Audit Report SAAF (2017) AR.NO.071

EX-10.77 5 exhibit1077-2016.htm AUDITED FINANCIAL STATEMENTS OF UNCONSOLIDATED AFFILIATE Exhibit




Exhibit 10.77



MOMENTIVE UV COATINGS (SHANGHAI) CO., LTD.

FINANCIAL STATEMENTS AND
REPORT OF THE AUDITORS
FOR THE YEAR ENDED 31 DECEMBER 2016























































Audit Report
SAAF (2017) AR.NO.071


TO THE BOARD OF DIRECTORS OF
MOMENTIVE UV COATINGS (SHANGHAI) CO., LTD.
We have audited the accompanying financial statements of Momentive UV Coatings (Shanghai) Co., Ltd. (hereinafter referred to as “the Company”),including the balance sheet as of 31 December 2016 and the income statement, cash flow statement for the year then ended as well as notes to the financial statements.
1. Responsibility of the Company’s management on these financial statements
Management is responsible for the preparation of these financial statements. This responsibility includes: (1) these financial statements are prepared in accordance with Accounting Standards for Business Enterprises and the Accounting System for Business Enterprises, and present fairly. (2) designing, implementing and maintaining internal control relevant to the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
2. Responsibility of certified public accountants
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in United States of America. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance 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 the auditor’s 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 the internal control relevant to the preparation 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 internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of 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.

2





3. Auditor’s opinion
In our opinion, the financial statements of Momentive UV Coatings (Shanghai) Co., Ltd. have been prepared in accordance with U.S. Generally accepted accounting principles, and present fairly, in all material respects, the financial position of the Company as of 31 December 2016, and the results of its operations and cash flows for the year then ended.



/s/ Shanghai Asahi Accounting Firm Chinese CPA : Li Can



Chinese CPA : Zhu Jun


Shanghai P. R. China     February 10, 2017


3





BALANCE SHEET ( to be continued)
AS AT 31 DECEMBER 2016
(All amounts in Rmb Yuan unless otherwise stated)
 
 
 
31 December

31 December

 
ASSETS
Notes
2016

2015

 
Current assets
 
 
 

 
Cash at bank and in hand
4.1
11,677,321.79

31,484,429.58

 
 
Notes receivable
4.2
26,576,197.31

38,771,101.63

 
 
Accounts receivable
2.6, 4.3
89,902,219.94

99,798,425.81

 
 
Other receivables
2.6
2,400.00

2,400.00

 
 
Inventories
2.7, 4.4
18,707,271.67

20,865,869.40

 
 
Prepaid expenses
 
4,512.95

4,192.00

 
 
Total current assets 
 
146,869,923.66

190,926,418.42

 
 
 
 
 
Fixed assets 
 
 

 

 
 
 
Fixed assets - cost
2.8, 4.5
6,628,202.01

6,709,359.28

 
Less: Accumulated depreciation
2.8, 4.5
5,881,545.21

5,811,740.84

 
Fixed assets - net
 
746,656.80

897,618.44

 
Less: Provision for impairment of fixed assets
 


 
 
Fixed assets - net book value
 
746,656.80

897,618.44

 
 
Other assets
 
 
 
 
Long-term prepaid expenses
2.9
142,500.00

232,500.00

 
 
Deferred tax - debit
 
240,760.17

38,844.43

 
 
TOTAL ASSETS
 
147,999,840.63

192,095,381.29

  

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

4





BALANCE SHEET (continued)
AS AT 31 DECEMBER 2016
(All amounts in Rmb Yuan unless otherwise stated)

    
 
 
  
31 DECEMBER

31 DECEMBER

 
LIABILITIES AND OWNERS’ EQUITY
Notes
2016

2015

 
Current liabilities
 
 
 
 
Notes payable
 


 
 
Accounts payable
4.6
47,965,757.51

58,816,829.79

 
 
Salary payable
 
980,000.00

400,000.00

 
 
Tax payable
4.7
7,834,795.03

16,175,954.28

 
 
Other surcharges
 
10,543.40

22,836.06

 
 
Dividend payable
 
22,461,693.80

13,145,723.63

 
 
Other payable
4.8
1,887,909.46

738,393.44

 
 
Total current liabilities

 
81,140,699.20

89,299,737.20

 
 
