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海大集团:2018年年度报告(英文版) 下载公告
公告日期:2019-06-12

Guangdong Haid Group Co., Limited

2018 Annual Report

Stock Code: 002311Stock Abbreviation: Haid Group

Date of Approval for Publication: 13 April 2019

Full text of 2018 Annual Report of Guangdong Haid Group Co., Limited

Section I. Important Notice, Table of Contents and Definitions

The board of directors (the "Board"), the supervisory committee, the directors,the supervisors and the senior management of the Guangdong Haid Group Co.,Limited (the "Company") hereby warrant the truthfulness, accuracy andcompleteness of the information presented in this report, guarantee that thereare no misrepresentations, misleading statements or material omissionscontained in this annual report, and are individually and collectively responsiblefor the authenticity, accuracy and completeness of the information contained inthis report.Mr. Hua Xue, head of the Company, Ms. Li Tian, head in charge of accountingwork, and Mr. Shaolin Yang, head of the accounting department (AccountingOfficer), declare that they warrant the truthfulness, accuracy and completenessof the financial statements in the annual report.All directors were present in person at the Board meeting to consider andapprove this annual report.The Report contains forward-looking statements such as future plans, which donot constitute any specific undertakings by the Group to its investors. Investorsare advised to pay attention to investment risks.The proposed profit distribution plan of the Company was considered andpassed by the Board: on the basis of the total number of shares on theregistration date when the plan is implemented in the future, the Company willdistribute cash dividend of RMB 3.00 (tax inclusive) and 0 bonus share (taxinclusive) for every 10 existing shares held by all shareholders withoutcapitalization of capital reserve.This report has been prepared in both Chinese and English. Should there be anydiscrepancies or misunderstandings between the two versions, the Chineseversion shall prevail. The complete published Chinese 2018 Annual Report isavailable at http://www.cninfo.com.cn.

Full text of 2018 Annual Report of Guangdong Haid Group Co., Limited

Risk Warning

I. Risk of Periodical Fluctuations in the Feed Industry due to Abnormal

Weather and Animal Epidemic Diseases during Animal ProductionThe feed industry mainly serves the downstream animal feeding industry. Theabnormal changes in natural elements such as precipitation and typhoon maylead to fluctuations of the inventory of livestock or aquatic products and eventhe large-scale outbreak of animal diseases. This thus affects the demand forfeed and likely causes the risk of periodic and regional fluctuations of the latter.With the environmental changes and the expansion of animal productionindustry, animal epidemic diseases may also occur occasionally. For instance, theAfrican swine fever virus broke out across China in August 2018.PRRSV-mediated pig disease, shrimp-relevant EMS epidemic disease andpoultry-relevant “H7N9” disease all occurred recently. The outbreak of animaldiseases will directly inhibit the scale of animal production and reduce thedemand for feed in the short term; major animal epidemic diseases may alsodampen the demand from end-consumers, leading to a downturn of the animalproduction industry, and further affect the feed demand, giving rise to adverseeffects on the production and operation of feed enterprises.Risk management methods: (1) The Company is currently fully deployingfactories and developing local markets in major areas in Southern China,Central China, Eastern China and Northern China and overseas markets inSoutheast Asia, etc. and the expansion of regional distribution can effectivelycope with the risk of weather anomalies and natural disasters in local areas. (2)The Company's feed varieties cover pig feed, chicken feed, duck feed and otherlivestock feed and fish feed, shrimp feed and other aquatic feed. With a varietyof products and a well-balanced structure, it can effectively deal with the risk ofsingle breed species and has strong comprehensive anti-risk capability.II. Risk of Drastic Price Fluctuations of Major Raw MaterialsThe feed ingredients mainly consist of various kinds of staple agriculturalproducts such as corn and soybeans(soybean meal). In recent years, the domesticand international markets of agricultural product have been closely linked.Changes in the planting area and harvest of crops in major grain-producingcountries, purchasing and storage and subsidy policies, import and exportpolicies, fluctuations in logistics capacity and costs of shipping, exchange ratesand others may cause great fluctuations in prices of agricultural products, which,in turn, has a certain impact on the cost of feed and farming. With thestrengthening of the internationalization in trade of agricultural products, thefactors for changes in the prices of agricultural products have become more

Full text of 2018 Annual Report of Guangdong Haid Group Co., Limited

complex and the price fluctuations have therefore increased. If raw materialprices fluctuate and the Company fails to understand the changes in the trade offeed raw materials in a timely manner and promptly implement strategicmanagement and risk control of procurement, the Company may face the risk ofrising integrated procurement costs.Risk management methods: (1) The Company divides raw material intodifferent categories and implements a combination of centralized procurementof staple category and local procurement of regional varieties, which not onlyguarantees the advantages of large-scale raw material procurement, but alsoobtains localization advantages from rapid response in respect of regionalprocurement; (2) The Company continuously invests in the construction of theraw material procurement research system. The team of the professional rawmaterial information research department is relatively mature. It conductsstrategic procurement through the real-time tracking, research and judgment ofthe domestic and foreign bulk raw material market trends, and implementsposition risk management for bulk raw materials through futures hedging, rawmaterials trade and other tools to effectively control procurement risks; (3) TheCompany has accumulated rich experience in research and development ofanimal nutrition and feed formula technologies, and has research anddevelopment team composed of over 1,000 members. Large amounts of fundsare spent on research and development each year, focusing on animal nutritionrequirements, feed formula technology, animal farming and geneticimprovement, comprehensive investigation on healthy animal farming strategies,and other research areas. The Company has a profound understanding ofanimal nutritional requirements and higher level of expertise in comprehensiveutilization of raw materials. Therefore, in case of raw material price fluctuations,it can quickly adjust the formula to control the reasonable feed nutrient leveland formula costs.III. Risk of Structural, Regional and Scale Adjustment to Farming Industry

under Environmental Protection Regulations and PoliciesIn recent years, the State has introduced a series of environmental protectionlaws and regulations including the new Environmental Protection Law (环保法),the Regulations on Prevention and Control of Pollution from Large-ScaleProduction of Livestock and Poultry (畜禽规模养殖污染防治条例), Action Planfor Prevention and Treatment of Water Pollution (水污染防治行动计划), andthe Guiding Opinions on Adjusting the Layout of Pig Production in theSouthern Water Network Region (关于促进南方水网地区生猪养殖布局调整),the "13th Five-Year Plan" on Ecological and Environmental Protection (“十三五”生态环境保护规划), which stipulate the pollution prevention and control ofanimal production industry, increase the pollution control of animal production

Full text of 2018 Annual Report of Guangdong Haid Group Co., Limited

industry, and especially limit the production scale in the regions of key watersources and its surrounding areas. According to the regulations and policies ofthe central government, banned areas and restricted areas have been set upthroughout the country, and pig farms in the banned areas in the southern waternetwork area are gradually relocating. The implementation of environmentalprotection policies will speed up the withdrawal of private pig farming farmers,reduce the backward production capacity failing to meet environmentalprotection standards and with a small scale, and enable large -scale farmers tocontinuously expand their production capacity and improve the farming scaleand structure; In addition, the establishment of banned areas and restrictedareas will enforce adjustments to the pig production capacity in all places acrossthe country. The adjustments to the scale composition of pig production and therelocation of pig production area will certainly have a profound impact on theexisting capacity layout, market share, pricing power and business model of thefeed industry. The impact of enforced environmental protection policies on thepig growing and feed industries puts existing competitive companies in themarket at risk of reshuffle.Risk management methods: (1) The Company continually improves itscapability to serve farmers. In addition to feed products, the Company is alsoengaged in the industrial chain of animal healthcare products, vaccines andfinance and has a strong stickiness to large-scale farmers; (2) The feed varietiesof the Company cover livestock, poultry, and aquatic animals and the productline is abundant. The production lines for pig feed, chicken feed, duck feed andpelleted fish feed can be shared. The Company can rapidly shift the productionlayout and make adjustments to adapt to the changes in the industry byadjusting the production capacity in all places. (3) The Company adoptsmultiple models to speed up the production layout in areas with rich resourcesand strong environmental carrying capacity, and to seize the market share ofnew animal farming areas.IV. Risk of Exchange Rate FluctuationsThe global procurement of raw materials has become the norm. The scale ofoverseas investment and overseas operations of the Company is also rapidlyexpanding. The scale of cross-border fund settlement and the stock of overseasassets have grown substantially, involving the currency types of various relatedcountries. Currency exchange rate fluctuations are subject to different influencefactors, and exchange rate fluctuations in any currency may have a certainimpact on the settlement cost and asset stock value of the region.Risk management methods: (1) Based on the business scale, business model, andsettlement characteristics in different regions and countries, the Companystrictly controls the exchange rate risks, carefully selects settlement currencies,

Full text of 2018 Annual Report of Guangdong Haid Group Co., Limited

and strives to achieve relatively balanced regional fund inflow and outflowthrough structural arrangements of financing sources and financing types; (2)The expansion of two-way fluctuations in the RMB exchange rate has becomethe new normal. The Company further enhances its awareness of foreignexchange risk management, and arranges settlement models based on theprocurement and sales strategies and cycle characteristics of import and exportoperations. And forward foreign exchange settlement and sale, swaps, foreignexchange options and other financial instruments are flexibly used to lock theexchange rate risks, control procurement and sales costs, and control thepossible risk brought about by exchange rate fluctuations.

Full text of 2018 Annual Report of Guangdong Haid Group Co., Limited

Table of Contents

Section I. Important Notice, Table of Contents and Definitions ..................................................... 1

Section II. Company Profile and Key Financial Indicators ................................................................. 8

Section III. Business Overview ............................................................................................................................... 12

Section IV. Discussion and Analysis of Operations .................................................................................. 18

Section V. Material Matters ......................................................................................... 38

Section VI. Share Changes and Shareholder Information ................................................................. 65

Section VII. Preferred Shares ................................................................................................................................... 74

Section VIII. Directors, Supervisors, Senior Management and Staff ....................................... 75

Section IX. Corporate Governance ...................................................................................................................... 84

Section X. Corporate Bonds ...................................................................................................................................... 93

Section XI. Financial Statements ........................................................................................................................... 94

Section XII. Documents Available for Reference ................................................................................. 318

Full text of 2018 Annual Report of Guangdong Haid Group Co., Limited

Definitions

ItemDefinition
Company, Group, Haid GroupGuangdong Haid Group Co., Limited
Boardthe board of directors of Guangdong Haid Group Co., Limited
Supervisory Committeethe supervisory committee of Guangdong Haid Group Co., Limited
General Meetingthe general meeting of Guangdong Haid Group Co., Limited
Company Lawthe Company Law of the People’s Republic of China
Securities Lawthe Securities Law of the People’s Republic of China
Articles of Associationthe Articles of Association of Guangdong Haid Group Co., Limited
RMBRenminbi
reporting period, the period, the yearthe period from 1 January 2018 to 31 December 2018
last year, the same period of last yearthe period from 1 January 2017 to 31 December 2017
the end of the period31 December 2018
the beginning of the period or the year1 January 2018
CSRCChina Securities Regulatory Commission

Full text of 2018 Annual Report of Guangdong Haid Group Co., Limited

Section II. Company Profile and Key Financial Indicators

I. Company profile

Stock abbreviationHaid GroupStock code002311
Stock exchanges on which the shares are listedShenzhen Stock Exchange
Chinese name of the Company广东海大集团股份有限公司
Chinese abbreviation of the Company海大集团
English name of the Company (if any)Guangdong Haid Group Co., Limited
English abbreviation of the Company (If any)HAID GROUP
Legal representative of the CompanyHua Xue
Registered addressRoom 701 , Building 2,Haid Mansion,No. 42,Road 4, Wangbo, Nancun Town, Panyu Dist, Guangzhou,China.
Postal code of registered address511445
Office addressRoom 701 , Building 2,Haid Mansion,No. 42,Road 4, Wangbo, Nancun Town, Panyu Dist, Guangzhou,China
Postal code of office address511445
Website of the Companywww.haid.com.cn
Email addresszqbgs@haid.com.cn

II. Contact persons and contact methods

Secretary to the BoardSecurities Affairs Representative
NameZhijian HuangJiewen Lu
Correspondence addressRoom 701 , Building 2,Haid Mansion,No. 42,Road 4, Wangbo, Nancun Town, Panyu Dist, Guangzhou,ChinaRoom 701 , Building 2,Haid Mansion,No. 42,Road 4, Wangbo, Nancun Town, Panyu Dist, Guangzhou,China
Telephone8620-393889608620-39388960
Facsimile8620-393889588620-39388958
Email addresszqbgs@haid.com.cnzqbgs@haid.com.cn

III. Information disclosure and places for inspection

Designated media for information disclosureSecurities Times, China Securities Journal, Securities Daily, Shanghai Securities News
Designated websites for the publication of the Annual Report as approved by CSRCwww.cninfo.com.cn
Places for inspection of the Company’s Annual ReportSecurities Department of the Company

Full text of 2018 Annual Report of Guangdong Haid Group Co., Limited

IV. Change in registration

Organisation registration codeNo change
Change of principal activities since its listing (if any)No change
Change of the controlling shareholder (if any)No change

V. Other relevant information

CPAs engaged by the Company

Name of CPAsGP Certified Public Accountants (Special General Partnership)
CPAs’ Office AddressRooms 1001-1008, No. 555 Dongfeng East Road, Yuexiu District, Guangzhou
Name of the Signing Certified Public AccountantsHongfei Xian, Shuxia Zhang

Sponsors engaged by the Company to continuously perform its supervisory function during the reporting period□ Applicable √ Not applicableFinancial Advisors engaged by the Company to continuously perform its supervisory function during the reporting period□ Applicable √ Not applicable

VI. Major accounting data and financial indicators

Retrospective adjustment to or restatement of the accounting data for prior years by the Company□ Yes √ No

20182017Increase/decrease for the year as compared to the prior year2016
Total Operating Revenue (RMB)42,156,628,800.1132,556,634,127.3829.49%27,185,309,985.32
Net income attributable to shareholders of the Company (RMB)1,437,281,732.281,207,225,209.3519.06%855,810,234.81
Net income after excluding non-operating gains or losses attributable to shareholders of the Company (RMB)1,394,557,560.671,162,756,461.4819.94%816,352,234.72
Net cash flows from operating activities (RMB)1,035,764,006.33494,221,455.85109.57%1,142,154,547.73
Basic earnings per share (RMB per share)0.900.7815.38%0.55
Diluted earnings per share (RMB per share)0.900.7815.38%0.55
Rate of return on net assets on weighted average basis20.21%20.01%0.20%16.17%
As at the end of 2018As at the end of 2017Increase/decrease as at the end of the year compared to the end of the prior yearAs at the end of 2016
Total assets (RMB)17,365,663,861.0613,160,456,702.9331.95%10,287,890,139.45

Full text of 2018 Annual Report of Guangdong Haid Group Co., Limited

Net assets attributable to shareholders of the Company (RMB)7,745,939,076.966,474,694,687.2419.63%5,649,592,278.17

VII. Differences in accounting data under domestic and overseas accounting standards

1. Differences between the net income and net assets disclosed in accordance with international accountingstandards and China accounting standards in the financial report

□ Applicable √ Not applicableThere was no difference between the net income and net assets disclosed in accordance with international accounting standards andChina accounting standards in the financial report during the reporting period.

2. Differences between the net income and net assets disclosed in accordance with overseas accountingstandards and China accounting standards in the financial report

□ Applicable √ Not applicableThere was no difference between the net income and net assets disclosed in accordance with overseas accounting standards andChina accounting standards in the financial report during the reporting period.

VIII. Key Financial Indicators by Quarter

Unit: RMB

Q1Q2Q3Q4
Total Operating Revenue7,259,881,518.5610,421,019,240.4913,152,576,065.3011,323,151,975.76
Net income attributable to shareholders of the Company100,553,917.47499,877,101.97670,628,222.00166,222,490.82
Net income after excluding non-operating gains or losses attributable to shareholders of the Company93,390,698.04483,434,671.03660,773,552.00156,958,639.60
Net cash flows from operating activities147,825,655.92147,367,901.52-342,769,844.401,083,340,293.29

Whether the above indicators or their aggregated amounts have any material difference with the respective amounts as disclosed inthe quarterly report or interim report□ Yes √ No

IX. Items and Amounts of Non-operating Gains or Losses

√ Applicable □ Not applicableUnit: RMB

ItemAmount for 2018Amount for 2017Amount for 2016Explanation
Gain or loss on disposal of non-current assets-581,071.09-12,825,316.16-4,691,026.41
Government subsidies charged to current profit or loss (exclusive of government subsidies given in the Company’s ordinary course of business at fixed quotas or amounts as per government’s uniform standards)66,315,959.9159,725,956.7045,252,629.88
Gain equal to the amount by which investment costs for the Company to obtain subsidiaries, associates and joint ventures are lower than the Company’s enjoyable fair122,148.00

Full text of 2018 Annual Report of Guangdong Haid Group Co., Limited

value of identifiable net asset value of investees when making investments
Gain or loss on changes in fair value of trading financial assets and liabilities & income from disposal of trading financial assets and liabilities and available-for-sale financial assets (exclusive of effective portion of hedges that arise in the Company’s ordinary course of business)-175,206.74-73,004.675,830,256.01
Reversed portion of impairment allowance for accounts receivable which are tested individually for impairment3,466,834.571,359,508.00
Non-operating gains and losses other than above-12,961,386.262,623,429.25195,344.69
Other gains and losses that meet the definition of non-operating gain/loss1,263,559.841,259,316.262,419,649.61
Less: Income tax effects11,931,518.808,012,841.8611,733,737.26
Less: Non-controlling interests effects (net of tax)2,672,999.82-289,552.35-2,184,883.57
Total42,724,171.6144,468,747.8739,458,000.09--

Notes for the Company's non-operating gain or loss items as defined in the Explanatory Announcement on Information Disclosurefor Companies Offering Their Securities to the Public No.1 - Non-operating Gains or Losses (公开发行证券的公司信息披露解释性公告第1号——非经常性损益) and the non-operating gain or loss items as illustrated in the Explanatory Announcement onInformation Disclosure for Companies Offering Their Securities to the Public No.1 - Non-operating Gains or Losses (公开发行证券的公司信息披露解释性公告第1号——非经常性损益) defined as its recurring gain or loss items□ Applicable √ Not applicableNo non-operating gain or loss items as defined or illustrated in the Explanatory Announcement on Information Disclosure forCompanies Offering Their Securities to the Public No.1 - Non-operating Gains or Losses (公开发行证券的公司信息披露解释性公告第1号——非经常性损益) were defined by the Company as its recurring gain or loss items during the reporting period.

Section III. Business Overview

I. Principal Operations of the Company During The Reporting Period

Whether the Company needs to comply with the disclosure requirements of specific industriesNo

(I) Principal businesses and products and major business models of the Company during the reporting period1. Principal businesses and productsCentering on the products and services needed in the animal production process, the Company’s businesses coverthe research and development, design, production, sales, service and all other types of activities of variousproducts. Its main products include feeds for aquatic animals, feeds for livestock and poultry, high-quality aquaticanimal seedlings, animal healthcare products, biological products, and pig farming.The production and sale of feeds for aquatic animals, livestock and poultry are the Company's most importantbusinesses, and the Company has also accumulated a wide range of customer resources through the feed business;the Company can better help customers to achieve animal farming success by providing customers with qualityanimal seedlings that are scarce in the market; Cost-effective animal health products including vaccines,veterinary drugs and biological products, supplemented by efficient overall animal farming solutions, enablecustomers to achieve healthy animal farming while implementing better control over the cost and gainingcompetitive advantage in respect of end products.Specifically, the Company's products mainly include feeds for chickens, ducks, pigs, fish and shrimps, farmedspecies such as pig, shrimp and fish fry, as well as biological products, veterinary drugs, vaccines and otherproducts needed in the production of livestock, poultry and aquatic animals.2. Main Business ModelThe Company started up from the feed business. Its rich customer resource helps to have deep understanding ofand exploration of customer needs. This results in a continually enlarged profile of products and service to thecustomer, which gradually extends from feed to high tech areas with increased added-value such as animalseedlings, veterinary drugs and vaccine products. The scale of production and sales of high value-added productshas gradually expanded, and the proportion thereof in income structure has also been increasing year by year. Inrecent years, through the extension of the industrial chain, the Company has further attempted to enter into suchareas as pig farming and food processing. The business model has been developed and extended in an orderlymanner with various industrial segments interactively supporting and developing each other.In particular, for the feed business which has the largest scale, the business management is mainly carried out withthe business model of centralized procurement of raw materials, distributed production layout, sales of productsaccompanied with technical services. The adoption of a centralized procurement model composed of "group +regional center", combined with hedging and other methods, for agricultural products and other bulk raw materialscan achieve better procurement cost advantages and risk control; with the goal of being the closest to the market,convenient in logistics and rich in resources, the Company conduct distributed layout production and its factoriescurrently are mainly distributed in nearly 100 cities in China and Southeast Asia; Distribution + direct sales is theCompany's main sales model. Focusing on localized marketing, the Company has fully established distributionchannels to efficiently solve farmers' capital and transportation needs. The Company’s own professionaltechnology and service teams consisting of a large number of members directly visit farmers to provide farmingtechnical services and have achieved functional complementation and collaboration with sales organization andmanagement teams in terms of sales and service as well as channel and farmers; high-quality animal seedlings,biological Products, veterinary drugs and vaccines have become indispensable products and tools for theCompany to provide services and constitute a package of overall sales programs and solutions.

The business models for seedlings and animal healthcare products reflect the distinctive features of research anddevelopment and technology as the guide, differentiated products as the carrier, and service support as the mainpromotion strategy. Seedlings and animal healthcare products involve a long period of investment in research anddevelopment. Technology accumulation needs better predictability and market insight, and strong originality ofproducts. To provide better service support, it is necessary to invest in the long term and to build service teamswith rich technology, knowledge, and experience. Therefore, a multi-tiered research and development system hasbeen chosen for the business management model, supplemented by a production base that has a relatively highstarting point for investment and a marketing strategy with a stronger aggressive power.The Company's pig farming business started at an early stage, and adopts the business model of "company +

farmer", which means that the Company provides farmers with necessary products such as seedlings, feed,

vaccines, etc., the farmers complete the farming process after agreeing on the main technical requirements for thefarming process and then the Company repurchases the finished products for sales. The Company also has someself-supporting production bases and will further expand the scale of production.The Company has set up professional functional departments including technology research institute, procurementcenter, financial center, factory operation center, marketing center, process and information management center,and human resource center at its headquarters. Each professional center aims at acquiring technical andmanagement leadership in its field and provides technical and management standards as well as integrated andprofessional management and service support for large regions/business divisions and various branches andsubsidiaries. The Group has set up multiple regional / business divisions according to regions or businesscategories. The regional / business divisions mainly organize and manage the production, sales and service ofbranches and subsidiaries.

(II) Development stage and periodic characteristics of and position of the Company in the industries where theCompany operated during the reporting period1. Industry development stageChina's feed industry development started in the 1980s. After over forty years of development, China’s totalamount of feed ranks the first in the world. In recent years, the national feed production was steady in slowergrowth and has entered a stage of stable development and industrial restructuring and upgrading. Due to theaggravated competition among enterprises, the number of feed enterprises decreased from more than 10,000 in2010 to over 6,000 in 2015. It is expected that the consolidation would continue and the number would be furtherreduced. According to the development goals under the "13th Five Year Plan" for National Feed Industry(2016-2020)(全国饲料工业“十三五”发展规划(2016-2020)) as promulgated by the Ministry of Agriculture, thenational feed production will reach 220 million tonnes by 2020, representing an increase of 10% as compared to200 million tonnes in 2015. The industry will gradually shift to large -scale and intensified development, but feedenterprises will be subject to further differentiation. Superior enterprises will make good use of the opportunity ofindustry consolidation and their scale advantages to extend the industrial chain or develop diversified businessesthrough mergers and acquisitions as well as construction of new production capacities; confronted with thedevelopment bottlenecks in terms of capital pressure, talent pressure, technical pressure and service capacity,SMEs will gradually be merged by dominant enterprises or eliminated from the market.The high-quality animal seedlings have a huge market space. However, most of the high-quality seedlings forfarmed species, especially aquatic seedlings, are currently under-supplied. There are fewer new strains withproprietary intellectual property right, and the production capacity is small. It is far from meeting the needs of theanimal farming industry to upgrade and progress. In a longer period, there will be pressure in respect of achievingresearch and development progress and improving production supply capacity.The market demand of animal healthcare industry has grown rapidly. In particular, with the upgrading ofconsumption, the upgrading of farming species has significantly increased the demand for health, safety, andgreen farming, and the concept of prevention over treatment has been increasingly accepted by a wide range offarmers. The help of reasonable animal healthcare product investment for farming is mainly reflected in the directeffects of a reduced disease risk, increased health and safety added value of products, controllable farming costs,

and improved farming efficiency, as well as a number of extended effects including reduced labor intensity andimproved industrial chain extension capability. In the future, the market capacity of the animal healthcare industrywill see a greater room for continuous development on the basis of the current situation, and dominant enterpriseswill usher in major market development opportunities.The pig farming business is rapidly moving towards large -scale, intensive, and factory-oriented development. Inaddition to changes in the scale and capabilities of the farming entities, the farming areas also show obviousfeatures of moving northwards and westwards. Small-scale farmers and family-based private farmers quicklywithdraw from the market. With the rapid advancement of farming technology, the automation of farming processhas been significantly improved and the techniques of animal waste treatment for environmental protection havealso been notably enhanced. The farming industry will continue to maintain the characteristics of large -scale andindustrialization development in the medium term.2. Periodic characteristics of the industryThe cycle of feed, animal healthcare products, seedlings and other industries is related to that of the animalproduction industry. The cycle of the animal production industry is mainly determined by the supply end (feedingcapacity).China is a country with a large population. Residents have a huge food consumption demand which remainsrelatively rigid and stable for a certain period of time. Therefore, the supply end of the animal production industry(animal farming capacity) determines the price of the farmed species and thus determines the cycle of the animalproduction industry. In general, the feed industry will lag behind the cycle of the animal production industry.When the animal farming capacity is smaller than the demand, the terminal price of the farmed species willincrease, the profit of the farming will be considerable, and the farming cycle will have a high degree of prosperity.However, due to the reduction of the farming capacity, feed demand will decline. When the farming amount isgreater than the consumer demand, the terminal price of the farmed species will fall, resulting in farming loss andsluggish farming cycle. However, due to the larger amount of animal farming, there is a greater demand for feed.As the prosperity of the animal farming industry directly affects the farmers' choice of high-quality or low-gradefeed products, the enthusiasm of feed feeding, the sensitivity of feed product prices, and the effective transfer offeed raw material price fluctuations, etc., the actual cycle of the feed industry is more complicated.The high-quality aquatic seedlings and animal healthcare industry are in a period of rapid growth, with no obviousperiodic characteristics, and they are in a period of rapid development of the industry as a whole.3. Position of the Company in the industries in which the Company operatesThe Company is a large integrated enterprise.Firstly, China's feed industry is still relatively decentralized. The Company ranks among the top five in thenational feed industry. It sold 10.7 million tonnes of feed in 2018, representing approximately 4.7% of thecountry's total feed production. There is still room for increase in market share. The Company's aquatic feed ranksat the forefront of the domestic industry due to its technological and scale leadership; and the livestock andpoultry feed ranks among the top ten in the industry and in a leading position in technology and industry scale inthe regional market. The Company ranks among the top ten feed enterprises in the world in terms of productionand sales scale.The Company has a relatively leading share in the aquatic feed market in Vietnam, India, Malaysia and othercountries in Southeast Asia, and ranks among the top five in the aquatic feed industry.The Company's high-quality fish and shrimp fry, and animal healthcare products for aquatic species are playing aleading role in the industry in respect of technology and market scale.The Company is recognized as a Key National Leading Enterprise for Industrialization of Agriculture, aState-Level Enterprise Technology Center, and among top 500 Chinese manufacturing companies, Forbes "Top 50Listed Companies in Asia" and Top 100 Chinese Listed Companies by Brand Value.

II. Material Changes of Major Assets

1. Material Changes of Major Assets

Major assetsDescription
Equity assetsDuring the reporting period, the Company’s equity assets increased by 14.47% from the beginning of the period, of which available-for-sale financial assets increased by 13.99%, mainly due to new and increased equity investments.
Fixed assetsDuring the reporting period, the Company’s fixed assets increased by 21.13% from the beginning of the period, mainly because the Company’s projects under construction were transferred to fixed assets after completion and being put into production in the year, the increase in purchase and construction of production equipment and the acquisition of equity interests of certain companies, resulting in an increase in the value of fixed assets.
Intangible assetsDuring the reporting period, the Company’s intangible assets increased by 9.78% from the beginning of the period, mainly due to the new land and software use rights.
Construction in progressDuring the reporting period, the construction in progress of the Company increased by 118.09% from the beginning of the period, mainly due to the addition of new plant and equipment investment in the newly established companies and companies in production that have not yet reached the scheduled usable status in the year.

2. Major Assets Overseas

□ Applicable √ Not applicable

III. Analysis of Core Competitiveness

Whether the Company needs to comply with the disclosure requirements of specific industriesNo

As the Company's products and services are centered on the needs of the animal production industry, theCompany's core competitiveness is also comprehensively represented by a diversified and complete productconfiguration, outstanding single product advantage, comprehensive farming technology service capabilities,industrial layout and the ability to organize the development of the industrial chain-related links, as well as thedelicacy management capability.1. Diverse and complete product configurationCentering on the animal farming chain, after many years of technological investment, transformation of researchand development achievements, product accumulation, production layout, etc., the Company's productconfiguration has reached a relatively rich and complete state and covered the whole process of animal farmingincluding feed, functional feed, seedlings, drugs, vaccines, biological products, etc. and it is still in development.Product configuration capability requires strong insights into customer demands, research and developmentorganization capability, results conversion capability, investment in construction of production bases, processingorganization capability, marketing promotion capability, and technical service capability.The Company has rich technical research reserves and a research and development team composed of more than1,000 members. It annually invests more than RMB 200 million in research and development and research anddevelopment personnel includes multi-disciplinary talents in the fields of animal nutrition, veterinary medicine,animal farming and genetic improvement, animal farming strategy optimization, bioengineering, biochemistry andmachinery. The fast transformation of research and development results and clear and rapid implementation ofinvestment supporting strategies contribute to the Company's strong product configuration capability.For example, for feed formula technology, the Company, through more than 10 years of accumulation incontinuous research and development, has established a huge database of animal nutrition requirements and

reserved a variety of raw material formula technologies. More than 1,000 sets of comparative experimental resultsare added to the database of core nutritional needs of animals and raw materials utilization to convert technologiesinto productivity. Therefore, the Company has a strong capacity in terms of organization and continuousoptimization of product formulas and adaptation to changes. To quickly adjust the formula when the raw materialprices fluctuate can ensure acquisition of cost competitive advantages.The Company now has a marketing team consisting of more than 5,000 members who visit farms or farming sitesto know the animal farming situation. Therefore, the Company has detailed data sources for terminal consumptionhabits, animal growth performance after feed utilization, animal farming strategy and animal farming needs, andcan accurately grasp the demands of farmers and precisely propose technical requirements on product design tosupport full concentration of the Company's technical resources on customer's core needs.2. Clear and excellent product power is the Company's most important competitive advantageFor all series of products, the Company is dedicated to creating product power that is significantly ahead of itscompetitors and has invested heavily in the explicit expression of product power.Despite of a high price, high-end products have the obvious advantage of ultimate pursuit of animal survival rate,growth effects, and growth efficiency and have a prominent brand effect. On the basis of ensuring leadingproduction efficiency, middle-end products are close to the competitors' product pricing and are pursuingoutstanding cost performance. Therefore, in light of the industry’s overall good farming benefits, the Company’scustomers, with the support of integrated products, can obtain significantly higher returns than those of the sametype of farmers; in the event that the industry’s farming benefits decline and even the entire industry suffers losses,the Company’s customers can suffer from less or even no loss.The manifestation of product power requires the support of various internal professional capabilities of theCompany: the research and development capabilities of animal nutrition and raw material utilization, productformula technology capability, raw material value procurement capability, efficient internal operation capabilityare all indispensable. For example, in respect of support of value purchase capacity, the Company’s purchase teamhas outstanding professional capabilities. The team is young and specialized, and it performs division of laboraccording to subdivided raw material categories. The wide industry perspective and a large amount of informationacquisition and analysis ensure tracking, research, and judgment of the market trends of bulk raw materials athome and abroad in a real time way and utilization of futures instruments for hedging of bulk raw materials toeffectively control the purchase price risk and position risk. The prominent purchase capability can identifynumerous raw material purchase opportunities, making cost advantages for feed products and trade of rawmaterials possible. The Company is the first company to successfully achieve centralized purchase in the industry.It has obvious advantages in respect of large-scale purchases. Besides, it is sophisticated in the combinedapplication of purchase tools including spot goods, futures and options, as well as flexible application methods.Forward value purchase and risk position management also help the Company to gain purchasing cost advantages.Another example is the Company's ability to support efficient operations. By promoting the application of SAP,EPS and other management software, the Company has a strong information-based system, and internaloperations are gradually becoming more streamlined, standardized, and more data-based. The role of data-basedoperation is to find out the efficient and energy-saving operation method by comparing the big data of branches;the role of process-based operation and standardization is to greatly improve the internal reproducibility. Thehighly efficient operation capability is an important support for the effective organization of professionalproduction of various products.3. Comprehensive animal farming technical services is an important initiative for the Company to coordinateproduct chain and continuously acquire new customers and improve customer's stickinessIn 2006, the Company took the lead in the industry to provide comprehensive technical services to farmers, andpositioned the Company as a service-oriented enterprise and an enterprise that provides animal farming solutionsto farmers. The Company provides farmers with full-process product and technical service support including "fry -stocking mode - environmental control – animal epidemic prevention - feed - market information" to ensure thatfarmers can use the most advanced farming technology to ensure farmers’ growing success and profitability. TheCompany has a service team composed of more than 5,000 talents with the most experience and most passion in

the industry; it has also accumulated a variety of advanced animal farming models based on local characteristics;its hundreds of highly efficient service stations in farming concentrated areas throughout the country cansimultaneously provide technical services for tens of thousands of farmers. The Company's relatively completeservice system in the industry can give full play to its product force strengths and provides a full range oftechnical services for farming, which can effectively amplify the benefits for customers, thereby increasing thestickiness of customers.The comprehensive animal farming technical services have become an important brand label of the Company andan important means for the Company to obtain customers and increase the stickiness of customers.4. The Company's existing industrial layout advantage supports the Company to quickly organize thecomprehensive development of multiple links in the industrial chain, reserve of new businesses in order, and theincreasingly prominent industrial comprehensive advantages.The Company's feed products include a full range of feed products such as livestock and poultry feed and aquaticfeed. The product line is complete and the product mix features endow the company with a strong anti-riskcapability. Different kinds of feed products have different technical contents, different gross profit margins, anddifferent market characteristics and operational risks. The Company's product mix makes it possible for theCompany to obtain higher gross profit margins than the industry's general level, and to better control the marketoperational risks caused by animal epidemic diseases and imbalance of supply and demand and ensures theCompany's stable revenue from sales of feed products and maintain a rapid growth much higher than that of theindustry.Over the years, the Company has orderly developed high-quality aquatic animal seedlings, aquatic animalhealthcare products, livestock and poultry vaccines, veterinary drugs, animal healthcare products for livestock andpoultry, pig farming and other businesses and the core technologies in industrial chain have gradually gainedadvantages in terms of technology, industrial layout and industrial collaboration, thus fostering more new businessgrowth points and profit growth points for the Company and laying a sound foundation for the Company to furtheramplify the multiplier effects of the industrial chain and create comparative competitive advantages.5. Continuously building excellent operation management team and fine management capabilityThe Company has a hard-working, dedicated, professional and superb management team with a consistentphilosophy. Most of the members of the team are graduated from agricultural institutions of higher learning andhave a strong professional background. The management has a profound and comprehensive understanding of thefeed industry and has accumulated rich practical experience and formed magnificent and unified visions and goals,strong industry insight, leadership and executive force, enabling them to adapt to the rapid changes in the feedindustry and the Company's ever-increasing operational management requirements in terms of academicbackground, knowledge structure, industry experience and age.In recent years, the industry is in an era of dramatic changes with tremendous changes in industry development,scale of farmers and needs of customers. Emerging industries including rural finance and ″Internet+″ modelhave also constantly impacted the industry. To promote the transformation and innovation of the industry andcreate corporate mechanism and culture, i.e. the collective learning capacity that can quickly respond to changesenabling the Company to continuously create value for customers, is the foundation for the Company to gainsustainable competitive advantages.From producing aquafeed premixture to manufacturing compound feeds for various aquatic species includingfreshwater fish, marine fish, and shrimps, from having leading advantages in aquatic feeds at the beginning togradually having apparent advantages extended to feed for livestock and poultry, from simple feed productionoperation to provision of comprehensive services including seedlings, animal healthcare and animal farmingtechnical services for farmers, and from business operation only in Southern China to expansion to Central China,Eastern China, Northern China, Southeast Asia and South America, the Company has experienced the process ofdevelopment from scratch to become stronger and larger and to rank the forefront of the industry, relying on thecollective learning ability of the Company’s management and all employees. Affected by this culture and benefitsfrom this capacity, the Company keeps learning and growing.

