CONNECTED TRANSACTIONS

Transcription

1 We have entered into certain transactions with parties who are our connected persons (under certain rules and regulations) that will continue following the [ ], thereby constituting continuing connected transactions under those rules and regulations. CONTINUING Summary Table of Our Continuing Connected Transactions Proposed annual cap for the year ended December 31, Nature of transaction (millions) Exempt continuing connected transactions (1) Service Agreement... N/A N/A N/A (2) SAP Services Agreement... N/A N/A N/A (3) Trademark Licensing Agreements.... N/A N/A N/A (4) Local Services Agreement... N/A N/A N/A (5) PET Recycling Agency Agreement... N/A N/A N/A (6) Research and Development Agreement... N/A N/A N/A (7) Chemtex Consulting India Consulting Service Agreement... N/A N/A N/A (8) Chemtex International Consulting Service Agreement... N/A N/A N/A (9) Infrastructure Support and Office Services Agreement... N/A N/A N/A (10) Guarantee in respect of the Brazilian Syndicated Facility... N/A N/A N/A Continuing connected transactions which are subject to the requirements of reporting, annual review and announcement but exempt from the independent shareholders approval requirement (11) Raw Materials Supply Agreement (1)... US$40 (C= 30.8) (12) Distributorship Agreement (1)... US$45.0 (C= 34.6) US$83.7 (C= 64.4) US$50.4 (C= 38.8) US$83.7 (C= 64.4) US$50.4 (C= 38.8) Notes: (1) Amounts of the proposed annual caps under this agreement have been translated to euro at a rate of C= 1.3: US$1.0 solely for the convenience of the reader. 264

2 Exempt Continuing Connected Transactions The following transactions (other than the Service Agreement and the Local Services Agreement which are both exempt under certain rules and regulations and the guarantees which are exempt under certain rules and regulations) are made in the ordinary course of business and on normal commercial terms where each of the relevant percentage ratios (other than the profits ratio) calculated for the purpose of certain rules and regulations will, as our Directors currently expect, not exceed 0.1% on an annual basis. Under certain rules and regulations, the transactions are exempted from the reporting, annual review, announcement and independent shareholders approval requirements under certain rules and regulations. 1. Service Agreement Principal terms: M&G International S.à r.l. entered into a service agreement with M&G Finanziaria S.r.l. on October 29, 2013 (the Service Agreement ), pursuant to which we will share certain administrative and advisory services with M&G Finanziaria S.r.l. on a cost basis, such services to include information technology systems and consulting services in relation to human resources, accounting, tax, legal consulting, insurance consulting, quality, health security, environmental protection, engineering and technology and other miscellaneous services. The term of the Service Agreement is from January 1, 2014 for an initial period of three years, automatically renewing for further periods of 12 months each unless terminated by M&G Finanziaria S.r.l. at any time, or by M&G International S.à r.l. at least 60 days before the commencement of any such renewal period. Reasons for the transaction: M&G Finanziaria S.r.l. has been sharing these services with us for many years. Given the size of M&G Finanziaria S.r.l. and its in-depth knowledge of information technology systems and its familiarity with the business and the countries in which we operate, we believe that M&G Finanziaria S.r.l. has the ability to provide/share such services to complex international operations like us in an efficient manner. 2010, 2011 and 2012 and the six months ended June 30, 2013 were C= 11.3 million, C= 9.9 million, C= 9.4 million and C= 6.1 million, respectively. Services have been provided and will continue to be provided to us at cost. 2. SAP Services Agreement Principal terms: M&G Polímeros Brasil S.A. entered into a SAP services agreement with M&G Finanziaria S.r.l. on January 2, 2009 (the SAP Services Agreement ), pursuant to which M&G Finanziaria S.r.l. implemented and now operates the SAP corporate management system for M&G Polímeros Brasil S.A. The SAP Services Agreement was carried out in two phases, one in which M&G Finanziaria S.r.l. installed SAP, which ended on December 31, 2009, and another during which M&G Finanziaria S.r.l. currently provides M&G Polímeros Brasil S.A. with SAP information services related to purchasing, sales, production, plant maintenance, financial accounting, management control and general administration. 265

