Announcement on the External Guarantee Limit of Maoming Petrochemical Shihua Co., Ltd

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Securities Code: 000637 Securities Short Name: Maohua Shihua Announcement Number: 2021-019 The company and all members of its board of directors guarantee that the information disclosed is true, accurate, and complete, and that there are no false records, misleading statements, or significant omissions in this announcement. I. Overview of Guarantee Arrangements (1) Basic Information on This Guarantee Maoming Petrochemical Shihua Co., Ltd. (hereinafter referred to as the “Company”)’s subsidiary companies, Maoming Shihua Dongcheng Chemical Co., Ltd. (hereinafter referred to as “Dongcheng Company”), Maoming Shihua Dongyou Chemical Co., Ltd. (hereinafter referred to as “Dongyou Company”), its wholly-owned subsidiary Zhanjiang Shihua Chemical Co., Ltd. (hereinafter referred to as “Zhanjiang Shihua”), and its equity-held subsidiary Huizhou Daya Bay Petrochemical Power and Heat Co., Ltd. (hereinafter referred to as the “Heat Company”), need to replenish working capital from time to time for their operations. Therefore, they plan to apply to banks for comprehensive credit lines or loan amounts totaling 530 million yuan. The Company will provide joint and several liability guarantees within these credit limits, with the amount of such guarantee responsibility falling at 455.5 million yuan. This proposal must be submitted to the company’s 2020 annual general meeting of shareholders for approval. The following announcement is made: The company’s holding subsidiaries, wholly-owned subsidiaries, and jointly-owned subsidiaries intend to apply to banks for comprehensive credit lines or loan amounts, with the company providing guarantees in such cases. The actual credit limits granted will be determined by each bank’s approval, and the specific amount of financing will depend on the actual operating conditions of the subsidiaries. The validity period for applying for credit or a loan amount is three years. During this period, the approved amount can be used repeatedly. Such credit facilities refer to loans, trade financing, letters of guarantee, fund services, and other credit-related services. Date and Place of Signing: After the credit or loan application is approved by the bank, the board of directors authorizes the company’s chairman to sign relevant guarantee contracts, agreements, or other contractual legal documents with the creditors from time to time, in accordance with the actual business needs of the subsidiary. Dongcheng Company and Dongyou Company plan to sign the contract in Maoming, Zhanjiang Shihua plans to do so in Zhanjiang, while the Thermal Power Company intends to sign the contract in Huizhou. (II) Voting results on the board’s review of the guarantee proposal: For the aforementioned guarantee transactions, they were all reviewed in advance by three independent directors prior to the board’s consideration. All the aforementioned secured transactions were approved by more than 2/3 of the directors at the fourth meeting of the company’s 11th board of directors. Due to the involvement of guarantee matters, in accordance with Article 202, Paragraph 3 of the Company’s Articles of Association (revised in 2017), such resolutions must still be reviewed and approved by the company’s 2020 annual general meeting. In line with Article 77, Item (4) and Article 202, Paragraph 3 of the Company’s Articles of Association (revised in 2017), the above resolutions are special resolutions that require approval by more than two-thirds of the voting rights held by the shareholders present at the meeting. The company’s independent directors have issued an independent opinion on the material matters related to this guarantee. Furthermore, the approval of the aforementioned resolution by the company’s shareholders does not necessarily mean that credit financing loans and the corresponding guarantees will be granted. Whether each guaranteed party enters into a financing transaction that requires the company to provide a guarantee is subject to the approval of the relevant creditors. II. Basic information of the guaranteed party
(1) Dongcheng Company
1. Name: Maoming Shihua Dongcheng Chemical Co., Ltd.
Date of establishment: January 28, 2005
Registered address: No. 162, Guandu Road, Maoming City
Legal representative: Liang Peisong
Registered capital: RMB 329.3653 million
Main business: Production and sales [Operations are conducted in accordance with a valid Safety Production License for Hazardous Chemicals Enterprises; the production site is limited to the northwest corner of the Maoming Petrochemical Refinery complex, while the storage site is limited to (Beishan Transfer Station): Maonan Petrochemical Industrial Park along Huan Shi North Road]. Products include liquefied petroleum gas (2548), propane (139), propylene (140), pentane (2796), n-butane (2778), cyclopentane (969), isobutane (2707), and solvent oil (1734). Production and sales: Ethanolamine (33), diethanolamine (566) (operation is permitted only by the ethanolamine branch in accordance with the scope specified in its valid Safety Production License). Production and sales: Triethanolamine (operated in accordance with the relevant approval documents issued under a valid special permit for the production of controlled chemicals) ； Production and sales: Polypropylene ； Operation without storage facilities (wholesale trade): hydrogen peroxide solutions, ammonia, methyl tert-butyl ether (MTBE), liquefied petroleum gas (limited to use in the production of industrial materials), propylene, n-butane, isobutane, pentane, isobutylene, propane, methanol, naphtha, solvent oils, acetic acid, butyl acetate, sodium hydroxide, cyclopentane, isooctane, styrene, coal tar, 1,2-dimethylbenzene, 1,3-dimethylbenzene, 1,4-dimethylbenzene, 1,3,5-trimethylbenzene, 1,2,4,5-tetramethylbenzene, ethylene oxide, ethanol, 2-aminoethanol, 2,2’-dihydroxydiethylamine, synthetic resins containing flammable solvents, paints, auxiliary materials, coatings, and other similar products ； Industrial white oil, fuel oil, crude oil, asphalt, chemical products, mixed aromatics, condensate oil, light cycle oil, petroleum products (the above business items do not include hazardous chemicals, flammable and explosive substances, or refined petroleum products). Production and sales: plastic products, woven bags, plastic drums, plastic containers, plastic modified products, iron drums, iron containers (production limited to branch companies). Sales (without warehousing): Chemical products (excluding hazardous chemicals and flammable/explosive items). Packaging Engineering. Import and export of goods, import and export of technology (except for those prohibited by laws and administrative regulations; for those restricted by laws and administrative regulations, permission must be obtained before operations can proceed). (The above sales are limited to self-produced products.) Relationships or other business connections with listed companies: The company’s holding subsidiary. 