WANHUA CHEMICAL GROUP Co., Ltd. SEMI-ANNUAL REPORT 2018
Company Code：600309 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Important Note
1. Board of directors (the "Board"), board of supervisors, directors, supervisors and senior management of the Company certify that this report does not contain any false or misleading statements or material omissions and are jointly and severally liable for the authenticity, accuracy and integrity of the content.
2. All directors attended the board meeting.
3. The semi-annual report is not audited.
4. Liao Zengtai, head of the Company, Kou Guangwu, chief accountant, and Zhang Shoujun, person in charge of the accounting body (accountant leader), certify that the financial reporting of the semi-annual report is authentic, accurate and integrated.
5. Plan of profit distribution or capital reserve capitalization approved by the Board
N/A
6. Risk statement of forward-looking description
✓ Applicable □ N/A
The forward-looking description on future plan and development strategy in this report does not constitute substantive commitment to investors. Please note the investment risk.
7. Does the situation exist where the controlling shareholders and their related parties occupy the funds of the Company for non-operational use?
No
8. Does the situation exist where the Company provides external guarantee which is not in compliance with the required decision-making procedures?
No
9. Significant risk alert
There are no significant risks which have adverse effects on the Company's future development strategy and operation objects during the reporting period.
10. Others
□ Applicable ✓ N/A 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Contents
Section I Definitions...... 1
Section II General Information and Financial Indicators of the Company...... 2
Section III The Company's Business Overview...... 5
Section IV Discussion and Analysis for Operation...... 7
Section V Important Events...... 14
Section VI Changes in Ordinary Shares and Information of Shareholders...... 27
Section VII Preferred Stock Information...... 31
Section VIII Directors, Supervisors and Senior Management...... 32
Section IX Corporate Bonds...... 33
Section X Financial Report...... 34
Section XI List of Documents Available For Inspection...... 158 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
SECTION I DEFINITIONS
In this report, unless the context otherwise requires, the following terms shall have the meanings set out below:
Definition of f requently used words
CSRC Refers to China Securities Regulatory Commission SSE Refers to Shanghai Stock Exchange Company, the Company, Wanhua Refers to Wanhua Chemical Group Co., Ltd. Chemical, Wanhua Wanhua Industry, former controlling Refers to Wanhua Industrial Group Co., Ltd, former controlling shareholder shareholder Yantai Wanhua, controlling share- Refers to "Yantai Wanhua Chemical Co., Ltd.", controlling shareholder holder
The subsidiary controlled by the Company, Wanhua Chemical (Ning- Wanhua Ningbo Refers to bo) Co., Ltd. MDI Refers to Diphenyl-methane-diisocyanate TDI Refers to Toluene diisocynate SAP Refers to Super Absorbent Polymer TPU Refers to Thermoplastic Polyurethane PC Refers to Polycarbonate PMMA Refers to Polymethyl methacrylate
ADI Refers to Aliphatic isocyanate (including H12MDI, HDI, HDI derivatives and IPDI) LPG Refers to Liquefied petroleum gas
1 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
SECTION II GENERAL INFORMATION AND FINANCIAL INDICATORS OF THE COMPANY
I. Information of the Company
Legal company name in Chinese 万华化学集团股份有限公司 Abbreviation of legal company name in Chinese 万华化学 Legal company name in English Wanhua Chemical Group Co., Ltd. Abbreviation of legal company name in English Wanhua Legal representative of the Company Liao Zengtai
II. Contacts
Secretary to the Board Securities affairs representative
Name Kou Guangwu Xiao Minghua Address No.7 Xingfu South Road, Yantai City No.7 Xingfu South Road, Yantai City Telephone number 0535-6698537 0535-6698537 Facsimile number 0535-6837894 0535-6837894 E-mail [email protected] [email protected]
III. Changes in basic information of the Company
Registration address No.17, Tianshan Road, Economic Technology Development Zone, Yantai City Post code of registration address 264006 Office address No.7 Xingfu South Road, Yantai City Post code of office address 264013 Website www.whchem.com E-mail [email protected]
IV. Changes in information disclosure and the locations
"China Securities Journal", "Shanghai Securities News", Designated newspapers for information disclosure "Securities Times" and "Securities Daily" Website designated by CSRC for the publication of the http://www.sse.com.cn Company's semi-annual report
The Company's semi-annual report is available at Office of the Board
2 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
V. Abbreviation of the Company's shares
Class of shares Stock exchange Short name Stock code Former short name
A shares Shanghai Stock Exchange Wanhua Chemical 600309 Yantai Wanhua
VI. Other relevant information
□ Applicable ✓ N/A
VII. Major accounting data and financial indicators of the Company
(I) Major accounting data Unit: RMB Major accounting data 30 June 2018 (January - June) 30 June 2017 Year on year (%)
Operating income 30,054,174,638.75 24,430,086,476.77 23.02 Net profit attributable to shareholders 6,949,934,414.32 4,861,037,879.29 42.97 of the Company Net profit excluding non-recurring prof- it or loss attributable to shareholders of 6,479,882,747.21 4,792,592,513.48 35.21 the Company Net cash flow from operating activities 8,445,172,019.49 1,448,528,030.70 483.02 At the end of 30 June 2018 At the end of the prior year Year on year (%)
Net assets attributable to shareholders 30,111,092,864.98 27,279,539,897.19 10.38 of the Company
Total assets 68,092,765,754.54 65,827,732,248.24 3.44
(II) Major financial indicators
Major financial indicators 30 June 2018 (January - June) 30 June 2017 Year on year (%)
Basic earnings per share (RMB/Share) 2.54 1.79 41.90 Diluted earnings per share (RMB/Share) N/A N/A Basic earnings per share excluding 2.37 1.77 33.90 non-recurring profit or loss (RMB/Share) Weighted average return on net assets (%) 25.43 25.43 0
Weighted average return on net assets Decreased by 1.36 23.71 25.07 excluding non-recurring profit or loss (%) percentage points
Explanations for accounting data and financial indicators of the Company
□ Applicable ✓ N/A
VIII. Differences between figures under foreign and domestic accounting principles
□ Applicable ✓ N/A
3 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
IX. Item and amounts of non-recurring profit or loss
✓ Applicable □ N/A Unit: RMB Item and amounts of non-recurring profit or loss Amount Notes (if applicable)
Profit or loss on disposal of non-current assets -12,720,853.21 Government grants recognized in profit or loss for the current year, except those closely related with normal business courses, and 844,422,936.84 given on quota basis continuously based on the state policy Other non-operating income and expenses other than the above 1,240,089.51 Amounts affected by minority interests -159,727,644.09 Income tax effects -203,162,861.94 Total 470,051,667.11
X. Others
□ Applicable ✓ N/A
4 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
SECTION III THE COMPANY'S BUSINESS OVERVIEW
I. Primary business, business model and industry description of the Company during the reporting period
(I) Primary business
The Company is mainly engaged in the research and development, production and sale of petrochemical products such as polyurethane (MDI, TDI and polyhydric alcohol), propylene and its downstream product acrylic acid and propylene oxide, fine chemicals such as SAP, TPU, PC, PMMA, organic amine, ADI and waterborne coatings and new materials. Among them, MDI product is one of the most important ingredients for polyurethane which is endowed with merits of both rubber and plastics and widely applied to areas such as chemical industry, light industry, textile, architecture, home appliances, building materials, transportation and aerospace.
The Company commits itself to becoming a most competitive supplier of polyurethane, petrochemicals, fine chemicals and new materials.
(II) Business model
Business model of the Company: Wanhua Chemical adheres to a path of professional development by focusing on the growth in the sector of chemical new materials. To better draw on its strength in technology and manufacturing, the Company mainly carries out B2B businesses.
Purchase model: Major raw materials the Company needs for its production such as pure benzene, coal and LPG are bulk raw materials. By actively developing overseas suppliers, establishing good cooperative relations with strategical suppliers and adopting multiple purchase models such as fixed price, floating price and contract price, the Company realizes stable supply of raw materials and procurement at a low cost.
Production model: The Company has a wide range of products and a complicated production line involving dangerous processes of high temperature and pressure and toxic or harmful substances. To ensure a production and operation of "safety, stability, sustainability, satisfaction and quality" and provide satisfactory, high-quality and stable products to customers, the Company adopts a production and operation model with production and management in Ningbo Production Base, Yantai Production Base and Zhuhai Base, and with planning and coordination made by the headquarter. The Company sets up monthly production goals according to annual plan for production and operation, and makes dynamic adjustments according to market requirements and device conditions.
Sales model: The Company is mainly engaged in the production and sale of chemical products and new material products. Major products are all sold through market, in form of direct selling and distribution.
(III) Industry description
The Company's products are closely related to everyday life. As supply-side reform of China chemical industry deepens and global economy recovers, chemical industry enters into a prosperity cycle. Relying on its advantages such as technology, productivity and product quality, Wanhua achieves a stable production and operation, improves its market power and enhances profitability. At present, the Company has formed three major industrial clusters of polyurethane, petrifaction, and
5 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
fine chemical products and new materials with highly integrated industry chain and highly integrative production line but with different industrial cycles, which significantly improved the Company's anti-risk capability.
The Company will embrace a development driven by innovation, improve the global competitivity of Wanhua's polyurethane industrial cluster, enter into ethylene industry, expand petrochemical industrial cluster, invest more in cultivating hi-tech and high value-added fine chemical products and new material industrial cluster and take a path of "technological innovation" and "high efficiency".
II. Descriptions on significant changes in main assets of the Company during the reporting period
□ Applicable ✓ N/A
III. Analysis of core competitiveness during the reporting period
✓ Applicable □ N/A
Technological innovation is the core competitiveness of Wanhua. The Company has established a complete research and development framework, developed an innovative research and development system including basic research, engineering development, process optimization and research and development of product application and successfully set up industrial innovative platforms such as "National Polyurethane Engineering Technology Research Center", "National Engineering Laboratory for Preparation Technology of Polymer Surface Materials", "National-Recognized Enterprise Technology Center" and "Postdoctoral Scientific Research Stations".
In the first half of 2018, the Company continues to invest more in research and development of new chemical materials industry and of new products, attract high-caliber talents, and made achievements of technological innovation.
6 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
SECTION IV DISCUSSIONS AND ANALYSIS OF OPERATIONS
I. Discussions and analysis of operations
During the reporting period, the Company recorded an operating income of RMB 30.054 billion yuan, an increase of 23.02% compared to 30 June 2017; an operating profit of RMB 10.317 billion yuan, an increase of 39.73% compared to 30 June 2017; a net profit attributable to shareholders of listed companies of RMB 6.95 billion yuan, an increase of 42.97% compared to 30 June 2017.
In the first half of 2018, domestic economy grows smoothly while MDI demands of developed countries in Europe and America are growing at a fast speed. During the reporting period, market price of domestic polymeric MDI falls back and monomeric MDI price increases compared to that of the last year; the Company adopts a proactive and effective sales and management approach, with operating results increasing largely year-on-year. In 2018, the Company's theme for its management is "a year of deepening security and safty". In the first half year, the Company pragmatically deepens inherent safety design and management, process and labor discipline management and employee training management, promotes a steady improvement of the Company's management ability in security and environmental protection and keeps safe and stable operation of the Company's production equipment. During the reporting period, the Company's sales of polyurethane products are stable in domestic markets and growing healthily in overseas markets; petroleum chemicals formed industrial power of Wanhua in local markets; products of each business division have achieved satisfactory results in market expansion and customer management.
In the first half of 2018, the Company applied for 63 domestic and foreign patents and received16 newly authorized patents; the Company achieved satisfactory results in optimization of production equipment in the industrial parks, transformation of self-invented new products and development of materials and application technology.
In the second half of 2018, the Company will continue to deepen safety management to ensure the safe and stable operation of equipment. With regards to the sales, the Company will integrate its marketing system so as to provide better services to its customers; in terms of human resources management, the Company will develop a long-term talent plan so as to reserve talents 2 to 3 years in advance; the Company will continue to proactively push the Company's overall listing in the second half of 2018.
7 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(I) Analysis of Primary Business
1. Analytical statement of changes in items relevant to financial statements Unit: RMB Item 30 June 2018 30 June 2017 Changes (%)
Operating income 30,054,174,638.75 24,430,086,476.77 23.02 Operating costs 17,995,540,445.20 14,946,177,503.39 20.40 Selling expenses 788,975,503.91 671,559,854.65 17.48 Administrative expenses 1,070,147,079.50 811,531,490.40 31.87 Financial expenses 420,633,215.62 450,443,344.86 -6.62 Net cash flow from operating activities 8,445,172,019.49 1,448,528,030.70 483.02
Net cash flow from investing activities -4,254,915,071.26 -2,278,955,850.50 -86.70
Net cash flow from financing activities -4,379,946,694.79 1,212,522,035.73 -461.23 Research and development expenditures 566,765,267.79 475,271,085.84 19.25 Taxes and levies 313,901,360.97 168,049,530.69 86.79 Impairment losses of assets 46,280,129.91 160,473,460.20 -71.16 Income from disposal of assets 144,071.76 1,684,644.58 -91.45 Other income 844,422,936.84 104,390,508.37 708.91 Non-operating income 3,563,427.84 15,369,016.50 -76.81 Non-operating expenses 15,188,263.30 8,780,867.50 72.97 Income tax expenses 2,075,315,522.89 1,580,614,505.98 31.30
Reasons of changes in operating income: No significant changes.
Reasons of changes in operating costs: No significant changes.
Reasons of changes in selling expenses: No significant changes.
Reasons of changes in administrative expenses: Increases in staff costs and research and development expenditures for the period.
Reasons of changes in financial expenses: No significant changes.
Reasons of changes in net cash flows arising from operating activities: More occupation of working capitals in the first half of 2017.
Reasons of changes in net cash flows arising from investing activities: Increases in payments related to Wanhua Yantai Industrial Party.
Reasons of changes in net cash flows arising from financing activities: Additional funds in place as at 30 June 2017, and year- on-year increases in dividend distribution for the period.
Reasons of changes in research and development expenditures: No significant changes.
Reasons of changes in taxes and levies: Increases in city maintenance and construction tax and surtax for the period.
Reasons of changes in impairment losses of assets: Fast growth of accounts receivable as at 30 June 2017, resulting in an increase of bad debt provision.
Reasons of changes in income from disposal of assets: Profits from disposal of ships by Singapore Shipping in the first half of 2017.
8 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Reasons of changes in other income: Increase in government grants received for the period.
Reasons of changes in non-operating income: Receipts of compensation for breach of contract from suppliers and part of accounts payable write-off.
Reasons of changes in non-operating expenses: Increases in retirement of fixed assets.
Reasons of changes in income tax: Increases in total profits for the period.
2. Others
(1) Details of significant changes in the Company's profit structure or source
□ Applicable ✓ N/A
(2) Others
□ Applicable ✓ N/A
(II) Descriptions on significant changes in profits resulted by non-primary businesses
□ Applicable ✓ N/A
9 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(III) Analysis of assets and liabilities
✓ Applicable □ N/A
1. Assets and liabilities Unit: RMB Proportion to 31 December Proportion to Changes Item 30 June 2018 Explanations total assets (%) 2017 total assets (%) (%)
Other receivables 171,478,824.56 0.25 246,322,725.81 0.37 -30.38 Decreases in export tax refund receivable for the period. Assets held for sale 15,127,273.56 0.02 Intention to sell assets related to paraformalde-hyde. Increases in prepaid payments and land funds of Yantai Indus- Other non-current assets 1,934,883,139.30 2.84 1,007,854,102.69 1.53 91.98 trial Park Project for the period. Derivative financial liabilities 2,785,734.17 0.01 Changes in fair value of hedging instrument for the period. Employee benefits payable 471,722,857.38 0.69 730,321,421.23 1.11 -35.41 Payment of the bonus recorded last year in the reporting period. Decreases in the balance of income tax and val-ue-added tax Taxes payable 1,157,472,626.00 1.70 2,245,188,240.76 3.41 -48.45 payable at the end of the period.
Interest payable 60,343,243.96 0.09 31,970,671.84 0.05 88.75 Increases in short-term borrowings for the peri-od.
Other payables 335,019,834.40 0.49 508,025,236.51 0.77 -34.05 Returns of funds for the period. Non-current liabilities due 1,868,013,333.32 2.74 2,670,513,333.46 4.06 -30.05 Due repayment for part of loans for the period. within one year
Other comprehensive in- Translation differences in foreign currency statements of over- -7,988,717.39 -0.01 9,518,565.65 0.01 -183.93 come seas subsidiaries.
10 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
2. Restrictions of main assets as at the end of the reporting period
✓ Applicable □ N/A
Restricted assets as at 30 June 2018:
Item Closing carrying amount Reasons for restriction
Cash and bank balances 14,752,670.34 Cash deposits for bank acceptances, letter of credit and LPG paper Pledged for obtainment of bank borrowings, issue of acceptance Notes receivable 4,060,081,680.43 and letter of guarantee for customs tariff Fixed assets 8,502,873,770.53 Pledged for obtainment of borrowings Intangible assets 454,661,874.84 Pledged for obtainment of borrowings Total 13,032,369,996.14
3. Other explanation
□ Applicable ✓ N/A
(IV) Investment Analysis
1. General analysis on external equity investment
✓ Applicable □ N/A
Unit: RMB 0'000 Item Amount
Investments in the reporting period 70,312.73 Collected investments in the reporting period Investments in the same period of last year 41,000.00 Collected investments in the same period of last year 2,000.00
Unit: RMB 0'000 Investment Investee Principal operating activities Type amount
Wanhua Chemical Group Energy Co., Ltd. Sales of electricity New establishment 21,024.02 Yantai Wanhua Port Service Co., Ltd. Cargo handling and storage New establishment 10,000.00 Imports and exports of commodities Wanhua Chemical (Singapore) Co., Ltd. Capital increment 24,722.10 and wholesale businesses Linde Gas (Yantai) Co., Ltd. Production and sale of industrial gas Capital increment 4,566.61 Yantai Harbor Wanhua Industrial Park Cargo handling and storage Capital increment 10,000.00 Port Co., Ltd. Total 70,312.73
(1) Significant equity investment
□ Applicable ✓ N/A
(2) Significant non-equity investment
□ Applicable ✓ N/A
11 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(3) Financial assets measured at fair value
□ Applicable ✓ N/A
(V) Sale of significant assets and equity
□ Applicable ✓ N/A
(VI) Sale of significant assets and equity
✓ Applicable □ N/A
Main stock-sharing subsidiaries:
1. The holding subsidiary, Wanhua Chemical (Ningbo) Co., Ltd., founded on 27 February 2006, is mainly engaged in the development and production of polyurethane and auxiliaries, isocyanurate and derivatives; production of phosgene, formaldehyde, liquid oxygen, liquid nitrogen, hydrochloric acid and compressed air; technological and consulting services. The Company's registered capital is RMB 936 million yuan, with a total asset of RMB 19,084.95 million yuan and a net asset of RMB 13,370.89 million yuan. Principal operating revenue achieved during the reporting period is RMB 10,410.29 million yuan, with principal operating profit of RMB 4,668.10 million yuan and net profit of RMB 3,823.73 million yuan.
2. The holding subsidiary Wanhua Chemical (Ningbo) Thermal Power Co., Ltd. is mainly engaged in the production and supply of heat, electricity and pure water and construction of heat-supply pipe network. The Company's registered capital is RMB 450 million yuan, with a total asset of RMB 1,105.44 million yuan and a net asset of RMB 688.96 million yuan. Net profit achieved during the reporting period is RMB 114.53 million yuan.
3. The wholly-owned subsidiary Wanhua Chemical (Beijing) Co., Ltd. is mainly engaged in development, manufacturing and sale of polyurethane; sale of chemical products; item investments; technological development, technical training, etc. The Company's registered capital is RMB 60 million yuan with a total asset of RMB 358.94 million yuan and a net asset of RMB 249.78 million yuan. Net profit achieved during the reporting period is RMB - 4.73 million yuan.
4. The holding subsidiary Wanhua Chemical (Ningbo) Chlor-alkali Co., Ltd. is mainly engaged in the manufacturing of caustic soda, liquid chlorine, hydrochloric acid, sodium hypochlorite, chlorinated paraffin and chemical machinery; filling of hydrogen and liquid chlorine, inspection of seamless gas cylinder (limited to hydrogen) and welded gas cylinder (limited to liquid chlorine) ; wholesale and retail of corrosives (sulfuric acid) and flammable liquids (methanol, toluene) ; chemical technology consulting, services and chemical technology development; imports and exports of various goods of self- operation and agent, excluding goods and technologies restricted by the country. The Company's registered capital is RMB 170 million yuan, with a total asset of RMB 1,396.28 million yuan and a net asset of RMB 911.41 million yuan. Net profit realized during the reporting period is RMB 223.56 million yuan.
5. The holding subsidiary Wanhua Chemical (Foshan) Rong Wei Polyurethane Co., Ltd. is mainly engaged in the production and sale of polyurethane materials and polyurethane-produced products and the import and export of goods and technologies. The Company's registered capital is RMB 28.86 million yuan with a total asset of RMB 173.94 million yuan and a net asset of RMB 79.49 million yuan. Net profit realized during the reporting period is RMB 2.25 million yuan.
6. The holding subsidiary Wanhua Chemical (Ningbo) Rong Wei Polyurethane Co., Ltd. is mainly engaged in the production and sale of polyurethane materials and polyurethane-produced products and the import and export of goods and technologies. The Company's registered capital is RMB 150 million yuan with a total asset of RMB 1,131.12 million yuan and a net asset of RMB 313.68 million yuan. Net profit realized during the reporting period is RMB 38.59 million yuan.
7. The wholly-owned subsidiary Wanhua Chemical (Guangdong) Co., Ltd. is mainly engaged in the production, sale, R&D and promotion and technological services of chemical products such as waterborne coatings, polyether polyol, modified MDI and adhesive. The Company's registered capital is RMB 200 million yuan with a total asset of RMB 1,247.43 million yuan and a net asset of RMB 137.05 million yuan. Net profit realized during the reporting period is RMB -21.88 million yuan.
12 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
8. The holding subsidiary Wanhua Chemical (Yantai) Chlor-Alkali Thermal Power Co., Ltd. is engaged in investment development, construction and management of items such as color-alkali chemical products, thermal engineering, steam, and industrial water and food additives. The Company's registered capital is RMB 400 million yuan with a total asset of RMB 3,255.19 million yuan and a net asset of RMB 869.57 million yuan. Net profit realized during the reporting period is RMB 220.43 million yuan.
(VII) Structural entities under the control of the Company
□ Applicable ✓ N/A
II. Other disclosure matters
(I) Cautions and descriptions on expected losses of accumulated net profits for the period from the beginning of the year to the end of the next reporting period or significant changes from that of 30 June 2017
□ Applicable ✓ N/A
(II) Potential risks
□ Applicable ✓ N/A
(III) Other disclosure matters
□ Applicable ✓ N/A
13 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
SECTION V IMPORTANT EVENTS
I. Introduction on general meeting of shareholders
Designated index website of resolu- Disclosure date Sequence of the Meeting Date tions publicized of resolutions
The first extraordinary general meeting Website of Shanghai Stock Exchange 12 January 2018 13 January 2018 of shareholders in 2018 www.sse.com.cn The second extraordi-nary general meet- Website of Shanghai Stock Exchange 28 February 2018 1 March 2018 ing of shareholders in 2018 www.sse.com.cn Website of Shanghai Stock Exchange 2017 General meeting of shareholders 10 May 2018 11 May 2018 www.sse.com.cn
Descriptions on general meeting of shareholders
✓ Applicable □ N/A
Issues for deliberation on the general meeting of shareholders have all been approved.
II. Plan for profit distribution or transfer from capital reserves
(I) Semi-annual plans for profit distribution and transfer from capital reserves developed
Whether to distribute or transfer No Stock dividend per 10 shares (shares) Cash dividend per 10 shares (RMB) (in-clusive of tax)
Capital reserve transferred into share capital per 10 shares (share)
Details on plans for profit distribution or transfer from capital reserves
14 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
III. Performance of Commitments
(I) Commitments of actual controllers, shareholders, related parties, purchasers and the Company to related parties during the reporting period or till the reporting period
✓ Applicable □ N/A
Back- Type of Whether Whether the Where the com- Where the com- Com- Date ground of com- there is commitment is mitment is not ful- mitment is not ful- mitment Content of commitment and pe- com-mit- mit- deadline for fulfilled timely filled timely, speci- filled timely, specify made by riod ment ment fulfillment? and strictly fy the reason. sub-sequent plan.
Commit- ment relat- ing to share reform
Commit- ment relat- ing to share reform
Commit- ment relat- ing to signif- icant assets restructur- ing
IPO related commit- ments
IPO related commit- ments
Commit- ments relat- ing to equity incentives Commit- ments relat- ing to equity incentives
15 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
In 2011, the Company’s original controlling share- holder Wanhua Industry acquired 96% equity of Hungary BorsodChem Zrt. on 31 January 2011 at Hungary Budapest time. As BorsodChem company (the “BC company”) and Wanhua Chemical formed horizontal competition and have related transactions, Wanhua Industry made the commitment that “within 18 months after significant improvement of BC com- pany’s operation (including but not limited to that BC company meet the crite-ria as going concern and is not expected to experience normal operating loss The orig- in the next 12 months) , Wanhua Chemical is entitled inal con- to request Wanhua Industry to raise a proposal of solving trolling solving the chemical business combination between hori- share- BC company and Wanhua Chemical with appropriate Other Com- zontal holder measures, and upon the submission of the proposal mitment compe- Wanhua to general meeting of shareholders for voting, Wan- tition Industri- hua Industry will avoid the voting.” Details refer to al Group the Company’s Lin No.2011-01 Announcement. In Co., Ltd. 2014, on the basis of the agreement, the two parties have entered into a supplemen-tary agreement for an extension of 3 years regarding the valid period speci- fied in the agreement and the two parties may further negotiate upon the expiry of the agree-ment. In 2017, the two parties continued to enter into supplementary agreement based on the agreement for an extension of 3 years regarding the valid period speci-fied in the agreement and the two parties may further negotiate upon the expiry of the agreement. In 2016, Wanhua Industry acquired the rest 4% equity of BC com-pany, and held 100% equity of BC company.
Note: After receiving a notice from its original controlling shareholder Wanhua Industrial Group Co., Ltd. (hereinafter referred to as "Wanhua Industry") in 2017, Wanhua Industry planned on the Company's separation and overall listing, which may lead to a major asset restructuring. By applying to Shanghai Stock Exchange, the Company's shares have been suspended temporarily on 5 December 2017 and the suspension commences on 6 December 2017.
16 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
In January 2018, the Company's original controlling shareholder Wanhua Industry completed a split-off, namely Wanhua Industry splitted off into Wanhua Industrial Group Co., Ltd. (the remained enterprise) and a newly established company Yantai Wanhua Chemical Co., Ltd. (hereinafter referred to as "Yantai Wanhua"). After the split-off, the original shareholder of Wanhua Industry has an unchanged contribution ratio in the remained company Wanhua Industry and the newly established company Yantai Wanhua. The controlling shareholder of the Company changed from Wanhua Industry to Yantai Wanhua, with the actual controller of the Company unchanged to be State-Owned Assets Supervision and Administration Commission of Yantai Government. Corresponding commitments to solve peer competition shall be performed by Yantai Wanhua. As at the end of the reporting period, Yantai Wanhua holds 100% of the equity of BC Company.
On 8 May 2018, Wanhua Industrial completed all the transfer and registration procedures for the transfer of all the 1,310,256,380 shares of Wanhua Chemical (accounting for 47.92% of the Company's total shares) it held to Yantai Wanhua Chemical Co., Ltd.
On 10 May 2018, the Company publicized Plan of Wanhua Chemical Group Co., Ltd. to Acquire Yantai Wanhua Chemical Co., Ltd. and Related Party Transactions and other relevant information. Since the opening-up of the market on 4 June 2018, the Company's shares resume trading.
On 19 July 2018, the Company convened the third extraordinary general meeting of shareholders in 2018 and deliberated and approved relevant proposals of the major asset restructuring. The Company received Administrative License Application Form of China Securities Regulatory Commission (Please refer to the Company's announcement Lin 2018 No.97) on 19 July 2018 and Feedback Notice of China Securities Regulatory Commission on Review of Administrative License (Please refer to the Company's announcement Lin 2018 No.98). The major asset restructuring is yet to be approved by China Securities Regulatory Commission.
Subsequent to the completion of relevant major asset restructurings, controlling shareholders will complete their commitments to solve peer competition.
IV. Employment and Dismissal of Certified Public Accountants
Explanations on the employment and dismissal of certified public accountants
□ Applicable ✓ N/A
Explanations on changing the certified public accountants during the audit period
□ Applicable ✓ N/A
Explanations on "modified audit report" of certified public accountants
□ Applicable ✓ N/A
Explanations on "modified audit report" issued by certified public accountants on financial report in the annual report of previous year
□ Applicable ✓ N/A
V. Bankruptcy and Reorganization
□ Applicable ✓ N/A
VI. Significant Lawsuit and Arbitration
□ Significant lawsuits and arbitrations for the period ✓ No significant lawsuits and arbitrations for the period
17 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
VII. Penalty and rectification of the Company and its directors, supervisors, senior management, controlling shareholders, actual controllers and purchasers
□ Applicable ✓ N/A
VIII. Explanations on credit issue of the Company and its controlling shareholders and actual controllers during the reporting period
□ Applicable ✓ N/A
IX. The Company's share option incentive scheme, employee stock ownership plan or other employee incentive scheme and relevant impacts
(I) Related incentive schemes that have been disclosed in the temporary announcement but have no progress or change subsequently
□ Applicable ✓ N/A
(II) Incentive schemes not disclosed in the temporary announcement or having subsequent progresses.
Share option incentive scheme
□ Applicable ✓ N/A
Employee stock ownership
□ Applicable ✓ N/A
Other incentive measures
□ Applicable ✓ N/A
X. Significant related party transactions of the Company during the reporting period
(I) Significant related party transactions related to daily operations
1. Events that have been disclosed in the temporary announcement but have no progress or change subsequently
□ Applicable ✓ N/A
2. Events that have been disclosed in the temporary announcement and have progresses or changes subsequently
✓ Applicable □ N/A
The 2017 annual general meeting of shareholders held on 10 May 2018 passed the Proposal on the Fulfillment of the Normal Related Transactions Agreement between the Company and Related Parties , approving the expected normal related transactions between the Company and related parties in 2018.
18 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
The related transactions for the period from January to June 2018 are detailed as follows: Unit: RMB Related party Relationship Type of transaction Content of transaction Pricing principle Amount Term of payment
Wholly-owned subsidiary of Market price for BorsodChem Zrt. Sales of commodities Sales of commodities 659,627,004.64 T/T parent company the same period
Wholly-owned subsidiary of Market price for BorsodChem Italia S.r.l. Sales of commodities Sales of commodities 5,682,779.77 T/T parent company the same period Wanhua BorsodChem Wholly-owned subsidiary of Market price for Latin-America Comercio de Sales of commodities Sales of commodities 2,391,080.45 T/T parent company the same period Produtos Quimicos Ltda.
Wanhua EnergySav Science & The same ultimate con- Market price for Sales of commodities Sales of commodities 81,327,163.17 Bank acceptance, T/T Technology Co., Ltd. trolling company the same period
Wanhua EnergySav Science The same ultimate con- Market price for Sales of commodities Sales of commodities 50,388.12 Bank acceptance, T/T Tech-nology (Yantai) Co., Ltd. trolling company the same period
Yantai Wanhua Chlor-Alkali Market price for Associate of parent company Sales of commodities Sales of commodities 466,542.92 Bank acceptance, T/T Co., Ltd. the same period Sales of commodi-ties/ Sales of commodities/ ren- Market price for Linde Gas (Yantai) Co., Ltd. Associate rendering ser-vice/ 161,218,993.82 Bank acceptance, T/T dering service/ Land lease the same period Land lease Yantai Harbor Wanhua Indus- Market price for Joint venture Rendering service Rendering service 1,012,264.15 Bank acceptance, T/T trial Park Port Co., Ltd. the same period
Subsidiary of the associate Wanhua Eco-technology (Yan- Market price for of the same ultimate con- Sales of commodities Sales of commodities 130,104,795.01 Bank acceptance, T/T tai) Co.,Ltd. the same period trolling company
Subsidiary of the associate Wanhua Ecoboard (Jingzhou) Market price for of the same ultimate con- Sales of commodities Sales of commodities 13,821,813.51 Bank acceptance, T/T Co., Ltd. the same period trolling company
Yantai Tayho Advanced Materi- The same ultimate con- Market price for Sales of commodities Sales of commodities 112,608,814.99 Bank acceptance, T/T als Co., Ltd. trolling company the same period
Moon Environment Technolo- The same ultimate con- Market price for Sales of commodities Sales of commodities 920,927.70 Bank acceptance, T/T gy Co., Ltd. trolling company the same period
Wholly-owned subsidiary of Purchase of com-mod- Purchase of commodi-ties/ Market price for BorsodChem Zrt. 199,053,035.28 T/T parent company ities/ receipt of service receipt of service the same period Wanhua BorsodChem Wholly-owned subsidiary of Market price for Latin-America Comercio de Receipt of service Receipt of service 3,824,785.06 T/T parent company the same period Produtos Quimicos Ltda.
19 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Wanhua Building Technology The same ultimate con- Purchase of com-mod- Purchase of commodi-ties/ Market price for 1,922,424.82 Bank acceptance, T/T (Yantai) Co., Ltd. trolling company ities/ receipt of service receipt of service the same period Wanhua EnergySav (Yantai) The same ultimate con- Market price for En-vironment Protection Sci- Purchase of material Purchase of material 1,339,460.42 Bank acceptance, T/T trolling company the same period ence & Technology Co., Ltd.
Wanhua EnergySav (Yantai) The same ultimate con- Market price for Receipt of service Receipt of service 228,225.23 Bank acceptance, T/T En-gineering Co., Ltd. trolling company the same period
Shanxi Zhongqiang Fushan The same ultimate con- Market price for Purchase of material Purchase of material 2,587,550.10 Bank acceptance, T/T Coal Industry Co., Ltd. trolling company the same period Market price for Linde Gas (Yantai) Co., Ltd. Associate Purchase of material Purchase of material 166,662,733.25 Bank acceptance, T/T the same period Yantai Harbor Wanhua Indus- Market price for Joint venture Receipt of service Receipt of service 87,939,760.93 Bank acceptance, T/T trial Park Port Co., Ltd. the same period
Yantai Wanhua Chlor-Alkali Purchase of material/ Purchase of material/ receipt Market price for Associate of parent company 1,763,634.64 Bank acceptance, T/T Co., Ltd. receipt of service of service the same period
Yantai Huali Thermal Power Wholly-owned subsidiary of Purchase of material/ Purchase of material/ receipt Market price for 7,032,433.63 Bank acceptance, T/T Co., Ltd. associate of parent company receipt of service of service the same period
For the Company's related transactions, on the one hand, considering the Company's strategic layout, i.e., enlarging the shares in overseas market, it is inevitable to have related transactions; on the other hand, as the related parties for selling goods are the downstream clients of MDI products, these transactions are also inevitable. The related parties for purchasing materials are the raw material suppliers of the Company, providing supporting service for the production of the Company. Therefore, the related transactions are inevitable. In addition, the related transactions due to the influence of location are also inevitable.
The related transaction has no significant influence on the Company's independence.
The Company's dependence on related parties is minor, and no related measure is required.
