On 1 January 2018, Sanjiang Chemical Co. Ltd. ("Sanjiang Chemical"), a wholly-owned subsidiary of China Sanjiang Fine Chemicals Company Limited (“company”), entered into the fatty alcohol supply agreement with Zhejiang Jiahua Energy Chemical Co. Ltd. (“Jiahua Energy Chemical Co”) to regulate the supplier and customer relationships of the transactions under the fatty alcohol supply agreement. Jiahua Energy Chemical Co has agreed to supply fatty alcohol of no more than 8,000 tonnes for the three years ending 31 December 2020. The fatty alcohol supply agreement shall become effective on 1 January 2018 and has a term ending on 31 December 2020 which may be renewable upon further agreement by the parties (subject to compliance with the Listing Rules). Pursuant to the fatty alcohol supply agreement, the purchase price shall be the weighted average price of fatty alcohol purchased by all customers of Jiahua Energy Chemical Co from the 26th day of the previous calendar month to the 25th day of the month of purchase, plus the transportation cost of RMB 10 per tonne of fatty alcohol purchased. In order to ensure that the purchase price per tonne is no less favourable than the prevailing market price, the Group would compare quotations from the other independent fatty alcohol suppliers after taking into account the additional transportation costs that may incur, analyse such market information, and the unit purchase price for fatty alcohol is agreed after arm's length negotiation with Jiahua Energy Chemical Co. Accordingly, the Board considers that the methods and procedures can ensure that the purchase of fatty alcohol will be conducted on normal commercial terms and not prejudicial to the interests of the company and its shareholders as a whole. Based on: (1) the expected amount of purchases to be made by Sanjiang Chemical from Jiahua Energy Chemical Co for fatty alcohol for the three years ending 31 December 2020; and (2) the estimated market price of fatty alcohol for three years ending 31 December 2020.