Section IV. Discussion and Analysis of Operations

I. Overview

(I) Industry situation2018 was a tough year for the feed industry. In the first half year, in a backdrop of industrial downturn, some bigenterprises were challenged by the difficulties of weak growth and even declined sales and profits, in addition toSMEs suffering from operating difficulties; coupled with a tightened domestic monetary policy and financialdeleveraging, an overwhelming number of enterprises faced the great pressure and risks from the shortage andrupture of fund and operating cash chain. In the second half year, the outbreak of the African Swine Fever (ASF)added fuel to flames, giving a big blow to the pig farming and feed industries; in addition, US-China trade frictionresulted in multiple times of soar and slump in protein raw materials in China throughout the year, causing a surgein industrial risks. The feed industry stepped into a period of difficult survival.(II) Different breeds and feed categories in the industry showed different trends and performances.In the pig market, the farming cyclic downturn and the outbreak of the plague resulted in low pig prices and bigdecrease in livestock inventory. During the reporting period, pig farming and feed companies went from bad toworse and were still struggling at the end of the period. After the high-level sways in 2016 and the overall fallback in 2017, pig price kept going down all the way until below RMB10/kg in the middle of May 2018 when itgradually stabilized with a slight increase. From August 2018, the exogenous ASF started to attack China’s pigfarming market and spread quickly from the northern area to the whole country, sweeping major pig farmingprovinces and regions in China. The sustained effects of the plague coupled with the policy of pig transportationrestrictions resulted in pervasive unsalable pigs and passive livestock inventory. Pig prices differentiated inproduction and sale areas, prices in many regions decreased further and kept going down with new lowest records,and farmers withdrew faster due to serious losses. Product sales of feed companies suffered from substantialdecrease with the decrease of the livestock inventory. At the same time, they were challenged by farmers’withdrawal from farming due to big losses or the outbreak of the plague, frequent bad debts in feed sales,withdrawal of loans by financial institutions, requirement of upper-stream raw material companies for cash salesand industrial fund shortage.In the poultry market, poultry feed showed a downturn at first followed by an upturn subsequently in the reportingperiod. Affected by the bird flu in the first half year of 2017 and the environmental demolition in the second halfyear, in the first half year of 2018, China’s poultry inventory remained at a low level, poultry feed demand andsales declined, and coupled with the tight monetary policy and big fluctuations in raw material prices, the wholeindustry witnessed difficulties. Due to the short market supply of eggs and meat with substantial profits in poultryfarming, there was a marked increase in poultry inventory in the second half year; poultry feed demand and salesrecovered slightly, but small companies lacking product competitiveness struggled to tide over the difficulties.In the aquatic product market, product prices were relatively higher at first followed by decreases all way down.The low prices throughout the year formed a stark contrast to the high prices in 2017; if viewed in detailedclassification of aquatic species, special aquaculture performed better than bulk aquatic products. The positivetrend of high prices in 2017 continued at the beginning of 2018. From January to April, the prices remained at arelatively higher level and farmers showed increasing enthusiasm for aquatic farming and substantially increasedseeds and feed. However, in late April, bulk aquatic product (conventional freshwater cultured species such asgrass carp, crucian and tilapia) prices slumped. Rapid shrink of profits and even losses from bulk aquatic productculture in many regions, and low prices and losses from culture continued until the end of the year without anyrecovery. Farmers’ enthusiasm decreased and demand for general aquatic feed declined considerably. Specialaquaculture product (which refers to the species with higher prices and with the large-scale culture started inrecent years, such as bass, snakehead, Chinese perch and crayfish) prices remained stable in the first three quartersdriven by the upgrading consumption of domestic people. The profits were quite impressive and thecorresponding feed demand was robust. Affected by the sustained low prices of bulk aquatic products and pigs,some special aquaculture products saw a slump from the fourth quarter until the lowest point around the Spring

Festival in February 2019. It was not until March 2019 that the prices started to recover. During the reportingperiod, aquatic feed industry fell quickly to depression from the boom in 2017, facing great pressure.(III) Impact of ASF on the industry and the Company’s business strategiesThe outbreak of the “African Swine Fever” (ASF) in 2018 will inevitably bring profound impact to domestic pigfarming and feed industry and even the entire farming, feed, animal health and slaughtering industries. Before theproduction and introduction of effective vaccines against ASF, the plague may haunt for a long time and we allneed to learn how co-exist with ASF”.ASF poses a direct and huge threat to pig farming and it is yet difficult to conclude how big the impact will be. Inaddition, the possibility of overturning and rebuilding the industry cannot be ruled out as at now. ASF has changedthe core logic of pig farming from the previous orientation by cost-effectiveness to the focus on epidemic andbiological prevention and control. No effective prevention and control model has been developed in the currentstage. In the hardest hit regions, individual farmers, large pig farms and super large pig farming companies areimpacted to the same extent. Prevention and control seems more difficult in super large pig farms and focus onepidemic prevention has become the core. Upon the change in the core logic of pig farming, significant changeswill occur to other elements including investment schemes for pig farm building, production and operation models,profit models and farmers’ structure, fattening models and farming areas.The impact of ASF on feed industry is similarly huge and far-reaching. The big decrease in pig livestock inventorywill be a destructive blow to small and medium feed companies mainly engaged in pig feed business and farmers’demand for feed companies will change more thoroughly and rapidly: 1. High quality feed: Feed prices are notimportant any more. Instead, the safety and ability to enhance pig immunity of feed are more important. Thus, bigadjustment is expected in the R&D orientation of feed technology, with safety, health, immunization andresistance to diseases to become more straightforward demands; 2. Service: Feed companies should be able tohelp customers effectively enhance the capabilities of prevention and control. They should be able to providecustomers with effective guidance and support in farming model, pig farm design, epidemic prevention andcontrol and farming management; 3. Fund: Fund will be an inevitable challenge in the fight against ASF. Facingsuch high demands from farmers, most existing small and medium feed companies will surely withdraw frommarket competition.We believe that the industrial impact of ASF is not fully clear yet. Lots of situations keep changing and the presentjudgment may change accordingly. In the stage of rapid changes in industrial impact factors, the Company muststick to its own development logic in the first place, maintain corporate strategic willpower and grasp coreelements in its development; meanwhile, it should not miss any opportunity to expand rapidly on the basis ofmature conditions.The Company’s development plan for pig farming was summarized as follows: 1. In 2018, the Company had700,000 slaughter pigs, including about 200,000 self-supporting pigs and piglets and about 500,000 pigs (All werepurchased from outside) raised in the “Company + Farmers” model. After the outbreak of ASF, all the Company’semployees maximized efforts and stayed alerted to handle it with their optimum anti-epidemic plans and strictestanti-epidemic requirements. During the reporting period, the Company’s slaughter pigs were not impacted andslaughter scale was consistent with the budget. 2. The Company rebuilt the sow farms under construction to meetnew anti-epidemic requirements. In 2018, the Company started to build a number of sow farms. As ASF broke outbefore project operation, based on its own understanding of anti-epidemic and the data analysis of epidemic casesand successful anti-epidemic cases nationwide, the Company substantially modified the original design scheme toachieve the highest standard of anti-epidemic requirements. 3. The Company accelerated the completion ofprocedures for reserved land construction to get ready for the expansion of pig farm construction scale andaccelerated progress of investment and construction. Currently, the Company has about 20,000 mu of reservedland for pig farming in Guangdong, Guangxi, Hunan, Hubei, Guizhou and Shandong, which may satisfy thecapacity layout building for more than 200,000 sows (about 5 million pigs). At present, the Company suffers fewlosses from ASF due to the small capacity of its pig farms. Therefore, it does not have a heavy asset burden andhas strong capabilities to expand capacity rapidly after the stabilization of the plague. Since the outbreak of ASF,the Company has suspended the launch of new pig farm construction. Meanwhile, it has sped up the completion ofearly-stage approval procedures for land construction and the reservation for pig farm construction and operatingpersonnel, and continued to refine anti-epidemic plans for pig farms in an effort to ensure the adequate preparation

of various resources needed for construction. Once ASF stabilizes, the Company will expedite pig farmconstruction to achieve the established strategic goal.ASF is both a huge challenge and a significant opportunity to the Company’s feed business. 1. Consumptiondemands are expected to shift from pig to poultry and aquaculture, which will benefit the Company’s poultry andaquatic feed businesses. It is expected that ASF will result in big decrease in pig livestock inventory andsubstantial increase in pig price and drive consumption towards poultry and aquaculture. The Company isexpected to seize more market shares and gain high profits by virtue of its competitive advantages in poultry andaquatic feed over the years. But at the same time, the Company has to face competitors shifting from pig feed topoultry and aquatic feed. Thus, the Company must keep strengthening its competitive advantages in poultry andaquatic feed. 2. With the outbreak of ASF, farmers’ demands for feed will undergo fundamental changes,providing an opportunity for companies with product competitiveness and service capabilities to fully demonstratethemselves. As a late-mover competitor of pig feed, the Company has been taking product R&D and serviceenhancement as the competitive core, persists in spending on product R&D and continues to develop serviceabilities targeting farmers. As a result, it is equipped with strong product development capabilities and servicecapabilities, and the huge changes in pig feed industry will be a precious opportunity to the Company. 3. Theoutbreak of ASF will inevitably accelerate the integration in feed industry, resulting in faster enhancement ofindustrial concentration. Big market space will be left as most small and medium feed companies are forced toleave the industry, and the Company will have an opportunity to overtake others at the turning in pig feed market.(IV) Production and operation of the CompanyIn 2018, the Company achieved stable and sustainable growth. The business scale of animal feed, aquatic breeding,animal health products, animal husbandry and trade grew on all fronts. For 2018, the operating revenue amountedto RMB 42,157 million, up by 29.49% year-on-year, and the net income attributable to the shareholders of theCompany reached RMB 1,437 million, representing a year-on-year increase of 19.06%.1. Feed sales volume exceeded 10 million tons, marking a new milestoneDuring the reporting period, the Company’s sales volume of feed reached 10.7 million tons, up by 26%year-on-year; sale revenue from feed reached RMB 34,965 million, up by 31.77% year-on-year. The sales volumeof aquatic feed reached 3.11 million tons, up by 23% year-on-year. Marked optimization was seen in the structureof aquatic feed products. The sales volume of aquatic feed for the species including weever, snakehead, yellowcatfish and golden pompano increased by nearly 40% year-on-year, with high growth maintained for years. Thesales volume of feed for crawfish, the extremely popular products, rose by more than 100%. Crawfish is one ofthe fastest growing aquatic species in the market in recent years. The Company has spent on breeding, nutritiondemands, culture technology and culture model with big potential for growth in the future. The sales volume ofpig feed reached 2.32 million tons, up by 53% year-on-year, which was much higher than the industrial averagelevel. With the establishment and refinement of the pig feed quality system, the R&D of new market wasimplemented and tailored to market demands. As a result, the pig feed product competence was further enhanced.Markets in core regions such as Guangdong and Hubei grew by over 30%. The sales volume in newly developedregions rose rapidly, and the word of mouth of new brands continued to increase, gaining recognition of farmers.The sales volume of poultry feed reached 5.27 million tons, up by 19% year-on-year. During the reporting period,while the sound growth of conventional advantaged products such as feed for egg-laying poultry and meat duckswas maintained, meat chicken feed grew by nearly 40% and goose feed advanced by leaps and bounds, becomingnew growth points for the Company’s poultry feed. The Company developed a model of pursuing perfection, scaleand high efficiency for its poultry feed products in the southern region, which resulted in high market shares andsubstantial increase in profitability in some areas.The gross profit margin of the Company’s feed business was 11.04%, down by 0.52 percentage point year-on-year.It was mainly due to the depression of pig industry and compressed profits from pig feed; at the same time,farmers reduced the use of front-end feed with higher gross margins, resulting in the year-on-year decrease in thegross margin of the Company’s pig feed. During the reporting period, while the Company’s sales volume of pigfeed increased by 53% year-on-year, the decreased gross margin of pig feed had a great impact on the overallgross margin of the feed business. In addition, in terms of bulk aquatic products, the gross margin of generalaquatic feed declined slightly on a year-on-year basis because farmers lowered standards for the purchase and useof feed due to low fish prices. During the reporting period, the Company’s gross margin of special aquatic feed

remained unchanged year-on-year, and that of poultry feed slightly rose due to the market recovery in the secondhalf year and the Company’s large-scale and highly efficient operation.2. The animal health business generated operating revenue of RMB 473 million, up by 19.82% year-on-year witha gross profit margin of 47.32%.The Company’s animal health products include microecologics, vaccines and veterinary drugs for aquatic animals,livestock and poultry with a focus on aquatic health. Over years of development, the Company’s aquatic healthbusiness has been equipped with a strong service system, favorable internal distribution channels, solid brandfoundation and prominent advantages in the cost performance of core products. Driven by consumption upgradingand the increase in the size of high-end aquaculture market, the aquatic health market space will maintain stablegrowth. In 2018, the Company commenced the construction of aquatic health factories in Southeast Asia. Thesales from aquatic health business in Southeast Asia will become a new highlight in growth in the future. TheCompany’s livestock and poultry health is still in the early stage. As the capacity of livestock and poultry marketis far bigger than that of aquatic health market and the Company has accumulated years’ experience in the R&D inthe industries of pig vaccines and veterinary drugs, it will have huge space for the support to its own businessdevelopment and livestock and poultry feed development.3. Seedlings, pig farming and poultry meat processing businesses grew on all frontsDuring the reporting period, the Company’s agricultural product business generated sales revenue of RMB 1,742million, up by 44.37% year-on-year. The business mainly includes pig farming, aquaculture fry production ,andpoultry meat processing, which generated revenue of RMB 893 million, RMB 280 million and RMB 565 million,respectively.The Company had 700,000 slaughter pigs, up by 52% year-on-year, including about 200,000 self-supporting pigsand piglets and about 500,000 pigs raised in the “Company + Farmers” model. In 2018, the Company formed apreliminary model for its pig farming segment in cost control, farming technology and human resource reserve.With the expansion of the Company’s farming scale and increasingly mature farming service team, together withthe establishment of the Company’s farming technology research system and gradual implementation of thefarming information-based system which effectively supported the refinement of the Company’s farming system,the farming cost of “Company + Farmers” was cut down effectively step by step and the farming cost wascontrolled within RMB12/kg in the second half year. As at the end of the reporting period, the Company had morethan 800 employees working in the pig farming segment, up by 80% year-on-year. The refinement of the farmingsystem, the improvement of the farming technology and service staff’s skills and the reserve of professionals caneffectively support the subsequent rapid development of pig farming.Aquatic fry mainly include shrimp and fish fry. In terms of shrimp breed, the Company has established acomprehensive system and formed a relatively controllable and standard management model from geneticimprovement to propagation and reproduction. In particular, the Company has made great breakthroughs in whiteshrimp genetic selection, with advantages emerging in its self-developed strains. In terms of fish fry, the Companystarted the genetic selection and reproduction of special species including largemouth bass, snakehead, sea bass,grouper, mandarinfish and crawfish on the basis of continuing to reinforce the breeding R&D and organization ofgenetic selection programmes for the existing breeds including grass carp, crucian, beam, tilapia and yellowcatfish. With breakthroughs in R&D, the special aquaculture will comprise industrial chain advantages togetherwith the Company’s special aquatic feed and animal health products to serve farmers.Regarding the pou ltry meat processing business, in 2017, the Company set up meat duck slaughter and processingfactories in Shandong, which generated operating revenue of RMB 149 million and RMB 565 million in 2017 and2018, respectively. The business expansion was smooth. In addition to supporting the Company’s feed businessdevelopment, it further deepened the Company’s understanding of slaughter, meat product processing and foodbusinesses.4. The trade business generated revenue of RMB 4,875 million, up by 11.97% year-on-yearThe Company’s trade business mainly includes the trade of raw materials of feed. The profit growth points areincreased mainly through the direct conversion of the Company’s purchase advantages of centralized purchase,

large-scale purchase and the combination of futures and spot goods into its trade advantages. In the first half year,trade scale declined year-on-year as the Company controlled the trade scale of raw materials due to bigfluctuations in the price of such raw materials as beans and soybean meals resulting from US-China trade frictionsand substantial increase in capital costs caused by the tight monetary policy in China. In the second half year, theCompany’s trade scale increased as the monetary policy was eased.5. The Company continued to increase R&D spending, focused on the research in animal nutrition, reproductionand genetic improvement and farming model, created professional and differentiated terminal products, furtherenhanced product competence and built a technology-driven farming companyThe Company is determined to become a world’s first-class husbandry enterprise and the foundation lies intechnological innovation and technology-driven. The Company has one research institute, three research centersand over ten R&D pilot bases, which are equipped with a team comprising 59 members with the PhD Degree andnearly 220 with the Master’s Degree engaged in high-grade, precision and advanced R&D. They carry outresearch and development centering around all industrial chain links including breeding, anti-epidemic, farming tofeed, covering pig, chicken, duck, fish, shrimp and other species. Based on the nutrition requirements andproblems of cultured species in different farming stages, the “Database of Animal Nutrition Requirements” andthe “Database of Raw Material Utilization” have been established through whole-cycle experiments in growthperformance and farming. Over years of accumulation, the Company has reserved plentiful development andutilization technologies of new raw materials, application technologies of functional feed additives, formulas andsynthetic methods of energy-efficient and eco-friendly feed for aquaculture, livestock and poultry, and diseaseprevention and control methods for aquaculture, livestock and poultry.During the reporting period, the Company spent RMB 310 million on R&D, up by 21.76% year-on-year. Sinceestablishment, the Company has persisted in increasing R&D spending to systematically establish the technologyand specialization systems for breeding, anti-epidemic, nutrition and farming technology and enhance coreproduct competitiveness. The sustained generous R&D spending guarantees the Company’s leading industrialchain advantages in aquaculture breeding, feed, animal health and farming model and product competitiveness ofpig and poultry feed in the market.While conducting massive fundamental research, the Company gave even more focus on R&D application and theconversion of R&D achievements. During the reporting period, the Company’s new products converted fromR&D technologies included Miaojianle, a functional extruded feed for grass carp fingerling, crucian fingerling’sfunctional feed targeting crucian gill hemorrhage, highly effective health care feed for raw-fish-free culture oflarge yellow croaker, and Danduobao, a functional feed for laying ducks. All the products have generated positivemarket effects and product profits.

II. Analysis of Principal Operations

1. Overview

Please see "I. Overview" under "Discussion and Analysis of Operations" for relevant information.

2. Revenue and cost

(1) Components of revenue

Unit: RMB

20182017Increase/decrease
Amount% of revenueAmount% of revenue
Total operating revenue42,156,628,800.11100%32,556,634,127.38100%29.49%
By industry
Feed industry40,415,026,750.3695.87%31,350,326,470.8796.29%28.91%
Farming industry1,741,602,049.754.13%1,206,307,656.513.71%44.37%
By product
Sales of feed34,965,196,221.2082.94%26,534,947,550.9581.50%31.77%
Sales of animal healthcare products473,324,165.981.12%395,033,183.991.21%19.82%
Sales of agricultural products1,741,602,049.754.13%1,206,307,656.513.71%44.37%
Trading business4,874,822,732.9311.57%4,353,761,813.6613.37%11.97%
Others101,683,630.250.24%66,583,922.270.21%52.71%
By region
Southern China25,268,338,101.6559.94%21,435,646,148.6665.84%17.88%
Eastern China5,944,635,932.6414.10%4,541,380,412.7513.95%30.90%
Northern China13,048,253,974.3730.95%6,882,406,834.6021.14%89.59%
Central China9,410,967,930.3522.32%7,668,641,426.5123.55%22.72%
Overseas2,982,432,421.867.08%2,418,687,862.147.43%23.31%
Combined offset-14,497,999,560.76-34.39%-10,390,128,557.28-31.91%39.54%

(2) Industries, products or regions accounting for over 10% of revenue or operating income of theCompany

√ Applicable □ Not applicableWhether the Company needs to comply with the disclosure requirements of specific industriesNoUnit: RMB

RevenueOperating costsGross profit marginIncrease/decrease of revenue as compared to the corresponding period of the prior yearIncrease/decrease of operating costs as compared to the corresponding period of the prior yearIncrease/decrease of gross profit margin as compared to the corresponding period of the prior year
By industry
Feed industry40,415,026,750.3636,112,759,842.5210.65%28.91%29.34%-0.29%
Farming industry1,741,602,049.751,502,826,342.2513.71%44.37%41.86%1.53%
By product
Sales of feed34,965,196,221.2031,106,349,787.9611.04%31.77%32.55%-0.52%
Sales of animal healthcare products473,324,165.98249,356,564.2047.32%19.82%25.57%-2.41%
Sales of agricultural products1,741,602,049.751,502,826,342.2513.71%44.37%41.86%1.53%
Trading business4,874,822,732.934,722,496,795.033.12%11.97%11.64%0.28%
By region
Southern China25,268,338,101.6522,447,917,297.3711.16%17.88%18.41%-0.40%
Eastern China5,944,635,932.645,523,880,572.287.08%30.90%32.76%-1.30%
Northern China13,048,253,974.3712,247,035,437.726.14%89.59%88.34%0.62%
Central China9,410,967,930.358,870,998,367.705.74%22.72%23.91%-0.90%
Overseas2,982,432,421.862,660,815,502.8310.78%23.31%23.19%0.09%

Under the circumstances that the statistics specification for the Company’s principal operations data experienced adjustment in thereporting period, the principal operations data upon adjustment of the statistics specification at the end of the reporting period in thelatest year□ Applicable √ Not applicable

(3) Whether revenue from sales in kind is higher than revenue from services

√ Yes □ No

By industryItemUnit20182017Increase/ decrease
Feed industrySales10,000 tonnes1,070.14849.0826.04%
Production output10,000 tonnes1,065.37855.8924.34%
Inventories10,000 tonnes12.5917.36-27.48%

Explanation on why the related data varied by more than 30%□ Applicable √ Not applicable

(4) Performance of material sales contracts of the Company during the reporting period

□ Applicable √ Not applicable

(5) Composition of operating costs

By industry and productUnit: RMB

By industryItem20182017Increase/decrease
Amount% of operating costsAmount% of operating costs
Feed industryMaterial costs34,607,873,095.7195.83%26,732,784,022.6595.75%29.46%
Feed industryLabour costs407,312,350.011.13%312,782,570.851.12%30.22%
Feed industryManufacturing expenses983,253,333.822.72%775,075,975.452.77%26.86%
Feed industryOthers114,321,062.980.32%99,548,939.510.36%14.84%
Total of feed industry36,112,759,842.52100.00%27,920,191,508.46100.00%29.34%
Farming industryMaterial costs1,239,184,793.4182.46%881,166,875.5383.18%40.63%
Farming industryLabour costs174,088,889.2011.58%119,219,016.8911.25%46.02%
Farming industryManufacturing expenses89,552,659.645.96%59,001,291.545.57%51.78%
Total of farming industry1,502,826,342.25100.00%1,059,387,183.96100.00%41.86%

Unit: RMB

By productItem20182017Increase/decrease
Amount% of operating costsAmount% of operating costs
Sales of feedMaterial costs29,729,810,330.6595.57%22,399,293,007.6495.45%32.73%
Sales of feedLabour costs400,649,491.111.29%305,549,069.491.30%31.12%
Sales of feedManufacturing expenses975,889,966.203.14%763,651,378.573.25%27.79%
Total sales of feed31,106,349,787.96100.00%23,468,493,455.70100.00%32.55%
Sales of animal healthcare productsMaterial costs235,330,337.6894.38%179,915,386.5590.61%30.80%
Sales of animal healthcare productsLabour costs6,662,858.902.67%7,233,501.363.64%-7.89%
Sales of animal healthcare productsManufacturing expenses7,363,367.622.95%11,424,596.885.75%-35.55%
Total sales of animal health products249,356,564.20100.00%198,573,484.79100.00%25.57%
Sales of agricultural productsMaterial costs1,239,184,793.4182.46%881,166,875.5383.18%40.63%
Sales of agricultural productsLabour costs174,088,889.2011.58%119,219,016.8911.25%46.02%
Sales of agricultural productsManufacturing expenses89,552,659.645.96%59,001,291.545.57%51.78%
Total sales of agricultural products1,502,826,342.25100.00%1,059,387,183.96100.00%41.86%
Trading businessMaterial costs4,642,732,427.3898.31%4,153,575,628.4698.19%11.78%
Trading businessPurchase expenses79,764,367.651.69%76,369,756.071.81%4.44%
Total of trading business4,722,496,795.03100.00%4,229,945,384.53100.00%11.64%
OthersSales costs34,556,695.33100.00%23,179,183.44100.00%49.09%

(6) Change of scope of consolidation during the reporting period

√ Yes □ NoDuring the year, the scope of consolidation included 272 newly established subsidiaries. For details, please refer to the Note 7

"Interests in other entities" in XI "Financial Report". The scope of consolidation of the Company in this year increased by 45 and

reduced by 1 as compared with the last year. For details, please refer to the Note 6 "Change in scope of consolidation" in XI

"Financial Report".(7) Significant change in or adjustment of the businesses, products or services of the Company during thereporting period

□ Applicable √ Not applicable

(8) Sales to major customers and major suppliers

Sales to major customers of the Company

Total sales to top 5 customers (RMB)1,357,908,873.12
Total sales to top 5 customers as a percentage of the total sales for the year3.22%
Sales to top 5 customers who are related parties as a percentage of the total sales for the year0.00%

Information on top 5 customers of the Company

No.Name of customerSales (RMB)As a percentage of the total sales for the year (%)
1No. 1722,522,520.281.71%
2No. 2176,209,755.800.42%
3No. 3172,598,491.900.41%
4No. 4159,257,793.990.38%
5No. 5127,320,311.150.30%
Total--1,357,908,873.123.22%

Other explanation of major customers√ Applicable □ Not applicableThe top five customers of the Company are mainly customers of the trading business. The top five customers have no relatedrelationship with the Company. The Company’s directors, supervisors, senior management, core technical personnel, shareholdersholding more than 5% of shares, de facto controllers and other related parties do not have direct or indirect interest in the majorcustomers. The top five customers accounted for 3.22% of total annual sales. The Company’s sales revenue does not depend onsingle or top five customers.Major suppliers of the Company

Total purchases from top 5 suppliers (RMB)3,562,362,176.57
Total purchases from top 5 suppliers as a percentage of the total purchases for the year9.00%
Total purchases from top 5 suppliers who are related parties as a percentage of the total purchases for the year0.00%

Information on top 5 suppliers of the Company

No.Name of supplierPurchases (RMB)As a percentage of the total purchases for the year (%)
1No. 11,082,865,823.042.73%
2No. 2717,054,113.791.81%
3No. 3630,926,821.621.59%
4No. 4572,148,743.301.44%
5No. 5559,366,674.821.41%
Total--3,562,362,176.579.00%

Other explanation of major suppliers√ Applicable □ Not applicableThe top five suppliers of the Company have no related relationship with the Company. The Company’s directors, supervisors, seniormanagement, core technical personnel, shareholders holding more than 5% of shares, de facto controllers and other related parties donot have direct or indirect interest in the major suppliers. The top five suppliers accounted for 9.00% of total annual sales. TheCompany’s sales revenue does not depend on single or top five suppliers.

3. Expenses

Unit: RMB

20182017Increase/ decreaseReasons for material changes
Selling and distribution expenses1,377,926,458.681,070,474,010.8528.72%Mainly due to the expansion of the Company's operating scale, the increase in market development and
promotional costs caused by new production capacity and new markets being put into operation and new products being put into the market, and the increase in sales service personnel and their salary
General and administrative expenses967,112,552.40793,314,667.2421.91%Mainly due to the expansion of the Company's operating scale, the increase in management personnel and their salary
Finance expenses219,052,330.9280,452,779.18172.27%Mainly due to the increase in interest expenses as a result of the increase in long-term and short-term borrowings and the interests thereon
Research and development expenditure309,167,320.66253,923,095.4921.76%Mainly due to a higher expense on R&D materials and higher salaries for the R&D personnel in a bid to enhance the research and development of new products and projects

4. Research and development expenditure

For further information, please refer to “I. Overview” in “Section IV. Discussion and Analysis of Operations”.√ Applicable □ Not applicableResearch and development expenditure of the Company

20182017Percentage change
Research and development headcount1,2001,08910.19%
Ratio of research and development personnel6.90%7.19%-0.29%
Research and development expenditure (RMB)310,403,708.96258,307,038.1020.17%
Research and development expenditure to revenue0.74%0.79%-0.05%
Capitalized amount of research and development expenditure (RMB)5,396,408.679,066,389.79-40.48%
Capitalized research and development expenditure to research and development expenditure1.74%3.51%-1.77%

Reasons for significant change in total research and development expenditure to revenue□ Applicable √ Not applicableReasons for significant change in capitalization rate of research and development expenditure and explanations thereon□Applicable √Not applicable

5. Cash flows

Unit: RMB

Item20182017Increase/ decrease
Subtotal of cash inflows from operating activities42,570,025,344.2333,674,711,087.0626.42%
Subtotal of cash outflows from operating activities41,534,261,337.9033,180,489,631.2125.18%
Net cash flows from operating activities1,035,764,006.33494,221,455.85109.57%
Subtotal of cash inflows from investing activities2,630,017,529.915,838,680,823.75-54.96%
Subtotal of cash outflows from investing activities4,635,569,493.876,910,126,307.27-32.92%
Net cash flows from investing activities-2,005,551,963.96-1,071,445,483.52-87.18%
Subtotal of cash inflows from financing activities10,290,384,714.544,444,218,932.29131.55%
Subtotal of cash outflows from financing activities8,550,331,518.384,017,826,193.07112.81%
Net cash flows from financing activities1,740,053,196.16426,392,739.22308.09%
Net increase in cash and cash equivalents783,892,200.49-162,818,229.01581.45%

Explanation on main effects of material changes√ Applicable □ Not applicable1. Net cash flows from operating activities increased by 109.57% as compared to the corresponding period of the prior year mainlydue to higher operating revenue and profits.2. Net cash flows from investing activities decreased by 87.18% as compared to the corresponding period of the prior year mainlydue to the expansion of the Company's scale and the increase in fixed asset investments.3. Net cash flows from financing activities increased by 308.09% as compared to the corresponding period of the prior year mainlydue to the increase in long-term and short-term borrowings during the reporting period.

Explanation on main reasons leading to the material difference between net cash flows from operating activities during the reportingperiod and net income for the year√ Applicable □ Not applicableDuring the reporting period, the net cash flows from operating activities of the Company amounted to RMB 1,035.76 million, whichwas RMB 448.18 million less than the net income of RMB1,483.94 million. The difference was mainly due to the increase instocking of raw materials.

III. Analysis of Non-Principal Operations

□ Applicable √ Not applicable

IV. Analysis of Assets and Liabilities

1. Material changes of asset items

Unit: RMB

As at the end of 2018As at the end of 2017Percentage changeDescription of major changes
AmountAs a percentage of total assetsAmountAs a percentage of total assets
Monetary assets1,735,409,838.589.99%1,392,046,440.3310.58%-0.59%At the end of the period, the percentage in total assets decreased by 0.59%, flat with the end of the prior year; and the
balance increased by 24.67% year-on-year, which was mainly due to the increase in the scale of the Company's operations, operating revenue and cash inflows.
Accounts receivable1,096,136,255.706.31%760,285,344.095.78%0.53%At the end of the period, the percentage in total assets increased by 0.53%, and the balance increased by 44.17% year-on-year, which was mainly due to the increase in the scale of the Company's operations and operating revenue.
Inventories4,843,780,132.1727.89%3,383,848,292.1925.71%2.18%At the end of the period, the percentage in total assets increased by 2.18%, and the balance increased by 43.14% year-on-year, which was mainly due to the increase in stocking of certain raw materials.
Investment properties46,397,156.640.27%78,309,684.870.60%-0.33%At the end of the period, the percentage in total assets decreased by 0.33%, and the balance decreased by 40.75% year-on-year, which was mainly due to the transfer of some leased-out properties to self-occupied fixed assets.
Long-term equity investments38,614,535.850.22%32,554,508.110.25%-0.03%At the end of the period, the percentage in total assets decreased by 0.03%, flat with the end of the prior year; and the balance increased by 18.62% year-on-year, which was mainly due to the profits of associates during the reporting period.
Property, plant and equipment4,555,480,833.7726.23%3,760,863,514.3628.58%-2.35%At the end of the period, the percentage in total assets decreased by 2.35%, and the balance increased by 21.13% year-on-year, which was mainly due to the production capacity expansion projects under construction being completed, put into production and converted into fixed assets.
Construction in progress724,011,706.234.17%331,973,573.262.52%1.65%At the end of the period, the percentage in total assets increased by 1.65%, and the balance increased by 118.09% year-on-year, which was mainly due to the increase in production capacity expansion projects under construction.
Short-term borrowings2,715,954,867.6915.64%2,303,898,763.7017.51%-1.87%At the end of the period, the percentage in total assets decreased by 1.87%, and the balance increased by 17.89% year-on-year, which was mainly due to the increase in short-term bank loans for more external investments.
Long-term borrowings1,842,910,000.0010.61%0.00%10.61%At the end of the period, the percentage in total assets increased by 10.61%, which was mainly due to the proper increase in long-term bank loans in light of the adjusted monetary policy.
Goodwill380,610,061.822.19%294,540,631.482.24%-0.05%At the end of the period, the balance increased by 29.22% year-on-year, which was mainly due to the Company’s acquisition of Feicheng Heruifeng and Weifang Xuheng. The percentage in total assets at the end of the period was flat with the end of the prior year.

Explanations on relevant data:

1. As at the end of the reporting period, the book value of inventories of the Company was RMB 4,843.78 million, which are mainlyraw materials for production and trade, and merchandise inventories. Inventory falling price reserves of RMB 0.75 million have beensufficiently provided for certain inventory goods whose costs are lower than the net realizable value. The other inventory turnover isnormal.2. As at the end of the reporting period, the book value of fixed assets of the Company was RMB 4,555.48 million. Except thatimpairment provisions of RMB 0.29 million have been sufficiently provided for certain finance lease fixed assets whose recoverableamounts are lower than the book value, the other fixed assets are in normal use and there has been no significant change inprofitability.3. As at the end of the reporting period, the book value of goodwill of the Company was RMB 380.61 million, representing 4.63% ofthe net assets attributable to the shareholders of the Company. At the end of the period, after the Company allocates goodwill to therelevant asset group and uses the financial forecast data approved by the management as the benchmark to predict future cash flows,the Company discounts the goodwill at discounted rate and calculates the present value of future cash flows from the related assetgroup after the allocation of goodwill. Upon calculation, except that the present values of the future cash flows of the asset groups ofHunan Innovation Biotechnology Limited and Sichuan Hailinger Biopharmaceutical Co., Ltd., both subsidiaries of the Company,were less than their book values and provisions of RMB6.08 million for impairment of goodwill were made, the goodwill of otherasset groups did not show signs of impairment.

2. Assets and liabilities measured at fair value

√ Applicable □ Not applicableUnit: RMB

ItemOpening balanceProfit or loss from change in fair value during the periodCumulative fair value change charged to equityImpairment provided during the periodPurchases during the periodDisposal during the periodClosing balance
Financial assets
2. Derivative financial assets9,601,140.0040,071,452.7349,672,592.73
Total of the above9,601,140.0040,071,452.7349,672,592.73
Financial liabilities18,771,309.55-27,500,480.4546,271,790.00

Whether there were any material changes on the measurement attributes of major assets of the Company during the reporting period□ Yes √ No

3. Restriction on asset rights as at the end of the reporting period

As at the end of the reporting period, the Company still had restricted assets of around RMB 7.24 million, which were mainly letterof credit deposits and land reclamation deposits.

V. Analysis of Investments

1. Overview

√ Applicable □ Not applicable

Investments during the reporting period (RMB)Investments during the corresponding period of prior year (RMB)Change
1,232,329,580.75694,684,513.0077.39%

2. Material equity investments during the reporting period

□ Applicable √ Not applicable

3. Material non-equity investments during the reporting period

□ Applicable √ Not applicable

4. Financial assets measured at fair value

√ Applicable □ Not applicableUnit: RMB

Asset classInitial investment costProfit or loss from change in fair value during the periodCumulative fair value change charged to equityPurchases during the periodDisposal during the periodAccumulative return on investmentClosing balanceSource of fund
Futures9,601,140.00-6,658,265.002,942,875.00Owned funds
Derivative financial assets0.0046,729,717.7346,729,717.73Owned funds
Total9,601,140.0040,071,452.730.000.000.000.0049,672,592.73--

5. Use of proceeds

□ Applicable √ Not applicableThe Company did not use any raised funds during the reporting period.

VI. Disposal of Material Assets and Equity Interest

1. Disposal of material assets

□ Applicable √ Not applicableThe Company did not dispose of any material asset in the reporting period.