3 The term of the SAP Services Agreement is from January 2, 2009 to December 31, 2015, when these services will be included in the Service Agreement as above. Reasons for the transaction: SAP corporate management systems are costly to develop and given M&G Finanziaria S.r.l. has already developed such a system, it would be more cost efficient for M&G Polímeros Brasil S.A. to use such services which are provided by M&G Finanziaria S.r.l. This will help M&G Polímeros Brasil S.A. save investment costs in corporate management systems. 2010, 2011 and 2012 and the six months ended June 30, 2013 were C= 1.5 million, C= 1.4 million, C= 1.5 million and C= 0.8 million, respectively. Services have been provided and will continue to be provided to us at cost. 3. Trademark Licensing Agreements Principal terms: M&G Polímeros Brasil S.A., M&G Polímeros México, S.A. de C.V. and M&G Polymers USA, LLC entered into several trademark licensing agreements with M&G Finanziaria S.r.l. on April 1, 2006, in the case of the agreements with the M&G Polímeros México, S.A. de C.V., and M&G Polymers USA, LLC, and March 1, 2007, in the case of the agreement with M&G Polímeros Brasil S.A. (the Trademark Licensing Agreements ), pursuant to which M&G Polímeros Brasil S.A., M&G Polímeros México, S.A. de C.V. and M&G Polymers USA, LLC have obtained non-exclusive licenses to certain trademarks (which are the logos and/or the names of M&G and Chemtex ) from M&G Finanziaria S.r.l., for use by the PET and Engineering divisions in their respective regions. M&G Finanziaria S.r.l. is in the process of transferring these trademarks to us; this is a lengthy process that requires the filing of different applications and a long vetting process of the applications by the regulatory authorities, but it is expected that we will acquire these trademarks by The fees payable under the Trademark Licensing Agreement are based on a fixed percentage of 0.2% of the amount of sales per year of M&G Polímeros México, S.A. de C.V. and M&G Polymers USA, LLC, and 0.4% of the amount of net sales per year of M&G Polímeros Brasil S.A. Such percentage was arrived at after arm s length negotiations between the relevant parties and with reference to the range of market rates for trademark licensing fees. The initial term of the respective Trademark Licensing Agreements with M&G Polímeros México, S.A. de C.V. and M&G Polymers USA, LLC was April 1, 2006 to March 31, 2009, but each of such agreements are automatically renewed for successive two-year periods unless either party sends written notice to the other at least 12 months before the end of the then-current period. The initial term of the Trademark Licensing Agreement with M&G Polímeros Brasil S.A. was January 1, 2007 to December 31, 2009, but such agreement is automatically renewed for successive two-year periods unless either party sends written notice to the other at least 12 months before the end of the then-current period. The Trademark Licensing Agreements were automatically renewed on April 1, 2013 for M&G Polímeros México, S.A. de C.V. and M&G Polymers USA, LLC and the current term will expire on April 1, 2015, subject to further renewal. For M&G Polímeros Brasil S.A. the agreement was automatically renewed on January 1, 2012 and will expire on January 1, 2014, subject to further renewal. Reasons for the transaction: Given our relationship with M&G Finanziaria S.r.l. and in order to maintain branding consistency, it would be necessary for us to obtain rights to use the M&G logos and names of M&G and Chemtex as the names of our subsidiaries and in our marketing materials. 266

4 2010, 2011 and 2012 and the six months ended June 30, 2013 were C= 3.8 million, C= 4.3 million, C= 4.5 million and C= 2.2 million, respectively. 