3. Events that have not been disclosed in the temporary announcement
□ Applicable ✓ N/A
20 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(II) Significant related party transactions related to assets or equity acquisition and disposal
1. Events that have been disclosed in the temporary announcement but have no progress or change subsequently
□ Applicable ✓ N/A
2. Events that have been disclosed in the temporary announcement and have progresses or changes subsequently
□ Applicable ✓ N/A
3. Events that have not been disclosed in the temporary announcement
✓ Applicable □ N/A RMB: Yuan Content of Related party Relationship Type of transaction Pricing principle Amount transaction
Yantai Wanhua Associate of parent Purchase of assets other Transfer of Market pricing 177,980.00 Chlor-Alkali Co., Ltd. company than commodi-ties fixed assets
4. Performance achievement events involving performance convention in reporting period which should be disclosed
□ Applicable ✓ N/A
(III) Significant related party transactions related to external joint investment
1. Events that have been disclosed in the temporary announcement but have no progress or change subsequently
□ Applicable ✓ N/A
2. Events that have been disclosed in the temporary announcement and have progresses or changes subsequently
□ Applicable ✓ N/A
3. Events that have not been disclosed in the temporary announcement
□ Applicable ✓ N/A
(IV) Balances due from/to related parties
1. Events that have been disclosed in the temporary announcement but have no progress or change subsequently
□ Applicable ✓ N/A
2. Events that have been disclosed in the temporary announcement and have progresses or changes subsequently
□ Applicable ✓ N/A
3. Events that have not been disclosed in the temporary announcement
□ Applicable ✓ N/A
(V) Other significant related transactions
□ Applicable ✓ N/A
21 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(VI) Others
□ Applicable ✓ N/A
XI. Significant contracts and implementation
(I) Trusteeship, contracting and leasing
□ Applicable ✓ N/A
(II) Guarantee
✓ Applicable □ N/A
22 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
RMB: Yuan General information of guarantee (except guarantee provided for subsidiaries)
Overdue Related Amount of Signed date Starting date Ending date Type of guaran- Completion Overdue of Counter Relation- Guarantor Relationship Guarantee amount of party guarantee of guarantee of guarantee of guarantee tee of guarantee guarantee guarantee ship guarantee guarantee
Wanhua Chemical Head office of Yantai Harbor Wanhua In- joint and several Joint 25,000,000.00 24 April 2014 24 April 2014 22 April 2020 No No Yes Yes Group Co., Ltd. the Company dustrial Park Port Co., Ltd. liability guarantee venture
Wanhua Chemical Head office of Yantai Harbor Wanhua In- joint and several Joint 50,000,000.00 8 May 2015 8 May 2015 7 May 2020 No No Yes Yes Group Co., Ltd. the Company dustrial Park Port Co., Ltd. liability guarantee venture
Wanhua Chemical Head office of Yantai Harbor Wanhua In- joint and several Joint 25,000,000.00 29 April 2016 29 April 2016 28 April 2021 No No Yes Yes Group Co., Ltd. the Company dustrial Park Port Co., Ltd. liability guarantee venture
Wanhua Chemical Head office of Yantai Harbor Wanhua In- joint and several Joint 225,000,000.00 2 April 2018 4 April 2018 3 April 2025 No No Yes Yes Group Co., Ltd. the Company dustrial Park Port Co., Ltd. liability guarantee venture
Wanhua Chemical Holding Ningbo Xiebei Thermal 6 September 6 September 5 September joint and several Joint (Ningbo) Thermal 55,000,000.00 No No Yes Yes subsidiary Power Co., Ltd. 2015 2015 2020 liability guarantee venture Power Co., Ltd.
Wanhua Chemical Holding Ningbo Xiebei Thermal 5 September joint and several Joint (Ningbo) Thermal 82,500,000.00 4 March 2016 4 March 2016 No No Yes Yes subsidiary Power Co., Ltd. 2020 liability guarantee venture Power Co., Ltd.
Wanhua Chemical Holding Ningbo Xiebei Thermal 14 October 14 October 13 October joint and several Joint (Ningbo) Thermal 165,000,000.00 No No Yes Yes subsidiary Power Co., Ltd. 2014 2014 2020 liability guarantee venture Power Co., Ltd.
Total amount of guarantee incurred during the reporting period (except guarantee provided for subsidiaries) 225,000,000.00
Total balance of guarantee at the end of the reporting period(A) (except guarantee provided for subsidiaries) 627,500,000.00
Guarantee provided for subsidiaries from the Company and its subsidiaries
Total amount of guarantees provided for subsidiaries during the reporting period 8,348,743,162.72
Total balance of guarantees provided for subsidiaries at the end of the reporting period(B) 12,609,741,016.67
Total amount of guarantees provided (including guarantee provided for subsidiaries)
Total amount of guarantees provided (A and B) 13,237,241,016.67
Ratio of total amount of guarantee against net assets - %) 43.96
Including:
Amount of guarantee provided for shareholders, actual controller and its related parties (C) 0
Direct or indirect debt guarantees provided for guaranteed parties whose asset-liability ratio exceeds 70% (D) 11,007,096,852.11
Amount of total amount exceeding 50% of net assets (E) -
Total amount of guarantee above (C, D and E) 11,007,096,852.11
Statement for joint liability of undue guarantee
The above total guarantee amount (including those for subsidiaries) is the contractual guarantee Information of guarantee amount, the actual guarantee amount is RMB 9,329,712,430.35, accounting for 30.98% of the net assets of the Company.
23 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
XI. Other significant contracts
□ Applicable ✓ N/A
XII. Poverty alleviation by listed companies
□ Applicable ✓ N/A
XIII. Convertible bonds of the Company
□ Applicable ✓ N/A
XIV. Environment protection
(I) Environment protection of the Companies and their subsidiaries in high pollution industries regulated by the State Environmental Protection Department.
✓ Applicable □ N/A
According to a list of companies in high pollution industries published by State Environmental Protection Department, Wanhua Chemical Group Co., Ltd., Wanhua Chemical (Yantai) Chlor-Alkali Thermal Power Co., Ltd., Wanhua Chemical (Ningbo) Thermal Power Co., Ltd. and Wanhua Chemical (Ningbo) Co., Ltd. are all companies in high pollution industries.
1. Unloading information
✓ Applicable □ N/A
Monitoring indicators of the subsidiary Wanhua Chemical (Ningbo) Thermal Power Co, Ltd. and Yantai Chlor-alkali mainly include smoke, SO2 and nitrogen oxides in flue gas. The exhaust gas generated in the production process is discharged after passing through the flue gas purification facility, and the pollution factor satisfies requirements in theEmission Standards for Atmospheric Pollutants in Thermal Power Plants . In the first half of 2018, Wanhua Thermal Power SO2 emissions were 45.22 tons, nitrogen oxide emissions were 108.8 tons, and soot emissions were 7.58 tons. In the first half of 2018, SO2 emissions of Yantai Chlor-alkali were 70.8 tons, nitrogen oxide emissions were 144.9 tons, and soot emissions were 4.27 tons. Flue gas pollutant discharge concentration and total discharge amount meet the emission standard requirements.
The main monitoring indicators of Wanhua Ningbo and Wanhua Chemical are COD (chemical oxygen demand) and ammonia nitrogen in wastewater. According to the principle of "clean water and sewage diversion, rainwater and sewage diversion, sewage and dirt diversion and sewage and dirt separate treatment", the Company has established a complete wastewater collection and treatment system. The production wastewater and sewage are discharged into the corresponding sewage treatment system through independent pipe networks. The drainage part of the sewage treatment facility enters the water reuse system, and is reused after further treatment, and some of the discharges enter the urban sewage pipe network. In the first half of 2018, the total amount of COD emissions from the external wastewater of Wanhua Ningbo was 52.02 tons, and the total amount of ammonia nitrogen emissions was 1.73 tons.
In the first half of 2018, the total amount of COD from the wastewater discharged from Yantai Industrial Park was 399.25 tons, and the total amount of ammonia nitrogen emissions was 5.03 tons, both meeting the emission standards.
2. Construction and operation of pollution prevention and control facilities
✓ Applicable □ N/A
In the construction of pollution prevention and control measures, the key pollutant discharge units strictly implement requirements of national laws and regulations, strictly implement construction requirements of pollution prevention and
24 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
control facilities in the EIA documents at the phase of design, and track the progress of environmental protection facilities through supervision during the construction phase. Through PSSR (pre-start safety inspection) , the environmental protection facilities are confirmed and inspected, and the operation results of the environmental protection facilities are evaluated through the completion acceptance during the trial production phase, so that the environmental protection facilities are "designed, constructed, and put into operation at the same time".
Wanhua Chemical has built environmental protection facilities such as sulfur recovery, sewage treatment facilities, incinerators, nitric acid tail gas reduction, waste energy boilers, etc.; Wanhua Ningbo has built environmental protection facilities such as sewage treatment facilities, incinerators, storage tank waste gas treatment, and formaldehyde waste gas treatment; Wanhua Ningbo Thermal Power and Yantai Chlor-alkali have built environmental protection facilities such as desulfurization, denitrification and dust removal. In the operation of environmental protection facilities, key pollutant discharge units have integrated the operation and maintenance of environmental protection facilities into daily production operations and equipment inspection and maintenance management, so that environmental protection facilities are continuously and stably operated. And through the online monitoring or daily monitoring, etc., the performance of environmental protection facilities is tracked and evaluated.
3. Environmental impact assessment of construction items and other administrative licenses of environmental protection
✓ Applicable □ N/A
Supervision, trial production, completion and acceptance of all stages of work, from the start of construction and the later stage of the technical transformation, the Company strictly implemented requirements of environmental impact assessment and carried out the project approval of environmental impact assessment and completion of environmental protection acceptance.
4. Emergency plan for environmental incidents
✓ Applicable □ N/A
In terms of environmental emergency, the Company strictly implemented requirements of national laws and regulations, organized risk assessment of environmental incidents, and developed plans for emergencies based on results of risk assessment, including comprehensive plans, special plans and on-site disposal plans. In terms of plan management, the first step is to revise the emergency plan according to changes in regulations and the actual situation on time, and to make timely revision, review and filing of the plan; the second step is to continuously carry out training and practicing for emergency plans.
5. Environment automatic monitoring plan
✓ Applicable □ N/A
During the reporting period, the Company set up sewage discharge outlets and developed pollutant monitoring plan strictly in accordance with laws, regulations and standards. Key pollutant discharge units disclosed environmental information such as sewage discharge outlets, pollutant discharges, environmental protection facilities and environmental automatic monitoring plans through websites and display screens. Environmental automatic monitoring plans include exhaust, wastewater and noise emissions. Main pollution factors, control indicators, frequency of monitoring, monitoring methods and testing instruments were specified.
6. Other environmental information that should be published
□ Applicable ✓ N/A
25 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(II) Explanations on environmental protection of companies other than key pollutant discharge units
□ Applicable ✓ N/A
(III) Explanations on reasons for undisclosed environmental information of companies other than key pollutant discharge units
□ Applicable ✓ N/A
(IV) Explanations on subsequent progression or changes in disclosures of environmental information during the reporting period
□ Applicable ✓ N/A
XV. Descriptions on other significant matters
(I) Changes in accounting policies, accounting estimates and accounting methods, reasons and impacts compared to the last accounting period
□ Applicable ✓ N/A
(II) Restatement of material accounting errors during the reporting period, corrected amounts, reasons and impacts
□ Applicable ✓ N/A
(III) Others
□ Applicable ✓ N/A
26 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
SECTION VI ORDINARY SHARE CAPITAL CHANGES AND INFORMATION OF SHAREHOLDERS
I. Changes in share capital
(I) Changes in share capital
1. Changes in share capital
During the period, total number of the Company's shares and share capital structure remain unchanged.
2. Explanations on changes in share capital
□ Applicable ✓ N/A
3. Effect of changes in ordinary shares in financial indicators including earnings per share and net assets per share in latest year/period (if any)
□ Applicable ✓ N/A
4. Other content the Company considers necessary or required to be disclosed by regulators
□ Applicable ✓ N/A
(II) Changes of restricted shares
□ Applicable ✓ N/A
II. Shareholders
(I) Total number of shareholders
Total ordinary shareholders at the end of report period (households) 117,733
The preferred shareholders at the end of report period (households) N/A
27 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(II) Table of shareholding of top X shareholders and top X floating shareholders (or shareholders with no restricted conditions) Unit: Share
Top ten shareholders
Changes in re- Shareholding at Propor- Restricted Number of shares pledged or frozen Name of shareholders Nature of shareholders porting period end of reporting tion (%) shares held period Status Quantity Domestic non-State- Yantai Wanhua Chemical Co., Ltd. 1,310,256,380 1,310,256,380 47.92 0 Pledged 186,000,000 owned legal person China Securities Finance Corporation Limit- 62,941,070 62,941,146 2.30 0 Unknown Unknown ed Hong Kong Securities Clearing Company Ltd. 15,325,769 40,801,850 1.49 0 Unknown Unknown National Social Security Fund 108 Combina- 1,900,000 38,498,825 1.41 0 Unknown Unknown tion Shanghai Lvlian Junhe Industry Merge Equi- 0 27,842,227 1.02 0 Unknown Unknown ty Investment Fund Partnership (LLP) Central Huijin Asset Management Co., Ltd. 0 25,598,520 0.94 0 Unknown Unknown Sun Huigang 24,542,397 24,542,397 0.90 0 Unknown Unknown Beijing Fengshan Investment Co., Ltd. 0 16,417,776 0.60 0 Unknown Unknown China Huarong Asset Management Co., Ltd. -10,910,619 13,038,614 0.48 0 Unknown Unknown China Pacific Life Insurance Co., Ltd. – Div- idend Distribution – Individual Dividend -135,000 12,558,203 0.46 0 Unknown Unknown Distrbution
28 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Unit: Share
Top ten shareholders of non-restricted shares
Name of shareholders Name of shareholders Name of shareholders Type Number
Yantai Wanhua Chemical Co., Ltd. 1,310,256,380 Ordinary shares in RMB 1,310,256,380 China Securities Finance Corporation Limited 62,941,146 Ordinary shares in RMB 62,941,146 Hong Kong Securities Clearing Company Ltd. 40,801,850 Ordinary shares in RMB 40,801,850 National Social Security Fund 108 Combination 38,498,825 Ordinary shares in RMB 38,498,825 Shanghai Lvlian Junhe Industry Merge Equity Investment Fund Partnership (LLP) 27,842,227 Ordinary shares in RMB 27,842,227 Central Huijin Asset Management Co., Ltd. 25,598,520 Ordinary shares in RMB 25,598,520 Sun Huigang 24,542,397 Ordinary shares in RMB 24,542,397 Beijing Fengshan Investment Co., Ltd. 16,417,776 Ordinary shares in RMB 16,417,776 China Huarong Asset Management Co., Ltd. 13,038,614 Ordinary shares in RMB 13,038,614 China Pacific Life Insurance Co., Ltd. –Dividend Distribution – Individual Dividend Distribution 12,558,203 Ordinary shares in RMB 12,558,203 It is unknown that whether the above shareholders are related parties or acting-in-concert Explanation of the related relationship or concerted actions among the above shareholders parties under " Administrative Rules on Acquisition of Listed Company Explanation on preferential shareholders of voting power recovered and shareholding numbers N/A
Quantity of restricted shares held by the top ten shareholders and the restricted conditions
□ Applicable ✓ N/A
29 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(III) Strategic investors or general legal representative who have been included in top 10 shareholders due to placement of new shares
✓ Applicable □ N/A
Agreed date of termination Name of strategic investor or common legal representative Agreed date of shareholding of shareholding Shanghai Lvlian Junhe Industry Merge Equity Investment 16 Jan 2017 Fund Partnership (LLP)
China Huarong Asset Management Co., Ltd. 16 Jan 2017
Agreed term of shareholding regarding strategic investor's Subscription of the shares non-publicly issued by the or common legal representative's involvement in issuance Company, with lock-up period of 12 months, listing and of new shares circulating on 16 January 2018.
III. Changes of controlling shareholders or actual controllers
Name of new controlling holder Yantai Wanhua Chemical Co., Ltd. Name of new actual controller Change date 8 May 2018 ✓ Applicable □ N/A Please refer to Announcement of Wanhua Chemical Group Co., Ltd. on Completion of Transfer for Shares of Controlling Shareholders Index and date for designated website (Lin 2018 No.65) disclosed by the Company on the website of Shanghai Stock Exchange on 9 May 2018.
30 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
SECTION VII PREFERRED SHARE INFORMATION □ Applicable ✓ N/A
31 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
SECTION VIII DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
I. Information of shareholding
(I) Ownership of directors, supervisors and senior management in incumbent and outgoing in reporting period
□ Applicable ✓ N/A
(II) Information of incentive shares awarded to directors, supervisors and senior management during reporting period
□ Applicable ✓ N/A
II. Information of changes of directors, supervisors and senior management
✓ Applicable □ N/A
Name Position held Changes Li Limin Vice president Appointment
Information of changes of directors, supervisors and senior management
✓ Applicable □ N/A
On 25 June 2018, the eighth extraordinary meeting in 2018 of the Company's seventh board of directors deliberated and approved Proposal on Engagement of the Company's Vice President to engage Mr. Li Limin as the Company's vice president.
III. Other explanations
□ Applicable ✓ N/A
32 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
SECTION IX CORPORATE BONDS
□ Applicable ✓ N/A
33 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
SECTION X FINANCIAL REPORT
I. Auditor's Report
□ Applicable ✓ N/A
II. Financial Statement
Consolidated Balance Sheet
30 June 2018
Prepared by: Wanhua Chemical Group Co., Ltd.
Unit: RMB Item Note Closing balance Opening balance
Current assets:
Cash and bank balances VII1 2,895,734,252.40 3,062,974,654.18
Balances with clearing agencies
Placements with banks and other financial institutions
Financial assets at fair value through profit or loss
Derivative financial assets
Notes receivable VII2 10,565,298,030.30 11,308,297,066.37
Accounts receivable VII3 3,287,381,488.17 2,832,792,897.08
Prepayments VII4 493,973,985.74 481,975,826.77
Premiums receivable
Amounts receivable under reinsurance contracts
Reinsurer's share of insurance contract reserves
Interest receivable
Dividends receivable
Other receivables VII5 171,478,824.56 246,322,725.81
Financial assets purchased under resale agreements
Inventories VII6 7,410,616,495.06 6,999,627,326.74
Assets held for sale VII7 15,127,273.56
Non-current assets due within one year
Other current assets VII8 294,919,792.42 268,224,126.74
Total Current Assets 25,134,530,142.21 25,200,214,623.69
Non-current Assets:
Loans and advances to customers
34 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Available-for-sale financial assets VII9 20,000,000.00 20,000,000.00
Held-to-maturity investments
Long-term receivables VII10 350,050,363.76 318,793,498.76
Long-term equity investments VII11 658,990,960.12 525,628,774.00
Investment properties
Fixed assets VII12 27,270,488,991.49 27,610,330,297.20
Construction in progress VII13 8,084,724,528.92 6,419,934,249.79
Materials for construction of fixed assets VII14 886,582,836.89 885,595,169.94
Disposal of fixed assets
Bearer biological assets
Oil and gas assets
Intangible assets VII15 2,473,919,642.72 2,521,052,340.83
Development expenditure
Goodwill VII16 277,518,585.35 277,518,585.35
Long-term prepaid expenses VII17 12,468,105.83 15,473,499.25
Deferred tax assets VII18 988,608,457.95 1,025,337,106.74
Other non-current assets VII19 1,934,883,139.30 1,007,854,102.69
Total Non-current Assets 42,958,235,612.33 40,627,517,624.55
TOTAL ASSETS 68,092,765,754.54 65,827,732,248.24
Current Liabilities:
Short-term borrowings VII20 15,249,914,740.04 12,714,569,960.22
Loans from the central bank
Customer deposits and deposits from banks and other
financial institutions
Taking from banks and other financial institutions
Financial liabilities at fair value through profit or loss
Derivative financial liabilities VII21 2,785,734.17
Notes payable VII22 2,277,674,547.01 1,851,643,240.39
Accounts payable VII23 3,671,114,571.69 4,388,212,374.08
Receipts in advance VII24 2,283,771,725.53 2,679,648,525.88
Financial assets sold under repurchase agreements
Fees and commissions payable
Employee benefits payable VII25 471,722,857.38 730,321,421.23
Taxes payable VII26 1,157,472,626.00 2,245,188,240.76
Interest payable VII27 60,343,243.96 31,970,671.84
Dividends payable
Other payables VII28 335,019,834.40 508,025,236.51
Amounts payable under reinsurance contracts
Insurance contract reserves
Funds from securities trading agency
Funds from underwriting securities agency
35 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Liabilities held for sale
Non-current liabilities due within one year VII29 1,868,013,333.32 2,670,513,333.46
Other current liabilities
Total Current Liabilities 27,377,833,213.50 27,820,093,004.37
Non-current Liabilities:
Long-term borrowings VII30 5,238,643,571.40 6,321,648,809.13
Bonds payable
Including: Preferred shares
Perpetual bonds
Long-term payables VII31 1,352,722.00 1,352,722.00
Long-term employee benefits payable
Special payables
Provisions
Deferred income VII32 877,055,598.31 915,610,203.02
Deferred tax liabilities VII18 18,523,973.81 14,900,951.35
Other non-current liabilities
Total Non-current Liabilities 6,135,575,865.52 7,253,512,685.50
TOTAL LIABILITIES 33,513,409,079.02 35,073,605,689.87
OWNERS' EQUITY
Share capital VII33 2,734,012,800.00 2,734,012,800.00
Other equity instruments
Including: Preferred shares
Perpetual bonds
Capital reserve VII34 2,392,970,759.21 2,392,825,722.70
Less: Treasury shares
Other comprehensive income VII35 -7,988,717.39 9,518,565.65
Special reserve VII36
Surplus reserve VII37 2,823,172,641.71 2,823,172,641.71
General reserve
Retained profits VII38 22,168,925,381.45 19,320,010,167.13
Total owners' equity attributable to equity holders of the 30,111,092,864.98 27,279,539,897.19 Company
Minority interests 4,468,263,810.54 3,474,586,661.18
TOTAL OWNERS' EQUITY 34,579,356,675.52 30,754,126,558.37
TOTAL LIABILITIES AND OWNERS' EQUITY 68,092,765,754.54 65,827,732,248.24
Legal Representative: Liao Zengtai Chief Accountant: Kou Guangwu
Person in Charge of the Accounting Body: Zhang Shoujun
36 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Balance Sheet of the Company 30 June 2018 Prepared by: Wanhua Chemical Group Co., Ltd.
Unit: RMB Item Note Closing balance Opening balance
Current assets:
Cash and bank balances 1,545,709,471.96 2,214,358,511.06
Financial assets at fair value through profit or loss
Derivative financial assets
Notes receivable 1,105,704,732.82 2,824,289,219.62
Accounts receivable XVII1 5,142,131,682.92 6,045,935,341.22
Prepayments 147,570,351.52 221,801,873.88
Interest receivable
Dividends receivable 44,000,000.00
Other receivables XVII2 1,205,434,518.37 1,082,477,120.08
Inventories 2,667,695,270.56 2,582,117,980.56
Assets held for sale
Non-current assets due within one year
Other current assets 65,273,120.60 16,052,999.25
Total Current Assets 11,879,519,148.75 15,031,033,045.67
Non-current Assets:
Available-for-sale financial assets 20,000,000.00 20,000,000.00
Held-to-maturity investments
Long-term receivables 485,005,344.00 462,431,762.00
Long-term equity investments XVII3 5,233,922,958.86 4,868,876,085.21
Investment properties
Fixed assets 9,385,222,030.12 9,191,430,136.83
Construction in progress 6,756,940,257.82 5,304,949,160.10
Materials for construction of fixed assets 764,217,514.01 786,277,192.30
Disposal of fixed assets
Bearer biological assets
Oil and gas assets
Intangible assets 1,563,524,630.35 1,583,694,835.82
Development expenditure
Goodwill
Long-term prepaid expenses 8,230,214.93 10,844,790.67
Deferred tax assets 258,593,586.23 296,648,593.06
Other non-current assets 1,706,950,078.96 802,974,226.65
Total Non-current Assets 26,182,606,615.28 23,328,126,782.64
TOTAL ASSETS 38,062,125,764.03 38,359,159,828.31
37 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Current Liabilities:
Short-term borrowings 5,949,780,000.00 6,086,315,000.00
Financial liabilities at fair value through profit or loss
Derivative financial liabilities
Notes payable 37,013,641.45 20,000.00
Accounts payable 2,229,760,465.12 2,481,883,779.52
Receipts in advance 1,497,843,946.44 37,595,121.71
Employee benefits payable 306,321,977.73 509,759,885.12
Taxes payable 51,823,162.41 378,386,599.22
Interest payable 14,468,995.99 14,481,454.45
Dividends payable
Other payables 129,391,161.09 233,184,532.29
Liabilities held for sale
Non-current liabilities due within one year 1,457,333,333.32 1,677,333,333.46
Other current liabilities
Total Current Liabilities 11,673,736,683.55 11,418,959,705.77
Non-current Liabilities:
Long-term borrowings 4,832,000,000.00 5,400,666,666.29
Bonds payable
Including: Preferred shares
Perpetual bonds
Long-term payables 1,352,722.00 1,352,722.00
Long-term employee benefits payable
Special payables
Provisions
Deferred income 612,819,823.50 639,666,792.37
Deferred tax liabilities
Other non-current liabilities
Total Non-current Liabilities 5,446,172,545.50 6,041,686,180.66
TOTAL LIABILITIES 17,119,909,229.05 17,460,645,886.43
OWNERS' EQUITY:
Share capital 2,734,012,800.00 2,734,012,800.00
Other equity instruments
Including: Preferred shares
Perpetual bonds
Capital reserve 2,446,060,553.93 2,445,915,517.42
Less: Treasury shares
Other comprehensive income
Special reserve
Surplus reserve 2,823,172,641.71 2,823,172,641.71
Retained profits 12,938,970,539.34 12,895,412,982.75
38 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
TOTAL OWNERS' EQUITY 20,942,216,534.98 20,898,513,941.88
TOTAL LIABILITIES AND OWNERS' EQUITY 38,062,125,764.03 38,359,159,828.31
Legal Representative: Liao Zengtai Chief Accountant: Kou Guangwu
Person in Charge of the Accounting Body: Zhang Shoujun
39 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Consolidated Income Statement
From January 2018 to June 2018
Unit: RMB Amount for the Amount for the Item Note current period prior period
I. Total operating income 30,054,174,638.75 24,430,086,476.77 Including: Operating income VII39 30,054,174,638.75 24,430,086,476.77 Interest income Premiums earned Fee and commission income II. Total operating costs 20,635,477,735.11 17,208,235,184.19 Including: Operating costs VII39 17,995,540,445.20 14,946,177,503.39 Interest expenses Fee and commission expenses Surrenders Claims and policyholder benefits (net of amounts recover- able from reinsurers) Changes in insurance contract reserves (net of reinsurers' share) Insurance policyholder dividends Expenses for reinsurance accepted Taxes and levies VII40 313,901,360.97 168,049,530.69 Selling expenses VII41 788,975,503.91 671,559,854.65 Administrative expenses VII42 1,070,147,079.50 811,531,490.40 Financial expenses VII43 420,633,215.62 450,443,344.86 Impairment losses of assets VII44 46,280,129.91 160,473,460.20 Add: Gains from changes in fair values (Losses are indicated by " － ") Investment income (Loss is indicated by " － ") VII45 53,855,509.79 55,661,140.08 Including: Income from investments in associates and joint ventures 53,855,509.79 49,677,651.48 Income from disposal of assets (Loss is indicated by “－”) VII46 144,071.76 1,684,644.58 Foreign exchange gains (Losses are indicated by " － ") Other income VII47 844,422,936.84 104,390,508.37 III. Operating profit (Loss is indicated by “－”) 10,317,119,422.03 7,383,587,585.61 Add: Non-operating income VII48 3,563,427.84 15,369,016.50 Less: Non-operating expenses VII49 15,188,263.30 8,780,867.50 IV. Total profit (Total loss is indicated by " － ") 10,305,494,586.57 7,390,175,734.61 Less: Income tax expenses VII50 2,075,315,522.89 1,580,614,505.98 V. Net profit (Net loss is indicated by " － ") 8,230,179,063.68 5,809,561,228.63 (I) Categorized by the continuity of operations 1.Net profit from continuing operations (Net loss is indicated by "－") 8,230,179,063.68 5,809,561,228.63 2. Net profit from discontinued operations (Net loss is indicated by "－")
(II) Categorized by ownership
1. Net profit(loss) attributable to shareholders of the Company 6,949,934,414.32 4,861,037,879.29
40 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
2. Profit or loss attributable to minority interests 1,280,244,649.36 948,523,349.34 VI. Other comprehensive income, net of tax VII51 -17,507,283.04 4,142,645.86 Other comprehensive income attributable to owners of the Company, -17,507,283.04 4,142,645.86 net of tax (I) Other comprehensive income that will not be reclassified subse- quently to profit or loss: 1. Changes in net liabilities or net assets of the re-measurement of defined benefit plan 2. Share of other comprehensive income of investees under equity method which cannot be reclassified into profit and loss (II) Other comprehensive income that will be reclassified subsequently -17,507,283.04 4,142,645.86 to profit or loss: 1. Share of other comprehensive income of investees under equity method which will be reclassified into profit and loss 2. Gain (loss) from changes in fair values of available-for-sale finan- cial assets 3. Held-to-maturity investments which will be reclassified into avail- able-for-sale financial assets 4. Effective part of gain or loss on hedging of cash flow -2,785,734.17 7,100,711.73 5. Exchange differences arising on translation of foreign currency -14,721,548.87 -2,958,065.87 financial statements 6. Others Other comprehensive income attributable to minority interests net of tax VII. Total comprehensive income 8,212,671,780.64 5,813,703,874.49 Total comprehensive income attributable to owners of the Company 6,932,427,131.28 4,865,180,525.15 Total comprehensive income attributable to minority interests 1,280,244,649.36 948,523,349.34 VIII. Earnings per share: (I) Basic earnings per share (RMB/share) XVIII2 2.54 1.79 (II) Diluted earnings per share (RMB/share)
Legal Representative: Liao Zengtai Chief Accountant: Kou Guangwu
Person in Charge of the Accounting Body: Zhang Shoujun
41 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Income Statement of the Company
From January 2018 to June 2018
Unit: RMB Amount for the Amount for the Item Note current period prior period
I. Total operating income XVII4 11,358,977,989.48 10,333,794,502.59 Less: Operating costs XVII4 5,874,506,806.81 6,175,907,914.80 Taxes and levies 130,701,640.79 36,233,027.76 Selling expenses 61,708,047.46 56,443,287.64 Administrative expenses 625,965,864.49 566,671,672.69 Financial expenses 215,908,113.17 275,386,084.17 Impairment losses of assets 1,740,925.07 1,592,237.06 Add: Gains from changes in fair values (Losses are indicated by " － ") Investment income (Loss is indicated by " － ") XVII5 284,545,655.14 1,364,466,615.86 Including: Income from investments in associates and joint ventures 8,995,503.14 11,358,641.70 Gains from disposal of assets(Loss is indicated by " － ") 9,032,348.10 13,811,722.16 Other income 39,707,925.76 40,148,743.58 II. Operating profit (Loss is indicated by " － ") 4,781,732,520.69 4,639,987,360.07 Add: Non-operating income 1,468,810.10 1,401,242.78 Less: Non-operating expenses 6,210,904.68 567,786.10 III. Total profit (Total loss is indicated by " － ") 4,776,990,426.11 4,640,820,816.75 Less: Income tax expenses 632,413,669.52 491,117,655.95 IV. Net profit (Net loss is indicated by " － ") 4,144,576,756.59 4,149,703,160.80 (I) Net profit from continuing operations (Net loss is indicated by " － ") 4,144,576,756.59 4,149,703,160.80 (II) Net profit from discontinued operations (Net loss is indicated by " － ") V.Other comprehensive income, net of tax
(1) Other comprehensive income that will not be reclassified subse- quently to profit or loss: 1. Changes in net liabilities or net assets of the re-measurement of defined benefit plan 2. Share of other comprehensive income of investees under equity method which cannot be reclassified into profit and loss (II) Other comprehensive income that will be reclassified subsequently to profit or loss: 1. Share of other comprehensive income of investees under equity method which will be reclassified into profit and loss 2. Gain (loss) from changes in fair values of available-for-sale finan- cial assets 3. Held-to-maturity investments which will be reclassified into avail- able-for-sale financial assets 4. Effective part of gain or loss on hedging of cash flow 5. Exchange differences arising on translation of foreign currency financial statements 6. Others VI.Total comprehensive income 4,144,576,756.59 4,149,703,160.80
42 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
VII. Earnings per share:
(I) Basic earnings per share(RMB/share) (II) Diluted earnings per share (RMB/share)
Legal Representative: Liao Zengtai Chief Accountant: Kou Guangwu
Person in Charge of the Accounting Body: Zhang Shoujun
43 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Consolidated Cash Flow Statement
From January 2018 to June 2018
Unit: RMB Amount for the Amount for the Item Note current period prior period I. Cash Flows from Operating Activities:
Cash receipts from the sale of goods and the rendering of services 36,671,078,983.33 25,049,927,662.85 Net increase in customer deposits and deposits from banks and other financial institutions Net increase in loans from the central bank Net increase in taking from banks and other financial institutions Cash receipts from premiums under direct insurance contracts Net cash receipts from reinsurance business Net cash receipts from policyholders' deposits and investment con- tract liabilities Net increase in disposal of financial assets at fair value through profit or loss Cash receipts from interest, fees and commissions Net increase in taking from banks Net increase in financial assets sold under repurchase arrangements Receipts of tax refunds 687,547,942.00 535,748,503.76 Other cash receipts relating to operating activities VII52(1) 827,796,455.26 610,329,705.71 Sub-total of cash inflows from operating activities 38,186,423,380.59 26,196,005,872.32 Cash payments for goods purchased and services received 21,954,840,846.15 20,517,049,226.77 Net increase in loans and advances to customers Net increase in balance with the central bank and due from banks and other financial institutions Cash payments for claims and policyholders' benefits under direct insurance contracts Cash payments for interest, fees and commissions Cash payments for insurance policyholder dividends Cash payments to and on behalf of employees 1,353,501,347.50 1,036,431,220.29 Payments of various types of taxes 5,252,931,292.90 2,356,022,706.86 Other cash payments relating to operating activities VII52(2) 1,179,977,874.55 837,974,687.70 Sub-total of cash outflows from operating activities 29,741,251,361.10 24,747,477,841.62 Net Cash Flow from Operating Activities VII53(1) 8,445,172,019.49 1,448,528,030.70 II. Cash Flows from Investing Activities:
Cash receipts from disposals and recovery of investments Cash receipts from investment income 66,304,460.18 6,000,000.00 Net cash receipts from disposals of fixed assets, intangible assets and 5,646,783.98 776,508.20 other long-term assets Net cash receipts from disposals of subsidiaries and other business units Other cash receipts relating to investing activities VII52(3) 1,590,439.64 398,060,504.91 Sub-total of cash inflows from investing activities 73,541,683.80 404,837,013.11
44 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Cash payments to acquire or construct fixed assets, intangible assets 4,182,790,655.06 2,586,792,863.61 and other long-term assets Cash payments to acquire investments 145,666,100.00 10,000,000.00 Net increase in pledged loans receivables Net cash payments for acquisitions of subsidiaries and other business units Other cash payments relating to investing activities VII52(4) 87,000,000.00 Sub-total of cash outflows from investing activities 4,328,456,755.06 2,683,792,863.61 Net Cash Flow from Investing Activities -4,254,915,071.26 -2,278,955,850.50 III. Cash Flows from Financing Activities:
Cash receipts from capital contributions 2,459,999,984.00 Including: cash receipts from capital contributions from minority owners of subsidiaries Cash receipts from borrowings 19,702,952,200.47 15,202,515,189.13 Cash receipts from issue of bonds Other cash receipts relating to financing activities Sub-total of cash inflows from financing activities 19,702,952,200.47 17,662,515,173.13 Cash repayments of borrowings 19,245,971,148.50 14,267,495,214.70 Cash payments for distribution of dividends or profits or settlement of 4,836,486,626.76 2,181,419,177.12 interest expenses Including: payments for distribution of dividends or profits to minori- 286,567,500.00 539,226,875.00 ty owners of subsidiaries Other cash payments relating to financing activities VII52(5) 441,120.00 1,078,745.58 Sub-total of cash outflows from financing activities 24,082,898,895.26 16,449,993,137.40 Net Cash Flow from Financing Activities -4,379,946,694.79 1,212,522,035.73 IV. Effect of Foreign Exchange Rate Changes on Cash and Cash 24,367,963.10 -1,026,453.80 Equivalents
V. Net Increase in Cash and Cash Equivalents -165,321,783.46 381,067,762.13 Add: Opening balance of Cash and Cash Equivalents 3,046,303,365.52 1,962,848,541.01 VI. Closing Balance of Cash and Cash Equivalents VII53(4) 2,880,981,582.06 2,343,916,303.14
Legal Representative: Liao Zengtai Chief Accountant: Kou Guangwu
Person in Charge of the Accounting Body: Zhang Shoujun
45 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Cash Flow Statement of the Company
From January 2018 to June 2018
Unit: RMB Amount for the Amount for the Item Note current period prior period I. Cash Flows from Operating Activities:
Cash receipts from the sale of goods and the rendering of services 13,347,380,000.20 9,957,356,814.46 Receipts of tax refunds 6,064,556.89 115,596,267.41 Other cash receipts relating to operating activities 19,331,210.19 119,405,691.66 Sub-total of cash inflows from operating activities 13,372,775,767.28 10,192,358,773.53 Cash payments for goods purchased and services received 6,375,544,371.60 6,994,843,465.16 Cash payments to and on behalf of employees 759,278,805.69 596,157,873.61 Payments of various types of taxes 1,675,885,242.20 553,320,542.50 Other cash payments relating to operating activities 259,983,767.21 155,939,258.83 Sub-total of cash outflows from operating activities 9,070,692,186.70 8,300,261,140.10 Net Cash Flow from Operating Activities XVII6 4,302,083,580.58 1,892,097,633.43 II. Cash Flows from Investing Activities:
Cash receipts from disposals and recovery of investments Cash receipts from investment income 319,550,152.00 138,431,875.00 Net cash receipts from disposals of fixed assets, intangible assets and 3,803,474,535.50 137,559,902.92 other long-term assets Net cash receipts from disposals of subsidiaries and other business units Other cash receipts relating to investing activities 221,480,988.02 812,728,188.38 Sub-total of cash inflows from investing activities 4,344,505,675.52 1,088,719,966.30 Cash payments to acquire or construct fixed assets, intangible assets 3,486,547,638.67 2,008,943,087.14 and other long-term assets Cash payments to acquire investments 145,666,100.00 409,999,950.00 Net cash payments for acquisitions of subsidiaries and other business units Other cash payments relating to investing activities 391,515,671.53 343,906,771.32 Sub-total of cash outflows from investing activities 4,023,729,410.20 2,762,849,808.46 Net Cash Flow from Investing Activities 320,776,265.32 -1,674,129,842.16 III. Cash Flows from Financing Activities:
Cash receipts from capital contributions 2,459,999,984.00 Cash receipts from borrowings 8,593,657,000.00 8,044,013,702.19 Cash receipts from issue of bonds Other cash receipts relating to financing activities Sub-total of cash inflows from financing activities 8,593,657,000.00 10,504,013,686.19 Cash repayments of borrowings 9,535,981,666.43 8,849,165,550.06 Cash payments for distribution of dividends or profits or settlement of 4,352,133,263.71 1,493,020,641.98 interest expenses Other cash payments relating to financing activities 1,078,685.58 Sub-total of cash outflows from financing activities 13,888,114,930.14 10,343,264,877.62 Net Cash Flow from Financing Activities -5,294,457,930.14 160,748,808.57
46 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
IV. Effect of Foreign Exchange Rate Changes on Cash and Cash 2,949,045.14 -15,389.86 Equivalents
V. Net Increase in Cash and Cash Equivalents -668,649,039.10 378,701,209.98 Add: Opening balance of Cash and Cash Equivalents 2,214,358,511.06 605,649,464.46 VI. Closing Balance of Cash and Cash Equivalents XVII6 1,545,709,471.96 984,350,674.44
Legal Representative: Liao Zengtai Chief Accountant: Kou Guangwu
Person in Charge of the Accounting Body: Zhang Shoujun
47 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Consolidated Statement of Changes in Owners' Equity
From January 2018 to June 2018
Unit: RMB Amount for the current period
Attributable to owners of the Company ITEM Other equity instruments Minority Total owners' Less: Other com- Special General interests equity Share capital Capital reserve Treasury prehensive Surplus reserve Retained profits Preferred Perpetual Oth- reserve reserve shares income shares bonds ers
I. Closing balance of the pre- 2,734,012,800.00 2,392,825,722.70 9,518,565.65 2,823,172,641.71 19,320,010,167.13 3,474,586,661.18 30,754,126,558.37 ceding year
Add: Changes in accounting policies
Corrections of prior period errors
Business combinations involv- ing enterprises under common control
Others
II. Opening balance of the 2,734,012,800.00 2,392,825,722.70 9,518,565.65 2,823,172,641.71 19,320,010,167.13 3,474,586,661.18 30,754,126,558.37 current year
III. Changes for the year (Loss- 145,036.51 -17,507,283.04 2,848,915,214.32 993,677,149.36 3,825,230,117.15 es are indicated by " － ")
(I) Total comprehensive income -17,507,283.04 6,949,934,414.32 1,280,244,649.36 8,212,671,780.64
(II) Owners' contributions and reduction in capital
1. Ordinary shares contributed by shareholders
2. Capital contribution from other equity instrument holders
3. Share-based payment recognized in owners' equity
4. Others
(III) Profit distribution -4,101,019,200.00 -286,567,500.00 -4,387,586,700.00
1. Transfer to surplus reserve
2. Transfer to general reserve
48 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
3. Distributions to owners (or -4,101,019,200.00 -286,567,500.00 -4,387,586,700.00 shareholders)
4. Others
(IV) Transfers within owners' equity
1. Capitalization of capital reserve
2. Capitalization of surplus reserve
3. Loss offset by surplus reserve
4. Others
(V) Special reserve
1. Transfer to special reserve 66,361,412.52 8,847,775.71 75,209,188.23 in the period
2. Amount utilized in the period 66,361,412.52 8,847,775.71 75,209,188.23
(VI) Others 145,036.51 145,036.51
IV. Closing balance of the 2,734,012,800.00 2,392,970,759.21 -7,988,717.39 2,823,172,641.71 22,168,925,381.45 4,468,263,810.54 34,579,356,675.52 current year
49 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Amount for the current period
Attributable to owners of the Company ITEM Other equity instruments Minority Total owners' Less: Other com- Special General interests equity Share capital Capital reserve Treasury prehensive Surplus reserve Retained profits Preferred Perpetual Oth- reserve reserve shares income shares bonds ers
I. Closing balance of the pre- 2,162,334,720.00 48,410,490.40 7,607,533.24 1,579,310,659.11 11,023,922,668.07 3,512,350,984.86 18,333,937,055.68 ceding year
Add: Changes in accounting pol- icies
Corrections of prior period errors
Business combinations involv- ing enterprises under common control
Others
II. Opening balance of the 2,162,334,720.00 48,410,490.40 7,607,533.24 1,579,310,659.11 11,023,922,668.07 3,512,350,984.86 18,333,937,055.68 current year
III. Changes for the year (Loss- 571,678,080.00 2,344,509,397.42 4,142,645.86 3,266,197,079.29 365,787,099.34 6,552,314,301.91 es are indicated by " － ")
(I) Total comprehensive income 4,142,645.86 4,861,037,879.29 948,523,349.34 5,813,703,874.49
(II) Owners' contributions and 116,009,280.00 2,344,415,232.30 2,460,424,512.30 reduction in capital
1. Ordinary shares contributed 116,009,280.00 2,344,415,232.30 2,460,424,512.30 by shareholders
2. Capital contribution from other equity instrument holders
3. Share-based payment recognized in owners' equity
4. Others
(III) Profit distribution 455,668,800.00 -1,594,840,800.00 -582,736,250.00 -1,721,908,250.00
1. Transfer to surplus reserve
2. Transfer to general reserve
3. Distributions to owners( or 455,668,800.00 -1,594,840,800.00 -582,736,250.00 -1,721,908,250.00 shareholders)
4. Others
50 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(IV) Transfers within owners' equity
1. Capitalization of capital reserve
2. Capitalization of surplus reserve
3. Loss offset by surplus reserve
4. Others
(V)Special reserve
1. Transfer to special reserve 31,605,801.57 6,094,239.11 37,700,040.68 in the period
2. Amount utilized in the period 31,605,801.57 6,094,239.11 37,700,040.68
(VI) Others 94,165.12 94,165.12
IV. Closing balance of the 2,734,012,800.00 2,392,919,887.82 11,750,179.10 1,579,310,659.11 14,290,119,747.36 3,878,138,084.20 24,886,251,357.59 current year
Note: As approved by the China Securities Regulatory Commission on the Approval of Non-Public Offering of Stock of Wanhua Chemical Group Co., Ltd. (Zheng Jian Xu Ke [2016] No. 1805) , the Company issued 116,009,280 RMB ordinary shares (A Share) at the offering price of RMB 21.55 per share on 6 January 2017, totaling RMB 2,499,999,984.00, after deducting the underwriter's issuance expenses of RMB 37,735,849.06(excluding VAT) and other issuance expenses of RMB 1,839,622.64 (excluding VAT) , is the actual raised funds of RMB 2,460,424,512.30 (net) , including new registered capital of RMB 116,009,280.00 and share premiums of RMB 2,344,415,232.30.
