ADAMALtd.FINANCIALSTATEMENTSANDAUDITOR’SREPORTFORTHEYEARENDED31DECEMBER2025

ADAMALtd.FINANCIALSTATEMENTSANDAUDITOR'SREPORTFORTHEYEARENDED31DECEMBER2025

CONTENTSPAGESAUDITOR'SREPORT1-7THECONSOLIDATEDANDCOMPANY'SBALANCESHEETS8-10THECONSOLIDATEDANDCOMPANY'SINCOMESTATEMENTS11-12THECONSOLIDATEDANDCOMPANY'SCASHFLOWSTATEMENTS13-14THECONSOLIDATEDANDCOMPANY'SSTATEMENTSOFCHANGESINSHAREHOLDERS'EQUITY15-17NOTESTOTHEFINANCIALSTATEMENTS18–126

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AUDITOR'SREPORT

KPMGHuazhenShenZiNo.2605093TotheshareholdersofADAMALtd.:

I.OpinionWehaveauditedtheaccompanyingfinancialstatementsofADAMALtd.(hereinafterreferredtoasthe"Adama"),whichcomprisetheconsolidatedandcompanybalancesheetsasat31December2025,theconsolidatedandcompanyincomestatements,theconsolidatedandcompanycashflowsstatements,andtheconsolidatedandcompanystatementsofchangesinshareholders'equityfortheyearthenended,andnotestothefinancialstatements.Inouropinion,theaccompanyingfinancialstatementspresentfairly,inallmaterialrespects,theconsolidatedandcompanyfinancialpositionofAdamaasat31December2025,andtheconsolidatedandcompanyfinancialperformanceandcashflowsofAdamafortheyearthenendedinaccordancewiththeAccountingStandardsforBusinessEnterprisesissuedbytheMinistryofFinanceofthePeople’sRepublicofChina(hereinafterreferredtoasthe“ASBEs”).II.BasisforOpinionWeconductedourauditinaccordancewithChinaStandardsonAuditingforCertifiedPublicAccountants(“CSAs”).OurresponsibilitiesunderthosestandardsarefurtherdescribedintheAuditor'sResponsibilitiesfortheAuditoftheFinancialStatementssectionofourreport.WeareindependentofAdamainaccordancewiththetheIndependenceStandardsforChineseCertifiedPublicAccountantsNo.1–IndependenceRequirementsforAuditandReviewEngagements,asapplicabletoauditsoffinancialstatementsofpublicinterestentitiesandtheChinaCodeofEthicsforCertifiedPublicAccountants(“theCode”),andwehavefulfilledourotherethicalresponsibilitiesinaccordancewiththeCode.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforouropinion.III.KeyAuditMattersKeyauditmattersarethosemattersthat,inourprofessionaljudgment,wereofmostsignificanceinourauditofthefinancialstatementsforthecurrentyear.Thesematterswereaddressedinthecontextofourauditofthefinancialstatementsasawhole,andinformingouropinionthereon,andwedonotprovideaseparateopiniononthesematters.

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AUDITOR'SREPORT-continued

KPMGHuazhenShenZiNo.2605093III.KeyAuditMatters-continued

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AUDITOR'SREPORT-continued

KPMGHuazhenShenZiNo.2605093

III.KeyAuditMatters-continued

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AUDITOR'SREPORT-continued

KPMGHuazhenShenZiNo.2605093IV.OtherInformationAdama’smanagementisresponsiblefortheotherinformation.Theotherinformationcomprisestheinformationincludedin2025annualreportofAdama,otherthanthefinancialstatementsandourauditor'sreportthereon.Ouropiniononthefinancialstatementsdoesnotcovertheotherinformationandwedonotexpressanyformofassuranceconclusionthereon.Inconnectionwithourauditofthefinancialstatements,ourresponsibilityistoreadtheotherinformationand,indoingso,considerwhethertheotherinformationismateriallyinconsistentwiththefinancialstatementsorourknowledgeobtainedintheauditorotherwiseappearstobemateriallymisstated.If,basedontheworkwehaveperformed,weconcludethatthereisamaterialmisstatementofthisotherinformation;wearerequiredtoreportthatfact.Wehavenothingtoreportinthisregard.V.ResponsibilitiesofManagementandThoseChargedwithGovernancefortheFinancialStatementsManagementisresponsibleforthepreparationandfairpresentationofthefinancialstatementsinaccordancewithASBEs,andforthedesign,implementationandmaintenanceofsuchinternalcontrolnecessarytoenablethatthefinancialstatementsarefreefrommaterialmisstatement,whetherduetofraudorerror.Inpreparingthefinancialstatements,managementisresponsibleforassessingAdama'sabilitytocontinueasagoingconcern,disclosing,asapplicable,mattersrelatedtogoingconcernandusingthegoingconcernbasisofaccountingunlessmanagementeitherintendstoliquidateAdamaortoceasesoperations,orhasnorealisticalternativebuttodoso.ThosechargedwithgovernanceareresponsibleforoverseeingAdama'sfinancialreportingprocess.VI.Auditor'sResponsibilitiesfortheAuditoftheFinancialStatementsOurobjectivesaretoobtainreasonableassuranceaboutwhetherthefinancialstatementsasawholearefreefrommaterialmisstatement,whetherduetofraudorerror,andtoissueanauditor'sreportthatincludesouropinion.Reasonableassuranceisahighlevelofassurance,butisnotaguaranteethatanauditconductedinaccordancewithCSAswillalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefromfraudorerrorandareconsideredmaterialif,individuallyorintheaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisofthesefinancialstatements.

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AUDITOR'SREPORT-continued

KPMGHuazhenShenZiNo.2605093VI.Auditor'sResponsibilitiesfortheAuditoftheFinancialStatements-continuedAspartofanauditinaccordancewithCSAs,weexerciseprofessionaljudgmentandmaintainprofessionalskepticismthroughouttheaudit.Wealso:

(1)Identifyandassesstherisksofmaterialmisstatementofthefinancialstatements,whetherdueto

fraudorerror,designandperformauditproceduresresponsivetothoserisks,andobtainauditevidencethatissufficientandappropriatetoprovideabasisforouropinion.Theriskofnotdetectingamaterialmisstatementresultingfromfraudishigherthanforoneresultingfromerror,asfraudmayinvolvecollusion,forgery,intentionalomissions,misrepresentations,ortheoverrideofinternalcontrol;

(2)Obtainanunderstandingofinternalcontrolrelevanttotheauditinordertodesignaudit

proceduresthatareappropriateinthecircumstances;

(3)Evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesandrelateddisclosuresmadebythemanagement;

(4)Concludeontheappropriatenessofthemanagement'useofthegoingconcernbasisofaccounting

and,basedontheauditevidenceobtained,whetheramaterialuncertaintyexistsrelatedtoeventsorconditionsthatmaycastsignificantdoubtonAdama'sabilitytocontinueasagoingconcern.Ifweconcludethatamaterialuncertaintyexists,wearerequiredtodrawattentioninourauditor'sreporttotherelateddisclosuresinthefinancialstatementsor,ifsuchdisclosuresareinadequate,tomodifyouropinion.Ourconclusionsarebasedontheauditevidenceobtaineduptothedateofourauditor'sreport.However,futureeventsorconditionsmaycauseAdamatoceasetocontinueasagoingconcern;

(5)Evaluatetheoverallpresentation,structureandcontentofthefinancialstatements,includingthe

disclosures,andwhetherthefinancialstatementsrepresenttheunderlyingtransactionsandeventsinamannerthatachievesfairpresentation;

(6)Obtainsufficientappropriateauditevidenceregardingthefinancialinformationoftheentitiesor

businessactivitieswithinAdamatoexpressanopiniononthefinancialstatements.Weareresponsibleforthedirection,supervisionandperformanceofthegroupaudit.Weremainsolelyresponsibleforourauditopinion.Wecommunicatewiththosechargedwithgovernanceregarding,amongothermatters,theplannedscopeandtimingoftheauditandsignificantauditfindings,includinganysignificantdeficienciesininternalcontrolthatweidentifyduringouraudit.

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AUDITOR'SREPORT-continued

KPMGHuazhenShenZiNo.2605093

VI.Auditor'sResponsibilitiesfortheAuditoftheFinancialStatements-continuedWealsoprovidethosechargedwithgovernancewithastatementthatwehavecompliedwithrelevantethicalrequirementsregardingindependence,andtocommunicatewiththemallrelationshipsandothermattersthatmayreasonablybethoughttobearonourindependence,andwhereapplicable,relatedsafeguards.Fromthematterscommunicatedwiththosechargedwithgovernance,wedeterminethosemattersthatwereofmostsignificanceintheauditofthefinancialstatementsofthecurrentyearandarethereforethekeyauditmatters.Wedescribethesemattersinourauditor'sreportunlesslaworregulationprecludespublicdisclosureaboutthematterorwhen,inextremelyrarecircumstances,wedeterminethatamattershouldnotbecommunicatedinourreportbecausetheadverseconsequencesofdoingsowouldreasonablybeexpectedtooutweighthepublicinterestbenefitsofsuchcommunication.KPMGHuazhenCPALLPChineseCertifiedPublicAccountantBeijingChinaWangJia

(EngagementPartner)

ChineseCertifiedPublicAccountant

WangShan

26March2026Thisindependentauditor'sreportofthefinancialstatementsandtheaccompanyingfinancialstatementsareEnglishtranslationsoftheindependentauditor'sreportandthefinancialstatementspreparedunderaccountingprinciplesandpracticesgenerallyacceptedinthePeople'sRepublicofChina.Thesefinancialstatementsarenotintendedtopresentthebalancesheetandresultsofoperationsandcashflowsinaccordancewithaccountingprinciplesandpracticesgenerallyacceptedinothercountriesandjurisdictions.IncasetheEnglishversiondoesnotconformtotheChineseversion,theChineseversionprevails

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ADAMALtd.(ExpressedinRMB'000)ConsolidatedBalanceSheet

Non-currentassets

Totalassets

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ADAMALtd.(ExpressedinRMB'000)ConsolidatedBalanceSheet(continued)

Currentliabilities

Non-currentliabilities

Totalliabilities

Shareholders'equity

Non-controllinginterests

TotalEquity

Totalliabilitiesandequity

GaelHiliLegalrepresentative

ThesefinancialstatementswereapprovedbytheBoardofDirectorsoftheCompanyonMarch26,2026.Thenotesformpartofthesefinancialstatements.

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ADAMALtd.(ExpressedinRMB'000)Company'sBalanceSheet

Non-currentassets

Totalassets

Currentliabilities

Non-currentliabilities

Totalliabilities

Shareholders’equity

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ADAMALtd.(ExpressedinRMB'000)ConsolidatedIncomeStatement

I.Operatingincome

Add:Non-operatingincome

Less:Incometaxexpenses(income)

V.Othercomprehensiveincome(loss),netoftax

VI.Totalcomprehensivelossfortheperiodattributableto

ShareholdersoftheCompany

VII.Earningspershare

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ADAMALtd.(ExpressedinRMB'000)Company'sIncomeStatement

I.Operatingincome

Add:Non-operatingincome

Less:Incometaxexpense

V.Othercomprehensiveincome,netoftax

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ADAMALtd.(ExpressedinRMB'000)ConsolidatedCashFlowStatement

Cashpaidforgoodsandservices

Netcashflowsprovidedbyoperatingactivities

II.Cashflowsfrominvestingactivities:

Cashpaidtoacquirefixedassets,intangibleassetsand

Netcashflowsusedininvestingactivities

III.Cashflowsfromfinancingactivities:

Cashrepaymentsofborrowings

IV.Effectsofforeignexchangeratechangesoncashandcashequivalent

V.Netdecreaseincashandcashequivalents

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ADAMALtd.

(ExpressedinRMB'000)Company'sCashFlowStatement

Cashpaidforgoodsandservices

Netcashflowsprovidedbyoperatingactivities

II.Cashflowsfrominvestingactivities:

Cashpaidtoacquirefixedassets,intangibleassetsandotherlong-termassets

Netcashflowsprovidedbyinvestingactivities

III.Cashflowsfromfinancingactivities:

Cashrepaymentsofborrowings

Netcashflowusedinfinancingactivities

IV.Effectsofforeignexchangeratechangesoncashandcashequivalents

V.Netincrease(decrease)incashandcashequivalents

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ADAMALtd.(ExpressedinRMB'000)ConsolidatedStatementofChangesinShareholders’EquityFortheyearendedDecember31,2025

I.BalanceatJanuary1,2025

II.Changesinequityfortheperiod

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ADAMALtd.(ExpressedinRMB'000)StatementofChangesinShareholders’Equity

I.BalanceatJanuary1,2024

II.Changesinequityfortheperiod

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ADAMALtd.(ExpressedinRMB'000)

Company'sStatementofChangesinShareholders’Equity

FortheyearendedDecember31,2025

I.BalanceatJanuary1,2025

FortheyearendedDecember31,2024

I.BalanceatJanuary1,2024

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IBASICCORPORATEINFORMATION

ADAMALtd.(hereinafterthe“Company”orthe“Group”)isacompanylimitedbysharesestablishedinChinawithitsheadofficelocatedinHubeiJingzhou.InJune2020,thecontrollingshareholderoftheCompanychangedfromChinaNationalAgrochemicalCo,.Ltd.(hereinafter–“CNAC")toSyngentaGroupCo.,Ltd.(hereinafter“SyngentaGroup”).AsofAugust2021,followingthecombinationbetweenChinaNationalChemicalCo.,Ltd.(hereinafter-“ChemChina”)andSinochemHoldingsCorporationLtd.(hereinafter-“SinochemHoldings”),SyngentaGroup,andsubsequentlytheCompany,areultimatelycontrolledbySinochemHoldings-parentofbothChemChinaandSinochemGroupCo.,Ltd.(hereinafter“SinochemHoldings”),subordinatedtoSASAC.TheprincipalactivitiesoftheCompanyanditssubsidiaries(togetherreferredtoasthe“Group”)areengagedindevelopment,manufacturingandmarketingofagrochemicals,intermediatematerialsforotherindustries,foodadditivesandsyntheticaromaticproducts,mainlyforexport.ForinformationaboutthelargestsubsidiariesoftheCompany,refertoNoteVII.TheCompany’sconsolidatedfinancialstatementshadbeenapprovedbytheBoardofDirectorsoftheCompanyonMarch26,2026.DetailsofthescopeofconsolidatedfinancialstatementsaresetoutinNoteVII"Interestinotherentities",whereasthechangesofthescopeofconsolidationaresetoutinNoteVI"Changesinconsolidationscope".IIBASISOFPREPARATION

1.Basisofpreparation

TheGrouphasadoptedtheAccountingStandardsforBusinessEnterprisesissuedbytheMinistryofFinance(the"MoF").Inaddition,theGrouphasdisclosedrelevantfinancialinformationinthesefinancialstatementsinaccordancewithInformationDisclosureandPresentationRulesforCompaniesOfferingSecuritiestothePublicNo.15－GeneralProvisionsonFinancialReporting(revisedbyChinaSecuritiesRegulatoryCommission(hereinafter"CSRC”)in2023).

2.Accrualbasisandmeasurementprinciple

TheGrouphasadoptedtheaccrualbasisofaccounting.Inthehistoricalcostmeasurement,assetsobtainedshallbemeasuredattheamountofcashorcashequivalentsorfairvalueoftheconsiderationpaid.Liabilitiesshallbemeasuredattheactualamountofcashorassetsreceived,orthecontractualamountinapresentobligation,ortheprospectiveamountofcashorcashequivalentspaidtodischargetheliabilities.Fairvalueistheamountforwhichanassetcouldbeexchanged,oraliabilitysettled,betweenknowledgeable,willingmarketparticipantsinanarm’slengthtransactionatthemeasurementdate.Fairvaluemeasuredanddisclosedinthefinancialstatementsaredeterminedonthisbasiswhetheritisobservableorestimatedbyvaluationtechniques.

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IIBASISOFPREPARATION-(cont’d)

2.Accrualbasisandmeasurementprinciple-(cont’d)

Thefollowingtableprovidesananalysis,groupedintoLevels1to3basedonthedegreetowhichthefairvalueinputisobservableandsignificanttothefairvaluemeasurementasawhole:

Level1-basedonquotedprices(unadjusted)inactivemarkets;Level2-basedonvaluationtechniquesforwhichthelowestlevelinputthatissignificanttothefairvalue

measurementisobservable(otherthanquotedpricesincludedwithinLevel1),eitherdirectlyorindirectly;Level3-basedonvaluationtechniquesforwhichthelowestlevelinputthatissignificanttothefairvalue

measurementisunobservable.

3.Goingconcern

Thefinancialstatementshavebeenpreparedonthegoingconcernbasis.TheGrouphasperformedgoingconcernassessmentforthefollowing12monthsfromDecember31,2025andhavenotidentifiedanysignificantdoubtfulmatteroreventonthegoingconcern,assuchthefinancialstatementhavebeenpreparedonthegoingconcernbasis.IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES

1.Statementofcompliance

ThesefinancialstatementsareincompliancewiththeAccountingStandardsforBusinessEnterprisestotrulyandcompletelyreflecttheCompany'sconsolidatedfinancialpositionasatDecember31,2025andtheCompany'sconsolidatedoperatingresults,changesinshareholders'equityandcashflowsforthetwelvemonthsthenended.