Total liabilities
 
81,140,699.20

89,299,737.20

 
 
Owners' equity
 
 
 
 
 
Paid-in capital
4.9
4,138,525.00

4,138,525.00

 
 
Surplus reserve
4.10
2,100,000.00

2,100,000.00

 
 
Undistributed profits
4.11
60,620,616.43

96,557,119.09

 
 
Total owners' equity
 
66,859,141.43

102,795,644.09

 
 
TOTAL LIABILITIES AND OWNERS’ EQUITY
 
147,999,840.63

192,095,381.29

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












5




INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2016
(All amounts in Rmb Yuan unless otherwise stated)


 
Notes
Year 2016
Year 2015
Year 2014
Revenues from main operations
2.10
4.12
334,219,891.26

342,012,867.83

283,502,034.63

 
 
 
 
Less: Costs main operations
4.12
233,818,221.10

261,367,286.76

212,942,441.80

 
 
 
 
 
      Surcharges for main operations
 
979,176.41

786,737.38

617,583.18

Profit from main operations
 
99,422,493.75

79,858,843.69

69,942,009.65

 
 
 
 
 
Less: Selling and distribution expenses
4.13
4,128,783.69

4,820,806.92

7,388,847.12

 
 
 
 
 
Other operation income
 
388.89

47,638.49

233,254.72

 
 
 
 
 
General and
administrative expenses
4.14
17,416,177.10

11,657,992.28

5,537,479.87

 
 
 
 
 
Finance (income) expenses - net
4.15
(2,695,350.25
)
(1,092,332.51
)
(13,182.60
)
 
 
 
 
 
Operating profit
 
80,573,272.10

64,520,015.49

57,262,119.98

 
 
 
 
 
Non-operating income
4.16
191,919.03

87,342.07

137,199.22

 
 
 
 
 
Non-operating expense
4.16
2,046.15



 
 
 
 
 
Total profit
 
80,763,144.98

64,607,357.56

57,399,319.20

 
 
 
 
 
Less: Income taxes
2.11
20,237,953.84

16,196,870.02

14,368,981.92

 
 
 
 
 
Net profit
 
60,525,191.14

48,410,487.54

43,030,337.28

 
 
 
 
 


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

















6




CASHFLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2016
(All amounts in Rmb Yuan unless otherwise stated)

1. Cash flows from operating activities
Year 2016
Year 2015
Year 2014
Cash received from sales of goods or rendering of services
406,222,940.09

382,507,558.14

334,543,657.23

Cash received relating to other operating activities
191,919.03

87,342.07

137,199.22

Sub-total of cash inflows
406,414,859.12

382,594,900.21

334,680,856.45

Cash paid for goods and services
(277,618,516.29
)
(287,000,379.42
)
(241,215,872.34
)
Cash paid to and on behalf of employees
(7,989,408.44
)
(7,633,928.62
)
(6,523,856.43
)
Payments of taxes and levies
(47,133,802.28
)
(21,917,429.15
)
(27,568,272.06
)
Cash paid relating to other operating activities
(5,730,450.09
)
(6,870,003.19
)
(2,931,652.51
)
Sub-total of cash outflows

(338,472,177.1
)
(323,421,740.38
)
(278,239,653.34
)
Net cash flows from operating activities
67,942,682.02

59,173,159.83

56,441,203.11

2. Cash flows from investing activities
 
 
 
intangible assets and other long-term assets
23,398.06



Sub-total of cash inflows

23,398.06



Cash paid to acquire fixed assets, intangible assets and other long-term assets
(212,142.73
)
(356,027.35
)
(35,987.65
)
Sub-total of cash outflows
(212,142.73
)
(356,027.35
)
(35,987.65
)
Net cash flows used in investing activities
(188,744.67
)
(356,027.35
)
(35,987.65
)
3. Cash flows from financing activities
 
 
 
Sub-total of cash inflows
 
 
 
Cash payments for distribution of dividends or profits
(87,145,723.63
)
(57,000,000
)
(46,479,576
)
Sub-total of cash outflows
(87,145,723.63
)
(57,000,000.00
)
(46,479,576.00
)
Net cash flows used in financing activities
(87,145,723.63
)
(57,000,000.00
)
(46,479,576.00
)
4. Effect of foreign exchange rate changes on cash and cash equivalents
(415,321.51
)
(458,617.00
)
(11,975.86
)
5. Net increase (used) in cash and cash equivalents
(19,807,107.79
)
1,358,515.48

