Exhibit 99.1

Report of independent registered public accounting firm (PCAOB ID 1424)	2
Financial statements of SECCO	3

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Shanghai Secco Petrochemical Company Limited

We have audited the accompanying income statement statements of changes in owners’ equity and cash flows of Shanghai Secco Petrochemical Company Limited (the “Company”) for the year ended December 31, 2020.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the requirements of Accounting Standards for Business Enterprises in the People’s Republic of China; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended December 31, 2020 in accordance with the requirements of Accounting Standards for Business Enterprises in the People’s Republic of China.

Other Matter

The accompanying balance sheets of the Company as of December 31, 2022 and 2021, and the related income statements, statements of changes in owners’ equity and cash flows for the years then ended are presented for purposes of complying with Rule 3-09 of SEC Regulation S-X; however, Rule 3-09 does not require the 2022 and 2021 financial statements to be audited and they are therefore not covered by this report.

/s/PricewaterhouseCoopers Zhong Tian LLP

Shanghai, the People’s Republic of China

April 28, 2021

2

Shanghai Secco Petrochemical Company Limited

Balance sheets as at 31 December 2021* and 2022*

(Expressed in Renminbi Yuan)

	Note	31 December 2021*		31 December 2022*
Assets
Current assets
Cash at bank and on hand	6		3,282,751,042		1,322,431,469
Accounts receivable	7		251,529,912		224,931,881
Financial assets at fair value through other comprehensive income	8		260,065,209		212,655,800
Advances to suppliers	9		22,771,842		55,368,985
Other receivables	10		41,376,432		501,424,701
Inventories	11		2,205,453,196		2,290,713,659
Current portion of non-current assets			—		—
Other current assets	12		2,171,547		333,867,951
Total current assets			6,066,119,180		4,941,394,446
Non-current assets
Fixed assets	13		3,166,903,848		2,800,316,384
Construction in progress	14		203,497,772		421,906,466
Right-of-use assets	15		367,711		53,685
Intangible assets	16		627,505,136		590,916,001
Long term prepaid expenses	17		135,014,349		102,709,387
Deferred tax assets	18		48,291,526		698,726,289
Other non-current assets	19		1,553,779,369		1,068,780,880
Total non-current assets			5,735,359,711		5,683,409,092
Total assets			11,801,478,891		10,624,803,538
Liabilities and owner’s equity
Current liabilities
Short-term borrowings	20		—		6,608,867,012
Accounts payable			1,787,137,217		1,424,493,816
Contract liabilities	21		415,450,821		434,327,898
Employee benefits payable	22		105,573,340		101,102,098
Taxes payable	5(3)		316,126,213		73,406,011
Other payables	23		2,755,463,900		278,305,641
Non-current liabilities maturing within one year	24		111,639		65,123
Other current liabilities	25		54,008,607		56,462,627
Total current liabilities			5,433,871,737		8,977,030,226
Non-current liabilities
Lease liabilities	26		65,747		1,809
Deferred tax liabilities			—		—
Total non-current liabilities			65,747		1,809
Total liabilities			5,433,937,484		8,977,032,035
Owners’ equity
Paid-in capital	27		500,000,000		3,115,180,000
Capital surplus	28		1,454,646		1,454,646
Specific reserve	29		—		—
Surplus reserve	30		3,052,773,285		437,593,285
Undistributed profits/(accumulated losses)			2,813,313,476		(1,906,456,428	)
Total owners’ equity			6,367,541,407		1,647,771,503
Total liabilities and owners’ equity			11,801,478,891		10,624,803,538

* Not covered by the independent auditor’s report included herein

The accompanying notes form an integral part of these financial statements.

Legal representative	Chief Executive Officer	Chief Finance Officer department	(Company stamp)
Wang Jingyi	Zhang Minglong	Zhang Bing

3

Shanghai Secco Petrochemical Company Limited

Income statements for the year ended 31 December 2020, 2021* and 2022*

(Expressed in Renminbi Yuan)

	Note		2020			2021*			2022*
Revenue		32		21,626,059,244			29,723,223,208			24,096,829,125
Less:        Cost of sales				17,269,274,588			25,170,369,009			25,816,322,652
Taxes and surcharges		33		47,163,147			68,615,664			34,194,268
Selling and distribution expenses				545,058,651			171,618,022			99,155,273
General and administrative expenses				778,238,133			384,640,241			410,883,541
R&D expenses				10,829,389			15,954,174			12,557,414
Financial (income)/expense		34		(162,465,492	)		(228,367,775	)		28,453,641
Including:    Interest expenses				6,019,753			2,682,042			134,233,247
Interest income				172,009,089			232,479,017			104,673,458
Add:        Other income		35		10,958,322			16,387,830			8,459,157
Investment income		36		58,535,901			46,328,616			—
Net reversal of impairment losses on financial assets				1,040,393			—			—
Asset impairment losses		37		(6,787,522	)		(127,513,762	)		(289,308,464	)
Losses on disposal of assets				—			—			—
Operating Profit/(loss)				3,201,707,922			4,075,596,557			(2,585,586,971	)
Add:        Non-operating income		38		15,062,370			4,305,837			1,148,819
Less:        Non-operating expenses		38		8,546,265			13,581,464			13,478,436
Profi/(Loss) before taxation				3,208,224,027			4,066,320,930			(2,597,916,588	)
Less:        Income tax expenses		39		795,424,371			940,417,068			(650,337,336	)
Net profit/(loss) for the year				2,412,799,656			3,125,903,862			(1,947,579,252	)
Including: Net profit/(loss) from continuing operations				2,412,799,656			3,125,903,862			(1,947,579,252	)
Net profit from discontinued operations				—			—			—
Other comprehensive income				—			—			—
Total comprehensive income				2,412,799,656			3,125,903,862			(1,947,579,252	)

* Not covered by the independent auditor’s report included herein

The accompanying notes form an integral part of these financial statements.

Legal representative	Chief Executive Officer	Chief Finance Officer department	(Company stamp)
Wang Jingyi	Zhang Minglong	Zhang Bing

4

Shanghai Secco Petrochemical Company Limited

Cash flow statements for the year ended 31 December 2020, 2021* and 2022*

(Expressed in Renminbi Yuan)

	Note		2020			2021*			2022*
Cash flow generated from/(used in) operating activities:
Cash received from sales of goods or rendering of services				21,427,685,227			28,606,446,224			23,210,508,430
Refund of taxes and surcharges				53,504			374,419			208,526,868
Cash received from other operating activities				181,540,815			151,007,619			57,185,620
Sub-total of cash inflows				21,609,279,546			28,757,828,262			23,476,220,918
Cash paid for goods and services				(16,695,409,936	)		(22,606,453,710	)		(25,105,405,730	)
Cash paid to and on behalf of employees				(506,833,430	)		(577,421,410	)		(647,391,432	)
Payments of taxes and surcharges				(1,209,305,980	)		(2,035,109,503	)		(954,985,656	)
Cash paid to other operating activities				(78,693,377	)		(90,970,900	)		(86,639,796	)
Sub-total of cash outflows				(18,490,242,723	)		(25,309,955,523	)		(26,794,422,614	)
Net cash flow generated from/(used in) operating activities		41(1)		3,119,036,823			3,447,872,739			(3,318,201,696	)
Cash flow (used in)/generated from investing activities:
Cash received from entrusted loans				2,000,000,000			2,000,000,000			—
Cash received from returns on investments				62,048,056			49,108,333			—
Cash received from disposal of fixed assets				1,314,386			—			316,019
Cash received from other investing activities				120,834,086			1,252,602,486			1,020,280,522
Sub-total of cash inflows				2,184,196,528			3,301,710,819			1,020,596,541
Cash paid to acquire fixed assets, intangible assets and other long-term assets				(378,975,254	)		(318,538,272	)		(277,888,509	)
Cash paid for entrusted loans				(4,000,000,000	)		—			—
Cash paid to other investing activities				(2,140,000,000	)		(1,450,000,000	)		(34,823,000	)
Sub-total of cash outflows				(6,518,975,254	)		(1,768,538,272	)		(312,711,509	)
Net cash flows (used in)/generated from investing activities				(4,334,778,726	)		1,533,172,547			707,885,032
Cash flows (used in)/generated from financing activities:
Cash received from borrowings				—			—			7,009,867,012
Sub total of cash inflows				—			—			7,009,867,012
Cash repayments of borrowings				(500,000,000	)		—			(401,000,000	)
Cash payments for distribution of profits				(2,368,000,000	)		(3,171,706,061	)		(2,772,190,652	)
Payment for capital reduction				—			(4,650,645,401	)		(2,650,165,871	)
Cash payments for interest expenses				(5,222,150	)		—			(124,568,098	)
Cash paid to other financing activities				(6,378,698	)		(5,746,724	)		(98,730	)
Sub-total of cash outflows				(2,879,600,848	)		(7,828,098,186	)		(5,948,023,351	)
Net cash flows (used in)/generated from financing activities				(2,879,600,848	)		(7,828,098,186	)		1,061,843,661
Effect of foreign exchange rate changes on cash and cash equivalents				(2,504,130	)		(832,847	)		3,330,430
Net decrease in cash and cash equivalents		41(2)		(4,097,846,881	)		(2,847,885,747	)		(1,545,142,573	)
Add: Cash and cash equivalents at beginning of year				9,278,483,670			5,180,636,789			2,332,751,042
Cash and cash equivalents at end of year		41(3)		5,180,636,789			2,332,751,042			787,608,469

* Not covered by the independent auditor’s report included herein

The accompanying notes form an integral part of these financial statements.

Legal representative	Chief Executive Officer	Chief Finance Officer	(Company stamp)
Wang Jingyi	Zhang Minglong	Zhang Bing

5

Shanghai Secco Petrochemical Company Limited

Statements of changes in owner’s equity for the years ended 31 December 2020, 2021* and 2022*

(Expressed in Renminbi Yuan)

	Note	Paid-in capital			Capital surplus		Specific reserve			Surplus reserve			Undistributed profits/ (accumulated losses)			Total owners’ equity
Balance at 1 January 2020			7,800,811,272			1,454,646		—			2,498,902,933			3,368,186,371			13,669,355,222
Movements for the year ended 31 December 2020
Net profit			—			—		—			—			2,412,799,656			2,412,799,656
Profit distribution
- Appropriation to surplus reserve			—			—		—			241,279,966			(241,279,966	)		—
- Distribution for owners			—			—		—			—			(2,368,000,000	)		(2,368,000,000	)
Specific reserve
- Accrued			—			—		39,036,294			—			—			39,036,294
- Utilized			—			—		(39,036,294	)		—			—			(39,036,294	)
Balance at 31 December 2020			7,800,811,272			1,454,646		—			2,740,182,899			3,171,706,061			13,714,154,878
Balance at 1 January 2021			7,800,811,272			1,454,646		—			2,740,182,899			3,171,706,061			13,714,154,878
Movements for the year ended 31 December 2021*
Net profit						—		—			—			3,125,903,862			3,125,903,862
Owner’s contributions
- Capital reduction			(7,300,811,272	)		—		—			—			—			(7,300,811,272	)
Profit distribution	31
- Appropriation to surplus reserve			—			—		—			312,590,386			(312,590,386	)		—
- Distribution for owners			—			—		—			—			(3,171,706,061	)		(3,171,706,061	)
Specific reserve	29
- Accrued			—			—		28,523,706			—			—			28,523,706
- Utilized			—			—		(28,523,706	)		—			—			(28,523,706	)
Balance at 31 December 2021*			500,000,000			1,454,646		—			3,052,773,285			2,813,313,476			6,367,541,407
Balance at 1 January 2022*			500,000,000			1,454,646		—			3,052,773,285			2,813,313,476			6,367,541,407
Movements for the year ended 31 December 2022*
Net loss			—			—		—			—			(1,947,579,252	)		(1,947,579,252	)
Owner’s contributions
- Capital reduction			—			—		—			—			—			—
Profit distribution	31
- Appropriation to surplus reserve			2,615,180,000			—		—			(2,615,180,000	)		—			—
- Distribution for owners			—			—		—			—			(2,772,190,652	)		(2,772,190,652	)
Specific reserve	29
- Accrued			—			—		41,419,862			—			—			41,419,862
- Utilized			—			—		(41,419,862	)		—			—			(41,419,862	)
Balance at 31 December 2022*			3,115,180,000			1,454,646		—			437,593,285			(1,906,456,428	)		1,647,771,503

* Not covered by the independent auditor’s report included herein

The accompanying notes form an integral part of these financial statements.

Legal representative	Chief Executive Officer	Chief Finance Officer	(Company stamp)
Wang Jingyi	Zhang Minglong	Zhang Bing

6

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

1 Company status

Shanghai Secco Petrochemical Company Limited (“the Company”) was a Sino-foreign equity joint venture established in Shanghai, the People’s Republic of China (“the PRC”) in 2001 by China Petroleum and Chemical Corporation (“Sinopec Corp.”), Sinopec Shanghai Petrochemical Company Limited (“SPC”) and BP Chemicals East China Investments Limited (“BPCECIL”). The original registered capital and paid-in capital of the Company both were USD 901,440,964. Sinopec Corp., SPC and BPCECIL held 30%, 20% and 50% equity interest in the Company, respectively. The Company commenced its active operation on 31 March 2005, and the approved period of operation is 50 years.

On 24 October 2013 and 25 November 2013, Sinopec Corp., SPC and BPCECIL amended the Equity Joint Venture Contract and Articles of Association to progressively increase the registered capital of the Company from USD 901,440,964 to USD 1,051,526,582. The total increased registered capital would be contributed by Sinopec Corp., SPC and BPCECIL in proportion to their respective shareholding in the Company by instalments. In 2013 and 2014, the Company received paid-in capital contributed by Sinopec Corp., SPC and BPCECIL in proportion to their respective shareholding in the Company by instalments, totalling to USD 58,430,374 (equivalent to RMB 357,226,095). The capital has been verified by PricewaterhouseCoopers Zhong Tian LLP and Shanghai Huayi Accountant Office Co., Ltd. with verification reports PricewaterhouseCoopers Zhongtian Yanzi (2013) No. 872 and Hua Yanzi (2014) No. 002 issued, respectively.

On 27 April 2017, Sinopec Corp. and Sinopec Shanghai Gaoqiao Petrochemical Company Limited (“Gaoqiao Petrochemical”) (subsidiary of Sinopec Corp.) entered into an agreement with BPCECIL, according to which Gaoqiao Petrochemical purchased 50% equity in the Company from BPCECIL. On 26 October 2017, the Company was transformed from a “Sino-foreign joint venture” to an “other limited liability corporation”.

According to the resolution of the Board of Directors on 12 July 2021, the Company’s paid-in capital has reduced from RMB 7,800,811,272 to RMB 500,000,000, all owners of the Company has reduced their capital in proportion to their shareholding ratios.

