INTERIM REPORT 2015 Tiande Chemical Holdings Limited (incorporated in the Cayman Islands with limited liability) (Stock Code: 609)

Transcription

1 INTERIM REPORT 2015 Tiande Chemical Holdings Limited (incorporated in the Cayman Islands with limited liability) (Stock Code: 609)

2 Contents 2 Corporate Information 5 Condensed Consolidated Income Statement 6 Condensed Consolidated Statement of Comprehensive Income 7 Condensed Consolidated Statement of Financial Position 9 Condensed Consolidated Statement of Cash Flows 11 Condensed Consolidated Statement of Changes in Equity 13 Notes to the Condensed Consolidated Financial Statements 39 Management Discussion and Analysis 54 Other Information Tiande Chemical Holdings Limited Interim Report

3 Corporate Information BOARD OF DIRECTORS Executive Directors Mr. Liu Hongliang (Chairman) Mr. Wang Zijiang Mr. Guo Xitian (General manager) Mr. Guo Yucheng (resigned as an executive Director on 22 May 2015) Mr. Gao Feng (Deputy general manager) (appointed as an executive Director on 22 May 2015) Independent Non-Executive Directors Mr. Gao Baoyu Mr. Leung Kam Wan Mr. Liu Chenguang BOARD COMMITTEES Audit Committee Mr. Leung Kam Wan (Chairman) Mr. Gao Baoyu Mr. Liu Chenguang Remuneration Committee Mr. Liu Chenguang (Chairman) Mr. Gao Baoyu Mr. Leung Kam Wan Mr. Liu Hongliang Nomination Committee Mr. Liu Hongliang (Chairman) Mr. Leung Kam Wan Mr. Liu Chenguang Safety and Environmental Protection Committee Mr. Guo Yucheng (resigned from Chairmanship on 22 May 2015) Mr. Guo Xitian (appointed as Chairman on 22 May 2015) Mr. Gao Baoyu Mr. Sun Zhenmin 2 天德化工控股有限公司二零一五年中期報告

4 Corporate Information Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY Cayman Islands A COMPANY SECRETARY Ms. Lau Wai Chun INDEPENDENT AUDITOR BDO Limited PRINCIPAL BANKERS Bank of China (Hong Kong) Limited Industrial and Commercial Bank of China, Weifang Branch HONG KONG SHARE REGISTRAR AND TRANSFER OFFICE Computershare Hong Kong Investor Services Limited Shops on the 17th Floor Hopewell Centre 183 Queen s Road East Wan Chai Hong Kong REGISTERED OFFICE Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY Cayman Islands PRINCIPAL PLACE OF BUSINESS IN HONG KONG Room 2204A 22nd Floor Bank of America Tower 12 Harcourt Road Central Hong Kong Tiande Chemical Holdings Limited Interim Report

5 Corporate Information HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS IN THE PEOPLE S REPUBLIC OF CHINA (THE PRC ) Weifang High Tech Industry Development Zone Weifang City Shandong Province The PRC COMPANY WEBSITE STOCK CODE The Stock Exchange of Hong Kong Limited (the Stock Exchange ): 天德化工控股有限公司二零一五年中期報告

6 Condensed Consolidated Income Statement Six months ended 30 June Notes RMB 000 RMB 000 (Unaudited) (Unaudited) Turnover 4 584, ,741 Cost of sales (420,577) (406,612) Gross profit 163, ,129 Other income 4 6,259 8,265 Selling expenses (18,283) (18,157) Administrative and other operating expenses (20,545) (21,747) Finance costs 5 (355) (289) Fair value gain/(loss) on derivative financial instruments 511 (504) Share of loss of a joint venture (2,993) (1,812) Profit before income tax 6 128, ,885 Income tax expense 7 (35,640) (31,864) Profit for the period 92,614 89,021 Profit for the period attributable to owners of the Company 92,614 89,021 Earnings per share for profit attributable to owners of the Company for the period 9 Basic and diluted RMB RMB0.105 Tiande Chemical Holdings Limited Interim Report

7 Condensed Consolidated Statement of Comprehensive Income Six months ended 30 June RMB 000 RMB 000 (Unaudited) (Unaudited) Profit for the period 92,614 89,021 Other comprehensive income Items that may be reclassified subsequently to the income statement: Exchange (loss)/gain on translation of financial statements of foreign operations (1,090) 88 Other comprehensive income for the period (1,090) 88 Total comprehensive income for the period attributable to owners of the Company 91,524 89,109 6 天德化工控股有限公司二零一五年中期報告

8 Condensed Consolidated Statement of Financial Position 30 June December 2014 Notes RMB 000 RMB 000 (Unaudited) (Audited) ASSETS AND LIABILITIES Non-current assets Property, plant and equipment , ,114 Prepaid land lease payments 50,768 51,415 Investment properties 14,510 14,510 Deposits paid for acquisition of property, plant and equipment 7,869 4,156 Interests in a joint venture 36,713 40,104 Finance lease receivable 13,812 14,210 Deferred tax assets 1,375 1, , ,759 Current assets Inventories 114,220 88,898 Trade and bills receivable , ,037 Prepayments and other receivables 12 22,594 25,006 Amount due from a joint venture 38,492 37,543 Finance lease receivable Bank and cash balances 98,864 62, , ,223 Tiande Chemical Holdings Limited Interim Report

9 Condensed Consolidated Statement of Financial Position 30 June December 2014 Notes RMB 000 RMB 000 (Unaudited) (Audited) Current liabilities Trade payables 13 23,176 16,002 Accruals and other payables 14 85,070 85,212 Bank borrowings 61,021 30,571 Current tax liabilities 20,597 18, , ,730 Net current assets 445, ,493 Total assets less current liabilities 1,141,562 1,080,252 Non-current liabilities Deferred income 11,291 12,211 Deferred tax liabilities 4,965 3,138 Derivative financial instruments 9,975 10,486 26,231 25,835 Net assets 1,115,331 1,054,417 EQUITY Equity attributable to the Company s owners Share capital 15 7,786 7,786 Reserves 1,107,545 1,046,631 Total equity 1,115,331 1,054,417 LIU HONGLIANG Director WANG ZIJIANG Director 8 天德化工控股有限公司二零一五年中期報告

10 Condensed Consolidated Statement of Cash Flows Six months ended 30 June RMB 000 RMB 000 (Unaudited) (Unaudited) Net cash generated from operating activities 91,037 95,518 Cash flows from investing activities Purchases of property, plant and equipment (54,876) (40,626) Loan to a joint venture (354) Proceeds on disposals of property, plant and equipment 2,900 Expenses for disposals of property, plant and equipment (258) Government grant for the construction of property, plant and equipment 500 Increase in pledged bank deposits (10,286) Interest received Net cash used in investing activities (53,521) (48,544) Cash flows from financing activities Dividend paid (30,610) (30,342) Interest paid (339) (329) Repayments of bank borrowings (33,297) New bank borrowings raised 30,450 30,571 Net cash used in financing activities (499) (33,397) Tiande Chemical Holdings Limited Interim Report