2. Disposal of material equity interest

□ Applicable √ Not applicable

VII. Analysis of major subsidiaries and investees

√ Applicable □ Not applicableMajor subsidiaries and investees accounting for over 10% of the net income of the CompanyUnit: RMB

Name of companyType of companyPrincipal activitiesRegistered capitalTotal assetsNet assetsRevenueOperating profitNet income
Guangdong Hinter Biotechnology Group Co., Ltd.SubsidiaryProduction and sales of premixture80,000,000753,803,428.57662,133,882.171,351,224,833.43615,991,440.95528,973,099.04
Qingyuan Haibei Bio-technoloSubsidiaryProduction and sales of premixture,1,000,000464,399,057.92274,557,320.71807,451,166.85315,121,532.89269,224,335.12
gy Co., Ltd.additives and micro-ecological products

Description of major subsidiaries and investees1. Guangdong Hinter Biotechnology Group Co., Ltd. is mainly engaged in feed premixture which are mainly sold to other internalbranches and subsidiaries of the Company and other feed companies in the industry. The gross profit of the product is higher than thatof the Company's compound feed products. During the reporting period, its revenue and profit were good and recorded a net incomeof RMB 529 million.2. Qingyuan Haibei Bio-technology Co., Ltd. is mainly engaged in animal healthcare products and feed additives, which are mainlysold to internal feed companies, farmers and distributors. Its product gross margin is higher than that of the Company's compoundfeed products. During the reporting period, it recorded a net income of RMB 269 million.Acquisition and disposal of subsidiaries during the reporting period√ Applicable □ Not applicable

Name of companiesMethods to acquire and dispose of subsidiaries during the reporting periodImpact on overall production and operation and results
Feicheng Heruifeng Agricultural Science and Technology Co., Ltd.Business combination not under common controlNo material effects on the results of the period
Weifang Xuheng Agricultural Science and Technology Co., Ltd.Business combination not under common controlNo material effects on the results of the period
Linyi Yitun Ecological Agriculture Co., Ltd.Business combination not under common controlNo material effects on the results of the period
Zoucheng Mulian Zhongxing Ecological Agriculture Technology Co., Ltd.Business combination not under common controlNo material effects on the results of the period
Jianong (Lianyungang) Husbandry Technology Co., Ltd.Business combination not under common controlNo material effects on the results of the period
Alaer Ruiliheng Biological Protein Co., Ltd.Business combination not under common controlNo material effects on the results of the period
Kembang Subur International Ltd.Business combination not under common controlNo material effects on the results of the period
Namduong Vietnam Aquatic Hatchery Co., Ltd.Business combination not under common controlNo material effects on the results of the period
Changzhou Gude Mold Technology Co., Ltd.Disposal of equity interestsNo material effects on the results of the period
Shaoguan Zhenjiang Yitun Ecological Agriculture Co., Ltd.Newly establishedNo material effects on the results of the period
Shandong Yitun Ecological Agriculture Co., Ltd.Newly establishedNo material effects on the results of the period
Qinzhou Yitun Ecological Agriculture Co., Ltd.Newly establishedNo material effects on the results of the period
Guiding Yitun Ecological Agriculture Co., Ltd.Newly establishedNo material effects on the results of the period
Binyang Heji Yitun Ecological Agriculture Co., Ltd.Newly establishedNo material effects on the results of the period
Shaoyang Yitun Ecological Agriculture Co., Ltd.Newly establishedNo material effects on the results of the period
Maoming Haihang Feed Co., Ltd.Newly establishedNo material effects on the results of the period
Gansu Haid Feed Co., Ltd.Newly establishedNo material effects on the results of the period
Weinan Haid Feed Co., Ltd.Newly establishedNo material effects on the results of the period
Qingyuan Hailong Biotechnology Co., Ltd.Newly establishedNo material effects on the results of the period
PT.HAIDA SURABAYA TRADINGNewly establishedNo material effects on the results of the period
Jinzhou Zhengyuan Grains Trading Co., Ltd.Newly establishedNo material effects on the results of the period
Yingkou Fengmu Agricultural Development Co., Ltd.Newly establishedNo material effects on the results of the period
Guangzhou Haiyou Trade Co., Ltd.Newly establishedNo material effects on the results of the period
Ningbo Fengmu Agricultural Development Co., Ltd.Newly establishedNo material effects on the results of the period
Yonglong Haid Co., Ltd.Newly establishedNo material effects on the results of the period
Changzhou Hairong Aquatic Farming Service Specialized Cooperative AssociationNewly establishedNo material effects on the results of the period
Jining Fengcheng Feed Co., Ltd.Newly establishedNo material effects on the results of the period
Dong’e Dingxin Farming Service Co., Ltd.Newly establishedNo material effects on the results of the period
Heze Haiding Ecological Farming Co., Ltd.Newly establishedNo material effects on the results of the period
Qingyuan Hainong Agriculture and Animal Husbandry Co., Ltd.Newly establishedNo material effects on the results of the period
Yichang Zhihai Feed Co., Ltd.Newly establishedNo material effects on the results of the period
Meishan Haid Zhihai Feed Co., Ltd.Newly establishedNo material effects on the results of the period
Liaocheng Daxin Feed Co., Ltd.Newly establishedNo material effects on the results of the period
Nanning Haid Biological Technology Co., Ltd.Newly establishedNo material effects on the results of the period
Ganzhou Hailong Feed Co., Ltd.Newly establishedNo material effects on the results of the period
Yancheng Dachuan Feed Co., Ltd.Newly establishedNo material effects on the results of the period
Guangdong Mutai Biological Technology Co., Ltd.Newly establishedNo material effects on the results of the period
Guangzhou Haiyuan Micro-Credit Co., Ltd.Newly establishedNo material effects on the results of the period
Guangdong Haid Biological Technology Co., Ltd.Newly establishedNo material effects on the results of the period
Jiangmen Rongchuan Feed Co., Ltd.Newly establishedNo material effects on the results of the period
Chongqing Zhihai Feed Co., Ltd.Newly establishedNo material effects on the results of the period
Meizhou Haid Biological Technology Co., Ltd.Newly establishedNo material effects on the results of the period
Yicheng Haid Biological Technology Co., Ltd.Newly establishedNo material effects on the results of the period
Heshan Ronghai Feed Co., Ltd.Newly establishedNo material effects on the results of the period
Hexian Haid Biologicla Technology Co., Ltd.Newly establishedNo material effects on the results of the period
Sheng Long Aqua Technology (M) SDN. BHD.Newly establishedNo material effects on the results of the period

VIII. Structured Entities Controlled by the Company

□ Applicable √ Not applicable

IX. Outlook on the Future Development of the Company

(I) Development status of the industryAccording to the "13th Five-Year Development Plan for National Feed Industry" (2016-2020) (全国饲料工业“十三五”发展规划(2016-2020 )) issued by the Ministry of Agriculture, during the "13th Five-Year" period, asChina’s economic development has entered into a new normal, the farming industry has entered a new stage ofproduction slowdown, structural optimization, quality upgrade, layout adjustment and industrial integration andthe development of the feed industry faces many challenges in terms of market space, technological updating andindustrial integration.1. Feed demand is stable and the overall industry continues to growAccording to the development goals under the "13th Five -Year Development Plan for National Feed Industry"(2016-2020) (全国饲料工业“十三五”发展规划(2016-2020)), the national industrial feed production is expectedto reach 220 million tonnes in 2020. According to animal species, there are 94 million tonnes of pig feed , 60million tonnes of feed for poultry for meat, 31 million tonnes of feed for poultry for eggs, 20 million tonnes ofaquatic feed , 10 million tonnes of ruminant feed, 1.2 million tonnes of pet feed, and 3.8 million tonnes of otheranimal feeds. It is expected that the total amount of feed will increase by 20 million tonnes in the next five years,representing a growth rate of approximately 10%, and the annual average increase will be approximately 4 milliontonnes, representing a growth rate of approximately 1.9%.2. It is more apprent for technology to drive industry progressIn the differentiation and integrated development of the feed industry, technology has played an increasinglyimportant role in the industrial competition. The global agricultural products are becoming more and more closelyrelated. Weather conditions and trade frictions in certain regions will cause large fluctuations in the prices ofagricultural products. Animal farming requirements, feed formula adjustments, and raw material substitutiontechnologies are the core fields of feed technology competition. For other technologies, vigorous development ofbiological feed technology, continuous increase in the types and the continuous expansion of functions of feedmicrobes, enzyme preparations, etc. have shown tremendous potentials in promoting the reduction of the use offeed antibiotics and efficient utilization of feed resources, and will become new threshold of competition in theindustry.3. It is more urgent to conduct industrial integrationThe growth of the total amount of feed has slowed down, and the competition among enterprises has been fierce.Leading enterprises have accelerated their investment in industries and foreign countries. The feed enterpriseswith strong overall strength have advantages in capital, management, technology, and talents. They will furtheraccelerate the pace of entering the farming industry and building the entire industry chain in order to enhancesustainable development capability. The feed industry in emerging markets such as Southeast Asia, Northeast Asia,and Africa is in a rapid growth period, and the "going global" initiative is increasingly important for China's feedcompanies to expand their development space.4. Seedlings and animal healthcare industries will rapidly grow in longer periods due to technologicaladvancement and farming upgrades.Focusing on the development of the farming industry, the development trend of the feed business also indicates toa large extent that the high-quality animal seedlings will have a huge development demand in the long term.

Strengthening animal health care is an important trend feature of future animal farming development. Productdemand will grow rapidly.(II) Prospects for the future development of the CompanyThe Company's development strategy is to become a leading high-tech farming and animal husbandry companywith sustainable development capability in China. The Company's development is based on "creating value forcustomers". The Company will closely focus on the farming sector to provide farmers with comprehensivesolutions, including feed, seedling, animal healthcare products and farming technology services, and meet otherneeds of farmers and distributors for financial services, etc. to effectively enhance the profitability of theCompany's farmers and distributors and realize the win-win development of the Company and its customers.The basic strategy for the development of the Company's industrial chain is to scale up on the basis ofspecialization and to extend the industrial chain based on core competitiveness. The Company will focus on feedproducts as its core business. At the same time, it will actively develop raw materials, animal healthcare products,seedling, farming, circulation, and food processing businesses, cultivate the Company's professional capabilities inthe entire industry chain, and build its comprehensive core competitiveness in the industry chain.(III) Possible risks1. Risk of Periodical Fluctuations in the Feed Industry due to Abnormal Weather and Animal Epidemic Diseasesduring Animal ProductionThe feed industry mainly serves the downstream animal feeding industry. The abnormal changes in naturalelements such as weather, precipitation and typhoon may lead to fluctuations of the inventory of livestock oraquatic products and even the large-scale outbreak of animal diseases. This thus affects the demand for feed andlikely causes the risk of periodic and regional fluctuations of the latter. With the environmental changes and theexpansion of animal production industry, animal epidemic diseases may also occur occasionally. For instance, theAfrican swine fever virus broke out across China in August 2018. PRRSV-mediated pig disease, shrimp-relevantEMS epidemic disease and poultry-relevant “H7N9” disease all occurred recently. The outbreak of animaldiseases will directly inhibit the scale of animal production and reduce the demand for feed in the short term;major animal epidemic diseases may also dampen the demand from end-consumers, leading to a downturn of theanimal production industry, and further affect the feed demand, giving rise to adverse effects on the productionand operation of feed enterprises.Risk response measures: (1) The Company is currently fully deploying factories and developing local markets inmajor areas in Southern China, Central China, Eastern China and Northern China and overseas markets inSoutheast Asia, etc. and the expansion of regional distribution can effectively cope with the risk of weatheranomalies and natural disasters in local areas. (2) The Company's feed varieties cover pig feed, chicken feed, duckfeed and other livestock feed and fish feed, shrimp feed and other aquatic feed. With a variety of products and awell-balanced structure, it can effectively deal with the risk of single breed species and has strong comprehensiveanti-risk capability.2. Risk of Drastic Price Fluctuations of Major Raw MaterialsThe feed ingredients are mainly various kinds of staple agricultural products, mainly corn and soybeans (soybeanmeal). In recent years, the domestic and international agricultural product markets have been closely linked.Changes in the planting area and harvest of major grain-producing countries, purchasing and storage and subsidypolicies, import and export policies, fluctuations in logistics capacity and costs of shipping, exchange rates andothers may cause great fluctuations in prices of agricultural products, which, in turn, has a certain impact on thecost of feed and farming. With the strengthening of the internationalization of trade of agricultural products, thefactors for changes in the prices of agricultural products have become more complex and the price fluctuationshave therefore increased. If raw material prices fluctuate and the Company fails to understand the changes in feedraw materials in a timely manner and promptly implement strategic management and risk control of procurement,the Company may face the risk of rising integrated procurement costs.Risk response measures: (1) The Company divides raw material varieties and implements a combination of

centralized procurement of large varieties and local procurement of regional varieties, which not only guaranteesthe advantages of large-scale raw material procurement, but also obtains localization advantages from rapidresponse in respect of regional procurement; (2) The Company continuously invests in the construction of the rawmaterial procurement research system. The team of the professional raw material information research departmentis relatively mature. It conducts strategic procurement through the real-time tracking, research and judgment ofthe domestic and foreign bulk raw material market trends, and implements position risk management for bulk rawmaterials through futures hedging, raw materials trade and other tools to effectively control procurement risks; (3)The Company has accumulated rich experience in research and development of animal nutrition and feed formulatechnologies, and has research and development team composed of over 1,000 members. Large amounts of fundsare spent on research and development each year, focusing on animal nutrition requirements, feed formulatechnology, animal farming and genetic improvement, comprehensive investigation on healthy animal farmingstrategies, and other research areas. The Company has a profound understanding of animal nutritionalrequirements and higher level of expertise in comprehensive utilization of raw materials. Therefore, in case of rawmaterial price fluctuations, it can quickly adjust the formula to control the reasonable feed nutrient level andformula costs.3. Risk of Structural, Regional and Scale Adjustment to Farming Industry under Environmental ProtectionRegulations and PoliciesIn recent years, the State has introduced a series of environmental protection laws and regulations including thenew Environmental Protection Law (环保法), the Regulations on Prevention and Control of Pollution fromLarge-Scale Production of Livestock and Poultry (畜禽规模养殖污染防治条例), Action Plan for Prevention andTreatment of Water Pollution (水污染防治行动计划), and the Guiding Opinions on Adjusting the Layout of PigProduction in the Southern Water Network Region (关于促进南方水网地区生猪养殖布局调整), the "13thFive-Year Plan" on Ecological and Environmental Protection (“十三五”生态环境保护规划), which stipulatethe pollution prevention and control of animal production industry, increase the pollution control of animalproduction industry, and especially limit the production scale in the regions of key water sources and itssurrounding areas. According to the regulations and policies of the central government, banned areas andrestricted areas have been set up throughout the country, and pig farms in the banned areas in the southern waternetwork area are gradually relocating. The implementation of environmental protection policies will speed up thewithdrawal of private pig farming farmers, reduce the backward production capacity failing to meetenvironmental protection standards and with a small scale, and enable large -scale farmers to continuously expandtheir production capacity and improve the farming scale and structure; In addition, the establishment of bannedareas and restricted areas will enforce adjustments to the pig production capacity in all places across the country.The adjustments to the scale composition of pig production and the relocation of pig production area will certainlyhave a profound impact on the existing capacity layout, market share, pricing power and business model of thefeed industry. The impact of enforced environmental protection policies on the pig growing and feed industriesputs existing competitive companies in the market at risk of reshuffle.Risk response measures: (1) The Company continually improves its capability to serve farmers. In addition to feedproducts, the Company is also engaged in the industrial chain of animal healthcare products, vaccines and financeand has a strong stickiness to large-scale farmers; (2) The feed varieties of the Company cover livestock, poultry,and aquatic animals and the product line is abundant. The production lines for pig feed, chicken feed, duck feedand pelleted fish feed can be shared. The Company can rapidly shift the production layout and make adjustmentsto adapt to the changes in the industry by adjusting the production capacity in all places. (3) The Company adoptsmultiple models to speed up the production layout in areas with rich resources and strong environmental carryingcapacity, and to seize the market share of new animal farming areas.4. Risk of Exchange Rate FluctuationsThe global procurement of raw materials has become the norm. The scale of overseas investment and overseasoperations of the Company is also rapidly expanding. The scale of cross-border fund settlement and the stock ofoverseas assets have grown substantially, involving the currency types of various related countries. Currencyexchange rate fluctuations are subject to different influence factors, and exchange rate fluctuations in any currencymay have a certain impact on the settlement cost and asset stock value of the region.Risk response measures: (1) Based on the business scale, business model, and settlement characteristics in

different regions and countries, the Company strictly controls the exchange rate risks, carefully selects settlementcurrencies, and strives to achieve relatively balanced regional fund inflow and outflow through structuralarrangements of financing sources and financing types; (2) The expansion of two-way fluctuations in the RMBexchange rate has become the new normal. The Company further enhances its awareness of foreign exchange riskmanagement, and arranges settlement models based on the procurement and sales strategies and cyclecharacteristics of import and export operations. And forward foreign exchange settlement and sale, swaps, foreignexchange options and other financial instruments are flexibly used to lock the exchange rate risks, controlprocurement and sales costs, and control the possible risk brought about by exchange rate fluctuations.

X. Reception of Research Investigations, Communications and Interviews

1. Registration table of reception of research investigations, communications and interviews during thereporting period

√ Applicable □ Not applicable

Reception timeReception methodReception object typeIndex of basic information on research investigation
25 January 2018Field researchInstitutionFor details, please refer to the Table of Investor Relations Activity Records of Guangdong Haid Group Co., Limited 2018-001) published on the website of www.cninfo.com.cn on 26 January 2018
14 May 2018Field researchInstitutionFor details, please refer to the Table of Investor Relations Activity Records of Guangdong Haid Group Co., Limited 2018-002) published on the website of www.cninfo.com.cn on 15 May 2018
14 May 2018Field researchIndividualFor details, please refer to the Table of Investor Relations Activity Records of Guangdong Haid Group Co., Limited 2018-002) published on the website of www.cninfo.com.cn on 15 May 2018
29 August 2018Field researchInstitutionFor details, please refer to the Table of Investor Relations Activity Records of Guangdong Haid Group Co., Limited 2018-003) published on the website of www.cninfo.com.cn on 31 August 2018
26 October 2018Field researchInstitutionFor details, please refer to the Table of Investor Relations Activity Records of Guangdong Haid Group Co., Limited 2018-004) published on the website of www.cninfo.com.cn on 30 October 2018
14 November 2018Field researchInstitutionFor details, please refer to the Table of Investor Relations Activity Records of Guangdong Haid Group Co., Limited 2018-005) published on the website of www.cninfo.com.cn on 16 November 2018

Section V. Material Matters

I. Profit Distribution for Ordinary Shares of the Company and Capitalization of CapitalReserves

Formulation, implementation or adjustment of profit distribution policy for ordinary shares, especially the cash dividend during thereporting period√ Applicable □ Not applicable

According to the Proposal on 2017 Profit Distribution Plan (《关于2017年度利润分配预案的议案》) asconsidered and approved at the 2017 annual general meeting convened on 17 May 2018, the distribution plan is asfollows: Based on "the total number of shares on the registration date when the plan is implemented in the future",a cash dividend of RMB 2.50 (tax inclusive) was to be paid for every 10 shares. On 28 June 2018, dividenddistribution was completed.The Company’s profit distribution policy, dividend distribution policy, dividend standards, and dividend ratios arewell-defined and clear. Independent directors have duly performed their duties and functions. Minorityshareholders have the opportunity to fully express their views and concern, which is in line with the Articles ofAssociation and the requirements of the consideration procedures. The conditions and procedures for theadjustment or change of the profit distribution policy are compliant and transparent, and the legal rights andinterests of small and medium investors are fully protected.

Particulars of Cash Dividend Policy
Whether the policy is in compliance with the requirements of the Articles of Association or the resolutions passed at the general meeting;Yes
Whether the basis and ratio of the distribution of dividends are well-defined and clear;Yes
Whether the relevant decision making procedure and system are sound;Yes
Whether the independent directors have duly performed their duties and functions;Yes
Whether there are enough opportunities for minority shareholders to express their views and concerns, and whether their legal interests are sufficiently protected, etc;Yes
Whether the conditions and procedures are legal and transparent in respect of cash dividend policy with adjustments and changes;Not applicable

The dividend distribution plans for ordinary shares (proposed) and the proposals on capitalization of capital reserves (proposed) overthe past three years (the reporting period inclusive)

1. 2016 annual dividend distribution plan of the CompanyBased on the Company’s total share capital of 1,575,965,054 shares, a cash dividend of RMB 3.00 (tax inclusive)per 10 shares was distributed and total cash dividend distributed amounted to RMB 472,798,516.20. Theremaining undistributed profits were carried forward to the following year.2. 2017 annual dividend distribution plan of the CompanyBased on the Company’s total share capital of 1,581,514,354 shares, a cash dividend of RMB 2.50 (tax inclusive)per 10 shares was distributed and total cash dividend distributed amounted to RMB 395,378,588.50. Theremaining undistributed profits were carried forward to the following year.3. 2018 annual dividend distribution plan of the Company

On 13 April 2019, the Proposal on 2018 Profit Distribution Plan (关于2018年度利润分配预案的议案) wasconsidered and approved at the seventeenth meeting of the fourth session of the Board. The Company proposed todistribute RMB 3.00 (tax inclusive) per 10 shares based on "the total number of shares on the registration datewhen the plan is implemented in the future". The proposed total amount of dividend shall not exceed the profit ofthe company (parent company) available for distribution to shareholders as at 31 December 2018. The remainingundistributed profits will be carried forward to the following year.

Cash dividends for ordinary shares of the Company over the past three years (the reporting period inclusive)Unit: RMB

Year of distributionAmount of cash dividends (tax inclusive)Net income attributable to ordinary shareholders of the Company in the consolidated financial statements during the year of distributionAs a percentage of net income attributable to ordinary shareholders of the Company in the consolidated financial statementsAmount of cash dividends distribution through other means (such as share repurchase)As a percentage of net income attributable to ordinary shareholders of the Company in the consolidated financial statementsTotal amount of cash dividends (including other means)As a percentage of net income attributable to ordinary shareholders of the Company in the consolidated financial statements
2018 [Note]474,390,280.201,437,281,732.2833.01%0.000.00%474,390,280.2033.01%
2017395,378,588.501,207,225,209.3532.75%0.000.00%395,378,588.5032.75%
2016472,798,516.20855,810,234.8155.25%0.000.00%472,798,516.2055.25%

Note: According to the 2018 profit distribution plan of the Company as considered and approved at the 17th meeting of the 4thsession of the Board of the Company: The Company proposed to distribute RMB 3.00 (tax inclusive) per 10 shares based on “thetotal number of shares on the registration date when the plan is implemented in the future”. The proposed total amount of dividendshall not exceed the profit of the company (parent company) available for distribution to shareholders as at 31 December 2018.According to the Company's total share capital of 1,581,300,934.00 shares as at 13 April 2018, the Company's 2018 annual cashdividend is expected to be RMB 474,390,280.20.The Company made a profit and had positive retained profit available for ordinary shareholders of parent company during thereporting period without cash dividend for ordinary shares being proposed□ Applicable √ Not applicable

II. Proposals on Profit Distribution and Capitalization of Capital Reserves During ThisReporting Period

√ Applicable □ Not applicable

Numbers of bonus share per 10 shares (share(s))0
Dividend distribution per 10 shares (RMB) (tax inclusive)3.00
Conversion per 10 shares (share(s))0
Share base of the distribution proposal (shares)Total number of shares on the registration date when the plan is implemented in the future
Amount of cash dividend (RMB) (tax inclusive)474,390,280.20
Amount of cash dividends distribution through other means (such as share repurchase) (RMB)0.00
Total amount of cash dividends (including other means) (RMB)474,390,280.20
Distributable profits (RMB )2,501,542,551.12
Percentage of total amount of cash dividends (including other means) to total incomes distribution100%
Cash dividend policy
For profit distribution of companies which are fully developed with significant capital expenditure arrangement, the percentage for cash dividend shall represent at least 20% of the profits distribution for the current year
Particulars of profit distribution and capitalization of capital reserves
According to the audit report issued by GP Certified Public Accountants(SGP), the Company (parent company) achieved a net income of RMB 1,367,670,762.86 and made provision for statutory surplus reserves of RMB 136,767,076.29, without allocation to discretionary revenue reserve in 2018. As at 31 December 2018, the profit available for distribution to shareholders amounted to RMB 2,501,542,551.12. Based on the good operating conditions and profitability in 2018, as well as the Company's business scale and future growth, the legitimate demands of investors and continuous return to shareholders, the Company proposed to carry out the 2018 profit distribution on the premise of guaranteeing the Company's normal operations and long-term development: The Company proposed to distribute RMB 3.00 (tax inclusive) per 10 shares based on "the total number of shares on the registration date when the plan is implemented in the future". The proposed total amount of dividend shall not exceed the profit of the company (parent company) available for distribution to shareholders as at 31 December 2018. The remaining undistributed profits will be carried forward to the following year. Taking into account the needs for the business scale expansion and fast growth of the Company, based on the expectations and confidence regarding the Company’s prospects, and in order to look after the shareholders’ immediate and long-term interests in a better way on the premise of guaranteeing the Company's normal operations and long-term development, the Company put forward the above-mentioned profit distribution plan. The preparation of the above-mentioned profit distribution plan is in line with the Company Law and the Articles of Association, and the Dividend Distribution Plan of the Company for the Next Three Years (2016 2018) (《关于公司未来三年(2016-2018年)分红回报规划》). The distribution plan is legal, compliant and reasonable and in line with the Company's distribution policy. The independent directors of the Company expressed their independent opinions that the Company's 2018 profit distribution plan gives full consideration to the returns to investors and is in line with the actual situation of the company without any prejudice to the interests of shareholders, in particular minority shareholders. Therefore, they approved the 2018 profit distribution plan.

III. Performance of Undertakings

1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,shareholders, related parties, bidders and the Company during the reporting period or prior periods butsubsisting to the end of the reporting period

√ Applicable □ Not applicable

UndertakingParty involved in undertakingType of undertakingDetails of undertakingUndertaking dateTermParticulars on the performance
Undertaking on shareholding structure reformation
Undertaking made in offering documents or shareholding alternation documents
Undertaking made during asset reconstruction
Undertaking made on initial public offering or refinancingHua XueUndertaking on horizontal competitio1. Mr. Hua Xue guarantees no prejudice to the interests of Haid Group and its other shareholders by virtue of his capacity as the de facto controller. 2. Mr. Hua Xue guarantees that, as long as he serves as the de facto27 November 2009Long termIn strict performance
n, related party transaction and capital occupationcontroller of Haid Group, he and his wholly-owned subsidiaries, controlled subsidiaries and actually controlled companies (except Haid Group) will not engage in business activities that, directly or indirectly, compete with or constitute competitive threat to the principal businesses or major products of Haid Group in any form, including investment, acquisition or merger of companies, enterprises or other economic organizations the principal businesses or major products of which are the same with or similar to those of Haid Group.
Guangzhou Haihao Investment Co., Ltd.Undertaking on horizontal competition, related party transaction and capital occupation1. It guarantees no prejudice to the interests of Haid Group and other shareholders of Haid Group by virtue of its capacity as the controlling controller. 2. Guangzhou Haihao guarantees that, as long as it is the controlling shareholder of Haid Group, it and its wholly-owned subsidiaries, controlled subsidiaries (except Haid Group) and actually controlled companies will not engage in business activities that, directly or indirectly, compete with or constitute competitive threat to the principal businesses or major products of Haid Group in any form, including investment, acquisition or merger of companies, enterprises or other economic organizations the principal businesses or major products of which are the same with or similar to those of Haid Group.27 November 2009Long termIn strict performance
Equity incentive undertakingsGuangdong Haid Group Co., LimitedOther undertakingThe Company guarantees no provision loans or financial assistance in other forms to the incentive targets for acquisition of relevant interests under the Restricted Shares and Share Options Plan of Guangdong Haid Group Co., Limited (广东海大集团股份有限公司限制性股票及股票期权计划), including provision of guarantees for their loans.4 March 2015From 4 March 2015 to 3 March 2019In strict performance
Guangdong Haid Group Co., LimitedOther undertakingThe Company guarantees no provision of loans or financial assistance in other forms to the incentive targets for acquisition of relevant interests under the 2016 Restricted Shares Incentive Plan of Guangdong Haid Group Co., Limited (广东海大集团股份有限公司2016年限制性股票激励计划), including provision of guarantees for their loans.15 February 2017From 15 February 2017 to 23 March 2022In strict performance
Other undertakings made to the Company’s minority shareholdersGuangdong Haid Group Co., LimitedDividend undertakingSpecific conditions, proportions and intervals of cash dividends: The following conditions shall be satisfied when the company makes distribution of cash dividends: (1) The profits and the accumulative distributable profit (i.e., tax after the Company makes up losses and make allocation to reserves) realized by the company in the year or half year is positive in value and the cash flow is sufficient. The distribution of cash dividend will not affect the Company's subsequent operations; (2) The auditor has issued a standard unqualified audit report on the Company's annual financial report (if the Company distributes the interim dividend, the auditor shall have issued a standard unqualified audit report on the Company's financial report for the previous year; (3) The Company has no plan on material external investment or major cash outlays within the next twelve months (except proceeds-financed investment projects). A major investment plan means that the accumulated expenditure of the Company to be used for external investment and purchase of assets or equipment within the next twelve months will reach or exceed 30% of the Company's latest audited net assets. (4) Other circumstances in which the Board considers it is not suitable for distribution of cash dividends. In compliance with the above conditions, the Company will, in principle, make a distribution of cash18 April 2016From 18 April 2016 to 17 April 2019In strict performance
dividend once a year. The Board of the Company may propose interim cash dividends based on the profitability of the Company when the relevant regulations allow. In principle, the Company's profits accumulated in cash every three years should not be less than 30% of the annual average distributable profit realized in the three years.
Hua Xue, Li Tian, Yingzhuo Xu, Xiaojun Shang, Chengping Lu, Xinchun Li, Erxuan Deng, Zhenxiong Qi, Jing Wang, Jia Chen, Mingzhong Chen, Xueqiao Qian, Shaolin Yang, Zhijian HuangUndertaking on reduction of shareholdingIn compliance with the laws and regulations governing shareholding reductions by directors, supervisors and senior management27 November 2009Long termIn strict performance
Whether undertakings performed on timeYes
Specific reasons why undertakings were not performed on time and next stepsNot applicable

2. Description on the Company’s assets and items in meeting original profit forecast and its explanation asthere is profit forecast for assets and items of the Company and the reporting period is still within theprofit forecast period

√ Applicable □ Not applicable

Earnings forecast asset or project nameForecast start timeForecast end timeExpected results for the current period (RMB 0’000)Actual results for the current period (RMB 0’000)Reasons for failure to reach the forecast (if applicable)Date of previous forecast disclosureIndex of previous forecast disclosure
Shandong Daxin Group Co., Ltd.1 January 201731 December 201810,50010,724.14Not applicable15 September 2017For details, please refer to the Announcement on the Acquisition of Partial Equity Interests of Daxin Group and External Investment (《关于收购大信集团部分股权暨对外投资的公告》) (Announcement No. 2017-076) published in China Securities Journal, Securities Times, Securities Daily and on the website of http://www.cninfo.com.cn.

Undertaking of the Company's shareholders and counterparties on operating results in reporting year√ Applicable □ Not applicable

Jianbing Liu, Haibo Yu, Yuqin Wang, Xianlai Duan and Mingjun Yang (hereinafter referred to as “the undertakingparty”), former shareholders of Shandong Daxin Group Co., Ltd. (formerly known as Shandong Daxin Group Co.,Limited, hereinafter referred to as "Daxin Group"), the acquisition target of the Company, made undertakings onthe net income (i.e., net income attributable to shareholders of the company, before or after the non-operatingincome and loss, whichever is lower; the case is the same below) to be realized in four full accounting years from2017 to 2020:

(1) Daxin Group will achieve a net income of not less than RMB 50 million in 2017, the accumulated net incomeof not less than RMB 105 million in 2017 and 2018, the accumulated net income of not less than RMB 165million in 2017 to 2019, and the accumulated net income of not less than RMB 230 million in 2017 to 2020.(2) If the accumulated net income for the current year fails to reach the committed amount, the undertaking partyshall pay the Company compensation = (accumulated net income for the current year - actual accumulated netincome of the current year) / total committed amount of RMB 230 million * total transaction amount of RMB298,776,000 – net compensation paid by the undertaking party to the Company. The accumulated compensationamount is limited to the total transaction price of the underlying assets. If the actual accumulated net income forany year during the results undertaking period is not less than the accumulated net income undertaken, theCompany shall return all the compensation that has been paid by the undertaking party to the undertaking party.(3) The undertaking party will increase shareholding in Haid Group through purchase of shares from thesecondary market within 6 months after receipt of the second installment of payment for equity transfer with anamount of RMB 60 million. After Daxin Group’s fulfillment of the annual results goals for 2017 and 2018 orpayment of sufficient compensation in case of non-fulfillment of the goals, the undertaking party may release thelock-up for 50% of the above-mentioned shares additionally purchased; After Daxin Group’s fulfillment of theannual results goals for 2017 to 2020 or payment of sufficient compensation in case of non-fulfillment of the goals,the undertaking party may release the lock-up for the remaining 50% of the above-mentioned shares.Up to 29 June 2018, the undertaking party completed the shareholding increase of RMB 60 million and thelock-up thereof. According to the 2017 Audit Report of Shandong Daxin Group Co., Ltd. (山东大信集团有限公司2017年度审计报告) (Guang Kuai Shen Zi [2018] No. G17036521306) and the 2018 Audit Report of ShandongDaxin Group Co., Ltd. (山东大信集团有限公司2018年度审计报告) (Guang Kuai Shen Zi [2019] No.G18031440261) issued by GP Certified Public Accountants (Special General Partnership), Daxin Group's2017-2018 audited net income attributable to shareholders of the company was RMB 121.40 million and the netincome attributable to the shareholders of the company after excluding non-operating income or loss was RMB107.24 million. The undertaking on results of 2017 and 2018 was fulfilled, and the undertaking party was thusallowed to unlock 50% of the above-mentioned increased shares.

IV. Appropriation of Funds of the Company by the Controlling Shareholder and Its RelatedParties for Non-Operating Purposes

□ Applicable √ Not applicableThere was no appropriation of funds of the Company by the controlling shareholder and its related parties for non-operating purposesduring the reporting period.

V. Opinions of the Board, the Supervisory Committee and Independent Directors (If Any)Regarding the "Modified Audit Report" for the Reporting Period Issued by the Accountants

□ Applicable √ Not applicable

VI. Reason for Changes in Accounting Policies, Accounting Estimates and AccountingMethods as Compared to the Financial Report for the Prior Year

√ Applicable □ Not applicable(1) Change in accounting policies

The Ministry of Finance issued on 15 June 2018 the "Notice on Revision and Issuance of the Format of GeneralCorporate Financial Statements for 2018" (关于修订印发2018年度一般企业财务报表格式的通知) Cai Kuai[2018] No. 15, combining certain balance sheet items and splitting certain income statement items; and issued on7 September 2018 the “Interpretations Regarding the Format of General Corporate Financial Statements for 2018"(关于2018年度一般企业财务报表格式有关问题的解读), asking for adjustments to the comparative data of thecomparable periods.The Company has prepared its financial statements as per the said latest requirements on the format of thecorporate financial statements. Where any financial statement item is changed, the comparative figure of thecomparable period is also adjusted accordingly as per the Accounting Standards for Enterprises No. 30 –Presentation of Financial Statements (企业会计准则第30号——财务报表列报) and other applicable rules.The following table presents the effects of the above-mentioned accounting policy changes on the consolidatedfinancial statement items and amounts as at 31 December 2017 (or of the year then ended):

Item affectedBefore the adjustmjentAfter the adjustmentAfter the adjustment
Notes receivable19,209,112.07-19,209,112.07-
Accounts receivable760,285,344.09-760,285,344.09-
Notes and accounts receivable-779,494,456.16779,494,456.16
Interest receivable1,802,621.51-1,802,621.51-
Dividends receivable---
Other receivables360,198,872.961,802,621.51362,001,494.47
Notes payable---
Accounts payable1,228,192,300.58-1,228,192,300.58-
Notes and accounts payable-1,228,192,300.581,228,192,300.58
Interest payable5,188,104.75-5,188,104.75-
Dividends payable8,880,810.40-8,880,810.40-
Other payables550,146,036.6814,068,915.15564,214,951.83
Administrative expense1,047,237,762.73-253,923,095.49793,314,667.24
Research and development expenditure-253,923,095.49253,923,095.49
Other income41,395,359.881,259,316.2642,654,676.14
Non-operating gain28,416,521.26-1,259,316.2627,157,205.00

The following table presents the effects of the above-mentioned accounting policy changes on the parentcompany’s financial statement items and amounts as at 31 December 2017 (or of the year then ended):

Item affectedBefore the adjustmjentAfter the adjustmentAfter the adjustment
Interest receivable964,410.93-964,410.93-
Dividends receivable35,271,940.95-35,271,940.95-
Other receivables5,186,480,721.3936,236,351.885,222,717,073.27
Notes payable---
Accounts payable3,841,782.78-3,841,782.78-
Notes and accounts payable-3,841,782.783,841,782.78
Interest payable4,568,756.23-4,568,756.23-
Dividends payable3,841,961.69-3,841,961.69-
Other payables2,192,507,455.768,410,717.922,200,918,173.68
Administrative expense316,375,501.94- 85,463,563.72230,911,938.22
Research and development expenditure-85,463,563.7285,463,563.72
Other income14,689,716.12603,237.1615,292,953.28
Non-operating gain8,993,035.99-603,237.168,389,798.83

Apart from the above-mentioned changes in accounting policies, there was no other change in accounting policies of the Company inthe year.(2) Change in significant accounting estimatesIn the year, there was no change in the major accounting estimates of the Company.

VII. Reason for Retrospective Restatement to Correct Major Accounting Errors During theReporting Period

□ Applicable √ Not applicableDuring the reporting period, there was no major accounting error which shall be subject to retrospective restatement.

VIII. Reason for Changes in Scope of the Consolidated Financial Statements as Compared tothe Financial Report for the Prior Year

√ Applicable □ Not applicableIn the year, a total of 272 subsidiaries were included in the scope of the consolidated financial statements of the Company. For details,please refer to Note VII "Equity in other entities" in XI "Financial Report". The scope of consolidation of the Company during theyear had 45 more companies included and 1 company excluded compared to the prior year. For details, please refer to Note VI"Changes in the scope of consolidation" in XI "Financial Report".

IX. Engagement or Dismissal of Accounting Firms

Current accounting firm engaged

Name of the domestic accounting firmGP Certified Public Accountants (SGP)
Remuneration of the domestic accounting firm (RMB ’0,000)360
Continued term of service of the domestic accounting firm13
Name of certified public accountants of the domestic accounting firmHongfei Xian, Shuxia Zhang
Continued term of service of certified public accountants of the domestic accounting firmHongfei Xian 5 years, Shuxia Zhang 1 year
Name of the overseas accounting firm (if any)Not applicable
Remuneration of the overseas accounting firm (RMB ’0,000) (if any)0
Continued term of service of the overseas accounting firm (if any)Not applicable
Name of certified public accountants of the overseas accounting firm (if any)Not applicable
Continued term of service of certified public accountants of the overseas accounting firm (if any)Not applicable

Whether to appoint another accounting firm during the current period□ Yes √ NoParticulars on recruitment of accounting firms, financial consultants or sponsors for internal control and auditing purposes□ Applicable √ Not applicable

X. Suspension in Trading or Delisting Upon Publication of Annual Report

□ Applicable √ Not applicable

XI. Matters Related to Bankruptcy and Reorganisation

□ Applicable √ Not applicableThere was no matter related to bankruptcy and reorganisation during the reporting period.

XII. Material Litigation and Arbitration

□ Applicable √ Not applicableDuring the reporting period, the Company was not involved in any material litigation and arbitration.

XIII. Punishment and Rectification

□ Applicable √ Not applicableThere was no punishment and rectification of the Company during the reporting period.

