may compete with the business of the Group (including Qinghai Salt Lake upon Completion) at fair market value to it. The Option will remain valid and exercisable by the Company until the termination of the Non-competition Undertaking.

After Completion and in accordance with the Non-competition Undertaking, Sinochem Group should inform the Company immediately upon any intention to transfer such equity interest, and the Company shall have a right of first refusal to acquire such equity interest (the “ Right of First Refusal ”). An independent board committee of the Company, comprising at least two independent non-executive Directors, would be formed to decide whether to acquire such equity interest.

The Option and the Right of First Refusal, which will remain in place during the tenure of the Non-competition Undertaking, affords the Group the option to acquire Sinochem Group’s stake in Qinghai Salt Lake, or other relevant equity interests, in the future.

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3.7 Future transactions between the Group and Qinghai Salt Lake

Qinghai Salt Lake has been a long-term supplier of potash products to the Group and the management of the Group has confirmed that this is expected to continue following Completion. As Sinochem Group’s equity interest in Qinghai Salt Lake upon Completion (assuming there will be no other change between the Latest Practicable Date and the date of Completion) will be lower than 30%, Qinghai Salt Lake is not expected to be a connected person of the Company pursuant to the Listing Rules and therefore future transactions between the Group and Qinghai Salt Lake will not be regarded as continuing connected transactions.

4. Business and financial information on Qinghai Salt Lake

4.1 Background and business of Qinghai Salt Lake

Qinghai Salt Lake is a joint stock limited liability company established in the PRC whose shares are traded on the SZSE. Its business comprises the development, production and sale of potassium chloride (a form of potash), the development and utilisation of salt lake resources, and other businesses. As at the Latest Practicable Date, the market capitalisation of Qinghai Salt Lake was approximately RMB38.6 billion.

Qinghai Salt Lake has the mining right for Chaerhan Salt Lake in Qinghai province, which is the largest potassium mine in the PRC. All potash and chemical products of Qinghai Salt Lake are produced from natural resources extracted from Chaerhan Salt Lake, and no purchase of potassium chloride was made from other independent suppliers. According to the latest annual report and interim report of Qinghai Salt Lake (collectively, “ QSL Reports ”), it is the largest potash producer in China, with sales of potassium chloride of approximately 4.9 million tonnes and 1.8 million tonnes in 2016 and in the first half of 2017 respectively.

Apart from potash production, Qinghai Salt Lake also produces other chemical products utilising natural resources extracted from Chaerhan Salt Lake, for example, lithium, magnesium and PVC related products. According to the announcement of Qinghai Salt Lake dated 26 September 2017, Qinghai Salt Lake is in the process of increasing its production of lithium carbonate. Other ancillary businesses of Qinghai Salt Lake include warehousing, department store and hotel operations.

The two largest shareholders of Qinghai Salt Lake are (i) 青海省國有資產投資管理有限公司 (Qinghai State-owned Assets Investment and Management Co., Ltd.), which in turn is owned by the State-owned Assets Supervision and Administration Commission of Qinghai Provincial People’s Government, holding approximately 27.0% of the issued shares of Qinghai Salt Lake as at 30 June 2017, and (ii) Sinochem Fertilizer. As at the Latest Practicable Date, the Group has two representatives on the board of directors of Qinghai Salt Lake out of a total of 12 directors.

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4.2 Financial information

For the purpose of analysing the financial information of Qinghai Salt Lake, we have extracted and summarised from the unaudited consolidated financial information of Qinghai Salt Lake and its subsidiaries, as presented in Appendix II to the Circular, which has been reviewed by KPMG, the Company’s auditor. The discussion in this section is primarily based on our understanding from the representatives of Qinghai Salt Lake and the management discussion and analysis as set out in the QSL Reports.

Financial results

Set out below is a summary of the unaudited consolidated financial results of Qinghai Salt Lake for the three years ended 31 December 2014, 2015 and 2016, and for the six months ended 30 June 2016 and 2017 respectively, principally as extracted and summarised from Appendix II to the Circular and prepared in accordance with the same accounting policies as those adopted by the Group in preparation of the consolidated financial statements of the Group for those respective periods (the “ Accounting Policies ”) :

	For the six	For the six	months	For the year ended 31	For the year ended 31	For the year ended 31
	ended	30 June			December
	2017		2016	2016	2015	2014
	(unaudited)	(unaudited)		(unaudited)	(unaudited)	(unaudited)
	RMB’000		RMB’000	RMB’000	RMB’000	RMB’000
Revenue	4,143,572	5,205,031		9,630,421	10,725,511	10,256,324
Cost of sales	(2,946,666)	(2,848,869)		(5,824,418)	(5,917,336)	(5,644,044)
Gross profit	1,196,906	2,356,162		3,806,003	4,808,175	4,612,280
Gross profit margin	28.9%		45.3%	39.5%	44.8%	45.0%
Other revenue	995,862		354,822	1,322,004	787,855	907,007
Other net expense	(1,304,481)		(308,991)	(1,587,182)	(1,272,049)	(888,904)
Distribution cost	(150,187)		(993,139)	(1,192,330)	(1,879,272)	(1,616,829)
Administrative expenses	(569,161)		(365,198)	(779,924)	(698,728)	(539,621)
Finance costs	(656,668)		(594,400)	(1,083,540)	(993,123)	(754,386)
Share of profits less losses of
associates	1,960		(7,674)	4,377	9,519	615
Income tax	(34,816)		(78,069)	(279,816)	(218,142)	(388,780)
Profit/(loss) for the period/
year	(520,585)		363,513	209,592	544,235	1,331,382
Net margin	(12.6)%		7.0%	2.2%	5.1%	13.0%
Profit/(loss) attributable to
shareholders of Qinghai
Salt Lake	(522,503)		329,354	341,265	558,966	1,302,259

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Revenue

Revenues of Qinghai Salt Lake mainly represented sales of potassium chloride and chemical products in the PRC, of which potassium chloride and chemical products segments were the two largest contributors to overall revenue. Total revenues remained flat in 2014 and 2015, but decreased from approximately RMB10,725.5 million in 2015 to approximately RMB9,630.4 million in 2016, mainly due to a significant decline in the selling price of potassium chloride (exclusive of tax), from approximately RMB1,776.8 per tonne in 2015 to approximately RMB1,505.6 per tonne in 2016, which was in turn caused by an oversupply of fertilizers in the PRC market.

For the six months ended 30 June 2017, Qinghai Salt Lake recorded total revenues of approximately RMB4,143.6 million, a significant decrease of approximately 20.4% compared to the corresponding period in previous year. The drop was principally due to the decrease in (i) the selling price (from approximately RMB1,588.1 per tonne in the first half of 2016 to approximately RMB1,284.1 per tonne in the first half of 2017), and (ii) reduced sales volumes (from approximately 2.5 million tonnes in the first half of 2016 to approximately 1.9 million tonnes in the first half of 2017) of potassium chloride, partly offset by additional revenue contribution from chemical products segment following completion and commencement of the relevant production facilities, in particular lithium products.

Gross profit and gross profit margin

Gross profits and gross profit margins of Qinghai Salt Lake were generally stable in 2014 and 2015, but showed a decreasing trend since the second half of 2016, mainly due to reduced contributions from sales of potassium chloride as mentioned above and enlarged gross losses arising from sales of certain chemical products. For the six months ended 30 June 2017, the gross profit and gross profit margin of Qinghai Salt Lake further decreased, compared to the same period last year. We note from the QSL Reports that such decrease was mainly due to a lower gross profit contribution from sales of potassium chloride.

Other revenue

Other revenue of Qinghai Salt Lake mainly comprised income from transportation and delivery services, warehousing services and rental income. We note from the QSL Reports that other revenue increased in 2016, mainly due to the recognition of (i) gains on disposal of subsidiaries of approximately RMB290.1 million and (ii) additional transportation income following a change in the accounting policy of Qinghai Salt Lake since July 2016, resulting in a re-allocation of the Group’s revenue relating to transportation and delivery services into other revenue. Increase in other revenue for the six months ended 30 June 2017 was also mainly a result of the above change in accounting policy.

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Other net expense

Other net expense of Qinghai Salt Lake mainly comprised transportation and delivery expenses and impairment losses relating to inventories and property, plant and equipment. Qinghai Salt Lake recorded a substantial amount of inventory impairment related to chemical products in recent years, principally due to the gross losses arising from sales of chemical products, which in turn was mainly a result of the lower utilisation of the related production facilities and hence a higher unit production cost.

Distribution cost and administrative expenses

Distribution cost of Qinghai Salt Lake broadly increased in line with its revenue in 2014 and 2015, but decreased significantly since the second half of 2016, mainly due to expenses relating to transportation and delivery expenses being classified as other net expenses following the abovementioned change in accounting policy. Administrative costs of Qinghai Salt Lake increased in past two years, mainly due to the increase in losses arising from temporary suspension of certain production facilities.

Finance costs

Finance costs of Qinghai Salt Lake mainly comprised interest expenses relating to bank loans and debentures. The increase in finance costs since 2015 was mainly due to additional borrowings to finance construction and development of chemical production facilities. The aggregate amount of interest-bearing borrowings and debentures increased from RMB37,855.0 million as at 31 December 2014 to RMB45,698.9 million as at 30 June 2017.

Profit/(loss) attributable to shareholders of Qinghai Salt Lake

The profit attributable to shareholders of Qinghai Salt Lake declined in recent years, having decreased from approximately RMB1,302.3 million in 2014 to approximately RMB559.0 million in 2015, and further to approximately RMB341.3 million in 2016. Such decreases were mainly due to reduced profit contributions from sales of potassium chloride and the increase in impairment losses relating to inventories, as discussed above. For the six months ended 30 June 2017, Qinghai Salt Lake recorded an attributable loss of approximately RMB522.5 million, compared to a profit of approximately RMB329.4 million in the corresponding period in 2016, mainly due to the significantly reduced gross profit as explained above.

2017 Q3 Announcement

We note that Qinghai Salt Lake published an announcement on 31 October 2017 (“ 2017 Q3 Announcement ”) regarding its unaudited results for the nine months ended 30 September 2017. According to the 2017 Q3 Announcement, Qinghai Salt Lake recorded revenue amounting to approximately RMB7,649.5 million, while the attributable loss continued to deteriorate, to approximately RMB859.2 million, for the nine months ended 30 September 2017. Shareholders should note that the above nine-month results are prepared in accordance with accounting principles generally

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accepted in the PRC, which is different from the financial information of Qinghai Salt Lake for the three years ended 31 December 2016 and the six months ended 30 June 2017 as presented in this section, which are principally extracted from Appendix II to the Circular and prepared in accordance with the Accounting Policies.