According to the resolution of the 15th Session of the first Shareholders’ Meeting on 30 August 2022, the registered capital of the Company increased from RMB 500,000,000 to RMB 3,115,180,000, and the registered capital increased by RMB 2,615,180,000 through transfer from surplus reserve. Sinopec, Gaoqiao Petrochemical and Shanghai Petrochemical increased the capital according to the original shareholding ratio.

According to the resolution of the 16th Session of the first Shareholders’ Meeting on 25 November 2022, Sinopec transferred 15% of its equity (original investment amount of RMB 467,277,000) to INEOS, and Gaoqiao Petrochemical transferred 35% of its equity (original investment amount of RMB 1,090,313,000) to INEOS. As at 31 December 2022, to INEOS, Sinopec, Gaoqiao Petrochemical and Shanghai Petrochemical held the registered and paid-up capital of the Company of RMB 1,557,590,000, RMB 467,277,000, RMB 467,277,000 and RMB 623,036,000, respectively. The stakes are 50%, 15%, 15% and 20%.

7

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

The Company’s approved scope of business operations mainly comprises the production of ethylene, polyethylene, styrene, polystyrene, propylene, acrylonitrile, polypropylene, butadiene, aromatic hydrocarbons and by-products; sales of these products and purchased raw materials; as well as provision of related after-sales services and technical consultation with respect to such main petrochemical products and by-products; it is also engaged in polymers application development and providing ancillary utilities engineering services to suppliers and processors.

These financial statements were approved for issue by the Company’s responsible persons on 15 March 2022.

2 Basis of preparation

The financial statements are prepared in accordance with the Accounting Standards for Business Enterprises—Basic Standard, the specific accounting standards and other relevant regulations issued by the Ministry of Finance on 15 February 2006 and in subsequent periods (hereafter collectively referred to as “the Accounting Standards for Business Enterprises” or “CAS”).

The Company incurred net loss of RMB 1,947,579,252 during 2022. As at 31 December 2022, the Company’s current liabilities exceeded its current assets by RMB 4,035,635,780. The Company’s working capital position depends primarily on the Company’s ability to maintain sufficient net operating cash inflows and renew short-term borrowings, as well as access to sufficient external financing to maintain working capital and repay maturing debts. As at 31 December 2022, the management forecasted the Company’s cash flows for the period from 1 January 2023 to 31 December 2023, taking full account of current unused bank lines of credit, future capital expenditures and irrevocable capital commitments, and the ability to renew and refinance future bank borrowings as they mature. As at 31 December 2022, the Company’s unused bank line of credit was RMB 2,191,132,988. As at the issue date of the report, the Company has increased its bank line of credit by RMB 5,700,000,000. According to this forecast, the management believes that the Company has sufficient funds to meet its working capital, capital expenditure and debt repayment requirements for the period from 1 January 2023 to 31 December 2023. Accordingly, these financial statements have been prepared on a going concern basis.

The financial statements have been prepared on the going concern basis.

(1) Statement of compliance

The financial statements have been prepared in accordance with the requirements of Accounting Standards for Business Enterprises or referred to as China Accounting Standards (“CAS”) issued by the Ministry of Finance (“MOF”). These financial statements present truly and completely the financial position of the Company as at 31 December 2022, and the financial performance and the cash flows of the Company for the year then ended.

(2) Accounting year

The accounting year of the Company is from 1 January to 31 December.

(3) Functional currency and presentation currency

The Company’s functional currency is Renminbi and these financial statements are presented in Renminbi.

8

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

3 Significant accounting policies and accounting estimates

(1) Translation of foreign currencies

When the Company receives capital in foreign currencies from investors, the capital is translated to Renminbi at the spot exchange rate at the date of the receipt. Other foreign currency transactions are, on initial recognition, translated to Renminbi at the spot exchange rates on the dates of the transactions.

Monetary items denominated in foreign currencies are translated to Renminbi at the spot exchange rate at the balance sheet date. The resulting exchange differences are generally recognized in profit or loss, unless they arise from the re-translation of the principal and interest of specific borrowings for the acquisition, construction or production of qualifying assets. Non-monetary items that are measured at historical cost in foreign currencies are translated to Renminbi using the exchange rate at the transaction date.

(2) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, deposits that can be readily withdrawn on demand, and short-term, highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of change in value.

(3) Inventories

Inventories include raw materials, work in progress and finished goods, and are measured at the lower of cost and net realizable value.

Cost is determined using the weighted average method. The cost of finished goods and semi-finished products comprise raw materials, direct labor and systematically allocated production overhead based on the normal production capacity. Turnover materials include low value consumables and packaging materials, and are expensed when issued.

Provision for decline in the value of inventories is determined at the excess amount of the carrying amounts of the inventories over their net realizable value. Net realizable value is determined based on the estimated selling price in the ordinary course of business, less the estimated costs to completion and estimated costs necessary to make the sale and related taxes.

The Company adopts the perpetual inventory system.

(4) Fixed assets

Fixed assets comprise buildings, specialized machinery and equipment, general machinery and equipment, office and other equipment. Fixed assets purchased or constructed by the Company are initially measured at cost at the time of acquisition.

When an enterprise sells products or by-products produced before a fixed asset is available for its intended use, the proceeds and related cost are accounted for in accordance with CAS 14 - Revenue and CAS 1 - Inventories respectively, and recognised in profit or loss for the current period.

Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed asset when it is probable that the associated economic benefits will flow to the Company and the related cost can be reliably measured. The carrying amount of the replaced part is derecognized. All the other subsequent expenditures are recognized in profit or loss for the period in which they are incurred.

9

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

Fixed assets are depreciated using the straight-line method to allocate the cost of the assets to their estimated residual values over their estimated useful lives. For the fixed assets that have been provided for asset impairment loss, the related depreciation charge is prospectively determined based upon the adjusted carrying amounts over their remaining useful lives.

The estimated useful lives, the estimated net residual values expressed as a percentage of cost and the annual depreciation rates of fixed assets are as follows:

	Estimated useful life	Residual value rate			Depreciation rate
Plant and buildings	12 to 40 years		3	%	2.43% to 8.08%
Specialized machinery and equipment	5 to 30 years		3	%	3.23% to 19.40%
General machinery and equipment	4 to 20 years		3	%	4.85% to 24.25%
Office and other equipment	5 years		0	%	20.00%
Motor vehicles	8 to 10 years		3	%	9.70% to 12.13%
Machinery and equipment	4 to 14 years		3	%	6.93% to 24.25%

The estimated useful life and the estimated net residual value of a fixed asset and the depreciation method applied to the asset are reviewed, and adjusted as appropriate at each year-end.

A fixed asset is derecognized on disposal or when no future economic benefits are expected from its use or disposal. The amount of proceeds from disposals on sale, transfer, retirement or damage of a fixed asset net of its carrying amount and related taxes and expenses is recognized in profit or loss for the current period.

(5) Construction in progress

Construction in progress is measured at actual cost. Actual cost comprises construction costs, installation costs, borrowing costs that are eligible for capitalization and other costs necessary to bring the fixed assets ready for their intended use. Construction in progress is transferred to fixed assets when the assets are ready for their intended use, and depreciation is charged starting from the following month.

When an enterprise sells products or by-products produced before a fixed asset is available for its intended use, the proceeds and related cost are accounted for in accordance with CAS 14 – Revenue and CAS 1 – Inventories respectively, and recognised in profit or loss for the current period.

(6) Leases

(a) The Company as the lessee

The Company recognize the right-of-use assets at the beginning of the lease period and the lease liabilities at the present value of the outstanding lease payments. Lease payments include fixed payments and payments to be made if it is reasonably determined that the option to buy or to terminate the lease option will be exercized. The variable rent, which is determined by a certain percentage of sales, is not included in the lease payment and is recorded into the current profit and loss when it actually occurs. The Company will be paid from the balance sheet date within one year (including one year) of the lease liabilities, as a non-current liabilities due within one year.

10

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

The right-of-use assets of the Company including leased houses and buildings, plant and machinery equipment, means of transport and others. The right-of-use assets are initially measured at cost, which includes the initial measurement of the lease liability, the lease payment paid on or before the lease period, the initial direct expenses, etc., and deducts the lease incentive received. Where the Company is able to reasonably determine the ownership of the leased assets upon the expiration of the lease term, depreciation of the leased assets shall be calculated and withdrawn within the remaining service life of the leased assets; If it is not reasonable to determine whether the ownership of the leased asset can be acquired at the end of the lease term, the depreciation shall be calculated within the shorter period between the lease term and the remaining useful life of the leased asset. When the recoverable amount is lower than the book value of the asset, the Company writes down the book value to the recoverable amount.

For short-term leases with a lease term of no more than 12 months, the Company chooses not to recognize the right-of-use assets and lease liabilities, and records the relevant rental expenses into the current profits and losses or related asset costs according to the straight-line.

(7) Intangible assets

Intangible assets are stated in the balance sheet at cost less accumulated amortization (where the estimated useful life is finite) and impairment losses (see Note 3(11)(b)).

For an intangible asset with finite useful life, its cost less estimated residual value and accumulated asset impairment losses is amortized using the straight-line method over its estimated useful life. The respective amortization periods for such intangible assets are as follows:

	Amortization period
Land use rights		47 years
Patents		10 years
Software		2 to 10 years

Useful lives and amortization methods of intangible asset with finite useful life are reviewed at least at each year-end.

If the acquisition costs of the land use rights and the buildings located thereon cannot be reasonably allocated between the land use rights and the buildings, all of the acquisition costs are recognized as fixed assets.

11

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

(8) Research and development

The expenditure on an internal research and development project is classified into expenditure on the research phase and expenditure on the development phase based on its nature and whether there is material uncertainty that the research and development activities can form an intangible asset at the end of the project.

Expenditure on the research phase is recognized in profit or loss in the period in which it is incurred. Expenditure on the development phase is capitalized only if all of the following conditions are satisfied:

• it is technically feasible to complete the intangible asset so that it will be available for use or sale;

• management intends to complete the intangible asset, and use or sell it;

• it can be demonstrated how the intangible asset will generate economic benefits;

• there are adequate technical, financial and other resources to complete the development and the ability to use or sell the intangible asset; and

• the expenditure attributable to the intangible asset

Other development expenditures that do not meet the conditions above are recognized in profit or loss in the period in which they are incurred. Development costs previously recognized as expenses are not recognized as an asset in a subsequent period. Capitalized expenditure on the development phase is presented as development costs in the balance sheet and transferred to intangible assets at the date that the asset is ready for its intended use.

When an enterprise sells products or by-products produced in the course of research and development, the proceeds and related cost are accounted for in accordance with CAS 14 – Revenue and CAS 1 - Inventories respectively, and recognised in profit or loss for the current period.

(9) Long-term deferred expenses

Long-term prepaid expenses mainly include the catalyst expenditures that have been incurred but should be recognized as expenses over more than one year in the current and subsequent periods. Long-term prepaid expenses are amortized on the straight-line basis over the expected beneficial period and are presented at actual expenditure net of accumulated amortization.

Catalysts are amortized on the straight-line basis over their useful lives of 1.5 to 10 years.

12

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

(10) Financial instruments

Financial instruments include cash at bank and on hand, receivables, payables, paid-in capital and etc.

(a) Recognition and initial measurement of financial assets and financial liabilities

A financial asset or financial liability is recognized in the balance sheet when the Company becomes a party to the contractual provisions of a financial instrument.

A financial asset or financial liability is measured initially at fair value. For financial assets and financial liabilities at fair value through profit or loss, any related directly attributable transaction costs are charged to profit or loss; for other categories of financial assets and financial liabilities, any related directly attributable transaction costs are included in their initial costs. A trade receivable, without significant financing component or practical expedient applied for one year or less contracts, is initially measured at the transaction price in accordance with Note 3(16).

(b) Classification and subsequent measurement of financial assets

(i) Classification of financial assets

The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. On initial recognition, a financial asset is classified as measured at amortized cost, at fair value through other comprehensive income (“FVOCI”), or at fair value through profit or loss (“FVTPL”).

Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

• it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

13

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an investment-by-investment basis. The instrument meets the definition of equity from the perspective of the issuer.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

The business model refers to how the Company manages its financial assets in order to generate cash flows. That is, the Company’s business model determines whether cash flows will result from collecting contractual cash flows, selling financial assets or both. The Company determines the business model for managing the financial assets according to the facts and based on the specific business objective for managing the financial assets determined by the Company’s key management personnel.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as a profit margin. The Company also assesses whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.

(ii) Subsequent measurement of financial assets

• Financial assets at FVTPL

These financial assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss unless the financial assets are part of a hedging relationship.

14

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

• Financial assets at amortized cost

These assets are subsequently measured at amortized cost using the effective interest method. A gain or loss on a financial asset that is measured at amortized cost and is not part of a hedging relationship shall be recognized in profit or loss when the financial asset is derecognized, reclassified, through the amortization process or in order to recognize impairment gains or losses.

• Debt investments at FVOCI

These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, impairment and foreign exchange gains and losses are recognized in profit or loss. Other net gains and losses are recognized in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.

• Equity investments at FVOCI

These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss. Other net gains and losses are recognized in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to retained earnings.

(c) Classification and subsequent measurement of financial liabilities

Financial liabilities are classified as measured at FVTPL or amortized cost.

• Financial liabilities at FVTPL

A financial liability is classified as at FVTPL if it is classified as held-for-trading (including derivative financial liability) or it is designated as such on initial recognition.

Financial liabilities at FVTPL are subsequently measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss, unless the financial liabilities are part of a hedging relationship.

• Financial liabilities at amortized cost

These financial liabilities are subsequently measured at amortized cost using the effective interest method.

15

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

(d) Offsetting

Financial assets and financial liabilities are generally presented separately in the balance sheet, and are not offset. However, a financial asset and a financial liability are offset and the net amount is presented in the balance sheet when both of the following conditions are satisfied:

• the Company currently has a legally enforceable right to set off the recognized amounts;

• the Company intends either to settle on a net basis, or to realize the financial asset and settle the financial liability simultaneously.

(e) Derecognition of financial assets and financial liabilities

Financial asset is derecognized when one of the following conditions is met:

• the Company’s contractual rights to the cash flows from the financial asset expire;

• the financial asset has been transferred and the Company transfers substantially all of the risks and rewards of ownership of the financial asset; or

• the financial asset has been transferred, although the Company neither transfers nor retains substantially all of the risks and rewards of ownership of the financial asset, it does not retain control over the transferred asset.

Where a transfer of a financial asset in its entirety meets the criteria for derecognition, the difference between the two amounts below is recognized in profit or loss:

• the carrying amount of the financial asset transferred measured at the date of derecognition;

• the sum of the consideration received from the transfer and, when the transferred financial asset is a debt investment at FVOCI, any cumulative gain or loss that has been recognized directly in other comprehensive income for the part derecognized.

The Company derecognizes a financial liability (or part of it) only when its contractual obligation (or part of it) is extinguished.