11 Condensed Consolidated Statement of Cash Flows Six months ended 30 June RMB 000 RMB 000 (Unaudited) (Unaudited) Net increase in cash and cash equivalents 37,017 13,577 Cash and cash equivalents at the beginning of the period 62,942 49,551 Effect of foreign exchange rate changes (1,095) 92 Cash and cash equivalents at the end of the period 98,864 63,220 Analysis of balances of cash and cash equivalents Bank and cash balances 98,864 63, 天德化工控股有限公司二零一五年中期報告

12 Condensed Consolidated Statement of Changes in Equity For the six months ended 30 June 2015 Share capital Share premium Special reserve Surplus reserve fund Unaudited Property revaluation reserve Public welfare fund Foreign currency translation reserve Retained profits Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 Balance as at 1 January , ,333 31,182 67,040 1, (2,304) 842,094 1,054,417 8 Dividend paid (note 8) (30,610) (30,610) Transactions with owners (30,610) (30,610) Profit for the period 92,614 92,614 Other comprehensive income Exchange loss on translation of financial statements of foreign operations (1,090) (1,090) Total comprehensive income for the period (1,090) 92,614 91,524 Balance as at 30 June , ,333 31,182 67,040 1, (3,394) 904,098 1,115,331 Tiande Chemical Holdings Limited Interim Report

13 Condensed Consolidated Statement of Changes in Equity For the six months ended 30 June 2015 Share capital Share premium Special reserve Surplus reserve fund Unaudited Property revaluation reserve Public welfare fund Foreign currency translation reserve Retained profits Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 Balance as at 1 January , ,333 31,182 60,241 1, (2,476) 724, ,082 8 Dividend paid (note 8) (30,342) (30,342) Transactions with owners (30,342) (30,342) Profit for the period 89,021 89,021 Other comprehensive income Exchange gain on translation of financial statements of foreign operations Total comprehensive income for the period 88 89,021 89,109 Balance as at 30 June , ,333 31,182 60,241 1, (2,388) 783, , 天德化工控股有限公司二零一五年中期報告

14 Notes to the Condensed Consolidated Financial Statements 1. Cricket Square, Hutchins Drive, P. O. B o x , G r a n d Cayman KY1-1111, Cayman Islands General information and basis of preparation Tiande Chemical Holdings Limited (the Company ) was incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Law of the Cayman Islands. The address of its registered office is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands. The Company s shares are listed on The Stock Exchange of Hong Kong Limited (the Stock Exchange ). The principal activity of the Company is investment holding. The principal activities of the Company s subsidiaries (together with the Company referred to as the Group ) are research and development, manufacture and sale of fine chemical products. The ultimate holding company of the Group is Cheerhill Group Limited, a company incorporated in the British Virgin Islands. The unaudited condensed consolidated interim financial statements for the six months ended 30 June 2015 (the Unaudited Condensed Financial Information ) have been prepared in accordance with Hong Kong Accounting Standard ( HKAS ) 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants (the HKICPA ) and the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the Stock Exchange (the Listing Rules ). Tiande Chemical Holdings Limited Interim Report

15 Notes to the Condensed Consolidated Financial Statements General information and basis of preparation (Continued) The Unaudited Condensed Financial Information does not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group s annual financial statements for the year ended 31 December 2014 (the 2014 Annual Financial Statements ). The Unaudited Condensed Financial Information has been prepared in accordance with the same accounting policies adopted in the 2014 Annual Financial Statements, except for the adoption of the new and revised Hong Kong Financial Reporting Standards ( HKFRSs ), which collective term includes all applicable individual Hong Kong Financial Reporting Standards ( HKFRS ), Hong Kong Accounting Standards and Interpretations issued by the HKICPA. The functional currency of the Company is Hong Kong Dollars ( HK$ ). The Unaudited Condensed Financial Information is presented in Renminbi ( RMB ) because the main operations of the Group are located in the People s Republic of China (the PRC ). All values are rounded to the nearest thousand except when otherwise stated. The Unaudited Condensed Financial Information has been approved for issue by the board (the Board ) of directors (the Directors ) of the Company on 24 August 天德化工控股有限公司二零一五年中期報告

16 Notes to the Condensed Consolidated Financial Statements Adoption of new or amended HKFRSs In the current period, the Group has applied for the first time the following new and revised standards, amendments and interpretations issued by the HKICPA, which are relevant to and effective for the Group s financial statements for the annual period beginning on 1 January 2015: Amendments to HKFRS Annual Improvements to HKFRSs Cycle Amendments to HKFRS Annual Improvements to HKFRSs Cycle Other than as noted below, the adoption of these new and revised HKFRSs did not change the Group s accounting policies as followed in the preparation of the 2014 Annual Financial Statements. Tiande Chemical Holdings Limited Interim Report

17 Notes to the Condensed Consolidated Financial Statements 2. 報告 報告 二零一零年 二零一二年 期年 報告 二零一一年 二零一 年 期年 Adoption of new or amended HKFRSs (Continued) Amendments to HKFRS Annual Improvements to HKFRSs Cycle and HKFRSs Cycle The amendments issued under the annual improvements process make small, non-urgent changes to a number of standards where they are currently unclear. They include amendments to HKAS 16 Property, Plant and Equipment to clarify how the gross carrying amount and accumulated depreciation are treated where an entity uses the revaluation model. The carrying amount of the asset is restated to revalued amount. The accumulated depreciation may be eliminated against the gross carrying amount of the asset. Alternatively, the gross carrying amount may be adjusted in a manner consistent with the revaluation of the carrying amount of the asset and the accumulated depreciation is adjusted to equal the difference between the gross carrying amount and the carrying amount after taking into account accumulated impairment losses. The adoption of the amendments to HKAS16 has no impact on these financial statements as the Group uses the cost model for its property, plant and equipment. 16 天德化工控股有限公司二零一五年中期報告

18 Notes to the Condensed Consolidated Financial Statements Adoption of new or amended HKFRSs (Continued) The Group has not early adopted the new HKFRSs that have been issued but are not yet effective. The Directors anticipate that the application of new and revised HKFRSs but not yet effective will have no material impact on the results and the financial position of the Group. 3. Segment information The Group manages its businesses by product and service lines. For the six months ended 30 June 2015, the Group has identified the following four product and service lines as its operating segments: (i) (i) Cyanide and its derivative products: Research and development, manufacture and sale of cyanide and its derivative products; (ii) (ii) Alcohol products: Research and development, manufacture and sale of alcohol products; (iii) (iv) (iii) Chloroacetic acid and its derivative products: Research and development, manufacture and sale of chloroacetic acid and its derivative products; and (iv) Other chemical products: Sale of other chemical products, e.g. steam and fine petrochemical products. Tiande Chemical Holdings Limited Interim Report