XIV. Credibility of the Company, Its Controlling Shareholders and Beneficial Controllers

□ Applicable √ Not applicable

XV. Implementation of the Equity Incentive Plan, Employee Shareholding Plan or OtherEmployee Incentive Measures of the Company

√ Applicable □ Not applicable

(I) Restricted Shares and Share Option Incentive Plan1. Decision-making procedures and approval(1) On 3 March 2015, the Company convened the 2015 first non-operating general meeting to consider andapprove, by way of special resolutions, the Restricted Shares and Share Option Incentive Plan of Guangdong HaidGroup Co., Limited (广东海大集团股份有限公司限制性股票与股票期权激励计划) and its summary(hereinafter referred to as "Restricted Shares and Share Option Incentive Plan"), the Proposal Regarding theMeasures for Implementation and Assessment of the Restricted Shares and Share Option Incentive Plan ofGuangdong Haid Group Co., Limited (《关于<广东海大集团股份有限公司限制性股票与股票期权激励计划实施考核管理办法>的议案》), the Proposal Regarding Authorisation of the Board of Directors at the GeneralMeeting to Handle Matters Related to the Restricted Shares and Share Option Incentive Plan (《关于股东大会授权董事会办理公司限制性股票与股票期权激励计划相关事宜的议案》) and other proposals.(2) On 4 March 4 2015, the Company convened the thirteenth meeting of third session of the Board to considerand approve the Proposal Regarding Grant of Restricted Shares and Share Options to the Targets of the RestrictedShares and Share Option Incentive Plan of Guangdong Haid Group Co., Limited (《关于向<广东海大集团股份有限公司限制性股票与股票期权激励计划>激励对象授予限制性股票与股票期权的议案》), pursuant to whichthe Company granted 14,395,000 restricted shares to 168 targets of restricted shares incentives at the price of

RMB 5.64 per share; 10,425,000 share options to 291 targets of share option incentives at the exercise price ofRMB 11.41 per share with the grant date of 4 March 2015. The source of the underlying shares of the restrictedshares and share options under the plan were the RMB denominated ordinary shares issued by the Company to theincentive targets by way of private placement. On 20 March 2015, the Company completed registration for grantof the above-mentioned restricted shares and share options.2. Implementation during the reporting period(1) The third unlocking/exercise period of Restricted Shares and Share Option Incentive Plan1) On 19 April 2018, the Company convened the twelfth meeting of the fourth session of the Board to considerand approve the Proposal on the Satisfaction of the Unlocking/Exercise Conditions of the Share Option IncentivePlan (《关于股权激励计划符合解锁/行权条件的议案》). The Board was of the view that the restrictedshares/share options held by incentive targets had satisfied the unlocking/exercise conditions of the thirdunlocking/exercise period of the Restricted Shares and Share Option Incentive Plan (《限制性股票与股票期权激励计划》) and thus approved the unlocking of restricted shares/exercise of share options in the thirdunlocking/exercise period of the Restricted Shares and Share Option Incentive Plan (《限制性股票与股票期权激励计划》). In the third unlocking/exercise period of the Restricted Shares and Share Option Incentive Plan (《限制性股票与股票期权激励计划》), the number of restricted shares available for listing and trading was 5,362,700shares and the number of exercisable options was 3,607,800. The exercise term was from 11 May 2018 to 1 March2019.2) From 11 May to 31 December 2018, the option incentive targets chose to exercise 3,530,850 options in thethird exercise period of the Restricted Shares and Share Option Incentive Plan (《限制性股票与股票期权激励计划》), of which 3,517,950 shares were added to the share capital during the reporting period, while 12,900 optionswere exercised but not yet registered.(2) Repurchase for cancellation for Restricted Shares and Share Option Incentive PlanOn 19 April 2018, the Company convened the twelfth meeting of the fourth session of the Board to consider andapprove the Proposal on Adjustments to Relevant Matters of the Stock Incentive Plan of the Company andCancellation of Certain Share Options (《关于调整公司股权激励计划相关事项及注销部分股票期权的议案》)and the Proposal Regarding Repurchase of Certain Restricted Shares for Cancellation (《关于回购注销部分限制性股票的议案》). In respect of the Restricted Shares and Share Option Incentive Plan (限制性股票与股票期权激励计划) of the Company, due to demission, death caused by illness or unaccepted individual performanceappraisal results of certain incentive targets, the number of incentive targets of the Company was adjusted to 381,the number of restricted shares which had been granted but not unlocked was adjusted to 5,362,700 shares and thenumber of restricted shares which had been granted and were subject to repurchase for cancellation was 21,700shares. The repurchase price was RMB 3.31 per share; the number of share options which had been granted butnot exercised was 3,607,800, the number of share options which had been granted and was subject to cancellationwas 12,600. On 19 June 2018, the Company completed cancellation for the above-mentioned share options andthe purchase for cancellation for the above-mentioned restricted shares.3. Incentive targets' exercise of interests during the reporting period and interests accumulatively granted but notyet exercised as at the end of the reporting periodDuring the reporting period, the number of options exercised in the third exercise period of restricted shares andshare option incentive plan was 3,517,950; the number of cancelled share options in the third exercise period was12,600, and the number of restricted shares which had been repurchased for cancellation was 21,700.As at the end of the reporting period, the unexercised share options under the Restricted Shares and Share OptionIncentive Plan were 76,950.(II) 2016 Restricted Share Incentive Plan1. Decision-making procedures and approval

1) On 15 February 2017, the Company convened the 2017 first non-operating general meeting to consider andapprove the 2016 Restricted Share Incentive Plan of Guangdong Haid Group Co., Limited (Revision) (广东海大集团股份有限公司2016年限制性股票激励计划(修订稿)) and its summary (hereinafter referred to as "2016Restricted Share Incentive Plan") and the Proposal Regarding Authorisation of the Board of Directors at theGeneral Meeting to Handle Matters Related to the 2016 Restricted Share Incentive Plan (《关于提请股东大会授权董事会办理公司2016年限制性股票激励计划相关事宜的议案》) and related resolutions, pursuant to whichthe Company was approved to issue no more than 46 million restricted shares to incentive targets by way ofprivate placement of which 41,601,300 shares would be first granted to 1,484 incentive targets at the grant price ofRMB 7.48 per share, and 4,398,700 restricted shares would be reserved.2) On 13 March 2017, the Company convened the sixth meeting of the fourth session of the Board to consider andapprove the Proposal on Adjustment to the Number of Interests under the 2016 Restricted Share Incentive Plan ofthe Company (《关于调整公司2016年限制性股票激励计划权益数量的议案》), pursuant to which the number ofincentive targets of first grant was changed from 1,484 into 1,373 and the restricted shares not granted yet wereadjusted from 41,601,300 shares to 40,283,200 shares.3) On 13 March 2017, the Company convened the sixth meeting of the fourth session of the Board to consider andapprove the Proposal on Grant of Restricted Shares to Incentive Targets under the 2016 Restricted Share IncentivePlan of the Company (《关于向公司2016年限制性股票激励计划激励对象授予限制性股票的议案》), pursuantto which the Company was approved to grant 40,283,200 shares to 1,373 incentive targets for the first time with13 March 2017 as the first grant date and the grant price of RMB 7.48 per share. On 20 March 2017, the Companycompleted the registration of grant of all the above-mentioned restricted shares.4) On 27 October 2017, the Company convened the tenth meeting of the four session of the Board to consider andapprove the Proposal Regarding Adjustments to the Matters Related to the Equity Incentive Plan and Cancellationof Certain Restricted Shares (《关于调整公司股权激励计划相关事项及注销部分股票期权的议案》) and theProposal Regarding Repurchase of Certain Restricted Shares for Cancellation (《关于回购注销部分限制性股票的议案》), pursuant to which the Company was approved to repurchase the 618,800 unlocked restricted shareswhich had been granted to the certain incentive targets who have resigned or terminated the labor contract forcancellation, the number of incentive targets of the first grant was adjusted to 1,336 and the repurchase price ofrestricted shares was adjusted to RMB 7.18 per share. On 28 December 2017, the Company completes therepurchase for cancellation for all the above-mentioned restricted shares and the cancellation for all theabove-mentioned share options.5) On 8 December 2017, the Company convened the eleventh meeting of the fourth session of the Board toconsider and approve the Proposal Regarding the Grant of Reserved Restricted Shares to Incentive Targets underthe 2016 Restricted Share Incentive Plan of the Company (《关于向公司2016年限制性股票激励计划激励对象授予预留限制性股票的议案》), pursuant to which the Company was approved to grant 4,398,700 reservedrestricted shares to 399 incentive targets with the grant price of RMB 10.44 per share and 8 December 2017 as thegrant date. Upon audit and confirmation by the Shenzhen Stock Exchange and Shenzhen Branch of ChinaSecurities Depository and Clearing Corporation Limited, the Company completed the registration for grant ofreserved restricted shares to 360 incentive targets. 4,308,000 reserved restricted shares were granted and thelisting date of the restricted shares would be 24 January 2018.2. Implementation during the reporting period(1) The first unlocking/exercise period of the 2016 Restricted Share Incentive PlanOn 19 April 2018, the Company convened the twelfth meeting of the fourth session of the Board to consider andapprove the Proposal on the Satisfaction of the Unlocking/Exercise Conditions of the Restricted Share IncentivePlan (《关于股权激励计划符合解锁/行权条件的议案》). The Board was of the view that the restricted sharesfirst granted to incentive targets under the 2016 Restricted Share Incentive Plan (《2016年限制性股票激励计划》)had satisfied the unlocking conditions of the first unlocking period and thus approved the unlocking of restrictedshares in the first unlocking period of the 2016 Restricted Share Incentive Plan (《2016年限制性股票激励计划》).In the first unlocking period of the 2016 Restricted Share Incentive Plan (《2016年限制性股票激励计划》), the

number of restricted shares available for listing and trading was 7,837,500.(2) Repurchase for cancellation for the 2016 Restricted Share Incentive PlanOn 19 April 2018, the Company convened the twelfth meeting of the fourth session of the Board to consider andapprove the Proposal on Adjustments to Relevant Matters of the Stock Incentive Plan of the Company andCancellation of Certain Share Options (《关于调整公司股权激励计划相关事项及注销部分股票期权的议案》)and the Proposal Regarding Repurchase of Certain Restricted Shares for Cancellation (《关于回购注销部分限制性股票的议案》). In respect of the 2016 Restricted Share Incentive Plan (《2016年限制性股票激励计划》) of theCompany, due to demission, violation of professional ethics or damage of the Company’s interests of certainincentive targets, the number of restricted shares which had been first granted but not unlocked was adjusted to39,153,500 shares and the number of restricted shares which had been granted and were subject to repurchase forcancellation was 510,900 shares with a repurchase price of RMB 7.18 per share. The number of restricted shareswhich had been reserved and granted but not unlocked was 4,259,800, and the number of restricted shares whichhad been granted and was subject to repurchase for cancellation was 48,200 with a repurchase price of RMB10.44 per share. On 5 June 2018, the Company completed the repurchase for cancellation of the above-mentionedrestricted shares.On 24 October 2018, the Company convened the sixteenth meeting of the fourth session of the Board to considerand approve the Proposal on the Adjustment to the Repurchase Price of the Stock Incentive Plan (《关于调整股权激励计划回购价格的议案》) and the Proposal Regarding Repurchase of Certain Restricted Shares forCancellation (《关于回购注销部分限制性股票的议案》). Due to the implementation of the Company’s 2017annual equity distribution, as well as the dismission, disqualification or termination of employment of 63restricted share incentive targets and 19 reserved restricted share incentive targets in the first grant, the Companywas approved to adjust the repurchase price of the first granted restricted shares under the 2016 Restricted ShareIncentive Plan (Revised) (《2016年限制性股票激励计划(修订稿)》) to RMB 6.93 per share, adjust therepurchase price of the reserved restricted shares to RMB 10.19 per share, and repurchase for cancellation the1,093,120 restricted shares and the 178,000 reserved restricted shares of the above-mentioned incentive targetswhich had been first granted but failed to satisfy the unlocking conditions. And the Proposal RegardingRepurchase of Certain Restricted Shares for Cancellation (《关于回购注销部分限制性股票的议案》) has beenapproved at the first extraordinary general meeting of 2018.3. Incentive targets' exercise of interests during the reporting period and interests accumulatively granted but notyet exercised as at the end of the reporting periodAs at the end of the reporting period, the number of restricted shares which had been granted but not unlockedunder the 2016 Restricted Share Incentive Plan was 36,447,514 shares.In summary, during the reporting period, due to implementation of the Restricted Shares and Share OptionIncentive Plan (限制性股票与股票期权激励计划) and the 2016 Restricted Share Incentive Plan (2016年限制性股票激励计划), the Company accumulatively granted 4,308,000 restricted shares and 3,607,800 options toincentive targets; the Company repurchased a total of 1,851,920 restricted shares for cancellation and cancelled anaggregate of 12,600 share options. As at the end of the reporting period, the Company had granted a total of36,447,514 restricted shares which had not been unlocked and 76,950 share options which had not been exercised.(III) Explanations for other circumstances due to the implementation of the Restricted Shares and Share OptionIncentive Plan (限制性股票与股票期权激励计划) and 2016 Restricted Share Incentive Plan (2016年限制性股票激励计划) during the reporting period1. For information on grant of interests to and exercise of interests by directors and senior management, pleaserefer to I. 2 "Changes in restricted shares" under section VI in this report.2. Explanation on changes in share capital caused by implementation of the Restricted Shares and Share OptionIncentive Plan (限制性股票与股票期权激励计划) and 2016 Restricted Share Incentive Plan (2016年限制性股票激励计划).

During the reporting period, the total shares of the Company increased by 3,517,950 shares due to incentivetargets’ independent exercise of options; increased by 4,308,000 due to the grant of restricted shares to incentivetargets; and decreased by 1,851,920 shares due to repurchase of restricted shares for cancellation. After theabove-mentioned changes, the total number of shares of the Company as at the end of the period changed from1,575,237,054 shares to 1,581,211,084 shares. For details of the changes, please refer to the I.1 under section VIof this report.3. Accounting treatment method for option incentive and effects of equity incentive cost on the results of theCompanyAccording to relevant provisions under the Accounting Standards for Business Enterprises No. 11 - Share-basedPayment (企业会计准则第11号–股份支付), the Company will, on each balance sheet date in the waiting period,amend the number of restricted shares / share options that are expected to be unlockable / exercisable according tothe latest available changes in the number of incentive targets allowed to unlock restricted shares/exercise options,completion of performance indicators and other follow-up information and include the services obtained in thecurrent period in the relevant costs or expenses and capital reserves at fair value of the restricted shares/exerciseoptions on the grant date.The implementation of the above equity incentive plan will not have a significant impact on the Company'sfinancial position and operating results during the reporting period and in the future.(IV) Employee Stock Ownership Plan for Core Team1. On 15 February 2017, the Proposal Regarding the Employee Stock Ownership Plan for Core Team ofGuangdong Haid Group Co., Limited (Revised) and Its Summary (《关于<广东海大集团股份有限公司核心团队员工持股计划(修订稿)>及其摘要的议案》) was approved at the first extraordinary general meeting of 2017,pursuant to which the Company was approved to prepare the Employee Stock Ownership Plan for Core Team ofGuangdong Haid Group Co., Limited (Revised) (广东海大集团股份有限公司核心团队员工持股计划(修订稿))(hereinafter referred to as the “Employee Stock Ownership Plan”) in accordance with relevant laws andregulations. As such, the Employee Stock Ownership Plan would permanently exist and be launched each yearunless determination as determined by the Stock Ownership Plan Management Committee and consideration andapproval by the Board and general meeting; and the Company would formulate specific plans under the EmployeeStock Ownership Plan. As at 21 March 2017, the Company's initial Employee Stock Ownership Plan for CoreTeam "GF Yuanchi ? Haid Core No. 1 Targeted Asset Management Program (广发原驰?海大核心1号定向资产管理计划)" purchased 720,187 shares. On 29 December 2017, the vesting of the first vesting period of theabove-mentioned purchased shares was completed, with 40% of these shares, i.e. 288,075 shares, being vested.On 29 December 2018, the vesting of the second vesting period of the above-mentioned purchased shares wascompleted, with 30% of these shares, i.e. 216,056 shares, being vested.2. On 14 May 2018, the Proposal Regarding the Second Plan of the Employee Stock Ownership Plan for CoreTeam of Guangdong Haid Group Co., Limited and Its Summary (《关于<广东海大集团股份有限公司核心团队员工持股计划之二期计划>及其摘要的议案》) (hereinafter referred to as the “Second Plan of the EmployeeStock Ownership Plan”) was approved at the 2017 annual general meeting. As such, the Company was approvedto implement the Second Plan of the Employee Stock Ownership Plan. A special fund of RMB38,511,460.57would be established and the related employees would raise no more than RMB50,000,000. The total number ofemployees to participate in the Second Plan of the Employee Stock Ownership Plan would be no more than 30,including 4 directors, supervisors and senior management, as well as no more than 26 other core personnel. As at11 July 2018, the "GF Yuanchi ? Haid Core No. 2 Targeted Asset Management Program” (广发原驰?海大核心2号定向资产管理计划) purchased 4,386,186 shares of the Company’s stock from the secondary market for theSecond Plan of the Employee Stock Ownership Plan, of which 1,908,436 shares were purchased with the specialfund. As at 28 December 2018, the first vesting of the said shares purchased with the special fund was completed,with 40% of these shares, i.e. 763,374 shares, being vested. And the shares purchased with the employees’self-raised capital would be vested on the third vesting day of the shares purchased with the special fundaccording to their payment percentage.

XVI. Significant Related Party Transactions

1. Related party transactions associated with day-to-day operation

√ Applicable □ Not applicable

Related partyRelated party relationshipTypes of the related party transactionsSubject matter of the related party transactionsPricing basis of the related party transactionsPrice of related party transactionsAmount of related party transactions (RMB ’0,000)Percentage as the amount of similar transactionsAmount of transactions approved (RMB ’0,000)Whether exceeding approved capSettlement of related party transactionsMarket price of available similar transactionDisclosure dateDisclosure index
Foshan Haihang Xingfa Agriculture and Animal Husbandry Development Co., Ltd.AssociateSales of products and commoditiesSales of feed and other productsMarket priceThe price of each transaction shall be determined by both parties through negotiation based on the uniform market price as quoted externally by the seller at the time of transaction.4,787.720.11%5,229NoOn normal commercial terms or in accordance with relevant agreementsNot applicable20 April 2018Announcement on Day-to-day Related Party Transaction in 2018 (Announcement No. 2018-016) published in the media designated for information disclosure
Guizhou Fuhai Chemical Co., Ltd.AssociatePurchase of raw materialsPurchase of raw materialsMarket priceThe price of each transaction shall be determined by both parties through negotiation based on the uniform market price as quoted externally by the seller at the time of transaction.8,871.720.22%8,800YesOn normal commercial terms or in accordance with relevant agreementsNot applicable20 April 2018Announcement on Day-to-day Related Party Transaction in 2018 (Announcement No. 2018-016) published in the media designated for information disclos
ure
Total----13,659.44--14,029----------
Particulars on refund of bulk saleNot applicable
Actual performance of day-to-day transactions to be conducted in the period for which the total transaction amount is estimated by categories during the reporting period (if any)Not applicable
Reasons for large differences between transaction prices and market reference prices (if applicable)Not applicable

2. Related party transaction in connection with purchase or sale of assets or equity interest

□ Applicable √ Not applicableThere was no related party transaction of the Company in connection with purchase or sale of assets or equity interest during thereporting period.

3. Related party transaction connected to joint external investment

□ Applicable √ Not applicableThere was no related party transaction of the Company connected to joint external investment during the reporting period.

4. Related creditors’ rights and debts transactions

□ Applicable √ Not applicableThe Company did not have any related creditors’ rights and debts transactions during the reporting period.

5. Other significant related party transactions

□ Applicable √ Not applicableThere was no other significant related party transaction of the Company during the reporting period.

XVII. Material Contracts and Implementation

1. Custody, contracting and leasing

(1) Custody

□ Applicable √ Not applicableThere was no custody of the Company during the reporting period.

(2) Contracting

□ Applicable √ Not applicableThere was no contracting of the Company during the reporting period.

(3) Leasing

□ Applicable √ Not applicableThere was no leasing of the Company during the reporting period.

2. Significant guarantees

√ Applicable □ Not applicable

(1) Guarantees

Unit: RMB 0’000

External guarantees of the Company and its subsidiaries (excluding guarantees to subsidiaries)
Name of obligeeDate of the related announcement disclosing the guarantee amountAmount of guaranteeGuarantee dateGuarantee providedType of guaranteeTermFulfilled or notGuarantee to related parties or not
Customers (such as farmers and dealers) of Jiangsu Haihe Agriculture and Animal Husbandry Co., Ltd.27 April 201840226 April 20180Joint liability guarantee1 yearNoNo
Customers (such as farmers and dealers) of seven controlled subsidiaries including Hunan Haid Bio-Feed Co., Ltd.28 June 20181,556.94 July 2018373Joint liability guarantee1 yearNoNo
Customers (such as farmers and dealers) for whom Shandong Haiding Agriculture and Animal Husbandry Co., Ltd. provided guarantees26 October 20181,10026 October 2018100.97Joint liability guarantee1 yearNoNo
Total external guarantees approved during the reporting period (A1)3,058.9Total actual external guarantees during the reporting period (A2)473.97
Total external guarantees approved at the end of the reporting period (A3)3,058.9Total balance of actual external guarantees at the end of the reporting period (A4)473.97
Guarantees between the Company and its subsidiaries
Name of obligeeDate of the related announcement disclosing the guarantee amountAmount of guaranteeGuarantee dateGuarantee providedType of guaranteeTermFulfilled or notGuarantee to related parties or not
Sheng Long Bio-Tech International Co., Ltd.29 March 201668,6007 May 2016834.57Joint liability guarantee2 yearsYesNo
11 April 20163,869.09Joint liability guarantee2 yearsYesNo
27 June 20163,435.00Joint liability guarantee2 yearsYesNo
26 September5,068.20Joint liability2 yearsYesNo
2016guarantee
27 April 201775,75030 August 201711,923.73Joint liability guarantee1 yearYesNo
29 November 20173,688.79Joint liability guarantee2 yearsNoNo
29 November 20177,278.30Joint liability guarantee2 yearsYesNo
20 April 201899,3897 May 201814,086.21Joint liability guarantee2 yearsNoNo
2 July 20189,761.93Joint liability guarantee1 yearNoNo
23 July 20186,329.11Joint liability guarantee2 yearsNoNo
21 December 20184,785.70Joint liability guarantee2 yearsNoNo
29 August 2018888
Haid International Group Limited27 April 201792,25012 May 20176,863.20Joint liability guarantee1 yearYesNo
31 May 201711,852.95Joint liability guarantee1 yearYesNo
28 June 20176,863.20Joint liability guarantee1 yearYesNo
4 July 201715,101.58Joint liability guarantee1 yearYesNo
27 October 201733,08328 March 201834,316Joint liability guarantee7 yearsNoNo
20 April 2018120,04217 July 20186,863.20Joint liability guarantee2 yearsNoNo
9 July 201811,828.70Joint liability guarantee1 yearNoNo
9 July 20186,863.20Joint liability guarantee1 yearNoNo
17 July 201813,726.40Joint liability guarantee2 yearsNoNo
29 August 201855,235.2028 December 201815,099.04Joint liability guarantee2 yearsNoNo
Sheng Long Bio Tech (M) SDN. BHD27 April 20177502 August 2017343.16Joint liability guarantee1 yearYesNo
20 April 201870025 September 2018137.26Joint liability guarantee1 yearNoNo
Haid Feed Co., Limited20 August 20164,9001 January 2017857.07Joint liability guarantee1 yearYesNo
27 April 201712,00012 November 20172,311.86Joint liability guarantee2 yearsNoNo
8 February 2018807.81Joint liability guarantee2 yearsNoNo
20 April 20184,33923 July 2018222.78Joint liability guarantee2 yearsNoNo
29 August 20184,620
ShengLong Bio-Tech(India)Private Limited20 April 20184,25412 December 2018489.27Joint liability guarantee2 yearsNoNo
29 August 20187,700
Hai Duong Haid Company Limited27 April 20178,25030 November 20172,638.59Joint liability guarantee2 yearsNoNo
20 April 201817 April 20181,750.23Joint liability guarantee2 yearsNoNo
20 April 201810,584
China Haida Feed Group(HK)Limited20 April 2018202,700
29 August 201811,550
PT.HAIDA AGRICULTURE INDONESIA20 April 20183,500
PT.HAIDA SURABAYA TRADING20 April 20183,500
66 wholly-owned or controlled subsidiaries20 April 201817,4121 January 201817,412Joint liability guarantee1 yearNoNo
Total amount of guarantee provided for subsidiaries approved during the reporting period (B1)546,413.2Total amount of guarantee provided for subsidiaries during the reporting period (B2)227,408.13
Total amount of guarantee provided for subsidiaries approved as at the end of the reporting period (B3)841,996.2Total balance of guarantee provided for subsidiaries as at the end of the reporting period (B4)111,635.13
Guarantees between subsidiaries
Name of obligeeDate of the related announcement disclosing the guarantee amountAmount of guaranteeGuarantee dateGuarantee providedType of guaranteeTermFulfilled or notGuarantee to related parties or not
Total amount of guarantee provided (i.e. sum of the above three guarantee amounts)
Total amount of guarantee approved during the reporting period (A1+B1+C1)549,472.10Total amount of guarantee during the reporting period (A2+B2+C2)227,882.10
Total amount of guarantee approved as at the end of the reporting period (A3+B3+C3)845,055.10Total balance of guarantee as at the end of the reporting period (A4+B4+C4)112,109.10
The percentage of total amount of guarantee provided (i.e. A4+B4+C4) to the net assets of the Company14.47%
Of which:
Balance of guarantee provided for shareholders, beneficial controllers and its related parties (D)0
Balance of guarantee directly or indirectly provided for obligors with gearing ratio over 70% (E)5,168.42
Total amount of guarantee provided in excess of 50% of net assets (F)0
Sum of the above three amount of guarantee (D+E+F)5,168.42
Explanations on liability to guarantee occurred during the reporting period or possible joint liability for satisfaction forNot applicable
undue guarantee (if any)
Explanations on provision of guarantee in violation of established proceduresNot applicable

Note: The "Guarantee provided" in the table is converted at the middle rate of exchange at the end of the reporting period.

(2) External guarantees against the rules and regulations

□ Applicable √ Not applicableThere was no external guarantee provided by the Company which was against the rules and regulations during the reporting period.

3. Entrusted cash and asset management(1) Entrusted wealth management

√ Applicable □ Not applicableEntrusted wealth management during the reporting periodUnit: RMB 0’000

TypeFund source for entrusted wealth managementAmount of entrusted wealth managementUndue balanceOverdue outstanding amount
Wealth management products of banksOwned funds67,00043,0000
Total67,00043,0000

Particulars of high risk wealth management products with individual significant amount or low security, poor liquidity, andnon-principal guaranteed□ Applicable √ Not applicableUnable to recover the principal of entrusted wealth management or other circumstances that may result in impairment□ Applicable √ Not applicable

(2) Entrusted loans

□ Applicable √ Not applicableThe Company did not have any entrusted loan during the reporting period.

4. Other material contracts

□ Applicable √ Not applicableThe Company did not have any other material contract during the reporting period.

XVIII. Fulfillment of Social Responsibility

1. Fulfillment of social responsibilityWith the mission of “prospering agriculture and transforming rural China through relying on science andtechnology”, the Company adopts the philosophy of "service-oriented: create value for customers; people-first:

realize value of employees; market-based: create benefits for the society".(1) Protection of the rights and interests of shareholders and creditorsThe Company has established a relatively complete legal person governance structure and improved the internalcontrol system in accordance with the Company Law, the Securities Law, and the Code of Corporate Governancefor Listed Companies to effectively guarantee the rights and interests of all shareholders and creditors; theCompany strictly follows relevant laws. regulations, rules and other provisions in fulfillment of informationdisclosure obligations to disclose information truthfully, accurately, completely, and in a timely manner to ensure

that all shareholders have equal opportunities to obtain information; pays attention to communication andexchange with investors, strengthens communication with investors through multi-level and multi-channelapproaches including telephone, e-mail, and investor relations interactive platforms, etc.; and has prepared a stableprofit distribution policy to proactively reward shareholders. The Company's cash dividend amount since itslisting has reached RMB 2.057 billion and the cash dividend in nearly three years amounts to RMB 1.353 billion(excluding the 2018 dividend distribution which is subject to consideration at the general meeting).(2) Protection of employees' rights and interestsAdhering to the people-centered principle, the Company has formulated relevant management systems for laboremployment and security in accordance with the provisions of the Labor Law, Labor Contract Law and otherrelevant laws and regulations as well as the Company’s actual conditions to guarantee the legal rights and interestsof employees from the system level. The Company focuses on production safety and employee labor safety andproactively creates opportunities for employees to improve their abilities and qualities; various professional orskill trainings are carried out through Haid School on a regular or irregular basis; the Company continuouslyshares the Company’s development achievements with employees, and has launched equity incentive plan,employee stock ownership plan, profit sharing, etc. The remuneration and assessment committee of the Boardfully listens to employees' opinions and formulates salary system plan each year; the Company shoulderscorporate social responsibilities and helps employees whose families are in trouble due to major accidents, majordiseases, disability, or death. The Company has set up the "Haid Group Employee Mutual Aid Fund" for which theCompany, executives and other employees donate a certain amount of donations each year to form a pool of funds,which is implemented by the Executive Committee. In 2018, the Company provided a total of RMB 1,052,000 to48 employees in difficulties.(3) Protection of the rights and interests of suppliers, customers and consumersThe Company has always adhered to the principles of "integrity, equality, and mutual benefit" and proactivelyconstructs and develops strategic partnerships with suppliers and customers. It stresses communication andcoordination with related parties to jointly build a platform for trust and cooperation, and makes investments insmall loan and commercial factoring businesses and industrial funds to solve the financing difficulties of someupstream and downstream operators, reduce the pressure caused by accounts receivable, improve the upstreamand downstream production and management problems, and improve the industrial chain. It takes advantage ofthe combination of industrial capital and financial capital and effectively fulfills its social responsibilities tosuppliers, customers, and consumers.(4) Environmental ProtectionThe Company highly values environmental protection work, takes environmental protection as an important task,and includes environmental protection, energy saving and emission reduction into the important agenda. In strictaccordance with relevant environmental protection regulations and corresponding standards, the Companyeffectively and comprehensively treats waste water, waste gas, and waste residues, and regularly maintains,improves, and renews the Company's environmental protection-related equipment. Over the years, it hasproactively fulfilled its corporate responsibility of environmental protection.(5) Proactive participation in social welfare undertakingsAs the development of enterprises originates from the society, repaying the society is the due responsibility ofenterprises. The Company earnestly fulfills its social responsibilities and has paid taxes in accordance with the law,cared for the disadvantaged groups in the society, and supported education. During the reporting period,1) the Company donated a total of RMB 461,000 to the College of Marine Sciences and the College of VeterinaryMedicine of South China Agricultural University, Guangxi University, Huazhong Agricultural University, SichuanAgricultural University, Hubei Vocational College of Bio-Technology and the School of Life Sciences of SunYat-Sen University, as well as other secondary and primary schools, for the purpose of setting up scholarships andsupporting teaching activities.2) the Company participated in 35 other public welfare activities and donated a total of approximately RMB

1,490,000 mainly used to care for children and the elderly, to care for the physical and mental health of residents,to improve the living environment of local residents, to help the poor, etc.3) the Company continued to support the poverty alleviation work plans at the national, provincial and municipallevels. In the 2018 Guangdong Poverty Alleviation Day & “Yangcheng Charity for People” Program, theCompany donated RMB1 million to the Guangzhou Yangcheng Glorious Cause Foundation to support povertyalleviation in the Guangdong Province.During the reporting period, the Company donated a total of RMB 428,000 and materials to poverty-stricken areasin Guangdong, Guangxi, Guizhou, Henan, Hujian, Hainan, Shandong, etc. for helping the poor, improving theliving environment, purchasing social insurance, etc.2. Performance of Social Responsibility for Targeted poverty alleviation(1) Targeted poverty alleviation planThe Company proactively responds to the spirit under the Decision of the Central Committee of the ChineseCommunist Party and the State Council on Tackling Key Problems in Poverty Alleviation (《中共中央、国务院关于打赢脱贫攻坚战的决定》) and Opinions of China Securities Regulatory Commission on Giving Play to theRole of Capital Market in Serving the Poverty Alleviation Strategy of the State (《中国证监会关于发挥资本市场作用服务国家脱贫攻坚战略的意见》), and has formulated industrial poverty alleviation programs and workplans to assist accrete poverty alleviation. By leveraging on the advantages of the Company in terms of industry,talents, and resources and direct investment in education assistance and industrial development, the Companydevoted to education, poverty alleviation through transfer employment, and other social welfare undertakings andproactively performs social responsibilities.(2) Summary of targeted poverty alleviation in the yearDuring the reporting period, the Company actively promoted the implementation of poverty alleviation projects.1) Proactively carrying out poverty alleviation projectsThe Company always regards poverty alleviation as an important issue for the Company to fulfill its socialresponsibilities. In implementing the strategic layout, the Company gives priority to establishment of productionbases in poor counties / districts / villages (hereinafter referred to as "Poverty-stricken Areas"). During thereporting period, the Company conducted investment in establishment of quite a number of subsidiaries andproactively pushed forward the construction and operation and the projects in several Poverty-stricken Areasincluding the Long’an County in Nanning, Guangxi, the Guiding County in Guizhou and the Shaoyang County inHunan.During the reporting period, the Company, as always, proactively responded to the call of the Committee of theCommunist Party and the government of the Guangzhou Municipality for the counterpart support program. Itsigned a counterpart support agreement with the Zhidong Village in Ziqiang Town, Zhijin County, Bijie City onthe construction project of an edible mushroom production base. This was an effective move to help the poorvillage and the people there to develop their specialty industry and to help them fight their own way out of poverty.The Company has fully fulfilled its social responsibility and contributed positive energy to the cause of targetedpoverty alleviation.2) Proactively carrying out poverty alleviation through educationSince 2016, the Company has persisted in carrying out public benefit activities themed by "prospering farmers andsupporting education" and paid continuous attention to underprivileged children in rural areas. During thereporting period, the Company carried out public benefit activities themed by "prospering farmers and supportingeducation" in Wangling Primary School and Miaoben Primary School in Zhongcheng Town and ChangzhaiVillage Primary School in Bakai Town, Rongjiang County, Guizhou Province. The Company proactivelyadvocated employees to proactively participate in the public benefit activities themed by "prospering farmers and

supporting education". During the reporting period, the total amount of donations made by the employees wasover RMB 20,000, which were used to buy articles of daily use, school supplies and devices. And the Companyinsisted on combination of poverty alleviation, education improvement, and prompting ambition.3) Proactively carrying out poverty alleviation through agricultural and forestry developmentDuring the reporting period, the Company invested RMB 15,574,400 to carry out eight poverty alleviationthrough industrial development programs in Guizhou, Henan, Hunan, Hubei, Guangxi, etc.(3) Targeted poverty alleviation achievements

IndicatorsUnit of measurementQuantity/ development situation
I. General information————
Including: 1. FundsRMB 0'0001,557.44
2. Cash converted from materialsRMB 0'0002.06
II. Sub-item investment————
1. Poverty elimination through industrial development————
Including: 1.1Types of industrial development poverty elimination projects——Agriculture and forestry industry poverty alleviation
1.2Number of industrial development poverty elimination projectsitem8
1.3Invested amount to industrial development poverty elimination projectsRMB 0'0001,557.44
2. Poverty elimination through shift of occupation————
3. Poverty elimination through relocation————
4. Poverty elimination through education————
Including: 4.1 Input of funding poor studentsRMB 0'0002.06
5. Poverty alleviation through improvement in health————
6. Poverty alleviation through ecological protection————
7. Minimum guarantee————
8. Social poverty alleviation————
9.Other projects————
III. Awards granted (description, level)————
Including: 1.Top 10 Chinese Listed Companies in Social Responsibility 2017 (Special Award for Contributions in Poverty Alleviation)
2.Guangdong-Hong Kong-Macau Greater Bay Area Corporate Social Responsibility Award 2017—For Contributions in Targeted Poverty Alleviation

(4) Subsequent targeted poverty alleviation planThe Company will continue to proactively respond to the call of the country to give full play to the Company'sadvantages in terms of industries, talents and resources, engage in targeted poverty alleviation with a relentlesseffort, and promote organic integration between economic value creation and social responsibility fulfillment.