Legal Representative: Liao Zengtai Chief Accountant: Kou Guangwu
Person in Charge of the Accounting Body: Zhang Shoujun
51 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Statement of Changes in Owners' Equity of the Company
From January 2018 to June 2018
Unit: RMB Amount for the current period
ITEM Other equity instruments Less: Other com- Special Total owners' Share capital Capital reserve Treasury prehensive Surplus reserve Retained profits Preferred Perpetual Oth- reserve equity shares income shares bonds ers I. Closing balance of the preceding year 2,734,012,800.00 2,445,915,517.42 2,823,172,641.71 12,895,412,982.75 20,898,513,941.88
Add: Changes in accounting policies
Corrections of prior period
Others
II. Opening balance of the current year 2,734,012,800.00 2,445,915,517.42 2,823,172,641.71 12,895,412,982.75 20,898,513,941.88
III. Changes for the year (Losses are indicated by " － ") 145,036.51 43,557,556.59 43,702,593.10
(I) Total comprehensive income 4,144,576,756.59 4,144,576,756.59
(II) Owners' contributions and reduction in capital
1. Ordinary shares contributed by shareholders
2. Capital contribution from other equity instrument holders
3. Share-based payment recognized in owners' equity
4. Others
(III) Profit distribution -4,101,019,200.00 -4,101,019,200.00
1. Transfer to surplus reserve
2. Distributions to owners( or shareholders) -4,101,019,200.00 -4,101,019,200.00
3. Others
(IV) Transfers within owners' equity
1. Capitalization of capital reserve
2. Capitalization of surplus reserve
3. Loss offset by surplus reserve
4. Others
(V) Special reserve
1. Transfer to special reserve in the period 23,525,548.86 23,525,548.86
2. Amount utilized in the period 23,525,548.86 23,525,548.86
(VI) Others 145,036.51 145,036.51
IV. Closing balance of the current year 2,734,012,800.00 2,446,060,553.93 2,823,172,641.71 12,938,970,539.34 20,942,216,534.98
52 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Amount for the current period
ITEM Other equity instruments Less: Other com- Special Total owners' Share capital Capital reserve Treasury prehensive Surplus reserve Retained profits Preferred Perpetual Oth- reserve equity shares income shares bonds ers I. Closing balance of the preceding year 2,162,334,720.00 101,500,285.12 1,579,310,659.11 3,295,495,939.32 7,138,641,603.55
Add: Changes in accounting policies
Corrections of prior period errors
Others
II. Opening balance of the current year 2,162,334,720.00 101,500,285.12 1,579,310,659.11 3,295,495,939.32 7,138,641,603.55
III. Changes for the year (Losses are indicated by " － ") 571,678,080.00 2,344,509,397.42 2,554,862,360.80 5,471,049,838.22
(I) Total comprehensive income 4,149,703,160.80 4,149,703,160.80
(II) Owners' contributions and reduction in capital 116,009,280.00 2,344,415,232.30 2,460,424,512.30
1. Ordinary shares contributed by shareholders 116,009,280.00 2,344,415,232.30 2,460,424,512.30
2. Capital contribution from other equity instrument holders
3. Share-based payment recognized in owners' equity
4. Others
(III) Profit distribution 455,668,800.00 -1,594,840,800.00 -1,139,172,000.00
1. Transfer to surplus reserve
2. Distributions to owners( or shareholders) 455,668,800.00 -1,594,840,800.00 -1,139,172,000.00
3. Others
(IV) Transfers within owners' equity
1. Capitalization of capital reserve
2. Capitalization of surplus reserve
3. Loss offset by surplus reserve
4. Others
(V) Special reserve
1. Transfer to special reserve in the period 13,054,515.90 13,054,515.90
2. Amount utilized in the period 13,054,515.90 13,054,515.90
(VI) Others 94,165.12 94,165.12
IV. Closing balance of the current year 2,734,012,800.00 2,446,009,682.54 1,579,310,659.11 5,850,358,300.12 12,609,691,441.77
Legal Representative: Liao Zengtai Chief Accountant: Kou Guangwu
Person in Charge of the Accounting Body: Zhang Shoujun 53 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
III. Basic Infotmation About The Company
(I) General
✓ Applicable □ N/A
Wanhua Chemical Group Co., Ltd. (the"Company"or "Wanhua Chemical") , formally known as Yantai Wanhua Polyurethane Co., Ltd., was established by Yantai Wanhua Synthetic Leather Co., Ltd. with official approval document of No. Lu Zheng Gu Zi[1998] 70 issued by the People's Government of Shandong Province, together with Dongfang Electronics Co., Ltd., Yantai Moon Co., Ltd., Yantai Spandex Group Co., Ltd. and Hongta Industrial Investment Co., Ltd. by means of sponsorship. The Company was incorporated and registered under the approval of Administration Bureau of Industry and Commerce of Shandong Province on 16 December 1998 with the Uniform Social Credit Code of 91370000163044841F.
The Company is located in Yantai city of Shandong province economic and technical development district No. 17 of Tianshan Road. The business scope of the Company and its subsidiaries (hereinafter refer to as the "Group") covers development, sale and manufacture of Polyurethane and its additives as well as Isocyanate and its derivatives; sales of liquefied petroleum gas, propylene, acrylic and other petrochemical products; Technical services; Staff training; Import and export business within the scope of permission; Operations of special railway lines under permission; Manufacture and supplies of heat, electricity and pure water as well as construction of heat pipe network; Research & development, manufacture and sale of MDI; Sale of chemical products; Project investments; Research & development and Technical training and etc..; Research & development, manufacture and sale of TPU and Polyether Polyol; Sale of Chemical material and product; Research & development, manufacture of new chemical materials and technology services; Operation and maintenance of dock and other port facilities and etc.
The parent company of the Company is Yantai Wanhua Chemical Co., Ltd. and the ultimate controlling shareholder of the Company is State-owned Assets Supervision and Administration Commission of Yantai Municipal Government.
The Company and the consolidated financial statements of the Company have been approved by the board of the directors on 30 July 2018.
(II) Scope of consolidated financial statements
✓ Applicable □ N/A
The scope of and changes in consolidated financial statements for the period are disclosed in Note VIII and Note IX 1.
IV. Basic of Preparation of Financial Satements
(I) Basis of preparation
The Group has adopted the Accounting Standards for Business Enterprises ("ASBE") and relevant provisions issued by the Ministry of Finance ("MOF"). In addition, the Group has disclosed relevant financial information in accordance with Information Disclosure and Presentation Rules for Companies Offering Securities to the Public No. 15 - General Provisions on Financial Reporting.
Basis of accounting and principle of measurement
The Group adopts the accrual basis of accounting. Except for certain financial instruments which are measured at fair value, the Group adopts the historical cost as the principle of measurement in the financial statements. Where assets are impaired, provisions for asset impairment are made in accordance with relevant requirements.
In accordance with the historical cost method, the assets' value should be the same with the fair value of cash or cash equivalents paid for those assets. The liabilities should be the same amount with the cash or cash equivalents received, the contract amount or the future payment for the present obligations.
54 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Fair value is the amount received by selling assets or paid for transferring liabilities in orderly transaction held by market participants on measuring day. Whether fair value is observable or estimated by measurement technology, it was determined on this base in the financial statements for measurement or disclosure.
The fair value was divided into three classes based on observable degree of value inputted and the importance of those inputted value:
Level 1: The inputted value is the same with an unadjusted price of the same assets or liabilities which could be obtained on measuring day;
Level 2: The inputted value is directly or indirectly observable for related assets or liabilities but other than the Level 1 value;
Level 3: The inputted value is unobservable for related assets or liabilities.
(II) Going concern
✓ Applicable □ N/A
As at 30 June 2018, the Group's total current liabilities exceeded of total current assets of RMB 2.243 billion. However, as at 30 June 2018, unutilized bank facility was more than RMB 32.7 billion, which can be utilized to satisfy the Group's cash flow demand. Therefore, the financial statements have been prepared on a going concern basis.
V. Significant Accounting Policies and Accounting Estimates
Tips for the specific accounting policies and accounting estimates:
✓ Applicable □ N/A
The Group determined the specific accounting policies and accounting estimates according to the production and business operation characteristics that mainly reflected in receivables for which bad debt provision (Note: V (11) ) , Inventory (Note: V(12) ) , depreciation of fixed assets and amortization of intangible assets (Note: V(15) &(18) ) , timing for recognizing the revenue (Note: V(22)) etc.
(I) Statement of compliance with the ASBE
The financial statements of the Company have been prepared in accordance with Accounting Standards for Business Enterprises, and present truly and completely, the Company's and consolidated financial position as of 30 June 2018, and the Company's and consolidated results of operations and cash flows for the period then ended.
(II) Accounting period
The Group adopts the calendar year as its accounting year, i.e. from 1 January to 31 December.
(III) Operating cycle
✓ Applicable □ N/A
Operating cycle is the period of the purchase of raw material for production and the collection of cash from receivable created by the sale of inventory. The Group's operating cycle is 140 days. The Group adopts 12 months as time division for liquidity of assets and liabilities.
55 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(IV) Functional currency
Renminbi ("RMB") is the currency of the primary economic environment in which the Company and its domestic subsidiaries operate. Therefore, the Company and its domestic subsidiaries choose RMB as their functional currency. The Company's foreign subsidiaries choose their functional currencies based on the primary economic environment in which they operate, including USD, JPY, INR, SGD etc. The Group adopts RMB to prepare its financial statements.
(V) The accounting treatment of business combinations involving enterprises under common control and business combinations not involving enterprises under common control
✓ Applicable □ N/A
Business combinations are classified into business combinations involving enterprises under common control and business combinations not involving enterprises under common control.
1. Business combinations involving enterprises under common control
A business combination involving enterprises under common control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or parties both before and after the combination, and that control is not transitory.
Assets and liabilities obtained shall be measured at their respective book value as recorded by the combining entities at the date of the combination. The difference between the book value of the net assets obtained and the book value of the consideration paid for the combination (or the aggregate face value of shares issued as consideration) is adjusted to the capital premium in capital reserve. If the capital premium is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings. Costs that are directly attributable to the combination are charged to profit or loss in the period in which they are incurred.
2. Business combinations not involving enterprises under common control and goodwill
A business combination not involving enterprises under common control is a business combination in which all of the combining enterprises are not ultimately controlled by the same party or parties before and after the combination.
The cost of combination is the aggregate of the fair values, at the acquisition date, of the assets given, liabilities incurred or assumed, and equity securities issued by the acquirer in exchange for control of the acquire where a business combination not involving enterprises under common control is achieved in stages that involve multiple transactions, the cost of combination is the sum of the consideration paid at the acquisition date and the fair value at the acquisition date of the acquirer's previously held interest in the acquiree. The intermediary expenses incurred by the acquirer in respect of auditing, legal services, valuation and consultancy services, etc. and other associated administrative expenses attributable to the business combination are recognized in profit or loss when they are incurred.
The acquiree's identifiable assets, liabilities and contingent liabilities, acquired by the acquirer in a business combination, that meet the recognition criteria, shall be measured at fair value at the acquisition date.
Where the cost of combination exceeds the acquirer's interest in the fair value of the acquiree's identifiable net assets, the difference is treated as an asset and recognized as goodwill, which is measured at cost on initial recognition. Where the cost of combination is less than the acquirer's interest in the fair value of the acquiree's identifiable net assets, the acquirer firstly reassesses the measurement of the fair values of the acquiree's identifiable assets, liabilities and contingent liabilities and measurement of the cost of combination. If after that reassessment, the cost of combination is still less than the acquirer's interest in the fair value of the acquiree's identifiable net assets, the acquirer recognizes the remaining difference immediately in profit or loss for the current period.
Goodwill arising on a business combination is measured at cost less accumulated impairment losses, and is presented separately in the consolidated financial statements.
56 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(VI) Preparation of consolidated financial statements
✓ Applicable □ N/A
The scope of consolidation in the consolidated financial statements is determined on the basis of control. Control is the power over the investee, exposure or rights to variable returns from its involvement with the investee, and the ability to use its power over the investee to affect the amount of the investor's returns. If changes of related facts and situations lead to changes of related elements of control, the Group will undertake reassessment.
The combination of subsidiaries begins with controlling the subsidiary by the Group, and ends with the Group's losing control of the subsidiary. For a subsidiary disposed of by the Group, the operating results and cash flows before the date of disposal (the date when control is lost) are included in the consolidated income statement and consolidated statement of cash flows, as appropriate.
For a subsidiary acquired through a business combination not involving enterprises under common control, the operation results and cash flows from the acquisition date (the date when control is obtained) are included in the consolidated income statement and consolidated statement of cash flows.
No matter when the business combination occurs in the reporting period, subsidiaries acquired through a business combination involving enterprises under common control or the party being absorbed under merger by absorption are included in the Group's scope of consolidation as if they had been included in the scope of consolidation from the date when they first came under the common control of the ultimate controlling party. Their operating results and cash flows from the beginning of the earliest reporting period or from the date when they first came under the common control of the ultimate controlling party are included in the consolidated income statement and consolidated statement of cash flows, as appropriate.
The significant accounting policies and accounting periods adopted by the subsidiaries are determined based on the uniform accounting policies and accounting periods set out by the Company.
All significant intra-group balances and transactions are eliminated on consolidation.
The portion of subsidiaries' equity that is not attributable to the Company is treated as minority interests and presented as "minority interests" in the consolidated balance sheet within owners' equity. The portion of net profits or losses of subsidiaries for the period attributable to minority interests are presented as "minority interests" in the consolidated income statement below the "net profit" line item.
When the amount of loss for the period attributable to the minority shareholders of a subsidiary exceeds the minority shareholders' portion of the opening balance of owners' equity of the subsidiary, the excess amounts are still allocated against minority interests.
Acquisition of minority interests or disposal of interest in a subsidiary that does not result in the loss of control over the subsidiary is accounted for as equity transactions. The carrying amounts of the Company's interests and minority interests are adjusted to reflect the changes in their relative interests in the subsidiary. The difference between the amount by which the minority interests are adjusted and the fair value of the consideration paid or received is adjusted to capital reserve under owners' equity. If the capital reserve is not sufficient to absorb the difference, the excess is adjusted against retained earnings.
When the Group loses control over a subsidiary due to disposal of certain equity interest or other reasons, any retained interest is re-measured at its fair value at the date when control is lost. The difference between (i) the aggregate of the consideration received on disposal and the fair value of any retained interest and (ii) the share of the former subsidiary's net assets cumulatively calculated from the acquisition date according to the original proportion of ownership interest is recognized as investment income in the period in which control is lost. Other comprehensive income associated with investment in the former subsidiary is reclassified to investment income in the period in which control is lost.
57 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(VII) Classification of joint venture arrangements and accounting treatment for joint operation
✓ Applicable □ N/A
Joint venture arrangements include common management and joint venture, which is decided by rights and obligations agreed in the arrangements based on the structure, legal form and contract terms. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. The joint venture arrangements of the Group are joint ventures.
The Group's investment in the joint venture is accounted by the equity method. Refer to Note (V) 14.3.2."Long-term equity investments measured at equity method" for details.
(VIII) Recognition criteria of cash and cash equivalents
Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash equivalents are the Group's short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
(IX) Translation of transactions and financial statements denominated in foreign currencies
✓ Applicable □ N/A
1. Transactions denominated in foreign currencies
A foreign currency transaction is recorded, on initial recognition, by applying an exchange rate that approximates the actual spot exchange rate on the date of transaction. The exchange rate that approximates the actual spot exchange rate on the date of transaction is exchange rate of the beginning of the month.
The Company and subsidiaries employing RMB as functional currency adopt spot exchange buying rate and spot exchange selling rate of the Bank of China as the spot exchange rate. As for the subsidiaries which do not use RMB as functional currency, they use the spot exchange buying rate and spot exchange selling rate searched in Bloomberg as functional currency. That is, the transaction form foreign currency asset converting by spot exchange buying rate, and the transaction form foreign currency liabilities converting by spot exchange selling rate.
At the balance sheet date, foreign currency monetary items are translated into RMB using the spot exchange rates at the balance sheet date. Exchange differences arising from the differences between the spot exchange rates prevailing at the balance sheet date and those on initial recognition or at the previous balance sheet date are recognized in profit or loss for the period, except that (1) exchange differences related to a specific-purpose borrowing denominated in foreign currency that qualify for capitalization are capitalized as part of the cost of the qualifying asset during the capitalization period; (2) exchange differences related to hedging instruments for the purpose of hedging against foreign currency risks are accounted for using hedge accounting; (3) exchange differences arising from changes in the carrying amounts (other than the amortized cost) of available-for-sale monetary items are recognized as other comprehensive income.
When the consolidated financial statements include foreign operation(s) , if there is foreign currency monetary item constituting a net investment in a foreign operation, exchange difference arising from changes in exchange rates are recognized as " exchange differences arising on translation of financial statements " in other comprehensive income, and in profit and loss for the period upon disposal of the foreign operation.
Foreign currency non-monetary items measured at historical cost are translated to the amounts in functional currency at the spot exchange rates on the dates of the transactions and the amounts in functional currency remain unchanged. Foreign currency non-monetary items measured at fair value are re-translated at the spot exchange rate on the date the fair value is determined. Difference between the re-translated functional currency amount and the original functional currency amount is treated as changes in fair value (including changes of exchange rate) and recorded to profit or loss for the period or recognized as other comprehensive income.
58 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
2. Translation of financial statements denominated in foreign currencies
For the purpose of preparing the consolidated financial statements, financial statements of a foreign operation are translated from the foreign currency into RMB using the following method: assets and liabilities on the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date; shareholders' equity items except for retained earnings are translated at the spot exchange rates at the dates on which such items arose; all items in the income statement as well as items reflecting the distribution of profits are translated at exchange rates that approximate the actual spot exchange rates on the dates of the transactions; the difference between the translated assets and the aggregate of liabilities and shareholders' equity items is separately presented as other comprehensive income under the shareholders' equity.
Cash flows arising from a transaction in foreign currency and the cash flows of a foreign subsidiary are translated at an exchange rate which approximates the spot exchange rate on the date of the cash flows. The effect of exchange rate changes on cash and cash equivalents is regarded as a reconciling item and presented separately in the cash flow statement as "effect of exchange rate changes on cash and cash equivalents".
The opening balances and the comparative figures of previous year are presented at the translated amounts in the previous year's financial statements.
On disposal of the Group's entire interest in a foreign operation, or upon a loss of control over a foreign operation due to disposal of certain interest in it or other reasons, the Group transfers the accumulated exchange differences arising on translation of financial statements of this foreign operation attributable to the owners' equity of the Company and presented under owners' equity, to profit or loss in the period in which the disposal occurs.
In case of a disposal or other reason that does not result in the Group losing control over a foreign operation, the proportionate share of accumulated exchange differences arising on translation of financial statements are re-attributed to minority interests and are not recognized in profit and loss. For partial disposals of equity interests in foreign operations which are associates or joint ventures, the proportionate share of the accumulated exchange differences arising on translation of financial statements of foreign operations is reclassified to profit or loss.
(X) Financial instruments
✓ Applicable □ N/A
Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. For financial assets and financial liabilities at fair value through profit or loss, transaction costs are immediately recognized in profit or loss. For other financial assets and financial liabilities, transaction costs are included in their initial recognized amounts.
1. Effective interest method
The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability (or a group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period, using the effective interest rate. The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected life of the financial asset or financial liability or, where appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.
When calculating the effective interest rate, the Group estimates future cash flows considering all contractual terms of the financial asset or financial liability (without considering future credit losses), and also considers all fees paid or received between the parties to the contract giving rise to the financial asset and financial liability that are an integral part of the effective interest rate, transaction costs, and premiums or discounts, etc.
2. Classification, recognition and measurement of financial assets
On initial recognition, the Group's financial assets are classified into one of the four categories, including financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables, and available-for-sale financial assets.
59 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. The Group's financial assets comprise of loans and receivables and available-for-sale financial assets.
(1) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Financial assets classified as loans and receivables by the Group include notes receivable, accounts receivable, other receivables, and long-term receivables.
Loans and receivables are subsequently measured at amortized cost using the effective interest method. Gain or loss arising from derecognition, impairment or amortization is recognized in profit or loss.
(2) Available-for-sale financial assets
Available-for-sale financial assets include financial assets that are not classified as financial assets at fair value through profit or loss, loans and receivables or held-to-maturity investments.
Available-for-sale financial assets are subsequently measured at fair value, and gains or losses arising from changes in the fair value are recognized as other comprehensive income, except that impairment losses and exchange differences related to amortized cost of monetary financial assets denominated in foreign currencies are recognized in profit or loss, until the financial assets are derecognized, at which time the gains or losses are released and recognized in profit or loss.
Interests obtained and the dividends declared by the investee during the period in which the available-for-sale financial assets are held, are recognized in investment income.
For investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, they are measured at cost.
3. Impairment of financial assets
The Group assesses at each balance sheet date the carrying amounts of financial assets other than those at fair value through profit or loss. If there is objective evidence that a financial asset is impaired, the Group determines the amount of any impairment loss. Objective evidence that a financial asset is impaired is evidence that, arising from one or more events that occurred after the initial recognition of the asset, the estimated future cash flows of the financial asset, which can be reliably measured, have been affected.
Objective evidence that a financial asset is impaired includes the following observable events:
(1) Significant financial difficulty of the issuer or obligor;
(2) A breach of contract by the borrower, such as a default or delinquency in interest or principal payments;
(3) The Group, for economic or legal reasons relating to the borrower's financial difficulty, granting a concession to the borrower;
(4) It becoming probable that the borrower will enter bankruptcy or other financial reorganizations;
(5) The disappearance of an active market for that financial asset because of financial difficulties of the issuer;
(6) Upon an overall assessment of a group of financial assets, observable data indicates that there is a measurable decrease in the estimated future cash flows from the group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group. Such observable data includes:
- Adverse changes in the payment status of borrower in the group of assets;
- Economic conditions in the country or region of the borrower which may lead to a failure to pay the group of assets;
60 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(7) Significant adverse changes in the technological, market, economic or legal environment in which the issuer operates, indicating that the cost of the investment in the equity instrument may not be recovered by the investor;
(8) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost;
(9) Other objective evidence indicating there is an impairment of a financial asset
- Impairment of financial assets measured at amortized cost
To the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The amount of reduction is recognized as an impairment loss in profit or loss. If, subsequent to the recognition of an impairment loss on financial assets carried at amortized cost, there is objective evidence of a recovery in value of the financial assets which can be related objectively to an event occurring after the impairment is recognized, the previously recognized impairment loss is reversed. However, the reversal is made to the extent that the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.
For a financial asset that is individually significant, the Group assesses the asset individually for impairment. For a financial asset that is not individually significant, the Group assesses the asset individually for impairment or includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset (whether significant or not), it includes the asset in a group of financial assets with similar credit risk characteristics and collectively reassesses them for impairment. Assets for which an impairment loss is individually recognized are not included in a collective assessment of impairment.
- Impairment of available-for-sale financial assets
When an available-for-sale financial asset is impaired, the cumulative loss arising from decline in fair value previously recognized directly in other comprehensive income is reclassified from the in other comprehensive income to profit or loss. The amount of the cumulative loss that is reclassified from in other comprehensive income to profit or loss is the difference between the acquisition cost (net of any principal repayment and amortization) and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss. If, subsequent to the recognition of an impairment loss on available-for-sale financial assets, there is objective evidence of a recovery in value of the financial assets which can be related objectively to an event occurring after the impairment is recognized, the previously recognized impairment loss is reversed. The amount of reversal of impairment loss on available-for-sale equity instruments is recognized as other comprehensive income, while the amount of reversal of impairment loss on available-for-sale debt instruments is recognized in profit or loss.
- Impairment of financial assets measured at cost
If an impairment loss has been incurred on an investment in unquoted equity instrument (without a quoted price in an active market) whose fair value cannot be reliably measured, or on a derivative financial asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the carrying amount of the financial asset is reduced to the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. The amount of reduction is recognized as an impairment loss in profit or loss. The impairment loss on such financial asset is not reversed once it is recognized.
4. Transfer of financial assets
The Group derecognizes a financial asset if one of the following conditions is satisfied: (1) the contractual rights to the cash flows from the financial asset expire; or (2) the financial asset has been transferred and substantially all the risks and rewards of ownership of the financial asset are transferred to the transferee; or (3) although the financial asset has been transferred, the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset but has not retained control of the financial asset.
61 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership of a financial asset, and it retains control of the financial asset, it recognizes the financial asset to the extent of its continuing involvement in the transferred financial asset and recognizes an associated liability. The extent of the Group's continuing involvement in the transferred asset is the extent to which it is exposed to changes in the value of the transferred asset.
For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, the difference between (1) the carrying amount of the financial asset transferred; and (2) the sum of the consideration received from the transfer and any cumulative gain or loss that has been recognized in other comprehensive income, is recognized in profit or loss.
If a part of the transferred financial asset qualifies for derecognition, the carrying amount of the transferred financial asset is allocated between the part that continues to be recognized and the part that is derecognized, based on the respective fair values of those parts. The difference between (1) the carrying amount allocated to the part derecognized; and (2) the sum of the consideration received for the part derecognized and any cumulative gain or loss allocated to the part derecognized which has been previously recognized in other comprehensive income, is recognized in profit or loss.
5. Classification, recognition and measurement of financial liabilities
Debt and equity instruments issued by the Group are classified into financial liabilities or equity instruments on the basis of the substance of the contractual arrangements and definitions of financial liability and equity instrument, other than in legal ways only.
Financial liabilities of the Group are other financial liabilities.
(1) Other financial liabilities
For a derivative liability that is linked to and must be settled by delivery of an unquoted equity instrument (without a quoted price in an active market) whose fair value cannot be reliably measured, it is subsequently measured at cost. Financial liabilities other than liabilities from financial guarantee contracts are subsequently measured at amortized cost using the effective interest method, with gain or loss arising from derecognition or amortization recognized in profit or loss.
(2) Financial guarantee contracts
A financial guarantee contract is a contract by which the guarantor and the lender agree that the guarantor would settle the debts or bear obligations in accordance with terms of the contract in case the borrower fails to settle the debts. Financial guarantee contracts that are not designated as financial liabilities at fair value through profit or loss, are initially measured at their fair values less the directly attributable transaction costs. Subsequent to initial recognition, they are measured at the higher of: (i) the amount determined in accordance with Accounting Standard for Business Enterprises No. 13 – Contingencies; and (ii) the amount initially recognized less cumulative amortization recognized in accordance with the principles set out in Accounting Standard for Business Enterprises No. 14 – Revenue.
6. Derecognition of financial liabilities
The Group derecognizes a financial liability (or part of it) only when the underlying present obligation (or part of it) is discharged. An agreement between the Group (an existing borrower) and an existing lender to replace the original financial liability with a new financial liability with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.
When the Group derecognizes a financial liability or a part of it, it recognizes the difference between the carrying amount of the financial liability (or part of the financial liability) derecognized and the consideration paid (including any non-cash assets transferred or new financial liabilities assumed) in profit or loss.