(f) Equity instrument

The consideration received from the issuance of equity instruments net of transaction costs is recognized in owners’ equity. Consideration and transaction costs paid by the Company for repurchasing self-issued equity instruments are deducted from owners’ equity.

16

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

(11) Impairment of assets

Except for impairment of assets set out in Notes 3(3) and (15), impairment of assets is accounted for using the following principles:

(a) Impairment of financial instruments

The Company recognizes loss allowances for expected credit loss (ECL) on:

• financial assets measured at amortized cost;

• debt investments measured at FVOCI.

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive).

The maximum period considered when estimating ECLs is the maximum contractual period (including extension options) over which the Company is exposed to credit risk.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the balance sheet date (or a shorter period if the expected life of the instrument is less than 12 months).

Loss allowances for trade receivables are always measured at an amount equal to lifetime ECL. ECLs on these financial assets are estimated using a provision matrix based on the Company’s historical credit loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast general economic conditions at the balance sheet date.

17

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

Except for trade receivables, the Company measures loss allowance at an amount equal to 12-month ECL for the following financial instruments, and at an amount equal to lifetime ECL for all other financial instruments.

• If the financial instrument is determined to have low credit risk at the balance sheet date;

• If the credit risk on a financial instrument has not increased significantly since initial recognition.

Financial instruments that have low credit risk

The credit risk on a financial instrument is considered low if the financial instrument has a low risk of default, the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.

Significant increases in credit risk

In assessing whether the credit risk of a financial instrument has increased significantly since initial recognition, the Company compares the risk of default occurring on the financial instrument assessed at the balance sheet date with that assessed at the date of initial recognition.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort, including forward-looking information. In particular, the following information is taken into account:

• failure to make payments of principal or interest on their contractually due dates;

• an actual or expected significant deterioration in a financial instrument’s external or internal credit rating (if available);

• an actual or expected significant deterioration in the operating results of the debtor; and;

• existing or forecast changes in the technological, market, economic or legal environment that have a significant adverse effect on the debtor’s ability to meet its obligation to the Company.

Depending on the nature of the financial instruments, the assessment of a significant increase in credit risk is performed on either an individual basis or a collective basis. When the assessment is performed on a collective basis, the financial instruments are grouped based on shared credit risk characteristics, such as past due status and credit risk ratings.

18

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Company considers a financial asset to be in default when:

• the borrower is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realizing security (if any is held); or

• the financial asset is more than 90 days past due.

Credit-impaired financial assets

At each balance sheet date, the Company assesses whether financial assets carried at amortized cost and debt investments at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:

• significant financial difficulty of the borrower or issuer;

• a breach of contract, such as a default in interest or principal payments;

• for economic or contractual reasons relating to the borrower’s financial difficulty, the Company having granted to the borrower a concession that would not otherwise consider;

• it is probable that the borrower will enter bankruptcy or other financial reorganization; or

• the disappearance of an active market for that financial asset because of financial difficulties.

Presentation of allowance for ECL

ECLs are remeasured at each balance sheet date to reflect changes in the financial instrument’s credit risk since initial recognition. Any change in the ECL amount is recognized as an impairment gain or loss in profit or loss. The Company recognizes an impairment gain or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for debt investments that are measured at FVOCI, for which the loss allowance is recognized in other comprehensive income.

19

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

Write-off

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. A write-off constitutes a derecognition event. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

Subsequent recoveries of an asset that was previously written off are recognized as a reversal of impairment in profit or loss in the period in which the recovery occurs.

(b) Impairment of other assets

The carrying amounts of the following assets are reviewed at each balance sheet date based on internal and external sources of information to determine whether there is any indication of impairment:

• fixed assets

• construction in progress

• right-of-use assets

• intangible assets

• long-term deferred expenses.

If any indication exists, the recoverable amount of the asset is estimated.

An asset group is composed of assets directly related to cash generation and is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or asset groups.

The recoverable amount of an asset (or asset group, set of asset groups) is the higher of its fair value (see Note 3(12)) less costs to sell and its present value of expected future cash flows.

The present value of expected future cash flows of an asset is determined by discounting the future cash flows, estimated to be derived from continuing use of the asset and from its ultimate disposal, to their present value using an appropriate pre-tax discount rate.

An impairment loss is recognized in profit or loss when the recoverable amount of an asset is less than its carrying amount. A provision for impairment of the asset is recognized accordingly. Impairment losses related to an asset group or a set of asset groups are to reduce the carrying amount of the other assets in the asset group or set of asset groups on a pro rata basis. However, such allocation would not reduce the carrying amount of an asset below the highest of its fair value less costs to sell (if measurable), its present value of expected future cash flows (if determinable) and zero.

Once an impairment loss is recognized, it is not reversed in a subsequent period.

20

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

(12) Fair value measurement

Unless otherwise specified, the Company measures fair value as follows:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

When measuring fair value, the Company takes into account the characteristics of the particular asset or liability (including the condition and location of the asset and restrictions, if any, on the sale or use of the asset) that market participants would consider when pricing the asset or liability at the measurement date, and uses valuation techniques that are appropriate in the circumstances and for which sufficient data and other information are available to measure fair value. Valuation techniques mainly include the market approach, the income approach and the cost approach.

(13) Employee benefits

Employee benefits refer to all forms of consideration or compensation given by the Company in exchange for service rendered by employees or for termination of employment relationship, which include short-term employee benefits, post-employment benefits, termination benefits and other long-term employee benefits.

(a) Short-term employee benefits

Short-term employee benefits include employee wages or salaries, bonus, allowances and subsidies, staff welfare, premiums or contributions on medical insurance, work injury insurance and maternity insurance, housing funds, union running costs and employee education costs. The short term employee benefits actually occurred are recognized as a liability in the accounting period in which the service is rendered by the employees, with a corresponding charge to the profit or loss for the current period or the cost of relevant assets. Non-monetary benefits are measured at fair value.

(b) Post-employment benefits

The Company classifies post-employment benefit plans as either defined contribution plans or defined benefit plans. Defined contribution plans are post-employment benefit plans under which the Company pays fixed contributions into a separate fund and will have no obligation to pay further contributions; and defined benefit plans are post-employment benefit plans other than defined contribution plans. During the reporting period, the Company’s post-employment benefits mainly include the premiums or contributions on basic pensions and unemployment insurance, both of which belong to defined contribution plans.

Basic pensions

The Company’s employees participate in the basic pension plan set up and administered by local authorities of Ministry of Human Resource and Social Security. Monthly payments of premiums on the basic pensions are calculated according to prescribed bases and percentages by relevant local authorities. When employees retire, the relevant local authorities are obliged to pay the basic pensions to them. The amounts based on the above calculations are recognized as liabilities in the accounting period in which the service has been rendered by the employees, with a corresponding charge to the profit or loss for the current period or the cost of relevant assets.

21

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

(c) Termination benefits

The Company provides compensation for terminating the employment relationship with employees before the end of the employment contracts or as an offer to encourage employees to accept voluntary redundancy before the end of the employment contracts. The Company recognizes a liability arising from compensation for termination of the employment relationship with employees, with a corresponding charge to profit or loss for the current period at the earlier of the following dates: 1) when the Company cannot unilaterally withdraw an employment termination plan or a curtailment proposal; 2) when the Company recognizes costs or expenses for a restructuring that involves the payment of termination benefits.

The termination benefits expected to be settled within one year since the balance sheet date are classified as current liabilities.

(14) Provisions

Provisions for product warranties and onerous contracts, are recognized when the Company has a present obligation, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be measured reliably.

A provision is initially measured at the best estimate of the expenditure required to settle the related present obligation. Factors surrounding a contingency, such as the risks, uncertainties and the time value of money, are taken into account as a whole in reaching the best estimate of a provision. Where the effect of the time value of money is material, the best estimate is determined by discounting the related future cash outflows. The increase in the discounted amount of the provision arising from passage of time is recognized as interest expense.

The carrying amount of provisions is reviewed at each balance sheet date and adjusted to reflect the current best estimate.

The provisions expected to be settled within one year since the balance sheet date are classified as current liabilities.

(15) Income tax

Current tax and deferred tax are recognized in profit or loss.

Current tax is the expected tax payable calculated at the applicable tax rate on taxable income for the year, plus any adjustment to tax payable in respect of previous years.

At the balance sheet date, current tax assets and liabilities are offset only if the Company has a legally enforceable right to set them off and also intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases, which include the deductible tax losses and

22

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

tax credits carried forward to subsequent periods. Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilized.

At the balance sheet date, deferred tax is measured based on the tax consequences that would follow from the expected manner of recovery or settlement of the carrying amount of the assets and liabilities, using tax rates enacted at the balance sheet date that are expected to be applied in the period when the asset is recovered or the liability is settled.

The carrying amount of a deferred tax asset is reviewed at each balance sheet date, and is reduced to the extent that it is no longer probable that the related tax benefits will be utilized. Such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

At the balance sheet date, deferred tax assets and liabilities are offset if all of the following conditions are met:

• the taxable entity has a legally enforceable right to offset current tax liabilities and assets, and

• they relate to income taxes levied by the same tax authority on either:

• the same taxable entity; or

• different taxable entities which intend either to settle the current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

(16) Revenue recognition

The Company shall, when the customer acquires control over the relevant goods or services, recognize the income at the amount of consideration to which it is expected to be entitled.

The following is the description of accounting policies regarding revenue from the Company’s principal activities:

(a) Sales of goods

The Company manufactures and sells ethylene, polyethylene, styrene, polystyrene, propylene, acrylonitrile, polypropylene, butadiene, aromatic hydrocarbons and other chemical products and plastic raw materials to distributors. Sales are recognized when control of the products has transferred, being when the products are delivered to and accepted by the customer. The Company delivers the products to the specific location in accordance with the sales contract, and recognized as revenues when the customer confirms receipt of the products. Revenue excludes value added tax and is after deduction of any estimated trade discounts.

23

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

(17) Government grants

Government grants refer to the monetary or non-monetary assets obtained by the Company from the government, including tax return and financial subsidy.

Government grants are recognized when the grants can be received and the Company can comply with all attached conditions. If a government grant is a monetary asset, it will be measured at the amount received or receivable. If a government grant is a non-monetary asset, it will be measured at its fair value. If it is unable to obtain its fair value reliably, it will be measured at its nominal amount.

Government grants related to assets refer to government grants which are obtained by the Company for the purposes of purchase, construction or acquisition of the long-term assets. Government grants related to income refer to the government grants other than those related to assets.

Government grants related to assets are either deducted against the carrying amount of the assets, or recorded as deferred income and recognized in profit or loss on a systemic basis over the useful lives of the assets. Government grants related to income that compensate the future costs, expenses or losses are recorded as deferred income and recognized in profit or loss, or deducted against related costs, expenses or losses in reporting the related expenses; government grants related to income that compensate the incurred costs, expenses or losses are recognized in profit or loss, or deducted against related costs, expenses or losses directly in current period. The Company applies the presentation method consistently to the similar government grants in the financial statements.

Government grants that are related to ordinary activities are included in operating profit, otherwise, they are recorded in non-operating income or expenses.

(18) Safety production costs

The Company extracted safety production costs in accordance with the regulations, shall be charged in relevant costs or profit and loss, and in the specific reserve. When the Company use the specific reserve, safety production belong to expenses and directly offset the special reserves. If the costs formed into fixed assets, the special reserves shall be offset according to the cost forming into fixed assets, and recognize the same amount of accumulated depreciation. This fixed asset shall no longer accrue depreciation in the following period.

24

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

(19) Profit distributions to owners

Distributions of profit proposed in the profit appropriation plan to be approved after the balance sheet date are not recognized as a liability at the balance sheet date but are disclosed in the notes separately.

(20) Related parties

If a party has the power to control, jointly control or exercize significant influence over another party, or vice versa, or where two or more parties are subject to common control or joint control from another party, they are considered to be related parties. Related parties may be individuals or enterprises. Enterprises with which the Company is under common control only from the State and that have no other related party relationships are not regarded as related parties.

(21) Significant accounting estimates and judgements

The Company continually evaluates the critical accounting estimates and key judgements applied based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

(a) Critical judgments in applying the accounting policies

Classification of financial assets

The Company in determining the classification of financial assets involved in the major judgments including business model and contract cash flow characteristics of the analysis.

The Company determines the business model of managing financial assets at the level of financial asset portfolio, taking into account such factors as the way of evaluating and reporting the performance of financial assets to key managers, the risk and management methods that affect the performance of financial assets, and the ways in which relevant business managers are paid, etc.

When the Company evaluates whether the contract cash flow of financial assets is consistent with the basic loan arrangement, there are the following main judgments: whether the time distribution or amount of principal may change within the duration due to prepayment or other reasons; whether interest include only the time value of money, credit risk, other basic lending risks, and consideration of costs and profits. For example, whether the prepayment amount reflect only the principal outstanding and the interest based on the principal outstanding, as well as the reasonable compensation paid for the early termination of the contract.

25

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

(b) Critical accounting estimates and key assumptions

The critical accounting estimates and key assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next accounting year are outlined below:

(i) Estimated useful lives and net residual values of fixed assets and other long-term assets

The Company assessed the estimated useful lives of fixed assets and other long-term assets in line with historical experience based on the actual useful lives of assets with similar nature or function. If there are significant changes in estimated useful lives and net residual values, depreciation or amortization expenses for future periods are adjusted.

(ii) Provision for decline in the value of inventories

Any excess of the cost over the net realizable value of each item of inventories is recognized as a provision for decline in the value of inventories. Net realizable value is determined based on the estimated selling price in the ordinary course of business, less the estimated costs to completion and estimated costs necessary to make the sale and related taxes. Management bases the estimates on all available information, including the current market prices of the finished goods and raw materials, costs to completion, costs necessary to make the sale and related taxes. If the actual selling prices are lower or the costs to completion are higher than estimated, the actual allowance for decline in the value of inventories would be higher than estimated.

(iii) Income taxes

As there are some transactions and events for which the ultimate tax determination is uncertain during the ordinary course of business, significant judgement is required from the Company in determining the provision for income taxes. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

(iv) Impairments for non-current assets

At the end of each reporting period, the Company tests for impairment for non-current assets for which certain events or changes in circumstances indicate that the carrying amount may not be recoverable. If circumstances indicate that the carrying amount of non-current assets may not be recoverable, an impairment loss may be recognized in profit or loss for the excess of the carrying amounts over the recoverable amounts.

The recoverable amount of an asset or a cash-generating unit (“CGU”) (a portion of which related to certain production facilities) are the higher of the fair value less costs of disposal and value in use. In estimating the present value of future cash flows, significant judgments are required regarding the volume of production, selling price,

26

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

related operating costs and discount rate to be used in calculating the present value of the asset or CGUs. In estimating recoverable amounts, the Company uses all relevant information available, including projections of production volumes, selling prices and related operating costs based on reasonable and supportable assumptions.

