Shanghai Chlor-Alkali Chemical Co., Ltd. 2014 Annual Report

2014 年年度报告

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Company code: 600618 Company name: Chlor-Alkali Chemical

Shanghai Chlor-Alkali Chemical Co., Ltd.

2014 Annual Report

Important Notice

1. The Board of Directors, the Supervisory Committee, Directors, Supervisors and senior

executives of the the company ensure the content of this Annual Report is true, accurate and

integrative, not having any false statement, misleading representation or significant omission,

and will take joint and several legal responsibilities for the Report.

2. All the Directors of the Company attended the Board meeting.

3. BDO China Shu Lun Pan Certified Public Accountants LLP issued an auditor's report with

standard and unqualified opinion for the Company.

4. Mr. Huang Dailie, principal of the Company, Mr. He Gang, principal in charge of accounting of

the Company, and Mr. Lai Yonghua, head of accounting department (accounting officer) declare

to guarantee the truth, accuracy and integrity of the financial report in this Annual Report.

5. The proposal on profit distribution and proposal on capital reserve transferring into share

capital examined by the Board of Directors

According to the 2014 annual financial audit issued by BDO China Shu Lun Pan Certified Public

Accountants LLP engaged by the Company, the net profit of the parent company in 2014 is RMB -

586,490,853.47 and the undistributed profit at beginning of the year is RMB 11,631,767.29. In 2014

the Company distributed the profit of 2013 of RMB 5,781,999.88 to the shareholders. It executed the

No. 9 Enterprise Accounting Standard - Employees Salary (amended) amended by the Ministry of

Finance, reducing the undistributed profit at beginning of the year by RMB 177,320,000.00 according

to the clause 31 of the Standard and making the profit available for dividend at end of the year being

RMB - 757,961,086.06. Therefore, the Company is not capable of distributing profit for 2014, not

making cash bonus for 2014.

6. The declaration on the risk for forward looking statement

The future plan or other forward looking statement included in this Report shall not constitute the

Company's substantial commitment to the investors, and we remind the investors to pay attention to

the investment risks.


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7. Is there any non-operational fund occupation by the controlling shareholder or the related

parties?

No

8. Is there any guarantee for outside entities in violation of the stipulated decision-making process?

No


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Contents

第一节 Paraphrase and Important Risk Prompt ............................................................................... 4

第二节 Company Profile ................................................................................................................. 5

第三节 Financial Highlights ............................................................................................................ 7

第四节 Report of the Board of Directors ....................................................................................... 10

第五节 Major Events ..................................................................................................................... 28

第六节 Changes of Share Capital and Particulars of Shareholders ............................................... 38

第七节 Particulars of the Preference Shares .................................................................................. 41

第八节 Particulars of the Directors, Supervisors, Senior Executives and Staff Members ............. 42

第九节 Company Governance ....................................................................................................... 51

第十节 Internal Control ................................................................................................................. 54

第十一节 Financial Report ................................................................................................................ 56

第十二节 Documents for Reference .................................................................................................. 74


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1. Paraphrase and Important Risk Prompt

1. Paraphrase

In this Report, except otherwise indicated, these words and expressions shall have the meanings as

follows:

Paraphrase for generally-used expressions

CSRC means China Securities Regulatory Commission

SSRB means Shanghai Regulatory Bureau of China Securities

Regulatory Commission

Huayi Group means Shanghai Huayi (Group) Company

The Company, Company, or

Chlor-Alkali Chemical

means Shanghai Chlor-Alkali Chemical Co., Ltd.

Sodium hydroxide means

Molecular formula: NaOH; a strong soluble alkali.

Sodium hydroxide is easy to be solved into water, has

strong alkalinity, and can supply Na+ ion. These

properties make it used widely in the industries such as

soap-making, textile industry, printing and dyeing,

blanching, papermaking, petroleum refining,

metallurgy and other chemical industries.

Chlorine gas means

Molecular formula: Cl2. As an important chemical raw

material, chlorine gas is widely used in the industries

such as papermaking, printing and dyeing, pigment,

bleaching powder, textile industry, chemical fiber,

grease petroleum, rubber, plastic, pharmacy,

disinfection, agricultural pesticide, metallurgy and

electronic industry.

EDC means

Ethylene dichloride. Achromic or yellowish transparent

liquid with specific gravity of about 1.26 and odor

similar to chloroform, insoluble in water, dissolve in

ethyl alcohol and ethyl ether. Mainly used as the

solvent for wax, fat and rubber, and also used in

producing vinyl chloride and polycarbonate.

PPVC means

Paste resin. The Company's production for paste resin

mainly adopts two processes, mixing method and seed

emulsion polymerization, and the paste resin is mainly

used in the products such as the artificial leather, floor

leather, wall paper, toy and bottle cap.

TPVC means

Special resin. The special resin produced by the

Company is mainly the customer specially-used

material, the medical resin with high polymeric level

such as plasma bag, infusion tube and the seal with

high elasticity and the resin specially used for primary

coating in automobiles.

CPVC means

Chlorinated polyvinyl chloride. Mainly used in various

pipes with different caliber and the related fittings such

as elbow and T-joint, the valve body and the wig.

2. Important notice for risk

The Company has described in details the risk factors existing in the Company in the Report. Please

consult the content about the risk factors possibly faced in the outlook for future development and the

countermeasures made by the Board of Directors.


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2. Company Profile

1. Company information

Chinese name of the Company 上海氯碱化工股份有限公司

Short form 氯碱化工

English name of the Company SHANGHAI CHLOR－ALKALI CHEMICAL CO.，LTD.

Abbreviation SCAC

Legal representative of the Company Mr. Huang Dailie

2. Contact information

Secretary of the Board of

Directors

Securities representative

Name Xu Peiwen Shen Qinyi

Contact address 4747 Longwu Rd., Shanghai 4747 Longwu Rd., Shanghai

Tel. 021-64340601 021-64342640

Fax 021-64341341 021-64341438

E-mail [email protected] [email protected]

3. Basic information

Registered address of the Company 4747, 4800 Longwu Rd., Shanghai

Zip code of registered address 200241

Business address of the Company 4747 Longwu Rd., Shanghai

Zip code of business address 200241

Website www.scacc.com

E-mail [email protected]

4. Information disclosure and filing site

Newspapers for information disclosure

selected by the Company

China Securities News, Shanghai Securities News,

Securities Post and Hong Kong Commercial Daily

Website appointed by China Securities

Regulatory Commission for carrying annual

report

www.sse.com.cn

Site for filing annual report 4747 Longwu Rd., Shanghai

5. The Company's share

The Company's share

Type of share Stock exchange for

listing of share

Share name Share code Share name before change

A share Shanghai Stock

Exchange

Chlor-Alkali

Chemical

600618

B share Shanghai Stock

Exchange

Chlor-Alkali B

Share

900908

6. Change of registration during the report period

1) Index of the Company's first registration

For the Company's first registration, please see Brief Introduction to the Company in 2011 Annual

Report.


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2) Change in the Company's main business since its listing in stock market

The Company has not got any change in its main business since its listing in the stock market.

3) Change in the Company's controlling shareholder since its listing in stock market

The Company has not got any change in its controlling shareholder since its listing in the stock

market.

7. Other relevant information

Public accounting firm

engaged by the Company

(domestic)

Name BDO China Shu Lun Pan Certified Public

Accountants LLP

Business address 4th Floor, New Huangpu Financial Plaza, No.

61, East Nanjing Rd., Shanghai, China

Name of the

accountant for

signing

Gu Xuefeng, Ling Min

8. Other

On December 30, 2014, the Company convened the 16th meeting of 8th Board of Directors, which

elected Mr. Huang Dailie the Chairman of the Board. On January 5, 2015, the Company completed

the procedure for official alteration.


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3. Financial Highlights

1. Main accounting data and financial indexes of previous 3 years before end of the report period

1) Main accounting data

Unit: RMB

Main accounting

data

2014 Interim

Report

2013 Increase or

decrease

than same

period of

last year (%)

2012

After adjustment Before adjustment

Operating

income 7,015,409,267.56 6,974,211,654.53 6,974,211,654.53 0.59 6,340,883,649.76

Net profit

attributable to

shareholders of

the listed

Company

-592,502,499.95 16,623,782.76 16,623,782.76 -3,664.19 102,542,136.82

Net profit

attributable to

shareholders of

the Company,

after

non-recurring

profit and loss

-262,177,332.00 -139,868,977.14 -139,868,977.14 Not

applicable 65,211,838.90

Net cash flow

from operating

activities

-29,059,999.83 580,026,390.02 580,026,390.02 -105.01 644,308,830.14

End of 2014 End of 2013

Increase or

decrease

(%)

End of 2012

After adjustment Before adjustment

Net assets

attributable to

shareholders of

the Company

2,164,655,507.39 2,848,201,003.60 2,848,201,003.60 -24.00 2,828,464,570.60

Total assets 5,754,717,626.22 5,992,581,029.65 5,992,581,029.65 -3.97 6,340,132,786.82

2) Main financial indexes

Main financial indexes 2014

2013 Increase or decrease

than same period of

last year (%)

2012 After

adjustment

Before

adjustment

Basic earnings per share

(RMB/share) -0.5124 0.0144 0.0144 -3,658.33 0.0887

Diluted earnings per share

(RMB/share) -0.5124 0.0144 0.0144 -3,658.33 0.0887

Basic earnings per share after

non-recurring profit and loss

(RMB/share)

-0.2267 -0.121 -0.121 Not applicable 0.0564

Return on net assets,

weighted average (%) -24.4467 0.5857 0.5857

Decrease by 25.03

percentage points 3.6921

Return on net assets after

non-recurring profit and loss,

weighted average (%)

-10.8175 -4.9279 -4.9279 Decrease by 5.89

percentage points 2.3480

2. Difference of accounting data between domestic and overseas accounting standards

1) The difference of net profit and net assets attributable to shareholders of the Company between

the international accounting standard and Chinese accounting standards

□Applicable √Not applicable


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2) The difference of net profit and net assets attributable to shareholders of the Company between

the international accounting standards and Chinese accounting standards


3. Items of non-recurring profit and loss

√Applicable □Not applicable

Unit: RMB Items of non-recurring profit or

loss Amount in 2014 Note (if applicable) Amount in 2013

Amount in

2012

Profit or loss from disposal of

non-current assets 1,111,822.13

71,743,954.84 12,512,201.40

Tax return and exemption approved

by the authority beyond its right or

with no official approval file, or

occasionaly happened

1,120,000.00 3,754,074.00

Government subsidy attributable to

profit and loss of current period,

except such government subsidy

closely related to the Company's

normal business operation, meeting

the regulation of national policy

and enjoyed constantly in certain

quota or quantity according to a

certain standard

5,732,560.40 111,427,687.60 7,605,127.69

The income generated when the

cost for the Company acquiring the

investment in the subsidiaries,

affiliated enterprises and the joint

ventures is less than the fair value

of the recognized net assets of the

invested units enjoyed while

acquiring the investment

7,427,541.47

The profit and loss from change of

fair value due to holding of

tradable financial assets and

tradable financial liabilities and the

income acquired from disposal of

tradable financial assets, tradable

financial liabilities and salable

financial assets, except that from

the effective hedge business related

to the Company's normal operating

business

136,030.13

Other non-operating revenue and

expenditure other than above items 6,572,403.12 7,086,532.41 2,528,619.33

Other profit or loss items meeting

the definition of non-recurring

profit and loss

-343,652,815.90

Compensation for

personnel

placement and

related loss on work

stoppage caused by

the production halts

of the PVC unit and

the supporting

facilities in Wujing

Base

-35,532,990.89 4,311,535.50

Impact of minority interests 50,515.48 -32,543.41 -876,846.11

Impact of income tax -139,653.18 680,119.35 -67,985.49

Total -330,325,167.95 156,492,759.90 37,330,297.92

4. Items measured with fair value

Unit: RMB


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Item Beginning

balance Closing balance

Change in

current period

Impact on profit of

current period

Salable financial

assets

10,926,604.39 14,914,742.76 3,988,138.37 55,663.83

Total 10,926,604.39 14,914,742.76 3,988,138.37 55,663.83


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第一节 Report of the Board of Directors

1. Discussion and analysis of the Board of Directors on the operation status during the report

period

In 2014, Chinese economy started to enter the transfer period from high speed growing to middle

speed growing. In order to fit such complicated and changeable economic situation, the Company

implemented the strategy of "innovation, upgrading and transformation" in all aspects, kept on

speeding up the adjustment and transfer in Wujing area and promoting the upgrading in the Chemical

Park, made the optimization of operation and decrease of loss as basic target and focused on the

significant projects such as ethylene tank and CPVC to keep the equilibrium of operation and

sustainable development for the Company. Meanwhile, it continued to implement the strategy of

"going out" unshakably, sought the chances of strategic cooperation and investment in the global

market, and strived to exploit new space for enterprise development.

The adjustment in Wujing Base makes the Company get the biggest loss with the amount of RMB

590,000,000 since its listing in stock market. However, through analysis to the loss, the expenditure

of RMB 520,000,000 for the adjustment in Wujing Base is mainly the impairment appropriated for

the units and the cost for placement of the employees. This expenditure will help the Company to

alleviate the burden for its forthcoming development. For the production operation, after absorbing

RMB 230,000,000 for the price rising of its main raw material ethylene and industrial electricity, the

Company controls the loss at RMB 70,000,000.

In 2014, the Company realized gross operating income of RMB 7,015,000,000, increasing by 0.59%

than previous year, gross profit of RMB - 583,000,000, decreasing by 1961.7% than previous year,

net profit attributable to shareholders of the Company of RMB - 592,000,000, decreasing by

3664.19% than previous year, and investment income of RMB 62,632,800, decreasing by 56.54%

than previous year.

1) Analysis on main business

(1) Analysis on changes in relevant items in the income statement and cash flow statement

Unit: RMB

Item Current period Same period of last

year Change ratio (%)

Operating income 7,015,409,267.56 6,974,211,654.53 0.59

Operating cost 6,375,944,582.66 6,344,195,298.75 0.50

Selling cost 205,248,898.35 193,012,461.43 6.34

Management cost 633,388,738.66 416,638,560.56 52.02

Financial expenses 121,456,535.42 111,801,208.77 8.64

Net cash flow from operating

activities

-29,059,999.83 580,026,390.02 -105.01

Net cash flow from investment

activities

-495,001,156.50 -247,218,330.78 Not applicable

Net cash flow from financing

activities

353,435,963.67 -327,297,981.40 Not applicable

Expenditure on R&D 40,756,284.35 42,071,822.11 -3.13

(2) Income

(a) Analysis on the factors influencing the Company's products income mainly from sale of goods

Unit: '0000 tons

Product

classification Item 2014 2013

Increase or decrease

(%)

Polyvinyl chloride Sales volume 8.01 15.47 -48.22


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resin Output 8.61 16.76 -48.63

Inventory 0.70 0.31 125.81

Sodium hydroxide

Sales volume 71.50 74.80 -4.41

Output 73.00 73.19 -0.26

Inventory 2.15 0.60 258.33

(b) Main customers

Unit: RMB

Total of sales amount to top 5

customers 3,282,013,865.31

Ratio in total sales

amount 46.97%

(3) Cost

(a) Cost analysis

Unit: RMB

By sectors

Sector Component of

cost Current period

Ratio

in

total

cost

(%)

Same period of

last year

Ratio

in

total

cost

(%)

Change

ratio

between

the current

period and

same

period of

last year

(%)

Industry Direct material 3,614,263,644.00 57.42 3,543,812,672.61 56.44 1.99

Direct labour 92,817,782.97 1.47 122,690,121.16 1.95 -24.35

Power 249,017,879.57 3.96 353,590,656.79 5.63 -29.57

Manufacturing

cost

331,797,420.12 5.27 533,631,687.86 8.50 -37.82

Total 4,287,896,726.66 68.13 4,553,725,138.42 72.52 -5.84

Construction Direct material 1,397,498.74 0.02 847,321.23 0.01 64.93

Direct labour 1,581,052.08 0.03 2,095,440.22 0.03 -24.55

Manufacturing

cost

22,470,081.24 0.36 19,904,665.69 0.32 12.89

Total 25,448,632.06 0.40 22,847,427.14 0.36 11.39

Trade

income

Purchase cost 1,980,812,658.24 31.47 1,702,287,777.63 27.12 16.36

By product

Product Component of

cost Current period

Ratio

in

total

cost

(%)

Same period of

last year

Ratio

in

total

cost

(%)

Change

ratio

between

the current

period and

same

period of

last year

(%)

PVC Direct material 593,100,331.68 9.42 1,120,840,740.78 17.85 -47.08

Direct labour 22,641,881.58 0.36 34,198,442.96 0.54 -33.79

Power 108,524,507.82 1.72 174,928,497.51 2.79 -37.96

Manufacturing

cost

128,110,613.58 2.04 153,861,264.90 2.45 -16.74

Total 852,377,334.66 13.54 1,483,828,946.15 23.63 -42.56


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Sodium

hydroxide

Direct material 846,403,320.03 13.45 766,943,649.79 12.21 10.36

Direct labour 4,283,945.16 0.07 15,567,915.32 0.25 -72.48

Power 86,798,377.75 1.38 68,353,774.89 1.09 26.98

Manufacturing

cost

39,077,055.00 0.62 140,535,329.16 2.24 -72.19

Total 976,562,697.94 15.52 991,400,669.16 15.79 -1.50

Chlorine

products

Direct material 2,043,905,626.27 32.47 1,587,487,697.19 25.28 28.75

Direct labour 21,048,519.55 0.33 22,972,608.30 0.37 -8.38

Power 42,051,606.32 0.67 99,822,584.08 1.59 -57.87

Manufacturing

cost

119,573,405.43 1.90 197,330,597.08 3.14 -39.40

Total 2,226,579,157.57 35.38 1,907,613,486.65 30.38 16.72

(b) Main suppliers

Unit: RMB

Total of purchase amount from

top 5 suppliers 3,906,600,757.17

Ratio in total purchase

amount 54.33%

(4) Expenses

Unit: RMB

Item 2014 2013 Increase or

decrease (%)

Selling cost 205,248,898.35 193,012,461.43 6.34

Management cost 633,388,738.66 416,638,560.56 52.02

Financial expenses 121,456,535.42 111,801,208.77 8.64

Income tax

expense 4,622,713.67 5,990,994.17 -22.84

Analysis on reasons for change of expenses:

1) The selling cost increases by 6.34% than the same period of last year, and this is mainly caused by

the increase of the depreciation of fixed assets transferred from the expanding of the dock. 2) The management cost increased by 52.02% than the same period of last year, and this is mainly

caused by the big increase of the employee's dismissal fee in this year than previous year. 3) The expense of income tax decreased by 22.84% than the same period of last year, and this is

mainly caused by decrease of the profit of the subsidiaries within the consolidation range this year.