19 Notes to the Condensed Consolidated Financial Statements Segment information (Continued) These operating segments are monitored and strategic decisions are made on the basis of adjusted segment operating results. Each of these operating segments is managed separately as each of the product and service lines requires different resources as well as marketing approaches. Inter-segment sales are priced with reference to prices charged to external parties for similar orders. Certain comparative figures in the segment information for the six months ended 30 June 2014 have been reclassified. Previously, Fine petrochemical products and Other by-products were reported as two separate segments. For the six months ended 30 June 2015, they were reported under the new Other chemical products segment as a result of the change in information reported internally for the purposes of resources allocation and assessment of business performance, details of which have been set out in note 5 of the 2014 Annual Financial Statements. Comparative figures have been reclassified accordingly. 18 天德化工控股有限公司二零一五年中期報告

20 Notes to the Condensed Consolidated Financial Statements Segment information (Continued) Six months ended 30 June 2015 Cyanide and its derivative products Alcohol products Chloroacetic acid and its derivative products Other chemical products Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenue: External customers 510,623 49,977 14,664 8, ,237 Inter-segment revenue 8,492 88, ,563 Reportable segment revenue 510,623 58, ,330 9, ,800 Reportable segment profit 137,534 4,253 17,540 3, ,782 Reportable segment assets 723,929 18,058 87,798 80, ,562 Six months ended 30 June 2014 Cyanide and its derivative products Alcohol products Chloroacetic acid and its derivative products Other chemical products Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenue: External customers 500,135 33,126 16,775 11, ,741 Inter-segment revenue 29, , ,284 Reportable segment revenue 500,135 62, ,459 12, ,025 Reportable segment profit 124,473 9,092 75,148 6, ,836 Reportable segment assets 577,643 29,044 96,909 89, ,785 Tiande Chemical Holdings Limited Interim Report

21 Notes to the Condensed Consolidated Financial Statements Segment information (Continued) The totals presented for the Group s operating segments reconcile to the Group s key financial figures as presented in the financial statements as follows: Six months ended 30 June RMB 000 RMB 000 (Unaudited) (Unaudited) Reportable segment revenue 681, ,025 Elimination of inter-segment revenue (97,563) (176,284) Consolidated revenue 584, ,741 Six months ended 30 June RMB 000 RMB 000 (Unaudited) (Unaudited) Reportable segment profit 162, ,836 Rental income Finance costs (355) (289) Corporate unallocated income 3,506 4,425 Corporate unallocated expenses (21,242) (23,628) Fair value gain/(loss) on derivative financial instruments 511 (504) Share of loss of a joint venture (2,993) (1,812) Elimination of inter-segment profit (14,317) (72,575) Consolidated profit before income tax 128, , 天德化工控股有限公司二零一五年中期報告

22 Notes to the Condensed Consolidated Financial Statements Turnover and other income Turnover of the Group, which is the revenue from the Group s principal activities, and other income recognised during the period are as follows: Six months ended 30 June RMB 000 RMB 000 (Unaudited) (Unaudited) Turnover Sales of cyanide and its derivative products 510, ,135 Sales of alcohol products 49,977 33,126 Sales of chloroacetic acid and its derivative products 14,664 16,775 Sales of other chemical products 8,973 11, , ,741 Other income Government grants 51 1,905 Bank interest income Interest income from a joint venture Interest income from finance lease Release of deferred income 1,370 1,370 Rental income Gain on disposals of property, plant and equipment 1,998 Exchange gains, net 2,470 1,674 Sundry income ,259 8,265 Tiande Chemical Holdings Limited Interim Report

23 Notes to the Condensed Consolidated Financial Statements Finance costs Six months ended 30 June RMB 000 RMB 000 (Unaudited) (Unaudited) Interest charges on: Bank loans wholly repayable within five years Profit before income tax Profit before income tax is arrived at after charging/ (crediting): Six months ended 30 June RMB 000 RMB 000 (Unaudited) (Unaudited) Directors remuneration Fees Salaries, discretionary bonus and other benefits 1,882 1,799 Retirement benefit scheme contributions ,083 1,996 Other staff costs 37,471 31,833 Retirement benefit scheme contributions 2,491 2,244 Total staff costs 42,045 36, 天德化工控股有限公司二零一五年中期報告

24 Notes to the Condensed Consolidated Financial Statements 6. Six months ended 30 June RMB 000 RMB 000 (Unaudited) (Unaudited) Amortisation of prepaid land lease payments i Cost of inventories recognised as an expense (note i), including 412, ,874 Reversal of writedown of inventories to net realisable value (41) (33) Depreciation on property, plant and equipment 33,604 31,469 Exchange gains, net (2,470) (1,674) Impairment loss on trade 6. Profit before income tax (Continued) receivables 1,500 Minimum lease payments under operating leases in respect of leasehold land and buildings Rental income less outgoings (358) (429) Direct operating expenses arising from investment properties that generated rental income 4 3 ii Research costs (note ii) 2,827 8,398 Tiande Chemical Holdings Limited Interim Report

25 Notes to the Condensed Consolidated Financial Statements Profit before income tax (Continued) Notes: (i) 32,343,000 30,239,000 32,188,000 26,507,000 (i) Cost of inventories recognised as an expense includes RMB32,343,000 (six months ended 30 June 2014: RMB30,239,000) relating to depreciation expenses and RMB32,188,000 (six months ended 30 June 2014: RMB26,507,000) relating to staff costs. These amounts are also included in the respective total amounts disclosed separately above. 41,000 33,000 The write-down of inventories of RMB41,000 (six months ended 30 June 2014: RMB33,000) was reversed as the market price of these inventories was increased during the period. (ii) 240, ,000 2,379,000 2,929,000 (ii) Research costs include RMB240,000 (six months ended 30 June 2014: RMB169,000) relating to depreciation expenses and RMB2,379,000 (six months ended 30 June 2014: RMB2,929,000) relating to staff costs. These amounts are also included in the respective total amounts disclosed separately above Income tax expense Six months ended 30 June RMB 000 RMB 000 (Unaudited) (Unaudited) Current tax PRC Enterprise Income Tax Tax for the period 33,939 30,349 PRC dividend withholding tax 1,800 35,739 30,349 Deferred tax (99) 1,515 35,640 31, 天德化工控股有限公司二零一五年中期報告

26 Notes to the Condensed Consolidated Financial Statements 7. 25% 25% Income tax expense (Continued) No provision for Hong Kong Profits Tax has been made as the Group s income neither arises in nor derives from Hong Kong (six months ended 30 June 2014: Nil). The subsidiaries established in the PRC are subject to PRC Enterprise Income Tax at the rate of 25% for the period (six months ended 30 June 2014: 25%). Pursuant to the PRC Corporate Income Tax Law and its related regulations, non-prc-resident enterprises are levied withholding tax at 10% (unless reduced by tax treaties/arrangements) on dividends receivable from PRC enterprises for profits earned since 1 January The Group has adopted the 10% withholding tax rate for PRC withholding tax purposes during the period ended 30 June A government grant obtained by Weifang Binhai Petro-Chem Co., Ltd. for subsidising the construction of production lines and ancillary facilities for manufacturing of high purity isobutylene, polyisobutylene and chloroacetic acid was recognised as a deferred income in As the construction has been completed as at 31 December 2007, the deferred income commenced to release to profit or loss over the useful lives of the relevant assets. Such income is taxable for the year in which it is released to profit or loss. Tiande Chemical Holdings Limited Interim Report