2.Accountingperiod

TheGrouphasadoptedthecalendaryearasitsaccountingyear,i.e.from1Januaryto31December.

3.Businesscycle

Thecompanytakestheperiodfromtheacquisitionofassetsforprocessingtotheirrealisationincashorcashequivalentsasanormaloperatingcycle.Theoperatingcycleforthecompanyis12months.

4.Reportingcurrency

TheCompanyanditsdomesticsubsidiarieschooseRenminbi(hereinafter"RMB")astheirfunctionalcurrency.Functionalcurrenciesofoverseassubsidiariesaredeterminedonthebasisoftheprincipaleconomicenvironmentinwhichtheoverseassubsidiariesoperate.ThefunctionalcurrencyoftheoverseassubsidiariesismainlytheUnitedStatesDollar(hereinafter"USD").ThepresentationcurrencyofthesefinancialstatementsisRenminbi.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

5.Criteriaofdeterminingmaterialiteminthereportanditsbenchmark

6.Businesscombinations

6.1Businesscombinationsnotinvolvingenterprisesundercommoncontrolandgoodwill

Abusinesscombinationnotinvolvingenterprisesundercommoncontrolisabusinesscombinationinwhichallofthecombiningenterprisesarenotultimatelycontrolledbythesamepartyorpartiesbeforeandafterthecombination.Thecostsofbusinesscombinationarethefairvalueoftheassetspaid,liabilitiesincurredorassumedandequityinstrumentsissuedbytheacquirerforthepurposeofachievingthecontrolrightsovertheacquiree.Theintermediarycostssuchasaudit,legalservicesandassessmentconsultingcostsandotherrelatedmanagementcoststhataredirectlyattributabletothecombinationbytheacquirerarechargedtoprofitorlossintheperiodinwhichtheyareincurred.Directcapitalissuancecostsincurredinrespectofequityinstrumentsorliabilitiesissuedpursuanttothebusinesscombinationshouldbechargedtotherespectequityinstrumentsorliabilitiesuponinitialrecognitionoftheunderlyingequityinstrumentsorliabilities.Theacquiree’sidentifiableassets,liabilitiesandcontingentliabilitiesacquiredbytheacquirerinabusinesscombination,thatmeettherecognitioncriteriashallbemeasuredatfairvalueattheacquisitiondate.Theconsiderationtransferredincludesthefairvalueofanycontingentconsideration.(suchasearnoutarrangementswiththeformershareholders).Aftertheacquisitiondate,theGrouprecognizeschangesinthefairvalueofcontingentconsiderationclassifiedasafinancialliabilityatfairvaluethroughprofitorloss.Wherethecostofcombinationexceedstheacquirer’sinterestinthefairvalueoftheacquiree’sidentifiablenetassets,thedifferenceistreatedasanassetandrecognizedasgoodwill,whichismeasuredatcostoninitialrecognition.Wherethecostofcombinationislessthantheacquirer’sinterestinthefairvalueoftheacquiree’sidentifiablenetassets,theremainingdifferenceisrecognizedimmediatelyinprofitorlossforthecurrentyear.Thegoodwillraisedbecauseofthebusinesscombinationshouldbeseparatelydisclosedintheconsolidatedfinancialstatementandmeasuredbytheinitialamountlessanyaccumulativeimpairmentprovision.Inabusinesscombinationachievedinstages,theGroupremeasureitspreviouslyheldequityinterestintheacquireeatitsacquisition-datefairvalueandrecognisetheresultinggainorloss,ifany,inprofitorloss.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

7.Basisforpreparationofconsolidatedfinancialstatements

Thescopeofconsolidationinconsolidatedfinancialstatementsisdeterminedonthebasisofcontrol.ControlisachievedwhentheCompanyhaspowerovertheinvestee;isexposed,orhasrights,tovariablereturnsfromitsinvolvementwiththeinvestee;andhastheabilitytouseitspowertoaffectitsreturns.ForasubsidiarydisposedofbytheGroup,theoperatingresultsandcashflowsbeforethedateofdisposal(thedatewhencontrolislost)areincludedinconsolidatedincomestatementandconsolidatedstatementofcashflows.Forasubsidiaryacquiredthroughabusinesscombinationnotinvolvingenterprisesundercommoncontrol,theoperatingresultsandcashflowsfromtheacquisitiondate(thedatewhencontrolisobtained)areincludedinconsolidatedincomestatementandconsolidatedstatementofcashflows.ThesignificantaccountingpoliciesandaccountingyearsadoptedbythesubsidiariesaredeterminedbasedontheuniformaccountingpoliciesandaccountingyearssetoutbytheCompany.Allsignificantintra-groupbalances,transactionsandunrealizedprofitsareeliminatedonconsolidation.Theportionofsubsidiaries'equitythatisnotattributabletotheCompanyistreatedasnon-controllinginterestsandpresentedas"non-controllinginterests"intheshareholders’equityinconsolidatedbalancesheet.Theportionofnetprofitsorlossesofsubsidiariesfortheperiodattributabletonon-controllinginterestsispresentedas"non-controllinginterests"inconsolidatedincomestatementbelowthe"netprofit"lineitem.Totalcomprehensiveincomeattributabletonon-controllingshareholdersispresentedseparatelyintheconsolidatedincomestatementbelowthetotalcomprehensiveincomelineitem.Whentheamountoflossfortheperiodattributabletothenon-controllingshareholdersofasubsidiaryexceedsthenon-controllingshareholders'portionoftheopeningbalanceofowners'equityofthesubsidiary,theexcessamountisstillallocatedagainstnon-controllinginterests.Acquisitionofnon-controllinginterestsordisposalofequityinterestinasubsidiarythatdoesnotresultinthelossofcontroloverthesubsidiaryisaccountedforasequitytransactions.ThecarryingamountsoftheCompany'sinterestsandnon-controllinginterestsareadjustedtoreflectthechangesintheirrelativeinterestsinthesubsidiary.Thedifferencebetweentheamountbywhichthenon-controllinginterestsareadjustedandthefairvalueoftheconsiderationpaidorreceivedisadjustedtocapitalreserveunderowners'equity.Ifthecapitalreserveisnotsufficienttoabsorbthedifference,theexcessisadjustedagainstretainedearnings.Othercomprehensiveincomeattributedtothenon-controllinginterestisreattributedtotheshareholdersofthecompany.AputoptionissuedbytheGrouptoholdersofnon-controllingintereststhatissettledincashorotherfinancialinstrumentisrecognizedasaliabilityatthepresentvalueoftheexerciseprice(accordingtothe"anticipatedacquisitionmethod").TheGroup’sshareofasubsidiary’sprofitsincludestheshareoftheholdersofthenon-controllingintereststowhichtheGroupissuedaputoption.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

7.Basisforpreparationofconsolidatedfinancialstatements-(cont’d)

IncaseswhichtheGrouphasaCalloptioninadditiontothePutoptionabove,duetotheanticipatedacquisitionmethodimplementationnovalueisgiventotheCalloptionintheconsolidatedfinancialstatements.WhentheGrouplosescontroloverasubsidiaryduetodisposalofcertainequityinterestorotherreasons,anyretainedinterestisre-measuredatitsfairvalueatthedatewhencontrolislost.Thedifferencebetween(i)theaggregateoftheconsiderationreceivedondisposalandthefairvalueofanyretainedinterestand(ii)theshareoftheformersubsidiary'snetassetscumulativelycalculatedfromtheacquisitiondateaccordingtotheoriginalproportionofownershipinterestisrecognizedasinvestmentincomeintheperiodinwhichcontrolislost.Othercomprehensiveincomeassociatedwiththedisposedsubsidiaryisreclassifiedtoinvestmentincomeintheperiodinwhichcontrolislost.

8.Classificationandaccountingmethodsofjointarrangement

Therearetwotypesofjointarrangements–jointoperationsandjointventures.Thetypeofjointarrangementsisdeterminedbasedontherightsandobligationsofjointoperatortothejointarrangementsbyconsideringthefactors,suchasthestructure,thelegalformofthearrangements,andthecontractualterms,etc.Ajointoperationisajointarrangementwherebythejointoperatorshaverightstotheassets,andobligationsfortheliabilities,relatingtothearrangement.Ajointventureisajointarrangementwherebythejointventureshaverightstothenetassetsofthearrangement.

9.Cashandcashequivalents

Cashcomprisescashonhandanddepositsthatcanbereadilywithdrawnondemand.CashequivalentsaretheGroup'sshort-term,highlyliquidinvestmentsthatarereadilyconvertibletoknownamountsofcashandwhicharesubjecttoaninsignificantriskofchangesinvalue.

10.Translationoftransactionsandfinancialstatementsdenominatedinforeigncurrencies

10.1Transactionsdenominatedinforeigncurrencies

Oninitialrecognition,foreigncurrencytransactionsaretranslatedintofunctionalcurrencyusingthespotexchangerateprevailingatthedateoftransaction.Atthebalancesheetdate,foreigncurrencymonetaryitemsaretranslatedintofunctionalcurrencyusingthespotexchangeratesatthebalancesheetdate.Exchangedifferencesarisingfromthedifferencesbetweenthespotexchangeratesprevailingatthebalancesheetdateandthoseoninitialrecognitionoratthepreviousbalancesheetdatearerecognizedinprofitorlossfortheperiod,exceptthat(i)exchangedifferencesrelatedtoaspecific-purposeborrowingdenominatedinforeigncurrencythatqualifyforcapitalizationarecapitalizedaspartofthecostofthequalifyingassetduringthecapitalizationperiod.(ii)exchangedifferencesrelatedtohedginginstrumentsforthepurposeofhedgingagainstforeigncurrencyrisksareaccountedforusinghedgeaccounting.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

10.Translationoftransactionsandfinancialstatementsdenominatedinforeigncurrencies-(cont’d)

10.1Transactionsdenominatedinforeigncurrencies-(cont’d)

Whenpreparingfinancialstatementsinvolvingforeignoperations,ifthereisanyforeigncurrencymonetaryitems,whichinsubstanceformspartofthenetinvestmentintheforeignoperations,exchangedifferencesarisingfromthechangesofforeigncurrencyarerecordedasothercomprehensiveincome,andwillbereclassifiedtoprofitorlossupondisposaloftheforeignoperations.Foreigncurrencynon-monetaryitemsmeasuredathistoricalcostaretranslatedtotheamountsinfunctionalcurrencyatthespotexchangeratesonthedatesofthetransactionsandtheamountsinfunctionalcurrencyremainunchanged.

10.2Translationoffinancialstatementsdenominatedinforeigncurrency

Forthepurposeofpreparingconsolidatedfinancialstatements,financialstatementsofaforeignoperationaretranslatedfromtheforeigncurrencyintoRMBusingthefollowingmethod:assetsandliabilitiesonthebalancesheetaretranslatedatspotexchangerateprevailingatthebalancesheetdate;shareholders'equityitems,exceptforretainedearnings,aretranslatedatthespotexchangeratesatthedatesonwhichsuchitemsarose;allitemsintheincomestatementaswellasitemsreflectingthedistributionofprofitsaretranslatedataveragerateoratspotexchangeratesonthedatesofthetransactions;theretainedearningsopeningbalanceispreviousyear'stranslatedretainedearningsclosingbalance;theclosingbalanceofretainedearningsiscalculatedandpresentedonthebasisofeachtranslatedincomestatementandprofitdistributionitem.Thedifferencebetweenthetranslatedassetsandtheaggregateofliabilitiesandshareholders'equityitemsisrecordedasothercomprehensiveincome.CashFlowsarisingfromtransactioninforeigncurrencyandthecashflowsofaforeignsubsidiaryaretranslatedatthespotexchangerateonthedateofthecashflow,theeffectofexchangeratechangesonthecashandcashequivalentsisregardedasareconcilingitemandpresentseparatelyinthestatement“effectofforeignexchangeratechangesonthecashandcashequivalents".Theopeningbalancesandthecomparativefiguresofprioryeararepresentedatthetranslatedamountsintheprioryear'sfinancialstatements.OndisposaloftheGroup'sentireequityinterestinaforeignoperation,oruponalossofcontroloveraforeignoperationduetodisposalofcertainequityinterestinitorotherreasons,theGrouptransferstheaccumulatedtranslationdifferences,whichareattributabletotheowners'equityoftheCompanyandpresentedunderothercomprehensiveincometoprofitorlossintheperiodinwhichthedisposaloccurs.IncaseofadisposalorotherreasonthatdoesnotresultintheGrouplosingcontroloveraforeignoperation,theproportionateshareofaccumulatedtranslationdifferencesarere-attributedtonon-controllinginterestsandarenotrecognizedinprofitandloss.Forpartialdisposalsofequityinterestinforeignoperations,whichareassociatesorjointventures,theproportionateshareoftheaccumulatedtranslationdifferencesarereclassifiedtoprofitorloss.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

11.Financialinstruments

TheGrouprecognizesafinancialassetorafinancialliabilitywhenitbecomesapartytothecontractualprovisionsoftheinstrument.Atinitialrecognition,theGroupmeasuresafinancialassetorfinancialliabilityatitsfairvalueplusorminus(whichisnotmeasuredatfairvaluethroughprofitorloss)transactioncoststhataredirectlyattributabletotheacquisitionorissueofthefinancialassetorfinancialliability.Initialrecognitionintradereceivableswhichdonotcontainasignificantfinancingcomponent,shallbemadeaccordingtotheirtransactionprice.

11.1Classificationandmeasurementoffinancialassets

Afterinitialrecognition,anentityshallmeasureafinancialassetat:(a)amortisedcost;(b)fairvaluethroughothercomprehensiveincome(“FVTOCI”);or(c)fairvaluethroughprofitorloss(“FVTPL”).

11.1.1Financialassetsatamortisedcost

Afinancialassetismeasuredatamortisedcostifbothofthefollowingconditionsaremet:(a)thefinancialassetisheldwithinabusinessmodelwhoseobjectiveistoholdfinancialassetsinordertocollectcontractualcashflows;and(b)thecontractualtermsofthefinancialassetgiveriseonspecifieddatestocashflowsthataresolelypaymentsofprincipalandinterestontheprincipalamountoutstanding.Suchfinancialassetsaresubsequentlymeasuredatamortisedcost,usingeffectiveinterestmethod.Gainsorlossesuponimpairmentandderecognitionarerecognizedinprofitorloss.

11.1.1.1Effectiveinterestmethodandamortisedcost

Effectiveinterestraterepresentstheratethatdiscountsthefuturecashflowovertheexpectedsubsistingperiodorshorterperiod,ifappropriate,ofthefinancialassetorfinancialliabilitytothecurrentcarryingvalueofsuchfinancialassetorfinancialliability.Whencalculatingtheeffectiveinterestrate,theGroupwillconsidertheanticipatedfuturecashflow(notconsideringthefuturecreditloss)onthebasisofallcontractclausesoffinancialassetsorfinancialliabilities,aswellasconsiderallkindsofchargeswhichareanintegralpartoftheeffectiveinterestrate,includingtransactionfeesanddiscountorpremiumpaidorreceivedbetweenbothpartiesoffinancialassetorfinancialliabilitycontract.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

11.Financialinstruments-(cont’d)

11.1Classificationandmeasurementoffinancialassets-(cont’d)

11.1.2FinancialassetsatFVTOCI

Afinancialassetismeasuredatfairvaluethroughothercomprehensiveincomeifbothofthefollowingconditionsaremet:(a)thefinancialassetisheldwithinabusinessmodelwhoseobjectiveisachievedbybothcollectingcontractualcashflowsandsellingfinancialassetsand(b)thecontractualtermsofthefinancialassetgiveriseonspecifieddatestocashflowsthataresolelypaymentsofprincipalandinterestontheprincipalamountoutstanding.Againorlossonafinancialassetmeasuredatfairvaluethroughothercomprehensiveincomeisrecognizedinothercomprehensiveincome,exceptforimpairmentgainsorlosses,foreignexchangegainsandlossesandinterestcalculatedusingtheeffectiveinterestmethod,untilthefinancialassetisderecognizedorreclassified.Whenthefinancialassetisderecognizedthecumulativegainorlosspreviouslyrecognizedinothercomprehensiveincomeisreclassifiedfromequitytoprofitorlossasareclassificationadjustment.

11.1.3FinancialassetsatFVTPL

FinancialassetsatFVTPLareeitherthosethatareclassifiedasfinancialassetsatFVTPLordesignatedasfinancialassetsatFVTPL.AfinancialassetismeasuredatFVTPLunlessitismeasuredatamortisedcostoratFVTOCI.TheGroupmay,atinitialrecognition,irrevocablydesignateafinancialassetasmeasuredatFVTPLifdoingsoeliminatesorsignificantlyreducesameasurementorrecognitioninconsistency(sometimesreferredtoasan‘accountingmismatch’)thatwouldotherwisearisefrommeasuringassetsorliabilitiesorrecognizingthegainsandlossesonthemondifferentbases.AgainorlossonafinancialassetthatismeasuredatFVTPLisrecognizedinprofitorlossunlessitispartofahedgingrelationship.Dividendsarerecognizedinprofitorloss.