(5) Expenditure on R&D

(a) Expenditure on R&D

Unit: RMB

The cost of R&D expenditure 15,511,089.73

Capitalization of R&D expenditure in

current period

25,245,194.62

Total of R&D expenditure 40,756,284.35

Ratio of total R&D expenditure in net

assets (%)

1.81

Ratio of total R&D expenditure in

operating income (%)

0.58

(b) Remark

In 2014 the Company still focus on the advanced chlorine production process and the new material in

its R&D work. The main research projects are the "process development for chlorine gas made


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through catalytic oxidation of hydrogen chloride", "research on processing application for chlorinated

polyvinyl chloride" and "development on specific polyvinyl chloride resin". For the project of

"process development for chlorine gas made through catalytic oxidation of hydrogen chloride", based

on the pilot research, the Company completed the compiling of the process package for the industrial

unit with the capacity of 100,000 tons per year. For the project of "research on processing application

for chlorinated polyvinyl chloride", the Company mainly made the research on the formulation for the

long-time heat resisting fittings of chlorinated polyvinyl chloride and the improvement on the

smoothness of inner-wall of the tubes with high extrusion speed and small caliber, improved the

formulation for the tubing and fittings of chlorinated polyvinyl chloride, and realized the

commercialization of the self-developed mixing material. For the project of "development on specific

polyvinyl chloride resin", the Company mainly made the testing for the "production of paste resin

with the mixing method of vinyl chloride-vinyl acetate copolymerization" to enhance the specialized

rate of the products and the differentiation competitive advantage of the Company.

(6) Cash flow

Unit: RMB

Item 2014 2013 Difference

Net balance of cash flow from

business activities -29,059,999.83 580,026,390.02 -609,086,389.85


investment activity -495,001,156.50 -247,218,330.78 -247,782,825.72


financing activities 353,435,963.67 -327,297,981.40 680,733,945.07

Note:

1) The decrease of the net cash flow of operating activities is mainly caused by the decrease of the

gross profit due to big rise of the ethylene prices and the dropping of the selling of products, the

decrease of the government subsidy and the increase of the expenditure for dismissal cost of

employees.

2) The decrease of the net cash flow of investment activities is mainly caused by the increase of the

investment in Huntsman, Lianhen and the financial company in current period.

3) The increase of net cash flow of financing activities is mainly because the increase of loan

makes the increase of the inflow of fund..

(7) Other

(a) Detailed explanation on significant changes of the profit structure or profit source of the

Company

Unit: RMB

Item 2014 2013 Increase or decrease

than previous year (%)

Management cost 633,388,738.66 416,638,560.56 52.02

Loss from assets

impairment 320,560,676.78 116,423,625.78 175.34

Investment income 62,632,834.28 144,125,008.27 -56.54

Operating profit -596,384,778.31 -88,579,797.32 -573.27

Non-operating revenue 13,543,603.10 122,523,307.47 -88.95

Non-operating expense 126,817.45 2,629,788.44 -95.18

Gross profit -582,967,992.66 31,313,721.71 -1961.70

Net profit -587,590,706.33 25,322,727.54 -2420.41

Note:

1) The increase of management cost is caused by the increase of the employee's dismissal cost in

current year than previous year.

2) The increase of loss from assets impairment is mainly because the production halt of the PVC unit


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in Wujing Base makes the increase of the provision for assets impairment appropriated.

3) The decrease of return on investment is caused by the decrease of the income from disposal of

equity interest in current year than the previous year.

4) The decrease of non-operating revenue is mainly caused by the decrease of the government

subsidy fund in current year.

5) The decrease of the operating profit, gross profit and net profit is mainly caused by the big rise of

ethylene prices and the big increase of assets impairment appropriated and the employee's dismissal

cost due to readjusting of industrial structure of the Company.

(b) Explanation on the progress of the development strategy and management plan

During the report period, the Company promoted the strategy of "innovation, upgrading and

transformation" unshakably and implemented the halt plan for PVC unit (except chlorinated

polyvinyl chloride, i.e. CPVC) in Wujing Base. This means the Company's strategic transfer is to be

completed soon. Faced with the big rising of the price of raw material and energy and the

continuous dropping of the product price, the Company strived to optimize the operation to enhance

the efficiency and control the loss of main business. Due to the production halt plan implemented in

Wujing Base, the Company is required to appropriate assets impairment provisions for PVC unit.

Meanwhile, it should pay compensation cost to a large number of employees dismissed by the

Company through agreement. Therefore in 2014 the Company got big loss in its business, a big

decrease compared with the profit target raised by the Board of Directors at beginning of the year.

A) Make great efforts to promote the Company's strategy adjustment based on the target for future

development

Speed up the step for entering the new material field. In 2014, through full analysis on the future

development of MDI industry, the Company learned the good chance for rapid development of

polyurethane industry in China and Asia Pacific area. In consideration of the requirements for

strategic transformation to the new material field, the Company decided to make investment of

RMB 307,480,000 in the MDI expansion project of Shanghai Huntsman Polyurethane Co., Ltd.

and Shanghai Lianheng Isocyanic Ester Co., Ltd. The Company's total investment in MDI fields in

Chemical Park has reached RMB 1,170,000,000, accounting for 26% of the Company's total

investment in Chemical Park. This important investment in 2014 makes the Company be further

involved with new material field and helps it to make transformation and solidify the industrial chain

for the recycling economy. Meanwhile, through this project the Company can build a cooperative

platform with foreign capital, master the new technology for producing chlorine and grasp chances

in the keen competition in the industry.

Speed up the concentration and upgrading from Wujing to Chemical Park. In 2014, the price of PVC,

the Company's product, was influenced by the continual downturn of market and the price of the raw

material ethylene was rising greatly. Such severe situation caused by over capacity means the

advent of the capacity removing movement in PVC industry. Therefore, the Company, based on

the strategic plan of concentration and upgrading from Wujing to Chemical Park and relevant

policies such as industrial distribution and reorganization of an industry issued by Shanghai

municipal government, has made determination to implement overall halt of PVC process unit in

Wujing Base (only reserve CPVC unit). Meanwhile, it started to make the dismissal work in

Wujing Base orderly. It formulated the dismissal plan in full consideration of the rights of the

employees after hearing earnestly the opinion of the employees. Due the understanding and

support of the employees, the plan can be implemented stably and orderly. The Company

dismissed 792 persons totally in this year. The halt of main production units in Wujing area and the

preliminary completion of the dismissal work mean that the Company's adjustment and

transformation strategy in Wujing area entered the final period. In 2014 the Company's capacity

transfer, work thought and management work further inclined to Chemical Park. In Chemical Park, it

has got the annual capacity of 720,000 tons of sodium hydroxide and 720,000 tons of ethylene

dichloride (EDC). In Chemical Park the Company's income reaches RMB 4,386,450,000 and gross

profit reaches RMB 576,000,000, accounting for 144% of the total gross profit of the Company.

While in Wujing area, the income is only RMB 235,610,000, and the gross profit is only RMB -

138,000,000. The Company has firmly implemented the strategic adjustment from Wujing Base to

Chemical Park, made hard work for Shanghai to realize "innovation driven and developing through


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transformation", and made new contribution for Shanghai to build a city of resource-saving type and

environment-friendly type.

Continue to probe into the way of international merger and industrial transformation and upgrading.

In 2014 the Company made tracking study on 9 merger and acquisition project, in which it

completed the investigation on 4 companies and 2 chemical parks in China and formed the related

investigation reports and traced 1 merger and acquisition project and 3 new joint venture projects.

The target projects for acquisition mainly include following three types. First is that it makes use

of the chance of industrial consolidation to build new production bases through merger and

acquisition in the areas with cost comparative advantage. In this way it can expand its industrial

scale, enhance its market share and strengthen the control power in market. This can support the

implementation of the Company's strategy of "going out from Shanghai". Second is that it focused

on the chemical products encouraged by national policy and having high added value and strong

profitability based on the market position of the advanced material, in order to extend the Company's

product chain and enhance the market risk preventing ability and the enterprise's whole profitability.

This can support the implementation of the Company's strategy of "going out from chlor-alkali".

Third is that, it strived to find the raw material of low-price and high quality and advanced chemical

engineering technique in global market to master the internally advanced chemical engineering

technique and expand the international raw material market and sales market. This can support the

implementation of the Company's strategy of "going out from China". In order to strengthen the

analytical study on investment abroad and strive for valuable investment opportunities, the Company

has established the investment committee office. Through periodic meeting, information collecting,

business discuss, field survey and report preparing, it strengthened the study on the chances for

investment and cooperation at home and abroad and get progress in the study on extending of the

industrial chain and upgrading and transformation of the Company.

B) Optimize the Company's overall operation management based on the principle of efficiency first

Optimize the operation to ensure the production equilibrium in the main battlefield of Chemical Park.

The Company adjusted timely and flexibly the production load in accordance with the market change,

and ensured the sodium hydroxide unit of Huasheng Factory running in heavy-duty level even with

the high price of ethylene and fluctuating demand downstream. Due to the big loss of the PVC

products in Wujing area, the Company reduced the output and provided vinyl chloride resource to

Tianyuan Factory to ensure the monthly output of paste resin and special resin, Tianyuan's

differentiated products, realizing the goal of maximizing the benefit of the units in the main

battlefield.

Adjust the structure of production and sale and contend for market with the differentiation strategy.

Faced with the severe sales situation, the Company made adjustment initiatively, transfer the sales

center to Chemical Park, focus on the high efficiency products and optimize the market distribution.

It continued to promote the product differentiated marketing, focused on high-end product market,

optimize the area structure and customer structure of the products, concentrated the technical force

and marketing force to improve the quality and promotion of the special resin and new material

CPVC, and grasped the chance to exploit the markets in Middle East Asia, South America and

Africa. The implementation of the differentiated strategy has provided the Company with

favourable conditions under the severe market competition.

Strengthen the cooperation and seek the copartners to expand the business opportunities. The

Company paid close attention to the cooperation between its units in Chemical Park and the

downstream enterprises. Firstly, it valued highly the "commercial negotiation for important

contracts", and established a specific negotiation group to promote the negotiation process and set

sound basis for the Company's new development in Chemical Park. At present it has signed a supply

agreement for the sodium hydroxide and liquid chlorine needed for capacity expansion with

Lianheng Isocyanic Ester Co., Ltd., and the negotiation with Bayer, BASF and other enterprises are

just under progress. Secondly, it strengthened the communication with the downstream enterprises

and enhanced the implementation rate of contract. The quantities of liquid chlorine and hydrogen gas

received have been increased to certain extent. Thirdly, it made active negotiation with Jinshan

Petrochemical and Secco Petrochemical and completed the renewal of the new year's contract for

ethylene with Jinshan Petrochemical. Meanwhile, it strived to find new suppliers for ethylene

abroad, making negotiations with many international enterprises to discuss the purchase of

ethylene. It is ready to purchase ethylene by itself in 2015.


16 / 74

Take an active part in the deal for carbon emission and get "green profit" through energy-saving and

emission reduction. In the adjustment in Wujing area, it made full use of the chance of production

halt and big reduction of energy consumption, researched earnestly the carbon emission policy of the

government and strived to conduct the transaction for carbon emission to get the "green profit" due

to energy-saving and emission reduction for the Company. From June 2013 to June 2014, the

Company had totally sold 53.167 carbon index and the transaction amount exceeded RMB

10,000,000. Afterwards, it will continue to increase the efforts in energy-saving and emission

reduction, enhance the management level for energy-saving, decrease the discharge amount of

carbon, and based on the market situation make market transaction for the carbon index to seek for

the biggest benefit for the Company.

2) Analysis on industry, products and area operation

(1) Main business divided by sectors and products

Unit: RMB Main business by sectors

Sector Operating income Operating cost

Gross

profit

rate (%)

Increase

or

decrease

of

operating

income

than

previous

year (%)

Increase

or

decrease

of

operating

costs than

previous

year (%)

Increase or

decrease of gross

profit rate than

previous year (%)

Industry 4,881,799,897.82 4,287,896,726.66 12.17 -5.19 -5.84 Increase by 0.61

percentage points

Constructi

on

27,016,732.70 25,448,632.06 5.80 10.74 11.39 Decrease by 0.55

percentage points

Trade

income

1,993,574,818.85 1,980,812,658.24 0.64 15.74 16.36 Decrease by 0.53

percentage points

Total 6,902,391,449.37 6,294,158,016.96 8.81 0.09 0.24 Decrease by 0.14

percentage points

Main business by products

Product Operating income Operating cost

Gross

profit

rate (%)

Increase

or

decrease

of

operating

income

than

previous

year (%)

Increase

or

decrease

of

operating

costs than

previous

year (%)

Increase or

decrease of gross

profit rate than

previous year (%)

PVC 596,604,070.66 852,377,334.66 -42.87 -52.51 -42.56 Decrease by 24.75

percentage points

Sodium

hydroxide

1,362,501,605.21 976,562,697.94 28.33 -0.75 -1.50 Increase by 0.55

percentage

points

Chlorine

products

2,618,478,421.73 2,226,579,157.57 14.97 15.43 16.72 Decrease by 0.94

percentage points

Other 2,324,807,351.77 2,238,638,826.79 3.71 16.33 18.07 Decrease by 1.42

percentage points

Total 6,902,391,449.37 6,294,158,016.96 8.81 0.09 0.24 Decrease by 0.14

percentage points

(2) Main business divided by area

Unit: RMB

Area Operating income Increase or decrease of operating

income than previous year (%)

China 6,570,330,568.88 2.02

Other countries 332,060,880.49 -27.16


17 / 74

Total 6,902,391,449.37 0.09

3) Analysis on the assets and liabilities

(1) Analysis on assets and liabilities

Unit: RMB

Item Closing

balance

Ratio

of

closing

balance

in total

assets

(%)

Closing

balance of

previous period

Ratio of

closing

balance

of

previou

s period

in total

assets

(%)

Chang

e ratio

of

closin

g

balanc

e (%)

Remark

Accounts

receivable 321,902,440.07 5.59 219,585,380.39 3.66 46.60

Mainly caused by

the increase of the

balance of the

receivables from

the customers in

the sales credit

period

Long-term

equity

investment

270,736,394.62 4.70 187,641,718.86 3.13 44.28

Mainly caused by

the capital increase

of the affiliated

company

Huntsman and the

increase of the

return on

investment of

Huntsman

confirmed in

current period

Construction

in progress 288,223,047.31 5.01 142,900,085.66 2.38 101.70

Mainly caused by

the increase of the

investment in the

low temperature

ethylene storage

and transportation

unit project

Engineering

materials 1,173,259.66 0.02 1,914,050.52 0.03 -38.70

Special equipment

used for the

construction in

progress

Development

expenditure 25,794,289.58 0.45 8,805,094.96 0.15 192.95

New development

projects in current

period

Short-term

loan 868,531,399.29 15.09 422,800,855.65 7.06 105.42

Increase of

short-term loan in

current period

Wages

payable 28,052,005.16 0.49 947,961.82 0.02

2,859.

19

Mainly caused by

the increase of

dismissal welfare

Tax payable 27,392,973.52 0.48 62,085,362.46 1.04 -55.88

Decrease of the

value added tax

unpaid in current

period


18 / 74

Deferred

income 6,198,450.00 0.11 930,800.00 0.02 565.93

Government

subsidy of the

R&D project in

current period

4) Analysis on core competitive power

(1) Profitability advantage of the integrated commercial mode

The Company implemented the integrated commercial mode in the Chemical Park, adopt the pricing

mechanism of "cost formula method" to offset the cost rising basically. While selling chlorine, it

should also sell sodium hydroxide in certain ratio. It established a compensation mechanism for the

risk in contract implementation to ensure a stable supply relation between the two parties. The

integrated commercial mode enhanced the Company's ability in long-term stable existing and

development and ensured the downstream customers to obtain the long-term and stable supply of

reliable chlor-alkali products. This has really reflected the mutually beneficial and win-win status.

At present, MDI and TDI are still under a high-speed growing stage with good prospect. Therefore,

the Company will still have profitability advantage with its integration mode in the Chemical Park.

(2) Comprehensive advantages of the international cooperative partners

The Company's downstream partners are all the multinational enterprises with the history of more

than 100 years and plentiful of technology resources. Based on the cooperation with the Company's

industrial chain, such companies will further make technical cooperation with the Company,

because the Company is of the condition for integrating fully the technology resources of all parties

and can conduct the industrial upgrading. In 2014 the Company made investment in Shanghai

Huntsman Polyurethane Co., Ltd.'s MDI refining expansion project with the annual capacity of

240,000 tons and Shanghai Lianheng Isocyanic Ester Co., Ltd.'s coarse MDI expansion project with

the annual capacity of 240,000 tons and HCL catalytic oxidation project with the annual capacity of

120,000 tons. If in 2016 MDI industry enters the second booming cycle, the Company will also get

the return on investment.

(3) The Company has got initial success in new technology and new material

The Company has completed the kiloton-level pilot plant test for producing chlorine gas with

hydrogen chloride through catalytic oxidation and completed basically the compiling of the

industrial process package with the capacity of 100,000 tons, setting sound basis for the Company's

realizing new technology for chlorine production. Meanwhile, the Company has perfected the

self-developed industrial process technique for chlorinated polyvinyl chloride resin and can provide

technical support for the industrial process package design for chlorinated polyvinyl chloride with

annual capacity of 40,000 tons. This provides full preparation for the Company to expedite further

the development and research for the series products of chlorinated polyvinyl chloride resin.

5) Analysis on investment

(1) General analysis on equity investment

Unit: RMB'0000

Item Closing balance Beginning

balance

Increase or

decrease

Increase or

decrease (%)

Long-term equity

investment 27,073.64 18,764.17 8,309.47 44.28

Salable financial assets 34,985.56 27,113.69 7,871.87 29.03

Incl.: Measured as per

fair value 1,491.47 1,092.66 398.81 36.50

Measured as per cost 33,494.09 26,021.03 7,473.06 28.72

Analysis on reason for change of equity investment:

1) Long-term equity investment increased by 44.28% than the same period of last year, and this is

mainly caused by the Increase of the investment in the affiliated company Huntsman and the return

on investment in Huntsman in current period.