9,913,663.60


7





NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2016

(Amounts expressed in Renminbi (“RMB”) unless otherwise stated)


1. COMPANY BACKGROUND AND PRINCIPAL ACTIVITIES
Momentive UV Coatings (Shanghai) Co., Ltd., formally known as Borden UV (Shanghai) Co., Ltd.༈¨”the Company”༉©is a Sino-foreign equity joint venture enterprise between Borden UV Coatings Holdings (Shanghai) Limited and Prime Union Limited. The Company was established on 18 March 2004 with the approval of the Shanghai Municipal Government in Shangwaihuhuiduzizi[2004]0768 and the business license number is 913101157595925826 with the operation period of 30 years. The Company’s registered capital is USD$500,000.00.

The approved Company’s business operation scope includes manufacture and sale of various kinds of UV coatings and provision of related technical consulting services (Comment: extracted from Articles of Associations of the Company.)

In 2007, the Company’s prior shareholder Borden UV Coating Holding (Shanghai) Limited was renamed Hexion Specialty UV Coating (Shanghai) Limited and transferred 0.01% of its shares to Prime Union Limited, and the Company was renamed Hexion UV Coatings (Shanghai) Co., Ltd.. In 2013, based on the approvals of the Company’s Board of Directors and the Pudong District of Shanghai Municipal government, the Company was renamed Momentive UV Coatings (Shanghai) Co., Ltd., and one of the Company’s investors, Hexion Specialty UV Coatings (Shanghai) Ltd., was renamed Momentive Specialty UV Coatings (Shanghai) Limited (subsequently renamed again to Hexion UV Coatings (Shanghai) Limited in 2015).


2. PRINCIPAL ACCOUNTING POLICIES
2.1 Accounting standards
The Company adopts accounting principles generally accepted in the United States of America.

2.2 Accounting period
The Company’s accounting year starts on 1 January and ends on 31 December.

2.3 Basis of accounting and measurement bases
The Company follows the accrual method of accounting. Assets are initially recorded at their actual costs and are subsequently adjusted for impairment, if any, as events and circumstances warrant.

2.4 Reporting currency
The recording currency of the Company is RMB Yuan.

2.5 Foreign currency translation
Except for the accounting treatment for paid-in capital, foreign currency transactions are translated into RMB at the exchange rates stipulated by the People’s Bank of China on the first day of the month in which the transactions took place. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into RMB at the stipulated exchange rates by the People’s Bank of China at the balance sheet date. Exchange differences arising from these translations are expensed, except for those which occurred in the pre-operation period, which are recorded as long-term deferred expenses, and those attributable to foreign currency borrowings that have been taken out specifically for the construction of fixed assets, which are capitalized as part of the fixed asset costs.

2.6 Provision for Bad Debt
Full provisions are applied to receivables where events or changes in circumstances indicate that the balances cannot be collected (the debtor is deregistered, bankrupt and the Company can not take back the accounts receivable according to the bankruptcy procedure in law; the debtor is dead, has no heritage to pay or has no haeres; has solid evidence that the accounts receivable aged over three years and can not be taken back). When the bad debt occurs, it is written off through the bad debt provision with the approvals according to the authorized level.



8




2.7 Inventories
2.7.1 Inventories include materials in transit, raw materials, work in progress, finished goods, low cost consumables and packaging materials.
2.7.2 Inventories are stated at the lower of cost or market.
2.7.3 The inventory issuance cost was determined using the weighted average method.
2.7.4 Low cost consumables are fully amortized when issued for use.

2.8 Fixed assets and depreciation
2.8.1 Fixed assets include buildings, machinery and equipment used in production or rendering of services, or held for management purposes, which have useful lives of more than one year.
2.8.2 Fixed assets purchased or constructed by the Company are recorded at actual cost.
2.8.3 Fixed assets are depreciated using the straight-line method to write off the cost of the assets to their residual values of 0% which represents their estimated salvage value over their estimated useful lives. Their estimated useful lives are as follows:
 
Category:
useful lives (years) :
Annual depreciation rate (%):
 
Machinery
10
10
 
Electronic equipment
10
10
 
Motor vehicle
10
10
 

2.9 Long-term prepaid expenses
Long-term prepaid expenses was recorded in actual cost and are amortized on the straight-line basis over the expected beneficial periods and are presented at cost net of accumulated amortization.