7. Derivatives and embedded derivatives
Derivative financial instruments include forward future contracts, etc. Derivatives are initially measured at fair value at the date when the derivative contracts are entered into and are subsequently re-measured at fair value. The resulting gain or
62 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
loss is recognized in profit or loss unless the derivative is designated and highly effective as a hedging instrument, in which case the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
An embedded derivative is separated from the hybrid instrument, where the hybrid instrument is not designated as a financial asset or financial liability at fair value through profit or loss, and treated as a standalone derivative if 1) the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract; and 2) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative. If the Group is unable to measure the embedded derivative separately either at acquisition or at a subsequent balance sheet date, it designates the entire hybrid instrument as a financial asset or financial liability at fair value through profit or loss.
8. Offsetting financial assets and financial liabilities
Where the Group has a legal right that is currently enforceable to set off the recognized financial assets and financial liabilities, and intends either to settle on a net basis, or to realize the financial asset and settle the financial liability simultaneously, a financial asset and a financial liability shall be offset and the net amount is presented in the balance sheet. Except for the above circumstances, financial assets and financial liabilities shall be presented separately in the balance sheet and shall not be offset.
9. Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The Group issues (including refinancing), repurchases, sells, or cancels equity instruments as changes in the rights and interests. The Group does not recognize any changes in the fair value of equity instruments. Transaction costs associated with equity are deducted from the rights and interests.
All types of distributions made by the Group to holders of equity instruments are treated as profit distribution and shall not change the total shareholders' equity.
(XI) Receivables
1. Receivables that are individually significant and for which bad debt provision is individually assessed
✓ Applicable □ N/A
Basis or monetary criteria for The Group deems a receivable that exceeds RMB 8,000,000 as an individually signifi- determining an indi-vidually cant receivable. significant receivable
For related party that are individually significant, the Group does not make provision for bad debt. For non-related party that are individually significant, the Group assesses the receivables individually for impairment. For a financial asset that is not impaired individ- Method of determining pro- ually, the Group includes the asset in a group of financial assets with similar credit risk vision for receivables that are characteristics and collectively assesses them for impairment. Receivables for which an individually significant and for impairment loss is individually recognized are not included in a collective assessment of which bad debt provision is impairment. individually assessed If there is objective evidence that the Group is unable to recover relevant debts under the original terms of other receivables, the Group has made provision for bad debts of other receivables.
63 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
2. Receivables for which bad debt provision is collectively assessed on a credit risk characteristics portfolio basis:
✓ Applicable □ N/A
Receivables for which bad debt provision is collectively assessed on a credit risk char-acteristics portfolio basis(aging analysis, percentage of balance and other methods)
Receivables due from domestic customers aging analysis Receivables due from overseas customers percentage of balance
Note: This credit risk characteristics portfolio does not include accounts receivable due from related parties.
Aging analysis of accounts receivable for which bad debt provision is made
✓ Applicable □ N/A
Provision as a proportion Provision as a proportion Aging of accounts receivable (%) of other receivables (%)
Within 1 year (inclusive) 5 More than 1 year but not exceeding 2 years 10 More than 2 years but not exceeding 3 years 30 More than 3 years but not exceeding 4 years 50 More than 3 years but not exceeding 4 years 100 More than 5 years 100
Portfolios that percentage of total receivables outstanding is used for bad debt provision:
✓ Applicable □ N/A
Provision as a proportion Provision as a proportion Name of portfolio of accounts receivable (%) of other receivables (%)
Accounts receivable-overseas clients 15
Portfolios that other methods are used for bad debt provision:
□ Applicable ✓ N/A
3. Accounts receivable that are not individually significant but for which bad debt provision is individually assessed:
✓ Applicable □ N/A
Reasons for making individual bad debt provision Impairment of objective evidence
The difference between estimated recoverable amount and Bad debt provision methods the book value shall be recognized as bad debt provision
64 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(XII) Inventories
✓ Applicable □ N/A
1. Categories of inventories
The Group's inventories mainly include raw materials, work in progress and goods on hand, etc. Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase, costs of conversion and other expenditures incurred in bringing the inventories to their present location and condition.
2. Valuation method of inventories upon delivery
The actual cost of inventories upon delivery is calculated using the weighted-average method.
3. Basis for determining net realizable value of inventories and provision methods for decline in value of inventories
At the balance sheet date, inventories are measured at the lower of cost and net realizable value. If the net realizable value is below the cost of inventories, a provision for decline in value of inventories is made. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion, the estimated costs necessary to make the sale and relevant taxes. Net realizable value is determined based on clear evidence obtained, and takes into consideration of the purposes of holding inventories and effect of post balance sheet events.
For large quantity and low value items of inventories, provision for decline in value is made based on categories of inventories. Provision for decline in value of other inventories is made based on the excess of cost of inventory over its net realizable value on an item-by-item basis.
After the provision for decline in value of inventories is made, if the circumstances that previously caused inventories to be written down below cost no longer exist so that the net realizable value of inventories is higher than their cost, the original provision for decline in value is reversed and the reversal is included in profit or loss for the period.
4. Inventory count system
The perpetual inventory system is maintained for stock system.
5. Amortization method for low cost and short-lived consumable items and packaging materials
Packaging materials and low cost and short-lived consumable items are amortized using the immediate write-off method.
(XIII) Assets held for sale
✓ Applicable □ N/A
When the Group collects book value mainly through the sale (including exchange of non-monetary assets of commercial substance) other than continuous use of one item of non-current assets or disposal group, it shall be classified as held-for- sale.
Non-current assets or disposal groups classified as held-for-sale need to meet all the criteria as bellow: (1) Assets can be sold immediately under the current situation in accordance with conventions of sale of such assets or disposal groups in similar transactions; (2) The sale is likely to take place, i.e. the Group has made a resolution on a plan to sell and obtained determined purchase commitments expecting that the sale shall be completed in one year.
Where the Company losses control over its subsidiaries for reasons such as the sale of investments in subsidiaries, whether part of equity investment is retained after the sale or not, the Company shall classify entire investments in subsidiaries as held-for-sale and classify all the assets and liabilities of subsidiaries in the consolidated financial statements as held-for-sale when investments in subsidiaries proposed to be sold meet the requirements of such classification.
65 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
The Group measures non-current assets or disposal groups classified as held-for-sale at the lower amount between net book value and fair value after deducting selling costs. Book value that is higher than the net amount of fair value less selling costs is reduced to that of fair value less selling costs. The amount reduced is recognized as impairment losses of assets and recorded to profit or loss for the period. And provision for impairment of held-for-sale assets is made at the same time. Increases in net amount of fair value of non-current assets classified as held-for-sale on the balance sheet less selling expenses subsequently shall offset the reduced amount and be reversed to impairment losses of assets that are recognized in the held-for-sale category and the revered amount is recorded to profit or loss for the period.
Non-current assets classified as held-for-sale or that of disposal groups are not depreciated or amortized and interests of liabilities in the disposal groups classified as held-for-sale and other expenses are continued to be recognized.
Equity investments of associate or joint venture are wholly or partly classified as held-for-sale assets and the part classified as held-for-sale is no longer accounted using the equity method since the date of classification.
(XIV) Long-term equity investments
✓ Applicable □ N/A
1. Criteria of determination of control or significant influence
Control is defined as power over the investee, exposed or having the rights to variable returns from its involvement with the investee and having the ability to use its power to affect its returns. Joint control is defined as the contractually agreed sharing of control of an arrangement. Joint control exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Significant influence is defined as the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies. When determining whether an investing enterprise is able to exercise control or significant influence over an investee, the effect of potential voting rights of the investee (for example, warrants and convertible debts) held by the investing enterprises or other parties that are currently exercisable or convertible shall be considered.
2. Determination of the initial cost of investment
For a long-term equity investment acquired through business combination involving enterprises under common control, the initial investment cost of the long-term equity investment acquired is the absorbing party's share of the owners' equity of the party being absorbed in the consolidated financial statements of the ultimate controlling party at combination date. The difference between the initial investment cost and the carrying amount of cash paid, non-cash assets transferred and liabilities assumed shall be adjusted to capital reserve. If the balance of capital reserve is not sufficient, any excess shall be adjusted to retained earnings. If the consideration of the combination is satisfied by the issue of equity securities, the initial investment cost of the long-term equity investment shall be the absorbing party's share of the owners' equity of the party being absorbed in the consolidated financial statements of the ultimate controlling party at combination date. The aggregate face value of the shares issued shall be accounted for as share capital. The difference between the initial investment cost and the aggregate face value of the shares issued shall be adjusted to capital reserve. If the balance of capital reserve is not sufficient, any excess shall be adjusted to retained earnings.
For a business combination not involving enterprises under common control, the initial investment cost of the long-term equity investment acquired shall be the cost of acquisition.
The audit, legal, valuation and consulting fees, other intermediary fees, and related administrative fees paid by the absorbing party or acquirer for the business combination, shall be recognized in profit or loss as incurred.
The long-term equity investments acquired otherwise than through a business combination are initially measured at costs. When an investor becomes capable of exercising joint control or significant influence (but not control) over an investee due to additional investment or other reasons, fair value of the equity investment determined in accordance with "Accounting Standard for Business Enterprises No.22 – Financial Instruments: Recognition and Measurement", together with additional investment cost, shall be determined as the cost of the long-term equity investment.
66 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
3. Subsequent measurement and the method to recognize profit and loss
(1) Long-term equity investments accounted for using the cost method
Investments in subsidiaries are accounted for using cost method in the Company's separate financial statements. Subsidiaries refer to the investees over which the Group can exert control.
Under the cost method, a long-term equity investment is measured at initial investment cost. Investment income recognized is limited to the amount distributed to it out of accumulated net profits of the investee arising after the investment was made. Any cash dividends or distributions received in excess of this amount are treated as return of initial investment cost to reduce the carrying amount of the investment.
(2) Long-term equity investments accounted for using the equity method
The Group accounts for investment in associates and joint ventures using the equity method. An associate is an entity over which the Group has significant influence and a joint venture refer to joint arrangements in which the Group exert rights over the net assets.
Under the equity method, where the initial investment cost of a long-term equity investment exceeds the Group's share of the fair value of the investee's identifiable net assets at the time of acquisition, no adjustment is made to the initial investment cost. Where the initial investment cost is less than the Group's share of the fair value of the investee's identifiable net assets at the time of acquisition, the difference is recognized in profit or loss for the period, and the cost of the long-term equity investment is adjusted accordingly
Under the equity method, the Group recognizes its share of the net profit or loss and other comprehensive income of the investee for the period as investment income and other comprehensive income for the period. Meanwhile, carrying amount of long-term equity investment is adjusted: the carrying amount of long-term equity investment is decreased in accordance with its share of the investee's declared profit or cash dividends; Other changes in owners' equity of the investee other than net profit or loss and other comprehensive income are correspondingly adjusted to the carrying amount of the long-term equity investment, and recognized in the capital reserve. The Group recognizes its share of the investee's net profit or loss based on the fair value of the investee's individual identifiable assets, etc. at the acquisition date after making appropriate adjustments. When the investors' accounting policies and accounting period are inconsistent with those of the Company, the Company recognizes investment income and other comprehensive income after making appropriate adjustments to conform to the Company's accounting policies and accounting period. However, unrealized gains or losses resulting from the Group's transactions with its associates and joint ventures, which does not constitute a business, are eliminated based on the proportion attributable to the Group and then investment gains or losses or is recognized. However, unrealized losses resulting from the Group's transactions with its associates and joint ventures which represent impairment losses on the transferred assets are not eliminated. The Group discontinues recognizing its share of net losses of the investee after the carrying amount of the long-term equity investment together with any long-term interests that in substance form part of its net investment in the investee is reduced to zero. Otherwise, if the Group should bear extra loss, the loss should be recorded in accrued liabilities and current loss. When the investees realizes profit afterwards, the Group should not recognize the related portion of profit until the extra loss has been recovered.
4. Disposal of long-term equity investments
On disposal of a long-term equity investment, the difference between the proceeds actually received and the carrying amount is recognized in profit or loss for the period. For long-term equity investments accounted for using the equity method if the remaining interest after disposal is still accounted for using the equity method, other comprehensive income previously recognized for using the equity method is accounted for on the same basis as would have been required if the investee had directly disposed of related assets or liabilities, and transferred to profit or loss for the period on a pro rata basis; owners' equity recognized due to changes in other owners' equity of the investee (other than net profit or loss, other comprehensive income and profit distribution) is transferred to profit or loss for the period on a pro rata basis. For long- term equity investments accounted for using the cost method, if the remaining interest after disposal is still accounted for using the cost method, other comprehensive income previously recognized for using the equity method or in accordance
67 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
with the standards for the recognition and measurement of financial instruments before obtaining the control over the investee, is accounted for on the same basis as would have been required if the investee had directly disposed of related assets or liabilities, and transferred to profit or loss for the period on a pro rata basis; changes in other owners' equity in the investee's net assets recognized under the equity method (other than net profit or loss, other comprehensive income and profit distribution) is transferred to profit or loss for the period on a proportion rata basis.
When the Group loses control of the investee due to partial disposal of equity investments and the remaining interest after disposal has resulted in joint control of or significant influence over the investee, when preparing the individual financial statements, the remaining interest is changed to the equity method and adjusted as if the equity method had been applied from the date of the first acquisition; if the remaining interest after disposal has not resulted in joint control of or significant influence over the investee, the remaining interest is accounted for under relevant requirements of the standards for the recognition and measurement of financial instruments, and the difference between the fair value and carrying amount on the date when control is lost is charged to profit or loss for the period. Upon loss of control over the investee, other comprehensive income previously recognized under the equity method or in accordance with the standards for the recognition and measurement of financial instruments before obtaining the control over the investee, is accounted for on the same basis as would have been required if the investee had directly disposed of related assets or liabilities; upon loss of control, other changes in owners' equity recognized due to changes of the investee's net assets recognized under the equity method (other than net profit or loss, other comprehensive income and profit distribution) are transferred to profit or loss for the period. If the remaining interest after disposal is accounted for using the equity method, other comprehensive income and other owners' equity is transferred on a pro rata basis; if the remaining interest after disposal is changed to be accounted for under the standards for the recognition and measurement of financial instruments, other comprehensive income and other owners' equity are entirely transferred to profit and loss
(XV) Fixed assets
1. Recognition criteria
✓ Applicable □ N/A
Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and have useful lives of more than one accounting year. A fixed asset is recognized only when it is probable that economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. Fixed assets are initially measured at cost.
Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and if it is probable that economic benefits associated with the asset will flow to the Group and the subsequent expenditures can be measured reliably. Meanwhile, the carrying amount of the replaced part is derecognized. Other subsequent expenditures are recognized in profit or loss in the period in which they are incurred.
2. Depreciation method
A fixed asset is depreciated over its useful life using the straight-line method since the month subsequent to the one in which it is ready for intended use. The useful life, estimated net residual value rate and annual depreciation rate of each category of fixed assets are as follows:
✓ Applicable □ N/A
68 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Depreciation Residual Annual depre- Category Depreciation method period (years) value rate ciation rate
Buildings straight-line method 20-40 4%-5% 2.38%-4.80% Machinery and equipment (excluding R&D straight-line method 10-12 4%-5% 7.92%-9.60% equipment and catalyst) Machinery and equipment - R&D equipment straight-line method 2-12 4%-5% 7.92%-48.00% Machinery and equipment -catalyst straight-line method 1-10 0-30% 7.00%-100.00% Electronic equipment, appliances and furniture straight-line method 5-8 4%-5% 11.88%-19.20% Transportation vehicles straight-line method 6-12 4%-5% 7.92%-16.00%
Estimated net residual value of a fixed asset is the estimated amount that the Group would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.
Other explanation:
If a fixed asset is to be disposed of or no future economic benefits are expected to be generated from its use or disposal, the fixed asset is derecognized. When a fixed asset is sold, transferred, retired or damaged, the amount of any proceeds on disposal of the asset net of the carrying amount and related taxes is recognized in profit or loss for the period.
The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation method applied at least once at each financial year end, and accounts for any change as a change in an accounting estimate.
3. Identification basis and valuation and depreciation methods for fixed assets acquired under finance leases
□ Applicable ✓ N/A
(XVI) Construction in progress
✓ Applicable □ N/A
Construction in progress is measured at its actual costs. The actual costs include various construction expenditures during the construction period, borrowing costs capitalized before it is ready for intended use and other relevant costs. Construction in progress is not depreciated. Construction in progress is transferred to a fixed asset when it is ready for intended use.
(XVII) Borrowing Costs
✓ Applicable □ N/A
Borrowing costs directly attributable to the acquisition, construction or production of qualifying asset are capitalized when expenditures for such asset and borrowing costs are incurred and activities relating to the acquisition, construction or production of the asset that are necessary to prepare the asset for its intended use or sales have commenced. Capitalization of borrowing costs ceases when the qualifying asset being acquired, constructed or produced becomes ready for its intended use or sale. Other borrowing costs are recognized as an expense in the period in which they are incurred.
Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be capitalized is the actual interest expense incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used on the asset or any investment income on the temporary investment of those funds. Where funds are borrowed under general-purpose borrowings, the Group determines the amount of interest to be capitalized on such borrowings by applying a capitalization rate to the weighted average of the excess of cumulative expenditures on the asset over the amounts of specific-purpose borrowings. The capitalization rate is the weighted average of the interest rates applicable to the general-purpose borrowings. During the capitalization period, exchange differences related to a specific-purpose
69 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
borrowing denominated in foreign currency are all capitalized. Exchange differences in connection with general-purpose borrowings are recognized in profit or loss in the period in which they are incurred.
(XVIII) Intangible assets
1. Valuation method, useful life and impairment test
✓ Applicable □ N/A
Intangible assets include land use rights, non-patented technology and software, etc.
An intangible asset is measured initially at cost. When an intangible asset with a finite useful life is available for use, its original cost is amortized over its estimated useful life using the straight-line method. The amortization method, useful life and estimated net residual value rate of each category of intangible assets are as follows:
Category Amortization period (years) Annual amortization rate (%)
Land use rights 10-50 2-10 Non-patented technology 10 10 Software 10 10 Others –use right of backup power(Note) 50 2
For an intangible asset with a finite useful life, the Group reviews the useful life and amortization method at the end of the period, and makes adjustments when necessary.
Note: Others are supply fee of Industrial Park back-up power laid by State Grid Shandong Electric Power Company, and being depreciated by using the term of use of the land used in the Wanhua Yantai Industrial Park.
2. Accounting policies of research and development expenditure
✓ Applicable □ N/A
Expenditure during the research phase is recognized in profit or loss in the period in which it is incurred.
If the expenditures cannot be distinguished between the research phase and development phase, the Group recognizes all of them in profit or loss for the period.
(XIX) Impairment of long-term assets
✓ Applicable □ N/A
The Group assesses at each balance sheet date whether there is any indication that long-term equity investments, fixed assets, construction in progress, and intangible assets with finite useful life may be impaired. If there is any indication that such assets may be impaired, the recoverable amount is estimated. Intangible assets unavailable for use are tested for impairment annually, irrespective of whether there is any indication that the assets may be impaired.
The recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group determines the recoverable amount of the asset group to which the asset belongs. The recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of the future cash flows expected to be derived from the asset.
If the recoverable amount of an asset is less than its carrying amount, the difference is recognized as an impairment loss and charged to profit or loss for the current period.
Goodwill is tested for impairment at least at the end of each year. For the purpose of impairment testing, goodwill is considered together with the related assets group(s), i.e., goodwill is reasonably allocated to the related assets group(s) or
70 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
each of assets group(s) expected to benefit from the synergies of the combination. An impairment loss is recognized if the recoverable amount of the assets group or sets of assets groups (including goodwill) are less than its carrying amount. The impairment loss is firstly allocated to reduce the carrying amount of any goodwill allocated to such assets group or sets of assets groups, and then to the other assets of the group on the pro-rata basis of the carrying amount of each asset (other than goodwill) in the group.
Once an impairment loss on assets mentioned above is recognized, it is not reversed in a subsequent period.
(XX) Long-term prepaid expenses
✓ Applicable □ N/A
Long-term prepaid expenses represent expenses incurred that should be borne and amortized over the current and subsequent periods (together of more than one year), including leasehold improvement expenses etc... Long-term prepaid expenses are amortized using the straight-line method over 3 to 5 years of the expected periods in which benefits are derived.
(XXI) Employee benefits
1. Accounting methods of short-term employee benefits
✓ Applicable □ N/A
The Group recognizes the employee benefits payable for those services as a liability. The related expenditures are either included in cost of related assets or charged to profit or loss in the period when they are incurred. The welfare funds are recorded into the profits and losses of the current cost according to the actual amount. The welfare funds for non-monetary benefits are accounted for, in accordance with the fair value measurement.
Payment made by the Group of social security contributions for employees such as premiums or contributions on medical insurance, work injury insurance and maternity insurance, etc. and payments of housing funds, as well as trade union fund and employee education fund provided in accordance with relevant requirements, are calculated according to prescribed bases and percentages in determining the amount of employee benefits and recognized as relevant liabilities, with a corresponding charge to the profit or loss for the period or the costs of relevant assets in the accounting period in which employees provide services.
2. Accounting methods of post-employment benefits
✓ Applicable □ N/A
Post-employment benefits are defined contribution plans.
During the accounting period in which employees render services to the Group, contributions payable based on the defined contribution plans are recognized as liabilities and included in profit or loss for the period or related costs of assets.
3. Accounting methods of termination benefits
□ Applicable ✓ N/A
4. Accounting methods of other long-term employee benefits
□ Applicable ✓ N/A
71 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(XXII) Revenue
✓ Applicable □ N/A
1. Revenue from the sale of goods
Revenue from sale of goods is recognized when (1) the Group has transferred to the buyer the significant risks and rewards of ownership of the goods; (2) the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; (3) the amount of revenue can be measured reliably; (4) it is probable that the associated economic benefits will flow to the Group; and (5) the associated costs incurred or to be incurred can be measured reliably.
2. Revenue from rendering of services
Revenue from rendering of services is recognized when (1) the amount of revenue can be measured reliably; (2) it is probable that the associated economic benefits will flow to the Group; (3) the stage of completion of the transaction can be determined reliably; and (4) the associated costs incurred or to be incurred can be measured reliably. Revenue from rendering of services is recognized using the percentage of completion method at the balance sheet date. The stage of completion of a transaction for rendering for services is determined based on the proportion that costs incurred to date bear to the estimated total costs of the transaction.
When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognized only to the extent of the costs incurred that will be recoverable, and the costs incurred are recognized as expenses for the period. When it is not probable that the costs incurred will be recovered, revenue is not recognized.
3. Interest income
Interest income is measured based on the length of time for which the Group's cash is used by others and the applicable interest rate.
(XXIII) Government grants
Government grants are transfer of monetary assets and non-monetary assets from the government to the Group at no consideration. A government grant is recognized only when the Group can comply with the conditions attaching to the grant and the Group will receive the grant.
If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or receivable.
1. Basis of recognition and accounting treatment of government grants related to assets
✓ Applicable □ N/A
Government grants related to assets of the Group are set out in VII 32, which represent government grants used to acquire or construct long-term assets or form long-term assets in other ways and are related to assets.
A government grant related to an asset is recognized as deferred income, and evenly amortized to profit or loss over the useful life of the related asset.
2. Basis of recognition and accounting treatment of government grants related to income
✓ Applicable □ N/A
Government grants related to income of the Group are set out in VII 47 and 58, which mainly comprise industrial support fund and are related to income.
Government grants other than those related to assets are related to income.
72 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
For a government grant related to income, if the grant is a compensation for related expenses or losses to be incurred in subsequent periods, the grant is recognized as deferred income, and recognized in profit or loss over the periods in which the related costs are recognized. If the grant is a compensation for related expenses or losses already incurred, the grant is recognized immediately in profit or loss for the period.
Government grants related to daily activities of the Group are recognized in other income based on the substance of business.
Government grants irrelevant to daily activities of the Group are recognized in non-operating income..
(XXIV) Deferred tax assets/Deferred tax liabilities
✓ Applicable □ N/A
The income tax expenses include current income tax and deferred income tax.
1. Current income tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods are measured at the amount expected to be paid (or recovered) according to the requirements of tax laws.
2. Deferred tax assets and deferred tax liabilities
For temporary differences between the carrying amounts of certain assets or liabilities and their tax base, or between the nil carrying amount of those items that are not recognized as assets or liabilities and their tax base that can be determined according to tax laws, deferred tax assets and liabilities are recognized using the balance sheet liability method.
Deferred tax is generally recognized for all temporary differences. Deferred tax assets for deductible temporary differences are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilized. However, for temporary differences associated with the initial recognition of goodwill and the initial recognition of an asset or liability arising from a transaction (not a business combination) that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of transaction, no deferred tax asset or liability is recognized.
For deductible losses and tax credits that can be carried forward, deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the deductible losses and tax credits can be utilized. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates, according to tax laws, that are expected to apply in the period in which the asset is realized or the liability is settled.
Current and deferred tax expenses or income are recognized in profit or loss for the period, except when they arise from transactions or events that are directly recognized in other comprehensive income or in shareholders' equity, in which case they are recognized in other comprehensive income or in shareholders' equity; and when they arise from business combinations, in which case they adjust the carrying amount of goodwill.
At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it is no longer probable that sufficient taxable profits will be available in the future to allow the benefit of deferred tax assets to be utilized. Such reduction in amount is reversed when it becomes probable that sufficient taxable profits will be available.
73 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
3. Income tax offsetting
When the Group has a legal right to settle on a net basis and intends either to settle on a net basis or to realize the assets and settle the liabilities simultaneously, current tax assets and current tax liabilities are offset and presented on a net basis.
When the Group has a legal right to settle current tax assets and liabilities on a net basis, and deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax assets and liabilities on a net basis or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be reversed, deferred tax assets and deferred tax liabilities are offset and presented on a net basis.
(XXV) Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
1. Accounting treatment of operating leases
✓ Applicable □ N/A
(1) The Group as lessee under operating leases
Operating lease payments are recognized on a straight-line basis over the term of the relevant lease, and are either included in the cost of related asset or charged to profit or loss for the period. Initial direct costs incurred are charged to profit or loss for the period. Contingent rents are charged to profit or loss in the period in which they are actually incurred.
(2) The Group as lessor under operating leases
Rental income from operating leases is recognized in profit or loss on a straight-line basis over the term of the relevant lease. Initial direct costs with more than an insignificant amount are capitalized when incurred, and are recognized in profit or loss on the same basis as rental income over the lease term. Other initial direct costs with an insignificant amount are charged to profit or loss in the period in which they are incurred. Contingent rents are charged to profit or loss in the period in which they actually arise.
2. Accounting treatment of finance leases
□ Applicable ✓ N/A
(XXVI) Other significant accounting policies and accounting estimates
✓ Applicable □ N/A
1. Hedge accounting
Some financial instruments are used as hedging instruments by the Group for the purpose of avoiding certain risks. The Group applies hedging accounting for a hedge that satisfies the prescribed conditions. Hedging activities of the Group are cash flow hedges.
At the inception of a hedge, the Group records the relationship between the hedging instrument and hedged item, risk management objective and strategy for undertaking various hedging transactions. At the inception and in subsequent periods, the hedge is assessed for effectiveness by the Group on an ongoing basis so as to determine whether the hedge is highly effective throughout the accounting periods for which the hedging relationship was designated.
(1) Cash flow hedges
The effective portion of a change in the fair value of a derivative that is designated and qualifies as a cash flow hedge is recognized in other comprehensive income, and the gain or loss relating to the ineffective portion is recognized in profit or loss.
74 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the amounts previously recognized in other comprehensive income are reclassified to profit or loss in the same periods during which the financial asset or financial liability affects profit or loss. If the Group expects that all or a portion of a net loss previously recognized in other comprehensive income will not be recovered in future accounting periods, the net loss that is not expected to be recovered is immediately recognized in profit or loss.
If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, the amounts previously recognized in other comprehensive income are reclassified to profit or loss in the same periods during which the non-financial asset or non-financial liability affects profit or loss. If the Group expects that all or a portion of a net loss previously recognized in other comprehensive income will not be recovered in future accounting periods, the net loss that is not expected to be recovered is immediately recognized in profit or loss.
Except as stated above, the amounts previously recognized in other comprehensive income are reclassified to profit or loss in the same periods during which the hedged forecast transaction affects profit or loss.
Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any gain or loss accumulated in other comprehensive income at that time is reclassified to profit or loss when the forecast transaction occurs and is recognized in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in other comprehensive income is reclassified immediately to profit or loss.
(XXVII) Key changes in accounting policies and estimates
1. Key changes in accounting policies
□ Applicable ✓ N/A
2. Key changes in accounting estimates
□ Applicable ✓ N/A
(XXVIII) Others
✓ Applicable □ N/A
In the application of the accounting policies, which are described in Note V, the Group is required to make judgements, estimates and assumptions about the carrying amounts of items in the financial statements that cannot be measured accurately, due to the internal uncertainties of the operating activities. These judgements, estimates and assumptions are based on historical experience of the Group's management as well as other factors that are considered to be relevant. Actual results may differ from these estimates. The above judgements, estimates and assumptions are regularly reviewed on an ongoing basis. Changes in accounting estimates are recognized in the period in which the estimate is changed if the change affects only that periods, or in the period of the change and future periods if the change affects both current and future periods.
Key assumptions and uncertainties in accounting estimates
At the balance sheet date, key assumptions and uncertainties in accounting estimates which may probably result in significant adjustments to the carrying amounts of assets and liabilities in future periods are as follows:
1. Impairment of accounts receivable
The Group makes bad debt provision for accounts receivable where there is obvious evidence indicating doubts in recoverability of accounts receivable. As management is required to make assumptions in consideration of bad debt provision, as well as make judgements on historical recoverability, aging, financial position of debtors and the overall economic environment, there is uncertainty in the calculation of bad debt provision. Though there are not any reasonably significant changes in estimates and assumptions as the basis of determination of impairment of accounts receivable in the
75 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
future, where the actual results in the future vary from the previous estimates, the carrying amount and bad debt loss of receivables will change.
2. Provision for decline in value of inventories
As described in (V) 12, inventories are measured at the lower of costs and net realizable value. Net realizable value is the estimated selling price less the estimated costs of completion, the estimated costs necessary to make the sale and relevant taxes.
The Group has specific operation procedure to control relevant risk as a considerable proportion of its working capital is used for inventories. The Group conducts comprehensive review of inventories on a regular basis to determine if there is any outdated, dead stock and review relevant impairment of inventories. The review procedure includes comparing the carrying amounts of outdated and dead stock with respective net realizable values to determine if it is necessary to make impairment provision for any outdated and dead stock in the financial statements. In determination of the estimated selling price, estimated costs of completion, the estimated costs necessary to make the sale and relevant taxes used for calculating net realizable value, it is required to make accounting estimates as appropriate. Management has followed the best estimates and taken into account historical experience and the existing production costs and selling expenses to ensure the rationality of their accounting estimates. Based on the above procedure, management of the Group considers it has made adequate provision for decline in value of outdated and dead stock.
3. Impairment of goodwill
For the purpose of impairment testing of goodwill, it is necessary to calculate the present value of future estimated cash flows of relevant assets group or portfolios of assets group in which goodwill is included, including estimating the future cash flows of the above assets group or portfolios of assets group and determining a pre-tax interest rate that reflects time value of money in the current market and asset-specific risk as appropriate.
4. Fixed assets and accumulated depreciation
Fixed assets are depreciated on a straight-line basis in consideration of relevant residue value. The Group reviews estimated useful life and residual value rate on a regular basis to determine the depreciation expense which is to be recognized in each reporting period. The estimated useful life and residual value rate are determined based on the Group's past experiences on assets of similar nature in combination with expected technical modifications. In case of significant changes in previous estimates, the depreciation expense will be adjusted in the future periods.
5. Deferred tax assets
Deferred tax assets are realized mainly based on the actual profits in the future and the effective tax rate in the future years that temporary differences are utilized. If profits actually generated in the future are less than expected, or the effective tax rate is lower than expected, deferred tax assets recognized will be reversed and recognized in the consolidated income statement for the period in which the reversal incurred. For deductible losses that can be carried forward, deferred tax assets are not fully recognized due to uncertainty whether sufficient taxable profits will be available in the future.
76 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
VI. TAXES
(I) Major categories of taxes and tax rates
Major categories of taxes and tax rates
✓ Applicable □ N/A
Basis of tax Category of tax Tax rate computation
Except that the output tax of Wanhua Chemical (Ningbo) Ther- mal Power Co,, Ltd. ("Wanhua Thermal Power") and Wanhua The amount Chemical (Yantai) Chlor-alkali Thermal Power Co.,Ltd. ("Yantai of output tax Chlor-alkali") are calculated as 10% of the steam sales, the out- Value-added tax after deduc- put tax of Wanhua Chemical (Ningbo) Port Co., Ltd. ("Wanhua tion of input Port") is calculated as 6% of the port service revenue, other tax output tax is calculated as 16% of the sales according to the relevant provisions of tax laws. Actual turn- City maintenance and construction tax 5%-7% over tax Taxable in- Enterprise income tax See the table below come
Note: In accordance with Notice on Adjustments to Value-added Tax Rate of SAT, MoF, (Cai Shui [2018]32), the Group has respectively adjusted the original applicable tax rates of 17% and 11% to 16% and 10% since 1 May 2018.
77 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Disclosure explanations regarding taxable entities with different EITs
✓ Applicable □ N/A
Taxpayers Income tax rate (%)
Wanhua Chemical (Note 1) 15 Wanhua Chemical (Ningbo) Co., Ltd. ("Wanhua Ningbo") 25 Wanhua Port 25 Wanhua Thermal Power 25 Wanhua Chemical (Beijing) Co., Ltd. ("Wanhua Beijing") (Note 2) 15 Wanhua Chemical (Foshan) Rongwei Polyurethane Co., Ltd. ("Foshan Rongwei") 25 Shanghai Wanhua Industry Development Co., Ltd. 25 Yantai Wanhua Chemical Design Institute 25 Wanhua Chemical (Ningbo) Trading Co., Ltd. ("Ningbo Trading") 25 Wanhua Chemical (Ningbo) Rongwei Polyurethane Co., Ltd.("Ningbo Rongwei") (Note3) 15 Wanhua Chemical (Ningbo) Chlor-alkali Co., Ltd. "Ningbo Chlor-alkali") 25 Yantai Chlor-alkali 25 Wanhua Chemical (Guangdong) Co., Ltd. ("Wanhua Guangdong") 25 Wanhua Chemical (Hong Kong) Co., Limited ("Wanhua Hong Kong") 16.5 Wanhua Chemical (Japan) Co., Ltd. (Note 7) Wanhua Chemical (America) Co., Ltd. (Note 5) Wanhua Chemical US Holding Inc. (Note 5) Wanhua America Innovation Technology Co., Ltd. (Note 5) Wanhua International (India) Private Limited (Note 6) Wanhua Chemical (Yantai) Selling Co., Ltd. ("Yantai Selling") 25 Wanhua Chemical (Yantai) Rongwei Polyurethane Co., Ltd. ("Yantai Rongwei") 25 Shanghai Wanhua Kejv Chemical Technology Development Co., Ltd. ("Shanghai Kejv") 25 Wanhua Chemical (Singapore) Co., Ltd.("Wanhua Singapore") 10 Wanhua Shipping (Singapore) Co., Ltd. ("Singapore Shipping") 17 Wanhua Chemical International Holding Co., Ltd. ("BVI") (Note 4) Wanhua Chemical (Yantai) Petrochemical Co., Ltd. ("Yantai Petrochemical") 25 Wanhua Chemical US Real Estate LLC (Note 5) Wanhua Chemical (Hungary) Holding Co., Ltd. 9 Zhuhai Wanhua Real Estate Development Co., Ltd. 25 Ningbo XinDa Mingzhou Trading Co., Ltd. 25 Yantai Wanhua Port Service Co., Ltd. 25 Wanhua Chemical Group Energy Co., Ltd. 25 Wanhua Chemical US Operations LLC (Note 5)
78 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(II) Tax incentive
✓ Applicable □ N/A
Note 1: According to Lu Ke Zi [2018] No. 37 – Notice on Designation of 2078 Enterprises including Weihai Expanding Fiber Co., Ltd. as High and New Technology Enterprises for 2017, jointly issued by Department of Science and Technology of Shandong Province, Department of Finance of Shandong Province, State Administration of Taxation of Shandong Province and Local Taxation Bureau of Shandong Province, the Company qualifies for high and new technology enterprise (Certificate No. GR201737001423) with effective period of three years, and has been subject to the favorable enterprise income tax rate from 1 January 2017 to 31 December 2019 (2017 EIT: 15%).