11.1.4DesignatedfinancialassetsatFVTOCI

Atinitialrecognition,theGroupmakesanirrevocableelectiontodesignatetoFVTOCIaninvestmentinanequityinstrumentthatisnotheldfortrading.Whenanon-tradingequityinstrumentinvestmentisdesignatedasafinancialassetthatismeasuredatfairvaluethroughothercomprehensiveincome,thechangesinthefairvalueofthefinancialassetarerecognisedinothercomprehensiveincome.Uponrealizationtheaccumulatedgainsorlossesfromothercomprehensiveincomearetransferredfromothercomprehensiveincomeandincludedinretainedearnings.DuringtheperiodinwhichtheGroupholdsthesenon-tradinginvestmentinstruments,therighttoreceivedividendsintheGrouphasbeenestablished,andtheeconomicbenefitsrelatedtodividendsarelikelytoflowintotheGroup,andwhentheamountofdividendscanbereliablymeasured,thedividendincomeisrecognizedinthecurrentprofitandloss.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

11.Financialinstruments-(cont’d)

11.2Impairmentoffinancialassets

TheGrouprecognizesalossallowanceforexpectedcreditlossesonfinancialassetsthatareclassifiedtoamortisedcostandFVTOCI.TheGroupalwaysmeasuresthelossallowanceatanamountequaltolifetimeexpectedcreditlossesfortradereceivablesandnotesreceivables.Forfinancialassetsotherthantradereceivables,theGroupinitiallymeasurethelossallowanceforthatfinancialinstrumentatanamountequalto12-monthexpectedcreditlosses.Ateachbalancesheetdate,ifthecreditriskonthatfinancialinstrumenthasincreasedsignificantlysinceinitialrecognition,theGroupmeasuresthelossallowanceforafinancialinstrumentatanamountequaltothelifetimeexpectedcreditlosses.TheGrouprecognizesinprofitorloss,asanimpairmentgainorloss,theamountofexpectedcreditlosses(orreversal)thatisrequiredtoadjustthelossallowancetotheamountthatisrequiredtoberecognized.

11.2.1Significantincreasesincreditrisk

Ateachbalancesheetdate,theGroupassesseswhetherthecreditriskonafinancialinstrumenthasincreasedsignificantlysinceinitialrecognition.TheGroupmainlyconsidersthefollowinglistofinformationinassessingchangesincreditrisk:

(a)significantchangesininternalpriceindicatorsofcreditriskasaresultofachangeincreditrisksinceinception.(b)significantchangesinexternalmarketindicatorsofcreditriskforaparticularfinancialinstrument

orsimilarfinancialinstrumentswiththesameexpectedlife.(c)asignificantchangeinthedebtors’abilitytomeetitsdebtobligations.(d)anactualorexpectedsignificantchangeintheoperatingresultsofthedebtor.(e)significantincreasesincreditriskonotherfinancialinstrumentsofthesamedebtor.(f)anactualorexpectedsignificantadversechangeintheregulatory,economic,ortechnologicalenvironmentofthedebtor.(g)significantchangesinthevalueofthecollateralsupportingtheobligationorinthequalityofthird-partyguaranteesorcreditenhancements,whichareexpectedtoreducethedebtor’seconomicincentivetomakescheduledcontractualpaymentsortootherwisehaveaneffectontheprobabilityofadefaultoccurring.(h)significantchangesthatareexpectedtoreducethereceivable’seconomicincentivetomakescheduledcontractualpayments.(i)significantchangesintheexpectedperformanceandbehaviourofthedebtor.TheGroupassumesthatthecreditriskonafinancialinstrumenthasnotincreasedsignificantlysinceinitialrecognitionifthefinancialinstrumentisdeterminedtohavelowcreditriskatthereportingdate.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

11.Financialinstruments-(cont’d)

11.2Impairmentoffinancialassets-(cont’d)

11.2.2Credit-impairedfinancialasset

Afinancialassetiscredit-impairedwhenoneormoreeventsthathaveadetrimentalimpactontheestimatedfuturecashflowsofthatfinancialassethaveoccurred.Evidencethatafinancialassetiscredit-impairedincludeobservabledataaboutthefollowingevents:

(a)significantfinancialdifficultyoftheissuerorthereceivable;(b)abreachofcontract,suchasadefaultorpastdueevent;(c)thelender(s)ofthereceivable,foreconomicorcontractualreasonsrelatingtothereceivable’sfinancialdifficulty,havinggrantedtothereceivableaconcession(s)thatthelender(s)wouldnototherwiseconsider;

(d)itisbecomingprobablethatthereceivablewillenterbankruptcyorotherfinancialreorganization;

11.2.3Recognitionofexpectedcreditlosses

Expectedcreditlossesoffinancialinstrumentsaredeterminedasthepresentvalueofthedifferencebetween:(a)thecontractualcashflowsthatareduetoanentityunderthecontract;and(b)thecashflowsthattheentityexpectstoreceive.Forafinancialassetthatiscredit-impairedatthereportingdate,anentityshallmeasuretheexpectedcreditlossesasthedifferencebetweentheasset’sgrosscarryingamountandthepresentvalueofestimatedfuturecashflowsdiscountedatthefinancialasset’soriginaleffectiveinterestrate.Anyadjustmentisrecognizedinprofitorlossasanimpairmentgainorloss.TheGroupmeasuresexpectedcreditlossesofafinancialinstrumentinawaythatreflects:

(a)anunbiasedandprobability-weightedamountthatisdeterminedbyevaluatingarangeofpossibleoutcomes;(b)thetimevalueofmoney;and(c)reasonableandsupportableinformationthatisavailablewithoutunduecostoreffortatthereportingdateaboutpastevents,currentconditionsandforecastsoffutureeconomicconditions.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

11.Financialinstruments-(cont’d)

11.2Impairmentoffinancialassets-(cont’d)

11.2.4Written-offoffinancialassets

TheGroupdirectlyreducesthegrosscarryingamountofafinancialassetwhentheentityhasnoreasonableexpectationsofrecoveringafinancialassetinitsentiretyoraportionthereof.Awrite-offconstitutesaderecognitionevent.

11.3Transferoffinancialasset

TheGroupderecognizesafinancialassetifoneofthefollowingconditionsissatisfied:(i)thecontractualrightstothecashflowsfromthefinancialassetexpire;or(ii)thefinancialassethasbeentransferredandsubstantiallyalltherisksandrewardsofownershipofthefinancialassettransferredtothetransferee;or(iii)althoughthefinancialassethasbeentransferred,theGroupneithertransfersnorretainssubstantiallyalltherisksandrewardsofownershipofthefinancialassetbuthasnotretainedcontrolofthefinancialasset.IftheGroupneithertransfersnorretainssubstantiallyalltherisksandrewardsofownershipofafinancialasset,anditretainscontrolofthefinancialasset,itrecognizesthefinancialassettotheextentofitscontinuinginvolvementinthetransferredfinancialassetandrecognizesanassociatedliability.TheextentoftheGroup’scontinuinginvolvementinthetransferredassetistheextenttowhichitisexposedtochangesinthevalueofthetransferredasset.Whenthecompanyisderecognizingafinancialassetinitsentirety,thedifferencebetween(i)thecarryingamountofthefinancialassettransferred;and(ii)thesumoftheconsiderationreceivedfromthetransferisrecognizedinprofitorloss.

11.4Classificationandmeasurementoffinancialliabilities

Debtandequityinstrumentsareclassifiedaseitherfinancialliabilitiesorasequityinaccordancewiththesubstanceofthecontractualarrangementsandthedefinitionsofafinancialliabilityandanequityinstrument.AllfinancialliabilitiesaresubsequentlymeasuredatFVTPLorotherfinancialliabilities.FinancialliabilitiesareclassifiedasatFVTPLwhenthefinancialliabilityis(i)heldfortradingor(ii)itisdesignatedasatFVTPL.Thefinancialliabilityotherthanderivativefinancialliabilitiesarestatedasliabilitiesheldfortrading.Otherfinancialliabilitiesaresubsequentlymeasuredatamortizedcostbyusingeffectiveinterestmethod.Gainorlossarisingfromderecognitionoramortizationisrecognizedincurrentprofitorloss.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

11.Financialinstruments-(cont’d)

11.5Derecognitionoffinancialliabilities

Financialliabilitiesarederecognizedinfullorinpartonlywhenthepresentobligationisdischargedinfullorinpart.AnagreemententeredintoforcebetweentheGroup(debtor)andacreditortoreplacetheoriginalfinancialliabilitieswithnewfinancialliabilitieswithsubstantiallydifferentterms,derecognizetheoriginalfinancialliabilitiesaswellasrecognizethenewfinancialliabilities.Whenfinancialliabilitiesisderecognizedinfullorinpart,thedifferencebetweenthecarryingamountofthefinancialliabilitiesderecognizedandtheconsiderationpaid(includingtransferrednon-cashassetsornewfinancialliability)isrecognizedinprofitorlossforthecurrentperiod.

11.6Derivatives

Derivativefinancialinstrumentsincludeforwardexchangecontracts,currencyswapsandforeignexchangeoptions,etc.Derivativesareinitiallymeasuredatfairvalueatthedatewhenthederivativecontractsareenteredintoandaresubsequentlyre-measuredatfairvalue.Theresultinggainorlossisrecognizedinprofitorlossunlessthederivativeisdesignatedandhighlyeffectiveasahedginginstrument,inwhichcasethetimingoftherecognitioninprofitorlossdependsonthenatureofthehedgerelationship(NoteIII

32.1).

11.7Offsettingfinancialassetsandfinancialliabilities

Financialassetsandfinancialliabilitiesshallbepresentedseparatelyinthebalancesheetandshallnotbeoffset,exceptforcircumstanceswheretheGrouphasalegalrightthatiscurrentlyenforceabletooffsettherecognizedfinancialassetsandfinancialliabilities,andintendseithertosettleonanetbasis,ortorealizethefinancialassetandsettlethefinancialliabilitysimultaneously,afinancialassetandafinancialliabilityshallbeoffsetandthenetamountispresentedinthebalancesheet.

11.8Equityinstruments

Theconsiderationreceivedfromtheissuanceofequityinstrumentsnetoftransactioncostsisrecognizedinshareholders’equity.ConsiderationandtransactioncostspaidbytheCompanyforrepurchasingself-issuedequityinstrumentsaredeductedfromshareholders’equity.WhentheCompanyrepurchasesitsownshares,thosesharesaretreatedastreasuryshares.Allexpendituresrelatingtotherepurchasearerecordedinthecostofthetreasuryshares,withthetransactionenteringintothesharecapital.Treasurysharesareexcludedfromprofitdistributionsandarestatedasadeductionundershareholders’equityinthebalancesheet.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

12.Accountsreceivables

Accountsreceivablesareassessedforimpairmentonacollectivegroupand/oronanindividualbasisasfollows:

Expectedcreditlossesinrespectofaccountsreceivablesismeasuredatanamountequaltolifetimeexpectedcreditlosses.Theassessmentismadecollectivelyforaccountreceivables,wherereceivablessharesimilarcreditriskcharacteristicsbasedongeographicallocation,usingtheexpectedcreditlossesmodelincludinginter-aliaaginganalysis,historicallossexperiencesadjustedbytheobservablefactorsreflectingcurrentandexpectedfutureeconomicconditions.Theratiooftheaccountreceivablescollectiveprovisionforexpectedcreditlossesinwhichcreditlosseshasnotoccurredisbetween0%-2.81%.Whencreditriskonaccountsreceivablehasincreasedsignificantlysinceinitialrecognition,thegrouprecordsspecificprovisionorcollectiveprovision,whichisdeterminedforgroupsofsimilarassetsincountriesinwhichtherearelargenumberofcustomerswithimmaterialbalances.Inassessingwhetherthecreditriskonaccountsreceivableshasincreasedsignificantlysinceinitialrecognition,theGroupcomparestheriskofadefaultoccurringontheaccountsreceivablesatthereportingdatewiththeriskofadefaultoccurringontheaccountsreceivablesatthedateofinitialrecognitionandconsidersbothquantitativeandqualitativeinformationthatisreasonableandsupportable,includingobservabledatathatcomestotheattentionoftheGroupaboutlosseventssuchasasignificantdeclineinthesolvencyofanindividualdebtorortheportfolioofdebtors,andsignificantchangesinthefinancialconditionthathaveanadverseeffectonthedebtor.

13.Receivablesfinancing

Allreceivbalesfinancingarebankacceptancenotesduewithin1year.Fromthepastexperience,thepossibilityofsignificantlossesduetobanksdefaultislow,theGroupbelievesthatthereisnosignificantcreditriskinthebankacceptancesnotesheld.

14.Otherreceivables

TheGroupdeterminesexpectedcreditlossesforotherreceivablesonanindividualbasis.

15.Inventories

15.1Categoriesofinventoriesandinitialmeasurement

TheGroup'sinventoriesmainlyincluderawmaterials,workinprogress,semi-finishedgoods,finishedgoodsandreusablematerials.Reusablematerialsincludelow-valueconsumables,packagingmaterialsandothermaterials,whichcanbeusedrepeatedlybutdonotmeetthedefinitionoffixedassets.Inventoriesareinitiallymeasuredatcost.Costofinventoriescomprisesallcostsofpurchase,costsofconversionandotherexpendituresincurredinbringingtheinventoriestotheirpresentlocationandconditionincludingdirectlaborcostsandanappropriateallocationofproductionoverheads.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

15.Inventories-(cont’d)

15.2Valuationmethodofinventoriesupondelivery

Theactualcostofinventoriesupondeliveryiscalculatedusingtheweightedaveragemethod.

15.3Basisfordeterminingnetrealizablevalueofinventoriesandprovisionmethodsfordeclineinvalueof

inventoriesAtthebalancesheetdate,inventoriesaremeasuredatthelowerofcostandnetrealizablevalue.Ifthenetrealizablevalueisbelowthecostofinventories,aprovisionfordeclineinvalueofinventoriesismade.Netrealizablevalueistheestimatedsellingpriceintheordinarycourseofbusinesslesstheestimatedcostsofcompletion,theestimatedcostsnecessarytomakethesaleandrelevanttaxes.Indeterminingtherealizablevalueofinventory,itisbasedonsolidevidenceobtained,whilealsoconsideringthepurposeofholdingtheinventoryandtheimpactofeventsafterthebalancesheetdate.Aftertheprovisionfordeclineinvalueofinventoriesismade,ifthecircumstancesthatpreviouslycausedinventoriestobewrittendownbelowcostnolongerexistsothatthenetrealizablevalueofinventoriesishigherthantheircarryingamount,theoriginalprovisionfordeclineinvalueisreversedandthereversalisincludedinprofitorlossfortheperiod.

15.4Theperpetualinventorysystemismaintainedforstocksystem.

16.Long-termequityinvestments

Long-termequityinvestmentsincludeinvestmentsinsubsidiaries,jointventuresandassociates.

16.1Basisfordeterminingcontrol,jointcontrolandsignificantinfluenceoverinvestee

ControlisachievedwhentheCompanyhaspowerovertheinvestee;isexposed,orhasrights,tovariablereturnsfromitsinvolvementwiththeinvestee;andhastheabilitytouseitspowertoaffectitsreturns.Jointcontrolisthecontractuallyagreedsharingofcontroloveraneconomicactivity,andexistsonlywhenthestrategicfinancialandoperatingpolicydecisionsrelatingtotheactivityrequiretheunanimousconsentofthepartiessharingcontrol.Significantinfluenceisthepowertoparticipateinthefinancialandoperatingpolicydecisionsoftheinvesteebutisnotcontrolorjointcontroloverthosepolicies.Whendeterminingwhetheraninvestingenterpriseisabletoexercisecontrolorsignificantinfluenceoveraninvestee,theeffectofpotentialvotingrightsoftheinvestee(forexample,warrantsandconvertibledebts)heldbytheinvestingenterprisesorotherpartiesthatarecurrentlyexercisableorconvertibleshallbeconsidered.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

16.Long-termequityinvestments-(cont’d)

16.2Determinationofinvestmentcost

SubsidiariesarethecompaniesthatarecontrolledbytheCompany.AssociatesarethecompaniesoverwhichtheGrouphassignificantinfluence.JointventuresarejointarrangementsoverwhichtheGrouphasjointcontrolalongwithotherinvestorsandhasrightstothenetassetsofthejointarrangement.TheCompanyaccountsfortheinvestmentinsubsidiariesathistoricalcostintheCompany'sfinancialstatements.Investmentsinassociatesandjointventuresareaccountedforunderequitymethod.Foralong-termequityinvestmentacquiredthroughabusinesscombinationinvolvingenterprisesundercommoncontrol,theinvestmentcostofthelong-termequityinvestmentistheshareofthecarryingamountoftheshareholders'equityoftheacquireeattributabletotheultimatecontrollingpartyatthedateofcombination.Thedifferencebetweeninitialinvestmentcostandcashpaid,non-cashassetstransferredandbookvalueofliabilitiesassumed,isadjustedincapitalreserve.Ifthebalanceofcapitalreserveisnotsufficienttoabsorbthedifference,anyexcessisadjustedtoretainedearnings.Foralong-termequityinvestmentacquiredthroughbusinesscombinationnotinvolvingenterprisesundercommoncontrol,theinvestmentcostofthelong-termequityinvestmentisthecostofacquisition.Forabusinesscombinationnotinvolvingenterprisesundercommoncontrolachievedinstagesthatinvolvesmultipleexchangetransactions,theinitialinvestmentcostiscarriedattheaggregateofthecarryingamountoftheacquirer’spreviouslyheldequityinterestintheacquireeandthenewinvestmentcostincurredontheacquisitiondate.Regardingthelong-termequityinvestmentacquiredotherwisethanthroughabusinesscombination,ifthelong-termequityinvestmentisacquiredbycash,thehistoricalcostisdeterminedbasedontheamountofcashpaidandpayable;ifthelong-termequityinvestmentisacquiredthroughtheissuanceofequityinstruments,thehistoricalcostisdeterminedbasedonthefairvalueoftheequityinstrumentsissued.

