China Sanjiang Fine Chemicals : (1) MAJOR AND CONNECTED TRANSACTION - DISPOSAL OF 51% EQUITY INTEREST IN THE TARGET COMPANY; (2) MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTION - FINANCIAL ASSISTANCE TO THE TARGET COMPANY UPON COMPLETION OF THE DISPOSAL OF 51% EQUITY INTEREST IN THE TARGET COMPANY; (3) PROPOSED CONDITIONAL SPECIAL DIVIDEND; AND (4) NOTICE OF EGM

If you are in any doubt about any aspect of this Circular or as to the action to be taken, you should consult your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional advisers.‌‌‌‌‌‌‌

If you have sold or transferred all your Shares, you should at once hand this Circular together with the enclosed form of proxy to the purchaser or transferee or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

This Circular is addressed to the Shareholders in connection with the EGM to be held at 10 : 00 a.m. on 29 August 2016.

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.

CHINA SANJIANG FINE CHEMICALS COMPANY LIMITED

中 國 三 江 精 細 化 工 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2198)

1. MAJOR AND CONNECTED TRANSACTION -

   DISPOSAL OF 51% EQUITY INTEREST IN THE TARGET COMPANY;

2. MAJOR TRANSACTION AND

   CONTINUING CONNECTED TRANSACTION -

   FINANCIAL ASSISTANCE TO THE TARGET COMPANY UPON COMPLETION OF THE DISPOSAL OF

   51% EQUITY INTEREST IN THE TARGET COMPANY;

3. PROPOSED CONDITIONAL SPECIAL DIVIDEND; AND

4. NOTICE OF EGM

Independent Financial Advisor to the

Independent Board Committee and the Independent Shareholders Gram Capital Limited

Capitalised terms used in this cover page shall have the same meanings as those defined in the section headed ''Definitions'' in this Circular. A letter from the Board is set out on pages 5 to 28 of this Circular. A letter from the Independent Board Committee containing its advice and recommendation to the Independent Shareholders is set out on pages 29 to 30 of this Circular. A letter from Gram Capital to the Independent Board Committee and the Independent Shareholders is set out on pages 31 to 49 of this Circular.

A notice convening the EGM to be held at Compass Office, L20, Infinitus Plaza, 199 Des Voeux Road Central, Sheung Wan, Hong Kong at 10 : 00 a.m. on 29 August 2016 is set out on pages 72 to 74 of this Circular. If you are not able to attend the meeting in person, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon and deposit it with the Company's branch share registrar and transfer office in Hong Kong, Tricor Investor Services 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 before the time appointed for holding the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof if you so wish.

12 August 2016

Page

DEFINITIONS 1-4

LETTER FROM THE BOARD 5-28

LETTER FROM THE INDEPENDENT BOARD COMMITTEE 29-30

LETTER FROM GRAM CAPITAL 31-49

APPENDIX I - FINANCIAL INFORMATION ON THE GROUP 50-52

APPENDIX II - VALUATION REPORT 53-65

APPENDIX III - GENERAL INFORMATION 66-71

NOTICE OF EGM 72-74

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

''Announcement'' announcement of the Company dated 17 June 2016 in relation to, among other matters, the Disposal and the Financial Assistance

''associate(s)'' has the meaning ascribed to it under the Listing Rules ''Board'' the board of Directors

''Business Day'' any day(s) (excluding Saturday(s), Sunday(s) and statutory holiday(s) in Hong Kong)

''Capitol International'' Capitol International Limited (佳都國際有限公司), a company incorporated in Hong Kong with limited liability and a direct wholly-owned subsidiary of the Company

''Circular'' the circular of the Company dated 12 August 2016 in relation to, among other matters, the Disposal and the Financial Assistance

''Company'' China Sanjiang Fine Chemicals Company Limited (中國三江精細

化工有限公司), a company incorporated in the Cayman Islands

and the issued Shares of which are listed on the Main Board of the Stock Exchange

''Completion'' completion of the SP Agreement, which shall take place on the Completion Date

''Completion Date'' the date which Completion takes place

''connected person(s)'' has the meaning ascribed to it in the Listing Rules

''Consideration'' RMB306,000,000, being the consideration for the Disposal ''Director(s)'' director(s) of the Company

''Disposal'' the disposal of the Sale Interest pursuant to the terms and conditions of the SP Agreement

''EGM'' an extraordinary general meeting of the Company to be convened for the purpose of considering and, if thought fit, approving and ratifying the SP Agreement, the LG Agreement and the transactions contemplated thereunder by the Independent Shareholders and approving the Special Dividend by the Shareholders

''Financial Assistance'' collectively, the Loan and the Guarantee

''Group'' collectively, the Company and its subsidiaries from time to time

''Guarantee'' the provision of guarantee by the Group to certain banks in favour of the Target Company in respect of the repayment obligations of the Target Company

''Hong Kong'' the Hong Kong Special Administrative Region of the PRC

''Independent Board Committee''

an independent board committee of the Board comprising all the existing independent non-executive Directors that joined the Company on or before 17 June 2016, when the Company entered into the SP Agreement and LG Agreement, who have no material interest in the SP Agreement, the LG Agreement and the transactions contemplated thereunder; namely, Mr. Shen Kaijun and Ms. Pei Yu

''Independent Financial Adviser'' or ''Gram

Capital''

Gram Capital Limited, a licensed corporation to carry out type 6 (advising on corporate finance) regulated activity as defined under the SFO, being the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the SP Agreement, the LG Agreement and the transactions contemplated thereunder

''Independent

Shareholders''

Shareholders who are not involved or interested in the SP Agreement, the LG Agreement and the transactions contemplated thereunder (i.e. Shareholders other than Mr. Guan and Ms. Han and their respective associates)

''Jiahua'' 浙江嘉化集團股份有限公司 (Zhejiang Jiahua Group Co., Ltd.*),

a joint stock company established in the PRC with limited liability and a company which was owned as to 67.43% by 杭州 浩明投資有限公司 (Hangzhou Haomin Investment Company

Limited*), a company established in the PRC with limited liability and was owned by Mr. Guan, Ms. Han and Mr. Han Jianping (being an executive Director) as to 75.00%, 20.00% and 5.00% respectively as at the Latest Practicable Date

''Jiahua Energy Chemical Co''

浙江嘉化能源化工股份有限公司 (Zhejiang Jiahua Energy Chemical Co., Ltd.*) (formerly known as 浙江嘉化工業園投資 發展有限公司 (Zhejiang Jiahua Industrial Park Investment and

Development Co., Ltd.*)), a company established with limited liability in the PRC and owned by Jiahua and Mr. Guan as to approximately 61.047% and 2.15% respectively, and a connected person of the Company as at the Latest Practicable Date