安道麦B：2023年半年度报告（英文版）

湖北沙隆达股份有限公司2017年半年度报告全文ADAMALtd. Semi-Annual Report 2023 1 ADAMALTD. SEMI-ANNUALREPORT 2023 ADAMALtd. is a global leader in crop protection, providing solutions to farmers across the world to combat weeds, insects and disease. ADAMA has one of the widest and most diverse portfolios of active ingredients in the world, state-of-the art R&D, manufacturing and formulation facilities, together with a culture that empowers our people in markets around the world to listen to farmers and ideate from the field. This uniquely positions ADAMA to offer a vast array of distinctive mixtures, formulations and high-quality differentiated products, delivering solutions that meet local farmer and customer needs in over 100 countries globally. Please see important additional information and further details included in the Annex. August 2023 ADAMALtd. Semi-Annual Report 2023 2 Section I - Important Notice, Table of Contents and Definitions The Company’s Board of Directors, Board of Supervisors, directors, supervisors and senior managers confirm that the content of the Report is true, accurate and complete and contains no false statement, misleading presentations or material omissions, and assume joint and several legal liability arising therefrom. Steve Hawkins, the person in charge of the Company (President and Chief Executive Officer) as well as its legal representative, and Efrat Nagar, the person leading the accounting function (Chief Financial Officer), hereby assert and confirm the truthfulness, accuracy and completeness of the Financial Report. All the Company’s directors attended the board meeting for the review of this Report. The forward-looking information described in this Report, such as future plans, development strategy, market trends and their effect etc., does not constitute, in any manner whatsoever, a substantial commitment of the Company to investors. Investors and other relevant people are cautioned to be sufficiently mindful of investment risks as well as the difference between plans, forecasts and commitments. The Company has described its possible risks in “X - Risks Facing the Company and Countermeasures” under Section III herein. The major risks of the Company include, among others, exchange rate fluctuations; exposure to interest rate, Israel CPI and NIS exchange rate fluctuations; fluctuations in raw material inputs and prices, and in sales. Investors and other relevant people are cautioned to be sufficiently mindful of investment risks. For the complete “Risks Facing the Company and Countermeasures” of the Company, please see the relevant section below. For the Reporting Period, the Company does not plan to distribute cash dividends or bonus shares or convert capital reserve into share capital. This Report and its Abstract have been prepared in both Chinese and English. Should there be any discrepancies between the two versions, the Chinese version shall prevail. ADAMALtd. Semi-Annual Report 2023 3 Table of Contents Section I - Important Notice, Table of Contents and Definitions .......................................2 Section II - Corporate Profile and Financial Results..........................................................6 Section III - Performance Discussion and Analysis ...........................................................9 Section IV – Corporate Governance .................................................................................36 Section V – Environmental and Social Responsibilities .................................................38 Section VI - Significant Events ..........................................................................................51 Section VII - Share Changes and Shareholders ...............................................................80 Section VIII - Preferred stock ............................................................................................87 Section IX - Bonds .............................................................................................................88 Section X - Financial Report ..............................................................................................89 ADAMALtd. Semi-Annual Report 2023 4 Documents Available for Reference (I) Duly signed Financial Statements by the Legal Representative and Accounting Principal as well as Head of the Accounting Organ; (II) Originals of all Company’s documents previously disclosed in media designated by the CSRC as well as the originals of all the public notices, were deposited in the Company’s office. ADAMALtd. Semi-Annual Report 2023 5 Definitions General Terms Definition Company, the Company ADAMALtd. Adama Solutions Adama Agricultural Solutions Ltd., a wholly-owned subsidiary of the Company, incorporated in Israel according to its laws Anpon, ADAMAAnpon ADAMAAnpon (Jiangsu) Ltd., a wholly-owned subsidiary of the Company, incorporated in China according to its laws ADAMAHuifeng ADAMAHuifeng (Jiangsu) Ltd., a 51% owned subsidiary of the Company, incorporated in China according to its laws Board of Directors/Board The Board of Directors of the Company Board of Supervisors The Board of Supervisors of the Company Group, the Group, ADAMA The Company, including all its subsidiaries, unless expressly stated otherwise ChemChina China National Chemical Co., Ltd. ChemChina-Syngenta Transaction The acquisition of Syngenta AG by ChemChina in 2017 CNAC China National Agrochemical Co., Ltd., the indirect controlling shareholder of the Company, a wholly-owned subsidiary of ChemChina CSRC China Securities Regulatory Commission SZSE Shenzhen Stock Exchange SASAC State Assets Supervision and Administration Commission of China Syngenta Group Syngenta Group Co., Ltd, the controlling shareholder of the Company as of June 15,2020, a wholly-owned subsidiary of CNAC Sinochem Holdings Sinochem Holdings Corporation Ltd. Sinochem Group Sinochem Holdings including all its subsidiaries unless otherwise indicated or the context otherwise requires Report This 2023 Semi-Annual Report Reporting Period, this Period January 1,2023 - June 30,2023 2022 Annual Report The Company’s 2022 Annual Report published on March 21,2023 ADAMALtd. Semi-Annual Report 2023 6 Section II - Corporate Profile and Financial Results I. Corporate Information Stock name ADAMAA, ADAMABStock code 000553,200553 Stock exchange Shenzhen Stock Exchange Company name in Chinese 安道麦股份有限公司Abbr. 安道麦Company name in English (if any) ADAMALtd. Abbr. (if any) ADAMA Legal representative Steve Hawkins II. Contact Information III. Other Information 1. Ways to Contact the Company Indicate by tick mark whether any changes occurred to the registered address, office address and their postal codes, website address and email address of the Company during the Reporting Period. □ Applicable √ Not applicable No changes occurred to the said information during the Reporting Period, which can be found in the 2022 Annual Report. 2. Information Disclosure Media and Place where this Report is Kept Indicate by tick mark whether any changes occurred to the information disclosure media and the place where this Report is kept during the Reporting Period. □ Applicable √ Not applicable The newspapers designated by the Company for information disclosure, the website designated by the CSRC for the publication of this Report and the location where this Report is kept did not change during Board Secretary Securities Affairs Representative & Investor Relations Manager Name Guo Zhi Wang Zhujun Address 6/F, No.7 Office Building, No.10 Courtyard, Chaoyang Park South Road, Chaoyang District, Beijing Tel.010-56718110010-56718110 Fax 010-59246173010-59246173 E-mail irchina@adama.com irchina@adama.com ADAMALtd. Semi-Annual Report 2023 7 the Reporting Period. Said information can be found in the 2022 Annual Report. 3. Other Relevant Documents Indicate by tick mark whether any changes occurred to the relevant documents during the Reporting Period. □ Applicable √ Not applicable IV. Main Accounting Data and Financial Results Indicate by tick mark whether the Company needs to retroactively adjust or restate any of its accounting data. □ Yes √ No January - June 2023 January - June 2022 YoY +/- (%) Operating revenues (RMB’000) 17,253,20118,795,828 -8.21% Net profit attributable to shareholders of the Company (RMB’000) (242,156) 732,098 -133.08% Net profit attributable to shareholders of the Company excluding non-recurring profit and loss (RMB’000) (304,966) 655,023 -146.56% Net cash flow from operating activities (RMB’000) (64,876) (1,345,861) 95.18% Basic EPS (RMB/share) (0.1039) 0.3142 -133.07% Diluted EPS (RMB/share) NANANA Weighted average return on net assets -1.03% 3.35% -4.38% End of Reporting Period End of last year +/- (%) Total assets (RMB’000) 59,901,90257,980,4893.31% Net assets attributable to shareholders (RMB’000) 23,644,51023,124,6552.25% V. Differences in Accounting Data under Domestic and Foreign Accounting Standards 1. Differences in Net Profit and Net Assets Disclosed in Financial Reports Prepared under Chinese and International Accounting Standards □ Applicable √ Not applicable None during the Reporting Period. 2. Differences in Net Profit and Net Assets Disclosed in Financial Reports Prepared under Chinese and Foreign Accounting Standards □ Applicable √ Not applicable None during the Reporting Period. 3. Reason for accounting data differences under Chinese and Foreign Accounting Standards □ Applicable √ Not applicable ADAMALtd. Semi-Annual Report 2023 8 VI. Non-Recurring Profit/Loss √ Applicable □ Not applicable Unit: RMB’000 Item Reporting Period Note Gains/losses on the disposal of non-current assets (including the offset part of asset impairment provisions) 23,402 Government grants recognized through profit or loss (excluding government grants closely related to regular operation of the Company and continuously given at a fixed quota or amount in accordance with certain standards) 19,053 Recovery or reversal of provision for bad debts which is assessed individually during the years 27,325 Other non-operating income and expenses other than the above 13,569 Other profit or loss that meets the definition of non-recurring profit or loss (2,751) Mainly provision for early retirement plan of employees at the Company’s Israeli manufacturing facilities. Less: Income tax effects 17,788 Total 62,810 Details of other profit and loss items that meet the definition of non-recurring profit or loss. √ Applicable □ Not applicable Mainly provisions for early retirement plan of employees at the Company’s Israeli manufacturing facilities as explained above in the note. Explanation whether the Company has classified an item as non-recurring profit/loss according to the definition in the Explanatory Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public - Non-Recurring Profit and Loss, and reclassified any non-recurring profit/loss item given as an example in the said explanatory announcement to recurrent profit/loss □ Applicable √ Not applicable No such cases in the Reporting Period. ADAMALtd. Semi-Annual Report 2023 9 Section III - Performance Discussion and Analysis I. Main Business of the Company during the Reporting Period The Company is a corporation incorporated in the People's Republic of China. The Group is a global leader in crop protection, engaging in the development, manufacturing and commercialization of a wide range of crop protection products, that are largely off-patent. The Group provides solutions to farmers to combat weeds, insects and disease, and sells its products in over 100 countries, through approximately 60 subsidiaries worldwide. The Group's business model integrates end-customer access, regulatory expertise, state-of-the art global R&D, production and formulation facilities, thereby providing the Group a significant competitive edge and allowing it to launch new and differentiated products that meet local farmers and customer needs in key markets. The Group's primary operations are global, spanning activities in Europe, Africa & Middle East (EAME), North America, Latin America and Asia-Pacific (including China)1. The Group also utilizes its expertise to adapt such products also for the development, manufacturing and commercialization of similar products for non-agricultural purposes (Consumer and Professional Solutions). In addition, the Group leverages its core capabilities in the agricultural and chemical fields and operates in several other non-agricultural areas, none of which, individually, is material for the Group. These activities, collectively reported as Intermediates and Ingredients, include primarily, (a) the manufacturing and marketing of dietary supplements, food colors, texture and flavor enhancers, and food fortification ingredients; (b) fragrance products for the perfume, cosmetics, body care and detergents industries; (c) the manufacturing of industrial products and (d) other non-material activities. ADAMAGroup is a distinctive member of Syngenta Group, a world leader in agricultural inputs, spanning crop protection, seeds, fertilizers, additional agricultural and digital technologies, as well as an advanced distribution network in China. The General Crop Protection Market Environment Over Q22023 the price trend of crop commodities was mixed, with corn, wheat and soybean prices continuing to decline while sugar and rice prices increased. Overall, crop commodity prices remain above the 10-yr average and global planted area remains high compared to previous years, supporting healthy input demand from farmers. Despite relatively healthy farmer consumption, crop protection sales into the distribution channel have slowed down significantly due to high channel inventory levels, following channel loading in 2022. In addition, the distribution channel across all geographies is opting to buy crop inputs on a "just in time" basis and striving to carry minimal inventory given wide high interest rate environment outside China and abundant supply of CP products. This trend, coupled with the ongoing decline in AI prices coming out of China, is putting pressure on crop protection prices. 1 As of 2023, the India, Middle East & Africa (IMA) region has been reorganized such that the countries formerly included in this region will now be included in the Europe region (renamed EAME) or in the Asia Pacific region. ADAMALtd. Semi-Annual Report 2023 10 Crop Protection Products As described within the Company’s 2022 annual report, the Group is focused on the development, manufacturing and commercialization of largely off-patent crop protection products, which are generally herbicides, insecticides and fungicides, which protect agricultural and other crops against weeds, insects and disease, respectively. Since the publication of the 2022 annual report, no major changes occurred with that respect. For details, please refer to 2022 annual report. Please see important additional information and further details included in the Annex. ADAMALtd. Semi-Annual Report 2023 11 II. Core Competitiveness Analysis No significant changes occurred to the core competitiveness of the Company during the Reporting Period. III. Analysis of Main Business General Description Whether it is the same as main business of the Company during the Reporting Period disclosed or not √ Yes □ No Please refer to the relevant information in section “I. Main Business of the Company during the Reporting Period” above. Year-on-year changes of main financial data: 2023 Apr-June (000’RMB) Same period of last year (000’RMB) +/-% 2023 Apr-June (000’USD) Same period of last year (000’USD) +/-% Operating revenues 8,642,6259,779,837 -11.63% 1,233,1581,479,232 -16.64% Cost of goods sold 6,865,8957,141,561 -3.86% 979,6831,080,253 -9.31% Selling and Distribution expenses 1,095,9061,169,181 -6.27% 156,372176,843 -11.58% General and administrative expenses 194,777359,487 -45.82% 27,77954,349 -48.89% R&D expenses 127,476144,701 -11.90% 18,18821,886 -16.90% Financial Expenses (income) 249,143 (179,893) 238.50% 35,505 (27,312) 230.00% Gain (loss) from Changes in Fair Value (430,092) (744,824) -42.26% (61,367) (112,657) -45.53% Total Net Financial Expenses 679,235564,93120.23% 96,87285,34513.51% Profit (loss) before tax (389,700) 379,387 -202.72% (55,586) 57,441 -196.77% Tax expenses (income) (64,271) 74,941 -185.76% (9,171) 11,334 -180.92% Net income (loss) (325,429) 304,446 -206.89% (46,415) 46,107 -200.67% EBITDA 806,2671,479,823 -45.52% 115,014223,778 -48.60% Net cash flows from operating activities 2,840,293467,985506.92% 405,26270,786472.52% Net cash flows used in investing activities (481,744) (705,151) 31.68% (68,737) (106,656) 35.55% Net cash flows used in financing activities (1,449,755) (420,688) -244.62% (206,855) (63,630) -225.09% Net increase in cash and cash equivalents 1,091,971 (483,583) 325.81% 126,311 (103,376) 222.19% ADAMALtd. Semi-Annual Report 2023 12 Reporting Period (000’RMB) Same period of last year (000’RMB) +/-% Reporting Period (000’USD) Same period of last year (000’USD) +/-% Operating revenues 17,253,20118,795,828 -8.21% 2,491,6832,898,953 -14.05% Cost of goods sold 13,358,72713,822,755 -3.36% 1,928,6802,132,317 -9.55% Selling and Distribution expenses 2,161,1992,159,0890.10% 312,074332,721 -6.21% General and administrative expenses 461,146642,313 -28.21% 66,70898,883 -32.54% R&D expenses 262,378274,738 -4.50% 37,90542,363 -10.52% Financial Expenses (income) 455,855 (438,224) 204.02% 65,727 (67,991) 196.67% Gain (loss) from Changes in Fair Value (782,218) (1,341,717) -41.70% (112,834) (206,648) -45.40% Total Net Financial Expenses 1,238,073903,49337.03% 178,561138,65728.78% Profit (loss) before tax (318,589) 833,374 -138.23% (45,200) 128,935 -135.06% Tax expenses (income) (76,433) 101,276 -175.47% (10,948) 15,482 -170.71% Net income (242,156) 732,098 -133.08% (34,252) 113,453 -130.19% EBITDA 1,940,9902,772,062 -29.98% 280,866427,274 -34.27% Net cash flows from (used in) operating activities (64,876) (1,345,861) 95.18% (19,357) (214,835) 90.99% Net cash flows used in investing activities (1,121,109) (1,278,869) 12.34% (162,187) (196,998) 17.67% Net cash flows provided by financing activities 1,401,023 (94,095) 1588.98% 209,817 (12,203) 1819.39% Net increase (decrease) in cash and cash equivalents 345,284 (2,568,738) 113.44% 25,853 (427,928) 106.04% Major changes to the profit structure or sources of the Company in the Reporting Period: □ Applicable √ Not applicable None during the Reporting Period. ADAMALtd. Semi-Annual Report 2023 13 Analysis of Financial Highlights (1) Operating Revenues Revenues in the second quarter declined by approximately 17% (-12% in RMB terms; -15% in CER terms) to $1,233 million, reflecting a decrease of 10% in volumes and a decrease of 5% in prices. The lower sales reflect market dynamics of channel destocking in light of high interest rates and a "wait and see" approach, given the market overstocking in 2022 and declining active ingredient and raw material costs impacting the crop protection market pricing. Additionally, sales were also impacted by negative weather conditions in certain geographies. These results brought the revenues in the first half of 2023 to $2,492 million, a decline of approximately 14% (-8% in RMB terms; -11% in CER terms), reflecting a decrease of 9% in volumes and a decrease of 2% in prices. This is in comparison to the record sales the Company achieved in 2022, which reflected the high demand due to supply uncertainty in the market. Unit: RMB’000 2023H12022H1 YoY +/-% Amount Ratio of the operating revenue Amount Ratio of the operating revenue Total operating revenue 17,253,201100.0% 18,795,828100.0% -8.2% Classified by industries Manufacture of chemical raw materials and chemical products 17,253,201100.0% 18,795,828100.0% -8.2% Classified by products Herbicides 7,630,19544.2% 8,829,59747.0% -13.6% Fungicides 3,475,68820.1% 3,193,019 17.0% 8.9% Insecticides 4,749,28227.5% 4,820,00125.6% -1.5% Ingredients and Intermediates (Formerly referred to as Non-Agro) 1,398,0368.1% 1,953,21110.4% -28.4% Classified by regions Europe, Africa & Middle East (EAME)* 5,286,85630.6% 5,136,11427.3% 2.9% North America 3,018,61717.5% 3,639,60019.4% -17.1% Latin America 3,902,21022.6% 3,993,95321.2% -2.3% Asia-Pacific* 5,045,51829.2% 6,026,16132.1% -16.3% * 2022 denote proforma sales. As of 2023, the India, Middle East & Africa (IMA) region has been reorganized such that the countries formerly included in this region are now included in the Europe region (renamed EAME) or in the Asia Pacific region. Note: the sales split per product category is provided for convenience purposes only, and is not representative of the way the Company is managed or in which it makes its operational decisions. ADAMALtd. Semi-Annual Report 2023 14 Regional Sales Performance in USD Note: the following analysis of regional sales performance is based on USD results, and the numbers in this table may not sum due to rounding. Europe, Africa & Middle East (EAME): Sales in EAME in constant exchange rates were lower in the quarter due to a decrease in volumes exacerbated by negative weather conditions and high inventory levels in the market, and higher in the half year period, reflecting generally higher prices in comparison to the same periods in 2022. While prices were higher on a year-to-year basis, market prices are currently presenting a downward trend. The fungicide Soratel based on ADAMA’s Asorbital formulation mastery technology, continues to be well received in the UK. North America: Consumer & Professional Solutions - Sales were impacted by lower demand following inflationary pressures and high channel inventories. In the USAg market the channel is lowering inventory levels due to high interest rates with demand focusing on "just-in-time" supply from producers. Sales were also impacted by drought in the Mid-West and pressure on prices following channel destocking. Sales in Canada increased as the Company expanded its product portfolio during 2022, while pricing in the market was more insulated with overall market inventories better controlled. Latin America: Brazil – strong competition and channel destocking put pressure on prices led to a decline in sales, while the Company is successfully consuming the high-cost inventory accumulated. In LATAM, sales are supported by the strong performance of the biologicals portfolio. Looking forward, El Nio is expected to have a positive effect on rainfall in the South of LATAM. Asia-Pacific: In China, the market is experiencing oversupply and pricing pressure impacting both the branded and industrial sales, while the branded portfolio was significantly supported by the sales of differentiated products. Sales in the wider APAC & Pacific region were negatively impacted by strong competition from China and by the commencement and negative impact of El Nio. In India sales were impacted by the delayed Monsoon season. Q22023 $m Q22022 $m Change USD H12023 $m H12022 $m Change USD Europe, Africa & Middle East (EAME)* 334365 -8.4% 765794 -3.7% North America 225278 -19.1% 436562 -22.4% Latin America 329379 -13.1% 562613 -8.3% Asia Pacific 345458 -24.6% 729930 -21.6% Of which China 141213 -33.6% 323449 -28.1% Total 1,2331,479 -16.6% 2,4922,899 -14.0% ADAMALtd. Semi-Annual Report 2023 15 (2) Cost of Goods Sold: List of the industries, products or regions which exceed 10% of the operating revenues or operating profits of the Company as at the Reporting Period Unit: RMB’000 Operating revenues Cost of goods sold Gross Margin (%) YoY increase/decrease of the operating revenues YoY increase/decrease of the cost of goods sold YoY increase/decrease of the gross margin Classified by industries Manufacturing chemical raw materials and chemical products 17,253,20113,358,72722.6% -8.2% -3.4% -3.9% Classified by products Crop Protection 15,855,16512,109,32123.6% -5.9% -1.9% -3.1% Ingredients and Intermediates 1,398,0361,249,40610.6% -28.4% -15.7% -13.5% If the scope of the Company's main business was adjusted during the Reporting Period, the Company's annual financial data of main business according to the adjusted scope at the end of the year is disclosed as follows: □ Applicable √ Not applicable The cost of goods sold in the first half of the year reflected the decline in sales, high-cost inventory and the negative impact of exchange rates moderated by lower transportation and logistics costs. These impacts on the gross profit were slightly moderated by the improvement in the Company's sales mix of higher margin products. (3) Operating Expenses: Operating expenses include Sales and Marketing, General and Administration and R&D. The Company recorded certain non-operational charges within its operating expenses amounting to RMB 39 million ($ 6 million) in Q22023 in comparison to RMB 146 million ($ 22 million) in Q2 2022, and RMB 104 million ($ 15 million) in H12023 in comparison to RMB 182 million ($ 28 million) in H12022, mainly as follows: (i) Non-cash amortization charges in respect of Transfer assets received and written-up related to the 2017 ChemChina-Syngenta acquisition. The proceeds from the Divestment of crop protection products in connection with the approval by the EUCommission of the acquisition of Syngenta by ChemChina, net of taxes and transaction expenses, were paid to Syngenta in return for the transfer of a portfolio of products in Europe of similar nature and economic value. Since the products acquired from Syngenta are of the same nature, and with the same net economic value as those divested, the Divestment and Transfer transactions had no net impact on the underlying economic performance of the Company. These additional amortization charges will continue until 2032 but at a reducing rate, yet will still be at a meaningful level until 2028; (ii) Charges related to the non-cash amortization of intangible assets created as part of the Purchase Price Allocation (PPA) on acquisitions, with no impact on the ongoing performance of the companies acquired; and (iii) Incentive plans - share-based compensation. ADAMALtd. Semi-Annual Report 2023 16 Excluding the impact of the abovementioned non-operational items, the lower operating expenses in the second quarter and half year period of 2023 were mainly due to Company OPEX management measures, an adjustment of a provision for success-based compensation, and the positive impact of exchange rates. Additionally, in the first half year of 2023 the company did not increase the doubtful debt provision that was recorded for trade receivables in Ukraine during the first half year of 2022. (4) Financial Expenses: “Financial Expenses” alone mainly reflect interest payments on corporate bonds and bank loans as well as foreign exchange gains/losses on the bonds and other monetary assets and liabilities before the Company carries out any hedging. The impact of Financial Expenses (before hedging) is RMB 456 million ($66 million) for the first half of 2023 compared to an income of RMB 438 million ($68 million) for the corresponding period in 2022. Given the global nature of its operational activities and the composition of its assets and liabilities, the Company, in the ordinary course of its business, uses foreign currency derivatives (forwards and options) to hedge the cash flow risks associated with existing monetary assets and liabilities that may be affected by exchange rate fluctuations. “Gains/Losses from Changes in Fair Value” amounted to a net loss of RMB 782 million ($113 million) in the first half of 2023, mainly due to hedging transactions, compared with a net loss of RMB 1,341 million ($207 million) in the corresponding period in 2022. The aggregate of Financial Expenses and Gains/Losses from Changes in Fair Value (hereinafter as “Total Net Financial Expenses”), which more comprehensively reflects the financial expenses of the Company in supporting its main business and protecting its monetary assets/liabilities, amounts to RMB 1,238 million ($179 million) in the first half of 2023 compared with RMB 903 million ($139 million) in the corresponding period in 2022. The higher financial expenses were mainly driven by higher bank interest expenses due to the sharp increase in interest rates and an increase in short-term loans as well as higher hedging costs on exchange rates. These financial expenses were moderated by the net effect of lower Israeli CPI on the ILS-denominated, CPI-linked bonds. (5) Cash Flow: Net cash flows from (used in) operating activities: Operating cash flow of $405 million (RMB 2,840 million) was generated in the quarter and $19 million (RMB 65 million) was used in the half-year period, compared to $71 million (RMB 468 million) generated in the quarter and $215 million (RMB 1,346 million) used in the corresponding periods last year, respectively. The higher cash flow generated in the quarter was primarily due to a decrease in the procurement of goods. Net cash used in investing activities was $69 million (RMB 482 million) in the quarter and $162 million (RMB 1,121 million) in the half-year period, compared to $107 million (RMB 705 million) and $197 million (RMB 1,279 million) in the corresponding periods last year, respectively. The cash used in investing activities in the second quarter and first half period of 2023 included investments in new production facilities in ADAMAAnpon, investments in manufacturing capabilities in Israel and investments in intangible assets relating to ADAMA's global registrations as well as the acquisition of AgriNova New Zealand in Q12023. Free cash flow of $288 million (RMB 2,021 million) was generated in the second quarter and $254 ADAMALtd. Semi-Annual Report 2023 17 million (RMB 1,689 million) consumed in the half-year period compared to $83 million (RMB 551 million) and $469 million (RMB 2,999 million) consumed in the corresponding periods last year, respectively, reflecting the aforementioned operating and investing cash flow dynamics. Cash Flow from Financing Activities was $207 million (RMB 1,450 million) consumed in the quarter and $210 million (RMB 1,401 million) generated in the half-year period, compared to $64 million (RMB 421 million) and $12 million (RMB 94 million) consumed in the corresponding periods last year, respectively, mainly driven by the paydown of short terms loans due to the positive free cash flow in the quarter. ADAMALtd. Semi-Annual Report 2023 18 IV. Analysis of Non-Core Business √ Applicable □ Not applicable Unit: RMB’000 Amount Proportion in total profit Reasons Whether sustained Investment income 10,090 -3.17% No Gain/loss from change of Fair Value (782,218) 245.53% Mainly from changes in fair value and realization of derivatives. See explanation of financial expenses No Asset impairment losses 105,88733.24% No Gain or loss from disposal of assets 23,402 -7.35% No Non-operating income 36,073 -11.32% No Non-operating loss 11,0153.46% No V. Analysis of Assets and Liabilities 1. Significant Changes in Asset Composition Unit: RMB’000 End of Reporting Period End of last year Change in percentage (%) Reason for significant change Amount As a percentage of total assets (%) Amount As a percentage of total assets (%) Cash at bank and on hand 4,604,5237.69% 4,290,9617.40% 0.29% Accounts receivable 9,363,75815.63% 9,018,37515.55% 0.08% Inventories 16,667,95727.83% 16,927,24129.19% -1.36% Investment property 22,9630.04% 3,1680.01% 0.03% Long term equity investments 29,2720.05% 26,3680.05% 0.00% Fixed assets 9,476,56015.82% 8,952,18415.44% 0.38% Construction in progress 3,147,4935.25% 2,961,4015.11% 0.14% Right of use assets 640,9961.07% 555,8890.96% 0.11% Short-term loans 6,341,67710.59% 3,342,9215.77% 4.82% Supporting the increased working capital. Contract liabilities 1,446,1292.41% 1,776,5733.06% -0.65% Lease liabilities 498,9670.83% 431,0760.74% 0.09% ADAMALtd. Semi-Annual Report 2023 19 2. Main Overseas Assets √ Applicable □ Not applicable Specific contents of the assets Reason Scale (Amount) of the assets (RMB’000) Location Operation /Management mode Control measures to guarantee safety of the assets Net Profit of the assets (RMB’000) Proportion of overseas assets out of total net assets (%) Significant impairment risk Equity investment in Adama Solutions Acquired through Major Assets Restructuring 20,463,717 Israel and globally Corporate Governance Corporate Governance (229,154) 87% No Other explanations N/A 3. Assets and Liabilities Measured at Fair Value √ Applicable □ Not applicable Unit: RMB’000 Item Opening balance Profit/loss on fair value changes in the Reporting Period Cumulative fair value changes charged to equity Impairment provided in the Reporting Period Purchased in the Reporting Period Sold in the Reporting Period Others Closing balance Financial assets 1.Financial assets held for trading (excluding derivative financial assets) 1,685 - - - 1,930 2.Derivative financial assets (including long term) 233,809 (636,076) 30,319 - 573,688 (9,599) - 192,141 3.Other equity investments 158,341 - 4,564 - - - - 162,905 Total financial assets 393,835 (636,076) 34,883 - 573,933 (9,599) - 356,976 Other 189,601 - - - 66,056 (33,901) - 221,756 Total of above 583,436 (636,076) 34,883 - 639,989 (43,500) - 578,732 Financial liabilities 545,516190,142 - - - - - 735,658 Significant changes in the measurement attributes of the main assets in the Reporting Period □ Yes √ No 4. Limitation on Asset Rights as of End of the Reporting Period At the end of this Reporting Period, restricted assets included RMB 33,986,000 - restricted cash, most of which as guarantee for bank acceptance bills; and RMB 195,920,000 - other non-current assets, mainly as guarantee for asset securitization and lawsuits. ADAMALtd. Semi-Annual Report 2023 20 VI. Investments Made 1. Overall Condition of the Total Investments Made √ Applicable □ Not applicable Investment during the Reporting Period (RMB'000) Investment during the Same Period Last Year (RMB'000) +/-% YoY 29,389,82820,936,56540.38% 2. Significant Equity Investments during the Reporting Period √ Applicable □ Not applicable ADAMALtd. Semi-Annual Report 2023 21 Name of the Invested Company Main Business Mode of Investment Investment Amount (RMB'000) Shareholding Proportion Source of Funds Investment Partner Investment Term Types of Products Progress as of the Balance Sheet Date Estimated Return Profit or Loss on Investments for the Reporting Period (RMB'000) Involved in Litigation or Not Date of Disclosure Disclosure Index (if applicable) Agrinova New Zealand Limited Agrochemical Acquisition 170,155100% Self-raised funds None Long-term Crop protection products, growth regulators, bio-solutions and plant nutrients for the horticultural market Completed -- 6,286 No Jan 6, 2023 Announcement on Closing of the Acquisition of 100% Equity of Agrinova New Zealand Limited by a Wholly Owned Subsidiary (Announcement No. 2023-1) disclosed at info.com Adama Chile S.A. Agrochemical Acquisition 116,311100% Self-raised funds None Long-term Chemical crop protection products and bio-stimulants Completed -- --* No March 14, 2023 Announcement on the Acquisition of Equity Held by Minority Shareholders of a Controlled Subsidiary (Announcement No. 2023-7) disclosed at info.com Total -- -- 286,466 -- -- -- -- -- -- -- 6,286 -- -- -- ADAMALtd. Semi-Annual Report 2023 22 *Note: The Company previously indirectly held 60% equity of Adama Chile S.A., and consolidated Adama Chile S.A. in the financial statements as a subsidiary. After the acquisition, the Company indirectly held 100% equity of Adama Chile S.A. 3. Significant Non-Equity Investments executed during the Reporting Period □ Applicable √ Not applicable 4. Financial Investments (1) Investments in Securities □ Applicable √ Not applicable None during the Reporting Period. ADAMALtd. Semi-Annual Report 2023 23 (2) Investments in Derivative Financial Instruments √ Applicable □ Not applicable (1) Investment in Derivative Financial Instruments for Hedging during the Reporting Period √ Applicable □ Not Applicable Unit: 000 RMB Investment Type Opening Balance Profit/loss on fair value changes in the Reporting Period Cumulative fair value changes charged to equity Purchased in the Reporting Period Sold in the Reporting Period Closing Balance Percentage of investment amount divided by net asset at end of the period Option 3,490,710 -247,866 -243,6438,899,295 -3,490,7108,899,29537.64% Forward 22,863,927 -578,354 -568,50120,490,533 -22,863,92720,490,53386.66% Total 26,354,637 -826,220 -812,14429,389,828 -26,354,63729,389,828124.30% Explanation of accounting policies and principles for hedging, and any significant changes compared with last reporting period Please refer to section X of this Report, note III.28.1 for the disclosure of the accounting policies for hedging. There is no change in the accounting policies for hedging during the reporting period. Explanations about gain/loss during the Reporting Period The loss during the year was RMB 812,144,000 compared to a loss of RMB 1,324,948,000 in the same period last year. The loss was mainly due to the devaluation of the ILS of 5.1% compared to 13.9% last year. Explanations for hedging effect Despite of the loss incurred from the hedging transactions, the Group has effectively mitigated the impact from the exchange rate fluctuations during the year. Source of fund for the investment Internal. Risk and control analysis for the Reporting Period (including but not limited to market risk, liquidity risk, credit risk, operational risk, legal risk, etc.) The aforesaid refers to short term hedging currency transactions made with banks. The Group’s transactions are not traded in the market. The Transactions are between the applicable company in the Group and the applicable bank until the expiration date of the transaction, therefore no market risk is involved. Regarding credit and liquidity risk, the Group is working with large and substantial banks only and with some of them the Group has ISDA agreements. As to operational risk, the Group is working with relevant software, which is its back office for all transactions. No legal risk is involved. The actions taken in order to further reduce risks are: The relevant subsidiaries have specific guidelines, under the Group’s policy, which were approved by the subsidiaries' financial statements ADAMALtd. Semi-Annual Report 2023 24 committee of the board, which specifies, inter alia, the hedging policy, the persons that have the authorization to deal with hedging, the tools, ranges etc. The only subsidiary that has hedging positions in the Group in the period was Adama Solutions and its subsidiaries. The relevant subsidiaries apply management designed procedures and controls, which among other things, monitor the working process and the controls of the hedging transactions and are quarterly reviewed and annually audited. The controllers of the relevant subsidiaries are involved in the process and are monitoring the hedging accounting treatment. Every 2-3 years the internal audit of the relevant subsidiaries’ department is auditing the entire procedure. Market price or fair value change of investments during the Reporting Period. Specific methodology and assumptions should be disclosed in the analysis of fair value of the investments The aforesaid refers to short time hedging currency transactions made by the relevant subsidiary with banks. Segregation of duties as follows: For the fair value evaluation, the relevant subsidiary is usually using external experts. The relevant subsidiary hedges currencies only; the relevant transactions are simple (Options and forwards) for short terms. For fair value methodology see section X of this Report, note IX. Fair Value. The exchange rates are provided by the accounting department of the relevant subsidiary and all other parameters are provided by the experts. Litigation-related situations (if applicable) N/A Date of disclosure of Board approval (if any) December 30,2017 Date of disclosure of Shareholders’ approval (if any) N/A Independent Directors’ opinion on the investment in derivative financial instruments and related risk controls The derivative investments carried by the Company are for hedging and narrowing down the risk of market fluctuations. The investments respond to the Company’s routine business demands and are in accordance with the relevant laws and regulations. Additionally, the Company has adopted Currency Risk Hedging Policy to strengthen the risk management and control which benefit the Company’s ability to protect against market risk. The derivative investments do not harm the interests of the Company and its shareholders. The company is required to comply with the “Self-regulatory Guidelines for Listed Companies on Shenzhen Stock Exchange: No.3 - Disclosure of Industry Information”. The derivative transactions carried out by the Group were mainly through options and forward in order to mitigate the currency exposure and the fluctuation in Israeli CPI. For more details, please refer to the section above. (2) Investment in Derivative Financial Instruments for Speculation during the Reporting Period □ Applicable √ Not Applicable No such situation occurred during the Reporting Period.ADAMALtd. Semi-Annual Report 2023 25 5. Use of Raised Fund □ Applicable √ Not applicable None during the Reporting Period. VII. Sale of Major Assets and Equity Interests 1. Sale of Significant Assets □ Applicable √ Not applicable None during the Reporting Period. 2. Sale of Significant Equities □ Applicable √ Not applicable VIII. Main Controlled and Joint Stock Companies √ Applicable □ Not applicable List of main subsidiaries and stock-participating companies influencing over 10% of the net profits on the Company Unit: RMB’000 Name Type Main services Registered capital Total assets Net assets Operating revenues Operating profit Net profit Adama Solutions Subsidiary Development, manufacturing and marketing of agrochemicals, intermediate materials for other industries, food additives and synthetic aromatic products, mainly for export. 