Strong Petrochemical : DISCLOSEABLE TRANSACTION IN RELATION TO INVESTMENT IN A FUND

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STRONG PETROCHEMICAL HOLDINGS LIMITED

海 峽 石 油 化 工 控 股 有 限 公 司*

(Incorporated in the Cayman Islands with limited liability)

(STOCK CODE: 852)

DISCLOSEABLE TRANSACTION IN

RELATION TO INVESTMENT IN A FUND

THE INVESTMENT

The Board is pleased to announce that on 7 August 2020 (after trading hours), Strong New Energy (an indirect wholly-owned subsidiary of the Company) executed the Application Form, pursuant to which Strong New Energy has agreed to make a capital commitment to subscribe for the Participating Shares in SH Energy of up to US$25,000,000 (equivalent to approximately HK$195,000,000). SH Energy is managed by the Manager. SH Energy has certain investment objectives and strategies that are further set out in this announcement.

LISTING RULES IMPLICATION

As certain applicable percentage ratios stipulated under Rule 14.07 of the Listing Rules in respect of the Investment exceed 5% but are less than 25%, the Investment constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules.

THE INVESTMENT

The Board is pleased to announce that on 7 August 2020 (after trading hours), Strong New Energy (an indirect wholly-owned subsidiary of the Company) executed the Application Form, pursuant to which Strong New Energy has agreed to make a capital commitment to subscribe for the Participating Shares in SH Energy of up to US$25,000,000 (equivalent to approximately HK$195,000,000).

Date

7 August 2020 (after trading hours)

• For identification purposes only

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Party to the Application Form

Strong New Energy, an indirect wholly-owned subsidiary of the Company, as subscriber of SH Energy

Investment objective and investment strategy

The primary investment objective of SH Energy is to seek to maximise total returns to investors, whilst preserving capital through prudent investment. SH Energy seeks to achieve its investment objective by investing in privately held oil and gas assets and companies in the explorative and/or production stage, as well as assets and companies involved in the upstream and/or downstream oil and gas production processes. SH Energy shall target investments in oil and gas assets and companies which demonstrate a strong performance record.

Principal amount of the Investment

Strong New Energy has agreed to make a capital commitment to subscribe for Participating Shares in SH Energy of up to US$25,000,000 (equivalent to approximately HK$195,000,000). The consideration for the Investment will be satisfied in cash by the internal resources and, if necessary, the bank borrowings of the Group when SH Energy Directors call for payment. The Participating Shares are limited-votingnon-redeemable Class A shares of par value US$0.01 each in SH Energy. The Company is not entitled to nominate any person to be SH Energy Directors.

Basis of the principal amount of the Investment

The amount of the Investment was determined after arm's length negotiation between Strong New Energy and SH Energy on normal commercial terms.

Term

The SH Energy Directors shall compulsorily redeem all SH Energy Shares on the earlier of the following:

1. the day that is five (5) calendar years from 17 August 2020, which may be initially extended by the SH Energy Directors at its absolute discretion and in consultation with the Manager, for up to two (2) additional one-year periods, and may be further extended to permit the orderly disposition of the investments of SH Energy with the prior written consent of the SH Energy Directors and the holders of Class A Shares; and
2. the day the SH Energy Directors determine to compulsorily redeem all SH Energy Shares after SH Energy has disposed of all the investments of SH Energy and made distribution of all proceeds to the holders of SH Energy Shares.

The SH Energy Directors may wind up SH Energy upon completion of redemption of all of the SH Energy Shares.

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Allocation of proceeds

Amongst other things, after payment of, or reservation of amounts for the payment of, the expenses and liabilities of SH Energy as determined by the SH Energy Directors, the proceeds shall be allocated in the amounts and order of priority as determined as follows:

1. first, 100% to the holders of Class B Shares until holders of Class B Shares have received an amount equal to the capital contributions made by the holders of Class B Shares as of the date of the allocation;
2. second, 100% to the holders of Class B Shares until the holders of Class B Shares have received the preferred return amount at a rate of return of 12% compounded annually as of the date of the allocation; and
3. thereafter, 100% to the holders of Class A Shares.