3. Dongcheng Company is not a party that has failed to fulfill its obligations; its financial situation is as follows: (II) Dongyou Company 1. Name: Maoming Shihua East Oil Chemical Co., Ltd. Date of establishment: June 29, 2011. Registration location: Maonan Petrochemical Industrial Park, Huanshi North Road, Maoming City. Legal representative: Qiu Xiaopeng. Registered capital: 179.5 million RMB. Main business: Production and sales of petrochemical products (except for those projects that are prohibited or restricted by laws, administrative regulations, and decisions issued by the State Council) ； Import and export of goods, as well as import and export of technologies (projects prohibited by laws and administrative regulations shall not be carried out; projects subject to restrictions under laws and administrative regulations require a license before they can be undertaken) ； Purchase and sale of waste materials (excluding hazardous waste). (For projects that require approval according to law, business operations can only be carried out after obtaining approval from the relevant authorities.) Relationship with listed companies or other business connections: The company’s holding subsidiary. 3. Dongyou Company is not a party that has failed to fulfill its obligations; its financial situation is as follows: (III) Zhanjiang Shihua 1. Name: Zhanjiang Shihua Chemical Co., Ltd. Date of establishment: March 29, 2018. Registration address: Office 2901, Fortune Hub Financial Center, No. 27 Leshan Road, Zhanjiang Economic Development Zone. (Place of production and operation: North of the Port Access Road in the Donghai Island New Area, Zhanjiang Economic and Technological Development Zone (south of Sinochem Petrochemical Co., Ltd.)) Legal representative: Song Weipu. Registered capital: RMB 260 million. Main business: Sale of hazardous chemicals (specifically, operations are conducted in accordance with the items specified in the Hazardous Chemicals Business License No. Yue-Zhan Kai Wei-Hua Jing Zi 000003 (valid until March 3, 2023) and No. Yue-Zhan Wei-Hua Jing Zi 023 (valid until February 27, 2023)) ； Sale of plastic products (excluding plastic shopping bags with a thickness of less than 0.025 millimeters), woven bags, pulp, paper, steel products, hardware and electrical goods, petrochemical equipment, instruments and meters, as well as cement and chemical products (except hazardous chemicals). (For projects that require approval according to law, business operations can only be carried out after obtaining approval from the relevant authorities.) Relationship with listed companies or other business connections: The company is a wholly-owned subsidiary. 3. Zhanjiang Shihua is not a party subject to enforcement for breach of contracts; its financial situation is as follows: (IV) Thermal Power Company 1. Name: Huizhou Daya Bay Petrochemical Power and Thermal Co., Ltd. Date of establishment: October 29, 2008 Registered address: 7th floor, Building 2 (R&D), No. 26, Xiyong Petrochemical Avenue, Huizhou Daya Bay Legal representative: Liu Pingfan Registered capital: 40 million RMB Main business: Sale of steam, deionized water, condensate water, hydrogen, carbon monoxide, as well as steam energy generated through coal-based cogeneration ； Tunnel leasing service ； Pipeline transportation services. (For projects that require approval according to law, business operations can only be carried out after obtaining approval from the relevant authorities.) Relationship with listed companies or other business connections: The company has subsidiaries in which it holds shares. 3. The thermal power company is not a party that has failed to fulfill its obligations; its financial situation is as follows: III. Main contents of the guarantee agreement 1. Type of guarantee: All are joint and several liability guarantees. 2. Duration of the guarantee: Two years from the date when the term of the principal debt expires (subject to the terms of the guarantee contract signed). 3. Amount of the guarantee: The principal amount of the debt under the main contract, interest, penalty interest, compound interest, liquidated damages, damages, costs incurred in enforcing the rights (including but not limited to litigation fees, arbitration fees, attorney fees, travel expenses, enforcement fees, preservation fees, appraisal fees, auction or sale fees, transfer fees, announcement fees, etc.), and all other applicable expenses (if any). 4. Guarantees provided by other shareholders: Guarantee for Dongcheng Company: The contribution made by Maoming State-owned Assets Operating Company to Dongcheng Company constitutes “support funds” paid in the form of preferred shares, with agreed-upon fixed returns, a specified exit timeline, and predetermined exit procedures. Therefore, this guarantee is provided in its entirety by the company, with Maoming State-owned Assets Operation Company not being required to share the guarantee liability in proportion to its capital contribution. Guarantee for Dongyou Company: The Company and Dongcheng Company jointly hold a 42.48% stake in Dongyou Company; the Company is the actual controller of Dongyou Company. Since the capital contribution made by Maoming State-owned Assets Operation Company to Dongyou Company was in the form of preferred shares, which constitute **support funds, with fixed returns, specified timelines for withdrawal, and defined methods for exiting such investments, the guarantee provided this time is shared between the company and Maoming Tianyuan Trading Development Co., Ltd. (hereinafter referred to as “Tianyuan Trading”) in accordance with their original shareholding ratios. Specifically, the company provides a joint and several liability guarantee covering 51% of the credit limit, while Tianyuan Trading provides a joint and several liability guarantee covering 49% of the credit limit; Maoming State-owned Assets Operation Company is not required to assume any guarantee responsibilities in proportion to its capital contribution. Guarantee for Zhanjiang Shihua: The company provides a full guarantee. Guarantee for the thermal power company: The guarantee is shared by the company, Huizhou Daya Bay Petrochemical Industrial Zone Investment Co., Ltd. (hereinafter referred to as “Daya Bay Company”), and Huizhou Taidong Energy Co., Ltd. (“Taidong Energy”) in proportion to their shareholdings; specifically, Daya Bay Company provides a joint and several liability guarantee covering 51% of the credit limit, Taidong Energy provides such a guarantee for 34% of the credit limit, and the company provides it for 15% of the credit limit. 5. Since the relevant principal debt and guarantee agreements have not yet been signed, the final terms and conditions shall be subject to the actual agreements signed. IV. Board of Directors’ Opinion 1. The company provides guarantees to support the financing needs for the daily operations of its wholly-owned, controlling, and partially-owned subsidiaries. 