Note 2: According to Guo Ke Fa Huo[2016]No.32, Guo Ke Fa Huo[2016]No.195 – "About the public of the list of the high and new technology enterprises in Beijing of 2017" issued by Department of Science and Technology of Beijing, Department of Finance of Beijing and State Administration of Taxation of Beijing, the subsidiary of the Company, Wanhua Beijing qualifies for the high and new technology enterprise (Certificate No.: GR201711002957) with effective period of three years, and has been subject to the favorable enterprise income tax rate from 1 January 2017 to 31 December 2019 (2017 EIT: 15%) .
Note 3: According to Yong Gao Qi Ren Ling [2016] No. 2 – "The Announcement of High and New Technology Enterprises Designation Review list of Year 2016", issued by Department of Science and Technology of Ningbo, the subsidiary of the Company, Ningbo Rongwei qualifies for the high and new technology enterprise (Certificate No.: GR201633100167) with effective period of three years, and has been subject to the favorable enterprise income tax rate from 1 January 2016 to 31 December 2018 (2017 EIT: 15%) .
Note 4: According to local tax laws in the British Virgin Islands, the tax rate is 0%.
Note 5: According to local tax laws in the United States, the fixed tax rate of 21% has been adopted since 1 January 2018. (EIT applicable in 2017: a progressive tax rate at 35%)
Note 6: According to local tax laws in India, the applicable tax rate is 26% (2017 EIT: 33.063%).
Note 7: According to local tax laws in Japan, the enterprise income tax rate is 23.4% for fiscal years starting from 1 April 2016 to 31 March 2018 (2017 EIT: 23.4%).
(III) Others
□ Applicable ✓ N/A
VII. NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS
(I) Cash and bank balances
✓ Applicable □ N/A Unit: RMB Item Closing balance Opening balance
Cash on hand: 149,961.65 151,834.64 Bank balances: 2,880,831,617.13 3,038,929,570.25 Other Currency: 14,752,673.62 23,893,249.29 Total 2,895,734,252.40 3,062,974,654.18 Including: Total balances deposited overseas 270,877,172.56 358,421,944.58
Other description:
At 30 June 2018, other currency used for pledge to issue bank acceptance bill and letter of credit amounted to RMB 8,706,037.50 (31
79 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
December 2017: RMB 16,671,288.66), and other currency used as LPG paper deposits amounted to RMB 6,046,632.84 (31 December 2017: nil) refer to Note VII 22.
(II) Notes receivable
1. Categories of notes receivable
✓ Applicable □ N/A Unit: RMB Item Closing balance Opening balance
Bank acceptances 10,565,298,030.30 11,308,297,066.37 Total 10,565,298,030.30 11,308,297,066.37
2. Notes receivables have been pledged as security at the end of the period
✓ Applicable □ N/A Unit: RMB Item Pledged amount at the end of the period
Bank acceptances 4,060,081,680.43 Total 4,060,081,680.43
Note: Notes receivable used for pledge to acquire borrowings, issue bank acceptances and customs duty guarantee, refer to Note VII20 and 22.
3. Undue endorsed or discounted notes receivables at balance sheet date
✓ Applicable □ N/A Unit: RMB Amount of derecognized Amount of non-derecognized Item at the end of the period at the end of the period
Bank acceptances 1,218,810,315.32
Total 1,218,810,315.32
Note: Refer to Note (X) 2
4. At the closing of the period, no notes receivables were reclassified to accounts receivable due to the drawers' inability to settle the notes on maturity
□ Applicable ✓ N/A
80 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(III) Accounts receivable
1. Categories of accounts receivable
✓ Applicable □ N/A Unit: RMB Closing balance Opening Balance
Carrying amount Bad debt provision Carrying amount Bad debt provision Category Proportion Pro- Proportion Propor- Book Value Book Value Amount Amount of provi- Amount portion Amount of provi- tion (%) sion (%) (%) sion (%)
Account receivable that are individually significant and for 2,367,060,284.77 64.09 252,006,237.62 10.65 2,115,054,047.15 1,955,527,319.41 61.22 222,540,645.40 11.38 1,732,986,674.01 which bad debt pro- vision has been as- sessed individually
Accounts receivable for which bad debt provision is collective- 1,313,873,143.93 35.57 147,366,464.02 11.22 1,166,506,679.91 1,231,801,903.01 38.57 132,018,401.57 10.72 1,099,783,501.44 ly assessed according to credit risk charac- teristics
Accounts receivable that are not individu- ally significant and for 12,584,943.03 0.34 6,764,181.92 53.75 5,820,761.11 6,867,130.42 0.21 6,844,408.79 99.67 22,721.63 which bad debt pro- vision is individually assessed
Total 3,693,518,371.73 / 406,136,883.56 / 3,287,381,488.17 3,194,196,352.84 / 361,403,455.76 / 2,832,792,897.08
Accounts receivable that are individually significant at the end of the period and for which bad debt provision is individually assessed:
The Group determines that accounts receivable which exceed RMB 8,000,000.00 as individually significant accounts receivable.
Accouns receivable that are individually significant at the end of the period and for which bad debt provision is individually assessed:
✓ Applicable □ N/A
81 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Unit: RMB Closing balance Accounts receivable Proportion of provision (by company) Accounts receivable Bad debt provision Reasons of provision (%)
BorsodChem Zrt. 372,633,967.35 Related party does not reserve for bad debt Company I 74,423,516.80 11,163,527.52 15.00% Using the percentage of total receivables outstanding Company II 61,783,966.09 9,267,594.91 15.00% Using the percentage of total receivables outstanding Company III 60,425,606.63 9,063,840.99 15.00% Using the percentage of total receivables outstanding Company IV 56,411,488.30 8,461,723.25 15.00% Using the percentage of total receivables outstanding Others 1,741,381,739.60 214,049,550.95 12.29% Using aging analysis /Using the percentage of total receivables outstanding Total 2,367,060,284.77 252,006,237.62 / /
Note: The Group assessed the bad debt provision of accounts receivable which are individually significant separately. At 30 June 2018, RMB 14,331,169.00 of bad debt provision is accrued for accounts receivable that are individually significant (31 December 2017: RMB 14,331,169.00) , for which provisions have been made in full amount due to the bankruptcy insolvency of the counterparty. With reference to the Note V.11, receivables for which bad debt provision is collectively assessed on a portfolio basis, as at 30 June 2018, an amount of RMB 237,675,068.62 is accrued as bad debt provision (at 31 December 2017: RMB 208,209,476.40).
The aging analysis of bad debt provision on portfolio basis:
✓ Applicable □ N/A Unit: RMB Closing balance Aging Accounts receivable Bad debt provision Proportion of provision
Within 1 year 499,594,766.35 24,979,680.73 5.00% Subtotal amount within 1 year 499,594,766.35 24,979,680.73 5.00% More than 1 year but not exceeding 2 years 6,097,297.91 609,729.78 10.00% More than 2 years but not exceeding 3 years 1,177,750.92 353,325.28 30.00% More than 3 years but not exceeding 4 years 18,731.28 9,365.64 50.00% More than 4 years but not exceeding 5 years 241,608.00 241,608.00 100.00% More than 5 years 189,771.13 189,771.13 100.00% Total 507,319,925.59 26,383,480.56
82 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Basis for determining a portfolio:
The Group classifies accounts receivable that are not individually significant into groups of financial assets according to the similarity and relevance of credit risk characteristics. These credit risks usually reflect the debtors' ability to pay the amounts due at maturity under contractual terms of related assets and are related to the estimation of future cash flows of the assets subject to assessment.
This portfolio represents receivables due from domestic customers.
Portfolios that percentage of total receivables outstanding is used for bad debt provision:
✓ Applicable □ N/A Unit: RMB Closing balance Percentage of total receivables outstanding Proportion of Accounts receivable Bad debt provision provision
Accounts receivable due from overseas customers 806,553,218.34 120,982,983.46 15.00% Total 806,553,218.34 120,982,983.46 15.00%
Basis for determining a portfolio:
The Group classifies accounts receivable that are not individually significant into groups of financial assets according to the similarity and relevance of credit risk characteristics. These credit risks usually reflect the debtors' ability to pay the amounts due at maturity under contractual terms of related assets and are related to the estimation of future cash flows of the assets subject to assessment.
This portfolio represents receivables due from overseas customers.
Portfolios that other methods are used for bad debt provision:
□ Applicable ✓ N/A
2. Bad debt provisions that have been made, recovered or reversed during the current period
Bad debt provisions of RMB 50,304,811.46 have been made for the current period; bad debt provisions of RMB 5,349,143.41 have been recovered or reversed for the current period.
Significant reversals and collections during the current period:
□ Applicable ✓ N/A
3. Accounts receivable written off during the current period
✓ Applicable □ N/A Unit: RMB Item Write-off amount
Accounts receivable actually written off 222,240.25
Significant accounts receivable written off
□ Applicable ✓ N/A
Description of accounts receivable written off
□ Applicable ✓ N/A
83 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
4. Five customers with the largest balancess
✓ Applicable □ N/A
For period ended 30 June 2018, the largest five debtors hold the accounts receivable balance of RMB 625,678,545.17 (31 December 2017: RMB 615,462,771.34), which accounts for 16.94% (31 December 2017: 19.27%) of total amount receivable balance. The bad debt provision is RMB 37,956,686.67(31 December 2017: RMB 46,513,860.86).
5. Accounts receivable derecognized due to transfer of financial assets
□ Applicable ✓ N/A
6. Amounts of assets and liabilities arising from where accounts receivable are transferred but with continuous involvement
□ Applicable ✓ N/A
Other description:
□ Applicable ✓ N/A
There are no accounts receivables that have been derecognized in the current period due to transfer of financial assets; no amounts of assets and liabilities arising from where accounts receivable are transferred but with continuous involvement.
(IV) Prepayments
1. Aging analysis of prepayments is as follows:
✓ Applicable □ N/A Unit: RMB Closing balance Opening Balance Aging Amount Proportion (%) Amount Proportion (%)
Within 1 year 486,454,784.55 98.48 473,897,387.39 98.32 More than 1 year but not exceeding 2 years 4,544,156.73 0.92 6,111,393.51 1.27 More than 2 years but not exceeding 3 years 1,441,340.53 0.29 1,639,207.32 0.34 More than 3 years 1,533,703.93 0.31 327,838.55 0.07 Total 493,973,985.74 100.00 481,975,826.77 100.00
Explanations of reasons for prepayments with significant balances and aged more than one year not settled in a timely manner:
There are no significant items that aged more than 1 year in prepayments.
2. Top five advanced payments to suppliers
✓ Applicable □ N/A
As of 30 June 2018, top five balances of advanced payments to suppliers amounted to RMB 222,215,538.30 (31 December 2017: RMB 222,434,124.84), accounting for 44.99% (31 December 2017: 46.15%) of total closing balances of advanced payments to suppliers.
84 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(V) Other receivables
1. Disclosure of other receivables by categories:
✓ Applicable □ N/A Unit: RMB Closing balance Opening Balance
Categories Carrying amount Bad debt provision Carrying amount Bad debt provision Book Value Book Value Amount Proportion (%) Amount Proportion (%) Amount Proportion (%) Amount Proportion (%) Other receivables that are individually significant and for which bad debt provi- 155,231,536.99 90.53 155,231,536.99 230,485,681.11 93.57 230,485,681.11 sion has been assessed individually Other receivables for which bad debt provision is collectively assessed accord- ing to credit risk characteristics Other receivables that are not individ- ually significant but for which bad debt 16,247,287.57 9.47 16,247,287.57 15,837,044.70 6.43 15,837,044.70 provision has been assessed individually Total 171,478,824.56 / / 171,478,824.56 246,322,725.81 / / 246,322,725.81
Description of categories of other receivables:
The Group determines that other receivable more than RMB 8,000,000.00 is considered as individually significant other receivable.
Other receivables that are individually significant and for which bad debt provision is individually assessed at the end of the period:
□ Applicable ✓ N/A
Portfolios that aging analysis is used for bad debt provision:
□ Applicable ✓ N/A
Portfolios that percentage of total receivables outstanding is used for bad debt provision:
□ Applicable ✓ N/A
Portfolios that other methods are used for bad debt provision:
□ Applicable ✓ N/A 85 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
2. Provision, recovery or reversal of bad debt provision during the current period:
Bad debt provision of RMB 0 is made for the current period; the amount of recovery or reversal is RMB 0 for the current period.
Other receivables of the Group mainly include export tax refund and deposits, which is most likely to be recovered; therefore, no bad debt provision is made in this regard.
Significant amounts of bad debt provision reversed or recovered during the current period:
□ Applicable ✓ N/A
3. Other receivables written off during the current period
□ Applicable ✓ N/A
4. Disclosure of other receivables by nature
✓ Applicable □ N/A Unit: RMB Payment nature Closing balance Opening Balance
Export tax refund 123,701,061.52 185,811,036.44 Petty cash 3,876,791.87 2,875,993.11 Deposits 38,939,712.89 54,607,887.44 Others 4,961,258.28 3,027,808.82 Total 171,478,824.56 246,322,725.81
5. Top five entities with the largest closing balances of other receivables:
✓ Applicable □ N/A Unit: RMB Percentage of total closing bal- Closing balance of Name Payment nature Closing balance Aging ance of other receivables (%) bad debt provision
Company V Export tax refund 103,924,038.79 Within 1 year 60.60 Company VI Export tax refund 19,777,022.73 Within 1 year 11.53 Company VII Deposits 11,000,000.00 Within 1 year 6.42 Company VIII Deposits 10,590,000.00 Within 1 year 6.18
3,985,535.47 Within 1 year Company IX Deposits 5.80 5,954,940.00 2 to 3 years Total / 155,231,536.99 / 90.53
6. Accounts receivable involving government grants
□ Applicable ✓ N/A
7. Other receivables that have been derecognized due to transfer of financial assets
□ Applicable ✓ N/A
8. Amounts of assets and liabilities arising from where accounts receivable are transferred but with continuous involvement
□ Applicable ✓ N/A 86 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(VI) Inventories
1. Categories of inventories
✓ Applicable □ N/A Unit: RMB Closing balance Opening Balance
Provision for Provision for Item Carrying Carrying decline in value Book value decline in value Book value amount amount of inventories of inventories
Raw materials 2,070,303,403.53 9,304,026.18 2,060,999,377.35 2,046,614,541.83 9,304,026.18 2,037,310,515.65
Work in-progress 1,391,884,042.25 1,008,536.93 1,390,875,505.32 1,217,000,723.59 683,675.21 1,216,317,048.38
Goods on hand 3,743,216,546.65 315,924.93 3,742,900,621.72 3,531,811,391.61 195,086.64 3,531,616,304.97
Properties under 215,840,990.67 215,840,990.67 214,383,457.74 214,383,457.74 development (Note)
Total 7,421,244,983.10 10,628,488.04 7,410,616,495.06 7,009,810,114.77 10,182,788.03 6,999,627,326.74
Note: Properties under development refer to properties in Zhuhai developed by Zhuhai Wanhua Real Estate Development Co., Ltd. with the budget of RMB 500,000,000.00; such properties are expected to be completed in November 2020.
2. Provision for decline in value of inventories
✓ Applicable □ N/A Unit: RMB Increase in the period Decrease in the period Item Opening Balance Closing balance Provision Others Reversal or write-off Others
Raw materials 9,304,026.18 9,304,026.18 Work in-progress 683,675.21 1,008,536.93 683,675.21 1,008,536.93 Goods on hand 195,086.64 315,924.93 195,086.64 315,924.93 Total 10,182,788.03 1,324,461.86 878,761.85 10,628,488.04
Note: Inventories are measured at the lower of cost and net realizable value, including the compare of the carrying amount of the outdated and obsolete inventory with its corresponding net realizable value. If the net realizable value is below the cost of inventories, a provision for decline in value of inventories is made. After the provision for decline in value of inventories is made, if the circumstances that previously caused inventories to be written down below cost no longer exist so that the net realizable value of inventories is higher than their cost, the original provision for decline in value is reversed and the reversal is included in profit or loss for the period. Inventories for which bad debt provisions have been made shall be written off by enterprises in the sales (equivalent sales inclusive) upon transfer of sales costs of inventories.
87 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
3. Interest expense capitalized in the closing balance of inventoroes as at 30 June 2018
□ Applicable ✓ N/A
4. Unsettled assets that have been completed arising from construction contructs as at 30 June 2018
□ Applicable ✓ N/A
(VII) Assets held for sale
✓ Applicable □ N/A Unit: RMB Book value at 30 Expected disposal Expected timing Item Fair value June 2018 expense of disposal Paraformaldehyde installation 15,127,273.56 32,800,000.00 August 2018 Total 15,127,273.56 32,800,000.00 /
Other explanation:
The Company has made resolutions on disposal of paraformaldehyde installation and entered into non-cancellable transfer agreement with the third party. Such transfer of asset is expected to be complete within one year.
(VIII) Other current assets
✓ Applicable □ N/A Unit: RMB Item Closing balance Closing balance
VAT to be deducted 245,210,149.19 261,273,865.61 Advance payment of income tax 49,262,528.51 2,412,671.62 Others 447,114.72 4,537,589.51 Total 294,919,792.42 268,224,126.74
(IX) Available-for-sale financial assets
1. Available-for-sale financial assets
✓ Applicable □ N/A Unit: RMB Closing balance Opening Balance
Item Impairment provi- Impairment provi- Carrying amount Book value Carrying amount Book value sion sion
Held-for-sale eq- 20,000,000.00 20,000,000.00 20,000,000.00 20,000,000.00 uity instrument:
Measured at cost 20,000,000.00 20,000,000.00 20,000,000.00 20,000,000.00
Total 20,000,000.00 20,000,000.00 20,000,000.00 20,000,000.00
2. Available-for-sale financial assets measured at fair value at end of the period
□ Applicable ✓ N/A
88 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
3. Available-for-sale financial assets measured at cost at end of the period
✓ Applicable □ N/A Unit: RMB Carrying amount Impairment provision Proportion of ownership Cash divi- Investee Increase in Decrease in Increase in Decrease in interest in dends for Opening Closing bal- Opening Closing the current the current the current the current the investee the period balance ance balance balance period period period period (%)
Hongta Inno- vation Invest- 20,000,000.00 20,000,000.00 5 ment Co., Ltd.
Total 20,000,000.00 20,000,000.00 /
4. Changes in impairment of available-for-sale financial assets during the reporting period
□ Applicable ✓ N/A
5. Description of significant decrease or other-than-temporary decrease in fair value of available-for-sale equity instruments but for which no bad debt provision is made at the end of the period
□ Applicable ✓ N/A
(X) Long-term receivables
1. Long-term receivables:
✓ Applicable □ N/A Unit: RMB Closing balance Opening Balance Discount Item rate Carrying amount Bad debt provision Book value Carrying amount Bad debt provision Book value range
Staff housing 350,050,363.76 350,050,363.76 318,793,498.76 318,793,498.76 loans (Note)
Total 350,050,363.76 350,050,363.76 318,793,498.76 318,793,498.76 /
Note: According to "The Measures of Staff Housing Loans of Wanhua Chemical Group Co., Ltd.", each employee is granted a housing loan of RMB 100,000 or 150,000 with maturity of seven or ten years if certain conditions are met; interest is calculated at the bank loan rate of interest over the same period. The Group is responsible for the interests and withholding individual income tax for the staff.
2. Long-term receivables that have been derecognized due to transfer of financial assets
□ Applicable ✓ N/A
3. Amounts of assets and liabilities arising from where long-term receivables are transferred but with continuous involvement
□ Applicable ✓ N/A
89 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(XI) Long-term equity investments
✓ Applicable □ N/A
Unit: RMB Movement of the current year Closing Investment balance Closing bal- Investee Opening Balance profit or loss Other com- Dividends or Provision for for Other equity ance Increase Decrease recognized prehensive profit de- impairment Others impair- movement using equity income clared loss ment method
I. Joint Venture
Yantai Harbor Wanhua Industrial Park Port Co., Ltd. 189,383,736.12 100,000,000.00 5,510,407.09 294,894,143.21
UI Wanhua (Yantai) Peroxide Co., Ltd. 15,205,680.83 -1,072.21 15,204,608.62
Ningbo Xiebei Thermal Power Co., Ltd. 223,064,200.62 44,860,006.65 66,304,460.18 201,619,747.09
Yantai Recycled Water Co.,Ltd. 55,773,786.84 -53,684.22 55,720,102.62
Sub-total 483,427,404.41 100,000,000.00 50,315,657.31 66,304,460.18 567,438,601.54
II. Associate
Linde Gas (Yantai) Co., Ltd. 32,224,372.13 45,666,100.00 3,672,707.06 145,036.51 81,708,215.70
Yantai Bulk Commodity Exchange Center 9,976,997.46 -132,854.58 9,844,142.88
Sub-total 42,201,369.59 45,666,100.00 3,539,852.48 145,036.51 91,552,358.58
Total 525,628,774.00 145,666,100.00 53,855,509.79 145,036.51 66,304,460.18 658,990,960.12
90 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(XII) Fixed assets
1. Details of fixed assets
✓ Applicable □ N/A Unit: RMB Electronic equip- Machinery and Transporta- Item Buildings ment, appliances Total equipment tion vehicles and furniture
I. Original carrying amount
1. Opening balance 4,574,257,735.20 33,506,550,619.61 108,895,221.35 293,245,982.59 38,482,949,558.75
2. Increase in the current period 99,439,360.09 1,074,424,583.67 8,289,476.35 7,264,318.48 1,189,417,738.59
(1) Acquisitions 1,053,088.70 7,043,191.18 7,007,811.48 7,083,825.52 22,187,916.88
(2) Construction in progress 98,386,271.39 1,067,381,392.49 1,281,664.87 180,492.96 1,167,229,821.71
3. Decrease in the current period 104,681,492.19 4,189,216.94 1,555,537.74 110,426,246.87
(1) Disposals or retirement 19,113,816.40 4,189,216.94 1,555,537.74 24,858,571.08
(2) Other decreases 85,567,675.79 85,567,675.79
4. Closing balance 4,673,697,095.29 34,476,293,711.09 112,995,480.76 298,954,763.33 39,561,941,050.47
II. Accumulated depreciation
1. Opening balance 818,326,452.98 9,628,924,136.88 54,337,926.65 198,553,340.20 10,700,141,856.71
2. Increase in the current period 85,573,455.86 1,395,950,118.05 6,679,862.62 16,835,684.65 1,505,039,121.18
(1) Accrual 85,573,455.86 1,395,950,118.05 6,679,862.62 16,835,684.65 1,505,039,121.18
3. Decrease in the current period 80,920,275.03 3,874,490.26 1,411,558.46 86,206,323.75
(1) Disposals or retirement 10,479,872.80 3,874,490.26 1,411,558.46 15,765,921.52
(2) Other decreases 70,440,402.23 70,440,402.23
4. Closing balance 903,899,908.84 10,943,953,979.90 57,143,299.01 213,977,466.39 12,118,974,654.14
III. Impairment provision
1. Opening balance 23,600,589.12 148,876,815.72 172,477,404.84
2. Increase in the current period
(1) Accrual
3. Decrease in the current period
(1) Disposals or retirement
(2) Other decreases
4. Closing balance 23,600,589.12 148,876,815.72 172,477,404.84
IV. Book Value
1. Book value at 30 June 2018 3,746,196,597.33 23,383,462,915.47 55,852,181.75 84,977,296.94 27,270,488,991.49
2. Book value at 1 January 2018 3,732,330,693.10 23,728,749,667.01 54,557,294.70 94,692,642.39 27,610,330,297.20
2. Temporary idle fixed assets
□ Applicable ✓ N/A
3. Fixed assets under finance leases
□ Applicable ✓ N/A
91 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
4. Fixed assets under operating leases
□ Applicable ✓ N/A
5. Fixed assets of which certificate of title have not been obtained
□ Applicable ✓ N/A Unit: RMB Item Book value Reasons why certificates of title have not been obtained
Buildings 1,332,304,686.47 In progress
Other explanation:
✓ Applicable □ N/A
As at 30 June 2018, machinery and equipment with net value of RMB 8,502,873,770.53 (31 December 2017: RMB 10,098,718,963.01) were pledged to acquire bank borrowings. For details, please refer to Note (VII) 29 and 30.
(XIII) Construction in progress
1. Details of construction in progress
✓ Applicable □ N/A Unit: RMB Closing balance Opening balance Item Carrying Impairment Carrying Impairment Book value Book value amount provision amount provision
Polyurethane industrial chain extension and supporting 4,487,075,218.74 4,487,075,218.74 3,604,472,147.65 3,604,472,147.65 project
Wanhua Yantai Industrial 1,776,918,428.46 1,776,918,428.46 1,448,743,204.30 1,448,743,204.30 park Project
Ethylene project 544,295,803.83 544,295,803.83 303,083,001.36 303,083,001.36
Wanhua Shanghai Center 425,648,592.27 425,648,592.27 407,084,040.63 407,084,040.63 project
Technological transforma- tion of Wanhua Ningbo of 269,756,054.32 269,756,054.32 118,650,201.78 118,650,201.78 2017
U.S. integrated project 242,391,997.12 242,391,997.12 132,133,420.80 132,133,420.80
Technological transforma- tion of Wanhua Ningbo HDI 52,730,653.17 52,730,653.17 101,090,665.06 101,090,665.06 project
Production capacity ex- tension project of Ningbo 50,724,795.79 50,724,795.79 36,060,247.05 36,060,247.05 Chlor-alkali
Others 235,182,985.22 235,182,985.22 268,617,321.16 268,617,321.16
Total 8,084,724,528.92 8,084,724,528.92 6,419,934,249.79 6,419,934,249.79
Construction in progress has not been used as collateral to obtain bank borrowings.
92 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
2. Significant changes in construction in progress for the current period
✓ Applicable □ N/A
The Group decides that construction in progress of more than RMB 50,000,000.00 is considered as significant construction in progress as follows: Unit: RMB
Amount Including: Interest Transfer to Other Con- Amount of Transfer to injected as a capitalized capitaliza- Opening Increase in the intangible decreases Closing struction accumulated Name of Items Budget amount fixed assets for proportion interest ex- tion rate Source of funds balance current period assets for for the balance on prog- capitalized in- the period of budget penses for for the the period period ress terest expenses amount (%) the period period (%)
Polyurethane industri- Cash from oper- al chain extension and 17,500,000,000.00 3,604,472,147.65 1,733,207,596.14 850,604,525.05 4,487,075,218.74 34.11 34.11 237,548,175.19 5,461,799.98 1.20 ation and loans, supporting project and raised funds
Wanhua Yantai Indus- Cash from oper- 23,800,000,000.00 1,448,743,204.30 328,175,224.16 1,776,918,428.46 97.93 97.93 1,100,196,281.80 trial park Project ation and loans
Cash from oper- Ethylene project 17,500,000,000.00 303,083,001.36 241,212,802.47 544,295,803.83 3.11 3.11 ation
Cash from oper- Wanhua Shanghai 610,000,000.00 407,084,040.63 18,564,551.64 425,648,592.27 69.78 69.78 ation and raised Center project funds
Technological trans- Cash from oper- formation of Wanhua 300,000,000.00 118,650,201.78 151,105,852.54 269,756,054.32 94.54 94.54 ation Ningbo of 2017
Cash from oper- U.S. integrated project 7,800,000,000.00 132,133,420.80 110,258,576.32 242,391,997.12 3.11 3.11 ation
Technological trans- Cash from oper- formation of Wanhua 460,000,000.00 101,090,665.06 33,986,432.94 82,346,444.83 52,730,653.17 95.26 95.26 1,191,597.87 ation and loans Ningbo HDI project
Production capacity Cash from oper- extension project of 55,000,000.00 36,060,247.05 14,664,548.74 50,724,795.79 93.33 93.33 ation Ningbo Chlor-alkali
Cash from oper- Others 268,617,321.16 218,219,616.47 234,278,851.83 17,375,100.58 235,182,985.22 103,434,293.22 1,655,658.73 ation and loans
Total 68,025,000,000.00 6,419,934,249.79 2,849,395,201.42 1,167,229,821.71 17,375,100.58 8,084,724,528.92 / / 1,442,370,348.08 7,117,458.71 / /
3. Bad debt provision for impairment of construction in progress
□ Applicable ✓ N/A 93 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(XIV) Materials for construction of fixed assets
✓ Applicable □ N/A Unit: RMB Item Closing balance Opening balance
Equipment 714,412,118.53 704,176,951.57 Materials 172,170,718.36 181,418,218.37 Total 886,582,836.89 885,595,169.94
(XV) Intangible assets
1. Details of intangible assets
✓ Applicable □ N/A Unit: RMB Non-patent Item Land use right Software Others Total technology I. Original carrying amount
1. Opening balance 2,116,698,607.36 804,124,695.23 140,011,353.61 21,402,800.00 3,082,237,456.20 2. Increase in the current period 17,907,637.22 8,710,281.66 26,617,918.88 (1) Acquisitions 532,536.64 8,710,281.66 9,242,818.30 (2) Construction in progress 17,375,100.58 17,375,100.58 3. Decrease in the current period (1) Disposals (2) Other decreases 4. Closing balance 2,134,606,244.58 804,124,695.23 148,721,635.27 21,402,800.00 3,108,855,375.08 II. Accumulated amortization
1. Opening balance 236,000,546.40 251,115,518.78 72,958,373.43 1,110,676.76 561,185,115.37
2. Increase in the current period 23,057,224.56 42,795,511.32 7,682,911.41 214,969.70 73,750,616.99 (1) Accrual 23,057,224.56 42,795,511.32 7,682,911.41 214,969.70 73,750,616.99 3. Decrease in the current period (1) Disposals (2) Other decreases 4. Closing balance 259,057,770.96 293,911,030.10 80,641,284.84 1,325,646.46 634,935,732.36 III. Impairment provision
1. Opening balance 2. Increase in the current period (1) Accrual 3. Decrease in the current period (1)Disposals 4. Closing balance IV. Book Value
1.Book value at 30 June 2018 1,875,548,473.62 510,213,665.13 68,080,350.43 20,077,153.54 2,473,919,642.72 2.Book value at 1 January 2018 1,880,698,060.96 553,009,176.45 67,052,980.18 20,292,123.24 2,521,052,340.83
94 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
2. Land use right of which certificate of title have not been obtained
✓ Applicable □ N/A Unit: RMB Item Book value Reasons why certificates of title have not been obtained
Land use right 92,763,700.65 In progress
(XVI) Goodwill
1. Original carrying amount of the goodwill
✓ Applicable □ N/A Unit: RMB
Name of the Opening Increase in the current period Decrease in the current period Closing investee balance Business combination Disposals balance
Ningbo Chlor-alkali 277,518,585.35 277,518,585.35 Total 277,518,585.35 277,518,585.35
2. Provision for impairment of goodwill
✓ Applicable □ N/A Unit: RMB
Name of the Opening Increase in the current period Decrease in the current period Closing investee balance Accrual Disposals balance
Ningbo Chlor-alkali 0 0 Total 0 0
Description of impairment test process and parameters of goodwill and determination of impairment losses of goodwill
□ Applicable ✓ N/A
(XVII) Long-term prepaid expenses
✓ Applicable □ N/A Unit: RMB Increase in Amortization Item Opening balance Other decreases Closing balance the period in the period
Leasehold improvements 15,453,722.54 1,059,656.80 4,062,748.57 12,450,630.77 Others 19,776.71 2,301.65 17,475.06 Total 15,473,499.25 1,059,656.80 4,065,050.22 12,468,105.83
95 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(XVII) Deferred tax assets / Deferred tax liabilities
1. Deferred tax assets without offset
✓ Applicable □ N/A Unit: RMB Closing balance Opening balance Item Deductible tempo- Deductible tempo- Deferred tax assets Deferred tax assets rary differences rary differences
Impairment provision of 347,665,758.61 65,835,014.22 320,345,358.82 59,350,988.15 assets Unrealized profit from in- 1,701,845,455.83 336,694,332.03 1,831,183,874.39 366,069,199.60 ter-group transactions Deductible losses 121,690,078.56 27,299,626.02 52,252,553.80 10,813,743.31 Employee benefits payable 413,800,000.00 76,150,000.00 661,000,000.00 116,250,000.00 Unpaid expenses 1,759,417,377.33 357,633,177.14 1,696,965,046.65 343,069,662.67 Deferred income 877,055,598.31 149,785,250.50 915,610,203.02 156,307,538.16 Differences in depreciation of 7,642,579.88 1,910,644.97 2,647,996.28 661,999.07 fixed assets Total 5,229,116,848.52 1,015,308,044.88 5,480,005,032.96 1,052,523,130.96
2. Deferred tax liabilities without offset
✓ Applicable □ N/A Unit: RMB Closing balance Opening Balance Item Deductible tempo- Deferred tax liabili- Deductible tempo- Deferred tax liabili- rary differences ties rary differences ties
Revaluation of fixed assets and intangible assets of subsidiaries not involving 58,735,751.64 14,683,937.91 59,603,805.40 14,900,951.35 enterprises under common control Differences in depreciation 174,810,636.72 30,539,622.83 159,319,610.28 27,186,024.22 of fixed assets Total 233,546,388.36 45,223,560.74 218,923,415.68 42,086,975.57
3. Deferred tax assets and deferred tax liabilities that are presented at the net amount after offset
✓ Applicable □ N/A Unit: RMB Offset amount Balance after the Offset amount at Balance after the offset Item at the end of the offset at the end of the beginning of the at the beginning of the reporting period the reporting period reporting period reporting period
Deferred tax assets 26,699,586.93 988,608,457.95 27,186,024.22 1,025,337,106.74 Deferred tax liabilities 26,699,586.93 18,523,973.81 27,186,024.22 14,900,951.35
96 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
4. Details of unrecognized deferred tax assets
✓ Applicable □ N/A Unit: RMB Item Closing balance Opening balance
Deductible losses 33,376,790.84 43,813,079.69 Impairment provision of assets 78,398,058.03 58,606,135.35 Total 111,774,848.87 102,419,215.04
Due to the uncertainty whether there will be sufficient taxable profits in the future of certain subsidiaries, the above deductible temporary differences and deductible losses are not recognized as deferred assets.
5. Deductible losses, for which no deferred tax assets are recognized, will expire in the following years
✓ Applicable □ N/A Unit: RMB Year Closing balance Opening balance Note
2018 3,456,565.57 4,950,895.77 2019 9,574,473.98 9,574,473.98 2020 13,503,867.05 13,503,867.05 2021 195,641.86 195,641.86 2023 6,646,242.38 It is the deductible losses of Wanhua Singapore. Its maturity has Indefinite 15,588,201.03 no limitation according to the local tax law. Total 33,376,790.84 43,813,079.69 /
Other description:
✓ Applicable □ N/A
Apart from deductible temporary differences and deductible losses of unrecognized deferred tax assets, the Group believes that it is probable that sufficient taxable profits will be available in future periods to offset the deductible temporary differences and deductible losses. Therefore, the related deferred tax assets are recognized.
(XIX) Other non-current assets
✓ Applicable □ N/A Unit: RMB Item Closing balance Opening Balance
Prepayment for construction 1,448,381,985.10 980,949,525.94 Prepayment for land 486,501,154.20 26,904,576.75 Total 1,934,883,139.30 1,007,854,102.69
(XX) Short-term borrowings
1. Categories of short-term borrowings:
✓ Applicable □ N/A
97 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Unit: RMB Item Closing balance Opening balance
Secured loans with collaterals 230,000,000.00 198,389,201.59 Guaranteed loans 84,786,011.96 Unsecured and non-guaranteed loans 15,019,914,740.04 12,431,394,746.67 Total 15,249,914,740.04 12,714,569,960.22
Description of categories of short-term borrowings:
Note: Secured loans with collaterals as at 30 June 2018 was the loans for notes receivable, refer to Note VII2 (2).