Distribution policy

Unless otherwise not permitted under applicable laws or the memorandum and articles of association of SH Energy, the SH Energy Directors will declare distributions semi-annually with respect to each period ending on 30 June and 31 December of each financial year ended 31 December, provided however that any final decision shall be determined at the absolute discretion of the SH Energy Directors.

Redemption

The Participating Shares are not subject to voluntary redemption in whole or in part.

Management

The SH Energy Directors are responsible for the overall management of SH Energy. The SH Energy Directors have delegated, subject to their responsibility and supervision, day-to-day investment management of the SH Energy's assets to the Manager.

Management Fee

The Manager is entitled to a management fee as follows:

1. US$620,000 (equivalent to approximately HK$4,836,000) in respect of the period from the date of the Investment Management Agreement to the first anniversary of that date, which shall be paid by SH Energy in advance on or before 31 August 2020; and
2. 2% per annum of the Total Invested Capital of SH Energy for each anniversary after the first anniversary thereafter, which shall accrue daily and be paid by SH Energy in advance within seven (7) business days on a semi-annual basis.

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INFORMATION OF SH ENERGY

SH Energy is an exempted company incorporated under the laws of the Cayman Islands with limited liability on 14 July 2020. SH Energy has appointed the Manager as its investment manager. To the best of the Directors' knowledge, information and belief, and having made all reasonable enquiries, SH Energy and its ultimate beneficial owners are third parties independent of the Company and connected persons of the Company.

INFORMATION OF THE MANAGER

The Manager is a company incorporated in Hong Kong with limited liability on 22 October 2019. The Manager is licensed and regulated by the Securities and Futures Commission of Hong Kong to conduct Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities as defined in the Securities and Futures Ordinance in Hong Kong. To the best of the Directors' knowledge, information and belief, and having made all reasonable enquiries, the Manager and its ultimate beneficial owners are third parties independent of the Company and connected persons of the Company.

INFORMATION OF THE COMPANY

The Company is an investment holding company. The Group is principally engaged in trading of commodities, including crude oil, petroleum products, petrochemicals, coal and iron ore, and provision of petroleum products and petrochemical storage services.

REASONS FOR AND BENEFITS OF THE INVESTMENT

The principal purpose of the Investment is to diversify the investment portfolio of the Company with an aim to enhancing its profitability. The Investment provides an opportunity to the Company to capture investment opportunities and broaden the revenue streams for the Group.

With reference to the investment objective of SH Energy and the extensive experience and capabilities of the directors and the management of SH Energy and the Manager, the Board believes that the Investment will enable the Company to achieve the purpose of exploiting profitable investment opportunities and diversifying the Company's investment portfolio.

Based on the above, the Directors consider that the Investment is on normal commercial terms, are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATION

As certain applicable percentage ratios stipulated under Rule 14.07 of the Listing Rules in respect of the Investment exceed 5% but are less than 25%, the Investment constitute a discloseable transaction for the Company under Chapter 14 of the Listing Rules.

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DEFINITIONS

In this announcement, unless the context requires otherwise, the following expressions shall have the following meanings:

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Unless the context requires otherwise, amounts denominated in US$ have been converted into HK$ at an exchange rate of US$1.00=HK$7.80 for the purpose of illustration only. No representation is made that any amount in HK$ or US$ has been or could have been or could be converted at the relevant dates at the above rate or any other rates or at all.

By Order of the Board

STRONG PETROCHEMICAL HOLDINGS LIMITED

Wang Jian Sheng

Chairman

Hong Kong, 7 August 2020

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As at the date of this announcement, the Board comprises two executive directors and three independent non-executive directors. The executive directors are Mr. Wang Jian Sheng and Mr. Yao Guoliang. The independent non-executive directors are Ms. Cheung Siu Wan, Dr. Chan Yee Kwong and Mr. Deng Heng.

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