Financial position

Set out below is a summary of the unaudited consolidated financial position of Qinghai Salt Lake as at 31 December 2014, 2015, 2016 and as at 30 June 2017 respectively, principally as extracted and summarised from Appendix II to the Circular and prepared in accordance with the Accounting Policies:

Property, plant and equipment Intangible assets and goodwill Other non-current assets Total non-current assets Inventories Trade and bills receivables Other receivables and prepayments Pledge bank deposits Cash and cash equivalents Total current assets Total assets Trade and bills payables Other payables and accrued expenses Interest-bearing borrowings due within one year Short-term financing bonds Current tax liabilities Other current liabilities Total current liabilities Interest-bearing borrowings due after one year Other non-current liabilities	As at 30 June 2017 (unaudited) RMB’000 66,676,559 570,550 1,563,571 68,810,680 3,067,079 2,298,062 3,843,950 148,812 5,601,763 14,959,666 83,770,346 6,623,218 2,683,948 10,424,817 3,800,000 65,723 443,837 24,041,543 31,474,047 2,256,399	As at 31 December 2016 (unaudited) RMB’000 65,807,105 588,061 1,524,832 67,919,998 3,389,211 2,093,574 3,730,157 277,114 5,535,834 15,025,890 82,945,888 7,103,817 3,223,811 9,958,317 750,000 211,714 516,998 21,764,657 32,387,414 2,422,286	As at 31 December 2015 (unaudited) RMB’000 61,634,832 589,142 1,670,754 63,894,728 2,870,351 1,384,981 3,532,493 352,024 8,678,631 16,818,480 80,713,208 6,525,481 2,506,085 5,562,067 4,700,000 68,477 771,072 20,133,182 34,165,733 1,931,848	As at 31 December 2014 (unaudited) RMB’000 53,298,283 562,560 2,699,353
				56,560,196 2,649,890 2,300,368 3,106,743 334,400 2,947,710
				11,339,111 67,899,307 5,848,854 3,138,054 7,356,000 – 294,337 264,034
				16,901,279 30,498,972 1,219,203

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	As at 30	As at 31	As at 31	As at 31
	June	December	December	December
	2017	2016	2015	2014
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
	RMB’000	RMB’000	RMB’000	RMB’000
Total non-current liabilities	33,730,446	34,809,700	36,097,581	31,718,175
Total liabilities	57,771,989	56,574,357	56,230,763	48,619,454
Net current liabilities	(9,081,877)	(6,738,767)	(3,314,702)	(5,562,168)
Net assets	25,998,357	26,371,531	24,482,445	19,279,853
Equity attributable to shareholders
of Qinghai Salt Lake	22,402,014	23,041,450	22,910,905	17,685,415
NAV per share (RMB)	8.04	12.41	12.33	11.12

As at 30 June 2017, Qinghai Salt Lake recorded total assets of approximately RMB83.8 billion, which mainly comprised (i) property, plant and equipment of approximately RMB66.7 billion, mainly representing fertilizer processing facilities, transportation equipment and storage facilities of mining sites of Chaerhan Salt Lake, potassium fertilizer production plants, as well as the magnesium production facilities currently under construction, (ii) cash and cash equivalents of approximately RMB5.6 billion, (iii) other receivables and prepayments of approximately RMB3.8 billion, mainly comprising deductible input VAT arising from purchase of equipment and machinery, and (iv) inventories of approximately RMB3.1 billion. As explained earlier, significant impairment losses have been recognised in recent years on inventories.

As at 30 June 2017, Qinghai Salt Lake recorded total liabilities of approximately RMB57.8 billion, which mainly comprised (i) interest-bearing borrowings and financing bonds of approximately RMB45.7 billion, representing a majority of Qinghai Salt Lake’s liabilities, (ii) trade and bills payables to suppliers of approximately RMB6.6 billion, and (iii) other payables and accrued expenses of approximately RMB2.7 billion,which mainly consisted of receipts in advance from customers, interests payable and accrued payroll and welfare. The interest-bearing borrowings and financing bonds consisted of bank borrowings of approximately of RMB34.9 billion, bonds of approximately RMB3.8 billion, and debentures of approximately RMB7.0 billion with an interest rate of 4.99%, as at 30 June 2017. We note from Qinghai Salt Lake’s 2017 interim report that the unutilised banking facilities available to Qinghai Salt Lake amounted to approximately RMB22.5 billion as at 30 June 2017.

As at 30 June 2017, Qinghai Salt Lake recorded equity attributable to its shareholders of approximately RMB22.4 billion. On a per share basis, the net asset value (the “ NAV ”) attributable to the shareholders of Qinghai Salt Lake decreased from approximately RMB12.41 per share as at 31 December 2016 to approximately RMB8.04 per share as at 30 June 2017, principally due to the increase in number of issued shares from 1,857,393,734 shares as at 31 December 2016 to 2,786,090,601 shares as at 30 June 2017 as a result of the Bonus Issue (as defined below).

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2017 Q3 Announcement

According to the 2017 Q3 Announcement, prepared in accordance with accounting principles generally accepted in the PRC, Qinghai Salt Lake recorded total assets of approximately RMB83.6 billion and total liabilities of approximately RMB57.8 billion, and equity attributable to its shareholders of approximately RMB22.1 billion, with no material changes as compared to those balances as at 30 June 2017.

4.3 Prospects

Sales of potassium chloride contributed a substantial part of Qinghai Salt Lake’s total revenue historically. As set out in Qinghai Salt Lake’s 2016 annual report, global commodity prices, including potash prices, in general exhibited a downward trend. As such, sales of potassium chloride, while remaining the largest business segment of Qinghai Salt Lake, contributed less to the operating performance of Qinghai Salt Lake than before. Going forward, the restrictions on production for domestic potash producers due to measures related to environmental protection and the oversupply situation in the fertilizer market may create uncertainties regarding Qinghai Salt Lake’s performance. We have reviewed statistics from the National Bureau of Statistics of the PRC (as retrieved from its website at http:// data.stats.gov.cn/easyquery.htm?cn=B01 on the Latest Practicable Date) and note that the producer price index for agricultural products has decreased to 96.8 points in the third quarter of 2017, from 101.5 points in the fourth quarter of 2016, and that the fertilizer inventory levels at the end of the third quarter of 2017 have increased by approximately 27.6% as compared to that in the beginning of 2017, which in general indicate an oversupply situation in the PRC.

With a view to a comprehensive development of the resources from the Chaerhan Salt Lake, Qinghai Salt Lake established a number of chemical production facilities, including those relating to magnesium and PVC related products. However, the majority of these production facilities have yet to run at full capacity. In addition, Qinghai Salt Lake has been increasing its production and sale of lithium. The selling price of lithium increased by over 10% in the first half of 2017, and Qinghai Salt Lake recorded revenue and net profit of approximately RMB172.1 million and RMB88.5 million respectively from its lithium operations. We understand from the management of Qinghai Salt Lake that efforts are being focused on improving operations, including upgrading the production facilities and lifting the production capacity.

According to an announcement of Qinghai Salt Lake dated 3 August 2017, Qinghai Salt Lake is discussing certain proposals such as asset and debt restructurings and a debt for equity swap. Such proposals are under preparation with no specific transaction counterparty having been determined as at the Latest Practicable Date. There are uncertainties as to whether such proposals will materialise.

Qinghai Salt Lake’s operations generated a net profit in previous years, but profits declined in recent years owing to a weak fertilizer market and a loss-making chemical products segment. Having considered (i) the weak performance of Qinghai Salt Lake in the past two years, (ii) the fluctuation in global commodity prices, especially potash, (iii) that

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Qinghai Salt Lake’s ability to improve its operational efficiency remains unclear, and (iv) the outcome of the restructuring proposals under preparation is unknown, we are of the view that the outlook of Qinghai Salt Lake is subject to financial and commercial uncertainties.

5. Evaluation of the consideration for the Disposal

As set out in the section headed “Principal terms of the Share Transfer Agreement”, the consideration for the Disposal was determined with reference to the SASAC Interim Measures, pursuant to which the consideration for the transfer of listed shares by state-owned shareholders shall not be lower than 90% of the daily volume-weighted average closing price of the listed shares for the previous 30 trading days preceding the date of the indicative announcement published by the target company (the “ 30 Days VWAP ”). We note that the same pricing mechanism, using the 30 Days VWAP, was adopted for both the 2008 Acquisition and the 2015 Acquisition.

As set out in the letter from the Board, the consideration of approximately RMB14.11 per Qinghai Salt Lake share (the “ Per Share Consideration ”) represents 90% of the 30 Days VWAP of approximately RMB15.68 per Qinghai Salt Lake share from 30 August 2017 to 17 October 2017 (being the date of the announcement of Qinghai Salt Lake in relation to its trading suspension pending the disclosure of the Disposal). The total consideration for the Disposal is approximately RMB8,063.2 million, being the product of (i) the Per Share Consideration of approximately RMB14.11 and (ii) the 571,578,484 shares of Qinghai Salt Lake held by the Group, based primarily on the SASAC Interim Measures.

5.1 Analysis of Qinghai Salt Lake’s share price

The share price chart below illustrates the daily closing price of the Qinghai Salt Lake shares as quoted on the SZSE from 2 January 2017 up to the Latest Practicable Date (the “ Review Period ”):

==> picture [409 x 181] intentionally omitted <==

----- Start of picture text -----

Share price
(RMB) Publication of an unusual price
movement announcement Publication of Qinghai
22.0 Salt Lake’s Q3 2017
indicative results
30 trading days from 30 announcement
20.0 August 2017 to 17
October 2017
18.0
Per Share Consideration Trading halt
= RMB14.11 Publication of Qinghai Salt Publication of Qinghai Salt
16.0 Lake’s Q1 2017 indicative Lake’s H1 2017 indicative
results announcement results announcement
14.0
Publication of the Publication of
12.0 Bonus Issue ( Note ) indicative
Disposal Publication of
announcement the Disposal
10.0 Publication of Qinghai Salt announcement
Lake’s 2016 indicative
results announcement
8.0
Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17
Share price Implied Share Consideration
----- End of picture text -----

Note: On 12 June 2017 Qinghai Salt Lake announced a bonus issue (the “ Bonus Issue ”) to the then shareholders of Qinghai Salt Lake by way of capitalising its capital reserve, on the basis of 5 shares for every 10 shares held on 16 June 2017, and the ex-distribution date was 19 June 2017. Following completion of the Bonus Issue, the issued shares of Qinghai Salt Lake increased from 1,857,393,734

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to 2,786,090,601. The share price of Qinghai Salt Lake for the period from 1 January 2017 to 18 June 2017 (the day before the ex-distribution date) as presented in the share price chart above has been adjusted for the effect of the Bonus Issue on the share price of Qinghai Salt Lake

The shares of Qinghai Salt Lake traded within a relatively stable range in early 2017, with the adjusted price between RMB12.10 and RMB13.30 and closing at RMB12.20 on 14 April 2017. On the same date, Qinghai Salt Lake published its indicative results announcement for the three months ended 31 March 2017, which indicated a loss attributable to shareholders of Qinghai Salt Lake in the range of RMB224.0 million to RMB300.0 million. After that, the share price followed a general downward trend and reached an adjusted six-month low of approximately RMB9.29 on 1 June 2017, before climbing to RMB10.61 on 14 July 2017. On the same date after market close, Qinghai Salt Lake announced to the market that it expected to record an enlarged loss attributable to shareholders of Qinghai Salt Lake, in the range of RMB447.0 million to RMB670.0 million, for the six months ended 30 June 2017. The market price of Qinghai Salt Lake shares dropped by approximately 10.0% on the following trading day, followed by a gradual, overall rise in July and August 2017. Beginning in early September 2017, the market price exhibited a clear upward trend, reaching a high of RMB20.02 on 26 September 2017, the highest point during the Review Period, which may relate to (i) Qinghai Salt Lake’s production and development in respect of lithium and (ii) updates on the restructuring proposals, as set out in an unusual price movement announcement published by Qinghai Salt Lake on 26 September 2017. Afterwards, the share price of Qinghai Salt Lake trended downward prior to publication of an indicative announcement relating to the Disposal on 17 October 2017, after which trading was suspended. The Group published the announcement as regards the Disposal on 24 October 2017, and trading in shares of Qinghai Salt Lake resumed on the following day. After that, the shares of Qinghai Salt Lake generally traded between RMB14.80 and RMB16.00 in the following month until mid-November 2017, after which the share price dropped to a low of RMB12.59 on 23 November 2017. The share price of Qinghai Salt Lake closed at RMB13.85 on the Latest Practicable Date, lower than the Per Share Consideration of approximately RMB14.11.

5.2 Comparison of the market prices of Qinghai Salt Lake share

The Per Share Consideration of approximately RMB14.11 represents:

(i) a premium of approximately 1.9% over the closing price of RMB13.85 per Qinghai Salt Lake share as quoted on the SZSE on the Latest Practicable Date;
(ii) a discount of approximately 12.8% to the closing price of RMB16.18 per Qinghai Salt Lake share as quoted on the SZSE on the last trading day immediately prior to the date of the Share Transfer Agreement (the “ Last Trading Day ”);
(iii) a discount of approximately 10.2% to the average closing price of approximately RMB15.72 per Qinghai Salt Lake share as quoted on the SZSE for the last 30 consecutive trading days immediately prior to and including the Last Trading Day;

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(iv) a premium of approximately 13.8% over the average closing price of approximately RMB12.40 per Qinghai Salt Lake share as quoted on the SZSE for the last 90 consecutive trading days immediately prior to and including the Last Trading Day and adjusted for the effect of the Bonus Issue; and
(v) a premium of approximately 75.5% over NAV per Qinghai Salt Lake share of approximately RMB8.04 based on the NAV attributable to the shareholders of Qinghai Salt Lake of approximately RMB22,402.0 million as at 30 June 2017 divided by 2,786,090,601 shares of Qinghai Salt Lake in issue as at 30 June 2017.