720,08550,595,23617,581,98915,440,683 (318,175) (226,280) Subsidiaries acquired or disposed during the Reporting Period √ Applicable □ Not applicable Company Name Way of Acquirement or Disposal Impact on the Business Operation and Performance of the Company Agrinova New Zealand Limited Purchase 100% of Share Equity Upon the completion of the Transaction, Adama New Zealand Ltd., the Company’s indirectly wholly-owned subsidiary, owns and hold 100% equity in Agrinova New Zealand Limited, and Agrinova became an indirectly wholly controlled subsidiary of the Company. Based on the Accounting Standards for Business Enterprises, Agrinova is included in the Company’s consolidated financial statements. ADAMALtd. Semi-Annual Report 2023 26 For details, please refer to the Announcement on Closing of the Acquisition of 100% Equity of Agrinova New Zealand Limited by a Wholly Owned Subsidiary (Announcement No.2023-1) Adama Chile S.A. Purchase the remaining 40% Share Equity of the controlled subsidiary After completion of the Transaction, Adama Chile S.A. became an indirect wholly-owned subsidiary of the Company, which is conducive to enhancing the Company's decision-making efficiency, promoting development strategy, further integrating local market resources, and meeting the Company's production, operation and development needs. The Transaction will not lead to any change in the Company's combination scope. The transaction price is fair and reasonable. There is no situation that will harm the interests of the Company's shareholders and will not have an adverse impact on the Company's financial situation and operating results. For details, please refer to the Announcement on the Acquisition of Equity Held by Minority Shareholders of a Controlled Subsidiary (Announcement No. 2023-7) Explanations on the main controlled and joint stock companies √ Applicable □ Not applicable During the Reporting Period, total sales of Solutions, a wholly-owned subsidiary of the Company, amounted to $2,227 million, a decline of 12%, reflecting a decrease of 9% in volumes and stable prices. Solutions’ net loss was $32 million in the first half of the year, compared with net income of $63 million in the corresponding period last year. For detailed explanation of the performance movement, see above explanation of the Section. IX. Structured Entities Controlled by the Company □ Applicable √Not applicable X. Risks Facing the Company and Countermeasures The Group is exposed to several major risk factors, resulting from its economic environment, the industry and the Group's unique characteristics, as follows (the order below does not indicate priority): Exchange rate fluctuations Although the Company reports its consolidated financial statements in RMB, the Company’s material subsidiary Solutions reports its consolidated financial statements in US dollars, which is its functional currency, while its operations, sales and purchases of raw materials are carried out in various currencies. Therefore, fluctuations in the exchange rate of the selling currency against the purchasing currency impact the Company’s results. The Group's most significant exposures are to the Euro, the Israeli Shekel ADAMALtd. Semi-Annual Report 2023 27 and the Brazilian Real. The Group has lesser exposures to other currencies. The strengthening of the US dollar against other currencies in which the Company operates reduces the dollar value of such sales and vice versa. On an annual basis, approximately 20% of the Group’s sales are to the European market and therefore the impact of long-term trends on the Euro may affect the Company's results and profitability. Analyses of currency exposure from foreign currency exchange rate fluctuations against assets, liabilities and cash flow denominated in foreign currencies are done constantly. High volatility of the exchange rates of these currencies could increase the costs of transactions to hedge against currency exposure, thereby increasing the Company's financing costs. The Group uses commonly accepted financial instruments to hedge most of its substantial net balance sheet exposure to any particular currency. Nonetheless, since as part of these operations the Group hedges against most of its balance sheet exposure and only against part of its economic exposure, exchange rate volatility might impact the Group’s results and profitability. As of the date of publication of this Report, the Group has hedged most of its balance sheet exposure. In addition, as the Company’s product sales depend directly on the cyclical nature of the agricultural seasons, therefore the Company’s income and its exposure to the various currencies is not evenly distributed over the year. Countries in the northern hemisphere have similar agricultural seasons and therefore, in these countries, the highest sales are usually during the first half of the calendar year. During this period, the Company is most exposed to the Euro. In the southern hemisphere, the seasons are opposite and most of the local sales are carried out during the second half of the year. During these months, most of the Company's exposure pertains to the Brazilian Real. Exposure to Interest rate, Israel CPI and NIS exchange rate fluctuations The debentures issued by Solutions, the material subsidiary of the Company, are Israeli Shekel based and linked to the Israel Consumer Price Index “CPI” and therefore an increase in the CPI and an appreciation of the shekel rate against the dollar might lead to a significant increase in its financing expenses. In addition, high volatility of the exchange rate of USD/NIS and expectations of material changes in the inflation rate, may increase the costs of hedging transactions on currency exposure, and as a result, may lead to a further increase in the company's financing costs. As of the date of approval of the financial statements, Solutions hedged most of its exposure to these risks on an ongoing basis, through CPI hedging and USD-ILS exchange rate hedging transactions. In addition, inflation in several global markets has a cross effect on the business results of the Group, since on one hand, it contributes to the Group's ability to increase the sale price of its products, but on the other hand, it may increase the Group's production costs and operating expenses. As of the date of the Report, the Group is unable to isolate the influence of inflation on its sale prices and its costs. The Group estimates that the cumulative cross influence of inflation does not have a material effect on to its financial results. Since December 31,2021the Group have had dollar denominated liabilities bearing variable London Interbank Offered Rates (LIBOR) interest. As a result, the Group was exposed to changes in the US dollar LIBOR interest rate. The Group prepares a quarterly summary of its exposure to changes in the relevant interest rate benchmarks (which replaced the LIBOR interest rate) and periodically examines hedging the variable interest rate by converting it to a fixed rate. As part of the global reform in interest rate benchmarks, the phasing out of LIBOR (the so-called LIBOR fallback) was scheduled for the end of 2021. As of January 1,2022 three global interest rate benchmarks has transitioned to alternative risk-ADAMALtd. Semi-Annual Report 2023 28 free rates while replacing the former benchmark LIBOR: SOFR (USD), ESTR (EUR) and SONIA (GBP). As of the date of publication of this Report, the Group has not carried out hedging for such exposure, since US dollar interest rates have been relatively stable. In addition, the effect of interest changes on the debt that serves the Group’s working capital is seasonal. Such debt bears a variable interest, but has no material effect on the Group’s financing expenses. As a result, the net increase in interest rate does not have a material effect on the Group’s business. Business operations in emerging markets The Group conducts business - mainly product sales and raw material procurement - inter alia, in emerging markets such as Latin America (particularly in Brazil, the largest market, country wise, in which the Group operates), Eastern Europe, Southeast Asia and Africa. The Group's activity in emerging markets is exposed to risks typical of those markets, including: political and regulatory instability; volatile exchange rates; economic and fiscal instability and frequent revisions of economic legislation; relatively high inflation and interest rates; terrorism or war; restrictions on import and trade; differing business cultures; uncertainty as to the ability to enforce contractual and intellectual property rights; foreign currency controls; governmental price controls; restrictions on the withdrawal of money from the country; barter deals and potential entry of international competitors and accelerated consolidations by large-scale competitors in these markets. Developments in these regions may have a significant effect on the Group's operations. Distress to the economies of these markets could impair the ability of the Group's customers to purchase its products or the ability to market them at international market prices, as well as harm the Group's ability to collect customer debts, in a way that could have a significant adverse effect on the Group's operating results. The Group’s operations in multiple regions allows for the diversification of such risks and for the reduction of its dependency on particular economies. In addition, changes in registration requirements or customers' preferences in developed western countries, which may limit the use of raw materials purchased from emerging economies, may require redeployment of the Group's procurement organization, which might negatively affect its profitability for a certain period. Operating in a competitive market The crop protection products industry is highly competitive. Currently, seven multinational companies, including the Company, lead the global industry. Five of these, Bayer, Syngenta, Corteva, BASF and FMC, are Originator Companies, which develop, manufacture and market both patent-protected as well as off-patent products. The Group competes with the original products with the aim of maintaining and increasing its market share. The Originator Companies possess resources enabling them to compete aggressively, in the short-to-medium term, on price and profit margins, so as to protect their market share. Loss of market share or inability to acquire additional market share from the Originator Companies can affect the Group's position in the market and adversely affect its financial results. For details regarding the Group’s competitive advantages see section III - subsection II. Core competitiveness analysis above. Similarly, the Group also competes in the more decentralized off-patent segment of the market, against other off-patent companies and smaller-scale Originator Companies, which have significantly grown in number in recent years and are materially changing the face of the crop protection industry, the majority of whom have not yet deployed global distribution networks, and are only active locally. These companies often price their products aggressively and at times have lower profit margins than the Group, which may adversely impact the Group's sales and product prices. The Group's ability to maintain its revenues and ADAMALtd. Semi-Annual Report 2023 29 profitability from a specific product in the long term is affected by the number of companies producing and selling comparable off-patent products and the timing of their entrance to the relevant market. Any delay in developing or obtaining registrations for products and/or delayed penetration into markets and/or growth of competitors that focus on off-patent active ingredients (whether by the expansion of their product portfolio, granting registrations to other manufacturers (including manufacturers in China and India) to operate in additional markets, transforming their distribution network to a global scale or increasing the competition for distribution access), and/or difficulty in purchasing low cost raw materials, may harm the Group’s sales, affect its global position and lead to price erosion. Decline in scope of agricultural activities; Climate change and exceptional changes in weather conditions The scope of general agricultural activities worldwide may be negatively affected by many exogenous factors, some resulting from climate change, including but not limited to extreme weather conditions, natural disasters, a decrease in agricultural commodity prices, government policies and the economic condition of farmers. A material decline in the scope of agricultural activities would by necessary implication cause a decline in the demand for the Group’s products, erosion of its prices and collection difficulties, which may have a significant adverse effect on the Group's results. Extreme weather conditions, both chronic and acute, as well as other damages caused by nature may have an impact on the demand for the Group's products as well as to price thereof. For example, drought may reduce the need for fungicides, which could result in fewer sales and greater unsold inventories in the market, whereas excessive rain could lead to increased plant disease or weed growth requiring growers to purchase and use more crop protection products. Drought and/or increased temperatures may change insect pest pressures, requiring growers to use more, less, or different insecticides. Climate change may increase the frequency or intensity of extreme weather such as storms, floods, heat waves, droughts and other events that could affect the demand for the Company’s products. The Group believes, that should a number of such bad seasons occur in succession, without favorable seasons in the interim, its results may sustain significant harm. Environmental, health and safety legislation, standards, regulation and exposure Many aspects of the Group's operations are strictly regulated, including in relation to production and trading, and particularly in relation to the storage, treatment, manufacturing, transport, usage and disposal of its products, their ingredients and byproducts, some of which are considered hazardous. The Group's activities involve hazardous materials. Defective storage or handling of hazardous materials may cause harm to human life or to the environment in which the Group operates. The regulatory requirements regarding the environment, health and safety could, inter alia, include soil and groundwater clean-up requirements; as well as restrictions on the volume and type of emissions the Group is permitted to discharge into the air, water and soil. The regulatory requirements applicable to the Group vary from product to product and from market to market, and tend to become stricter with time. In recent years, both government authorities and environmental protection organizations have been applying increasing pressure, including through investigations and indictments as well as increasingly stricter legislative proposals and class action suits related to companies and products that may potentially pollute the environment. Compliance with these legislative and regulatory requirements and protection against such legal actions requires the Group to commit considerable human and financial resources (both in terms of substantial ongoing costs and in terms of material one-time investments) to meet mandatory environmental standards. In some instances, this may result in delaying the introduction of products into new markets or in adverse effects on the ADAMALtd. Semi-Annual Report 2023 30 Group’s profitability. In addition, the toughening, material alteration or revocation of environmental licenses or permits, or their stipulations, or the inability to obtain such licenses and permits, may significantly affect the Group's ability to operate its production facilities, which in turn may have a material adverse effect on the financial and business results of the Group. The Group may be required to bear significant civil liabilities (including due to class actions) or criminal liabilities (including high penalties and/or high compensation payments and/or costs of environmental monitoring and rehabilitation), resulting from violation of environmental, health and safety regulations, while some of the existing legislation may impose “strict liability” regime on the Group, i.e. the Group will be held liable, regardless of proof of negligence or malice. While the Group invests material sums in adapting its facilities and in constructing special facilities in accordance with environmental requirements, it is currently unable to assess with any certainty whether these investments (current and future) and their outcomes may satisfy current or future requirements, should these be significantly increased or changed. In addition, the Group is unable to predict with any certainty the extent of future costs and investments it may incur in order to meet the requirements of the environmental authorities in the relevant countries in which it operates since, inter alia, the Group is unable to estimate the extent of potential pollutions, their duration, the extent of the measures required to be taken by the Group in handling them, the division of responsibility among other parties and the amounts recoverable from third parties. Furthermore, the Group may be the target of bodily injury claims and property damage claims caused by exposure to hazardous materials, which are largely covered under the Group’s insurance policies. Legislative, standard and regulatory changes in product registration The majority of the substances and products marketed by the Group require registration at various stages of their development, production, import, utilization and marketing, and are also subject to strict regulatory supervision by the regulatory authorities in each country. Compliance with the regulatory requirements that vary from country to country and which are becoming more stringent with time, involves significant time and costs, and rigorous compliance with individual registration requirements for each product. Noncompliance with these regulatory requirements might materially adversely affect the Group’s expenses, cost structure and profit margins, as well as penetration of its products in the relevant market, and may even lead to suspension of sales of the relevant product, and recall of those products already sold, or to legal action. Moreover, to the extent new regulatory requirements are imposed on existing registered products (requiring additional investment or leading to the existing registration's revocation) and/or the Group is required to compensate another company for its use of the latter's product registration data, these might amount to significant sums, considerably increasing the Group's costs and adversely affecting its results and reputation. In recent years the industry has been suffering from revocation of registration for many products around the world. This trend is particularly evident in European countries as well as in many other countries worldwide. Nevertheless, the Group believes that, in countries where the Group maintains a competitive edge, any toughening of registration requirements may actually increase this edge, since this will make it difficult for its competitors to penetrate the same market, whereas in countries in which the Group possesses a small market share, if any, such toughening may make further penetration of the Group's products into that market more difficult. ADAMALtd. Semi-Annual Report 2023 31 Product liability Product and producer liability are a risk for the Group. Regardless of their prospects or actual results, product liability lawsuits might involve considerable costs as well as tarnish the Group's reputation, thus potentially impacting its profits. The Group has a third-party and defective product liability insurance cover. However, there is no certainty that the scope of insurance cover is sufficient. Any future product liability lawsuit or series of lawsuits could materially affect the Group’s operations and results, should the Group lose the lawsuit or should its insurance cover not suffice or apply in a particular instance. In addition, while the Group has not currently encountered any difficulty renewing such insurance policy, it is possible that it will encounter future difficulties in renewing an insurance policy for third party liability and defective products on terms acceptable to the Group. Successful market penetration and product diversification The Group’s growth and profit margins are affected, inter alia, by the extent of its success in developing differentiated products and obtaining registrations for them, so as to enable it to gain market share at the expense of its competitors. Usually, being the first to launch a certain off-patent product affords the Group continuing advantage, even after other competitors penetrate the same market. As such, the Group's revenues and profit margins from a certain new off-patent product could be materially affected by its ability to launch such product ahead of the launch of a comparable product by its competitors. Should new products fail to meet registration requirements in the different countries or should it take a long period of time to obtain such registrations, the Group's ability to successfully introduce a new product to the relevant market in the future may be affected, since entry into the market prior to other competitors is important for successful market penetration. Furthermore, successful market penetration involves, inter alia, product diversification in order to suit each market's changing needs. Therefore, if the Group fails to adapt its product mix by developing new products and obtaining the required regulatory approvals, its future ability to penetrate that market and to maintain its existing market share could be affected. Failure to introduce new products to given markets and meet Group objectives (given the considerable time and resources invested in their development and registration) might affect the sales of the product in question in the relevant market, the Group’s results and margins. Intellectual property rights of the Group and of third parties The Group's ability to develop off-patent products is dependent, inter alia, on its ability to oppose patents or patent application of Originator Companies or other third parties, or to develop products that do not otherwise infringe intellectual property rights in a manner that may involve significant legal and other costs. Originator Companies tend to vigorously defend their products and may attempt to delay the launch of competing off-patent products by registering patents on slightly different versions of products for which the original patent protection is about to expire or has expired, with the aim of competing against the off-patent versions of the original product. The Originator Companies may also change the branding and marketing of their products. Such actions may increase the Group's costs and the risk it entails, and harm or even prevent its ability to launch new products. The Group is also exposed to legal claims that its products or production processes infringe on third-party intellectual property rights. Such claims may involve time, costs, substantial damages and management resources, impair the value of the Group's brands and its sales and adversely affect its results. Such lawsuits that were concluded involved non-material amounts. Furthermore, although the Group protects its brands and trade secrets with patents, trademarks and other methods of intellectual property protection, these protective means may not be sufficient for fully ADAMALtd. Semi-Annual Report 2023 32 safeguarding its intellectual property. Any unlawful or other unauthorized use of the Group's intellectual property rights could adversely affect the value of its intellectual property and goodwill. In addition, the Group may be required to take legal actions involving financial costs and resources to safeguard its intellectual property rights. Fluctuations in raw material inputs and prices, and in sales costs Significant percentage of the Groups’ cost of sales derives from raw material costs. Hence, significant increases or decreases in raw material costs affect the cost of goods sold, and are, due to the length of the Company’s inventory cycle, generally reflected in the Company’s financials. Most of the Group's raw materials are distant derivatives of oil prices and therefore, extreme changes or decrease in oil prices may affect the costs of raw materials, although only partially. To reduce exposure to fluctuations in the prices of raw materials, the Group customarily engages in long-term purchase contracts for key raw materials, wherever possible. Similarly, the Group acts to adjust its sales prices, wherever possible, to reflect the changes in the costs of raw materials. As of the date of approval of the financial statements, the Group has not engaged in any hedging transactions against increases in oil and other raw material costs. Exposure due to recent developments in the genetically modified seeds market Any significant development in the market of genetically modified seeds for agricultural crops, including as a result of regulatory changes in certain countries currently prohibiting the use of genetically modified seeds, and/or any significant increase in the sales of genetically modified seeds and/or to the extent new crop protection products are developed for further crops that would be widely used (substituting traditional products), will affect demand for crop protection products, requiring the Group to respond by adapting its product portfolio to the new demand structure. Consequently, to the extent that the Group fails to adapt its product mix accordingly, this may reduce demand for its products, erode their sales price and by implication affect the Group’s results and market share. Nevertheless, the fact that the Group itself markets some of the products for which herbicide tolerance traits have been developed, acts to mitigate this exposure (albeit only in terms of marketing margins). In addition, natural and/or biological substances that attack weeds, pests and diseases are potential alternatives for the Company’s products, though as of the date of the report, their efficiency is relatively limited, and they are commercialized in a relatively small volumes. Operational risks The Group’s operations, including its manufacturing activities, rely, inter alia, on state-of-the-art computer systems. The Group continually invests in upgrading and protecting these systems from malfunctions and attack. Any unexpected failure of these systems, as well as the integration of new systems, could involve substantial costs and adversely affect the Group's operations until completion of the repair or integration. The potential occurrence of a substantial failure that cannot be repaired within a reasonable time frame may also affect the Group's operations and its results. Currently, the Group has a property and loss-of-profit insurance policy. The Group's production capacity is affected, among others, by its facilities’ output and individual area and time allocation at full capacity. The Group's Multi-purpose facilities provide manufacturing flexibility and enable the Group to prepare for the manufacturing of new products. Although the Group believes that its existing sites have sufficient facilities and land areas to expand its production capacity, if necessary, in the case of immediate or short-term increases in demand for new products supply may be delayed due to lack of capacity to meet demand for such new products. ADAMALtd. Semi-Annual Report 2023 33 Data protection and cyber security During its activity, the Group may be exposed to risks and threats, related to the stability of its information technologies systems, data protection and cyber security, which could appear in many different forms (such as service denial, misleading employees, malfunction, encryption or data erasing and other cyber-attacks via E-mail or malicious software). An attack on such computerized systems, mainly network based systems may cause the group material damages and expenses and even partial suspension and disruption of their proper functioning. In order to minimize the abovementioned risks, the group invests resources in its technological resilience and in proper protection of its systems. Raw material supply and/or shipping, port service disruptions and inventory Lack of raw materials or other inputs utilized in the manufacture of the Group’s products may prevent the Group from supplying its products or significantly increase production costs. Moreover, the Group imports raw materials to its production facilities worldwide, from where it then exports the technical or formulated products to its subsidiaries around the world for formulation and/or commercialization purposes. Disruptions in the supply of raw materials from regular suppliers may adversely affect operations until an alternative supplier is engaged. If any of the Group's suppliers are unable to supply raw materials for a prolonged period, including due to ongoing disruptions and/or prolonged strikes and/or infrastructure defects in the operating of a relevant port, and if the Group is unable to engage with an alternative supplier at similar terms and in accordance with the relevant product registration requirements, this may adversely affect the Group's results, significantly affect its ability to obtain raw materials in general, or obtain them at reasonable prices, as well as limit its ability to supply products and/or meet customer supply deadlines. These might negatively affect the Group, its finances and operating results. In order to reduce this risk, it is the Group's practice to occasionally adjust the volume of its product inventories or in certain scenarios, to increase the levels of inventory held by the Company to overcome possible supply shortages, logistic challenges and increases in cost of inventory, as mentioned above, in order to support expected future sales. Additionally, in the case of fluctuations in the market prices for inventory held by the Company, this may affect its finances and operating results. Failed mergers and acquisitions; difficulties in integrating acquired operations The Group's strategy includes growth through mergers, acquisitions, investments and collaborations designed to expand its product portfolio and deepen its presence in certain geographical markets. Growth through mergers and acquisitions requires assimilation of acquired operations and their effective integration in the Group, including realization of certain forecasts, profitability, market conditions and competition. Failure to successfully implement the above and/or non-realization of the relevant forecasts may result in not achieving the incremental value forecasted, loss of customers, exposure to unexpected liabilities, reduced value of the intangible assets included in the merger or acquisition as well as the loss of professional and skilled human resources. Production concentration in limited plants A large portion of the Group’s production operations is concentrated in a relatively small number of locations. Natural disasters, hostilities, labor disputes, substantial operational malfunction or any other material damage might significantly affect Group operations, as a result of the difficulty, the time and investment required for relocating the production operation or any other activity. International taxation Most of the Group’s sales are global, through its consolidated subsidiaries worldwide. These individual ADAMALtd. Semi-Annual Report 2023 34 companies are assessed in accordance with the tax laws effective in each respective location. The Group’s effective tax rate could be significantly affected by different classification or attribution of the profits arising from the proportional value of the components of each of the companies in the Group in the various countries, as is recognized in each tax jurisdiction; changes in the characteristics (including regarding the location of control and management) of these companies; changes in the breakdown of the Group's profits into regions where differing tax rates apply; changes in statutory tax rates and other legislative changes; changes in assessment of the Group's deferred tax assets or deferred tax liabilities; changes in determining the areas in which the Group is taxed; and potential changes in the Group's organizational structure. Changes in tax regulations and the manner of their implementation, including with regard to the implementation of BEPS, may lead to a substantial increase in the Group's applicable tax rates and have a material adverse effect on its financial position, results and cash flows. The Group’s Financial Statements do not include a material provision for exposure for international taxation, as stated above. Risks arising from the Group’s debt The Group finances its business operations by means of its own equity and loans from external sources (primarily traded debentures issued by Solutions and bank credit). The Group's main source for servicing the debt and its operating expenses is by means of the profits from the Group companies’ operations. Restrictions applying to the Group companies regarding distribution of dividends to the Group, or the tax rate applicable on these dividends, may affect the Group's ability to finance its operations and service its debt. In addition, the Group's Finance Documents, as contained in the bank credit agreements, require meeting certain Financial Covenants. Failure to meet these covenants due to an exogenous event or non-materialization of Group forecasts, and insofar as the financing parties refuse to extend or update these Financial Covenants as per the Group’s capabilities, may lead the financing parties to demand the immediate payment of these liabilities (or part thereof). Exposure to customer credit risks The Group’s sales to customers worldwide usually involve customer credit as is customary in each market. A portion of these credit lines is insured, while the remainder are exposed to risk, particularly during economic slowdowns in the relevant markets. The Group’s aggregate credit, however, is diversified among many customers in dozens of countries, mitigating this risk. In addition, in certain regions, particularly in South America, credit days are particularly long (compared to those extended to customers in regions such as Europe), and on occasion, inter alia, owing to agricultural seasons or economic downturns in those countries, the Group may encounter difficulty in timely collection of customer debts, with the collection period being extended over several years. Generally, such issues arise more often in developing countries where the Group may be less familiar with its customers, the collaterals might be in double until actual repayment and the insurance cover of these customers is likely to be limited. Credit default by any of the customers may negatively impact the Group's cash flow and financial results. The Group’s working capital and cash flow needs Similar to other companies operating in the crop protection industry, the Group has substantial cash flow and working capital requirements in the ordinary course of operations. In view of the Group's growth and considering its primary growth regions, the Group’s broad product portfolio and the Group’s investments ADAMALtd. Semi-Annual Report 2023 35 in manufacturing infrastructures, the Group has significant financing and investment needs. The Group acts continually to improve the state and management of its working capital. While currently the Group is in compliance with all its financial covenants, significant deterioration of its operating results may in the future lead the Group to fail to comply with its financial covenants and fail to meet its financial needs. As a result, the Group's ability to meet its goals and growth plans, as well as its ability to meet its financial obligations, may be harmed. Contagious disease outbreak Outbreak of a contagious disease and pandemics, or other adverse public health developments, in territories where significant production activity is taking place or from which raw materials are supplied to a significant extent, may have a material adverse effect on the Company’s activity, such that the Company may encounter difficulties with procurement of raw materials and intermediates, experience a certain decrease of activity within its production facilities due to governmental instructions, and be constrained with respect to its logistics and supply lines. In addition, the Company sales could be potentially impacted by a temporary decrease in demand for its products, as well as by temporary disruption of the Company’s ability to sell and distribute products as mentioned above. ADAMALtd. Semi-Annual Report 2023 36 Section IV - Corporate Governance I. Annual and Special Meetings of Shareholders Convened during the Reporting Period 1. Meetings of Shareholders Convened during the Reporting Period Meeting Type Investor participation ratio Convened date Disclosure date Resolutions of the meeting 2022 Annual Shareholders Meeting Annual Shareholders Meeting 80.3123% April 12,2023 April 13,2023 Announcement on the Resolutions of 2022 Annual General Meeting (Announcement No.: 2023-18). Disclosed at the website CNINFO 2. Special Meetings of Shareholders Convened at Request of Preference Shareholders with Resumed Voting Rights □ Applicable √ Not applicable II. Changes in Directors, Supervisors and Senior Management √Applicable □ Not applicable Changes in directors, supervisors and senior management during the Reporting Period, were as follows: Name Position Type Date Reason Michal Arlosoroff General Legal Counsel Left the position January 1,2023 Retirement Shahar Florentz Chief Financial Officer Left the position February 15, 2023 Resignation for personal reasons Efrat Nagar Chief Financial Officer Accepted the position February 16, 2023 -- Ignacio Dominguez President and CEO (legal representative of the Company) Left the position May 1,2023 Resignation from the Company Steve Hawkins President and CEO (legal representative of the Company) Accepted the position May 1,2023 -- ADAMALtd. Semi-Annual Report 2023 37 III. Basic Information on the Profit Distribution and Converting Capital Reserve into Share Capital in the Reporting Period □ Applicable √ Not applicable For the Reporting Period, the Company does not plan to distribute cash dividends or bonus shares or convert capital reserve into share capital. IV. Stock Incentive Plans, ESOP or Other Employee Incentives □ Applicable √ Not applicable To the date of the report, the Company does not have stock incentive plans, ESOP or other staff incentives. It shall be noted, that the Company’s subsidiary, Adama Solutions, currently has several long-term incentive plans according to which it has granted long-term cash rewards to executive officers and employees. These long-term incentive plans are based either on the performance of the Company's shares (phantom cash incentives) and/or the Company's performance. Adama Solutions has further adopted an incentive plan linked to the increase in the Syngenta Group EBITDA. ADAMALtd. Semi-Annual Report 2023 38 Section V - Environmental and Social Responsibilities I. Major Environmental Situation Is the Company listed as a “Key Polluting Entity” by the environmental protection agencies √ Yes □ No Policies and Sector Standards related to Environmental Protection The Group complies with the following laws, regulations and sector standards related to environmental protection in the process of production and operation: 1. Laws and Regulations 1) Environmental Protection Law of the People's Republic of China; 2) Law of the People's Republic of China on the Prevention and Control of Air Pollution; 3) Law of the People's Republic of China on the Prevention and Control of Water Pollution; 4) Law of the People's Republic of China on the Prevention and Control of Environmental Pollution by Solid Waste; 5) Law of the People's Republic of China on the Prevention and Control of Environmental Noise Pollution; 6) Law of the People's Republic of China on the Prevention and Control of Soil Pollution; 7) Water Law of the People's Republic of China; 8) Cleaner Production Promotion Law of the People's Republic of China; 9) Yangtze River Protection Law of the People's Republic of China; 10) Regulations on the Administration of Pesticides; 11) Regulations on the Administration of Environmental Protection of Construction Projects; 2. Sector Standards 1) Discharge Standard of Pollutants for Urban Sewage Treatment Plant (GB18918-2002); 2) Water Quality Standard for Sewage Discharged into Urban Sewers (GB/T 31962-2015); 3) Emission Standard of Air Pollutants for Pesticide Manufacturing Industry (GB 39727-2020); 4) Standard for Pollution Control of Hazardous Waste Incineration GB18484-2020; 5) Emission Standard of Air Pollutants for Thermal Power Plants (GB 13223-2011); 6) Emission Standard of Air Pollutants for Pesticide Manufacturing Industry (GB 39727-2020); 7) Standard for fugitive emission control of volatile organic compounds (GB37822-2019); 8) Emission Standard for Volatile Organic Compounds in Chemical Industry (DB 32/3151-2016); 9) Emission Standard for Odor Pollutants (GB 14554-93); 10) Emission Standard of Pollutants for Caustic Soda and PVCIndustry (GB 15581-2016); 11) Emission Standard for Industrial Enterprises Noise at Boundary GB12348-2008; 12) Standard for Pollution Control of Storage and Landfill of General Industrial Solid Waste GB18599-2020; 13) Standard for Pollution Control of Hazardous Waste Storage GB18597-2023. 14) Technical Specification for Setting Identification Signs of Hazardous Waste HJ1276-2022. ADAMALtd. Semi-Annual Report 2023 39 Environmental Protection Administrative Permits 1. EIAApproval On 12 June 2023, the Company received the "Approval of Environmental Impact Assessment Statement for the Recycled Solvent Purification Project of the Overall Relocation and Upgrading Project for Insecticides of ADAMALtd.". The subsidiaries, including Adama Anpon and Adama Huifeng have had EIA approvals for all the projects in operation and under construction. 2. Waste Discharge Permits The Company reapplied for Emission Permit on 17 April 2023 which remains valid during the reporting period. Adama Anpon, the Company's subsidiary, had its discharge permit changed for Anpon site on December 1st,2022 and renewed the discharge permit for Maidao site on December 20th,2021, which means the discharge permits for both plants are within the validity period in H12023. The waste discharge permit of Adama Huifeng, another subsidiary of the Company, was changed on 9 October 2022 and remains valid during the reporting period. ADAMALtd. Semi-Annual Report 2023 40 Sector Discharge/Emission Standards and Pollutant Discharge and Emission during Operational Activities Company name Main pollutants and special pollutants Way of emission No. of emission points Layout of emission points Concentration Pollution standards applied Total amount emitted/ Discharged (ton) Total amount Approved (ton) Exceeding limit ADAMA Ltd. CODContinuous 1 General Discharge Port The new site: 16.27mg/L Discharge Standards for Pollutants from Urban Sewage Treatment Plant (GB 18918 – 2002), COD <50mg/L 33.3612173.2104 None Ammonia nitrogen Continuous 1 General Discharge Port The new site: 0.33mg/L Discharge Standards for Pollutants from Urban Sewage Treatment Plant (GB 18918 – 2002), ammonia nitrogen<8mg/L; 0.683417.321 None Total Phosphorous Continuous 1 General Discharge Port The new site: 0.34mg/L. Discharge Standards for Pollutants from Urban Sewage Treatment Plant (GB 18918 – 2002), total phosphorous <0.5mg/L 0.71511.722 None NOx Continuous 4 Power plant, Hazardous waste incinerator, Acephate RTO, and Wastewater RTO Power plant: 26.76 mg/m3 Hazardous waste incinerator: 52.3 mg/m3 Acephate RTO: 6.3 mg/m3 Wastewater RTO: 3.17 mg/m3 (1) The power plant complies with the ultra-low limit of the standard range for pollutant emission, which is NOx < 50mg/m3; (2) Hazardous waste incinerator: Table 3 in the "Standards for the Control of Hazardous Waste Incineration Pollution " (GB18484-2020), which is NOx 19.9538260.27 None ADAMALtd. Semi-Annual Report 2023 41 Company name Main pollutants and special pollutants Way of emission No. of emission points Layout of emission points Concentration Pollution standards applied Total amount emitted/ Discharged (ton) Total amount Approved (ton) Exceeding limit <300mg/m3; (3) RTO: Table 1 and 2 and specifically the air pollutant emission limits in Table 2 of the "Standards for the Air Pollutant Emission of the Pesticide manufacturing Industry" (GB 39727-2020), which is NOx <200mg/m3; SO2 Continuous 4 Power plant, Hazardous waste incinerator, Acephate RTO, Wastewater RTO Power plant: 6.04 mg/m3 Hazardous waste incinerator: 12.33 mg/m3 Acephate RTO: 7.2 mg/m3 Wastewater RTO: 1.47 mg/m3 (1) The power plant complies with the ultra-low limit of the standard range for pollutant emission, which is SO2 < 35 mg/m3; (2) Hazardous waste incinerator: Table 3 in the "Standards for the Control of Hazardous Waste Incineration Pollution " (GB18484-2020), which is SO2 <100mg/m3; (3) RTO: Table 1 and 2 and specifically the air pollutant emission limits in Table 2 of the "Standards for the Air Pollutant Emission of the Pesticide manufacturing 5.1977116.48 None ADAMALtd. Semi-Annual Report 2023 42 Company name Main pollutants and special pollutants Way of emission No. of emission points Layout of emission points Concentration Pollution standards applied Total amount emitted/ Discharged (ton) Total amount Approved (ton) Exceeding limit Industry" (GB 39727-2020), which is SO2 <200mg/m3; Fume and Dust Continuous 7 Power plant, Hazardous waste incinerator, Acephate RTO, Wastewater RTO , Acephate powder outlet, Acephate granule outlet, Sodium sulfate outlet Power plant: 0.6mg/m3 Hazardous waste incinerator: 3.8 mg/m3 Acephate RTO: 5.09 mg/m3 Wastewater RTO: 7.7 mg/m3 Acephate powder outlet: 7.89mg/m3. Acephate granule outlet: 7.93mg/m3. Sodium sulfate outlet: 59mg/m3. (1) The power plant complies with the ultra-low limit of the standard range for pollutant emission, which is fume and dust < 10 mg/m3; (2) Hazardous waste incinerator: Table 3 in the "Standards for the Control of Hazardous Waste Incineration Pollution " (GB18484-2020), which is fume and dust <30 mg/m3; (3) RTO: Table 1 and 2 and specifically the air pollutant emission limits in the " the Emission Standards for Air Pollutants of the Pesticide Manufacturing Industry" (GB 39727-2020), which is fume and dust < 30 mg/m3; (4) Table 1 particulates of the Emission Standards for Air Pollutants in the Pesticide Manufacturing 4.711844.726 None ADAMALtd. Semi-Annual Report 2023 43 Company name Main pollutants and special pollutants Way of emission No. of emission points Layout of emission points Concentration Pollution standards applied Total amount emitted/ Discharged (ton) Total amount Approved (ton) Exceeding limit Industry (GB39727-2020) <20mg/m3. (5) Table 2 particulates of the Comprehensive Emission Standards for Air Pollutants (GB 16297-1996) <120mg/m3. VOCs Continuous 5 Acephate RTO, Wastewater RTO, Outlet of Class A Warehouse, Outlet of Class C Warehouse, Outlet of the Lab Building Acephate RTO: 17.84 mg/m3 Wastewater RTO: 3.56 mg/m3 Class A Warehouse: 0.95mg/m3 Class C Warehouse: 1.04mg/m3 Lab Building: 1.43mg/m3 (1) Table 1 and 2 and specifically, the emission limits of air pollutants in Table 2 of the Emission Standards for Air Pollutants of the Pesticide Manufacturing Industry (GB 39727-2020), which is VOCs <100mg/m3; (2) Table 1 Air Pollutant Emission Limits in "Volatile Organic Compounds Emission Control Standards for Industrial Enterprises" (DB12/524-2020) of VOCs <60mg/m3 2.90956.221 None ADAMA Anpon (Jiangsu) Co., Ltd. CODContinuous 2 General Discharge Port 52.57mg/L Comprehensive Standard on Discharge of Waste Water (GB8978-1996)，COD< 500 mg/l; 35.42 265.69 None ADAMALtd. Semi-Annual Report 2023 44 Company name Main pollutants and special pollutants Way of emission No. of emission points Layout of emission points Concentration Pollution standards applied Total amount emitted/ Discharged (ton) Total amount Approved (ton) Exceeding limit Ammonia Nitrogen Continuous 2 General Discharge Port 2.77mg/L Water Quality Standard for Sewage Discharged into Urban Sewerage (GBT 31962-2015), Ammonia Nitrogen <45 mg/l; 1.8728.348 None Total Phosphorous Continuous 2 General Discharge Port 0.10mg/L Water Quality Standard for Sewage Discharged into Urban Sewerage （GBT 31962-2015）, total phosphorous < 8 mg/l; 0.065520.273 None NOx Continuous 1 Power Plant / Standard on Air Pollution of Thermal Power Plants（GB13223-2011）NOx < 100 mg/m3 / 181.516 None The power plant has been deactivated. SO2 Continuous 1 Power Plant / Standard on Air Pollution of Thermal Power Plants（GB13223-2011）SO2 < 50 mg/m3 / 396.902 None The power plant has been deactivated. Fume and Dust Continuous 1 Power Plant / Standard on Air Pollution of Thermal Power Plants（GB13223-2011）Fume and Dust < 20mg/m3 / 67.515 None The power plant has been deactivated. VOCs Continuous 13 Various Facilities 28.26mg/m3 Standards for the Volatile Organic Compound Emission of the Chemical Industry, DB 32/3151- 2016 0.25747.313 None ADAMALtd. Semi-Annual Report 2023 45 Company name Main pollutants and special pollutants Way of emission No. of emission points Layout of emission points Concentration Pollution standards applied Total amount emitted/ Discharged (ton) Total amount Approved (ton) Exceeding limit Maidao Branch of ADAMA Anpon (Jiangsu) Co., Ltd. CODContinuous 1 General Discharge Port 54.16mg/l Agreement on Discharged Water: COD<500mg/L 3.258182.755 None Ammonia Nitrogen Continuous 1 General Discharge Port 0.91mg/l Agreement on Discharged Water: ammonia nitrogen <35mg/L 0.0554.084 None Total Phosphorous Continuous 1 General Discharge Port 0.83mg/l Agreement on Discharged Water: total phosphorus <3mg/L 0.050.327 None NOx Continuous 1 Outlet of DFTO Furnace / Emission Standards for Pollutants in Petrochemical Industry (GB31571-2015) NOx<100mg/m3 / 1.966 None SO2 Continuous 1 Outlet of DFTO Furnace / Emission Standards for Pollutants in Petrochemical Industry (GB31571-2015) SO2 <50mg/m3 / 1.673 None Fume and Dust Continuous 1 Outlet of DFTO Furnace / Emission Standards for Pollutants in Petrochemical Industry (GB31571-2015): Fume and Dust <20mg/ m3. 