4 Changes in accounting policies

In 2022, the Company has adopted the revised accounting requirements and guidance under CAS newly issued by the Ministry of Finance (“MOF”) as follows :

• “Accounting for selling outputs that are produced before fixed assets are available for intended use or produced in the course of research and development” (“accounting for sales before intended use”) in CAS Bulletin No.15 (Caikuai [2021] No.35)

• “Determining whether a contract is onerous” in CAS Bulletin No.15

• Notice of Application Issues for Accounting Treatment of COVID-19-Related Rent Concessions (Caikuai [2022] No.13)

(1) Accounting for sales before intended use

In accordance with CAS Bulletin No.15, the Company accounts for the proceeds and related cost arising from the sale of products or by-products produced before the fixed asset is available for its intended use and in the course of research and development (“sales before intended use”) in accordance with CAS 14 – Revenue and CAS 1 – Inventories respectively, and recognises them in profit or loss for the current period. The net amount of proceeds from such sales before intended use less related costs is no longer offset against the cost of the fixed asset or research and development expenditure.

These provisions are effective from 1 January 2022. The Company has made retrospective adjustments in accordance with these provisions for sales before intended use occurring between 1 January 2021 and the date of initial implementation.

The adoption of Bulletin No.15 does not have a significant effect on the financial position and financial performance of the Company.

(2) “Determining whether a contract is onerous”

In accordance with CAS Bulletin No.15, when determining whether a contract is onerous, the Company includes in its estimated cost of fulfilling the contract the amount of the incremental cost of fulfilling the contract and the allocation of other costs directly attributable to fulfilling the contract.

The provisions in CAS Bulletin No. 15 on determining whether a contract is onerous are effective from 1 January 2022. The Company applied these provisions to contracts for which it has not yet fulfilled all its obligations as at 1 January 2022, and recognised the cumulative effect as an adjustment to the opening balance of retained earnings and other relevant financial statement items in the year of initial application. Comparative information is not restated.

The adoption of Bulletin No.15 does not have a significant effect on the financial position and financial performance of the Company.

(3) Caikuai [2022] No.13

The Accounting Treatment of COVID-19-Related Rent Concessions (Caikuai [2020] No.10) provides a practical expedient under certain conditions for rent concessions occurring as a direct consequence of the COVID-19 pandemic. According to the provisions of Caikuai [2022] No.13, the practical expedient of Caikuai [2020] No.10 can continue to apply to eligible reduction in lease payments that are originally due after 30 June 2022.

The Company adopted the above regulation on 1 January 2022 with retrospective adjustments. The cumulative effects have been adjusted to the opening balance of retained earnings and other relevant line items in the financial statements for the year 2022. Comparative information is not restated.

The adoption of the above regulation does not have a significant effect on the financial position and financial performance of the Company.

27

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

5 Taxation

(1) The types of taxes applicable to the Company’s include

Tax Name	Tax basis and applicable rate
Value added tax (“VAT”)	Output VAT is 6% or 9% or 13% of product sales and taxable services revenue, based on tax laws. The basis for VAT payable is to deduct input VAT from the output VAT for the period
City maintenance and construction tax	5% of VAT paid
Educational surcharge	3% of VAT paid
Local educational surcharge	2% of VAT paid

(2) Income tax

The statutory income tax rate of the Company is 25%. The applicable income tax rate for the year is the statutory rate (2021: 25%).

Pursuant to the “Circular on Enterprise Income Tax Policy concerning Deductions for Equipment and Appliances”(Cai Shui [2018] 54) issued by the State Administration of Taxation, during the period from 1 January 2018 to 31 December 2020, the cost of newly purchased equipment with the original cost less than RMB 5 million can be fully deducted against taxable profit in the next month after the asset is put into use, instead of being depreciated annually for tax filing.

(3) Taxes payable

	31 December 2021		31 December 2022
	RMB		RMB
Unpaid VAT		63,240,335		—
Enterprise income tax payable		173,463,260		—
Environmental tax payable		65,275,459		64,873,290
Educational surcharge payable		3,162,017		—
Individual income tax payable		5,008,019		4,309,517
City maintenance and construction tax payable		3,162,016		—
Unpaid stamp tax		2,065,124		1,980,181
Property tax payable		—		1,493,040
Unpaid land use tax		749,983		749,983
Total		316,126,213		73,406,011

28

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

6 Cash at bank and on hand AND

	31 December 2021		31 December 2022
	RMB		RMB
Deposits with banks
- RMB		3,246,711,253		1,282,704,723
- USD (translated into RMB)		36,039,789		39,726,746
Other cash balances		—		—
Total		3,282,751,042		1,322,431,469

Cash and cash equivalents listed in the cash flow statement:

	31 December 2021		31 December 2022
	RMB		RMB
Cash at bank		3,282,751,042		1,322,431,469
Less: Time deposit (a)		950,000,000		534,823,000
Cash and cash equivalents		2,332,751,042		787,608,469

(a) As at 31 December 2022, time deposits represent time deposit at bank of one year to three years of maturity which will expire within one year, and the annual interest rate is 3.784% to 5.110% (31 December 2021: time deposit at bank of 18 months to three years of maturity which will expire within one year, and the annual interest rates are from 3.192% to 3.784%).

7 Accounts receivable

(1) Accounts receivable by customer type:

	31 December 2021		31 December 2022
	RMB		RMB
Receivables due from related parties		33,850,641		57,609,762
Accounts receivable from third parties		225,436,156		175,079,004
Sub-total		259,286,797		232,688,766
Less: Provision for bad debts		7,756,885		7,756,885
Total		251,529,912		224,931,881

29

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

(2) The ageing analysis of accounts receivable is as follows:

	31 December 2021		31 December 2022
	RMB		RMB
Within 1 year (inclusive)		251,529,912		224,931,881
Over 1 year but within 2 years (inclusive)		—		—
Over 2 years but within 3 years (inclusive)		—		—
Over 3 years		7,756,885		7,756,885
Sub-total		259,286,797		232,688,766
Less: Provision for bad debts		7,756,885		7,756,885
Total		251,529,912		224,931,881

The ageing is counted starting from the date when accounts receivable are recognized.

(3) Assessment of ECLs on accounts receivable:

For accounts receivables, regardless of whether exists the significant financing component, the Company measures the loss provision according to the lifetime expected credit losses.

(4) Movements of provisions for bad debts:

	2020			2021		2022
	RMB			RMB		RMB
Balance at the beginning of the year		8,797,278			7,756,885		7,756,885
Additions during the year		—			—		—
Recoveries or reversals during the year		(1,040,393	)		—		—
Balance at the end of the year		7,756,885			7,756,885		7,756,885

30

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

8 Financial assets at fair value through other comprehensive income

	31 December 2021		31 December 2022
	RMB		RMB
Financial assets at fair value through other comprehensive income		260,065,209		212,655,800

(1) Due to the requirement of cash management, the Company discounted and endorsed part of the bank acceptance notes. The business model of bank acceptance notes management is for the purpose of collecting cash flow of contracts and sales. Therefore, the Company classified all notes receivable to financial assets measured at fair value and whose changes are included in other comprehensive income.

(2) The Company has no single provision for impairment of the bank acceptance notes, with all provision was accrued by their expected credit loss. As at 31 December 2022 and 31 December 2021, the Company considers that no bank acceptance notes has significant credit risk, and will not suffer significant loss due to the violation of banks.

(3) As at 31 December 2022 and 31 December 2021, the Company had no unmatured notes receivable that have been endorsed or discounted.

9 Advances to suppliers

	31 December 2021		31 December 2022
	RMB		RMB
Advances to suppliers		22,771,842		55,368,985

As at 31 December 2022 and 31 December 2021, the Company’s prepayment mainly refers to the prepayment of goods purchase, the aging of which is within one year.

31

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

10 Other receivables

	31 December 2021		31 December 2022
	RMB		RMB
Refund of consumption tax payable (a)		28,448,944		460,539,379
Property rental deposits		12,911,288		40,769,797
Others		16,200		115,525
Total		41,376,432		501,424,701

As at 31 December 2022 and 31 December 2021, all other receivables were aged within one year except for property rental deposits. No other receivables were past due but unimpaired. Provision for bad debts was not required as assessed by management of the Company.

(a) According to regulations of the Interim Measures for Consumption Tax Refunding (Exempting) on Naphtha and Fuel Used in Production of Ethylene and Arene Chemical Products issued by the State Administration of Taxation, eligible enterprises, which use naphtha and fuel to produce ethylene and arene chemical products, can enjoy tax rebate for consumption tax. As at 31 December 2022, the Company could made a tax refund application to the local tax bureau and estimated that the consumption tax refund of RMB 460,539,379 would be received (31 December 2021: RMB 28,448,944 ).

11 Inventories

(1) An analysis of inventories by category for the year is as follows:

	31 December 2021			31 December 2022
	RMB			RMB
Raw materials		1,321,363,602			1,378,708,801
Semi-finished products		555,997,481			483,437,116
Finished goods		333,877,632			502,732,687
Goods in transit		130,226,977			160,539,431
Sub-total		2,341,465,692			2,525,418,035
Less: Provision for decline in the value of inventories		(136,012,496	)		(234,704,376	)
Total		2,205,453,196			2,290,713,659

32

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

(2) An analysis of provision for decline in the value of inventories of the Company is as follows:

	Balance at 1 January 2020		Provision made for the year		Written back during the year Transferred out			Balance at 31 December 2020
	RMB		RMB		RMB			RMB
Raw materials		75,392,637		2,508,089		(5,600,250	)		72,300,476
Semi-finished products		4,834,979		2,752,574		(4,834,980	)		2,752,573
Finished goods		2,423,292		1,526,859		(2,423,291	)		1,526,860
Total		108,687,179		9,301,069		(35,337,340	)		82,650,908

	Balance at 1 January 2021		Provision made for the year		Written back during the year Transferred out			Balance at 31 December 2021
	RMB		RMB		RMB			RMB
Raw materials		72,300,476		26,762,508		(1,996,635	)		97,066,349
Semi-finished products		2,752,573		26,554,107		(2,752,574	)		26,554,106
Finished goods		1,526,860		12,392,039		(1,526,858	)		12,392,041
Total		76,579,909		65,708,654		(6,276,067	)		136,012,496

	Balance at 1 January 2022		Provision made for the year		Written back during the year Transferred out			Balance at 31 December 2022
	RMB		RMB		RMB			RMB
Raw materials		97,066,349		55,403,648		(44,068,193	)		108,401,804
Semi-finished products		26,554,106		112,266,867		(90,114,823	)		48,706,150
Finished goods		12,392,041		121,637,949		(56,433,568	)		77,596,422
Total		136,012,496		289,308,464		(190,616,584	)		234,704,376

33

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

12 Other current assets

	31 December 2021		31 December 2022
	RMB		RMB
Entrusted loans		—		—
Time deposits		—		—
Input tax to be deducted		—		333,711,035
Others		2,171,547		156,916
Total		2,171,547		333,867,951

34

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

13 Fixed assets

	Plant and buildings			Specialized machinery and equipment			General machinery and equipment			Office and other equipment			Motor vehicles			Machinery and equipment			Total
	RMB			RMB			RMB			RMB			RMB			RMB			RMB
Cost
Balance at 31 December 2020		1,362,400,848			19,928,699,797			—			—			11,598,267			250,758,393			21,553,457,305
Transfers from construction in progress (Note 14)		7,354,242			229,893,477			24,174,512			—			—			—			261,422,231
Other increases during the year		1,303,787			29,177,331			10,941,680			3,924,580			—			—			45,347,378
Reclassification during the year		104,437,291			(188,982,524	)		325,549,776			21,352,117			(11,598,267	)		(250,758,393	)		—
Disposals during the year		(991,050	)		(50,030,703	)		(7,908,577	)		(119,347	)		—			—			(59,049,677	)
Balance at 31 December 2021		1,474,505,118			19,948,757,378			352,757,391			25,157,350			—			—			21,801,177,237
Less: Accumulated depreciation
Balance at 31 December 2020		(969,634,784	)		(16,916,359,748	)		—			—			(4,208,383	)		(144,633,489	)		(18,034,836,404	)
Charge for the year		(45,718,875	)		(561,948,667	)		(33,774,586	)		(4,269,835	)		—			—			(645,711,963	)
Decrease during the year		329,819			38,258,737			7,569,715			116,707			—			—			46,274,978
Reclassification during the year		(77,210,951	)		127,193,874			(183,732,050	)		(15,092,745	)		4,208,383			144,633,489			—
Balance at 31 December 2021		(1,092,234,791	)		(17,312,855,804	)		(209,936,921	)		(19,245,873	)		—			—			(18,634,273,389	)
Carrying amounts
At 31 December 2021		382,270,327			2,635,901,574			142,820,470			5,911,477			—			—			3,166,903,848
At 31 December 2020		392,766,064			3,012,340,049			—			—			7,389,884			106,124,904			3,518,620,901

	Buildings			Specialized machinery and equipment			General machinery and equipment			Office and other equipment			Total
	RMB			RMB			RMB			RMB			RMB
Cost
Balance at 31 December 2021		1,474,505,118			19,948,757,378			352,757,391			25,157,350			21,801,177,237
Transfers from construction in progress (Note 14)		3,510,569			91,984,579			36,076,308			—			131,571,456
Other increases during the year		853,384			13,093,475			16,463,015			210,273			30,620,147
Reclassification during the year		—			(59,030	)		59,030			—			—
Disposals during the year		(914,921	)		(72,664,124	)		(5,876,258	)		(32,135	)		(79,487,438	)
Balance at 31 December 2022		1,477,954,150			19,981,112,278			399,479,486			25,335,488			21,883,881,402
Less: Accumulated depreciation
Balance at 31 December 2021		(1,092,234,791	)		(17,312,855,804	)		(209,936,921	)		(19,245,873	)		(19,083,565,018	)
Charge for the year		(42,791,317	)		(442,490,162	)		(37,548,490	)		(2,051,590	)		(524,881,559	)
Decrease during the year		347,247			69,534,840			5,687,388			20,455			75,589,930
Reclassification during the year		(4,176	)		4,176			(4,176	)		—			—
Balance at 31 December 2022		(1,134,678,861	)		(17,685,806,950	)		(241,802,199	)		(21,277,008	)		(18,034,836,404	)
Carrying amounts
At 31 December 2022		343,275,289			2,295,305,328			157,677,287			4,058,480			2,800,316,384
At 31 December 2021		382,270,327			2,635,901,574			142,820,470			5,911,477			3,166,903,848

In 2022, the amounts of depreciation expenses charged cost of sales, selling and distribution expenses, general and administrative expenses and research and development expenses were RMB 503,299,883, RMB 35,965, RMB 20,735,611 and RMB 810,100 (2021: RMB 625,441,687, RMB 235,451, RMB 19,521,193 and RMB 513,632 ), respectively.