As set out above, the Per Share Consideration of approximately RMB14.11 is lower than the (average) closing price of Qinghai Salt Lake on the Last Trading Day, and for the last 30 full trading days. However, the Per Share Consideration represented an approximately 13.8% premium over the average closing price of Qinghai Salt Lake shares for the last 90 consecutive trading days and a premium of approximately 75.5% over the NAV per Qinghai Salt Lake share as at 30 June 2017. Owing to the rising share price, the Per Share Consideration represents discounts to the near-term market prices of Qinghai Salt Lake, but a premium over longer-term market prices of Qinghai Salt Lake. The discounts to the near-term market prices were principally due to (i) a strong rising trend despite the significant drop in share price shortly before the Disposal announcement, and (ii) the 10% discount applied to the 30 Days VWAP in arriving at the consideration for the Disposal (please refer to the sub-section below headed “Comparable transactions” for further analysis). As the share price of Qinghai Salt Lake has exhibited substantial fluctuations, in particular from September 2017, a longer-term average may be more representative of the share price performance of Qinghai Salt Lake. As described in the above section, the closing price of the shares of Qinghai Salt Lake in general continued to trend downward after the Disposal announcement and closed lower than the Per Share Consideration, at RMB13.85 on the Latest Practicable Date.

5.3 Analysis of historical trading volume of Qinghai Salt Lake share

Set out in the table below are the monthly total trading volumes of the shares of Qinghai Salt Lake and the percentages of the monthly total trading volume to (i) the total issued shares of Qinghai Salt Lake and (ii) the total issued shares of Qinghai Salt Lake held by the public (see footnote 3 to the table below) during the Review Period:

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			Percentage of the
		Percentage of the	monthly total
		monthly total	trading volume
		trading volume	to the total
	Monthly total	to the total	issued shares of
	trading volume	issued shares of	Qinghai Salt
	of Qinghai Salt	Qinghai Salt	Lake held by the
	Lake share	Lake	public
	(Note 1)	(Note 2)	(Note 3)
2017
January	173,493,904	9.3%	17.8%
February	160,582,304	8.6%	16.5%
March	212,218,311	11.4%	21.8%
April	185,646,810	10.0%	19.1%
May	128,518,771	6.9%	13.2%
June	294,444,385	10.6%	20.1%
July	537,664,114	19.3%	36.8%
August	621,685,830	22.3%	42.5%
September	3,069,108,012	110.2%	210.0%
October	1,221,581,860	43.8%	83.6%
From 1 November to the
Latest Practicable
Date	1,109,532,860	39.8%	75.9%

Notes:

(1) Source: Bloomberg
(2) The calculation is based on the monthly total trading volumes of shares of Qinghai Salt Lake divided by the total issued share capital of Qinghai Salt Lake at the end of each month, or at the Latest Practicable Date, as applicable
(3) The calculation is based on the monthly total trading volumes of shares of Qinghai Salt Lake share divided by the total issued share capital of Qinghai Salt Lake held by the public, which is defined as the total issued shares of Qinghai Salt Lake minus the aggregate number of shares held by the two largest shareholders of Qinghai Salt Lake (being 青海省國有資產投資管理有限公司 (Qinghai State-owned Assets Investment and Management Co., Ltd.) and Sinochem Fertilizer, both of which hold over 10% of the issued shares of Qinghai Salt Lake), at the end of each month, or at the Latest Practicable Date, as applicable

As shown in the above table, except for the relatively high monthly trading volumes in September, October and November 2017 (which may be related to the significant fluctuations in share price during these periods as mentioned in the sub-section above headed “Analysis of Qinghai Salt Lake’s share price”), the monthly trading volumes of Qinghai Salt Lake shares represented approximately 6.9% to 22.3% of total issued shares of Qinghai Salt Lake, and approximately 13.2% to 42.5% of Qinghai Salt Lake shares held by the public. We note that the SZSE listing rules impose disposal restrictions on substantial shareholders of a listed company in that they are not allowed to sell more than 2% of the total issued shares of a listed company in any continuous period of 90 calendar days, unless they dispose of the shares by way of an agreement. Based on the above observations, we

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consider that even though the shares of Qinghai Salt Lake are relatively actively traded, the Group may well have encountered obstacles to disposing of its entire shareholding in Qinghai Salt Lake in the market within a relatively short period of time, which might also have caused a downward pressure on the share price.

5.4 Comparable transactions

Pursuant to the Share Transfer Agreement, Sinochem Fertilizer agreed to sell its approximately 20.52% interest in Qinghai Salt Lake, a significant block of shares, at a price equivalent to 90% of the 30 Days VWAP, in accordance with the SASAC Interim Measures. We note that the same pricing basis was applied to the pricing of Previous Acquisitions when the Group acquired shares of Qinghai Salt Lake.

We have reviewed placings of significant blocks of existing shares (i.e. 10% to 30% of the share capital), with a transaction value of at least RMB1.0 billion, of companies listed on the SZSE that would not result in a change of the largest shareholder (taking into account parties acting in concert with it), as announced by the listed company on the website of the SZSE during the period from 1 January 2016 to and including the Latest Practicable Date. Details of our review are set out below:

			Percentage	Premium/(discount) of the placing price	Premium/(discount) of the placing price	Premium/(discount) of the placing price	Premium/(discount) of the placing price
			of	over/(to)	the (average) closing		share
			placing	price immediately prior to signing of the
		Total	shares		relevant agreement
		value of	to total	last	Last 5	Last 10	Last 30
Date of the		placing	issued	trading	trading	trading	trading
agreement	Company	shares	shares	day	days	days	days
		RMB
		billion	%
27 August 2017	NETAC Technology	1.14	19.84	20.7%	21.9%	21.8%	22.8%
	Co., Ltd. (stock
	code: 300042)
16 August 2017	Jinzi Ham Co., Ltd.	1.54	14.72	10.4%	11.3%	14.4%	12.6%
	(stock code:
	002515)
9 June 2017	China Vanke Co.,	29.20	14.07	(9.9)%	(10.7)%	(7.8)%	(4.6)%
	Ltd. (stock code:
	000002)
12 April 2017	Xin Zhi Motor Co.,	2.42	26.00	(8.4)%	(7.2)%	(8.8)%	(9.3)%
	Ltd. (stock code:
	2664)
14 March 2017	Xi’an Dagang Road	1.18	29.95	(16.2)%	(16.6)%	(17.5)%	(14.6)%
	Machinery Co.,
	Ltd. (stock code:
	300103)
2 August 2016	Hunan Valin Steel	1.10	10.08	(8.1)%	(8.1)%	(6.6)%	(6.5)%
	Co., Ltd. (stock
	code: 000932)
22 January 2016	China High-Speed	3.84	18.74	(10.0)%	(16.7)%	(17.7)%	(29.0)%
	Railway
	Technology Co.,
	Ltd. (stock code:
	000008)

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			Percentage	Premium/(discount) of the placing price	Premium/(discount) of the placing price	Premium/(discount) of the placing price	Premium/(discount) of the placing price
			of	over/(to)	the (average) closing		share
			placing	price immediately prior to signing of the
		Total	shares		relevant agreement
		value of	to total	last	Last 5	Last 10	Last 30
Date of the		placing	issued	trading	trading	trading	trading
agreement	Company	shares	shares	day	days	days	days
		RMB
		billion	%
			*Mean*	(3.1)%	(3.7)%	(3.2)%	(4.1)%
			*Median*	(8.4)%	(8.1)%	(7.8)%	(6.5)%
			*Maximum*	20.7 %	21.9 %	21.8 %	22.8 %
			*Minimum*	(16.2)%	(16.7)%	(17.7)%	(29.0)%
24 Oct 2017	The Disposal	8.1	20.52	(12.8)%	(15.1)%	(20.7)%	(10.2)%

Source: website of the SZSE, Bloomberg

Note: We also considered Guangdong Sunwill Precising Plastic Co., Ltd. (stock code: 002676) (“ Guangdong Sunwill ”) to be a Comparable Transaction as it falls under the above criteria. Shares of Guangdong Sunwill were placed at premiums of approximately 59.7% to 66.4% on the basis of the above ranges. However, we consider that such premiums might have been influenced by the announcement of an acquisition by Guangdong Sunwill from the new shareholder on the same date as the placing agreement. On this basis, we consider the transaction to be an outlier

Most of the Comparable Transactions above have involved placing discounts to historical trading prices. While the discount as represented by the Per Share Consideration for the last trading day and the last 5, 10 and 30 trading days is higher than the mean and median discounts of the Comparable Transactions, we note that the discount of approximately 10.2% as represented by the Per Share Consideration for the last 30 trading days, which takes into account a wider share price range prior to signing of the Share Transfer Agreement, is well within the relevant range of discounts. As the share price of Qinghai Salt Lake has exhibited substantial fluctuations, in particular beginning in September 2017, a longer-term average would be more representative of the recent share price performance of Qinghai Salt Lake. Based on the foregoing, we consider the discount as represented by the Per Share Consideration reasonable.

As described in the above section headed “Prospects”, while potassium chloride production remains a major part of the business, Qinghai Salt Lake has been expanding its chemical production segment. Based on the QSL Reports, Qinghai Salt Lake recorded a significant portion of property, plant and equipment under construction, and the production facilities have yet to run at full capacity. On the basis of the above, we consider Qinghai Salt Lake to be a diversified business, covering production of potassium chloride and chemical production as well as various ancillary operations and services in the PRC, with different financial performance (as detailed in the section headed “Business and financial information of Qinghai Salt Lake”). This, in our view, makes it difficult to identify direct comparable companies in the market.

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6. Financial effects of the Disposal

Qinghai Salt Lake is currently being equity accounted for as an associate of the Group, where the Group’s share of Qinghai Salt Lake’s net assets and results are included in the Group’s consolidated balance sheet and consolidated statement of profit or loss respectively. Immediately upon Completion, the Group will cease to have any interest in Qinghai Salt Lake. Accordingly, Qinghai Salt Lake’s net assets and results will no longer be reflected in the Group’s consolidated financial statements. As stated in the letter from the Board in the Circular, the gain or loss (including dividend distribution) in connection with the shares of Qinghai Salt Lake during the period from the date of the Share Transfer Agreement to the date of Completion shall be vested in or borne by Sinochem Fertilizer.

Unless otherwise stated, the analysis below on the financial effects of the Disposal references the unaudited pro forma financial information of the Remaining Group in Appendix IV to the Circular, which has been prepared for illustrative purposes only based on certain assumptions as set out therein. The actual financial effects of the Disposal on the Group can only be determined upon Completion, and accordingly may be different from the pro forma financial information presented below.

6.1 Liquidity and gearing

The Group’s bank balances and cash were approximately RMB490.9 million as at 30 June 2017. Following Completion, the Group is expected to receive net proceeds of approximately RMB8,048.1 million, calculated based on the gross proceeds from the Disposal of approximately RMB8,063.2 million, less the estimated transaction costs of approximately RMB15.1 million. This is a very significant sum for the Group, equivalent to approximately 114.3% of the Company’s entire market capitalisation as at the Latest Practicable Date. Such proceeds are expected to significantly improve the liquidity position of the Group.

As at 30 June 2017, the Group had a Gearing Ratio of approximately 91.4%. As the consideration under the Disposal will be received by the Group in cash, and assuming RMB4,000 million of the proceeds will be used to repay the Group’s outstanding loans, with due dates between 3 November 2017 and 20 September 2019. For illustrative purpose only, the Gearing Ratio, on the basis of the pro forma consolidated statement of financial position as at 30 June 2017 and assuming a reduction of each of cash and interest-bearing borrowings of RMB4,000 million, would be substantially reduced to approximately 42.8%.