4. Local Services Agreement Principal terms: M&G Polímeros Brasil S.A. entered into a local services agreement with M&G Fibras Brasil S.A. on June 26, 2013 (the Local Services Agreement ), pursuant to which M&G Polímeros Brasil S.A. shares the following services with M&G Fibras Brasil S.A.: legal, accounting, tax, treasury, human resources, information technology, risk management, purchase of utilities and raw materials, and office leasing. The term of the Local Services Agreement is from June 26, 2013 for a term of three years, renewable for equal periods subject to execution of an amendment agreement. Reasons for the transaction: As M&G Polímeros Brasil S.A. shared the same parent with M&G Fibras Brasil S.A. prior to the Reorganization, they had been sharing these services for many years. Therefore, it is more cost and operationally efficient for M&G Polímeros Brasil S.A. to continue sharing such services with M&G Fibras Brasil S.A. 2010, 2011 and 2012 and the six months ended June 30, 2013 were nil, nil, nil and nil, respectively. As M&G Fibras Brasil S.A. and M&G Polímeros Brasil S.A. were within the same group of companies prior to the Reorganization, nothing was charged. Services have been and will continue will be provided at cost. 5. PET Recycling Agency Agreement Principal terms: M&G Polímeros Brasil S.A. entered into a PET recycling agency agreement with M&G Fibras Brasil S.A. on June 26, 2013 (the PET Recycling Agency Agreement ), pursuant to which M&G Polímeros Brasil S.A. acts as an exclusive agent to M&G Fibras Brasil S.A. for the sale of its products to third parties. Under the PET Recycling Agency Agreement, M&G Fibras Brasil S.A. may refuse to sell its products to third parties in the event the price negotiated by M&G Polímeros Brasil S.A. is deemed too low or when sales to a single customer are higher than 10% of the production quantities estimated in the PET Recycling Agency Agreement. Nevertheless, M&G Fibras Brasil S.A. is not allowed under the PET Recycling Agency Agreement to sell its recycled PET directly to third-party customers. The fees payable under the PET Recycling Agency Agreement are US$10 (C= 7.69, translated at a rate of C= 1.0 : US$1.3) per ton of products sold by M&G Polímeros Brasil S.A. Such rate was arrived at after arm s length negotiations between the parties with reference to the market price charged by other agents engaged in the sales of relevant products and has been confirmed by PAL to be fair and reasonable. The term of the PET Recycling Agency Agreement is from June 26, 2013 for a term of three years, renewable for equal periods pursuant to an amendment. 267

5 Reasons for the transaction: As a portion of the production of the PET recycling plant of M&G Fibras Brasil S.A. is sold to customers in the PET bottling market and it lacks a sales and distribution network, M&G Polímeros Brasil S.A. can leverage its sales network to sell and distribute these minor quantities of PET recycling products to end customers. In addition, by entering into this arrangement, we can ensure that such PET recycling products will not be sold to competitors of our Group. 2010, 2011 and 2012 and the six months ended June 30, 2013 were nil, nil, nil and nil, respectively. 6. Research and Development Agreement Principal terms: M&G USA Corporation entered into a research and development agreement with Biochemtex on [ ] (the Research and Development Agreement ) in respect of the division of business between the two companies. Under the Research and Development Agreement, Biochemtex will design, build and operate a MOGHI technology demonstration plant manufacturing bioreformate in Modugno, Italy, and M&G Polymers USA, LLC will share costs up to an amount of US$18.0 million (C= 13.8 million, translated at a rate of C= 1.0 : US$1.3) payable in four installments through December 31, Part of the payments are subject to the achievement by Biochemtex of certain milestones in the construction of the demonstration plant and the construction of the demonstration plant is expected to complete in Biochemtex will own all intellectual property rights on the MOGHI technology and will be responsible for filing, prosecuting and maintaining any and all relevant patents applications and patents worldwide. Biochemtex has granted an exclusive, irrevocable and sublicensable license to M&G USA Corporation for PET applications of MOGHI technology. Biochemtex has agreed to introduce M&G Polymers USA, LLC to third parties licensed to use MOGHI technology as a possible off-taker of the MOGHI Xylene which is produced in the relevant MOGHI plant. Reasons for the transaction: M&G Polymers USA, LLC entered into the Research and Development Agreement because Biochemtex is developing an industrial demonstration plant and is in the process of developing the relevant technological know-how for the MOGHI technology. It is therefore beneficial for us to participate in this project so that we can be part of the development of the MOGHI technology and secure the irrevocable and perpetual license for PET applications of the MOGHI technology, which is important for the production of our products. 