27 Notes to the Condensed Consolidated Financial Statements ,610,000 30,342, Income tax expense (Continued) The government grants obtained by Weifang Parasia Chem Co., Ltd. ( Weifang Parasia ) for subsidising the construction of production lines were recognised as deferred income in both 2014 and As the construction has not yet been completed as at 30 June 2015, no deferred income commenced to release to profit or loss over the useful lives of the relevant assets. The whole income is taxable when Weifang Paraisa received the government grants in both 2014 and Dividends During the six months ended 30 June 2015, a final dividend of 4.5 HK cents (six months ended 30 June 2014: 4.5 HK cents) per ordinary share was distributed to the shareholders of the Company ( Shareholders ) in respect of the year ended 31 December The aggregate amount of the final dividend distributed and paid in the current period amounted to approximately RMB30,610,000 (six months ended 30 June 2014: RMB30,342,000). The Board has declared the payment of an interim dividend of 2.5 HK cents per ordinary share for the six months ended 30 June 2015 (six months ended 30 June 2014: Nil). The interim dividend declared after the reporting date has not been recognised as a liability in this Unaudited Condensed Financial Information at the reporting date. 26 天德化工控股有限公司二零一五年中期報告

28 Notes to the Condensed Consolidated Financial Statements Earnings per share The calculation of the basic and diluted earnings per share attributable to owners of the Company is based on the following data: Six months ended 30 June RMB 000 RMB 000 (Unaudited) (Unaudited) Profit for the period 92,614 89,021 Number of ordinary shares Six months ended 30 June shares 000 shares (Unaudited) (Unaudited) Weighted average number of ordinary shares for the purpose of basic and diluted earnings per share 846, ,878 There were no dilutive potential ordinary shares for the six months ended 30 June 2015 and Tiande Chemical Holdings Limited Interim Report

29 Notes to the Condensed Consolidated Financial Statements ,100,000 22,300, , Property, plant and equipment During the six months ended 30 June 2015, the Group acquired property, plant and equipment of approximately RMB52.1 million (six months ended 30 June 2014: RMB22.3 million) but has not disposed of any property, plant and equipment (six months ended 30 June 2014: RMB644,000) Trade and bills receivable 30 June December 2014 RMB 000 RMB 000 (Unaudited) (Audited) Trade receivables 183, ,003 Bills receivable 177, , , ,037 The Group allows a credit period normally ranging from one month to six months to its trade customers (31 December 2014: ranging from one month to six months). The bills receivable are non-interest bearing bank acceptance bills and expired in six months upon issuance. Each customer has a maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by management. 28 天德化工控股有限公司二零一五年中期報告

30 Notes to the Condensed Consolidated Financial Statements Trade and bills receivable (Continued) The ageing analysis of trade and bills receivable at the reporting date, based on the invoice date, is as follows: 30 June December 2014 RMB 000 RMB 000 (Unaudited) (Audited) to 90 days 295, , to 180 days 61,551 75, to 365 days 1,494 7, Over 365 days 2,315 1, , ,037 The below table reconciled the impairment loss of trade receivable for the period: 30 June December 2014 RMB 000 RMB 000 (Unaudited) (Audited) At 1 January Impairment loss recognised 1,500 At 30 June 2015/ 31 December ,500 Tiande Chemical Holdings Limited Interim Report

31 Notes to the Condensed Consolidated Financial Statements Trade and bills receivable (Continued) Trade and bills receivable related to a large number of diversified customers for whom there was no recent history of default. Based on past credit policy, management believes that no further impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered to be fully recoverable. The Group did not hold any collateral in respect of trade receivables past due but not impaired. The Directors considered that the fair values of trade and bills receivable are not materially different from their carrying amounts because these amounts have short maturity periods June December 2014 RMB 000 RMB 000 (Unaudited) (Audited) Advanced to the suppliers 15,049 17,420 Prepayments 4,903 5,509 Other receivables 1, Prepayments and other receivables Prepaid land lease payments current portion 1,293 1,293 22,594 25, 天德化工控股有限公司二零一五年中期報告

32 Notes to the Condensed Consolidated Financial Statements Trade payables The Group was granted by its suppliers credit periods ranging from 30 to 365 days (31 December 2014: ranging from 30 to 365 days). The ageing analysis of trade payable at the reporting date, based on the invoice date, is as follows: 30 June December 2014 RMB 000 RMB 000 (Unaudited) (Audited) to 90 days 21,762 15, to 180 days to 365 days Over 365 days ,176 16,002 All amounts are short term and hence the carrying amounts of trade payables are considered to be a reasonable approximation of fair values. Tiande Chemical Holdings Limited Interim Report

33 Notes to the Condensed Consolidated Financial Statements Accruals and other payables 30 June December 2014 RMB 000 RMB 000 (Unaudited) (Audited) Payables for acquisition of property, plant and equipment 32,239 31,301 Receipts in advance 5,219 11,354 Accrued expenses 7,817 5,861 Wages and welfare payables 3,268 6,086 Other tax payables 6,963 5,813 Other payables 26,274 21,557 Deferred income current portion 3,290 3,240 85,070 85, Share capital Authorised: 0.01 Ordinary shares of HK$0.01 each As at 1 January 2014, 31 December 2014, 1 January 2015 and 30 June 2015 (Unaudited) Issued and fully paid: 0.01 Ordinary shares of HK$0.01 each As at 1 January 2014, 31 December 2014, 1 January 2015 and 30 June 2015 (Unaudited) Amount Number of ordinary shares HK$ 000 RMB ,000,000,000 1,000, ,878,000 8,468 7, 天德化工控股有限公司二零一五年中期報告

34 Notes to the Condensed Consolidated Financial Statements Commitments The Group s commitments at the reporting date are as follows: 30 June December 2014 RMB 000 RMB 000 (Unaudited) (Audited) Contracted but not provided for Property, plant and equipment 31,059 10,114 Shareholder s loans to a joint venture (note) 57,055 61,919 88,114 72,033 Authorised but not contracted for Property, plant and equipment 94, , , ,830 55% 11,880,000 3,575,000 28,109,000 8,305,000 57,055,000 Note: The Company agrees to make shareholder s loans of EURO11,880,000 to a joint venture, Dekel Investment Holdings Limited ( Dekel Investment ) in accordance with 55% shareholding of the Company in Dekel Investment, which is subject to the terms and conditions set out in the joint venture agreement dated 30 June As at 30 June 2015, the Group made a shareholder s loan of EURO3,575,000 (approximately RMB28,109,000) to Dekel Investment and therefore, the Group is committed to make the remaining balance of a shareholder s loan of EURO8,305,000 (approximately RMB57,055,000) to Dekel Investment accordingly. Tiande Chemical Holdings Limited Interim Report