3. Information on environmental protection

Whether the Company and its subsidiaries are key pollutant discharging units as published by the environmental protection authorityYes

Name of the company or subsidiaryNames of major pollutants and characteristic pollutantsDischarge methodOutlet quantityOutlet distributionEmission concentrationPollutant discharge standardsTotal dischargeTotal discharge approvedExcessive discharge
Gaozhou Sanhe Animal Husbandry Co., Ltd. (“Gaozhou Sanhe”) [Note ]Sewage: COD, ammonia nitrogen, PH level, TP, TNDischarge after two-stage A/O treatment1Sewage outletCOD: 70-100mg/L; ammonia: 24-35 mg/L; PH value: 6-9; TP: <1 mg/L; TN: 160-170 mg/LStandards in Table 5 under the Pollutant Discharge Standards for Livestock and Poultry Farming Industry (GB18596-2001)Sewage <128,000 tons /year; COD<16.6 tons /year; ammonia nitrogen <3.2 tons /year;Sewage <128,000 tons /year; COD<16.6 tons /year; ammonia nitrogen <3.2 tons /year;No
GuangzhouDachuan Feed Co., Ltd.(Guangzhou Dachuan)Sewage: COD , BOD5, ammonia nitrogen, PH value, suspended matter, animal and vegetable oilsMunicipal pipe network1Sewage outletCOD: 10mg/L; BOD5: 3.7mg/L; ammonia nitrogen: 0.05mg/L; PH value : 7.86(dimensionless); suspended matter: 11mg/L; animal and vegetable oils: 0.12mg/LThe Discharge Limits of Water Pollutants in Guangdong (DB-44/26-2001) the second time period first-levelSewage : 3,800 tons /yearSewage : 4,860 tons /yearNo
Exhaust gas: particles, sulfur dioxide, nitrogen oxides, carbon monoxide, odorDischarge after sewage treatment4Boiler exhaust gas outlet; dust outlet; soot exhaust gas outlet; exhaust gas outletParticles: 23 mg/m3; sulfur dioxide: 0.24 mg/m3; ammonia nitride: 52 mg/m3; carbon monoxide: 52 mg/m3; odor: average is 16 (dimensionless)Emission Standard of Air Pollutants for Boilers(DB-44/765-2010)gas standard; Emission Limits of Air Pollutants (DB-44/27-2001) the second time period second-level and concentration limits of unorganized emission monitoringExhaust gas: 105 million cubic meters; odor 6 tons/yearExhaust gas: 1,586.21 million cubic meters/yearNo
point for the second time period; Emission Standard of Cooking Fume(GB18483-2001); Emission Standards for Odor Pollutants (GB14554-93) boundary second-level
Guangzhou Haiwei Feed Co., Ltd. (Guangzhou Haiwei)Sewage: COD , BOD5, ammonia nitrogen, PH value, suspended matter, phosphate, animal and vegetable oilsMunicipal pipe network1Total outletCOD: 75.1 mg/l; BOD5: 21.4 mg/L; ammonia nitrogen: 0.089 mg/L; PH value: 6.94; suspended matter: 41 mg/L; phosphate: 0.04 mg/L; animal and vegetable oils < 0.04 mg/LThe discharge limits of water pollutants in Guangdong (DB-44/26-2001) the second time period second-levelSewage: 5,000 tons/yearSewage: 5,300 tons /yearNo
Exhaust gas: particles, sulfur dioxide, nitrogen oxides, carbon monoxide, lampblack, odor, sootDischarge after sewage treatment3Boiler chimney, canteen chimney, workshop exhaust gas outletParticles: 1.9 mg/L; sulfur dioxide: 23.3 mg/m3; nitrogen oxide: 101 mg/m3; soot: 0.237 mg/l; ozone (dimensionless): 18; soot: 20 mg/m3Emission Standard of Air Pollutants for Boilers(DB-44/765-2010)gas standard; Emission Limits of Air Pollutants (DB-44/27-2001) the second time period second-level; Emission Standard of Cooking Fume(GB18483-2001); Emission Standards for Odor Pollutants (GB14554-93) boundary standardExhaust gas: 50.82 million cubic meters/yearExhaust gas: 64.27 million cubic meters/yearNo
Suixian Yuliang Haiding Feed Co., Ltd. (Suixian Haiding)Sewage: COD , ammonia nitrogenMunicipal pipe network1Sewage outletCOD<20mg/L; ammonia nitrogen<35mg/LSecond-level standard in table 4 under integrated wastewater discharge standard (GB8978-1996)COD: 0.2 tons/year; ammonia nitrogen: 0.02 tons/yearCOD: 0.42 tons/year; ammonia nitrogen: 0.049 tons/yearNo
Exhaust gas: nitrogen oxides, carbon monoxideExhaust gas: organized discharge1Exhaust gas outletSulfur dioxide <0.5mg/m3; nitrogen oxides <0.5mg/m3Integrated emission standard of air pollutants(GB16297-1996) the second time period second-level; Emission standard of air pollutants for boiler(GB13271-2001) Class II Period II Coal-fired Boiler StandardSulfur dioxide<1.2 tons/year;Nitrogen oxide<1.2 tons/yearSulfur dioxide: 1.2 tons/year;Nitrogen oxide: 1.2 tons/yearNo
Zhuhai Rongchuan Feed Co., Ltd.(Zhuhai Rongchuan)Exhaust gas: sulfur dioxide, nitrogen oxides, particles(others), dust, odorExhaust gas: organized discharge3Boiler exhaust gas outlet; dust outlet; soot exhaust gas outlet; exhaust gas outletSulfur dioxide <50mg/ m3; nitrogen oxides <150mg/ m3; particles (others) <20 mg/ m3; odor (dimensionless) <2000.4; dust <120.12 mg/m3Emission Standard of Air Pollutants for Boiler (GB 13271-2014); Emission Limits of Air Pollutants (DB-44/27-2001) ; Emission Standards for Odor Pollutants(GB-14554-93)Exhaust gas <4,285.43 million cubic meters/yearExhaust gas: 4,285.43 million cubic meters/yearNo
Kaifeng Haid Feed Co., Ltd. (Kaifeng Haid)Sewage: COD , ammonia nitrogenMunicipal pipe network1Sewage outletCOD<0.52 tons/year; ammonia nitrogen<0.06 tons/yearSecond-level standard in table 4 under integrated wastewater discharge standard (GB8978-1996)COD<0.52 tons/year; ammonia nitrogen<0.06 tons/yearCOD: 0.52 tons/year; ammonia nitrogen: 0.06 tons/yearNo
Exhaust gas: sulfur dioxide, nitrogen dioxide,Discharge after sewage treatment1Exhaust gas outletSulfur dioxide <0.77 tons/year; nitrogenEmission standard of air pollutants forSulfur dioxide <0.77 tons/year; nitrogenSulfur dioxide: 0.77 tons/year; nitrogenNo
sootdioxide <3.3 tons/year; soot <0.67 tons/yearboilers(DB-44/765-2010)gas standarddioxide <3.3 tons/year; soot <0.67 tons/yeardioxide: 3.3 tons/year; soot: 0.67 tons/year

Note: The Company acquired 90% equity interests in Gaozhou Sanhe in 2015 and acquired 10% of minority interests in March 2016.After the acquisition of Gaozhou Sanhe, the Company continued to reform and upgrade the farming technology and environmentalprotection equipment, of which the sewage treatment system was completed in June 2017. Since the acquisition, a total of RMB 7.10million has been invested in Gaozhou Sanhe’s environmental protection projects and equipment.

Construction and operation of pollution prevention and control facilitiesDuring the reporting period, the Company’s key pollutant discharging subsidiaries were all equipped withpollution prevention and control facilities as required and all environmental protection facilities were operatingnormally.Gaozhou Sanhe’s farms were equipped with pollution prevention and control facilities as required and allenvironmental protection facilities were operating normally.In the feed factories of Guangzhou Dachuan, Guangzhou Haiwei, Yuncheng Haiding, Zhuhai Rongchuan andKaifeng Haid, sewage is treated at the sewage treatment station to achieve the standards before being dischargedor recycled; waste gas is being treated through the installation of pulse jet fabric filter, cyclone separator, ozoneprocessor, dust removing tower, desulfurization equipment and electrostatic fume equipment before beingdischarged.

Environmental Impact Assessment and Other Environmental Protection Administrative Licensing of ConstructionProjectsGaozhou Sanhe has obtained the Guangdong Provincial Pollutant Emission Permit (广东省污染物排放许可证)with the number 4409812017000061.All the aforementioned feed factories prepared environmental impact reports before project implementation andsubmitted to the environmental authority for review and approval in accordance with the requirements ofenvironmental laws and regulations. They commenced project construction after obtaining the approval andcarried out construction works strictly in accordance with the requirements of environmental impact assessment.Furthermore, they went through the procedures for the acceptance of project completion for environmental impactassessment in accordance with laws and obtained the pollutant discharge permit.

Emergency plan for emergent environmental incidentsThe Company has formulated the Measures for Management of Safety and Environmental Protection Incidents(安全环保事故事件管理办法) to standardize the Company's safety and environmental accident reporting andinvestigation procedures and enhance the level of accident management. Meanwhile, as per the rules for theprevention of pollution and other public hazards in the Environmental Protection Law of the People’s Republic ofChina, an emergency plan system for urgent environmental incidents has also be formulated and filed with theenvironmental protection and other related administrations.

Self-monitoring program for environmentIn accordance with national or local standards for pollutant discharge (control), environmental impact assessment

reports and official replies, and technical specification requirements of environment monitoring, the Companyformulates self-monitoring plans and designates special personnel to carry out routine monitoring, including themonitoring of the discharge of water pollutants and atmospheric pollutants.Some subsidiaries appoint external professional institutions to carry out phased environment monitoring andintensify their supervision over environmental protection through the combination of self-monitoring andprofessional monitoring by third parties.1. During the reporting period, Yuncheng Haiding appointed Xi’an Juengeng Instrument Co., Ltd., a third-partyindependent institution to carry out two phases of comparative monitoring. The comparative monitoring reportswith the No. ZUYRHJB20180102 and ZYTHJB20180441 were produced respectively, and the results showedthat the system was stable, equipment operation was normal and pollutant monitoring results were accurate.Yuncheng Haiding ensures the accuracy and effectiveness of its self-monitoring by appointing a third-partyinstitution to evaluate its pollutant source monitoring equipment.2. During the reporting period, Zhuhai Rongchuan appointed SOAO Analysis Laboratory, a third-partyindependent institution, to test the concentrations of particulates, ammonia, hydrogen sulfide, trimethylamine andodor. The test report with the No. R18060904HNX-A1 was produced, proving that the results met the standards.3. During the reporting period, Guangzhou Dachuan appointed China National Analytical Center, Guangzhou(NACC), a third-party independent institution, to monitor odor in the air. The monitoring report with theNo.NS201802220 was produced, proving that the results met the standards.

Other environmental information that should be disclosedNone

Others information on environmental protectionNone

XIX. Other Matters of Significance

□ Applicable √ Not applicableThe Company did not have any other matters of significance to be explained during the reporting period.

XX. Matters of Significance of Subsidiaries of the Company

□ Applicable √ Not applicable

Section VI. Share Changes and Shareholder Information

I Share Changes

1. Share Changes

Unit: share

BeforeIncrease/decrease in Reporting Period (+/-)After
SharesPercentage (%)New issueShares as dividend converted from retained earningsShares as dividend converted from capital reservesOtherSubtotalSharesPercentage (%)
1. Restricted shares46,679,4442.96%4,308,000-14,539,930-10,231,93036,447,5142.31%
1.3 Shares held by other domestic investors46,679,4442.96%4,308,000-14,539,930-10,231,93036,447,5142.31%
Shares held by domestic natural persons46,679,4442.96%4,308,000-14,539,930-10,231,93036,447,5142.31%
2. Non-restricted shares1,528,557,61097.04%3,517,95012,688,01016,205,9601,544,763,57097.69%
2.1 RMB common shares1,528,557,61097.04%3,517,95012,688,01016,205,9601,544,763,57097.69%
3. Total shares1,575,237,054100.00%7,825,950-1,851,9205,974,0301,581,211,084100.00%

Reasons for share changes:

√ Applicable □ Not applicable

1. Based on the shareholdings of the Company’s directors, supervisors and senior management in the Company atthe end of last year, their tradable shares were recalculated at the beginning of the current year, resulting inchanges in their shares in lockup.2. Share options were exercised under the Restricted Share and Share Option Incentive Plan(《限制性股票与股票期权激励计划》).During the period from 11 May to 31 December 2018, the awardees of the Restricted Share and Share OptionIncentive Plan (《限制性股票与股票期权激励计划》) chose to exercise 3,530,850 share options in the thirdexercise period, which thus increased the Company’s total shares by 3,517,950 shares, with 12,900 sharesexercised but unregistered. As such, the Company’s total shares increased by 3,517,950 shares.3. Restricted shares were granted under the 2016 Restricted Share Incentive Plan (《2016年限制性股票激励计划》).

On 8 December 2017, the Company granted 4,308,000 restricted shares to the 360 awardees of the 2016Restricted Share Incentive Plan (《2016年限制性股票激励计划》). As of 10 January 2018, the Company hadreceived a total of RMB 44,975,520.00 from the 360 awardees for subscription of those restricted shares, of whichRMB 4,308,000.00 was added to the Company’s registered capital and the other RMB 40,667,520.00 to capitalreserves. This increase in capital was verified by GP Certified Public Accountants (LLP), which issued the CapitalVerification Report GHYZ [2018] No. G17036520025 (广会验字[2018]G17036520025号《验资报告》). On 18January 2018, as confirmed by the Shenzhen branch of China Securities Depository and Clearing Co., Ltd., theCompany completed the registration of the said restricted shares with the Shenzhen branch of China SecuritiesDepository and Clearing Co., Ltd. As such, the Company’s total shares increased by 4,308,000 shares.4. Certain restricted shares were repurchased and cancelled under the equity incentive plans.(1) As certain awardees of the Restricted Share and Share Option Incentive Plan (《限制性股票与股票期权激励计划》) and the 2016 Restricted Share Incentive Plan (Revised) (《2016年限制性股票激励计划(修订稿)》) hadresigned, passed away after illness or failed in their individual performance appraisals, among others, theCompany repurchased and cancelled a total of 580,800 restricted shares that had been granted to the said awardeesbut failed to meet the unlocking conditions. On 20 April 2018, the Company disclosed the Announcement onDecrease in Capital due to Repurchase and Cancellation of Certain Restricted Shares (《关于回购注销部分限制性股票的减资公告》) (announcement No. 2018-022) and publicized the capital decrease matter for 45 days. As of5 June 2018, the Company had returned a total of RMB 4,243,297.00 to the relevant awardees in cash, thusreducing the share capital by RMB 580,800.00 and the capital reserves by RMB 3,662,497.00. This decrease incapital was verified by GP Certified Public Accountants (LLP), which issued the Capital Verification ReportGHYZ [2018] No. G18026520013 (广会验字[2018]G18026520013号《验资报告》). On 19 June 2018, asconfirmed by the Shenzhen branch of China Securities Depository and Clearing Co., Ltd., the Companycompleted the repurchase and cancellation of the said restricted shares with the said authority. As such, theCompany’s total shares decreased by 580,800 shares.(2) As certain awardees of the 2016 Restricted Share Incentive Plan (Revised) (《2016年限制性股票激励计划(修订稿)》) had resigned for personal reasons, violated the professional ethics or damaged the Company’sinterests, among others, the Company repurchased and cancelled a total of 1,271,120 restricted shares that hadbeen granted to the said awardees but failed to meet the unlocking conditions. On 26 October 2018, the Companydisclosed the Announcement on Decrease in Capital due to Repurchase and Cancellation of Certain RestrictedShares (《关于回购注销部分限制性股票的减资公告》) (announcement No. 2018-060) and publicized the capitaldecrease matter for 45 days. As of 12 December 2018, the Company had returned a total of RMB 9,389,141.60 tothe relevant awardees in cash, thus reducing the share capital by RMB 1,271,120.00 and the capital reserves byRMB 8,118,021.60. This decrease in capital was verified by GP Certified Public Accountants (LLP), which issuedthe Capital Verification Report GHYZ [2018] No. G18031440027 (广会验字[2018]G18031440027号《验资报告》). On 27 December 2018, as confirmed by the Shenzhen branch of China Securities Depository and ClearingCo., Ltd., the Company completed the repurchase and cancellation of the said restricted shares with the saidauthority. As such, the Company’s total shares decreased by 1,271,120 shares.After all the changes above, the Company’s total shares have changed from 1,575,237,054 shares to1,581,211,084 shares.

Approval of share changes:

√ Applicable □ Not applicable

1. On 8 December 2017, the Proposal on Granting Reserved Restricted Shares to Awardees under 2016 RestrictedShare Incentive Plan (《关于向公司2016年限制性股票激励计划激励对象授予预留限制性股票的议案》) wasreviewed and approved at the Eleventh Meeting of the Company’s Fourth Board. As such, the Company granted4,308,000 restricted shares to 360 awardees at the price of RMB 10.44/share, with 8 December 2017 as the grantday. On 18 January 2018, the Company completed the registration of the said restricted shares.2. On 19 April 2018, the Proposal on Adjustments to Equity Incentive Plans and Cancellation of Certain ShareOptions (《关于调整公司股权激励计划相关事项及注销部分股票期权的议案》) and the Proposal on

Repurchase and Cancellation of Certain Restricted Shares (《关于回购注销部分限制性股票的议案》) werereviewed and approved at the Twelfth Meeting of the Company’s Fourth Board. As certain awardees of theRestricted Share and Share Option Incentive Plan (《限制性股票与股票期权激励计划》) and the 2016 RestrictedShare Incentive Plan (Revised) (《2016年限制性股票激励计划(修订稿)》) had resigned, failed in the 2017annual individual performance appraisals or passed away after illness, among others, the Company was agreed torepurchase and cancel a total of 580,800 restricted shares that had been granted to these awardees but failed tomeet the unlocking conditions. And the Proposal on Repurchase and Cancellation of Certain Restricted Shares(《关于回购注销部分限制性股票的议案》) has been reviewed and approved at the 2017 Annual GeneralMeeting.3. On 24 October 2018, the Proposal on Repurchase and Cancellation of Certain Restricted Shares (《关于回购注销部分限制性股票的议案》) was reviewed and approved at the Sixteenth Meeting of the Company’s FourthBoard. As 63 awardees of restricted shares and 19 awardees of reserved restricted shares in the first grant hadresigned, been disqualified for the incentives or had their labor contracts terminated by the Company, amongothers, the Company was agreed to repurchase and cancel 1,093,120 restricted shares and 178,000 reservedrestricted shares in the first grant that had been granted to these awardees but failed to meet the unlockingconditions. And the Proposal on Repurchase and Cancellation of Certain Restricted Shares (《关于回购注销部分限制性股票的议案》) has been reviewed and approved at the First Extraordinary General Meeting of 2018.

Transfer of share ownership:

□ Applicable √ Not applicableImplementation progress of any share repurchase:

□ Applicable √ Not applicableImplementation progress of any reduction of the repurchased shares through centralized bidding:

□ Applicable √ Not applicableEffects of share changes on the basic earnings per share, diluted earnings per share, equity per share attributable to the commonshareholders of the Company and other financial indicators of the prior year and the prior period, respectively:

□ Applicable √ Not applicableOther information that the Company considers necessary or is required by the securities regulator to be disclosed:

□ Applicable √ Not applicable

2. Change in Restricted Shares

√ Applicable □ Not applicableUnit: share

ShareholderOpening restricted sharesUnlocked in Reporting PeriodIncreased in Reporting PeriodClosing restricted sharesReason for lockupDate of unlocking
Li Tian1,158,900189,0051,347,905Shares in lockup due to her senior management position: 1. The shares in lockup due to her senior management position increased by 25 shares upon the recalculation of her transferable shares in the year according to her shareholdings on 1 January 2018; 2. 188,980 restricted shares were transferred to her shares in lockup due to her senior management position upon being unlocked.Not applicable
Li Tian314,900188,980125,920Restricted shares: 188,980 restricted shares were unlocked during the reporting period.11 May 2018
Xueqiao Qian73,500178,175251,675Shares in lockup due to his senior management position: 1. The shares in lockup due to his senior management position increased by 8,875 shares upon the recalculation of his transferable shares in the year according to his shareholdings on 1 January 2018; 2. 169,300 restricted shares were transferred to his shares in lockup due to his senior management position upon being unlocked.Not applicable
Xueqiao Qian258,500169,30089,200Restricted shares: 169,300 restricted shares were unlocked during the reporting period.11 May 2018
Shaolin Yang168,00073,140241,140Shares in lockup due to his senior management position: 1. The shares in lockup due to his senior management position decreased by 12,300 shares upon the recalculation of his transferable shares in the year according to his shareholdings on 1 January 2018; 2. 85,440 restricted shares were transferred to his shares in lockup due to his senior management position upon being unlocked.Not applicable
Shaolin Yang175,20085,44089,760Restricted shares: 85,440 restricted shares were unlocked during the reporting period.11 May 2018
Zhijian Huang230,24471,870302,114Shares in lockup due to his senior management position: 1. The shares in lockup due to his senior management position decreased by 18,650 shares upon the recalculation of his transferable shares in the year according to his shareholdings on 1 January 2018; 2. 90,520 restricted shares were transferred to his shares in lockup due to his senior management position upon being unlocked.Not applicable
Zhijian Huang200,60090,520110,080Restricted shares: 90,520 restricted shares were unlocked during the reporting period.11 May 2018
Other restricted share awardees than senior management44,099,60014,517,8804,308,00033,889,720Restricted shares: 1. A total of 4,308,000 restricted shares were granted during the reporting period; 2. A total of 12,665,960 restricted shares were unlocked during the reporting period; 3. A total of 1,851,920 restricted shares were repurchased and cancelled during the reporting period.11 May 2018
Total46,679,44415,052,1204,820,19036,447,514----

II Issuance and Listing of Securities

1. Securities (Exclusive of Preferred Shares) Issued in Reporting Period

□ Applicable √ Not applicable

2. Change in Total Shares, Shareholder Structure and Asset and Liability Structures

√ Applicable □ Not applicable

1. On 8 December 2017, the Company granted 4,308,000 restricted shares to the 360 awardees of the 2016Restricted Share Incentive Plan (《2016年限制性股票激励计划》). As of 10 January 2018, the Company hadreceived a total of RMB 44,975,520.00 from the 360 awardees for subscription of those restricted shares, of whichRMB 4,308,000.00 was added to the Company’s registered capital and the other RMB 40,667,520.00 to capitalreserves. This increase in capital was verified by GP Certified Public Accountants (LLP), which issued the CapitalVerification Report GHYZ [2018] No. G17036520025 (广会验字[2018]G17036520025号《验资报告》). On 18January 2018, as confirmed by the Shenzhen branch of China Securities Depository and Clearing Co., Ltd., theCompany completed the registration of the said restricted shares with the Shenzhen branch of China SecuritiesDepository and Clearing Co., Ltd. As such, the Company’s total shares increased by 4,308,000 shares.2. As certain awardees of the Restricted Share and Share Option Incentive Plan (《限制性股票与股票期权激励计划》) and the 2016 Restricted Share Incentive Plan (Revised) (《2016年限制性股票激励计划(修订稿)》) hadresigned, passed away after illness or failed in their individual performance appraisals, among others, theCompany repurchased and cancelled a total of 580,800 restricted shares that had been granted to the said awardeesbut failed to meet the unlocking conditions. On 20 April 2018, the Company disclosed the Announcement onDecrease in Capital due to Repurchase and Cancellation of Certain Restricted Shares (《关于回购注销部分限制性股票的减资公告》) (announcement No. 2018-022) and publicized the capital decrease matter for 45 days. As of5 June 2018, the Company had returned a total of RMB 4,243,297.00 to the relevant awardees in cash, thusreducing the share capital by RMB 580,800.00 and the capital reserves by RMB 3,662,497.00. This decrease incapital was verified by GP Certified Public Accountants (LLP), which issued the Capital Verification ReportGHYZ [2018] No. G18026520013 (广会验字[2018]G18026520013号《验资报告》). On 19 June 2018, asconfirmed by the Shenzhen branch of China Securities Depository and Clearing Co., Ltd., the Companycompleted the repurchase and cancellation of the said restricted shares with the said authority. As such, theCompany’s total shares decreased by 580,800 shares.3. As certain awardees of the 2016 Restricted Share Incentive Plan (Revised) (《2016年限制性股票激励计划(修订稿)》) had resigned for personal reasons, violated the professional ethics or damaged the Company’s interests,among others, the Company repurchased and cancelled a total of 1,271,120 restricted shares that had been grantedto the said awardees but failed to meet the unlocking conditions. On 26 October 2018, the Company disclosed theAnnouncement on Decrease in Capital due to Repurchase and Cancellation of Certain Restricted Shares (《关于回购注销部分限制性股票的减资公告》) (announcement No. 2018-060) and publicized the capital decrease matterfor 45 days. As of 12 December 2018, the Company had returned a total of RMB 9,389,141.60 to the relevantawardees in cash, thus reducing the share capital by RMB 1,271,120.00 and the capital reserves by RMB8,118,021.60. This decrease in capital was verified by GP Certified Public Accountants (LLP), which issued theCapital Verification Report GHYZ [2018] No. G18031440027 (广会验字[2018]G18031440027号《验资报告》).On 27 December 2018, as confirmed by the Shenzhen branch of China Securities Depository and Clearing Co.,Ltd., the Company completed the repurchase and cancellation of the said restricted shares with the said authority.As such, the Company’s total shares decreased by 1,271,120 shares.After all the changes above, the Company’s total shares have changed from 1,575,237,054 shares to1,581,211,084 shares.

3. Existing Staff-Held Shares

□ Applicable √ Not applicable

III Shareholders and Actual Controller

1. Shareholders and Their Shareholdings at Period-End

Unit: share

Common shareholders at period-end11,220Common shareholders at month-end prior to disclosure of this Report12,245Preferred shareholders with resumed voting rights at period-end (if any) (see note 8)0Preferred shareholders with resumed voting rights at month-end prior to disclosure of this Report (if any) (see note 8)0
5% or greater shareholders or top 10 shareholders
Name of shareholderNature of shareholderShareholding percentage at period-end (%)SharesChange during Reporting PeriodRestricted sharesNon-restricted sharesPledged or frozen shares
StatusShares
Guangzhou Haihao Investment Co., Ltd.Domestic non-state-owned juridical person57.59%910,589,359910,589,359Pledged53,519,000
Hong Kong Securities Clearing Company Ltd.Foreign juridical person2.54%40,201,21621,206,50740,201,216
National Social Security Fund Portfolio 406Other2.13%33,739,2183,001,58533,739,218
Norges Bank – Proprietary FundForeign juridical person2.00%31,613,791-5,231,87431,613,791
China Merchants Bank Co., Ltd - Orient Red Ruifeng Flexible Allocation Mixed Fund (LOF)Other1.50%23,766,5712,676,95823,766,571
Bank of China-Dongfanghong Ruihua Shanghai-Hong Kong-Shenzhen Dynamic Asset Allocation Mixed Type Securities Investment FundOther1.25%19,782,55019,782,550
Central Huijin Asset Management Ltd.State-owned juridical person1.09%17,187,60017,187,600
Industrial and Commercial BankOther0.90%14,233,2038,349,70314,233,203
of China-Invesco Great Wall Newly Growth Mixed Securities Investment Fund
CDPQ or la CaisseForeign juridical person0.76%12,041,561-1,388,30012,041,561
Bank of China-Invesco Great Wall Dingyi Mixed Securities Investment Fund (LOF)其他0.75%11,830,0004,371,64611,830,000
Strategic investor or general juridical person becoming top-10 shareholder due to placing of new shares (if any) (see note 3)N/A
Related or acting-in-concert parties among shareholders aboveAmong the top 10 shareholders above, the first shareholder is the controlling shareholder of the Company, which is neither a related party nor an acting-in-concert party to the other shareholders. It is unknown whether there is, among the other shareholders, any acting-in-concert party as defined in the Administrative Measures On Acquisition Of Listed Companies (《上市公司收购管理办法》) or any related party.
Top 10 non-restricted shareholders
Name of shareholderNon-restricted shares held at period-endType of shares
TypeShares
Guangzhou Haihao Investment Co., Ltd.910,589,359RMB common stock910,589,359
Hong Kong Securities Clearing Company Ltd.40,201,216RMB common stock40,201,216
National Social Security Fund Portfolio 40633,739,218RMB common stock33,739,218
Norges Bank – Proprietary Fund31,613,791RMB common stock31,613,791
China Merchants Bank Co., Ltd - Orient Red Ruifeng Flexible Allocation Mixed Fund (LOF)23,766,571RMB common stock23,766,571
Bank of China-Dongfanghong Ruihua Shanghai-Hong Kong-Shenzhen Dynamic Asset Allocation Mixed Type Securities Investment Fund19,782,550RMB common stock19,782,550
Central Huijin Asset Management Ltd.17,187,600RMB common stock19,782,550
Industrial and Commercial Bank of China-Invesco Great Wall Newly Growth Mixed Securities Investment Fund14,233,203RMB common stock14,233,203
CDPQ or la Caisse12,041,561RMB common stock12,041,561
Bank of China-Invesco Great Wall Dingyi Mixed Securities Investment Fund (LOF)11,830,000RMB common stock11,830,000
Related or acting-in-concert parties among top 10 non-restricted common shareholders, as well as between top 10 non-restricted common shareholders and top 10 common shareholdersAmong the top 10 shareholders above, the first shareholder is the controlling shareholder of the Company, which is neither a related party nor an acting-in-concert party to the other shareholders. It is unknown whether there is, among the other shareholders, any acting-in-concert party as defined in the Measures for Administration of Takeover of Listed Companies (《上市公司收购管理办法》) or any related party.
Top 10 common shareholders conducting securities margin trading (if any) (see note 4)N/A

Indicate by tick mark whether any of the top 10 common shareholders or the top 10 non-restricted common shareholders of theCompany conducted any promissory repo during the Reporting Period.□ Yea √ NoNo such cases in the Reporting Period.

2. Controlling Shareholder

Nature of controlling shareholder: Controlled by a natural personType of controlling shareholder: Juridical person

Name of controlling shareholderLegal representative/person in chargeDate of establishmentUnified social credit codeMain business scope
Guangzhou Haihao Investment Co., Ltd.Hua XueSeptember 27, 200691440113793877530GInvestment with self-owned capital; wholesale of commodities (excluding commodities that require a permit or approval document to trade); retail sales of commodities (excluding commodities that require a permit or approval document to trade); import and export of commodities (excluding commodities restricted to specific parties); and import and export of technologies
Controlling shareholder’s holdings in other listed companies at home or abroad in Reporting PeriodN/A

Change of the controlling shareholder during the Reporting Period:

□ Applicable √ Not applicableNo such cases in the Reporting Period.

3. Actual Controller

Nature of actual controller: Domestic natural personType of actual controller: Natural person

Name of actual controllerRelationship with actual controllerNationalityRight of residence in other countries or regions
Hua XueHimselfChineseNone
Main office titlesChairman of the Board, General Manager
Used-to-be-holding listed companies at home and abroad in past 10 yearsN/A

Change of the actual controller during the Reporting Period:

□ Applicable √ Not applicableNo such cases in the Reporting Period.Ownership and control relations between the actual controller and the Company:

Indicate by tick mark whether the actual controller controls the Company via trust or other ways of asset management.□ Applicable √ Not applicable

4. Other 10% or Greater Juridical-Person Shareholders

□ Applicable √ Not applicable

5. Holdings of the Company’s Controlling Shareholder, Actual Controller, Reorganizer and OtherCommitment Makers under Restricted Sales Condition

□ Applicable √ Not applicable

Hua Xue39.75%

39.75%Guangzhou Haihao Investment Co., Ltd.

Guangzhou Haihao Investment Co., Ltd.Guangdong Haid Group Co., Limited

Guangdong Haid Group Co., Limited57.59%

Section VII. Preferred Shares

□ Applicable √ Not applicableNo preferred shares in the Reporting Period.

Section VIII. Directors, Supervisors, Senior Management and Staff

I Change in Shareholdings of Directors, Supervisors and Senior Management

NameOffice titleIncumbent/FormerGenderAgeStarting date of tenureEnding date of tenureOpening shareholding (share)Increase in Reporting Period (share)Decrease in Reporting Period (share)Other increase/decrease (share)Closing shareholding (share)
Hua XueChairman of the BoardIncumbentMale49June 6, 2007June 7, 2019
Hua XueGeneral ManagerIncumbentMale49May 25, 2010June 7, 2019
Yingzhuo XuDirector and Vice General ManagerIncumbentMale51June 6, 2007June 7, 2019
Li TianVice General ManagerIncumbentFemale47June 6, 2007June 6, 20191,965,1001,965,100
Li TianDirectorIncumbentFemale47June 7, 2016June 7, 2019
Xiaojun ShangDirectorIncumbentFemale46May 25, 2010June 7, 2019
Chengping LuIndependent DirectorIncumbentMale74November 13, 2015June 7, 2019
Xinchun LiIndependent DirectorIncumbentMale57August 21, 2013June 7, 2019
Erkang DengIndependent DirectorIncumbentFemale51August 21, 2013June 7, 2019
Zhenxiong QiSupervisorIncumbentMale49June 6, 2007June 7, 2019
Jing WangSupervisorIncumbentFemale40May 12, 2014June 7, 2019
Jia ChenSupervisorIncumbentFemale37August 21, 2013June 7, 2019
Mingzhong ChenVice General ManagerIncumbentMale54June 6, 2007June 7, 2019
Zhijian HuangVice General Manager and Board SecretaryIncumbentMale41July 26, 2012June 7, 2019549,592549,592
Xueqiao QianChief EngineerIncumbentMale52June 6, 2007June 7, 2019454,500454,500
Shaolin YangChief Financial OfficerIncumbentMale45October 22, 2012June 7, 2019441,200110,300330,900
Total------------3,410,3920110,3003,300,092

II Change in Directors, Supervisors and Senior Management

□ Applicable √ Not applicable

III Brief Biographies

Professional backgrounds, main working experience and current responsibilities in the Company of the incumbent directors,supervisors and senior management:

1. Directors

(1) Hua Xue

Mr. Hua Xue, with no permanent residency abroad, is an engineer. He graduated from College of Fisheries ofHuazhong Agricultural University in 1992 with a major in special aquaculture; in 1995, he obtained the master’sdegree in zoology from School of Life Sciences of Sun Yat-Sen University. As one of the founders of theCompany, he now serves as the Chairman of the Board and General Manager of the Company. At present, he hasheld various social positions such as Executive Vice President of China Feed Industry Association (CFIA),Chairman of China Vocational Education Group of Modern Fishery, Vice Chairman of China Association ofYoung Rural Entrepreneurial Leaders (CAYREL), Chairman of Guangdong Hi-tech Enterprise Association(GDHTEA), Vice Chairman of Guangdong Agricultural Science and Technology Innovation Alliance, VicePresident of Guangdong Feed Industry Association, Vice President of Guangdong Fisheries Association, ViceChairman of Guangdong Association of Young Scientists (GDAYS), Executive Vice Chairman of GuangdongShaanxi Chamber of Commerce, the NPC Member of the 14th National Congress of the Communist Party ofGuangzhou, a member of the 11th Chinese People’s Political Consultation Conference Guangzhou Committee,Vice Chairman of the 15th Executive Committee of Guangzhou Federation of Industry and Commerce, Presidentof Guangzhou Association of Agricultural Leading Enterprises, Honorary Chairman of Guangzhou FeedProfession Association (GZFPA), Vice Chairman of Guangzhou Panyu District Chamber of Commerce and VicePresident of Guangzhou Panyu District Manufacturers Association. Meanwhile, he is recognized as “LeadingEntrepreneur in China’s Feed Industry” by the Ministry of Agriculture, “Top 30 Excellent Entrepreneurs inChina” by China Feed Industry Association (CFIA), “2012-2013 Excellent Entrepreneur” by the AgriculturalIndustrialization Branch of China Association of Agricultural Science Societies (CAASS), “2017 Guangdong TopTen Influential Business People” by Guangdong Radio and Television Station, “2011 Guangdong ExcellentEntrepreneur with Outstanding Contribution in Corporate Culture” by Guangdong Federation of Entrepreneurs,“The Second Excellent Builders for the Socialism with Chinese Characteristics in Guangzhou” by the ChinesePeople’s Political Consultative Conference Guangzhou Committee, “The 30th Anniversary of Guangzhou’sReform and Opening up—The Most Respected Entrepreneur” by Guangzhou Enterprise Federation, “Best ListedCompany Leader” by New Fortune in 2018, the Second Prize for Outstanding Industrial Talents in Panyu District2018, among others. Mr. Hua Xue holds 39.75% equity interests in the Company's controlling shareholderGuangzhou Haihao Investment Co., Ltd. and is the actual controller of the Company.

(2) Li Tian

Ms. Li Tian, with no permanent residency abroad, is a Chinese Certified Public Accountant and Certified TaxAccountant. She graduated from Beijing Wuzi University in 1993 with a major in accounting. From 2002 to 2004,she studied and obtained EMBA from Sun Yat-sen Business School. She is recognized as a “High-End IndustrialTalent in Panyu District 2018”. From 1993 to 1996, she was engaged in financial work at GuangdongReclamation Yanling Building Co., Ltd.. From 1996 to 2001, she worked for Guangzhou Lingnan Certified PublicAccountants and Guangdong Kangyuan Certified Public Accountants in succession. In January 2004, she joinedthe Company and successively served as Chief Financial Officer, Board Secretary, and Vice General Manager.Currently, she is the Company’s director and Vice General Manager, as well as Vice Chairman of GuangzhouInstitute of Internal Audit.

(3) Yingzhuo Xu

Mr. Yingzhuo Xu, Chinese nationality, with no permanent residency abroad, is a livestock specialist. Hegraduated from South China Agricultural University with a bachelor’s degree in Animal Husbandry in 1991 andlater obtained a master’s degree in business administration from HEC Paris. As one of the founders of theCompany, he now serves as the Company’s director and Vice General Manager. Mr. Yingzhuo Xu holds 27%equity interests in Guangzhou Haihao Investment Co., Ltd., the Company's controlling shareholder.

(4) Xiaojun Shang

Ms. Xiaojun Shang is a permanent resident in Hong Kong. She graduated from NUS Business School with abachelor’s degree (first class honors) in finance and banking management and is currently a director of theCompany. Ms. Xiaojun Shang is an executive director of CDH Nemo (HK) Limited and CDH InvestmentsManagement (Hong Kong) Limited.

(5) Chengping Lu

Professor Chengping Lu, with no permanent residency abroad, majors in Veterinary Science, and now is aprofessor as well as doctoral tutor. He graduated from Agricultural College of Yangzhou University with a majorin veterinary medicine in 1968, and was admitted to Nanjing Agricultural College in 1978 for a master’s degree inveterinary microbiology and immunology. In 1982, the Ministry of Education sent him to the Federal Republic ofGermany for advanced studies and doctoral studies. In 1985, he obtained the doctoral degree in veterinarymedicine from University of Munich. In the same year, he returned to work at Nanjing Agricultural University asa professor. He served as a professor in 1992 and was approved by the Academic Degree Committee of the StateCouncil in 1993 as a tutor for doctoral students. Now he is a professor at Nanjing Agricultural University. Inaddition, he has served as Dean of College of Veterinary Medicine of Nanjing Agricultural College, ExecutiveDeputy Director of the Graduate School, member of the 4th Veterinary Science Research and Appraisal Team ofthe Academic Degree Committee of the State Council, convener of the 5th and the 6th Veterinary ScienceResearch and Appraisal Team, the Secretary-General of the 1st National Veterinary Professional EducationSteering Committee, the Chairman of the 2nd National Veterinary Professional Education Steering Committee,member of Chinese Society of Microbiology and Vic Chairman of the Professional Veterinary Committee, and theOverseas Visiting Professor at Nihon University.Professor Chengping Lu has long been committed to the research of veterinary microbiology and immunologyand aquatic animal pathogenic microorganisms and immunology, and played an important role in the timelydiagnosis and effective prevention and control of swine streptococcal disease broken out in Sichuan in 2005,producing a good social impact. At the same time, the “Swine Streptococcus Disease Research and Prevention andControl Technology” won the second prize of the National Science and Technology Progress Award in 2007; in2008, he was appointed as a Chief Expert in the special non-profit industrial (agricultural) scientific andtechnological project of “Swine Streptococcus Disease Biohazard Prevention and Control Technology Researchand Demonstration” by the Ministry of Agriculture; in May 2013, he was appointed by OIE (World Organizationfor Animal Health) as the specialist in the OIE Swine Streptococcus Disease Diagnosis Reference Laboratory.