2) The salable financial assets measured as per fair value increased by 36.50% than the same period

of last year, and this is mainly caused by the change of fair value in current period.


19 / 74

3) The salable financial assets measured as per cost increased by 28.72% than the same period of

last year, and this is mainly caused by the increase of the investment in Lianheng Company and

Huayi Financial Company.

Information of invested companies

Unit: RMB'0000

Name of the

invested company Business nature

Beginning

balance of

investment

cost

Closing

balance of

investment

cost

Ratio in the

equity of

the invested

company

（%)

Remark

Shanghai Huntsman

Polyurethane Co.,

Ltd.

Refine of MDI and

polymer 14,598.89 18,256.08 30

Long-term

equity

investment

Shanghai Lianheng

Isocyanic Ester Co.,

Ltd.

Produce and sell

the chemicals

related to raw MDI

13,996.15 18,559.21 15 Salable financial

assets

Shanghai Huayi

Tianyuan Chemical

Logistics Co., Ltd.

Logistics 7,540.66 7,540.66 16.64 Salable financial

assets

Shanghai Huayi

Group Finance Co.,

Ltd.

Financial

company 3,000.00 6,000.00 10

Salable financial

assets

Suzhou Tianyuan

Logistics Co., Ltd. Logistics 134.09 134.09 13.5

Salable financial

assets

Beijing Yinzhao

Information

Technology Co.,

Ltd.

Consultation for

information

technology

164.61 164.61 16 Salable financial

assets

(a) Equity interest in other listed companies held

Unit: RMB

Share

code Share name

Initial

investment

cost

Closing

balance of book

value

Gain or

loss in the

report

period

Change in

owner's

equity during

the report

period

Accounting

subjects

Source

of

share

600636 3F 360,000.00 7,320,772.80 32,392.80 1,000,397.64

Salable

financial

assets

Legal

person

share

600623 Double Coin

Share 690,000.00 2,076,360.00 15,444.00 598,026.00

Salable

financial

assets

Legal

person

share

600610

S China

Textile

Machinery

2,095,000.00 2,095,000.00

Salable

financial

assets

Legal

person

share

600688 Shanghai

Petrochemical 900,000.00 1,948,500.00 22,500.00 891,225.00

Salable

financial

assets

Legal

person

share

600637 BesTV 86,967.00 3,294,309.96 7,827.03 59,354.98

Salable

financial

assets

Legal

person

share

600082 Haitai

Development 20,000.00 274,800.00 60,000.00

Salable

financial

assets

Legal

person

share


20 / 74

Total 4,151,967.00 17,009,742.76 78,163.83 2,609,003.62 / /

(b) Equity interest of non-listed financial firms held

Name of the firm Initial investment

amount (RMB) Shares held

Ratio in

this

company's

equity

interest

(%)

Closing balance

of book value

(RMB)

Profit and loss

during the report

period (RMB)

Accounting

subjects

Source

of

share

Shenyin &

Wanguo

Securities Co.,

Ltd.

1,250,000.00 1,760,000 1,250,000.00 176,000.00

Salable

financial

assets

Legal

person

share

Bank of Shanghai

Co., Ltd. 150,000.00 1,049,302 7,307,758.85 230,846.44

Salable

financial

assets

Legal

person

share

Shanghai Huayi

Group Finance

Co., Ltd. 60,000,000.00 10 60,000,000.00 600,000.00

Salable

financial

assets

Finan

cial

contri

butio

n in

cash

Total 61,400,000.00 2,809,302 / 68,557,758.85 1,006,846.44 / /

(2) Utilization of the raised capital

(a) Utilization of the raised fund


(b) Projects promised in the raised fund


(c) Change of the project with raised fund


(3) Analysis on main subsidiaries and joint-stock companies

(a) Operation status of the controlled companies

Unit: RMB'0000

Name of company Business nature Registered

capital

Assets

scale Net profit

Shanghai Dakai Plastic Co.,

Ltd.

Plastic membrane and its deep

processing 4,347.76 14,875.38 -845.49

Shanghai Jinyuan Tap Water

Co., Ltd. Tap water 900 1,394.08 190.70

Shanghai Chlor-Alkali

Machinery Co., Ltd.

Maintenance and engineering

construction of petrochemical

devices 3,000 2,208.02 289.76

Shanghai Ruisheng

Enterprises Co., Ltd. Trade 500 5,100.00 470.26

Shanghai Luwei Plastics

Co., Ltd.

Production for CPVC tubing

and fittings 5,000 3,471.57 -921.74

Shanghai Tiantai Addition

Agent Co., Ltd.

Produce antistatic agent and

levelling agent 3,300 21,489.71 1,563.79

(b) Individual controlled subsidiaries with its net profit or its investment income's impact on the

Company's net profit over 10%

Unit: RMB'0000


21 / 74

Name of

company

Business

nature

Main

product or

service

Main

business

income

Main

business

profit

Net profit

Investment

income

from the

joint stock

company

Shanghai

Tiantai

Addition

Agent Co.,

Ltd.

Production

and sale of

chemical

products

Chemical

reagent and

additive

23,992.14 5,322.76 1,563.79 688.07

Shanghai

Ruisheng

Enterprises

Co., Ltd.

Trade

Sales of

chemical

raw material

and

products

28,786.44 1,225.93 470.26 470.26

Shanghai

Chlor-Alkali

Machinery

Co., Ltd.

Industry Machine

manufacturi

ng

10,430.18 2,353.31 289.76 241.46

Shanghai

Jinyuan Tap

Water Co.,

Ltd.

Industry Tap water 834.72 453.97 190.70 148.33

Shanghai

Luwei

Plastics Co.,

Ltd.

Production

and sale of

chemical

products

Production

for CPVC

tubing and

fittings

1,414.60 -6.23 -921.74 -645.22

Shanghai

Dakai Plastic

Co., Ltd.

Production

and sale of

chemical

products

Plastic

membrane

and its deep

processing

7,900.82 -126.15 -845.49 -760.94

Shanghai

Huntsman

Polyurethane

Co., Ltd.

Production

and sale of

chemical

products

Refine of

MDI and

polymer

371,743.57 29,725.52 15,507.61 4,652.28

(4) Projects with non-raised capital


Unit: RMB'0000

Project name Project

amount Project progress

Investment

amount in

current year

Total actual

investment

amount

Project income

30000m3 low

temperature

ethylene storage and

transportation unit

project

23,845

Civilwork

construction was

basically

completed in the

report period

13,713 14,685 The project is under

construction

40,000 tons/year

high performance

chlorinated

polyvinyl chloride

project

43,326

The DESign for

the foundation

work was

completed in the

report period

3,522 3,522

This is the preparing

period for the

project, construction

has not been started

yet.

Total 67,171 / 17,235 18,207 /


22 / 74

2. Discussion and analysis of the Board of Directors on future development of the Company

1) Competition situation and development trend in the industry

(1) The low carbon society is required to make energy-saving and emission reduction to get green low

carbon

For the chlor-alkali industry of energy resource intensive type, in addition to the need for

optimization and upgrading of the product structure, we are required to implement the energy-saving

and emission reduction for low carbon production promptly. Only by speeding up the elimination of

the backward production capacity and adjustment of the structure and take a new way of

industrialization, we then can meet the need for future development of the chemical industry and

achieve the new economic growth point in green economy and low carbon economy.

(2) Merger and reorganization and the park integration should be the development direction of the

chlor-alkali industry

Merger and reorganization is the only way for chlor-alkali industry to be mature, the most effective

mean for enhancing the competitive power, and the basic condition for the scientific development of

chlor-alkali industry. To make the reorganization of cross-regions and cross-industries and to realize

the industrial layout optimization should be the development trend of the chlor-alkali industry. By

adopting the mode of chemical park for the chlor-alkali industry, we can make reasonable use of

energy source and resource, maximize the energy-saving and consumption reducing, reduce the cost,

increase the added value of the products and the anti-risk ability of the enterprise, and realize the

sustainable development through the recycling economy mode.

(3) The R&D and use of new material is the important support for development of the national economy

The development of chemical new material industry should be of important support role in all the

fields, especially the high technique and top technique fields. The rapid development of big aircraft,

new energy automobile, modern rail transit and new strategic industries makes high technical

requirements and market demand. The six kinds of material, i.e. the engineering plastics, special

rubber, high performance fibre, organic fluorine material, organic silicon material and biological

degradable plastics, are the focus of development.

2) Development strategy of the Company

In 2014 the Company completed the first draft of five-year plan (2015 to 2019) and clarified the

development goal of future 5 years: "going out from chlor-alkali, going out from Shanghai and going

out from China", promote the Company's "innovation, upgrading and transformation" and realize the

Company's new development. The Company plans to become the professional chlorine supplier with

best competitive power in the world and the manufacturer of vinyl material and chlorine fine

chemicals with high added value.

In the period of 2015 to 2019 Shanghai Chemical Industry Park Caojing Base will continue to be the

main battlefield for the Company's development. In order to optimize the layout, the Company will

speed up the concentration of the advanced material projects to the main battlefield, focusing on the

construction of the second-phase projects of CPVC (chlorinated polyvinyl chloride) unit with annual

capacity of 40,000 tons, DEACON (chlorine gas manufactured with hydrogen chloride through

catalytic oxidation) with annual capacity of 100,000 tons, 30,000 m3 low temperature ethylene tank

and persulfate unit with annual capacity of 15,000 tons. It joined the investment for production

expansion of the copartners in Chemical Park to share income from the investment. It keeps a stiff

step in "going out" to promote the development in different cities and in the world and enhance the

international competition capability.

For achieving above goals, the Company will stabilize the production operation in Chemical Park,

optimize the existing assets and speed up the work of "going out" mainly with following work.

(1) Stabilize the production and sale to ensure the profit target

Strengthen the risk control and provide HSE guarantee for the adjustment and development. It will

continue to advocate the safety culture of "consciousness, sensitivity and realism", make the safety

production changed from generally controlled situation to intrinsic safety, ensure the heavy running

of Huasheng Factory and enhance the contract implementation rate. It will strengthen the facility

management, strengthen the careful operation, further reduce the non-planned production halt, make

overhaul for the units and ensure the electrolysis units running stably and with full load. It will

strengthen the communication and coordination with downstream enterprises, use price strategy to

enhance the contract implementation rate, and optimize the supply chain for Tianyuan Factory to


23 / 74

revive the national brand. It will expand the profit space through cost reduction and price rising. It

will reduce the power cost and evaluate the cost structure reasonably. It will research the

combination between the local optimization and whole benefit in the integrated industrial chain,

integrate the marketing resource and enhance the market competitive power. It will integrate the

marketing resources at home and abroad, enhance the international marketing level for bulk

materials and exploit the segment market for the differentiated products. It will optimize the market

structure for alkali and acid to enhance the value. It will make full use of the existing channels,

customers, brands and other resources to exploit actively the trade with big profit. It will reform the

marketing mechanism and organize the sales company.

(2) Optimize the existing assets to overcome the pressure of transformation

Build a high performance organization. The Company will continue to promote the dismissal and

placement of the employees, achieving the target of about 1200 employees in the Company. It will

transfer the control center to Caojing Chemical Park. It will handle official business in Caojing

Chemical Park, make use of the professional advantages to strengthen the vertical support and

service for the branch factory's operation, coordination in the upstream and downstream companies

and the project construction.It will rebuild the process to enhance the organizing competitive power.

It will further integrate and optimize the function of the departments, improve and explore the

production and operation system, focus on key business, optimize the personnel structure and quality

to achieve simplicity and high efficiency, enhance the competitive power and control strictly the

expense in the transformation period to demonstrate the results of adjustment. It will control and

reduce the expense in the adjustment period for PVC factory, no longer having the expenditure for

investment and overhaul. The organizational system for PVC factory will be kept until the CPVC

project with the capacity of 40,000 tons in the Chemical Park is put into service. It will optimize the

utilities for CPVC unit with the capacity of 10,000 tons, make full use of the supply mode with

market principle, reduce the cost and enhance the competitive power. It will speed up the dismissal

of employees and assets disposal in Wujing area to reduce various service charge as early as possible

and remove the inventories. It will reduce the fund cost for the inventories, reduce the risk of price

decline of the inventories and speed up the disposal of idle assets. It will strengthen the maintenance,

prevent the damage and loss through technical prevention, personnel prevention and periodic review

of the inventories. Through the information channels of network and industry, it will organize the

assets disposal group to promote the disposal of inventories. It will adopt many ways such as making

realization through dividing, physical financial contribution and going out to make flexible disposal.

(3) Strive to win the future

The Company will speed up the industrialization speed of the CPVC unit with the capacity of 40,000

tons. In April 2015 the project started the construction and entered the overall construction phase.

The project is planned to be put into service in June 2016. It will innovate the marketing mode, make

full use of the local marketing resource of third parties, strive to exploit the markets in different areas

and with different culture, and build the channels to expand the market share. The objective is at end

of 2016 the clear powder, mixture material and products should be of the sales ability of 4 times the

current production capacity. Meanwhile, it will speed up the pace of industrialization for high-end

products such as the hybrid material and products to further enhance the market competitive power

and consolidate the integrated chlorine making. It will make the negotiation for renewal of the

contract for supply of pipe chlorine with the downstream enterprise, striving for the expanding of

production volume of the downstream enterprises to increase the supply of chlorine, and make the

negotiation for the commercial contract for salt water reclamation with Bayer to ensure the pipe

chlorine and alkali business. It will promote the new technology for preparation of chlorine. The

Deacon project with the capacity of 100,000 tons has entered the preparing phase, and in 2017 the

project will achieve the industrialization. It will make cooperation with the downstream enterprises

to make technical study on the electrolysis of salt water, "going out" firmly. It will expand the border

for the regions, products and industries through the innovation of technology (such as the new

technology for vinyl material and chlorine fine chemical products) and the innovation of commercial

mode (such as merger and acquisition, investment, joint venture and integration). Meanwhile it will

build the development platform, strengthen the building of professional team, decide the object for

merger and acquisition or investment, collect the information on reorganization of international

chemical companies, select the target enterprise, and make the research and negotiation for

development in the world to achieve the target of "going out".


24 / 74

3) Operating plan

Income plan Cost plan Expense plan New year's operating objective

RMB 7.1 billion RMB 6.6

billion

RMB 0.8

billion Gross profit of RMB 11 million

Strategy and action adopted for realizing the objective

(1) The Company will speed up the implementation of the strategic layout in the Chemical Park to set

a sound basis for sustainable development. The adjustment on the layout of the Chemical Park

by the Company is an important measure for implementation of the reorganization of the

industrial structure raised by the 12th five-year plan of national chemical industry, and is the

overall adjustment and optimization made under the deep change in domestic industry. This shall

be of significant meaning for making the Company's main business bigger, stronger and better

and enhancing the Company's overall competitive power. Therefore, in 2015 the Company needs

to grasp the chances to speed up the pace for concentration in the Chemical Park, mainly

promoting firmly the construction of key projects and focusing on the construction schedule and

engineering quality. It needs to speed up the construction for the project of ethylene tank in the

Chemical Park, adopting effective measures for the project progress to ensure the project

completed on schedule. While speeding up the progress of the CPVC project with annual capacity

of 40,000 tons, the Company not only needs to continue to strengthen the promotion of CPVC

new products in the market, but also needs to promote the R&D on CPVC hybrid material with

every efforts. In this way this project will make the Company transferred from the traditional

chemical industry to new material field. Meanwhile, it will continue to perfect the

industrialization technical process for the project of chlorine gas manufactured by hydrogen

chloride through catalytic oxidation, speeding up the pace of the industrialization of the project.

(2) The Company will adapt to the new and normal status for transformation development and

enhance the management efficiency and level. In the chance for the Company's strategic

adjustment and under the prerequisite condition for ensuring the current organization structure

and system stable, the management efficiency and level will be enhanced significantly. In 2015

the Company needs to continue to make the work on dismissal of the employees. Aimed at the

severe problem of disproportion of management personnel, the Company will strive to further

streamline and optimize the personnel structure, and enhance the efficiency of the management

personnel through streamlining the surplus personnel and keeping the core personnel. On the

other hand it will continue to promote the utilization and disposal of the inefficient assets. It will

research and decide the executive plan to dispose and reuse the stopped units or assets, strive to

find the chance of transferring all the assets or making investment, such as selling the sodium

hydroxide and the paste resin unit including the technique. Meanwhile it will tap the potential

value of Caowu pipeline and Jinwu pipeline and try to transfer them to enhance the assets

utilization ratio and optimize the assets structure.

(3) Adhere to the development strategy of "going out" and grasp the chance for internationalization

and globalization. The Company makes "going out " as its goal and the important driving force

for its upgrading development in recent years. In 2015 the Company will further increase the pace

of "going out" and promote the industrial adjustment aimed at global distribution. It will

strengthen the ability of merger and acquisition, strive to find the projects in view of forward

looking and systematicness, strengthen the research on the development trend of the business of

merger and acquisition and the object of merger and acquisition, strengthen the professional

capability for project valuation and risk evaluation, optimize the design for incentive and

evaluation system, initiate the enthusiasm of the team, and boost the system flow for the project

from decision-making to implementation. It will strengthen the research on the investment

opportunities. It will make use of the chance of industrial integration to find the cost advantage

area and build new development base through merger and acquisition. Based on the Company's

positioning of advanced material, it will find the chemical products having high added value and

good profitability and encouraged by national policy to enrich the Company's product chain and

enhance the Company's whole profitability. It will continue to collect the information on relevant

products and markets, trace the investment opportunity and technology source for merger and

acquisition at home and abroad and strengthen the communication with the investment institution

at home and abroad. Through hard work, it will make the Company "go out from chlor-alkali, go


25 / 74

out from Shanghai and go out from China", boost the Company's "innovation, upgrading and

transformation" and set solid basis for the Company's new development.

4) Fund required for maintaining current business and completing the investment projects under

construction

Due to big investment and fund pressure in the 12th Five-year Plan, the Company will continue to

keep good cooperative relationship with banks and other financial institutions to stabilize the

financing channels with banks. It will change its acquisition strategy in operating activities, strive to

compare cost to control cost strictly, reduce stocks and reduce tying-down of capital. It will

strengthen the process control for accounts receivable, improve the rate of fund recovery and

increase the cash flow in production and operation. Meanwhile, it will continue to strive for the fund

support of its big shareholder Huayi Group and try to find other financing channel.