35 Notes to the Condensed Consolidated Financial Statements Related party transactions During the six months ended 30 June 2015, the Group entered into the following transactions with the related parties: Six months ended 30 June RMB 000 RMB 000 (Unaudited) (Unaudited) Rental expenses to a related company in which all the executive Directors have beneficial interests and can exercise significant influence Sale of goods to a joint venture 4,005 Purchase of raw materials from a joint venture 140 Rental income from a joint venture Acquisition of the property, plant and equipment from a related company in which all the executive Directors have beneficial interests and can exercise significant influence 13,800 Interest income from finance lease from a joint venture Interest income from loan to a joint venture Disposals of property, plant and equipment to a related company in which all the executive Directors have beneficial interests and can exercise significant influence 2, 天德化工控股有限公司二零一五年中期報告

36 Notes to the Condensed Consolidated Financial Statements Fair value measurement of financial instruments The following table provides an analysis of financial instruments carried at fair value by level of fair value hierarchy: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset and liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3: Inputs for the asset and liability that are not based on observable market data (unobservable inputs). Level 1 Level 2 Level 3 Total RMB 000 RMB 000 RMB 000 RMB June 2015 Liabilities: Financial liabilities at fair value through profit or loss Derivative financial instruments 9,975 9, December 2014 Liabilities: Financial liabilities at fair value through profit or loss Derivative financial instruments 10,486 10,486 Tiande Chemical Holdings Limited Interim Report

37 Notes to the Condensed Consolidated Financial Statements Fair value measurement of financial instruments (Continued) The fair value of derivative financial instruments is estimated using a binomial lattice model. Significant unobservable inputs 30 June 31 December (Unaudited) (Audited) Inflation rate 1.5%-2.5% 1.5%-2.5% Weighted average cost of capital ( WACC ) 15.7% 15.9% Expected volatility 47.3% 44.8% 5% 128,000 5% 126,000 5% 1,504,000 5% 1,926,000 5% 116,000 5% 110,000 Increase inflation rate by 5% would increase the fair value gain of derivative financial instruments by RMB128,000 whilst decreased inflation rate by 5% would decrease the fair value gain of derivative financial instruments by RMB126,000. Increase WACC by 5% would decrease the fair value gain of derivative financial instruments by RMB1,504,000. Lower WACC by 5% would increase the fair value gain of derivative financial instruments by RMB1,926,000. Increase expected volatility by 5% would decrease the fair value gain of derivative financial instruments by RMB116,000. Lower expected volatility by 5% would increase the fair value gain of derivative financial instruments by RMB110,000. There were no changes in valuation techniques during the period. 36 天德化工控股有限公司二零一五年中期報告

38 Notes to the Condensed Consolidated Financial Statements Fair value measurement of financial instruments (Continued) There were no transfers between levels during the period. The financial liabilities classified in Level 3 use valuation techniques based on significant inputs that are not based on observable market data. The financial instruments within this level are reconciled from opening to closing balances as follows: 30 June December 2014 RMB 000 RMB 000 (Unaudited) (Audited) Derivative financial liabilities: At 1 January 10,486 12,596 Fair value gain on derivative financial instruments (511) (2,110) At 30 June 2015/ 31 December ,975 10,486 Tiande Chemical Holdings Limited Interim Report

39 Notes to the Condensed Consolidated Financial Statements ,000 2,110, ,000, Fair value measurement of financial instruments (Continued) During the period, fair value gain on derivative financial instruments of RMB511,000 (year ended 31 December 2014: RMB2,110,000) was recognised in the consolidated income statement. The Group s finance team performs valuations of financial instruments for financial reporting purposes, including Level 3 fair values, in consultation with independent third party valuer. Valuation techniques are selected based on the characteristics of each instrument, with the overall objective of maximising the use of marketbased information. The finance team reports directly to the Directors and to the audit committee of the Company. Valuation processes and fair value changes are discussed among the audit committee and the valuation team at least six months, in line with the Group s reporting dates. 19. Event after the reporting date On 10 July 2015, the Board announced that the Company has granted share options to certain eligible persons to subscribe for a total of 17,000,000 ordinary share of HK$0.01 each in the share capital of the Company, pursuant to the share option scheme adopted by the Company on 4 October Details of the grant of share options are set out in the Company s announcements dated 10 July 天德化工控股有限公司二零一五年中期報告

40 Management Discussion and Analysis 5.9% 3.6% 81.7% 80.3% Summary of operating results Business Review The Group has performed well in securing sustainable profit during the period under review. The PRC economy is losing steam and the overall manufacturing activities are slowing down. The manufacturing sector suffers from the shrinking market demand. As a result, both the selling price and material costs are on a downward trend. By virtue of the continuous expansion of products portfolio and production capacities of promising products in the past few years, the turnover of the Group achieved a certain degree of growth. The turnover of the Group derived from the domestic market was increased by 5.9% but the turnover of the Group derived from the overseas market was decreased by 3.6% as compared with the corresponding period last year. The turnover arising from the PRC accounted for 81.7% (2014: 80.3%) of the total turnover of the Group. As the degree of decrease in material costs outpaced selling price and the Group adopted a lean procurement process and intensified automated production process ultimately improving the efficiencies and eliminating wastage thus reducing total cost. Hence, both the gross profit margin and gross profit of the Group recorded fair growth. Couple with the implementation of effective operating cost control measures, the profit for the period realised mild growth. Tiande Chemical Holdings Limited Interim Report

41 Management Discussion and Analysis Afinitica Technologies SL Summary of operating results (Continued) Business Review (Continued) The business environment of the manufacturing sector in the PRC remained difficult. The Group put efforts in product optimisation and production process improvement and kept a lean operating structure in order to improve the business edge during the period under review. Besides, the Group has launched a project to further reduce air pollution emissions by upgrading and advancing the existing production facilities. The project will be divided into several phases and completed by 2016 as planned. After the completion of this project, the overall environmental protection conditions of the Group will be improved so as to sustain the long term business growth as well as comply with ever-tightening environmental standards. On the other hand, it is noteworthy that the Group has successfully introduced new business by entering into a toll manufacturing supply agreement between Weifang Common Chem Co. Ltd. ( Weifang Common ), a wholly-owned subsidiary of the Company, and Afinitica Technologies SL, by which Weifang Common will produce certain types of adhesives products during the period under review. For details, please refer to the announcement of the Company dated 14 April Such new business will make a positive contribution to the revenue of the Group in the foreseeable future. The Board believes that entering into a new business sector will enable the Group to further realise its business potential. 40 天德化工控股有限公司二零一五年中期報告

42 Management Discussion and Analysis (i) (ii) Summary of operating results (Continued) Business Review (Continued) Cyanide and its derivative products Cyanide and its derivative products remain the key driver for the overall growth of the Group. During the period under review, the turnover of this category of products still recorded marginal growth, albeit the challenging market conditions. Such growth was mainly attributable to (i) the relatively stable selling price; and (ii) the new products launched in the last financial year received warm reception from the market during the period under review. In view of the promising market response, the Group has already begun to expand the production capacity of such products during the period under review in order to tap the ever growing market and potential demands and seize market share. This category of products delivered double digit profit growth benefited from the decrease of material costs during the period under review. Tiande Chemical Holdings Limited Interim Report