03.095 None VOCs Continuous 10 Various Facilities 20.26mg/m3 Standards for the Volatile Organic Compound Emission of the Chemical Industry, DB 32/3151-2016, Total non-methane 0.032.017 None ADAMALtd. Semi-Annual Report 2023 46 Company name Main pollutants and special pollutants Way of emission No. of emission points Layout of emission points Concentration Pollution standards applied Total amount emitted/ Discharged (ton) Total amount Approved (ton) Exceeding limit hydrocarbons ≤ 80 mg/m3 ADAMA Huifeng (Jiangsu) Co., Ltd. CODContinuous 1 General Discharge Port 185.9 mg/l Standards of the Industrial Park 34.236247.6378 None Ammonia Nitrogen Continuous 1 General Discharge Port 2.89mg/l Standards of the Industrial Park 0.422919.3783 None Total Phosphorous Continuous 1 General Discharge Port 0.32mg/l Standards of the Industrial Park 0.05460.9285 None Total Nitrogen Continuous 1 General Discharge Port 19.08 mg/l Standards of the Industrial Park 3.403146.77204 None NOx Continuous 10 RTO and the Discharge Ports at Various Workshops 7.44 mg/m3 Jiangsu Comprehensive Standard on Air Pollutants Emission (DB32/4041-2021) 4.7532147.7072 None SO2 Continuous 10 RTO and the Discharge Ports at Various Workshops 4.43 mg/m3 Jiangsu Comprehensive Standard on Air Pollutants Emission (DB32/4041-2021) 3.251747.1958 None Fume and Dust Continuous 10 RTO and the Discharge Ports at Various Workshops 1.92 mg/m3 Comprehensive Standard on Air Pollutants Emission (DB32/4041-2021) 0.803322.7146 None VOCs Continuous 10 RTO and the Discharge Ports at Various Workshops 7.92 mg/m3 Comprehensive Standard on Air Pollutants Emission (DB32/4041-2021) 10.816062.92994 None ADAMALtd. Semi-Annual Report 2023 47 Treatment of Pollutants (1) Development and Operation of Wastewater Treatment Facilities The Company has a 20,000 tons/day wastewater treatment plant, which adopts the process composed of "secondary A/O + MBR + ozone co-oxidation + MBBR + calcium used for phosphorus removal". At present, all the facilities are operating normally, and after treatment, the COD, ammonia nitrogen and total phosphorus in the discharged wastewater all meet the standards. ADAMAAnpon, a subsidiary of the Company, has its own wastewater treatment plant with a design capacity of 11,000 tons per day. At present, the facilities are operating normally, and the COD, ammonia nitrogen and total phosphorus in the treated wastewater are all up to the standard. ADAMAHuifeng, another subsidiary of the Company, has its own wastewater treatment plant with a capacity of 5,000 tons per day. At present, the facilities are operating normally, and after treatment, the COD, ammonia nitrogen, total nitrogen and total phosphorus in the discharged wastewater all meet the standards. The COD and SS volume discharged by Adama (Nanjing) Agricultural Science and Technology Co., Ltd, a subsidiary of the Company meet the emission standards. (2) Development and Operation of Exhaust Gas Treatment Facilities The Company's self-owned coal-fired thermal power plant had undergone a transformation to enable ultra-low emission, and since the upgrading completed, the environmental protection facilities of the plant has been operating normally. The sulfur dioxide, nitrogen oxides, fume and dust in the exhaust gas have all achieved the target of the ultra-low emission and met the emission standards. To treat the exhaust gas from the incinerator of the solid waste rotary kiln, the company adopts a process consisting of "SNCR + semi-dry (rapid cooling) de-acidification + activated carbon injection + dust removal bag + SCR". The sulfur dioxide, nitrogen oxides, fume and dust in the exhaust gas all meet the emission standards. As for the RTO treatment process for VOCs, the company adopts a flow of steps including "acid scrubbing and absorption, alkali scrubbing and absorption, three-chamber RTO furnace incineration, rapid cooling tower and alkali absorption", and the sulfur dioxide, nitrogen oxides, fume and dust and VOCs all meet the emission standards. All chemical production lines at Adama Anpon are equipped with RTO incinerators, TO incinerators and resin adsorption as well as other exhaust gas treatment facilities to strengthen the operation management and further reduce the total emission amount of VOC in addition to the efforts to ensure the emission standards are met. Adama Huifeng has RTO furnace, alkali washing exhaust gas treatment facilities and pickling exhaust gas treatment facilities, which are used to treat VOC-containing process exhaust gas, pickling exhaust gas and alkali washing exhaust gas respectively. The main emission targets of sulfur dioxide, nitrogen oxides, fume and dust and non-methane total hydrocarbons have all met the mandatory standards. Adama (Nanjing) Agricultural Science and Technology Co., Ltd. has installed five sets of fans and supporting exhaust pipelines, each of which is equipped with a set of "water spray + activated carbon adsorption" treatment facilities. It also has two general pipes for exhaust. The emission of VOCs and hydrogen chloride is compliant with the required standards. ADAMALtd. Semi-Annual Report 2023 48 (3) Implementation of the "Interim Measures on Environmental Information Disclosure” The Company and its subsidiaries disclose production and pollution information according to the Interim Measures on Environmental Information Disclosure and transfers information about all the main indicators in wastewater and air pollutants to the release platform for environmental information of key pollution sources set up by the local ecology and environment bureaus on a daily basis. Contingency plan of environmental accidents The Company and its relevant subsidiaries have formulated the Contingency Plan for Environmental Emergencies according to their production facilities and industry features, and then submitted files to the local environmental protection authorities as record. Inputs in Environmental Protection and Treatment and Payment of Environmental Tax Company Name Inputs in Environmental Protection and Treatment during H12023 (0,000RMB) Payment of Environmental Tax during H12023 (0,000RMB) ADAMALtd.3,450.4818.8933 Adama Anpon (Jiangsu) Ltd.1,2001.44 Adama Huifeng (Jiangsu) Ltd.5,9974.158 Adama (Nanjing) Agricultural Science and Technology Co., Ltd 12.87 / Note: Adama (Nanjing) Agricultural Science and Technology Co., Ltd. is not required to pay environmental protection tax because it is not a key environmental enterprise. Environment self-monitoring plan The Company attributes great importance to protecting the environment, out of a sense of responsibility to society and the environment and strives to meet the relevant regulatory requirements and to even go beyond mere compliance, engaging in constant dialogue with stakeholders, including the authorities and the community. In order to improve the environmental management, track the discharge of various pollutants, evaluate the impact on the surrounding environment, strengthen the discharge management of pollutants in the production process, accept the supervision and inspection of environmental authorities and provide reference for pollution prevention and control, the Company and its subsidiaries - Anpon and ADAMA Huifeng have formulated a self-monitoring plan, which conducts regular tests in strict accordance with the requirements. The major monitored indicators and frequency of the Company, Anpon and ADAMAHuifeng are as the following: 1. Monitored Indicators Waste water: COD, NH3-N, PH, SS, Petroleum, TP. ADAMALtd. Semi-Annual Report 2023 49 Air Pollutant: SO2, Nitrogen oxide, Fume and Dust, Non-methane Hydrocarbon. Noise: Noise at the Site Border 2. Frequency Boiler emission, Non-methane Hydrocarbon in the waste gas, SO2 in RTO furnace, NOx, Fume and Dust, and waste water discharged from the centralized point: continuous auto monitoring (COD, Ammonia nitrogen, Total Phosphorous). Manual sampling: PM in some waste gas discharge outlets, SS in wastewater discharge outlet, Petroleum, once a month. Noise: once a quarter. While continually examining itself according to the implications of the environmental laws, the Company has been taking proactive actions to prevent or mitigate the environmental risks, reduce the environmental effects that may result from its activities, and invests extensive resources to fulfill those legal provisions that are, and are anticipated to, affect it. The Company’s plants are subject to atmospheric emissions regulations, whether by virtue of the stipulations provided in the business licenses or under the applicable law. Hazardous materials are stored and utilized in the Company's plants, together with infrastructures and facilities containing fuels and hazardous materials. The Company takes actions to prevent soil and water pollution by these materials and treats them, if revealed. The Company’s plants conduct various soil surveys, risk surveys and tests with regard to treatment of the soil or ground water at the plants. The Company intends to continue investing in environmental protection, to the extent required and beyond this, whether on its own volition or in compliance with contractual commitments, regulatory or legal standards relating to environmental protection, so as to realize its best available policy and comply with any legal requirements. As part of its policy of ecological process improvement, the Company also invests in remediation, changes in production processes, establishment of sewage facilities, as well as in byproduct storage and recycling. Administrative punishment due to environmental problems in the Reporting Period No Other environmental information that should be disclosed No. Measures of reducing GHGs emissions and their effects √Applicable □Not applicable During the reporting period, the company had set up a dedicated work force for energy saving and carbon reduction, clarified future targets and completed carbon emission verification as well as carbon compliance. It also carried out a number of energy saving and emission reduction initiates, such as saving steam consumption by the renovation of chlor-alkali chemical water steam pipeline, the optimization of ADAMALtd. Semi-Annual Report 2023 50 public utility engineering and upgrading of brine pumps, reducing energy consumption and maintenance frequency of equipment by the optimization of public utility engineering and rational resource allocation, and decreasing both energy consumption and CO2 emission by the replacement of water pumps and motor types, the increase of frequency converters so as to better match pumps and motors with actual needs, etc. Other related information on environmental protection No. II. Social Responsibilities In terms of consolidating and expanding the achievements of poverty eradication and rural revitalization, in the first half of 2023, ADAMAAnpon, one of the Company’s subsidiaries, continued to provide paired-up assistance to Sanhe Village, Shunhe Township, Huai'an District in Huai’an City of Jiangsu Province in accordance with the arrangements of the local provincial government for the economically less developed villages. During the spring farming season, various towns and communities at Huai'an District pushed forward the public space governance for the countryside. According to the unified planning of the task force, volunteers from ADAMAAnpon analyzed and deployed with the village councils to facilitate the implementation. Thanks to the efforts on public space governance, Sanhe Village managed to rectify 235 problems, recovered land area of 743.67 mu, and increased collective income by 321,300 yuan through a variety of methods such as land transfer, revitalization of idle assets and resources, and remediation of encroached assets and resources. ADAMALtd. Semi-Annual Report 2023 51 Section VI - Significant Events I. Commitments completed by the Company, the shareholders, the actual controllers, the purchasers, or other related parties during the Reporting Period, and those which should have been completed failed to be fulfilled during the Reporting Period □ Applicable√ Not applicable Note: No commitment that should have been completed during the Reporting Period failed to be timely fulfilled. For details of the on-going commitments, please refer to the 2022 Annual Report published on the website on March 21,2023. II. Inadequate use of Company’s capital by the controlling shareholder or its related parties for non-operating purposes □ Applicable √ Not applicable No such situation occurred during the Reporting Period. III. Illegal guarantee □ Applicable √ Not applicable Non during the Reporting Period. IV. Engagement and Disengagement of CPAFirm Has the semi-annual financial report been audited □ Yes √ No This Semi-Annual Report is unaudited. V. Explanations Given by the Board of Directors and Board of Supervisors Regarding “Modified Auditor’s Report” Issued by CPAFirm for the Reporting Period □ Applicable √ Not applicable VI. Explanations Given by Board of Directors Regarding “Modified Auditor’s Report” Issued for Last Year □ Applicable √ Not applicable ADAMALtd. Semi-Annual Report 2023 52 VII. Bankruptcy and Restructuring □ Applicable √ Not applicable None during the Reporting Period. VIII. Litigation and Arbitration Matters Material litigations or arbitrations: □ Applicable √ Not applicable None during the Reporting Period. Other litigations or arbitrations: □ Applicable √ Not applicable No significant litigation or arbitrations during the Reporting Period. IX. Punishment and Rectification □Applicable √Not applicable None during the Reporting Period. X. Integrity of the Company, its controlling shareholders and actual controller □ Applicable √ Not applicableADAMALtd. Semi-Annual Report 2023 53 XI. Material Related-Party Transactions 1. Related-Party Transactions in the ordinary course of business √ Applicable □ Not applicable Related party Relationship Type of related party transaction Content of related party transaction Pricing principle of related party transaction Price Value (RMB ‘0000) Percentage against transactions of the same kind Approved transaction quota (RMB ‘0000) Whether exceeds the approved quota Settlement methods Market price of similar transactions if the Company knows Date of announcement Index of the disclosure Syngenta AG and its subsidiaries Under the same control of Sinochem Holdings Purchasing raw materials and products from related parties Purchase of raw materials/products Market price Market price 61,6847.51% 144,486 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Bluestar (Beijing) Chemical Machinery Co., Ltd. Under the same control of Sinochem Holdings Purchasing raw materials and products from related parties Purchase of raw materials/products - - - - 856 No - N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Jiangsu Huaihe Chemicals Co., Ltd. Under the same control of Sinochem Holdings Purchasing raw materials and products Purchase of raw materials/products Market price Market price 12,3671.51% 23,512 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business ADAMALtd. Semi-Annual Report 2023 54 Related party Relationship Type of related party transaction Content of related party transaction Pricing principle of related party transaction Price Value (RMB ‘0000) Percentage against transactions of the same kind Approved transaction quota (RMB ‘0000) Whether exceeds the approved quota Settlement methods Market price of similar transactions if the Company knows Date of announcement Index of the disclosure from related parties in 2023 (No.2023-12) Sinofert Under the same control of Sinochem Holdings Purchasing raw materials and products from related parties Purchase of raw materials/products Market price Market price 460.01% 115 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Jiangsu Yangnong Chemical Co., Ltd. Under the same control of Sinochem Holdings Purchasing raw materials and products from related parties Purchase of raw materials/products Market price Market price 390.00% 52,875 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Jiangsu Youjia Plant Protection Co., Ltd. Under the same control of Sinochem Holdings Purchasing raw materials and products from related parties Purchase of raw materials/products Market price Market price 10,6961.30% 29,561 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) ADAMALtd. Semi-Annual Report 2023 55 Related party Relationship Type of related party transaction Content of related party transaction Pricing principle of related party transaction Price Value (RMB ‘0000) Percentage against transactions of the same kind Approved transaction quota (RMB ‘0000) Whether exceeds the approved quota Settlement methods Market price of similar transactions if the Company knows Date of announcement Index of the disclosure Hangzhou (Torch) Xidou Door Film Industry Co., Ltd. Under the same control of Sinochem Holdings Purchasing raw materials and products from related parties Purchase of raw materials/products Market price Market price 70.00% 14 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Sinochem Lantian Fluorine Materials Co., Ltd. Under the same control of Sinochem Holdings Purchasing raw materials and products from related parties Purchase of raw materials/products - - - - 288 No - N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Zhonglan International Chemical Co., Ltd. Under the same control of Sinochem Holdings Purchasing raw materials and products from related parties Purchase of raw materials/products Market price Market price 4,4480.54% 25,300 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Sinochem Agro Co.,Ltd. Under the same control Purchasing raw Purchase of raw Market price Market price 7210.09% 8,090 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-ADAMALtd. Semi-Annual Report 2023 56 Related party Relationship Type of related party transaction Content of related party transaction Pricing principle of related party transaction Price Value (RMB ‘0000) Percentage against transactions of the same kind Approved transaction quota (RMB ‘0000) Whether exceeds the approved quota Settlement methods Market price of similar transactions if the Company knows Date of announcement Index of the disclosure of Sinochem Holdings materials and products from related parties materials/products Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Jiangsu Youshi Chemical Co., Ltd. Under the same control of Sinochem Holdings Purchasing raw materials and products from related parties Purchase of raw materials/products Market price Market price 6010.07% - - Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Bluestar Engineering Co.,Ltd. Under the same control of Sinochem Holdings Purchasing raw materials and products from related parties Purchase of raw materials/products Market price Market price 1,1140.14% - - Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) ELKEM SILICONES BRASIL LTDA Under the same control of Sinochem Holdings Purchasing raw materials and products Purchase of raw materials/products Market price Market price 260.00% - - Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business ADAMALtd. Semi-Annual Report 2023 57 Related party Relationship Type of related party transaction Content of related party transaction Pricing principle of related party transaction Price Value (RMB ‘0000) Percentage against transactions of the same kind Approved transaction quota (RMB ‘0000) Whether exceeds the approved quota Settlement methods Market price of similar transactions if the Company knows Date of announcement Index of the disclosure from related parties in 2023 (No.2023-12) Beijing Guangyuan Yinong Chemical Co., LTD Under the same control of Sinochem Holdings Purchasing raw materials and products from related parties Purchase of raw materials/products Market price Market price 150.00% - - Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Sinochem Chemical Science and Technology Research Institute Co., LTD Under the same control of Sinochem Holdings Purchasing raw materials and products from related parties Purchase of raw materials/products Market price Market price 40.00% - - Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Syngenta (China) Investment Company Limited Under the same control of Sinochem Holdings Purchasing raw materials and products from related parties Purchase of raw materials/products Market price Market price 3,5830.44% - - Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) ADAMALtd. Semi-Annual Report 2023 58 Related party Relationship Type of related party transaction Content of related party transaction Pricing principle of related party transaction Price Value (RMB ‘0000) Percentage against transactions of the same kind Approved transaction quota (RMB ‘0000) Whether exceeds the approved quota Settlement methods Market price of similar transactions if the Company knows Date of announcement Index of the disclosure Shandong Dacheng Agrochemical Company Limited Under the same control of Sinochem Holdings Purchasing raw materials and products from related parties Purchase of raw materials/products Market price Market price 2750.03% - - Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Sinochem International Crop Care Company Limited Under the same control of Sinochem Holdings Purchasing raw materials and products from related parties Purchase of raw materials/products Market price Market price 2,4840.30% - - Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Syngenta AG and its subsidiaries Under the same control of Sinochem Holdings Selling raw materials and products to related parties Selling products Market price Market price 64,1503.72% 159,178 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Jiangsu Huaihe Chemicals Under the same control of Sinochem Selling raw materials and Selling products Market price Market price 11,8350.69% 26,893 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions ADAMALtd. Semi-Annual Report 2023 59 Related party Relationship Type of related party transaction Content of related party transaction Pricing principle of related party transaction Price Value (RMB ‘0000) Percentage against transactions of the same kind Approved transaction quota (RMB ‘0000) Whether exceeds the approved quota Settlement methods Market price of similar transactions if the Company knows Date of announcement Index of the disclosure Co., Ltd. Holdings products to related parties in the Ordinary Course of Business in 2023 (No.2023-12) Sinofert Under the same control of Sinochem Holdings Selling raw materials and products to related parties Selling products Market price Market price 9,9660.58% 14,168 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Sino MAP Under the same control of Sinochem Holdings Selling raw materials and products to related parties Selling products Market price Market price 7880.05% 1,150 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Jiangsu Yangnong Chemical Co., Ltd. Under the same control of Sinochem Holdings Selling raw materials and products to related parties Selling products Market price Market price 10.00% 6 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Jiangsu Under the Selling raw Selling Market Market 2,4510.14% 12,650 No Cash N/AMarch Announcement on ADAMALtd. Semi-Annual Report 2023 60 Related party Relationship Type of related party transaction Content of related party transaction Pricing principle of related party transaction Price Value (RMB ‘0000) Percentage against transactions of the same kind Approved transaction quota (RMB ‘0000) Whether exceeds the approved quota Settlement methods Market price of similar transactions if the Company knows Date of announcement Index of the disclosure Youshi Chemical Co., Ltd. same control of Sinochem Holdings materials and products to related parties products price price Settlement 21,2023 Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Jiangsu Youjia Plant Protection Co., Ltd. Under the same control of Sinochem Holdings Selling raw materials and products to related parties Selling products Market price Market price 510.00% 173 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Syngenta Nantong Crop Protection Co.,Ltd. Under the same control of Sinochem Holdings Selling raw materials and products to related parties Selling products Market price Market price 1700.01% 610 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Sinochem International Crop Care Company Limited Under the same control of Sinochem Holdings Selling raw materials and products to related parties Selling products Market price Market price 1,4260.08% 1,898 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) ADAMALtd. Semi-Annual Report 2023 61 Related party Relationship Type of related party transaction Content of related party transaction Pricing principle of related party transaction Price Value (RMB ‘0000) Percentage against transactions of the same kind Approved transaction quota (RMB ‘0000) Whether exceeds the approved quota Settlement methods Market price of similar transactions if the Company knows Date of announcement Index of the disclosure Sinochem Agro Co.,Ltd. Under the same control of Sinochem Holdings Selling raw materials and products to related parties Selling products Market price Market price 2680.02% 230 Yes Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Syngenta (China) Investment Company Limited Under the same control of Sinochem Holdings Selling raw materials and products to related parties Selling products Market price Market price 6460.04% 725 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Beijing Guangyuan Yinong Chemical Co., LTD Under the same control of Sinochem Holdings Selling raw materials and products to related parties Selling products Market price Market price 1090.01% - - Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Henan Junhua Development Co. Ltd. Under the same control of Sinochem Holdings Selling raw materials and products to related Selling products Market price Market price 40.00% - - Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business ADAMALtd. Semi-Annual Report 2023 62 Related party Relationship Type of related party transaction Content of related party transaction Pricing principle of related party transaction Price Value (RMB ‘0000) Percentage against transactions of the same kind Approved transaction quota (RMB ‘0000) Whether exceeds the approved quota Settlement methods Market price of similar transactions if the Company knows Date of announcement Index of the disclosure parties in 2023 (No.2023-12) Sinochem Information Technology Co., Ltd Under the same control of Sinochem Holdings Receiving services from related parties Value-added OA services Market price Market price 430.01% 40 Yes Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Sinochem Information Technology Co., Ltd Under the same control of Sinochem Holdings Receiving services from related parties IT services Market price Market price 20.00% 35 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Syngenta AG and its subsidiaries Under the same control of Sinochem Holdings Receiving services from related parties Regular services Market price Market price 450.01% 52 No Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Sino MAP Under the same control of Sinochem Receiving services from Regular services - - - - 40 No - N/A March 21,2023 Announcement on Expected Related-Party Transactions ADAMALtd. Semi-Annual Report 2023 63 Related party Relationship Type of related party transaction Content of related party transaction Pricing principle of related party transaction Price Value (RMB ‘0000) Percentage against transactions of the same kind Approved transaction quota (RMB ‘0000) Whether exceeds the approved quota Settlement methods Market price of similar transactions if the Company knows Date of announcement Index of the disclosure Holdings related parties in the Ordinary Course of Business in 2023 (No.2023-12) Bluestar (Beijing) Chemical Machinery Co., Ltd. Under the same control of Sinochem Holdings Receiving services from related parties Regular services - - - - 100 No - N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Shenyang Chemical Co., Ltd. Under the same control of Sinochem Holdings Receiving services from related parties Regular services Market price Market price 580.01% - - Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) China Bluestar Chengrand Research Institute Chemical Industry Under the same control of Sinochem Holdings Receiving services from related parties Regular services Market price Market price 10.00% - - Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Shenyang Under the Receiving Regular Market Market 20.00% - - Cash N/AMarch Announcement on ADAMALtd. Semi-Annual Report 2023 64 Related party Relationship Type of related party transaction Content of related party transaction Pricing principle of related party transaction Price Value (RMB ‘0000) Percentage against transactions of the same kind Approved transaction quota (RMB ‘0000) Whether exceeds the approved quota Settlement methods Market price of similar transactions if the Company knows Date of announcement Index of the disclosure Shenhua Institute Testing Technology Co., Ltd. same control of Sinochem Holdings services from related parties services price price Settlement 21,2023 Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Sinofert Under the same control of Sinochem Holdings Receiving services from related parties Regular services Market price Market price 10.00% - - Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Syngenta (China) Investment Company Limited Under the same control of Sinochem Holdings Receiving services from related parties Regular services Market price Market price 310.00% - - Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Sinochem Innovation (Beijing) Technology Research Institute Co., Ltd. Under the same control of Sinochem Holdings Receiving services from related parties Regular services Market price Market price 40.00% - - Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) ADAMALtd. Semi-Annual Report 2023 65 Related party Relationship Type of related party transaction Content of related party transaction Pricing principle of related party transaction Price Value (RMB ‘0000) Percentage against transactions of the same kind Approved transaction quota (RMB ‘0000) Whether exceeds the approved quota Settlement methods Market price of similar transactions if the Company knows Date of announcement Index of the disclosure Zhonglan Lianhai Design Institute Co., Ltd. Under the same control of Sinochem Holdings Purchasing fixed assets from related parties Purchase of fixed assets Market price Market price 400.00% - - Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Syngenta AG and its subsidiaries Under the same control of Sinochem Holdings Rendering services to related parties Regular services Market price Market price 1870.01% - - Cash Settlement N/A March 21,2023 Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.2023-12) Total -- -- 190,389 -- 503,045 -- -- -- -- -- Details of large sales return - Execution of related-party transactions in the ordinary course of business whose value was expected by types during this reporting period (if any) According to the Company's daily business operation needs, the Company estimates that the total amount of daily related party transactions in 2023 will not exceed RMB 5,030.45 million. For details, please refer to Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2023 (No.: 2023-12). The Company’s actual amount of daily related party transactions defined in the listing rules incurred for the six months ended June 30,2023 is RMB 1,903.89 million, which does not exceed the expected amount. Reasons for large difference between transaction price and market reference price (if applicable) The Company’s related transactions with related party shall be carried out in accordance with the principle of voluntary, equality and mutual benefit, fair, and will not harm the interests of the Company. ADAMALtd. Semi-Annual Report 2023 66 2. Related-Party Transactions arising from Asset/Equity acquisition or sale □ Applicable √ Not applicable The Company was not involved in any related-party transactions arising from asset/equity acquisition or sale during the Reporting Period. 3. Related-Party Transactions with Joint Investments □ Applicable √ Not applicable The Company was not involved in any related-party transaction with joint investments during the Reporting Period. 4. Credits and Liabilities with Related Parties √ Applicable □ Not applicable Whether non-operating credits and liabilities with related parties exist or not □ Yes √ No The Company was not involved in any non-operating credit and liability with related parties in the Reporting Period. 5. Transactions with financial companies with related relationships √ Applicable □ Not applicable Deposit Business In RMB ’0000 Related Parties Relations Maximum Daily Deposit Limit Range of Interest Rate Opening Balance Transactions during the Reporting Period Ending Balance Total Deposit Amount for the Reporting Period Total Withdrawal Amount for the Reporting Period Sinochem Finance Co., Ltd Under the same control of Sinochem Holdings 150,0000.55%-1.9% 41,76616,18347,55010,399 ADAMALtd. Semi-Annual Report 2023 67 Loans In RMB ’0000 Related Parties Relations Credit Amount of the Loan Range of Interest Rate Opening Balance Transactions during the Reporting Period Ending Balance Total Amount of Loans for the Reporting Period Total Amount of Payment for the Reporting Period Sinochem Finance Co., Ltd Under the same control of Sinochem Holdings 50,0002.7%-3.0% - 5,000 - 5,000 Facilities and Other Financial Services In RMB ’0000 Related Party Relations Type of the Services Total Amount Actual Amount Incurred Sinochem Finance Co., Ltd Under the same control of Sinochem Holdings Facilities 50,000 - 6. Transactions between the finance company controlled by the Company and related parties □ Applicable √ Not applicable The company does not hold any equity interest in any finance company. 7. Other material related-party transactions √Applicable □ Not applicable The 18th Meeting of the 9th Session of the Board of Directors approved the Proposal on Credit Facilities from the Related Party. The website to disclose the interim announcements on significant related-party transactions: Name of the interim announcement Disclosure date of the interim announcement Website to disclose the interim announcement Announcement on Credit Facility of USD 250 million from a Related Party (Announcement No.2023-6) February 16,2023 Juchao website ADAMALtd. Semi-Annual Report 2023 68 XII. Particulars regarding material contracts and execution thereof 1. Particulars about trusteeship, Contract and Lease (1) Trusteeship □ Applicable √ Not applicable There was no trusteeship of the Company in the Reporting Period. (2) Contract operation □ Applicable √ Not applicable There was no contract operation of the Company in the Reporting Period. (3) Lease □Applicable√ Not applicable There is no major lease in the Reporting Period. ADAMALtd. Semi-Annual Report 2023 69 2. Significant Guarantees (1) Details of guarantees √Applicable □ Not applicable Unless otherwise specified, the unit hereunder is RMB ‘0000 Guarantees provided by the Company in favor of third parties (excluding subsidiaries) Guaranteed party Disclosure date of the announcement Planned guarantee amount Actual occurrence date Actual guarantee amount Type of guarantee Collateral（if any） Counter Guarantee（if any） Period of guarantee expired or not Guarantee for a related party or not -- -- -- -- -- -- -- -- -- -- -- Total guarantee line approved in favor of third parties (excluding subsidiaries) during the reporting period (A1) 0 Total amount of the occurred guarantee in favor of third parties (excluding subsidiaries) during the reporting period (A2) 0 Aggregated guarantee line in favor of third parties (excluding subsidiaries) that has been approved by the end of the reporting period (A3) 5,000 Total guarantee balance in favor of third parties (excluding subsidiaries) by the end of the reporting period (A4) 0 Guarantees provided by the Company in favor of its subsidiaries Guaranteed party Disclosure date of the announcement Planned guarantee amount Actual occurrence date Actual guarantee amount Type of guarantee Collateral（if any） Counter Guarantee（if any） Period of guarantee expired or not Guarantee for a related party or not ADAMA Anpon (Jiangsu) Ltd. December 22,2020 April 29,2021 October 28,2021 125,800 December 1, 2021 3,800 Joint and several liability / / Three years after the project loan matures No No December 1, 2021 200 Joint and several / / Three years Yes No ADAMALtd. Semi-Annual Report 2023 70 liability after the project loan matures January 1, 2022 3,500 Joint and several liability / / Three years after the project loan matures No No February 28, 2022 2,100 Joint and several liability / / Three years after the project loan matures No No April 28, 2022 1,400 Joint and several liability / / Three years after the project loan matures No No May 20,2022750 Joint and several liability / / Three years after the project loan matures No No June 26, 2022 2,350 Joint and several liability / / Three years after the project loan matures No No January 18, 2022 4,000 Joint and several liability / / Three years after the loan Yes No ADAMALtd. Semi-Annual Report 2023 71 matures January 25, 2022 400 Joint and several liability / / Three years after the project loan matures No No February 28, 2022 390 Joint and several liability / / Three years after the project loan matures No No July 2,2022810 Joint and several liability / / Three years after the project loan matures No No March 31, 2022 104,100 March 30, 2022 3,000 Joint and several liability / / Three years after the loan matures Yes No August 11, 2022 1,000 Joint and several liability / / Three years after the project loan matures No No August 31, 2022 1,000 Joint and several liability / / Three years after the project loan matures No No ADAMALtd. Semi-Annual Report 2023 72 October 28, 2022 1,100 Joint and several liability / / Three years after the project loan matures No No October 31, 2022 1,000 Joint and several liability / / Three years after the project loan matures No No November 17,2022 2,000 Joint and several liability / / Three years after the project loan matures No No November 23,2022 2,500 Joint and several liability / / Three years after the project loan matures No No November 30,2022 1,100 Joint and several liability / / Three years after the project loan matures No No December 17,2022 2,000 Joint and several liability / / Three years after the loan matures No No January 12, 2023 1,000 Joint and several / / Three years No No ADAMALtd. Semi-Annual Report 2023 73 liability after the loan matures January 16, 2023 1,000 Joint and several liability / / Three years after the loan matures No No April 4,20231,200 Joint and several liability / / Three years after the loan matures No No April 4,20231,400 Joint and several liability / / Three years after the loan matures No No April 13, 2023 440 Joint and several liability / / Three years after the loan matures No No April 26, 2023 200 Joint and several liability / / Three years after the loan matures No No Total guarantee line approved in favor of the subsidiaries during the reporting period (B1) 114,000 Total amount of the occurred guarantee in favor of the subsidiaries during the reporting period (B2) 5,240 Aggregated guarantee line that has been approved in favor of the subsidiaries by the end of the reporting period 343,900 Total guarantee balance in favor of the subsidiaries by the end of the reporting period (B4) 32,440 ADAMALtd. Semi-Annual Report 2023 74 (B3) Guarantees provided by subsidiaries in favor of subsidiaries (USD ’0000) Guaranteed party Disclosure date of the announcement Planned guarantee amount Actual occurrence date Actual guarantee amount Type of guarantee Collateral（if any） Counter Guarantee（if any） Period of guarantee expired or not Guarantee for a related party or not Control Solutions, Inc. October 31, 2018 1,300 October 30,2018 0 joint and several liability / / Generally 7 years (subject to the overseas laws) No No Control Solutions, Inc. January 10, 2019 4,000 January 9, 2019 750 joint and several liability / / The loan term (5 years) and any applicable statute of limitations period (generally 7 years). No No ADAMA Brazil Not applicable 22,287.0 8 Related guarantees existed before the company was consolidated into the financial statements of the Company. 2.10 joint and several liability / / Valid until cancelled No No ADAMALtd. Semi-Annual Report 2023 75 ADAMA Brazil January 22, 2022 900 December 29,2021 900 joint and several liability / / December 31, 2025 No No Adama India Private Ltd. Not applicable 8,915.34 Related guarantees existed before the company was consolidated into the financial statements of the Company. 3,684.38 joint and several liability / / Valid until cancelled No No ADAMA Turkey Tarm Sanayi ve Ticaret Limited irketi Not applicable 7,150 Related guarantees existed before the company was consolidated into the financial statements of the Company. 711.95 joint and several liability / / Valid until cancelled No No Adama Makhteshim Not applicable unlimited Related guarantees existed before the company was consolidated into the financial statements of the Company. 50,440 joint and several liability / / Valid until cancelled No No ADAMALtd. Semi-Annual Report 2023 76 Adama Makhteshim April 25,20237,875 May 3, 2023 0 joint and several liability / / Valid until cancelled No No Adama Agan Not applicable unlimited Related guarantees existed before the company was consolidated into the financial statements of the Company. 29,570 joint and several liability / / Valid until cancelled No No ADAMA Agricultural Solutions UKLtd. January 22, 2022 423.58 January 22,2022 113.01 joint and several liability / / Valid until cancelled No No ADAMA CELSIUS BV, Curacao branch, & ADAMA Fahrenheit BV, Curacao Branch November 25, 2022 4,500 November 24,2022 0 joint and several liability / / Valid until cancelled No No ADAMA CELSIUS BV, Curacao branch, & ADAMA Fahrenheit BV, Curacao January 22, 2022 7,000 January 22,2022 3,133.97 joint and several liability / / Valid until cancelled No No ADAMALtd. Semi-Annual Report 2023 77 Branch ADAMA Ukraine LLC Not applicable 3,000 Related guarantees existed before the company was consolidated into the financial statements of the Company. 0 joint and several liability / / Valid until cancelled No No Makhteshim Agan of North Amercia Inc. Not applicable 4,000 Related guarantees existed before the company was consolidated into the financial statements of the Company. 3,100 joint and several liability / / Valid until cancelled No No Total guarantee line approved in favor of the subsidiaries during the reporting period (C1) 7,875（approximately RMB 541.15 million） Total amount of the guarantee in favor of the subsidiaries occurred during the reporting period (C2) 92,405.41（approximately RMB 6,677.03 million） Aggregated guarantee line that has been approved in favor of the subsidiaries by the end of the reporting period (C3) 71,351 (approximately RMB 5,155.68 million) (the guarantee amount for Adama Makhteshim and Adama Agan is unlimited) Total guarantee balance in favor of the subsidiaries by the end of the reporting period (C4) 92,405.41（approximately RMB 6,677.03 million） Total guarantee amount provided by the Company (total of the above-mentioned three kinds of guarantees) ADAMALtd. Semi-Annual Report 2023 78 Total guarantee line approved during the reporting period (A1+B1+C1) 168,114.64 Total actual occurred amount of guarantee during the reporting period (A2+B2+C2) 672,943.01 Total guarantee line that has been approved at the end of the reporting period (A3+B3+C3) 864,468.06 Total actual guarantee balance at the end of the reporting period (A4+B4+C4) 700,143.01 Proportion of total guarantee amount (A4+B4+C4) to the net assets of the Company 29.61% Of which: The balance of the guarantee provided in favor of the controlling shareholder and related party. 0 Amount of debt guarantee provided for the guaranteed party whose asset-liability ratio is not less than 70% directly or indirectly (E) USD 553.01 million (approximately RMB 3,995.94 million) The amount of the guarantee that exceeds 50% of the net assets 0 Total amount of the above three guarantees (D+E+F) USD 553.01 million (approximately RMB 3,995.94 million) As for undue guarantee, liability to guarantee has happened or there is evidence that joint liquidated liability may be undertaken during this Reporting Period (if existing) -- Regulated procedures are violated to offer guarantee (if existing) -- ADAMALtd. Semi-Annual Report 2023 79 3. Wealth management entrustment □ Applicable √ Not applicable No such cases in the Reporting Period. 