(6) Xinchun Li

Professor Xinchun Li, with no permanent residency abroad, Ph.D. in Economics from Humboldt University, isnow a professor and doctoral tutor of Sun Yat-Sen Business School, an expert enjoying Special governmentallowances of the State Council, and a Cheung Kong Scholar Chair Professor. From April 2004 to March 2011, hewas appointed as Dean of Sun Yat-sen Business School. He has long been engaged in the research and teaching ofcorporate strategic management, family business management, and entrepreneurial management. He was selectedinto the New Century National Hundred, Thousand and Ten Thousand Talent Project (2005) approved by theMinistry of Human Resources, the Ministry of Science and Technology, and the Ministry of Education, and theNew Century Excellent Talents (2004) of the Ministry of Education as well as a member of China National MBAEducation Supervisory Committee. Now, he is also an independent director of Guangzhou Digital Media Co., Ltd.

(871828.OC).

(7) Erkang Deng

Ms. Erkang Deng, Chinese nationality, with no permanent residency abroad, is a Chinese CPA. She graduated

from South China University of Technology with a master’s degree in applied chemistry and studied EMBA inChina Europe International Business School (CEIBS) from 2004 to 2007. However, she ever worked forGuangdong Kangyuan Certified Public Accountants, Guangzhou Securities Investment Banking Department,Guangzhou Gaojin Technology Industry Group Co., Ltd., Guangzhou Yiwen Environmental Technology Co., Ltd.,and Guangdong Lihai Group Co., Ltd. in charge of business audit, taxation, listing recommendation, financialmanagement as well as investment & financing management etc.. Now, she is a director of Changzhou BbetterFilm Technologies Co., Ltd..

2. Supervisors

(1) Zhenxiong Qi

Dr. Zhenxiong Qi has no permanent residency abroad. In 1992, he graduated from Huazhong AgriculturalUniversity with a major in freshwater aquaculture and later studied the master’s degree in aquatic biology. In 1998,he graduated from Ocean University of China with a doctorate in aquaculture. He successively participated in theState Key Program of National Natural Science Foundation of China—Studies on the Optimization of IntegratedAquaculture Ecosystem Structure of Shrimps, theNational Key Technologies R & D Program of China during the 8th Five-Year Plan Period—Studies on theStructural Optimization of Integrated Seawater and Pond Aquaculture System, National Climb—B Plan:

Comprehensive R&D of Coastal Mud Flat in Shandong Province and was partially involved in the ShandongProvincial Natural Science Fund Project -- Saline-Alkali Soil Comprehensive R&D in Shandong Province.Meanwhile, he has also published many research papers and applied for two invention patents. In the field ofanimal nutrition and feed research, he has hosted or participated in a number of R&D projects in Guangzhou Cityand Panyu District, including Application of Biotechnology to Develop New Feed Protein Sources andDevelopment, Demonstration and Promotion of Environment-friendly Shrimp Feeds; with respect to the aquaticanimal farming and disease prevention & control, he has hosted or participated in relevant researches such asDemonstration and Promotion of the Healthy Farming Mode for Grass Carp, Study on the Prevention andTreatment of Fish Diseases by Using Chinese Herbal Medicines and Application of Microecological Preparationsin Feed and Aquaculture, and has accumulated rich experience in aquaculture at the grass-roots level. From theday when he joins the Company on, he has mainly engaged in researches on feed nutrition, aquaculture andaquaculture ecology. Mr. Zhenxiong Qi holds 0.1% equity interests in the Company’s controlling shareholderGuangzhou Haihao Investment Co., Ltd..

(2) Jing Wang

Ms. Jing Wang has no permanent residency abroad. In 2001, she graduated from China University of Science andTechnology (USTC) with a major in management science. From 2006 to 2008, she studied and obtained the MBAdegree at Cheung Kong Graduate School of Business. From 2001 to 2006, she respectively worked for iFLYTEKCo., Ltd., Shenzhen BW consulting Co., Ltd., and Tencent Technology Co., Ltd.. From early 2008 to 2010, sheworked as a consultant at IBM China. From February 2012 on, she joined the Company and is currently thedirector of the Company’s factory operations center.

(3) Jia Chen

Ms. Jia Chen has no permanent residency abroad. In 2005, she graduated from Hunan Business School, majoringin financial management; in 2008, she obtained the master’s degree in management from Sun Yat-sen BusinessSchool. From July 2008 to June 2010, she worked for Hytera Communications Co., Ltd. and was engaged infinancial work. In July 2010, she joined the Company and is now the Company’s Financial Manager.

3. Senior Executives

(1) Mingzhong Chen

Mr. Mingzhong Chen, with no permanent residency abroad, has obtained the master’s degree in businessadministration from Hong Kong Baptist University. In March 2000, he joined Guangzhou HAID and worked inthe Company in January 2004. He served as the administrative and purchasing manager of several subsidiaries ofthe Company, and later was transferred to serve as the Company’s purchasing director. Now, he is a Vice GeneralManager of the Company.

(2) Xueqiao Qian

Dr. Xueqiao Qian, with no permanent residency abroad, is an Associate Professor and has obtained the doctoratedegree from the Institute of Hydrobiology, Chinese Academy of Science. He successively presided over orparticipated in the Hubei Provincial Natural Science Fund Project -- Development and Utilization of FeatherProteins in Fishery Feeds, the development projects of the State Key Laboratory of Freshwater Ecology andBiotechnology -- Effects of Nutrition Levels and Nutritional History on Fish’s Growth and Activities, Research onthe Feeding Behavior and Chemical Sensation of Allogynogenetic Crucian Carp, and Studies on the Utilization ofPlant Protein by Main Cultured Freshwater Fish, the NSFC Project -- Studies on the Comparative NutritionalEnergetics of Feed Protein Requirements of Carnivorous Fish and Omnivorous Fish, and the MOA’s 948 project-- Artificial Propagation and Large-scale Aquaculture of Paddlefish etc.. Further, he has published more than 20papers, of which, three papers were published in international publications and included in SCI. He joined theCompany in 2004 and is mainly engaged in the aquatic animal nutrition and feed research and the development ofnew feed additives. Now, he is the chief engineer of the Company. Meanwhile, Mr. Xueqiao Qian holds 3%equity interests in the Company’s controlling shareholder Guangzhou Haihao Investment Co., Ltd..

(3) Shaolin Yang

Mr. Shaolin Yang, with no permanent residency abroad, has obtained the master’s degree. Graduated from SunYat-sen University with a major in Business Administration, he is also a senior accountant, certified publicaccountant, and certified tax accountant, and has been selected and listed into the expert database of the high-techenterprises of Department of Science and Technology of Guangdong Province. From June 2005 to January 2008,he served as Financial Manager of Guangzhou KYH Metal Co., Ltd., and from December 2008 to April 2012, heserved as Executive Director, CFO and Joint Secretary of KEE HOLDINGS COMPANY LIMITED (HK.02011).From May/June 2016 till now, he has served as a supervisor of Guangdong Association of ManagementAccountants (GAMA) and an off-campus tutor for master candidates in accounting of Sun Yat-sen BusinessSchool. In April 2012, he joined the Company and is currently the Company’s CFO.

(4) Zhijian Huang

Mr. Zhijian Huang, with no permanent residency abroad, is an accountant and a bachelor’s degree holder. In 2004,he joined the Company and was engaged in financial work. He successively served as the Financial Manager andthe Securities Representative of the Company. And now he is a Vice General Manager and the Board Secretary ofthe Company.

Posts concurrently held in shareholding entities:

√ Applicable □ Not applicable

NameShareholding entityPost held in shareholding entityStarting date of tenureEnding date of tenureCompensation or allowance from shareholding entity
Hua XueGuangzhou Haihao Investment Co., Ltd.Executive directorSeptember 27, 2006None
Yingzhuo XuGuangzhou Haihao Investment Co., Ltd.SupervisorSeptember 27, 2006None
NoteNone

Posts held concurrently in other entities:

√ Applicable □ Not applicable

NameOther entityPost held in other entityStarting date of tenureEnding date of tenureCompensation or allowance from
the entity
Hua XueGuangzhou Juchang Investment Co., Ltd.Executive DirectorMarch 9, 2011None
Hua XueGuangdong Aerocity Holding Co., Ltd.DirectorJanuary 21, 2015None
Xiaojun ShangCDH Investments Management (Hong Kong) LimitedExecutive DirectorOctober 1, 2010Yes
Xiaojun ShangCDH Nemo (HK) LimitedExecutive DirectorSeptember 29, 2006None
Chengping LuNanjing Agriculture UniversityProfessorJune 20, 1985Yes
Xinchun LiSun Yat-Sen UniversityProfessorSeptember 1, 1995Yes
Xinchun LiGuangzhou Yuetai Group Co., Ltd.Independent DirectorMay 3, 2012September 10, 2018Yes
Xinchun LiGuangzhou Digital Media Co., Ltd.Independent DirectorMay 10, 2016May 9, 2019Yes
Erkang DengChangzhou Bbetter Film Technologies Co., Ltd.DirectorNovember 23, 2015Yes
Mingzhong ChenGuangzhou Guanglan Investment Co., Ltd.Independent DirectorJuly 26, 2013None
Shaolin YangGuangdong Association of Management AccountantsSupervisorMay 18, 2016May 18, 2021None
Shaolin YangSun Yat-Sen UniversityExtramural Tutor for master’s degree studentsJune 5, 2016June 5, 2019Yes
NoteNone

Punishments imposed in the recent three years by the securities regulator on the incumbent directors, supervisors and seniormanagement as well as those who left in the Reporting Period:

□ Applicable √ Not applicable

IV Compensation of Directors, Supervisors and Senior Management

Decision-making procedure, determination basis and actual payments of compensation for directors, supervisors and seniormanagement:

The compensation of the Company’s directors, supervisors and senior management is in strict compliance with theCompany’s Rules of Procedure for Meetings of Shareholders (《股东大会议事规则》) and Rules of Procedure forBoard (《董事会议事规则》), as well as with the Company Law and the Company’s Articles of Association. Thecompensation is determined according to the Company’s operating performance and these personnel’sperformance appraisal indicators.

Compensation of directors, supervisors and senior management in the Reporting Period:

Unit: RMB 0,000

NameOffice titleGenderAgeIncumbent/FormerTotal before-tax compensation from the CompanyCompensation from related party
Hua XueChairman of the Board and General ManagerMaleIncumbent348.29None
Yingzhuo XuDirector and Vice General ManagerMaleIncumbent118.36None
Li TianDirector and Vice General ManagerFemaleIncumbent263.24None
Xiaojun ShangDirectorFemaleIncumbentNone
Xinchun LiIndependent DirectorMaleIncumbent11None
Erkang DengIndependent DirectorFemaleIncumbent11None
Chengping LuIndependent DirectorMaleIncumbent11None
Zhenxiong QiSupervisorMaleIncumbent102.51None
Jing WangSupervisorFemaleIncumbent86.35None
Jia ChenSupervisorFemaleIncumbent33.97None
Mingzhong ChenVice General ManagerMaleIncumbent84.13None
Zhijian HuangBoard Secretary and Vice General ManagerMaleIncumbent103.6None
Shaolin YangChief Financial OfficerMaleIncumbent145.05None
Xueqiao QianChief EngineerMaleIncumbent131.12None
Total--------1,449.62--

Equity incentives for directors, supervisors and senior management in the Reporting Period:

√ Applicable □ Not applicableUnit: share

NameOffice titleExercisable shares in Reporting PeriodExercised shares in Reporting PeriodExercise price for exercised shares in Reporting Period (RMB/share)Market price at period-end (RMB/share)Opening restricted shares heldUnlocked shares in Reporting PeriodNewly granted restricted shares in Reporting PeriodPrice for restricted shares newly granted (RMB/share)Closing restricted shares held
Li TianDirector and Vice General Manager00314,900188,9807.48125,920
Zhijian HuangBoard Secretary and Vice General Manager00200,60090,5207.48110,080
Shaolin YangChief Financial Officer00175,20085,4407.4889,760
Xueqiao QianChief Engineer00258,500169,3007.4889,200
Total--00----949,200534,240.000--414,960
Remark (if any)The restricted shares of the Company’s directors and senior management in this table are in lockup.

V Employees

1. Numbers, Functions and Educational Backgrounds of Employees

Number of in-service employees of Parent Company (Haid Group exclusive of subsidiaries)1,027
Number of in-service employees of major subsidiaries16,362
Total number of in-service employees17,389
Total number of paid employees in Reporting Period17,389
Number of retirees to whom Parent Company or its major subsidiaries need to pay retirement pension0
Functions
FunctionEmployees
Production7,286
Sales5,768
Technical1,200
Financial1,095
Administrative1,664
Procurement376
Total17,389
Educational backgrounds
Educational backgroundEmployees
Doctoral degree69
Master’s degree654
Bachelor’s degree3,699
Junior college3,395
Senior high school, technical secondary school and below9,572
Total17,389

2. Employee Compensation Policy(1) As per the Labor Contract Law of the People’s Republic of China, as well as other applicable national andlocal laws and regulations, in order to regulate compensation with effective procedures and standards, theCompany has formulated, taking its realities into consideration, a post and compensation system to help boost itsdevelopment at present and in the future through offering industry-competitive compensation to its employees andaligning their performances to compensation to fully promote initiative and creativity among employees.(2) The Company has formulated the Restricted Share and Share Option Incentive Plan (《限制性股票与股票期权激励计划》), the 2016 Restricted Share Incentive Plan (Revised Draft)(《2016年限制性股票激励计划(修订稿)》) and the Key Personnel Stock Ownership Plan (《核心团队员工持股计划》) to cover more employeesand more incentive means. These plans will help mobilize employees, bring more economic benefits, improve thecompensation and incentive mechanism and better the corporate governance.3. Employee Training PlansThe Company always places importance on the development of human resources and talents with a firm beliefthat staff development is an important power and resource for the Company’s continuous development. TheCompany has established a multi-level training management system covering a wide range, possesses an excellentcourse development system and a systematic internal trainer development system and carries out broad-based andprecise talent development through famous trainer courses, outdoor training, behavior learning, coach tutoring,Internet learning and other channels in an active effort to create opportunities for employees to enhance theirabilities and competence; in 2018, the Company established the self-inspection mechanism covering “talentdevelopment mechanism, talent development platform operation and plan implementation, talent assessment andtalent management self-inspection reports”. The Company formulates annual training plans according toemployees’ requirements, its own development needs and self-inspection reports. In addition to organizingemployees to participate in external training on all specialty systems, the Company conducts specialties or skillstraining through Haid College, the functional department of talent development, to enhance employees’ specialtyskills and professional competence.

4. Labor Outsourcing

□ Applicable √ Not applicable

Section IX. Corporate Governance

I Overview

Since its establishment, the Company has continuously regulated its operations and improved its internalmanagement system, comprehensively searched for any problem in the corporate governance, and rectifiedexisting problems. Meanwhile, the Company has not only strictly observed relevant laws and regulationsincluding Corporation Law and Securities Law etc., but also studied and implemented relevant requirements putforward by various regulatory agencies such as China Securities Regulatory Commission (CSRC), ShenzhenStock Exchange, China Securities Regulatory Commission Guangdong Office so as to improve the corporategovernance structure and upgrade the Company’s standard operations. As of the end of the Reporting Period, theCompany believes that the actual situation of the corporate governance meets the requirements of the normativedocuments, and has formed the corporate governance structure featuring a clear separation of powers andresponsibilities, clear definition of their respective duties, checks and balances, scientific decision-making andcoordinated operation.1. The Establishment of the Company SystemFrom the Company’s listing to the end of the Reporting Period, the Company has formulated and strictlyimplemented various systems, including Articles of Association, Rules of Procedure of the Shareholders’ GeneralMeeting, Rules of Procedure of the Board, Working System of the Special Committee of the Board, Rules ofProcedure of the Supervisory Committee, Independent Director System, Working Rules of General Manager,Code of Conduct of Directors, Supervisors and Senior Executives, Board Secretarial Work System, Related Partyand Related Transaction Management System, Special Reserve and Use Management System of Raised Funds,Management Policy for Shares held by Directors, Supervisors and Senior Executives in the Company and RelatedChanges, Administrative Measures for the External Provision of Financial Assistance, Assessment andManagement Methods for Stock Option Incentive Plans, Management Systems for Holding Subsidiaries,Registration Management System for Insider Information, Insider Information Registration and Filing System,Accountability System for Major Errors in Information Disclosure in Annual Reports, Futures ManagementSystem, Working Rules for Annual Reports by the Audit Committee, Investment Decision Management System,Investor Relations Management System, External Information User Management System, Information DisclosureSystem, Internal Reporting System for Major Information, Dividend Management System, Information DisclosureManagement System for Debt Financing Instruments in the Inter-bank Bond Market, Investor ComplaintsManagement System, The Implementation and Assessment Management Policies for the Restricted Stock and theStock Option Incentive Plans, 2016 Annual Implementation and Assessment Management Policies for theRestricted Stock Option Assessment Plans, Foreign Exchange Hedging Management System and the Complaintand Complainant Protection System, etc., and the established sound internal control system in order tocontinuously improve the Company’s governance structure and enhance the Company’s governance level.2. Shareholders and General MeetingDuring the Reporting Period, the Company strictly adhered to applicable laws and regulations such as CorporationLaw, Rules of the General Meeting of Listed Companies, Articles of Association, and Rules of Procedure of theGeneral Meeting, as well as the Company’s internal control rules, and standardized the convening, holding andvoting procedures of the General Meeting to ensure that all Shareholders could be equal, and fully exercise theirrights. In addition, as witnessed by the hired lawyers, the legitimacy of the meeting’s convening, holding andvoting procedures could be guaranteed, and relevant legitimate rights and interests of the Company and itsshareholders could be secured as well. In 2018, two general meetings were convened and held by the Board intotal; the convening, holding and voting procedures of such meetings were witnessed by the lawyers and all werelegal and valid.3. The Company and Its Controlling Shareholder

The Company has independent and complete businesses and independent management capabilities. It iscompletely independent from the controlling shareholder in terms of business, personnel, assets, organization, andfinance. The controlling shareholder exercises its rights and assumes corresponding obligations in accordancewith the law, and there is no direct or indirect interference with the Company’s decision-making and businessoperation beyond the authority of the shareholders’ general meeting. Meanwhile, the Company’s Board,Supervisory Committee, and various internal functional departments are capable of independent operations. As ofthe Reporting Period, no controlling shareholder of the Company ever occupied the capital of the listed Company,and no listed Company illegally provided any controlling shareholder with any guarantee.4. Directors and the BoardStrictly in accordance with Corporation Law, Articles of Association, Rules of Procedure of the Board andIndependent Director System, the Company has elected and appointed various directors, and such election andappointment procedures are open, fair and just. Besides, the composition and number of directors meet relevantlegal and regulatory requirements. The members for the Company’s 4th session of Board are all nominated,approved and elected by the Board by means of the cumulative voting system. Currently, there are 7 directors,including 3 independent directors. Independent directors occupy more than one third of all directors and theirqualifications are in accordance with Guidance Opinions on the Establishment of Independent Director System inListed Companies.All directors of the Company have performed their duties in strict compliance with relevant laws, regulations, andregulatory documents, attended all board meetings and carried out related works in a serious and responsiblemanner, and firmly conformed to any statement and commitment made by directors. However, independentdirectors have full right to know about the Company’s major issues and can issue independent opinions on majorissues without being influenced.The Board has established the audit committee, the remuneration and appraisal committee, the strategy committeeand the nomination committee. Each committee can exercise its functions in accordance with its work rules andmake due contributions to the standardization of corporate governance. In the meantime, the Board is able to carryout its work in strict accordance with relevant laws and regulations. All directors of the Company are honest andtrustworthy, diligent and responsible, attend corresponding board meetings and shareholders’ meetings with aserious attitude, actively participate in relevant training, and are familiar with relevant laws and regulations.5. Supervisors and the Supervisory CommitteeThe Company has strictly observed Corporation Law, Articles of Association and other relevant regulations toappoint supervisors. The 4th session of the Supervisory Committee consists of three supervisors, including twoshareholder supervisors and one employee supervisor. The number and composition of the SupervisoryCommittee meet relevant requirements stipulated in applicable laws and regulations. However, the shareholderrepresentative supervisors are elected by adopting the cumulative voting system, and the employee supervisors areelected and appointed by means of the employees’ assembly in the form of secret ballot. The number ofsupervisors that served as directors or senior management personnel of the Company in recent two years does notexceed one half of the total number of supervisors of the Company, and the number of supervisors nominated by asingle shareholder does not exceed one half of the total number of supervisors of the Company.The Company’s supervisors can earnestly fulfill their responsibilities in accordance with Rules of Procedure ofthe Supervisory Committee, effectively supervise and inspect the Company’s major issues, related transactions,the use of funds raised, the legality and compliance of duties performed by the Company’s directors and seniormanagement, and maintain legitimate rights and interests of the Company and its shareholders.6. StakeholdersThe Company fully respects and safeguards legitimate rights and interests of relevant stakeholders, realizes thecoordinated balance of interests of the society, shareholders, the Company, and employees etc., sincerely treatssuppliers and customers, earnestly cultivates every employee, develops the mutual benefit and win-wincooperation with relevant stakeholders, and jointly promotes the Company’s sustained, healthy and rapiddevelopment.

7. Information Disclosure and TransparencyPursuant to relevant laws and regulations, the Company’s Information Disclosure System, Investor RelationsManagement System and Information Disclosure Management System for Debt Financing Instruments in theInter-bank Bond Market, the Company has disclosed corresponding information in a true, accurate, complete andtimely manner to ensure that all shareholders have equal access to such information.The Company has designated the board secretary in charge of the Company’s information disclosure and investorrelations management, and the securities department serves as the executive department for information disclosureand investor relations management. The Company pays special attention to communicate with investors and willstrengthen communication with investors by various means such as telephone, e-mail, and investor relationsinteractive platform etc.8. Internal Audit SystemThe Company has established the complete internal audit system and set up the internal audit department incharge of the effective internal supervision of the Company’s daily operations.9. Investor Relations ManagementThe Company has always attached great importance to the management of investor relations, carried out relatedworks in accordance with Investor Relations Management System and other systems, implemented the investorrelations management by various means such as Shenzhen Stock Exchange investor relations interactive platform,investor hot-lines, and reception of investors etc., strengthened the communication with investors, and fullyguaranteed the investors’ right to know.The corporate governance is a systematic and long-term project that requires continuous improvement. After theCompany is successfully listed, it is willing to accept supervisions from all parties, adhere to the scientific outlookon development, constantly improve the corporate governance system, and strengthen the implementation ofvarious laws and regulations to promote the healthy development of the Company and enhance the overallcompetitiveness.

The implementation of the Company’s special activities of corporate governance and that of the insiderinformation registration management system are described as follows:

1. The implementation of the Company’s special activities of corporate governanceIn accordance with the Issuance and Printing of Notice on Education Materials for the Fraud Risk WarningInvolved in the Acquisition and Reorganization of the Listed Companies (GDZJF [2018] No. 135) (广东证监发[2018]135号《关于印发上市公司并购重组涉及诈骗风险警示教育材料的通知》), the Company attached greatimportance to it and organized its directors, supervisors and senior managers to study the case materials diligentlyand learn a lesson from market experience at an in-depth level.According to the Notice on Diligently Studying and Implementing the Newly Revised Code of CorporateGovernance for Listed Companies (GDZJF [2018] No. 147) (广东证监发[2018]147号《关于认真学习贯彻新修订的<上市公司治理准则>的通知》,认真组织学习、梳理《公司章程》), the Company earnestly organized thestudy and review of the Articles of Incorporation and relevant policies, reinforced Party building, increased thetransparency of the Company’s information disclosure, carried out promotion and implementation targeting itscontrolling shareholder and related parties, valued the safeguard of shareholders’ rights and interests, proactivelyimplemented new development concepts, carried out standard corporate actions, enhanced internal governancelevel, protected investors’ illegitimate rights and interests and promoted the guiding principles and requirementsfor the sound development of capital market.In accordance with the Notice on Carrying Out the Themed Promotional Activity of “Constitution Promotion

Week” of 2018 (GDZJF [2018] No. 162) (广东证监发[2018]162号《关于开展2018年“宪法宣传周”主题宣传活动的通知》), the Company established a special group to strengthen the awareness of its directors, supervisors,senior managers, other employees and investors to further uphold, study, observe, safeguard and apply theConstitution through training, lectures, Internet platform-based communication and other ways.2. Formulation and Implementation of Confidential Information Insiders Registration and Management SystemAccording to Corporation Law, Securities Law, Management Policies for Information Disclosure of ListedCompanies, Stock Listing Rules of Shenzhen Stock Exchange, Guidelines for the Operation of Listed Companieson SME Boards of Shenzhen Stock Exchange, Regulations on the Establishment of Insiders Registration andManagement System by Listed Companies and other relevant laws, regulations, and Articles of Association,Proposal of Establishing Insider Information Registration and Filing System was deliberated and approved at the11th meeting of the 1st session of Board on April 13, 2010; Proposal of Deliberating Insider InformationRegistration and Management System at the 18th meeting of the 2nd session of Board on December 29, 2011. Thetwo proposals were respectively disclosed on the website (http://www.cninfo.com.cn) on April 15, 2010 and onDecember 31, 2011. The Company properly carried out corresponding information insider registration andreporting works strictly according to relevant requirements and systems, and recorded and revealed the list of allinformation insiders and relevant reports, communications, formulation, resolutions and disclosures before anyinformation was disclosed. If any special event is involved and the list of the information insider’s close relatives(spouse, parents and offspring) was required, the Company also finished corresponding registration and reportingwork. During the Reporting Period, the Company notified all directors, supervisors, senior management personneland relevant information insiders that they were not allowed to buy and sell the Company’s stocks within thewindow period by means of SMS and e-mail 30 days before the disclosure of regular reports and 10 days beforethe disclosure of earnings forecasts and Preliminary Earnings Estimate, and conducted an internal audit on thebuying and selling of the Company’s stocks by directors, supervisors, senior management personnel and relevantinformation insiders. During the Reporting Period, no information insider was ever involved in the illegal buyingand selling of the Company’s stocks, and no relevant personnel was suspected of being involved in insider tradingand was imposed some supervision measures and administrative penalties by competent regulatory departments.

Indicate by tick market whether there is any material incompliance with the regulatory documents issued by the CSRC governing thegovernance of listed companies.□ Yes √ NoNo such incompliance.

II The Company’s Independence from Controlling Shareholder in Business, Personnel, Asset,Organizational Structure and Financial Affairs

With independent and complete business and self-dependent operating ability, the Company is completelyindependent from its controlling shareholder in business, personnel, asset, organizational structure and financialaffairs. The controlling shareholder exercises its rights and shoulders its corresponding obligations according tolaw, with no direct or indirect intervention in the Company’s decision-making and operating activities by goingbeyond the General Meeting.1. Independence in BusinessThe Company has an independent and complete business operation system, with all the necessary conditions andabilities to carry out production and operational activities and extend its business in an independent manner.Therefore, the Company is independent from its controlling shareholder in doing business with its controllingshareholder or any of the controlling shareholder’s related parties.2. Independence in PersonnelThe Company’s senior management and key technical staff all work full time for and get paid by the Company.None of them hold any post other than director or supervisor in or get paid by the controlling shareholder, the

actual controller or any other company under their control.3. Independence in AssetThe Company owns its own production and operation venues, as well as is able to control all of its assets withcomplete, clear ownership. The Company has never provided guarantees for any shareholder’s liability with itsassets or credit, nor has it lent any loan or credit line under its name to any shareholder. None of the Company’sassets, capital or other resources is occupied to harm the interests of the Company.4. Independence in Organizational StructureThe Company has a sound, clear organizational structure. Its Board, Supervisory Committee and all otherfunctional departments are able to operate in an independent manner. The Company’s organizational structure iscomplete independent from its controlling shareholder, with no interventions from the controlling shareholder ofany of its related parties in this respect. All the Company’s departments perform their duties independently, withno overlap between the Company’s organizational structure and its controlling shareholder’s.5. Independence in Financial AffairsAs per the applicable laws and regulations, the Company has put in place a sound, well-established financialmanagement system. It has an independent accounting system and an independent financial department withprofessional financial staff, who hold no posts in the controlling shareholder or any of its related parties. TheCompany has its own bank account, not sharing the same account with its controlling shareholder. And it pays itsown taxes by law. And the Company is able to use its self-owned capital at its sole discretion, with none of itscapital being occupied by the controlling shareholder or it having to provide any guarantee for the controllingshareholder against laws and regulations.

III Horizontal Competition

□ Applicable √ Not applicable

IV Annual and Non-Operating General Meetings Convened during Reporting Period

1. General Meetings Convened during Reporting Period

MeetingTypeInvestor participation ratioDateDisclosure dateIndex to disclosed information
2017 Annual General MeetingAnnual63.61%14 May 201815 May 2018Announcement on Resolutions of 2017 Annual General Meeting (No. 2018-034) disclosed on Securities Times, China Securities Journal, Securities Daily and www.cninfo.com.cn
First Non-Operating General Meeting of 2018Non-operating62.89%14 November 201815 November 2018Announcement on Resolutions of First Non-Operating General Meeting of 2018 (No. 2018-064) disclosed on Securities Times, China Securities Journal, Securities Daily and www.cninfo.com.cn

2. Non-operating General Meetings Convened at Request of Preferred Shareholders with Resumed VotingRights

□ Applicable √ Not applicable

V Performance of Duties by Independent Directors in Reporting Period

1. Attendances of Independent Directors at Board Meetings and General Meetings

Attendances of independent directors at board meetings and general meetings
Independent directorDue attendances at board meetings in Reporting PeriodAttendances at board meetings on siteAttendances at board meetings by telecommunicationAttendances at board meetings through a proxyAbsences at board meetingsNot attending board meetings in person for twice in a rowAttendances at general meetings
Chengping Lu53200N/A1
Xinchun Li55000N/A0
Erkang Deng55000N/A1

Explanation for any independent director not attending board meetings in person for twice in a row:

Not applicable.

2. Objections Raised by Independent Directors on Matters of the Company

Indicate by tick mark whether any independent director raised any objection on any matter of the Company.□ Yes √ NoNo such cases in the Reporting Period.

3. Other Information about Performance of Duties by Independent Directors

Indicate by tick mark whether any suggestions from independent directors were adopted by the Company.√ Yes □ NoSuggestions of independent directors adopted or non-adopted by the Company:

During the Reporting Period, the Company’s independent directors performed their duties in strict accordancewith the Company Law, the Code of Corporate Governance for Listed Companies in China, the Guidelines of theShenzhen Stock Exchange for the Standard Operation of Listed Companies on the Small and Medium-SizedEnterprise Board, the Directive on Establishment of Independent Director System in Listed Companies, the Rulesfor Independent Directors and other applicable laws and regulations, as well as the Company’s Articles ofAssociation. Upon an in-depth knowledge about the Company’s production and operation status obtained throughattending the Company’s board meetings and general meetings, as well as through on-site investigations, theindependent directors carefully exercised their voting rights and effectively performed their duties. Theindependent directors issued independent, just opinions on the Company’s continuing related-party transactions,employee investment, profit distribution, deposit and use of raised funds, 2017 Annual Internal ControlSelf-Assessment Report (《公司2017年度内部控制自我评价报告》), provision of guarantees for external parties,adjustments to the exercise prices and repurchase prices of its restricted share and stock option incentive plan,provision of guarantees for its wholly-owned and controlled subsidiaries, re-employment of the CPA firm andother matters arising during the Reporting Period. All the independent directors’ suggestions and opinion wereaccepted by the Company during the Reporting Period, which protected the interests of the Company as a whole,as well as the legal interests of the shareholders, especially the minority shareholders.

VI Performance of Duties by Specialized Committees under Board in Reporting Period

1. The Audit Committee under the fourth Board convened a total of eight meetings during the Reporting Period, atwhich the Company’s periodic reports, the quarterly related-party transactions, the matter concerning theoccupation of the Company’s funds by its controlling shareholder or other related parties, changes to theaccounting policies, the work report of the internal audit department, etc. were reviewed, and the person-in-charge

of internal audit was nominated. The Audit Committee also communicated with the external auditors on the auditof the 2017 annual financial statements and urged the audit progress. As such, the Audit Committee has faithfullyfulfilled its supervision and examination duties.2. Performance of Duties by Compensation and Appraisal Committee under BoardThe Compensation and Appraisal Committee under the fourth Board convened a total of five meetings during theReporting Period to improve the post and compensation systems, as well as to push forward the implementation ofthe equity incentive plan, the core team stock ownership plan and the employee investment plan.3. Performance of Duties by Nomination Committee under BoardThe Nomination Committee under the fourth Board convened a total of two meetings during the Reporting Periodto review the core management candidates and offer advice according to the Company’s operating status and assetscale.4. Performance of Duties by Strategy Committee under BoardThe Strategy Committee under the fourth Board convened a total of two meetings during the Reporting Period todiscuss and offer advice on the hedging business, the production capacity plan, etc.

VII Performance of Duties by Supervisory Board

Indicate by tick mark whether the Supervisory Board found any risk to the Company during its supervision in the Reporting Period.□ Yes √ NoThe Supervisory Board raised no objections in the Reporting Period.

VIII Appraisal of and Incentive for Senior Management1. Appraisal of Senior ManagementThe Company has put in place a senior management selection, appraisal, incentive and restrictive system. Allappointed by and being responsible to the Board, senior management shoulders the operating indicators set by theBoard. The Compensation and Appraisal Committee under the Board is responsible for a year-end appraisal ofsenior management’s service ability, performance of duties and fulfillment of objectives, among others. And thenthe committee formulates a compensation plan for the Board’s review. During the Reporting Period, the Companyduly restricted its senior management as per the applicable laws and regulations by aligning their compensationwith their and the Company’s performances.2. Incentive for Senior ManagementFor details, see “Part V Significant Events”, “XV Implementation of Equity Incentive Plans, Employee StockOwnership Plans or Other Employee Incentive Measures” herein.

IX Internal Control Assessment Report

1. Material Internal Control Deficiencies Identified for Reporting Period

□ Yes √ No

2. Internal Control Self-Assessment Report

Disclosure date of internal control self-assessment report16 April 2019
Index to disclosed internal control self- assessment reportwww.cninfo.com.cn
Assessed entities’ combined assets as a percentage of consolidated total assets100.00%
Assessed entities’ combined sales revenue as a percentage of consolidated sales revenue100.00%
Internal control deficiency identification standards
TypeFinancial-reporting relatedNon-financial-reporting related
Nature standardA material deficiency refers to a deficiency or a deficiency group that consists of multiple deficiencies that may cause a great deviation from the control objective. It is considered a material financial-reporting internal control deficiency if any of the following cases occurs: (1) Any of the Company’s directors, supervisors or senior management is involved in a serious fraud; (2) The Company corrects its disclosed financial statements for multiple times; (3) certified public accountants identifies a material misstatement in the current financial statements which the Company has failed to identify during its internal control process; or (4) The Company’s Audit Committee and internal audit organ maintain invalid supervision over internal control. A serious deficiency refers to a single deficiency or a deficiency group including other deficiencies that is less serious than a material deficiency but may still cause a deviation from the control objective. It is considered a serious financial-reporting internal control deficiency if any of the following cases occurs: (1) The Company does not select and adopt its accounting policies as per the generally accepted accounting standards; (2) The Company does not formulate anti-fraud procedures or control measures; (3) The Company has no control systems for the accounting treatment of non-conventional or special transactions; or (4) There are one or multiple deficiencies in controls over the financial reporting process and there is no reasonable assurance that the financial statements prepared are truthful and accurate. An ordinary deficiency refers to any deficiency that is neither a material deficiency nor a serious deficiency.Material deficiencies: (1) The internal control environment is invalid; (2) Any leak of insider information about any investment in external parties, asset restructuring, etc. against regulations causes any severe fluctuations in the Company’s stock price or any materially adverse impact on the Company’s image; (3) The violation of the Company’s decision-making procedure in any significant event causes a significant economic loss to the Company; or (4) The independent auditor identifies any other material deficiencies in the Company. Serious deficiencies: (1) The Company provides any guarantee or conducts any derivative financial instrument transaction without due authorization or performance of the corresponding information disclosure duty; (2) A severe loss of key talent occurs; (3) The Company is punished or a materially adverse impact is made to its image due to deviation from governing policies, measurement errors, etc.; (4) The independent auditor identifies any other serious deficiencies in the Company. An ordinary deficiency refers to any deficiency that is neither a material deficiency nor a serious deficiency.
Quantitative standardMaterial deficiency: misstated amount >= 5% of net asset value. Serious deficiency: 3% of net asset value <= misstated amount < 5% of net asset value. Ordinary deficiency: misstated amount < 3% of net asset value.Material deficiency: the direct loss caused to the Company >= RMB 1 million. Serious deficiency: RMB 0.5 million <= the direct loss caused to the Company < RMB 1 million. Ordinary deficiency: the direct loss caused to the Company < RMB 0.5 million.
Number of material financial-reporting internal control deficiencies0
Number of material non-financial-reporting internal control deficiencies0
Number of serious financial-reporting internal control deficiencies0
Number of serious non-financial-reporting internal control deficiencies0

X Independent Auditor’s Report or Verification Report on Internal Control

Verification report on internal control

Opinion paragraph in the verification report on internal control
In our opinion, Guangdong Haid Group Co., Limited maintained, in all material respects, effective internal control over financial reporting as of 31 December 2018, based on the Basic Rules on Enterprise Internal Control (《企业内部控制基本规范》) and other control standards.
Independent auditor’s report on internal control disclosed or notDisclosed
Disclosure date16 April 2019
Index to such report disclosedhttp://www.cninfo.com.cn
Type of the verification opinionUnmodified unqualified opinion
Material non-financial-reporting internal control deficienciesNone

Indicate whether any modified opinion is expressed in the CPA firm’s verification report on the Company’s internal control.□ Yes √ NoIndicate whether the CPA firm’s verification report on the Company’s internal control is consistent with the internal controlself-assessment report issued by the Company’s Board.√ Yes □ No

Section X. Corporate Bonds

Does the Company have any corporate bonds publicly offered and listed on the stock exchange, which were unduebefore the date of this Report’s approval or were due but could not be redeemed in full?No.