35

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

14 Construction in progress

	RMB
Cost
Balance at 1 January 2021		366,781,634
Additions during the year		220,463,538
Transferred to fixed assets (note 13)		(261,422,231	)
Decrease due to other reasons		(19,425,759	)
Transferred to intangible assets (note 16)		(41,094,302	)
Balance at 31 December 2021		265,302,880
Less: Provision for impairment
Balance at 1 January and 31 December 2020		—
Charge for the year		(61,805,108	)
Balance at 31 December 2021		(61,805,108	)
Carrying amounts
At 31 December 2021		203,497,772
At 31 December 2020		366,781,634

	RMB
Cost
Balance at 1 January 2022		265,302,880
Additions during the year		368,877,517
Transferred to fixed assets (note 13)		131,571,456
Decrease due to other reasons		—
Transferred to intangible assets (note 16)		18,897,367
Balance at 31 December 2022		483,711,574
Less: Provision for impairment
Balance at 1 January 2022 and 31 December 2021		(61,805,108	)
Charge for the year		—
Balance at 31 December 2022		(61,805,108	)
Carrying amounts
At 31 December 2022		421,906,466
At 31 December 2021		203,497,772

36

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

The construction in progress balance of the Company is mainly production and environmental protection equipment installation programs.

15 Right-of-use assets

(1) As a lessee

	Buildings			Vehicles and other equipments			Total
	RMB			RMB			RMB
Cost
Balance at 1 January 2021		10,704,710			323,880			11,028,590
Decrease during the year		(5,994,638	)		(71,973	)		(6,066,611	)
Balance at 31 December 2021		4,710,072			251,907			4,961,979
Less: Accumulated depreciation
Balance at 1 January 2021		(5,138,260	)		(53,980	)		(5,192,240	)
Amortization during the year		(5,360,384	)		(108,255	)		(5,468,639	)
Decrease during the year		5,994,638			71,973			6,066,611
Balance at 31 December 2021		(4,504,006	)		(90,262	)		(4,594,268	)
Carrying amounts
At 31 December 2021		206,066			161,645			367,711
At 31 December 2020		5,566,450			269,900			5,836,350

	Buildings			Vehicles and other equipments			Total
	RMB			RMB			RMB
Cost
Balance at 1 January 2022		4,710,072			251,907			4,961,979
Decrease during the year		(4,710,072	)		—			(4,710,072	)
Balance at 31 December 2022		—			251,907			251,907
Less: Accumulated depreciation
Balance at 1 January 2022		(4,504,006	)		(90,262	)		(4,594,268	)
Amortization during the year		(206,066	)		(107,960	)		(314,026	)
Decrease during the year		4,710,072			—			4,710,072
Balance at 31 December 2022		—			(198,222	)		(198,222	)
Carrying amounts
At 31 December 2022		—			53,685			53,685
At 31 December 2021		206,066			161,645			367,711

37

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

16 Intangible assets

	Land use rights			Patents			Software			Total
	RMB			RMB			RMB			RMB
Cost
Balance at 31 December 2020		770,966,668			1,024,953,159			208,052,638			2,003,972,465
- Additions during the year		—			—			3,065,615			3,065,615
- Transferred from construction in progress (Note 14)		—			—			41,094,302			41,094,302
Balance at 31 December 2021		770,966,668			1,024,953,159			252,212,555			2,048,132,382
Less: Accumulated amortization
Balance at 31 December 2020		(261,641,497	)		(973,852,833	)		(131,696,368	)		(1,367,190,698	)
Provision during the year		(16,429,844	)		(11,201,198	)		(25,805,506	)		(53,436,548	)
Balance at 31 December 2021		(278,071,341	)		(985,054,031	)		(157,501,874	)		(1,420,627,246	)
Carrying amounts
At 31 December 2021		492,895,327			39,899,128			94,710,681			627,505,136
At 31 December 2020		509,325,171			51,100,326			76,356,270			636,781,767

	Land use rights			Patents			Software			Total
	RMB			RMB			RMB			RMB
Cost
Balance at 31 December 2021		770,966,668			1,024,953,159			252,212,555			2,048,132,382
- Additions during the year		—			—			871,550			871,550
- Transferred from construction in progress (Note 14)		—			—			18,897,367			18,897,367
Balance at 31 December 2022		770,966,668			1,024,953,159			271,981,472			2,067,901,299
Less: Accumulated amortization
Balance at 31 December 2021		(278,071,341	)		(985,054,031	)		(157,501,874	)		(1,420,627,246	)
Provision during the year		(16,429,846	)		(10,857,525	)		(29,070,681	)		(56,358,052	)
Balance at 31 December 2022		(294,501,187	)		(995,911,556	)		(186,572,555	)		(1,476,985,298	)
Carrying amounts
At 31 December 2022		476,465,481			29,041,603			85,408,917			590,916,001
At 31 December 2021		492,895,327			39,899,128			94,710,681			627,505,136

38

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

17 Long-term prepaid expenses

	Balance at 31 December 2020		Additions during the year		Amortization during the year			Balance at 31 December 2021
	RMB		RMB		RMB			RMB
Catalyst		170,066,390		18,596,307		(53,648,348	)		135,014,349
Improvements to fixed assets held under operating leases		1,038,509		—		(1,038,509	)		—
		171,104,899		18,596,307		(54,686,857	)		135,014,349
	Balance at 31 December 2021		Additions during the year		Amortization during the year			Balance at 31 December 2022
	RMB		RMB		RMB			RMB
Catalyst		135,014,349		17,903,167		(50,208,129	)		102,709,387
		135,014,349		17,903,167		(50,208,129	)		102,709,387

39

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

18 Deferred tax assets and liabilities

	Deferred tax assets/(liabilities)
	Balance at the beginning of 2021			Current year increase/ decrease charged to profit or loss			Balance at the end of 2021
	RMB			RMB			RMB
Provision for decline in the value of inventories		19,144,978			14,858,147			34,003,125
Provision for impairment of fixed assets and construction in progress		—			15,451,277			15,451,277
Bad debt provision for accounts receivables		1,939,221			—			1,939,221
Accrued environmental tax		15,909,685			—			15,909,685
Sales cut-off adjustments		9,540,273			(9,540,273	)		—
Difference in depreciation of fixed assets		3,289,597			66,809,389			70,098,986
Undeclared assets disposals		3,241,760			1,998,953			5,240,713
Differences in amortization of long - term prepaid expenses		1,549,097			(1,531,005	)		18,092
Difference in depreciation of fixed assets		(86,917,981	)		(7,451,592	)		(94,369,573	)
Total		(32,303,370	)		80,594,896			48,291,526

	Deferred tax assets/(liabilities)
	Balance at the beginning of 2022			Current year increase/ decrease charged to profit or loss			Balance at the end of 2022
	RMB			RMB			RMB
Provision for decline in the value of inventories		34,003,125			24,672,969			58,676,094
Provision for impairment of fixed assets and construction in progress		15,451,277			—			15,451,277
Bad debt provision for accounts receivables		1,939,221			—			1,939,221
Accrued environmental tax		15,909,685			—			15,909,685
Difference in depreciation of fixed assets (deferred tax assets)		70,098,986			(3,015,224	)		67,083,762
Undeclared assets disposals		5,240,713			53,145			5,293,858
Differences in amortization of long - term prepaid expenses		18,092			81,416			99,508
Deductible loss		—			648,529,795			648,529,795
Other assets		—			75,000			75,000
Difference in depreciation of fixed assets		(94,369,573	)		(19,962,338	)		(114,331,911	)
Total		48,291,526			650,434,763			698,726,289

40

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

At the balance sheet date, the deferred tax assets and liabilities on the balance sheet, after offsetting each other, were as follows:

	31 December 2021		31 December 2022
	RMB		RMB
Deferred tax assets, net		48,291,526		698,726,289
Deferred tax liabilities, net		—		—
Total		48,291,526		698,726,289

19 Other non-current assets

	31 December 2021		31 December 2022
	RMB		RMB
Bank deposits
- Agricultural bank of China (1)		500,000,000		—
Time deposits
- China Everbright Bank (2)		500,000,000		500,000,000
- China Industrial Bank (3)		500,000,000		500,000,000
Construction materials		34,874,025		—
Prepayment for machineries		18,905,344		68,780,880
Total		1,553,779,369		1,068,780,880

(1) As at 31 December 2021, bank deposits included three year deposit of RMB 500,000,000 in Agricultural Bank of China, Shanghai Jinshan branch, with an annual interest rate of 3.784%, which will be due on 28 December 2023.

(2) As at 31 December 2022, time deposits of RMB 500,000,000 (31 December 2021: RMB 500,000,000 ) was three-year deposit in China Everbright Bank, Shanghai Nanshi branch, with an annual interest rate of 3.700%, which will be due on 1 February 2024.

(3) As at 31 December 2022, time deposits of RMB 500,000,000 (31 December 2021: RMB 500,000,000 ) was three-year deposit in China Industrial Bank, Shanghai branch, with an annual interest rate of 3.650%, which will be due on 5 January 2024.

41

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

20. Short-term borrowings

	2022		2021
	RMB		RMB
Credit loans		6,608,867,012		—

As at 31 December 2022,the interest rate of short-term borrowings is from 2.85% to 2.95% (31 December 2021: Nil).

As at 31 December 2022, the Company had no overdue short-term borrowings.

21 Contract liabilities

	31 December 2021		31 December 2022
	RMB		RMB
Advances from customers		415,450,821		434,327,898

22 Employee benefits payable

	Note		31 December 2021		31 December 2022
			RMB		RMB
Short-term employee benefits		(1)		99,965,532		95,035,491
Defined contribution plans payable		(2)		5,607,808		6,066,607
Total				105,573,340		101,102,098

(1) Short-term employee benefits

	Balance at 1 January 2021		Accrued during the year		Paid during the year			Balance at 31 December 2021
	RMB		RMB		RMB			RMB
Wages and salaries, bonus, allowances and subsidies		20,000,000		404,673,606		(404,673,606	)		20,000,000
Staff welfare		—		17,329,504		(17,329,504	)		—
Social security contributions		4,653,102		33,831,726		(35,632,799	)		2,852,029
- Medical insurance		3,695,473		29,375,245		(30,679,767	)		2,390,951
- Work injury insurance		421,434		2,027,544		(2,239,580	)		209,398
- Maternity insurance		536,195		2,428,937		(2,713,452	)		251,680
Housing fund		—		34,551,223		(34,551,223	)		—
Labour union fee		832,226		7,924,676		(7,927,121	)		829,781
Employee education funds		—		5,467,918		(5,467,918	)		—
Employees’ bonus and welfare fund		76,283,722		—		—			76,283,722
Termination benefits		—		501,130		(501,130	)		—
Total		101,769,050		504,279,783		(506,083,301	)		99,965,532

42

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

	Balance at 1 January 2022		Accrued during the year		Paid during the year			Balance at 31 December 2022
	RMB		RMB		RMB			RMB
Wages and salaries, bonus, allowances and subsidies		20,000,000		450,222,847		(455,222,847	)		15,000,000
Staff welfare		—		15,779,913		(15,779,913	)		—
Social security contributions		2,852,029		39,066,877		(38,891,524	)		3,027,382
- Medical insurance		2,390,951		33,189,237		(33,064,822	)		2,515,366
- Work injury insurance		209,398		2,673,570		(2,650,438	)		232,530
- Maternity insurance		251,680		3,204,070		(3,176,264	)		279,486
Housing fund		—		38,486,039		(38,486,039	)		—
Labour union fee		829,781		9,046,777		(9,152,171	)		724,387
Employee education funds		—		3,272,558		(3,272,558	)		—
Employees’ bonus and welfare fund		76,283,722		—		—			76,283,722
Termination benefits		—		684,354		(684,354	)		—
Other		—		108,290		(108,290	)		—
Total		99,965,532		556,667,655		(561,597,696	)		95,035,491

(2) Defined contribution plans payable

	Balance at 1 January 2021		Accrued during the year		Paid during the year			Balance at 31 December 2021
	RMB		RMB		RMB			RMB
Basic pensions		8,692,144		48,071,927		(52,737,206	)		4,026,865
Unemployment insurance		224,924		714,459		(813,543	)		125,840
Supplementary pensions		1,455,103		27,589,451		(27,589,451	)		1,455,103
Total		10,372,171		76,375,837		(81,140,200	)		5,607,808

	Balance at 1 January 2022		Accrued during the year		Paid during the year			Balance at 31 December 2022
	RMB		RMB		RMB			RMB
Basic pensions		4,026,865		51,431,431		(50,986,535	)		4,471,761
Unemployment insurance		125,840		1,609,543		(1,595,640	)		139,743
Supplementary pensions		1,455,103		30,392,732		(30,392,732	)		1,455,103
Total		5,607,808		83,433,706		(82,974,907	)		6,066,607

23 Other payables

	31 December 2021		31 December 2022
	RMB		RMB
Deposits		9,500,000		12,060,000
Capital reduction payable		2,650,165,871		—
Construction payable		92,861,068		254,245,705
Others		2,936,961		11,999,936
Total		2,755,463,900		278,305,641

43

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

24 Non-current liabilities maturing within one year

	Note	31 December 2021		31 December 2022
		RMB		RMB
Lease liabilities maturing within one year	26		111,639		65,123

25 Other current liabilities

	31 December 2021		31 December 2022
	RMB		RMB
Output VAT to be recognized		54,008,607		56,462,627

44

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

26 Lease liabilities

	31 December 2021			31 December 2022
	RMB			RMB
Lease liabilities		177,386			66,932
Less: current portion of non-current liabilities (Note 24)		(111,639	)		(65,123	)
Total		65,747			1,809

As at 31 December 2022, the Company had no lease payments related to lease contracts which had been signed but not been executed (31 December 2021: Nil).

27 Paid-in capital

The Company’s paid-in capital and registered capital structure at 31 December is as follows:

	2021				2022
	Amount		%		Amount		%
	RMB				RMB
INEOS		—		—		1,557,590,000		50
Sinopec Corp		150,000,000		30		467,277,000		15
Gaoqiao Petrochemical		250,000,000		50		467,277,000		15
SPC		100,000,000		20		623,036,000		20
Total		500,000,000		100		3,115,180,000		100

According to the resolution of the first 15th Shareholders’ Meeting on 30 August 2022, the registered capital of the Company increased from RMB 500,000,000 to RMB 3,115,180,000, and the registered capital increased by RMB 2,615,180,000 through transfer from surplus reserve. Sinopec, Gaoqiao Petrochemical and Shanghai Petrochemical increased the capital according to the original shareholding ratio.

According to the resolution of the 16th Session of the first Shareholders’ Meeting on 25 November 2022, Sinopec transferred 15% of its equity (original investment amount of RMB 467,277,000) to INEOS, and Gaoqiao Petrochemical transferred 35% of its equity (original investment amount of RMB 1,090,313,000) to INEOS. As at 31 December 2022, to INEOS, Sinopec, Gaoqiao Petrochemical and Shanghai Petrochemical held the registered and paid-up capital of the Company of RMB 1,557,590,000, RMB 467,277,000, RMB 467,277,000 and RMB 623,036,000, respectively. The stakes are 50%,15%,15% and 20%.