2. Dongcheng Company and Dongyou Company are subsidiaries under the company’s control. Over the past three fiscal years, they have maintained good asset quality, solvency, and credit standing. They also have a certain level of negotiation and operational foundation in their financing arrangements with the lending banks, and there have been no instances of failure to repay principal and interest on time. Although Dongyou Company incurred losses in 2020, they were caused by the impact of the pandemic. With the epidemic situation in the country now under effective control and the production and operations of Dongyou Company improving, the risk of its being unable to repay debts is relatively low. The Thermal Power Company is a subsidiary in which the company holds shares; it is a public utility support service company controlled by the state-owned entity in Daya Bay, Huizhou. The company integrates the heat sources in the Daya Bay Petrochemical Industrial Zone to provide unified heating services, offering steam, demineralized water, condensed water, and pipeline services to the enterprises within this zone. Over the past three fiscal years, it has maintained high asset quality, good operational performance, strong debt repayment capacity, and a favorable credit rating. 3. The Company and Dongcheng Company jointly hold 51% of the shares in Dongyou Company, while the Company holds 15% of the shares in Reili Company. The other shareholders of Dongyou Company and Reili Company provide guarantees in proportion to their shareholdings; the ratio of these guarantees is fair and equitable, and there is no situation that undermines the interests of the Company. 4. Zhanjiang SHIHUA is a wholly-owned subsidiary of the company, so there is no risk related to corporate management and control. Zhanjiang Shihua’s project is about to go into operation; its debt repayment capacity is promising, the quality of its assets is good, and its credit risk is low. The risk associated with the company providing guarantees is within controllable limits; it is in line with the company’s strategic goal of strengthening and expanding its core business, and it can generate new sources of profit for the company. There is no risk of harming the interests of the company or its shareholders. 5. Since the guaranteed parties are all subsidiaries of the company, the company did not require the guaranteed parties to provide counter-guarantees. V. Independent Directors’ Independent Opinion: Regarding the matter of the company providing guarantees for its wholly-owned subsidiaries, holding subsidiaries, and equity-held subsidiaries to apply for credit lines or loans from commercial banks, for the wholly-owned subsidiaries, it is reasonable for the company to assume such guarantee responsibilities. As for the holding subsidiaries and equity-held subsidiaries, other shareholders apart from the company provide guarantees in proportion to their shares, which is fair and reasonable; there is no situation that undermines the interests of the company or its minority shareholders. The provision of guarantees by the company to its wholly-owned subsidiaries, holding subsidiaries, and equity-held subsidiaries this time is lawful and compliant, as well as fair and reasonable. Once approved at the company’s 2020 annual general meeting of shareholders, the decision-making process regarding this significant matter complies with relevant laws, administrative regulations, departmental rules, regulatory documents, as well as the rules, notices, and guidelines of the Shenzhen Stock Exchange, in addition to the provisions of the company’s articles of association. VI. Total number of external guarantees and number of overdue guarantees: Following approval by the shareholders’ meeting, the total amount of external guarantees that the listed company and its holding subsidiaries may provide is 2.342 billion yuan. This figure represents 257.69% of the company’s most recent audited net assets. All these guarantees are provided by the company for its holding subsidiaries and jointly-controlled entities ； As of the date of this announcement, the total amount covered by the guarantee agreements signed by the company amounts to 1.945 billion yuan, which represents 214.02% of the company’s most recent audited net assets. As of the date of this announcement, the Company and its holding subsidiaries have no overdue external guarantees, nor any external guarantees involved in litigation, or situations where they are required to bear losses due to unfavorable court rulings related to such guarantees. VII. List of reference documents
1. Resolutions of the fourth meeting of the eleventh Board of Directors of the Company ； 2. Prior review and independent opinions by the company’s independent directors. Board of Directors of Maoming Petrochemical Shihua Co., Ltd. April 29, 2021 Securities Code: 000637 Securities Short Name: Maohua Shihua Announcement Number: 2021-021 Announcement by Maoming Petrochemical Shihua Co., Ltd. regarding the Transfer of Some Shares of its Fully-Owned Subsidiary and Related Transactions I. Overview of the Transaction On April 27, 2021, Maoming Petrochemical Shihua Co., Ltd. (hereinafter referred to as “the Company”) held the fourth meeting of its 11th Board of Directors, during which the resolution regarding the transfer of some shares of its fully-owned subsidiary, Zhanjiang Shihua Chemical Co., Ltd., as well as related transactions, was approved. In order to advance the construction of the projects under development at Zhanjiang Shihua Chemical Co., Ltd. (hereinafter referred to as “Zhanjiang Shihua”), consolidate resources, effectively motivate the management team, and promote sustainable development, the company plans to transfer its 12% stake in Zhanjiang Shihua, corresponding to an original investment amount of 31.2 million yuan. Of this, 6.5% of the shares (corresponding to an original investment of 16.9 million yuan) were transferred to a joint-stock company to be established by mid-level management personnel (which has not yet been registered; hereinafter referred to as the proposed company). 3% of the shares (corresponding to an original investment of 7.8 million yuan) were transferred to Song Weipu, who serves as the general manager and financial director. 1% of the shares (corresponding to an original investment of 2.6 million yuan) were transferred to Song Hutang, who is the executive vice general manager. Another 1% of the shares (also corresponding to an original investment of 2.6 million yuan) was transferred to Ma Yongxin, who is the vice general manager. Finally, 0.5% of the shares (corresponding to an original investment of 1.3 million yuan) was transferred to Liu Xiaoyan, who is the head of the supervisory board. Following the completion of the transaction, the company holds 88% of the equity in Zhanjiang Shihua. Based on the “Asset Appraisal Report on the Total Equity Value of Zhanjiang Shihua Chemical Co., Ltd. in Connection with the Planned Equity Transfer by Its Shareholders” (Ya Ping Bao No. 19) issued by Beijing Asia-Pacific Lianhua Asset Appraisal Co., Ltd., and the “Audit Report of Zhanjiang Shihua Chemical Co., Ltd.” (ZT Audit No. 441FC0005) issued by Grant Thornton LLP, as of the valuation date of November 30, 2020, the net assets of Zhanjiang Shihua (i.e., the total equity held by shareholders) amounted to