2010, 2011 and 2012 and the six months ended June 30, 2013 were nil, nil, nil and nil, respectively. We did not incur any fees during the years ended December 31, 2010, 2011 and 2012 and the six months ended June 30, 2013 because the amounts paid by us during this period are regarded as investments made by us. Payment of the costs for the building of the MOGHI plant will be made when certain milestones are achieved. 7. Chemtex Consulting India Consulting Service Agreement Principal terms: Chemtex Consulting of India Private Limited ( Chemtex Consulting India ) entered into a consulting service agreement with Biochemtex (then named Chemtex Italia) on November 18, 2013 (the Chemtex Consulting India Consulting Service Agreement ) pursuant to which Chemtex Consulting India provides drafting, design and/or professional engineering services in connection with certain industrial projects undertaken by Biochemtex where it provides construction, engineering, procurement, operation, maintenance, management and financing services. 268

6 Services provided by Chemtex Consulting India are charged by the hours spent by employees of Chemtex Consulting India and the hourly rates of the employees range from US$15 (C= 11.09) to US$40 (C= 29.56), depending on the seniority and experience of each such employee. The fees charged per year under the Chemtex Consulting India Consulting Service Agreement shall not exceed US$3,000,000 (C= 2,307,692, translated at a rate of C= 1.0 : US$1.3). Once this cap is reached, no services under the Chemtex Consulting India Consulting Agreement will be provided by Chemtex Consulting India until a new cap has been agreed between the parties and the relevant requirements under certain rules and regulations have been complied with. Such rates are determined based on market rates for similar types of services and are subject to annual adjustment based on inflation in the countries where the services are to be performed and fluctuations in the US$/Rupee exchange rate. In addition to service fees, Chemtex Consulting India will also charge for disbursements paid on behalf of Biochemtex and miscellaneous expenses of its employees working outside his/her home office. The term of the Chemtex Consulting India Consulting Service Agreement is from November 18, 2013 to [ ]. Reasons for the transaction: Chemtex Consulting India has the engineering and design expertise which is relevant for the projects undertaken by Biochemtex in the bio field. Therefore, Chemtex Consulting India entered into the Chemtex Consulting India Consulting Service Agreement with Biochemtex with a view to leverage its expertise through the provision of relevant services to customers (including connected customers) at market price. 2010, 2011 and 2012 and the six months ended June 30, 2013 were nil, nil, nil and US$0.04 million (C= 0.03 million), respectively. 8. Chemtex International Consulting Service Agreement Principal terms: Chemtex International entered into a consulting service agreement with Biochemtex (then named Chemtex Italia) on November 18, 2013 (the Chemtex International Consulting Service Agreement ) pursuant to which Chemtex International provides project management, procurement assistance, project controls, design and/or professional engineering services in connection with certain industrial projects undertaken by Biochemtex where it provides construction, engineering, procurement, operation, maintenance, management and financing services. Services provided by Chemtex International are charged by the hours spent by employees of Chemtex International and the hourly rates of the employees are capped at US$160 (C= 118.2). The fees charged per year under the Chemtex International Consulting Service Agreement shall not exceed US$5,000,000 (C= 3,846,154, translated at a rate of C= 1.0 : US$1.3). Once this cap is reached no services under the Chemtex International Consulting Service Agreement will be provided by Chemtex International until a new cap has been agreed between the parties and the relevant requirements under certain rules and regulations have been complied with. Such rates are subject to annual adjustment based on inflation in the countries where the services are to be performed. In addition to service fees, Chemtex International will also charge for disbursements paid on behalf of Biochemtex and miscellaneous expenses, including software charges, service charges and charges for employees working outside his/her home office. 269