45

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

28 Capital surplus

	31 December 2021 and 2022
	RMB
Other capital surplus
- Transferred from special payable		1,964,000
Foreign currency capital translation difference		(509,354	)
Total		1,454,646

29 Specific reserve

	2021			2022
	RMB			RMB
Balance at the beginning of the year		—			—
Increase during the year		28,523,706			41,419,862
Decrease during the year		(28,523,706	)		(41,419,862	)
Balance at the end of the year		—			—

30 Surplus reserve

	31 December 2020		Increase during the year		Decrease during the year		31 December 2021
	RMB		RMB		RMB		RMB
Reserve fund		133,718,997		—		—		133,718,997
Enterprise expansion fund		133,718,996		—		—		133,718,996
Statutory surplus reserve		1,422,522,825		312,590,386		—		1,735,113,211
Discretionary surplus reserve		1,050,222,081		—		—		1,050,222,081
		2,740,182,899		312,590,386		—		3,052,773,285

	31 December 2021		Increase during the year		Decrease during the year			31 December 2022
	RMB		RMB		RMB			RMB
Reserve fund		133,718,997		—		(133,718,997	)		—
Enterprise expansion fund		133,718,996		—		(133,718,996	)		—
Statutory surplus reserve		1,735,113,211		—		(1,297,519,926	)		437,593,285
Discretionary surplus reserve		1,050,222,081		—		(1,050,222,081	)		—
		3,052,773,285		—		(2,615,180,000	)		437,593,285

In accordance with the Company Law and the Company’s Articles of Association, the Company should appropriate 10% of net profit for the year to the statutory surplus reserve, and the Company can cease appropriation when the statutory surplus reserve accumulated to more than 50% of the registered capital. The statutory surplus reserve can be used to make up for the loss or increase the share capital after approval from the appropriate authorities. The Company didn’t appropriate the statutory surplus reserve in 2022 (2021: RMB 312,590,386 to the statutory surplus reserve).

46

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

31 Undistributed profits

	2021			2022
	RMB			RMB
Undistributed profits at beginning of year		3,171,706,061			2,813,313,476
Add: Net profit/(loss) for the current year		3,125,903,862			(1,947,579,252	)
Less: Profit distribution
Profit distribution to equity owners		(3,171,706,061	)		(2,772,190,652	)
Appropriation to free surplus reserves		(312,590,386	)		—
Undistributed profits/(accumulated losses) at end of year		2,813,313,476			(1,906,456,428	)

Pursuant to the resolution at the 32th Session of the first Meeting of the Board of Directors dated 28 February 2022, the Company made profit distribution to shareholders amounting to RMB 2,772,190,652 for the current year (2021: RMB 3,171,706,061, 2020: RMB 2,368,000,000).

32 Revenue and cost of sales

	2020					2021					2022
	Revenue		Cost of sales			Revenue		Cost of sales			Revenue		Cost of sales
Main operations
- Sales of olefin		5,098,976,996		(4,246,257,694	)		7,113,735,587		(6,326,093,477	)		6,295,589,765		(5,751,203,014	)
- Sales of polyethylene		4,994,277,463		(3,803,906,817	)		5,741,835,673		(5,429,556,673	)		5,190,012,918		(6,079,495,459	)
- Sales of acrylonitrile		4,418,734,626		(3,676,021,011	)		7,476,126,532		(5,536,514,979	)		4,514,576,652		(5,639,421,091	)
- Sales of styrene		2,394,141,160		(2,178,378,109	)		3,407,790,936		(2,933,607,175	)		2,983,565,129		(2,975,548,981	)
- Sales of polystyrene		2,382,513,536		(1,699,238,708	)		3,520,810,677		(2,740,722,490	)		2,783,826,139		(2,764,687,444	)
- Sales of polypropylene		2,186,126,691		(1,531,787,415	)		2,273,269,124		(2,067,997,433	)		2,149,281,286		(2,544,731,840	)
Other operations		151,288,772		(133,684,834	)		189,654,679		(135,876,782	)		179,977,236		(61,234,823	)
		21,626,059,244		(17,269,274,588	)		29,723,223,208		(25,170,369,009	)		24,096,829,125		(25,816,322,652	)

The Company’s revenue is recognized at a certain point of time.

47

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

33 Taxes and surcharges

	2020		2021		2022
	RMB		RMB		RMB
Educational surcharge		20,293,244		30,855,712		4,796,425
Stamp tax		9,931,997		11,779,005		11,762,332
Environmental protection tax		9,877,785		9,253,559		8,356,953
City maintenance and construction tax		4,058,649		13,725,651		4,796,425
Urban land utilization tax		2,999,933		2,999,933		1,499,966
Property tax		—		—		2,980,363
Others		1,539		1,804		1,804
Total		47,163,147		68,615,664		34,194,268

34 Financial (income)/expense - net

	2020			2021			2022
	RMB			RMB			RMB
Interest expenses		6,019,753			2,682,042			134,233,247
Less: interest income		(172,009,089	)		(232,479,017	)		(104,673,458	)
Exchange losses/(gains) net		3,049,923			1,030,046			(1,359,689	)
Others		473,921			399,154			253,541
Total		(162,465,492	)		(228,367,775	)		28,453,641

35 Other income

	2020 RMB		2021 RMB		2022 RMB		Asset- related/ Income- related
Refund for unemployment insurance		—		3,195,900		12,000		Income-related
Government subsidies for port construction		1,769,194		118,083		—		Income-related
Government subsidies for chemical industry zone		6,142,800		12,600,000		4,125,300		Income-related
Government subsidies for R&D project		2,623,000		—		—		Income-related
Others		423,328		473,847		1,158,857		Income-related
Government subsidies for Shanghai high-tech		—		—		3,163,000		Income-related
Total		10,958,322		16,387,830		8,459,157

36 Investment income

	2020		2021		2022
	RMB		RMB		RMB
Income from entrusted loans		58,535,901		46,328,616		—

48

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

37 Asset impairment losses

	2020			2021			2022
	RMB			RMB			RMB
Losses on decline in the value of inventories		(6,787,522	)		(65,708,654	)		(289,308,464	)
Impairment loss of construction in progress		—			(61,805,108	)		—
Total		(6,787,522	)		(127,513,762	)		(289,308,464	)

38 Non-operating income and expenses

(1) Non-operating income

	2020		2021		2022
	RMB		RMB		RMB
Long aging payables not to be paid		2,509,172		2,461,634		348,166
Suppliers penalty for breach of contracts		11,098,500		—		342,910
Gains on retirement of assets		—		281,442		432,743
Others		1,454,698		1,562,761		25,000
Total		15,062,370		4,305,837		1,148,819

(2) Non-operating expenses

	2020		2021		2022
	RMB		RMB		RMB
Losses on retirement of assets		6,071,562		11,930,452		3,896,782
Donation expenses		2,016,652		200,000		300,000
Penalty expenses		450,000		—		—
Others		8,051		1,451,012		9,281,654
Total		8,546,265		13,581,464		13,478,436

39 Income tax expenses

(1) Income tax expenses for the year represents

	2020		2021			2022
	RMB		RMB			RMB
Current tax expenses for the year		775,846,702		1,021,011,964			97,427
Changes in deferred tax assets/liabilities		19,577,669		(80,594,896	)		(650,434,763	)
Total		795,424,371		940,417,068			(650,337,336	)

49

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

(2) Reconciliation between income tax expense and accounting profit:

	2020			2021			2022
	RMB			RMB			RMB
Total profit/(losses)		3,208,224,027			4,066,320,930			(2,597,916,588	)
Income tax expenses calculated at applicable tax rates		802,056,007			1,016,580,232			(649,479,147	)
Costs, expenses and losses not deductible for tax purposes		2,114,316			2,114,316			2,179,756
Super deduction of R&D expenses		—			(3,890,000	)		(3,137,647	)
Identify discrepancies arising from unregulated deferred income tax assets in previous years		—			(74,148,775	)		—
Deductible temporary differences for which no deferred tax asset was recognized		(3,300,003	)		—			2,275
True up for final settlement of enterprise income tax in respect of previous year		(3,475,083	)		(238,705	)		97,427
Income tax expenses		795,424,371			940,417,068			(650,337,336	)

40 Supplement to income statement

The cost of sales, selling and administrative expenses, general and administrative expenses and R&D expenses in the income statements are listed as follows by nature:

	2020		2021			2022
	RMB		RMB			RMB
Changes in inventories of finished goods and semi-finished products		19,142,488		(195,053,026	)		(242,843,079	)
Consumed raw materials and low value consumables, etc.		16,117,811,082		23,345,177,320			24,227,388,996
Employee benefits		509,886,089		580,655,620			640,101,361
Depreciation and amortization expenses		726,861,191		759,304,007			631,761,766
Transportation costs		410,720,367		453,194,590			431,310,686
Repairs and maintenance expenses		385,416,604		405,370,162			221,878,212
Environment related cost		83,888,263		73,927,998			70,418,639
Commodity storage fees		33,037,958		34,245,243			30,830,561
Insurance expense		22,588,996		22,048,801			25,044,891
Vehicle usage fees		16,144,814		16,172,557			15,493,010
Others		277,902,909		247,538,174			287,533,837
		18,603,400,761		25,742,581,446			26,338,918,880

50

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

41 Supplement to cash flow statement

(1) Reconciliation of net profit to cash flows from operating activities:

		2020			2021			2022
		RMB			RMB			RMB
Net profit/(loss)			2,412,799,656			3,125,903,862			(1,947,579,252	)
Add:	Losses on provision for decline in the value of inventories		6,787,522			65,708,654			289,308,464
	Impairment loss of construction in progress		—			61,805,108			—
	Net reversal of impairment losses on financial assets		(1,040,393	)		—			—
	Depreciation of fixed assets		624,149,178			645,711,963			524,881,559
	Amortization of intangible assets		53,691,786			53,436,548			56,358,052
	Amortization of long-term prepaid expenses		43,307,960			54,686,857			50,208,129
	Depreciation of right-of-use assets		5,712,267			5,468,639			314,026
	Losses on disposal of fixed assets		6,071,562			11,649,010			3,464,039
	Financial (income)/loss		(23,611,698	)		(111,432,469	)		56,687,415
	Investment income		(58,535,901	)		(46,328,616	)		—
	Increase in deferred tax assets		—			(48,291,526	)		(650,434,763	)
	Increase / (decrease) in deferred tax liabilities		19,577,669			(32,303,370	)		—
	Decrease / (increase) in inventories		91,046,499			(779,872,012	)		(374,568,927	)
	(Increase) / decrease in operating receivables		(117,243,028	)		440,884,928			(416,357,016	)
	Increase/(decrease) in operating payables		56,323,744			845,163			(910,483,422	)
Net cash flows generated from/(used in) operating activities			3,119,036,823			3,447,872,739			(3,318,201,696	)

(2) Major investments and financing activities not involving cash payments:

	2021		2022
	RMB		RMB
Surplus reserve transferred to paid-in capital		—		2,615,180,000

(3) Change in cash and cash equivalents:

	2020			2021			2022
	RMB			RMB			RMB
Cash and cash equivalents at the end of the year		5,180,636,789			2,332,751,042			787,608,469
Less: Cash and cash equivalents at the beginning of the year		(9,278,483,670	)		(5,180,636,789	)		(2,332,751,042	)
Net decrease in cash and cash equivalents		(4,097,846,881	)		(2,847,885,747	)		(1,545,142,573	)

(3) Cash and cash equivalents held by the Company are as follows:

	2020		2021		2022
	RMB		RMB		RMB
(a)   Cash at bank and on hand
- Bank deposits available on demand		5,180,636,789		2,332,751,042		787,608,469
(b)   Closing balance of cash and cash equivalents available on demand		5,180,636,789		2,332,751,042		787,608,469

51

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

42 Risk analysis for financial instruments

Financial instruments and risks

The Company’s activities expose it to a variety of financial risks: market risk (primarily foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance.

(1) Market risk

(a) Foreign exchange risk

The Company’s major operational activities are carried out in Mainland China. Sales transactions are mainly denominated in RMB while purchase transactions are mainly denominated in USD and RMB. The Company is exposed to foreign exchange risk arising from the recognized assets and liabilities, and future transactions denominated in foreign currencies, primarily with respect to US dollars. The Company’s finance department is responsible for monitoring the amount of assets and liabilities, and transactions denominated in foreign currencies to minimize the foreign exchange risk. Therefore, the Company may consider entering into forward exchange contracts or currency swap contracts to mitigate the foreign exchange risk. During 2021 and 2022, the Company did not enter into any forward exchange contracts or currency swap contracts.

The financial assets and the financial liabilities denominated in foreign currencies, which are held by the Company, whose recording currencies are RMB, are expressed in RMB as at 31 December 2021 and 2022 as follows:

	31 December 2021
	USD			EUR			Total
Financial assets denominated in foreign currency - Cash at bank and on hand		36,039,789			—			36,039,789
Financial liabilities denominated in foreign currency - Payables		(214,584,414	)		(724,528	)		(215,308,942	)
Net balance sheet exposure		(178,544,625	)		(724,528	)		(179,269,153	)

	31 December 2022
	USD			EUR			Total
Financial assets denominated in foreign currency - Cash at bank and on hand		39,726,746			—			39,726,746
Financial liabilities denominated in foreign currency - Payables		(280,801,289	)		(672,032	)		(281,473,321	)
Net balance sheet exposure		(241,074,543	)		(672,032	)		(241,746,575	)

52

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

As at 31 December 2022, if the RMB had strengthened/weakened by 10% against the USD while all other variables had been held constant, the Company’s net profit for the year would have been approximately RMB 18,080,591 (31 December 2021: approximately RMB 13,390,847 lower/higher) lower/higher for various financial assets and liabilities denominated in USD.

(b) Interest rate risk

The interest rate risk of the Company is mainly generated by short-term loan. Financial liabilities with floating interest rate make the Company face interest rate risk of cash flow, while financial liabilities with fixed interest rate make the Company face interest rate risk of fair value. The Company determines the relative proportions of fixed and floating rate contracts in accordance with prevailing market conditions. As at 31 December 2022, the balance of short-term borrowings is RMB 6,608,867,012, all of which are fixed interest rate financial liabilities. (31 December 2021: Nil).

The financial department of the Company headquarters continuously monitors the interest rate level of the Company. Higher interest rates would increase the cost of the new interest-bearing debt and the Company has not yet been paid to the floating interest at a pre-determined rate of interest-bearing debt payments, and our Company’s financial performance have a significant adverse impact, management is on the basis of the latest market situation to adjust in time, the adjustment of interest rate swap arrangements may be carried out to reduce the interest rate risk. There is no interest rate swap arrangement for the Company in 2021 and 2022.