RMB 271,855,600 ； Taking Zhanjiang Shihua’s registered capital of 260 million into account, and after consultation among the parties involved in the transfer, the transfer price per share of capital contributed is 1.05 yuan, resulting in a total transfer amount of 32.76 million yuan. The transferees, Song Weipu, Song Hutang, and Ma Yongxin are senior management personnel of the company, while Liu Xiaoyan is the chairman of the company’s supervisory board. In accordance with the ‘Shenzhen Stock Exchange Stock Listing Rules’ and other relevant regulations, as well as the provisions of the company’s articles of association, this transaction constitutes a related-party transaction. Over the past 12 months, the company has engaged in no related-party transactions with the aforementioned related parties. This transaction does not constitute a major asset restructuring as defined in the Measures for the Administration of Major Asset Restructurings of Listed Companies. The share transfer agreement has not yet been signed; it will be signed subsequent to approval by the company’s shareholders’ meeting. II. Basic Information of the Counterparty 1. The company to be established is a joint-stock company founded by key middle-management personnel of the company for the purpose of carrying out this transaction; it is planned to be registered in Zhanjiang City, and no financial data is available at present. Apart from making equity investments in Zhanjiang Shihua, the company does not engage in any other business activities. There is no associated relationship with the company. 2. Song Weipu, male, Chinese nationality, acting general manager and finance director of the company. He currently resides in Maonan District, Maoming City, Guangdong Province. His ID number is 13220119850109****. His mailing address is No. 162, Guandu Road, Maoming City, Guangdong Province ； 3. Song Hutang, male, Chinese nationality, Party Secretary and Executive Deputy General Manager of the company. He currently resides in Maonan District, Maoming City. His ID number is 44090219630120****. His mailing address is No. 162, Guandu Road, Maoming City, Guangdong Province ； 4. Ma Yongxin, male, Chinese nationality, deputy general manager of the company. He currently resides in Maonan District, Maoming City. His ID number is 44090219740502****. His mailing address is No. 162, Guandu Road, Maoming City, Guangdong Province ； 5. Liu Xiaoyan, female, Chinese nationality, Chairperson of the company’s supervisory board. She currently resides in Maonan District, Maoming City. Her ID number is 37050219760223****, and her mailing address is No. 162, Guandu Road, Maoming City, Guangdong Province. The transferees, Song Weipu, Song Hutang, and Ma Yongxin are senior management personnel of the company, while Liu Xiaoyan is the chairman of the company’s supervisory board; they all have an affiliated relationship with the company. None of the aforementioned counterparties are persons subject to enforcement for breach of trust. III. Basic Information on the Subject of the Transaction 1. Name and Type of the Subject of the Transaction The subject of this transaction is 12% of the shares in Zhanjiang Shihua. The type of transaction is asset sale, meaning that the company intends to sell its 12% stake in Zhanjiang Shihua to the company to be established, Song Weipu, Song Hutang, Ma Yongxin, and Liu Xiaoyan. 2. Ownership status: The shares in question are owned by the company; the property rights are clear, and there are no pledges or other interests held by third parties, no significant disputes, lawsuits or arbitration cases, and no judicial measures such as seizures or freezes. 3. Explanation of the operational status of Zhanjiang Shihua: Zhanjiang Shihua was established on March 29, 2018, with a registered capital of RMB 20 million. In January 2019, the company increased its investment in Zhanjiang Shihua by RMB 240 million, raising its registered capital to RMB 260 million; the capital increase was made in the form of cash funds. Zhanjiang Shihua Investment & Operation is developing a project for the comprehensive utilization of pyrolyzed carbon nine and pyrolyzed tar, as well as a project for the production of 300,000 tons per year of hydrogen peroxide (at 27.5% purity); both projects are located in the Donghai Island Petrochemical Industrial Park within the Zhanjiang Economic and Technological Development Zone. Affected by the COVID-19 pandemic, the construction of the two projects has been impacted to some extent. By the end of 2020, construction of the two aforementioned projects in Zhanjiang Shihua had been completed, and they are scheduled to go into operation in the near future. 1. Overview of the target asset 2. Overview of the shareholders of the target asset 3. Basic information on Zhanjiang Shihua: 4. Key financial indicators of Zhanjiang Shihua for the most recent year and quarter 5. Assessment results: The target asset was assessed by Beijing Asia-Pacific Lianhua Asset Appraisal Co., Ltd., which issued the \"Asset Appraisal Report on the Total Equity Value of the Shareholders of Zhanjiang Shihua Chemical Co., Ltd. in Connection with the Proposed Transfer of Shares\" (Appraisal Report No. 19). This appraisal firm possesses the qualifications to carry out business related to securities and futures. The company’s board of directors believes that the procedure for selecting the appraisal firm was lawful, that the firm possesses independence, and that the appraisal assumptions and conclusions are reasonable. The assessment date is November 30, 2020. No events that could have a significant impact on the assessment results occurred between the assessment date and the date when the relevant assessment results were disclosed. The valuation method used this time is the asset-based approach. The value type for this appraisal is market value. 6. Audit Status: The target assets were audited by Zhitong Accounting Firm, which issued the \"Audit Report on Zhanjiang Shihua Chemical Co., Ltd.\" (Zhitong Audit No. 441FC0005). The auditing firm possesses the qualifications necessary to carry out services related to securities and futures. The audit report is of the standard unqualified opinion type. 7. Upon completion of this equity transfer, the equity structure of Zhanjiang Shihua will be as follows: IV. Main contents of the transaction agreement; V. Total amount of various related-party transactions that have occurred to date. Apart from this transfer of a portion of the equity in its wholly-owned subsidiary to a related party, during the past twelve months up to the date of issuance of this announcement, the Company and its subsidiaries have not entered into any other related-party transactions with Song Weipu, Song Hutang, Ma Yongxin, or Liu Xiaoyan. VI. Other Remarks: This transaction involves no issues related to personnel placement or land leasing. Upon completion, it will not give rise to any related-party transactions involving the transferred senior management personnel, nor will it result in any competition within the same industry. As of the date of issuance of this report, the company’s maximum guarantee limit for Zhanjiang Shihua is 670 million yuan. The parties acquiring the shares in this transfer shall provide counter-guarantees to the company in accordance with their subscribed capital contributions, by pledging all of their shares in Zhanjiang Shihua to the company. That is: 1. The proposed company intends to pledge all 6.5% of its shares in Zhanjiang Shihua to the company as counter-guarantee for the latter ； The Company will sign relevant equity pledge contracts with the proposed company. 