7 The term of the Chemtex International Consulting Service Agreement is from November 18, 2013 to [ ]. Reasons for the transaction: Chemtex International has the engineering and design expertise which is relevant for the projects undertaken by Biochemtex in the bio field. Therefore, Chemtex International entered into the Chemtex International Consulting Service Agreement with Biochemtex with a view to leverage its expertise through the provision of relevant services to customers (including connected customers) at market price. 2010, 2011 and 2012 and the six months ended June 30, 2013 were nil, nil, nil and US$4.9 million (C= 3.6 million), respectively. 9. Infrastructure Support and Office Services Agreement Principal terms: Chemtex International Inc. entered into an infrastructure support and office services agreement with Beta Renewables USA Inc. on September 16, 2013 and amended on November 11, 2013 (the Infrastructure Support and Office Services Agreement ) pursuant to which Chemtex International provides office space and certain infrastructure support (such as computer network and system), office services (such as office equipment and furniture), and administrative, accounting and HR services, to Beta Renewables USA Inc. in return for an annual fee of US$500,000 (C= 384,615, translated at a rate of C= 1.0 : US$1.3), which will be reviewed annually by the parties. The fees charged were determined with reference to the market price for the renting of similar office space and the provision of office services. The term of the Infrastructure Support and Office Services Agreement is from September 16, 2013 to December 31, At the end of the fixed term, the agreement is renewed automatically for additional one year terms, without notice, unless one party provides written notice of non-renewal to the other party 30 days prior to the date of any automatic renewal. Any such renewal will be subject to compliance with certain rules and regulations. Reasons for the transaction: Beta Renewables USA Inc. is setting up a new branch office in the United States and is therefore sharing office space and certain infrastructure support with Chemtex International, which would enable Beta Renewables USA Inc. to save some initial set up costs. Given Chemtex International has extra office space and sufficient infrastructure and office support services, it is in the interest of Chemtex International to share such space and support services with Beta Renewables USA Inc. at cost, which will help Chemtex International to save costs. 2010, 2011 and 2012 and the six months ended June 30, 2013 were nil, nil, nil and nil, respectively. 10. Guarantee in respect of the Brazilian Syndicated Facility Principal terms: Our subsidiary M&G Polímeros Brasil S.A. is the borrower under a secured syndicated credit facility entered into with BNDES, BNB and other Brazilian commercial banks as identified therein, as lenders (the Brazilian Syndicated Facility ). The Brazilian Syndicated Facility comprises three different agreements, entered into on March 28, 2007, April 10, 2007 and April 27, 2007, as subsequently modified, and provides for R$460 million (C= million) of credit lines to 270

8 fund the construction and outfitting of our Suape plant in Pernambuco state, Brazil. The facility is structured in sub-credits, some of which are to be used for construction of the plant and others to finance the importation of specialized equipment and machinery necessary to the plant s manufacturing. All obligations of the borrower are irrevocably guaranteed by the guarantee letters issued by M&G Finanziaria S.r.l., dated October 11, 2007, October 22, 2007 and November 7, According to the guarantee letters, the obligations of the guarantor under them may be enforced by the lender in its discretion (i) without first having recourse to any other guarantee and/or indemnity or any other security; (ii) without taking any steps to initiate judicial proceedings against the borrower or the guarantor or any other person; or (iii) without first demanding or seeking payment from the borrower. Additionally, the security package consists of an alignment of the rights related to the rental agreement entered into by M&G Polímeros Brasil S.A. in connection with the Suape plant site, and other collateral. The facility matures in April The various sub-credits of the Brazilian Syndicated Facility bear interest at variable rates, which differ according