2.10 Sales of goods
Revenue from the sale of goods is recognized when significant risks and rewards of ownership of the goods are transferred to the buyer, the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and it is probable that the economic benefit associated with the transaction will flow to the Company and the relevant revenue and costs can be measured reliably.

2.11 Enterprise income tax (“EIT”)
EIT is recognized under the liability method (balance sheet approach).

3. Taxations
The Company’s applicable major taxations and rate are as follows:
Category:
Tax base:
Statutory Tax %:
Value added tax
Valuation amount
17
EIT
Taxable income
25
The actual EIT rate applicable for 2016 was 25%.

9





4. NOTES TO MAJOR ACCOUNTS IN THE FINANCIAL STATEMENTS
4.1 Cash at bank and in hand
Item:
31 December 2016
31 December 2015
Original currency
Exchange rate
RMB equivalent
Original currency
Exchange rate
RMB equivalent
Cash in hand
 
 
42,907.15

 
 
26,344.66

RMB
 
 
42,907.15

 
 
26,344.66

Cash at bank
 
 
11,634,414.64

 
 
31,458,084.92

RMB
 
 
7,973,653.18

 
 
24,765,927.71

USD
527,715.36

6.9370

3,660,761.46

1,030,577.37

6.4936

6,692,157.21

Total
 
 
11,677,321.79

 
 
31,484,429.58


4.2 Notes Receivable
Category:
31 December 2016
  31 December 2015
Bank Note
26,576,197.31
38,771,101.63
The top major debtors are as follows:
 
No.
Debtor Name:
Note Quantity:
      31 December 2016
 
1
Zhong Tian Technology Optical Fiber Co., Ltd.
3
14,335,673.48
 
2
Changfei Optical Fiber Co., Ltd.
7
7,746,600.00
 
3
Nanjing Fiberhome Fujikura Optical Communication Ltd.
3
3,800,000.00
 
 
4
Zhongzhu Optic fiber Co., Ltd
4
693,923.83
 
 
        Total
 
26,576,197.31

 
No.
Debtor Name:
Note Quantity:
      31 December 2015
 
1
Changfei Optical Fiber Co., Ltd.
7
30,256,585.63
 
2
Zhong Tian Technology Optical Fiber
Co., Ltd.
1
3,000,000.00
 
3
Nanjing Fiberhome Fujikura Optical Communication Ltd.
1
2,000,000.00
 
 
4
Chengdu Zhongzhu Optical Fiber Co., Ltd.
10
1,470,000.00
 
 
5
Xi’an Xigu Optical Communication Ltd.
3
1,234,588.00
 
 
 
        Total
 
37,961,173.63

10





4.3 Accounts Receivable
31 December 2016
31 December 2015
89,902,219.94
99,798,425.81
The top 5 major debtors are as follows:
Debtor Name:
Nature:
31 December 2016
%
Furukawa Japan
Goods sold
31,223,312.13
35%
Zhong Tian Technology Optical Fiber Co., Ltd.
Goods sold
4,675,285.68
5%
Changfei Optical Fiber Co., Ltd.
Goods sold
22,233,000.03
25%
OFSLLC
Goods sold
10,062,426.5
11%
BIRLA FURUKAWA
Goods sold
5,833,739.52
6%
Total
 
74,027,763.86
82%
There was no receivable from related parties as of 31 December 2016.

Aging:
31 December 2016
%
31 December 2015
%
Within 1 year
89,901,173.79

99.999
99,797,379.66

99.999
1 to 2 years
1,046.15

0.001
1,046.15

0.001
Total
89,902,219.94

100
99,798,425.81

100

4.4 Inventory
Item:
31 December 2016
31 December 2015
Amount
Reserve
Amount
Reserve
Raw materials
9,093,245.46

11,236,148.21

Packing material
121,466.70

98,697.32

Low valued consumables
513,825.99

55,113.98

Finished goods
8,978,733.52

9,475,909.89

Total
18,707,271.67

20,865,869.4


4.5 Fixed Assets and Accumulated Depreciation
Original Cost
Category:
31 December 2016
Additions
Deductions
31 December 2015
Machinery
3,014,713.91