2. Song Weipu pledged all 3% of his shares in Zhanjiang Shihua to the company as counter-guarantee for the company ； The company will sign the relevant equity pledge contract with Song Weipu. 3. Song Hutang pledged all 1% of his shares in Zhanjiang Shihua to the company as counter-guarantee for the company ； The company will sign a relevant equity pledge contract with Song Hutang. 4. Ma Yongxin pledged all 1% of his shares in Zhanjiang Shihua to the company as counter-guarantee for the company ； The company will sign a relevant equity pledge contract with Ma Yongxin. 5. Liu Xiaoyan pledged all of her 0.5% stake in Zhanjiang Shihua to the company as counter-guarantee for the company ； The company will sign a relevant equity pledge contract with Liu Xiaoyan. VII. Purpose of the Equity Transfer and Its Impact on the Company: In order to advance the construction of the projects under development at Zhanjiang Shihua, consolidate resources, effectively motivate the management team, and promote sustainable development, the company plans to transfer its 12% stake in Zhanjiang Shihua to a joint-stock company to be established by key middle-level managers, as well as to senior management officials and supervisors. Following this share transfer, the company’s stake in Zhanjiang Shihua will increase to 88%, keeping it as the controlling shareholder of Zhanjiang Shihua; Zhanjiang Shihua will remain included in the company’s consolidated financial statements. The transfer of some shares of Zhanjiang Shihua in this instance will not affect the company’s actual control over it, nor will it have a significant impact on the company’s financial conditions and operational status. There is also no risk of harm to the interests of the listed company or its shareholders. The funds obtained from this equity transfer will be used for the company’s daily operations, and the company is expected to earn a profit of 1.56 million yuan from this transfer. The recipient of this transaction is a joint-stock company established by the company’s senior management, supervisors, and middle-level managers; the company has a full understanding of its ability to make payments to these individuals. Prior to the transaction, the company publicly sought the investment intentions of the aforementioned individuals, who voluntarily selected an investment amount that matched their financial capabilities. The board believes that there is no credit risk on the part of the transferee, and that the company will be able to recover the amount paid for the transfer of shares. VIII. Review Procedures to be Followed for Transactions (I) Board of Directors’ Review On April 27, 2021, the fourth meeting of the 11th Board of Directors was held, during which the resolution on the transfer of equity in the company’s wholly-owned subsidiary and related transactions was approved. The board of directors believes that, for this share transfer, an appraisal institution qualified to handle securities and futures business should be engaged to conduct an appraisal, and the transfer price should be determined based on the appraised value. The parties to the transaction agreed that the price per unit of capital contribution for this transaction would be 1.05 yuan. The appraisal institution involved in this equity transfer is independent, the appraisal assumptions are reasonable, and the conclusions drawn in the asset appraisal report are sound; such conclusions comply with relevant laws, regulations, normative documents, and the Company’s Articles of Association, and they will not harm the interests of the company’s shareholders, especially the minority shareholders. (II) Application for review by independent directors and independent opinions: The company’s independent directors expressed their prior approval of this proposal, stating that this transaction is necessary in order to advance the construction and operational activities of the projects under development at Zhanjiang Shihua, to integrate resources and effectively motivate the management team, and to promote sustainable development. The transaction did not have an adverse effect on the independence of the listed company, and no actions or circumstances that harmed the interests of minority shareholders were found. It is agreed to submit the “Proposal on the Transfer of Some Shares of the Fully-Owned Subsidiary and Related Transactions” to the fourth meeting of the 11th Board of Directors of the company for consideration. The company’s independent directors issued an independent opinion on this proposal: This transaction will help advance the construction and operational activities of the projects under development at Zhanjiang Shihua, facilitate the integration of resources and provide effective incentives for the management team, thereby promoting sustainable development. We have conducted a preliminary review of this matter. The appraisal agency for this transaction is Beijing Asia-Pacific Lianhua Asset Appraisal Co., Ltd. This company has the qualifications to engage in securities and futures-related activities, possesses professional appraisal capabilities, and has no affiliation with either the company in question or the target company; thus, it maintains independence. This transaction is conducted in accordance with the principle of fairness; the transaction price is fair and reasonable, and it does not harm the interests of the company or its shareholders. The procedures for reviewing and voting on this transaction complied with relevant laws and regulations as well as the provisions of the Company’s Articles of Association. We agree to this partial share transfer and consent to submitting this proposal for consideration at the company’s general meeting of shareholders. (III) Written opinion of the Audit Committee The company’s Audit Committee expressed the following opinion on this matter: The transaction was carried out in accordance with the principles of fairness, impartiality, voluntariness, and good faith, and there is no situation that undermines the interests of the company and all shareholders, particularly those who are minority shareholders. Therefore, we agree to submit the aforementioned proposal to the board of directors for review; this proposal still needs to be submitted to the shareholders’ meeting for consideration. VIII. Risk Warnings: This share transfer transaction must be approved by the company’s shareholders’ meeting. Moreover, the transfer agreement has not yet been signed, and the company that the key middle-management personnel intend to establish has not yet been registered; as a result, the outcome of this transaction remains uncertain. Going