2. Short-term borrowings overdue but not yet repaid
□ Applicable ✓ N/A
(XXI) Derivative financial liabilities
✓ Applicable □ N/A Unit: RMB Item Closing balance Opening balance
Liquefied petroleum gas (LPG) futures 2,785,734.17 contract Total 2,785,734.17
(XXII) Notes payable
✓ Applicable □ N/A Unit: RMB Category Closing balance Opening Balance
Bank acceptances 2,277,674,547.01 1,851,643,240.39 Total 2,277,674,547.01 1,851,643,240.39
Note: Bank acceptances are mainly issued for notes pledged and deposits received as issuing terms, refer to Note VII 1, 2. Notes payable due at the end of the period but not yet paid amounted to RMB 0.
(XXIII) Accounts payable
1. Details of accounts payable are as follows:
✓ Applicable □ N/A Unit: RMB Item Closing balance Opening balance
Accounts payable for purchase 1,672,101,642.94 2,027,128,320.64 Accounts payable for construction 1,999,012,928.75 2,361,084,053.44 Total 3,671,114,571.69 4,388,212,374.08
98 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
2. Significant accounts payable aged more than one year
□ Applicable ✓ N/A
(XXIV) Receipts in advance
1.Details of receipts in advance are as follows:
✓ Applicable □ N/A Unit: RMB Item Closing balance Opening balance
Receipts in advance from sale of goods 2,283,771,725.53 2,679,648,525.88 Total 2,283,771,725.53 2,679,648,525.88
2. Significant receipts in advance aged more than one year
□ Applicable ✓ N/A
3. Project of construction contracts that have been settled but not completed yet at the end of the period
□ Applicable ✓ N/A
(XXV) Employee benefits payable
1. Details of employee benefits payable
✓ Applicable □ N/A Unit: RMB Increase in the Decrease in the Item Opening balance Closing balance current period current period
I. Short-term employee benefits 728,901,767.32 1,134,450,017.33 1,393,318,892.14 470,032,892.51 II. Post-employment benefit-defined 1,419,653.91 114,069,281.74 113,798,970.78 1,689,964.87 contribution plan Total 730,321,421.23 1,248,519,299.07 1,507,117,862.92 471,722,857.38
2. Details of short-term employee benefits
✓ Applicable □ N/A Unit: RMB Increase in the Decrease in the Item Opening Balance Closing balance current period current period
I. Wages or salaries, bonuses, allowances 720,942,961.90 965,778,937.97 1,231,563,915.98 455,157,983.89 and subsidies II. Staff welfare 1,413.67 37,692,358.49 37,692,358.49 1,413.67 III. Social security contributions 961,457.34 63,634,519.87 63,515,620.72 1,080,356.49 Including: Medical insurance 760,159.32 49,620,462.81 49,428,392.58 952,229.55 Work injury insurance 144,313.31 8,195,049.68 8,271,523.62 67,839.37 Maternity insurance 56,984.71 5,819,007.38 5,815,704.52 60,287.57 IV. Housing funds 6,986,934.41 61,299,080.38 54,500,824.07 13,785,190.72 V. Labor union and education fund 9,000.00 6,045,120.62 6,046,172.88 7,947.74 Total 728,901,767.32 1,134,450,017.33 1,393,318,892.14 470,032,892.51
99 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
3. Details of defined contribution plan
✓ Applicable □ N/A Unit: RMB Increase in the Decrease in the Item Opening balance Closing balance current period current period
1. Pension insurance 1,382,541.27 109,696,748.74 109,445,785.01 1,633,505.00 2. Unemployment insurance 37,112.64 4,372,533.00 4,353,185.77 56,459.87 Total 1,419,653.91 114,069,281.74 113,798,970.78 1,689,964.87
Other explanation:
✓ Applicable □ N/A
The Group has set up the pension fund insurance and employment insurance by the government regulation. According to the plan, the Group deposits 13~18% and 0.5~2% of employee's monthly basic salary into the insurance every month. Besides the mentioned expense above, the Group has no longer any further payments. The relevant expenditure will be accounted into Profit and Loss or capitalized.
In this current period, the Group deposited RMB 109,696,748.74 and RMB 4,372,533.00 into pension insurance and unemployment insurance, respectively (For the period from January to June 2017: RMB 80,281,098.55 and RMB 3,498,343.62). As at 30 June 2018, the Group has outstanding payments of RMB 1,633,505.00 and RMB 56,459.87 (31 December 2017: RMB 1,382,541.27 and 37,112.64) for pension insurance and unemployment insurance. The relevant subsequent payments h settled after reporting period.
(XXVI) Taxes payable
✓ Applicable □ N/A Unit: RMB Item Closing balance Opening balance
Value-added tax 207,159,749.27 386,767,262.29 Enterprise income tax 887,226,675.18 1,759,657,889.04 Individual income tax 8,957,270.08 7,394,714.08 City construction and maintenance tax 15,443,135.92 33,856,120.00 Others 38,685,795.55 57,512,255.35 Total 1,157,472,626.00 2,245,188,240.76
(XXVII) Interest payable
✓ Applicable □ N/A Unit: RMB Item Closing balance Opening Balance
Interest payable on short-term borrowings 55,837,403.09 21,301,049.70 Interest payable on long-term borrowings 4,505,840.87 10,669,622.14 Total 60,343,243.96 31,970,671.84
Significant interest due but not paid yet:
□ Applicable ✓ N/A
100 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(XXVIII) Other payables
1. Details of other payables are as follows:
✓ Applicable □ N/A Unit: RMB Item Closing balance Opening balance
Transportation fees 134,573,399.12 123,875,048.14 Deposit fees 61,551,764.52 58,201,662.75 Current accounts (Note) 149,267,372.94 Unpaid maintenance fee 117,058,780.35 152,006,983.75 Others 21,835,890.41 24,674,168.93 Total 335,019,834.40 508,025,236.51
Note: Current accounts refer to the amount borrowed by Yantai Selling from Yantai Wanhua Synthetic Leather Co., Ltd.
2. Significant other payables aging more than one year
✓ Applicable □ N/A Unit: RMB Item Closing balance Reasons for amounts not paid or carried forward
Company X 26,336,418.39 Long settlement period of overhaul cost Total 26,336,418.39 /
(XXIX) Non-current liabilities due within one year
✓ Applicable □ N/A Unit: RMB Item Closing balance Opening balance
Long-term borrowings due within one year 1,868,013,333.32 2,670,513,333.46 Total 1,868,013,333.32 2,670,513,333.46
(XXX) Long-term borrowings
1. Categories of long-term borrowings
✓ Applicable □ N/A Unit: RMB Item Closing balance Opening balance
Secured loans with collateral 912,000,000.00 1,273,000,000.00 Guaranteed loans 1,765,000,000.00 1,804,999,999.64
Unsecured and non-guaranteed loans 2,561,643,571.40 3,243,648,809.49
Total 5,238,643,571.40 6,321,648,809.13
Description of categories of long-term borrowings:
Note 1: The guaranteed loans are guaranteed by Wanhua Industrial Group Co., Ltd., for details refer to Note (XII) 5(4).
101 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Note 2: Secured loans with collateral are acquired with fixed assets and intangible assets as collaterals, for details refer to Note (VII) 12 and 15.
Others description, including interest rates range:
✓ Applicable □ N/A
The above interest rates range from 1.20% to 4.90% per annum for this reporting period.
(XXXI) Long-term payables
1. Long-term payables categorized by nature:
✓ Applicable □ N/A Unit: RMB Item Opening balance Closing balance
For re-lending money from Department of 1,352,722.00 1,352,722.00 Finance of Yantai
Other description:
✓ Applicable □ N/A
According to the official documents Lu Jing Mao Tou Zi [2002] No. 592 and Lu Cai Jian Zhi [2002] No. 112 issued by government of Shandong Province, the MDI Project with 80,000 tons annual production is qualified as the special fund for national key technology transformation projects in 2002, thus the local finance bureau granted the loans and the Company pays interests annually.
(XXXII) Deferred income
Details of deferred income
✓ Applicable □ N/A Unit: RMB Opening Increase in the Decrease in Closing Item Reasons balance period the period balance
Government Monetary assets obtained from 915,610,203.02 300,000.00 38,854,604.71 877,055,598.31 subsidies the government at no cost Total 915,610,203.02 300,000.00 38,854,604.71 877,055,598.31 /
102 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Details of deferred government grant:
✓ Applicable □ N/A Unit: RMB New grants Recognized in Related Opening Other Closing Liability item in the cur- non-operating to assets/ balance changes balance rent year for the period income
Industrial upgrad- Related to 461,533,562.82 21,049,060.51 440,484,502.31 ing subsidies assets Industrial support- Related to 106,779,380.17 4,745,750.22 102,033,629.95 ing subsidies assets Key industries and comprehensive Related to 83,333,333.39 4,166,666.64 79,166,666.75 technology trans- assets formation projects
Environmental Related to 45,940,000.00 1,200,000.00 44,740,000.00 protection subsidy assets Special funds for strengthening the Related to core competitive- 42,830,000.00 1,487,152.80 41,342,847.20 assets ness of manufac- turing industry
Special funds for Related to optimization of 40,777,050.34 1,926,474.84 38,850,575.50 assets industrial structure
Subsidized interest for key industry Related to 26,815,910.36 1,568,344.86 25,247,565.50 technical transfor- assets mation project
Special funds for supporting the Related to 27,414,626.84 415,373.16 26,999,253.68 development of assets enterprises
Special fund from Related to Bureau of finance 26,974,789.91 1,512,605.04 25,462,184.87 assets and construction
Park upgrading Related to and reconstruction 18,264,062.50 328,125.00 17,935,937.50 assets subsidies
Special subsidies for green Integrat- Related to 8,700,000.00 8,700,000.00 ed manufacturing assets project
Recycling transfor- Related to 8,437,500.00 375,000.00 8,062,500.00 mation subsidies assets Related Others 17,809,986.69 300,000.00 80,051.64 18,029,935.05 to assets/ income Total 915,610,203.02 300,000.00 38,854,604.71 877,055,598.31 /
103 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(XXXIII) Share capital
✓ Applicable □ N/A Unit: RMB Changes in current years( ＋ , 一 ) Opening Capitalization of Closing balance balance New issue Bonus issue Others Subtotal surplus reserve
Total shares 2,734,012,800.00 2,734,012,800.00
Other explanation:
As at 30 June 2018, Yantai Wanhua Chemical Co., Ltd., controlling shareholder of the Company, has pledged its 186,000,000 shares of the Company to The Export-Import Bank of China as collateral to acquire bank facilities, which totally accounts for 6.8% of total outstanding shares.
(XXXIV) Capital reserve
✓ Applicable □ N/A Unit: RMB Increase in the Decrease in the Item Opening balance Closing balance current period current period
Capital premium(share premium) 2,372,425,571.21 2,372,425,571.21 Other capital reserve 20,400,151.49 145,036.51 20,545,188.00 Total 2,392,825,722.70 145,036.51 2,392,970,759.21
Other explanation, including changes for the period and reasons for such changes:
Other increases in capital reserve is due to other equity changes of the associate, Linde Gas (Yantai) Co., Ltd.
104 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(XXXV) Other comprehensive income
✓ Applicable □ N/A
Unit: RMB Amount for the current period
Less: trans- Attrib- ferred from utable other com- Less: Attributable Opening Before to Mi- Closing Item prehensive income to the Com- balance income tax nority balance income previ- tax ex- pany (after amount interest ously to gains pense tax) (after and losses in tax) current period
I. Items that will not be reclassified subsequently to profit or loss
Including: changes in net liabilities and net assets from re-measurement of defined benefit plan Shares of other comprehensive income in the investee that will not be reclassified subsequently to profit or loss under equity method II. Items that may be reclassified 9,518,565.65 -17,507,283.04 -17,507,283.04 -7,988,717.39 subsequently to profit or loss
Including: shares of other comprehensive income in the invest- ee that may be reclas- sified subsequently to profit or loss Changes in profit or loss from fair value of available-for-sale financial assets Held-to-maturity in- vestments reclassi- fied to profit or loss of available-for-sale financial assets Effective part of gains and losses on -2,785,734.17 -2,785,734.17 -2,785,734.17 cash flow hedging Translation differ- ences of financial statements denom- 9,518,565.65 -14,721,548.87 -14,721,548.87 -5,202,983.22 inated in foreign currencies Total other compre- 9,518,565.65 -17,507,283.04 -17,507,283.04 -7,988,717.39 hensive income
105 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(XXXVI) Special reserve
✓ Applicable □ N/A
Unit: RMB Increase in the Decrease in the Item Opening balance Closing balance current period current period Production safety fee 66,361,412.52 66,361,412.52 Total 66,361,412.52 66,361,412.52
(XXXVII) Surplus reserve
✓ Applicable □ N/A
Unit: RMB Increase in the Decrease in the Item Opening balance Closing balance current period current period
Statutory surplus reserve 2,351,465,675.58 2,351,465,675.58
Discretionary surplus reserve 471,706,966.13 471,706,966.13 Total 2,823,172,641.71 2,823,172,641.71
Description of surplus reserve, including changes for the period, and reasons for the changes:
The statutory surplus reserve can be used for increasing the registered share capital, making up losses, or expanding the Company's operations.
(XXXVIII) Retained profits
✓ Applicable □ N/A
Unit: RMB Amount for the Amount for the Item current period prior period
Retained profit at the end of the prior period before adjustment 19,320,010,167.13 11,023,922,668.07 Adjustment for total retained profit at the beginning of the period
(increase“+”, decrease“-”) Retained profit at the beginning of the period after adjustment 19,320,010,167.13 11,023,922,668.07 Add: Net profit attributable to owners of the Company for the period 6,949,934,414.32 4,861,037,879.29
Less: Appropriation to statutory surplus reserve
Appropriation to discretionary surplus reserve Appropriation to general risk reserve Declaration of dividends on ordinary shares 4,101,019,200.00 1,139,172,000.00 Conversion of ordinary shares' dividends into share capital 455,668,800.00 Retained profit at the end of the period 22,168,925,381.45 14,290,119,747.36
106 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(XXXIX) Operating income and operating costs
✓ Applicable □ N/A
Unit: RMB Amount for the current period Amount for the prior period Item Revenue Cost Revenue Cost
Principal operation 29,791,238,787.14 17,739,311,098.57 24,363,950,294.20 14,891,864,808.01 Other operation 262,935,851.61 256,229,346.63 66,136,182.57 54,312,695.38 Total 30,054,174,638.75 17,995,540,445.20 24,430,086,476.77 14,946,177,503.39
(XL) Taxes and leviese
✓ Applicable □ N/A
Unit: RMB Item Amount for the current period Amount for the prior period
City construction and maintenance tax 137,559,236.45 61,629,336.41 Education surcharges 98,470,757.28 44,063,621.95 House property tax 11,081,667.67 11,033,716.49 Land use tax 27,913,867.95 26,455,079.09 vehicle and vessel use tax 96,442.95 79,737.45 Stamp tax 31,737,921.49 23,191,682.81 water conservancy construction fund 5,387,605.91 1,546,904.17 Others 1,653,861.27 49,452.32 Total 313,901,360.97 168,049,530.69
(XLI) Selling expenses
✓ Applicable □ N/A
Unit: RMB Item Amount for the current period Amount for the prior period
Logistics expenses 588,091,833.53 530,727,861.70 Staff cost 97,039,169.21 72,887,334.56 Sales commission and consulting fees 32,444,695.42 13,478,382.83 Travelling expenses 17,366,843.83 16,625,572.15 Others 54,032,961.92 37,840,703.41 Total 788,975,503.91 671,559,854.65
107 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(XLII) Administrative expenses
✓ Applicable □ N/A
Unit: RMB Item Amount for the current period Amount for the prior period
Research and development expenses 566,765,267.79 475,271,085.84 Staff cost 270,032,878.19 192,504,418.81 Material consumption 18,208,886.82 12,271,973.93 Depreciations 35,520,599.73 29,422,411.55 Consulting fee 7,166,257.23 3,955,470.45 Information cost 21,125,031.10 20,553,006.59 Rent and property management fee 8,226,430.53 4,576,891.92 Labor costs 26,083,069.43 12,029,404.17 Water, electricity & gas charges 5,783,487.97 1,966,150.09 Travelling expenses 9,606,467.81 9,482,972.40 Entertainment cost 9,354,736.40 6,325,206.04 Amortization of intangible assets 10,669,696.68 9,555,544.96 Insurance fee 4,311,919.36 5,727,107.70 Others 77,292,350.46 27,889,845.95 Total 1,070,147,079.50 811,531,490.40
(XLIII) Financial expenses
✓ Applicable □ N/A
Unit: RMB Item Amount for the current period Amount for the prior period
Interest expenses 467,571,524.16 438,957,603.44 Less: Capitalized interest expenses -7,117,458.71 -10,259,571.40 Less: Interest income -24,342,426.65 -15,071,945.81 Exchange gains and losses -40,422,804.12 15,194,068.10 Less: Capitalized exchange losses and gains 110,695.25 Others 24,944,380.94 21,512,495.28 Less: Capitalized fees and commissions Total 420,633,215.62 450,443,344.86
108 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(XLIV) Impairment losses of assets
✓ Applicable □ N/A
Unit: RMB Item Amount for the current period Amount for the prior period
I. Bad debt allowance 44,955,668.05 160,183,881.68 II. Provision for decline in value of inventories 1,324,461.86 289,578.52 Total 46,280,129.91 160,473,460.20
(XLV) Investment income
✓ Applicable □ N/A
Unit: RMB Amount for the current Amount for the prior Item period period
Income from long-term equity investments under equity method 53,855,509.79 49,677,651.48 Investment income from held-for-sale financial assets 6,000,000.00 Others -16,511.40 Total 53,855,509.79 55,661,140.08
(XLVI) Income from disposal of assets
✓ Applicable □ N/A
Unit: RMB Item Amount for the current period Amount for the prior period
Income from disposal of non-current assets 144,071.76 1,684,644.58 Total 144,071.76 1,684,644.58
109 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(XLVII) Other income
✓ Applicable □ N/A Unit: RMB Item Amount for the current period Amount for the prior period
Special funds for supporting the development of enter- 745,895,373.16 12,010,000.00 prises Special fund for key industries support 38,840,000.00 35,194,321.00 Industry upgrading subsidy 21,049,060.51 2,060,721.46 Subsidy for comprehensive utilization of resources and 11,677,206.82 16,124,859.45 energy saving Special fund for industrial transformation and upgrading 6,830,000.00 1,790,000.00 Industrial supporting subsidies 4,745,750.22 Key industries and comprehensive technology transfor- 4,166,666.64 4,166,666.64 mation projects Special funds for optimization of industrial structure 1,926,474.84 6,010,474.82 Subsidized interest for key industry technical transfor- 1,568,344.86 16,729,044.80 mation project
Special fund from Bureau of finance and construction 1,512,605.04 1,512,605.05 Special funds for strengthening the core competitive- 1,487,152.80 ness of manufacturing industry Environmental protection subsidy 1,200,000.00 2,400,000.00 Recycling transformation subsidies 375,000.00 Park upgrading and reconstruction subsidies 328,125.00 Others 2,821,176.95 6,391,815.15 Total 844,422,936.84 104,390,508.37
(XLVIII) Non-operating income
Details of non-operating income
✓ Applicable □ N/A Unit: RMB Amount for the Amount for the Amount included in non-recurring Item current period prior period profit or loss for the period
Total gains on disposal of non-current assets 1,436,424.43 3,155.41 1,436,424.43 Including: Gains on disposal of fixed assets 1,436,424.43 3,155.41 1,436,424.43 Liquidated damages of suppliers 10,000,000.00 Others 2,127,003.41 5,365,861.09 2,127,003.41 Total 3,563,427.84 15,369,016.50 3,563,427.84
Government grants recognized in profit or loss for the current period:
□ Applicable ✓ N/A
110 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(XLIV) Non-operating expenses
✓ Applicable □ N/A
Unit: RMB Amount for the Amount for the Amount included in non-recurring Item current period prior period profit or loss for the period
Total losses on disposal of non-current assets 14,301,349.40 8,699,892.57 14,301,349.40 Including: Losses on disposal of fixed assets 14,301,349.40 8,699,892.57 14,301,349.40 Donations to third parties 492,000.00 492,000.00 Others 394,913.90 80,974.93 394,913.90 Total 15,188,263.30 8,780,867.50 15,188,263.30
(L) Income tax expenses
1. Details of income tax expenses
✓ Applicable □ N/A
Unit: RMB Item Amount for the current period Amount for the prior period
Current income tax expenses 2,034,963,851.64 1,778,452,319.91 Deferred income tax expenses 40,351,671.25 -197,837,813.93 Total 2,075,315,522.89 1,580,614,505.98
2. Reconciliation of income tax expenses to the accounting profit is as follows:
✓ Applicable □ N/A
Unit: RMB Item Amount for the current period
Accounting profit 10,305,494,586.57 Income tax expenses calculated under statutory/applicable tax rate 1,545,824,187.99 Effect of subsidiaries applicable to different tax rate 606,940,106.88 Effect of adjustments of income tax for prior periods -12,123,269.98 Effect of non-taxable income -10,930,573.91 Effect of non-deductible costs, expenses and losses 1,408,052.10 Effect of using previously unrecognized deductible losses of deferred tax assets -2,562,379.68 Effect of deductible temporary differences and deductible losses for which deferred 4,086,626.94 tax assets are unrecognized in the current period Effect of using previously unrecognized deductible temporary differences -120,902.19 Changes in deferred income tax assets/liabilities arising from adjustments of tax rate 110,805.87 Offset enterprise income tax by acquisition of special-purpose equipment -9,661,871.08 Super tax deduction for qualified research and development expenditures on 50% -48,068,148.95 Others 412,888.90 Income tax expenses 2,075,315,522.89
111 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(LI) Other comprehensive income
✓ Applicable □ N/A
Details are set out in VII35.
(LII) Items in the cash flow statement
1. Other cash receipts relating to operating activities:
✓ Applicable □ N/A Unit: RMB Item Amount for the current period Amount for the prior period
Government grants related to income 805,868,332.13 582,957,831.28
Others 21,928,123.13 27,371,874.43 Total 827,796,455.26 610,329,705.71
2. Other cash payments relating to operating activities:
✓ Applicable □ N/A Unit: RMB Item Amount for the current period Amount for the prior period
Cash and bank balances with restrictions recovered 1,179,977,874.55 837,974,687.70 Total 1,179,977,874.55 837,974,687.70
3. Other cash receipts related to investing activities:
✓ Applicable □ N/A Unit: RMB Item Amount for the current period Amount for the prior period
Government grants related to assets 393,653,000.00 Others 1,590,439.64 4,407,504.91 Total 1,590,439.64 398,060,504.91
4. Other cash payments relating to investing activities
✓ Applicable □ N/A Unit: RMB Item Amount for the current period Amount for the prior period
Land auction margin paid 87,000,000.00 Total 87,000,000.00
5. Other cash payments relating to financing activities
✓ Applicable □ N/A Unit: RMB Item Amount for the current period Amount for the prior period
Financing charges paid 441,120.00 1,078,745.58 Total 441,120.00 1,078,745.58
112 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(LIII) Supplementary information to the cash flow statement
1. Supplementary information to the cash flow statement
✓ Applicable □ N/A
Unit: RMB Supplementary information Current period Prior period
1. Reconciliation of net profit to cash flow from operating activities: Net profit 8,230,179,063.68 5,809,561,228.63 Add: Impairment losses of assets 46,280,129.91 160,473,460.20 Depreciation of fixed assets, depreciation of gas and oil assets, depreciation of 1,456,403,451.80 1,591,537,667.98 bearer biological assets Amortization of intangible assets 72,411,758.84 71,344,038.62 Amortization of long-term prepaid expenses 3,772,512.40 3,606,036.42 Losses on disposal of fixed assets, intangible assets and other long-term as- 12,720,853.21 7,012,092.58 sets (income is indicated by "-") Financial expenses (income is indicated by "-") 474,659,977.41 421,182,281.39 Investment losses (income is indicated by "-") -53,855,509.79 -55,661,140.08 Decrease in deferred tax assets (increase is indicated by "-") 36,728,648.79 -196,560,611.36 Increase in deferred tax liabilities (decrease is indicated by "-") 3,623,022.46 -1,277,202.57 Decrease in inventories (increase is indicated by "-") -412,313,630.18 -1,987,377,639.16 Decrease in receivables from operating activities (increase is indicated by "-") 275,043,654.21 -7,021,441,695.91 Increase in payables from operating activities (decrease is indicated by "-") -1,700,481,913.25 2,646,129,513.96 Others Net cash flow from operating activities 8,445,172,019.49 1,448,528,030.70 2. Significant investing and financing activities that do not involve cash
receipts and payments
Capital transferred from debts Convertible debts due within 1 year Fixed assets under finance lease 3. Net changes in cash and cash equivalents: Closing balance of cash 2,880,981,582.06 2,343,916,303.14 Less: Opening balance of cash 3,046,303,365.52 1,962,848,541.01 Add: Closing balance of cash equivalents Less: Opening balance of cash equivalents Net increase of cash and cash equivalents -165,321,783.46 381,067,762.13
2. Net cash payments for acquisition of subsidiaries
□ Applicable ✓ N/A
3. Net cash receipts from disposal of subsidiaries
□ Applicable ✓ N/A
113 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
4. Composition of cash and cash equivalents
✓ Applicable □ N/A
Unit: RMB Item Closing balance Opening balance
I. Cash 2,880,981,582.06 3,046,303,365.52 Including: Cash on hand 149,961.65 151,834.64 Bank deposits 2,880,831,617.13 3,038,929,570.25 Other monetary funds 3.28 7,221,960.63
II. Cash equivalents
Including: Bond investments due within 3 months III. Closing balance of cash and cash equivalents 2,880,981,582.06 3,046,303,365.52 Including: Restricted cash and cash equivalents of the Company or intra-group companies
Other explanation:
✓ Applicable □ N/A
Cash and cash equivalents exclude restricted currency funds of the Company and subsidiaries within the Group. As at 30 June 2018, the restricted cash and bank balances amounted to RMB 14,752,670.34 (31 December 2017: RMB 16,671,288.66).
(LIV) Notes to items in the statement of changes in owners' equity
Description of events including adjustments to names and amounts of "other" items for the end of the prior year:
□ Applicable ✓ N/A
(LV) Restricted ownership of asset and right of use
✓ Applicable □ N/A
Unit: RMB Item Book value at 30 June 2018 Reasons to be restricted
Deposits for issuance of bank acceptances, deposits for L/C, Cash and bank balances 14,752,670.34 and LPG paper deposits Notes pledged for acquisition of bank loans, opening bank Notes receivable 4,060,081,680.43 acceptances and customs duty guarantee Fixed assets 8,502,873,770.53 Used for receiving loans Intangible assets 454,661,874.84 Used for receiving loans Total 13,032,369,996.14 /
114 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(LVI) Foreign currency monetary item
1. Foreign currency monetary item:
✓ Applicable □ N/A
Unit: RMB Item Closing balance (O.C) Exchange rate Closing balance (RMB)
Cash and bank balances Including: USD 10,512,048.51 6.6076 69,459,434.49 EUR 1,758,511.91 7.7101 13,567,580.29 JPY 1,290,819,398.00 0.0596 77,140,827.40 SGD 95,945.25 4.8403 465,775.76 RUB 662,719.34 0.1050 69,585.53 KRW 3,128,780,708.00 0.0059 18,550,964.02 AED 119,827.47 1.8027 216,012.98 HKD 10,800.89 0.8420 9,106.81 HUF 5,697.21 0.0232 132.93
Accounts receivable
Including: USD 90,101,556.83 6.6076 595,355,046.91 EUR 62,360,605.35 7.7101 480,806,503.32 KRW 5,167,202,183.00 0.0059 30,553,666.51 Other receivables KRW 78,725,000.00 0.0059 465,500.93 Short-term borrowings USD 240,959,288.10 6.6356 1,598,909,452.12 Accounts payable USD 19,317,990.99 6.6356 128,186,461.01 EUR 5,122,782.12 7.7670 39,788,648.73 JPY 10,395,997.00 0.0601 624,321.20 GBP 39,835.00 8.7818 349,823.00 KRW 715,000.00 0.0060 4,262.12 CHF 838,500.00 6.7055 5,622,561.75 HKD 150,000.00 0.8454 126,810.00 Interest payable USD 854,854.97 6.6356 5,672,475.64 Other payables USD 2,784.33 6.6356 18,475.70 EUR 1,947.13 7.7670 15,123.36
2. Description of entities operating overseas, including significant entities operating overseas, disclosures of their main operating places, functional currencies and their basis, reasons for changes of functional currency (if any)
✓ Applicable □ N/A
115 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Wanhua Chemical (Hong Kong) Co., Ltd., a subsidiary of the Company, mainly operates in Hong Kong, and USD is the currency of the primary economic environment in which Wanhua Chemical (Hong Kong) Co., Ltd. operates. Therefore, Wanhua Chemical (Hong Kong) Co., Ltd., chooses USD as its functional currency.
Wanhua Chemical (Japan) Co., Ltd., a subsidiary of the Company, mainly operates in Japan, and JPY is the currency of the primary economic environment in which Wanhua Chemical (Japan) Co., Ltd. operates. Therefore, Wanhua Chemical (Japan) Co., Ltd., chooses JPY as its functional currency.
Wanhua Shipping (Singapore) Co., Ltd., a subsidiary of the Company, mainly operates in Singapore, and SGD is the currency of the primary economic environment in which the above company operates. Therefore, it chooses SGD as its functional currency.
Wanhua Chemical (Singapore) Co., Ltd., a subsidiary of the Company, mainly operates in Singapore, and USD is the currency of the primary economic environment in which the above company operates. Therefore, it chooses USD as its functional currency.
Wanhua Chemical (America) Co., Ltd., Wanhua Chemical US Holding Inc., Wanhua America Innovation Technology Co., Ltd., Wanhua Chemical US Real Estate LLC, and Wanhua Chemical US Operations LLC, subsidiaries of the Company, mainly operate in the U.S.A., and USD is the currency of the primary economic environment in which they operates. Therefore, they choose USD as their functional currency.
Wanhua Chemical International Holding Co., Ltd. ("BVI"), a subsidiary of the Company, mainly operates in the British Virgin Islands, and CNY is the main currency in its business. Therefore, BVI chooses CNY as its functional currency.
Wanhua International (India) Private Limited., a subsidiary of the Company, mainly operates in India, and INR is the currency of the primary economic environment in which Wanhua International (India) Private Limited. operates. Therefore, it chooses INR as functional currency.
Wanhua Chemical (Hungary) Holding Co., Ltd., a subsidiary of the Company, mainly operating in Hungary, chooses USD as functional currency, since USD is the currency of the primary economic environment in which Wanhua Chemical (Hungary) Holding Co., Ltd., operates.
(LVII) Hedge
✓ Applicable □ N/A
Disclosure of hedge items and relevant hedging instruments by categories of hedges, qualitative and quantitative information of the hedged risk:
Cash flow hedges:
The Group's subsidiary, Wanhua Singapore, adopts liquefied petroleum gas (LPG) futures contracts to mitigate the cash flow risk arising from its expected transactions, i,e, some of the floating prices are converted into fixed prices, or locking the price difference between purchases and sales. In 2018, the Group designated acquired futures contracts as hedging instrument, and the critical terms of these futures contracts are similar to those of corresponding purchase/sales contracts. The Group uses major terms comparison to assess hedge effectiveness. The Group's management considers the futures contracts are highly effective hedging instruments, with the major terms as follows:
Item hedged Hedging instrument Hedging method
Liquefied petroleum gas To lock fluctuations in the expected price of LPG via purchase Expected price of LPG (LPG) futures contracts or sales of LPG futures contracts at various price indexes
Regarding fair value changes of the above contracts in 2018, net loss attributable to the effective hedging recognized in other comprehensive income amounted to RMB 2,785,734.17, which was recognized in other comprehensive income. No profit or loss transferred from other comprehensive income was recognized for the current period.
116 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(LVIII) Government grants
1. General information of government grants
✓ Applicable □ N/A
Unit: RMB Presenting Amount recognized Categories Amount item in profit or loss
Special funds for supporting the development of enterprises 745,895,373.16 Other income 745,895,373.16
Special fund for key industries support 38,840,000.00 Other income 38,840,000.00
Industry upgrading subsidy 21,049,060.51 Other income 21,049,060.51
Subsidy for comprehensive utilization of resources and energy saving 11,677,206.82 Other income 11,677,206.82
Special fund for industrial transformation and upgrading 6,830,000.00 Other income 6,830,000.00
Industrial supporting subsidies 4,745,750.22 Other income 4,745,750.22
Key industries and comprehensive technology transformation projects 4,166,666.64 Other income 4,166,666.64
Special funds for optimization of industrial structure 1,926,474.84 Other income 1,926,474.84
Subsidized interest for key industry technical transformation project 1,568,344.86 Other income 1,568,344.86
Special fund from Bureau of finance and construction 1,512,605.04 Other income 1,512,605.04
Special funds for strengthening the core competitiveness of 1,487,152.80 Other income 1,487,152.80 manufacturing industry
Environmental protection subsidy 1,200,000.00 Other income 1,200,000.00
Recycling transformation subsidies 375,000.00 Other income 375,000.00
Park upgrading and reconstruction subsidies 328,125.00 Other income 328,125.00
Others 2,821,176.95 Other income 2,821,176.95
Total 844,422,936.84 844,422,936.84
2. Return of government grants
□ Applicable ✓ N/A
VIII. Changes of scope of consolidation
(I) Business combinations not involving enterprises under common control
□ Applicable ✓ N/A
(II) Business combinations involving enterprises under common control
□ Applicable ✓ N/A
(III) Counter purchase
□ Applicable ✓ N/A
117 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(IV) Disposal of subsidiaries
Where the loss of control is incurred upon single disposal of investment in subsidiaries
□ Applicable ✓ N/A
Whether there is disposal of investments in subsidiaries in stages and the control is lost for the period
□ Applicable ✓ N/A
(V) Changes in the scope of consolidation due to other reasons
Description of changes in the scope of consolidation due to other reasons (e.g. establishment of new subsidiaries, and liquidation of subsidiaries, etc.)