16.3Subsequentmeasurementandrecognitionofprofitorloss

Ifthelong-termequityinvestmentisaccountedforatcost,itshouldbemeasuredathistoricalcostlessaccumulatedimpairmentlosses.Dividenddeclaredbytheinvesteeshouldbeaccountedforasinvestmentincome.Undertheequitymethod,wherethelong-termequityinvestmentinitialinvestmentcostexceedstheGroup’sshareofthefairvalueoftheinvestee’sidentifiablenetassetsatthetimeofacquisition,noadjustmentismadetotheinitialinvestmentcost.WheretheinitialinvestmentcostislessthantheGroup’sshareofthefairvalueoftheinvestee’sidentifiablenetassetsatthetimeofacquisition,thedifferenceisrecognizedinprofitorlossfortheperiod,andthecostofthelong-termequityinvestmentisadjustedaccordingly.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

16.Long-termequityinvestments-(cont’d)

16.3Subsequentmeasurementandrecognitionofprofitorloss-(cont’d)

Undertheequitymethod,theGrouprecognizesitsshareofthenetprofitorlossandothercomprehensiveincomeoftheinvesteefortheperiodasinvestmentincomeorlossandothercomprehensiveincomefortheperiod.TheGrouprecognizesitsshareoftheinvestee’snetprofitorlossbasedonthefairvalueoftheinvestee’sindividualseparatelyidentifiableassets,etc.attheacquisitiondateaftermakingappropriateadjustmentstobeconfirmedwiththeGroup'saccountingpoliciesandaccountingperiod.TheGroupdiscontinuesrecognizingitsshareofnetlossesoftheinvesteeafterthecarryingamountofthelong-termequityinvestmenttogetherwithanylong-termintereststhatinsubstanceformpartofitsnetinvestmentintheinvesteeisreducedtozero.IftheGrouphasincurredobligationstoassumeadditionallossesoftheinvestee,aprovisionisrecognizedaccordingtotheexpectedobligation,andrecordedasinvestmentlossfortheperiod.

16.4Methodsofimpairmentassessmentanddeterminingtheprovisionforimpairmentloss

Iftherecoverableamountsoftheinvestmentstosubsidiaries,jointventuresandassociatesarelessthantheircarryingamounts,animpairmentlossshouldberecognizedtoreducethecarryingamountstotherecoverableamounts(NoteIII23).

16.5Thedisposaloflong-termequityinvestment

Ondisposalofalongtermequityinvestment,thedifferencebetweentheproceedsactuallyreceivedandreceivableandthecarryingamountisrecognizedinprofitorlossfortheperiod.

17.Investmentproperties

Investmentpropertyreferstorealestateheldtoearnrentalsorforcapitalappreciation,orboth,includingleasedlanduserights,landuserightsheldandprovidedfortransferringafterappreciationandleasedconstructions,etc.Investmentpropertyisinitiallymeasuredatcost.SubsequentexpendituresrelatedtoaninvestmentpropertyshallbeincludedincostofinvestmentpropertyonlywhentheeconomicbenefitsassociatedwiththeassetwilllikelyflowtotheGroupanditscostcanbemeasuredreliably.Allothersubsequentexpendituresoninvestmentpropertyshallbeincludedinprofitorlossforthecurrentperiodwhenincurred.TheGroupadoptscostmethodforsubsequentmeasurementofinvestmentproperty,whichisdepreciatedoramortizedusingthesamepolicyasthatforbuildingsandlanduserights.Whenaninvestmentpropertyissold,transferred,retiredordamaged,theamountofproceedsondisposalofthepropertynetofthecarryingamountandrelatedtaxesandsurchargesisrecognizedinprofitorlossforthecurrentperiod.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

18.Fixedassets

18.1Recognitioncriteriaforfixedassets

FixedassetsincludelandownedbytheGroupandbuildings,machineryandequipment,motorvehicles,officeequipmentandothers.Fixedassetsaretangibleassetsthatareheldforuseintheproductionorsupplyofgoodsorforadministrativepurposes,andhaveusefullivesofmorethanoneaccountingyear.AfixedassetisrecognizedonlywhenitisprobablethateconomicbenefitsassociatedwiththeassetwillflowtotheGroupandthecostoftheassetcanbereliablymeasured.Purchasedorconstructedfixedassetsareinitiallymeasuredatcostwhenacquired.SubsequentexpendituresincurredforthefixedassetareincludedinthecostofthefixedassetandifitisprobablethateconomicbenefitsassociatedwiththeassetwillflowtotheGroupandthesubsequentexpenditurescanbemeasuredreliably.Othersubsequentexpendituresarerecognizedinprofitorlossintheperiodinwhichtheyareincurred.

18.2Depreciationofeachcategoryoffixedassets

Fixedassetisdepreciatedbasedonthecostoffixedassetrecognizedlessexpectednetresidualvalueoveritsusefullifeusingthestraight-linemethodsincethemonthsubsequenttotheoneinwhichitisreadyforintendeduse.Depreciationiscalculatedbasedonthecarryingamountofthefixedassetafterimpairmentovertheestimatedremainingusefullifeoftheasset.TheGroupreviewstheusefullifeandestimatednetresidualvalueofafixedassetandthedepreciationmethodappliedatleastonceateachfinancialyear-end,andaccountforanychangeasachangeinanaccountingestimate.Theestimatedusefullife,estimatednetresidualvalueandannualdepreciationrateofeachcategoryoffixedassetsareasfollows:

OverseasLandownedbytheGroupisnotdepreciated.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

18.Fixedassets-(cont’d)

18.3Otherexplanations

Ifafixedassetisupondisposalornofutureeconomicbenefitsareexpectedtobegeneratedfromitsuseordisposal,thefixedassetisderecognized.Whenafixedassetissold,transferred,retiredordamaged,theamountofanyproceedsondisposaloftheassetnetofthecarryingamountandrelatedtaxesisrecognizedinprofitorlossfortheperiod.Thedifferencebetweenrecoverableamountsofthefixedassetsunderthecarryingamountisreferredtoasimpairmentloss(NoteIII23).

19.Constructioninprogress

Constructioninprogressismeasuredatitsactualcosts.Theactualcostsincludevariousconstruction,installationcosts,borrowingcostscapitalizedandotherexpendituresincurreduntilsuchtimeastherelevantassetsarecompletedandreadyforitsintendeduse.Whentheassetconcernedisreadyforitsintendeduse,thecostoftheassetistransferredtofixedassetsanddepreciatedstartingfromthefollowingmonth.Thedifferencebetweenrecoverableamountsoftheconstructioninprogressunderthecarryingamountisreferredtoasimpairmentloss(NoteIII23).

20.Borrowingcosts

Borrowingcostsdirectlyattributabletotheacquisition,constructionorproductionofqualifyingassetarecapitalizedwhenexpendituresforsuchassetandborrowingcostsareincurredandactivitiesrelatingtotheacquisition,constructionorproductionoftheassetthatarenecessarytopreparetheassetforitsintendeduseorsalehavecommenced.Capitalizationofborrowingcostsceaseswhenthequalifyingassetbeingacquired,constructedorproducedbecomesreadyforitsintendeduseorsale.Borrowingcostsincurredsubsequentlyshouldbechargedtoprofitorloss.Capitalizationofborrowingcostsissuspendedduringperiodsinwhichtheacquisition,constructionorproductionofaqualifyingassetissuspendedabnormallyandwhenthesuspensionisforacontinuousperiodofmorethan3months.Capitalizationissuspendeduntiltheacquisition,constructionorproductionoftheassetisresumed.Wherefundsareborrowedunderaspecific-purposeborrowing,theamountofinteresttobecapitalizedistheactualinterestexpensesincurredonthatborrowingfortheperiodlessanybankinterestearnedfromdepositingtheborrowedfundsbeforebeingusedontheassetoranyinvestmentincomeonthetemporaryinvestmentofthosefunds.Wherefundsareborrowedundergeneral-purposeborrowings,theGroupdeterminestheamountofinteresttobecapitalizedonsuchborrowingsbyapplyingacapitalizationratetotheweightedaverageoftheexcessofcumulativeexpendituresontheassetovertheamountsofspecific-purposeborrowings.Thecapitalizationrateistheweightedaverageoftheinterestratesapplicabletothegeneral-purposeborrowings.Duringthecapitalizationperiod,exchangedifferencesonforeigncurrencyspecific-purposeborrowingarefullycapitalizedwhereasexchangedifferencesonforeigncurrencygeneral-purposeborrowing,chargedtoprofitorloss.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

21.Intangibleassets

21.1Valuationmethods,usefullife,impairmenttest

TheGroup’sintangibleassetsincludeproductregistrationassets,intangibleassetsuponpurchaseofproducts,marketingrightsandrightstousetradenamesandtrademarks,landuserights,softwareandcustomerrelations.Intangibleassetsarestatedatcostlessaccumulatedamortizationandimpairmentlosses.Whenanintangibleassetwithafiniteusefullifeisavailableforuse,itsoriginalcostlessanyaccumulatedimpairmentlossesisamortizedoveritsestimatedusefullifeusingthestraight-linemethod.Anintangibleassetwithanindefiniteusefullifeisnotamortized.Foranintangibleassetwithafiniteusefullife,theGroupreviewstheusefullifeandamortizationmethodattheendoftheyear,andmakesadjustmentswhennecessary.Therespectiveamortizationperiodsforsuchintangibleassetsareasfollows:

Thedifferencebetweenrecoverableamountsoftheintangibleassetsunderthecarryingamountisreferredtoasimpairmentloss(seeNoteIII23).

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

21.Intangibleassets-(cont’d)

21.2Researchanddevelopmentexpenditure

Internalresearchanddevelopmentprojectexpenditureswereclassifiedintoresearchexpendituresanddevelopmentexpendituresdependingonitsnatureandthegreateruncertaintywhethertheresearchactivitiesbecomingtointangibleassets.Expenditureduringtheresearchphaseisrecognizedasanexpenseintheperiodinwhichitisincurred.Expenditureduringthedevelopmentphasethatmeetsallofthefollowingconditionsatthesametimeisrecognizedasintangibleasset:

-Itistechnicallyfeasibletocompletetheintangibleassetsothatitwillbeavailableforuseorsale;-TheGrouphastheintentiontocompletetheintangibleassetanduseorsellit;-TheGroupcandemonstratethewaysinwhichtheintangibleassetwillgenerateeconomicbenefits;-Theavailabilityofadequatetechnical,financialandotherresourcestocompletethedevelopmentandtheabilitytouseorselltheintangibleasset;-Theexpenditureattributabletotheintangibleassetduringitsdevelopmentphasecanbereliably

measured.Expendituresthatdonotmeetalloftheaboveconditionsatthesametimearerecognizedinprofitorlosswhenincurred.Iftheexpenditurescannotbedistinguishedbetweentheresearchphaseanddevelopmentphase,theGrouprecognizesalloftheminprofitorlossfortheperiod.Expendituresthathavepreviouslybeenrecognizedintheprofitorlosswouldnotberecognizedasanassetinsubsequentyears.Thoseexpenditurescapitalizedduringthedevelopmentstagearerecognizedasdevelopmentcostsincurredandwillbetransferredtointangibleassetwhentheunderlyingprojectisreadyforanintendeduse.Theresearchanddevelopmentexpenditureincludessalariesandwelfareexpensesofpersonneldirectlyengagedinresearchanddevelopmentactivities,depreciationexpensesofinstrumentsandequipmentusedinresearchanddevelopmentactivities,expensesforfieldtrialandprofessionalservices,materialsconsumedandleaseandmaintenanceexpensesrelatedtoresearchanddevelopmentactivities.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

22.Goodwill

Theinitialcostofgoodwillrepresentstheexcessofcostofacquisitionovertheacquirer’sinterestinthefairvalueoftheidentifiablenetassetsoftheacquireeunderabusinesscombinationnotinvolvingenterprisesundercommoncontrol.Goodwillisnotamortizedandisstatedinthebalancesheetatcostlessaccumulatedimpairmentlosses(seeNoteIII23).Ondisposalofanassetgrouporasetofassetgroups,anyattributablegoodwilliswrittenoffandincludedinthecalculationoftheprofitorlossondisposal.

23.Impairmentoflong-termassets

TheCompanyassessesateachbalancesheetdatewhetherthereisanyindicationthatthefixedassets,constructioninprogress,rightofuseassets,intangibleassetswithfiniteusefullives,investmentpropertiesmeasuredathistoricalcost,investmentsinsubsidiaries,jointventuresandassociatesmaybeimpaired.Ifthereisanyindicationthatsuchassetsmaybeimpaired,recoverableamountsareestimatedforsuchassets.Therecoverableamountofanassetisthehigherofitsfairvaluelesscoststosellandthepresentvalueofthefuturecashflowestimatedtobederivedfromtheasset.TheGroupestimatestherecoverableamountonanindividualbasis.Ifitisnotpossibletoestimatetherecoverableamountoftheindividualasset,theGroupdeterminestherecoverableamountoftheassetgrouptowhichtheassetbelongs.Identificationofanassetgroupisbasedonwhethermajorcashinflowsgeneratedbytheassetgrouparelargelyindependentofthecashinflowsfromotherassetsorassetgroups.Goodwillarisingfromabusinesscombinationistestedforimpairmentatleastateachyearend,irrespectiveofwhetherthereisanyindicationthattheassetmaybeimpaired.Forthepurposeofimpairmenttesting,thecarryingamountofgoodwillacquiredinabusinesscombinationisallocatedfromtheacquisitiondateonareasonablebasistoeachoftherelatedassetgroups;ifitisimpossibletoallocatetotherelatedassetgroups,itisallocatedtoeachoftherelatedsetofassetgroups.EachoftherelatedassetgroupsorsetofassetgroupsisanassetgrouporsetofassetgroupthatisabletobenefitfromthesynergiesofthebusinesscombinationandshallnotbelargerthanareportablesegmentdeterminedbytheGroup.Ifthecarryingamountoftheassetgrouporsetofassetgroupsishigherthanitsrecoverableamount,theamountoftheimpairmentlossfirstreducedbythecarryingamountofthegoodwillallocatedtotheassetgrouporsetofassetgroups,andthenthecarryingamountofotherassets(otherthanthegoodwill)withintheassetgrouporsetofassetgroups,proratabasedonthecarryingamountofeachasset.Oncetheimpairmentlossofsuchassetsisrecognized,itwillnotbereversedinanysubsequentperiod.

24.Contractliabilities

ContractliabilitiesrefertotheGroup’sobligationtotransfergoodsorservicestoacustomerforwhichtheGrouphasreceivedconsiderationfromthecustomer.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

25.Employeebenefits

25.1Short-termemployeebenefits

Employeewagesorsalaries,bonuses,socialsecuritycontributions,measuredonanon-discountedbasis,andtheexpenseisrecordedwhentherelatedserviceisprovided.Aprovisionforshort-termemployeebenefitsinrespectofcashbonusesisrecognizedintheamountexpectedtobepaidwheretheGrouphasacurrentlegalorconstructiveobligationtopaythesaidamountforservicesprovidedbytheemployeeinthepastandtheamountcanbeestimatedreliably.

25.2Post-employmentbenefits

Post-employmentbenefitsareclassifiedintodefinedcontributionplansanddefinedbenefitplans.Adefinedcontributionplanisapost-employmentbenefitplanunderwhichtheGrouppayscontributionstoaseparateentityandhasnolegalorconstructiveobligationtopayfurtheramounts.Obligationsforcontributionstodefinedcontributionplansarerecognizedasanexpenseinprofitorlossintheperiodsduringwhichrelatedservicesarerenderedbyemployees.DefinedbenefitplansoftheGrouparepost-employmentbenefitplansotherthandefinedcontributionplans.Inaccordancewiththeprojectedunitcreditmethod,theGroupmeasurestheobligationsunderdefinedbenefitplansusingunbiasedandmutuallycompatibleactuarialassumptionstoestimaterelateddemographicvariablesandfinancialvariables,anddiscountobligationsunderthedefinedbenefitplanstodeterminethepresentvalueofthedefinedbenefitliability.Thediscountrateusedistheyieldonthereportingdateonhighly-ratedcorporatedebenturesdenominatedinthesamecurrency,thathavematuritydatesapproximatingthetermsoftheGroup’sobligation.TheGroupattributesbenefitobligationsunderadefinedbenefitplantoperiodsofserviceprovidedbyrespectiveemployees.Servicecostandinterestexpenseonthedefinedbenefitliabilityarechargedtoprofitorlossandremeasurementsofthedefinedbenefitliabilityarerecognizedinothercomprehensiveincome.