The remaining proceeds, amounting to approximately RMB4,048.1 million, will be used to fund the Group’s future strategic development, and normal business operations as appropriate. According to the management of the Group, (i) approximately RMB1,000 million to RMB2,000 million is expected to be used for developing and expanding the Group’s current businesses by way of capital expenditure and/or investments, focusing on an integrated “product + service” business model as set out under the section headed “Reasons for and benefits of the Disposal”, (ii) approximately RMB800 million would be used for potential acquisitions in connection with the Group’s compound fertilizer business, (iii) approximately RMB850 million has been set aside for research and development and enhancement of the Group’s existing facilities, and (iv) the remaining balance would be used

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for general working capital purpose. We are advised by the management of the Group that the unutilised proceeds may be deposited with commercial banks or financial institutions in accordance with the cash management policies of the Group, for the purpose of earning interest income.

6.2 Earnings

For the nine months ended 30 September 2017, Qinghai Salt Lake incurred a net loss, which has negatively impacted the financial performance of the Group. Following Completion, the Group will no longer be exposed to any loss of Qinghai Salt Lake.

As set out in note 4 to the unaudited pro forma financial information of the Remaining Group, had the Disposal completed on 1 January 2017, the estimated one-off loss from the Disposal would be approximately RMB879.9 million, calculated based on the total consideration to be received by the Group from the Disposal after the deduction of estimated transaction costs for the Disposal, less (i) the carrying value of the 20.52% equity interest in Qinghai Salt Lake as at 1 January 2017 of approximately RMB8,216.4 million and (ii) the capital and other reserves in relation to the Group’s share of Qinghai Salt Lake’s net asset changes (other than profit or loss or other comprehensive income and distributions received) which were recognised by the Group in previous years, of approximately RMB711.6 million (“ Previous Reserve Reduction ”). We understand from the management of the Group that the difference between the above pro forma disposal loss of approximately RMB879.9 million (assuming the Disposal had been completed on 1 January 2017) and the estimated disposal loss of approximately RMB650 million as stated in the letter from the Board (based on the carrying value of the equity interest in Qinghai Salt Lake as at 30 September 2017) was mainly a result of the Group having recorded a share of loss of Qinghai Salt Lake during the nine months ended 30 September 2017.

6.3 NAV

As at 30 June 2017, the net assets of the Group amounted to approximately RMB8,214.1 million. As set out in the unaudited pro forma financial information of the Remaining Group, had the Disposal completed on 30 June 2017, the net assets of the Group would be reduced to approximately RMB8,191.2 million, representing a decrease of approximately RMB22.9 million or approximately 0.3%. The minimal reduction in NAV compared to the estimated loss on disposal as mentioned above is due to the reversal of the Previous Reserve Reduction, offsetting most of the loss on disposal which would reduce the NAV.

OPINION AND RECOMMENDATION

Having taken into account the above principal factors and reasons, we consider that the Disposal is on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned. We further consider that the entering into of the Share Transfer Agreement is in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole. We therefore advise the Independent

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Board Committee to recommend, and we ourselves recommend, the Independent Shareholders to vote in favour of the resolution to be proposed at the SGM to approve the Disposal.

Yours faithfully, for and on behalf of SOMERLEY CAPITAL LIMITED John Wong Director

Mr. John Wong is a licensed person registered with the SFC and a responsible officer of Somerley Capital Limited, which is licensed under the SFO to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities. He has over ten years of experience in the corporate finance industry.

– 39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The financial information of the Group for the three years ended 31 December 2014, 2015 and 2016, and the six months ended 30 June 2017 are disclosed in the following documents which have been published on the website of the Stock Exchange (www.hkexnews.hk) and the website of the Company (www.sinofert.com):

the Annual Report 2014 dated 26 March 2015 (pages 85 to 175);
the Annual Report 2015 dated 31 March 2016 (pages 84 to 167);
the Annual Report 2016 dated 30 March 2017 (pages 98 to 179); and
the Interim Report 2017 dated 24 August 2017 (pages 27 to 57).

INDEBTEDNESS

As at the close of business on 31 October 2017, being the latest practicable date for the purpose of this indebtedness statement prior to the publication of this circular, the Group had total outstanding debts of approximately RMB6,501,947,000 as below. The unsecured and guaranteed bank borrowings were guaranteed by the Company.

RMB

Bank borrowings −Secured and unguaranteed −Unsecured and guaranteed −Unsecured and unguaranteed Bonds Total outstanding debts	5,000,000 187,142,645 2,815,856,785
	3,007,999,430 --------------------- 3,493,947,499
	6,501,946,929

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities, no member of the Group had outstanding at the close of business on 31 October 2017 any mortgages, charges, debentures or other loan capital or bank overdrafts, loans, debt securities or other similar indebtedness, or any obligations under hire purchase contracts or finance leases payable or any guarantees or other contingent liabilities.

– 40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

WORKING CAPITAL

Taking into account the Group’s cash and cash equivalents on hand, financial resources available to the Group, proceeds from the Disposal and cash generated from future operations, the Directors after due and careful enquiry, are of the view that, in the absence of unforeseeable circumstances, the Group has sufficient working capital for the Group’s present requirements, that is, for at least 12 months from the date of this circular.

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

After the Disposal, the Group intends to focus on integration of various agricultural inputs and services. The Group will provide agricultural services directly to end users, enhance research and development, and continuously promote products upgrades, so as to gradually form a competitive product portfolio, thereby enhancing the Group’s overall competitiveness.

The Disposal will release a large amount of capital for the Group to implement the strategic transformation of its business model, contribute to its cash flow and financial position. The Group will continue to look for investing opportunities in relation to the fertilizer business which have synergies with the current fertilizer business of the Group or to increase its market share in both the PRC and the global fertilizer business. Looking ahead, the Group will continue to promote the production and sale of its fertilizer products, as well as the integration of its products and services, with a view to creating a sustainable business model and striving for business growth in order to bring in largest returns for the shareholders.

– 41 –

FINANCIAL INFORMATION OF QINGHAI SALT LAKE

APPENDIX II

UNAUDITED CONSOLIDATED FINANCIAL INFORMATION OF THE TARGET GROUP

Set out below are the unaudited consolidated statements of financial position of Qinghai Salt Lake Industry Co., Ltd. (the “Target Company” or “Qinghai Salt Lake”) and its subsidiaries (hereinafter collectively referred to as the “Target Group”) as of 31 December 2014, 2015, 2016 and 30 June 2016 and 2017, and the related unaudited consolidated statements of profit or loss and other comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years ended 31 December 2014, 2015, 2016 and for the six months ended 30 June 2016 and 2017, and explanatory notes (collectively referred to as the “Unaudited Consolidated Financial Information”). The Unaudited Consolidated Financial Information has been prepared on the basis set out in Note (1) to the Unaudited Consolidated Financial Information below and prepared in accordance with paragraph 68(2)(a)(i)(A) of Chapter 14 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Listing Rules”).

The auditor of Sinofert Holdings Limited (the “Company”), KPMG, was engaged to review the Unaudited Consolidated Financial Information of the Target Group in accordance with Hong Kong Standard on Review Engagements (“HKSRE”) 2400 (Revised), Engagements to Review Historical Financial Statements , and with reference to Practice Note 750, Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal , issued by the Hong Kong Institute of Certified Public Accountants. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable the auditor to obtain assurance that the auditors would become aware of all significant matters that might be identified in an audit. Accordingly, the auditor does not express an audit opinion. The auditor has issued an unmodified review report.

– 42 –

APPENDIX II

FINANCIAL INFORMATION OF QINGHAI SALT LAKE

Unaudited consolidated statements of profit or loss and other comprehensive income for the years ended 31 December 2014, 2015, 2016 and for the six months ended 30 June 2016 and 2017

(Expressed in Renminbi)

Revenue Cost of sales Gross profit Other revenue Other net expense Distribution cost Administrative expenses Profit from operations Financial costs Share of profits less losses of associates Profit/(Loss) before taxation Income tax Profit/(Loss) and total comprehensive income/ (expence) for the year/period Attributable to: Equity shareholders of the Target Company Non-controlling interests	Years ended 31 December 2014 2015 2016 RMB’000 RMB’000 RMB’000 10,256,324 10,725,511 9,630,421 (5,644,044) (5,917,336) (5,824,418) 4,612,280 4,808,175 3,806,003 907,007 787,855 1,322,004 (888,904) (1,272,049) (1,587,182) (1,616,829) (1,879,272) (1,192,330) (539,621) (698,728) (779,924) 2,473,933 1,745,981 1,568,571 (754,386) (993,123) (1,083,540) 615 9,519 4,377 1,720,162 762,377 489,408 (388,780) (218,142) (279,816) 1,331,382 544,235 209,592 1,302,259 558,966 341,265 29,123 (14,731) (131,673)	Six months ended 30 June 2016 2017 RMB’000 RMB’000 5,205,031 4,143,572 (2,848,869) (2,946,666) 2,356,162 1,196,906 354,822 995,862 (308,991) (1,304,481) (993,139) (150,187) (365,198) (569,161) 1,043,656 168,939 (594,400) (656,668) (7,674) 1,960 441,582 (485,769) (78,069) (34,816) 363,513 (520,585) 329,354 (522,503) 34,159 1,918

– 43 –

FINANCIAL INFORMATION OF QINGHAI SALT LAKE

APPENDIX II

Unaudited consolidated statements of financial position at 31 December 2014, 2015, 2016 and 30 June 2016 and 2017

(Expressed in Renminbi)

Non-current assets Property, plant and equipment Investment properties Intangible assets Advance payments for acquisition of property, plant and equipment Goodwill Interest in associates Available-for-sale investments Deferred tax assets Other long-term assets Current assets Inventories Trade and bills receivables Other receivables and prepayments Pledged bank deposit Cash and cash equivalents Current liabilities Trade and bills payables Other payables and accrued expenses Interest-bearing borrowings due within one year Short-term financing bond Current portion of obligations under finance lease Current tax liabilities Net current liabilities Total assets less current liabilities	Years ended 31 December 2014 2015 2016 RMB’000 RMB’000 RMB’000 53,298,283 61,634,832 65,807,105 15,733 136,352 131,959 541,219 567,801 584,132 1,932,489 753,337 630,178 21,341 21,341 3,929 86,335 85,227 107,564 478,125 478,125 478,125 157,547 194,905 171,519 29,124 22,808 5,487 56,560,196 63,894,728 67,919,998 ------------ ------------ ------------ 2,649,890 2,870,351 3,389,211 2,300,368 1,384,981 2,093,574 3,106,743 3,532,493 3,730,157 334,400 352,024 277,114 2,947,710 8,678,631 5,535,834 11,339,111 16,818,480 15,025,890 ------------ ------------ ------------ 5,848,854 6,525,481 7,103,817 3,138,054 2,506,085 3,223,811 7,356,000 5,562,067 9,958,317 – 4,700,000 750,000 264,034 771,072 516,998 294,337 68,477 211,714 16,901,279 20,133,182 21,764,657 ------------ --------------------------------------------- ------------ --------------------------------------------- ------------ --------------------------------------------- (5,562,168) (3,314,702) (6,738,767) ------------ --------------------------------------------- ------------ --------------------------------------------- ------------ --------------------------------------------- 50,998,028 60,580,026 61,181,231 ------------ --------------------------------------------- ------------ --------------------------------------------- ------------ ---------------------------------------------	At 30 June 2017 RMB’000 66,676,559 129,762 566,621 679,869 3,929 106,525 478,125 164,139 5,151 68,810,680 ------------ 3,067,079 2,298,062 3,843,950 148,812 5,601,763 14,959,666 ------------ 6,623,218 2,683,948 10,424,817 3,800,000 443,837 65,723 24,041,543 ------------ --------------------------------------------- (9,081,877) ------------ --------------------------------------------- 59,728,803 ------------ ---------------------------------------------