(2) Credit risk

Credit risk is managed on the grouping basis. Credit risk mainly arises from cash at bank, accounts receivable, other receivables and notes receivable.

The Company expects that there is no significant credit risk associated with cash at bank since they are deposited at state-owned banks and other medium or large size listed banks. Management does not expect that there will be any significant losses from non-performance by these counterparties.

In addition, the Company has policies to limit the credit exposure on bills receivable, accounts receivable, receivables under financing and other receivables. The Company assesses the credit quality of and sets credit limits on its customers by taking into account their financial position, the availability of guarantee from third parties, their credit history and other factors such as current market conditions. The credit history of the customers is regularly monitored by the Company. In respect of customers with a poor credit history, the Company will use written payment reminders, or shorten or cancel credit periods, to ensure the overall credit risk of the Company is limited to a controllable extent.

As at 31 December 2021 and 2022, the Company has no collateral or other credit enhancement held as a result of a material debtor’s mortgage.

53

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

(3) Liquidity risk

Cash flow forecasting is performed by the Company. The Company monitors the Company’s short-term and long-term liquidity requirements to ensure it has sufficient cash and securities that are readily convertible to cash to meet operational needs, while maintaining sufficient headroom on its undrawn committed borrowing facilities from major financial institutions so that the Company does not breach borrowing limits or covenants on any of its borrowing facilities to meet the short-term and long-term liquidity requirements.

The financial liabilities of the Company at the balance sheet date are analyzed by their maturity dates below at their undiscounted contractual cash flows:

	31 December 2021
	Within 1 year		1 to 2 years		1 to 2 years		Over 5 years		Total
	RMB		RMB		RMB		RMB		RMB
Accounts payable		1,787,137,217		—		—		—		1,787,137,217
Other payables		2,755,463,900		—		—		—		2,755,463,900
Lease liabilities		116,496		67,956		—		—		184,452
		4,542,717,613		67,956		—		—		4,542,785,569

	31 December 2022
	Within 1 year		1 to 2 years		1 to 2 years		Over 5 years		Total
	RMB		RMB		RMB		RMB		RMB
Short-term borrowings		6,684,482,143		—		—		—		6,684,482,143
Accounts payable		1,424,493,816		—		—		—		1,424,493,816
Other payables		278,305,641		—		—		—		278,305,641
Lease liabilities		66,119		1,837		—		—		67,956
		8,387,347,719		1,837		—		—		8,387,349,556

As at 31 December 2022, the Company had no lease payments related to lease contracts which had been signed but not been executed (as at 31 December 2021: Nil).

43 Fair value estimation

(1) Assets and liabilities measured at fair value

The following table presents the fair value information and the fair value hierarchy, at the end of the current reporting period, of the Company’s assets and liabilities which are measured at fair value at each balance sheet date on a recurring or non-recurring basis. The level in which fair value measurement is categorized is determined by the level of the fair value hierarchy of the lowest level input that is significant to the entire fair value measurement. The levels of inputs are defined as follows:

Level 1 inputs:	unadjusted quoted prices in active markets that are observable at the measurement date for identical assets or liabilities;
Level 2 inputs:	inputs other than Level 1 inputs that are either directly or indirectly observable for underlying assets or liabilities;

54

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

Level 3 inputs: inputs that are unobservable for underlying assets or liabilities.

			31 December 2021
	Note		Level 1 fair value measurements		Level 2 fair value measurements		Level 3 fair value measurements		Total
			RMB		RMB		RMB		RMB
Financial assets
Financial assets at fair value through other comprehensive income-Notes receivable		8		—		260,065,209		—		260,065,209

			31 December 2022
	Note		Level 1 fair value measurements		Level 2 fair value measurements		Level 3 fair value measurements		Total
			RMB		RMB		RMB		RMB
Financial assets
Financial assets at fair value through other comprehensive income-Notes receivable		8		—		212,655,800		—		212,655,800

(2) Fair value of other financial instruments (items not measured at fair value at the end of the year)

The Company’s financial assets and liabilities measured at amortized cost mainly include receivables, short-term borrowings and payables.

As at 31 December 2022 and 31 December 2021, the carrying amount of the financial assets and liabilities not measured at fair value is a reasonable approximation of their fair value.

44 Capital management

The Company’s capital management policies aim to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, or sell assets to reduce debts.

The Company’s total capital is calculated as ‘owners’ equity’ as shown in the balance sheet. The Company is not subject to external mandatory capital requirements, and monitors capital on the basis of gearing ratio.

As at 31 December 2021 and 2022, the gearing ratios of the Company were as follows:

	31 December 2021			31 December 2022
Gearing ratio		46.04	%		84.49	%

55

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

45 Commitments

As at 31 December, the capital commitments of the Company are summarized as follows:

Item	2021		2022
	RMB		RMB
Contracts for acquisition of fixed assets being or to be executed		47,874,261		113,103,648

46 Related parties and related party transactions

(1) Information about the investor of the Company is listed as follows:

Investor name	Registered place	Business nature	31 December 2021 and 2022 Shareholding percentage
Sinopec Corp.	Beijing, the PRC	Oil and gas exploration, development, production and marketing, crude oil processing, oil products production, trading and distribution		15	%
Sinopec Shanghai Petrochemical Company Limited	Shanghai, the PRC	Crude oil processing, petroleum products, chemical products and synthetic fibres, etc.		20	%
Sinopec Shanghai Gaoqiao Petrochemical Company Limited	Shanghai, the PRC	Crude oil processing, petroleum products, chemical products and storage, etc.		15	%
INEOS	Shanghai, the PRC	Investment, technical services, consulting services, etc		50	%

(2) Nature of related parties that do not control or are not controlled by the Company

Name of entity	Relationship with the Company
INEOS Europe AG	Subsidiary of INEOS
INEOS Styrolution Switzerland S.A.	Subsidiary of INEOS
Shanghai Dongfang Engineering Consultants Co., Ltd.	Subsidiary of Sinopec Corp.
Shanghai Sinopec Mitsui Elastomers, Co., Ltd.	Joint venture of Gaoqiao Petrochemical Corp
Shanghai Chemical Industry Park Logistics Company Limited	Associated Company of SPCL
Shanghai Huayi Information Technology Company Limited	Associated Company of Sinopec Corp.
Shanghai Petrochemical Machinery Manufacturing Company Limited	Subsidiary of Sinopec Corp.
Shanghai Leader Catalyst Company Limited	Subsidiary of Sinopec Corp.
Shanghai Jinshan Hotel Co., Ltd.	Subsidiary of SPCL
Shanghai Jinchang Engineering Plastics Company Limited	Subsidiary of SPCL
China International United Petroleum and Chemical Company Limited	Subsidiary of Sinopec Corp.
Sinopec Shanghai Petrochemical Company Limited	Subsidiary of Sinopec Corp.
Sinopec Shanghai Gaoqiao Petrochemical Company Limited	Subsidiary of Sinopec Corp.
Sinopec Catalyst Company Limited Shanghai Branch	Subsidiary of Sinopec Corp.
Sinopec Catalyst Company Limited Beijing AUDA Branch	Subsidiary of Sinopec Corp.
Sinopec Catalyst Company Limited Nanjing Branch	Subsidiary of Sinopec Corp.
China Petrochemical Press Co., Ltd	Subsidiary of Sinopec Corp.

56

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

Name of entity	Relationship with the Company
Sinopec Chemical Commercial Holding Company Limited Huadong Branch	Subsidiary of Sinopec Corp.
Sinopec Consulting Company Limited	Subsidiary of Sinopec Corp.
Sinopec Engineering Construction Company Limited	Subsidiary of Sinopec Corp.
Sinopec Hainan Petrochemical Company Limited	Subsidiary of Sinopec Corp.
Sinopec Lubricants Company Limited Huadong Branch	Subsidiary of Sinopec Corp.
Sinopec Fuel Oil Sales Company Limited. Shanghai Branch	Subsidiary of Sinopec Corp.
Sinopec Sales Company Limited. Shanghai Branch	Subsidiary of Sinopec Corp.
Sinopec Shared Services Company Limited	Subsidiary of Sinopec Corp.
Sinopec Tendering Company Limited	Subsidiary of Sinopec Corp.
Sinopec Qingdao Refining&Chemical Company Limited	Subsidiary of Sinopec Corp.
Shanghai Research Institute of Petrochemical Technology	Subsidiary of Sinopec Corp.
China Petroleum and Chemical Corporation Beijing Research Institute of Chemical Industries	Subsidiary of Sinopec Corp.
China Petroleum and Chemical Corporation Beijing Yanshan Branch	Branch of Sinopec Corp.
China Petroleum and Chemical Corporation Guangzhou Branch	Branch of Sinopec Corp.
China Petroleum and Chemical Corporation Jinling Branch	Branch of Sinopec Corp.
China Petroleum and Chemical Corporation Zhenhai Refining Branch	Branch of Sinopec Corp.
China Sinopec Corporation Qingdao Institute of Safety Engineering	Subsidiary of Sinopec Corp.
China Petroleum and Chemical Co., Ltd., QILU Research Institute	Subsidiary of Sinopec Corp.
China Jinshan Associated Trading Corporation	Subsidiary of SPCL
Sinopec (Beijing) Chemical Research Institute Co. LTD	Subsidiary of Sinopec Corp.
Sinopec (Europe) Co., LTD	Subsidiary of Sinopec Corp.
Sinopec Shanghai Engineering Company Limited	Subsidiary of Sinopec Corp.
Sinopec Beijing Catalyst Company Limited	Subsidiary of Sinopec Corp.
Sinopec Nanjing Engineering Company Limited	Subsidiary of Sinopec Corp.
Sinopec Group Shared Services Co., Ltd. Nanjing Branch	Subsidiary of Sinopec Corp.
Sinopec International Business Ningbo Co., LTD	Subsidiary of Sinopec Corp.
Sinopec Ningbo Engineering Company Limited	Subsidiary of Sinopec Corp.
Sinopec Ningbo Engineering Company Limited Shanghai Branch	Subsidiary of Sinopec Corp.
Sinopec Ningbo Engineering Company Limited Shanghai Jinshan Branch	Branch of Sinopec Corp.
Information Technology Branch of Sinopec Refining and Chemical Engineering (Group) Co., Ltd.	Subsidiary of Sinopec Corp.
China Petroleum and Chemical Corporation Limited Yanshan Branch of Beihua Institute	Subsidiary of Sinopec Corp.
Nanjing Yangzi Petrochemical Refining Company Limited	Subsidiary of Sinopec Corp.
Sinopec Qingdao Security Engineering Research Institute Co. LTD	Subsidiary of Sinopec Corp.
BASF Gaoqiao Specialty Chemicals (Shanghai) Company Limited	Associated Company of Gaoqiao Petrochemical Corp.
BASF-YPC. Shanghai Company Limited	Joint venture of Sinopec Corp.
Sinopec Yingke Information Technology Co., Ltd	Subsidiary of Sinopec Corp.
Petrochemical Engineering Quality Supervision Station	Subsidiary of Sinopec Corp.
China Petroleum and Chemical Corporation Zhenhai Refining Branch	Branch of Sinopec Corp.
China International United Petroleum and Chemical Company Limited	Subsidiary of Sinopec Corp.
China Petroleum and Chemical Corporation Jinling Branch	Branch of Sinopec Corp.
Sinopec Qingdao Refining&Chemical Company Limited	Subsidiary of Sinopec Corp.
China Petroleum and Chemical Corporation Guangzhou Branch	Branch of Sinopec Corp.
China Jinshan Associated Trading Corporation	Subsidiary of SPC
Shanghai Jinshan Hotel Co., Ltd.	Subsidiary of SPCL
Sinopec Chemical Commercial Holding Company Limited Huadong Branch	Subsidiary of Sinopec Corp.

57

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

Name of entity	Relationship with the Company
Shanghai Leader Catalyst Company Limited	Subsidiary of Sinopec Corp.
Sinopec Catalyst Company Limited Shanghai Branch	Subsidiary of Sinopec Corp.
China Petroleum and Chemical Corporation Beijing Yanshan Branch	Branch of Sinopec Corp.
Nanjing Yangzi Petrochemical Refining Company Limited	Subsidiary of Sinopec Corp.
Sinopec Catalyst Company Limited Beijing AUDA Branch	Subsidiary of Sinopec Corp.
China Petroleum and Chemical Corporation Shanghai Petrol-Chemical Industry Institute	Subsidiary of Sinopec Corp.
BASF-YPC. Shanghai Company Limited	Joint venture of Gaoqiao Petrochemical
Petro-Cyber Works Information Technology Company Limited	Subsidiary of Sinopec Corp.
Sinopec Hainan Petrochemical Co., Ltd.	Subsidiary of Sinopec Corp.
Sinopec Catalyst Company Limited Nanjing Branch	Subsidiary of Sinopec Corp.
Sinopec Beijing Catalyst Company Limited	Subsidiary of Sinopec Corp.
BASF Gaoqiao Specialty Chemicals (Shanghai) Company Limited	Associated Company of Gaoqiao Petrochemical
Shanghai Sinopec Mitsui Elastomers Company Limited	Associated Company of Gaoqiao Petrochemical

(2) Nature of related parties that do not control or are not controlled by the Company (continued)

Name of entity	Relationship with the Company
Sinopec Shanghai Sales Company Limited	Subsidiary of Sinopec Corp.
Shanghai Jinchang Engineering Plastics Company Limited	Subsidiary of SPC
China Petrochemical International Tianjin Company Limited	Subsidiary of Sinopec Corp.
Yihua Bona Fabric Company Limited	Joint venture of Sinopec Corp.
Petrochemical Engineering Quality Supervision Station	Subsidiary of Sinopec Corp.
Sinopec Ningbo Engineering Company Limited Shanghai Branch	Subsidiary of Sinopec Corp.
China Petroleum and Chemical Co., Ltd., QILU Branch	Subsidiary of Sinopec Corp.
China Sinopec Corporation Qingdao Institute of Safety Engineering	Subsidiary of Sinopec Corp.
China Petroleum and Chemical Corporation Beijing Research Institute of Chemical Industries	Subsidiary of Sinopec Corp.
Information Technology Branch of Sinopec Refining and Chemical Engineering (Group) Co., Ltd.	Subsidiary of Sinopec Corp.
Sinopec Tendering Company Limited	Subsidiary of Sinopec Corp.
Sinopec Consulting Company Limited	Subsidiary of Sinopec Corp.
Shanghai Petrochemical Machinery Manufacturing Company Limited	Subsidiary of Sinopec Corp.
Sinopec Publishing House Co., Ltd.	Subsidiary of Sinopec Corp.
Sinopec Europa Gmbh	Subsidiary of Sinopec Corp.
China petrochemical International Enterprise Company Limited Ningbo Bidding Center	Subsidiary of Sinopec Corp.
Shanghai Chemical Industry Park Logistics Company Limited	Joint venture of SPC
Sinopec Nanjing Engineering Company Limited	Subsidiary of Sinopec Corp.
Shanghai Dongfang Engineering Consultants Co., Ltd.	Subsidiary of Sinopec Corp.
Shanghai Huayi Information Technology Company Limited	Joint venture of Sinopec Corp.