43 Management Discussion and Analysis Summary of operating results (Continued) Business Review (Continued) Cyanide and its derivative products (Continued) Breaking through the existing business, the Group has explored the production of adhesives products during the period under review. The construction of production line for the adhesives products has begun and the trial production run is scheduled in the second half of the year. Commercial production will be launched in the coming year as planned if the construction works and trial run are on track. The management of the Group is optimistic to the development prospect of this new business and will divert more resources in enhancing its development. In addition, the Group will put more efforts on expanding the product range to sustain continuous business development in accordance with the Group s business development strategy. Certain conceptual products are in the pipe line. Once the developments are completed, the Group will commence the production and introduce the adhesives products to the market in the right time. Alcohol products The turnover from external customers of alcohol products achieved considerable growth as compared with the corresponding period last year. This was driven by the growth in sales quantity of an alcoholic product during the period under review. However, the overall selling price of this category of products has deteriorated which in turn harmed the gross profit margin, together with the reduced intersegment revenue, leading the reportable segment profit of this category of products be dropped eventually. 42 天德化工控股有限公司二零一五年中期報告

44 Management Discussion and Analysis Summary of operating results (Continued) Business Review (Continued) Chloroacetic acid and its derivative products Both the turnover and the profit of this category of products had decreased as a result of the decline in the selling price during the period under review. The primary function of this category of products is strengthening the competitive advantage of vertical integration production of the Group thereby enhancing the cost effectiveness of the production of cyanide and its derivative products. Simultaneously, external sales could broaden the customer base and diversify source of revenue of the Group. In anticipation of continuing severe market conditions for the manufacturing sector, the Group will, as always, improve the productivity of this category of products through automation and advancement of production process in order to keep up with the pace of the development of cyanide and its derivative products. Tiande Chemical Holdings Limited Interim Report

45 Management Discussion and Analysis Summary of operating results (Continued) Business Review (Continued) Joint venture company (the JV ) JV has successfully launched commercial production in the second quarter of During the period under review, JV still recorded a net loss because its production capacity has not reached the expected level. The JV management has made great efforts to foster better relationship with the customers and broaden the marketing activity to tap potential market opportunities. It is anticipated that the operating activity will ramp up in the second half of The JV management keeps analysing customer needs and adjusting the product specification thus seeking greater market share. Further expansion of production capacity is expected during 2016 and The JV management believes that upon the expansion of production capacity, it will be able to achieve economies of scale in its production and healthier results for the JV going forward. 44 天德化工控股有限公司二零一五年中期報告

46 Management Discussion and Analysis Summary of operating results (Continued) Business Review (Continued) Outlook Looking forward, the manufacturing sector in the PRC continues to face a challenging market environment. Market demand shows sign of slowing and the market sentiment turns cautious. Despite business environment hardship, the Group has set the existing businesses on a path to continuous improvement and keeps seeking suitable investment opportunities to sustain business growth in the long run. The Group will stay put with its business development strategy to amplify its product portfolio continuously and consolidate its business competitive ability to expand the coverage of downstream sectors so as to diversify market volatility risk and secure sustainable profitability. Given the characteristics of the Group s existing business competitive advantages, vertically penetrating into downstream products development will be one of the best ways to expand and enhance the product portfolio of the Group. Thus, the Group will direct extra resources towards deepening downstream business development and actively cultivate new related products development in coming future. In spite of the dimmer economic outlook, the Group will take appropriate actions to overcome turbulence in the business environment ahead and maintain its sustainable competitive business advantages. In light of the solid management expertise as well as the uncompromising attitude in pursuit of excellence, the Board believes that the Group is capable to achieve continuous growth in the future. Tiande Chemical Holdings Limited Interim Report

47 Management Discussion and Analysis Summary of operating results (Continued) Dividend The Board has declared an interim dividend of 2.5 HK cents per ordinary share for the six months ended 30 June 2015 (six months ended 30 June 2014: Nil). The interim dividend will be payable on 9 October 2015 to the Shareholders whose name appear on the register of members of the Company (the Register of Members ) on 30 September Closure of Register of Members For the purpose of ascertaining Shareholders entitlement to the interim dividend, the Register of Members will be closed from 25 September 2015 to 30 September 2015, both days inclusive, during which no transfer of shares of the Company will be registered. In order to qualify for the interim dividend for the six months ended 30 June 2015, all transfer documents accompanied by the relevant share certificate(s) must be lodged with the Company s share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at Shops on the 17th Floor of Hopewell Centre, 183 Queen s Road East, Wanchai, Hong Kong, for registration not later than 4:30 p.m. on 24 September 天德化工控股有限公司二零一五年中期報告

48 Management Discussion and Analysis 584,200, ,700, ,700, ,100,000 22,500,000 8,600, % 5.5% % (i) (ii) 18,200, ,00018,300, % 3.2% Summary of operating results (Continued) Financial Review Turnover and gross profit of the Group for the six months ended 30 June 2015 amounted to approximately RMB584.2 million and RMB163.7 million respectively, representing an increase of approximately RMB22.5 million and RMB8.6 million or 4.0% and 5.5% as compared with approximately RMB561.7 million and RMB155.1 million recorded in the corresponding period last year. The gross profit margin slightly increased by 0.4 percentage points to 28.0% (six months ended 30 June 2014: 27.6%). The satisfactory growth in the current period is mainly attributable to (i) the new products introduced in the previous year which boosted the growth of turnover; and (ii) the degree of decrease in material costs outpaced selling price during the period under review. The selling expenses marginally increased by approximately RMB0.1 million from approximately RMB18.2 million in the corresponding period last year to approximately RMB18.3 million. The selling expenses remained flat as the Group implemented effective cost management measures. The selling expenses as a percentage of the Group s turnover was 3.1% (six months ended 30 June 2014: 3.2%). Tiande Chemical Holdings Limited Interim Report

49 Management Discussion and Analysis 20,500,000 21,700,000 1,200, % 3.9% 100, , ,000 Summary of operating results (Continued) Financial Review (Continued) The administrative and other operating expenses amounted to approximately RMB20.5 million, which was decreased by approximately RMB1.2 million from approximately RMB21.7 million in the corresponding period last year. Such decrease was principally due to the decrease in research and development expenses during the period under review. The administrative and other operating expenses accounted for 3.5% of the Group s turnover, which was lower than 3.9% from the corresponding period last year. The finance costs represented interest on bank borrowings which were increased by approximately RMB0.1 million to approximately RMB0.4 million (six months ended 30 June 2014: RMB0.3 million). The slight increase was solely due to increase in weighted average bank borrowing amounts during the period under review. 48 天德化工控股有限公司二零一五年中期報告