forward, the company will disclose the progress of this transaction in a timely manner in accordance with laws, regulations, and relevant regulatory requirements. Investors are advised to be aware of investment risks. IX. Documents for Reference 1. Resolutions of the Fourth Meeting of the 11th Board of Directors of the Company ； 2. Prior consent of independent directors for review and independent opinion ； 3. The “Asset Appraisal Report on the Total Equity Value of the Shareholders of Zhanjiang Shihua Chemical Co., Ltd. in Connection with the Proposed Transfer of Shares by Those Shareholders”, prepared by Beijing Asia-Pacific Lianhua Asset Appraisal Co., Ltd ； 4. “Audit Report of Zhanjiang Shihua Chemical Co., Ltd.” (Zhongtong Audit No. 441FC0005) ； 5. Version of the “Equity Transfer Agreement” (not yet signed). Securities Code: 000637 Securities Short Name: Maohua Shihua Announcement Number: 2021-022 Maoming Petrochemical Shihua Co., Ltd. Announcement on the Amendment to the Articles of Association The company and all members of its board of directors guarantee that the information disclosed is true, accurate, and complete, with no false records, misleading statements, or significant omissions. Maoming Petrochemical Shihua Co., Ltd. (hereinafter referred to as the “Company”) held the fourth meeting of its 11th Board of Directors on April 27, 2021. With 8 votes in favor, 0 votes against, and 0 abstentions, the meeting deliberated and approved the “Proposal on Amendments”. This proposal still needs to be submitted to the Company’s 2020 Annual General Meeting of Shareholders for approval via a special resolution. The specific amendments proposed are as follows: Reference documents: 1. Resolution of the fourth meeting of the 11th Board of Directors. This is to announce. Securities Code: 000637 Securities Short Name: Maohua Shihua Announcement Number: 2021-012 Summary of the Annual Report 2020 for Maoming Petrochemical Shihua Co., Ltd. I. Important Notes This summary of the annual report is derived from the full text of the annual report. In order to gain a comprehensive understanding of the company’s operational results, financial condition, and future development plans, investors should read the full text of the annual report in the media designated by the China Securities Regulatory Commission. Except for the following directors, the other directors attended in person the board meeting at which this annual report was reviewed. Warning regarding non-standard audit opinion: □ Applicable √ Not applicable. Plan for distribution of profits from common shares or use of retained earnings to increase share capital during the reporting period, as considered by the board: √ Applicable □ Not applicable. Is it intended to use retained earnings to increase share capital? □ Yes √ No. The plan approved by the board for distributing profits from common shares is as follows: based on a base amount of 519,875,356, each shareholder will receive a cash dividend of 0 yuan (including taxes), with no bonus shares issued (including taxes); retained earnings will not be used to increase share capital. Proposed distribution plan for preferred stock dividends for the reporting period, as approved by the board of directors: □ Applicable √ Not applicable II. Basic information about the company 1. Company overview 2. Overview of main businesses or products during the reporting period (I) Main businesses of the company The company operates in the field of basic chemical raw materials manufacturing; its main activities involve the production and sale of petrochemical products. Its key products include liquefied petroleum gas, polypropylene, MTBE, special industrial white oils, ethanolamine, polymer-grade isobutane, propane, etc. The comprehensive utilization project for producing 140,000 tons per year of pyrolyzed carbon nine and pyrolyzed tar, as well as the hydrogen peroxide production project with an annual capacity of 300,000 tons (based on 27.5% purity), which were invested in and built by the company’s wholly-owned subsidiary, Zhanjiang Shihua Chemical Co., Ltd., are scheduled to be completed and put into operation in April 2021. After its commissioning, Zhanjiang Shihua’s main products include industrial hydrogen peroxide (27.5%/35%), dicyclopentadiene (high-purity/polyester grade), hydrogenated carbon 9, petroleum resin, naphthalene, and heavy tar. (II) Main uses of the company’s products, production processes, and upstream and downstream industrial chains: Liquefied petroleum gas: Used as a basic raw material in the chemical industry as well as a new type of fuel (for household use, for cutting metals, and for drying agricultural products or heating industrial furnaces). Polypropylene resin powder: Suitable for melt spinning, injection molding, or extrusion into flat filaments; it can be used to produce non-woven fabrics, textile bags, packing materials, binding ropes, film products, as well as daily items and small containers. MTBE: Used as a raw material in organic chemical manufacturing (such as for the production of high-purity isobutylene through cracking) and as an additive to increase the octane rating of gasoline. Special industrial white oils: mainly used as industrial solvents, as well as processing oils and lubricants in fields such as textiles and mechanical processing. Ethanolamine: Used in the production of surfactants, as well as in textile chemicals, gas purifiers, cement setting accelerators, petroleum additives, leather softeners, corrosion inhibitors for lubricants, and anti-coking additives. Polymer-grade isobutane: used as a catalyst solvent in the production of full-density polyethylene, and can also be used to produce isooctane (an octane number booster for gasoline), among other things. Propane: used as a fuel for heat treatment, an gas for metal cutting, a propellant for aerosols, a shielding gas for carburizing, and an asphalt removal solvent, among other applications. Industrial hydrogen peroxide (27.5%/35%): mainly used for pulp bleaching in the paper industry and waste paper deinking ； Primarily used as a fiber bleaching agent in the textile industry ； It is also used in the chemical industry, environmental management, and the electronics industry, among other fields. Bicyclopentadiene: mainly used in the production of unsaturated resins and modified unsaturated polyesters. It is also used in the production of pesticides, fragrances, flame retardants, norbornene, olefin derivatives, adamantanes, and epoxides. Hydrogenated carbon 9: Pyrolyzed carbon 9 aromatics have excellent solvency for synthetic resins, and can be used as diluents for paints and inks, emulsifiers for pesticides, cleaners for precision machinery, and diluents in certain chemical reactions. Petroleum resins: They are divided into three main categories: cold-polymerized resins, copolymerized resins, and tar resins. Among them, cold-polymerized resins are used as additives in industries such as paints, rubber, adhesives, inks, plastic floor tiles, and colored asphalt ； Copolymer resins are primarily used in hot-melt adhesives, pressure-sensitive adhesives, tires, and rubber