to the sub-credit. As the facility has been granted by state development banks, the interest rates are set by the Brazilian government on terms that are intended to encourage investment, generally on more favorable terms than those prevailing in the Brazilian commercial market. For sums drawn in reais, under the agreement with BNDES, the interest rate is either: (i) TJLP (Taxa de Juros de Longo Prazo) as established by the Central Bank of Brazil plus a 2.72% spread, in the case of a TJLP lower than 6% per year; or (ii) in the case of a TJLP higher than 6% per year, the interest rate is calculated as determined in the agreement. The Brazilian Syndicated Facility can be drawn down primarily in Brazilian reais. The Brazilian Syndicated Facility contains affirmative and negative covenants which are market standard for development bank loans in Brazil and may differ from international standards, as further described under Financial Information Indebtedness. As of June 30, 2013, C= 92.7 million was outstanding under the Brazilian Syndicated Facility and as of the Latest Practicable Date, we are not aware of the lending banks having made any claim against M&G Finanziaria S.r.l. pursuant to the guarantee letter provided thereby. We do not propose to discharge the guarantee provided by M&G Finanziaria S.r.l. with respect to this Brazilian Syndicated Facility as any discharge would require renegotiation with the lenders, which would be an unduly burdensome and cost-ineffective exercise for us. In particular, based on our discussions with the lenders, we understand that they have indicated that they will not agree to the release of such guarantee. Furthermore, there are no other financial institutions in Brazil which provide similar types of syndicated facilities, which are intended to encourage long-term investment in Brazil, and the terms of the Brazilian Syndicated Facility are favorable to us, so it would not be in our interest to discharge this facility and obtain a new facility from financial institutions outside Brazil which may offer less favorable interest rate and/or maturity terms. Given that we have the ability to obtain financing independent of our Controlling Shareholders and that the size of the guarantee is insignificant from our perspective, we are of the view that we are able to operate independently from our Controlling Shareholders from a financial perspective notwithstanding the existence of the guarantee from M&G Finanziaria S.r.l. Historical amounts: The maximum aggregate amounts of M&G Finanziaria S.r.l. s obligations under the Brazilian Syndicated Facility for the years ended December 31, 2010, 2011 and 2012 and the six months ended June 30, 2013 were C= million, C= million, C= million and C= 92.7 million, respectively. 271

9 Continuing connected transactions which are subject to the requirements of reporting, annual review and announcement but exempt from the independent shareholders approval requirement 11. Raw Materials Supply Agreement Principal terms: M&G International S.A. (which has since merged with Chemtex Global to form M&G International S.à r.l.) entered into a raw materials supply agreement with M&G Fibras Brasil S.A. on November 1, 2008 and amended on February 1, 2013 and November 11, 2013 (the Raw Materials Supply Agreement ), pursuant to which M&G Fibras Brasil S.A. agreed to purchase all its PTA requirements from M&G International S.A. Under the terms of the Raw Materials Supply Agreement, M&G Fibras Brasil S.A. is obligated to purchase its imported PTA requirements from M&G International S.à r.l., and M&G International S.à r.l. is obligated to sell to M&G Fibras Brasil S.A. the required amount of PTA. If M&G International S.A. fails to ship any quantity of PTA ordered in any given month, it is to pay any additional cost incurred by M&G Fibras Brazil S.A. to buy such quantity of PTA from alternative sources. M&G Fibras Brasil S.A. is entitled to enter into contractual agreements with third parties for the supply of PTA in the event of more than three months supply disruption by M&G International S.à r.l. No fees are paid to M&G International S.