5) Possible risks

(1) Risk

(a) The sodium hydroxide market at home and abroad is still in decline. The keen low cost competition

in international market makes the price of sodium hydroxide is lower than domestic market. The

downstream industries such as chemical fiber, paper making, printing and dyeing and aluminium

oxide are in depression with weak demand. The price of sodium hydroxide is still very low. This will

influence the profitability of the Company's leading product sodium hydroxide.

(b) The situation in the market of downstream is severe. Since the second half-year of 2014 TDI has

been in difficulty with heavy loss for its gross profit. In 2015 Wanhua's 300,000 tons of capacity of

TDI will be put into service, and the market competition will be more drastic. The rapid expansion

of MDI causes the profitability decreasing greatly, and this product has already in low profit range.

The structural surplus of PC in domestic market makes the domestic industrial operating rate in

recent 5 years is lower than 60%, and most of the manufacturer get loss. This will possibly make

influence on the operating rate of Huasheng Factory and the return on investment of the Company in

the enterprises in Chemical Park.

(c) The difference between the net value of stock assets in Wujing Base and the realized value of assets

has made significant influence on the economic efficiency of the Company.

(2) Countermeasures

(a) Further implement the strategies and actions (1-3) to be taken for achieving the objects in the

operating plan.

(b) Stop some units in Wujing base, strive to get the specific subsidy for reorganization of an industry

and the subsidy due to the policy for energy saving and emission reduction offered by Shanghai

government and make the transfer of stock assets to reduce the influence on the efficiency of current

period to smallest level.

3. The explanation of the Board of Directors on the Non-standard Auditor's Report by the public

accounting firm

1) The explanation of the Board of Directors and the Supervisory Committee on the Non-standard

Auditor's Report by the public accounting firm


2) The analysis and explanation of the Board of Directors on the reason and influence of the

changes in the accounting policy, accounting estimate or accounting method


In 2014 the Ministry of Finance amended the No. 2 Enterprise Accounting Standard--Long-term

Equity Investment, No. 9 Enterprise Accounting Standard--Employee's Rewards, No. 30 Enterprise

Accounting Standard--Presentation in the Financial Statements, No. 33 Enterprise Accounting

Standard--Consolidated Financial Statement, No. 39 Enterprise Accounting Standard--Measuring of

Fair Value, No. 40 Enterprise Accounting Standard--Arrangement of Joint Operation, No. 41


26 / 74

Enterprise Accounting Standard--Disposure of Equities in Other Entities and other standards, and

requested the listed companies to implement them since July 1, 2014.

Based on the issuing and amending of above accounting standards, the Company has made related

change for original accounting policies. After this change the accounting policies adopted by the

Company are 8 enterprise accounting standards issued by the Ministry of Finance since January 26,

2014, i.e., No. 2, No. 9, No. 30, No. 33, No. 37, No. 39, No. 40 and No. 41., and the Enterprise

Accounting Standard--Basic Principle amended on July 23, 2014. See followings:

(1) Particulars of the implementation of the No. 2 Enterprise Accounting Standard-- Long-term Equity

Investment

In accordance with the requirements of the Notice of the Ministry of Finance on Printing and Issuing

Amendment, the Company reclassified the long-term equity investment with no control, with joint

control or significant influence and with no offer in active market and with the fair value

immeasurable into the accounting subject salable financial assets, and make retroactive adjustment.

The change of this accounting policy only makes influence to two items in the financial statement,

the salable financial assets and the long-term equity investment, but no any influence to the

operating results and cash flow in 2013 and current period.

(2) Particulars of the implementation of the No. 9 Enterprise Accounting Standard--Employee's Rewards

In accordance with clause 31 of No. 9 Enterprise Accounting Standard--Employee's Rewards, the

Company evaluated the arrangement of the employee's rewards and made the benefit plan, made

acturial evaluation, and after the audit by BDO China Shu Lun Pan Certified Public Accountants

LLP, adopted the retroactive adjustment to make relevant adjustment. The implementation of this

accounting standard influences the Company's equity at beginning of 2014 (the owner's equity

reduced by RMB 164,600,000.00), and makes the profit in 2014 increase by RMB 600,000.00. This

does not make significant influence on the Company's profit or loss of current period.

(3) Implementation of No. 30 Enterprise Accounting Standard--Presentation of the Financial Statements,

No. 33 Enterprise Accounting Standard--Consolidated Financial Statements, No. 39 Enterprise

Accounting Standard--Measurement of Fair Value, No. 40 Enterprise Accounting

Standard--Arrangement of Joint Operation, and No. 41 Enterprise Accounting Standard--Disclosure

of the Equity in Other Entities

The employee's rewards, presentation of financial statements, consolidated financial statements,

measurement of fair value, arrangement of joint operation and the equity in other entities in the

financial statements before the change of the accounting policies have been calculated and disclosed

according to above standards since July 1, 2014. The change of the accounting policies due to the

implementation of the new standard should not make influence on the operating results and cash

flow amount in 2013 and current year, so we need not to make retroactive adjustment.

3) The analysis and explanation of the Board of Directors on the reason and influence of the

correction for important previous mistakes


4. Proposal on profit distribution or on capital reserves transferred into share capital

1) Formulating, executing or adjusting of the cash dividend distribution policy

In 2012 the Company, based on relevant regulations of China Securities Regulatory Committee,

Shanghai Securities Regulatory Bureau and Shanghai Stock Exchange, made amendment on the

clauses of the Articles of Association related to the profit distribution, improved further relevant

decision-making process and mechanism, and defined the policies such as the profit distribution form,

actual conditions and ratio for cash dividends and the use of undistributed profit.

During the report period, the Company, strictly in accordance with relevant provisions, implemented

the decision-making process for profit distribution and executed the profit distribution plan.. The

Company's 2013 profit distribution plan: Based on the Company's total share capital of 1,156,399,976

shares on December 31, 2013, the Company shall distribute cash dividend of RMB 0.05 (tax included)

for every 10 shares held to all the shareholders, totally distributing dividend of RMB 5,781,999.88.

The undistributed profit shall be carried forward to the next year. The cash dividend to the holders of

B share shall be paid in US dollars. This profit distribution plan was examined and passed by the

Company's 2013 annual shareholders' meeting convened on May 7, 2014 and implemented on June

19, 2014.


27 / 74

5. Proposal on profit distribution or on capital reserves transferred into share capital

(1) The plan or proposal for profit distribution and the plan or proposal for transfer of capital

reserves into share capital in recent 3 years (including the report period)

Unit: RMB

The year

for

distribution

Bonus

shares for

every 10

shares

held

Dividend

for every

10 shares

held

(RMB)

(tax

included)

Increased

shares

for every

10 shares

held

Amount of

cash dividend

(tax included)

Net profit

attributable to

shareholders of the

Company in the

consolidated

statements

Ratio in the net

profit

attributable to

shareholders of

the Company

in consolidated

statements (%)

2014 0 0 0 0 -592,502,499.95 0

2013 0 0.05 0 5,781,999.88 16,623,782.76 34.78

2012 0 0 0 0 102,542,136.82 0

6. The work on fulfillment of social responsibility

1) The work on social responsibility

The Company performed its social responsibility actively and declared its social responsibility report

of 2014. The full text of the report was carried in the website of Shanghai Stock Exchange at the same

day: www.sse.comc.cn。

http://www.sse.comc.cn/


28 / 74

5. Major Events

1. Significant lawsuits, arbitrations and events generally questioned by the media


2. Occupation of funds and the liquidation during the report period


3. Transaction of assets and business merger


4. Equity incentive of the Company and the influences


5. Significant related transactions


1) Related transactions in routine operation

(1) The events disclosed in provisional announcement and having no progress or change

Description of event Index

Based on the principle of fairness and reasonableness, mutual

advantage and mutual benefit and voluntaries and good faith, the

Company, Shanghai Huayi (Group) Company and Shanghai Huayi

Group Finance Co., Ltd. signed a frame agreement on finance

service of 3 parties, through which Shanghai Huayi (Group)

Company shall make use of the self advantage for short-term

financing and bond issuing and Shanghai Huayi Group Finance

Co., Ltd. shall provide the Company with finance service as a

non-banking financial institution to meet the Company's

requirements for reducing financing cost in developing its

business. The valid period of the agreement is 3 years.

China Securities News, Shanghai

Securities News, Securities Post

and Hong Kong Commercial

Daily on May 29, 2012 and the

website of Shanghai Stock

Exchange: www.sse.com.cn

For many years the Company has always provided Shanghai

Tianyuan Group Shengde Plastic Co., Ltd. with SPVC special

material needed by production. In order to reduce the influence of

the Company's adjustment for Wujing Base on Shanghai Tianyuan

Group Shengde Plastic Co., Ltd., the Company singned an

agreement for customized 10000 tons SPVC special material with

Shanghai Tianyuan Group Shengde Plastic Co., Ltd.

China Securities News, Shanghai

Securities News, Securities Post

and Hong Kong Commercial

Daily and the website of

Shanghai Stock Exchange:

www.sse.com.cn on October 9,

2014.

(1) Events not disclosed in provisional announcement

Unit: RMB'0000

Related

transaction party

Related

relation

Type of

related

transaction

Content of

related

transaction

Pricing

principle of

related

transaction

Amount of

related

transaction

Ratio in total

amount of

transactions

with same

type (%)

Shanghai Wujing

Chemical Co.,

Ltd.

Controlled

subsidiary

of parent

company

Purchase

goods

Material

purchase

Settled as per

agreed price 763.24 0.11

Shanghai Huayi

Energy Chemical

Co., Ltd. (original

Controlled

subsidiary

of parent

Purchase

goods

Material

purchase

Settled as per



29 / 74

name Shanghai

Carbonization

Co., Ltd.)

company

Shanghai Huayi

Tianyuan

Chemical

Logistics Co.,

Ltd.

Controlled

subsidiary

of parent

company

Purchase

goods

Material

purchase

Settled as per

agreed price

84.50 0.01

Shanghai

Xintianyuan

Chemical

Transport Co.,

Ltd.

Controlled

subsidiary

of parent

company

Purchase

goods

Material

purchase

Settled as per

agreed price

154.44 0.02

Shanghai

Chlor-Alkali

Creation Co., Ltd.

Wholly

owned

subsidiary

of parent

company

Purchase

goods

Material

purchase

Settled as per

agreed price

612.92 0.09

Shanghai Huayi

Group Equipment

Engineering Co.,

Ltd.

Wholly

owned

subsidiary

of parent

company

Purchase

goods

Material

purchase

Settled as per

agreed price

167.50 0.02

Shanghai

Chemical Supply

and Marketing

Co., Ltd.

Wholly

owned

subsidiary

of parent

company

Purchase

goods

Material

purchase

Settled as per

agreed price

21.63 0.00

Shanghai Huayi

New Energy

Chemical Sales

Co., Ltd.

Wholly

owned

subsidiary

of parent

company

Purchase

goods

Material

purchase

Settled as per

agreed price

1,197.63 0.17

Shanghai Huayi

Information

Technology Co.,

Ltd.

Controlled

subsidiary

of parent

company

Purchase

goods

Material

purchase

Settled as per


Shanghai Huayi

Group Huayuan

Chemical Co.,

Ltd.

Wholly

owned

subsidiary

of parent

company

Purchase

goods

Material

purchase

Settled as per

agreed price

18.07 0.00

Shanghai Huayi

Trade Co., Ltd.

Wholly

owned

subsidiary

of parent

company

Purchase

goods

Material

purchase

Settled as per

agreed price

1,164.06 0.16

Shanghai White

Elephant & Swan

Battery Co., Ltd.

Controlled

subsidiary

of parent

company

Purchase

goods

Material

purchase

Settled as per


Shanghai

Zhongyuan

Chemical Co.,

Ltd.

Controlled

subsidiary

of parent

company

Accept

labour

service

Accept

labour

service

Settled as per


Shanghai Chemical

Industry Inspection Wholly Accept Accept Settled as per 343.92 0.05


30 / 74

& Detection Co.,

Ltd. (original

Shanghai Chemical

Industry Pressure

Vessel Inspection

Co., Ltd.)

owned

subsidiary

of parent

company

labour

service

labour

service

agreed price

Shanghai Huayi

Tianyuan

Chemical

Logistics Co.,

Ltd.

Controlled

subsidiary

of parent

company

Accept

labour

service

Accept

labour

service

Settled as per

agreed price

3,689.25 0.51

Shanghai

Xintianyuan

Chemical

Transport Co.,

Ltd.

Controlled

subsidiary

of parent

company

Accept

labour

service

Accept

labour

service

Settled as per

agreed price

298.66 0.04

Shanghai

Chlor-Alkali

Creation Co., Ltd.

Wholly

owned

subsidiary

of parent

company

Accept

labour

service

Accept

labour

service

Settled as per

agreed price

2,839.41 0.39

Shanghai Huayi

Engineering Co.,

Ltd.

Wholly

owned

subsidiary

of parent

company

Accept

labour

service

Accept

labour

service

Settled as per

agreed price

13,650.12 1.90

Shanghai Huayi

Information

Technology Co.,

Ltd.

Controlled

subsidiary

of parent

company

Accept

labour

service

Accept

labour

service

Settled as per


Shanghai Dye

Research Institute

Co., Ltd.

Controlled

subsidiary

of parent

company

Accept

labour

service

Accept

labour

service

Settled as per


Shanghai Huayi

Energy Chemical

Co., Ltd. (original

name Shanghai

Carbonization

Co., Ltd.)

Controlled

subsidiary

of parent

company

Sell

commodities Product sale

Settled as per

agreed price

425.43 0.07

Shanghai Huayi

Group Huayuan

Chemical Co.,

Ltd.

Wholly

owned

subsidiary

of parent

company

Sell


Settled as per

agreed price

85.37 0.01

Shanghai 3F New

Materials Co.,

Ltd.

Controlled

subsidiary

of parent

company

Sell


Settled as per

agreed price 3,484.56 0.53

Shanghai Huayi

Tianyuan

Chemical

Logistics Co.,

Ltd.

Controlled

subsidiary

of parent

company

Sell


Settled as per

agreed price

294.60 0.05

Shanghai

Chlor-Alkali

Creation Co., Ltd.

Wholly

owned

subsidiary

Sell


Settled as per



31 / 74

of parent

company

Shanghai

Tianyuan Group

Shengde Plastic

Co., Ltd.

Wholly

owned

subsidiary

of parent

company

Sell


Settled as per

agreed price

4,687.62 0.73

Shanghai Resin

Factory Co., Ltd.

Wholly

owned

subsidiary

of parent

company

Sell


Settled as per

agreed price

37.79 0.01

Shanghai Huayi

Acrylic Acid Co.,

Ltd.

Controlled

subsidiary

of parent

company

Sell


Settled as per


Shanghai

Chemical Supply

and Marketing

Co., Ltd.

Wholly

owned

subsidiary

of parent

company

Sell


Settled as per

agreed price

316.63 0.05

Shanghai Peony

Printing Ink Co.,

Ltd.

Controlled

subsidiary

of parent

company

Sell


Settled as per


Shanghai

Huntsman

Polyurethane Co.,

Ltd.

Affiliated

company

Sell


Settled as per


Shanghai Sanaisi

Reagent Co., Ltd.

Wholly

owned

subsidiary

of parent

company

Sell


Settled as per

agreed price

1.49 0.00

Shanghai Yiping

Pigment Co., Ltd.

Controlled

subsidiary

of parent

company

Sell


Settled as per


Shanghai Huayi

Energy Chemical

Co., Ltd. (original

name Shanghai

Carbonization

Co., Ltd.)

Controlled

subsidiary

of parent

company

Rendering of

service

Rendering of

service

Settled as per

agreed price

132.36 0.02

Shanghai Huayi

Tianyuan

Chemical

Logistics Co.,

Ltd.

Controlled

subsidiary

of parent

company

Rendering of

service

Rendering of

service

Settled as per

agreed price

317.77 0.05

Shanghai Huayi

Engineering Co.,

Ltd.

Wholly

owned

subsidiary

of parent

company

Rendering of

service

Rendering of

service

Settled as per

agreed price

32.50 0.01

Shanghai Huayi

Polymer Co., Ltd.

Wholly

owned

Rendering of

service

Rendering of

service

Settled as per



32 / 74

subsidiary

of parent

company

Shanghai

Huntsman

Polyurethane Co.,

Ltd.

Affiliated

company

Rendering of

service

Rendering of

service

Settled as per


Shanghai 3F New

Materials Co.,

Ltd.

Controlled

subsidiary

of parent

company

Rendering of

service

Rendering of

service

Settled as per


Total / 37,040.25 5.33

Particulars for return sales of big quantity

The necessity and

persistence of the

related transaction,

the reason for select

the related party

(not other party in

the market) to make

transaction

The transaction between the Company and related parties, is that the Company pays

expenditure for service and trusteeship business, for purchase of raw material, sales

of product and other recurring business operations and for stripping non-recurring

assets and non-central business. Such transactions are the necessary supplement for

the coordination based on specialization and mutual transfer of predominance

between the Company and its controlling shareholder and part of subordinate

enterprises, and they will continue to exist.

The influence of the

related transaction

on the Company's

independence.

This makes no impacts on the Company's independence.

2) Related transactions due to purchase and sale of assets

(1) The events disclosed in provisional announcement and having subsequent implementation

progress or change

On November 23, 2013 the Company convened the 7th meeting of 8th Board of Directors, which

examined and passed the Motion on the Related Transaction for Purchase of the Construction in

Progress of D4-2 Land Lot of Shanghai Paint Co., Ltd. As evaluated by Shanghai Dongzhou Assets

Appraisal Co., Ltd., this asset shoud have the book value of RMB 141,910,000 and evaluated value

of RMB 108,420,000. On May 28, 2014, the Company signed a transfer agreement with Shanghai

Paint Co., Ltd. in the evaluated price of RMB 108,420,000 and completed the assets transfer on

November 11, 2014, when the Company got the Shanghai real estate warrants for this land lot. On

February 13, 2015 the Company completed the transfer procedure with Shanghai Paint Co., Ltd.

3) Significant related transactions for joint investment

(1) The events disclosed in provisional announcement and having subsequent implementation

progress or change

On November 23, 2013 the Company convened the 7th meeting of 8th Board of Directors, which

examined and passed the Motion on the Related Transaction for Joint Capital Increase with the

Related Party in Shanghai Huayi Group Finance Co., Ltd. The motion agreed that Shanghai Huayi

Group Finance Co., Ltd. increased the registered capital by RMB 0.3 billion, and the shareholders

shall make the capital increase with cash in the share holding ratio. The Company shall make capital

increase of RMB 30,000,000 according to its shareholding ratio. On March 19, 2014, the Company

made financial contribution of RMB 30,000,000 to complete this capital increase.