4. Other Significant Contracts □ Applicable √ Not applicable None during the Reporting Period. XIII. Other Significant Events □ Applicable √ Not applicable None during the Reporting Period. XIV. Significant Events of Subsidiaries □ Applicable √ Not applicable ADAMALtd. Semi-Annual Report 2023 80 Section VII - Share Changes and Shareholders I. Changes in shares 1. Changes in shares Unit: share Before the Change Increase/Decrease (+/-) After the Change Amount Proportion Newly Issued Shares Bonus Shares Capitalization of Public Reserves Other Subtotal Amount Proportion I. Restricted Shares 4,500 0.0002% -- -- -- -- -- 4,500 0.0002% 1. State-owned Shares -- -- -- -- -- -- -- -- -- 2. State-owned Legal Person’s Shares 00.00% -- -- -- -- -- 00.00% 3. Shares Held by Domestic Investors 4,500 0.0002% -- -- -- -- -- 4,500 0.0002% Among which, Shares Held by Domestic Legal Person 00.00% -- -- -- -- -- 00.00% Shares Held by Domestic Natural Person 4,500 0.0002% -- -- -- -- -- 4,500 0.0002% II. Shares not Subject to 2,329,807,26699.9998% -- -- -- -- -- 2,329,807,26699.9998% ADAMALtd. Semi-Annual Report 2023 81 Trading Moratorium 1.RMBOrdinary Shares 2,177,067,46193.4439% -- -- -- -- -- 2,177,067,46193.4439% 2.Domestically Listed Foreign Shares 152,739,8056.5559% -- -- -- -- -- 152,739,8056.5559% III. Total Shares 2,329,811,766100.00% -- -- -- -- -- 2,329,811,766100.00% ADAMALtd. Semi-Annual Report 2023 82 Reasons for the change in shares □ Applicable √ Not applicable Approval of the change in shares □ Applicable √ Not applicable The registered status for the change in shares □ Applicable √ Not applicable Status of share buyback □ Applicable √ Not applicable Status of share buyback in the way of centralized bidding □ Applicable √Not applicable Effects of the change in shares on the basic EPS, diluted EPS, net assets per share attributable to common shareholders of the Company and other financial indexes over the last year and last period. □ Applicable √Not Applicable Other contents that the Company considered necessary or is required by securities regulatory authorities to disclose □ Applicable √ Not applicable 2. Changes in Restricted Shares √ Applicable □ Not applicable Unit: share Shareholders Restricted shares at the opening of the Reporting Period Restricted shares increased in the Reporting Period Shares Released from Restricted Sale During the Reporting Period Restricted shares at the end of the Reporting Period Restriction reasons Date of release Jiang Chenggang 4,500004,500 Shares held by a supervisor should be locked up. Six months after the expiration of the term Total 4,500004,500 -- -- ADAMALtd. Semi-Annual Report 2023 83 II. Issuance and Listing of Securities □ Applicable √ Not applicable ADAMALtd. Semi-Annual Report 2023 84 III. Total Number of Shareholders and Their Shareholdings Unit: share Total Number of Shareholders as of the End of the Reporting Period 42,447 (the number of ordinary A share shareholders is 29,382; the number of B share shareholders is 13,065) Total Number of Preferred Stockholders with Vote Right Restored (if any) as of the End of the Reporting Period 0 Shareholding of Top 10 Common Shareholders or Those Holding More than 5% Shares Number of Shareholder Nature of Shareholder Holding Percentage (%) Number of Shareholding at the End of the Reporting Period Increase and Decrease of Shares during the Reporting Period Number of Common Shares Held Subject to Trading Moratorium Number of Common Shares Held Not Subject to Trading Moratorium Pledged, Marked or Frozen Shares Status of Shares Amount Syngenta Group Co., Ltd. State-owned Legal Person 78.47% 1,828,137,961 001,828,137,961 -- 0 China Cinda Asset Management Co., Ltd. State-owned Legal Person 1.34% 31,115,916 0 0 31,115,916 -- 0 Wang Xiuqin Domestic Natural Person 0.31% 7,216,454 -1,271,261 0 7,216,454 -- 0 Bosera Funds-China Merchants Bank- Bosera Funds Xincheng No.2 Collective Asset Management Plan Others 0.28% 6,500,000 0 0 6,500,000 -- 0 Wu Feng Domestic Natural Person 0.26% 6,141,269 661,354 0 6,141,269 -- 0 Bosera Funds-Postal Savings Bank- Bosera Funds Xincheng No.3 Collective Asset Management Plan Others 0.26% 6,000,000 0 0 6,000,000 -- 0 Zhu Shenglan Domestic Natural Person 0.25% 5,756,000 1,766,000 0 5,756,000 -- 0 Hong Kong Securities Clearing Company Ltd. (HKSCC) Overseas Legal Person 0.22% 5,118,398 -5,487,682 0 5,118,398 -- 0 China Universal Asset Management Fund-Industrial Bank-CUAM-Strategic Enhancement No.3 Collective Asset Management Plan Others 0.19% 4,400,000 00 4,400,000 -- 0 Qichun County State-owned Assets Supervision and Administration Bureau State-owned 0.18% 4,169,266 00 4,169,266 -- 0 Strategic Investors or the General Legal Person Who Become the Top 10 Common Shareholders (if any) due to the Not Applicable ADAMALtd. Semi-Annual Report 2023 85 Placement of New Shares Explanation on Associated Relationship or/and Persons Syngenta Group Co., Ltd. is neither a related party to any other shareholders listed above, nor any acting-in-concert party as prescribed in the Administrative Methods for Acquisition of Listed Companies. It is unknown whether the other shareholders are related parties or acting-in-concert parties as prescribed in the Administrative Methods for Acquisition of Listed Companies. Explanation on Situations of Entrusted Voting Rights or Waiver of Voting Rights Involved by the Above Shareholders Not Applicable Explanation on the Existence of Special Repurchase Accounts among the Top 10 Shareholders (if any) Not applicable Details of Shares Held by Top 10 Common Shareholders Not Subject to Trading Moratorium Number of Shareholders Number of Common Shares Held Not Subject to Trading Moratorium at the End of the Period Type of Shares Type of Shares Amount Syngenta Group Co., Ltd.1,828,137,961 RMBOrdinary Share 1,828,137,961 China Cinda Asset Management Co., Ltd. 31,115,916 RMBOrdinary Share 31,115,916 Wang Xiuqin 7,216,454 RMBOrdinary Share 7,216,454 Bosera Funds-China Merchants Bank- Bosera Funds Xincheng No.2 Collective Asset Management Plan 6,500,000 RMBOrdinary Share 6,500,000 Wu Feng 6,141,269 RMBOrdinary Share 6,141,269 Bosera Funds-Postal Savings Bank- Bosera Funds Xincheng No.3 Collective Asset Management Plan 6,000,000 RMBOrdinary Share 6,000,000 Zhu Shenglan 5,756,000 RMBOrdinary Share 5,756,000 Hong Kong Securities Clearing Company Ltd. (HKSCC) 5,118,398 RMBOrdinary Share 5,118,398 China Universal Asset Management Fund-Industrial Bank-CUAM-Strategic Enhancement No.3 Collective Asset Management Plan 4,400,000 RMBOrdinary Share 4,400,000 Qichun County State-owned Assets Supervision and Administration Bureau 4,169,266 RMBOrdinary Share 4,169,266 Explanation on associated relationship among the top ten common shareholders of tradable share not subject to trading moratorium, as well as among the top ten common shareholders of tradable share not subject to trading moratorium and top ten shareholders, or explanation on acting-in-concert Syngenta Group Co., Ltd. is neither a related party to any other shareholders listed above, nor any acting-in-concert party as prescribed in the Administrative Methods for Acquisition of Listed Companies. It is unknown whether the other shareholders are related parties or acting-in-concert parties as prescribed in the Administrative Methods for Acquisition of Listed Companies. Particular about the top ten common shareholder participating in the securities lending and borrowing business (if any) Shareholder Wang Xiuqin held 7,216,454 shares of the Company through a credit collateral securities trading account. Shareholder Wu Feng held 4,776,243 shares of the Company through a common securities account and 1,365,026 shares of the Company through a credit collateral securities trading account, altogether 6,141,269 shares. Shareholder Zhu Shenglan held 5,756,000 shares of the Company through a credit collateral securities trading account. ADAMALtd. Semi-Annual Report 2023 86 Did any top 10 common shareholders or the top 10 common shareholders not subject to trading moratorium of the Company carry out a promissory buy-back in the Reporting Period □ Yes √ No The top 10 common shareholders or the top 10 common shareholders not subject to trading moratorium of the Company had not carried out any agreed buy-back in the Reporting Period. IV. Changes in Shareholdings of Directors, Supervisors and Senior Management □ Applicable √ Not applicable No such cases in the Reporting Period. For details, see Annual Report 2022. V. Change of the Controlling Shareholder or the Actual Controller Change of the controlling shareholder in the Reporting Period □ Applicable √ Not applicable There was no change of the controlling shareholder of the Company in the Reporting Period. Change of the actual controller in the Reporting Period □ Applicable √ Not applicable There was no change of the actual controller of the Company in the Reporting Period. ADAMALtd. Semi-Annual Report 2023 87 Section VIII - Preferred stock □ Applicable √ Not applicable There was no preferred stock during Reporting Period. ADAMALtd. Semi-Annual Report 2023 88 Section IX - Bonds □ Applicable √ Not applicable ADAMALtd. Semi-Annual Report 2023 89 Section X - Financial Report I. Audit report Was the half-year report audited □ Yes √ No The half-year report was not audited. II. Financial Statements Notes to the financial statements are presented in RMB’000. ADAMALtd. Semi-Annual Report 2023 90 (Expressed in RMB '000) Consolidated Balance Sheet June 30 December 31 Notes 20232022 Current assets Cash at bank and on hand V.14,604,5234,290,961 Financial assets held for trading V.21,9301,685 Derivative financial assets V.3192,141233,809 Bills receivable V.4107,296112,297 Accounts receivable V.59,363,7589,018,375 Receivables financing V.6125,29263,639 Prepayments V.7375,984341,102 Other receivables V.8870,1221,021,824 Inventories V.916,667,95716,927,241 Other current assets V.101,168,9481,129,688 Total current assets 33,477,95133,140,621 Non-current assets Long-term receivables V.1159,27382,510 Long-term equity investments V.1229,27226,368 Other equity investments V.13162,905158,341 Investment properties 22,9633,168 Fixed assets V.149,476,5608,952,184 Construction in progress V.153,147,4932,961,401 Right-of-use assets V.16640,996555,889 Intangible assets V.175,533,4955,342,754 Goodwill V.185,100,0284,805,157 Deferred tax assets V.191,759,5831,347,263 Other non-current assets V.20491,383604,833 Total non-current assets 26,423,95124,839,868 Total assets 59,901,90257,980,489 ADAMALtd. Semi-Annual Report 2023 91 (Expressed in RMB '000) Consolidated Balance Sheet (continued) June 30 December 31 Notes 20232022 Current liabilities Short-term loans V.216,341,6773,342,921 Derivative financial liabilities V.22735,658545,516 Bills payable V.23497,3441,114,775 Accounts payable V.245,944,9767,527,269 Contract liabilities V.251,446,1291,776,573 Employee benefits payable V.26856,1811,370,786 Taxes payable V.27575,271459,574 Other payables V.282,489,5971,611,282 Non-current liabilities due within one year V.292,591,8352,262,131 Other current liabilities V.30749,821703,794 Total current liabilities 22,228,48920,714,621 Non-current liabilities Long-term loans V.313,276,4543,662,870 Debentures payable V.327,433,0657,353,511 Lease liabilities V.33498,967431,076 Long-term payables 108,886107,686 Long-term employee benefits payable V.34762,792792,153 Provisions V.35297,238222,181 Deferred tax liabilities V.19332,560315,861 Other non-current liabilities V.361,318,9411,255,875 Total non-current liabilities 14,028,90314,141,213 Total liabilities 36,257,39234,855,834 Shareholders' equity Share capital V.372,329,8122,329,812 Capital reserve V.3812,945,83712,986,333 Less: Treasury shares - - Other comprehensive income V.391,964,7951,080,590 Special reserves 15,78815,818 Surplus reserve V.40242,498242,498 Retained earnings V.41 6,145,780 6,469,604 Total equity attributed to the shareholders of the company 23,644,510 23,124,655 Non-controlling interests - - Total Equity 23,644,51023,124,655 Total liabilities and equity 59,901,902 57,980,489 Steve Hawkins Legal representative Efrat Nagar Chief Financial Officer These financial statements were approved by the Board of Directors of the Company on August 82 2023. The notes form part of these financial statements. ADAMALtd. Semi-Annual Report 2023 92 (Expressed in RMB '000) Company's Balance Sheet June 30 December 31 Notes 20232022 Current assets Cash at bank and on hand XV.1124,556271,080 Accounts receivable XV.21,031,440758,462 Receivables financing XV.347,4462,596 Prepayments 18,3057,944 Other receivables XV.411,61111,611 Inventories 175,209256,001 Non-current assets due within one year 125,000125,000 Other current assets 1,4152,312 Total current assets 1,534,9821,435,006 Non-current assets Long-term equity investments XV.517,511,35217,511,352 Other equity investments 84,72084,720 Investment properties 2,8933,168 Fixed assets 1,777,9121,822,134 Construction in progress 71,83290,074 Right-of-use assets 1,6652,842 Intangible assets 255,294258,997 Deferred tax assets 55,00475,383 Other non-current assets 271,708269,574 Total non-current assets 20,032,38020,118,244 Total assets 21,567,36221,553,250 Current liabilities Short-term loans 50,00050,000 Bills payables 10,67642,451 Accounts payables 185,854205,767 Contract liabilities 23,46815,116 Employee benefits payable 6,88114,699 Taxes payable 2,5583,529 Other payables 729,711730,901 Non-current liabilities due within one year 718,780671,454 Total current liabilities 1,727,9281,733,917 Non-current liabilities Long-term loans 829,063836,795 Lease liabilities 184701 Long-term employee benefits payable 96,41797,574 Provisions 27,32628,516 Other non-current liabilities 374,360374,360 Total non-current liabilities 1,327,3501,337,946 Total liabilities 3,055,2783,071,863 Shareholders’ equity Share capital V.372,329,8122,329,812 Capital reserve 5,523,881115,523,881 Other comprehensive income 30,82230,822 Special reserves 16,47916,509 Surplus reserve V.40242,498242,498 Retained earnings 368,592337,865 Total shareholders’ equity 18,512,08418,481,387 Total liabilities and shareholders’ equity 21,567,36221,553,250 ADAMALtd. Semi-Annual Report 2023 93 (Expressed in RMB '000) Consolidated Income Statement Six months ended June 30 Notes 20232022 I. Operating income V.4217,253,20118,795,828 Less: Cost of sales V.4213,358,72713,822,755 Taxes and surcharges V.4351,42055,837 Selling and Distribution expenses V.442,161,1992,159,089 General and administrative expenses V.45461,146642,313 Research and Development expenses V.46262,378274,738 Financial expenses (incomes) V.47455,855 (438,224) Including: Interest expense 565,782326,788 Interest income 134,25453,960 Add: Investment income, net V.4810,0904,706 Including: Income from investment in associates and joint ventures 3,4394,706 Loss from changes in fair value V.49 (782,218) (1,341,717) Credit impairment reversal (losses) V.508,490 (97,125) Asset impairment losses V.51 (105,887) (85,346) Gain from disposal of assets V.5223,40260,298 II. Operating profit (343,647) 820,136 Add: Non-operating income 36,07329,797 Less: Non-operating expenses 11,01516,559 III. Total profit (loss) (318,589) 833,374 Less: Income tax expenses (income) V.53 (76,433) 101,276 IV. Net profit (loss) (242,156) 732,098 (1). Classified by nature of operations (1.1). Continuing operations (242,156) 732,098 (2). Classified by ownership (2.1). Shareholders of the Company (242,156) 732,098 (2.2). Non-controlling interests - V. Other comprehensive income, net of tax V.39884,205788,235 Other comprehensive income (net of tax) attributable to shareholders of the Company 884,205788,235 (1) Items that will not be reclassified to profit or loss: 14,74161,296 (1.1) Re-measurement of defined benefit plan liability 14,74161,296 (1.2) Fair Value changes in other equity investment - - (2) Items that were or will be reclassified to profit or loss 869,464726,939 (2.1) Effective portion of gains or loss of cash flow hedge 26,534 (60,863) (2.2) Translation differences of foreign financial statements 842,930787,802 VI. Total comprehensive income for the period attributable to Shareholders of the Company 642,049 1,520,333 Total comprehensive income for the period attributable to shareholders of the Company 642,049 1,520,333 Total comprehensive income for the period attributable to Non-controlling interests - - VII. Earnings per share XIV.2 (1) Basic earnings (loss) per share (Yuan/share) (0.10) 0.31 (2) Diluted earnings per share (Yuan/share) N/AN/A ADAMALtd. Semi-Annual Report 2023 94 (Expressed in RMB '000) Company's Income Statement Six months ended June 30 Notes 20232022 I. Operating income XV.61,093,7091,185,094 Less: Operating costs XV.6893,238881,418 Taxes and surcharges 4,2923,003 Selling and Distribution expenses 2,7442,178 General and administrative expenses 66,88765,151 Research and Development expenses 16,12938,042 Financial expenses 75525,075 Including: Interest expense 24,41225,382 Interest income 4,8143,340 Add: Investment income, net - - Gain from changes in fair value (losses) - - Credit impairment losses 91 (141) Asset Impairment reversal (losses) (3,067) 3,142 Gain from disposal of assets 1759,654 II. Operating Profit 106,705232,882 Add: Non-operating income 7,81513,082 Less: Non-operating expenses 509162 III. Total profit 114,011245,802 Less: Income tax expense 20,379 - IV. Net profit 93,632245,802 V. Other comprehensive income, net of tax - - (1) Items that will not be reclassified to profit or loss - - (1.1) Re-measurement of defined benefit plan liability - - (1.2) FV changes in other equity investment - - VI. Total comprehensive income for the period 93,632245,802 ADAMALtd. Semi-Annual Report 2023 95 (Expressed in RMB '000) Consolidated Cash Flow Statement Six months ended June 30 Notes 20232022 I. Cash flows from operating activities: Cash received from sale of goods and rendering of services 17,397,57516,427,981 Refund of taxes and surcharges 93,456164,802 Cash received relating to other operating activities V.56(1) 201,011304,088 Sub-total of cash inflows from operating activities 17,692,04216,896,871 Cash paid for goods and services 13,362,26413,683,974 Cash paid to and on behalf of employees 2,464,3532,329,629 Payments of taxes and surcharges 388,247494,626 Cash paid relating to other operating activities V.56(2) 1,542,0541,734,503 Sub-total of cash outflows from operating activities 17,756,91818,242,732 Net cash flows from operating activities V.57(1)a (64,876) (1,345,861) II. Cash flows from investing activities: Cash received from disposal of investments 158,498 5,887 Cash received from returns of investments 1,7101,588 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 30,688 70,264 Cash received relating to other investing activities V.56(3) 16,643 - Sub-total of cash inflows from investing activities 207,53977,739 Cash paid to acquire fixed assets, intangible assets and other long-term assets 1,178,4431,291,889 Cash paid for acquisition of investments 1,745 - Net cash paid to acquire subsidiaries or other business units 148,460 - Cash paid relating to other investing activities V.56(4) - 64,719 Sub-total of cash outflows from investing activities 1,328,6481,356,608 Net cash flows used in investing activities (1,121,109) (1,278,869) III. Cash flows from financing activities: Cash received from borrowings 2,711,5472,435,083 Cash received from other financing activities V.56(5) 1,428,30211,012 Sub-total of cash inflows from financing activities 4,139,8492,446,095 Cash repayments of borrowings 1,599,4281,163,615 Cash payment for dividends, profit distributions and interest 584,774431,993 Including: Dividends paid to non-controlling interest 18,76339,074 Cash paid relating to other financing activities V.56(6) 554,624944,580 Sub-total of cash outflows from financing activities 2,738,8262,540,188 Net cash flow provided by (used in) financing activities 1,401,023 (94,093) IV. Effects of foreign exchange rate changes on cash and cash equivalents 130,246150,085 V. Net increase (decrease) in cash and cash equivalents V.57(1)b 345,284 (2,568,738) Add: Cash and cash equivalents at the beginning of the year 4,225,2535,759,480 I. VI. Cash and cash equivalents at the end of the period V.57(2) 4,570,5373,190,742 ADAMALtd. Semi-Annual Report 2023 96 (Expressed in RMB '000) Company's Cash Flow Statement Six months ended June 30 Notes 20232022 I. Cash flows from operating activities: Cash received from sale of goods and rendering of services 621,379786,908 Refund of taxes and surcharges 28,66251,548 Cash received relating to other operating activities XV.7(1) 25,65923,102 Sub-total of cash inflows from operating activities 675,700861,558 Cash paid for goods and services 551,879653,912 Cash paid to and on behalf of employees 68,83770,273 Payments of taxes and surcharges 6,6053,899 Cash paid relating to other operating activities XV.7(2) 112,03970,927 Sub-total of cash outflows from operating activities 739,360799,011 Net cash flows from operating activities XV.8 (63,660) 62,547 II. Cash flows from investing activities: Net cash received from disposal of fixed assets, intangible assets and other long-term assets 1766,420 Cash received relating to other investing activities XV.7.(3) 2,850150,000 Sub-total of cash inflows from investing activities 2,867216,420 Cash paid to acquire fixed assets, intangible assets and other long-term assets 36,80850,383 Cash paid for other investing activities XV.7.(4) - 250,000 Sub-total of cash outflows from investing activities 36,808300,383 Net cash flows used in investing activities (33,941) (83,963) III. Cash flows from financing activities: Cash received from borrowings 450,000650,000 Cash received relating to other financing activities XV.7.(5) 12,7506,124 Sub-total of cash inflows from financing activities 462,750656,124 Cash repayments of borrowings 409,732553,732 Cash payment for dividends, profit distributions or interest 87,68445,228 Cash paid relating to other financing activities XV.7.(6) 3,83718,741 Sub-total of cash outflows from financing activities 501,253617,701 Net cash flow provided by (used in) financing activities (38,503) 38,423 IV. Effects of foreign exchange rate changes on cash and cash equivalents (880) 60 V. Net decrease in cash and cash equivalents (136,984) 17,067 Add: Cash and cash equivalents at the beginning of the year XV.8(2) 258,330259,434 VI. Cash and cash equivalents at the end of the period XV.8(2) 121,346276,501 ADAMALtd. Semi-Annual Report 2023 97 (Expressed in RMB '000) Consolidated Statement of Changes in Shareholders’ Equity For the six months ended June 30,2023 Share capital Capital reserve Other comprehensive income Special reserves Surplus reserve Retained earnings Total Non-controlling interests Total equity I. Balance at December 31,20222,329,81212,986,3331,080,59015,818242,4986,469,60423,124,655 - 23,124,655 II. Changes in equity for the period - (40,496) 884,205 (30) - (323,824) 519,855 - 519,855 1. Total comprehensive income (loss) - - 884,205 - - (242,156) 642,049 - 642,049 2. Owner’s contributions and reduction - (40,496) - - - - (40,496) - (40,496) 2.1 Transactions with holders of non controlling interest - (40,496) - - - - (40,496) - (40,496) 3. Appropriation of profits - - - - - (81,668) (81,668) - (81,668) 3.1 Distribution to owners - - - - - (62,905) (62,905) - (62,905) 3.2 Distribution to non-controlling interest - - - - - (18,763) (18,763) - (18,763) 4. Special reserve - - - (30) - - (30) - (30) 4.1 Transfer to special reserve - - - 5,010 - - 5,010 - 5,010 4.2 Amount utilized - - - (5,040) - - (5,040) - (5,040) III. Balance at June 30,20232,329,81212,945,8371,964,79515,788242,4986,145,78023,644,510 - 23,644,510 ADAMALtd. Semi-Annual Report 2023 98 (Expressed in RMB '000) Statement of Changes in Shareholders’ Equity For the six months ended June 30,2022 Share capital Capital reserve Other comprehensive income Special reserves Surplus reserve Retained earnings Total Non-controlling interests Total equity I. Balance at December 31,20212,329,812 12,977,171 (432,384) 19,857 240,162 5,940,465 21,075,083 - 21,075,083 II. Changes in equity for the period - - 788,235 (1,034) - 674,3861,461,587 - 1,461,587 1. Total comprehensive income - - 788,235 - - 732,0981,520,333 - 1,520,333 2. Owner’s contributions and reduction - - - - - - - - - 2.1 Cancellation of shares - - - - - - - - - 2.2 Non-controlling interests in respect of business combination - - - - - - - - - 3. Appropriation of profits - - - - - (57,712) (57,712) - (57,712) 3.1 Distribution to owners - - - - - (18,638) (18,638) - (18,638) 3.2 Distribution to non-controlling interest - - - - - (39,074) (39,074) - (39,074) 4. Special reserve - - - (1,034) - - (1,034) - (1,034) 4.1 Transfer to special reserve - - - 3,507 - - 3,507 - 3,507 4.2 Amount utilized - - - (4,541) - - (4,541) - (4,541) III. Balance at June 30,20222,329,81212,977,171355,85118,823240,1626,614,85122,536,670 - 22,536,670 ADAMALtd. Semi-Annual Report 2023 99 (Expressed in RMB '000) Company's Statement of Changes in Shareholders’ Equity For the six months ended June 30,2023 Share capital Capital reserve Other comprehensive income Special reserves Surplus reserve Retained earnings Total I. Balance at December 31,20222,329,81215,523,88130,82216,509242,498337,86518,481,387 II. Changes in equity for the period - - - (30) - 30,72730,697 1. Total comprehensive income - - - - - 93,63293,632 2. Appropriation of profits - - - - - (62,905) (62,905) 2.1 Transfer to Distribution to shareholders - - - - - (62,905) (62,905) 3. Special reserve - - - (30) - - (30) 3.1 Transfer to special reserve - - - 5,010 - - 5,010 3.2 Amount utilized - - - (5,040) - - (5,040) Ⅲ. Balance at June 30,20232,329,81215,523,88130,82216,479242,498368,59218,512,084 For the six months ended June 30,2022 Share capital Capital reserve Other comprehensive income Special reserves Surplus reserve Retained earnings Total I. Balance at December 31,20212,329,81215,523,88130,66820,548240,162335,48518,480,556 II. Changes in equity for the period - - - (1,034) - 227,164226,130 1. Total comprehensive income - - - - - 245,802245,802 2. Appropriation of profits - - - - - (18,638) (18,638) 2.1 Transfer to Distribution to shareholders - - - - - (18,638) (18,638) 3. Special reserve - - - (1,034) - - (1,034) 3.1 Transfer to special reserve - - - 3,507 - - 3,507 3.2 Amount utilized - - - (4,541) - - (4,541) Ⅲ. Balance at June 30,20222,329,81215,523,88130,66819,514240,162562,64918,706,686 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 100 IBASICCORPORATEINFORMATION ADAMALtd. (hereinafter the “Company” or the “Group”) is a company limited by shares established in China with its head office located in Hubei Jingzhou. In June 2020, the controlling shareholder of the Company changed from China National Agrochemical Co,. Ltd. (hereinafter – “CNAC") to Syngenta Group Co., Ltd. (hereinafter “Syngenta Group”). As of August 2021, following the combination between China National Chemical Co., Ltd. (hereinafter - “ChemChina”) and Sinochem Holdings Corporation Ltd. (hereinafter - “Sinochem Holdings”), Syngenta Group, and subsequently the Company, are ultimately controlled by Sinochem Holdings - parent of both ChemChina and Sinochem Group Co., Ltd. (hereinafter “Sinochem Holdings”), subordinated to SASAC. The principal activities of the Company and its subsidiaries (together referred to as the “Group”) are engaged in development, manufacturing and marketing of agrochemicals, intermediate materials for other industries, food additives and synthetic aromatic products, mainly for export. For information about the largest subsidiaries of the Company, refer to Note VII. The Company’s consolidated financial statements had been approved by the Board of Directors of the Company on August 28,2023. Details of the scope of consolidated financial statements are set out in Note VII "Interest in other entities", whereas the changes of the scope of consolidation are set out in Note VI "Changes in consolidation scope". IIBASISOFPREPARATION 1. Basis of preparation The Group has adopted the Accounting Standards for Business Enterprises issued by the Ministry of Finance (the "MoF"). In addition, the Group has disclosed relevant financial information in these financial statements in accordance with Information Disclosure and Presentation Rules for Companies Offering Securities to the Public No.15－General Provisions on Financial Reporting (revised by China Securities Regulatory Commission (hereinafter "CSRC”) in 2014). 2. Accrual basis and measurement principle The Group has adopted the accrual basis of accounting. Except for certain financial instruments which are measured at fair value, deferred tax assets and liabilities, assets and liabilities relating to employee benefits, provisions, and investments in associated companies and joint ventures, the Group adopts the historical cost as the principle of measurement in the financial statements. Where assets are impaired, provisions for asset impairment are made in accordance with relevant requirements. In the historical cost measurement, assets obtained shall be measured at the amount of cash or cash equivalents or fair value of the consideration paid. Liabilities shall be measured at the actual amount of cash or assets received, or the contractual amount in a present obligation, or the prospective amount of cash or cash equivalents paid to discharge the liabilities. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing market participants in an arm’s length transaction at the measurement date. Fair value measured and disclosed in the financial statements are determined on this basis whether it is observable or estimated by valuation techniques. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 101 IIBASISOFPREPARATION - (cont’d) 2. Accrual basis and measurement principle - (cont’d) The following table provides an analysis, grouped into Levels 1 to 3 based on the degree to which the fair value input is observable and significant to the fair value measurement as a whole: Level 1 - based on quoted prices (unadjusted) in active markets; Level 2 - based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable (other than quoted prices included within Level 1), either directly or indirectly; Level 3 - based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. 3. Going concern The financial statements have been prepared on the going concern basis. The Group has performed going concern assessment for the following 12 months from June 30,2023 and have not identified any significant doubtful matter or event on the going concern, as such the financial statement have been prepared on the going concern basis. IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES 1. Statement of compliance These financial statements are in compliance with the Accounting Standards for Business Enterprises to truly and completely reflect the Company's consolidated financial position as at June 30,2023 and the Company's consolidated operating results, changes in shareholders' equity and cash flows for the six months then ended. 2. Accounting period The Group has adopted the calendar year as its accounting year, i.e. from 1 January to 31 December. 3. Business cycle The company takes the period from the acquisition of assets for processing to their realisation in cash or cash equivalents as a normal operating cycle. The operating cycle for the company is 12 months. 4. Reporting currency The Company and its domestic subsidiaries choose Renminbi (hereinafter "RMB") as their functional currency. Functional currencies of overseas subsidiaries are determined on the basis of the principal economic environment in which the overseas subsidiaries operate. The functional currency of the overseas subsidiaries is mainly the United States Dollar (hereinafter "USD"). The presentation currency of these financial statements is Renminbi. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 102 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 5. Business combinations 5.1 Business combinations involving enterprises under common control A business combination involving enterprises under common control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or parties both before and after the combination, and that control is not transitory. Assets and liabilities obtained shall be measured at their respective carrying amounts as recorded by the combining entities at the date of the combination. The difference between the carrying amount of the net assets obtained and the carrying amount of the consideration paid for the combination is adjusted to the share premium in capital reserve. If the share premium is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings. Costs that are directly attributable to the combination are charged to profit or loss in the period in which they are incurred. 5.2 Business combinations not involving enterprises under common control and goodwill. A business combination not involving enterprises under common control is a business combination in which all of the combining enterprises are not ultimately controlled by the same party or parties before and after the combination. The costs of business combination are the fair value of the assets paid, liabilities incurred or assumed and equity instruments issued by the acquirer for the purpose of achieving the control rights over the acquiree. The intermediary costs such as audit, legal services and assessment consulting costs and other related management costs that are directly attributable to the combination by the acquirer are charged to profit or loss in the period in which they are incurred. Direct capital issuance costs incurred in respect of equity instruments or liabilities issued pursuant to the business combination should be charged to the respect equity instruments or liabilities upon initial recognition of the underlying equity instruments or liabilities. The acquiree’s identifiable assets, liabilities and contingent liabilities acquired by the acquirer in a business combination, that meet the recognition criteria shall be measured at fair value at the acquisition date. Where the cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference is treated as an asset and recognized as goodwill, which is measured at cost on initial recognition. Where the cost of combination is less than the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the remaining difference is recognized immediately in profit or loss for the current year. The goodwill raised because of the business combination should be separately disclosed in the consolidated financial statement and measured by the initial amount less any accumulative impairment provision. In a business combination achieved in stages, the Group remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognise the resulting gain or loss, if any, in profit or loss. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 103 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 6. Basis for preparation of consolidated financial statements The scope of consolidation in consolidated financial statements is determined on the basis of control. Control is achieved when the Company has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. For a subsidiary disposed of by the Group, the operating results and cash flows before the date of disposal (the date when control is lost) are included in consolidated income statement and consolidated statement of cash flows. For a subsidiary acquired through a business combination not involving enterprises under common control, the operating results and cash flows from the acquisition date (the date when control is obtained) are included in consolidated income statement and consolidated statement of cash flows. For a subsidiary acquired through a business combination involving enterprises under common control, it will be fully consolidated into consolidated financial statements from the date on which the subsidiary was ultimately under common control by the same party or parties. The significant accounting policies and accounting years adopted by the subsidiaries are determined based on the uniform accounting policies and accounting years set out by the Company. All significant intra-group balances, transactions and unrealized profits are eliminated on consolidation. The portion of subsidiaries' equity that is not attributable to the Company is treated as non-controlling interests and presented as "non-controlling interests" in the shareholders’ equity in consolidated balance sheet. The portion of net profits or losses of subsidiaries for the period attributable to non-controlling interests is presented as "non-controlling interests" in consolidated income statement below the "net profit" line item. Total comprehensive income attributable to non-controlling shareholders is presented separately in the consolidated income statement below the total comprehensive income line item. When the amount of loss for the period attributable to the non-controlling shareholders of a subsidiary exceeds the non-controlling shareholders' portion of the opening balance of owners' equity of the subsidiary, the excess amount is still allocated against non-controlling interests. Acquisition of non-controlling interests or disposal of equity interest in a subsidiary that does not result in the loss of control over the subsidiary is accounted for as equity transactions. The carrying amounts of the Company's interests and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. The difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is adjusted to capital reserve under owners' equity. If the capital reserve is not sufficient to absorb the difference, the excess is adjusted against retained earnings. Other comprehensive income attributed to the non-controlling interest is reattributed to the shareholders of the company. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 104 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 6. Basis for preparation of consolidated financial statements - (cont’d) A put option issued by the Group to holders of non-controlling interests that is settled in cash or other financial instrument is recognized as a liability at the present value of the exercise price (according to the "anticipated acquisition method"). The Group’s share of a subsidiary’s profits includes the share of the holders of the non-controlling interests to which the Group issued a put option. In cases which the Group has a Call option in addition to the Put option above, due to the anticipated acquisition method implementation no value is given to the Call option in the consolidated financial statements. When the Group loses control over a subsidiary due to disposal of certain equity interest or other reasons, any retained interest is re-measured at its fair value at the date when control is lost. The difference between (i) the aggregate of the consideration received on disposal and the fair value of any retained interest and (ii) the share of the former subsidiary's net assets cumulatively calculated from the acquisition date according to the original proportion of ownership interest is recognized as investment income in the period in which control is lost. Other comprehensive income associated with the disposed subsidiary is reclassified to investment income in the period in which control is lost. 7. Classification and accounting methods of joint arrangement Joint arrangement involves by two or more parties jointly control. Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control (the ventures). The Group makes the classification of the joint arrangements according to the rights and obligations in the joint arrangements to either joint operations or joint ventures. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint ventures are accounted for using the equity method. 8. Cash and cash equivalents Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash equivalents are the Group's short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 105 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 9. Translation of transactions and financial statements denominated in foreign currencies 9.1 Transactions denominated in foreign currencies On initial recognition, foreign currency transactions are translated into functional currency using the spot exchange rate prevailing at the date of transaction. At the balance sheet date, foreign currency monetary items are translated into functional currency using the spot exchange rates at the balance sheet date. Exchange differences arising from the differences between the spot exchange rates prevailing at the balance sheet date and those on initial recognition or at the previous balance sheet date are recognized in profit or loss for the period, except that (i) exchange differences related to a specific-purpose borrowing denominated in foreign currency that qualify for capitalization are capitalized as part of the cost of the qualifying asset during the capitalization period. (ii) exchange differences related to hedging instruments for the purpose of hedging against foreign currency risks are accounted for using hedge accounting. When preparing financial statements involving foreign operations, if there is any foreign currency monetary items, which in substance forms part of the net investment in the foreign operations, exchange differences arising from the changes of foreign currency are recorded as other comprehensive income, and will be reclassified to profit or loss upon disposal of the foreign operations. Foreign currency non-monetary items measured at historical cost are translated to the amounts in functional currency at the spot exchange rates on the dates of the transactions and the amounts in functional currency remain unchanged. 9.2 Translation of financial statements denominated in foreign currency For the purpose of preparing consolidated financial statements, financial statements of a foreign operation are translated from the foreign currency into RMB using the following method: assets and liabilities on the balance sheet are translated at spot exchange rate prevailing at the balance sheet date; shareholders' equity items, except for retained earnings, are translated at the spot exchange rates at the dates on which such items arose; all items in the income statement as well as items reflecting the distribution of profits are translated at average rate or at spot exchange rates on the dates of the transactions; the retained earnings opening balance is previous year's translated retained earnings closing balance; the closing balance of retained earnings is calculated and presented on the basis of each translated income statement and profit distribution item. The difference between the translated assets and the aggregate of liabilities and shareholders' equity items is recorded as other comprehensive income. Cash Flows arising from transaction in foreign currency and the cash flows of a foreign subsidiary are translated at the spot exchange rate on the date of the cash flow, the effect of exchange rate changes on the cash and cash equivalents is regarded as a reconciling item and present separately in the statement “effect of foreign exchange rate changes on the cash and cash equivalents". The opening balances and the comparative figures of prior year are presented at the translated amounts in the prior year's financial statements. On disposal of the Group's entire equity interest in a foreign operation, or upon a loss of control over a foreign operation due to disposal of certain equity interest in it or other reasons, the Group transfers the accumulated translation differences, which are attributable to the owners' equity of the Company and presented under other comprehensive income to profit or loss in the period in which the disposal occurs. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 106 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 9. Translation of transactions and financial statements denominated in foreign currencies - (cont’d) 9.2 Translation of financial statements denominated in foreign currency - (cont’d) In case of a disposal or other reason that does not result in the Group losing control over a foreign operation, the proportionate share of accumulated translation differences are re-attributed to non-controlling interests and are not recognized in profit and loss. For partial disposals of equity interest in foreign operations, which are associates or joint ventures, the proportionate share of the accumulated translation differences are reclassified to profit or loss. 10. Financial instruments The Group recognizes a financial asset or a financial liability when it becomes a party to the contractual provisions of the instrument. At initial recognition, the Group measures a financial asset or financial liability at its fair value plus or minus (which is not measured at fair value through profit or loss) transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. Initial recognition in trade receivables which do not contain a significant financing component, shall be made according to their transaction price. 10.1 Classification and measurement of financial assets After initial recognition, an entity shall measure a financial asset at: (a) amortised cost; (b) fair value through other comprehensive income (“FVTOCI”); or (c) fair value through profit or loss (“FVTPL”). 10.1.1 Financial assets at amortised cost A financial asset is measured at amortised cost if both of the following conditions are met: (a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and (b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Such financial assets are subsequently measured at amortised cost, using effective interest method. Gains or losses upon impairment and derecognition are recognized in profit or loss. 10.1.1.1 Effective interest method and amortised cost Effective interest method represents the method for calculating the amortized costs and interest income or expense of each period in accordance with the effective interest rate of financial assets or financial liabilities (inclusive of a set of financial assets or financial liabilities). Effective interest rate represents the rate that discounts the future cash flow over the expected subsisting period or shorter period, if appropriate, of the financial asset or financial liability to the current carrying value of such financial asset or financial liability. When calculating the effective interest rate, the Group will consider the anticipated future cash flow (not considering the future credit loss) on the basis of all contract clauses of financial assets or financial liabilities, as well as consider all kinds of charges which are an integral part of the effective interest rate, including transaction fees and discount or premium paid or received between both parties of financial asset or financial liability contract. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 107 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 10. Financial instruments - (cont’d) 10.1 Classification and measurement of financial assets - (cont’d) 10.1.2 Financial assets at FVTOCI A financial asset is measured at fair value through other comprehensive income if both of the following conditions are met: (a) the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and (b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A gain or loss on a financial asset measured at fair value through other comprehensive income is recognized in other comprehensive income, except for impairment gains or losses, foreign exchange gains and losses and interest calculated using the effective interest method, until the financial asset is derecognized or reclassified. When the financial asset is derecognized the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment. 10.1.3 Financial assets at FVTPL Financial assets at FVTPL are either those that are classified as financial assets at FVTPL or designated as financial assets at FVTPL. A financial asset is measured at FVTPL unless it is measured at amortised cost or at FVTOCI. The Group may, at initial recognition, irrevocably designate a financial asset as measured at FVTPL if doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an ‘accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases. A gain or loss on a financial asset that is measured at FVTPL is recognized in profit or loss unless it is part of a hedging relationship. Dividends are recognized in profit or loss. 10.1.4 Designated financial assets at FVTOCI At initial recognition, the Group makes an irrevocable election to designate to FVTOCI an investment in an equity instrument that is not held for trading. When a non-trading equity instrument investment is designated as a financial asset that is measured at fair value through other comprehensive income, the changes in the fair value of the financial asset are recognised in other comprehensive income. Upon realization the accumulated gains or losses from other comprehensive income are transferred from other comprehensive income and included in retained earnings. During the period in which the Group holds these non-trading investment instruments, the right to receive dividends in the Group has been established, and the economic benefits related to dividends are likely to flow into the Group, and when the amount of dividends can be reliably measured, the dividend income is recognized in the current profit and loss. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 108 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 10. Financial instruments - (cont’d) 10.2 Impairment of financial assets The Group recognizes a loss allowance for expected credit losses on financial assets that are classified to amortised cost and FVTOCI. The Group always measures the loss allowance at an amount equal to lifetime expected credit losses for trade receivables. For financial assets other than trade receivables, the Group initially measure the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. At each balance sheet date, if the credit risk on that financial instrument has increased significantly since initial recognition, the Group measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses. The Group recognizes in profit or loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance to the amount that is required to be recognized. 