products, and can serve as substitutes for terpene resins, rosin glycerides, etc ； Tar resin is mainly used in industries such as rubber, tires, V-belts, conveyor belts, paints, inks, waterproofing materials, and hoses. Naphthalene: It is mainly used in the production of water reducers and dispersants, and serves as a raw material for manufacturing synthetic resins, plasticizers, rubber antioxidants, surfactants, synthetic fibers, dyes, pharmaceuticals, and fragrances. Heavy tar: A raw material mainly used for industrial heating. (III) Industry development status and overall supply and demand trends The company’s main business falls within the **key industry of petrochemicals**. Specifically, the small-scale polypropylene production facilities are part of Category 7 of the **List of Projects Encouraged for Development in the Industrial Structure Adjustment Guidelines (2011 version)**, which belongs to the “Oil and Gas” sector and relates to the comprehensive utilization of resources associated with oil and gas ； Facilities for producing industrial white oil, MTBE, ethanolamine, etc. are considered encouraged development projects within the \"petrochemicals\" industry, which is listed in Category 11 of the Catalogue of Encouraged Development Projects. The petrochemical industry exhibits cyclical fluctuations and is a highly competitive sector. With the continuous improvement and implementation of relevant laws and regulations, regulatory policies regarding safety and environmental protection in the petrochemical industry are becoming increasingly strict, and efforts to shut down small, scattered, and polluting enterprises are being intensified ； Competition in this industry is fierce, and the prices of raw materials and products are linked to international crude oil prices; fluctuations are a normal feature of the market. As the company’s core business is in line with policies related to industries, energy, environmental protection, and other areas, it has been able to increase its production capacity and operational scale through ongoing technological upgrades and improved management. As a result, material and energy consumption has decreased, while product quality, stability, and competitiveness have improved. Once the projects for the comprehensive utilization of pyrolyzed carbon nine and pyrolyzed tar, as well as the project for producing 300,000 tons per year of hydrogen peroxide (at 27.5% purity), which were invested in and built by the company’s wholly-owned subsidiary, Zhanjiang Shihua Chemical Co., Ltd., come online, the company’s scope of operations, business scale, and main revenue sources will increase. The company has the largest domestic production capacity for polypropylene in the powder form, and its output of industrial white oil and ethanolamine ranks among the highest in South China. During the reporting period, affected by the COVID-19 pandemic, the downstream industries of the company resumed operations slowly, with limited production levels and reduced demand. Additionally, logistics and transportation were disrupted in the first half of 2020, resulting in a significant decline in the profits from the company’s core business compared to the same period the previous year ； During the pandemic, due to lower product selling prices, the provision for inventory write-downs increased ； In the second half of 2020, once the epidemic situation in the country was effectively brought under control, the company focused on improving its management, and the overall situation of its production and operations continued to improve. 3. Key accounting data and financial indicators (1) Key accounting data and financial indicators for the past three years: Does the company need to make retrospective adjustments or restatements to the accounting data for previous years? □ Yes √ No Unit: Yuan (2) Key accounting data by quarter Unit: Yuan Are there any significant differences between the above financial indicators or their totals and the corresponding financial indicators stated in the company’s quarterly and semi-annual reports? □ Yes √ No 4. Share capital and shareholders (1) Number of ordinary stockholders and preferred stockholders with restored voting rights, as well as a list of the top 10 shareholders by shareholding amount Unit: Shares (2) Total number of preferred stockholders and a list of the top 10 preferred stockholders by shareholding amount □ Applicable √ Not applicable There are no preferred stockholders whose shareholdings need to be reported during the company’s reporting period. (3) Disclose the ownership and control relationships between the company and its actual controller in the form of a block diagram. 5. Information on corporate bonds: Does the company have any corporate bonds that have been publicly issued and listed on a stock exchange, and which remain unpaid or not fully redeemed as of the date when the annual report is approved for publication? No. III. Discussion and analysis of operating conditions: 1. Brief overview of operating conditions during the reporting period: In 2020, the global outbreak of the novel coronavirus led to an economic downturn, a sluggish market, disrupted transportation, and declining demand; consequently, the petrochemical industry was severely affected. Facing difficulties and challenges, the company turned pressure into motivation, rose to the occasion, and strived hard. In the second half of the year, it reversed the passive situation in production and operations; its economic performance gradually recovered, and the company achieved new breakthroughs in its development. I. Stringent, meticulous, and practical efforts have been made to improve HSSE management, resulting in new advancements in safety and environmental protection work. The company adheres to the principle of giving top priority to safety and environmental protection, carries out thorough safety training, strictly implements the \"Work Safety Law\" and the \"Environmental Protection Law\", follows requirements such as the \"Four Orders and Three Systems\" and the \"Three Inspections at the Front Line\", enhances scientific inspection methods through a \"Five-in-One\" approach, conducts regular inspections on a weekly basis, as well as pre-holiday checks, quarterly inspections, and special inspections. It identifies potential hazards, urges corrective actions, and rewards those who contribute to detecting such hazards. Throughout the year, 726 potential accident hazards were identified, all of which were rectified, achieving a 100% correction rate. Efforts were made to effectively control the spread of COVID-19, with strict supervision to ensure that preventive measures were properly implemented. The company was awarded the title of “Advanced Collective in the Fight Against COVID-19” by Maoming City, received the “Special Contribution to Safety Award” from the Maoming City Safety Association, obtained the certificate for “Level 3 Compliance with Safety Production Standards,” and was honored as a “Green Card Unit” for ecological and environmental protection in Maoming City for the first time. II. Strengthening internal management through