3,014,713.91

Electronic
939,132.83



939,132.83

equipment
 
 
 
 
Motor Vehicle
413,071.79

168,552.99

293,300.00

537,818.80

Other equipment
2,261,283.48

43,589.74


2,217,693.74

Total
6,628,202.01

212,142.73

293,300.00

6,709,359.28


11





Accumulated depreciation
Category:
31 December 2016
Addition
Deductions
31 December 2015
Machinery
2,712,898.96

117,990.93


2,594,908.03

Electronic equipment
833,221.69

48,697.89


784,523.80

Motor Vehicle
225,792.25

52,997.34

293,300.00

466,094.91

Other equipment
2,109,632.31

143,418.21


1,966,214.10

Total
5,881,545.21

363,104.37

293,300.00

5,811,740.84


4.6 Accounts Payable
31 December 2016
31 December 2015
47,965,757.51
58,816,829.79
The top 5 major Creditors are as follows:
Creditor Name:
Nature:
31 December 2016
MIWON
Goods Purchased
15,236,204.82

Sartomer Logistics (Shanghai) Co., Ltd.
Goods Purchased
14,174,942.96

Shuangjian
Goods Purchased
6,354,397.84

Linjia Machine
Goods Purchased
2,040,680.00

湛新 (氰特)
Goods Purchased
1,634,068.80

Total
 
39,440,294.42


Creditor Name:
Nature:
31 December 2015
MIWON
Goods Purchased
28,094,430.53

Sartomer Logistics (Shanghai) Co., Ltd.
Goods Purchased
13,979,690.94

Shuangjian
Goods Purchased
3,001,376.84

Linjia Machine
Goods Purchased
2,468,520

Dai Quan
Goods Purchased
1,717,868.64

Total
 
49,261,886.95


4.7 Taxes Payable
Item:
31 December 2016
31 December 2015
VAT payable
637,109.93

2,283,606.21

EIT payable
6,858,152.38

13,490,360.42

Individual income tax payable
276,272.32

264,971.28

City construction tax
10,543.4

22,836.06

Extra charges of education funds
52,717.00

114,180.31

Total
7,834,795.03

16,175,954.28


12





4.8 Other Payables
31 December 2016
31 December 2015
1,887,909.46
738,393.44

The top 3 major Creditors are as follows:
Creditor Name:
Nature:
31 December 2016
  Fishand Richardson PC
Lawyer fee
1,478,573.62

  Caribou Specialty Materials
Technology service charge
288,416.74

  Momentive Chemical
Overseas market promotion
152,614.00


Creditor Name:
Nature:
31 December 2015
Momentive Chemical
Overseas market promotion
389,616.00

Caribou Specialty Materials
Technology service charge
200,645.81

Fishand Richardson PC
Lawyer fee
141,065.28



4.9 Paid-in Capital
Investor Name:
31 December 2016、 2015、2014
 
 
In USD$
RMB equivalent
(%)
Momentive Specialty UV coatings ( Shanghai) Limited(Renamed to Hexion UV Coating (Shanghai ) Limited in 2015)
249,950.00

2,068,848.65

49.99%

Prime Union Limited
250,050.00

2,069,676.35

50.01%

Total
500,000.00

4,138,525.00

100.00
%

4.10 Surplus Reserve
Item:
31 December 2016、2015、2014
Reserve fund
2,100,000.00
Total
2,100,000.00

4.11 Retained Earnings
Item:
2016
2015
2014
Retained earning, beginning
96,557,119.09

118,292,355.18

92,862,017.90

Add: current year profit
60,525,191.14

48,410,487.54

43,030,337.28

Less: Profit distribution to equity owners
96,461,693.80

70,145,723.63

17,600,000.00

Retained earning, ending
60,620,616.43

96,557,119.09

118,292,355.18


13





4.12 Operation Income / Operation Cost
Operation Income for Year 2016
Operation Income for year 2015
Operation Income for year 2014
Sales
Other Operation Income
Sales
Other Operation Income
Sales
Other Operation Income
334,219,891.26
388.89
342,012,867.83
47,638.49
283,502,034.63
233,254.72