25.3Terminationbenefits

WhentheGroupterminatestheemploymentwithemployeesorprovidescompensationunderanoffertoencourageemployeestoacceptvoluntaryredundancy,aprovisionisrecognizedwithacorrespondingexpenseinprofitorlossattheearlierofwhentheGroupcannolongerwithdrawtheofferoftheterminationbenefitandwhenitrecognisesanyrelatedrestructuringcosts.Ifthebenefitsarepayablemorethan12monthsaftertheendofthereportingperiod,theyarediscountedtotheirpresentvalue.Thediscountrateusedistheyieldonthereportingdateonhighly-ratedcorporatedebenturesdenominatedinthesamecurrency,thathavematuritydatesapproximatingthetermsoftheGroup’sobligation.

ADAMALtd.(ExpressedinRMB'000)

NotestotheFinancialStatements

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

25.Employeebenefits-(cont’d)

25.4Otherlong-termemployeebenefits

TheGroup’snetobligationforlong-termemployeebenefits,whicharenotattributabletopost-employmentbenefitplans,isfortheamountofthefuturebenefittowhichemployeesareentitledforservicesthatwereprovidedduringthecurrentandpriorperiods.Theamountofthesebenefitsisdiscountedtoitspresentvalueandthefairvalueoftheassetsrelatedtotheseobligationsisdeductedtherefrom.Thediscountrateusedistheyieldonthereportingdateonhighly-ratedcorporatedebenturesdenominatedinthesamecurrency,thathavematuritydatesapproximatingthetermsoftheGroup’sobligation.

26.Share-basedpayment

Share-basedpaymentreferstothetransactioninordertoacquiretheserviceofferedbytheemployeesorotherpartiesthatgrantsequityinstrumentsorliabilitiesonthebasisoftheequityinstruments.Share-basedpaymentclassifiedintoequity-settledshare-basedpaymentandcash-settledshare-basedpayment.

26.1Cash-settledshare-basedpayment

Thecash-settledshare-basedpaymentshouldbemeasuredaccordingtothefairvalueoftheliabilitiesrecognizedbasedonthesharesorotherequityinstrumentundertakenbytheCompany.Forcash-settledshare-basedpaymentmadeinreturnfortherenderingofemployeeservicesthatcannotbeexerciseduntiltheservicesarefullyprovidedduringthevestingperiodorspecifiedperformancetargetsaremet,oneachbalancesheetdatewithinthevestingperiod,theservicesacquiredinthecurrentperiodshall,basedonthebestestimateofthenumberofexercisableinstruments,berecognizedinrelevantexpensesandthecorrespondingliabilitiesatthefairvalueoftheliabilityincurredbytheCompany.Oneachbalancesheetdateandthesettlementdatebeforethesettlementoftherelevantliabilities,theCompanyshouldre-measurethefairvalueoftheliabilitiesandthechangesshouldbeincludedinthecurrentperiodprofitandloss.

27.Provisions

ProvisionsarerecognizedwhentheGrouphasapresentobligationrelatedtoacontingency,itisprobablethatanoutflowofeconomicbenefitswillberequiredtosettletheobligation,andtheamountoftheobligationcanbemeasuredreliably.Theamountrecognizedasaprovisionisthebestestimateoftheconsiderationrequiredtosettlethepresentobligationatthesettlementdate,takingintoaccountfactorspertainingtoacontingencysuchastherisks,uncertaintiesandtimevalueofmoney.Wheretheeffectofthetimevalueofmoneyismaterial,theamountoftheprovisionisdeterminedbydiscountingtherelatedfuturecashoutflows.Theincreaseintheprovisionduetopassageoftimeisrecognizedasinterestexpense.Ifallorpartoftheprovisionsettlementsisreimbursedbythirdparties,whentherealizationofincomeisvirtuallycertain,thentherelatedassetshouldberecognized.However,theamountofrelatedassetrecognizedshouldnotbeexceedingtherespectiveprovisionamount.

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Atthebalancesheetdate,theamountofprovisionshouldbere-assessedtoreflectthebestestimationthen.

ADAMALtd.(ExpressedinRMB'000)

NotestotheFinancialStatements

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

28.Revenue

RevenueoftheGroupismainlyfromsaleofgoods.TheGrouprecognizesrevenuewhentransferringgoodstoacustomer,attheamountofthetransactionprice.Thetimingoftransferringthecontrolofgoodschangesaccordingtothespecifictermsofthesalecontract.Regardingsalesofproducts,transferofthecontrolofgoodsgenerallyoccurswhentheproductsarriveatthecustomer’swarehouse,whileforcertainoverseasshipmentsthetransferoccurswhentheproductsareloadedontheshipper’stransportvehicles.Transactionpriceistheamountofconsiderationtowhichanentityexpectstobeentitledinexchangefortransferringgoodstoacustomer,excludingamountscollectedonbehalfofthirdparties.VariableconsiderationVariableconsiderationincludessaleswitharightofreturn(seebelow),refunds,discounts,volumerebatesetc.TheamountsofvariableconsiderationareestimatedusingtheGroup’spastexperienceintherelevantmarkets.TheGroupincludesinthetransactionpricetheamountsofvariableconsiderationonlytotheextentthatitishighlyprobablethatasignificantreversalintheamountofcumulativerevenuerecognizedwillnotoccurwhentheuncertaintyassociatedwiththevariableconsiderationissubsequentlyresolved.SignificantfinancingcomponentForacontractwithasignificantfinancingcomponent,theGrouprecognizerevenueatanamountthatreflectsthepricethatacustomerwouldhavepaidforthegoodsifthecustomerhadpaidcashforthosegoodsatreceipt.Thedifferencebetweentheamountofconsiderationandthecashsellingpriceofthegoods,isamortizedinthecontractperiodusingeffectiveinterestrate.TheGroupdoesnotadjusttheamountofconsiderationfortheeffectsofasignificantfinancingcomponentiftheGroupexpects,atcontractinception,thattheperiodbetweenwhentheentitytransfersagoodtoacustomerandwhenthecustomerpaysforthatgoodwillbeoneyearorless.SalewitharightofreturnForsalewitharightofreturn,theGrouprecognizesrevenueattheamountofconsiderationtowhichtheGroupexpectstobeentitled(ieexcludingtheproductsexpectedtobereturned).Foranyamountsreceived(orreceivable)forwhichanentitydoesnotexpecttobeentitled,theentityshallnotrecognizerevenuewhenittransfersproductstocustomersbutshallrecognizethoseamountsreceived(orreceivable)asarefundliability.AnassetrecognizedfortheGroup’srighttorecoverproductsfromacustomeronsettlingarefundliabilityshallinitiallybemeasuredbyreferencetotheformercarryingamountoftheproductlessanyexpectedcoststorecoverthoseproducts.AdvancereceiptsforthesaleofgoodsWhentheGroupreceivesadvancepaymentsfromcustomersforthesaleofgoods,itfirstrecognizessuchpaymentsasliabilitiesandthentransfersthemtorevenuewhentherelevantperformanceobligationsarefulfilled.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

29.Governmentgrants

Governmentgrantsaretransferofmonetaryassetsandnon-monetaryassetsfromthegovernmenttotheGroupatnoconsideration,includingtaxreturns,financialsubsidiesandsoon.AgovernmentgrantisrecognizedonlywhentheGroupcancomplywiththeconditionsattachedtothegrantandtheGroupwillreceivethegrant.Ifagovernmentgrantisintheformofatransferofamonetaryasset,itismeasuredattheamountreceivedorreceivable.Ifagovernmentgrantisintheformofanon-monetaryasset,itismeasuredatfairvalue.Ifthefairvaluecannotbereliablydetermined,itismeasuredatanominalamount.Governmentgrantsareeitherrelatedtoassetsorincome.

(1)ThebasisofjudgmentandaccountingmethodofthegovernmentgrantsrelatedtoassetsGovernmentgrantsobtainedforacquiringlong-termassetsaregovernmentgrantsrelatedtoassets.Agovernmentgrantrelatedtoanassetisoffsetwiththecostoftherelevantasset.

(2)ThebasisofjudgmentandaccountingmethodofthegovernmentgrantsrelatedtoincomeForagovernmentgrantrelatedtoincome,ifthegrantisacompensationforrelatedexpensesorlossestobeincurredinsubsequentperiods,thegrantisrecognizedasdeferredincome,andrecognizedinprofitorlossovertheperiodsinwhichtherelatedcostsarerecognized.Ifthegrantisacompensationforrelatedexpensesorlossesalreadyincurred,thegrantisrecognizedimmediatelyinprofitorlossfortheperiod.GovernmentgrantsrelatedtotheGroup’snormalcourseofbusinessareoffsetwithrelatedcostsandexpenses.GovernmentgrantsrelatedthatareirrelevantwiththeGroups’snormalcourseofbusinessareincludedinnon-operatinggains.

30.Currentanddeferredtax

Theincometaxexpensesincludecurrentincometaxanddeferredincometax.

30.1Currentincometax

Atthebalancesheetdate,currentincometaxliabilities(orassets)forthecurrentandpriorperiodsaremeasuredattheamountexpectedtobepaid(orrecovered)accordingtotherequirementsoftaxlaws.

30.2Deferredtaxassetsanddeferredtaxliabilities

Temporarydifferencesaredifferencesbetweenthecarryingamountsofcertainassetsorliabilitiesandtheirtaxbase.Alltaxabletemporarydifferencesarerecognizedasrelateddeferredtaxliabilities.Deferredtaxassetsarerecognizedtotheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichthedeductiblelossesandtaxcreditscanbeutilized.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

30.Currentanddeferredtax-(cont’d)

30.2Deferredtaxassetsanddeferredtaxliabilities-(cont’d)

Fordeductiblelossesandtaxcreditsthatcanbecarriedforward,deferredtaxassetsarerecognizedtotheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichthedeductiblelossesandtaxcreditscanbeutilized.However,fordeductibletemporarydifferencesassociatedwiththeinitialrecognitionofgoodwillandtheinitialrecognitionofanassetorliabilityarisingfromatransaction(notabusinesscombination)thataffectsneithertheaccountingprofitnortaxableprofits(ordeductiblelosses)atthetimeoftransaction,nodeferredtaxassetorliabilityisrecognized.Atthebalancesheetdate,deferredtaxassetsandliabilitiesaremeasuredatthetaxrates,accordingtotaxlaws,thatareexpectedtoapplyintheperiodinwhichtheassetisrealizedortheliabilityissettled.Deferredtaxliabilitiesarerecognizedfortaxabletemporarydifferencesassociatedwithinvestmentsinsubsidiariesandassociates,andinterestsinjointventures,exceptwheretheGroupisabletocontrolthetimingofthereversalofthetemporarydifferenceanditisprobablethatthetemporarydifferencewillnotreverseintheforeseeablefuture.TheGroupmayberequiredtopayadditionaltaxincaseofdistributionofdividendsbytheGroupcompanies.Thisadditionaltaxwasnotincludedinthefinancialstatements,sincethepolicyoftheGroupisnottodistributeintheforeseeablefutureadividendwhichcreatesasignificantadditionaltaxliability.Exceptforthosecurrentincometaxanddeferredtaxchargedtocomprehensiveincomeorshareholders’equityinrespectoftransactionsoreventswhichhavebeendirectlyrecognizedinothercomprehensiveincomeorshareholders’equity,anddeferredtaxrecognizedonbusinesscombinations,allothercurrentincometaxanddeferredtaxitemsarechargedtoprofitorlossinthecurrentperiod.Atthebalancesheetdate,thecarryingamountofdeferredtaxassetsisreviewedandreducedifitisnolongerprobablethatsufficienttaxableprofitswillbeavailableinthefuturetoallowthebenefitofdeferredtaxassetstobeutilized.Suchreductionisreversedwhenitbecomesprobablethatsufficienttaxableprofitswillbeavailable.

30.3Offsetofincometax

WhentheGrouphasalegalrighttosettlecurrenttaxassetsandliabilitiesonanetbasis,andtaxassetsandtaxliabilitiesrelatetoincometaxesleviedbythesametaxationauthorityoneitherthesametaxableentityordifferenttaxableentitieswhichintendtorealizetheassetsandliabilitiessimultaneously,currenttaxassetsandliabilitiesareoffsetandpresentedonanetbasis.WhentheGrouphasalegalrighttosettledeferredtaxassetsandliabilitiesonanetbasiswhichrelatestoincometaxesleviedbythesametaxationauthority,oneitherthesametaxableentityordifferenttaxableentitieswhichintendeithertosettlecurrenttaxassetsandliabilitiesonanetbasisortorealizetheassetsandliabilitiessimultaneously,ineachfutureperiodinwhichsignificantamountsofdeferredtaxassetsorliabilitiesareexpectedtobereversed,deferredtaxassetsanddeferredtaxliabilitiesareoffsetandpresentedonanetbasis.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

31.Leases

Leaseisacontract,thatconveystherighttouseanassetforaperiodoftimeinexchangeforconsideration.

31.1Determiningwhetheranarrangementcontainsalease

Ontheinceptiondateofthelease,theGroupdetermineswhetherthearrangementisaleaseorcontainsalease,whileassessingifitconveystherighttocontroltheuseofanidentifiedassetforaperiodoftimeinexchangeforconsideration.Initsassessmentofwhetheranarrangementconveystherighttocontroltheuseofanidentifiedasset,theGroupassesseswhetherithasthefollowingtworightsthroughouttheleaseterm:

(a)Therighttoobtainsubstantiallyalltheeconomicbenefitsfromuseoftheidentifiedasset;and(b)Therighttodirecttheidentifiedasset’suse.Anarrangementdoesnotcontainaleaseifanassetisleasedforaperiodoflessthan12months,ortoleaseofassetwithloweconomicvalue.

31.2Initialrecognitionofleasedassetsandleaseliabilities

Uponinitialrecognition,theGrouprecognizesaliabilityatthepresentvalueoffutureleasepayments(excludecertainvariableleasepayments,asdetailedinNoteIII31.4),andconcurrentlytheGrouprecognizesaright-of-useassetatthesameamount,adjustedforanyprepaidleasepaymentspaidattheleasedateorbefore,plusinitialdirectcostsincurredinrespectofthelease.Whentheinterestrateimplicitintheleaseisnotreadilydeterminable,theincrementalborrowingrateofthelesseeisused.TheGrouppresentsright-of-useassetsseparatelyfromotherassetsinthebalancesheet.

31.3Theleaseterm

Theleasetermisthenon-cancellableperiodoftheleaseplusperiodscoveredbyanextensionorterminationoption,ifitisreasonablycertainthatthelesseewillexerciseornotexercisetheoption,respectively.Ifthereisachangeintheleaseterm,orintheassessmentofanoptiontopurchasetheunderlyingasset,theGroupremeasurestheleaseliability,onthebasisoftherevisedleasetermandthereviseddiscountrateandadjusttheright-of-useassetsaccordingly.

31.4Variableleasepayments

Variableleasepaymentsthatdependonanindexorarate,areinitiallymeasuredusingtheindexorrateexistingatthecommencementofthelease.Whenthecashflowsoffutureleasepaymentschangeastheresultofachangeinanindexorarate,thebalanceoftheliabilityisadjustedwithacorrespondencechangeintheright-of-useasset.Othervariableleasepaymentsthatarenotincludedinthemeasurementoftheleaseliabilityarerecognizedinprofitorlossintheperiodinwhichtheconditionthattriggerspaymentoccurs.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

31.Leases-(cont’d)

31.5Subsequentmeasurement

Afterleasecommencement,aright-of-useassetismeasuredonacostbasislessaccumulateddepreciationandaccumulatedimpairmentlossesandisadjustedforre-measurementsoftheleaseliability.Theassetisdepreciatedonastraight-linebasisovertheusefullifeorcontractualleaseperiod,whicheverearlier.TheGroupappliesASBE8ImpairmentofAssets,todeterminewhethertheright-of-useassetisimpairedandtoaccountforanyimpairmentlossidentified.Aleaseliabilityismeasuredaftertheleasecommencementdateatamortizedcostusingtheeffectiveinterestmethod.