✓ Applicable □ N/A
Investee Principal operating activities Type Scope of consolidation
Wanhua Chemical Newly included in the scope of consoli- Sales of electricity New establishment Group Energy Co., Ltd. dation in the current period
Yantai Wanhua Port Load-off and warehousing of Newly included in the scope of consoli- New establishment Service Co., Ltd. goods dation in the current period
Wanhua Chemical US Production and sales of chemi- Newly included in the scope of consoli- New establishment Operations LLC cal products dation in the current period
(VI) Others
□ Applicable ✓ N/A
118 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Unit: RMB IX. EQUITY IN OTHER ENTITIES
(I) Equity in subsidiaries
1. Composition of the Group
✓ Applicable □ N/A
Main Registration Operation Proportion (%) Means of es- Name of subsidiary location location nature Direct Indirect tablishment
Wanhua Chemical (Ningbo) Co., Ltd. China Ningbo Manufacturing 74.5 Investment (Note1) Wanhua Chemical (Ningbo) Port Co., Ltd. China Ningbo Service 55 45 Investment Wanhua Chemical (Ningbo) Thermal Power China Ningbo Manufacturing 51 Investment Co., Ltd. (Note 2) Wanhua Chemical (Beijing) Co., Ltd. China Beijing Manufacturing 100 Investment Shanghai Wanhua Industrial Development China Shanghai Service 100 Investment Co., Ltd. Wanhua Chemical (Ningbo) Trading Co., China Ningbo Service 74.5 Investment Ltd. (Note 3) Wanhua Chemical (Ningbo) Rongwei China Ningbo Manufacturing 80 Investment Polyurethane Co., Ltd. (Note4) Hong Wanhua Chemical (Hong Kong) Co., Ltd. Hong Kong Service 100 Investment Kong
Wanhua Chemical (Japan) Co., Ltd. Japan Japan Service 100 Investment
Wanhua Chemical (America) Co., Ltd. U.S. U.S. Service 100 Investment Wanhua International (India) Private India India Service 100 Investment Limited Wanhua Chemical (Yantai) Chlor-Alkali China Yantai Manufacturing 60 Investment Thermal Power Co., Ltd. Wanhua Chemical (Guangdong) Co., Ltd. China Zhuhai Manufacturing 100 Investment
Subsidiary Wanhua Chemical (Foshan) Rongwei acquired not China Foshan Manufacturing 80 Polyurethane Co., Ltd. (Note 5) under com- mon control Subsidiary acquired not Yantai Wanhua Chemical Design Institute China Yantai Service 100 under com- mon control
Subsidiary Wanhua Chemical (Ningbo) Chlor-alkali acquired not China Ningbo Manufacturing 26.83934 23.52941 Co., Ltd.(Note 6) under com- mon control Wanhua Chemical (Yantai) Selling Co., Ltd. China Yantai Service 95 5 Investment (Note 7)
Wanhua Chemical (Yantai) Rongwei By spinning China Yantai Manufacturing 80 Polyurethane Co., Ltd. off Subsidiary Shanghai Wanhua Kejv Chemical Technolo- acquired not China Shanghai Service 100 gy Development Co., Ltd. under com- mon control Wanhua Chemical US Holding Inc. U.S. U.S. Service 100 Investment
119 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Wanhua Chemical (Singapore) Co., Ltd. Singapore Singapore Service 2.5 97.5 Investment (Note 8) Wanhua Shipping (Singapore) Co., Ltd. Singapore Singapore Service 100 Investment Wanhua Chemical International Holding Britain Virgin Island Service 100 Investment Co., Ltd. Wanhua America Innovation Technology U.S. U.S. Service 100 Investment Co., Ltd. Wanhua Chemical (Yantai) Petrochemical China Yantai Service 100 Investment Co., Ltd. Wanhua Chemical US Real Estate LLC U.S. U.S. Service 100 Investment Wanhua Chemical (Hungary) Holding Co., Hungary Hungary Service 100 Investment Ltd. Zhuhai Wanhua Real Estate Development China Zhuhai Real Estate 100 Investment Co., Ltd. Ningbo XinDa Mingzhou Trading Co. Ltd. China Ningbo Service 50.36875 Investment (Note 9) Wanhua Chemical Group Energy Co., Ltd. China Yantai Service 100 Investment (Note10) Yantai Wanhua Port Service Co., Ltd. (Note China Yantai Service 100 Investment 11) Wanhua Chemical US Operations LLC (Note U.S. U.S. Manufacturing 100 Investment 12)
Description of the shareholding varying from the voting right over the subsidiaries:
Note 5: According to the agreement signed between the Company and the subsidiary Foshan Rongwei and Yantai Rongwei, the Company holds 65% of the total voting rights. Based on the capital injection agreement, the Company promises to distribute the profits to shareholders based on the proportion of the registered capital with the rate of return of 10% disregarding profit or loss Foshan Rongwei made before IPO. When annual gross profit is below RMB 10,000,000, the Group guarantees the shareholders that the return of equity will be RMB 1,977,150, the distribution will be accumulated. While, the annual gross profit is more than RMB 10,000,000, the distribution will based on the capital proportion.
The basis for holding half or less of the voting rights but still controlling the investee, and holding more than half of the voting rights but not controlling the investee:
Ningbo Xiebei Thermal Power Co., Ltd. is the joint venture set up by the subsidiary Wanhua Thermal and Union King Holdings Limited. Wanhua Thermal holds 55% of its total share and the investment reached RMB 148,500,000.00. While Union King Holdings Limited holds 45% of the total shares and its investment reached RMB 121,500,000. According to the articles of incorporation of Xiebei Thermal Power, the decision made by the board will not be effective unless approved by two thirds of the directors. However, based on the Agreements of Shareholders' Voting Rights signed between our Company and Union King Holdings Limited. Union King Holdings Limited, as a shareholder of Xiebei Thermal Power, promises to act in concert with our Company when exercising the proposal rights on operating plans, financial budget preparation, financial policies, investments and portfolio management, management on cash and assets, and other operating and financial policies. Otherwise, the appointed director will act in concert with the director appointed by our Company when exercise the proposal rights. Therefore, Hong Kong Wanli will be consolidated in the financial statements as the subsidiary of Wanhua Ningbo.
On 1 July 2016, Wanhua Thermal Power and Union King Holdings Limited agreed to terminate the Agreements of Shareholders' Voting Rights, and Union King Holdings Limited is no longer controlled by Wanhua Thermal Power nor included in the consolidated scope. According to the Articles of Xiebei Thermal Power, the Board of Directors consists of five directors, three of which is appointed by the Group, and the decision made by the board will not be effective unless approved by two thirds of the directors. Therefore it is a joint venture which is being jointly controlled and thus equity method is adopted.
120 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Other explanation:
Note1: The Company holds 74.5% of equity interests in Wanhua Ningbo, Yantai Wanhua Chemical Co., Ltd. holds the remaining 25.5% of equity interests in Wanhua Ningbo.
Note 2: Newly set up by Ningbo Electric Power Development Company and Ningbo Daxie Development Zone Klc Holdings Ltd., the Company holds 51% of its total equity interests.
Note 3: A subsidiary invested by Wanhua Ningbo, who was a wholly owned subsidiary of the Company. Therefore, the Group holds 74.5% of voting rights over Wanhua Ningbo.
Note 4: Wanhua Chemical (Ningbo) Rongwei Polyurethane Co., Ltd is used to be wholly-owned subsidiary set up by Foshan Rongwei Investment who was held by the Company with capital proportion of 80%. According to the agreement signed between the Company and the minority shareholders of Foshan Rongwei in current period, Foshan Rongwei has divided into Yantai Rongwei and Foshan Rongwei. It is now a wholly-owned subsidiary of Yantai Rongwei after the split-off based on the agreement. The Company holds 80% of voting rights over Wanhua Chemical (Yantai) Rongwei Polyurethane Co., Ltd.
Note 6: As at 31 December 2016, the Company 25.36875% of voting rights over Wanhua Chemical (Ningbo) Chlor-Alkali Co., Ltd., Wanhua Chemical (Hong Kong) Co., Ltd. holds 25% of voting rights over Wanhua Chemical (Ningbo) Chlor-Alkali Co., Ltd. In September 2017, shareholders other than Wanhua Chemical (Hong Kong) Co., Ltd. contributed RMB 55 million to Wanhua Chemical (Ningbo) Chlor-Alkali Co., Ltd., of which the Company and Wanhua Chemical (Hong Kong) Co., Ltd. increased the capital according to their total shareholdings, and the remaining shareholders increased the capital according to their original shareholdings. After the capital increase, the direct shareholding of the Company increased to 26.83934% and the indirect shareholding of Wanhua Chemical (Hong Kong) Co., Ltd. decreased to 23.52941%.
Note 7: Newly set up by the Company and Wanhua Beijing who is the subsidiary of the Company, the Company holds 95% of total equity interests and Wanhua Beijing holds 5% of total equity interests.
Note 8: In the current period, Wanhua Chemical (Hungary) Holding Co., Ltd., subsidiary of the Company, increased capital contribution to Wanhua Singapore by USD 39,000,000, with shareholding ratio increased by 97.5%. The Company's direct equity interests in Wanhua Singapore fell to 2.5%.
Note 9: Newly set up by the Company and Wanhua Chemical (Ningbo) Chlor-Alkali Co., Ltd., who is the subsidiary of the Company, the Company holds 50.36875%% of equity interest of Ningbo XinDa Mingzhou Trading Co. Ltd.
Note 10: It is a wholly-owned subsidiary directly set up by the Company, 100% equity interests of which is immediately held by the Company. Refer to Note (VIII) 5.
Note 11:It is a wholly-owned subsidiary set up by the Company's subsidiary, of which 100% of equity interests is intermediately held by the Company.
Note 12: It is a wholly-owned subsidiary set up by the Company's subsidiary, Wanhua Chemical US Holding Inc., of which 100% of equity interests is intermediately held by the Company.
121 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
2. Significant not-wholly-owned subsidiaries
✓ Applicable □ N/A
Unit: RMB Proportion of Profit and loss attribut- Dividend de- Closing balance of Name of subsidiary minority interest able to minority interest clared minority interest (%)
Wanhua Chemical (Ningbo) 25.5% 975,049,942.52 3,276,065,937.58 Co., Ltd. Wanhua Chemical (Ningbo) 49% 56,119,377.61 98,000,000.00 323,812,267.55 Thermal Power Co., Ltd. Wanhua Chemical (Ningbo) 49.63125% 110,957,252.66 138,967,500.00 443,398,910.80 Chlor-alkali Co., Ltd.
Description of minority interests in subsidiaries varies from their voting rights:
□ Applicable ✓ N/A
122 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
3. Financial information in significant not-wholly-owned subsidiaries
✓ Applicable □ N/A
Unit: RMB Closing balance Opening balance Name of subsidiary Non-current Current Non-current Non-current Current Non-current Current assets Total assets Total liabilities Current assets Total assets Total liabilities assets liabilities liabilities assets liabilities liabilities
Wanhua Chemical (Ningbo) 12,461,678,560.39 6,623,275,439.54 19,084,953,999.93 5,655,164,279.84 58,900,000.00 5,714,064,279.84 8,798,399,770.60 6,788,031,912.04 15,586,431,682.64 5,979,167,227.34 60,100,000.00 6,039,267,227.34 Co., Ltd.
Wanhua Chemical (Ningbo) 128,692,739.51 976,748,527.79 1,105,441,267.30 406,800,606.85 9,675,937.50 416,476,544.35 174,393,628.46 1,018,579,856.58 1,192,973,485.04 408,684,041.66 9,854,062.50 418,538,104.16 Thermal Power Co., Ltd.
Wanhua Chemical (Ningbo) 683,180,971.65 713,094,318.48 1,396,275,290.13 474,804,537.48 10,061,469.14 484,866,006.62 605,200,852.81 710,757,861.78 1,315,958,714.59 337,896,108.41 10,216,607.21 348,112,715.62 Chlor-alkali Co., Ltd.
Amount for the current period Amount for the prior period Name of subsidiary Operating Total compre- Operation cash Operating Total compre- Operation cash Net profit Net profit income hensive income flow income hensive income flow
Wanhua Chemical (Ningbo) 10,697,358,164.19 3,823,725,264.79 3,823,725,264.79 -396,231,557.53 9,459,923,866.66 2,700,755,053.14 2,700,755,053.14 102,439,173.39 Co., Ltd. Wanhua Chemical (Ningbo) 568,609,592.20 114,529,342.07 114,529,342.07 275,292,253.97 577,287,385.81 134,729,367.30 134,729,367.30 205,679,910.99 Thermal Power Co., Ltd. Wanhua Chemical (Ningbo) 859,297,189.96 223,563,284.54 223,563,284.54 273,839,793.48 817,080,916.92 228,697,793.54 228,697,793.54 139,420,433.71 Chlor-alkali Co., Ltd.
4. Significant restrictions on utilization of the group's assets and liquidation of the group's debts
□ Applicable ✓ N/A
5. Finanical supports or other supports to structured entities included in the scope of consolidated financial statements
□ Applicable ✓ N/A
(II) Shares of owners' equity in subsidiaries change but still control transactions of subsidiaries
□ Applicable ✓ N/A
123 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(III) Equity in joint ventures or associates
✓ Applicable □ N/A
1. Significant joint venture or associates
✓ Applicable □ N/A
Unit: RMB
Main Registration Business Proportion (%) Accounting Name of associate and joint venture location location nature Direct Indirect method
I. Joint Venture Yantai Harbor Wanhua Industrial Park China Yantai Service 50 Equity method Port Co., Ltd. (Note 1) UI Wanhua (Yantai) peroxide Co., Ltd. China Yantai Manufacturing 50 Equity method (Note 2) Ningbo Xiebei Thermal Power Co., Ltd. China Ningbo Manufacturing 55 Equity method (Refer to Note IX 1, (1)) Yantai Recycled Water Co., Ltd (Refer China Yantai Manufacturing 31 Equity method to Note VII,11) II. Associate Linde Gas (Yantai) Co., Ltd. (Note 3) China Yantai Manufacturing 10 Equity method Yantai Bulk Commodity Exchange Cen- China Yantai Service 20 Equity method ter (Note VII, 11)
The basis for holding 20% or less of the voting rights but having a significant influence, or holding 20% or more of the voting rights without significant influence:
Note 3: It is a joint venture co-founded by Linde Gas (Hong Kong) Co., Ltd. and the Company; the Company holds 10% of equity interest. According to the Articles of the Company, the Board of Directors consists of five directors, one of which is appointed by the Company, therefore the Company can exert significant influence over the operating policy decisions and thus equity method is adopted. In the current period, Linde Gas (Yantai) Co., Ltd. made resolutions to increase capital investment to RMB 796,661,000.00. The Company added investments by RMB 45,666,100.00 in cash, holding 10% of the equity interests.
Other explanation:
Note 1: The registration capital was RMB 120,000,000.00, the Company holds 50% of equity interest. Yantai Harbor Wanhua Industrial Park Port Co., Ltd. made resolutions to increase capital to RMB 320,000,000.00 in 2015. The Company added investments by RMB100, 000,000.00 in cash, holding 50% of the equity interests. In the current period, Yantai Harbor Wanhua Industrial Park Port Co., Ltd. again made resolutions to increase capital investment to RMB 520,000,000.00, the Company added investments by RMB100, 000,000.00 in cash, still holding 50% of the equity interests.
Note 2: It is a joint venture co-founded by United Initiators Asia Limited and the Company, and the Company holds 50% of equity interest. According to the articles of association, the board of director is composed of four directors, among which of the Company has two directors. Therefore, it is a joint venture which is being jointly controlled and thus equity method is adopted.
124 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
2. Financial information in significant joint ventures
✓ Applicable □ N/A
Unit: RMB Closing balance/Amount for the current period Opening balance/Amount for the prior period Yantai Harbor UI Wanhua Yantai Harbor UI Wanhua Ningbo Xiebei Yantai Recy- Ningbo Xiebei Yantai Recy- Wanhua Indus- (Yantai) Wanhua Indus- (Yantai) Thermal Pow- cled Water Thermal Pow- cled Water Co., trial Park Port Peroxide Co., trial Park Port Peroxide Co., er Co., Ltd. Co., Ltd. er Co., Ltd. Ltd. Co., Ltd. Ltd. Co., Ltd. Ltd.
Current assets 503,001,685.33 28,140,003.48 219,143,113.02 31,103,029.18 82,273,512.99 28,142,040.90 230,576,423.86 60,757,834.81 Including: Cash and cash equivalents 113,474,222.19 28,005,255.14 77,178,689.84 8,840,081.74 73,193,208.93 28,007,464.60 96,956,165.04 60,600,403.64 Non-current assets 1,200,557,890.51 2,269,320.75 682,228,106.29 200,140,724.71 907,149,340.04 2,269,320.75 679,071,516.72 88,336,456.62 Total assets 1,703,559,575.84 30,409,324.23 901,371,219.31 231,243,753.89 989,422,853.03 30,411,361.65 909,647,940.58 149,094,291.43 Current liabilities 513,178,647.72 107.00 431,789,860.96 82,326,287.39 445,010,119.85 367,076,666.72 3,650.00 Non-current liabilities 600,592,641.71 103,000,000.00 165,645,260.94 137,000,000.00 Total liabilities 1,113,771,289.43 107.00 534,789,860.96 82,326,287.39 610,655,380.79 504,076,666.72 3,650.00 Minority interests Shareholders' interests attributable to 589,788,286.41 30,409,217.23 366,581,358.35 148,917,466.50 378,767,472.24 30,411,361.65 405,571,273.86 149,090,641.43 the Company Share of net assets calculated based on 294,894,143.21 15,204,608.62 201,619,747.09 55,720,102.62 189,383,736.12 15,205,680.83 223,064,200.62 55,773,786.84 proportion of shareholdings Adjustments: --Goodwill --Unrealized profit of internal transac- tions --Others Book value of equity investment in joint 294,894,143.21 15,204,608.62 201,619,747.09 55,720,102.62 189,383,736.12 15,205,680.83 223,064,200.62 55,773,786.84 ventures Fair value of equity investments in joint venture with quoted price on open mar- N/A N/A N/A N/A N/A N/A N/A N/A ket
125 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Operating income 88,429,395.25 437,517,920.70 84,091,165.85 379,291,263.20 Financial expenses 8,429,408.59 253.85 4,432,689.30 -137,317.24 3,561,761.62 371.06 8,158,278.23 Income tax expenses 25,449,424.92 29.99 22,351,298.94 Net profit 11,020,814.17 -253.85 81,563,648.45 -173,174.93 22,049,330.01 -64,916.67 69,670,926.86 Net profit from discontinued operations Other comprehensive income Total comprehensive income 11,020,814.17 -253.85 81,563,648.45 -173,174.93 22,049,330.01 -64,916.67 69,670,926.86 Dividend from joint ventures 66,304,460.18
126 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
3. Financial information in significant joint ventures
✓ Applicable □ N/A
Unit: RMB Closing balance / Amount for the Opening balance / Amount for the current period prior period
Name of associate and joint venture Yantai Bulk Yantai Bulk Linde Gas (Yan- Linde Gas (Yan- Commodity Ex- Commodity Ex- tai) Co., Ltd. tai) Co., Ltd. change Center change Center
Current assets 346,142,607.69 39,571,772.02 278,403,340.15 47,024,197.45 Non-current assets 924,612,011.09 10,242,578.11 864,390,674.89 23,846.15 Total assets 1,270,754,618.78 49,814,350.13 1,142,794,015.04 47,048,043.60 Current liabilities 75,878,137.92 593,635.75 444,709,562.63 663,056.28 Non-current liabilities 377,794,323.87 375,840,731.08 Total liabilities 453,672,461.79 593,635.75 820,550,293.71 663,056.28 Minority interests Shareholders' interests attributable to the 817,082,156.99 49,220,714.38 322,243,721.33 46,384,987.32 Company Share of net assets calculated based on 81,708,215.70 9,844,142.88 32,224,372.13 9,976,997.46 proportion of shareholdings Adjustments: -- Goodwill -- Unrealized profit of internal transactions -- Others Book value of equity investment in joint 81,708,215.70 9,844,142.88 32,224,372.13 9,976,997.46 ventures Fair value of equity investments in joint N/A N/A N/A N/A venture with quoted price on open market Operating income 304,704,006.31 2,971.71 243,890,625.61 Net profit 36,727,070.61 -651,694.41 5,102,477.89 15,317.76 Net profit from discontinued operations Other comprehensive income Total comprehensive income 36,727,070.61 -651,694.41 5,102,477.89 15,317.76 Dividend from associates
Other explanation:
Under the equity method, there is no significant difference between the accounting policies of the Group and those of the Group's joint ventures and associates. In addition, there does not exist significant limitation regarding investment realization and remittance of investment income of such long-term investments.
4. Summary of financial information in nonsignificant joint venture and associates
□ Applicable ✓ N/A
5. Significant restrictions on the ability of joint ventures or associates to transfer capital to the Company
□ Applicable ✓ N/A
127 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
6. Excess losses incurred in joint ventures or associates
□ Applicable ✓ N/A
7. Unrecognized commitments relating to investments with joint ventures
✓ Applicable □ N/A
According to Articles of Association of UI Wanhua (Yantai) Peroxide Co., Ltd., capital contribution of RMB30,000,000.00 was subscribed by the Company, and the actual contribution paid up was RMB RMB15,000,000.00 with the outstanding contribution of RMB15,000,000.00. Refer to Note (XIV), 1 (1).
8. Contingent liability related to associates and joint ventures
□ Applicable ✓ N/A
(IV) Significant common management
□ Applicable ✓ N/A
(V) Equity in structured entities that are not included in the consolidated scope
Description of structured entities that are not included in the consolidated scope:
□ Applicable ✓ N/A
(VI) Others
□ Applicable ✓ N/A
X. RISKS RELATED TO FINANCIAL INSTRUMENTS
✓ Applicable □ N/A
The Group's major financial instruments include cash and bank balances, notes receivable, accounts receivable, other receivables, available-for-sale financial assets, long-term receivables, borrowings, notes payable, accounts payable, interest payable, other payables, derivative financial liabilities and long-term payables etc. Details of these financial instruments are disclosed in Note (VII). The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. Management of the Group manages and monitors these exposures to ensure the risks are monitored at a certain level.
The sensitivity analysis technique has been adopted by the Group to analyze the possible effect of risk variables on current profits and losses and stockholders' equity. Since any risk variable rarely change individually, the relevance among these risk variables could lead to significant impact on the total amount. Therefore, the following content is under the assumption that each risk variable incurs in condition of independence.
(I) Risk management objectives and policies
The Group's risk management objectives are to achieve a proper balance between risks and yield, minimize the adverse impacts of risks on the Group's operation performance, and maximize the benefits of the shareholders and other stakeholders. Based on these risk management objectives, the Group's basic risk management strategy is to identify and analyze the Group's exposure to various risks, establish an appropriate maximum tolerance to risk, and implement risk management, and monitor regularly and effectively these exposures to ensure the risks are monitored at a certain level.
128 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
1. Market risk
(1) Currency risk
Currency risk is the risk that losses will occur because of changes in foreign exchange rates. The Group's exposure to the currency risk is primarily associated with USD, EUR, JPY, RUB, SGD, KRW, HKD, CHF, GBP and AED. Several of the Group's subsidiaries have purchases and sales denominated in USD, EUR, JPY, RUB, SGD, KRW, HKD, CHF, GBP and AED while the Group's other principal activities are denominated and settled in RMB.
As at 30 June 2018, the balance of the Group's assets and liabilities are both denominated in RMB except that the assets and liabilities set out below are denominated in USD, EUR, JPY, RUB, SGD, KRW, HKD, CHF, GBP, AED and HUF. Currency risk arising from the assets and liabilities denominated in foreign currencies may have impact on the Group's performance.
Unit: RMB Item Closing balance Opening balance
Cash and cash equivalents 179,479,420.21 463,342,081.16 Accounts receivable 1,106,715,216.74 730,695,856.86 Other receivables 465,500.93 478,454.38 Short-term borrowings 1,598,909,452.12 1,395,984,558.86 Accounts payable 174,702,887.81 292,842,230.81 Interest payable 5,672,475.64 846,680.72 Other payables 33,599.06 36,347.23
The Group closely monitors the effects of changes in the foreign exchange rates on the Group's currency risk exposures. The Group analyzes and forecasts changes in the foreign exchange rates and adjusts foreign currency liabilities to reduce foreign currency losses and obtains foreign currency income.
Sensitivity analysis on currency risk
129 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Holding other factors constant, listed is the effect of net profit and shareholders' equity due to exchange rate change:
Unit: RMB'000 At the end of the period Item Exchange rate change Impact on net profit Impact on shareholders' equity
USD Appreciate 1% against RMB -8,309 -8,309 USD Depreciate 1% against RMB 8,309 8,309 EUR Appreciate 1% against RMB 4,522 4,522 EUR Depreciate 1% against RMB -4,522 -4,522 JPY Appreciate 1% against RMB 765 765 JPY Depreciate 1% against RMB -765 -765 KRW Appreciate 1% against RMB 495 495 KRW Depreciate 1% against RMB -495 -495 CHF Appreciate 1% against RMB -48 -48 CHF Depreciate 1% against RMB 48 48 GBP Appreciate 1% against RMB -3 -3 GBP Depreciate 1% against RMB 3 3 HKD Appreciate 1% against RMB -1 -1 HKD Depreciate 1% against RMB 1 1 AED Appreciate 1% against RMB 2 2 AED Depreciate 1% against RMB -2 -2 SGD Appreciate 1% against RMB 4 4 SGD Depreciate 1% against RMB -4 -4 RUB Appreciate 1% against RMB 1 1 RUB Depreciate 1% against RMB -1 -1
(2) Interest rate risk – risk of changes in cash flows
The Group's cash flow interest rate risk of financial instruments relates primarily to variable-rate bank borrowings. As at 30 June 2018, balance of floating-rate loan amounted to RMB 13,789,755,218.10. It is the Group's policy to keep its borrowings at floating rate of interests to eliminate the fair value interest rate risk.
Interest rate sensitivity analysis
The sensitivity analysis on interest rate risk is based on the following assumptions: Changes in the market interest rate may influence the interest income or expense of the variable rate financial instruments;
On the basis of the above assumptions, where all other variables are held constant, the reasonably possible changes in the interest rate may have the following effect on net profit and shareholders' equity:
Unit: RMB'000
Change of Current period Item interest rate Impact on net profit Impact on shareholders' equity
Floating rate financial instruments Increase by 1% -87,484 -87,484 Floating rate financial instruments Decrease by 1% 87,484 87,484
130 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(3) Other price risk
Due to the fluctuation of liquefied petroleum gas prices, the Group's exposure to price risks are partly offset by cash flow hedges in response to price risks. The Group intends to further reduce price risks by using derivative financial instruments where applicable.
2. Credit risk
As at 30 June 2018, the Group's maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties and financial guarantees issued by the Group is arising from:
The carrying amount of the respective recognized financial assets as stated in the consolidated balance sheet. For financial instruments measured at fair value, the carrying amount reflects the exposure to risks but not the maximum exposure to risks. The maximum exposure to risks would vary according to the future changes in fair value.
The amount of financial guarantee contracts disclosed in Note (XIV) 2.
In order to minimize the credit risk, the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the management of the Group considers that the Group's credit risk is significantly reduced.
The Group has no significant concentration of credit risk, with exposure spread over a number of counterparties and customers.
3. Liquidity risk
In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group's operations and mitigate the effects of fluctuations in cash flows. The management monitors the utilization of bank borrowings and ensures compliance with loan covenants.
The Group relies on bank borrowings as a significant source of liquidity. As at 30 June 2018, the Group has available unutilized bank loan facilities of over RMB 32.7 billion.
The following is the maturity analysis for financial assets and financial liabilities held by the Group, which is based on undiscounted remaining contractual obligations:
Unit: RMB No maturity date Within 1 year 1 to 2 years 2 to 3 years More than 3 years Total
Non-derivative finan-
cial liabilities
Short-term borrowings 15,547,439,603.98 15,547,439,603.98
Notes payable 2,277,674,547.01 2,277,674,547.01
Accounts payable 3,671,114,571.69 3,671,114,571.69
Other payables 335,019,834.40 335,019,834.40
Long-term borrowings 2,086,469,267.59 2,364,484,023.99 1,154,408,683.04 2,043,668,250.00 7,649,030,224.62
Long-term payables 1,377,071.00 1,377,071.00
Derivative financial
liabilities
Financial guarantee 75,000,000.00 327,500,000.00 225,000,000.00 627,500,000.00 contracts
131 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(II) Transfer of financial assets
Transferred financial assets with entire derecognition but continued involvement
The Group has discounted the bank acceptance and third party endorsement bank acceptance to banks and third parties in the current year. As the relevant interest risk, credit risk, and other risks and rewards of those bank acceptance had been transferred to banks and third parties, our group had derecognized those undue acceptance bills, which had been discounted or endorsed already. Based on the agreement, if the bank acceptance cannot be accepted on the due date, our group has the responsibility to pay off the outstanding balance of those bills; based on the regulation of bills, the bill holder has the right of recourse if the bills were declined. Therefore, our group had continually involved those undue bills that had been discounted or endorsed. As 30 June 2018, the balance of those undue but discounted bills, undue but endorsed bills were RMB 839,020,660.99 (as at 31 December 2017: RMB 117,673,130.00) and RMB 379,789,654.33 (as at 31 December 2017: RMB 1,582,199,513.32), respectively.
XI. FAIR VALUE
(I) Closing fair values of assets and liabilities measured at fair
✓ Applicable □ N/A
Unit: RMB Closing balance Item Level 1 Level 2 Level 3 Total
I. Continuous fair value measurement (I) Financial assets at fair value through profit or loss (II) Available-for-sale financial assets (III) Investment properties (IV) Biological assets Total assets continuously measured at fair value (V) Held-for-trading financial liabilities 2,785,734.17 2,785,734.17 Including: Held-for-trading bonds issued Derivative financial liabilities 2,785,734.17 2,785,734.17 Others (VI) Designated as financial liabilities at fair value
through profit or loss Total liabilities continuously measured at fair value 2,785,734.17 2,785,734.17
132 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
1. Items at continuous and non-continuous level 2 fair value measurement, qualitative and quantitative information on valuation techniques and important parameters adopted
✓ Applicable □ N/A
Item Fair value at 30 June 2018 Valuation technique Inputs
Derivative financial assets Held-for-trading financial liabilities
Including: Liquefied petroleum gas (LPG) Method of discounted cash 2,785,734.17 Forward price futures contracts flow analysis
(II) Disclosure of fair value of asset and liability not measured at fair value
✓ Applicable □ N/A
The Group's financial asset and liability, measured by amortized cost, mainly include: notes receivable, accounts receivable, other receivables, long-term receivables, short-term borrowings, notes payable, accounts payable, interest payable, other payables, non-current liability due within a year, long-term borrowings, bonds payable and long-term payables.
Other than financial asset and liability mentioned below, the difference between the book value and fair value of financial asset and liability, not measured by fair measure method, is not noticeable. Unit: RMB
Closing balance Opening balance Book value Fair value Book value Fair value
Financial assets -Long-term receivables 350,050,363.76 292,629,139.34 318,793,498.76 264,775,932.98 Financial liabilities -Long-term borrowings 5,238,643,571.40 4,665,042,623.76 6,321,648,809.13 5,710,683,671.53
2. Others
□ Applicable ✓ N/A
133 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
XII. RELATED PARTY RELATIONSHIPS AND TRANSACTIONS
(I) Parents of the Company
✓ Applicable □ N/A
Unit: RMB0 '000 Proportion of the Com- Proportion of the Com- Name of Registered Registered Nature of business pany's ownership inter- pany's voting power Company place capital RMB est held by the parent (%) held by the parent (%) Yantai Manufacture, processing and sale of Wanhua raw materials and product of PU and Yantai 7,893.04 47.92 47.92 Chemical TPU, industrial gas, sodium hydroxide Co., Ltd. and chlorine products etc.
Explanations of the Company's parent company
On 30 January 2018, the Company's controlling shareholder, Wanhua Chemical Group Co., Ltd., completed the division by continued existence. In particular, Wanhua Chemical Group Co., Ltd., was divided into Wanhua Chemical Group Co., Ltd. (surviving company) and the newly established Yantai Wanhua Chemical Co., Ltd.
Before this division, the registered capital of Wanhua Industry was RMB 1,478,930,407.46. After this division, the registered capital of the surviving company is RMB 1,400,000,000.00 while the new established company Yantai Wanhua Chemical Co., Ltd. is RMB 78,930,407.46.
After this division, the original shareholders of Wanhua Industry kept the same proportion of capital contribution in the surviving company Wanhua Industry and the new company Yantai Wanhua. Moreover, the Company's controlling shareholder changed to Yantai Wanhua from Wanhua Industry, but the Company's actual controller hasn't changed.
The Company's ultimate controlling party is State-owned Assets Supervision and Administration Commission of Yantai Municipal Government.
(II) Subsidiaries of the Company
✓ Applicable □ N/A
For details of subsidiaries of the Group, refer to Note (IX) 1.
134 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(III) Associates and joint ventures of the Company
For details of significant associates and joint ventures of the Company, refer to Note (IX) 3.
✓ Applicable □ N/A
Details of other joint ventures or associates that had related party transactions with the Company for the current period or prior periods of which the balance is incurred:
✓ Applicable □ N/A
Name of associate and joint venture Relationship with the Company
Yantai Harbor Wanhua Industrial Park Port Co., Ltd. Joint venture UI Wanhua (Yantai) Peroxide Co., Ltd. Joint venture Ningbo Xiebei Thermal Power Co., Ltd. Joint venture Yantai Recycled Water Co., Ltd. Joint venture Linde Gas (Yantai) Co., Ltd. Associate Yantai Bulk Commodity Exchange Center Associate
(IV) Other related parties
✓ Applicable □ N/A
Name of other related parties Relationship between other related parties and the Company
Wanhua EnergySav Science & Technology Co., Ltd. With the same ultimate holding company Wanhua EnergySav (Yantai) Engineering Co., Ltd. With the same ultimate holding company Wanhua EnergySav Science Technology (Yantai) Co., Ltd. With the same ultimate holding company Wanhua EnergySav (Yantai) Environment Protection With the same ultimate holding company Science & Technology Co., Ltd. Wanhua Building Technology (Yantai) Co., Ltd. With the same ultimate holding company BorsodChem Zrt. Wholly-owned subsidiary of parent company BorsodChem MCHZ, s.r.o. Wholly-owned subsidiary of parent company BorsodChem Italia S.r.l. Wholly-owned subsidiary of parent company Wanhua BorsodChem Latin-America Wholly-owned subsidiary of the parent company Comercio de Produtos Quimicos Ltda. Wholly-owned subsidiary of parent company Shanxi Zhongqiang Fushan Coal Industry Co., Ltd. With the same ultimate holding company Wanhua Ecoboard Co., Ltd. Associate of the same ultimate holding company Wanhua Ecoboard (Jingzhou) Co., Ltd. Subsidiary of the associate of the same ultimate holding company Wanhua Ecoboard (Xinyang) Co., Ltd. Subsidiary of the associate of the same ultimate holding company Wanhua Eco-technology (Yantai) Co., Ltd. Subsidiary of the associate of the same ultimate holding company Yantai Wanhua Chlor-Alkali Co., Ltd. Associate of the parent company Yantai Huali Thermal Power Co., Ltd. Wholly-owned subsidiary of the associate of the parent company Yantai Tayho Advanced Materials Co.,Ltd. With the same ultimate holding company Moon Environment Technology Co.,Ltd. With the same ultimate holding company
135 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(V) Related party transactions
1. Sales and purchase of goods, provision and receipt of services
Purchase of goods/receipt of services
✓ Applicable □ N/A
Unit: RMB Amount for the Amount for the Related Party Types of related party transaction current period prior period
Purchase of commodities / receipt of BorsodChem Zrt. 199,053,035.28 161,598,533.77 service Wanhua BorsodChem Latin-America receipt of service 3,824,785.06 1,332,176.07 Comercio de Produtos Quimicos Ltda.
Wanhua EnergySav Science & Technology Purchase of material/receipt of ser- 17,465.81 Co., Ltd. vice
Wanhua Building Technology (Yantai) Co., Purchase of commodities / receipt of 1,922,424.82 1,925,359.86 Ltd. service Wanhua EnergySav (Yantai) Environment Purchase of material 1,339,460.42 853.40 Protection Science & Technology Co., Ltd. Wanhua EnergySav (Yantai) Engineering receipt of service 228,225.23 792,101.20 Co., Ltd. Shanxi Zhongqiang Fushan Coal Industry Purchase of material 2,587,550.10 38,932,742.08 Co., Ltd. Linde Gas (Yantai) Co., Ltd. Purchase of material 166,662,733.25 138,895,798.58 Yantai Harbor Wanhua Industrial Park Port receipt of service 87,939,760.93 89,512,718.60 Co., Ltd. Purchase of material/receipt of ser- Yantai Wanhua Chlor-Alkali Co., Ltd. 1,763,634.64 1,438,286.36 vice Purchase of material/receipt of ser- Yantai Huali Thermal Power Co., Ltd. 7,032,433.63 9,765,471.91 vice Ningbo Xiebei Thermal Power Co., Ltd. Purchase of material 36,695,967.51 14,321,282.01
136 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Sales of goods/ provision of services
✓ Applicable □ N/A
Unit: RMB Types of related party trans- Amount for the Amount for the Related Party action current period prior period
BorsodChem Zrt. Sales of commodities 659,627,004.64 517,570,817.77 BorsodChem MCHZ, s.r.o. Sales of commodities 2,802,661.71 BorsodChem Italia S.r.l. Sales of commodities 5,682,779.77 1,474,475.84 Wanhua BorsodChem Latin-America Comercio de Sales of commodities 2,391,080.45 Produtos Quimicos Ltda. Wanhua EnergySav Science & Technology Co., Ltd. Sales of commodities 81,327,163.17 46,670,269.34 Wanhua EnergySav Science Technology (Yantai) Co., Sales of commodities 50,388.12 13,604.82 Ltd. Wanhua Building Technology (Yantai) Co., Ltd. Sales of commodities 4,273.50 Yantai Wanhua Chlor-Alkali Co., Ltd. Sales of commodities 466,542.92 3,554,314.62 Sales of commodities/Render- Linde Gas (Yantai) Co., Ltd. 159,986,364.41 168,932,231.77 ing service
Yantai Harbor Wanhua Industrial Park Port Co., Ltd. Rendering service 1,012,264.15 843,396.22 Wanhua Ecoboard Co., Ltd. Sales of commodities 136,752.14 Wanhua Eco-technology (Yantai) Co.,Ltd. Sales of commodities 130,104,795.01 64,686,259.48 Wanhua Ecoboard (Jingzhou) Co., Ltd. Sales of commodities 13,821,813.51 20,401,672.25 Wanhua Ecoboard (Xinyang) Co., Ltd. Sales of commodities 4,552,991.46 Sales of commodities/Render- Ningbo Xiebei Thermal Power Co., Ltd. 194,346,783.37 156,535,998.22 ing service Yantai Tayho Advanced Materials Co.,Ltd. Sales of commodities 112,608,814.99 Moon Environment Technology Co.,Ltd. Sales of commodities 920,927.70
Description of related party transactions related to purchase and sales of goods, provision and receipt of services
✓ Applicable □ N/A
The pricing of the transactions is in accordance with the general service agreements, product purchase and sales contracts and other supplementary agreement signed between the Group and the related companies. The Company enters into arm's length transactions with the related parties based on the principles of equality, voluntariness, equivalence.