Section XI. Financial Statements

Independent Auditor’s Report

GKSZ [2019] No. G18031440036

To the Shareholders of Guangdong Haid Group Co., Limited

I. OpinionWe have audited the financial statements of Guangdong Haid Group Co., Limited (the“Company”), which comprise the consolidated and parent company balance sheets asof 31 December 2018, the consolidated and parent company statements of income,cash flows and changes in owners’ equity for the year then ended, as well as the notesto the financial statements.In our opinion, the financial statements referred to above present fairly, in all materialrespects, the consolidated and parent company financial position of the Company at 31December 2018, and the consolidated and parent company operating results and cashflows for the year then ended, in conformity with the Chinese Accounting Standardsfor Business Enterprises (CAS).II. Basis for OpinionWe conducted our audits in accordance with the Audit Standards for ChineseRegistered Accountants. Our responsibilities under those standards are furtherdescribed in the Auditor’s Responsibilities for Audit of Financial Statements section ofour report. We are independent of the Company in accordance with the China Code ofEthics for Certified Public Accountants, and we have fulfilled our other ethicalresponsibilities in accordance with the said Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.III. Key Audit MattersKey audit matters are those matters that, in our professional judgment, were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole, and informing our opinion thereon, and we do not provide a separate opinion on thesematters.(I) Revenue Recognition

1. DescriptionHaid Group is mainly engaged in feed production and sales. In 2018, Haid Group’soperating revenue was RMB 42,157 million, up by 29.49% year-on-year. As operatingrevenue is one of the key performance indicators of Haid Group with a substantialincrease, we identify revenue recognition as a key audit matter.Please refer to 26. “Revenue” in Note III to the Financial Statements for the accountingpolicy on the recognition of operating revenue, and Note V. “Operating Revenue andOperating Cost” to the Financial Statements for the disclosure of operating revenue.2. How Our Audit Addressed the Key Audit Matter(1) We understood and assessed the effectiveness of the management’s design andoperation of key internal control related to revenue recognition and tested theeffectiveness of key control implementation;(2) We carried out a spot check on important sales contracts to identify the contractterms and conditions related to the risk and remuneration transfer in respect ofcommodity ownership and evaluated whether Haid Group’s accounting policy ofrevenue recognition complied with the accounting standards for business enterprises;(3) We executed analytical review procedures to judge the reasonableness of changesin sales revenue and gross margin; examined the monthly average sales price of HaidGroup’s main products, and compared it with market trade prices as well as the data inthe same period of the previous period;(4) We paid attention to new customers in the reporting period, obtained the archivalinformation of new important customers, searched their relevant information throughpublic channels and conducted assessment on whether they were related parties ofHaid Group;(5) We inspected supporting documents related to revenue recognition, includingextracting sales statements to review related purchase and sales contracts, deliverynotes, bills of lading, weighing notes, bank receipt notes, and monthly statements ofaccount for sales, and verified and analyzed Haid Group’s ERP system data and thesales volume and amount in its financial system;(6) We selected samples and executed external confirmation procedures in respect ofrevenue to evaluate whether the revenue amount was accurate and complete;(7) We conducted sample tests on the sales revenue recognized around the balancesheet date and evaluated whether it was recognized in the appropriate period based onstocktaking.(II) Allowance for Doubtful Accounts Receivable1. DescriptionAs of 31 December 2018, the balance of the Company’s accounts receivable stood atRMB 1,230.04 million, with an allowance of RMB 133.90 million for doubtfulaccounts receivable. For further information, see note III of the financial statements,

item 11 under the heading “Accounts Receivable” and note V, item 3 under theheading “Notes and Accounts Receivable”. When assessing the recoverability of anaccount receivable, the Company’s management shall consider the age of the account,the payment history of the indebted and the indebted’s ability to pay, among others. Asthe balance of the Company’s accounts receivable was of a large amount and itinvolved complex and significant judgments of the Company’s management in makingthe allowance for doubtful accounts receivable, we paid attention to the estimate of theallowance for doubtful accounts receivable as a key audit matter.2. How Our Audit Addressed the Key Audit Matter1) We obtained an understanding of the management’s key internal controls overfinancial reporting associated with credit risk control, recovery of accounts andestimate of allowance for doubtful accounts receivable, and evaluated how effectivelythese internal controls were designed and worked.2) With respect to the overdue accounts receivable, we communicated with themanagement to learn about the information about the major indebted parties and themanagement’s assessment on the recoverability of these accounts.3) We evaluated whether the management’s policy for doubtful accounts for thecurrent period was consistent with the prior year, evaluated the appropriateness of themethods and assumptions adopted by the management in making the allowance fordoubtful accounts receivable, and reviewed whether the allowance was sufficient.4) We implemented an external confirmation procedure on certain selected accountsreceivable with a significant balance and crosschecked the amounts recorded by theCompany with the confirmation results.5) We checked the relevant payment history and the information about payments afterthe balance sheet date.(III) Impairment in Goodwill1. DescriptionAs of 31 December 2018, the balance of the Company’s goodwill stood at RMB389.40 million, with an allowance of RMB 8.79 million for impairment in goodwill.For further information, see note III of the financial statements, item 23 under theheading “Impairments in Long-Lived Assets” and note V, item 19 under the heading“Goodwill”. The Company’s management shall test goodwill at least annually todetermine whether any impairment loss shall be recognized. The management testsgoodwill for impairment by estimating the recoverable amounts of the asset groups thatgoodwill is allocated to, and then comparing these recoverable amounts with thecarrying value of those asset groups and goodwill. To estimate the recoverableamounts involves estimating the present value of the future cash flows the asset groupsare expected to generate. When estimating, the management needs to make significantjudgments and assumptions, including the determination of key parameters such as thefuture selling price, the cost of production, the operating expense, the discount rate andthe growth rate. As the goodwill impairment test involved a complex process and thesignificant judgments of the Company’s management, we paid close attention to the

goodwill impairment during our audit.2. How Our Audit Addressed the Key Audit Matter1) We obtained an understanding of the key internal controls associated withimpairment in goodwill, evaluated the effectiveness of their design and execution, aswell as tested how effectively these internal controls worked.2) We analyzed the key assumptions and methods adopted by the management inidentifying the asset group of goodwill and carrying out the impairment test ongoodwill, as well as evaluated the appropriateness of the valuation methods used by themanagement in estimating the cash flows.3) We compared the relevant asset groups’ actual results in 2018 with theircorresponding estimates made in the prior year to evaluate the reliability of themanagement’s estimates on cash flows. We evaluated the appropriateness of the sheetof recoverable amount estimates of goodwill asset groups prepared by the managementby comparing the financial data on the sheet with the actual operating data, theoperating plans and the budgets approved by the management.4) We discussed with the management about the possibility of changes to the keyassumptions, as well as evaluated the appropriateness of the key assumptions such asthe future revenue growth rate, the forecast gross margin percentage, the expense ratioand the discount rate that the management used in estimating the cash flows.5) We examined the investment agreements, the performance commitments and theacquisition evaluation reports, evaluated the pertinence and appropriateness of thevaluation specialists’ work results or conclusions, as well as evaluated the competence,professionalism and objectivity of the independent valuation specialists, so as torecheck the appropriateness of the Company’s judgment of impairment signs ingoodwill, taking into consideration the investees’ operating status .6) We tested whether the calculation of the net present value of future cash flows wascorrect.IV. Other InformationThe Company’s management is responsible for the other information. The otherinformation comprises all of the information included in the Company’s 2018 AnnualReport other than the financial statements and our auditor’s report thereon.Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.In connection with our audit of the financial statements, our responsibility is to read theother information and, in doing so, consider whether the other information is materiallyinconsistent with the financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated.If, based on the work we have performed, we conclude that there is a materialmisstatement of this other information, we are required to report that fact. We have

nothing to report in this regard.V. Responsibilities of Management and Those Charged with Governance for

Financial StatementsThe Company’s management is responsible for the preparation of the financialstatements that give a fair view in accordance with CAS, and for designing,implementing and maintaining such internal control as the management determines isnecessary to enable the preparation of financial statements that are free from materialmisstatement, whether due to fraud or error.In preparing the financial statements, the management is responsible for assessing theCompany’s ability to continue as a going concern, disclosing, as applicable, mattersrelated to going concern and using the going concern basis of accounting unless themanagement either intends to liquidate the Company or to cease operations, or have norealistic alternative but to do so.Those charged with governance are responsible for overseeing the Company’sfinancial reporting process.VI. Auditor’s Responsibilities for Audit of Financial StatementsOur objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement, whether due to fraud orerror, and to issue an auditor’s report that includes our opinion. Reasonable assuranceis a high level of assurance, but is not a guarantee that an audit conducted inaccordance with CAS will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if, individuallyor in the aggregate, they could reasonably be expected to influence the economicdecisions of users taken on the basis of these financial statements.As part of an audit in accordance with CAS, we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

(1) Identify and assess the risks of material misstatement of the financial statements,whether due to fraud or error, design and perform audit procedures responsive to thoserisks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error, as fraud may involve collusion, forgery,intentional omissions, misrepresentations, or the override of internal control.(2) Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Company’s internal control.(3) Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the management.(4) Conclude on the appropriateness of the management’s use of the going concernbasis of accounting and, based on the audit evidence obtained, whether a material

uncertainty exists related to events or conditions that may cast significant doubt on theCompany’s ability to continue as a going concern. If we conclude that a materialuncertainty exists, we are required by CAS to draw users’ attention in our auditor’sreport to the related disclosures in the financial statements or, if such disclosures areinadequate, to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor’s report. However, future events or conditionsmay cause the Company to cease to continue as a going concern.(5) Evaluate the overall presentation, structure and content of the financial statements,including the disclosures, and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.(6) Obtain sufficient appropriate audit evidence regarding the financial information ofthe entities or business activities within the Company to express an opinion on thefinancial statements. We are responsible for the direction, supervision and performanceof the Company audit. We remain solely responsible for our audit opinion.We communicate with those charged with governance regarding, among other matters,the planned scope and timing of the audit and significant audit findings, including anynoteworthy deficiencies in internal control that we identify during our audit.We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence, and communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence, and where applicable, related safeguards.From the matters communicated with those charged with governance, we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor’s report unless law or regulation precludes public disclosure about thematter or when, in extremely rare circumstances, we determine that a matter should notbe communicated in our report because the adverse consequences of doing so wouldreasonably be expected to outweigh the public interest benefits of suchcommunication.

GP Certified Public Accountants (SGP) Chinese CPA: Hongfei Xian

(Engagement Partner)

Chinese CPA: Shuxia Zhang

Guangzhou China 13 April 2019

1. Consolidated Balance Sheet

[English translation for reference only]Prepared by Guangdong Haid Group Co., LimitedUnit: RMB

Item31 December 201831 December 2017
Current assets:
Monetary assets1,735,409,838.581,392,046,440.33
Settlement reserve
Interbank loans granted
Financial assets measured at fair value49,672,592.739,601,140.00
Derivative financial assets
Notes and accounts receivable1,106,645,567.06779,494,456.16
Including: Notes receivable10,509,311.3619,209,112.07
Accounts receivable1,096,136,255.70760,285,344.09
Prepayments424,850,022.62744,735,722.57
Premiums receivable
Reinsurance receivables
Receivable reinsurance contract reserve
Other receivables502,215,573.25362,001,494.47
Including: Interest receivable1,794,497.121,802,621.51
Dividends receivable
Financial assets purchased under resale agreements
Inventories4,843,780,132.173,383,848,292.19
Assets classified as held for sale
Current portion of non-current assets903,000.00
Other current assets628,751,210.59214,976,686.51
Total current assets9,292,227,937.006,886,704,232.23
Non-current assets:
Loans and advances to customers157,600.00
Available-for-sale financial assets323,421,350.00283,721,350.00
Held-to-maturity investments
Long-term receivables17,519,129.5210,531,182.97
Long-term equity investments38,614,535.8532,554,508.11
Investment property46,397,156.6478,309,684.87
Property, plant and equipment4,555,480,833.773,760,863,514.36
Construction in progress724,011,706.23331,973,573.26
Productive living assets56,828,507.3117,121,846.74
Oil and gas assets
Intangible assets928,766,148.39846,002,659.79
R&D expense2,776,367.586,936,387.95
Goodwill380,610,061.82294,540,631.48
Long-term prepaid expense231,144,073.09195,501,009.05
Deferred income tax assets456,499,156.68289,789,208.00
Other non-current assets311,209,297.18125,906,914.12
Total non-current assets8,073,435,924.066,273,752,470.70
Total assets17,365,663,861.0613,160,456,702.93
Current liabilities:
Short-term borrowings2,715,954,867.692,303,898,763.70
Borrowings from central bank
Customer deposits and deposits from banks and other financial institutions
Interbank loans obtained
Financial liabilities measured at fair value46,271,790.0018,771,309.55
Derivative financial liabilities
Notes and accounts payable1,512,857,075.941,228,192,300.58
Advances from customers1,307,260,014.701,187,389,466.67
Financial assets sold under repurchase agreements
Handling charges and commissions payable
Payroll payable596,600,236.73532,053,872.59
Taxes payable118,589,643.1975,977,766.22
Other payables461,701,978.92564,214,951.83
Including: Interest payable25,144,934.165,188,104.75
Dividends payable6,250,397.108,880,810.40
Reinsurance payables
Insurance contract reserve
Payables for acting trading of securities
Payables for underwriting of securities
Liabilities directly associated with assets classified as held for sale
Current portion of non-current liabilities31,352,957.13
Other current liabilities160,521,969.4197,919,123.92
Total current liabilities6,951,110,533.716,008,417,555.06
Non-current liabilities:
Long-term borrowings1,842,910,000.00
Bonds payable
Including: Preferred shares
Perpetual bonds
Long-term payables115,622,929.75101,574,138.86
Long-term payroll payable64,891,859.1372,463,249.40
Provisions
Deferred income68,368,132.2375,417,073.10
Deferred income tax liabilities98,834,372.3465,655,212.14
Other non-current liabilities
Total non-current liabilities2,190,627,293.45315,109,673.50
Total liabilities9,141,737,827.166,323,527,228.56
Owners’ equity:
Share capital1,581,211,084.001,575,237,054.00
Other equity instruments
Including: Preferred shares
Perpetual bonds
Capital reserves2,010,778,182.221,849,285,839.41
Less: Treasury shares251,038,100.40302,540,781.00
Other comprehensive income7,600,777.65-2,771,414.88
Specific reserve
Surplus reserves518,730,727.06381,963,650.77
General reserve
Retained earnings3,878,656,406.432,973,520,338.94
Total equity attributable to shareholders of Company (Haid Group exclusive of subsidiaries)7,745,939,076.966,474,694,687.24
Non-controlling interests477,986,956.94362,234,787.13
Total owners’ equity8,223,926,033.906,836,929,474.37
Total liabilities and owners’ equity17,365,663,861.0613,160,456,702.93

Legal representative: Hua Xue Vice General Manager: Li TianChief Financial Officer: Shaolin Yang

2. Balance Sheet of the Parent Company [English translation for reference only]

Unit: RMB

Item31 December 201831 December 2017
Current assets:
Monetary assets1,236,624,716.15908,775,398.48
Financial assets measured at fair value49,293,017.732,295,520.00
Derivative financial assets
Notes and accounts receivable
Including: Notes receivable
Accounts receivable
Prepayments22,254,307.762,658,800.00
Other receivables6,996,953,598.795,222,717,073.27
Including: Interest receivable8,630.13964,410.93
Dividends receivable35,271,940.9535,271,940.95
Inventories17,550.00526,200.00
Assets classified as held for sale
Current portion of non-current assets
Other current assets34,776,246.75102,510,705.87
Total current assets8,339,919,437.186,239,483,697.62
Non-current assets:
Available-for-sale financial assets292,900,000.00252,000,000.00
Held-to-maturity investments
Long-term receivables1,527,302.501,518,902.50
Long-term equity investments3,103,551,860.052,446,634,148.53
Investment property36,316,499.7557,508,103.78
Property, plant and equipment206,423,560.87188,151,399.29
Construction in progress17,989,781.292,110,291.85
Productive living assets
Oil and gas assets
Intangible assets91,340,568.1054,052,625.93
R&D expense
Goodwill
Long-term prepaid expense20,848,132.1019,999,474.32
Deferred income tax assets190,619,356.0499,958,215.87
Other non-current assets2,659,873.341,719,904.77
Total non-current assets3,964,176,934.043,123,653,066.84
Total assets12,304,096,371.229,363,136,764.46
Current liabilities:
Short-term borrowings2,168,367,337.601,651,081,274.16
Financial liabilities measured at fair value32,630,290.0018,003,916.36
Derivative financial liabilities
Notes and accounts payable3,323,382.833,841,782.78
Advances from customers
Payroll payable121,078,753.60117,090,429.49
Taxes payable2,024,745.826,008,234.23
Other payables1,872,126,815.242,200,918,173.68
Including: Interest payable17,572,923.734,568,756.23
Dividends payable3,841,961.69
Liabilities directly associated with assets classified as held for sale
Current portion of non-current liabilities27,891,871.77
Other current liabilities24,112,595.057,221,463.77
Total current liabilities4,251,555,791.914,004,165,274.47
Non-current liabilities:
Long-term borrowings1,499,750,000.00
Bonds payable
Including: Preferred shares
Perpetual bonds
Long-term payables79,288,904.41101,574,138.86
Long-term payroll payable
Provisions
Deferred income9,166,812.1413,360,846.55
Deferred income tax liabilities24,340,746.748,977,906.64
Other non-current liabilities
Total non-current liabilities1,612,546,463.29123,912,892.05
Total liabilities5,864,102,255.204,128,078,166.52
Owners’ equity:
Share capital1,581,211,084.001,575,237,054.00
Other equity instruments
Including: Preferred shares
Perpetual bonds
Capital reserves2,089,547,854.241,914,381,221.12
Less: Treasury shares251,038,100.40302,540,781.00
Other comprehensive income
Specific reserve
Surplus reserves518,730,727.06381,963,650.77
Retained earnings2,501,542,551.121,666,017,453.05
Total owners’ equity6,439,994,116.025,235,058,597.94
Total liabilities and owners’ equity12,304,096,371.229,363,136,764.46

3. Consolidated Income Statement [English translation for reference only]

Unit: RMB

Item20182017
1. Total operating revenue42,156,628,800.1132,556,634,127.38
Including: Sales revenue42,156,628,800.1132,556,634,127.38
Interest revenue
Premium revenue
Handling charge and commission revenue
2. Total operating costs40,607,996,956.9531,270,302,771.79
Including: Cost of sales37,615,586,184.7728,979,578,692.42
Interest expense
Handling charge and commission expense
Surrenders
Net claims paid
Net amount provided as insurance contract reserve
Expenditure on policy dividends
Reinsurance premium expense
Taxes and surtaxes53,140,738.3447,090,570.89
Selling expense1,377,926,458.681,070,474,010.85
Administrative expense967,112,552.40793,314,667.24
R&D expense309,167,320.66253,923,095.49
Financial expenses219,052,330.9280,452,779.18
Including: Interest expense195,385,979.6799,628,632.10
Interest income32,211,787.1315,769,534.30
Impairment losses on assets66,011,371.1845,468,955.72
Add: Other income56,101,876.7542,654,676.14
Return on investment (“-” for loss)151,089,721.85174,653,719.01
Including: Share of profit or loss of joint ventures and associates6,349,268.046,438,634.76
Gain on changes in fair value (“-” for loss)12,578,735.85-32,550,170.35
Gains on foreign exchange (“-” for loss)
Gains on assets disposal (“-” for loss)66,161.296,037,071.03
3. Operating income (“-” for loss)1,768,468,338.901,477,126,651.42
Add: Non-operating gain26,850,623.8527,157,205.00
Less: Non-operating loss29,115,910.1122,219,213.88
4. Pretax income (“-” for loss)1,766,203,052.641,482,064,642.54
Less: Income tax expense282,262,891.74255,604,928.97
5. Net income (“-” for net loss)1,483,940,160.901,226,459,713.57
5.1 Net income from continuing operations (“-” for net loss)1,483,940,160.901,226,459,713.57
5.2 Net income from discontinued operations (“-” for net loss)
Net income attributable to shareholders of Company1,437,281,732.281,207,225,209.35
Net income attributable to non-controlling interests46,658,428.6219,234,504.22
6. Other comprehensive income, net of tax6,647,951.72-16,856,264.57
Attributable to shareholders of Company10,372,192.53-17,920,338.94
6.1 Items that will not be reclassified to profit or loss
6.1.1 Changes caused by remeasurements on defined benefit pension schemes
6.1.2 Other comprehensive income that will not be reclassified to profit or loss under equity method
6.2 Items that will be reclassified to profit or loss10,372,192.53-17,920,338.94
6.2.1 Other comprehensive income that will be reclassified to profit or loss under equity method
6.2.2 Gain/Loss on changes in fair value of available-for-sale financial assets
6.2.3 Gain/Loss arising from reclassification of held-to-maturity investments to available-for-sale financial assets
6.2.4 Effective gain/loss on cash flow hedges
6.2.5 Differences arising from translation of foreign currency-denominated financial statements10,372,192.53-17,920,338.94
6.2.6 Other
Attributable to non-controlling interests-3,724,240.811,064,074.37
7. Total comprehensive income1,490,588,112.621,209,603,449.00
Attributable to shareholders of Company1,447,653,924.811,189,304,870.41
Attributable to non-controlling interests42,934,187.8120,298,578.59
8. Earnings per share
8.1 Basic earnings per share0.900.78
8.2 Diluted earnings per share0.900.78

Where business combinations involving entities under common control occurred in the current period, the netincome achieved by the acquirees before the combinations was RMB 0.00, with the amount for last year beingRMB 0.00.

Legal representative: Hua Xue Vice General Manager: Li TianChief Financial Officer: Shaolin Yang

4. Income Statement of the Parent Company [English translation for reference only]

Unit: RMB

Item20182017
1. Sales revenue661,222,883.801,029,514,416.38
Less: Cost of sales285,175,292.67439,252,584.03
Taxes and surtaxes2,767,521.843,995,041.77
Selling expense5,641,884.777,711,441.89
Administrative expense270,389,544.81230,911,938.22
R&D expense107,532,183.9185,463,563.72
Financial expenses38,461,499.24111,099,746.02
Including: Interest expense223,995,781.91141,628,029.01
Interest income243,898,312.878,591,264.87
Impairment losses on assets456,330.36422,915.16
Add: Other income21,096,700.3515,292,953.28
Return on investment (“-” for loss)1,380,654,166.66755,967,175.94
Including: Share of profit or loss of joint ventures and associates1,415,674.664,968,619.45
Gain on changes in fair value (“-” for loss)32,371,124.09-21,458,656.36
Gains on assets disposal (“-” for loss)108,699.39-42,365.88
2. Operating income (“-” for loss)1,385,029,316.69900,416,292.55
Add: Non-operating gain1,020,334.938,389,798.83
Less: Non-operating loss3,837,704.112,500,860.63
3. Pretax income (“-” for loss)1,382,211,947.51906,305,230.75
Less: Income tax expense14,541,184.6553,100,513.47
4. Net income (“-” for net loss)1,367,670,762.86853,204,717.28
4.1 Net income from continuing operations (“-” for net loss)1,367,670,762.86853,204,717.28
4.2 Net income from discontinued operations (“-” for net loss)
5. Other comprehensive income, net of tax
5.1 Items that will not be reclassified to profit or loss
5.1.1 Changes caused by remeasurements on defined benefit pension schemes
5.1.2 Other comprehensive income that will not be reclassified into profit or loss under equity method
5.2 Items that will be reclassified to profit or loss
5.2.1 Other comprehensive income that will be reclassified into profit or loss under equity method
5.2.2 Gain/Loss on changes in fair value of available-for-sale financial assets
5.2.3 Gain/Loss arising from reclassification of held-to-maturity investments to available-for-sale financial assets
5.2.4 Effective gain/loss on cash flow hedges
5.2.5 Differences arising from translation of foreign currency-denominated financial statements
5.2.6 Other
6. Total comprehensive income1,367,670,762.86853,204,717.28
7. Earnings per share
7.1 Basic earnings per share0.880.55
7.2 Diluted earnings per share0.870.55

5. Consolidated Cash Flow Statement [English translation for reference only]

Unit: RMB

Item20182017
1. Cash flows from operating activities:
Proceeds from sale of commodities and rendering of services42,363,896,562.9833,544,235,792.90
Net increase in customer deposits and deposits from banks and other financial institutions
Net increase in loans from central bank
Net increase in loans from other financial institutions
Premiums received on original insurance contracts
Net proceeds from reinsurance
Net increase in deposits and investments of policy holders
Net increase in proceeds from disposal of financial assets measured at fair value
Interest, handling charges and commissions received6,884,283.073,813,764.79
Net increase in interbank loans obtained
Net increase in proceeds from repurchase transactions
Tax rebates3,976,919.184,055,969.22
Cash generated by other operating activities195,267,579.00122,605,560.15
Subtotal of cash generated by operating activities42,570,025,344.2333,674,711,087.06
Payments for commodities and services37,973,414,188.8730,201,765,337.10
Net increase in loans and advances to customers38,061,650.9583,000,000.00
Net increase in deposits in central bank and in interbank loans granted
Payments for claims on original insurance contracts
Interest, handling charges and commissions paid
Policy dividends paid
Cash paid to and for employees2,016,327,516.261,574,349,631.70
Taxes paid426,702,091.03336,639,740.76
Cash used in other operating activities1,079,755,890.79984,734,921.65
Subtotal of cash used in operating activities41,534,261,337.9033,180,489,631.21
Net cash flows from operating activities1,035,764,006.33494,221,455.85
2. Cash flows from investing activities:
Proceeds from disposal of investments2,457,440,496.065,669,875,076.07
Proceeds from return on investment166,471,732.10146,117,647.30
Net proceeds from disposal of property, plant and equipment, intangible assets and other long-lived assets6,105,301.7513,252,851.86
Net proceeds from disposal of subsidiaries or other business units958,489.00
Cash generated by other investing activities8,476,759.52
Subtotal of cash generated by investing activities2,630,017,529.915,838,680,823.75
Payments for acquisition of property, plant and equipment, intangible assets and other long-lived assets1,865,168,774.841,217,177,723.12
Payments for investments2,402,156,863.965,579,486,677.45
Net increase in pledged loans granted
Net payments for acquisition of subsidiaries and other business units361,835,034.57113,461,906.70
Cash used in other investing activities6,408,820.50
Subtotal of cash used in investing activities4,635,569,493.876,910,126,307.27
Net cash flows from investing activities-2,005,551,963.96-1,071,445,483.52
3. Cash flows from financing activities:
Capital contributions received136,908,348.00327,389,343.50
Including: Capital contributions by non-controlling interests to subsidiaries65,943,800.0025,299,553.50
Increase in borrowings obtained10,116,305,455.544,110,549,588.79
Net proceeds from issuance of bonds
Cash generated by other financing activities37,170,911.006,280,000.00
Subtotal of cash generated by financing activities10,290,384,714.544,444,218,932.29
Repayment of borrowings7,847,774,255.003,379,431,630.10
Payments for interest and dividends614,429,249.87591,778,280.22
Including: Dividends paid by subsidiaries to non-controlling interests42,490,812.9622,988,242.97
Cash used in other financing activities88,128,013.5146,616,282.75
Subtotal of cash used in financing activities8,550,331,518.384,017,826,193.07
Net cash flows from financing activities1,740,053,196.16426,392,739.22
4. Effect of foreign exchange rate changes on cash and cash equivalents13,626,961.96-11,986,940.56
5. Net increase in cash and cash equivalents783,892,200.49-162,818,229.01
Add: Cash and cash equivalents, beginning of the period1,374,275,559.371,537,093,788.38
6. Cash and cash equivalents, end of the period2,158,167,759.861,374,275,559.37

6. Cash Flow Statement of the Parent Company [English translation for reference only]

Unit: RMB

Item20182017
1. Cash flows from operating activities:
Proceeds from sale of commodities and rendering of services8,332,610.1471,845,730.20
Tax rebates
Cash generated by other operating activities41,512,928,148.0432,951,754,273.32
Subtotal of cash generated by operating activities41,521,260,758.1833,023,600,003.52
Payments for commodities and services18,480,816.3359,012,599.76
Cash paid to and for employees222,416,623.80181,288,504.44
Taxes paid39,624,617.1623,543,243.63
Cash used in other operating activities42,795,594,148.0032,845,898,890.01
Subtotal of cash used in operating activities43,076,116,205.2933,109,743,237.84
Net cash flows from operating activities-1,554,855,447.11-86,143,234.32
2. Cash flows from investing activities:
Proceeds from disposals of investment1,931,379,749.205,369,301,067.20
Proceeds from return on investment1,397,231,774.1999,996,233.35
Net proceeds from disposal of property, plant and equipment, intangible assets and other long-lived assets544,017.661,141,720.28
Net proceeds from disposal of subsidiaries or other business units2,238,220.00958,489.00
Cash generated by other investing activities179,022.57
Subtotal of cash generated by investing activities3,331,393,761.055,471,576,532.40
Payments for acquisition of property, plant and equipment, intangible assets and other long-lived assets70,540,678.2850,274,773.33
Payments for investments2,616,900,961.005,403,930,223.20
Net payments for acquisition of subsidiaries and other business units103,551,689.52147,551,210.48
Cash used in other investing activities
Subtotal of cash used in investing activities2,790,993,328.805,601,756,207.01
Net cash flows from investing activities540,400,432.25-130,179,674.61
3. Cash flows from financing activities:
Capital contributions received70,964,548.00302,089,790.00
Increase in borrowings obtained8,348,492,403.473,005,727,422.39
Net proceeds from issuance of bonds
Cash generated by other financing activities37,170,911.006,280,000.00
Subtotal of cash generated by financing activities8,456,627,862.473,314,097,212.39
Repayment of borrowings6,450,594,963.032,705,581,498.23
Payments for interest and dividends606,766,251.69611,069,308.32
Cash used in other financing activities34,000,331.3246,616,282.75
Sub-total of cash used in financing activities7,091,361,546.043,363,267,089.30
Net cash flows from financing activities1,365,266,316.43-49,169,876.91
4. Effect of foreign exchange rate changes on cash and cash equivalents-5,857,072.90890,027.26
5. Net increase in cash and cash equivalents344,954,228.67-264,602,758.58
Add: Cash and cash equivalents, beginning of the period891,104,487.481,155,707,246.06
6. Cash and cash equivalents, end of the period1,236,058,716.15891,104,487.48

7. Consolidated Statements of Changes in Owners’ Equity [English translation for reference only]

2018Unit: RMB

Item2018
Equity attributable to shareholders of Company (Haid Group exclusive of subsidiaries)Non-controlling interestsTotal owners’ equity
Share capitalOther equity instrumentsCapital reservesLess: Treasury sharesOther comprehensive incomeSpecific reserveSurplus reservesGeneral reserveRetained earnings
Preferred sharesPerpetual bondsOther
1. Closing balance of prior year1,575,237,054.001,849,285,839.41302,540,781.00-2,771,414.88381,963,650.772,973,520,338.94362,234,787.136,836,929,474.37
Add: Adjustments for changed accounting policies
Adjustments for corrections of previous errors
Adjustments for business combinations involving enterprises under common control
Other adjustments
2. Balances as of beginning of the year1,575,237,054.001,849,285,839.41302,540,781.00-2,771,414.88381,963,650.772,973,520,338.94362,234,787.136,836,929,474.37
3. Increase/ decrease in the period (“-” for5,974,030.00161,492,342.81-51,502,680.6010,372,192.53136,767,076.29905,136,067.49115,752,169.811,386,996,559.53
decrease)
3.1 Total comprehensive income10,372,192.531,437,281,732.2842,934,187.811,490,588,112.62
3.2 Capital increased and reduced by owners5,974,030.0078,666,740.59-42,608,730.6069,838,830.92197,088,332.11
3.2.1 Common shares increased by owners5,974,030.0051,265,457.40-42,608,730.6065,943,800.00165,792,018.00
3.2.2 Capital increased by holders of other equity instruments
3.2.3 Share-based payments included in owners’ equity32,414,924.981,609,910.9334,024,835.91
3.2.4 Other-5,013,641.792,285,119.99-2,728,521.80
3.3 Profit distribution-8,893,950.00136,767,076.29-532,145,664.79-42,300,348.27-428,784,986.77
3.3.1 Appropriation to surplus reserves136,767,076.29-136,767,076.29
3.3.2 Appropriation to general reserve
3.3.3 Appropriation to owners (or shareholders)-8,893,950.00-395,378,588.50-42,300,348.27-428,784,986.77
3.3.4 Other
3.4 Carryforwards within owners’ equity
3.4.1 Increase
in capital (or share capital) from capital reserves
3.4.2 Increase in capital (or share capital) from surplus reserves
3.4.3 Surplus reserves used to make up losses
3.4.4 Changes in defined benefit pension schemes transferred to retained earnings
3.4.5 Other
3.5 Specific reserve
3.5.1 Withdrawn for the period
3.5.2 Used during the period
3.6 Other82,825,602.2245,279,499.35128,105,101.57
4. Balances as of end of the period1,581,211,084.002,010,778,182.22251,038,100.407,600,777.65518,730,727.063,878,656,406.43477,986,956.948,223,926,033.90

[English translation for reference only]2017Unit: RMB

Item2017
Equity attributable to shareholders of CompanyNon-controlling interestsTotal owners’ equity
Share capitalOther equity instrumentsCapital reservesLess: Treasury sharesOther comprehensive incomeSpecific reserveSurplus reservesGeneral resRetained earnings
Preferred sharesPerpetual bondsOthererve
1. Closing balance of prior year1,541,428,454.001,512,859,968.5540,893,365.0015,148,924.06296,643,179.042,324,405,117.52158,519,570.465,808,111,848.63
Add: Adjustments for changed accounting policies
Adjustments for corrections of previous errors
Adjustments for business combinations involving enterprises under common control
Other adjustments
2. Balances as of beginning of the year1,541,428,454.001,512,859,968.5540,893,365.0015,148,924.06296,643,179.042,324,405,117.52158,519,570.465,808,111,848.63
3. Increase/ decrease in the period (“-” for decrease)33,808,600.00336,425,870.86261,647,416.00-17,920,338.9485,320,471.73649,115,221.42203,715,216.671,028,817,625.74
3.1 Total comprehensive income-17,920,338.941,207,225,209.3520,298,578.591,209,603,449.00
3.2 Capital increased and reduced by owners33,808,600.00279,442,640.29275,380,456.0028,916,249.4066,787,033.69
3.2.1 Common shares33,808,600.00242,371,250.00275,380,456.0032,017,319.0832,816,713.08
increased by owners
3.2.2 Capital increased by holders of other equity instruments
3.2.3 Share-based payments included in owners’ equity36,559,604.701,616,746.5138,176,351.21
3.2.4 Other511,785.59-4,717,816.19-4,206,030.60
3.3 Profit distribution-13,733,040.0085,320,471.73-558,109,987.93-28,027,091.68-487,083,567.88
3.3.1 Appropriation to surplus reserves85,320,471.73-85,320,471.73
3.3.2 Appropriation to general reserve
3.3.3 Appropriation to owners (or shareholders)-13,733,040.00-472,789,516.20-28,027,091.68-487,083,567.88
3.3.4 Other
3.4 Carryforwards within owners’ equity
3.4.1 Increase in capital (or share capital) from capital reserves
3.4.2 Increase in capital (or share capital) from surplus reserves
3.4.3 Surplus reserves used to
make up losses
3.4.4 Changes in defined benefit pension schemes transferred to retained earnings
3.4.5 Other
3.5 Specific reserve
3.5.1 Withdrawn for the period
3.5.2 Used during the period
3.6 Other56,983,230.57182,527,480.36239,510,710.93
4. Balances as of end of the period1,575,237,054.001,849,285,839.41302,540,781.00-2,771,414.88381,963,650.772,973,520,338.94362,234,787.136,836,929,474.37

8. Parent Company Statements of Changes in Owners’ Equity

[English translation for reference only]2018Unit: RMB

Item2018
Share capitalOther equity instrumentsCapital reservesLess: Treasury sharesOther comprehensive incomeSpecific reserveSurplus reservesRetained earningsTotal owners’ equity
Preferred sharesPerpetual bondsOther
1. Closing balance of prior year1,575,237,054.001,914,381,221.12302,540,781.00381,963,650.771,666,017,453.055,235,058,597.94
Add: Adjustments for changed accounting policies
Adjustments for
corrections of previous errors
Other adjustments
2. Balances as of beginning of the year1,575,237,054.001,914,381,221.12302,540,781.00381,963,650.771,666,017,453.055,235,058,597.94
3. Increase/ decrease in the period (“-” for decrease)5,974,030.00175,166,633.12-51,502,680.60136,767,076.29835,525,098.071,204,935,518.08
3.1 Total comprehensive income1,367,670,762.861,367,670,762.86
3.2 Capital increased and reduced by owners5,974,030.0085,290,293.31-42,608,730.60133,873,053.91
3.2.1 Common shares increased by owners5,974,030.0082,147,943.11-42,608,730.60130,730,703.71
3.2.2 Capital increased by holders of other equity instruments
3.2.3 Share-based payments included in owners’ equity3,142,350.203,142,350.20
3.2.4 Other
3.3 Profit distribution-8,893,950.00136,767,076.29-532,145,664.79-386,484,638.50
3.3.1 Appropriation to surplus reserves136,767,076.29-136,767,076.29
3.3.2 Appropriation to owners (or shareholders)-8,893,950.00-395,378,588.50-386,484,638.50
3.3.3 Other
3.4 Carryforwards within owners’ equity
3.4.1 Increase in capital (or share capital) from capital reserves
3.4.2 Increase in capital (or share capital) from surplus reserves
3.4.3 Surplus reserves used to make up losses
3.4.4 Changes in defined benefit pension schemes transferred to retained earnings
3.4.5 Other
3.5 Specific reserve
3.5.1 Withdrawn for the period
3.5.2 Used during the period
3.6 Other89,876,339.8189,876,339.81
4. Closing balance of the period1,581,211,084.002,089,547,854.24251,038,100.40518,730,727.062,501,542,551.126,439,994,116.02

[English translation for reference only]2017Unit: RMB

Item2017
Share capitalOther equity instrumentsCapital reservesLess: Treasury sharesOther comprehensive incomeSpecific reserveSurplus reservesRetained earningsTotal owners’ equity
Preferred sharesPerpetual bondsOther
1. Closing balance of prior year1,541,428,454.001,569,915,182.3940,893,365.00296,643,179.041,370,922,723.704,738,016,174.13
Add: Adjustments for changed accounting policies
Adjustments for corrections of previous errors
Other adjustments
2. Balances as of beginning of the year1,541,428,454.001,569,915,182.3940,893,365.00296,643,179.041,370,922,723.704,738,016,174.13
3. Increase/ decrease in the period (“-” for decrease)33,808,600.00344,466,038.73261,647,416.0085,320,471.73295,094,729.35497,042,423.81
3.1 Total comprehensive income853,204,717.28853,204,717.28
3.2 Capital increased and reduced by owners33,808,600.00280,547,601.21275,380,456.0038,975,745.21
3.2.1 Common shares increased by owners33,808,600.00242,721,548.00275,380,456.001,149,692.00
3.2.2 Capital increased by holders of other equity instruments
3.2.3 Share-based payments included in owners’ equity37,826,053.2137,826,053.21
3.2.4 Other
3.3 Profit distribution-13,733,040.0085,320,471.73-558,109,987.93-459,056,476.20
3.3.1 Appropriation to surplus reserves85,320,471.73-85,320,471.73
3.3.2 Appropriation to owners (or shareholders)-13,733,040.00-472,789,516.20-459,056,476.20
3.3.3 Other
3.4 Carryforwards within owners’ equity
3.4.1 Increase in capital (or share capital) from capital reserves
3.4.2 Increase in capital (or share capital) from surplus reserves
3.4.3 Surplus reserves used to make up losses
3.4.4 Changes in defined benefit pension schemes transferred to retained earnings
3.4.5 Other
3.5 Specific reserve
3.5.1 Withdrawn for the period
3.5.2 Used during the period
3.6 Other63,918,437.5263,918,437.52
4. Closing balance of the period1,575,237,054.001,914,381,221.12302,540,781.00381,963,650.771,666,017,453.055,235,058,597.94

I Company Profile

1. General InformationGuangdong Haid Group Co., Limited (formerly known as “Guangdong Haid Industrial Co., Ltd.”or “Guangdong Haid Group Limited”, and hereinafter referred to as the “Company”) wasincorporated with joint investments from natural persons Hua Xue, Yingzhuo Xu, Tan Lili, LuoQiang and Xiewu Jiang. The Company was registered with the Guangdong ProvinceAdministration for Industry and Commerce on January 8, 2004. It has obtained the businesslicense issued by the Guangdong Province Administration for Industry and Commerce with aunified social credit code of 914400007578948436.On May 17, 2007, as per the Reply on Approval of Change of Guangdong Haid Group Limited toForeign-Invested Limited Liability Company (SZP [2007] No. 905) issued by the Ministry ofCommerce of the People’s Republic of China, Guangdong Haid Group Limited as a wholechanged into Guangdong Haid Group Co., Limited with December 31, 2006 as the base day. TheCompany went public on the Shenzhen Stock Exchange in November 2009.As of December 31, 2018, the total shares of the Company was 1,581,211,084, of which36,447,514 were restricted shares, accounting for 2.31% of the total shares, and 1,544,763,570were non-restricted shares, accounting for 97.69% of the total shares.2. Industry Category the Company Belongs toThe Company competes in the feed industry.3. Business Nature and Principal Business ActivitiesThe production of feed and additives (operated by branches and subsidiaries with requiredlicenses), as well as the related technological development and services; livestock, poultry andaquatic farming and processing, as well as the related technological development and services; thewholesale, commission agency service (excluding auction service) and import and export (where aquota license is required or specialized regulations are imposed, the quota license is obtained andthe specialized regulations are complied with in the operations) of the said products, raw materialsof feed and agricultural and sideline products; and the purchase of grain.4. Registered AddressRoom 701, Building 2, Haid Mansion, No. 42, Road 4, Wangbo, Nancun Town, Panyu Dist,Guangzhou, China.5. Address of HeadquartersRoom 701, Building 2, Haid Mansion, No. 42, Road 4, Wangbo, Nancun Town, Panyu Dist,Guangzhou, China.6. Basic Organizational StructureThe Company has set up the general meeting, Board of Directors, Supervisory Committee andother organizations in accordance with the Company Law and the Company’s Articles ofAssociation. The general meeting is the Company’s highest authority.