– 44 –

APPENDIX II

FINANCIAL INFORMATION OF QINGHAI SALT LAKE

Non-current liabilities Interest-bearing borrowings due after one year Deferred income Obligations under finance lease Provisions Other non-current liabilities NET ASSETS CAPITAL AND RESERVES Share capital Reserves Total equity attributable to equity shareholders of the Target Company Perpetual capital instruments Non-controlling interests TOTAL EQUITY	Years ended 31 December 2014 2015 2016 RMB’000 RMB’000 RMB’000 30,498,972 34,165,733 32,387,414 565,591 645,595 648,279 438,191 560,674 933,954 86,000 6,000 44,865 129,421 719,579 795,188 31,718,175 36,097,581 34,809,700 ------------ --------------------------------------------- ------------ --------------------------------------------- ------------ --------------------------------------------- 19,279,853 24,482,445 26,371,531 1,590,509 1,857,394 1,857,394 16,094,906 21,053,511 21,184,056 17,685,415 22,910,905 23,041,450 – – 1,483,019 1,594,438 1,571,540 1,847,062 19,279,853 24,482,445 26,371,531	At 30 June 2017 RMB’000 31,474,047 651,673 789,719 6,000 809,007
		33,730,446 ------------ --------------------------------------------- 25,998,357

		2,786,091 19,615,923
		22,402,014 1,483,019 2,113,324
		25,998,357

– 45 –

FINANCIAL INFORMATION OF QINGHAI SALT LAKE

APPENDIX II

Unaudited consolidated statements of changes in equity

for the years ended 31 December 2014, 2015, 2016 and for the six months ended 30 June 2016 and 2017

(Expressed in Renminbi)

	Attributable to	equity shareholders of the Target Company	equity shareholders of the Target Company	equity shareholders of the Target Company	Total equity RMB’000 18,005,436 - - - - - - - - 1,331,382 79,631 (106,563) (102,691) – 72,658
Share capital RMB’000 1,590,509 - - - - - - - - – – – – – – 1,590,509 – – – – – 266,885 – 1,857,394 – – – – – – – –	Capital reserve RMB’000 5,915,457 - - - - - - - - – – – – – (370) 5,915,087 – – – – – 4,572,749 – 10,487,836 – – – – – 7 (80,946) –	Statutory reserve RMB’000 1,425,784 - - - - - - - - – – – – 163,857 – 1,589,641 – – – – 119,854 – – 1,709,495 – – – – 136,207 – – –	Special reserve RMB’000 223,717 - - - - - - - - – 79,631 – – – – 303,348 – (36,326) – – – – – 267,022 – (72,201) – – – – –	Retained profits RMB’000 7,254,991 - - - - - - - - 1,302,259 – (106,563) – (163,857) – 8,286,830 558,966 – (136,784) – (119,854) – – 8,589,158 341,265 – (57,580) – (136,207) – – –
					19,279,853 544,235 (36,326) (136,784) (19,364) – 4,839,634 11,197
					24,482,445 209,592 (65,324) (57,580) (360) – 7 319,732 1,483,019

– 46 –

APPENDIX II

FINANCIAL INFORMATION OF QINGHAI SALT LAKE

	Attributable to	equity shareholders of the Target Company	equity shareholders of the Target Company	equity shareholders of the Target Company	Total equity RMB’000 26,371,531 (520,585) 1,477 (116,566) (1,200) – 263,700
Share capital RMB’000 1,857,394 – – – – 928,697 – 2,786,091 1,857,394 – – – – – 1,857,394	Capital reserve RMB’000 10,406,897 – – – – (928,697) – 9,478,200 10,487,836 – – – (80,946) – 10,406,890	Statutory reserve RMB’000 1,845,702 – – – – – – 1,845,702 1,709,495 – – – – – 1,709,495	Special reserve RMB’000 194,821 – (367) – – – – 194,454 267,022 – (7,288) – – – 259,734	Retained profits RMB’000 8,736,636 (522,503) – (116,566) – – – 8,097,567 8,589,158 329,354 – (57,580) – – 8,860,932
					25,998,357

					24,482,445 363,513 (7,288) (57,580) 316,712 1,482,000
					26,579,802

– 47 –

FINANCIAL INFORMATION OF QINGHAI SALT LAKE

APPENDIX II

Unaudited consolidated statements of cash flows

for the years ended 31 December 2014, 2015, 2016 and for the six months ended 30 June 2016 and 2017

(Expressed in Renminbi)

Operating activities Cash generated from operations Income tax paid Net cash generated from operating activities Investing activities Payment for acquisitions of property, plant and equipment Payment for acquisitions of intangible assets Payment for acquisitions of other long-term assets Disposal of a subsidiary Interest received from bank deposits Proceeds from dividends from associates Dividends received from available-for-sale investments Proceeds received from disposal of, property, plant and equipment Net cash used in investing activities	Years ended 31 December 2014 2015 2016 RMB’000 RMB’000 RMB’000 1,742,601 1,298,285 2,199,693 (371,671) (481,360) (113,193) 1,370,930 816,925 2,086,500 ------------ ------------ ------------ (7,487,678) (5,045,253) (3,267,110) (6,299) (71,939) (53,333) (4,841) (3,039) (777) – – 325,696 33,264 12,135 23,207 – 4,845 6,549 12,000 12,000 10,000 714 977 533 (7,452,840) (5,090,274) (2,955,235) ------------ ------------ ------------	Six months ended 30 June 2016 2017 RMB’000 RMB’000 658,066 480,123 (73,166) (173,427) 584,900 306,696 ------------ ------------ (1,728,296) (1,551,312) – – (777) (630) 325,696 – 11,808 11,888 6,549 3,000 10,000 15,000 43 2,247 (1,374,977) (1,519,807) ------------ ------------

– 48 –

APPENDIX II

FINANCIAL INFORMATION OF QINGHAI SALT LAKE

Financing activities Interest paid Proceeds from borrowings raised Repayment of loans and borrowings Dividends paid Proceeds from perpetual capital instruments Capital injection from non-controlling interests Capital injection from owners of the Company Repayment for financial lease obligations Proceeds from borrowings for financial lease obligations Net cash generated from/ (used in) financing activities Net increase/(decrease) in cash andcash equivalent Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December/30 June	Years ended 31 December 2014 2015 2016 RMB’000 RMB’000 RMB’000 (2,244,821) (2,469,779) (2,670,300) 12,742,282 15,613,780 9,215,000 (3,601,800) (9,047,683) (10,555,750) (209,254) (156,148) (57,940) – – 1,482,000 14,500 611,000 84,000 – 4,839,634 – (195,502) (264,034) (771,072) 200,000 877,500 1,000,000 6,705,405 10,004,270 (2,274,062) ------------ --------------------------------------------- ------------ --------------------------------------------- ------------ --------------------------------------------- 623,495 5,730,921 (3,142,797) 2,324,215 2,947,710 8,678,631 2,947,710 8,678,631 5,535,834	Six months ended 30 June 2016 2017 RMB’000 RMB’000 (1,675,033) (1,209,161) 5,465,000 8,101,750 (7,635,500) (5,503,000) (57,579) (117,766) 1,482,000 – 84,000 263,700 – – (697,485) (256,483) 1,000,000 – (2,034,597) 1,279,040 ------------ --------------------------------------------- ------------ --------------------------------------------- (2,824,674) 65,929 8,678,631 5,535,834 5,853,957 5,601,763

– 49 –

FINANCIAL INFORMATION OF QINGHAI SALT LAKE

APPENDIX II

Notes to the financial information

(Expressed in Renminbi unless otherwise indicated)

(1) Basis of preparation

The unaudited consolidated financial information of the Target Group comprising the consolidated statements of financial position of the Target Group as at 31 December 2014, 2015, 2016 and, 30 June 2016 and 2017, and the consolidated statements of profit or loss and other comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows for the years ended 31 December 2014, 2015, 2016 and, for the six months ended 30 June 2016 and 2017, and explanatory notes (the “Unaudited Consolidated Financial Information”) has been prepared in accordance with Rule 14.68(2)(a)(i) of the Listing Rules solely for the purpose of inclusion in the circular to be issued by the Company in connection with the disposal of 20.52% equity interest of Qinghai Salt Lake in accordance with paragraph 14.68(2)(a)(i)(A) of the Listing Rules.

The Unaudited Consolidated Financial Information has been prepared in accordance with the same accounting policies as those adopted by the Company and its subsidiaries (hereinafter collectively referred to as the “Group”) in preparation of the consolidated financial statements of the Group for those respective years. The consolidated financial statements of the Group have been prepared in accordance with the Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

The Unaudited Consolidated Financial Information does not contain sufficient information to constitute a complete set of financial statements as defined in Hong Kong Accounting Standard 1 (Revised), Presentation of Financial Statements , or an interim financial report as defined in Hong Kong Accounting Standard 34, Interim Financial Reporting , issued by the HKICPA and should be read in connection with the relevant published annual report of the Company for the relevant periods.

As at 31 December 2014, 2015, 2016 and 30 June 2017, the Target Group’s current liabilities exceeded its current assets by approximately RMB5,562 million, RMB3,315 million, RMB6,739 million and RMB9,082 million, respectively. The liquidity of the Target Group is primarily dependent on its ability to maintain adequate cash inflows from operations and sufficient financing to meet its financial obligations as and when they fall due. Considering the Target Company’s sources of liquidity and the unutilized bank facilities, the Directors believe that adequate funding is available to fulfil the Target Group’s debt obligations and capital expenditure requirements when preparing the Unaudited Consolidated Financial Information for the year ended 31 December 2014, 2015, 2016 and for the six months ended 30 June 2016 and 2017. Accordingly, the Unaudited Consolidated Financial Information have been prepared on a basis that the Target Group will be able to continue as a going concern.

– 50 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

Following the Disposal, the Remaining Group will continue to carry out its existing businesses. The management discussion and analysis of the Remaining Group for the years ended 31 December 2014, 2015 and 2016 and the six months ended 30 June 2017 are set out below.

Business Review

From the year of 2014 to 2015, the global fertilizer production capacity continued to release, the demand grew slowly, and the production capacity was still excessive.

In the year of 2016, the fertilizer consumption in China came close to zero increase for the first time. China’s oversupply situation was relatively severe and both the import and export of fertilizers declined. The profitability of the fertilizer industry continued to deteriorate, the extent of loss in the nitrogen industry was enlarged and the overall fertilizer market shrank. In the face of such grave situation, domestic enterprises sped up their transformation and upgrading, actively developed towards the upstream and downstream of the supply chain and the Remaining Group was confronted with a comparatively fierce competition.

In the first half of 2017, the Chinese economy made steady progress in the environment of world economy recovery. Due to the favorable policies including the lowering of export tax for fertilizers, the fertilizer market rebounded to some extent and the price for fertilizer products increased. However, the operation of the fertilizer enterprises also faced significant challenges.

In order to effectively meet the severe market challenges and maintain its leading position, the Remaining Group continued to deepen strategic transformation and carry out reforms and was committed to becoming an agricultural service enterprise providing high-quality fertilizer products and crop nutrition solutions with the general philosophy of “taking root in the transformation and upgrading of modern agriculture”.

The Remaining Group continues to promote the production and sale of its fertilizer products, as well as the integration of its products and services, with a view to creating a sustainable business model and striving for business growth. As at Latest Practicable Date, the Remaining Group has not identified any projects for investments. The main capital expenditure in the following years will be on technological transformation. The management will grasp every opportunity to optimize the industrial layout of compound fertilizer.

Financial Review

For the year ended 31 December 2014, the Remaining Group’s revenue amounted to RMB28,311 million. Gross profit amounted to RMB1,418 million. Profit attributable to owners of the Remaining Group amounted to RMB134 million. The net profit margin, calculated based on profit attributable to owners of the Remaining Group divided by revenue, was 0.47%.

– 51 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX III

For the year ended 31 December 2015, the Remaining Group’s revenue amounted to RMB26,121 million, decreased by RMB2,190 million over 2014, which was attributable to the sales volume decrease due to the oversupply in domestic fertilizer market. While the Remaining Group seized market opportunities and the average selling price increased, the gross profit increased by RMB251 million over 2014 to RMB1,669 million. For the same reasons, profit attributable to owners of the Remaining Group recorded a moderate increase to RMB213 million and the net profit margin was 0.82%.