à r.l. for supplying PTA to M&G Fibras Brasil S.A. and all products are sold to M&G Fibras Brasil S.A. at market price. During the years ended December 31, 2010, 2011 and 2012 and the six months ended June 30, 2013, M&G International S.A. did not incur any loss as a result of supplying PTA to M&G Fibras Brasil due to the drop of market prices for PTA. In particular, the Raw Materials Supply Agreement provides that neither party will be obliged to perform its respective obligations thereunder if its performance of such obligations will result in it making a economic loss. The term of the Raw Materials Supply Agreement is from November 1, 2008 for an initial term to December 31, It has been renewed upon expiration of the initial term and will terminate on December 31, Reasons for the transaction: The production of fiber products requires PTA, so the sale of PTA by M&G International S.à r.l. to M&G Fibras Brasil S.A. would ensure that there is a constant demand for our products. As M&G International S.à r.l. purchases PTA from third-party suppliers in bulk, it will enjoy a favorable discount to market price from such third-party suppliers and would benefit from selling such PTA to M&G Fibras Brasil S.A. at market price which is usually and had been higher than M&G International S.à r.l. s purchase price during the years ended December 31, 2010, 2011 and 2012 and the six months ended June 30, In addition, since M&G International S.à r.l. has been selling PTA to M&G Fibras Brasil S.A. for many years, M&G International S.à r.l. is familiar with the product requirements and standards of M&G Fibras Brasil S.A. and is able to supply these products at low administrative costs, which would save us much time and costs for the development of new clients. 2010, 2011 and 2012 and the six months ended June 30, 2013 were US$53.2 million (C= 39.3 million), US$81.2 million (C= 60.0 million), US$68.5 million (C= 50.6 million) and US$22.4 million (C= 16.6 million), respectively. The PTA price payable by M&G Fibras Brasil S.A. under the Raw Materials Supply Agreement will be determined based on the market price of PTA at the relevant time. 272

10 Annual Caps: The maximum aggregate annual value of PTA to be sold to M&G Fibras Brasil S.A. for the years ending December 31, 2013, 2014 and 2015 shall not exceed the caps set out below: Proposed annual cap for the year ending December 31, (in millions) Total value of PTA to be sold... US$40.0 (C= 30.8) US$83.7 (C= 64.4) US$83.7 (C= 64.4) Basis of Caps: In determining the above annual caps, our Directors have mainly considered (i) the expected sales of approximately 29,000 tons of PTA in the year ending December 31, 2013 and approximately 59,800 tons in each of the years ending December 31, 2014 and 2015 with reference to the sales of 56,200 tons, 59,800 tons, 55,600 tons and 16,900 tons of PTA in the three years ended December 31, 2010, 2011 and 2012 and six months ended June 30, 2013, respectively; and (ii) the PTA price of US$1,400 (C= 1,034.7) per ton, which was the average market price in the year ended December 31, 2011 (being the highest average market price of PTA out of the three years ended December 31, 2010, 2011 and 2012). The more than proportional decrease in sales in the first half of 2013 resulted from M&G Fibras Brasil S.A. sourcing some of its PTA requirements from a local supplier in Brazil under competitive conditions. Depending on the availability of PTA in Brazil in 2014 and 2015 on more favorable conditions, M&G Fibras Brasil S.A. may purchase increased volumes of PTA from M&G International S.à.r.l., which are expected to be similar to the volumes purchased during the years ended December 31, 2010, 2011 and 2012 and the six months ended June 30, Distributorship Agreement Principal terms: M&G Polímeros Brasil S.A. entered into a distributorship agreement with 3Rios Indústria e Comércio de Plástico Ltda. ( 3Rios Indústria ) on August 14, 2009 and amended on March 1, 2011 and January 1, 2013 (the Distributorship Agreement ), pursuant to which M&G Polímeros Brasil S.A. appointed 3Rios Indústria as the exclusive distributor for the promotion and sale of PET resin products in Brazil to small and certain medium-sized customers named in the Distributorship Agreement. In turn, 3Rios Indústria agrees not to compete against M&G Polímeros Brasil S.A., directly or indirectly, in the distribution of PET resin products in Brazil. Under the Distributorship Agreement, M&G Polímeros Brasil S.A. retains the right to directly supply any customer named under the agreement which becomes or is reasonably expected to become a medium-sized customer at any time during the term of the Distributorship Agreement. In such an instance, M&G Polímeros Brasil S.A. agrees to nominate another customer or customers with similar PET-purchasing needs as a replacement under the Distributorship Agreement. The term of the Distributorship Agreement is from August 14, 2009 to December 31, Reasons for the transaction: 3Rios Indústria has the relevant distribution experience and network for the distribution of PET resin to small-sized customers. Given the additional costs which may be incurred for directly distributing PET resin to small-sized customers by us, we believe that it would be more cost effective to engage 3Rios Indústria for such distribution. 273