32.Othersignificantaccountingpoliciesandaccountingestimates

32.1Hedging

TheGroupusesderivativefinancialinstrumentstohedgeitsrisksrelatedtoforeigncurrencyandinflationrisksandderivativesthatarenotusedforhedging.HedgeaccountingTheGroupmakesanassessment,bothattheinceptionofthehedgerelationshipaswellasonanongoingbasis,whetherthehedgeisexpectedtobeeffectiveinoffsettingthechangesinthefairvalueofcashflowsthatcanbeattributedtothehedgedriskduringtheperiodforwhichthehedgeisdesignated.Aneffectivehedgeexistswhenallofthebelowconditionsaremet:

?Thereisaneconomicrelationshipbetweenthehedgeditemandthehedginginstrument;?theeffectofcreditriskdoesnotdominatethevaluechangesthatresultfromthateconomic

relationship;?thehedgeratioofthehedgingrelationshipisthesameasthatresultingfromthequantityofthehedgeditemthattheentityactuallyhedgesandthequantityofthehedginginstrumentthattheentityactuallyusestohedgethatquantityofhedgeditem.Onthecommencementdateoftheaccountinghedge,theGroupformallydocumentstherelationshipbetweenthehedginginstrumentandhedgeditem,includingtheGroup’sriskmanagementobjectivesandstrategyinexecutingthehedgetransaction,togetherwiththemethodsthatwillbeusedbytheGrouptoassesstheeffectivenessofthehedgingrelationship.Withrespecttoacash-flowhedge,aforecastedtransactionthatconstitutesahedgeditemmustbehighlyprobableandmustgiverisetoexposuretochangesincashflowsthatcouldultimatelyaffectprofitorloss.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

32.Othersignificantaccountingpoliciesandaccountingestimates-(cont’d)

32.1Hedging-(cont’d)

Cash-flowhedgesSubsequenttotheinitialrecognition,changesinthefairvalueofderivativesusedtohedgecashflowsarerecognizedthroughothercomprehensiveincomedirectlyinahedgingreserve,withrespecttothepartofthehedgethatiseffective.Regardingtheportionofthehedgethatisnoteffective,thechangesinfairvaluearerecognizedinprofitandloss.Theamountaccumulatedinthehedgingreserveisreclassifiedtoprofitandlossintheperiodinwhichthehedgedcashflowsimpactprofitorlossandispresentedinthesamelineiteminthestatementofincomeasthehedgeditem.Ifthehedginginstrumentnolongermeetsthecriteriaforhedgeaccounting,expiresorissold,terminatedorexercised,thehedgeaccountingisdiscontinued.Thecumulativegainorlosspreviouslyrecognizedinahedgingreservethroughothercomprehensiveincomeremainsinthereserveuntiltheforecastedtransactionoccursorisnolongerexpectedtooccur.Iftheforecastedtransactionisnolongerexpectedtooccur,thecumulativegainorlossinrespectofthehedginginstrumentinthehedgingreserveisreclassifiedtoprofitorloss.EconomichedgeHedgeaccountingisnotappliedwithrespecttoderivativeinstrumentsusedtoeconomicallyhedgefinancialassetsandliabilitiesdenominatedinforeigncurrencyorCPIlinked.Changesinthefairvalueofsuchderivativesarerecognizedinprofitorlossasgain(loss)fromchangesinfairvalue.

32.2Securitizationofassets

DetailsofthesecuritizationofassetagreementsandaccountingpolicyaresetoutinNoteV.5-Accountreceivables.

32.3Segmentreporting

ReportablesegmentsareidentifiedbasedonoperatingsegmentswhicharedeterminedbasedonthestructureoftheGroup’sinternalorganization,managementrequirementsandinternalreportingsystem.Twoormoreoperatingsegmentsmaybeaggregatedintoasingleoperatingsegmentifthesegmentshavesimilareconomiccharacteristicsandaresameorsimilarinrespectofthenatureofeachproductandservice,thenatureofproductionprocesses,thetypeorclassofcustomersfortheproductsandservices,themethodsusedtodistributetheproductsorprovidetheservices,andthenatureoftheregulatoryenvironment.Inter-segmentrevenuesaremeasuredonthebasisofactualtransactionpriceforsuchtransactionsforsegmentreporting.Segmentaccountingpoliciesareconsistentwiththosefortheconsolidatedfinancialstatements.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

32.Othersignificantaccountingpoliciesandaccountingestimates-(cont’d)

32.4Profitdistributionstoshareholders

Dividendswhichareapprovedafterthebalancesheetdatearenotrecognizedasaliabilityatthebalancesheetdatebutaredisclosedinthenotesseparately.

33.Changesinsignificantaccountingpoliciesandaccountingestimates

33.1Changesinsignificantaccountingpolicies

Therearenosignificantchangesinaccountingpoliciesinthereportingperiod.

33.2Changesinsignificantaccountingestimates

Therearenosignificantchangesinaccountingestimatesinthereportingperiod.

34.Significantaccountingestimatesandjudgments

Thepreparationofthefinancialstatementsrequiresmanagementtomakeestimatesandassumptionsthataffecttheapplicationofaccountingpoliciesandthereportedamountsofassets,liabilities,incomeandexpenses.Actualresultsmaydifferfromtheseestimates.Estimatesaswellasunderlyingassumptionsanduncertaintiesinvolvedarereviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognizedintheperiodinwhichtheestimateisrevisedandinanyfutureperiodsaffected.NotesV.34,NoteVIII,NoteIXandNoteXIIIcontaininformationabouttheassumptionsandtheirriskfactorsrelatingtopost-employmentbenefits–definedbenefitplans,fairvalueoffinancialinstrumentsandshare-basedpayments.Otherkeysourcesofestimationuncertaintyareasfollows:

34.1Expectedcreditlossoftradereceivables

AsdescribedinNoteIII.12,tradereceivablesarereviewedateachbalancesheetdatetodeterminewhethercreditriskonareceivablehasincreasedsignificantlysinceinitialrecognition,lifetimeexpectedlossesisaccruedforimpairmentprovision.EvidenceofimpairmentincludesobservabledatathatcomestotheattentionoftheGroupaboutlosseventssuchasasignificantdeclineinthesolvencyofanindividualdebtorortheportfolioofdebtors,andsignificantchangesinthefinancialconditionthathaveanadverseeffectonthedebtor.Ifthereisobjectiveevidenceofarecoveryinthevalueofreceivableswhichcanberelatedobjectivelytoaneventoccurringaftertheimpairmentwasrecognized,thepreviouslyrecognizedimpairmentlossisreversed.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

34.Significantaccountingestimatesandjudgments-(cont’d)

34.2Provisionforimpairmentofinventories

AsdescribedinNoteIII.15,thenetrealisablevalueofinventoriesisundermanagement’sregularreview,andasaresult,provisionforimpairmentofinventoriesisrecognizedfortheexcessofinventories’carryingamountsovertheirnetrealisablevalue.Whenmakingestimatesofnetrealisablevalue,theGrouptakesintoconsiderationtheuseofinventoriesheldonhandandotherinformationavailabletoformtheunderlyingassumptions,includingtheinventories’marketpricesandtheGroup’shistoricaloperatingcosts.Theactualsellingprice,thecostsofcompletionandthecostsnecessarytomakethesaleandrelevanttaxesmayvarybasedonthechangesinmarketconditionsandproductsaleability,manufacturingtechnologyandtheactualuseoftheinventories,resultinginthechangesinprovisionforimpairmentofinventories.Thenetprofitorlossmaythenbeaffectedintheperiodwhentheimpairmentofinventoriesisadjusted.

34.3Impairmentofassetsotherthaninventoriesandfinancialassets

AsdescribedinNoteIII.23,ifimpairmentindicationexists,assetsotherthaninventoriesandfinancialassetsareassessedatbalancesheetdatetodeterminewhetherthecarryingamountexceedstherecoverableamountoftheassets.Ifanysuchcaseexists,animpairmentlossisrecognized.Ifitisnotpracticaltoestimatetherecoverableamountofanindividualasset,therecoverableamountoftheassetgrouptowhichtheassetbelongswillbeestimated.Impairmentexistsifthecarryingamountofanassetorassetgroupishigherthanrecoverableamount,thehigherofitsfairvaluelesscostsofdisposalandthepresentvalueofthefuturecashflowsexpectedtobederivedfromtheassetorassetgroup.Inassessingthepresentvalueofestimatedfuturecashflows,significantjudgementsareexercisedovertheasset’sproduction,sellingprice,relatedoperatingexpensesanddiscountratetocalculatethepresentvalue.Alltheparametersusedforestimationoftherecoverableamountarebasedonreasonableandsupportableassumptions.

34.4Depreciationandamortisationofassetssuchasfixedassetsandintangibleassets

AsdescribedinNoteIII.18andIII.21,assetssuchasfixedassetsandintangibleassetsaredepreciatedandamortisedovertheirusefullivesaftertakingintoaccountresidualvalue.Theestimatedusefullivesoftheassetsareregularlyreviewedtodeterminethedepreciationandamortisationcostschargedineachreportingperiod.Theusefullivesoftheassetsaredeterminedbasedonhistoricalexperienceofsimilarassetsandtheestimatedtechnicalchanges.Iftherehavebeensignificantchangesinthefactorsusedtodeterminethedepreciationoramortisation,therateofdepreciationoramortisationisrevisedprospectively.

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IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

34.Significantaccountingestimatesandjudgments-(cont’d)

34.5Incometaxesanddeferredincometax

TheCompanyandGroupcompaniesareassessedforincometaxpurposesinalargenumberofjurisdictionsand,therefore,Companymanagementisrequiredtouseconsiderablejudgmentindeterminingthetotalprovisionfortaxesandattributionofincome.Whenassessingwhethertherewillbesufficientfuturetaxableprofitsavailableagainstwhichthedeductibletemporarydifferencescanbeutilised,theGrouprecognizesdeferredtaxassetstotheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichthedeductibletemporarydifferencescanbeutilised,usingtaxratesthatwouldapplyintheperiodwhentheassetwouldbeutilised.Indeterminingtheamountofdeferredtaxassets,theGroupmakesreasonablejudgementsandestimatesaboutthetimingandamountoftaxableprofitstobeutilisedinthefollowingperiods,andofthetaxratesapplicableinthefutureaccordingtotheexistingtaxpoliciesandotherrelevantregulations.Iftheactualtimingandamountoffuturetaxableprofitsortheactualapplicabletaxratesdifferfromtheestimatesmadebymanagement,thedifferencesaffecttheamountoftaxexpenses.

34.6Contingentliabilities

WhenassessingthepossibleoutcomesoflegalclaimsfiledagainsttheCompanyanditsinvesteecompanies,thecompanypositionsarebasedontheopinionsoftheirlegaladvisors.Theseassessmentsbythelegaladvisorsarebasedontheirprofessionaljudgment,consideringthestageoftheproceedingsandthelegalexperienceaccumulatedregardingthevariousmatters.Sincetheresultsoftheclaimswillbedeterminedbythecourts,theoutcomescouldbedifferentfromtheassessments.Inadditiontothesaidclaims,theGroupisexposedtounassertedclaims,interalia,wherethereisdoubtastointerpretationoftheagreementand/orlegalprovisionand/orthemanneroftheirimplementation.ThisexposureisbroughttotheCompany’sattentioninseveralways,amongothers,bymeansofcontactsmadetoCompanypersonnel.Inassessingtheriskderivingfromtheunassertedclaims,theCompanyreliesoninternalassessmentsbythepartiesdealingwiththesemattersandbymanagement,whoweighassessmentoftheprospectsofaclaimbeingfiled,andthechancesofitssuccess,iffiled.Theassessmentisbasedonexperiencegainedwithrespecttothefilingofclaimsandtheanalysisofthedetailsofeachclaim.Bytheirnature,inviewofthepreliminarystageoftheclarificationofthelegalclaim,theactualoutcomecouldbedifferentfromtheassessmentmadebeforetheclaimwasfiled.

34.7Employeebenefits

TheGroup’sliabilitiesforlong-termpost-employmentandotherbenefitsarecalculatedaccordingtotheestimatedfutureamountofthebenefittowhichtheemployeewillbeentitledinconsiderationforhisservicesduringthecurrentperiodandpriorperiods.Thebenefitisstatedatpresentvaluenetofthefairvalueoftheplan’sassets,basedonactuarialassumptions.Changesintheactuarialassumptionscouldleadtomaterialchangesinthebookvalueoftheliabilitiesandintheoperatingresults.

-51-

IIISIGNIFICANTACCOUNTINGPOLICIESANDACCOUNTINGESTIMATES-(cont’d)

34.Significantaccountingestimatesandjudgments-(cont’d)

34.8Derivativefinancialinstruments

TheGroupentersintotransactionsinderivativefinancialinstrumentsforthepurposeofhedgingrisksrelatedtoforeigncurrencyandinflationaryrisks.Thederivativesarerecordedattheirfairvalue.Thefairvalueofderivativefinancialinstrumentsisbasedonquotesfromfinancialinstitutions.Thereasonablenessofthequotesisexaminedbydiscountingthefuturecashflows,basedonthetermsandlengthoftheperiodtomaturityofeachcontract,whileusingmarketinterestratesofasimilarinstrumentasofthemeasurementdate.Changesintheassumptionsandthecalculationmodelcouldleadtomaterialchangesinthefairvalueoftheassetsandliabilitiesandintheresults.

-52-

IV.Taxation

1.Maintypesoftaxesandcorrespondingtaxrates

TheincometaxrateinChinais25%(2024:25%).ThesubsidiariesoutsideofChinaareassessedbasedonthetaxlawsinthecountryoftheirresidence.SetforthbelowarethetaxratesoutsideChinarelevanttothelargestsubsidiariesoftheGroupinrespectofassetsandoperatingincome:

TheVATrateoftheGroup'ssubsidiariesisintherangebetween2.6%to27%.

(1)BenefitsfromHigh-TechCertificate

TheCompany,wasjointlyapprovedasnewandhigh-techenterprise,bytheHubeiProvincialDepartmentofScienceandTechnology,DepartmentofFinanceofHubeiProvinceandHubeiProvincialOfficeoftheStateAdministrationofTaxation.Theapplicableincometaxratefor2025and2024is15%.AdamaAnpon(Jiangsu)Ltd.(FormallyknowasJiangsuAnponElectrochemicalCo.Ltd,hereinafter-“Anpon"),asubsidiaryoftheCompany,wasjointlyapprovedasnewandhigh-techenterprise,bytheJiangsuProvincialDepartmentofScienceandTechnology,DepartmentofFinanceofJiangsuProvinceandJiangsuProvincialOfficeoftheStateAdministrationofTaxation.Theapplicableincometaxratefor2025and2024is15%.

(2)AmendmenttotheLawfortheEncouragementofCapitalInvestments,1959

Since2013theIsraelienterprisesaretaxedunderthe"PreferredEnterprise"regime.ThebenefitsincludeagrantstrackforenterpriseslocatedinAreaA.Taxratesonpreferredincomeasfrom2017taxyearareasfollows:7.5%forDevelopmentAreaAand16%fortherestofthecountry.TheamendmentfurtherdeterminedthatnotaxshallapplytodividenddistributedoutofpreferredincometoIsraelresidentcompanyshareholder.

-53-

IV.Taxation-(cont’d)

1.Maintypesoftaxesandcorrespondingtaxrates-(cont’d)

(3)AmendmenttotheLawfortheEncouragementofCapitalInvestments,1959-(cont’d)

AsofJanuary1,2017thelawincludesnewtaxbenefittracksfora“preferredtechnologicalenterprise”anda“specialpreferredtechnologicalenterprise”whichawardreducedtaxratestoatechnologicalindustrialenterpriseforthepurposeofencouragingactivityrelatingtothedevelopmentofqualifyingintangibleassets.Thebenefitswillbeawardedtoa“preferredcompany”thathasa“preferredtechnologicalenterprise”ora“specialpreferredtechnologicalenterprise”withrespecttotaxable“preferredtechnologicalincome”peritsdefinitionintheEncouragementLaw.Regulationsthatprovideanexusformulaforallocatingeligibleprofitsgoverntheseregimes.IncomeofaPreferredTechnologicalEnterpriseaSpecialPreferredTechnologicalEnterprisewillbesubjecttoareducedcorporatetaxrateof6%regardlessofthedevelopmentareainwhichtheenterpriseislocated.

-54-

V.Notestotheconsolidatedfinancialstatements

1.CashatBankandOnHand

Cashonhand

IncludingcashandbankbalancesplacedoutsideChina

AsatDecember31,2025restrictedcashandbankbalanceswas96,974thousandRMB(asatDecember31,202446,645thousandRMB)mainlyincludingdepositsthatguaranteebankacceptancedrafts.

2.Financialassetsheldfortrading

Bankdeposits

3.Derivativefinancialassets

Economichedge

4.BillsReceivable

Post-datedchecksreceivable

-55-

V.Notestotheconsolidatedfinancialstatements–(cont'd)

5.AccountsReceivable

a.Bycategory

Accountreceivablesassessedindividuallyforimpairment

December31,2024

Accountreceivablesassessedindividuallyforimpairment

b.Aginganalysis

-56-

V.Notestotheconsolidatedfinancialstatements–(cont'd)

5.AccountsReceivable–(cont'd)

Maingroupsofaccountreceivablesassessedcollectivelyforimpairmentbasedongeographicallocation:

GeographicallocationA:

AccountreceivablesingeographicallocationAaregroupedbasedonsimilarcreditrisk:

GeographicallocationB:

AccountreceivablesingeographicallocationBaregroupedbasedonaginganalysis:

Othergeographicallocations:

Otheraccountreceivablesassessedcollectivelyforimpairment

-57-

V.Notestotheconsolidatedfinancialstatements–(cont'd)

5.AccountsReceivable–(cont'd)

c.Addition,written-backandwritten-offofprovisionforexpectedcreditlossesduringtheperiod

January1,2025

d.FivelargestaccountsreceivableatDecember31,2025:

e.Derecognitionofaccountsreceivableduetotransferoffinancialassets

CertainsubsidiariesofthegroupenteredintoasecuritizationtransactionwithRabobankInternationalforsaleoftradereceivables(hereinafter–“theSecuritizationProgram”and/or“theSecuritizationTransaction”).PursuanttotheSecuritizationProgram,thecompanieswillselltheirtradereceivablesdebts,invariousdifferentcurrencies,toaforeigncompanythatwassetupforthispurposeandthatisnotownedbytheAdamaLtd.(hereinafter–“theAcquiringCompany”).AcquisitionofthetradereceivablesbytheAcquiringCompanyisfinancedbyCooperativeRabobankU.A..ThetradereceivablesincludedaspartoftheSecuritizationTransactionaretradereceivablesthatmeetthecriteriaprovidedintheagreement.Everyyearthecreditfacilityisre-approvedinaccordancewiththeSecuritizationProgram.Asat31December2025,theSecuritizationagreementwasapproveduptoOctober24,2026.