For the year ended 31 December 2016, the Remaining Group’s revenue amounted to RMB14,959 million, decreased by RMB11,162 million or 42.73% year-on-year. Gross profit amounted to RMB241 million, decreased by RMB1,428 million over 2015. The decrease was mainly attributable to the resumption of value-added tax and a sluggish market. Loss attributable to owners of the Remaining Group amounted to RMB1,815 million. The net loss margin was 12.13%.

For the first half of 2017, the Remaining Group’s revenue amounted to RMB10,469 million, increased by RMB1,560 million, or 17.51% over the corresponding period in 2016. Gross profit amounted to RMB905 million, increased by RMB550 million over the corresponding period in 2016. The increase was mainly attributable to the rebounding of fertilizer market and the rising prices. Profit attributable to owners of the Remaining Group amounted to RMB151 million. The net profit margin was 1.44%.

Segment reporting

In the years of 2014 to 2016, the operating segments of the Remaining Group are divided into Marketing Segment (procurement and distribution of fertilizers and related products) and Production Segment (production and sales of fertilizers). The segment profit/ loss represents the profit/loss earned by each segment without taking into account unallocated expenses and income, share of result of associates and joint ventures and finance costs.

For the year ended 31 December 2014, the segment profit of the Remaining Group was RMB163 million, among which, Marketing Segment realized a profit of RMB378 million and Production Segment suffered a loss of RMB215 million.

For the year ended 31 December 2015, the segment profit of the Remaining Group was RMB533 million, among which, Marketing Segment realized a profit of RMB535 million and Production Segment suffered a loss of RMB2 million. The increase of profit from Marketing Segment and the decrease of loss in Production Segment from that of 2014 was resulted from the Remaining Group seizing opportunities of the rebounding market in the middle of the year and cost reduction and efficiency improvement through continuous implementation of technological innovation.

For the year ended 31 December 2016, the segment loss of the Remaining Group was RMB4,337 million, among which, Marketing Segment suffered a loss of RMB507 million and Production Segment suffered a loss of RMB3,830 million, which was mainly due to the resumption of value-added tax and the weak fertilizer market.

– 52 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX III

In the first half of 2017, the Remaining Group readjusted its strategies and changed its reportable segments to three segments namely Basic Fertilizers Segment, Distribution Segment and Production Segment. Basic Fertilizers Segment refers to the sourcing and trading of straight fertilizers such as nitrogen, phosphate and potash. Distribution Segment refers to the building of distribution channels, sourcing and selling of compound fertilizers and new type of fertilizer. Production Segment refers to the production and sales of fertilizers and MCP/DCP, etc.

The Remaining Group’s segment profit for the six months ended 30 June 2017 was RMB367 million, among which, the profits of Basic Fertilizers Segment and Distribution Segment were RMB322 million and RMB51 million respectively, and the loss of Production Segment was RMB5 million. This presented a huge increase in segment profit year-on-year, which was mainly attributable to the recovery in the fertilizer market brought by the supply-side reform and the Remaining Group’s great efforts in strategic transition and forming a new business model.

Capital structure, liquidity and financial resources

The total assets of the Remaining Group amounted to RMB17,349 million, RMB16,673 million, RMB14,649 million and RMB13,172 million as at 31 December 2014, 2015, and 2016 and 30 June 2017 respectively. The non-current assets amounted to RMB7,548 million, RMB7,556 million, RMB6,818 million and RMB6,711 million as at 31 December 2014, 2015, and 2016 and 30 June 2017 respectively, which primarily consisted of property, plant and equipment. The current assets amounted to RMB9,801 million, RMB9,117 million, RMB7,831 million and RMB6,461 million as at 31 December 2014, 2015, and 2016 and 30 June 2017 respectively, which primarily consisted of cash and cash equivalents, trade and bill receivables, other receivables and prepayments and inventory.

The non-current liabilities of the Remaining Group amounted to RMB3,094 million, RMB3,077 million, RMB3,866 million and RMB3,850 million as at 31 December 2014, 2015, and 2016 and 30 June 2017 respectively, which primarily consisted of interest-bearing borrowings due after one year. The current liabilities amounted to RMB8,735 million, RMB11,586 million, RMB10,729 million and RMB9,179 million as at 31 December 2014, 2015, and 2016 and 30 June 2017 respectively, which primarily consisted of trade and bill payables, other payables and accrued expenses, and interest-bearing borrowings due within one year.

The net current asset of the Remaining Group amounted to RMB1,065 million as at 31 December 2014 and the net current liabilities of the Remaining Group amounted to RMB2,469 million, RMB2,898 million and RMB2,718 million as at 31 December 2015, and 2016 and 30 June 2017, respectively.

The above analysis on capital structure, liquidity and financial resources of the Remaining Group is prepared by simple arithmetic deduction of the carrying value of interests in Qinghai Salt Lake as at the end of the relevant period in the balance sheets of the Group. Based on generally accepted accounting concepts, when there is a reduction in asset in the balance sheet of the Remaining Group mentioned above, there should be either a

– 53 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX III

corresponding increase in another asset, reduction in liability or reduction in total equity which involved assumptions to be made by the Company on the usage of the released financial resources as at the end of the relevant period. Since the above possible accounting treatments may have different outcome to the gearing ratio (calculated by interest-bearing debt divided by total equity) of the Remaining Group, the Company considers that the calculation and disclosure of gearing ratio of the Remaining Group as at the end of the relevant period is not representative and is misleading.

Borrowings

The Remaining Group’s principal sources of financing included cash, bank borrowings and proceeds from the issue of bonds and short-term commercial papers. All financial resources were primarily used for the Remaining Group’s trading and distribution, production, repayment of liabilities and related capital expenditures.

Below is the analysis of interest-bearing borrowings of the Remaining Group:

Bank loans, secured Bank loans, unsecured Short-term commercial paper Borrowings from Sinochem Group Borrowings from Sinochem Finance Co., Ltd. Borrowings from Sinochem Hong Kong (Group) Co., Ltd Bonds Principal amount Less: unamortized transaction costs Total Including: Fixed-rate borrowings Variable-rate borrowings	As at 31 December 2014 2015 2016 RMB million RMB million RMB million 144.41 – – 40.00 673.43 – – 2,000.00 2,000.00 200.00 200.00 – – 60.00 540.00 – 850.00 – – – – 2,500.00 2,500.00 3,500.00 (11.52) (9.17) (6.82) 2,872.89 6,274.26 6,033.18 2,872.89 5,924.26 6,033.18 – 350 –	As at 30 June 2017 RMB million 5.00 1,654.20 – – 2,355.00 – – 3,500.00 (5.64) 7,508.56 7,508.56 –

Fixed interest rate borrowings are charged at a rate ranging from 1.35% to 5.12%, from 1.35% to 5%, from 2.10% to 5% and from 1.85% to 5% per annum for the years ended 31 December 2014, 2015 and 2016 and the six months ended 30 June 2017 respectively.

Interests on borrowings at floating rates are calculated based on the borrowing rates announced by the People’s Bank of China.

– 54 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX III

Capital expenditure

During the years ended 31 December 2014, 2015 and 2016 and the six months ended 30 June 2017, the capital expenditure of the Remaining Group used in purchase of property, plant and equipment and lease payment on land use rights were RMB800 million, RMB397 million, RMB277 million and RMB124 million respectively.

Capital commitments

The Remaining Group had additional capital commitments of RMB1,249 million as at 30 June 2017 which were comprised of commitments for capital expenditure in respect of acquisition of property, plant and equipment contracted for but not provided in the consolidated financial statements.

Significant investment and material transaction

Save as disclosed in the section headed “Material Contracts” in Appendix V to this circular, the Remaining Group did not hold any significant investment as at 31 December 2014, 2015 and 2016 and 30 June 2017, and had no material acquisitions or disposals of subsidiaries and associated companies during the three years ended 31 December 2016 and the six months ended 30 June 2017.

Charge on assets

As at 31 December 2014, 2015 and 2016 and 30 June 2017, certain property, plant and equipment with an aggregate carrying value of RMB25,704 million, RMB7,951 million, RMB4,374 million and RMB4,049 million were pledged to secure banking facilities and borrowings granted to the Remaining Group.

Contingent liabilities

As at 31 December 2014, 2015 and 2016 and 30 June 2017, the Remaining Group had no significant contingent liabilities.

Employees and remuneration policies

As at 31 December 2014, 2015 and 2016 and 30 June 2017, the total numbers of full-time employees of the Remaining Group (including those employed by the subsidiaries of the Remaining Group) were 7,257, 6,752, 6,240 and 6,266 respectively. The key components of the Remaining Group’s remuneration package include basic salary, and where applicable, other allowances, annual incentive bonus, mandatory provident funds, and state-managed retirement benefits scheme. Total staff costs (including Directors’ remuneration) for the years ended 31 December 2014, 2015 and 2016 and the six months ended 30 June 2017 were RMB632 million, RMB671 million, RMB618 million and RMB337 million respectively.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX III

Exchange rate risk

Majority of the Remaining Group’s assets, liabilities and transactions are denominated in RMB, US dollar and Hong Kong dollar. Due to the presence of a certain scale of import and export business of the Remaining Group, the exchange rate fluctuations will have an impact on the cost of import and export prices. The management of the Remaining Group adopted prudent foreign exchange forward measures all the time and continued to monitor and control the above risks so as to mitigate the potential negative impact on the Remaining Group’s financial performance.

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APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

The following is the text of a report received from the reporting accountants, KPMG, Certified Public Accountants, Hong Kong, in respect of the Group’s pro forma financial information for the purpose in this circular.

(A) INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION

INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION

TO THE DIRECTORS OF SINOFERT HOLDINGS LIMITED

We have completed our assurance engagement to report on the compilation of pro forma financial information of Sinofert Holdings Limited (the “Company”) and its subsidiaries (collectively the “Group”) by the directors of the Company (the “Directors”) for illustrative purposes only. The pro forma financial information consists of the unaudited pro forma consolidated statement of financial position as at 30 June 2017 and the unaudited pro forma consolidated statement of profit or loss and other comprehensive income and the unaudited pro forma condensed consolidated statement of cash flows for the six months ended 30 June 2017 and related notes as set out in Part B of Appendix IV to the circular dated 1 December 2017 (the “Circular”) issued by the Company. The applicable criteria on the basis of which the Directors have compiled the pro forma financial information are described in Part B of Appendix IV to the Circular.

The pro forma financial information has been compiled by the Directors to illustrate the impact of the proposed disposal of 20.52% equity interest in Qinghai Salt Lake Industry Co., Ltd. (the “Disposal”) on the Group’s financial position as at 30 June 2017 and the Group’s financial performance and cash flows for the six months ended 30 June 2017 as if the Disposal had taken place at 30 June 2017 and 1 January 2017, respectively. As part of this process, information about the Group’s financial position as at 30 June 2017 and the Group’s financial performance and cash flows for the six months ended 30 June 2017 has been extracted by the Directors from the interim financial report of the Group for the six months ended 30 June 2017, on which a review report has been published.

Directors’ Responsibilities for the Pro Forma Financial Information

The Directors are responsible for compiling the pro forma financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX IV

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior. The firm applies Hong Kong Standard on Quality Control 1 “Quality Control for Firms That Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements” issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements (“HKSAE”) 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus” issued by the HKICPA. This standard requires that the reporting accountants plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the pro forma financial information in accordance with paragraph 4.29 of the Listing Rules, and with reference to AG 7 issued by the HKICPA.

For purpose of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the pro forma financial information.

The purpose of pro forma financial information included in an investment circular is solely to illustrate the impact of a significant event or transaction on the unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the events or transactions at 30 June 2017 or 1 January 2017 would have been as presented.