Operation Cost for year 2016
Operation Cost for year 2015
Operation Cost for year 2014
Cost of sales
Other Operation Cost
Cost of sales
Other Operation Cost
Cost of sales
Other Operation Cost
233,818,221.10
261,367,286.76
212,942,441.80

4.13 Selling and distribution expenses
Year 2016
Year 2015
Year 2014
4,128,783.69
4,820,806.92
7,338,847.12
The major 2016 items include:
Item:
Year 2016
Year 2015
Year 2014
Transportation
2,709,713.24

2,918,723.12

1,568,240.22

Market promotion
1,042,392.38

369,000.00

2,369,079.74

Gas and parking
111,927.71

126,631.67

194,696.27

Custom inspection
50,334.64

74,999.99

108,773.62

Office expense
33,284.66

45,743.30

155,417.18


4.14 G&A Expenses
Year 2016
Year 2015
Year 2014
17,416,177.10
11,657,992.28
5,537,479.87
The major 2016 items include:
Item
Year 2016
Year 2015
Year 2014
Consultant fees
7,425,998.20



Payroll
4,010,501.34

3,829,369.58

3,724,309.67

Overseas R & D fee
3,466,126.79

3,384,203.73


Statutory social insurance
458,919.92

453,578.50

379,421.50

Entertainment expenses
453,334.71

416,872.58

366,407.02

Office expense
399,906.96

407,177.19

241,014.06

Taxes
310,493.10

190,366.33

232,799.40

Lawyer fees

1,928,804.70



4.15 Financial Expenses
Item:
Year 2016
Year 2015
Year 2014
Interest expense
455,052.04

45,584.94


Interest income
(162,426.65
)
(82,315.96
)
(68,511.36
)
Foreign exchange loss (gain)
(3,049,485.53
)
(1,133,604.97
)
(18,666.07
)
Bank charges
61,509.89

78,003.48

73,994.83

Total
(2,695,350.25)

(1,092,332.51)

(13,182.60)


14





4.16 Non-operation Income / Non-operation (Expense)
 
Item
Year 2016
Year 2015
Year 2014
 
Net non-operation result
189,872.88

87,342.07

137,199.22

 
Total non-operation income
191,919.03

87,342.07

137,199.22

 
 
 
 
 
 
1. tax return
122,322.16

18,000.00

0

 
2. service charge return for tax payment
16,423.10

45,966.07

115,511.22

 
3. sponsor
9,000.00

22,376.00

  21,688.00

 
4. other
44,173.77

1,000.00


 
Total non-operation expense
2,046.15



 

4.17 Cash Flow Information
Supplemental Information
Year 2016

Year 2015

Year 2014

Reconciliation of net profit to cash flows from operating activities
 
 
 
   Net profit
60,525,191.14

48,410,487.54

43,030,337.28

   Adjust for:Provision for asset impairment



Depreciation of tangible assets
363,104.37

570,797

604,108.77

Amortization of long-term prepaid expenses
90,000.00

37,500.00

2,436.40

Amortization of prepaid expense
(320.95
)
(4,192.00
)

Losses on disposal of fixed assets, intangible assets and other long-term assets
(23,398.06
)


Finance expenses
415,321.51

458,617.00

11,975.86

Decrease in deferred tax debit
(201,915.74
)
479,683.42

163,844.03

Decrease in inventories
2,158,597.73

1,589,183.75

1,687,661.03

(Increase) Decrease in operating receivables
22,091,110.19

(16,040,544.12
)
3,872,228.53

Increase in operating payables
(17,475,008.17
)
23,671,627.24

7,068,611.21

Others



Net cash flows from operating activities
67,942,682.02

59,173,159.83

56,441,203.11


5. Related party relationships and transactions
5.1 Related party relationships
Name:
Related party relationships
Momentive Specialty UV coatings ( Shanghai) Limited (Renamed to Hexion UV Coating (Shanghai ) Limited in 2015)                                                                                                
Investor
Prime Union Limited
Investor

5.2 Transactions
There were no material related party transactions in 2016.



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6. Subsequent event
January 8, 2015 - Momentive UV Coatings (Shanghai) Co., Ltd. sued by DSM Desotech, Inc. for patent infringement in Southern District of Ohio.
The case is currently pending, and the Company is unable to assess the potential outcome and any resulting financial impact at this time.



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