10.2.1 Significant increases in credit risk At each balance sheet date, the Group assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. The Group mainly considers the following list of information in assessing changes in credit risk: (a) significant changes in internal price indicators of credit risk as a result of a change in credit risk since inception. (b) significant changes in external market indicators of credit risk for a particular financial instrument or similar financial instruments with the same expected life. (c) a significant change in the debtors’ ability to meet its debt obligations. (d) an actual or expected significant change in the operating results of the debtor. (e) significant increases in credit risk on other financial instruments of the same debtor. (f) an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor. (g) significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements, which are expected to reduce the debtor’s economic incentive to make scheduled contractual payments or to otherwise have an effect on the probability of a default occurring. (h) significant changes that are expected to reduce the receivable’s economic incentive to make scheduled contractual payments. (i) significant changes in the expected performance and behaviour of the debtor. (j) past due information. The Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 109 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 10. Financial instruments - (cont’d) 10.2 Impairment of financial assets - (cont’d) 10.2.2 Credit-impaired financial asset A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired include observable data about the following events: (a) significant financial difficulty of the issuer or the receivable; (b) a breach of contract, such as a default or past due event; (c) the lender(s) of the receivable, for economic or contractual reasons relating to the receivable’s financial difficulty, having granted to the receivable a concession(s) that the lender(s) would not otherwise consider; (d) it is becoming probable that the receivable will enter bankruptcy or other financial reorganization; 10.2.3 Recognition of expected credit losses For the purpose of determining significant increases in credit risk and recognizing a loss allowance on a collective basis, financial instruments are grouped on the basis of shared credit risk. Examples of shared credit risk characteristics may include, but are not limited to, the:(a) instrument type; (b) credit risk ratings; (c) collateral type; (d) industry; (e) geographical location of the debtor; and (f) the value of collateral relative to the financial asset if it has an impact on the probability of a default occurring. Expected credit losses of financial instruments are determined as the present value of the difference between: (a) the contractual cash flows that are due to an entity under the contract; and (b) the cash flows that the entity expects to receive. For a financial asset that is credit-impaired at the reporting date, an entity shall measure the expected credit losses as the difference between the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. Any adjustment is recognized in profit or loss as an impairment gain or loss. The Group measures expected credit losses of a financial instrument in a way that reflects: (a) an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; (b) the time value of money; and (c) reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 110 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 10. Financial instruments - (cont’d) 10.2 Impairment of financial assets - (cont’d) 10.2.4 Written-off of financial assets The Group directly reduces the gross carrying amount of a financial asset when the entity has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. A write-off constitutes a derecognition event. 10.3 Transfer of financial asset The Group derecognizes a financial asset if one of the following conditions is satisfied: (i) the contractual rights to the cash flows from the financial asset expire; or (ii) the financial asset has been transferred and substantially all the risks and rewards of ownership of the financial asset transferred to the transferee; or (iii) although the financial asset has been transferred, the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset but has not retained control of the financial asset. If the Group neither transfers nor retains substantially all the risks and rewards of ownership of a financial asset, and it retains control of the financial asset, it recognizes the financial asset to the extent of its continuing involvement in the transferred financial asset and recognizes an associated liability. The extent of the Group’s continuing involvement in the transferred asset is the extent to which it is exposed to changes in the value of the transferred asset. When the company is derecognizing a financial asset in its entirety, except for equity instrument designated to FVTOCI, the difference between (i) the carrying amount of the financial asset transferred; and (ii) the sum of the consideration received from the transfer is recognized in profit or loss. 10.4 Classification and measurement of financial liabilities Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. All financial liabilities are subsequently measured at FVTPL or other financial liabilities. Financial liabilities are classified as at FVTPL when the financial liability is (i) held for trading or (ii) it is designated as at FVTPL. The financial liability other than derivative financial liabilities are stated as liabilities held for trading. Other financial liabilities are subsequently measured at amortized cost by using effective interest method. Gain or loss arising from derecognition or amortization is recognized in current profit or loss. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 111 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 10. Financial instruments - (cont’d) 10.5 Derecognition of financial liabilities Financial liabilities are derecognized in full or in part only when the present obligation is discharged in full or in part. An agreement entered into force between the Group (debtor) and a creditor to replace the original financial liabilities with new financial liabilities with substantially different terms, derecognize the original financial liabilities as well as recognize the new financial liabilities. When financial liabilities is derecognized in full or in part, the difference between the carrying amount of the financial liabilities derecognized and the consideration paid (including transferred non-cash assets or new financial liability) is recognized in profit or loss for the current period. 10.6 Derivatives Derivative financial instruments include forward exchange contracts, currency swaps and foreign exchange options, etc. Derivatives are initially measured at fair value at the date when the derivative contracts are entered into and are subsequently re-measured at fair value. The resulting gain or loss is recognized in profit or loss unless the derivative is designated and highly effective as a hedging instrument, in which case the timing of the recognition in profit or loss depends on the nature of the hedge relationship (Note III 28.1). 10.7 Offsetting financial assets and financial liabilities Financial assets and financial liabilities shall be presented separately in the balance sheet and shall not be offset, except for circumstances where the Group has a legal right that is currently enforceable to offset the recognized financial assets and financial liabilities, and intends either to settle on a net basis, or to realize the financial asset and settle the financial liability simultaneously, a financial asset and a financial liability shall be offset and the net amount is presented in the balance sheet. 10.8 Equity instruments The consideration received from the issuance of equity instruments net of transaction costs is recognized in shareholders’ equity. Consideration and transaction costs paid by the Company for repurchasing self-issued equity instruments are deducted from shareholders’ equity. When the Company repurchases its own shares, those shares are treated as treasury shares. All expenditures relating to the repurchase are recorded in the cost of the treasury shares, with the transaction entering into the share capital. Treasury shares are excluded from profit distributions and are stated as a deduction under shareholders’ equity in the balance sheet. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 112 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 11. Receivables Receivables are assessed for impairment on a collective group and/or on an individual basis as follows: Expected credit losses in respect of a receivables is measured at an amount equal to lifetime expected credit losses. The assessment is made collectively for account receivables, where receivables share similar credit risk characteristics based on geographical location, using the expected credit losses model including inter-alia aging analysis, historical loss experiences adjusted by the observable factors reflecting current and expected future economic conditions. The ratio of the account receivables collective provision for expected credit losses in which credit losses has not occurred is between 0%-4.36%. When credit risk on a receivable has increased significantly since initial recognition, the group records specific provision or collective provision, which is determined for groups of similar assets in countries in which there are large number of customers with immaterial balances. In assessing whether the credit risk on a receivable has increased significantly since initial recognition, the Group compares the risk of a default occurring on the receivable at the reporting date with the risk of a default occurring on the receivable at the date of initial recognition and considers both quantitative and qualitative information that is reasonable and supportable, including observable data that comes to the attention of the Group about loss events such as a significant decline in the solvency of an individual debtor or the portfolio of debtors, and significant changes in the financial condition that have an adverse effect on the debtor. 12. Inventories 12.1 Categories of inventories and initial measurement The Group's inventories mainly include raw materials, work in progress, semi-finished goods, finished goods and reusable materials. Reusable materials include low-value consumables, packaging materials and other materials, which can be used repeatedly but do not meet the definition of fixed assets. Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase, costs of conversion and other expenditures incurred in bringing the inventories to their present location and condition including direct labor costs and an appropriate allocation of production overheads. 12.2 Valuation method of inventories upon delivery The actual cost of inventories upon delivery is calculated using the weighted average method. 12.3 Basis for determining net realizable value of inventories and provision methods for decline in value of inventories At the balance sheet date, inventories are measured at the lower of cost and net realizable value. If the net realizable value is below the cost of inventories, a provision for decline in value of inventories is made. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion, the estimated costs necessary to make the sale and relevant taxes. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 113 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 12. Inventories - (cont’d) After the provision for decline in value of inventories is made, if the circumstances that previously caused inventories to be written down below cost no longer exist so that the net realizable value of inventories is higher than their carrying amount, the original provision for decline in value is reversed and the reversal is included in profit or loss for the period. 12.4 The perpetual inventory system is maintained for stock system. 13. Long-term equity investments Long-term equity investments include investments in subsidiaries, joint ventures and associates. Subsidiaries are the companies that are controlled by the Company. Associates are the companies over which the Group has significant influence. Joint ventures are joint arrangements over which the Group has joint control along with other investors and has rights to the net assets of the joint arrangement. The Company accounts for the investment in subsidiaries at historical cost in the Company's financial statements. Investments in associates and joint ventures are accounted for under equity method. 13.1 Determination of investment cost For a long-term equity investment acquired through a business combination involving enterprises under common control, the investment cost of the long-term equity investment is the share of the carrying amount of the shareholders' equity of the acquiree attributable to the ultimate controlling party at the date of combination. The difference between initial investment cost and cash paid, non-cash assets transferred and book value of liabilities assumed, is adjusted in capital reserve. If the balance of capital reserve is not sufficient to absorb the difference, any excess is adjusted to retained earnings. For a long-term equity investment acquired through business combination not involving enterprises under common control, the investment cost of the long-term equity investment is the cost of acquisition. For a business combination not involving enterprises under common control achieved in stages that involves multiple exchange transactions, the initial investment cost is carried at the aggregate of the carrying amount of the acquirer’s previously held equity interest in the acquiree and the new investment cost incurred on the acquisition date. Regarding the long-term equity investment acquired otherwise than through a business combination, if the long-term equity investment is acquired by cash, the historical cost is determined based on the amount of cash paid and payable; if the long-term equity investment is acquired through the issuance of equity instruments, the historical cost is determined based on the fair value of the equity instruments issued. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 114 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 13. Long-term equity investments - (cont’d) 13.2 Subsequent measurement and recognition of profit or loss If the long-term equity investment is accounted for at cost, it should be measured at historical cost less accumulated impairment losses. Dividend declared by the investee should be accounted for as investment income. Under the equity method, where the long-term equity investment initial investment cost exceeds the Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, no adjustment is made to the initial investment cost. Where the initial investment cost is less than the Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, the difference is recognized in profit or loss for the period, and the cost of the long-term equity investment is adjusted accordingly. Under the equity method, the Group recognizes its share of the net profit or loss and other comprehensive income of the investee for the period as investment income or loss and other comprehensive income for the period. The Group recognizes its share of the investee’s net profit or loss based on the fair value of the investee’s individual separately identifiable assets, etc. at the acquisition date after making appropriate adjustments to be confirmed with the Group's accounting policies and accounting period. The Group discontinues recognizing its share of net losses of the investee after the carrying amount of the long-term equity investment together with any long-term interests that in substance form part of its net investment in the investee is reduced to zero. If the Group has incurred obligations to assume additional losses of the investee, a provision is recognized according to the expected obligation, and recorded as investment loss for the period. 13.3 Basis for determining control, joint control and significant influence over investee Control is achieved when the Company has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating policy decisions relating to the activity require the unanimous consent of the parties sharing control. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. When determining whether an investing enterprise is able to exercise control or significant influence over an investee, the effect of potential voting rights of the investee (for example, warrants and convertible debts) held by the investing enterprises or other parties that are currently exercisable or convertible shall be considered. 13.4 Methods of impairment assessment and determining the provision for impairment loss If the recoverable amounts of the investments to subsidiaries, joint ventures and associates are less than their carrying amounts, an impairment loss should be recognized to reduce the carrying amounts to the recoverable amounts (Note III 20). ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 115 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 13. Long-term equity investments - (cont’d) 13.5 The disposal of long-term equity investment On disposal of a long term equity investment, the difference between the proceeds actually received and receivable and the carrying amount is recognized in profit or loss for the period. 14. Investment properties Investment property refers to real estate held to earn rentals or for capital appreciation, or both, including leased land use rights, land use rights held and provided for transferring after appreciation and leased constructions, etc. Investment property is initially measured at cost. Subsequent expenditures related to an investment property shall be included in cost of investment property only when the economic benefits associated with the asset will likely flow to the Group and its cost can be measured reliably. All other subsequent expenditures on investment property shall be included in profit or loss for the current period when incurred. The Group adopts cost method for subsequent measurement of investment property, which is depreciated or amortized using the same policy as that for buildings and land use rights. When an investment property is sold, transferred, retired or damaged, the amount of proceeds on disposal of the property net of the carrying amount and related taxes and surcharges is recognized in profit or loss for the current period. 15. Fixed assets 15.1 Recognition criteria for fixed assets Fixed assets include land owned by the Group and buildings, machinery and equipment, motor vehicles, office equipment and others. Fixed assets are tangible assets that are held for use in the production or supply of goods or for administrative purposes, and have useful lives of more than one accounting year. A fixed asset is recognized only when it is probable that economic benefits associated with the asset will flow to the Group and the cost of the asset can be reliably measured. Purchased or constructed fixed assets are initially measured at cost when acquired. Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and if it is probable that economic benefits associated with the asset will flow to the Group and the subsequent expenditures can be measured reliably. Other subsequent expenditures are recognized in profit or loss in the period in which they are incurred. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 116 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 15. Fixed assets - (cont’d) 15.2 Depreciation of each category of fixed assets Fixed asset is depreciated based on the cost of fixed asset recognized less expected net residual value over its useful life using the straight-line method since the month subsequent to the one in which it is ready for intended use. Depreciation is calculated based on the carrying amount of the fixed asset after impairment over the estimated remaining useful life of the asset. The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation method applied at least once at each financial year-end, and account for any change as a change in an accounting estimate. The estimated useful life, estimated net residual value and annual depreciation rate of each category of fixed assets are as follows: Category Depreciation Useful life (years) Residual value (%) Annual depreciation rate (%) Buildings the straight-line method 15-500-41.9-6.7 Machinery and equipment the straight-line method 3-220-44.4-33.3 Office and other equipment the straight-line method 3-170-45.6-33.3 Motor vehicles the straight-line method 5-90-210.9-20.0 Overseas Land owned by the Group is not depreciated. 15.3 Other explanations If a fixed asset is upon disposal or no future economic benefits are expected to be generated from its use or disposal, the fixed asset is derecognized. When a fixed asset is sold, transferred, retired or damaged, the amount of any proceeds on disposal of the asset net of the carrying amount and related taxes is recognized in profit or loss for the period. The difference between recoverable amounts of the fixed assets under the carrying amount is referred to as impairment loss (Note III 20). 16. Construction in progress Construction in progress is measured at its actual costs. The actual costs include various construction, installation costs, borrowing costs capitalized and other expenditures incurred until such time as the relevant assets are completed and ready for its intended use. When the asset concerned is ready for its intended use, the cost of the asset is transferred to fixed assets and depreciated starting from the following month. The difference between recoverable amounts of the construction in progress under the carrying amount is referred to as impairment loss (Note III 20). ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 117 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 17. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying asset are capitalized when expenditures for such asset and borrowing costs are incurred and activities relating to the acquisition, construction or production of the asset that are necessary to prepare the asset for its intended use or sale have commenced. Capitalization of borrowing costs ceases when the qualifying asset being acquired, constructed or produced becomes ready for its intended use or sale. Borrowing costs incurred subsequently should be charged to profit or loss. Capitalization of borrowing costs is suspended during periods in which the acquisition, construction or production of a qualifying asset is suspended abnormally and when the suspension is for a continuous period of more than 3 months. Capitalization is suspended until the acquisition, construction or production of the asset is resumed. Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be capitalized is the actual interest expenses incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used on the asset or any investment income on the temporary investment of those funds. Where funds are borrowed under general-purpose borrowings, the Group determines the amount of interest to be capitalized on such borrowings by applying a capitalization rate to the weighted average of the excess of cumulative expenditures on the asset over the amounts of specific-purpose borrowings. The capitalization rate is the weighted average of the interest rates applicable to the general-purpose borrowings. During the capitalization period, exchange differences on foreign currency specific-purpose borrowing are fully capitalized whereas exchange differences on foreign currency general-purpose borrowing, charged to profit or loss. 18. Intangible assets 18.1 Valuation methods, useful life, impairment test The Group’s intangible assets include product registration assets, intangible assets upon purchase of products, marketing rights and rights to use tradenames and trademarks, land use rights, software and customer relations. Intangible assets are stated at cost less accumulated amortization and impairment losses. When an intangible asset with a finite useful life is available for use, its original cost less any accumulated impairment losses is amortized over its estimated useful life using the straight-line method. An intangible asset with an indefinite useful life is not amortized. For an intangible asset with a finite useful life, the Group reviews the useful life and amortization method at the end of the year, and makes adjustments when necessary. The respective amortization periods for such intangible assets are as follows: Item Amortization period (years) Land use rights 49-50 years Product registration 8,11 years Intangible assets on purchase of products 7-11,20 years Marketing rights, tradename and trademarks 4-10,30 years Exclusivity agreement 21 years Software 3-5 years Customer relations 5-10,13 years The difference between recoverable amounts of the intangible assets under the carrying amount is referred to as impairment loss (see Note III 20). ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 118 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 18. Intangible assets - (cont’d) 18.2 Research and development expenditure Internal research and development project expenditures were classified into research expenditures and development expenditures depending on its nature and the greater uncertainty whether the research activities becoming to intangible assets. Expenditure during the research phase is recognized as an expense in the period in which it is incurred. Expenditure during the development phase that meets all of the following conditions at the same time is recognized as intangible asset: - It is technically feasible to complete the intangible asset so that it will be available for use or sale; - The Group has the intention to complete the intangible asset and use or sell it; - The Group can demonstrate the ways in which the intangible asset will generate economic benefits; - The availability of adequate technical, financial and other resources to complete the development and the ability to use or sell the intangible asset; - The expenditure attributable to the intangible asset during its development phase can be reliably measured. Expenditures that do not meet all of the above conditions at the same time are recognized in profit or loss when incurred. If the expenditures cannot be distinguished between the research phase and development phase, the Group recognizes all of them in profit or loss for the period. Expenditures that have previously been recognized in the profit or loss would not be recognized as an asset in subsequent years. Those expenditures capitalized during the development stage are recognized as development costs incurred and will be transferred to intangible asset when the underlying project is ready for an intended use. 19. Goodwill The initial cost of goodwill represents the excess of cost of acquisition over the acquirer’s interest in the fair value of the identifiable net assets of the acquiree under a business combination not involving enterprises under common control. Goodwill is not amortized and is stated in the balance sheet at cost less accumulated impairment losses (see Note III 20). On disposal of an asset group or a set of asset groups, any attributable goodwill is written off and included in the calculation of the profit or loss on disposal. 20. Impairment of long-term assets The Company assesses at each balance sheet date whether there is any indication that the fixed assets, construction in progress, right of use assets, intangible assets with finite useful lives, investment properties measured at historical cost, investments in subsidiaries, joint ventures and associates may be impaired. If there is any indication that such assets may be impaired, recoverable amounts are estimated for such assets. The recoverable amount of an asset is the higher of its fair value less costs to sell and the present value of the future cash flow estimated to be derived from the asset. The Group estimates the recoverable amount on an individual basis. If it is not possible to estimate the recoverable amount of the individual asset, the Group determines the recoverable amount of the asset group to which the asset belongs. Identification of an asset group is based on whether major cash inflows generated by the asset group are largely independent of the cash inflows from other assets or asset groups. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 119 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 20. Impairment of long-term assets - (cont’d) Goodwill arising from a business combination is tested for impairment at least at each year end, irrespective of whether there is any indication that the asset may be impaired. For the purpose of impairment testing, the carrying amount of goodwill acquired in a business combination is allocated from the acquisition date on a reasonable basis to each of the related asset groups; if it is impossible to allocate to the related asset groups, it is allocated to each of the related set of asset groups. Each of the related asset groups or set of asset groups is an asset group or set of asset group that is able to benefit from the synergies of the business combination and shall not be larger than a reportable segment determined by the Group. If the carrying amount of the asset group or set of asset groups is higher than its recoverable amount, the amount of the impairment loss first reduced by the carrying amount of the goodwill allocated to the asset group or set of asset groups, and then the carrying amount of other assets (other than the goodwill) within the asset group or set of asset groups, pro rata based on the carrying amount of each asset. Once the impairment loss of such assets is recognized, it will not be reversed in any subsequent period. 21. Employee benefits 21.1 Short-term employee benefits Employee wages or salaries, bonuses, social security contributions, measured on a non-discounted basis, and the expense is recorded when the related service is provided. A provision for short-term employee benefits in respect of cash bonuses is recognized in the amount expected to be paid where the Group has a current legal or constructive obligation to pay the said amount for services provided by the employee in the past and the amount can be estimated reliably. 21.2 Post-employment benefits Post-employment benefits are classified into defined contribution plans and defined benefit plans. A defined contribution plan is a post-employment benefit plan under which the Group pays contributions to a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized as an expense in profit or loss in the periods during which related services are rendered by employees. Defined benefit plans of the Group are post-employment benefit plans other than defined contribution plans. In accordance with the projected unit credit method, the Group measures the obligations under defined benefit plans using unbiased and mutually compatible actuarial assumptions to estimate related demographic variables and financial variables, and discount obligations under the defined benefit plans to determine the present value of the defined benefit liability. The discount rate used is the yield on the reporting date on highly-rated corporate debentures denominated in the same currency, that have maturity dates approximating the terms of the Group’s obligation. The Group attributes benefit obligations under a defined benefit plan to periods of service provided by respective employees. Service cost and interest expense on the defined benefit liability are charged to profit or loss and remeasurements of the defined benefit liability are recognized in other comprehensive income. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 120 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 21. Employee benefits - (cont’d) 21.3 Termination benefits When the Group terminates the employment with employees or provides compensation under an offer to encourage employees to accept voluntary redundancy, a provision is recognized with a corresponding expense in profit or loss at the earlier of the following dates: - When the Group cannot unilaterally withdraw the offer of termination benefits because of an employee termination plan or a curtailment proposal. - When the Group has a formal detailed restructuring plan involving the payment of termination benefits and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it. If the benefits are payable more than 12 months after the end of the reporting period, they are discounted to their present value. The discount rate used is the yield on the reporting date on highly-rated corporate debentures denominated in the same currency, that have maturity dates approximating the terms of the Group’s obligation. 21.4 Other long-term employee benefits The Group’s net obligation for long-term employee benefits, which are not attributable to post-employment benefit plans, is for the amount of the future benefit to which employees are entitled for services that were provided during the current and prior periods. The amount of these benefits is discounted to its present value and the fair value of the assets related to these obligations is deducted therefrom. The discount rate used is the yield on the reporting date on highly-rated corporate debentures denominated in the same currency, that have maturity dates approximating the terms of the Group’s obligation. 22. Share-based payment Share-based payment refers to the transaction in order to acquire the service offered by the employees or other parties that grants equity instruments or liabilities on the basis of the equity instruments. Share-based payment classified into equity-settled share-based payment and cash-settled share-based payment. 22.1 Cash-settled share-based payment The cash-settled share-based payment should be measured according to the fair value of the liabilities recognized based on the shares or other equity instrument undertaken by the Company. For cash-settled share-based payment made in return for the rendering of employee services that cannot be exercised until the services are fully provided during the vesting period or specified performance targets are met, on each balance sheet date within the vesting period, the services acquired in the current period shall, based on the best estimate of the number of exercisable instruments, be recognized in relevant expenses and the corresponding liabilities at the fair value of the liability incurred by the Company. On each balance sheet date and the settlement date before the settlement of the relevant liabilities, the Company should re-measure the fair value of the liabilities and the changes should be included in the current period profit and loss. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 121 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 23. Provisions Provisions are recognized when the Group has a present obligation related to a contingency, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be measured reliably. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the settlement date, taking into account factors pertaining to a contingency such as the risks, uncertainties and time value of money. Where the effect of the time value of money is material, the amount of the provision is determined by discounting the related future cash outflows. The increase in the provision due to passage of time is recognized as interest expense. If all or part of the provision settlements is reimbursed by third parties, when the realization of income is virtually certain, then the related asset should be recognized. However, the amount of related asset recognized should not be exceeding the respective provision amount. At the balance sheet date, the amount of provision should be re-assessed to reflect the best estimation then. 24. Revenue Revenue of the Group is mainly from sale of goods. The Group recognizes revenue when transferring goods to a customer, at the amount of the transaction price. Goods are considered transferred when the customer obtains control of the goods. Transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring goods to a customer, excluding amounts collected on behalf of third parties. Significant financing component For a contract with a significant financing component, the Group recognize revenue at an amount that reflects the price that a customer would have paid for the goods if the customer had paid cash for those goods at receipt. The difference between the amount of consideration and the cash selling price of the goods, is amortized in the contract period using effective interest rate. The Group does not adjust the amount of consideration for the effects of a significant financing component if the Group expects, at contract inception, that the period between when the entity transfers a good to a customer and when the customer pays for that good will be one year or less. Sale with a right of return For sale with a right of return, the Group recognizes revenue at the amount of consideration to which the Group expects to be entitled (ie excluding the products expected to be returned). For any amounts received (or receivable) for which an entity does not expect to be entitled, the entity shall not recognize revenue when it transfers products to customers but shall recognize those amounts received (or receivable) as a refund liability. An asset recognized for the Group’s right to recover products from a customer on settling a refund liability shall initially be measured by reference to the former carrying amount of the product less any expected costs to recover those products. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 122 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 25. Government grants Government grants are transfer of monetary assets and non-monetary assets from the government to the Group at no consideration, including tax returns, financial subsidies and so on. A government grant is recognized only when the Group can comply with the conditions attached to the grant and the Group will receive the grant. If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or receivable. If a government grant is in the form of a non-monetary asset, it is measured at fair value. If the fair value cannot be reliably determined, it is measured at a nominal amount. Government grants are either related to assets or income. (1) The basis of judgment and accounting method of the government grants related to assets Government grants obtained for acquiring long-term assets are government grants related to assets. A government grant related to an asset is offset with the cost of the relevant asset. (2) The basis of judgment and accounting method of the government grants related to income For a government grant related to income, if the grant is a compensation for related expenses or losses to be incurred in subsequent periods, the grant is recognized as deferred income, and recognized in profit or loss over the periods in which the related costs are recognized. If the grant is a compensation for related expenses or losses already incurred, the grant is recognized immediately in profit or loss for the period. Government grants related to the Group’s normal course of business are offset with related costs and expenses. Government grants related that are irrelevant with the Groups’s normal course of business are included in non-operating gains. 26. Current and deferred tax The income tax expenses include current income tax and deferred income tax. 26.1 Current income tax At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods are measured at the amount expected to be paid (or recovered) according to the requirements of tax laws. 26.2 Deferred tax assets and deferred tax liabilities Temporary differences are differences between the carrying amounts of certain assets or liabilities and their tax base. All taxable temporary differences are recognized as related deferred tax liabilities. Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the deductible losses and tax credits can be utilized. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 123 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 26. Current and deferred tax - (cont’d) 26.2 Deferred tax assets and deferred tax liabilities - (cont’d) For deductible losses and tax credits that can be carried forward, deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the deductible losses and tax credits can be utilized. However, for deductible temporary differences associated with the initial recognition of goodwill and the initial recognition of an asset or liability arising from a transaction (not a business combination) that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of transaction, no deferred tax asset or liability is recognized. At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates, according to tax laws, that are expected to apply in the period in which the asset is realized or the liability is settled. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Group may be required to pay additional tax in case of distribution of dividends by the Group companies. This additional tax was not included in the financial statements, since the policy of the Group is not to distribute in the foreseeable future a dividend which creates a significant additional tax liability. Except for those current income tax and deferred tax charged to comprehensive income or shareholders’ equity in respect of transactions or events which have been directly recognized in other comprehensive income or shareholders’ equity, and deferred tax recognized on business combinations, all other current income tax and deferred tax items are charged to profit or loss in the current period. At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it is no longer probable that sufficient taxable profits will be available in the future to allow the benefit of deferred tax assets to be utilized. Such reduction is reversed when it becomes probable that sufficient taxable profits will be available. 26.3 Offset of income tax When the Group has a legal right to settle current tax assets and liabilities on a net basis, and tax assets and tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend to realize the assets and liabilities simultaneously, current tax assets and liabilities are offset and presented on a net basis. When the Group has a legal right to settle deferred tax assets and liabilities on a net basis which relates to income taxes levied by the same taxation authority, on either the same taxable entity or different taxable entities which intend either to settle current tax assets and liabilities on a net basis or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be reversed, deferred tax assets and deferred tax liabilities are offset and presented on a net basis. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 124 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 27. Leases Lease is a contract, that conveys the right to use an asset for a period of time in exchange for consideration. 27.1 Determining whether an arrangement contains a lease On the inception date of the lease, the Group determines whether the arrangement is a lease or contains a lease, while assessing if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In its assessment of whether an arrangement conveys the right to control the use of an identified asset, the Group assesses whether it has the following two rights throughout the lease term: (a) The right to obtain substantially all the economic benefits from use of the identified asset; and (b) The right to direct the identified asset’s use. An arrangement does not contain a lease if an asset is leased for a period of less than 12 months, or to lease of asset with low economic value. 27.2 Initial recognition of leased assets and lease liabilities Upon initial recognition, the Group recognizes a liability at the present value of future lease payments (exclude certain variable lease payments, as detailed in note III 27.4), and concurrently the Group recognizes a right-of-use asset at the same amount, adjusted for any prepaid lease payments paid at the lease date or before, plus initial direct costs incurred in respect of the lease. When the interest rate implicit in the lease is not readily determinable, the incremental borrowing rate of the lessee is used. The Group presents right-of-use assets separately from other assets in the balance sheet. 27.3 The lease term The lease term is the non-cancellable period of the lease plus periods covered by an extension or termination option, if it is reasonably certain that the lessee will exercise or not exercise the option, respectively. If there is a change in the lease term, or in the assessment of an option to purchase the underlying asset, the Group remeasures the lease liability, on the basis of the revised lease term and the revised discount rate and adjust the right-of-use assets accordingly. 27.4 Variable lease payments Variable lease payments that depend on an index or a rate, are initially measured using the index or rate existing at the commencement of the lease. When the cash flows of future lease payments change as the result of a change in an index or a rate, the balance of the liability is adjusted with a correspondence change in the right-of-use asset. Other variable lease payments that are not included in the measurement of the lease liability are recognized in profit or loss in the period in which the condition that triggers payment occurs. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 125 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 27. Leases (cont’d) 27.5 Subsequent measurement After lease commencement, a right-of-use asset is measured on a cost basis less accumulated depreciation and accumulated impairment losses and is adjusted for re-measurements of the lease liability. The asset is depreciated on a straight-line basis over the useful life or contractual lease period, whichever earlier. The Group applies ASBE8 Impairment of Assets, to determine whether the right-of-use asset is impaired and to account for any impairment loss identified. A lease liability is measured after the lease commencement date at amortized cost using the effective interest method. 28. Other significant accounting policies and accounting estimates 28.1 Hedging The Group uses derivative financial instruments to hedge its risks related to foreign currency and inflation risks and derivatives that are not used for hedging. Hedge accounting The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedge is expected to be effective in offsetting the changes in the fair value of cash flows that can be attributed to the hedged risk during the period for which the hedge is designated. An effective hedge exists when all of the below conditions are met: There is an economic relationship between the hedged item and the hedging instrument; the effect of credit risk does not dominate the value changes that result from that economic relationship; the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of hedged item. On the commencement date of the accounting hedge, the Group formally documents the relationship between the hedging instrument and hedged item, including the Group’s risk management objectives and strategy in executing the hedge transaction, together with the methods that will be used by the Group to assess the effectiveness of the hedging relationship. With respect to a cash-flow hedge, a forecasted transaction that constitutes a hedged item must be highly probable and must give rise to exposure to changes in cash flows that could ultimately affect profit or loss. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 126 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 28. Other significant accounting policies and accounting estimates - (cont’d) 28.1 Hedging (cont’d) Measurement of derivative financial instruments Derivative financial instruments are recognized initially at fair value; attributable transaction costs are recognized in profit or loss as incurred. Cash-flow hedges Subsequent to the initial recognition, changes in the fair value of derivatives used to hedge cash flows are recognized through other comprehensive income directly in a hedging reserve, with respect to the part of the hedge that is effective. Regarding the portion of the hedge that is not effective, the changes in fair value are recognized in profit and loss. The amount accumulated in the hedging reserve is reclassified to profit and loss in the period in which the hedged cash flows impact profit or loss and is presented in the same line item in the statement of income as the hedged item. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, the hedge accounting is discontinued. The cumulative gain or loss previously recognized in a hedging reserve through other comprehensive income remains in the reserve until the forecasted transaction occurs or is no longer expected to occur. If the forecasted transaction is no longer expected to occur, the cumulative gain or loss in respect of the hedging instrument in the hedging reserve is reclassified to profit or loss. Economic hedge Hedge accounting is not applied with respect to derivative instruments used to economically hedge financial assets and liabilities denominated in foreign currency or CPI linked. Changes in the fair value of such derivatives are recognized in profit or loss as gain (loss) from changes in fair value. Derivatives that are not used for hedging Changes in the fair value of derivatives that are not used for hedging are recognized in profit or loss as gain (loss) from changes in fair value. 28.2 Securitization of assets Details of the securitization of asset agreements and accounting policy are set out in Note V.5 - Account receivables. 28.3 Segment reporting Reportable segments are identified based on operating segments which are determined based on the structure of the Group’s internal organization, management requirements and internal reporting system. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 127 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 28. Other significant accounting policies and accounting estimates - (cont’d) 28.3 Segment reporting - (cont’d) Two or more operating segments may be aggregated into a single operating segment if the segments have similar economic characteristics and are same or similar in respect of the nature of each product and service, the nature of production processes, the type or class of customers for the products and services, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Inter-segment revenues are measured on the basis of actual transaction price for such transactions for segment reporting. Segment accounting policies are consistent with those for the consolidated financial statements. 28.4 Profit distributions to shareholders Dividends which are approved after the balance sheet date are not recognized as a liability at the balance sheet date but are disclosed in the notes separately. 29. Changes in significant accounting policies and accounting estimates 29.1 Changes in significant accounting policies On 30 November 2022, the Ministry of Finance issued "Accounting Standards for Business Enterprises Interpretation No.16” (hereinafter referred to as “Interpretation No.16”) which clarified the following accounting treatments: (1) Deferred tax related to assets and liabilities arising from a single transaction; (2) The income tax treatment of the dividend paid as the issuer of an equity instrument; and (3) When an entity changes a cash-settled share-based payment to an equity-settled share-based payment. According to the Interpretation No.16, the clarification regarding “Deferred tax related to assets and liabilities arising from a single transaction” was effective from 1 January 2023. Adoption of the interpretation has no significant impact on the Group’s financial statements. 29.2 Changes in significant accounting estimates There are no significant changes in accounting estimates in the reporting period. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 128 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 30. Significant accounting estimates and judgments The preparation of the financial statements requires management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates as well as underlying assumptions and uncertainties involved are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. Notes V.34, Note VIII, Note IX and Note XIII contain information about the assumptions and their risk factors relating to post-employment benefits – defined benefit plans, fair value of financial instruments and share-based payments. Other key sources of estimation uncertainty are as follows: 30.1 Expected credit loss of trade receivables As described in Note III.11, trade receivables are reviewed at each balance sheet date to determine whether credit risk on a receivable has increased significantly since initial recognition, lifetime expected losses is accrued for impairment provision. Evidence of impairment includes observable data that comes to the attention of the Group about loss events such as a significant decline in the solvency of an individual debtor or the portfolio of debtors, and significant changes in the financial condition that have an adverse effect on the debtor. If there is objective evidence of a recovery in the value of receivables which can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed . 30.2 Provision for impairment of inventories As described in Note III.12, the net realisable value of inventories is under management’s regular review, and as a result, provision for impairment of inventories is recognized for the excess of inventories’ carrying amounts over their net realisable value. When making estimates of net realisable value, the Group takes into consideration the use of inventories held on hand and other information available to form the underlying assumptions, including the inventories’ market prices and the Group’s historical operating costs. The actual selling price, the costs of completion and the costs necessary to make the sale and relevant taxes may vary based on the changes in market conditions and product saleability, manufacturing technology and the actual use of the inventories, resulting in the changes in provision for impairment of inventories. The net profit or loss may then be affected in the period when the impairment of inventories is adjusted. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 129 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 30. Significant accounting estimates and judgments - (cont’d) 30.3 Impairment of assets other than inventories and financial assets As described in Note III.20, if impairment indication exists, assets other than inventories and financial assets are assessed at balance sheet date to determine whether the carrying amount exceeds the recoverable amount of the assets. If any such case exists, an impairment loss is recognized. The recoverable amount of an asset (or an asset group) is the greater of its fair value less costs to sell and its present value of expected future cash flows. Since a market price of the asset (or the asset group) cannot be obtained reliably, the fair value of the asset cannot be estimated reliably, the recoverable amount is calculated based on the present value of estimated future cash flows. In assessing the present value of estimated future cash flows, significant judgements are exercised over the asset’s production, selling price, related operating expenses and discount rate to calculate the present value. All relevant materials which can be obtained are used for estimation of the recoverable amount, including the estimation of the production, selling price and related operating expenses based on reasonable and supportable assumptions. 30.4 Depreciation and amortisation of assets such as fixed assets and intangible assets As described in Note III.15 and III.18, assets such as fixed assets and intangible assets are depreciated and amortised over their useful lives after taking into account residual value. The estimated useful lives of the assets are regularly reviewed to determine the depreciation and amortisation costs charged in each reporting period. The useful lives of the assets are determined based on historical experience of similar assets and the estimated technical changes. If there have been significant changes in the factors used to determine the depreciation or amortisation, the rate of depreciation or amortisation is revised prospectively. 30.5 Income taxes and deferred income tax The Company and Group companies are assessed for income tax purposes in a large number of jurisdictions and, therefore, Company management is required to use considerable judgment in determining the total provision for taxes and attribution of income. When assessing whether there will be sufficient future taxable profits available against which the deductible temporary differences can be utilised, the Group recognizes deferred tax assets to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences can be utilised, using tax rates that would apply in the period when the asset would be utilised. In determining the amount of deferred tax assets, the Group makes reasonable judgements and estimates about the timing and amount of taxable profits to be utilised in the following periods, and of the tax rates applicable in the future according to the existing tax policies and other relevant regulations. If the actual timing and amount of future taxable profits or the actual applicable tax rates differ from the estimates made by management, the differences affect the amount of tax expenses. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 130 IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES - (cont’d) 30. Significant accounting estimates and judgments - (cont’d) 30.6 Contingent liabilities When assessing the possible outcomes of legal claims filed against the Company and its investee companies, the company positions are based on the opinions of their legal advisors. These assessments by the legal advisors are based on their professional judgment, considering the stage of the proceedings and the legal experience accumulated regarding the various matters. Since the results of the claims will be determined by the courts, the outcomes could be different from the assessments. In addition to the said claims, the Group is exposed to unasserted claims, inter alia, where there is doubt as to interpretation of the agreement and/or legal provision and/or the manner of their implementation. This exposure is brought to the Company’s attention in several ways, among others, by means of contacts made to Company personnel. In assessing the risk deriving from the unasserted claims, the Company relies on internal assessments by the parties dealing with these matters and by management, who weigh assessment of the prospects of a claim being filed, and the chances of its success, if filed. The assessment is based on experience gained with respect to the filing of claims and the analysis of the details of each claim. By their nature, in view of the preliminary stage of the clarification of the legal claim, the actual outcome could be different from the assessment made before the claim was filed. 30.7 Employee benefits The Group’s liabilities for long-term post-employment and other benefits are calculated according to the estimated future amount of the benefit to which the employee will be entitled in consideration for his services during the current period and prior periods. The benefit is stated at present value net of the fair value of the plan’s assets, based on actuarial assumptions. Changes in the actuarial assumptions could lead to material changes in the book value of the liabilities and in the operating results. 30.8 Derivative financial instruments The Group enters into transactions in derivative financial instruments for the purpose of hedging risks related to foreign currency and inflationary risks. The derivatives are recorded at their fair value. The fair value of derivative financial instruments is based on quotes from financial institutions. The reasonableness of the quotes is examined by discounting the future cash flows, based on the terms and length of the period to maturity of each contract, while using market interest rates of a similar instrument as of the measurement date. Changes in the assumptions and the calculation model could lead to material changes in the fair value of the assets and liabilities and in the results. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 131 IV. Taxation 1. Main types of taxes and corresponding tax rates The income tax rate in China is 25% (2022: 25%). The subsidiaries outside of China are assessed based on the tax laws in the country of their residence. Set forth below are the tax rates outside China relevant to the subsidiaries with significant sales to third party: Name of subsidiary Location 2023 ADAMA agriculture solutions Ltd. Israel 23.0% ADAMAMakhteshim Ltd. Israel 7.5% ADAMAAgan Ltd. Israel 7.5% ADAMABrasil S/A Brazil 34.0% Makhteshim Agan of North America Inc. U.S. 24.3% ADAMAIndia Private Ltd India 25.2% ADAMADeutschland GmbH Germany 32.5% Control Solutions Inc. U.S. 25.3% Adama Australia Pty Ltd Australia 30.0% ADAMANorthern Europe B.V. Netherlands 25.8% ADAMAItalia SRL Italy 27.9% Alligare LLC U.S. 26.1% The VAT rate of the Group's subsidiaries is in the range between 2.5% to 27%. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 132 IV. Taxation - (cont’d) 1. Main types of taxes and corresponding tax rates - (cont’d) (1) Benefits from High-Tech Certificate The Company, was jointly approved as new and high-tech enterprise, by the Hubei Provincial Department of Science and Technology, Department of Finance of Hubei Province and Hubei Provincial Office of the State Administration of Taxation. The applicable income tax rate from 2020 to 2022 is 15%. Adama Anpon (Jiangsu) Ltd. (Formally know as Jiangsu Anpon Electrochemical Co. Ltd, hereinafter - “Anpon"), a subsidiary of the Company, was jointly approved as new and high-tech enterprise, by the Jiangsu Provincial Department of Science and Technology, Department of Finance of Jiangsu Province and Jiangsu Provincial Office of the State Administration of Taxation. The applicable income tax rate from 2021 to 2023 is 15%. (2) Benefits under the Law for the Encouragement of Capital Investments Industrial enterprises of subsidiaries in Israel were granted “Approved Enterprise” or “Beneficiary Enterprise” status under the Israeli Law for the Encouragement of Capital Investments,1959. Should a dividend be distributed from the retained earning produced in which the company was considered as an “Approved Enterprise” or “Beneficiary Enterprise” from unreleased retained earnings, based on the temporary order as described below, the company may be liable for tax at the time of distribution. On December 29,2010 the Knesset approved the Economic Policy Law for 2011-2012, which includes an amendment to the Law for the Encouragement of Capital Investments - 1959 (hereinafter - “the Amendment”). The Amendment is effective from January 1,2011 and its provisions apply to preferred income derived or accrued in 2011 and thereafter by a preferred company, per the definition of these terms in the Amendment. The Amendment provides that only companies in Development Area A will be entitled to the grants track and that they will be entitled to receive benefits under this track and under the tax benefits track at the same time. The tax benefit tracks under the law constitute a preferred enterprise and a special preferred enterprise, which mainly provide a uniform and reduced tax rate for all the company’s income entitled to benefits. Tax rates on preferred income as from 2017 tax year are as follows: 7.5% for Development Area A and 16% for the rest of the country. The amendment further determined that no tax shall apply to dividend distributed out of preferred income to Israel resident company shareholder. As of the date of the report, all subsidiaries in Israel adopted the amendment and the deferred taxes were calculated accordingly. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 133 IV. Taxation - (cont’d) 1. Main types of taxes and corresponding tax rates - (cont’d) (2) Benefits under the Law for the Encouragement of Capital Investments - (cont’d) On December 21,2016 the Knesset plenum passed the second and third reading of the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in the Years 2017 and 2018) – 2016 in which the Encouragement Law was also amended (hereinafter: “the Amendment”). The Amendment is effective as from January 1,2017 and added new tax benefit tracks for a “preferred technological enterprise” and a “special preferred technological enterprise” which award reduced tax rates to a technological industrial enterprise for the purpose of encouraging activity relating to the development of qualifying intangible assets. The benefits will be awarded to a “preferred company” that has a “preferred technological enterprise” or a “special preferred technological enterprise” with respect to taxable “preferred technological income” per its definition in the Encouragement Law. Income of a Preferred Technological Enterprise a Special Preferred Technological Enterprise will be subject to a reduced corporate tax rate of 6% regardless of the development area in which the enterprise is located. In addition, as part of the amendment, a temporary provision was enacted, valid until June 30,2021, which settles tax benefits continuation on income that is eligible to the Preferred Enterprise tax benefits as at June 30,2016. On May 16,2017 the Knesset Finance Committee approved Encouragement of Capital Investment Regulations (Preferred Technological Income and Capital Gain of Technological Enterprise) – 2017 (hereinafter: “the Regulations”), which provides rules for applying the “preferred technological enterprise” and “special preferred technological enterprise” tax benefit tracks including the Nexus formula that provides the mechanism for allocating the technological income eligible for the benefits. On November 15,2021 the Economic Efficiency Law (Legislative Amendments for the 2021 and 2022 Budget Years) – 2021 was published as well as a Temporary Order to the Law for the Encouragement of Capital Investments – 1959 (hereinafter: “the temporary order”), which offers a reduced tax rate arrangement to companies that received an exemption from corporate tax under the aforesaid law. The temporary order provided that companies that choose to apply the temporary order, which is effective until November 14, 2022, will be entitled to a reduced tax rate on the “release” of exempt profits (hereinafter: “the beneficiary corporate tax rate”). The release of exempt profits makes it possible to distribute them at a reduced rate of corporate tax at the company level based on the rate of the profits being distributed pursuant to the conditions set forth in the Amendment. During 2022, Solutions announced its choice to release the retained earnings in a number of subsidiaries and committed to pay a reduced corporate tax in the amount of approximately 101 million RMB, which was recorded as tax expenses in the financial statements of 2022. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 134 IV. Taxation - (cont’d) 1. Main types of taxes and corresponding tax rates - (cont’d) (3) Benefits under the Law for the Encouragement of Industry (Taxes),1969 Under the Israeli Law for the Encouragement of Industry (Taxes) 1969, Solutions is an Industrial Holding Company and some of the subsidiaries in Israel are “Industrial Companies”. The main benefit under this law is the filing of consolidated income tax returns (Solutions files a consolidated income tax return with Adama Makhteshim and submission of a consolidated report together with Adama Agan as of 2017), amortization of know-how over 8 years and higher rates of depreciation. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 135 V. Notes to the consolidated financial statements 1. Cash at Bank and On Hand June 30 December 31 2023 2022 Cash on hand 960785 Deposits in banks 4,569,5774,224,468 Other cash and bank balances 33,98665,708 4,604,5234,290,961 Including cash and bank balances placed outside China 3,890,8043,300,538 As at June 30,2023 restricted cash and bank balances was 33,986 thousand RMB (as at December 31,2022 65,708 thousand RMB) mainly including deposits that guarantee bank acceptance drafts. 2. Financial assets held for trading June 30 December 31 2023 2022 Bank deposits 1,9301,685 1,9301,685 3. Derivative financial assets June 30 December 31 2023 2022 Economic hedge 170,384224,128 Accounting hedge derivatives 21,7579,681 192,141233,809 4. Bills Receivable June 30 December 31 2023 2022 Post-dated checks receivable 107,296112,297 107,296112,297 All bills receivables are due within 1 year. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 136 V. Notes to the consolidated financial statements – (cont'd) 5. Accounts Receivable a. By category June 30,2023 Book value Provision for expected credit losses Amount Percentage (%) Amount Percentage (%) Carrying amount Account receivables assessed individually for impairment 993,47910229,04023764,439 Account receivables assessed collectively for impairment 8,700,72090101,40118,599,319 9,694,199100330,44139,363,758 December 31,2022 Book value Provision for expected credit losses Amount Percentage (%) Amount Percentage (%) Carrying amount Account receivables assessed individually for impairment 383,2654212,64055170,625 Account receivables assessed collectively for impairment 8,945,1389697,38818,847,750 9,328,403100310,02839,018,375 b. Aging analysis June 30,2023 Within 1 year (inclusive) 9,217,990 Over 1 year but within 2 years 246,154 Over 2 years but within 3 years 25,500 Over 3 years but within 4 years 34,619 Over 4 years but within 5 years 54,576 Over 5 years 115,360 9,694,199 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 137 V. Notes to the consolidated financial statements – (cont'd) 5. Accounts Receivable – (cont'd) Main groups of account receivables assessed collectively for impairment based on geographical location: Geographical location A: Account receivables in geographical location A are grouped based on similar credit risk: June 30,2023 Book value Provision for expected credit loss Percentage (%) Credit group A 1,928,3428,8680.5 Credit group B 556,0054,8120.9 Credit group C 129,3365,6434.4 Credit group D 46,5839722.1 2,660,26620,2950.8 Geographical location B: Account receivables in geographical location B are grouped based on aging analysis: June 30,2023 Book value Provision for expected credit loss Percentage (%) Accounts receivable that are not overdue 746,193 6,629 0.9 Debts overdue less than 60 days 29,054 872 3.0 Debts overdue less than 180 days but more than 60 days 37,678 3,768 10.0 Debts overdue above 180 days 24,684 9,874 40.0 Legal Debtors 41,960 41,960 100.0 879,56963,1037.2 Other geographical locations: June 30,2023 Book value Provision for expected credit loss Percentage (%) Other account receivables assessed collectively for impairment 5,160,885 18,003 0.35 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 138 V. Notes to the consolidated financial statements – (cont'd) 5. Accounts Receivable – (cont'd) c. Addition, written-back and written-off of provision for expected credit losses during the period Lifetime expected credit loss (credit losses has not occurred) Lifetime expected credit loss (credit losses has occurred) Total January 1,202344,012266,016310,028 Addition (write back) during the period, net (2,285) 1,420 (865) Exchange rate effect 3,25918,01921,278 Balance as of June 30,202344,986285,455330,441 d. Five largest accounts receivable at June 30,2023: Name Closing balance Proportion of Accounts receivable (%) Allowance of expected credit losses (credit losses has occurred) Customer 1190,7112.0 - Customer 2188,8821.9 - Customer 3140,1591.4 - Customer 4114,0091.2 - Customer 597,1221.0 - Total 730,8837.5 - e. Derecognition of accounts receivable due to transfer of financial assets Certain subsidiaries of the group entered into a securitization transaction with Rabobank International for sale of trade receivables (hereinafter – “the Securitization Program” and/or “the Securitization Transaction”). Pursuant to the Securitization Program, the companies will sell their trade receivables debts, in various different currencies, to a foreign company that was set up for this purpose and that is not owned by the Adama Ltd. (hereinafter – “the Acquiring Company”). Acquisition of the trade receivables by the Acquiring Company is financed by Cooperative Rabobank U.A.. The trade receivables included as part of the Securitization Transaction are trade receivables that meet the criteria provided in the agreement. Every year the credit facility is re approved in accordance with the Securitization Program. As at 30 June 2023, the Securitization agreement was approved up to October 31,2023. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 139 V. Notes to the consolidated financial statements – (cont'd) 5. Accounts Receivable – (cont'd) e. Derecognition of accounts receivable due to transfer of financial assets - (cont'd) The maximum scope of the securitization is adjusted for the seasonal changes in the scope of the Company’s activities, as follows: during the months March through June the maximum scope of the securitization is $350 million (as of June 30,2023 – 2,529 million RMB), during the months July through September the maximum scope of the securitization is $300 million (as of June 30,2023 – 2,168 million RMB) and during the months October through February the maximum scope of the securitization is $250 million (as of June 30,2023– 1,806 million RMB).In addition the company has a temporary uncommitted facility of $150 million (as of June 30,2023- 1,084 million RMB) until September 20th 2023 and permanent uncommitted facility of 50$ million (as of June 30,2023- 361 million RMB) which will be applicable each period. The proceeds received from those customers whose debts were sold are used for acquisition of new trade receivables. The price at which the trade receivables debts are sold is the amount of the debt sold less a discount calculated based on, among other things, the expected length of the period between the date of sale of the trade receivable and its anticipated repayment date. In the month following acquisition of the debt, the Acquiring Company pays in cash most of the debt while the remainder is recorded as a subordinated note and as continuing involvement that is paid after collection of the debt sold. If the customer does not pay its debt on the anticipated repayment date, the Company bears interest up to the earlier of the date on which the debt is actually repaid or the date on which debt collection is transferred to the insurance company (the actual costs are not significant and are not expected to be significant). The Acquiring Company bears 95% of the credit risk in respect of the customers whose debts were sold and will not have a right of recourse to the Company in respect of the amounts paid in cash, except regarding debts with respect to which a commercial dispute arises between the companies and their customers, that is, a dispute the source of which is a claim of non-fulfillment of an obligation of the seller in the supply agreement covering the product, such as: a failure to supply the correct product, a defect in the product, delinquency in the supply date, and the like. The Acquiring Company appointed a policy manager who will manage for it the credit risk involved with the trade receivables sold, including an undertaking with an insurance company. Pursuant to the Receivables Servicing Agreement, the Group subsidiaries handle collection of the trade receivables as part of the Securitization Transaction for the benefit of the Acquiring Company. As part of the agreement, Solutions is committed to comply with certain financial covenants, mainly the ratio of the liabilities to equity and profit ratios. As of June 30,2023, Solutions was in compliance with the financial covenants. The accounting treatment of sale of the trade receivables included as part of the Securitization Program is: The Company is not controlling the Acquiring Company, therefore the Acquiring Company is not consolidated in the financial statements. The Company continues to recognize the trade receivables included in the Securitization Program based on the extent of its continuing involvement therein. In respect of the part of the trade receivables included in the securitization Program with respect to which cash proceeds were not yet received, however regarding which the Company has transferred the credit risk, a subordinated note is recorded. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 140 V. Notes to the consolidated financial statements – (cont'd) 5. Accounts Receivable – (cont'd) e. Derecognition of accounts receivable due to transfer of financial assets - (cont'd) The continuing involvement and subordinated note recorded in the balance sheet as part of the “other receivables” line item. The loss from sale of the trade receivables is recorded at the time of sale in the statement of income in the “financing expenses”. f. A subsidiary in Brazil (hereinafter - “the subsidiary”) entered into the following securitization agreements: (1) Since 2016, a securitization transaction with Rabobank Brazil for sale of customer receivables (hereinafter "FIDC-Donegal agreement"). Under the FIDC-Donegal agreement, the subsidiary will sell its receivables to a securitization structure (hereinafter - “the entity”) that was formed for this purpose where the subsidiary has subordinate rights of 5% of the entity's capital. As at 30 June 2023, the FIDC-Donegal agreement was approved up to September 30,2024. The maximum securitization scope as of June 30,2023 is BRL 350 million (as of June 30,2023 – 525 million RMB). On the date of the sale of the customer receivables, the entity pays the full amount which is the debt amount sold net of discount calculated, among others, over the expected length of the period between the date of sale of the customer receivable and its anticipated repayment date. The entity bears 95% of the credit risk in respect of the customers whose debts were sold such that the entity has the right of recourse to 5% of the unpaid amount. The subsidiary has a pledged deposit with regards to the entity’s right of recourse. The subsidiary continues to recognize the trade receivables sold to the entity based on the extent of its continuing involvement therein (5% right of recourse) and also recognizes an associated liability in the same amount. In "FIDC-Donegal agreement" the subsidiary handles the collection of receivables included in the securitization for the entity. (2) During 2021, the subsidiary has entered into an additional securitization agreement (hereinafter - “FIDC – Liverpool agreement”) with Itau Bank and Farm investments, for sale of customer receivables to a securitization structure that was formed for this purpose where the subsidiary has mezzanine quotes of 10.5% of the entity's capital. As at 30 June 2023, the FIDC-Liverpool agreement was approved up to November 10,2024. The maximum securitization scope as of June 30,2023 is BRL 300 million (as of June 30,2023 – 450 million RMB). The entity bears 100% of the credit risk in respect of the customers whose debts were sold (non-recourse), therefore the subsidiary has no continuing involvement in those account receivables sold. In "FIDC-Liverpool agreement" the collection of receivables is being handled by the entity. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 141 V. Notes to the consolidated financial statements – (cont'd) 5. Accounts Receivable – (cont'd) f. Derecognition of accounts receivable due to transfer of financial assets - (cont'd) June 30 December 31 20232022 Accounts receivables derecognized 4,039,4293,963,341 Continuing involvement 155,564193,532 Subordinated note in respect of trade receivables 512,533591,998 Liability in respect of trade receivables 741,51279,619 Six months ended June 30 20232022 Loss in respect of sale of trade receivables 115,53170,123 6. Receivables financing June 30 December 31 20232022 Bank acceptance draft 125,29263,639 125,29263,639 As at June 30,2023, bank acceptance endorsed but not yet due amounts to 342,458 thousands RMB. 7. Prepayments (1) The aging analysis of prepayments is as follows: June 30 December 31 20232022 Amount Percentage (%) Amount Percentage (%) Within 1 year (inclusive) 364,24097327,80997 Over 1 year but within 2 years (inclusive) 9,597311,0473 Over 2 years but within 3 years (inclusive) 1,434 - 1,204 - Over 3 years 713 - 1,042 - 375,984100341,102100 (2) Total of five largest prepayments by debtor at the end of the period: Amount Percentage of prepayments (%) June 30,202378,55421% ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 142 V. Notes to the consolidated financial statements – (cont'd) 8. Other Receivables (1) Other receivables by nature June 30 December 31 20232022 Dividends receivable 3,187 - Others 866,9351,021,824 870,1221,021,824 a. Others breakdown by categories June 30 December 31 20232022 Trade receivables as part of securitization transactions not yet eliminated 155,564193,532 Subordinated note in respect of trade receivables 512,533591,998 Financial institutions 69,22338,354 Other 167,851242,688 Sub total 905,1711,066,572 Provision for expected credit losses - other receivables (38,236) (44,748) 866,9351,021,824 b. Other receivables by aging June 30 2023 Within 1 year (inclusive) 842,680 Over 1 year but within 2 years 46,924 Over 2 years but within 3 years 1,292 Over 3 years but within 4 years 7,403 Over 4 years but within 5 years 152 Over 5 years 6,720 905,171 (2) Additions, recovery or reversal and written-off of provision for expected credit losses during the period: Six months ended June 30,2023 Balance as of January 12023, 44,748 Addition (written back) during the period (7,625) Write-off during the period - Exchange rate effect 1,113 Balance as of June 30,2023 38,236 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 143 V. Notes to the consolidated financial statements – (cont'd) 8. Other Receivables – (cont'd) (3) Five largest other receivables at June 30,2023: Name Closing balance Proportion of other receivables (%) Allowance of expected credit losses Party 1512,53357 - Party 269,2238 - Party 37,1641 - Party 46,8651 - Party 55,2311 - Total 601,01668 - 9. Inventories - (1) Inventories by category: June 30,2023 Book value Provision for impairment Carrying amount Raw materials 4,216,88822,9724,193,916 Work in progress 1,907,1036,4651,900,638 Finished goods 10,371,744305,96310,065,781 Others 518,01110,389507,622 17,013,746345,78916,667,957 December 31,2022 Book value Provision for impairment Carrying amount Raw materials 4,341,17620,9394,320,237 Work in progress 2,410,8835,9522,404,931 Finished goods 9,954,831237,3379,717,494 Others 495,12510,546484,579 17,202,015274,77416,927,241 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 144 V. Notes to the consolidated financial statements – (cont'd) 9. Inventories - (cont'd) (2) Provision for impairment of inventories: For the six months ended June 30,2023 January 1, 2023 Provision Reversal or write-off Other June 30,2023 Raw material 20,9397,969 (6,850) 91422,972 Work in progress 5,9525,613 (5,168) 686,465 Finished goods 237,337152,191 (94,325) 10,760305,963 Others 10,546570 (1,053) 32610,389 274,774166,343 (107,396) 12,068345,789 10. Other Current Assets June 30 December 31 20232022 Deductible VAT 728,516679,428 Current tax assets 325,136219,057 Short term investments 56,730171,496 Others 58,56659,707 1,168,9481,129,688 11. Long-Term Receivables June 30 December 31 20232022 Long term account receivables from sale of goods 59,27382,510 59,27382,510 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 145 V. Notes to the consolidated financial statements – (cont'd) 12. Long-Term Equity Investments (1) Long-term equity investments by category: June 30 December 31 20232022 Joint venture 1,3582,110 Associate 27,91424,258 29,27226,368 (2) Movements of long-term equity investments for the period are as follows: January 1, 2023 Investment income Other Comprehensive income Declared distribution of cash dividend Balance at the end of the period Joint venture Investee A 2,1107033 (855) 1,358 Sub-total 2,1107033 (855) 1,358 Associate Investee B 24,2583,3693,072 (2,785) 27,914 Sub-total 24,2583,3693,072 (2,785) 27,914 Sub-total 26,3683,4393,105 (3,640) 29,272 13. Other equity investments Dividend received during 2023 June 30,2023 December 31, 2022 Investment A 84,72084,720 - Investment B 76,33471,8406,651 Investment C 1,8511,781 - 162,905158,3416,651 Other equity investments are non-core businesses that are intended to be held in the foreseeable future. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 146 V. Notes to the consolidated financial statements – (cont'd) 14. Fixed assets Land & Buildings Machinery & equipment Motor vehicles Office & other equipment Total Cost Balance as at January 1,20234,240,65816,516,306166,587438,54221,362,093 Purchases 11,65649,28144,04420,307125,288 Transfer from construction in progress 38,105610,0841,8558,051658,095 Classification to Investment property (20,125) - - - (20,125) Disposals (8,175) (20,132) (11,547) (3,533) (43,387) Newly consolidated subsidiaries - 3,4832704784,231 Currency translation adjustment 100,486501,7098,29519,007629,497 Balance as at June 30,20234,362,60517,660,731209,504482,85222,715,692 Accumulated depreciation Balance as at January 1,2023 (1,791,373) (9,815,859) (74,448) (342,199) (12,023,879) Charge for the period (69,021) (384,563) (14,206) (19,210) (487,000) Classification to Investment property 2,149 - - - 2,149 Disposals 1,35319,0849,5613,50033,498 Newly consolidated subsidiaries - (2,348) (256) (277) (2,881) Currency translation adjustment (53,730) (301,637) (3,276) (15,319) (373,962) Balance as at June 30,2023 (1,910,622) (10,485,323) (82,625) (373,505) (12,852,075) Provision for impairment Balance as at January 1,2023 (132,663) (251,190) (1,107) (1,070) (386,030) Charge for the period - (634) (15) (41) (690) Disposals 1,5531,925381073,623 Currency translation adjustment (678) (3,254) (15) (13) (3,960) Balance as at June 30,2023 (131,788) (253,153) (1,099) (1,017) (387,057) Carrying amounts As at June 30,20232,320,1956,922,255125,780108,3309,476,560 As at January 1,20232,316,6226,449,25791,03295,2738,952,184 The lands reported as fixed assets are owned by the group subsidiaries and are located outside of China. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 147 V. Notes to the consolidated financial statements - (cont'd) 15. Construction in Progress (1) Construction in progress June 30 December 31 20232022 Book value Provision for impairment Carrying amount Book value Provision for impairment Carrying amount 3,265,974 (118,481) 3,147,4933,079,882 (118,481) 2,961,401 (2) Details and Movements of major construction projects in progress during period ended June 30,2023 Budget January 1,2023 Additions Including: Interest capitalized Currency translation differences Transfer to fixed assets June 30, 2023 Actual cost to budget (%) Project progress (%) Source of funds Project A 765,314542,618111,8615,264 - (66,338) 588,14177% 77% Bank loan Project B 639,165531,81772,28519,363411 - 604,51395% 95% Internal finance Project C 367,649333,51430,609 - (1,888) (362,235) - 100% 100% Internal finance Project D 194,60474,5231,625 - - (22,282) 53,86649% 49% Internal finance Project E 968,257352,423123,19213,02618,565 - 494,18051% 51% Internal finance Project G 74,17317,0703,123616776 - 20,96928% 28% Internal finance Project F Under re-evalution 238,078319 - - - 238,397 - - Internal finance * As of June 30,2023 Project AProject D and are include impairment of RMB 14 million and 35 million , respectively. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 148 V. Notes to the consolidated financial statements - (cont'd) 16. Right-of-use assets Land & Buildings Machinery & equipment Motor vehicles Office & other equipment Total Cost Balance as at January 1,2023593,79046,364294,1223,858938,134 Additions 106,2923,07244,577 - 153,941 Disposals (21,010) (301) (23,340) - (44,651) Currency translation adjustment 32,3281,85112,49014546,814 Balance as at June 30,2023711,40050,986327,8494,0031,094,238 Accumulated depreciation Balance as at January 1,2023 (221,223) (23,108) (136,165) (1,749) (382,245) Charge for the period (47,496) (617) (45,246) (360) (93,719) Disposals 17,79330121,116 - 39,210 Currency translation adjustment (9,159) (876) (6,350) (103) (16,488) Balance as at June 30,2023 (260,085) (24,300) (166,645) (2,212) (453,242) Provision for impairment Balance as at January 1,2023 - - - - - Balance as at June 30,2023 - - - - - Carrying amounts As at June 30,2023451,31526,686161,2041,791640,996 As at January 1,2023372,56723,256157,9572,109555,889 ADAMALTD. (Expressed in RMB '000) Notes to the Financial Statements 149 V. Notes to the consolidated financial statements - (cont'd) 17. Intangible Assets (1) Include land parcel in Israel that has not yet been registered in the name of the Group subsidiaries at the Land Registry Office, mostly due to registration procedures or technical problems. (2) Mainly non-compete and exclusivity agreements. Product registration Intangible assets on Purchase of Products Software Marketing rights, tradename and trademarks Customers relations Land use rights (1) Others(2) Total Costs Balance as at January 1,202312,204,3764,182,4571,216,249794,577578,572510,272588,58520,075,088 Newly consolidated subsidiaries 6,418 - - 30,07052,182 - - 88,670 Purchases 295,676 - 63,97548 - - 13,585373,284 Currency translation adjustment 478,902156,86046,26732,42222,1901,45115,623753,715 Transfer from construction in progress - - 8,898 - - - - 8,898 Disposal (3,231) - (137) - - (4,427) - (7,795) Balance as at June 30,202312,982,1414,339,3171,335,252857,117652,944507,296617,79321,291,860 Accumulated amortization Balance as at January 1,2023 (9,525,327) (3,125,941) (732,640) (524,730) (312,019) (95,570) (262,984) (14,579,211) Charge for the period (265,738) (82,684) (46,927) (14,308) (22,750) (5,173) (11,792) (449,372) Currency translation adjustment (375,438) (120,835) (30,302) (21,254) (13,339) (1,296) (9,252) (571,716) Disposal 798 Balance as at June 30,2023 (10,166,503) (3,329,460) (809,753) (560,292) (348,108) (101,357) (284,028) (15,599,501) Provision for impairment Balance as at January 1,2023 (95,951) (56,601) (49) - - (272) (250) (153,123) Charge for the period - - - - - - - - Currency translation adjustment (3,599) (2,123) (9) - - (10) - (5,741) Balance as at June 30,2023 (99,550) (58,724) (58) - - (282) (250) (158,864) Carrying amount As at June 30,20232,716,088951,133525,441296,825304,836405,657333,5155,533,495 As at January 1,20232,583,098999,915483,560269,847266,553414,430325,3515,342,754 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 150 V. Notes to the consolidated financial statements - (cont'd) 18. Goodwill Changes in goodwill The Group allocates goodwill to two cash generating units ("CGU "), Crop Protection (Agro) and a non-core activity included in the Intermediates and ingredients segment. At the end of the year, or more frequently whether indicators for impairment exists, the Group estimates the recoverable amount of each CGU for which goodwill has been allocated to using the DCF model based on the Group business plan. The discount rate used in the DCF model is determined based on the company's cost of equity and cost of debt, taking into account the comprehensive risk factors. As of December 31,2022 the fair value of the cash generating units to which goodwill has been allocated to exceeds its carrying amount. January 1, 2023 Change during the year Currency translation adjustment Balance at June 30,2023 Book value 4,805,157113,075181,7965,100,028 Impairment provision - - - - Carrying amount 4,805,157113,075181,7965,100,028 19. Deferred Tax Assets and Deferred Tax Liabilities (1) Deferred tax assets without taking into consideration of the offsetting of balances within the same tax jurisdiction June 30 December 31 20232022 Deductible temporary differences Deferred tax assets Deductible temporary differences Deferred tax assets Deferred tax assets Deferred tax assets in respect of carry forward losses 2,532,017506,1051,568,088256,749 Deferred tax assets in respect of inventories 3,132,366921,5852,402,900689,062 Deferred tax assets in respect of employee benefits 953,114155,4051,005,874166,264 Other deferred tax asset 2,529,942606,0212,030,651545,937 9,147,4392,189,1167,007,5131,658,012 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 151 V. Notes to the consolidated financial statements - (cont'd) 19. Deferred Tax Assets and Deferred Tax Liabilities - (cont’d) (2) Deferred tax liabilities without taking into consideration of the offsetting of balances within the same tax jurisdiction June 30 December 31 20232022 Taxable temporary differences Deferred tax liabilities Taxable temporary differences Deferred tax liabilities Deferred tax liabilities Deferred tax liabilities in respect of fixed assets and intangible assets 4,046,916762,0933,430,096626,610 4,046,916762,0933,430,096626,610 (3) Deferred tax assets and deferred tax liabilities presented on a net basis after offsetting June 30 December 31 20232022 The offset amount of deferred tax assets and liabilities Deferred tax assets or liabilities after offset The offset amount of deferred tax assets and liabilities Deferred tax assets or liabilities after offset Presented as: Deferred tax assets 429,5331,759,583310,7491,347,263 Deferred tax liabilities 429,533332,560310,749315,861 (4) Details of unrecognized deferred tax assets June 30 December 31 20232022 Deductible temporary differences 468,300518,542 Deductible losses carry forward 259,775229,672 728,075748,214 (5) Expiration of deductible tax losses carry forward for unrecognized deferred tax assets June 30 December 31 20232022 20231,7781,713 202436,31033,646 20256,5186,282 20266,6126,373 20278,0137,724 After 2027200,544173,934 259,775229,672 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 152 V. Notes to the consolidated financial statements - (cont'd) 19. Deferred Tax Assets and Deferred Tax Liabilities - (cont'd) (6) Unrecognized deferred tax liabilities When calculating the deferred taxes, taxes that would have applied in the event of realizing investments in subsidiaries were not taken into account since it is the Company’s intention to hold these investments and not realize them. 20. Other Non-Current Assets June 30 December 31 20232022 Judicial deposits 195,920154,273 Assets related to securitization 96,464112,388 Advances in respect of non-current assets 62,729174,035 Others 136,270164,137 491,383604,833 21. Short-Term Loans Short-term loans by category: June 30 December 31 20232022 Unsecured loans 6,341,6773,342,921 6,341,6773,342,921 22. Derivative financial liabilities June 30 December 31 20232022 Economic hedge 698,821490,496 Accounting hedge derivatives 36,83755,020 735,658545,516 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 153 V. Notes to the consolidated financial statements - (cont'd) 23. Bills Payables June 30 December 31 20232022 Post-dated checks payables 392,325900,537 Note payables draft 105,019214,238 497,3441,114,775 As at June 30,2023, none of the bills payable are overdue. 