50 Management Discussion and Analysis (i) (ii) 500,000 92,600,000 89,000,000 3,600,0004.0% Summary of operating results (Continued) Financial Review (Continued) On 30 June 2011, the Company entered into a joint venture agreement (the JV Agreement ) with Henkel Hong Kong Limited ( Henkel ) to set up a joint venture company. Under the JV Agreement, (i) the Company was granted with a call option to require Henkel to sell or cause the sale of all of the equities of the JV Company held by Henkel and/or its affiliates to the Company at the call option price; and (ii) Henkel was granted with a put option to require the Company to purchase or cause the purchase of all of the equities of the JV Company held by Henkel and/or its affiliates at the put option price. Such options can only be exercised during the option period which set on a specified future dates (please refer to the announcement of the Company dated 3 July 2011 for details.) Thus, the JV Agreement deemed to contain derivatives financial instruments which are required to be carried at fair value under relevant Hong Kong financial reporting standards. For the six months ended 30 June 2015, the fair value gain on the derivative financial instruments was, being determined by an independent valuer by the adoption of a binomial lattice model, approximately RMB 0.5 million. In view of the growth of turnover and gross profit and the improved operational efficiency, the net profit amounted to approximately RMB92.6 million, representing an increase of approximately RMB3.6 million or 4.0% as compared with approximately RMB89.0 million recorded in the corresponding period last year. Tiande Chemical Holdings Limited Interim Report

51 Management Discussion and Analysis 91,000,000 95,500,000 30,500,000 30,600,000 2,600, , ,000 54,900,000 40,600,000 33,300, , , ,000 30,600,000 30,300,000 Summary of operating results (Continued) Financial Review (Continued) Liquidity and financial resources For the six months ended 30 June 2015, the Group s primary source of funding included the net cash inflow generated from operating activities of approximately RMB91.0 million (six months ended 30 June 2014: RMB95.5 million); newly raised bank borrowings of approximately RMB30.5 million (six months ended 30 June 2014: RMB30.6 million); no proceeds on disposal of property, plant and equipment (six months ended 30 June 2014: RMB2.6 million) and interest received of approximately RMB0.9 million (six months ended 30 June 2014: RMB0.1 million). With the financial resources obtained from the Group s operations, the Group had spent approximately RMB54.9 million (six months ended 30 June 2014: RMB40.6 million) in the acquisition of the property, plant and equipment, no bank borrowing repayments (six months ended 30 June 2014: RMB33.3 million); no loan made to a joint venture (six months ended 30 June 2014: RMB0.4 million); interest paid of approximately RMB0.3 million (six months ended 30 June 2014: RMB0.3 million) and dividend paid of approximately RMB30.6 million (six months ended 30 June 2014: RMB30.3 million). 50 天德化工控股有限公司二零一五年中期報告

52 Management Discussion and Analysis 98,900,000 62,900,000 61,000,000 30,600,000 37,800,000 32,400, ,900, ,500,000 Summary of operating results (Continued) Financial Review (Continued) Liquidity and financial resources (Continued) As at 30 June 2015, the Group had bank and cash balances of approximately RMB98.9 million (31 December 2014: RMB62.9 million). The total amount of outstanding borrowings was approximately RMB61.0 million (31 December 2014: RMB30.6 million). The Group maintained a sound financial position, the net bank and cash balance of approximately RMB37.8 million (31 December 2014: RMB32.4 million) (total cash and cash equivalent net of total borrowings) as at 30 June The net current assets also further increased to approximately RMB445.9 million (31 December 2014: RMB402.5 million) as a result of the continuous positive operating results during the period under review. The Group will continue to expand its business scale through enhancing productivity, expanding the products portfolio and seeking suitable investment opportunities that will add momentum to the long term growth of the Group. By virtue of the Group s healthy financial position with promising cash inflow generated from the operating activities and available banking facilities obtained from banks, the Group is capable to meet its foreseeable commitments and working capital requirements. Nevertheless, the Group will continue to manage its working capital closely and cautiously, and dedicate to keep a sound liquidity position to optimise the equity return to its shareholders. During the period under review, the Group did not use any financial instruments for any hedging purposes. Tiande Chemical Holdings Limited Interim Report

53 Management Discussion and Analysis Summary of operating results (Continued) Financial Review (Continued) Pledge of assets As at 30 June 2015, neither bank deposits nor prepaid land lease payments of the Group were pledged to secure the Group s bank borrowings or borrowings facilities (31 December 2014: Nil). Contingent liabilities As at 30 June 2015, the Group had no material contingent liabilities. Exposure to fluctuations in exchange rates The Group s operation is mainly in the PRC and its assets, liabilities, revenues and transactions are mainly denominated in RMB, Hong Kong dollars and United States dollars. The Group s foremost exposure to the foreign exchange risk was caused by the fluctuation of RMB during the period under review. Most of the Group s income and expenses are denominated in RMB except for the Group s export sales which were, in majority, denominated in United States dollars. The Group has not experienced any material difficulties or effects on its operations or liquidity as a result of the fluctuations in currency exchange rates during the period under review. Besides, the Group will consider costefficient hedging methods to cope with future foreign currency transactions when appropriate. 52 天德化工控股有限公司二零一五年中期報告

54 Management Discussion and Analysis 1,096 1,009 Human resources As at 30 June 2015, the Group has 1,096 full time employees (31 December 2014: 1,009 full time employees). The increase in the number of employees was in line with the expansion in business activities during the period under review. The Group has established its human resources policies and scheme with a view to deploy more motivated incentives and rewards of the remuneration system which includes a wide range of training and personal development programs to the employees. The remuneration package offered to the staff was in line with their duties and the prevailing market trends. Staff benefits, including medical coverage and provident funds, have also been provided to the employees of the Group. Employees of the Group would receive discretionary bonuses and monetary rewards based on their ratings in annual performance appraisals. The Group also offered rewards or other incentives to the employees in order to motivate their personal growth and career development, such as ongoing training to enhance their technical and product knowledge as well as their knowledge of industry quality standards. All new employees of the Group are required to attend an introduction course and there are also various types of training courses available to all the Group s employees. The Group has also adopted a share option scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group s operations. No share option of the Company has been granted during the period under review. Tiande Chemical Holdings Limited Interim Report

55 Other Information XV XV Directors and chief executive s interests in securities As at 30 June 2015, the interests and short positions of the Directors, chief executive of the Company and their associates in the shares of the Company (the Shares ), underlying Shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the SFO )) which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which any such director or chief executive was taken or deemed to have under such provisions of the SFO) and were recorded in the register maintained by the Company pursuant to section 352 of the SFO, or which were notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the Model Code ) contained in Appendix 10 to the Rules Governing the Listing of Securities on the Stock Exchange (the Listing Rules ), were as follows: Long position in the Shares Name of Director Mr. Liu Hongliang Name of company/ associated corporation Cheerhill Group Limited 1 (Note 1) Number of Shares held/ interest in the Shares Capacity 584,000,000 2 Interest of (Note 2) controlled corporation (%) Approximate % in the total issued share capital 69.00% 54 天德化工控股有限公司二零一五年中期報告