rigorous efforts has led to a steady recovery in economic performance. In the face of a challenging external environment, the company adhered to strict internal governance; despite heavy losses in the first quarter due to the impact of the pandemic, its business conditions began to improve starting from the second quarter. We have strengthened plan management and optimized raw material procurement. We conducted cost-benefit analyses, actively participated in procurement bidding, made every effort to increase and balance the supply of raw materials, and reduced raw material costs, thereby ensuring a steady supply of raw materials for the plant to operate at full capacity. The company’s annual product output reached 680,400 tons. Among them, the output of polypropylene reached 195,800 tons, fulfilling 100.44% of the annual target ； The output of white oil products was 38,100 tons, accounting for 92.93% of the annual target ； The production volume of ethanolamine series products was 18,200 tons, achieving 108.22% of the annual target. The overall propylene yield of the gas separation unit increased by 1.71 percentage points compared to the annual plan ； The power costs for plants producing polypropylene, special white oil, ethanolamine, etc., have decreased. Faced with a challenging market environment, the company stays close to market trends, adopts flexible sales strategies, adjusts prices and offers promotions in a timely manner to increase sales volume. 13 new polypropylene end customers were acquired, accounting for 72.1% of the total end customers. Throughout the year, the company’s products were virtually fully produced and sold; 191,400 tons of polypropylene were sold, resulting in a production and sales rate of 97.70% ； 37,500 tons of special white oil were sold, with a production and sales rate of 98.53% ； 18,300 tons of ethanolamine were sold, with a production and sales rate of 100.30% ； 104,200 tons of MTBE were sold, with a production and sales rate of 96.60% ； 7,233 tons of isobutane were sold, with a production and sales rate of 96.35%. III. Making every effort to promote development, achieving new breakthroughs in corporate growth. Efforts are being made to advance the construction of Zhanjiang Shihua’s 300,000 tons per year hydrogen peroxide production facility, as well as the 140,000 tons per year facility for the comprehensive utilization of pyrolyzed carbon nine and tar. After the project is completed, various tasks are being carried out to ensure its smooth commissioning, including the completion of final construction work, rectification of issues identified through inspections, and preparations for operation; the facility is set to go into production soon. Efforts were made to enhance research, development, technological upgrades, and productivity; the capacity expansion upgrade of the three pre-treatment units was completed, raising their production capacity to 200,000 tons per year, which generates an additional profit of 4.8 million yuan per year. Revamp the isobutane production system and optimize production to increase isobutane output. The sec-butyl acetate plant was converted into an isopropanol production plant. A process reform was carried out for the 5# stripping hot water project; the projects to switch from secondary and tertiary power supply to municipal power were completed; pilot tests using new catalysts for polypropylene were conducted, yielding partial results; and a production line dedicated to manufacturing polypropylene melt-blown materials with high melt index was invested in and built. “The project “Research and Application of High-Efficiency Catalysts for Propylene Polymerization on Composite Supports” successfully passed the project defense and on-site review organized by the Maoming Science and Technology Bureau. 2. Were there any significant changes in the core business activities during the reporting period? □ Yes √ No 3. Information regarding products that account for 10% or more of the company’s core business revenue or core business profits. 4. Are there any seasonal or periodic operational characteristics that require special attention? □ Yes √ No 5. Explanation of any significant changes in operating revenue, operating costs, or the total net profit attributable to the shareholders of the listed company compared to the previous reporting period. √ Applicable □ Not applicable The net profit attributable to the shareholders of the listed company during this reporting period decreased by 83.97% compared to the same period last year, mainly due to the impact of the COVID-19 pandemic: the downstream industries involved in the company’s operations resumed work slowly, with limited production levels and reduced demand. Additionally, logistics and transportation were disrupted in the first half of 2020, resulting in a significant decline in core business profits compared to the previous year ； During the pandemic, due to lower product selling prices, the provision for inventory write-downs increased ； In the second half of 2020, once the epidemic situation in the country was effectively brought under control, the company focused on improving its management, and the overall situation of its production and operations continued to improve. 6. Facing delisting □ Applicable √ Not applicable 7. Matters related to financial reports (1) Explanation of any changes in accounting policies, accounting estimates, and accounting methods compared to the previous year’s financial reports √ Applicable □ Not applicable The Ministry of Finance issued Accounting Standards for Business Enterprises No. 14 – Revenue (Revised) in 2017; the company’s 10th Board of Directors, at its 10th meeting, adopted this standard as of January 1, 2020. In accordance with the new revenue standards, the company adjusted the amounts of retained earnings and other relevant items in the financial statements for the beginning of 2020, taking into account the cumulative impact of contracts that had not been completed as of January 1, 2020. In December 2019, the Ministry of Finance issued Interpretation No. 13 on Accounting Standards for Enterprises (Cai Kuai [2019] No. 21). In accordance with the provisions of this interpretation, companies are required to apply it starting from January 1, 2020, without making any retroactive adjustments. (2) Explanation of any situations where significant accounting error corrections required retrospective restatements occurred during the reporting period: □ Applicable √ Not applicable. There were no situations in the company’s reporting period where significant accounting error corrections required retrospective restatements. (3) Explanation of any changes in the scope of the consolidated financial statements compared to the previous year’s financial reports: √ Applicable □ Not applicable Guangxi Huaying Tianyi Chemical Co., Ltd., a subsidiary controlled by the company, has completed the cancellation procedures and is no longer included in the group’s consolidated scope for this period. Board of Directors of Maoming Petrochemical Shihua Co., Ltd. President Fan Hongyan (signature): April 27, 2021 Source: Securities Daily