A reasonable assurance engagement to report on whether the pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX IV

compilation of the pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

the related pro forma adjustments give appropriate effect to those criteria; and
the pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountants’ judgement, having regard to the reporting accountants’ understanding of the nature of the Group, the event or transaction in respect of which the pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

a) the pro forma financial information has been properly compiled on the basis stated;
b) such basis is consistent with the accounting policies of the Group, and
c) the adjustments are appropriate for the purposes of the pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

KPMG

Certified Public Accountants

Hong Kong 1 December 2017

– 59 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX IV

(B) PRO FORMA FINANCIAL INFORMATION

A. INTRODUCTION TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma financial information of the Group immediately after the completion of the Disposal(the “Remaining Group”), comprising the unaudited pro forma consolidated statement of financial position as at 30 June 2017 and the unaudited pro forma consolidated statement of profit or loss and other comprehensive income and the unaudited pro forma condensed consolidated statement of cash flows for the six months ended 30 June 2017 (“Unaudited Pro Forma Financial Information”) has been prepared to illustrate the effect of the Disposal as if it had been completed on 30 June 2017 and 1 January 2017 respectively.

The Unaudited Pro Forma Financial Information is prepared by the directors of the Remaining Group in accordance with paragraph 4.29 of the Listing Rules and has been prepared by the directors of the Company for the purpose of illustrating the effect of the Disposal.

The Unaudited Pro Forma Financial Information has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the financial results, cash flows and financial position of the Remaining Group had the Disposal been completed as of the specified dates or any other dates.

The Unaudited Pro Forma Financial Information is based upon the unaudited consolidated statement of financial position of the Group as at 30 June 2017 and the unaudited consolidated statement of profit or loss and other comprehensive income and the unaudited condensed consolidated statement of cash flows for the six months ended 30 June 2017, which have been extracted from the Company’s published interim financial report for the six months ended 30 June 2017, and adjusted on a pro forma basis to reflect the effect of the Disposal. These pro forma adjustments are (i) directly attributable to the Disposal and not relating to other future events and decision and (ii) factually supportable based on the terms of the share transfer agreement entered between Sinochem Fertilizer, a subsidiary of the Group, and Sinochem Group.

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APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

B. UNAUDITED PRO FORMA FINANCIAL INFORMATION

(Expressed in Renminbi unless otherwise indicated)

1. Unaudited pro forma consolidated statement of financial position as at 30 June 2017

Non-current assets Property,plant and equipment Lease payments Mining rights Goodwill Other long-term assets Interest in associates Interests in joint ventures Available-for-sale investments Advance payment for acquisition of property,plant and equipment Deferred tax assets Current assets Inventories Trade and bills receivables Other receivables and advance payments Loans to an associate Lease prepayments Bank balances and cash	The Group At 30 June 2017 RMB’000 3,379,800 494,219 595,250 840,483 11,065 8,568,688 354,376 477,835 31,255 29,411 14,782,382 3,712,010 554,561 1,019,345 670,000 13,810 490,922 6,460,648	Pro forma adjustment Note RMB’000 – – – – – (8,071,009) Note 1 – – – – (8,071,009) – – – – – 8,048,139 Note 2 8,048,139	The Remaining Group RMB’000 3,379,800 494,219 595,250 840,483 11,065 497,679 354,376 477,835 31,255 29,411
			6,711,373

			3,712,010 554,561 1,019,345 670,000 13,810 8,539,061
			14,508,787

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX IV

Current Liabilities Trade and bills payables Other payables and receipt in advance Interest-bearing borrowings – due within one year Tax liabilities Net current (liabilities)/assets Total assets less current liabilities Non-current liabilities Interest-bearing borrowings -due after one year Deferred income Deferred tax liabilities Other long-term liabilities NET ASSETS CAPITAL AND RESERVES Issued equity Reserves Total equity attributable to owners of the Company Non-controlling interests TOTAL EQUITY	The Group At 30 June 2017 RMB’000 3,763,173 1,386,820 4,014,195 14,617 9,178,805 (2,718,157) ------------- ------------------------- 12,064,225 ------------- ------------------------- 3,494,360 94,340 214,280 47,128 3,850,108 8,214,117 ------------- ------------------------- 8,267,384 89,261 8,356,645 (142,528) 8,214,117	Pro forma adjustment Note RMB’000 – – – – – 8,048,139 ------------- ------------------------- (22,870) ------------- ------------------------- – – – – – (22,870) ------------- ------------------------- – (22,870) (22,870) – (22,870)	The Remaining Group RMB’000 3,763,173 1,386,820 4,014,195 14,617 9,178,805 5,329,982 ------------- ------------------------- 12,041,355 ------------- ------------------------- 3,494,360 94,340 214,280 47,128 3,850,108 8,191,247 ------------- ------------------------- 8,267,384 66,391 8,333,775 (142,528) 8,191,247

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX IV

2. Unaudited pro forma consolidated statement of profit or loss and other comrprehensive income for the six months ended 30 June 2017

Revenue Cost of sales Gross profit Other income and gains Selling and distribution expenses Administrative expenses Other expenses and losses Share of results of associates Share of results of joint ventures Finance costs Loss on disposal of an associate Profit/(Loss) before taxation Income tax Profit/(Loss) for the period Profit/(Loss) for the period attributable to: – Owners of the Company – Non-controlling interests	The Group for the six months ended 30 June 2017 RMB’000 10,469,328 (9,564,812) 904,516 147,725 (388,368) (296,538) (29,167) (130,109) (19,628) (175,960) – 12,471 (4,071) 8,400 12,990 (4,590) 8,400	Pro forma adjustment Note RMB’000 – – – – – – – 137,804 Note 3 – – (879,856) Note 4 (742,052) – (742,052) (742,052) – (742,052)	The Remaining Group RMB’000 10,469,328 (9,564,812) 904,516 147,725 (388,368) (296,538) (29,167) 7,695 (19,628) (175,960) (879,856) (729,581) (4,071) (733,652) (729,062) (4,590) (733,652)

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX IV

Other comprehensive expenses Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of financial statements of overseas subsidiaries Changes in fair value of available-for-sale investments Other comprehensive expenses for the period Total comprehensive expenses for the period Total comprehensive expenses attributable to: – Owners of the Company – Non-controlling interests	The Group for the six months ended 30 June 2017 RMB’000 (43,254) (20,602) (63,856) (55,456) (50,866) (4,590) (55,456)	Pro forma adjustment Note RMB’000 – – – (742,052) (742,052) – (742,052)	The Remaining Group RMB’000 (43,254) (20,602) (63,856) (797,508) (792,918) (4,590) (797,508)

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APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

3. Unaudited pro forma condensed consolidated statement of cash flows for the six months ended 30 June 2017

Operating activities Cash used in operations Income tax paid Net cash used in operating activities Investing activities Purchases of property, plant and equipment Proceeds from disposals of property, plant and equipment Disposal of an associate Acquisition of other long-term assets Final installment of consideration paid for acquisition of Sinochem Yunlong Co.,Ltd. Interest received Loans to an associate Repayment of loans to an associate Dividends received from an associate Net cash (used in)/gathered from investing activities	The Group for the six months ended 30 June 2017 RMB’000 (1,527,980) (3,325) (1,531,305) ------------- (124,133) 2,187 – (2,209) (211,437) 20,778 (574,000) 574,000 7,621 (307,193) -------------	Pro forma adjustment Note RMB’000 – – – ------------- – – 8,048,139 Note 2 – – – – – (7,621) Note 3 8,040,518 -------------	The Remaining Group RMB’000 (1,527,980) (3,325) (1,531,305) ------------- (124,133) 2,187 8,048,139 (2,209) (211,437) 20,778 (574,000) 574,000 – 7,733,325 -------------

– 65 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX IV

Financing activities Repayment of borrowings Proceeds from new borrowings Repayment of short-term commercial papers Interest paid Net cash generated from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents as at 1 January 2017 Effect of foreign exchange rates changes Cash and cash equivalents at 30 June 2017	The Group for the six months ended 30 June 2017 RMB’000 (6,508,623) 9,982,818 (2,000,000) (112,238) 1,361,957 ------------- ------------------------- (476,541) 972,118 (4,655) 490,922	Pro forma adjustment Note RMB’000 – – – – – ------------- ------------------------- 8,040,518 – – 8,040,518	The Remaining Group RMB’000 (6,508,623) 9,982,818 (2,000,000) (112,238) 1,361,957 ------------- ------------------------- 7,563,977 972,118 (4,655) 8,531,440

Note 1 The adjustment represents the carrying amount of the equity interest in Qinghai Salt Lake as at 30 June 2017. Upon completion of the Disposal, the Remaining Group will no longer be a shareholder of Qinghai Salt Lake. The financial results of Qinghai Salt Lake will no longer be equity accounted for in the consolidated financial statements of the Company.

Note 2 The total consideration for the Disposal is approximately RMB8,063,199,000, subject to the terms and conditions of the share transfer agreement. Total consideration for the Disposal will be satisfied in cash by Sinochem Group on completion.

Disposal-related costs, such as professional fees for legal services, accounting service, stamp duty tax and other transaction costs, are included as part of the transaction costs for the Disposal of Qinghai Salt Lake. For the purpose of preparation of the Unaudited Pro Forma Financial Information of the Remaining Group, such costs related to the Disposal are estimated to be RMB15,060,000.

The adjustment to bank balances and cash represents the total consideration of RMB8,063,199,000 to be received by the Group from the Disposal after the deduction of estimated transaction cost of RMB15,060,000 for the Disposal.

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APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Note 3 The adjustment represents the exclusion of the Remaining Group’s share of results of Qinghai Salt Lake and the receipt of dividends received from Qinghai Salt Lake for the six months ended 30 June 2017 as if the Disposal had been completed on 1 January 2017.

Note 4 The adjustment to loss on disposal of an associate represents the total consideration of RMB8,063,199,000 to be received by the Group from the Disposal after the deduction of estimated transaction cost of RMB15,060,000 for the Disposal, less the carrying value of the 20.52% equity interest in Qinghai Salt Lake of RMB8,216,434,000 as at 1 January 2017 and the capital and other reserves of RMB711,561,000 in relation to the Remaining Group’s share of Qinghai Salt Lake’s net assets changes (other than profit or loss or other comprehensive income and distributions received) which were recognized by the Group in reserve in previous years.

The estimated loss on the Disposal is subject to change on the date of completion of the Disposal. The actual carrying amount of the equity interest in Qinghai Salt Lake and thus the gain/loss on disposal at the date of completion will likely be different from those stated in the pro forma financial information.

Note 5 The adjustments in respect of the pro forma consolidated statement of profit or loss and other comprehensive income and condensed consolidated statement of cash flows above are not expected to have a continuing effect on the Remaining Group.

Note 6 No adjustment has been made to reflect any trading results or other transaction of the Remaining Group entered into subsequent to 30 June 2017.

– 67 –

GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. INTEREST IN SECURITIES

Save as disclosed below, as at the Latest Practicable Date, none of the Directors and chief executives of the Company had any interest or short position in the Shares, underlying shares and debt securities of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) nor had any interest in the right to subscribe for Shares in the Company which had to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register of the Company referred to therein or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

As at the Latest Practicable Date, a Director of the Company had long position in the Shares of the Company as follows:

				Percentage of the
				issued share
			Number of	capital of the
Name	of Director	Capacity	Shares held	Company
Harry	Yang	Beneficial owner	600	0.000009%

3. MATERIAL CONTRACTS

The following contracts, not being contracts in the ordinary course of business, have been entered into by members of the Group, within the two years preceding the Latest Practicable Date and are or may be material:

(a) a share transfer agreement was entered into on 27 April 2015 between Sinochem Fertilizer and Sinochem Corporation, pursuant to which Sinochem Fertilizer acquired from Sinochem Corporation 238,791,954 shares of Qinghai Salt Lake, representing 15.01% of its then total issued share capital, at a total consideration of RMB3,890,101,118.75 (for further details, please refer to the Company’s announcement dated 9 December 2014, 12 February 2015 and 11 September 2015 and the circular dated on 27 January 2015);

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GENERAL INFORMATION

APPENDIX V

(b) an equity transfer contract and a supplemental agreement were entered into on 11 August 2016 between Sinochem Fertilizer and Yunnan Yuntianhua Co., Ltd.（雲南雲天化股份有限公司, “ Yuntianhua ”), pursuant to which Sinochem Fertilizer transferred its 25% equity interest in Yunnan Three Circles-Sinochem-Mosaic Fertilizers Co., Ltd. （雲南三環中化美盛化肥有限公司） to Yuntianhua for a consideration of RMB87,994,984.17 (for further details, please refer to the Company’s announcement dated 12 August 2016); and
(c) the Share Transfer Agreement.