56 Other Information ,000,000 38% 26% 11.5% 11.5% 6.5% 6.5% 2. 38% 1 584,000, XV Directors and chief executive s interests in securities (Continued) Notes: 1. The 584,000,000 Shares were held by Cheerhill Group Limited ( Cheerhill ), the entire issued share capital of which is ultimately beneficially owned as to 38% by Mr. Liu Hongliang, 26% by Mr. Wang Zijiang, 11.5% by Mr. Guo Xitian, 11.5% by Ms. Zheng Hong, 6.5% by Mr. Guo Yucheng and 6.5% by Mr. Fu Anxu. Except for Mr. Fu Anxu, Ms. Zheng Hong (her spouse is Mr. Gao Feng, who has became the executive Director with effective from 22 May 2015) and Mr. Guo Yucheng (resigned as an executive Director on 22 May 2015), all others are the executive Directors. 2. Mr. Liu is deemed to be interested in 584,000,000 Shares referred to in Note 1 above by virtue of his 38% interests in Cheerhill. Save as disclosed above, as at 30 June 2015, none of the Directors and chief executive of the Company, nor their associates had or was deemed to have any interests or short positions in the Shares, underlying Shares or debentures of the Company and any of its associated corporations (within the meaning of Part XV of the SFO) which had been recorded in the register maintained by the Company pursuant to section 352 of the SFO or which had been notified to the Company and the Stock Exchange pursuant to the Model Code as set out in the Listing Rules. At no time during the period under review, was the Company or any of its holding companies, its subsidiaries or its fellow subsidiaries a party to any arrangement that enables the Directors and chief executive of the Company or their spouse and children under 18 years of age to purchase any shares or underlying shares in, or debentures of, the Company or its associated corporation. Tiande Chemical Holdings Limited Interim Report

57 Other Information 5% 336 Substantial shareholders As at 30 June 2015, the following person who held interests of 5% or more of the issued share capital of the Company, other than the Directors, was recorded in the register of members required to be kept by the Company pursuant to Section 336 of the SFO: Long position in the Shares Name of shareholder Cheerhill (Note) Number of Shares held/ interest in the Shares and aggregated interest Capacity 584,000,000 Beneficiary owner (%) Approximate % in the total issued share capital 69.00% Note: 584,000,000 38% 26% 11.5% 11.5% 6.5% 6.5% 336 The 584,000,000 Shares were held by Cheerhill, the entire issued share capital of which is ultimately beneficially owned as to 38% by Mr. Liu Hongliang, 26% by Mr. Wang Zijiang, 11.5% by Mr. Guo Xitian, 11.5% by Ms. Zheng Hong, 6.5% by Mr. Guo Yucheng and 6.5% by Mr. Fu Anxu. Except for Mr. Fu Anxu, Ms. Zheng Hong (her spouse is Mr. Gao Feng, who has became the executive Director with effective from 22 May 2015) and Mr. Guo Yucheng (resigned as an executive Director on 22 May 2015), all others are the executive Directors. Save as disclosed above, as at 30 June 2015, the Company has not been notified by any persons who had any interest or short position in the Shares or underlying Shares which are required to be notified to the Company under the SFO or which are recorded in the register required to be kept by the Company pursuant to section 336 of the SFO. 56 天德化工控股有限公司二零一五年中期報告

58 Other Information 40,000,000 40,000,000 Share options The Company has approved and adopted a share option scheme (the Share Option Scheme ) on 4 October 2006 for the purpose of providing incentives and rewards to directors, eligible employees, suppliers, customers, any shareholder of each member of the Group or associated company or any of their respective associates, and advisers or consultants of the Group who contribute to the success of the Group. The Share Option Scheme has become effective for a period of 10 years commencing on 4 October 2006 and up to 40,000,000 options entitling the holders thereof to subscribe for up to 40,000,000 Shares may be granted under the Share Option Scheme. During the period under review, no share options were granted, exercised or cancelled by the Company under the Share Option Scheme. There were no outstanding share options under the Share Option Scheme as at 1 January 2015 and 30 June Model code for securities transactions by directors of listed companies The Company has adopted a code of conduct with standards no less than those prescribed under the Model Code as set out in Appendix 10 to the Listing Rules for securities transactions by Directors. Upon enquiry by the Company, all Directors have confirmed that they have complied with the required standards as set out in the Model Code and the Company s code of conduct regarding securities transactions by Directors throughout the six months ended 30 June Tiande Chemical Holdings Limited Interim Report

59 Other Information Model code for securities transactions by directors of listed companies (Continued) The senior management, who, because of their office in the Company, are likely to be in possession of unpublished price sensitive information, have been requested to comply with the provisions of the Model Code and the Company s code of conduct regarding securities transactions by Directors. Purchase, sale or redemption of the company s listed shares During the six months ended 30 June 2015, neither the Company nor any of its subsidiaries had redeemed, purchased or sold any of the Company s listed shares. Corporate governance practices None of the Directors is aware of information that would reasonably indicate that the Company is not, or was not during the six months ended 30 June 2015, in compliance with the Corporate Governance Code as set out in Appendix 14 to the Listing Rules. 58 天德化工控股有限公司二零一五年中期報告

60 Other Information (i) (ii) (iii) (iv) (v) (i) (ii) (iii) Nomination committee The Nomination Committee currently comprises an executive Director, namely Mr. Liu Hongliang (chairman of the Nomination Committee) and the two independent non-executive Directors, namely Mr. Leung Kam Wan and Mr. Liu Chenguang. During the period under review, the Nomination Committee has (i) reviewed the structure, size and composition (including the skills, knowledge and experience) of the Board; (ii) reviewed the diversity policy of the Company; (iii) assessed the independence of independent non-executive Directors; (iv) reviewed the Director succession plan; and (v) identified and assessed the candidate for election as a Director and made recommendation to the Board on the appointment. Remuneration committee The Remuneration Committee currently comprises three independent non-executive Directors, namely Mr. Liu Chenguang (chairman of the Remuneration Committee), Mr. Guo Baoyu, Mr. Leung Kam Wan and an executive Director Mr. Liu Hongliang. During the period under review, the Remuneration Committee has (i) reviewed the terms of services contract with executive Director and independent non-executive Director; (ii) reviewed and approved the remuneration package of all Directors and senior management of the Company by reference to the scope of duties and responsibilities of the Directors, corporate goals and objectives of the Group, after taking into account also the comparable market conditions; and (iii) reviewed and assessed the remuneration package for the new Director and made recommendation to the Board for approval. No Director shall participate in any discussion and decision about his own remuneration. Tiande Chemical Holdings Limited Interim Report

61 Other Information (i) (ii) (iii) (iv) (v) Audit committee The Audit Committee of the Company comprises the three independent nonexecutive Directors, namely Mr. Leung Kam Wan (chairman of the Audit Committee), Mr. Guo Baoyu and Mr. Liu Chenguang. During the period under review, the Audit Committee has (i) reviewed the accounting principles and practices adopted by the Company; (ii) reviewed the external auditor s independence and objectivity of the Company and made recommendation to the Board for reappointment of the independent auditor of the Company; (iii) approved the continuing connected transactions of the Company; (iv) discussed with the independent auditor of the Company on the nature and scope of the audit and reporting obligations; and (v) reviewed the independent auditor s management letter and made recommendations to the Board for improvement. Audit Committee has discussed internal control and financial reporting matters with the management and the independent auditor of the Company relating to the preparation of the unaudited condensed consolidated financial statements of the Group for the six months ended 30 June There is no disagreement raised by the Audit Committee on the accounting treatment adopted by the Company during the period under review. By order of the Board Liu Hongliang Chairman Hong Kong, 24 August 天德化工控股有限公司二零一五年中期報告