2. Description of trust/contracting/subcontracting with related parties
Details of trust/contracting with related parties:
✓ Applicable □ N/A
Unit: RMB Guaranteed Guaranteed Inception date Expiration date Whether execution of guar- Guarantor Guarantor amount amount used of guarantee of guarantee antee has been completed
Wanhua Other assets 1 February Wanhua Industry 30 January 2018 Lease agreement Chemical under trust 2017
Wanhua Chemi- Wanhua Other assets 31 January 1 February 2020 Lease agreement cal Industry Chemical under trust 2018
137 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Description of trust / contracting with related parties
✓ Applicable □ N/A
On 1 February 2017, the Company signed Supplementary Agreement to the Agreement of Wanhua Industrial Group Co., Ltd. Entrusting Wanhua Chemical Group Co., Ltd. to Manage Hungary BorsodChem Co., Ltd. with Wanhua Industrial Group Co., Ltd., and reached agreement on the operation management of BorsodChem Zrt. ("BC Company"), the terms are as follows:
1) After the acquisition, Wanhua Industrial Group Co., Ltd. entrusts the Company to manage the operations of BC Company;
2) The Company is not responsible for the profits or losses of BC Company during the entrusted period;
3) To ensure the right of operation management, Wanhua Industrial Group Co., Ltd. agrees that senior management personnel are appointed by the Company;
4) Wanhua Industrial Group Co., Ltd. will pay a trust fee of RMB 10,000,000 to the Company annually;
5) Within 18 months after the improvement of operations of BC Company (including but not limited to recurring operating loss will not occur in the following 12 months, BC Company has the conditions of sustainable operations) , the Company has the right to require Wanhua Industrial Group Co., Ltd. to come up with appropriate proposal on business consolidation of the Company and BC Company, Meanwhile Wanhua Industrial Group Co., Ltd. will promise to come up with appropriate proposal on business consolidation of the Company and BC Company within 18 months after the improvement of operations of BC Company and should avoid voting when the proposal is submitted to the shareholders' meeting for final approval;
6) The effective period of the agreement is three years. The terms are to be negotiated upon expiration.
In January 2018, Wanhua Industry, the original controlling shareholder of the Company, finished split-off, i,e, Wanhua Industry split off as Wanhua Industrial Group Co., Ltd. (the company that continues to exist) and established a new company, namely,Yantai Wanhua Chemical Co., Ltd. After the split-off, the Company enters into Supplementary Agreement to the Agreement of Wanhua Industrial Group Co., Ltd. and Yantai Wanhua Chemical Co., Ltd Entrusting Wanhua Chemical Group Co., Ltd. to Manage Hungary BorsodChem Co., Ltd.("BC Company") with Wanhua Industry and Wanhua Chemistry. Upon mutual consent of each party, Wanhua Industrial Group Co., Ltd.'s right of operation management over BC Company as agreed upon earlier continues to be effective. Wanhua Industrial Group is subject to the payment for the trust fee prior to 31 January 2018, while Yantai Wanhua Chemical Co., Ltd. is subject to the payment for the trust fee subsequently.
Details of trust / subcontracting with related parties:
□ Applicable ✓ N/A
Description of relating management // subcontracting with related parties
□ Applicable ✓ N/A
138 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
3. Leases with related parties
Leases where the Company entity is the lessor
✓ Applicable □ N/A
Unit: RMB Rental income recognized in Rental income recognized in Name of lessee Type of leased assets the current period the prior period
Linde Gas (Yantai) Co., Ltd. Land 1,232,629.41 1,229,879.70
Leases where the Company is the lessee:
□ Applicable ✓ N/A
Description of leases with related parties
□ Applicable ✓ N/A
4. Guarantees with related parties
Guarantees where the Company is the guarantor
✓ Applicable □ N/A
Unit: RMB Whether execution Guaranteed Guaranteed Inception date of Expiration date Guaranteed party of guarantee has amount amount used guarantee of guarantee been completed
Yantai Harbor Wanhua Industrial Park Port Co., 25,000,000.00 10,000,000.00 24 April 2014 22 April 2020 No Ltd. (Note 1) Yantai Harbor Wanhua Industrial Park Port Co., 50,000,000.00 40,000,000.00 8 May 2015 7 May 2020 No Ltd. (Note 1) Yantai Harbor Wanhua Industrial Park Port Co., 25,000,000.00 25,000,000.00 29 April 2016 28 April 2021 No Ltd. (Note 1) Yantai Harbor Wanhua Industrial Park Port Co., 225,000,000.00 225,000,000.00 4 April 2018 3 April 2025 No Ltd. (Note 1) Ningbo Xiebei Thermal 55,000,000.00 20,075,000.00 6 September 2015 5 September 2020 No Power Co., Ltd. (Note 2) Ningbo Xiebei Thermal 82,500,000.00 59,186,800.00 4 March 2016 5 September 2020 No Power Co., Ltd. (Note 2) Ningbo Xiebei Thermal 165,000,000.00 44,000,000.00 14 October 2014 13 October 2020 No Power Co., Ltd. (Note 2)
139 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Guarantors where the Company is the guaranteed party
✓ Applicable □ N/A
Unit: RMB Guaranteed Guaranteed Inception date Expiration date of Whether execution of guar- Guarantor amount amount used of guarantee guarantee antee has been completed
Wanhua Industry 1,765,000,000.00 1,765,000,000.00 2015/10/21 2031/11/23 No
Explanation for guarantees with related parties
✓ Applicable □ N/A
Note 1: Yantai Harbor Wanhua Industrial Park Port Co., Ltd., with all assets, provide counter-guarantee for Wanhua Chemical, undertaking joint liability. This counter-guarantee equals the total amount guaranteed by the Company.
Note 2: Ningbo Xiebei Thermal Power Co., Ltd., with all assets, provide counter-guarantee for Wanhua Chemical, undertaking joint liability. This counter-guarantee equals the total amount guaranteed by the Company.
5. Borrowings / loans with related parties
□ Applicable ✓ N/A
6. Assets transfer / debt restructuring with related parties
✓ Applicable □ N/A
Unit: RMB Contents of related Amount for the current Amount for the prior Related party transactions period period
Yantai Wanhua Chlor-Alkali Co., Ltd. Transfer of fixed assets 177,980.00
7. Compensation for key management personnel
✓ Applicable □ N/A
Unit: RMB Item Amount for the current period Amount for the prior period
Compensation for key management personnel 22,483,087.66 17,005,361.70
8. Other related-party transactions
□ Applicable ✓ N/A
140 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(VI) Amounts due from / to related parties
1. Amounts due from related parties
✓ Applicable □ N/A
Unit: RMB Closing balance Opening balance
Item Related party Carrying Bad debt Carrying Bad debt amount provision amount provision
Accounts receivable BorsodChem Zrt. 372,633,967.35 219,348,101.28
Accounts receivable Linde Gas (Yantai) Co., Ltd. 29,981,792.38 1,499,089.62 24,075,850.17 1,203,792.51
Accounts receivable Ningbo Xiebei Thermal Power Co., Ltd. 19,560,241.09 978,012.05 2,015,886.11 100,794.31
Accounts receivable Yantai Tayho Advanced Materials Co.,Ltd. 10,559,891.24 527,994.56
Accounts receivable BorsodChem Italia S.r.l. 3,351,115.16 2,338,467.79
Wanhua BorsodChem Latin-America Comercio de Accounts receivable 2,469,645.95 Produtos Quimicos Ltda.
Wanhua EnergySav Science & Technology Co., Accounts receivable 383,088.19 19,154.41 234,016.19 Ltd.
Accounts receivable Yantai Wanhua Chlor-Alkali Co., Ltd. 185,832.00 9,291.60 68,550.00 3,427.50
Wanhua EnergySav Science Technology (Yantai) Accounts receivable 16,865.68 843.28 20,932.42 Co., Ltd.
Accounts receivable BorsodChem MCHZ, s.r.o. 428,668.42
Accounts receivable Wanhua Building Technology (Yantai) Co., Ltd. 5,000.00
Yantai Harbor Wanhua Industrial Park Port Co., Prepayments 6,219,749.04 6,110,680.34 Ltd.
Prepayments Wanhua Building Technology (Yantai) Co., Ltd. 3,597,493.45
Prepayments Shanxi Zhongqiang Fushan Coal Industry Co., Ltd. 2,327,403.02 5,381,968.84
Prepayments Moon Environment Technology Co.,Ltd. 259,999.96
141 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
2. Amounts due to related parties
✓ Applicable □ N/A
Unit: RMB Item Related party Closing balance Opening balance
Accounts payable BorsodChem Zrt. 91,614,063.66 113,497,704.04
Accounts payable Linde Gas (Yantai) Co., Ltd. 29,897,231.55 24,599,834.74
Accounts payable Yantai Harbor Wanhua Industrial Park Port Co., Ltd. 6,129,640.29 5,549,649.45
Accounts payable Yantai Wanhua Chlor-Alkali Co., Ltd. 5,236,593.83 11,621,063.16
Accounts payable Yantai Huali Thermal Power Co., Ltd. 3,447,778.05 2,025,734.45
Accounts payable Wanhua EnergySav (Yantai) Engineering Co., Ltd. 340,781.83 287,056.67
Accounts payable Moon Environment Technology Co.,Ltd. 174,000.00
Accounts payable Wanhua Building Technology (Yantai) Co., Ltd. 2,741,001.81
Accounts payable Ningbo Xiebei Thermal Power Co., Ltd. 52,958.95
Receipts in advance Wanhua EnergySav Science & Technology Co., Ltd. 549,624.00 346,395.49
Receipts in advance Moon Environment Technology Co.,Ltd. 40.00
Other payables Yantai Harbor Wanhua Industrial Park Port Co., Ltd. 460,974.00 350.00
Other payables Linde Gas (Yantai) Co., Ltd. 32,900.00 45,600.00
Other payables Wanhua Building Technology (Yantai) Co., Ltd. 8,300.00 7,100.00
Wanhua EnergySav (Yantai) Environment Protection Science & Other payables 6,750.00 3,450.00 Technology Co., Ltd.
Other payables Moon Environment Technology Co.,Ltd. 1,500.00
Other payables Ningbo Xiebei Thermal Power Co., Ltd. 1,000,000.00 1,000,000.00
Other payables Wanhua EnergySav (Yantai) Engineering Co., Ltd. 10,750.00
Other payables Yantai Wanhua Chlor-Alkali Co., Ltd. 1,640.00
(VII) Related party commitments
✓ Applicable □ N/A
Please refer to Note (XII)5(2) for details.
(VIII) Others
□ Applicable ✓ N/A
142 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
XIII. SHARE-BASED PAYMENTS
(I) General information about share-based payments
□ Applicable ✓ N/A
(II) Equity-settled share-based payments
□ Applicable ✓ N/A
(III) Cash-settled share-based payments
□ Applicable ✓ N/A
(IV) Modification to and termination of share-based payments
□ Applicable ✓ N/A
(V) Others
□ Applicable ✓ N/A
XIV. COMMITMENTS OR CONTINGENCIES
(I) Significant commitment
✓ Applicable □ N/A
Significant commitment, nature, and amount at the balance sheet date
1. Capital Commitment
Unit: RMB'000 Closing balance Opening balance
- Commitment for acquisition and construction of long-term assets 9,019,572 5,053,691 - External investment commitment (note) 15,000 60,666 Total 9,034,572 5,114,357
Note: As at 30 June 2018, the Group subscribed capital contribution of RMB 30,000,000.00 under the Articles of Association of UI Wanhua (Yantai) Peroxide Co., Ltd. with actually paid-in capital of RMB 15,000,000.00 and the outstanding capital contribution of RMB 15,000,000.00 has not been paid yet. Details can be referred to Note IX 3(7).
143 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
2. Operating lease commitments
At the balance sheet date, the Group had the following commitments in respect of non-cancellable operating leases:
Unit: RMB'000 Closing balance Opening balance
Minimum lease payments under non-cancellable operating leases: 1st year subsequent to the balance sheet date 51,539 48,531 2nd year subsequent to the balance sheet date 23,281 34,935 3rd year subsequent to the balance sheet date 13,571 16,780 4th (or more) year subsequent to the balance sheet date 17,805 19,397 Total 106,196 119,643
3. There is no need to disclose other commitments of the Group as at 30 June 2018.
(II) Contingencies
1. Significant contingencies at the balance sheet date
✓ Applicable □ N/A
Contingent liabilities arise from providing guarantees to other entities and the related financial effects.
The Company provides guarantee to Yantai Harbor Wanhua Industrial Park Port Co., Ltd. for RMB 300 million borrowings and bears joint liability for the repayment, the maturity date of the borrowing is 3 April 2025. Meanwhile, these guarantees are offered counter guarantee by Yantai Harbor Wanhua Industrial Park Port Co., Ltd. As at 30 June 2018, there was no significant guarantee liability. Refer to Note XII 5(4) for details.
The Company's subsidiary, Wanhua Thermal Power, provided guarantee for borrowings and notes payable of RMB 123 million of Xiebei Thermal Power and undertakes joint liability. The maturity date of the related loans is 13 October 2020. At the same time, Xiebei Thermal Power provided counter-guarantee of the above guarantees for the Wanhua Thermal Power. As at 30 June 2018, there was no significant guarantee liability. Refer to Note XII 5(4) for details.
2. Description for not having significant contingencies that are required to be disclosed:
□ Applicable ✓ N/A
(III) Others
□ Applicable ✓ N/A
144 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
XV. EVENTS AFTER THE BALANCE SHEET DATE
(I) Significant non-adjusting events
□ Applicable ✓ N/A
(II) Profit appropriation
□ Applicable ✓ N/A
(III) Sales return
□ Applicable ✓ N/A
(IV) Description of other events after the balance sheet date
□ Applicable ✓ N/A
XVI. Other significant events
(I) Corrections of prior period errors
1. Retrospective application
□ Applicable ✓ N/A
2. Prospective application
□ Applicable ✓ N/A
(II) Debt restructuring
□ Applicable ✓ N/A
(III) Exchange of assets
1. Exchange of non-monetary assets
□ Applicable ✓ N/A
2. Exchange of other assets
□ Applicable ✓ N/A
(IV) Annuity plan
□ Applicable ✓ N/A
(V) Discontinued operations
□ Applicable ✓ N/A
145 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(VI) Segment information
1. Accounting policies and measurement criteria of determining reporting segment:
✓ Applicable □ N/A
Based on the Group's internal organization structure, management requirements and internal reporting system, the operations of the Group are under the same reporting segment.
Measurement of segment information is consistent with the accounting and measurement criteria in the preparation of the financial statements.
2. Financial information of reporting segments
✓ Applicable □ N/A
Unit: RMB Amount for the current period Amount for the prior period Item Operating income Operating costs Operating income Operating costs
Principle business (By industry) Chemical industry 29,431,203,879.32 17,458,184,209.05 23,971,500,908.45 14,590,660,010.39 Others 360,034,907.82 281,126,889.52 392,449,385.75 301,204,797.62 Total 29,791,238,787.14 17,739,311,098.57 24,363,950,294.20 14,891,864,808.01 Principle business (By product) PU series 16,811,184,449.68 7,243,942,450.68 13,979,493,707.81 6,650,770,735.03 Petrochemical series 8,319,781,131.74 7,340,252,247.26 6,917,184,715.76 5,915,500,120.31 Fine chemicals and new materials 2,686,001,269.51 1,787,755,827.48 1,767,497,460.90 1,209,843,242.81 series Others 1,974,271,936.21 1,367,360,573.15 1,699,774,409.73 1,115,750,709.86 Total 29,791,238,787.14 17,739,311,098.57 24,363,950,294.20 14,891,864,808.01 Principle business ( By geography) Domestic 19,648,350,318.53 10,553,322,088.33 17,859,067,679.31 10,278,251,616.02 Overseas 10,142,888,468.61 7,185,989,010.24 6,504,882,614.89 4,613,613,191.99 Total 29,791,238,787.14 17,739,311,098.57 24,363,950,294.20 14,891,864,808.01
3. Descriptions for not having reporting segments or not being able to disclose total assets and total liabilities for each reporting segment
□ Applicable ✓ N/A
4. Other explanation
✓ Applicable □ N/A
None of a single customer's revenue accounts for more than 10% of the total revenue of the Group.
(VII) Other significant transactions and events which have effect on investor's decision
□ Applicable ✓ N/A
(VIII) Others
□ Applicable ✓ N/A
146 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
XVII. NOTES TO KEY ITEMS IN THE COMPANY'S FINANCIAL STATEMENTS
(I) Accounts receivable
1. Disclosure of accounts receivable by categories
✓ Applicable □ N/A
Unit: RMB Closing balance Opening balance
Carrying amount Bad debt provision Carrying amount Bad debt provision Categories Propor- Proportion of Book Value Propor- Proportion of Book Value Amount Amount Amount Amount tion (%) provision (%) tion (%) provision (%)
Accounts receivable that are indi- vidually significant and for which 5,115,663,328.59 99.10 15,561,847.72 0.30 5,100,101,480.87 6,031,419,421.00 99.46 0.24 6,017,088,252.00 bad debt provision has been 14,331,169.00 assessed individually
Accounts receivables for which bad debt provision has been 38,958,570.69 0.76 4,245,696.20 10.90 34,712,874.49 32,582,539.07 0.54 3,735,449.85 11.46 28,847,089.22 collectively assessed according to credit risk characteristics
Accounts receivable that are individually insignificant and for 7,317,327.56 0.14 7,317,327.56 which bad debt provision has been assessed individually
Total 5,161,939,226.84 / 19,807,543.92 / 5,142,131,682.92 6,064,001,960.07 / 18,066,618.85 / 6,045,935,341.22
147 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Accounts receivable that are individually significant and for which bad debt provision has been assessed individually at the end of the period:
✓ Applicable □ N/A
Unit: RMB Closing balance Accounts receivable Proportion (by company) Accounts receivable Bad debt provision Reasons of provision of provision
No provision for bad debts in Yantai Petrochemical 4,451,273,465.65 related parties No provision for bad debts in Wanhua Hong Kong 578,557,675.56 related parties No provision for bad debts in Yantai Chlor-alkali 63,296,493.60 related parties Company XI 14,331,169.00 14,331,169.00 100% Expected to be uncollectable Provision at percentage of total Company XII 8,204,524.78 1,230,678.72 15% receivables outstanding method Total 5,115,663,328.59 15,561,847.72 / /
Note: For receivables that are individually significant, the Company assesses the receivables individually for impairment. As at 30 June 2018, individual provision impairment amounts to RMB 14,331,169.00 (31 December 2017: RMB 14,331,169.00). For receivables that are not impaired individually, the Company assesses provision for bad debt on a portfolio basis according to Note (V) 11. Impairment provision amounted to RMB 1,230,678.72 as at 30 June 2018 (31 December 2017: RMB 0).
Portfolios of accounts receivables that aging analysis is used for bad debt provision:
✓ Applicable □ N/A
Unit: RMB
Closing balance Aging Accounts receivable Bad debt provision Proportion of provision
Sub-total within 1 year 16,161,708.02 808,085.40 5.00% More than 1 year but not exceeding 2 years 2,479.51 247.95 10.00% More than 2 years but not exceeding 3 years 8,100.00 More than 3 years but not exceeding 4 years 4,050.00 50.00% More than 4 years but not exceeding 5 years More than 5 years 18,082.80 18,082.80 100.00% Total 16,190,370.33 830,466.15 /
Accounts receivable portfolios for which bad debt provision has been assessed using the percentage of total receivables outstanding approach:
✓ Applicable □ N/A Unit: RMB
Percentage of total Closing balance receivables outstanding Accounts receivable Bad debt provision Proportion of provision Accounts receivable due from overseas 22,768,200.36 3,415,230.05 15.00% customers Total 22,768,200.36 3,415,230.05 15.00%
148 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Accounts receivable portfolios for which bad debt provision has been assessed using other methods:
□ Applicable ✓ N/A
2. Bad debt provision\collections and reversals during the current period
Bad debt provision is RMB 1,740,925.07 for the current period, and recovered/ reversal of provision for bad debt is RMB 0 for the current period.
Significant amounts of recovered/reversal of provision for bad debt for the current period:
□ Applicable ✓ N/A
3. Accounts receivable written off in the current period
□ Applicable ✓ N/A
4. Top five entities with the largest closing balances of accounts receivables:
✓ Applicable □ N/A
Top five largest balances of accounts receivables amount to RMB 5,115,663,328.59 as at 30 June 2018 (as at 31 December 2017: RMB 6,017,088,252.00), representing 99.10% (as at 31 December 2017: 99.23%) of the total accounts receivables, the provision for bad debt is RMB 15,561,847.72 (as at 31 December 2017: RMB 0).
5. Accounts receivable derecognized due to transfer of financial assets:
□ Applicable ✓ N/A
6. Amounts of assets or liabilities arising from where accounts receivable are transferred but with continuous involvement
□ Applicable ✓ N/A
149 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(II) Other receivables
1. Disclosure of other receivables by categories：
✓ Applicable □ N/A
Unit: RMB Closing balance Opening balance
Carrying amount Bad debt provision Carrying amount Bad debt provision Categories Pro- Proportion Book Value Pro- Proportion Book Value Amount portion Amount of provision Amount portion Amount of provision (%) (%) (%) (%)
Other receivables that are individually significant and for which bad debt 1,197,380,655.85 99.33 1,197,380,655.85 1,075,487,734.00 99.35 1,075,487,734.00 provision has been assessed individu- ally
Other receivables for which bad debt provision has been collectively assessed according to credit risk characteristics
Other receivables that are not indi- vidually significant but for which bad 8,053,862.52 0.67 8,053,862.52 6,989,386.08 0.65 6,989,386.08 debt provision has been assessed individually
Total 1,205,434,518.37 / / 1,205,434,518.37 1,082,477,120.08 / / 1,082,477,120.08
Explanations of categories of other receivables:
The Company determines that other receivables of more than RMB 8,000,000.00 are considered as individually significant other receivables.
150 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
Other receivables that are individually significant and for which bad debt provision is individually assessed as at 30 June 2018:
□ Applicable ✓ N/A
Other receivables portfolios for which bad debt provision is assessed using aging analysis:
□ Applicable ✓ N/A
Other receivables portfolios for which bad debt provision is assessed using percentage of total receivables outstanding:
□ Applicable ✓ N/A
Other receivables portfolios for which bad debt provision is assessed using other methods:
□ Applicable ✓ N/A
2. Bad debt provision / recovery and reversals during the current period
Bad debt provision is RMB 0 for the period, recovered or reversal of provision for bad debt is RMB 0 for the period.
Significant amounts of reversal/recovery of bad debt provision in the current period:
□ Applicable ✓ N/A
3. Other receivables written off in the current period
□ Applicable ✓ N/A
4. Disclosure of other receivables by nature
✓ Applicable □ N/A
Unit: RMB Nature of receivables Closing balance Opening Balance
Other receivables due from related parties 1,197,380,655.85 1,076,045,285.11 Petty cash 2,309,737.29 1,426,353.63 Deposits 4,233,679.32 4,692,979.70 Others 1,510,445.91 312,501.64 Total 1,205,434,518.37 1,082,477,120.08
151 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
5. Top five entities with the largest closing balances of other receivables:
✓ Applicable □ N/A Unit: RMB Percentage of Closing Closing total closing Name Type Aging balance for balance balance of other impairment receivables (%) 81,377,235.56 Within 1 year
Wanhua Guangdong Other receivables of related party 203,059,894.95 1 to 2 years 38.57 0
180,465,650.31 2 to 3 years
Yantai Rongwei Other receivables of related party 307,647,503.95 Within 1 year 25.52 0
Zhuhai Wanhua Real Estate 125,772,493.10 Within 1 year Other receivables of related party 16.16 0 Development Co., Ltd. 69,000,000.00 1 to 2 years
Yantai Chlor-alkali Other receivables of related party 100,194,166.66 Within 1 year 8.31 0
Wanhua Hong Kong Other receivables of related party 100,000,000.00 Within 1 year 8.29 0
Total / 1,167,516,944.53 / 96.85 0
6. Accounts receivable involving government grants:
□ Applicable ✓ N/A
7. Other receivables derecognized due to transfers of financial assets:
□ Applicable ✓ N/A
8. Amounts of assets and liabilities arising from where accounts receivable are transferred but with continuous involvement
□ Applicable ✓ N/A
152 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(III) Long-term equity investments
✓ Applicable □ N/A
Unit: RMB Closing balance Opening balance
Item Carrying Impairment Carrying Impairment Book value Book value amount provision amount provision
Investment in subsidiaries 4,776,551,745.83 4,776,551,745.83 4,566,311,511.83 4,566,311,511.83
Investment in associates 457,371,213.03 457,371,213.03 302,564,573.38 302,564,573.38 and joint ventures
Total 5,233,922,958.86 5,233,922,958.86 4,868,876,085.21 4,868,876,085.21
1. Investments in subsidiaries
✓ Applicable □ N/A
Unit: RMB Decrease Provision for Closing Opening bal- Increase in the in the impairment balance Investee Closing balance ance current period current loss for the for im- period period pairment
Wanhua Chemical (Ningbo) Co., Ltd. 607,920,000.00 607,920,000.00
Wanhua Chemical (Yantai) Selling Co., Ltd. 20,900,000.00 20,900,000.00
Wanhua Chemical (Yantai) Petrochemical 2,050,000,000.00 2,050,000,000.00 Co., Ltd.
Wanhua Chemical (Yantai) Rongwei Poly- 72,918,038.59 72,918,038.59 urethane Co., Ltd.
Wanhua Chemical (Foshan) Rongwei 30,060,461.41 30,060,461.41 Polyurethane Co., Ltd.
Wanhua Chemical (Yantai) Chlor-Alkali 240,000,000.00 240,000,000.00 Thermal Power Co., Ltd.
Wanhua Chemical (Ningbo) Chlor-alkali 217,731,330.11 217,731,330.11 Co., Ltd.
Wanhua Chemical (Ningbo) Thermal Power 229,500,000.00 229,500,000.00 Co., Ltd.
Wanhua Chemical (Ningbo) Port Co., Ltd. 66,000,000.00 66,000,000.00
Wanhua Chemical (Beijing) Co., Ltd. 61,410,000.00 61,410,000.00
Wanhua Chemical (Guangdong) Co., Ltd. 200,000,000.00 200,000,000.00
Yantai Wanhua Chemical Design Institute 2,005,359.72 2,005,359.72
Shanghai Wanhua Kejv Chemical Tech- 583,369,070.00 583,369,070.00 nology Development Co., Ltd.
Shanghai Wanhua Industrial Develop- 120,000,000.00 120,000,000.00 ment Co., Ltd.
Wanhua Chemical Group Energy Co., Ltd. 210,240,234.00 210,240,234.00
Wanhua Chemical (Hong Kong) Co., Lim- 56,215,720.00 56,215,720.00 ited
Wanhua Chemical (America) Co., Ltd. 1,575,840.00 1,575,840.00
Wanhua Chemical (Japan) Co., Ltd. 538,192.00 538,192.00
Wanhua Chemical (Singapore) Co., Ltd. 6,167,500.00 6,167,500.00
Total 4,566,311,511.83 210,240,234.00 4,776,551,745.83
153 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
2. Investments in associates and joint ventures
✓ Applicable □ N/A
Unit: RMB
Changes for the period Cash div- Impair- Closing Opening Bal- De- idends ment Oth- Closing balance for Investor Increase Profit or loss Adjustment in Changes ance crease recognized using other compre- in other or profit provi- ers balance impairment equity method hensive income equity declared sion Increase I. Joint venture
Yantai Harbor Wanhua 189,383,736.12 100,000,000.00 5,510,407.09 294,894,143.21 Industrial Park Port Co., Ltd. UI Wanhua (Yantai) Perox- 15,205,680.83 -1,072.21 15,204,608.62 ide Co., Ltd. Yantai Recycled Water Co., 55,773,786.84 -53,684.22 55,720,102.62 Ltd. Sub-total 260,363,203.79 100,000,000.00 5,455,650.66 365,818,854.45 II．Associate
Linde Gas (Yantai) Co., Ltd. 32,224,372.13 45,666,100.00 3,672,707.06 145,036.51 81,708,215.70 Yantai Bulk Commodity 9,976,997.46 -132,854.58 9,844,142.88 Exchange Center Sub-total 42,201,369.59 45,666,100.00 3,539,852.48 145,036.51 91,552,358.58 Total 302,564,573.38 145,666,100.00 8,995,503.14 145,036.51 457,371,213.03
154 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(IV) Operating income and operating costs
✓ Applicable □ N/A
Unit: RMB Amount for the current period Amount for the prior period Item Revenue Cost Revenue Cost
Principal operating income 9,759,379,177.55 5,416,391,056.18 8,563,396,899.75 5,281,502,109.08 Other operating income 1,599,598,811.93 458,115,750.63 1,770,397,602.84 894,405,805.72 Total 11,358,977,989.48 5,874,506,806.81 10,333,794,502.59 6,175,907,914.80
(V) Investment income
✓ Applicable □ N/A
Unit: RMB Item Amount for the current period Amount for the prior period
Income from long-term equity investments under cost 275,550,152.00 1,347,263,750.00 method Including: Wanhua Ningbo 1,192,000,000.00 Yantai Chlor-alkali 60,000,000.00 Ningbo Chlor-alkali 75,150,152.00 45,663,750.00 Wanhua Thermal Power 102,000,000.00 81,600,000.00 Foshan Rongwei 4,000,000.00 Yantai Rongwei 34,400,000.00 28,000,000.00 Income from long-term equity investments under 8,995,503.14 11,358,641.70 equity method Including: Linde Gas (Yantai) Co., Ltd. 3,672,707.06 396,930.30 Yantai Harbor Wanhua Industrial Park Port Co., Ltd. 5,510,407.09 11,024,665.01 UI Wanhua (Yantai) Peroxide Co., Ltd. -1,072.21 -66,017.16 Yantai Bulk Commodity Exchange Center -132,854.58 3,063.55 Yantai Recycled Water Co., Ltd. -53,684.22 Investment income on disposal of long-term equity -155,775.84 investments Investment income from holding available-for-sale 6,000,000.00 financial assets Total 284,545,655.14 1,364,466,615.86
155 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
(VI) Others
✓ Applicable □ N/A
1. Supplementary information to the cash flow statement
Unit: RMB Amount for the Amount for the Supplementary information current period prior period 1. Reconciliation of net profit to cash flow from operating activities:
Net profit 4,144,576,756.59 4,149,703,160.80 Add: Impairment losses of assets 1,740,925.07 1,592,237.06 Depreciation of fixed assets, depletion of oil and gas assets, depreciation of 493,148,894.49 1,060,598,299.54 bearer biological assets Amortization of intangible assets 28,731,476.01 54,851,456.36 Amortization of long-term prepaid expenses 3,628,362.84 3,507,708.01 Losses on disposal of fixed assets, intangible assets and other long-term assets -3,043,771.17 -13,250,787.06 Financial expenses(Income is indicated by "-") 241,473,031.80 279,311,082.58 Investment income(Income is indicated by "-") -284,545,655.14 -1,364,466,615.86 Decrease in deferred tax assets(Increase is indicated by "-") 38,055,006.83 -64,551,611.48 Decrease in inventories(Increase is indicated by "-") -85,577,290.00 -93,927,902.67 Decrease in receivables from operating activities (Increase is indicated by "-") -1,128,759,316.05 -1,275,169,598.35 Increase in payables from operating activities (Losses are indicated by "-") 852,655,159.31 -846,099,795.50 Net cash flow from operating activities 4,302,083,580.58 1,892,097,633.43 2. Significant investing and financing activities that do not involve cash re- ceipts and payments:
Fixed assets acquired or constructed by debts Repay debts with dividends 3．Net changes in cash and cash equivalents:
Closing balance of cash and cash equivalents 1,545,709,471.96 984,350,674.44 Less: Opening balance of cash and cash equivalents 2,214,358,511.06 605,649,464.46 Net increase in cash and cash equivalents -668,649,039.10 378,701,209.98
2. Composition of cash and cash equivalents
Unit: RMB Item Closing balance Opening balance
I. Cash 1,545,709,471.96 2,214,358,511.06
Including: Cash on hand 108,794.70 78,912.38
Bank deposits 1,545,600,673.98 2,214,279,595.41
Other monetary funds 3.28 3.27
II. Cash equivalents
III. Closing balance of cash and cash equivalents 1,545,709,471.96 2,214,358,511.06
156 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
XVIII. SUPPLEMENTARY INFORMATION
(I) Breakdown of non-recurring profit or loss
✓ Applicable □ N/A
Unit: RMB Item Amount Remark
Profit or (loss) on disposal of non-current assets -12,720,853.21 Government grants recognized in profit or loss (other than grants which are closely related to the Company's business and are either in fixed amounts or determined under 844,422,936.84 quantitative methods in accordance with the national standard) Other non-operating income or expenses other than the above 1,240,089.51 Tax effects -203,162,861.94 Effects attributable to minority interests (after tax) -159,727,644.09 Total 470,051,667.11
If the Company determines an item as non-recurring profit or loss in accordance with the Explanatory Announcement to Information Disclosure Guidance for Public Companies No. 1 - Non-recurring Profit and Loss, or recognizes as recurring profit or loss for an item which was defined as non-recurring profit or loss in accordance with the Explanatory Announcement to Information Disclosure Guidance for Public Companies No. 1 - Non-recurring Profit and Loss, the Company should disclose corresponding reasons.
□ Applicable ✓ N/A
(II) Return on net assets and earnings per share ("EPS")
✓ Applicable □ N/A
Earnings per share Weighted average return Profit for the reporting period on net assets (%) Basic EPS Diluted RMB EPS RMB
Net profit attributable to ordinary shareholders of the Company 25.43 2.54 N/A Net profit after deduction of non-recurring profits or losses 23.71 2.37 N/A attributable to ordinary shareholders of the Company
(III) Differences between amounts prepared under foreign accounting standards and CAS
□ Applicable ✓ N/A
(IV) Others
□ Applicable ✓ N/A
157 2018 Semi-Annual Report WANHUA CHEMICAL GROUP CO., LTD.
SECTION XI LIST OF DOCUMENTS AVAILABLE FOR INSPECTION
Financial statements with signatures of legal representaive, chief accountant, and person in charge of accounting body. List of Documents Available For Inspection All original documents and announcements of the Company released on paper of "China Securities Journal", "Shanghai Securities News" "Securities Times" and "Securities Daily" during reporting period
Board of Directors: Liao Zengtai
Date of Approval by the board: 30 July 2018
Other revised information
□ Applicable ✓ N/A
158 WANHUA CHEMICAL GROUP CO., LTD.
www.whchem.com