4. DIRECTORS’ EMPLOYMENT WITH SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the following Directors are also employees of a company which has an interest or short position in the Shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:

Name of substantial Position in the substantial shareholder of the shareholder of the Name of Director Company Company Zhang Wei Sinochem Group President and director Sinochem Corporation President and director Yang Lin Sinochem Group General accountant Sinochem Corporation Chief financial officer

5. DIRECTORS’ SERVICE CONTRACTS

On 16 February 2017, Mr. Qin Hengde, executive Director and Chief Executive Officer of the Company, entered into a service contract with the Company for a term of three years. On 15 May 2017, Mr. Harry Yang, executive Director of the Company, renewed his service contract with the Company for a term of three years. Pursuant to the terms stipulated in the service contracts of Mr. Qin Hengde and Mr. Harry Yang, the respective service contract with the Company may be (i) terminated prior to its expiry if either party serves two months’ prior notice to the other in writing; or (ii) terminated by the Company in case of bankruptcy, diseases and any other significant faults of a director as described in the respective service contract. Should the Company terminate the respective service contract with Mr. Qin Hengde or Mr. Harry Yang prior to its expiry, Mr. Qin Hengde or Mr. Harry Yang will be entitled to receive a cash compensation equivalent to 11 months of his annual director’s salary, save for the circumstances described in item (ii) above.

Saved as disclosed above, as at the Latest Practicable Date, none of the Directors had entered into or proposed to enter into any service contract with the Company or any of its subsidiaries which is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

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GENERAL INFORMATION

APPENDIX V

6. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and their respective close associates were interested in any business apart from the business of the Group, which competes or is likely to compete, either directly or indirectly, with the business of the Group.

7. OTHER ARRANGEMENTS INVOLVING DIRECTORS

As at the Latest Practicable Date:

(a) none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date and which was significant in relation to the business of the Group; and
(b) none of the Directors had any direct or indirect interest in any assets which had been since 31 December 2016 (the date to which the latest published audited consolidated financial statements of the Company were made up), (i) acquired or disposed of by; (ii) leased to; or (iii) were proposed to be acquired or disposed of by; or (iv) were proposed to be leased to any member of the Group.

8. MATERIAL ADVERSE CHANGES

As at the Latest Practicable Date, the Directors were not aware of any material adverse changes in the financial or trading position of the Company since 31 December 2016, being the date to which the latest published audited consolidated financial statements of the Company were made up.

9. LITIGATION

As at the Latest Practicable Date, so far as the Directors are aware, no member of the Group was engaged in any litigation or arbitration of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened against any member of the Group.

10. EXPERTS

The following are the qualifications of the experts who have given opinions or advice, which are contained or referred to in this circular:

Name	Qualification
Somerley	a licensed corporation to carry out type 1 (dealing in securities)
	and type 6 (advising on corporate finance) regulated activities
	as defined under the SFO
KPMG	Certified Public Accountants

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GENERAL INFORMATION

APPENDIX V

As at the Latest Practicable Date, each of Somerley and KPMG:

(a) has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name, in the form and context in which it appears;
(b) did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group; and
(c) did not have any direct or indirect interest in any assets which had been since 31 December 2016 (the date to which the latest published audited consolidated financial statements of the Company were made up), acquired, disposed of by, or leased to any member of the Group or were proposed to be acquired or disposed of by, or leased to any member of the Group.

11. MISCELLANEOUS

(a) The company secretary of the Company is Ms. CHEUNG Kar Mun, Cindy, a fellow member of both the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants, and an associate member of The Hong Kong Institute of Chartered Secretaries.
(b) The registered office of the Company is at Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda.
(c) The principal place of business and head office of the Company in Hong Kong is at Unit 4705, 47th Floor, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong.
(d) The principal share registrar and transfer office of the Company is Codan Services Limited at Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda.
(e) The branch share registrar and transfer office of the Company in Hong Kong is Tricor Secretaries Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(f) In the event of inconsistency, the English text of this circular shall prevail over the Chinese text.

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GENERAL INFORMATION

APPENDIX V

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copied of the following documents will be available for inspection during normal business hours on any weekday (excluding Saturdays, Sundays and public holidays) at the principal place of business of the Company at Unit 4705, 47th Floor, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong up to and including the date of the SGM:

(a) the bye-laws of the Company;
(b) the Share Transfer Agreement;
(c) the service contracts referred to in the section headed “Directors’ Service Contracts” in this appendix;
(d) the material contracts referred to in the section headed “Material Contracts” in this appendix;
(e) the report from KPMG on the unaudited pro forma financial information of the Remaining Group, the text of which is set out in Appendix IV of this circular;
(f) the letter from the Independent Board Committee, the text of which is set out on pages 13 to 14 of this circular;
(g) the letter of advice from Somerley to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 15 to 39 of this circular;
(h) the written consents referred to in the section headed “Experts” in this appendix;
(i) the annual reports and consolidated financial statements of the Company for each of the two years ended 31 December 2015 and 2016 and the interim report and consolidated financial statements of the Company for the six months ended 30 June 2017; and
(j) a copy of each circular issued by the Company pursuant to the requirements set out in Chapters 14 and/or 14A of the Listing Rules which has been issued since 31 December 2016, being the date of the Company’s latest published audited consolidated financial statements, including the circulars dated 23 January 2017 and 20 November 2017 in relation to the renewal of continuing connected transactions.

– 72 –

NOTICE OF SPECIAL GENERAL MEETING

==> picture [77 x 76] intentionally omitted <==

SINOFERT HOLDINGS LIMITED 中化化肥控股有限公司 *

(Incorporated in Bermuda with limited liability)

(Stock Code: 297)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting of Sinofert Holdings Limited (the “ Company ”) will be held at Salon II, Mezzanine Floor, Grand Hyatt Hong Kong, 1 Harbour Road, Wanchai, Hong Kong on 20 December 2017 at 2:15 p.m. (or immediately after the conclusion or adjournment of the special general meeting of the Company scheduled to be convened on the same day at 2:00 p.m. at the same venue, whichever is the later), or any adjournment thereof, to consider and, if thought fit, pass, with or without modifications, the following resolution as ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT :
(a) the transactions contemplated under the Share Transfer Agreement (as defined and described in the circular to the shareholders of the Company dated 1 December 2017, a copy of which has been produced to the meeting marked “A” and signed by the Chairman of the meeting for the purpose of identification) be and are hereby approved, ratified and confirmed; and
(b) the directors of the Company or any other person authorized by the directors of the Company be and are hereby authorized to sign, execute, perfect and deliver all such documents and do all such deeds, acts, matters and things as they may in their absolute discretion consider necessary or desirable for the purpose of or in connection with the implementation of the Share Transfer Agreement and all transactions and other matters contemplated thereunder or ancillary thereto, to waive compliance from and/or agree to any amendment

* For identification purposes only

– 73 –

NOTICE OF SPECIAL GENERAL MEETING

or supplement to any of the provisions of the Share Transfer Agreement which in their opinion is not of a material nature and to effect or implement any other matters referred to in this resolution.”

For and on behalf of the Board of Sinofert Holdings Limited Qin Hengde

Executive Director and Chief Executive Officer

Hong Kong Special Administrative Region of the People’s Republic of China

1 December 2017

Notes:

The register of members of the Company will be closed from 15 December 2017 to 20 December 2017, both days inclusive, during which period no transfer of shares of the Company will be registered. In order to qualify for voting at the special general meeting of the Company, all transfers of shares of the Company accompanied by the relevant share certificates must be lodged for registration with the Company’s branch share registrar and transfer office in Hong Kong, Tricor Secretaries Limited, Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not later than 4:30 p.m. on 14 December 2017.
Any member of the Company entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote on his behalf. A proxy need not be a member of the Company.
To be valid, the form of proxy, together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of that power or authority, must be deposited at the branch share registrar and transfer office of the Company in Hong Kong, Tricor Secretaries Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible and in any event not less than 48 hours (excluding any part of a day that is a public holiday) before the time appointed for the holding of the meeting or any adjournment thereof.
Where there are joint holders of any ordinary share of the Company, any one of such holders may vote at the meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such holders are present at the meeting personally or by proxy, that one of such holders so present whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof.
Voting of the ordinary resolution set out in this notice will be by way of poll.

As at the date of this notice, the executive directors of the Company are Mr. Qin Hengde (Chief Executive Officer) and Mr. Harry Yang; the non-executive directors of the Company are Mr. Zhang Wei (Chairman), Mr. Yang Lin, Dr. Stephen Francis Dowdle and Ms. Xiang Dandan; and the independent non-executive directors of the Company are Mr. Ko Ming Tung, Edward, Mr. Lu Xin and Mr. Tse Hau Yin, Aloysius.

– 74 –

AI assistant

CWT International Limited — Proxy Solicitation & Information Statement 2017

49269_rns_2017-11-30_e321710b-6644-47c2-8317-5ff678ccb366.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

SINOFERT HOLDINGS LIMITED 中化化肥控股有限公司 *

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION DISPOSAL OF 20.52% EQUITY INTEREST IN QINGHAI SALT LAKE AND NOTICE OF SPECIAL GENERAL MEETING

SOMERLEY CAPITAL LIMITED

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

SINOFERT HOLDINGS LIMITED 中化化肥控股有限公司 *

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION DISPOSAL OF 20.52% EQUITY INTEREST IN QINGHAI SALT LAKE

INTRODUCTION

LETTER FROM THE BOARD

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION

THE SHARE TRANSFER AGREEMENT

Date

Parties

Interest to be disposed

Consideration

Payment

Conditions precedent of the Disposal

Completion

INFORMATION ON QINGHAI SALT LAKE

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE DISPOSAL

LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE DISPOSAL

Earnings

Assets and liabilities

USE OF PROCEEDS

INFORMATION ON THE COMPANY AND SINOCHEM GROUP

LISTING RULES IMPLICATIONS

SGM

LETTER FROM THE BOARD

RECOMMENDATION

FURTHER INFORMATION

SINOFERT HOLDINGS LIMITED 中化化肥控股有限公司 *

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION DISPOSAL OF 20.52% EQUITY INTEREST IN QINGHAI SALT LAKE

SOMERLEY CAPITAL LIMITED

Dear Sirs,

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION DISPOSAL OF 20.52% EQUITY INTEREST IN QINGHAI SALT LAKE

INTRODUCTION

LETTER FROM SOMERLEY

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Business and financial information on the Group

1.2 Financial information

Financial results

Financial position

2. Reasons for and benefits of the Disposal

LETTER FROM SOMERLEY

3. Principal terms of the Share Transfer Agreement

3.1 Subject matter

3.2 Consideration

3.3 Payment

3.5 Completion

3.6 Non-competition Undertaking

3.7 Future transactions between the Group and Qinghai Salt Lake

4. Business and financial information on Qinghai Salt Lake

4.1 Background and business of Qinghai Salt Lake

4.2 Financial information

Financial results

LETTER FROM SOMERLEY

Revenue

Gross profit and gross profit margin

Other revenue

Other net expense

Distribution cost and administrative expenses

Finance costs

Profit/(loss) attributable to shareholders of Qinghai Salt Lake

2017 Q3 Announcement

LETTER FROM SOMERLEY

Financial position

LETTER FROM SOMERLEY

2017 Q3 Announcement

4.3 Prospects

5. Evaluation of the consideration for the Disposal

5.1 Analysis of Qinghai Salt Lake’s share price

LETTER FROM SOMERLEY

CWT International Limited Proxy Solicitation & Information Statement 2017