24. Accounts payable June 30 December 31 20232022 Within 1 year (including 1 year) 5,861,6627,447,355 1-2 years (including 2 years) 27,86159,671 2-3 years (including 3 years) 35,5472,048 Over 3 years 19,90618,195 5,944,9767,527,269 There are no significant accounts payables aging over one year. 25. Contract liabilities June 30 December 31 20232022 Discount for customers 1,273,467904,615 Advances from customers 172,662871,958 1,446,1291,776,573 26. Employee Benefits Payable June 30 December 31 20232022 Short-term employee benefits 515,9381,027,543 Post-employment benefits 49,25133,317 Share based payment (See note XIII) 49,77176,875 Other benefits within one year 216,605204,794 831,5651,342,529 Current maturities 24,61628,257 856,1811,370,786 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 154 V. Notes to the consolidated financial statements - (cont'd) 27. Taxes Payable June 30 December 31 20232022 Corporate income tax 291,828240,672 VAT 244,410187,066 Others 39,03331,836 575,271459,574 28. Other Payables June 30 December 31 20232022 Dividends payables 750750 Other payables 2,488,8471,610,532 2,489,5971,611,282 (1) Other payables June 30 December 31 20232022 Accrued expenses 776,142758,158 Payables in respect of intangible assets 169,120106,510 Liability in respect of securitization transactions 741,51279,619 Hold-back payment due to acquistions 254,000254,000 Others 548,073412,245 2,488,8471,610,532 29. Non-Current Liabilities Due Within One Year Non-current liabilities due within one year by category are as follows: June 30 December 31 20232022 Long-term loans due within one year 1,852,5731,539,496 Lease liabilities due within one year 167,492156,977 Debentures payable due within one year 571,770565,658 2,591,8352,262,131 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 155 V. Notes to the consolidated financial statements - (cont'd) 30. Other Current Liabilities June 30 December 31 20232022 Put options to holders of non-controlling interests 483,688507,483 Provision in respect of returns 231,117158,173 Provision in respect of claims 34,62637,769 Others 390369 749,821703,794 31. Long-Term Loans Long-term loans by category June 30 December 31 2023 Interest range 2022 Interest range Long term loans Guaranteed loans 394,810 3.55%-3.75% 404,8412.92%-3.75% Unsecured loans 7344,,9191.73%-8.72% 4,797,5251.73%-7.67% Total Long term loans 5,129,027 5,202,366 Less: Long term loans from banks due within 1 year (1,852,573) (1,539,496 ) Long term loans, net 3,276,454 3,662,870 * For more detailes regarding the guaranteed loans – see note X. related parties and related parties transactions. For the maturity analysis, see note VIII.C - Liquidity risk. 32. Debentures Payable June 30 December 31 20232022 Debentures Series B 8,004,8357,919,169 Current maturities (571,770) (565,658) 7,433,0657,353,511 June 30 2023 First year (current maturities) 571,770 Second year 571,770 Third year 571,770 Fourth year 571,770 Fifth year and thereafter 5,717,755 8,004,835 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 156 V. Notes to the consolidated financial statements - (cont'd) 32. Debentures Payable - (cont'd) Movements of debentures payable: For the year ended June 30,2023: Maturity period Face value in RMB Face value NIS Issuance date Maturity period Issuance amount Balance at January 1, 2023 Amortization of discounts or premium CPI and exchange rate effect Repayment during the period Currency translation adjustment Balance at June 30, 2023 Debentures Series B 2,673,6401,650,0004.12.2006 November 2020-20363,043,742 3,321,071117 (83,196) - 120,7043,358,696 Debentures Series B 843,846513,52716.1.2012 November 2020-2036842,579 996,2375,075 (25,386) - 36,4091,012,335 Debentures Series B 995,516 600,0007.1.2013 November 2020-20361,120,339 1,231,9472,209 (31,263) - 44,8511,247,744 Debentures Series B 832,778533,3301.2.2015 November 2020-20361,047,439 1,151,945 (1,357) (29,233) - 41,7891,163,144 Debentures Series B 418,172266,6651-6.2015 November 2020-2036556,941 625,358 (3,683) (15,863) - 22,558628,370 Debentures Series B 497,989246,4995.5.2020 November 2020-2036692,896592,611 (4,348) (15,055) - 21,338594,546 7,919,169 (1,987) (199,996) - 287,6498,004,835 Series B debentures, in amount of NIS 3,810 million par value (3,730 million par value, net of self-purchased), linked to the CPI and bear interest at the base annual rate of 5.15%. The debenture principal shall be repaid in 17 equal payments in the years 2020 through 2036. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 157 V. Notes to the consolidated financial statements - (cont'd) 33. Lease liabilities June 30 December 31 2023 Interest range 2022 Interest range Lease liabilities 666,4591.1%-9.0% 588,0531.1%-9.1% Less: Lease liabilities due within one year (167,492) (156,977) Long term lease liabilities, net 498,967 431,076 34. Long-Term Employee Benefits Payable Post-employment benefit plans – defined benefit plan and early retirement June 30 December 31 20232022 Total present value of obligation 537,594566,550 Less: fair value of plan's assets (63,399) (70,001) Net liability related to Post-employment benefits 474,195496,549 Termination benefits 63,77165,782 Total recognized liability for defined benefit plan, net (1) 537,966562,331 Other long-term employee benefits 249,442258,079 Total long-term employee benefits, net 787,408820,410 Including: Long-term employee benefits payable due within one year 24,61628,257 762,792792,153 (1) Movement in the net liability and assets in respect of defined benefit plans, early retirement and their components Defined benefit obligation and early retirement Fair value of plan's assets Total 20232022 20232022 20232022 Balance as at January 1,2023632,332779,67170,00186,282562,331693,389 Expense/income recognized in profit and loss: Current service cost 17,41012,707 - - 17,41012,707 Past service cost 1,724 - 1,717 Interest costs 10,0466,6821,2956488,7516,034 Losses on curtailments and settlements 10,2215,478 - - 10,2215,478 Changes in exchange rates (22,559) (68,417) (3,206) (9,611) (19,353) (58,806) Actuarial losses due to early retirement 122 (77) - - 122 (77) Included in other comprehensive income: Actuarial gain (losses) as a result of changes in actuarial assumptions (17,680) (72,633) (1,766) (3,474) (15,914) (69,159) Foreign currency translation differences in respect of foreign operations 21,97131,9672,2763,74319,69528,224 Additional movements: Benefits paid (37,361) (35,291) (3,330) (6,104) (34,031) (29,187) Classification to termination (14,861) - (4,211) - (10,650) - Contributions paid by the Group - - 6231,342 (623) (1,342) Balance as at June 30,2023601,365660,08763,39972,826537,966587,261 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 158 V. Notes to the consolidated financial statements - (cont'd) 34. Long-Term Employee Benefits Payable - (cont'd) Post-employment benefit plans – defined benefit plan and early retirement - (cont'd) (2) Actuarial assumptions and sensitivity analysis The principal actuarial assumptions at the reporting date for defined benefit plan June 30 December 31 20232022 Discount rate (%)* 2.2%-3.0% 1.7%-3.0% * According to the demographic and the benefit components. The assumptions regarding the future mortality rate are based on published statistical data and acceptable mortality rates. Possible reasonable changes as of the date of the report in the discount rate, assuming the other assumptions remain unchanged, would have affected the defined benefit obligation as follows: As of June 30,2023 Increase of 1% Decrease of 1% Change in defined benefit obligation (43,856) 53,030 35. Provisions June 30 December 31 20232022 Liabilities in respect of contingencies* 181,871149,187 Provision in respect of site restoration 64,62765,291 Long-term liability in respect of business combinations 49,4545,182 Other 1,2862,521 297,238222,181 * Liabilities in respect of contingencies includes obligations of pending litigations, where an outflow of resources had been reliably estimated. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 159 V. Notes to the consolidated financial statements - (cont'd) 36. Other Non-Current Liabilities June 30 December 31 20232022 Put options to holders of non- controlling interests 957,651907,644 Long term loans – others 361,290348,231 1,318,9411,255,875 Current maturities - - 1,318,9411,255,875 37. Share Capital Balance at January 1,2023 Issuance of new shares Buyback of shares Balance at June 30,2023 Share capital 2,329,812 - - 2,329,812 38. Capital Reserve Balance at January 1,2023 Additions during the period Reductions during the period Balance at June 30,2023 Share premiums 12,606,562 - - 12,606,562 Other capital reserve 379,771 - (40,496) 339,275 12,986,333 - (40,496) 12,945,837 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 160 V. Notes to the consolidated financial statements - (cont'd) 39. Other Comprehensive Income, net of tax Attributable to shareholders of the company Balance at January 1, 2023 Before tax amount Less: transfer to profit or loss Less: Income tax expenses Net-of-tax amount Balance at June 30,2023 Items that will not be reclassified to profit or loss 101,37015,914 - 1,17314,741116,111 Re-measurement of changes in liabilities under defined benefit plans 46,83815,914 - 1,17314,74161,579 Changes in fair value of other equity investment 54,532 - - - - 54,532 Items that may be reclassified to profit or loss 979,220822,559 (50,690) 3,785869,4641,848,684 Effective portion of gain or loss of cash flow hedge (41,369) (20,371) (50,690) 3,78526,534 (14,835) Translation difference of foreign financial statements 1,020,589842,930 - - 842,9301,863,519 1,080,590838,473 (50,690) 4,958884,2051,964,795 40. Surplus reserve Balance at January 1,2023 Additions during the period Reductions during the period Balance at June 30,2023 Statutory surplus reserve 238,684 - - 238,684 Discretional surplus reserve 3,814 - - 3,814 242,498 - - 242,498 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 161 V. Notes to the consolidated financial statements - (cont'd) 41. Retained Earnings 20232022 Retained earnings as at January 1 6,469,6045,940,465 Net profits (loss) for the period attributable to shareholders of the Company (242,156) 732,098 Dividends to non-controlling Interest (18,763) (39,074) Dividend to the shareholders of the company (Note 1 & 2) (62,905) (18,638) Retained earnings as at June 306,145,7806,614,851 Note 1: On March 29,2022, after obtaining the approval of the 9th meeting of the Company's 9th Board of Directors, the Company declared RMB 0.08 (before tax) per 10 shares as cash dividend to all shareholders, resulting in a total cash dividend of 18,638 thousand RMB (before tax). No shares were distributed as share dividend and no reserve was transferred to equity capital. Note 2: On March 19,2023, after obtaining the approval of the 19th meeting of the Company's 9th Board of Directors, the Company declared RMB 0.27 (before tax) per 10 shares as cash dividend to all shareholders, resulting in a total cash dividend of 62,905 thousand RMB (before tax). No shares were distributed as share dividend and no reserve was transferred to equity capital. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 162 V. Notes to the consolidated financial statements - (cont'd) 42. Operating Income and Cost of Sales Six months ended June 30 Six months ended June 30 20232022 Income Cost of sales Income Cost of sales Principal activities 17,232,97613,349,94818,761,35613,802,108 Other businesses 20,2258,77934,47220,647 17,253,20113,358,72718,795,82813,822,755 43. Taxes and Surcharges Six months ended June 30 2023 2022 Tax on turnover 16,382 17,666 Others 35,038 38,171 51,420 55,837 44. Selling and Distribution Expenses Six months ended June 30 2023 2022 Salaries and related expense 972,566 1,015,829 Depreciation and amortization 476,152 481,460 Advertising and sales promotion 179,661 173,457 Warehouse expenses 98,906 75,378 Travel expenses 72,342 62,794 Registration 69,834 64,983 Professional services 56,550 53,811 Insurance 47,574 56,054 Others 187,614 175,323 2,161,199 2,159,089 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 163 V. Notes to the consolidated financial statements - (cont'd) 45. General and Administrative Expenses Six months ended June 30 2023 2022 Salaries and related expenses 157,127 375,272 Professional services 61,710 56,828 IT systems 61,002 58,466 Depreciation and amortization 55,710 48,168 Cost contribution arrangement 39,065 33,864 Office rent, maintenance and expenses 22,964 24,348 Other 63,568 45,367 461,146 642,313 46. Research and development expenses Six months ended June 30 2023 2022 Salaries and related expenses 134,457 127,574 Depreciation and amortization 38,407 42,400 Professional services 23,639 17,350 Field trial 21,526 16,475 Materials 13,741 38,803 Office rent, maintenance and expenses 5,416 6,077 Other 25,192 26,059 262,378 274,738 47. Financial expenses (incomes), net Six months ended June 30 2023 2022 Interest expenses on debentures and loans and other charges 562,720 341,633 CPI expenses in respect of debentures 184,710 236,815 Loss in respect of sale of trade receivables 115,352 51,063 Interest expense in respect of post-employment benefits and early retirement, net 11,287 7,000 Revaluation of put option, net 83,584 101,901 Interest income from customers, banks and others (134,254) (53,960) Exchange rate differences, net (414,163) (1,153,323) Interest expense on lease liabilities 16,132 11,962 Others 30,487 18,685 455,855 (438,224) ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 164 V. Notes to the consolidated financial statements - (cont'd) 48. Investment income, net Six months ended June 30 2023 2022 Income from long-term equity investments accounted for using the equity method 3,439 4,706 Other 6,651 - 10,090 4,706 49. Gain (loss) from Changes in Fair Value Six months ended June 30 2023 2022 Gain (loss) from changes in fair value of derivative financial Instruments (775,528) (1,330,194) Others (6,690) (11,523) (782,218) (1,341,717) 50. Credit impairment reversal (losses) Six months ended June 30 2023 2022 Bills receivable and accounts receivable 865 (64,703) Other receivables 7,625 (32,422) 8,490 (97,125) 51. Asset impairment losses Six months ended June 30 2023 2022 Inventories (105,197) (79,445) Fixed assets (690) (1,623) Intangible asset - (4,278) (105,887) (85,346) ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 165 V. Notes to the consolidated financial statements - (cont'd) 52. Gain from Disposal of Assets Six months ended June 30 Included in non-recurring items 2023 2022 Gain from disposal of fixed assets 23,402 60,57223,402 Loss from disposal of intangible assets - (274) - 23,402 60,29823,402 53. Income Tax Expenses Six months ended June 30 2023 2022 Current year 286,525 431,750 Deferred tax expenses (income) (367,924) (306,884) Adjustments for previous years, net 4,966 (23,590) (76,433) 101,276 (1) Reconciliation between income tax expense and accounting profit is as follows: Six months ended June 30 2023 2022 Profit before taxes (loss) (318,589) 833,374 Statutory tax in china 25% 25% Tax calculated according to statutory tax in china (79,647) 208,344 Tax benefits from Approved Enterprises (14,942) (98,005) Difference between measurement basis of income for financial statement and for tax purposes (28,110) 3,085 Taxable income and temporary differences at other tax rate (128,074) (58,494) Taxes in respect of prior years 4,966 (23,590) Utilization of tax losses prior years for which deferred taxes were not created (5,308) (31,440) Temporary differences and losses in the report year for which deferred taxes were not created 14,398 34,798 Non-deductible expenses, non-taxable income and other difference, net 93,470 21,569 Neutralization of tax calculated in respect of the Company’s share in results of equity accounted investees (931) (1,599) Effect of change in tax rate in respect of deferred taxes 66,971 13,979 Creation and reversal of deferred taxes for tax losses and temporary differences from previous years 774 32,629 Income tax expenses (76,433) 101,276 54. Other comprehensive income Details of the Other comprehensive income are set out in Note V.39 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 166 V. Notes to the consolidated financial statements - (cont'd) 55. Government g rants Amount recognized in the profit and loss statements during the six months ended June 30 Category Presentation accounts 2023 2022 Government grants related to income Non-Operating income 11,66515,623 Government grants related to assets Fixed assets, Intangible assets 7,3889,211 56. Notes to items in the cash flow statements (1) Cash received relating to other operating activities Six months ended June 30 2023 2022 Interest income 80,270 30,761 Financial institutions 38,020 231,142 Government subsidies 12,883 15,623 Others 69,838 26,562 201,011 304,088 (2) Cash paid relating to other operating activities Six months ended June 30 2023 2022 Derivatives transactions 225,818 471,332 Advertising and sales promotion 167,451 181,788 Professional services 164,944 122,886 Commissions and Warehouse 118,902 75,076 IT and Communication 114,304 125,187 Registration and Field trials 85,831 86,410 Travel 83,184 64,767 Insurance 70,183 37,655 Financial institutions 67,142 116,107 Others 444,295 453,295 1,542,054 1,734,503 (3) Cash received relating to other investing activities Six months ended June 30 2023 2022 Investment grant 16,643 - 16,643 - ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 167 V. Notes to the consolidated financial statements - (cont'd) 56. Notes to items in the cash flow statements - (cont'd) (4) Cash paid relating to other investing activities Six months ended June 30 2023 2022 Increase in short and long term investments,net - 64,719 - 64,719 (5) Cash received from other financing activities Six months ended June 30 2023 2022 Deposit for issuing bills payables 34,932 11,010 Borrowing from related party * 1,393,370 - 1,428,302 11,010 * For more detailes regarding the borrowing from related party – see note X. related parties and related parties transactions. (6) Cash paid relating to other financing activities Six months ended June 30 2023 2022 Payment in respect of hedging transactions on debentures 347,870 802,237 Realization of Call option 116,311 - Repayment of lease liability 86,608 84,743 Deposit for issuing bills payable 3,210 57,447 Repayment of loan from others 625 153 554,624 944,580 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 168 V. Notes to the consolidated financial statements - (cont'd) 57. Supplementary Information on Cash Flow Statement (1) Supplementary information on Cash Flow Statement a. Reconciliation of net profit to cash flows from operating activities: Six months ended June 30 2023 2022 Net profit (loss) (242,156) 732,098 Add: Impairment provisions for assets 105,887 85,346 Credit impairment losses (gain) (8,490) 97,125 Depreciation of fixed assets and investment property 487,815 499,714 Depreciation of right-of-use asset 93,719 80,900 Amortization of intangible asset 449,372 453,387 Gains on disposal of fixed assets, intangible assets, and other long-term assets, net (23,402) (60,298) Losses from changes in fair value 782,218 1,341,717 Financial expenses 329,817 (342,658) Investment income, net (10,090) (4,706) Increase in deferred tax assets, net (350,613) (318,979) Decrease in deferred tax liabilities, net (17,311) 12,095 Decrease (increase) in inventories, net 905,851 (3,360,343) Increase in operating receivables, net (752,091) (2,842,961) Increase (decrease) in operating payables, net (1,786,212) 2,248,418 Others (29,190) 33,284 Net cash flow from operating activities (64,876) (1,345,861) b. Net increase (decrease) in cash and cash equivalents Six months ended June 30 2023 2022 Closing balance of cash and cash equivalents 4,570,537 3,190,742 Less: Opening balance of cash and cash equivalents 4,225,253 5,759,480 Increase (decrease) in cash and cash equivalents 345,284 (2,568,738) ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 169 V. Notes to the consolidated financial statements - (cont'd) 57. Supplementary Information on Cash Flow Statement - (cont'd) (2) Details of cash and cash equivalents June 30 December 31 2023 2022 Cash on hand 960 785 Bank deposits available on demand without restrictions 4,569,577 4,224,468 4,570,537 4,225,253 58. Assets with Restricted Ownership or Right of Use June 30 2023 Reason Cash 33,986 Pledged Other non-current assets 195,920 Guarantees 229,906 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 170 V. Notes to the consolidated financial statements - (cont'd) 59. Foreign currencies denominated items (1) Foreign currencies denominated items As at June 30,2023 Foreign currency at the end of the period Exchange rate RMB at the end of the period Cash and bank balances BRL 329,919 1.499 494,548 EUR 41,621 7.848 326,642 GBP 24,852 9.121 226,673 ILS 93,092 1.953 181,808 ARS 6,262,188 0.028 175,341 RON 72,130 1.579 113,893 USD 12,806 7.226 92,533 PLN 50,745 1.760 89,311 ZAR 96,680 0.387 37,415 RUB 274,232 0.083 22,761 TRY 46,142 0.280 12,920 Other 186,253 Total 1,960,098 Bills and Accounts receivable BRL 964,126 1.499 1,445,225 EUR 97,454 7.848 764,822 TRY 1,282,941 0.280 359,223 USD 45,302 7.226 327,344 RON 184,439 1.579 291,229 HUF 9,349,497 0.021 196,339 CAD 24,370 5.448 132,767 ZAR 265,954 0.387 102,924 THB 460,422 0.203 93,466 ILS 39,995 1.953 78,110 RUB 891,820 0.083 74,021 CZK 173,747 0.331 57,510 IDR 84,611 0.4809 40,688 Other 204,059 Total 4,167,727 Other receivables EUR 31,965 7.848 250,860 GBP 7,378 9.121 67,293 ILS 21,769 1.953 42,515 BRL 20,689 1.499 31,013 Other 76,742 Total 468,423 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 171 V. Notes to the consolidated financial statements - (cont'd) 59. Foreign currencies denominated items - (cont'd) (1) Foreign currencies denominated items - (cont'd) As at June 30,2023 Foreign currency at the end of the period Exchange rate RMB at the end of the period Other current assets BRL 154,460 1.499 231,536 ILS 69,801 1.953 136,322 EUR 8,418 7.848 66,065 UAH 301,622 0.198 59,721 ARS 1,236,386 0.028 34,619 Other 100,056 Total 628,319 Long-term receivables BRL 39,542 1.499 59,273 Total 59,273 Other non-current assets BRL 156,948 1.499 235,265 Other 64,339 Total 299,604 Short-term loans ILS 165,883 1.953 323,969 EUR 28,108 7.848 220,589 TRY 205,316 0.280 57,488 Other 19,590 Total 621,636 Bills and Accounts payable ILS 749,274 1.953 1,463,333 EUR 63,553 7.848 498,761 BRL 152,884 1.499 229,173 USD 9,175 7.226 66,297 Other 132,045 Total 2,389,609 Other payables ILS 97,401 1.953 190,225 BRL 123,967 1.499 185,826 ILSCPI 22,230 1.953 43,416 Other 139,548 Total 559,015 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 172 V. Notes to the consolidated financial statements - (cont'd) 59. Foreign currencies denominated items - (cont'd) (1) Foreign currencies denominated items - (cont'd) As at June 30,2023 Foreign currency at the end of the period Exchange rate RMB at the end of the period Contract liabilities EUR 53,046 7.848 416,307 CAD 47,966 5.448 261,321 BRL 45,143 1.499 67,670 UAH 335,708 0.198 66,470 Other 95,366 Total 907,134 Non-current liabilities due within one year ILSCPI 317,339 1.953 619,764 EUR 67,984 7.848 533,539 Other 50,501 Total 1,203,804 Other current liabilities EUR 8,047 7.848 63,153 Other 3,468 Total 66,621 Long-term loan EUR 28,999 7.848 227,584 Total 227,584 Debentures payable ILSCPI 3,805,973 1.953 7,433,065 Total 7,433,065 Provision and Long-term payables BRL 111,510 1.499 167,154 Other 2,919 Total 170,073 Other non-current liabilities ILSCPI 48,183 1.953 94,102 EUR 5,526 7.848 43,369 USD 3,358 7.226 24,264 Other 51,723 Total 213,458 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 173 V. Notes to the consolidated financial statements - (cont'd) 59. Foreign currencies denominated items - (cont'd) (2) Major foreign operations Name of the Subsidiary Registration & Principal place of business Business nature Functional currency ADAMAFrance S.A.SFrance Distribution USD ADAMABrasil S/ABrazil Manufacturing; Distribution; Registration USD ADAMADeutschland GmbHGermany Distribution; Registration USD ADAMAIndia Private Ltd. India Manufacturing Distribution; Registration INR Makhteshim Agan of North America Inc. United States Manufacturing; Distribution; Registration USD Control Solutions Inc. United States Manufacturing; Distribution; Registration USD ADAMAAgan Ltd. Israel Manufacturing; Distribution; Registration USD ADAMAMakhteshim Ltd. Israel Manufacturing; Distribution; Registration USD ADAMAAustralia Pty Limited Australia Distribution AUD ADAMAItalia SRLItaly Distribution USD ADAMANorthern Europe B.V. Netherlands Distribution USD Alligare LLCUnited States Manufacturing; Distribution; Registration USD The functional currency of the subsidiaries above is the main currency that represent the principal economic environment. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 174 VI. Change in consolidation Scope 1. Business combinations involving enterprises not under common control (1) Business combinations involving enterprises not under common control during current period Name of the Company Acquisition date Total consideration of equity investment Proportion of equity investment Acquisition method Basis of acquisition date determination From acquisition date till period end Revenue Net profit AgriNova New Zealand Ltd 05.01.2023214,476100% Stock purchase Obtained control 35,1586,286 (2) Acquisition cost and goodwill Acquisition costs Total of AgriNova New Zealand Ltd Total acquisition cost in cash 170,155 Contingent consideration 44,321 Less: share of the fair value of the identifiable net assets acquired 101,401 Goodwill 113,075 (3) Identifiable assets and liabilities of the acquiree, at acquisition date AgriNova New Zealand Ltd Fair value at acquisition date 05.01.2023 Book value at acquisition date 05.01.2023 Assets: Cash and bank balances 21,695 21,695 Bills and Accounts receivable 8,066 8,066 Prepayments 903 903 Inventories 21,898 21,898 Fixed assets 1,350 1,350 Intangible assets 88,670 - Deferred tax assets 2,354 2,354 Liabilities: Bills and Accounts payable 7,601 7,601 Employee benefits payable 1,273 1,273 Taxes payable 8,573 8,573 Other payables 452 452 Contract liabilities 807 807 Deferred tax liabilities 24,829 - Net assets 101,401 37,560 Less: Non-controlling interests - - Net assets acquired 101,401 37,560 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 175 VII. Interest in Other Entities 1. Interests in subsidiaries Composition of the largest subsidiaries of the Group in respect of assets and operating income Name of the Subsidiary Registration & Principal place of business Business nature Direct Indirect Method of obtaining the subsidiary ADAMAFrance S.A.SFrance Distribution 100% Established ADAMABrasil S/ABrazil Manufacturing; Distribution; Registration 100% Purchased ADAMADeutschland GmbHGermany Distribution; Registration; 100% Established ADAMAIndia Private Ltd. India Manufacturing; Distribution; Registration 100% Established Makhteshim Agan of North America Inc. United States Manufacturing; Distribution; Registration 100% Established Control Solutions Inc. United States Manufacturing; Distribution; Registration 67% Purchased ADAMAAgan Ltd. Israel Manufacturing; Distribution; Registration 100% Restructure ADAMAMakhteshim Ltd. Israel Manufacturing; Distribution; Registration 100% Restructure ADAMAAustralia Pty Limited Australis Distribution 100% Purchased ADAMAItalia SRLItaly Distribution 100% Established ADAMANorthern Europe B.V. Netherlands Distribution 55% Purchased Alligare LLCUnited States Manufacturing; Distribution; Registration 100% Purchased Adama Anpon (Jiangsu) Ltd. China Manufacturing; Distribution 100% Purchased Adama Huifeng (Jiangsu) Co. Ltd. China Manufacturing; Distribution 51% Purchased 2. Interests in joint ventures or associates June 30 December 31 20232022 Joint venture 1,3582,110 Associate 27,91424,258 29,27226,368 3. Summarized financial information of joint ventures and associates June 30,2023 and six months then ended June 30,2022 and six months then ended Joint venture: Total carrying amount 1,3582,584 The Group's share of the following items: Net profit 70234 Other comprehensive income 33123 Total comprehensive income 103357 Associate: Total carrying amount 27,91417,924 The Group's share of the following items: Net profit 3,3694,472 Other comprehensive income 3,0721,754 Total comprehensive income 6,4416,226 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 176 VIII. Risk Related to Financial Instruments A. General The Group has extensive international operations, and, therefore, it is exposed to credit risks, liquidity risks and market risks (including currency risk, interest risk and other price risk). In order to reduce the exposure to these risks, the Group uses financial derivatives instruments, including forward transactions and options (hereinafter - “derivatives”). Transactions in derivatives are undertaken with major financial institutions, and therefore, in the opinion of Group Management the credit risk in respect thereof is low. This note provides information on the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes regarding the measurement and management of the risk. Additional quantitative disclosure is included throughout the consolidated financial statements. The Board of Directors has overall responsibility for establishing and monitoring the framework of the Group's risk management policy. The Finance Committee is responsible for establishing and monitoring the Group's actual risk management policy. The Chief Financial Officer reports to the Finance Committee on a regular basis regarding these risks. The Group’s risk management policy, established to identify and analyze the risks facing the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. The policy and methods for managing the risks are reviewed regularly, in order to reflect changes in market conditions and the Group's activities. The Group, through training, and management standards and procedures, aims to develop a disciplined and constructive control environment in which all the employees understand their roles and obligations. B. Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and derives mainly from trade receivables and other receivables as well as from cash and deposits in financial institutions. Accounts and other receivables The Group’s revenues are derived from a large number of widely dispersed customers in many countries. Customers include multi-national companies and manufacturing companies, as well as distributors, agriculturists, agents and agrochemical manufacturers who purchase the products either as finished goods or as intermediate products for their own requirements. The Company entered into an agreement for the sale of trade receivables in a securitization transaction, for details see note V.5.e. and f. In June 2022, a two-years agreement with an international insurance company was renewed. The amount of the insurance coverage was fixed at $150 million cumulative per year. The indemnification is limited to about 90% of the debt. The Group’s exposure to credit risk is influenced mainly by the personal characterization of each customer, and by the demographic characterization of the customer’s base, including the risk of insolvency of the industry and geographic region in which the customer operates. No single customer accounted for greater than 5% of total accounts receivable. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 177 VIII. Risk Related to Financial Instruments - (cont’d) B. Credit risk - (cont’d) The Company management has prescribed a credit policy, whereby the Company performs current ongoing credit evaluations of existing and new customers, and every new customer is examined thoroughly regarding the quality of his credit, before offering him the Group’s customary shipping and payment terms. The examination made by the Group includes an outside credit rating, if any, and in many cases, receipt of documents from an insurance company. A credit limit is prescribed for each customer, outstanding amount of the accounts receivable balance. These limits are examined annually. Customers that do not meet the Group’s criteria for credit quality may do business with the Group on the basis of a prepayment or against furnishing of appropriate collateral. Most of the Group’s customers have been doing business with it for many years. In monitoring customer credit risk, the customers were grouped according to a characterization of their credit, based on geographical location, industry, aging of receivables, maturity, and existence of past financial difficulties. Customers defined as “high risk” are classified to the restricted customer list and are supervised by management. In certain countries, mainly, Brazil, customers are required to provide property collaterals (such as agricultural lands and equipment) against execution of the sales, the value of which is examined on a current ongoing basis by the Company. In these countries, in a case of expected credit risk, the Company records a provision for the amount of the debt less the value of the collaterals provided and acts to realize the collaterals. The Group closely monitors the economic situation in Eastern Europe, specifically in Ukraine due to the conflict and in South America on an ongoing basis. The Group recognizes an impairment provision, which reflects its assessment regarding the credit risk of account receivables, Other receivables and investments on a lifetime expected credit loss basis. See also notes Ⅲ.10 – Financial instruments and Ⅲ.11 – Receivables. Cash and deposits in banks The Company holds cash and deposits in banks with a high credit rating. These banks are also required to comply with capital adequacy or maintain a level of security based on different situations. Guarantees The Company’s policy is to provide financial guarantees only to investee companies. Aging of receivables and expected credit risk Presented below is the aging of the past due trade receivables: June 30,2023 Past due by less than 90 days 1,041,318 Past due by more than 90 days 557,013 1,598,331 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 178 VIII. Risk Related to Financial Instruments - (cont’d) B. Credit risk - (cont’d) The company measure the provision for credit losses on a collective group basis, where receivables share similar credit risk characteristics based on geographical locations. The examination for expected credit losses is performed using model including aging analysis and historical loss experiences, and adjusted by the observable factors reflecting current and expected future economic conditions. When credit risk on a receivable has increased significantly since initial recognition, the group records specific provision or general provision which is determined for groups of similar assets in countries in which there are large number of customers with immaterial balances. The Group has credit risk exposures for accounts receivables amounted to RMB 8,567,344 thousand relate to category of "Lifetime expected credit losses (credit losses has not occurred)" and amounted to RMB 1,126,855 thousand related to category of "Lifetime expected credit losses (credit losses occurred)". The Group has credit risk exposures for other receivables amounted to RMB 38,236 thousand related to category of "Lifetime expected credit losses (credit losses occurred)". The credit risk exposures for all remaining balance of financial assets at amortised cost and financial assets at FVTOCI are related to "12-month expected credit losses". C. Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligation when they come due. The Group's approach to managing its liquidity risk is to assure, to the extent possible, an adequate degree of liquidity for meeting its obligations timely, under ordinary conditions and under pressure conditions, without sustaining unwanted losses or hurting its reputation. The cash-flow forecast is determined both at the level of the various entities as well as of the consolidated level. The Company examines the current forecasts of its liquidity requirements in order to ascertain that there is sufficient cash for the operating needs, including the amounts required in order to comply with the financial liabilities, while taking strict care that at all times there will be unused credit frameworks so that the Company will not exceed the credit frameworks granted to it and the financial covenants with which it is required to comply with. These forecasts take into consideration matters such as the Company’s plans to use debt for financing its activities, compliance with required financial covenants, compliance with certain liquidity ratios and compliance with external requirements such as laws or regulation. The surplus cash held by the Group subsidiaries, which is not required for financing the current ongoing operations, is invested in short-term interest-bearing investment channels. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 179 VIII. Risk Related to Financial Instruments - (cont’d) C. Liquidity risk - (cont’d) (1) Presented below are the contractual maturities of the financial liabilities at undiscounted amounts, including estimated interest payments: As at June 30,2023 Third- Fifth year Contractual Carrying First year Second year Fourth year and above Cash flow amount Non-derivative financial liabilities Short-term loans 6,445,953 - - - 6,445,9536,341,677 Bills payables 497,344 - - - 497,344497,344 Accounts payables 5,944,976 - - - 5,944,976 5,944,976 Other payables 2,489,597 - - - 2,489,5972,489,597 Other current liabilities 483,688 - - - 483,688 483,688 Debentures payable 934,238 937,974 1,787,786 7,174,504 10,834,502 8,004,835 Long-term loans 1,941,192 1,557,367 1,274,012 657,204 5,429,775 5,129,027 Long-term payables 7,233 13,324 25,436 88,402 134,395 108,886 Lease Liabilities 199,842 157,989 173,183 359,338 890,352 666,459 Long-term liability in respect of business combinations - 59,2402,764 - 62,00449,454 Other non-current liabilities 9,754 9,755 1,307,083 371,044 1,697,636 1,318,941 Derivative financial liabilities Foreign currency derivatives 735,658 - - - 735,658 735,658 19,689,475 2,735,649 4,570,264 8,650,492 35,645,880 31,770,542 D. Market risks Market risk is the risk that changes in market prices, such as foreign exchange rates, CPI, interest rates and prices of capital instruments, will affect the Group’s revenues or the value of its holdings in its financial instruments. The objective of market risk management is to manage and monitor the exposure to market risks within acceptable parameters, while optimizing the return. During the ordinary course of business, the Group purchases and sells derivatives and assumes financial liabilities for the purpose of managing market risks. (1) CPI and foreign currency risks Currency risk The Group is exposed to currency risk from its sales, purchases, expenses and loans denominated in currencies that differ from the Group’s functional currency. The main exposure is in Euro, Brazilian real, USD and in NIS. In addition, there are smaller exposures to various currencies such as the British pound, Polish zloty, Australian dollar, Indian rupee, Argentine peso, Canadian dollar, South African Rand, Ukraine Hryunia, the Turkish lira and Chinese Yuan Renminbi. The Group uses foreign currency derivatives – forward transactions and currency options – in order to hedge the cash flows risk, which derive from existing monetary assets and liabilities and anticipated sales and purchases, which may be affected by exchange rate fluctuations. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 180 VIII. Risk Related to Financial Instruments - (cont’d) D. Market risks - (cont’d) (1) CPI and foreign currency risks - (cont’d) The Group hedged a part of the estimated currency exposure to anticipate sales and purchases for the subsequent year. Likewise, the Group hedges most of its monetary assets and liabilities denominated in a non- U.S. dollar currency. The Group uses foreign currency derivatives to hedge its currency risk, mostly with maturity dates of less than one year from the reporting date. Solutions debentures are linked to the NIS-CPI and, therefore, an increase in the NIS-CPI, as well as changes in the NIS exchange rate, could cause significant exposure with respect to the subsidiary functional currency – the U.S. dollar. As of the approval date of the financial statements, the subsidiary had hedged most of its exposure deriving from issuance of the debentures, in options and forward contracts. (A) The Group’s exposure to NIS-CPI and foreign currency risk is as follows: June 30,2023 Total assets Total liabilities In USDollar 2,868,242 2,226,263 In Euro 1,559,256 2,048,441 In Brazilian real 2,496,860 482,676 CPI-linked NIS 45,205 8,169,485 In New Israeli Shekel 438,755 2,015,990 Denominated in or linked to other foreign currency 4,977,640 874,345 12,385,958 15,817,200 (B) The exposure to CPI and foreign currency risk in respect of derivatives is as follows: June 30,2023 Currency/linkage receivable Currency/linkage payable Average expiration date USD thousands Par value RMB thousands Par value Fair value Forward foreign currency USDEUR 20/10/2023340,6842,461,716 (328,803) Contracts and call options USDPLN 12/07/202318,177131,346 2,586 USDBRL 01/08/2023203,4481,470,076 (28,237) USDGBP 10/07/202313,02294,098 (5,172) USDZAR 19/08/202333,812244,316 7,164 ILSUSD 04/08/20231,418,85010,252,324 (194,263) USDOTHER 608,1924,394,672 (45,549) CPI forward contracts CPIILS 20/09/2023608,1084,394,068 48,757 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 181 VIII. Risk Related to Financial Instruments - (cont’d) D. Market risks - (cont’d) (1) CPI and foreign currency risks - (cont’d) (C) Sensitivity analysis The appreciation or depreciation of the Dollar against the following currencies as of June 30,2023 and the increase or decrease in the CPI would increase (decrease) the equity and profit or loss by the amounts presented below. This analysis assumes that all the remaining variables, among others interest rates, remains constant. June 30,2023 Decrease of 5% Increase of 5% Equity Profit (loss) Equity Profit (loss) New Israeli shekel (645,224) (667,211) 51,429 73,568 British pound 12,622 12,622 (12,622) (12,622) Euro 8,066 (38,484) (7,087) 41,087 Brazilian real 96,127 100,709 (97,004) (100,709) Polish zloty 2,468 2,468 (1,798) (1,798) South African Rand (6,378) 371 5,200 (912) Chinese Yuan Renminbi (11,105) (11,105) 15,721 15,721 CPI-linked NIS 232,100 232,100 (232,100) (232,100) (2) Interest rate risks The Group has exposure to changes in the variable interest rate. The Group has different assets and liabilities in different countries which bear interest according to the economic environment in each country. Most of the loans, other than the debentures, bear Dollar and Euro Libor interest. As a result, most of the variable interest exposure of those loans is to the Libor interest. Due to market conditions, the variable interest rates on cash are relatively low. The Company prepares a quarterly summary of exposure to a change in the Libor interest rate. As at the approval date of the financial statements, the Company had not hedged this exposure. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 182 VIII. Risk Related to Financial Instruments - (cont’d) D. Market risks - (cont’d) (2) Interest rate risks - (cont’d) (A) Type of interest The interest rate profile of the Group’s interest-bearing financial instruments was as follows: June 30,2023 Fixed-rate instruments – unlinked to the CPI Financial assets Other non-current assets 66,044 Financial liabilities Long-term loans (1) 3,845,009 Long-term payables 27,610 Other non-current liabilities 361,290 (4,167,865) Fixed-rate instruments – linked to the CPI Financial liabilities Debentures payable (1) 8,004,835 Variable-rate instruments Financial assets Cash at banks 855,860 Financial assets at fair value through profit or loss 1,930 Other current assets 56,730 Financial liabilities Short-term loans and credit from banks 6,341,677 Long-term loans (1) 1,284,018 Long-term payables 70,755 (6,781,930) (1) Including current maturities. (B) Sensitivity analysis of cash flows regarding variable-interest instruments A change of 5% in the interest rates on the reporting date would increase or reduce equity and profit or loss by the amounts presented below. This analysis assumes that all the remaining variables, among others exchange rates, remained fixed. Profit or loss Equity Increase in interest Decrease in interest Increase in interest Decrease in interest As at June 30,2023981 (997) 981 (997) ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 183 IX. Fair Value The fair value of forward contracts on foreign currency is based on their listed market price, if available. In the absence of market prices, the fair value is estimated based on the discounted difference between the stated forward price in the contract and the current forward price for the residual period until redemption, using an appropriate interest rate. The fair value of foreign currency options is based on bank quotes. The reasonableness of the quotes is evaluated through discounting future cash flow estimates, based on the conditions and duration to maturity of each contract, using the market interest rates of a similar instrument at the measurement date and in accordance with the Black & Scholes model. 