4) Related creditor's rights and debts

(1) Events not disclosed in provisional announcement

Unit: RMB'0000

Related party Related

relation Provide fund to related parties

Related parties provide fund to the

listed Company


33 / 74

Beginning

balance Amount

Closing

balance

Beginning

balance Amount

Closing

balance

Shanghai

Tianyuan Group

Shengde Plastic

Co., Ltd.

Wholly

owned

subsidiary

of parent

company

804.04 1,396.29 2,200.33

Shanghai Huayi

Energy Chemical

Co., Ltd. (original

name Shanghai

Carbonization Co.,

Ltd.)

Controlled

subsidiary

of parent

company

120.61 120.95 241.56

Shanghai 3F New

Materials Co.,

Ltd.

Controlled

subsidiary

of parent

company

12.14 22.70 34.84

Shanghai Huayi

Engineering Co.,

Ltd.

Wholly

owned

subsidiary

of parent

company

6,645.42 -3,691.22 2,954.20 1.51 15.01 16.52

Shanghai

Huntsman

Polyurethane Co.,

Ltd.

Affiliated

company 12.78 -12.78 0.00

Shanghai Peony

Printing Ink Co.,

Ltd.

Controlled

subsidiary

of parent

company

0.44 1.42 1.86

Shanghai Huayi

Tianyuan

Chemical

Logistics Co.,

Ltd.

Controlled

subsidiary

of parent

company

0.45 41.91 42.36 0.00 111.89 111.89

Shanghai Resin

Factory Co., Ltd.

Wholly

owned

subsidiary

of parent

company

2.29 4.58 6.87

Shanghai Paint

Co., Ltd.

Wholly

owned

subsidiary

of parent

company

0.47 0.00 0.47

Shanghai

Chlor-Alkali

Creation Co.,

Ltd.

Wholly

owned

subsidiary

of parent

company

0.00 17.37 17.37 6.69 78.47 85.16

Shanghai Dye

chemical plant

Controlled

subsidiary

of parent

company

0.00 37.62 37.62

Shanghai Soap

Co., Ltd.

Controlled

subsidiary

of parent

0.00 33.35 33.35


34 / 74

company

Shanghai Huayi

Polymer Co., Ltd.

Wholly

owned

subsidiary

of parent

company

0.00 76.43 76.43

Shanghai Huayi

Acrylic Acid Co.,

Ltd.

Controlled

subsidiary

of parent

company

0.00 54.53 54.53

Shanghai Huayi

New Energy

Chemical Sales

Co., Ltd.

Wholly

owned

subsidiary

of parent

company

0.03 0.06 0.09

Shanghai Chemical

Industry Inspection

& Detection Co.,

Ltd. (original

Shanghai Chemical

Industry Pressure

Vessel Inspection

Co., Ltd.)

Wholly

owned

subsidiary

of parent

company

0.00 10.52 -2.68 7.84

Shanghai

Xintianyuan

Chemical

Transport Co.,

Ltd.

Controlled

subsidiary

of parent

company

0.96 24.41 25.37

Shanghai Huayi

Information

Technology Co.,

Ltd.

Controlled

subsidiary

of parent

company

0.00 9.91 9.91

Shanghai

Chemical Supply

and Marketing

Co., Ltd.

Wholly

owned

subsidiary

of parent

company

25.30 -0.18 25.12

Shanghai Soap

Co., Ltd.

Controlled

subsidiary

of parent

company

0.00 0.00 0.54 0.54

Shanghai White

Elephant & Swan

Battery Co., Ltd.

Controlled

subsidiary

of parent

company

0.00 0.00 0.06 0.06

Shanghai Huayi

(Group)

Company

Controlling

shareholder

157,661.84 4.40 157,666.24

Shanghai Huayi

Group

Construction

Cost Consultation

Co., Ltd.

Controlled

subsidiary

of parent

company

2.85 -2.85 0.00

Shanghai Shenyu

Medicine

Chemical Co.,

Ltd.

Controlled

subsidiary

of parent

company

0.00 0.02 0.02


35 / 74

Shanghai

Huifeng Resin

Factory

Wholly

owned

subsidiary

of parent

company

0.00 5.14 5.14

Shanghai Huayi

Group Huayuan

Chemical Co.,

Ltd.

Controlled

subsidiary

of parent

company

0.00 2.61 2.61

Shanghai Sanaisi

Reagent Co., Ltd.

Controlled

subsidiary

of parent

company

0.00 0.08 0.08

Shanghai Peony

Printing Ink Co.,

Ltd.

Controlled

subsidiary

of parent

company

0.00 0.14 0.14

Shanghai Dye

Chemical Sales

Co., Ltd.

Controlled

subsidiary

of parent

company

0.00 0.03 0.03

Shanghai Huayi

Group Finance

Co., Ltd.

Affiliated

company

0.00 51.02 51.02

Total 7,598.67 -1,896.79 5,701.88 157,709.67 298.02 158,007.69

During the report period the amount of the fund supplied by the

Company to its controlling shareholder and subsidiaries (RMB) -18,967,900.00

Balance of the fund supplied by the Company to its controlling

shareholder and subsidiaries (RMB) 57,018,800.00

Reason for related creditor's rights and debts Formed from purchase and sale in regular

production operation

Impacts of related creditor's rights and debts to the

Company's operation results and financial status

No influence on the Company's operating

results and financial status

6. Important contracts and the implementation

1) Trusteeship, contracting and leasing


(1) Leasehold

Unit: RMB'0000

Lessor Lessee Leased

assets

Amount

related to

leased

asset

Beginning

date of

leasing

End date of

leasing

Income

on

leasing

Basis for

deciding

the

income

on

leasing

Related

transaction

or not

Related

relation

Shanghai

Chlor-Alkali

Chemical

Co., Ltd.

Shanghai

Huayi

Tianyuan

Chemical

Logistics

Co., Ltd.

Fixed

assets 5,882.25 2014-01-01 2014-12-31 1,049.40

Settled

as per

agreed

price

Yes

Controlled

subsidiary

of parent

company

Shanghai

Chlor-Alkali

Chemical Co.,

Ltd.

Shanghai

Tianyuan

Group

Shengde

Plastic

Co., Ltd.

Fixed

assets 713.54 2014-01-01 2014-12-31 900.00

Settled

as per

agreed

price

Yes

Wholly

owned

subsidiary

of parent

company


36 / 74

(2) Particulars of guarantee


7. Engaging and dismissing of the public accounting firm

Unit: RMB'0000

Whether change public accounting firm or not: No

Now engage

Name of the domestic public accounting firm BDO China Shu Lun Pan Certified Public

Accountants LLP

Reward to the domestic public accounting firm 88

Service age of domestic public accounting firm 4

Name Reward

Accounting firm for internal

control

BDO China Shu Lun Pan Certified

Public Accountants LLP

35.2

8. The influence of the implementation of new accounting standards on the consolidated financial

statements

In accordance with the No. 2 Enterprise Accounting Standard--Long-term Equity Investment, No. 9

Enterprise Accounting Standard--Employee's Rewards, No. 30 Enterprise Accounting

Standard--Presentation of Financial Statements and No. 33 Enterprise Accounting

Standard--Consolidated Financial Statements amended by the Ministry of Finance and the No. 39

Enterprise Accounting Standard--Measurement of Fair Value, No. 40 Enterprise Accounting

Standard--Arrangement of Joint Operation and No. 41 Enterprise Accounting Standard--Disclosure of

the Equity in Other Entities issued by the Ministry of Finance, the Company has made amendment on

original accounting policies. After this change the accounting policies adopted by the Company are 8

enterprise accounting standards issued by the Ministry of Finance since January 26, 2014, i.e., No. 2,

No. 9, No. 30, No. 33, No. 37, No. 39, No. 40 and No. 41., and the Enterprise Accounting

Standard--Basic Principle amended on July 23, 2014. Among them, the implementation of the No. 2

Enterprise Accounting Standard--Long-term equity investment, No. 30 Enterprise Accounting

Standard--Presentation of the Financial Statements, No. 33 Enterprise Accounting

Standard--Consolidated Financial Statements, No. 39 Enterprise Accounting Standard--Measurement

of Fair Value, No. 40 Enterprise Accounting Standard--Arrangement of Joint Operation and No. 41

Enterprise Accounting Standard--Disclosure of the Equity in Other Entities makes no influence on the

operating results and cash flow amount in 2013 and current year, so the Company needs not to make

retroactive adjustment. For implementation of No. 9 Enterprise Accounting Standard--Employee's

Rewards, the Company makes relevant adjustment through retroactive adjustment method. The

implementation influences the Company's equity at beginning of 2014 (the owner's equity reduced by

RMB 164,600,000.00), and makes the profit in 2014 increase by RMB 600,000.00. This does not

make significant influence on the Company's profit or loss of current period.

1) The influence of the change of the standard for long-term equity investment on the consolidated

financial statements (1)

Unit: RMB

Invested unit

Shareholders'

equity

attributed to

parent

company on

January 1,

2013 (+/-)

December 31, 2013

Long-term equity

investment (+/-)

Salable financial

assets (+/-)

Shareholders'

equity

attrubuted to

parent company

(+/-)

China Textile Machinery Co., Ltd. -2,095,000.00 2,095,000.00

China Petro Chemical Shanghai

Petrochemical Co., Ltd.

-900,000.00 900,000.00

Shanghai Lianheng Isocyanic Ester Co.,

Ltd.

-139,961,549.50 139,961,549.50


37 / 74

Suzhou Tianyuan Logistics Co., Ltd. -1,340,890.20 1,340,890.20

Beijing Yinzhao Information Technology

Co., Ltd.

-1,646,060.19 1,646,060.19

Shanghai Huayi Tianyuan Chemical

Logistics Co., Ltd.

-75,406,591.18 75,406,591.18

Shanghai Huayi Group Finance Co., Ltd. -30,000,000.00 30,000,000.00

Shenyin & Wanguo Securities Co., Ltd. -1,250,000.00 1,250,000.00

Shanghai Baoding Investment Co., Ltd. -62,500.00 62,500.00

Tianjin Tiannu Chemical Group Co., Ltd. -239,957.55 239,957.55

Bank of Shanghai Co., Ltd. -7,307,758.85 7,307,758.85

Total -260,210,307.47 260,210,307.47

2) The influence of the change of the standard for employee's rewards

Unit: RMB

Long-term wages payable on January 1, 2014

(+/-)

Shareholders' equity attributed to parent

company on January 1, 2014 (+/-)

164,600,000 164,600,000

Note on the influence of the change of the standard for employee's rewards The change of the standard for employee's rewards makes the Company's shareholders' equity at

beginning of 2014 decrease by RMB 164,600,000.00.

9. Description on other significant events



38 / 74

6. Changes of Share Capital and Particulars of Shareholders

1. Change of share capital

1) Table of change of share capital

(1) Table of change of share capital

During the report period the Company did not have any change in the total number of shares and the

structure of the share capital.

2. Issuing and listing of securities

1) Changes in the total number of the Company's shares, the structure of the Company's

shareholders and the structure of the Company's assets and liabilities

During the report period there was no change of total number and structure of the Company's shares

caused by bonus share, rationed share or other reason.

3. Information of the shareholders and the actual controller

1) Number of shareholders:

Number of shareholders at end of the report period 98,752

Number of shareholders at end of the fifth trading day before the

disclosing date for annual report

92,187

2) Top 10 shareholders and top 10 holders of tradable share (or the shareholders with no limited

sales condition) at end of the report period:

Unit: Share

Top 10 shareholders

Name of shareholder (in full)

Increase or

decrease in

the report

period

Closing

balance of

shares held

Ratio

(%)

Shares

with

limited

sales

conditions

held

Pledged or

frozen

Nature of

shareholder Status

of

share

Quantit

y

Shanghai Huayi (Group)

Company 0 581,592,347 50.29 0 None 0 State-owned

SCBHK A/C BBH S/A

VANGUARD EMERGING

MARKETS STOCK INDEX

FUND

0 8,649,032 0.75 0 None 0 Overseas

legal person

GUOTAI JUNAN

SECURITIES(HONGKONG)

LIMITED

2,429,028 3,044,228 0.26 0 None 0 Overseas

legal person

Bank of China Wuxi Branch 0 2,605,981 0.23 0 None 0 State-owned

legal person

VANGUARD TOTAL

INTERNATIONAL STOCK

INDEX FUND

695,600 2,535,800 0.22 0 无 0 Overseas

legal person

Customer credit trading

guarantee securities account

of Hongyuan Securities Co.,

Ltd.

1,630,786 1,843,401 0.16 None Other

Fang Jianwei 1,719,476 1,719,476 0.15 0 None 0

Overseas

natural

person


39 / 74

Customer credit trading

guarantee securities account

of Haitong Securities Co.,

Ltd.

1,382,962 1,502,864 0.13 None Other

Chen Cailin 0 1,399,248 0.12 0 None 0

Domestic

natural

person

CB LONDON A/C LEGAL

AND GENERAL

ASSURANCE (PENSIONS

MANAGEMENT) LTD

100,000 1,200,450 0.10 0 None 0 Overseas

legal person

Top 10 shareholders with no limited sales condition

Name of shareholder

Number of tradable

shares with no

limited sales

condition held

Type and number of share

Type Quantity

Shanghai Huayi (Group) Company 581,592,347

Renminbi ordinary

share 581,592,347

SCBHK A/C BBH S/A VANGUARD

EMERGING MARKETS STOCK

INDEX FUND

8,649,032 Domestic listed

foreign capital share 8,649,032

GUOTAI JUNAN

SECURITIES(HONGKONG) LIMITED 3,044,228

Domestic listed


Bank of China Wuxi Branch 2,605,981

Renminbi ordinary

share 2,605,981

VANGUARD TOTAL

INTERNATIONAL STOCK INDEX

FUND



Customer credit trading guarantee

securities account of Hongyuan Securities

Co., Ltd.

1,843,401 Renminbi ordinary

share 1,843,401

Fang Jianwei 1,719,476

Domestic listed


Customer credit trading guarantee

securities account of Haitong Securities

Co., Ltd.

1,502,864 Renminbi ordinary

share 1,502,864

Chen Cailin 1,399,248

Domestic listed


CB LONDON A/C LEGAL AND

GENERAL ASSURANCE (PENSIONS

MANAGEMENT) LTD



Remark on related relations or concerted

actions between above shareholders

Since January 12, 2009 the Company's shares have been

tradable in full, and it now has no shareholder with limited sales

condition. The Company has not learned whether related

relation exists between above shareholders or whether above

shareholders belong to the concerted actors stipulated in the

"Management Method for Information Disclosure for Change of

Shares Held by the Shareholders of Listed Companies".

4. Change of controlling shareholder and actual controller

1) The controlling shareholder

(1) Legal person

Unit: RMB'0000


40 / 74

Name Shanghai Huayi (Group) Company

Principal or legal

representative

Liu Xunfeng

Establishment date January 23, 1997

Organization code 13226216-8

Registered capital 328,108

Main business

Operation and management of state-owned assets within authorized

range, investment on industry, manufacture and sale for chemical and

medical products and equipment, installation, maintenance and

contracted service for projects of chemical and medical equipment.

Future development strategy

Achieve the "1350" strategic objective: Through hard work for several

years, the sales income will reach RMB 100 billion, the market share

of a batch of core products will be at leading position, it will reach

among top 3 in the chemical industry of China, top 50 in manufacture

industry of China and top 50 in global chemical industry.

Shares held in other domestic

or overseas listed companies

during the report period

During the report period Shanghai Huayi (Group) Company held

65.66% equity interest of Double Coin Holdings Limited and 31.53%

equity interest of Shanghai Sanaifu New Material Co., Ltd..

2) The actual controller

(1) Legal person

Unit: RMB

Name State-owned Assets Supervision and Administration

Commission of Shanghai Municipal Government

(2) The block diagram for property right and control relation between the Company and its actual

controller


41 / 74

7. Particulars of the Preference Shares

During the report period the Company had no preference share.


42 / 74

8. Particulars of the Directors, Supervisors, Senior Executives and Staff Members

1. Changes in shareholding and particulars of rewards

1) Particulars of Directors, Supervisors and senior executives (including the ones leaving post during the report period)

Unit: Share

Name Position (note) Gender Age

Start date

of office

term

End date of

office term

Shares held at

year-beginning

Shares

held at

year-end

Increase

or

decrease

Reason of

change

Reward got from

the Company

during the report

period

(RMB'0000)(before

tax)

Wage in the

shareholder's

unit in the

report period

Huang

Dailie

Chairman of

the Board Male 56

12/30/2014 12/20/2015 0 0 0 0

Hu

Yongkang

Director, Party

secretary and

deputy general

manager

Male 59 12/20/2012 12/20/2015 0 0 0 76.9

He Gang

Director,

general

manager and

deputy Party

secretary

Male 46 12/20/2012 12/20/2015 14,000 14,000 0 84

Wang

Zhenjin Director Male 48

12/20/2012 12/20/2015 0 0 0 0

Yu Zhaojun

Employee's

representative

director

Male 56

12/20/2012 12/20/2015 0 0 0 60.80

Li

Zengquan

Independent

Director Male 40

12/20/2012 12/20/2015 0 0 0 10

Zhang

Guoming

Independent

Director Male 52

12/30/2014 12/20/2015 0 0 0 0

Shao

Zhengzhong

Independent

Director Male 50

12/30/2014 12/20/2015 0 0 0 0

Zhang Outside Male 44 12/20/2012 12/20/2015 0 0 0 11.32


43 / 74

Wenlei Director

Chen Yao

Chairman of

Supervisory

Committee

Male 51

09/17/2013 12/20/2015 0 0 0 0

Yu Bin Supervisor Male 40 12/20/2012 12/20/2015 0 0 0 0

Dong Yan Supervisor Female 41 12/20/2012 12/20/2015 0 0 0 45.30

Wang

Minchun

Employee

Supervisor Female 53

12/20/2012 12/20/2015 0 0 0 34.80

Wang

Linzao

Employee

Supervisor Male 52

12/20/2012 12/20/2015 0 0 0 74.40

Cao Jinrong CFO Male 40 12/20/2012 12/20/2015 0 0 0 54.64

Chen Jiang

Deputy

general

manager

Male 50

12/20/2012 12/20/2015 0 0 0 64.50

Yuan

Maoquan

Deputy

general

manager

Male 47

12/20/2012 12/20/2015 0 0 0 64.10

Wang Hao

Deputy

general

manager

Male 48

11/07/2014 12/20/2015 0 12,500 12,500 Buy in

second

market

0

Xu Peiwen

Secretary of

the Board of

Directors

Male 59

12/20/2012 12/20/2015 0 0 0 56.90

Li Jun Chairman of

the Board Male 55

12/20/2012 10/29/2014 865 865 0 0

Wang

Kaiguo

Independent

Director Male 56

12/20/2012 12/30/2014 0 0 0 10

Lu Yiping Independent

Director Male 69

12/20/2012 12/30/2014 0 0 0 10

Zhang

Junjun

Deputy

general

manager

Male 40

12/20/2012 09/16/2014 0 0 0 57.10

Total / / / / / 14,865 27,365 12,500 / 714.76 /


44 / 74

Name Main work of recent 5 years

Huang Dailie

He used to be the Deputy Party secretary, executive Director and general manager of Shanghai Huayi Group Enterprise Development Co.,

Ltd. and manager of Enterprise Adjustment Department of Huayi Group. Now he is Chairman of the Board of Shanghai Chlor-Alkali

Chemical Co., Ltd., member of CPC Committee of Shanghai Huayi (Group) Company, Director, chairman of trade union and chairman of

Shanghai municipal chemical trade union.