58

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

(3) Significant related party transactions

The Company’s pricing on products sold to related parties and raw materials purchased from related parties is negotiated by both parties.

(a) Significant related party transactions

Sales of goods

	2020		2021		2022
	RMB		RMB		RMB
Sinopec Shanghai Petrochemical Company Limited		2,469,008,549		3,096,709,578		1,603,058,780
Sinopec Shanghai Gaoqiao Petrochemical Company Limited		1,609,838,063		2,344,682,615		2,302,251,861
Shanghai Sinopec Mitsui Elastomers Company Limited		313,324,007		542,433,412		484,362,580
China Jinshan Associated Trading Corporation		300,543,910		395,108,984		307,997,249
Sinopec Chemical Commercial Holding Company Limited Huadong Branch		137,036,739		104,461,770		118,193,894
Sinopec Shanghai Sales Company Limited		—		9,369,061		11,289,111
Shanghai Jinchang Engineering Plastics Company Limited		2,274,336		1,606,018		—
China Petrochemical International Tianjin Company Limited		11,467,671		—		—
Yihua Bona Fabric Company Limited		1,428,761		—		—
Total		4,844,922,036		6,494,371,438		4,827,153,475

Purchase of goods

	2020		2021		2022
	RMB		RMB		RMB
China Petroleum and Chemical Corporation Zhenhai Refining Branch		1,886,994,055		5,055,451,144		4,611,840,757
Sinopec Shanghai Gaoqiao Petrochemical Company Limited		2,416,640,786		3,500,853,274		4,914,204,373
Sinopec Shanghai Petrochemical Company Limited		1,214,059,295		2,806,216,204		1,763,524,192
Shanghai Jinshan Hotel Co., Ltd.		—		143,386		39,021
China International United Petroleum and Chemical Company Limited		1,789,430,831		1,774,208,796		1,931,024,604

59

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

China Petroleum and Chemical Corporation Jinling Branch	1,350,625,256	1,605,310,945	1,460,215,574
Sinopec Qingdao Refining&Chemical Company Limited	576,192,296	1,133,704,017	1,069,735,977
China Petroleum and Chemical Corporation Guangzhou Branch	431,135,789	992,405,630	390,798,834
China Jinshan Associated Trading Corporation	511,087,351	745,813,800	664,592,297
Sinopec Chemical Commercial Holding Company Limited Huadong Branch	1,285,275,149	611,974,256	855,436,077
Shanghai Leader Catalyst Company Limited			18,964,712
Shanghai Leader Catalyst Company Limited	33,549,209	32,657,746	24,159,630
Sinopec Catalyst Company Limited Shanghai Branch	21,991,150	23,561,947	20,106,193
China Petroleum and Chemical Corporation Beijing Yanshan Branch	12,927,351	19,934,903	18,494,348
Nanjing Yangzi Petrochemical Refining Company Limited	13,123,737	13,593,346	6,588,114
Sinopec Catalyst Company Limited Beijing AUDA Branch	14,549,120	13,243,628	11,625,700
China Petroleum and Chemical Corporation Shanghai Petrol-Chemical Industry Institute	—	1,979,555	311,416
BASF-YPC. Shanghai Company Limited	—	1,506,970	7,679,153
Petro-Cyber Works Information Technology Company Limited	83,894	197,124	—
Sinopec Fuel Oil Sales Co., Ltd. Shanghai Branch.	—	—	227,912
Sinopec Lubricants Co., Ltd. East China Branch	—	—	199,326
Sinopec Sales Company Limited. Shanghai Branch	—	—	132,743
INEOS Europe AG	—	—	50,993,672
Sinopec Hainan Petrochemical Co., Ltd.	160,937,378	—	44,176,559
Sinopec Catalyst Company Limited Nanjing Branch	2,653,805	—	—
Sinopec Beijing Catalyst Company Limited	1,235,865	—	—
BASF Gaoqiao Specialty Chemicals (Shanghai) Company Limited	157,678	—	—
Shanghai Jinshan Trading Corporation
Total	11,722,649,995	18,332,756,671	17,865,071,184

60

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

Purchasing engineering construction and maintenance services

	2020		2021		2022
	RMB		RMB		RMB
Sinopec Engineering Incorporation		3,481,030		30,735,660		6,701,600
Sinopec Shanghai Engineering Company Limited		3,614,528		8,913,236		50,258,150
Sinopec Shanghai Engineering Company Limited-headquarter		—		—		679,245
Sinopec Ningbo Engineering Company Limited		6,531,069		3,570,813		1,535,141
Sinopec Ningbo Engineering Company Limited Shanghai Jinshan Branch		5,231,665		3,150,482		—
Petrochemical Engineering Quality Supervision Station		499,900		280,300		—
Sinopec Ningbo Engineering Company Limited Shanghai Branch		—		244,268		594,785
China Petroleum and Chemical Co., Ltd., QILU Branch		—		216,981		—
INEOS Styrolution Switzerland S.A.		—		—		13,162,973
Sinopec International Business Ningbo Co., LTD		—		—		7,615,752
Shanghai Petrochemical Machinery Manufacturing Company Limited		—		—		27,217
Sinopec Qingdao Security Engineering Research Institute Co. LTD		—		—		3,264,211
Shanghai Chemical Industry Park Logistics Company Limited		2,293,009		—		—
Sinopec Nanjing Engineering Company Limited		441,742		—		—
Shanghai Dongfang Engineering Consultants Co., Ltd.		299,444		—		—
Sinopec Consulting Company Limited		—		—		—
Shanghai Petrochemical Machinery Manufacturing Company Limited		—		—		—
Total		22,392,387		47,111,740		83,839,074

61

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

Rental expenses

	2020		2021		2022
	RMB		RMB		RMB
Sinopec Shanghai Petrochemical Company Limited		2,050,914		2,038,814		1,905,717

Issuing entrusted loan

	2020		2021		2022
	RMB		RMB		RMB
Sinopec Corp.		4,000,000,000		—		—

Recovering entrusted loan

	2020		2021		2022
	RMB		RMB		RMB
Sinopec Corp.		2,000,000,000		2,000,000,000		—

Interest income from entrusted loans

	2020		2021		2022
	RMB		RMB		RMB
Sinopec Corp.		58,535,901		46,328,616		—

62

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

Consulting service fee

	2020		2021		2022
	RMB		RMB		RMB
Petro-Cyber Works Information Technology Company Limited		23,148,656		14,597,690		2,120,583
China Sinopec Corporation Qingdao Institute of Safety Engineering		3,468,491		2,076,967		—
China Petroleum and Chemical Corporation Beijing Research Institute of Chemical Industries		1,186,151		558,019		—
Information Technology Branch of Sinopec Refining and Chemical Engineering (Group) Co., Ltd.		—		138,867		—
Sinopec Tendering Company Limited		189,761		94,340		1,142,302
Sinopec Consulting Company Limited		—		87,264		87,264
Shanghai Petrochemical Machinery Manufacturing Company Limited		—		84,528		—
Sinopec Publishing House Co., Ltd.		—		45,871		—
Sinopec Europa Gmbh		576,088		17,369		11,854
China Petroleum and Chemical Corporation Limited Yanshan Branch of Beihua Institute		—		—		19,700
Sinopec Group Shared Services Co., Ltd. Nanjing Branch		—		—		73,585
Sinopec (Beijing) Chemical Research Institute Co., Ltd		—		—		318,000
Shanghai Chemical Industry Park Logistics Company Limited		1,309,586		—		—
Sinopec Ningbo Engineering Company Limited		188,679		—		—
China petrochemical International Enterprise Company Limited Ningbo Bidding Center		39,057		—		—
Shanghai Huayi Information Technology Company Limited		—		—		—
Total		30,106,469		17,700,915		3,773,288

63

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

Transportation service fee

	2020		2021		2022
	RMB		RMB		RMB
Shanghai Chemical Industry Park Logistics Company Limited		114,227,900		115,224,861		114,642,946

The above transactions with related parties were conducted under normal commercial terms or relevant agreements.

(b) The balances of transactions with related parties as at 31 December are set out as follows:

Accounts receivable

	2021		2022
	RMB		RMB
Shanghai Sinopec Mitsui Elastomers Company Limited		24,609,303		22,584,461
China Jinshan Associated Trading Corporation		5,663,355		2,625,886
Sinopec Chemical Commercial Holding Company Limited Huadong Branch		2,232,207		16,151,762
Sinopec Shanghai Sales Company Limited		1,345,776		1,319,312
Sinopec Shanghai Petrochemical Company Limited		—		14,928,341
Total		33,850,641		57,609,762

Financial assets at fair value through other comprehensive income

	2021		2022
	RMB		RMB
China Jinshan Associated Trading Corporation		24,480,000		16,000,000
Sinopec Chemical Commercial Holding Company Limited Huadong Branch		—		—
Total		24,480,000		16,000,000

64

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

Advances to suppliers

	2021		2022
	RMB		RMB
Shanghai Petrochemical Machinery Company		—		1,052,726
China International Petrochemical Union Co. LTD		—		1,365,058
Sinopec Beijing Catalyst Company Limited		18,280,685		—
Total		18,280,685		2,417,784

Other current assets-entrusted loans
	2021		2022
	RMB		RMB
Sinopec Corp.		—		—

65

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

Contract Liabilities

	2021		2022
	RMB		RMB
China Jinshan Associated Trading Corporation		1,374,802		2,959,508
Yihua Bona Fabric Company Limited		—		—
Shanghai Jinchang Engineering Plastics Company Limited		—		—
Total		1,374,802		2,959,508

Accounts payable

	2021		2022
	RMB		RMB
China Petroleum and Chemical Corporation Zhenhai Refining Branch		410,286,919		216,979,815
China International United Petroleum and Chemical Company Limited		164,575,394		262,989,639
Sinopec Shanghai Gaoqiao Petrochemical Company Limited		130,646,973		84,211,976
Sinopec Qingdao Refining&Chemical Company Limited		74,953,420		73,655,716
Sinopec Shanghai Petrochemical Company Limited		22,363,326		461,341
Sinopec Catalyst Company Limited Shanghai Branch		17,258,591		981,821
Sinopec Chemical Commercial Holding Company Limited Huadong Branch		17,203,042		22,465,957
Shanghai Chemical Industry Park Logistics Company Limited		16,564,103		16,539,190
China Petroleum and Chemical Corporation Jinling Branch		8,361,978		4,532,191
Sinopec Catalyst Company Limited Beijing AUDA Branch		5,160,796		1,926,301
Shanghai Leader Catalyst Company Limited		3,515,961		2,987,309
Sinopec Engineering Incorporation		3,481,030		3,797,730
Sinopec Ningbo Engineering Company Limited		2,335,709		3,210,449
Sinopec Shanghai Engineering Company Limited		1,874,373		1,197,392
China Jinshan Associated Trading Corporation		1,585,234		35,465,721

66

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

Petro-Cyber Works Information Technology Company Limited	1,518,474	2,951,356
Nanjing Yangzi Petrochemical Refining Company Limited	1,456,195	—
Sinopec Beijing Catalyst Company Limited	1,235,865	1,550,809
China Petroleum and Chemical Corporation Beijing Research Institute of Chemical Industries	591,000	591,000
BASF-YPC. Shanghai Company Limited	355,500	1,530,074
China Petroleum and Chemical Corporation Shanghai Petrol-Chemical Industry Insti Tute	349,904	—
Sinopec Ningbo Engineering Company Limited Shanghai Jinshan Branch	158,500	158,500
Sinopec Nanjing Engineering Company Limited	77,403	77,403
INEOS Europe AG	—	40,130
Sinopec Publishing House Co., Ltd.	45,871	—
China Petroleum and Chemical Corporation Guangzhou Branch	—	—
Sinopec Catalyst Company Limited Nanjing Branch	—	—
Shanghai Dongfang Engineering Consultants Co., Ltd.	—	—
China Sinopec Corporation Qingdao Institute of Safety Engineering	—	—
Shanghai Huayi Information Technology Company Limited	—	—
Basf Gaoqiao Specialty Chemicals (Shanghai) Company Limited	—	—
Petrochemical Engineering Quality Supervision Station	—	—
Sinopec Hainan Petrochemical Co., Ltd.	—	—
China Petroleum and Chemical Corporation Beijing Yanshan Branch	—	—
Total	885,955,561	738,301,820

67

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

48 Reconciliation to United States generally accepted accounting principles

The financial statements have been prepared in accordance with Accounting Standards for Business Enterprises in the People’s Republic of China (“CAS”), which differ in certain respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”). The significant differences are described in the reconciliation tables below. Other differences do not have a significant effect on either net profit or owners’ equity. The effects of the significant adjustments to net profit for the years ended 31 December 2020, 2021 and 2022 which would be required if U.S. GAAP were to be applied instead of CAS are summarized as follows:

	2020			2021		2022
	RMB			RMB		RMB
Net profit / (loss) under CAS		2,412,799,656			3,125,903,862		(1,947,579,252	)
Adjustments:
Employees’ bonus and welfare fund (a)		(148,099	)		—		—
Net profit / (loss) under U.S. GAAP		2,412,651,557			3,125,903,862		(1,947,579,252	)

The effects of the significant adjustments to owners’ equity as at 31 December 2020 and 2021 which would be required if U.S. GAAP were to be applied instead of CAS are summarized as follows:

	2021		2022
	RMB		RMB
Owners’ equity under CAS		6,367,541,407		1,647,771,503
Adjustments:
Employees’ bonus and welfare fund (a)		76,283,722		76,283,722
Owners’ equity under U.S. GAAP		6,443,825,129		1,724,055,225

(a) Employees’ bonus and welfare fund

In accordance with the Law of the PRC on Chinese-Foreign Equity Joint Ventures and the Company’s Articles of Association, the Company appropriated the employees’ bonus and welfare fund of net profit after setting off accumulated losses of previous years and before profit distributions to the investors.

68

SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020, 2021 AND 2022 (AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)

(EXPRESSED IN RENMINBI YUAN)

The employees’ bonus and welfare fund is restricted to fund payments of special bonus to employees and for the collective welfare of employees. None of it is allowed to be transferred to the Company in terms of cash dividends, loans or advances, nor can it be distributed except under liquidation.

Under CAS, appropriation of the employees’ bonus and welfare fund is a liability in nature and accounted for as a transfer from undistributed profits to employees’ bonus and welfare fund, a liability account. Subsequent payment is accounted for as a release of the Company’s liability.

Under U.S. GAAP, appropriation to the employees’ bonus and welfare fund is accounted for as a transfer from undistributed profits to the statutory reserves. Subsequent payment is accounted for as expenses or assets based on the usage of the payment, and proportionate undistributed profits and the statutory reserves are reversed concurrently.

69