1. Financial instruments measured at fair value for disclosure purposes only The carrying amount of certain financial assets and liabilities, including cash at bank and on hand, bills and accounts receivable, receivables financing, other receivables, derivatives financial assets, short-term loans, bills and accounts payable and other payable, are the same or proximate to their fair value. The following table details the carrying amount in the books and the fair value of groups of non-current financial instruments presented in the financial statements not in accordance with their fair values: June 30,2023 Carrying amount Fair value Financial assets Other non-current assets (a – Level 2) 102,84588,714 Financial liabilities Long-term loans and others (b – Level 2) 6,266,9496,015,605 Debentures (c – Level 1) 8,004,8359,105,391 a) The fair value of the other non-current assets is based on a discounted future cash flows, using the acceptable interest rate for similar investment having similar characteristics (Level 2). b) The fair value of the long-term loans and others is based on a discounted future cash flows, using the acceptable interest rate for similar loans having similar characteristics (Level 2). c) The fair value of the debentures is based on stock exchange quotes (Level 1). 2. The interest rates used in determining fair value The interest rates used to discount the estimate of anticipated cash flows are: June 30,2023 % U.S. dollar interest 5.85% - 7.03% Chinese Yuan Renminbi 1.08% - 1.96% Euro %18.3 - 3.66% ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 184 IX. Fair Value - (cont’d) 3. Fair value hierarchy of financial instruments measured at fair value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The table below presents an analysis of financial instruments measured at fair value. The various levels have been defined as follows: Level 1: quoted prices (unadjusted) in active market for identical instrument. Level 2: inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly. Level 3: inputs that are not based on observable market data (unobservable inputs). The Company’s forward contracts and options are carried at fair value and are evaluated by observable inputs and therefore are concurrent with the definition of level 2. June 30 2023 Forward contracts and options used for hedging the cash flow (Level 2) (10805, ) Forward contracts and options used for economic hedging (Level 2) (528,437) Other equity investment (Level 2) 90,6215 Receivables financing (Level 2) 125,292 Other non-current assets (Level 2) 96,464 Other (Level 2) 1,930 Financial Instrument Fair value Forward contracts Fair value measured on the basis of discounting the difference between the stated forward price in the contract and the current forward price for the residual period until redemption using an appropriate interest rates. Foreign currency options The fair value is measured based on the Black&Scholes model. No transfer between any levels of the fair value hierarchy in the reporting period. No change in the valuation techniques in the reporting period. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 185 X. Related parties and related party transactions 1. Information on parent Company Company name Registered place Business nature Registered capital (Thousand RMB) Shareholding percentage Percentage of voting rights Syngenta Group Shanghai, China Production and sales of agrochemicals, fertilizers and GM seeds 11,144,54578.47% 78.47% The Company’s ultimate controlling shareholder is Sinochem Holdings . 2. Information on the largest subsidiaries of the Company For information about the subsidiaries of the Company, refer to Note VII.1. 3. Information on largest joint ventures and associates of the Company For information about the joint ventures and associates of the Company, refer to Note V.12. Other joint ventures and associates that have related party transactions with the Group during this period or the previous periods are as follows: Name of entity Relationship with the Company Innovaroma SAJoint venture of the Group ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 186 X. Related parties and related party transactions - (cont’d) 4. Information on other related parties Name of other related parties Related party relationship Beijing Guangyuan Yinong Chemical Co., LTDCommon control Beijing Junmao Real Estate Co. Ltd. Common control Zhonglan Lianhai Design and Research Institute Common control Bluestar (Beijing) Chemical Machinery Co. Ltd. Common control Bluestar Engineering Co. Ltd. Common control China Chemical Information Center Common control China National Bluestar (Group) Co. Ltd. Common control China National Chemical Agrochemical Corporation Common control Dipagro LTDACommon control Elkem Silicones Brasil Ltd. Common control Elkem Silicones Hong Kong Co. Ltd. Common control Hangzhou (torch) Xidou door Film Industry Co., LTDCommon control Henan Junhua Development Co. Ltd. Common control Jiangsu Huaihe Chemical Co. Ltd. Common control Jiangsu Ruixiang Chemical Co., LTDCommon control Jiangsu Yangnong Chemical Co. Ltd. Common control Jiangsu Youjia Plant protection Co., LTDCommon control Jiangsu Youshi Chemical Co., LTDCommon control Jingzhou Sanonda Holdings Co. Ltd. Common control (MAP) Sinochem Modern Agriculture Co.LTDXinjiang Branch Common control (MAP) Sinochem Modern Agriculture Co.LTDYichang Branch Common control OOOSyngenta Common control P.T. Syngenta Indonesia Common control PTSyngenta Seed Indonesia Common control Shandong Dacheng Agrochemical Company Limited Common control Shenyang Chemical Co., Ltd. Common control Shenyang Shenhua Institute Testing Technology Co. Ltd. Common control Sinochem (Hainan) Agroecology Co. Common control Sinochem (Linyi) Crop Nutrition Co. Ltd Common control Sinochem Agriculture (Xinjiang) Biotechnology Co. Ltd. Common control Sino MAPCommon control Sinochem Agro Co. Ltd. Common control Sinochem Chemical Science and Technology Research Institute Co., LTDCommon control Sinochem Crop Protection Products Co. LTDCommon control Sinochem Fertilizer Company Limited Common control Sinochem Fertilizer Company Limited Fujian Branch Common control ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 187 X. Related parties and related party transactions - (cont’d) 4. Information on other related parties - (cont’d) Name of other related parties Related party relationship Sinochem Fertilizer Company Limited Guangxi Branch Common control Sinochem Fertilizer Company Limited Hebei Branch Common control Sinochem Fertilizer Company Limited Jiangsu Branch Common control Sinochem Fertilizer Company Limited Jilin Branch Common control Sinochem Fertilizer Company Limited Northwest Branch Common control Sinochem Fertilizer Company Limited Shandong Branch Common control Sinochem Fertilizer Company Limited Southwest Branch Common control Sinochem Information Technology Co. Ltd. Common control Sinochem International Crop Care (Overseas) Pte. Ltd. Common control Sinochem Innovation (Beijing) Technology Research Institute Co., Ltd. Common control Sinochem Lantian Fluorine Materials Co. Ltd. Common control Sinochem Modern Agriculture (Gansu) Co. LTDCommon control Sinochem Modern Agriculture (Guangxi) Co. LTDCommon control Sinochem Modern Agriculture (Hunan) Co. LTDCommon control Sinochem Modern Agriculture (Inner Mongolia) Co. LTDCommon control Sinochem Modern Agriculture (Jiangsu) Co. LTDCommon control Sinochem Modern Agriculture (Xinjiang) Co. LTDCommon control Sinochem Modern Agriculture Anhui Co. LTDCommon control Sinochem Modern Agriculture Sichuan Co. LTDCommon control Syngenta (China) Investment Company Ltd Common control Syngenta Agro (Argentina) S.A. Common control Syngenta Agro AGCommon control Syngenta Agro d.o.o. Common control Syngenta Agro GmbHCommon control Syngenta Agro SA de CVCommon control Syngenta Australia Pty Ltd Common control Syngenta Canada Inc Common control Syngenta Comercial Agricola Common control Syngenta Crop Protection AGCommon control Syngenta Crop Protection BVCommon control Syngenta Crop Protection LLCCommon control Syngenta Crop Protection Ltd. Common control Syngenta Crop Protection SACommon control Syngenta Czech s.r.o. Common control Syngenta Espaa S.A. Common control Syngenta France S.A.SCommon control Syngenta A.G. Common control Syngenta Group Saturn (NL) B.V. Common control Syngenta Hellas AEBECommon control Syngenta India Ltd Common control Syngenta Italia SpACommon control Syngenta Nantong Crop Protection Co., LTDCommon control Syngenta Protecao de Cultivos Ltda Common control Syngenta S.A. Common control Syngenta Seeds LTDACommon control Syngenta Slovakia s.r.o. Common control ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 188 X. Related parties and related party transactions - (cont’d) 4. Information on other related parties - (cont’d) Name of other related parties Related party relationship Syngenta Tarim Sanay ve Ticaret ASCommon control Syngenta Vietnam Limited Common control Syngenta Zambia Limited Common control Tov Syngenta Common control Valagro S.p.A. Common control China Bluestar Chengrand Research Institute Chemical Industry Common control Zhonglan International Chemical Co. Ltd. Common control Ningxia Ruitai Technology Co. Ltd. Common control Sinochem Finance Corporation Common control Jiangsu Huifeng Agrochemical Co. Ltd. Minority shareholder and its subsidiary Jiangsu Huifeng Biological Agriculture Co., Ltd Minority shareholder and its subsidiary Nongyi Net (Yangling) e-commerce Co., Ltd. Minority shareholder and its subsidiary Shanghai focus supply chain Co., Ltd Minority shareholder and its subsidiary Shanghai nengjianyuan Biological Agriculture Co., Ltd Minority shareholder and its subsidiary ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 189 X. Related parties and related party transactions - (cont’d) 5. Transactions and balances with related parties (1) Transactions with related parties Six months ended June 30 Type of purchase Related Party Relationship 20232022 Summary of purchase of goods/services: Purchase of goods/services received Common control under Sinochem Holdings 982,940 1,567,313 Minority shareholder and its subsidiary 7,4783,232 Purchase of fixed assets and other assets Common control under Sinochem Holdings 3968,474 Lease expenses Common control under Sinochem Holdings 97117 Minority shareholder and its subsidiary 2,668410 Summary of Sales of goods: Sale of goods/ Service rendered Common control under Sinochem Holdings 920,513 987,560 Joint venture 34,97951,757 Minority shareholder and its subsidiary 38,840 44,658 Lease income Minority shareholder and its subsidiary 631 - (2) Guarantees The Group as the guarantee receiver Guarantee provider Amount of guaranteed loan Inception date of guaranty Maturity date of guaranty Guaranty completed (Y / N) Parent company 323,00021/04/202120/04/2028 N 71,10801/06/202131/05/2028 N * During the reporting period, the Company paid a guarantee fee amounting to 219 thousand RMB (20221-6: 227 thousand RMB) to the parent company. (3) Remuneration of key management personnel and directors Periods ended June 30 20232022 Remuneration of key management personnel and directors 33,77352,977 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 190 X. Related parties and related party transactions - (cont’d) 5. Transactions and balances with related parties - (cont'd) (4) Receivables from and payables to related parties (including loans) Receivable Items June 30 December 31 20232022 Items Related Party Relationship Book Balance Expected credit losses Book Balance Expected credit losses Trade receivables Common control under Sinochem Holdings 153,673 - 356,708 Joint venture 16,273 - 25,727 - Minority shareholder and its subsidiary 24,839 - 13,172 - Other receivables Common control under Sinochem Holdings - Other Non-Current assets Common control under Sinochem Holdings 37 Prepayments Common control under Sinochem Holdings 9,685 - 34,393 - Payable Items June 30 December 31 Items Related Party Relationship 20232022 Trade payables Common control under Sinochem Holdings 486,257426,454 Minority shareholder and its subsidiary 2,899 - Other payables Common control under Sinochem Holdings 21,85024,974 Short-term loans * Common control under Sinochem Holdings 2,167,740696,459 Other non-current liabilities * Common control under Sinochem Holdings 361,290348,231 * The liabilities are loans from a related party, the interest expenses for the year ended June 30,2023 is 43,976 thousand RMB (six months ended June 30,2022: 3,033 thousand RMB ). On October 27,2021, the Board of Directors first approved (following the approval of the Company’s Audit Committee dated October 25,2021) the Company, through one of its subsidiaries, entering into committed credit facilities agreements in the aggregate amount of $100 million (RMB 696 million) on market terms with Syngenta Group, or any of its subsidiaries. Following the approvals of the Company’s requisite organs, these facilities were amended and further increased in December 2022 and in April 2023, to an aggregate amount of $400 million (RMB 2,890 million). As of 30 June 2023, a total of $350 million (RMB 2,529 million) was utilized. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 191 X. Related parties and related party transactions - (cont’d) 5. Transactions and balances with related parties - (cont'd) (5) Other related party transactions The closing balance of bank deposit in ChemChina Finance Corporation was nil thousand RMB (31.12.22: nil) Interest income of bank deposit for the current period was nil thousand RMB (amount for six months ended June 30,2022 was 90 thousand RMB). The closing balance of bank deposit in Sinochem Finance Corporation was 103,987 thousand RMB (31.12.22: 417,661) Interest income of bank deposit for the current period was 2,802 thousand RMB (amount for six months ended June 30,2022 was 976 thousand RMB ). The closing balance of a loan received from Sinochem Finance Corporation was 50,000 thousand RMB (31.12.22: nil) Interest expenses in the current period was 137 thousand RMB (amount for six months ended June 30,2022 was nil thousand RMB).ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 192 XI. Commitments and contingencies 1. Significant commitments June 30 December 31 20232022 Investment in Fixed assets 439,492429,862 2. Commitments and Contingent Liabilities On December 10,2018 the 9th meeting of the 8th session of the Board of Directors of the Company approved the extension of the engagement in annual liability insurance policies for directors, supervisors and senior officers of the Company (“D&OLiability Insurance) as originally approved by the 22nd meeting of the 7th session of Board of Directors and the 4th Interim Shareholders Meeting in 2017, and authorized the management to annually deal with all matters relating to renewal/extension of the customary D&OLiability Insurance policies, with up to 20% flexibility in the relevant terms of the original policy. On December 26,2018 the 3rd Interim Shareholders Meeting approved the above resolution. The current D&OLiability Insurance was renewed for an additional one-year term commencing November 15,2022. Environmental protection The manufacturing processes of the Company and the products it produces and market, entail environmental risks that impact the environment. The Company invests substantial resources in order to comply with the applicable environmental laws and attempts to prevent or minimize the environmental risks that could occur as a result of its activities. To the best of the Company’s knowledge, at the balance sheet date, there are no material environmental issues relating to the Company, there are no material administrative penalties or investigations related to environment, health and safety imposed or initiated by regulatory authorities, and none of the material permits and licenses regarding environmental issues required for the Company’s day to day operations have been revoked. Other For two of the Company’s production sites in China that have been in the process of relocation, Jingzhou site in Jingzhou, Hubei Province completed its relocation and upgrade program and is now at high level of opertion and Anpon old site in Huai’An, Jiangsu Province is in the process of relocating to the new site. As part of the relocation process, the Company executed in previous years a reduction plan to reduce the number of employees during the relocation period. Claims against subsidiaries In the ordinary course of business, legal claims were filed against subsidiaries, including claims for patent infringement. The Company, inter alia, like other companies operating in the crop protection market, is exposed to class actions for large amounts, which it must defend against while incurring considerable costs, even if these claims have no basis in the first place. In the opinion of the Company’s management, which is based, inter alia, on the opinions of its legal advisors regarding the prospects of the proceedings, the financial statements include adequate provisions where necessary to cover the exposure resulting from the claims. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 193 XI. Commitments and contingencies - (cont’d) 2. Commitments and Contingent Liabilities - (cont’d) Claims against subsidiaries (cont’d) On October 20,2020, a claim and a motion for its approval as a class action (the “Motion”) was filed against Monsanto Company and Bayer AG (the “Manufacturers”) as well as against ADAMAAgan Ltd., a wholly-owned subsidiary of Solutions, with respect to an herbicide bearing the brand name Roundup, which is produced by the Manufacturers and distributed in Israel in small quantities by Solutions’ subsidiary. The applicants argue that the product allegedly poses a risk to users or those who have been exposed to it. Solutions and its subsidiary reject the allegations against the subsidiary in the Motion and in the statement of claim. Based on the opinion of Solutions’ external counsels given this preliminary stage, as of the date of the financial statements the Motion and claim are not expected to have any non-negligible effect on the Company’s financial results. In addition, and as Solutions is an authorized distributor of the Manufactures, the Manufactures undertook to fully indemnify, defend and hold harmless ADAMAAgan Ltd., for any monetary compensation or any other remedy it will have to make in connection with the Motion. In June 2021, a lawsuit was filed against a subsidiary of the Company, alleging two patents owned by a large competitor of the Company, have been infringed by such subsidiary. Among the claims, the plaintiff seeks preliminary and permanent injunctions to prevent the subsidiary from manufacturing, using or commercializing a product that allegedly infringes the plaintiff’s patents, and seeks actual damages and profits loss. The said preliminary injunctions were granted by the court in favor of the plaintiff. The subsidiary has filed appeals against such preliminary injunctions, which were rejected. Prior to such claims, and on-going, the subsidiary filed several lawsuits against the said plaintiff seeking to declare the said patents are invalid and the subsidiary does not infringe them. In May 2023, an additional lawsuit (including a preliminary injunction) was filed by the same large competitor against said subsidiary, alleging infringement of the same two patents for a different product. The said preliminary injunction was rejected by the court, and plaintiff’s appeals with respect thereto are pending. All these lawsuits are pending as of the approval date of the financial statements. At this stage, the claims filed by the plaintiff are not expected to have a material effect on the Company. Various immaterial claims have been filed against Group companies in courts throughout the world, in immaterial amounts, for causes of action primarily involving employee-employer relations and various civil claims, for which the Company did not record a provision in the financial statements. The claims that in the estimation of Company’s management, based on its legal advisors’ opinion, have lower chances of succeeding than being rejected, amount to a negligible amount. Furthermore, claims were filed against the Company for product liability damages, for which the Company has adequate insurance coverage, such that the Company’s exposure in respect thereof is limited to the deductible amount or the amount thereof does not exceed the deductible amount. XII. Events subsequent to the balance sheet date The Company is not aware of any events subsequent to the balance sheet date. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 194 XIII. Share-based Payments 1. In February 2019, the remuneration committee and Solutions Board of Directors (as well as the General Meeting with respect to theformer CEO and Vice President who also serves as a director) approved the allocation of 77,864,910 phantom warrants to officers and employees in accordance with the long-term phantom compensation plan (hereinafter - "the 2019 Plan"), out of which 75,814,897 phantom warrants were granted at the grant date of February 21,2019. During 2019,1,206,081 additional Phantom warrants were granted. The warrants will vest in four equal portions, where the first and second quarters are exercisable after two years, the third quarter after three years and the fourth quarter after four years from January 1,2019. The warrants will be exercisable, in whole or in part, in accordance with the terms of the 2019 plan, and subject to achieving financial targets as determined in the plan. The warrants will be exercisable until the end of 2025. Upon exercise of each warrant, the offeree will be entitled to receive cash payment equal to the difference between the base price as determined at the time of the grant and the closing price of one share of the Company on the Shenzhen Stock Exchange, as it will be on the exercise date up, to the ceiling that was determined under the plan. The fair value of the granted warrants as aforesaid was estimated using the binomial pricing model. The cost of the benefit embodied in the warrants that were allocated as aforesaid, based on the fair value at the grant date, amounted to a total of approximately 186 million RMB. The liability at the end of the reporting period was recorded according to the vesting period as determined in the plan, taking into account the extent of the service that the employees provided until that date and the Company’s share price at the end of the reporting period. Statement of share based payments in the period Phantom warrants Total number of Phantom warrants at the beginning of the period 30,196,487 Total number of Phantom warrants granted in current period - Total number of Phantom warrants exercised in current period (198,228) Total number of Phantom warrants forfeited in current period (632,648) Total number of Phantom warrants at the end of the period 29,365,611 The exercise prices and the remainder of the contractual period for Phantom warrants outstanding at the end of period RMB 9.87 – 10.85 2.5 years The parameters used in implementing the model at the grant date are as follows: Stock price (RMB) 10.85 Exercise increment (RMB) 10.03/10.85 Expected volatility 43.97% Risk-free interest rate 3.06% Economic value as of February 21,2019 (in thousands RMB) 186,206 The methods for the determination of the fair value of liabilities arising from cash-settled share-based payments The binomial pricing model Accumulated amount of liabilities arising from cash-settled share-based payments (in thousands RMB) 32,977 Expenses arising from cash-settled share-based payments in current period (in thousands RMB) (20,682) ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 195 XIII. Share-based Payments - (cont’d) 2. In September 2019, the remuneration committee and Solutions Board of Directors (and the General Meeting with respect to the CEO and Vice President who also serves as a director) approved the cancellation of 2017 Plan against the allocation of 28,258,248 warrants in accordance with the long-term phantom compensation plan (hereinafter - "The Alternative Warrants" and "The Alternative Plan"). The cancellation and allocation date is September 26,2019. During 2019, an additional 90,130 Alternative Phantom Warrants were granted. The alternative warrants will vest in four equal portions, where the first quarter is exercisable after one year, the second quarter after two years, the third quarter after three years and the fourth quarter after four years from October 1,2019. The warrants will be exercisable, in whole or in part, in accordance with the terms of the Alternative Plan, and subject to achieving financial targets as determined in the plan. The warrants will be exercisable until October 1,2026. Upon exercise of each warrant, the offeree will be entitled to receive cash payment equal to the difference between the base price as determined at the time of the grant and the closing price of one share of the parent company on the Shenzhen Stock Exchange, as it will be on the exercise date up to the ceiling that was determined under the plan. The fair value of the total granted alternative warrants at the allocated date is equal to the fair value of the total warrants canceled from the 2017 plan. The cost of the benefit embodied in the warrants that were allocated as aforesaid, based on the fair value at the cancellation and allocation date, amounted to a total of approximately 69 million RMB. The liability in the financial statements at the end of the reporting period was recorded at the fair value estimated using the binomial option pricing model and by the vesting period from the original grant date of the 2017 plan to the end of the service period determined by the alternative plan, taking into account the extent of the service that the employees provided until that date and the stock price at the reporting date. Statement of share based payments in the period Phantom warrants Changes in the number of 2017 Plan: Total number of Phantom warrants at the beginning of the period 12,172,969 Total number of Phantom warrants granted in current period - Total number of Phantom warrants exercised in current period (82,739) Total number of Phantom warrants forfeited in current period (317,967) Total number of Phantom warrants at the end of the period 11,772,263 The range of the exercise prices and the remainder of the contractual period for Phantom warrants outstanding at the end of period RMB 9.37 – 9.43 3.25 years ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 196 XIII. Share-based Payments - (cont’d) The parameters used in implementing the model at the grant date are as follows: Stock price (RMB) 9.23 Exercise increment (RMB) 9.43 Expected volatility 40.29% Risk-free interest rate 3.14% Economic value as of September 26,2019 (in thousands RMB) 68,836 The methods for the determination of the fair value of liabilities arising from cash-settled share-based payments related to the alternative plan The binomial pricing model Accumulated amount of liabilities arising from cash-settled share-based payments related to the alternative plan (in thousands RMB) 16,794 Expenses (income) arising from cash-settled share-based payments in current period related to the alternative plan (in thousands RMB) (8,288) XIV. Other significant items 1. Segment reporting The Company presents its segment reporting based on a format that is based on a breakdown by business segments: Crop Protection (Agro) This is the main area of the Company’s operations and includes the manufacture and marketing of conventional agrochemical products. Intermediates and ingredients This field of activity includes a large number of sub-fields, including: Lycopan (an oxidization retardant), aromatic products, and other chemicals. It combines all the Company’s activities not included in the Crop Protection products segment. Segment results reported to the chief operating decision maker include items directly attributable to a segment as well as items that can be allocated on a reasonable basis. Unallocated items comprise mainly financing expenses, net, gains from changes in fair value, investment income and tax expenses. All assets and liabilities that can be attributed to a specific segment were allocated accordingly. Attributed assets include: accounts and bills receivables, receivables financing, inventory, fixed assets, right-of-use assets, construction in progress, intangible assets, goodwill, non-current trade receivables and long-term equity investments. Attributed liabilities include account payables, bill payablesand lease liabilities. All other assets and liabilities which are not attributable to a specific segment are presented as unallocated assets and liabilities. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 197 XIV. Other significant items - (cont'd) 1. Segment reporting - (cont’d) Information regarding the results and assets and liabilities of each reportable segment is included below: Crop Protection Intermediates and ingredients Elimination among segments Total Six months ended June 30 Six months ended June 30 Six months ended June 30 Six months ended June 30 20232022 20232022 20232022 20232022 Operating income from external customers 15,855,16516,842,6171,398,0361,953,211 - - 17,253,20118,795,828 Inter-segment operating income - - 709870 (709) (870) - - Interest in the profit or loss of associates and joint ventures - - 3,4394,706 - - 3,4394,706 Segment's results 954,0271,385,155 (41,194) 351,710 - - 912,8331,736,865 Financial expenses 455,855 (438,224) Loss from changes in fair value (782,218) (1,341,717) Investment income 6,651 - Profit before tax (318,589) 833,374 Income tax income (expense) 76,433 (101,276) Net profit (242,156) 732,098 Crop Protection Intermediates and ingredients Unallocated assets and liabilities Total June 30 December 31 June 30 December 31 June 30 December 31 June 30 December 31 20232022 20232022 20232022 20232022 Total assets 48,359,45347,113,3462,440,3612,520,0009,102,808 8,347,14359,901,90257,980,489 Total liabilities 6,286,7758,689,479123,512383,64029,316,10525,782,71536,257,39234,855,834 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 198 XIV. Other significant items - (cont'd) 1. Segment reporting - (cont’d) Geographic information The following tables sets out information about the geographical segments of the Group’s operating income based on the location of customers (sales target) and the Group's non-current assets (including mainly fixed assets, right-of-use assets, construction in progress, investment properties intangible assets and goodwill). In the case of investment property, fixed assets, right of used assets and construction in progress, the geographical location of the assets is based on its physical location. In case of intangible assets and goodwill, the geographical location of the company which owns the assets. Operating income from external customers Six months ended June 30 20232022 Europe, Africa and Middle East 5,286,8565,136,114 North America 3,018,6173,639,600 Latin America 3,902,2103,993,953 Asia Pacific 5,045,5186,026,161 17,253,20118,795,828 Specified non-current assets June 30 December 31 20232022 Europe, Africa and Middle East 14,141,27013,365,820 North America 1,346,6401,184,067 Latin America 2,589,1952,482,569 Asia Pacific 5,996,8875,862,043 24,073,99222,894,499 * As of 2023, the India, Middle East & Africa (IMA) region has been reorganized such that the countries formerly included in this region are now included in the Europe region (renamed EAME) or in the Asia Pacific region. The information for 2022 was re-classified accordingly. 2. The dependency on major customers No single customer's proportion of the total amount of sales is over 10%. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 199 XIV. Other significant items - (cont'd) 3. Calculation of Earnings per share and Diluted earnings per share Amount for the current period Amount for the prior period Net profit (loss) from continuing operations attributable to ordinary shareholders (242,156) 732,098 Shares Amount for the current period Amount for the prior period Number of ordinary shares outstanding at the beginning of the year 2,329,811,7662,329,811,766 Add: weighted average number of ordinary shares issued during the year - - Less: weighted average number of ordinary shares repurchased during the year - - Weighted average number of ordinary shares outstanding at the end of the year 2,329,811,7662,329,811,766 Amount for the current period Amount for the prior period Calculated based on net profit attributable to ordinary shareholders Basic earnings per share (0.10) 0.31 Diluted earnings per share N/AN/A Calculated based on net profit from continuing operations attributable to ordinary shareholders: Basic earnings per share (0.10) 0.31 Diluted earnings per share N/AN/A Calculated based on net profit from discontinued operations attributable to ordinary shareholders: Basic earnings per share N/AN/A Diluted earnings per share N/AN/A ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 200 XV. Notes to major items in the Company's financial statements 1. Cash at bank and on hand June 30 December 31 20232022 Deposits in banks 121,346258,330 Other cash and bank balances 3,21012,750 124,556271,080 As at June 30,2023, restricted cash and bank balances was 3,210 thousand RMB (as at December 31,2022: 12,750 thousand RMB). 2. Accounts receivable a. By category June 30,2023 Book value Provision for expected credit losses Amount Percentage (%) Amount Percentage (%) Carrying amount Account receivables assessed individually for impairment 13,893113,893100 - Account receivables assessed collectively for impairment 1,031,4619921 - 1,031,440 1,045,35410013,91411,031,440 December 31,2022 Book value Provision for expected credit losses Amount Percentage (%) Amount Percentage (%) Carrying amount Account receivables assessed individually for impairment 13,893213,893100 - Account receivables assessed collectively for impairment 758,471989 - 758,462 772,36410013,9022758,462 b. Aging analysis June 30,2023 Within 1 year (inclusive) 1,031,461 Over 1 year but within 2 years - Over 2 years but within 3 years - Over 3 years but within 4 years 15 Over 4 years but within 5 years 1 Over 5 years 13,877 1,045,354 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 201 XV. Notes to major items in the Company's financial statements - (cont'd) 2. Accounts receivable - (cont'd) c. Addition, written-back and written-off of provision for expected credit losses during the period Six months ended June 30,2023 Balance as of January 113,902 Addition during the year, net 21 Write back during the year (9) Write-off during the year - Exchange rate effect - Balance as of June 3013,914 d. Five largest accounts receivable at June 30,2023: Name Closing balance Proportion of Accounts receivable (%) Allowance of expected credit losses Party 1815,62378 - Party 2114,00911 - Party 320,5202 - Party 418,9652 - Party 518,0562 - 987,17395 - 3. Receivable financing June 30 December 31 20232022 Bank acceptance draft 7,44642,596 7,44642,596 As at June 30,2023, bank acceptance endorsed but not yet due amounts to 218,243 thousand RMB. ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 202 XV. Notes to major items in the Company's financial statements - (cont'd) 4. Other Receivables June 30 December 31 20232022 Other receivables 11,61111,611 11,61111,611 (1) Other receivables a. Other receivables by categories June 30 December 31 20232022 Other 17,53017,633 Provision for expected credit losses (5,919) (6,022) 11,61111,611 b. Other receivables by aging June 30,2023 Within 1 year (inclusive) - Over 1 year but within 2 years 113 Over 2 years but within 3 years 634 Over 3 years but within 4 years* 11,830 Over 4 years but within 5 years - Over 5 years 4,953 17,530 * Include intergroup balance with Anpon ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 203 XV. Notes to major items in the Company's financial statements - (cont'd) 4. Other Receivables - (cont'd) (2) Other receivables - (cont'd) c. Additions, recovery or reversal and written-off of provision for expected credit losses during the period: Period ended June 30,2023 Balance as of January 1,2023 6,022 Addition during the period - Written back during the period (103) Write-off during the period - Balance as of June 30,2023 5,919 d. Five largest other receivables at June 302023: Name Closing balance Proportion of other receivables (%) Credit loss provision Party 1 11,61166 - Party 2 3,125183,125 Party 35483548 Party 45433543 Party 52371237 16,064914,453 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 204 XV. Notes to major items in the Company's financial statements - (cont'd) 5. Long-term equity investments June 30,2023 December 31,2022 Amount balance Impairment loss Book value Amount balance Impairment loss Book value Invest in subsidiaries 17,511,352 - 17,511,35217,511,352 - 17,511,352 17,511,352 - 17,511,35217,511,352 - 17,511,352 Investments in subsidiaries Invested unit Opening balance Increase Decrease Closing balance Current provision Impairment loss Balance provision Impairment loss ADAMAAgricultural Solutions Ltd.15,890,213 - - 15,890,213 - - Adama Anpon (Jiangsu) Ltd.450,449 - - 450,449 - - ADAMAHiufeng (Jiangsu) Co. Ltd.848,140 - - 848,140 - - Hubei Sanonda Foreign Trade Co. Ltd.11,993 - - 11,993 - - Adama Huifeng (shanghai) Agricultural Technology Co., Ltd 310,557 - - 310,557 - - 17,511,352 - - 17,511,352 - - 6. Operating Income and operating costs Six months ended June 30,2023 Six months ended June 30,2022 Revenue Operating costs Revenue Operating costs Main operations ,073,326184,30681,162,352870,245 Other operations 0,3832,932822,74211,173 ,093,709193,23881,185,094881,418 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 205 XV. Notes to major items in the Company's financial statements - (cont'd) 7. Notes to items in the cash flow statements (1) Other cash received relevant to operating activities Six months ended June 30,2023 Six months ended June 30,2022 Interest income ,96413,340 Government subsidies ,766713,377 Other 5,92916,385 5,659223,102 (2) Other cash paid relevant to operating activities Six months ended June 30,2023 Six months ended June 30,2022 Professional services 1,288737,608 Transportation and Commissions 26,15126,622 Other 14,6006,697 112,03970,927 (3) Other cash received relevant to investing activities Six months ended June 30,2023 Six months ended June 30,2022 Loans 2,850150,000 2,850150,000 (4) Other cash paid relevant to investing activities Six months ended June 30,2023 Six months ended June 30,2022 Loans - 250,000 - 250,000 (5) Other cash received relevant to financing activities Six months ended June 30,2023 Six months ended June 30,2022 Deposit for issuing bills payables 12,7506,124 12,7506,124 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 206 XV. Notes to major items in the Company's financial statements - (cont'd) (6) Other cash paid relevant to financing activities: Six months ended June 30,2023 Six months ended June 30,2022 Deposit for issuing bills payable 3,21018,741 Other 627 - 3,83718,741 8. Supplementary information to cash flow statement (1) Reconciliation of net profit to net cash flows generated from operating activities: Six months ended June 30 20232022 Net profit 93,632245,802 Add: Assets impairment loss 3,067 (3,142 ) Credit impairment loss (91) 141 Depreciation of fixed assets and investment property 114,931100,485 Depreciation of-right-of use assets 1,1771,434 Amortization of intangible assets 6,0335,727 Gain on disposal of fixed assets, intangible assets and other long-term assets 472 (59,538 ) Financial expenses 2,66128,333 Decrease in deferred income tax assets 20,379 - Decrease (increase) in inventory 77,725 (107,348) Decrease in accounts receivable from operating activities (327,200 ) (287,302 ) Increase (decrease) in payables from operating activities 56,446) ) 137,955 Net cash flows generated from operating activities (63,660) 62,547 (2) Net increase in cash and cash equivalents Six months ended June 30 02322022 Closing balance of cash 21,3461276,501 Less: Opening balance of cash 58,3302259,434 Net increase in cash and cash equivalents 136,984)( 17,067 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 207 XV. Notes to major items in the Company's financial statements - (cont'd) 9. Related parties and related parties transactions (1) Information on parent Company Company name Registered place Business nature Registered capital (Thousand RMB) Shareholding percentage Percentage of voting rights Syngenta Group Shanghai, China Production and sales of agrochemicals, fertilizers and GM seeds 11,144,54578.47% 78.47% The ultimate controlling shareholder is Sinochem Holdings . (2) Information on the subsidiaries of the Company For information about the subsidiaries of the Company, refer to Note VII.1. (3) Transactions with related parties a. Transactions of goods and services Six months ended June 30 20232022 Summary of Purchase of goods/services received: Related Party Relationship Purchase of goods/services received Common control under ChemChina 50,95067,101 Subsidiary 53,85147,970 Purchase of fixed assets and other assets Common control under ChemChina Holdings - 2,569 Summary of Sales of goods: Sale of goods Common control under ChemChina 2,553 20,068 Subsidiary 499,786497,938 Sale of raw materials Subsidiary 1641,003 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 208 XV. Notes to major items in the Company's financial statements - (cont'd) 9. Transactions and balances with related parties - (cont'd) (3) Transactions with related parties - (cont'd) b. Guarantees The Company as the guarantor Amount of guaranteed loan Inception date of guaranty Maturity date of guaranty Guaranty completed (Y/ N) 40,000 2022.01.18 2023.01.17 Y Subsidiary 30,000 2022.03.30 2023.03.29 Y 38,000 2021.12.01 2024.11.28 N 20,000 2022.12.16 2023.12.12 N 35,000 2022.01.01 2025.11.28 N 21,000 2022.02.28 2027.11.28 N 14,000 2022.03.28 2027.11.28 N 7,500 2022.05.20 2027.11.28 N 23,500 2022.06.26 2027.11.28 N 10,000 2022.10.31 2027.11.28 N 11,000 2022.11.30 2027.11.28 N 10,000 2023.01.12 2025.06.20 N 20,000 2022.11.17 2024.12.20 N 12,000 2023.04.03 2025.06.20 N 4,000 2022.01.25 2026.09.28 N 3,900 2022.02.28 2026.09.28 N 8,100 2022.07.12 2026.09.28 N 4,400 2023.04.13 2026.09.28 N 10,000 2022.08.11 2028.06.22 N 10,000 2022.08.31 2028.06.22 N 11,000 2022.10.28 202706.22 N 25,000 2022.11.23 2026.12.22 N 10,000 2023.01.16 2026.06.22 N 14,000 2023.04.04 2026.06.22 N 2,000 2023.04.26 2028.05.05 N ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 209 XV. Notes to major items in the Company's financial statements - (cont'd) 9. Transactions and balances with related parties - (cont'd) (3) Transactions with related parties - (cont'd) b. Guarantees - (cont'd) The Company as the guarantee receiver Guarantee provider Amount of guaranteed loan Inception date of guaranty Maturity date of guaranty Guaranty completed (Y / N) Parent company 323,00021/04/202120/04/2028 N 71,10801/06/202131/05/2028 N During the reporting period, the Company paid a guarantee fee amounting to 219 thousand RMB (2022.1-6: 227) to the parent company. c. Intercompany borrowings/lending Related party Borrowing/ Lending amount Commencement date Termination date Balance at year end Note Lending Subsidiary 50,0002022.52023.1250,000 Fixed rate at 2.4% Subsidiary 40,0002022.62023.1240,000 Fixed rate at 2.4% Subsidiary 35,0002022.62023.1235,000 Fixed rate at 2.4% Subsidiary 125,0002022.62024.05125,000 Fixed rate at 2.4% ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 210 XV. Notes to major items in the Company's financial statements - (cont'd) 9. Transactions and balances with related parties - (cont'd) (3) Transactions with related parties - (cont'd) d. Receivables from and payables to related parties (including loans) Receivable Items June 30 December 31 20232022 Items Related Party Relationship Book Balance Expected credit losses Book Balance Expected credit losses Trade receivables Subsidiary 834,588 - 548,601 - Non-current assets within one year Subsidiary 125,000 - 125,000 - Other non-current assets Subsidiary 125,000 - 125,000 - Other receivables Subsidiary 11,611 - 11,611 - Trade receivables Common control under Sinochem Holding 955 Prepayments Common control under Sinochem Holding 1,311 Other non-current assets Common control under Sinochem Holding 37 Payable Items June 30 December 31 Items Related Party Relationship 20232022 Trade payables Subsidiary 195,686 Trade payables Common control under Sinochem Holdings 44,87746,152 Other payables Subsidiary 311,065395,152 Common control under Sinochem Holdings 327700 ADAMALtd. (Expressed in RMB '000) Notes to the Financial Statements 211 XV. Notes to major items in the Company's financial statements - (cont'd) 9. Transactions and balances with related parties - (cont'd) (3) Transactions with related parties - (cont'd) e. Other related party transactions The closing balance of bank deposit in ChemChina Finance Corporation was nil ( 231.12.2: nil). Interest income of bank deposit for the current period was nil (amount for period ended June 30,2022 was 67 thousand RMB). The closing balance of bank deposit in SinoChem Finance Corporation was 42,360 thousand RMB ( 231.12.2: 202,615 thousand RMB) Interest income of bank deposit for the current period was 1,490 thousand RMB (amount for period ended June 30,2022 was 493 thousand RMB). ADAMALtd. Semi-Annual Report 2023 212 Supplementary information (Expressed in RMB '000) 1. Extraordinary Gain and Loss Six months ended June 30,2023 Disposal of non-current assets 23,402 Government grants recognized through profit or loss 19,053 Recovery or reversal of expected credit losses which is assessed individually during the years 27,325 Other non-operating income or expenses other than the above 13,569 Other profit or loss that meets the definition of non-recurring profit or loss (2,751) Tax effect (17,788) 62,810 2. Return on net assets and earnings per share (“EPS”) The information of Return on net assets and EPS is in accordance with the Preparation Rules for Information Disclosure by Companies Offering Securities to the Public No.9 – Calculation and Disclosure of Return on net assets and Earnings per share (2010 Amendment) issued by China Securities Regulatory Commission. Profit during the reporting period Weighted average rate of return on net assets Basic EPS (RMB/share) Diluted EPS (RMB/share) Net profit attributable to ordinary shareholders of the Company (1.03) (0.10) N/A Net profit after deduction of extraordinary gains/losses attributable to ordinary shareholders of the Company (1.30) (0.13) N/A ADAMALtd. Legal Representative：Steve Hawkins August 28,2023