Hu Yongkang He used to be general manager, Party secretary and Chairman of the Board of Shanghai Wujin Chemical Co., Ltd. Now he is the Director,

Party secretary and deputy general manager of Shanghai Chlor-Alkali Chemical Co., Ltd.

He Gang

He used to be the manager of marketing department of Shanghai Chlor-Alkali Chemical Co., Ltd., assistant general manager, deputy general

manager and Routine vice general manager of Shanghai Chlor-Alkali Chemical Co., Ltd. Now he is the Director, general manager and deputy

Party secretary of Shanghai Chlor-Alkali Chemical Co., Ltd.

Wang Zhenjin

He used to be the chief economist and assets controller of assets financial department, head of management department and deputy general

manager of Tyre & Rubber Group Co., Ltd., routine vice director of Tyre Research Institute and deputy general manager of Double Coin

Holdings Limited. Now he is the general manager of assets department of Shanghai Huayi (Group) Company and Director of Shanghai

Chlor-Alkali Chemical Co., Ltd.

Yu Zhaojun He used to be Party secretary of PVC factory of Shanghai Chlor-Alkali Chemical Co., Ltd. Now he is the employee's representative director,

Deputy Party secretary, secretary of Party discipline committee and chairman of trade union of Shanghai Chlor-Alkali Chemical Co., Ltd.

Li Zengquan

Li Zengquan: He used to be the associate professor and master's tutor in Accounting Institute of Shanghai University of Finance and

Economics, senior researcher and senior visiting scholar of Accounting Department of City University of Hong Kong, Independent Director

of Bus Share, Independent Director of Haibo Share and financial consultation expert of Xuhui District State-owned Assets Supervision and

Administration Commission, has got the title of Twilight Scholar. Now he is the vice dean of Accounting Institute of Shanghai University of

Finance and orienttreasureconomics, proofreader of orienttreasureconomic Research and many other authoritive periodicals, member of

editorial board of China Journal of Accounting Research, Independent Director of Oriental Fortune, Independent Director of East China

Computer, Independent Director of Shenneng Share and Independent Director of Shanghai Chlor-Alkali Chemical Co., Ltd.

Zhang

Guoming

He used to be the deputy general manager of Shanghai Lianfa Property Management Development Company, executive director of Hong

Kong Tianhe Asset Management Company, Independent Director of Shanghai Qiangsheng Holdings Co., Ltd and Chairman of the Board of

Shanghai Jiaxiang Investment Co., Ltd. Now he is Chairman of the Board of Shanghai Nowei Investment Management Co., Ltd., Chairman

of the Board of Shanghai Dingli Refreshing Technology Co., Ltd., Dongfeng Electronic Science and Technology Co., Ltd., Independent

Director of Shanghai Xinpeng Industrial Co., Ltd. and Independent Director of Shanghai Chlor-Alkali Chemical Co., Ltd.

Shao

Zhengzhong

He used to be the lecturer of material science department of Fudan University, the lecturer, associate professor, subdean and professor of

Fudan University and associate professor of biology research institute of Aarhus University in Denmark. Now he is the doctoral tutor in

polymer science department of Fudan University. He is also the councilor of Shanghai Municipal Chemistry & Chemical Engineering

Association, subeditor of Journal of Materials Chemistry-B of Britain Royal Society of Chemistry (RSC) and member of multiple academic

committee, and the Independent Director of Shanghai Chlor-Alkali Chemical Co., Ltd.

Zhang Wenlei He used to be deputy chief of technical operation department, chief of general department and deputy secretary general of China Chlor-Alkali

Industry Association. Now he is vice chairman and secretary general of China Chlor-Alkali Industry Association, routine councilor of China


45 / 74

Petrochemical Industry Association, vice chairman of China Chemical Environment Protection Association, Independent Director of Hebei

Jinniu Chemical Co., Ltd. and Independent Director of Yibin Tianyuan Group Co., Ltd. and outside Director of Shanghai Chlor-Alkali

Chemical Co., Ltd.

Chen Yao

He used to be the manager of foreign cooperation department of Shanghai Huayi (Group) Company, Party secretary and deputy general

manager of Double Coin Holdings Limited. Now he is the secretary of Party discipline committee of Shanghai Huayi (Group) Company, vice

chairman of Supervisory Committee and Chairman of the Supervisory Committee of Shanghai Chlor-Alkali Chemical Co., Ltd.

Yu Bin

He used to be the deputy general manager, CFO, manager of finance department of Huayi Group Enterprise Development Co., Ltd., and

deputy general manager of financial department of Shanghai Huayi (Group) Company. Now he is the general manager of Shanghai Minhang

Huayi Petty Loan Co., Ltd. and Supervisor of Shanghai Chlor-Alkali Chemical Co., Ltd.

Dong Yan

She used to be the member of cadre section and allotment section of human resource department and chief of personnel wage section of

Shanghai Tianyuan (Group) Co., Ltd. and Shanghai Chlor-Alkali Chemical Co., Ltd., and the assistant manager of human resource

department of Shanghai Chlor-Alkali Chemical Co., Ltd. Now she is the Supervisor and human resource department manager of Shanghai

Chlor-Alkali Chemical Co., Ltd.

Wang Minchun

He used to be deputy Party secretary, secretary of Party disciplinary committee and chairman of trade union of PVC factory of Shanghai

Chlor-Alkali Chemical Co., Ltd. Now he is the employee Supervisor and vice chairman of trade union of Shanghai Chlor-Alkali Chemical

Co., Ltd. and Party secretary of PVC plant of Shanghai Chlor-Alkali Chemical Co., Ltd.

Wang Linzao

He used to be the manager of production control department of Shanghai Chlor-Alkali Chemical Co., Ltd. and deputy general manager of

Shanghai Tianyuan Huasheng Chemical Co., Ltd. Now he is the employee Supervisor of Shanghai Chlor-Alkali Chemical Co., Ltd. and

secretary of CPC general branch and factory director of Huasheng Chemical Plant of Shanghai Chlor-Alkali Chemical Co., Ltd.

Cao Jinrong He used to be the deputy manager of assets department of Shanghai Huayi (Group) Company and deputy general manager of Shanghai Huayi

Group Investment Co., Ltd. Now he is the CFO of Shanghai Chlor-Alkali Chemical Co., Ltd.

Chen Jiang He used to be manager of technical development department of Shanghai Chlor-Alkali Chemical Co., Ltd. and assistant general manager of

Shanghai Chlor-Alkali Chemical Co., Ltd. Now he is the deputy general manager of Shanghai Chlor-Alkali Chemical Co., Ltd.

Yuan Maoquan

He used to be the workshop chief engineer of PVC plant of Shanghai Chlor-Alkali Chemical Company, assistant chief and routine deputy

chief of technical center of Shanghai Chlor-Alkali Chemical Company and deputy chief engineer of Shanghai Chlor-Alkali Chemical Co.,

Ltd. Now he is the deputy general manager of Shanghai Chlor-Alkali Chemical Co., Ltd.

Wang Hao He used to be the assistant manager of technical development department of Shanghai Chlor-Alkali Chemical Co., Ltd. and deputy general

manager of Shanghai Huntsman Polyurethane Co., Ltd. Now he is the deputy general manager of Shanghai Chlor-Alkali Chemical Co., Ltd.

Xu Peiwen He used to be Board Secretary of Shanghai Tianyuan (Group) Co., Ltd., and since 2000 he has also been the Board Secretary and chief of the

Board Secretary's office of Shanghai Chlor-Alkali Chemical Co., Ltd.

Li Jun

He used to be general manager and Deputy Party secretary of Shanghai Chlor-Alkali Chemical Co., Ltd. and Deputy Party secretary of

Shanghai Tianyuan (Group) Co., Ltd. Now he is the vice president of Shanghai Huayi (Group) Company, chairman of China Chlor-Alkali

Industry Association and vice chairman of Shanghai Stock Company Association. On October 29, 2014, he leave the post of Chairman of the

Board of Shanghai Chlor-Alkali Chemical Co., Ltd.

Wang Kaiguo Since June 2001 he has been Party secretary and Chairman of the Board of Haitong Securities Co., Ltd. On December 30, 2014, he left the


46 / 74

post of Independent Director of Shanghai Chlor-Alkali Chemical Co., Ltd.

Lu Yiping

He used to be Chairman of the Board of Shanghai Petrochemical, Chairman of the Board of Shanghai Secco Petrochemical Industry Co., Ltd.

and Chairman of the Board of Shanghai Chemical Industry Park Development Co., Ltd. He resigned the post of Chairman of the Board of

Shanghai Petrochemical in 2005, the post of Chairman of the Board of Shanghai Secco Petrochemical Industry Co. in November 2006 and the

post of Chairman of the Board of Shanghai Chemical Industry Park Development Co. in August 2008. On December 30, 2014, he left the post

of Independent Director of Shanghai Chlor-Alkali Chemical Co., Ltd.

2) Equity incentive awarded to the Director, Supervisor and senior executives during the report period


2. Particulars of Directors, Supervisors and senior executives (including the ones leaving post during the report period)

1) Position in shareholder's unit


Name Name of shareholder's unit Position in the shareholder's unit Start date of office term

Huang Dailie Shanghai Huayi (Group) Company Member of CPC Committee,

Director, chairman of trade union

04/01/2008

Wang Zhenjin Shanghai Huayi (Group) Company General manager of assets

department

09/01/2008

Chen Yao Shanghai Huayi (Group) Company Secretary of Party discipline

committee, vice chairman of

Supervisory Committee

10/01/2011

2) Position in other units


Name Name of other unit Position in other unit Start date of office term

Hu Yongkang Shanghai Chlor-Alkali Machinery Co., Ltd. Chairman of the Board 03/01/2012

He Gang Shanghai Lianheng Isocyanic Acid Grease Co.,

Ltd.

Director 04/01/2011

He Gang Shanghai Huntsman Polyurethane Co., Ltd. Chairman of the Board 08/01/2013

He Gang Shanghai Huayi Group Fiscal Responsibility

Co., Ltd.

Director 03/01/2012

Li Zengquan East Money Information Co., Ltd. Independent Director 01/22/2014

Li Zengquan Shanghai East China Computer Co., Ltd. Independent Director 04/19/2014


47 / 74

Li Zengquan Shenneng Co., Ltd. Independent Director 05/20/2014

Zhang Wenlei Hebei Jinniu Chemical Co., Ltd. Independent Director 06/08/2011

Wang Linzao Shanghai Jinyuan Tap Water Co., Ltd. Director 07/01/2011

Chen Jiang Shanghai Dakai Plastic Co., Ltd. Chairman of the Board 03/01/2011

Chen Jiang Shanghai Huayi Tianyuan Chemical Logistics

Co., Ltd.

Director 03/01/2010

Cao Jinrong Shanghai Luwei Plastics Co., Ltd. Chairman of the Board 02/01/2013

Cao Jinrong Shanghai Ruisheng Enterprises Co., Ltd. Executive director 03/01/2012

Wang Hao Shanghai Huntsman Polyurethane Co., Ltd. Director 08/01/2013

3. Rewards of Directors, Supervisors and senior executives

Decision-making process for rewards to

Directors, Supervisors and senior executives

The reward to Directors, Supervisors and senior executives is decided by the salary & checking committee of

the Company.

The basis for deciding Rewards to Directors,

Supervisors and senior executives

Distributed according to the "Checking and Evaluation Methods on the Reward to Directors, Supervisors and

Senior Executives" of the Company

The rewards of the Directors, Supervisors and

Senior Executives payable

The Board of Directors decided the reward standard for the Directors, Supervisors and Senior Executives get

salary from the Company and paid the reward monthly in accordance with the Company's unified salary

management system and the annual performance review by the salary & checking committee of the Board of

Directors. The standard for allowance to Independent Directors was examined and passed by the

shareholders' meeting.

Actual total reward to all the Directors,

Supervisors and Senior Executives at end of the

report period

RMB 7,147,600

4. Change of Directors, Supervisors and senior executives

Name Position Change Reason of change

Huang Dailie Director, Chairman

of the Board Engaged

Elected the Director by the Company's 2014 first provisional shareholders' meeting on December 30, 2014.

In the same day, he was elected Chairman of the Board by 16th meeting of 8th Board of Directors.

Zhang Guoming Independent

Director

Engaged Elected the Independent Director by the Company's 2014 first provisional shareholders' meeting on

December 30, 2014.

Shao Zhengzhong Independent

Director

Engaged Elected the Independent Director by the Company's 2014 first provisional shareholders' meeting on

December 30, 2014.

Wang Hao Deputy general

manager

Engaged Engaged by 14th meeting of 8th Board of Directors on November 7, 2014.


48 / 74

Li Jun Chairman of the

Board

Leave

post

For work need, request to resign from the post on October 29, 2014.

Wang Kaiguo Independent

Director

Leave

post

For work need, request to resign from the post on October 29, 2014, and the resignation was valid since

December 30, 2014.

Lu Yiping Independent

Director

Leave

post

For work need, request to resign from the post on December 11, 2014, and the resignation was valid since

December 30, 2014.

Zhang Junjun Deputy general

manager

Leave

post

For work need, request to resign from the post on September 16, 2014.


49 / 74

5. Employees of the parent company and main subsidiaries

1) Particulars of employees

Number of in-service employees of the parent company 1,368

Number of in-service employees of main subsidiaries 373

Total number of in-service employees 1,741

Number of retired employees borne by the parent

company and main subsidiaries

4,188

Profession structure

Type of profession Number of people

Production personnel 903

Sales people 47

Technical personnel 134

Financial personnel 26

Administrative personnel 258

Total 1,368

Education level

Education level Number of people

Bachelor degree or higher 276

Junior college 358

Senior high school (technical secondary school) 592

Lower than senior high school 142

Total 1,368

2) Salary policy

The Company implements the "Position Level Salary Measures of Shanghai Chlor-Alkali Chemical

Co., Ltd.".

3) Training plan

In 2014 the Company made training for 11,643 mentimes. The training includes front line employees

of 7,854 mentimes, accounting for 67.46% of total. The main train content: post operation training, all

special work training (including the training for obtaining certificate of post), QHSE training, all staff

training for safety month and quality month, post change training, skill grade training (including the

training for certificate), and the training for enhancing the management skill of first-line manager.

There were 3,789 men-times of training for non front line employees, accounting for 32.54% of the

total training numbers. Main training content: Training for qualification of new manager, experience

training for management team, further education training for professional technical post,

certificate-getting training for the qualification of special post, QHSE training, special topic training

for engineer, special lecture and other training for post ability.


50 / 74

4) Statistical chart for profession

5) Statistical chart for education level


51 / 74

9. Company Governance

1. Company governance and registration management for insider

The Company kept on improving the Company's corporate governance structure, regulating its

operation and strengthening its internal management strictly in accordance with the provisions and

requirements of the Company Law, Securities Law and the Management Principle of the Listed

Companies and the files for company's governance issued by China Securities Regulatory Committee

and Shanghai Stock Exchange. The Board of Directors deems that, the actual conditions of the

Company's corporate governance structure have no difference compared with the requirements in the

Management Principle of the Listed Companies.

During the report period the Company implemented the Management System on Registration of

Learners of Insider Information strictly and made the insider information security work further well to

safeguard the interests of the shareholders.

2. Brief introductions to the shareholders' meetings

The meeting Date Name of motions Resolutions

Index on the

appointed

website for

carrying the

resolution

Date for

carrying

the

resolutions

2013 annual

shareholders'

meeting

05/07/2014

1. Examined 2013

Annual Report and

the Abstract;

2. Examined 2013

Work Report of the

Board of Directors;

3. Examined 2013

Work Report of the

Supervisory

Committee;

4. Examined the

Motion on 2013

Final Accounts and

2014 Financial

Budget;

5. Examined the

Proposal for 2013

Profit Distribution;

6. Examined the

Motion on

Application for

Financing Credit

Limit in 2014;

7. Examined the

Motion on

Engagement of the

Auditor for the

Company's 2014

Annual Report and

Payment for the

Reward of 2013;

8. Examined the

Motion on

Engagement of the

Examined

and passed www.sse.com.cn 05/08/2014


52 / 74

Auditor for the

Company's internal

control and

Payment for the

Reward of 2013;

9. Examined the 2013

Duty Performance

Report of the

Independent

Directors.

2014 1st

provisional

shareholders'

meeting

12/30/2014

1. Examined the

Motion on Election

of New Director of

the Company,

electing Mr. Huang

Dailie the Director

of 8th Board of

Directors;

2. Examined the

Motion on Election

of New

Independent

Directors

2.1 Elected Mr. Zhang

Guoming the

Independent

Director of 8th

Board of Directors;

2.2 Elected Mr. Shao

Zhengzhong the

Independent

Director of 8th

Board of Directors.