-58-

V.Notestotheconsolidatedfinancialstatements–(cont'd)

5.AccountsReceivable–(cont'd)

e.Derecognitionofaccountsreceivableduetotransferoffinancialassets-(cont'd)ThemaximumscopeofthesecuritizationisadjustedfortheseasonalchangesinthescopeoftheCompany’sactivities,asfollows:duringJanuary-350m$(asofDecember-20252,460millionRMB),duringthemonthsofFebruarythroughJuly–400m$((asofDecember-20252,812millionRMB),duringthemonthsofAugustthroughSeptember–300m$(asofDecember-20252,109millionRMB),duringthemonthsofOctoberthroughNovember-275m$(asofDecember-20251,933millionRMB)andduringthemonthofDecember–300m$(asofDecember-20252,109millionRMB).Inadditionthecompanyhasapermanentuncommittedfacilityof50$million(asofDecember30,2025-351millionRMB)whichwillbeapplicableeachperiod.Theproceedsreceivedfromthosecustomerswhosedebtsweresoldareusedforacquisitionofnewtradereceivables.Thepriceatwhichthetradereceivablesdebtsaresoldistheamountofthedebtsoldlessadiscountcalculatedbasedon,amongotherthings,theexpectedlengthoftheperiodbetweenthedateofsaleofthetradereceivableanditsanticipatedrepaymentdate.Inthemonthfollowingacquisitionofthedebt,theAcquiringCompanypaysincashmostofthedebtwhiletheremainderisrecordedasasubordinatednoteandascontinuinginvolvementthatispaidaftercollectionofthedebtsold.Ifthecustomerdoesnotpayitsdebtontheanticipatedrepaymentdate,theCompanybearsinterestuptotheearlierofthedateonwhichthedebtisactuallyrepaidorthedateonwhichdebtcollectionistransferredtotheinsurancecompany(theactualcostsarenotsignificantandarenotexpectedtobesignificant).TheAcquiringCompanybears95%ofthecreditriskinrespectofthecustomerswhosedebtsweresoldandwillnothavearightofrecoursetotheCompanyinrespectoftheamountspaidincash,exceptregardingdebtswithrespecttowhichacommercialdisputearisesbetweenthecompaniesandtheircustomers,thatis,adisputethesourceofwhichisaclaimofnon-fulfillmentofanobligationofthesellerinthesupplyagreementcoveringtheproduct,suchas:afailuretosupplythecorrectproduct,adefectintheproduct,delinquencyinthesupplydate,andthelike.TheAcquiringCompanyappointedapolicymanagerwhowillmanageforitthecreditriskinvolvedwiththetradereceivablessold,includinganundertakingwithaninsurancecompany.PursuanttotheReceivablesServicingAgreement,theGroupsubsidiarieshandlecollectionofthetradereceivablesaspartoftheSecuritizationTransactionforthebenefitoftheAcquiringCompany.Aspartoftheagreement,Solutionsiscommittedtocomplywithcertainfinancialcovenants,mainlytheratiooftheliabilitiestoequityandprofitratios.AsofDecember312025,Solutionswasincompliancewiththefinancialcovenants.TheaccountingtreatmentofsaleofthetradereceivablesincludedaspartoftheSecuritizationProgramis:

TheCompanyisnotcontrollingtheAcquiringCompany,thereforetheAcquiringCompanyisnotconsolidatedinthefinancialstatements.TheCompanycontinuestorecognizethetradereceivablesincludedintheSecuritizationProgrambasedontheextentofitscontinuinginvolvementtherein.AsubordinatednoteisrecordedinrespectoftheportionoftradereceivablesincludedintheSecuritizationProgramwithrespecttooutstandingcashproceeds,howevertheCompanyhastransferredthecreditrisk.Thecontinuinginvolvementandsubordinatednoterecordedinthebalancesheetaspartofthe“otherreceivables”lineitem.

-59-

V.Notestotheconsolidatedfinancialstatements–(cont'd)

5.AccountsReceivable–(cont'd)

e.Derecognitionofaccountsreceivableduetotransferoffinancialassets-(cont'd)

Thelossfromsaleofthetradereceivablesisrecordedatthetimeofsaleinthestatementofincomeinthe“financingexpenses”.f.AsubsidiaryinBrazil(hereinafter-“thesubsidiary”)enteredintothefollowingsecuritization

agreements:

Since2016,asecuritizationtransactionwithRabobankBrazilforsaleofcustomerreceivables(hereinafter"FIDC-Donegalagreement").UndertheFIDC-Donegalagreement,thesubsidiarywillsellitsreceivablestoasecuritizationstructure(hereinafter-“theentity”)thatwasformedforthispurposewherethesubsidiaryhassubordinaterightsof5%oftheentity'scapital.AsatJune17,2024theFIDC-DonegalagreementwasapproveduptoSeptember30,2027.ThemaximumsecuritizationscopeasofDecember31,2025isBRL386million(498millionRMB).Onthedateofthesaleofthecustomerreceivables,theentitypaysthefullamountwhichisthedebtamountsoldnetofdiscountcalculated,amongothers,overtheexpectedlengthoftheperiodbetweenthedateofsaleofthecustomerreceivableanditsanticipatedrepaymentdate.Theentitybears95%ofthecreditriskinrespectofthecustomerswhosedebtsweresoldsuchthattheentityhastherightofrecourseto5%oftheunpaidamount.Thesubsidiaryhasapledgeddepositwithregardstotheentity’srightofrecourse.Thesubsidiarycontinuestorecognizethetradereceivablessoldtotheentitybasedontheextentofitscontinuinginvolvementtherein(5%rightofrecourse)andalsorecognizesanassociatedliabilityinthesameamount.In"FIDC-Donegalagreement"thesubsidiaryhandlesthecollectionofreceivablesincludedinthesecuritizationfortheentity.Intheagreementabove,thesubsidiarydoesnotcontroltheentitiesandthereforetheentitiesarenotconsolidatedintheGroup'sfinancialstatements.Thelossfromthesaleofthetradereceivablesisrecordedatthetimeofsaleinthestatementofincomeinthe“financingexpenses”category.

-60-

V.Notestotheconsolidatedfinancialstatements–(cont'd)

5.AccountsReceivable–(cont'd)

f.Derecognitionofaccountsreceivableduetotransferoffinancialassets-(cont'd)

YearendedDecember31

6.Receivablesfinancing

Bankacceptancedraft

AsatDecember31,2025,bankacceptanceendorsedbutnotyetdueamountsto422,948thousandsRMB.

7.Prepayments

(1)Theaginganalysisofprepaymentsisasfollows:

Within1year(inclusive)

(2)Totaloffivelargestprepaymentsbydebtorattheendoftheperiod:

December31,2025

-61-

V.Notestotheconsolidatedfinancialstatements–(cont'd)

8.OtherReceivables

(1)Otherreceivablesbynature

Dividendreceivable

a.Othersbreakdownbycategories

Provisionforexpectedcreditlosses-otherreceivables

b.Otherreceivablesbyaging

(2)Additions,recoveryorreversalandwritten-offofprovisionforexpectedcreditlossesduringthe

period:

BalanceasofJanuary12025,

-62-

V.Notestotheconsolidatedfinancialstatements–(cont'd)

8.OtherReceivables–(cont'd)

(3)FivelargestotherreceivablesatDecember31,2025:

9.Inventories

(1)Inventoriesbycategory:

Rawmaterials

December31,2024

Rawmaterials

-63-

V.Notestotheconsolidatedfinancialstatements–(cont'd)

9.Inventories-(cont'd)

(2)Provisionforimpairmentofinventories:

FortheyearendedDecember31,2025

Rawmaterial

10.OtherCurrentAssets

DeductibleVAT

11.Long-TermReceivables

Longtermaccountreceivablesfromsaleofgoods

1)Additions,recoveryorreversalofprovisionforexpectedcreditlossesduringtheperiod:

-64-

V.Notestotheconsolidatedfinancialstatements–(cont'd)

12.Long-TermEquityInvestments

(1)Long-termequityinvestmentsbycategory:

Jointventure

(2)Movementsoflong-termequityinvestmentsfortheperiodareasfollows:

Jointventure

Associate

Sub-total

13.Otherequityinvestments

Dividendrecognized

during2025December31,

2025

InvestmentA

Otherequityinvestmentsarenon-corebusinessesthatareintendedtobeheldintheforeseeablefuture.

-65-

V.Notestotheconsolidatedfinancialstatements–(cont'd)

14.Fixedassets

Cost

Accumulateddepreciation

Provisionforimpairment

Carryingamounts

ThelandsreportedasfixedassetsareownedbythegroupsubsidiariesandarelocatedoutsideofChina.

-66-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

15.ConstructioninProgress

(1)Constructioninprogress

1,213,760

(2)DetailsandMovementsofmajorconstructionprojectsinprogressduringperiodendedDecember31,2025

ProjectA

*AsofDecember31,2025ProjectAandincludeimpairmentofRMB17million.

-67-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

16.Right-of-useassets

Cost

Accumulateddepreciation

Provisionforimpairment

Carryingamounts

ADAMALTD.(ExpressedinRMB'000)

NotestotheFinancialStatements

-68-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

17.IntangibleAssets

(1)IncludelandparcelinIsraelthathasnotyetbeenregisteredinthenameoftheGroupsubsidiariesattheLandRegistryOffice,mostlyduetoregistrationproceduresortechnicalproblems.

(2)Mainlyexclusivityagreements.

Accumulatedamortization

Provisionforimpairment

Carryingamount

-69-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

18.Goodwill

ChangesingoodwillTheGroupallocatesgoodwilltotwocashgeneratingunits("CGU"),CropProtection(Agro)andanon-coreactivityincludedintheIntermediatesandingredientssegment.Attheendoftheyear,ormorefrequentlywhetherindicatorsforimpairmentexists,theGroupestimatestherecoverableamountofeachCGUforwhichgoodwillhasbeenallocatedtousingtheDCFmodel,basedon:

?Theactualresultsof2025,2026workplanandtheforecastresultsforthenext4years.Thekey

assumptionscontainsprojectedrevenuegrowthrateandgrossmargin.?Thediscountrate(8.6%WAAC)basedonthecompany'scostofequityandcostofdebt,takingintoaccountthecomprehensiveriskfactors.?Theannualgrowthrate(1.5%)basedonthemanagementprojectionsandmarketexpectations.AsofDecember31,2025thevalueinuseofthecashgeneratingunitstowhichgoodwillhasbeenallocatedtoexceedsitscarryingamount.

Bookvalue

19.DeferredTaxAssetsandDeferredTaxLiabilities

(1)Deferredtaxassetswithouttakingintoconsiderationoftheoffsettingofbalanceswithinthesametaxjurisdiction

Deferredtaxassets

-70-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

19.DeferredTaxAssetsandDeferredTaxLiabilities-(cont’d)

(2)Deferredtaxliabilitieswithouttakingintoconsiderationoftheoffsettingofbalanceswithinthesametaxjurisdiction

Deferredtaxliabilities

(3)Deferredtaxassetsanddeferredtaxliabilitiespresentedonanetbasisafteroffsetting

Theoffsetamountofdeferredtaxassetsandliabilities

Presentedas:

(4)Detailsofunrecognizeddeferredtaxassets

Deductibletemporarydifferences

(5)Expirationofdeductibletaxlossescarryforwardforunrecognizeddeferredtaxassets

2025

-71-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

19.DeferredTaxAssetsandDeferredTaxLiabilities-(cont'd)

(6)UnrecognizeddeferredtaxliabilitiesWhencalculatingthedeferredtaxes,taxesthatwouldhaveappliedintheeventofrealizinginvestmentsinsubsidiarieswerenottakenintoaccount,sinceitistheCompany’sintentiontoholdtheseinvestmentsandnotrealizethem.

20.OtherNon-CurrentAssets

Judicialdeposits

21.Short-TermLoans

Short-termloansbycategory:

Unsecuredloans

-72-

V.Notestotheconsolidatedfinancialstatements–(cont'd)

22.Derivativefinancialliabilities

Economichedge

23.BillsPayables

Post-datedcheckspayables

AsatDecember31,2025,noneofthebillspayableareoverdue.

24.Accountspayable

Within1year(including1year)

Therearenosignificantaccountspayablesagingoveroneyear.AsatDecember31,2025,theamountoftheaccountspayableincludedunderthesupplierfinancingarrangementswas1,040,262thousandRMB(asatDecember31,2024:1,595,824thousandRMB).Accountspayablesunderfinancingarrangementshavepaymentduedatesrangingfrom90to180daysfromtheinvoicedate.Comparableaccountspayablethatarenotpartofsupplierfinancingarrangementshavesimilarpaymentterms.Undersupplierfinancearrangements,participatingsuppliersmayelect,toreceiveearlypaymentfromthefinancialinstitutionsforinvoicesowedandthecompanymakesapaymenttothefinancialinstitutionsontheoriginalinvoiceduedate,regardlessofwhetherthesupplierhaselectedtoreceiveearlypaymentornot.

-73-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

24.Accountspayable-(cont'd)

Thecompanymayprovideguaranteestothefinancialinstitutions(asmaybeprovidedtosuppliersdirectlyaswell)butincursnointerestorotherchargespayabletothefinancialinstitutionsonthepaymentsmade.Thebalanceoftheaccountspayableisnotderecognizedfromthebalancesheetbecausetheoriginalliabilityisnotsubstantiallymodifiedonenteringthearrangementsasitcontinuestocarrythecharacteristicofaccountspayableandrepresentliabilitiestopayforgoodsandservices.Thesettlementstothefinancialinstitutionsareincludedwithinoperatingcashflowsbecausetheycontinuetobepartofthenormaloperatingcycle.Supplierfinancingarrangementshavenoimpactonthecompany'sliquidityrisk.

25.Contractliabilities

Discountforcustomers

26.EmployeeBenefitsPayable

Short-termemployeebenefits

Currentmaturities

-74-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

27.TaxesPayable

Corporateincometax

28.OtherPayables

(1)Otherpayables

Accruedexpenses

29.Non-CurrentLiabilitiesDueWithinOneYearNon-currentliabilitiesduewithinoneyearbycategoryareasfollows:

Longtermloansfromrelatedpartyduewithinoneyear

-75-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

30.OtherCurrentLiabilities

Putoptionstoholdersofnon-controllinginterests

31.Long-TermLoansLong-termloansbycategory

Longtermloans

*Formoredetailesregardingtheguaranteedloans–seenoteX.relatedpartiesandrelatedparties

transactions.Forthematurityanalysis,seenoteVIII.C-Liquidityrisk.

32.DebenturesPayable

DebenturesSeriesB

December31

Firstyear(currentmaturities)

-76-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

32.DebenturesPayable-(cont'd)

Movementsofdebenturespayable:

FortheyearendedDecember31,2025:

DebenturesSeriesB

SeriesBdebentures,inamountofNIS3,810millionparvalue(2,958millionparvalue,netofself-purchased),linkedtotheCPIandbearinterestatthebaseannualrateof

5.15%.Thedebentureprincipalshallberepaidin17equalpaymentsintheyears2020through2036.OnAugust5,2024,ADAMASolutionsBoardofDirectorsapprovedabuybackplanfortheCompany'sdebentures(SeriesB)intheamountofuptoUSD50million(RMB356million).OnSeptember1,2024,theCompanypurchasedNIS129,081thousandparvalueofBondsforatotalconsiderationofapproximatelyUSD50million(RMB356million),fullyutilizingthebuybackplanOnMay26,2025,ADAMASolutionsBoardofDirectorsapprovedabuybackplanfortheCompany'sdebentures(SeriesB)intheamountofuptoUSD300million(RMB2,148million).OnMay29,2025,theCompanypurchasedNIS642,448,000parvalueofBondsforatotalconsiderationofapproximatelyUSD268million(RMB1,927million).ThelossinrespectofthedebenturesbuybackwasUSD9million(RMB68million),andincludedinthefinancialexpenses.