11 2010, 2011 and 2012 and the six months ended June 30, 2013 were US$21.6 million (C= 16.0 million), US$35.1 million (C= 25.9 million), US$36.1 million (C= 26.7 million) and US$16.9 million (C= 12.5 million), respectively. The PET resin price payable under the Distributorship Agreement will be determined based on the market price of PET at the relevant time. Annual Caps: The maximum aggregate annual amount of sales net of taxes for the years ending December 31, 2013, 2014 and 2015 shall not exceed the caps set out below: Proposed annual cap for the year ending December 31, (in millions) Total sales net of tax... US$45.0 (C= 34.6) US$50.4 (C= 38.8) US$50.4 (C= 38.8) Basis of Caps: In determining the above annual caps, our Directors have considered: (i) the expected sales volume of 22,500 tons of PET resin products in the year ending December 31, 2013, with reference to the actual sales of approximately 15,000 tons of PET resin products in the ten months ended October 31, 2013; (ii) the expected sales will increase to 25,000 tons in the years ending December 31, 2014 and 2015 due to the capped volume of PET resin to be distributed of 25,000 tons per year as stipulated under the Distributorship Agreement and which represents a growth of approximately 14.8% from the sales volume of 21,784 tons in the year ended December 31, 2012 and with reference to the historical annual growth of approximately 16.3% and 25.9% from the sales volume of 18,733 tons and 14,874 tons in the two years ended December 31, 2011 and 2010, respectively; and (iii) the PET price of US$2,000 (C= 1,478) per ton (being at the high side of the market price of PET during the years ended December 31, 2010, 2011 and 2012 and the six months ended June 30, 2013 and with reference to the range of historical annual average PET prices of US$1,451 (C= 1,072) to US$1,875 (C= 1,386) in respect of PET distributed by 3Rios Indústria between 2010 and 2012). NON-EXEMPT CONTINUING Under certain rules and regulations, each of the transactions under paragraphs 11 and 12 of the sub-section headed Continuing connected transactions which are subject to the requirements of reporting, annual review and announcement but exempt from the independent shareholders approval requirement will constitute connected transactions which are subject to the reporting, annual review and announcement requirements under certain rules and regulations. CONFIRMATION FROM OUR DIRECTORS Our Directors (including our independent non-executive Directors) are of the view that the continuing connected transactions as set out above have been and will be entered into during the ordinary and usual course of business of our Company on normal commercial terms because (i) the prices payable for the relevant products or services under paragraphs 5 9 and above are determined with reference to the market prices for the same products or services, (ii) the trademark licensing fee payable by us under the Trademark Licensing Agreement and services provided to us under the SAP Services Agreement are charged under terms better than the market price, or (iii) the 274

12 sharing of administrative services under the Service Agreement and the Local Services Agreement are charged at cost, and are fair and reasonable and in the interest of our Company and the Shareholders as a whole, and that the proposed annual caps for the non-exempt continuing connected transactions are fair and reasonable and in the interests of our Company and our Shareholders as a whole. Given most of the continuing connected transactions above are non-revenue generating and the relevant historical amounts represent only a small portion of our Group s revenue or assets during the years ended December 31, 2010, 2011 and 2012 and the six months ended June 30, 2013, our Directors are also of the view that such continuing connected transactions had not materially distorted our Group s results during the years ended December 31, 2010, 2011 and 2012 and the six months ended June 30,