Examined

and passed www.sse.com.cn 12/31/2014

3. Duty performance of the Directors

1) Attendance of Directors in Board meetings and shareholders' meetings

Name of

Director

Independent

Director or

not

Particulars of attendance in Board meetings

Particulars

of

attendance

in

shareholders'

meetings

Required

number of

attendances

this year

Attendances

in person

Attendances

through

communication

Entrusted

attendances Absences

Attendances

not in person

successively

for 2 times

or not

Attendances

in

shareholders'

meeting

Huang

Dailie

No 1 1 0 0 0 No 1

Hu

Yongkang

No 9 9 6 0 0 No 2

He Gang No 9 9 6 0 0 No 2

Wang

Zhenjin

No 9 9 6 0 0 No 2

Yu

Zhaojun

No 9 9 6 0 0 No 2


53 / 74

Li

Zengquan

Yes 9 9 6 0 0 No 2

Zhang

Guoming

Yes 1 1 0 0 0 No 1

Shao

Zhengzh

ong

Yes 1 1 0 0 0 No 1

Zhang

Wenlei

No 9 9 6 0 0 No 2

Board meetings convened this year 9

Incl.: On-site meetings 3

Meetings held through communication 6

Meetings held through communication and on site 0

4. Important opinions and proposals raised by the special committees under the Board of

Directors in duty performance during the report period

In 2014 the special committees under the Board of Directors of the Company, in accordance with the

provisions in the Enforcement Rules of the Special Committee under the Board of Directors,

performed their duties earnestly, conducted work actively, give full play to their professional skills

and play active role in the decision-making of the Board of Directors. For the annual report and

related work, the audit committee performed its duty earnestly, raising the constructive suggestion

for the Company's periodic report, internal control system, asset disposal and related transaction

from the professional point of view and supervising the further healthful, stable and rapid

development of the Company. The investment committee made discussion in a meeting on the

Company's participating the capital increase for expansion of MDI project by Shanghai Huntsman

Polyurethane Co., Ltd. and Shanghai Lianheng Isocyanic Ester Co., Ltd. and the investment in the

high performance chlorinated polyvinyl chloride project with the annual capacity of 40,000 tons to

enhance the scientificaalness of the investments. The salary & checking committee held a meeting to

examine and confirm the salary of the Company's senior executives in 2014 and raised an

examination proposal for the salary of the senior executives in 2014. The nomination committee held

a meeting to make discussion and proposal for the Company's change of Directors or Independent

Directors. The Company focus on exerting the advantage of the special committees under the Board

of Directors and the Independent Directors in profession and information, promoting the Board of

Directors making decision more scientific and effective.

5. The note of the Supervisory Committee for the Company's risk

The Supervisory Committee makes no rejection for the supervised events during the report period.

6. The examination and evaluation mechanism for the senior executives and the establishment and

implementation of the incentive mechanism during the report period

The implemented the Salary Checking Method for the Company's Senior Executives, let the salary &

checking committee under the Board of Directors to conduct annual performance review to decide the

reward standard for the Directors, Supervisors and Senior Executives getting salary from the

Company, and paid the reward monthly.


54 / 74

10. Internal Control

1. Declaration for the responsibility of internal control and the construction of the internal control

system

In accordance with the provisions of the enterprise internal control model system, to establish the

healthful and effective internal control, appraise the effectiveness and disclose the appraisal report on

internal control according to the facts, shall be the responsibility of the Board of Directors of the

Company. The Supervisory Committee shall exercise supervision on the Board of Directors'

establishing and implementing the internal control. The management shall be responsible for leading

the routine running of the internal control of the enterprise. The Board of Directors, the Supervisory

Committee, Directors, Supervisors and senior executives of the Company ensure that the content in

the report does not have any false statement, serious misrepresentation or significant omission and

will take the joint and several legal responsibilities for the truth, accuracy and completeness of the

content of the Report.

The goal of the Company's internal control is to ensure reasonably the legality and compliance of the

operating management, the safety of assets and the truth and integrity of the financial report and

relevant information, enhance the operating efficiency and effect and promote the realization of the

development strategy. Owing to its inherent limitation, the internal control can only provide

reasonable assurance for realization of above goal. Furthermore, the change of instances may cause

the internal control improper or the level of policy control and procedure following reduced, so

predicting the effectiveness of the future internal control in accordance with the appraisal result to the

internal control shall be of certain risk.

According to the cognizance to the significant and important deficiency in the internal control on the

financial report of Shanghai Chlor-Alkali Chemical Co., Ltd., there was no significant and important

deficiency in the internal control on the financial report at the base date of the appraisal report for

internal control; the Board of Directors deems that, the Company has kept effective internal control on

the financial report in all significant aspects in accordance with the requirements of the regulating

system and relevant provisions for the enterprise internal control. According to the cognizance to the

significant and important deficiencies other than in internal control on the financial report of Shanghai

Chlor-Alkali Chemical Co., Ltd., the Company did not find any significant and important deficiencies

other than in the internal control on the financial report at the base date of the appraisal report for the

internal control. There was no any factor influencing the appraisal conclusion for effectiveness of the

internal control from the base date of the appraisal report for the internal control to the issuing date of

the appraisal report for the internal control. For details of the appraisal report on internal control,

please see 2014 Self-appraisal Report for Internal Control of Shanghai Chlor-Alkali Chemical Co.,

Ltd. carried in the website of Shanghai Stock Exchange at the same day.

Whether disclose the self-assessment report for internal control: yes

3. Explanation of the auditor's report on internal control

During the report period the Company engaged BDO China Shu Lun Pan Certified Public

Accountants LLP as its audit agency for the internal control in 2014. Shanghai Shu Lun Pan CPA Ltd.

(special general partnership) issued an auditor's report on internal control with standard unqualified

opinion, deeming that the Company kept effective internal control on the financial report in all

significant aspects in accordance with the Fundamental Norms for Enterprise Internal Control and

relevant provisions on December 31, 2014. For details of the auditor's report on internal control,

please see the Auditor's Report on the Company's Internal Control carried in the website of Shanghai

Stock Exchange at the same day.

Whether disclose the auditor's report for internal control: yes


55 / 74

3. The accountability system for significant mistakes in the annual report and the note on relevant

implementation

The Company's Information Disclosure Management System had defined the range of insider

information and the confidentiality obligation of the insider for such information. The insider for such

information shall assume the obligation and responsibility of good faith and performing duty

diligently according to law. In case of any violation of the system, Shanghai Stock Exchange shall

dispose it according to regulations. The Company ensures the effective enforcement of internal

control through the responsibility claim system and encourage system.


56 / 74

11. Financial Report

1. Auditor's Report

Auditor's Report

XKSBZ [2015] No. 111082

To all the shareholders of Shanghai Chlor-Alkali Chemical Co., Ltd.:

We audited the attached financial statements of Shanghai Chlor-Alkali Chemical Co., Ltd. (hereinafter

referred to as the "Company"), including the balance sheet and consolidated balance sheet as of

December 31, 2014, income statement and consolidated income statement of 2014, cash flow statement

and consolidated cash flow statement of 2014, statement of changes of owner's equity and consolidated

statement of changes of owner's equity, and the notes of financial statements.

1. The management's responsibility to financial statements

To prepare financial statements make report fairly in it is the responsibility of the management of the

Company. Such responsibility should include: (1) to prepare the financial statements in accordance

with the provisions in the Enterprise Accounting Standard and make the statements realize fair

reflection; (2) to design, execute and maintain necessary internal control to make the financial

statements not have significant misrepresentation caused by fraud or error.

2. Responsibility of the certified accountants

Our responsibility is to express our audit opinion to the financial statements on the basis of executing

the audit work. We conducted the audit work in accordance with the provisions of the Auditing

Standards for CPAs of China. The Auditing Standards for CPAs of China requires us to abide by the

code of professional ethics of CPAs of China, and to plan and execute audit work to obtain reasonable

assurance for the financial statements not having significant misrepresentation.

The audit work involves with conducting audit procedure to obtain the audit evidences related to the

amount and disclosure of the financial statements. The audit procedure selected depends on the

judgement of the certified accountants, including the evaluation on the risk of significant

misrepresentation of the financial statements due to fraud or error. While making risk evaluation, the

certified accountants considered the internal control related to preparing and fair listing of the


57 / 74

financial statements to design a proper audit procedure, but the purpose is not to express our opinion

to effectiveness of the internal control. The audit work further includes evaluating the suitability of

accounting policy selected by the management and the reasonableness of the accounting estimate

made by the management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidences we have obtained is sufficient and appropriate to provide a basis

for our audit opinion.

3. Audit opinion

We deem that, the financial statements of the Company has been prepared in accordance with the

provisions of the enterprise accounting standard in all significant aspects, and has fairly reflected the

consolidated and the Company's financial status as of December 31, 2014 and its operating results and

cash flow in 2014.

BDO China Shu Lun Pan Certified Public Accountants LLP

China certified accountant: Gu Xuefeng

China certified accountant: Ling Min

Shanghai· China March 19, 2015


58 / 74

2. Financial statements

Consolidated Balance Sheet

December 31, 2014

Prepared by: Shanghai Chlor-Alkali Chemical Co., Ltd.

Unit: RMB

Item Note Closing balance Beginning

balance

Current assets:

Monetary capital 402,636,250.64 573,468,453.52

Settlement provisions

Capital lent

Financial assets measured with fair value and having

change attributed to profit or loss of current period

Derivative financial assets

Notes receivable 313,867,535.80 378,074,710.56

Accounts receivable 321,902,440.07 219,585,380.39

Advance payment 220,825,719.39 230,394,610.83

Premium receivable

Reinsurance accounts receivable

Receivable deposit for reinsurance contract

Interest receivable

Dividend receivable

Other receivables 1,895,445.80 1,481,952.65

Redemptory financial assets for sale

Inventories 497,804,243.07 390,476,527.64

Assets held for sale

Non-current assets due in 1 year

Other current assets

Subtotal of current assets 1,758,931,634.77 1,793,481,635.59

Non-current assets:

Loan and advances issued

Salable financial assets 349,855,650.23 271,136,911.86

Held-to-maturity investments

Long-term receivable

Long-term equity investment 270,736,394.62 187,641,718.86

Investment real estate

Fixed assets 2,727,746,278.61 3,313,496,420.90

Construction in progress 288,223,047.31 142,900,085.66

Engineering materials 1,173,259.66 1,914,050.52

Disposal of fixed assets

Productive biological assets

Oil gas assets

Intangible assets 311,958,605.26 255,416,359.06

Development expenditure 25,794,289.58 8,805,094.96

Goodwill

Long-term prepaid and deferred expenses 19,069,279.62 16,776,930.53

Deferred income tax assets 1,229,186.56 1,011,821.71

Other non-current assets

Subtotal of non-current assets 3,995,785,991.45 4,199,099,394.06

Total of assets 5,754,717,626.22 5,992,581,029.65

Current liabilities:

Short-term loan 868,531,399.29 422,800,855.65

Loan from central bank


59 / 74

Absorbed deposit and interbank deposit

Loan from other financial institutions

Financial liabilities measured with fair value and having


Derivative financial liabilities

Notes payable

Accounts payable 395,974,896.16 372,058,908.94

Advance receipts 304,022,294.89 331,371,643.21

Financial assets sold for repurchase

Handling charges and commission payable

Wages payable 28,052,005.16 947,961.82

Tax payable 27,392,973.52 62,085,362.46

Interest payable 3,916,313.32 3,231,705.95

Dividends payable 2,724,553.75 2,907,553.75

Other payables 713,938,238.76 806,835,168.66

Reinsurance accounts payable

Provision for insurance contract

Receipt from vicariously traded securities

Receipt from vicariously underwriting securities

Liabilities held for sale

Non-current liabilities due in 1 year

Other current liabilities

Subtotal of current liabilities 2,344,552,674.85 2,002,239,160.44

Non-current liabilities:

Long-term loan

Bonds payable

Incl.: Preference share

Perpetual debt

Long-term payables 950,000,000.00 950,000,000.00

Long-term wages payable 184,380,000.00

Specific payables 11,050,000.00 96,000,000.00

Estimated liabilities

Deferred income 6,198,450.00 930,800.00

Deferred income tax liability 2,274,880.65 1,795,745.90

Other non-current liabilities

Subtotal of non-current liabilities 1,153,903,330.65 1,048,726,545.90

Total of liabilities 3,498,456,005.50 3,050,965,706.34

Owner's equity

Share capital 1,156,399,976.00 1,156,399,976.00

Other equity instruments


Perpetual debt

Capital reserves 1,683,394,015.86 1,586,284,015.86

Less: Treasury stock

Other composite income 1,920,380.37 6,971,376.75

Specific reserves

Surplus reserves 11,329,760.39 11,329,760.39

General risk reserve

Undistributed profit -688,388,625.23 87,215,874.60

Subtotal of owner's equity attributable to parent company 2,164,655,507.39 2,848,201,003.60

Minority interest 91,606,113.33 93,414,319.71

Total of owner's equity 2,256,261,620.72 2,941,615,323.31

Total of liabilities and owner's equity 5,754,717,626.22 5,992,581,029.65


60 / 74

Legal representative: Mr. Huang Dailie Principal in charge of accounting: Mr. He Gang Head of

accounting dept.: Mr. Lai Yonghua

Balance Sheet of Parent Company

December 31, 2014

Prepared by: Shanghai Chlor-Alkali Chemical Co., Ltd.

Unit: RMB

Item Note Closing balance Beginning balance

Current assets:

Monetary capital 361,841,267.49 520,889,380.61

Financial assets measured with fair value and having


Derivative financial assets

Notes receivable 283,210,505.19 359,331,691.41

Accounts receivable 263,729,293.70 172,900,894.31

Advance payment 215,176,188.42 223,657,620.42

Interest receivable

Dividend receivable

Other receivables 7,971,011.77 1,146,309.00

Inventories 428,301,688.75 318,452,938.40

Assets held for sale

Non-current assets due in 1 year

Other current assets 20,000,000.00

Subtotal of current assets 1,560,229,955.32 1,616,378,834.15

Non-current assets:

Salable financial assets 338,978,781.42 260,419,183.02

Held-to-maturity investments

Long-term receivable

Long-term equity investment 454,050,813.30 370,956,137.54

Investment real estate

Fixed assets 2,570,275,614.49 3,147,708,955.11

Construction in progress 270,291,468.93 136,595,991.98

Engineering materials 1,173,259.66 1,914,050.52

Disposal of fixed assets

Productive biological assets

Oil gas assets

Intangible assets 265,269,075.06 205,724,769.34

Development expenditure 25,794,289.58 8,805,094.96

Goodwill

Long-term prepaid and deferred expenses 16,525,841.24 15,829,943.15

Deferred income tax assets

Other non-current assets 50,000,000.00

Subtotal of non-current assets 3,992,359,143.68 4,147,954,125.62

Total of assets 5,552,589,099.00 5,764,332,959.77

Current liabilities:

Short-term loan 821,281,399.29 368,350,855.65

Financial liabilities measured with fair value and

having change attributed to profit or loss of current

period

Derivative financial liabilities

Notes payable

Accounts payable 357,965,113.50 348,490,583.44

Advance receipts 299,962,187.40 323,823,687.69


61 / 74

Wages payable 27,774,004.42

Tax payable 24,552,210.54 58,852,446.65

Interest payable 3,916,313.32 3,231,705.95

Dividends payable 1,189,676.90 1,372,676.90

Other payables 762,117,190.54 833,863,795.45

Liabilities held for sale

Non-current liabilities due in 1 year

Other current liabilities

Subtotal of current liabilities 2,298,758,095.91 1,937,985,751.73

Non-current liabilities:

Long-term loan

Bonds payable


Perpetual debt

Long-term payables 950,000,000.00 950,000,000.00

Long-term wages payable 184,380,000.00

Specific payables 11,050,000.00 96,000,000.00

Estimated liabilities

Deferred income 6,198,450.00 930,800.00

Deferred income tax liability 1,409,344.92 969,995.16

Other non-current liabilities

Subtotal of non-current liabilities 1,153,037,794.92 1,047,900,795.16

Total of liabilities 3,451,795,890.83 2,985,886,546.89

Owner's equity:

Share capital 1,156,399,976.00 1,156,399,976.00



Perpetual debt

Capital reserves 1,690,068,638.82 1,592,958,638.82

Less: Treasury stock

Other composite income 955,919.02 6,126,270.38

Specific reserves

Surplus reserves 11,329,760.39 11,329,760.39

Undistributed profit -757,961,086.06 11,631,767.29

Total of owner's equity 2,100,793,208.17 2,778,446,412.88

Total of liabilities and owner's equity 5,552,589,099.00 5,764,332,959.77



Consolidated Income Statement

January to December 2014

Unit: RMB

Item Note Amount in

current period

Amount in

previous period

1. Gross operating income 7,015,409,267.56 6,974,211,654.53

Incl.: Operating income 7,015,409,267.56 6,974,211,654.53

Interest income

Premium earned

Income from handling charges and commission

2. Gross operating cost 7,674,426,880.15 7,206,916,460.12

Incl.: Operating cost 6,375,944,582.66 6,344,195,298.75

Interest cost

Expenditure for handling charges and commission


62 / 74

Surrender value

Net expenditure for compensation

Net provision for insurance contract appropriated

Bonus payment for policy

Reinsurance premium

Business tax and surcharges 17,827,448.28 24,845,304.83

Selling cost 205,248,898.35 193,012,461.43

Management cost 633,388,738.66 416,638,560.56

Financial expenses 121,456,535.42 111,801,208.77

Loss from assets impairment 320,560,676.78 116,423,625.78

Plus: Income from change of fair value ("－" for loss)

Investment income ("－" for loss) 62,632,834.28 144,125,008.27

Incl.: Investment income from affiliated enterprises

and joint ventures

46,522,824.01 60,933,984.15

Income from currency exchange ("－" for loss)

3. Operating profit ("－" for loss) -596,384,778.31 -88,579,797.32

Plus: Non-operating income 13,543,603.10 122,523,307.47

Incl.: Net gain from disposal of non-current

assets

1,152,634.58 499,145.25

Less: Non-operating expenditure 126,817.45 2,629,788.44

Incl.: Loss from disposal of non-current assets 40,812.45 239,846.23

4. Gross profit ("－" for gross loss) -582,967,992.66 31,313,721.71

Less: Income tax cost 4,622,713.67 5,990,994.17

5. Net profit ("－" for net loss) -587,590,706.33 25,322,727.54

Net profit attributable to owners of parent company -592,502,499.95 16,623,782.76