-77-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

33.Leaseliabilities

Leaseliabilities

34.Long-TermEmployeeBenefitsPayable

Post-employmentbenefitplans–definedbenefitplanandearlyretirement

Totalpresentvalueofobligation

Terminationbenefits

Otherlong-termemployeebenefits

Including:Long-termemployeebenefitspayableduewithinoneyear

(1)Movementinthenetliabilityandassetsinrespectofdefinedbenefitplans,earlyretirementand

theircomponents

Expense/incomerecognized

Includedinothercomprehensiveincome:

Additionalmovements:

-78-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

34.Long-TermEmployeeBenefitsPayable-(cont'd)

Post-employmentbenefitplans–definedbenefitplanandearlyretirement-(cont'd)

(2)Actuarialassumptionsandsensitivityanalysis

Theprincipalactuarialassumptionsatthereportingdatefordefinedbenefitplan

Discountrate(%)*

*Accordingtothedemographicandthebenefitcomponents.

Theassumptionsregardingthefuturemortalityratearebasedonpublishedstatisticaldataandacceptablemortalityrates.Possiblereasonablechangesasofthedateofthereportinthediscountrate,assumingtheotherassumptionsremainunchanged,wouldhaveaffectedthedefinedbenefitobligationasfollows:

Changeindefinedbenefitobligation

35.Provisions

Liabilitiesinrespectofcontingencies*

*Liabilitiesinrespectofcontingenciesincludesobligationsofpendinglitigations,whereanoutflowof

resourceshadbeenreliablyestimated.

-79-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

36.OtherNon-CurrentLiabilities

Longtermloansfromrelatedparty

Currentmaturities

37.ShareCapital

Sharecapital

38.CapitalReserve

Sharepremiums

-80-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

39.OtherComprehensiveIncome,netoftax

Itemsthatwillnotbereclassifiedtoprofitorloss

40.Surplusreserve

Statutorysurplusreserve

41.RetainedEarnings

RetainedearningsasatJanuary1

-81-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

42.OperatingIncomeandCostofSales

Principalactivities

43.TaxesandSurcharges

Taxonturnover

44.SellingandDistributionExpenses

Salariesandrelatedexpense

-82-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

45.GeneralandAdministrativeExpenses

Salariesandrelatedexpenses

46.Researchanddevelopmentexpenses

Salariesandrelatedexpenses

47.Financialexpenses(incomes),net

Interestexpensesondebenturesandloansandothercharges

-83-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

48.Investmentincome,net

Incomefromlong-termequityinvestmentsaccountedforusing

theequitymethod

49.Gain(loss)fromchangesinfairvalue

Gain(loss)fromchangesinfairvalueofderivativefinancial

50.Creditimpairmentreversal(losses)

Billsreceivableandaccountsreceivable

51.Assetimpairmentlosses

Fixedassets

ADAMALtd.(ExpressedinRMB'000)

NotestotheFinancialStatements

-84-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

52.GainfromDisposalofAssets

Gainfromdisposaloffixedassets

53.IncomeTaxExpenses(incomes)

Currentyear

(1)Reconciliationbetweenincometaxexpenseandaccountingprofitisasfollows:

Lossbeforetaxes

54.Othercomprehensiveincome

DetailsoftheOthercomprehensiveincomearesetoutinNoteV.39

-85-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

55.Governmentgrants

56.Notestoitemsinthecashflowstatements

(1)Cashreceivedrelatingtootheroperatingactivities

Derivativestransactions

(2)Cashpaidrelatingtootheroperatingactivities

Derivativestransactions

(3)Cashreceivedrelatingtootherinvestingactivities

-86-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

56.Notestoitemsinthecashflowstatements-(cont'd)

(4)Cashpaidrelatingtootherinvestingactivities

(5)Cashreceivedfromotherfinancingactivities

Borrowingfromrelatedparty*

*Formoredetailesregardingtheborrowingfromrelatedparty–seenoteX.relatedpartiesandrelated

partiestransactions.

(6)Cashpaidrelatingtootherfinancingactivities

Paymentinrespectofhedgingtransactionsondebentures

-87-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

57.SupplementaryInformationonCashFlowStatement

(1)SupplementaryinformationonCashFlowStatementa.Reconciliationofnetprofittocashflowsfromoperatingactivities:

Netloss

b.NetDecreaseincashandcashequivalents

Closingbalanceofcashandcashequivalents

-88-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

57.SupplementaryInformationonCashFlowStatement-(cont'd)

(2)Detailsofcashandcashequivalents

Cashonhand

58.AssetswithRestrictedOwnershiporRightofUse

Cash

-89-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

59.Foreigncurrenciesdenominateditems-(cont'd)

(1)Foreigncurrenciesdenominateditems-(cont'd)

Cashandbankbalances

BillsandAccountsreceivable

Otherreceivables

-90-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

59.Foreigncurrenciesdenominateditems-(cont'd)

(2)Foreigncurrenciesdenominateditems-(cont'd)

Othercurrentassets

Long-termreceivables

Long-terminvestments,loansandother

Short-termloans

BillsandAccountspayable

-91-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

59.Foreigncurrenciesdenominateditems-(cont'd)

(3)Foreigncurrenciesdenominateditems-(cont'd)

Contractliabilities

Non-currentliabilitiesduewithinoneyear

Othercurrentliabilities

Debenturespayable

ProvisionandLong-termpayables

Leaseliabilities

-92-

V.Notestotheconsolidatedfinancialstatements-(cont'd)

59.Foreigncurrenciesdenominateditems-(cont'd)

(4)Majorforeignoperations

ADAMAFranceS.A.S

Thefunctionalcurrencyofthesubsidiariesaboveisthemaincurrencythatrepresenttheprincipaleconomicenvironment.VI.ChangeinconsolidationScope

Thereisnochangeofconsolidationscopeduringtheperiod.

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VII.InterestinOtherEntities

1.InterestsinsubsidiariesCompositionofthelargestsubsidiariesoftheGroupinrespectofassetsandoperatingincome

ADAMAFranceS.A.S

2.Interestsinjointventuresorassociates

Jointventure

3.Summarizedfinancialinformationofjointventuresandassociates

Associate:

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VIII.RiskRelatedtoFinancialInstruments

A.General

TheGrouphasextensiveinternationaloperations,and,therefore,itisexposedtocreditrisks,liquidityrisksandmarketrisks(includingcurrencyrisk,interestriskandotherpricerisk).Inordertoreducetheexposuretotheserisks,theGroupusesfinancialderivativesinstruments,includingforwardtransactionsandoptions(hereinafter-“derivatives”).Transactionsinderivativesareundertakenwithmajorfinancialinstitutions,andtherefore,intheopinionofGroupManagementthecreditriskinrespectthereofislow.ThisnoteprovidesinformationontheGroup’sexposuretoeachoftheaboverisks,theGroup’sobjectives,policiesandprocessesregardingthemeasurementandmanagementoftherisk.Additionalquantitativedisclosureisincludedthroughouttheconsolidatedfinancialstatements.TheBoardofDirectorshasoverallresponsibilityforestablishingandmonitoringtheframeworkoftheGroup'sriskmanagementpolicy.TheFinanceCommitteeisresponsibleforestablishingandmonitoringtheGroup'sactualriskmanagementpolicy.TheChiefFinancialOfficerreportstotheFinanceCommitteeonaregularbasisregardingtheserisks.TheGroup’sriskmanagementpolicy,establishedtoidentifyandanalyzetherisksfacingtheGroup,tosetappropriaterisklimitsandcontrols,andtomonitorrisksandadherencetolimits.Thepolicyandmethodsformanagingtherisksarereviewedregularly,inordertoreflectchangesinmarketconditionsandtheGroup'sactivities.TheGroup,throughtraining,andmanagementstandardsandprocedures,aimstodevelopadisciplinedandconstructivecontrolenvironmentinwhichalltheemployeesunderstandtheirrolesandobligations.

B.Creditrisk

CreditriskistheriskoffinanciallosstotheGroupifacustomerorcounterpartytoafinancialinstrumentfailstomeetitscontractualobligations,andderivesmainlyfromtradereceivablesandotherreceivablesaswellasfromcashanddepositsinfinancialinstitutions.AccountsandotherreceivablesTheGroup’srevenuesarederivedfromalargenumberofwidelydispersedcustomersinmanycountries.Customersincludemulti-nationalcompaniesandmanufacturingcompanies,aswellasdistributors,agriculturists,agentsandagrochemicalmanufacturerswhopurchasetheproductseitherasfinishedgoodsorasintermediateproductsfortheirownrequirements.TheCompanyenteredintoanagreementforthesaleoftradereceivablesinasecuritizationtransaction,fordetailsseenoteV.5.e.andf.InSeptember2025,atwo-yearsagreementwithaninternationalinsurancecompanywasrenewed.Theamountoftheinsurancecoveragewasfixedat$150millioncumulativeperyear.Theindemnificationislimitedto90%ofthedebt.TheGroup’sexposuretocreditriskisinfluencedmainlybythepersonalcharacterizationofeachcustomer,andbythedemographiccharacterizationofthecustomer’sbase,includingtheriskofinsolvencyoftheindustryandgeographicregioninwhichthecustomeroperates.

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VIII.RiskRelatedtoFinancialInstruments-(cont’d)

B.Creditrisk-(cont’d)

TheCompanymanagementhasprescribedacreditpolicy,wherebytheCompanyperformscurrentongoingcreditevaluationsofexistingandnewcustomers,andeverynewcustomerisexaminedthoroughlyregardingthequalityofhiscredit,beforeofferinghimtheGroup’scustomaryshippingandpaymentterms.TheexaminationmadebytheGroupincludesanoutsidecreditrating,ifany,andinmanycases,receiptofdocumentsfromaninsurancecompany.Acreditlimitisprescribedforeachcustomer,outstandingamountoftheaccountsreceivablebalance.Theselimitsareexaminedannually.CustomersthatdonotmeettheGroup’scriteriaforcreditqualitymaydobusinesswiththeGrouponthebasisofaprepaymentoragainstfurnishingofappropriatecollateral.MostoftheGroup’scustomershavebeendoingbusinesswithitformanyyears.Inmonitoringcustomercreditrisk,thecustomersweregroupedaccordingtoacharacterizationoftheircredit,basedongeographicallocation,industry,agingofreceivables,maturity,andexistenceofpastfinancialdifficulties.Customersdefinedas“highrisk”areclassifiedtotherestrictedcustomerlistandaresupervisedbymanagement.Incertaincountries,mainly,Brazil,customersarerequiredtoprovidepropertycollaterals(suchasagriculturallandsandequipment)againstexecutionofthesales,thevalueofwhichisexaminedonacurrentongoingbasisbytheCompany.Inthesecountries,inacaseofexpectedcreditrisk,theCompanyrecordsaprovisionfortheamountofthedebtlessthevalueofthecollateralsprovidedandactstorealizethecollaterals.TheGroupcloselymonitorstheeconomicsituationinEasternEuropeandinSouthAmericaonanongoingbasis.TheGrouprecognizesanimpairmentprovision,whichreflectsitsassessmentregardingthecreditriskofaccountreceivables,Otherreceivablesandinvestmentsonalifetimeexpectedcreditlossbasis.SeealsonotesⅢ.11–Financialinstruments,Ⅲ.12–AccountsreceivablesandⅢ.14–Otherreceivables.CashanddepositsinbanksTheCompanyholdscashanddepositsinbankswithahighcreditrating.Thesebanksarealsorequiredtocomplywithcapitaladequacyormaintainalevelofsecuritybasedondifferentsituations.GuaranteesTheCompany’spolicyistoprovidefinancialguaranteesonlytoinvesteecompanies.AgingofreceivablesandexpectedcreditriskPresentedbelowistheagingofthepastduetradereceivables:

December31,2025Pastduebylessthan90days

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VIII.RiskRelatedtoFinancialInstruments-(cont’d)B.Creditrisk-(cont’d)

Thecompanymeasuretheprovisionforcreditlossesonacollectivegroupbasis,wherereceivablessharesimilarcreditriskcharacteristicsbasedongeographicallocations.Theexaminationforexpectedcreditlossesisperformedusingmodelincludingaginganalysisandhistoricallossexperiences,andadjustedbytheobservablefactorsreflectingcurrentandexpectedfutureeconomicconditions.Whencreditriskonareceivablehasincreasedsignificantlysinceinitialrecognition,thegrouprecordsspecificprovisionorgeneralprovisionwhichisdeterminedforgroupsofsimilarassetsincountriesinwhichtherearelargenumberofcustomerswithimmaterialbalances.TheGrouphascreditriskexposuresforaccountsreceivablesamountedtoRMB6,801,553thousandrelatetocategoryof"Lifetimeexpectedcreditlosses(creditlosseshasnotoccurred)"andamountedtoRMB784,538thousandrelatedtocategoryof"Lifetimeexpectedcreditlosses(creditlossesoccurred)".TheGrouphasaprovisionforotherreceivablesamountedtoRMB14,220thousandrelatedtocategoryof"Lifetimeexpectedcreditlosses(creditlossesoccurred)".ThecreditriskexposuresforallremainingbalanceoffinancialassetsatamortisedcostandfinancialassetsatFVTOCIarerelatedto"12-monthexpectedcreditlosses".

C.Liquidityrisk

LiquidityriskistheriskthattheGroupwillencounterdifficultyinmeetingitsfinancialobligationwhentheycomedue.TheGroup'sapproachtomanagingitsliquidityriskistoassure,totheextentpossible,anadequatedegreeofliquidityformeetingitsobligationstimely,underordinaryconditionsandunderpressureconditions,withoutsustainingunwantedlossesorhurtingitsreputation.Thecash-flowforecastisdeterminedbothatthelevelofthevariousentitiesaswellasoftheconsolidatedlevel.TheCompanyexaminesthecurrentforecastsofitsliquidityrequirementsinordertoascertainthatthereissufficientcashfortheoperatingneeds,includingtheamountsrequiredinordertocomplywiththefinancialliabilities,whiletakingstrictcarethatatalltimestherewillbeunusedcreditframeworkssothattheCompanywillnotexceedthecreditframeworksgrantedtoitandthefinancialcovenantswithwhichitisrequiredtocomplywith.TheseforecaststakeintoconsiderationmatterssuchastheCompany’splanstousedebtforfinancingitsactivities,compliancewithrequiredfinancialcovenants,compliancewithcertainliquidityratiosandcompliancewithexternalrequirementssuchaslawsorregulation.ThesurpluscashheldbytheGroupsubsidiaries,whichisnotrequiredforfinancingthecurrentongoingoperations,isinvestedinshort-terminterest-bearinginvestmentchannels.

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VIII.RiskRelatedtoFinancialInstruments-(cont’d)C.Liquidityrisk-(cont’d)

(1)Presentedbelowarethecontractualmaturitiesofthefinancialliabilitiesatundiscountedamounts,includingestimatedinterestpayments:

Derivativefinancialliabilities

D.Marketrisks

Marketriskistheriskthatchangesinmarketprices,suchasforeignexchangerates,CPI,interestratesandpricesofcapitalinstruments,willaffecttheGroup’srevenuesorthevalueofitsholdingsinitsfinancialinstruments.Theobjectiveofmarketriskmanagementistomanageandmonitortheexposuretomarketriskswithinacceptableparameters,whileoptimizingthereturn.Duringtheordinarycourseofbusiness,theGrouppurchasesandsellsderivativesandassumesfinancialliabilitiesforthepurposeofmanagingmarketrisks.

(1)CPIandforeigncurrencyrisksCurrencyriskTheGroupisexposedtocurrencyriskfromitssales,purchases,expensesandloansdenominatedincurrenciesthatdifferfromtheGroup’sfunctionalcurrency.ThemainexposureisinEuro,Brazilianreal,USDandinNIS.Inaddition,therearesmallerexposurestovariouscurrenciessuchastheBritishpound,Polishzloty,Australiandollar,Indianrupee,Argentinepeso,Canadiandollar,SouthAfricanRand,UkraineHryuniaandChineseYuanRenminbi.TheGroupusesforeigncurrencyderivatives–forwardtransactionsandcurrencyoptions–inordertohedgethecashflowsrisk,whichderivefromexistingmonetaryassetsandliabilitiesandanticipatedsalesandpurchases,whichmaybeaffectedbyexchangeratefluctuations.

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VIII.RiskRelatedtoFinancialInstruments-(cont’d)D.Marketrisks-(cont’d)

(1)CPIandforeigncurrencyrisks-(cont’d)TheGrouphedgedapartoftheestimatedcurrencyexposuretoanticipatesalesandpurchasesforthesubsequentyear.Likewise,theGrouphedgesmostofitsmonetaryassetsandliabilitiesdenominatedinanon-U.S.dollarcurrency.TheGroupusesforeigncurrencyderivativestohedgeitscurrencyriskwithmaturitydatesoflessthanoneyearfromthereportingdate.SolutionsdebenturesarelinkedtotheNIS-CPIand,therefore,anincreaseintheNIS-CPI,aswellaschangesintheNISexchangerate,couldcausesignificantimpactwithrespecttothesubsidiaryfunctionalcurrency–theU.S.dollar.Asoftheapprovaldateofthefinancialstatements,thesubsidiaryhadhedgedmostofitsexposurederivingfromissuanceofthedebentures,inoptionsandforwardcontracts.

(A)TheGroup’sexposuretoNIS-CPIandforeigncurrencyriskisasfollows:

InUSDollar

(B)TheexposuretoCPIandforeigncurrencyriskinrespectofderivativesisasfollows:

Forwardforeigncurrency