Minority interest income 4,911,793.62 8,698,944.78

6. Other composite income after tax -17,770,996.38 1,412,650.24

Other composite income attributed to owners of

parent company after tax

-17,770,996.38

1,412,650.24

1) Other composite income unable to be reclassified

into profit and loss afterwards

-20,380,000.00

(1) Change of net liabilities or net assets through

remeasuring and setting beneficial plan

-20,380,000.00

(2) Part shared in other composite income unable to be

reclassified into profit and loss in the invested unit

under equity method

2) Other composite income to be reclassified into profit

and loss afterwards

2,609,003.62

1,412,650.24

(1) Part shared in other composite income to be


under equity method

(2) Profit and loss from change of fair value of salable

financial assets

2,609,003.62

1,412,650.24

(3) Profit and loss from held-to-maturity investments

reclassified into salable financial assets

(4) Effective part of the profit and loss from hedge of

cash flow

(5) Conversion difference of foreign currency in

financial statement

(6) other

Other composite income attributed to minority

shareholders after tax

7. Total amount of composite income -605,361,702.71 26,735,377.78

Total composite income attributable to owners of -610,273,496.33 18,036,433.00


63 / 74

parent company

Total composite income attributable to minority

shareholders

4,911,793.62

8,698,944.78

8. Earnings per share:

1) Basic earnings per share (RMB) -0.5124 0.0144

2) Diluted earnings per share (RMB) -0.5124 0.0144



Income Statement of Parent Company


Unit: RMB

Item Note Amount in

current period

Amount in

previous period

1. Operating income 6,432,026,063.17 5,916,425,456.32

Less: Operating cost 5,885,413,772.01 5,388,806,879.89

Business tax and surcharges 14,534,262.10 21,475,479.12

Selling cost 187,923,372.52 178,228,083.71

Management cost 574,961,996.42 353,291,897.24

Financial expenses 118,604,257.55 108,695,503.06

Loss from assets impairment 314,225,426.94 116,003,101.01

Plus: Income from change of fair value ("－" for loss)

Investment income ("－" for loss) 67,674,160.81 143,303,054.56

Incl.: Investment income from affiliated enterprises

and joint ventures

46,522,824.01 60,933,984.15

2. Operating profit ("－" for loss) -595,962,863.56 -106,772,433.15

Plus: Non-operating income 9,552,010.09 118,197,625.26

Incl.: Net gain from disposal of non-current

assets

1,139,551.41 89,848.58

Less: Non-operating expenditure 80,000.00 1,974,977.39

Incl.: Loss from disposal of non-current assets 188,781.30

3. Gross profit ("－" for gross loss) -586,490,853.47 9,450,214.72

Less: Income tax cost

4. Net profit ("－" for net loss) -586,490,853.47 9,450,214.72

5. Other composite income after tax -17,890,351.36 29,497.44

1) Other composite income unable to be reclassified

into profit and loss afterwards

-20,380,000.00

(1) Change of net liabilities or net assets through

remeasuring and setting beneficial plan

-20,380,000.00

(2) Part shared in other composite income unable to be


under equity method

2) Other composite income to be reclassified into

profit and loss afterwards

2,489,648.64 29,497.44

(1) Part shared in other composite income to be


under equity method

(2) Profit and loss from change of fair value of salable

financial assets

2,489,648.64 29,497.44

(3) Profit and loss from held-to-maturity investments

reclassified into salable financial assets

(4) Effective part of the profit and loss from hedge of

cash flow


64 / 74

(5) Conversion difference of foreign currency in

financial statement

(6) other

6. Total amount of composite income -604,381,204.83 9,479,712.16

7. Earnings per share:

1) Basic earnings per share (RMB)

2) Diluted earnings per share (RMB)



Consolidated Cash Flow Statement


Unit: RMB

Item Note Amount in

current period

Amount in

previous period

1. Cash flow from operating activities:

Cash received from sale of commodities and

rendering of service

7,821,130,000.73 8,203,869,209.67

Net increase of customers' deposit and interbank

deposit

Net increase of loan from central bank

Net increase of loans from other financial institutions

Cash received for premium of original insurance

contract

Net cash received for reinsurance business

Net increase of deposit and investment of the insured

Net increase of financial assets measured with fair

value and having change attributed to profit or loss

of current period

Cash from receiving interest, handling charge and

commission

Net increase of loans from other financial institutions

Net increase of fund for buy-back business

Tax rebate received 640,058.18 554,337.82

Other cash received related to operating activities 156,646,472.25 172,431,519.72

Subtotal of cash inflow from operating activities 7,978,416,531.16 8,376,855,067.21

Cash paid for purchase of commodities and

accepting of service

6,943,640,631.86 6,795,220,824.04

Net increase of customer's loan and advances

Net increase of deposit in central bank and interbank

deposit

Cash for payment of compensation for original

insurance contract

Cash for payment of interest, handling charge and

commission

Cash for payment of policy bonus

Cash paid to or for employees 601,151,343.25 479,462,908.17

Cash paid for various taxes 203,873,014.61 212,616,312.30

Other cash paid related to operating activities 258,811,541.27 309,528,632.68

Subtotal of cash outflow from operating activities 8,007,476,530.99 7,796,828,677.19

Net cash flow from operating activities -29,059,999.83 580,026,390.02

2. Cash flow from investment activities:

Cash received from disinvestment 307,808.78

Cash received from investment income 21,390,010.27 11,632,681.50


65 / 74

Net cash received from disposal of fixed assets,

intangible assets and other long-term assets

38,134.62 879,408.36

Net cash received from disposal of subsidiaries and

other business units

100,455,646.23

Other cash received related to investment activities 287,300.00

Subtotal of cash inflow from investment activities 21,428,144.89 113,562,844.87

Cash paid for purchase and construction of fixed

assets, intangible assets and other long-term assets

404,176,849.64 360,776,175.65

Cash paid for investment 112,202,451.75

Net increase of mortgage loan

Net cash paid for acquiring subsidiaries and other

business units

Other cash paid related to investment activities 50,000.00 5,000.00

Subtotal of cash outflow from investment activities 516,429,301.39 360,781,175.65

Net cash flow from investment activities -495,001,156.50 -247,218,330.78

3. Cash flow from financing activities:

Cash received from absorbing investment 100,000.00

Incl.: Cash received by subsidiaries from absorption

of minorities' investment

Cash received from loan 1,909,331,399.29 934,700,855.65

Cash received from bond issuance

Other cash received related to financing activities 12,160,000.00

Subtotal of cash inflow from financing activities 1,921,491,399.29 934,800,855.65

Cash paid for redemption of debt 1,433,600,855.65 1,153,805,075.14

Cash paid for distribution of dividends, profit or

payment of interest

134,454,579.97 108,293,761.91

Incl.: Cash paid to minority shareholders as dividend

and profit by subsidiaries

Other cash paid related to financing activities

Subtotal of cash outflow from financing activities 1,568,055,435.62 1,262,098,837.05

Net cash flow from financing activities 353,435,963.67 -327,297,981.40

4. Impact of changes in exchange rate on cash and

cash equivalents

-124,286.85 -6,162,774.22

5. Net increase of cash and cash equivalents -170,749,479.51 -652,696.38

Plus: Beginning balance of cash and cash equivalents 573,284,390.95 573,937,087.33

6. Closing balance of cash and cash equivalents 402,534,911.44 573,284,390.95



Cash Flow Statement of Parent Company


Unit: RMB

Item Note Amount in

current period

Amount in

previous period

1. Cash flow from operating activities:

Cash received from sale of commodities and rendering

of service

7,161,542,311.10 6,909,563,045.93

Tax rebate received

Other cash received related to operating activities 168,932,480.24 182,400,494.17

Subtotal of cash inflow from operating activities 7,330,474,791.34 7,091,963,540.10

Cash paid for purchase of commodities and accepting

of service

6,466,432,119.57 5,694,920,028.38

Cash paid to or for employees 508,048,968.27 365,962,535.42

Cash paid for various taxes 170,218,563.80 176,779,177.89


66 / 74

Other cash paid related to operating activities 223,070,162.72 244,191,812.22

Subtotal of cash outflow from operating activities 7,367,769,814.36 6,481,853,553.91

Net cash flow from operating activities -37,295,023.02 610,109,986.19

2. Cash flow from investment activities:

Cash received from disinvestment 307,808.78

Cash received from investment income 21,151,336.80 11,679,367.61

Net cash received from disposal of fixed assets,

intangible assets and other long-term assets

122,298.35

Net cash received from disposal of subsidiaries and

other business units

99,416,016.00

Other cash received related to investment activities 287,300.00

Subtotal of cash inflow from investment activities 21,151,336.80 111,812,790.74

Cash paid for purchase and construction of fixed

assets, intangible assets and other long-term assets

376,753,836.62 352,867,211.32

Cash paid for investment 112,202,451.75 21,000,000.00

Net cash paid for acquiring subsidiaries and other

business units

Other cash paid related to investment activities 50,000.00 20,005,000.00

Subtotal of cash outflow from investment activities 489,006,288.37 393,872,211.32

Net cash flow from investment activities -467,854,951.57 -282,059,420.58

3. Cash flow from financing activities:

Cash received from absorbing investment

Cash received from loan 1,761,781,399.29 808,350,855.65

Other cash received related to financing activities 12,160,000.00

Subtotal of cash inflow from financing activities 1,773,941,399.29 808,350,855.65

Cash paid for redemption of debt 1,308,850,855.65 1,001,555,075.14

Cash paid for distribution of dividends, profit or

payment of interest

118,874,246.53 103,365,742.92

Other cash paid related to financing activities

Subtotal of cash outflow from financing activities 1,427,725,102.18 1,104,920,818.06

Net cash flow from financing activities 346,216,297.11 -296,569,962.41

4. Impact of changes in exchange rate on cash and

cash equivalents

-114,435.64 -5,953,739.96

5. Net increase of cash and cash equivalents -159,048,113.12 25,526,863.24

Plus: Beginning balance of cash and cash equivalents 520,889,380.61 495,362,517.37

6. Closing balance of cash and cash equivalents 361,841,267.49 520,889,380.61




67 / 74

Consolidated Statement of Changes in Owners' Equity


Unit: RMB

Item

Current period

Owner's equity attributable to parent company

Minority interest Total of owner's

equity

Share capital


Capital reserves

Less:

Treasury

stock

Other composite

income Specific reserves Surplus reserves

General

risk

reserve

Undistributed profit Preference

shares

Perpetual

debt Other

1. Closing balance of

last year

1,156,399,976.00 1,586,284,015.86 6,971,376.75 11,329,760.39 87,215,874.60 93,414,319.71 2,941,615,323.31

Plus: Change of

accounting policy

12,720,000.00 -177,320,000.00 -164,600,000.00

Correction of

previous errors

Business merger

under same control

Other

2. Beginning balance

of current year

1,156,399,976.00 1,586,284,015.86 19,691,376.75 11,329,760.39 -90,104,125.40 93,414,319.71 2,777,015,323.31

3. Increase or

decrease in current

period ("－" for

decrease)

97,110,000.00 -17,770,996.38 -598,284,499.83 -1,808,206.38 -520,753,702.59

1) Total amount of

composite income

-17,770,996.38 -592,502,499.95 4,911,793.62 -605,361,702.71

2) Capital increase

and decrease by

owners

(1) Common share

invested by the

shareholder

(2) Capital input by

the holder of other


68 / 74

equity instruments

(3) Shares payment

attributed to owners'

equity

(4) Other

3) Profit distribution -5,781,999.88 -6,720,000.00 -12,501,999.88

(1) Appropriation of

surplus reserves


provision for

normal risk

(3) Distribution to

owners (or

shareholders)

-5,781,999.88 -6,720,000.00 -12,501,999.88

(4) Other

4) Owners' equity

carried forward

internally

(1) Capital reserves

transferred into

capital (or share

capital)

(2) Surplus reserves

transferred into

capital (or share

capital)

(3) Deficit covered

by surplus reserves

(4) Other

5) Specific reserve

(1) Appropriated in

current period

21,814,745.60 21,814,745.60

(2) Used in current

period

21,814,745.60 21,814,745.60

6) Other 97,110,000.00 97,110,000.00


69 / 74


current period 1,156,399,976.00

1,683,394,015.86 1,920,380.37 11,329,760.39 -688,388,625.23 91,606,113.33 2,256,261,620.72

Item

Previous period

Owner's equity attributable to parent company

Minority interest Total of owner's

equity Share capital


Capital reserves

Less:

Treasury

stock

Other composite

income Specific reserves Surplus reserves

General

risk

reserve Undistributed profit

Preference

shares

Perpetual

debt Other


last year

1,156,399,976.00 1,590,142,742.37 10,384,738.92 71,537,113.31 80,230,030.92 2,908,694,601.52

Plus: Change of

accounting policy

-5,558,726.51 5,558,726.51

Correction of

previous errors

Business merger

under same control

Other


of current year

1,156,399,976.00 1,584,584,015.86 5,558,726.51 10,384,738.92 71,537,113.31 80,230,030.92 2,908,694,601.52

3. Increase or decrease

in current period ("

－" for decrease)

1,700,000.00 1,412,650.24 945,021.47 15,678,761.29 13,184,288.79 32,920,721.79

1) Total amount of

composite income

1,412,650.24 16,623,782.76 8,698,944.78 26,735,377.78

2) Capital increase and

decrease by owners

4,458,004.73 4,458,004.73

(1) Common share

invested by the

shareholder

4,458,004.73 4,458,004.73

(2) Capital input by the

holder of other

equity instruments

(3) Shares payment


equity

(4) Other

3) Profit distribution 945,021.47 -945,021.47 27,339.28 27,339.28


surplus reserves

945,021.47 -945,021.47


provision for normal

risk


70 / 74

(3) Distribution to

owners (or

shareholders)

27,339.28 27,339.28

(4) Other

4) Owners' equity

carried forward

internally


transferred into

capital (or share

capital)


transferred into

capital (or share

capital)

(3) Deficit covered by

surplus reserves

(4) Other

5) Specific reserve

(1) Appropriated in

current period

14,832,850.91 14,832,850.91

(2) Used in current

period

14,832,850.91 14,832,850.91

6) Other 1,700,000.00 1,700,000.00


current period

1,156,399,976.00 1,586,284,015.86 6,971,376.75 11,329,760.39 87,215,874.60 93,414,319.71 2,941,615,323.31

Legal representative: Mr. Huang Dailie Principal in charge of accounting: Mr. He Gang Head of accounting dept.: Mr. Lai Yonghua

Statement of Changes in Owners' Equity of Parent Company


Unit: RMB

Item

Current period

Share capital


Capital reserves

Less:

Treasury

stock

Other composite

income Specific reserves Surplus reserves Undistributed profit Total of owner's equity

Preference

shares

Perpetual

debt Other


last year

1,156,399,976.00 1,592,958,638.82 6,126,270.38 11,329,760.39 11,631,767.29 2,778,446,412.88

Plus: Change of

accounting policy

12,720,000.00 -177,320,000.00 -164,600,000.00

Correction of

previous errors

Other


of current year

1,156,399,976.00 1,592,958,638.82 18,846,270.38 11,329,760.39 -165,688,232.71 2,613,846,412.88


71 / 74

3. Increase or decrease

in current period ("

－" for decrease)

97,110,000.00 -17,890,351.36 -592,272,853.35 -513,053,204.71

1) Total amount of

composite income

-17,890,351.36 -586,490,853.47 -604,381,204.83

2) Capital increase and

decrease by owners

(1) Common share

invested by the

shareholder

(2) Capital input by the

holder of other

equity instruments

(3) Shares payment


equity

(4) Other

3) Profit distribution -5,781,999.88 -5,781,999.88


surplus reserves

(2) Distribution to

owners (or

shareholders)

-5,781,999.88 -5,781,999.88

(3) Other

4) Owners' equity

carried forward

internally


transferred into

capital (or share

capital)


transferred into

capital (or share

capital)


surplus reserves

(4) Other

5) Specific reserve

(1) Appropriated in

current period

21,814,745.60 21,814,745.60

(2) Used in current

period

21,814,745.60 21,814,745.60

6) Other 97,110,000.00 97,110,000.00


current period

1,156,399,976.00 1,690,068,638.82 955,919.02 11,329,760.39 -757,961,086.06 2,100793208.17


72 / 74

Item

Previous period

Share capital


Capital reserves

Less:

Treasury

stock

Other composite

income Specific reserves Surplus reserves Undistributed profit Total of owner's equity

Preference

shares

Perpetual

debt Other


last year

1,156,399,976.00 1,597,355,411.76 10,384,738.92 3,126,574.04 2,767,266,700.72

Plus: Change of

accounting policy

-6,096,772.94 6,096,772.94

Correction of

previous errors

Other


of current year

1,156,399,976.00 1,591,258,638.82 6,096,772.94 10,384,738.92 3,126,574.04 2,767,266,700.72

3. Increase or

decrease in current

period ("－" for

decrease)

1,700,000.00 29,497.44 945,021.47 8,505,193.25 11,179,712.16

1) Total amount of

composite income

29,497.44 9,450,214.72 9,479,712.16

2) Capital increase

and decrease by

owners

(1) Common share

invested by the

shareholder

(2) Capital input by

the holder of other

equity instruments

(3) Shares payment

attributed to

owners' equity

(4) Other

3) Profit distribution 945,021.47 -945,021.47


surplus reserves

945,021.47 -945,021.47

(2) Distribution to

owners (or

shareholders)

(3) Other

4) Owners' equity

carried forward

internally


transferred into

capital (or share

capital)


73 / 74


transferred into

capital (or share

capital)


surplus reserves

(4) Other

5) Specific reserve

(1) Appropriated in

current period

14,832,850.91 14,832,850.91

(2) Used in current

period

14,832,850.91 14,832,850.91

6) Other 1,700,000.00 1,700,000.00


current period

1,156,399,976.00 1,592,958,638.82 6,126,270.38 11,329,760.39 11,631,767.29 2,778,446,412.88

Legal representative: Mr. Huang Dailie Principal in charge of accounting: Mr. He Gang Head of accounting dept.: Mr. Lai Yonghua


74 / 74

12. Documents for Reference

1. Accounting statements signed and stamped by legal representative, CFO and chief of accounting

department;

2. The original auditor's report stamped by the public accounting firm and signed and stamped by the

certified public accountant;

3. Articles of Association of Shanghai Chlor-Alkali Co., Ltd. during the report period

4. The formal version of all files and originals of the announcements disclosed in the newspapers

appointed by China Securities Regulatory Committee during the report period;

5.

The Company shall furnish the above documents for reference when the China Securities

Regulatory Committee and the stock exchange request to provide them and the shareholders

request to consult according to the requirements of the statute or the Articles of Association.

Chairman of the Board: Huang Dailie

Presenting date approved by the Board of Directors: March 21, 2015