7. Approval of Financial Statements for IssueThe 2018 annual financial statements have been authorized for issue by the Company’s Board onApril 13, 2019.8. Scope of Consolidated Financial StatementsA total of 272 subsidiaries were included in the scope of the consolidated financial statements ofthe current year. For further information, please refer to “VII Interests in Other Entities” herein. 45entities were added into and 1 entity was removed from the consolidation scope of the current yearwhen compared to that of last year. For more information, see “VI Changes in ConsolidationScope” herein.

II Basis for Preparation of Financial Statements

1. Basis for PreparationThe Company and its subsidiaries (hereinafter referred to as the “Group”) are on thegoing-concern basis and in line with the actual transactions and events, corresponding recognitionand measurement are conducted according to Accounting Standards for Business Enterprises(ASBE)--Basic Standards, and relevant provisions stipulated in various specific accountingstandards, application guidance and Explanations on Standards, on which basis, financialstatements are prepared and formulated.2. Going ConcernThe Company is capable for continuing operations for at least 12 months from the end of thereporting period, and has no significant event that will affect its ability in continuing operations.

III Critical Accounting Policies and Estimates

1. Statement on Compliance with ASBEThe financial statements prepared by the Group are in compliance with Accounting Standards forBusiness Enterprises, and truly and completely reflect the Group’s financial status, operatingresults and cash flow and other relevant information.2. Accounting PeriodThe Group’s accounting period adopts the Gregorian calendar, and a fiscal year shall be fromJanuary 1 to December 31 of the Gregorian calendar.3. Operating CycleThe Group has regarded 12 months as one operating cycle which shall be the basis for theclassification of the liquidity of assets and liabilities.4. Recording Currency

The Company and its domestic subsidiaries shall adopt Renminbi as the recording currency. Whenan overseas subsidiary engages in overseas operations, it shall choose the currency prevailing inthe main economic environment in which it operates as the recording currency. The monetary unitfor these financial statements shall be RMB.5. Accounting Treatment for Business Combination Involving Entities under CommonControl and that not under Common Control(1) Business Combination Involving Entities under Common ControlThe assets and liabilities acquired by the Group in a business combination are measured at thecarrying value of the consolidated party in the final controller’s consolidated statements on the dayof combining. The combining party shall adjust the capital reserve (share capital premium) bytaking the difference between the carrying value of the owner’s equity of the combined party inthe consolidated financial statements of the final controller and the carrying value of theconsideration paid by the combing party; if the capital reserve (share capital premium) is notsufficient for offset, retained earnings shall be adjusted.Direct expenses incurred from such business combination shall be included in the current profitsor losses.(2) Business Combination Involving Entities not under Common ControlFor the business combination involving entities not under common control, the combining costsburdened by the purchasing party and the net identifiable assets acquired through suchcombination shall be measured at their fair value on the day of purchasing. When the combiningcosts is more than the fair value of the net identifiable assets of the purchased party on the day ofpurchasing, the difference shall be recognized as Goodwill; otherwise, such difference shall beincluded in the current profits or losses.Direct expenses incurred from such business combination shall be included in the current profitsor losses.For the business combination involving entities not under common control realized step by stepthrough various transactions, the equities held in the purchased party before the day of purchasingshall be remeasured at the fair value on the day of purchasing, and the difference between the fairvalue and the carrying value shall be included in the current income from investment; if theequities held in the purchased party before the day of purchasing involve other comprehensiveearnings, such comprehensive earnings shall be transferred into the income from investmentduring the period (involving the day of purchasing). Goodwill shall be the difference between thesum of the fair value of the equities previously held in the purchased party and the fair value of theconsideration paid on the day of purchasing, and the fair value of net identifiable assets acquiredfrom subsidiaries on the day f purchasing.6. Methods of Preparing Consolidated Financial StatementsThe Company and its subsidiaries shall be included in the scope of consolidated financialstatements, and the financial status, operating results and cash flow from the beginning of suchcontrol to the end of such control shall be reflected in these financial statements.For subsidiaries obtained through business combination involving entities under common control,when the financial statements during this period are prepared and consolidated, it shall be deemedthat the combined subsidiaries have been included in the Group’s scope of consolidation upon the

control over them by the Group’s final controller, and the opening balance of the consolidatedfinancial statements and the previous comparative statements shall be accordingly adjusted. Whenthe Group is preparing the consolidated financial statements, various assets and liabilities of theconsolidated subsidiaries upon the control over such subsidiaries by the Group’s final controllershall be combined into the Group’s consolidated balance sheet at their carrying value, theoperating results the Group’s consolidated profit statement, and the cash flow the Group’sconsolidated cash flow statement. However, the net income realized by the consolidatedsubsidiaries before the day of combining shall be separately reflected and listed in theconsolidated profit statement.For subsidiaries obtained through business combination involving entities not under commoncontrol, when the financial statements during this period are prepared and consolidated, relevantfinancial statements of subsidiaries shall be adjusted based on the fair value of various identifiableassets and liabilities recognized on the day of purchasing, and from the day of purchasing on, theassets, liabilities and operating results of the purchased subsidiaries shall be reflected and includedin the Group’s financial statements.The Group shall purchase stock equities from minority shareholders of its subsidiaries. The capitalreserve in the consolidated balance sheet shall be adjusted according to the difference between thecosts resulting from purchasing the newly-acquired long-term equity investment from minorityshareholders and the net identifiable assets held in the subsidiary that will be continuouslycalculated according to the newly-increased shareholding ratio from the day of purchasing (or theday of combining) on; if the capital reserve is not sufficient for offset, retained earnings shall alsobe adjusted.The shareholder’s equity and the net current profits or losses of the subsidiaries not belonging tothe Group shall be respectively and separately reflected and listed under Shareholder’s Equity andNet income in the consolidated financial statements as Minority Equity and Minority Profits orLosses. If the current losses burdened by minority shareholders of the subsidiaries exceed theirshares held in Owner’s Equity at the beginning of this period, the difference shall be applied tooffset Minority Equity.When any subsidiary applies different accounting period or policies from that applied by theGroup, necessary adjustments shall be made to the subsidiary’s financial statements according tothe Group’s accounting period or policies. During the business combination, all significanttransactions and balances within the Group’s scope of combination, including the unrealizedprofits or losses on internal transactions, are offset. The unrealized losses on internal transactionsshall be all recognized if there is any evidence proving that such losses are relevant assetsimpairment losses.7. Classification of Joint Arrangement and Accounting Treatment Methods for JointOperationJoint arrangement refers to an arrangement involving two or above participators for commoncontrol, and can be classified into Joint Operation and Joint Venture.Joint Operation refers to an arrangement involving the Group and other parties for commoncontrol, in which way, the Group shall own related assets and burden related liabilities resultingfrom such arrangement.The Group shall strictly adhere to the following principles for recognizing various items related tothe quantum of interest resulting from such joint operation:

--recognize the assets separately held and that jointly held by shares;--recognize the liabilities separately assumed and that jointly assumed by shares;

--recognize the income from selling the output shares held through joint operation;--recognize the income from selling the output shares held through joint operation by shares;--recognize the expenses separately incurred, and that resulting from joint operation by shares.8. Standards for Recognition of Cash and Cash EquivalentsThe Group’s Cash refers to the Group’s cash on hand and deposits available for payment at anytime; the Group shall recognize any investment featuring short holding period (no more than 3months usually), strong liquidity, easy conversion into the known amount and low risk in valuechanges as cash equivalents in accordance with ASBE -- Cash Flow Statement.9. Foreign Currency Transactions(1) Determination of Conversion Exchange Rate for Foreign Currency Transactions andAccounting Treatment MethodsWhen the Group’s foreign currency transactions are initially recognized, they shall be convertedinto the amount in the form of recording currency according to the spot rate on the day oftransaction or the rate approximating such spot rate (usually, it refers to the middle rate of theforeign exchange rate published by the People’s Bank of China). On the balance sheet date, theforeign currency monetary items shall be converted based on the spot rate on the balance sheetdate. For the resulting currency translation differences, the difference resulting from the foreigncurrency loans related to the purchasing, construction or production of assets meetingcorresponding capitalization requirements shall be capitalized according to ASBE No.17:

Borrowing Costs, and the rest shall be included in current profits or losses. Foreign currencynon-monetary items measured at the fair value shall be converted based on the spot rate on the daywhen the fair value is recognized, and the resulting exchange difference shall be included incurrent profits or losses or other comprehensive earnings. The amount resulting from the impact ofchanges in exchange rate on the cash shall be separately presented and listed in the cash flowstatement.(2) Conversion Methods for Foreign Currency Items on the Balance Sheet Date and AccountingTreatments for the Conversion of Foreign Currency StatementsOn the balance sheet date, the assets and liabilities items in the balance sheet shall be convertedbased on the spot rate on the balance sheet date, and except Undistributed Profits under Owner’sEquity, other items shall be converted based on the then spot rate. Undistributed Profits shall bepresented based on the converted amount in the statement of changes in stockholder’s equity.Incomes and expenses in the profit statement shall be converted based on the exchange rateapproximating the spot rate on the day of transaction that is determined by using systematical andreasonable methods. The difference resulting from such conversion shall be presented under OtherComprehensive Earnings in Owner’s Equity. The amount resulting from the impact of changes inexchange rate on the cash shall be separately presented and listed in the cash flow statement.10. Financial Instruments(1) Classification of Financial InstrumentsAccording to the purpose of financial assets and financial liabilities held and assumed by theGroup’s management, financial instruments shall be classified into financial assets or liabilitiesmeasured at fair value, including trading financial assets or liabilities (and directly-designatedfinancial assets or liabilities at fair value through profit or loss); loans and accounts receivable;available-for-sale financial assets; other financial liabilities etc..

(2) Recognition Basis and Measurement Methods for Financial Instruments① Financial Assets Measured at Fair ValueTrading financial assets and designated financial assets measured at fair value shall be included.The Group’s financial assets measured at fair value are all trading financial assets.Trading financial assets shall meet one of the following requirements:

A. The financial asset is obtained mainly for sale or buy-back in the near future;B. It is a part of identifiable financial instruments portfolio under centralized management, andany objective evidence proves that the Group has recently managed the portfolio by using theshort-term profit method;C. It belongs to the derivative instrument, but it’s designated as the derivative instrument for theeffective arbitrage tool, and belongs to the derivative instrument of the financial guaranteecontract, excluding the derivative instrument related to the equity instrument investment withoutany offer on the active market whose fair value cannot be reliably measured (correspondingsettlement is subject to the delivery of the equity instrument).The subsequent measurement of the trading financial assets shall be carried out at the fair value,and profits or losses from changes in the fair value and the dividend and interest income related tothe financial assets shall be included in current profits or losses.② Loans and Accounts ReceivableLoans and accounts receivable are non-derivative financial assets that have no quoted price in anactive market and have a fixed or determinable recovery amount. Financial assets classified by theGroup as loans and accounts receivable shall include notes receivable, accounts receivable,interest receivable and other receivables.Loans and receivables are subsequently measured at amortized costs by using the effective interestrate method. Gains or losses arising from the derecognition, impairment or amortization shall beincluded in current profits or losses.③ Available-for-sale Financial AssetsAvailable-for-sale Financial Assets refer to the available-for-sale non-derivative financial assetsdesignated when they are initially recognized and other financial assets that cannot be classified.However, for the equity instrument investment that has no quoted price in an active market andwhose fair value cannot be reliably measured and the derivative financial assets that are related tothe equity instrument and must be settled by delivering the equity instrument, the follow-upmeasurement shall be conducted based on the costs; for others that have an quoted price in theactive market or whose fair value can be reliably measured in despite of no quoted price in theactive market, they shall be measured at the fair value, and changes in the fair value shall beincluded in other comprehensive earnings. The available-for-sale debt instrument investmentwhose interests are calculated by using the effective interest method during the holding period andthe cash dividend related to the available-for-sale equity instrument investment which is declaredfor distribution by the invested units shall be calculated in current profits or losses as the incomefrom investment.④ Other Financial LiabilitiesThe sum of the fair value and relevant transaction expenses shall be regarded as the amount forinitial recognition, and the subsequent measurement shall be conducted at the amortized costs.

(3) Determination of Financial Assets and Financial LiabilitiesIf there exists an active market, financial assets held or financial liabilities that will be assumed bythe Group shall adopt the current quoted price in the active market; financial assets that will bepurchased by the Group or financial liabilities assumed by the Group shall adopt the current offerin the active market. If there is no such quoted price or offer, the market quotes for recenttransactions or market quotes for adjusted recent transactions shall prevail unless there is any solidevidence proving that such market quotes are not fair value.If there does not exist an active market, the Group shall apply corresponding valuation techniquesto determine the fair value, including referring to similar cases and the price used by variousparties for recent market transactions, referring to the current fair value of other equivalentfinancial instruments in nature, the discount cash flow method and the option pricing models etc..(4) Recognition and Measurement of the Transfer of Financial AssetsThe transfer of financial assets refers to the transfer or delivery of the financial assets to the issuerby the Group, and all and any part of financial assets can be transferred in the following twoforms:

a. the transfer of the right to collect the cash flow of the financial assets to the other party;b. the financial assets are transferred to the other party, but the right to collect the cash flow of thefinancial assets is retained and it’s also obliged to pay such collected cash flow to the finalbeneficiary. Meanwhile, the following requirements shall also be met:

-- it’s only obliged to pay the final beneficiary when equivalent cash flow is received from thefinancial assets;--as required in the contract, the financial assets cannot be sold or serve as the guaranty, but canserve as the guarantee for the payment of cash flow to the final beneficiary;-- it’s obliged to timely pay the collected cash flow to the final beneficiary.When the Group transfers substantially all the risks and rewards of all or part of the financialassets to the transferee, the Group derecognizes all or part of the financial assets. The differencebetween the consideration received and the carrying value of the transferred financial assets isrecognized as profits or losses. At the same time, the accrued gains or losses of the financial assetspreviously recognized in the owner’s equity are transferred to profits or losses; when all the risksand rewards related to the ownership are retained, all or part of the financial assets arecontinuously recognized and the consideration received is recognized as the financial liabilities.If the Group has neither transferred nor retained substantially all risks and rewards related to theownership of financial assets, but has not given up control of the financial assets, it shall recognizethe relevant financial assets in accordance with the degree of its continued involvement in thetransferred financial assets, and confirm the corresponding liabilities accordingly.(5) Derecognition of Financial Assets and Financial LiabilitiesWhen any of the following requirements is met, the Group’s financial assets shall bederecognized:

a. relevant contract rights to collect the cash flow from the financial assets are terminated;b. the financial assets are transferred, and meet relevant derecognition requirements stipulated inASBE No.23: Transfer of Financial Assets;

c. when all or part of the Group’s current obligations related to the financial liabilities areterminated, the financial liabilities or part of that can only be derecognized.(6) Impairment of Financial AssetsThe Group shall check the carrying value of financial assets other than trading financial assets onthe balance sheet date. If there is any objective evidence proving that the financial assets areimpaired, corresponding impairment allowance shall be calculated and withdrawn. For a singlefinancial asset of a significant amount, a separate impairment test is required. If there is anyobjective evidence proving that it has been impaired, the impairment loss shall be recognized andincluded in current profits or losses. For financial assets with insignificant single amounts thatshow no sign of impairment through conducting a separate test, the Group shall conductcorresponding impairment tests based on the credit portfolio to determine impairment losses basedon the creditworthiness of the client and the actual situation of doubtful accounts incurred over theyears.① Impairment of Loans and Accounts ReceivableWhen a financial asset measured at amortized cost is impaired, the impairment loss shall becalculated based on the difference between the carrying value and the present value of theestimated future cash flows discounted at the original effective interest rate and included in theprofits or losses for the current period. After the impairment loss has been recognized for afinancial asset measured at amortized cost, if there is any objective evidence proving that the valueof the financial asset has been recovered and is objectively related to the event that occurred afterthe loss is recognized, the previously recognized impairment loss shall be reversed, and includedin current profits or losses. However, the reversed carrying value shall not exceed the amortizedcost of the financial asset on the day of reversal under the assumption that no allowance forimpairment is calculated and withdrawn.② Impairment of Available-for-sale Financial AssetsIf the fair value of available-for-sale financial assets declines significantly, or it is expected thatthe downward trend will be non-transient after considering various relevant factors in acomprehensive manner, it will be deemed that it has been impaired and the accumulative lossesresulting from the decline in the fair value that are supposed to be directly included in the owner’sequity shall be all transferred out and corresponding impairment losses shall also be recognized.11. Accounts ReceivableAccounts receivable shall include accounts receivable, other receivables and factoring receivables.(1) Accounts receivable with amounts that are individually significant and for which the allowancefor doubtful accounts is provided on the individual basis:

Judgment basis or amount standard for the significant individual amount: accounts receivable andother receivables with their closing balances exceeding RMB 1 million (inclusive), and factoringreceivables with the closing balance exceeding RMB 20 million (inclusive).The method of the calculation and withdrawing of the allowance for doubtful accounts receivablewith amounts that are individually significant and for which the allowance for doubtful accounts isprovided on the individual basis, a separate impairment test shall be conducted. If there is anyobjective evidence showing any sign of impairment, corresponding allowance for doubtfulaccounts shall be calculated and withdrawn based on the different between the current value of thefuture cash flow and the carrying value.For accounts receivable with amounts that are individually significant that has been proved notimpaired by a separate test, corresponding bad debt provisions shall be calculated and withdrawn

based on the grouping basis.(2) Accounts receivable with amounts that are not individually significant but for which theallowance for doubtful accounts is provided on the individual basis:

If any sign indicates that the recoverability of a certain account receivable is significantly differentfrom other receivables of the same age group, and the recoverability cannot be truly reflectedwhen corresponding allowance for doubtful accounts are calculated and withdrawn for the accountreceivable based on the established ratio, corresponding allowance for doubtful accounts shall becalculated and withdrawn by using the specific identification method.(3) Accounts receivable (accounts receivable and other receivables) for which the allowance fordoubtful accounts is provided on the grouping basis:

For receivables (including receivables with significant single amount and receivables withinsignificant single amount) whose allowance for doubtful accounts are not separately calculatedand withdrawn after a separate test, the allowance for doubtful accounts shall be calculated andwithdrawn based on the following credit risk groups.

Group TypeGroup Determination BasisMethods for the Calculation and Withdrawing of Bad Debt Provisions based on Groups
Future Guarantee GroupFund NatureNot available
Unit Fund Group within the combination scope of receivablesFund NatureNot available
Factoring ReceivablesCredit Risk FeaturesBased on corresponding classification
Aging GroupReceivables other than the above groupsBy using the aging analysis method

Note 1: The Group shall not calculate and withdraw corresponding allowance for doubtfulaccounts for the future transaction guarantee receivable with low actual loss ratio and the unit fundwithin the combination scope of receivables. Except that, receivables within the group shall berespectively reflected and listed in the aging group and factoring receivables.Note 2: Factoring Receivables whose allowance for doubtful accounts is calculated and withdrawnaccording to corresponding group of credit risk features:

Corresponding allowance for doubtful accounts shall be calculated and withdrawn based oncorresponding classification standards. At the end of this period, Factoring Receivables shall beclassified into Normal, Concerned, Secondary, Suspected and Loss, and corresponding allowancefor doubtful accounts calculation and withdrawing proportions for each classification shall beshown as follows:

ClassificationCalculation and Withdrawing Proportion
Normal1.5%
Concerned3%
Secondary30%
ClassificationCalculation and Withdrawing Proportion
Suspected60%
Loss100%

Note 3: for the aging groups, corresponding allowance for doubtful accounts calculation andwithdrawing proportions by using the aging analysis method are shown as follows:

AgingCalculation and Withdrawing Proportion
Within one year5%
1-2 Years10%
2-3 Years25%
3-4 Years40%
4-5 Years40%
Over 5 Years100%

(4) Doubtful Account Recognition Standards:

a. the debtor goes bankrupt or dies, and the debt is still unrecoverable after the debtor’sbankruptcy property or estate is liquidated;b. the debtor fails to pay off the debt as scheduled, and obvious signs have indicated that the debtis unrecoverable.For receivables that cannot be recovered, the Company shall apply such receivables to write offcorresponding allowance for doubtful accounts as the doubtful account loss as approved by theGroup.12. Loans and Advances to CustomersCorresponding allowance for doubtful accounts shall be calculated and withdrawn based oncorresponding classification standards. At the end of this period, loans and advances to customersshall be classified into Normal, Concerned, Secondary, Suspected and Loss, and correspondingallowance for doubtful accounts calculation and withdrawing proportions for each classificationshall be shown as follows:

ClassificationCalculation and Withdrawing Proportion
Normal1.5%
Concerned3%
Secondary30%
ClassificationCalculation and Withdrawing Proportion
Suspected60%
Loss100%

13. Inventory(1) Classification of Inventory: raw materials, merchandise inventory, goods in process,consumptive biological assets and work in process-outsourced etc..(2) Inventory Valuation: the inventory upon obtained shall be valuated based on the actual costsand that shall be valuated by using the one-time weighted average method when received and sentout at the end of the month.(3) Inventory valuation allowance: At the end of the period, the valuation shall be made based onthe lower between the carrying value and the net realizable value, and the recognition standardshall be: the inventory’s selling price is lower than the cost; or relevant inventories are replaced,damaged or obsolete due to various reasons, in which case, a comparison shall be made betweenthe carrying value and the net realizable value of such inventories based on the single inventoryitem (the item of wide varieties and lower unit price by category); corresponding inventoryvaluation allowance shall be calculated and withdrawn based on the difference between the netrealizable value (the inventory’s net realizable value shall be determined based on the estimatedselling price minus the estimated completion costs and all necessary selling expenses) and thecarrying value, and included in current profits or losses.When all factors that may cause the depreciation of the inventory have disappeared, it shall bereversed to the write-down amount not exceeding the valuation allowance amount previouslycalculated and withdrawn and included in current profits or losses.(4) For inventory losses and damaged inventories, possible reasons shall be investigated before theend of this Reporting Period according to the actual costs, and they shall be well disposed beforethe final settlement at the end of the period. The inventory profit shall be recorded in the accountbased on the replacement cost and rearranged into the current management expenses.14. Long-term Equity InvestmentThe long-term equity investment shall include the long-term equity investment into subsidiariesand the long-term equity investment into joint ventures and cooperative enterprises.Subsidiaries refer to the invested units that the Group can exercise control over; joint venturesrefer to the invested units that the Group can exercise joint control with other parties; andcooperative enterprises refer to the invested units subject to the Group’s significant influence oncorresponding financial and business operation decisions. .The investment into subsidiaries shall be presented in the Group’s financial statements based onthe amount determined by using the cost method, and consolidated after being adjusted by meansof the equity method while preparing the consolidated financial statements; the investment intojoint ventures and cooperative enterprises shall be checked and calculated by using the equitymethod.(1) Determination of Investment CostThe long-term equity investment calculated by using the cost method shall be measured accordingto the initial investment cost. For the long-term equity investment calculated by using the equitymethod, the initial investment cost shall be regarded as the long-term equity investment cost when

the initial investment cost is greater than the fair value of the net identifiable assets held in theinvested units; otherwise, the difference shall be included in current profits or losses, and thelong-term equity investment cost shall accordingly be adjusted and increase.(2) Subsequent Measurement and Profits/Losses Recognition MethodThe long-term equity investment calculated by using the cost method, the cash dividend or profitdeclared by the invested units for distribution shall be recognized as the income from investmentand included in current profits or losses.For the long-term equity investment calculated by using the equity method the Group shallrecognize current investment gains and losses based on the shares of the net income or loss of theinvested units that shall be held or shared. While recognizing the net losses of the invested units,the carrying value of the long-term equity investment and other long-term equities substantiallyconstituting the net investment into the invested units shall be written off to zero. However, whenthe Group is obliged to assume corresponding extra losses and relevant estimated liabilitiesrecognition conditions stipulated in Contingency Criterion are met, it’s necessary to continue therecognition of investment losses and finish corresponding check and calculation by regarding it asthe estimated liabilities. For other changes in the shareholders’ equity except the net incomes orlosses of the invested units, when the Group’s shareholding ratio remains unchanged, the part ofamount calculated based on such shareholding ratio shall be directly included in othercomprehensive earnings. Accordingly, the carrying value of the long-term equity investment shallbe decreased based on the part of amount duly distributed to the group when the invested unitshave declared and distributed the profit or cash dividend. The unrealized internal transactionprofits or losses between the Group and the invested units shall be the basis for calculating the partattributable to the Group according to corresponding shareholding ratio, and that part shall beoffset, on which basis, corresponding investment profits or losses shall be recognized. For theinternal transaction losses incurred between the Group and the invested units, the part attributableto the assets impairment losses and the unrealized losses shall not be offset.(3) Basis for Confirming Control, Joint Control and Significant Influence on the Invested UnitsControl refers to the right to decide relevant financial and business operation policies for theinvested units, on which basis, corresponding benefits can be obtained from their operatingactivities. While confirming whether the control can be exercised over the invested units, variouspotential voting factors including the invested units’ current convertible bond and the currentexecutable warrants shall also be taken into consideration.Joint control refers to the shared control over a certain economic activity as required in thecontract, and only exists when all investors sharing such control over significant financial andbusiness operation decisions related to the economic activity have consented.Significant impact refers to the right retained by the Group to participate in deciding variousfinancial and business operation policies of the invested units, but the Group cannot control orjointly control the formulating of these policies with other participators.15. Investment PropertyInvestment property refers to the properties held for the purpose of obtaining the rent or capitalgain or both, including the leased land use right, the land use right held and available for transferafter appreciation, and the leased building. The Group’s investment property mainly includes theleased building, and the Group shall conduct the initial measurement of the existing real estatebased on the costs, and complete the subsequent measurement based on the fair value. Meanwhile,corresponding depreciation shall be calculated and withdrawn by using the same method with theproperty, plant and equipment.

16. Property, Plant and Equipment

(1) Recognition Conditions

Property, plant and equipment (PP&E) refers to the tangible assets held for the purpose ofproducing goods, rendering services, renting or conducting business operation with the service lifeexceeding one accounting year. PP&E can be classified into House and Building, MechanicalEquipment, Transportation Equipment, Electronic Equipment and Other Equipment. PP&E can berecognized only when the following conditions are met: a. the economic benefit related to thePP&E is likely to flow in the Company; b. the costs can be reliably measured.

(2) Depreciation Methods:

TypeDepreciation MethodPeriod of Depreciation (years)Ratio of Remaining ValueYearly Depreciation
House and BuildingStraight-line Depreciation Method5-40 years Note 1519.00-2.38
Mechanical EquipmentStraight-line Depreciation Method3-12 years531.67-7.92
Transportation EquipmentStraight-line Depreciation Method5 years519.00
Electronic EquipmentStraight-line Depreciation Method3-5 years531.67-19.00
Other EquipmentStraight-line Depreciation Method3-5 years531.67-19.00

Note 1: For the immovable building on the leased land, the depreciation period shall adopt theshorter period between the land usage right lease term and the PP&E’s expected service period.Note 2: The Group shall own the permanent ownership of the land purchased in India and Ecuador.As the land’s service life is uncertain, the Group has not calculated and withdrawn correspondingdepreciation, and the impairment test shall be conducted every year.

(3) PP&E Held for Sale:

The Group shall adjust the estimated net remaining value of the held-for-sale PP&E, and base onsuch value to reflect the amount of the fair value minus relevant disposal expenses withoutexceeding the original carrying value of the PP&E when relevant held-for-sale conditions are met.The difference between the original carrying value and the estimated net remaining value shall beincluded in current profits or losses as the assets impairment loss. Corresponding depreciationshall not be calculated and withdrawn for the held-for-sale PP&E.17. Construction in ProgressFor construction in progress, all necessary expenses incurred before the assets is built to achieveits expected service status shall be regarded as the entry value of PP&E. When the built PP&E hasachieved its expected service status, but the completion settlement has not been done yet, it shallbe transferred into PP&E from the day when it achieves the expected service status according to

the construction budget, cost or the project’s actual costs and the estimated value, and thedepreciation shall be calculated and withdrawn according to the Company’s depreciation policiesgeared to PP&E. Upon the final settlement, the provisional value previously estimated shall beadjusted based on the actual costs, but the depreciation amount previously calculated andwithdrawn shall not be adjusted. The Group shall accordingly capitalize the special loans appliedfor the purchasing, construction or production of assets meeting corresponding capitalizationrequirements or the loan interest resulting from occupying the general borrowing and auxiliaryexpenses resulting from the special loan before the purchased, constructed or produced assetsmeeting corresponding capitalization requirements achieve the expected usable or marketablestatus.18. Borrowing CostsFor the Group’s borrowing costs, the amount that can be directly attributed to the purchase &construction or construction of the assets in conformity with relevant capitalization requirementsshall be capitalized and included in relevant assets costs.Except for the above-mentioned borrowing costs, other borrowings costs shall be recognized asfinancial expenses.There’s no capitalized borrowing costs during this Reporting Period.19. Living Assets(1) The Group’s living assets include consumptive living assets and productive living assets.(2) The living assets acquired by the Group shall be initially measured based on the costs.a. The costs of purchased external living assets include the purchase price, transportation costs,insurance premiums, related taxes, and other expenses directly attributable to the purchase of theassets.b. The costs of self-propagated or farmed consumptive living assets shall be determined inaccordance with the necessary expenditures such as feed costs, labor costs, and indirectapportioned expenses incurred prior to the sale.c. The costs of self-propagated productive living assets shall be determined in accordance with thenecessary expenditures such as feed costs, labor costs, and indirect apportioned expenses incurredbefore the intended production and business objectives (ages) are achieved.d. The costs of living assets input by investors shall be determined in accordance with the valuestipulated in the investment contract or agreement, unless such assets cannot be measured at thefair value as required in the contract or agreement.

(3) Subsequent Measurement

a. Subsequent expenditures including maintenance and feeding expenses etc. incurred after theclosure of the living assets or the planned production and management purpose are achieved shallbe recognized as current expenses.b. The Group’s productive living assets that meet the intended production and operation objectivesshall be depreciated on a scheduled basis, and shall be respectively included in the costs or currentexpenses of relevant assets according to their purposes.c. At the end of each year, the Group shall inspect consumptive living assets and productive livingassets. If there is any solid evidence proving that the net realizable value of the consumptive living

assets or the recoverable amount of the productive living assets is lower than the carrying valuedue to natural disasters, animal disease infestations, or changes in market demand, the differencebetween the net realizable value or the recoverable amount and the carrying value shall serve asthe basis for calculating and withdrawing the living assets depreciation reserves or impairmentprovisions, and be recognized as current losses.If various factors that may cause the depreciation of consumptive living assets have disappeared,the write-down amount shall be recovered, restituted from the depreciation provisions previouslycalculated and withdrawn, and included in current profits or losses. Upon the calculation andwithdrawing of productive living assets impairment provisions, it cannot be reversed.(4) Acquisition and Disposala. The consumptive living assets when acquired or sold shall carry over the costs at the carryingvalue.b. Agricultural products produced by productive living assets shall be calculated and determinedbased on the necessary expenses such as material costs, labor costs, and indirect apportionedexpenses during the output process, and the carrying value shall be carried forward to the productcosts.c. The costs of the living asset after the change in the purpose shall be determined based on thecarrying value at the time of such change.d. When the living assets are sold out, the balance resulting from the income minus the carryingvalue and related taxes shall be included in current profits or losses.20. Intangible Assets(I) Valuation Method and Service Life(1) Determination Standard and Classification of Intangible AssetsIntangible assets refer to identifiable non-monetary assets without physical form owned orcontrolled by the Group, including land use rights, patented technologies, software use rights,trademark rights, and non-patent technologies.(2) Valuation of Intangible Assets:

a. The costs of the purchased external intangible assets shall be determined based on the actualexpenses incurred before it achieves the expected purpose;b. The costs of the intangible assets input by investors shall be determined based on the amountagreed in the investment contract or agreement, unless the assets cannot be measured at the fairvalue as required in the contract or agreement;c. The intangible assets acquired from the debtor that has resorted to the non-cash assets to pay thedebt, or the intangible assets exchanged by using the credit receivable shall be recognized by thefair value of the exchanged intangible assets;d. The costs of the intangible assets invested for non-monetary transactions shall be determinedbased on the fair value and related taxes;e. For donated intangible assets, if the donor provides relevant credentials, it shall be pricedaccording to the amount indicated on the certificate plus the relevant taxes and fees payable; if thedonor does not provide relevant credentials and there is an active market for similar or similarintangible assets, the estimated market price of similar or similar intangible assets plus the relevant

taxes and fees payable shall be regarded as the actual costs; if there is no active market for similaror similar intangible assets, the present value of the estimated future cash flows of the donatedintangible assets shall be regarded as the actual costs.(3) Amortization of intangible assets: Intangible assets with a limited service life shall beamortized within the estimated service life by using the straight-line method. If the period duringwhich the intangible assets can bring future economic benefit to the Group cannot be forecast, itshall be deemed as the intangible assets with uncertain service life. However, Intangible assetswith uncertain service life shall not be amortized.(II) Accounting policies for internal R&D expensesThe expenditure of the Group’s internal R&D projects shall be divided into Research Expenditureand Development Expenditure.Upon incurred, Research Expenditure shall be included in current profits or losses.When the following requirements are met, Development Expenditure can thus be capitalized;otherwise, it shall be included in current profits or losses:

The intangible assets is completed and available for use or sales, and it is feasible technically;Intend to complete the intangible assets and make it usable or marketable;The way available for the intangible assets to generate the economic benefit, including the abilityin proving that products generated by the intangible assets exist in the market or the intangibleassets itself exists in the market; if the intangible assets is only for internal use, its serviceabilitycan be proved;Technical resources, financial resources and other resources are sufficient to support thedevelopment of the intangible assets with the ability in using or selling the intangible assets;Expenditure attributed to the development stage of the intangible assets can be reliably measured.After the above requirements are met, the technical feasibility study and economic feasibilitystudy are completed and the project is established, it shall enter the development stage.Capitalized development expenditure shall be presented in the balance sheet as DevelopmentExpenses, and transferred to intangible assets on the day when it meets corresponding usableconditions.If Research Expenditure and Development Expenditure cannot be clearly differentiated, all R&DExpenses incurred shall be included in current profits or losses.21. GoodwillFor the business combination involving entities not under common control, the difference betweenthe combining costs and the fair value of the identifiable assets acquired from the purchased partyshall be recognized as Goodwill. Please refer to Note III. 23 for detailed Goodwill impairment testand accounting treatments.22. Long-term Prepaid ExpensesLong-term prepaid expenses refer to various expenses incurred that shall be amortized during thisperiod and subsequent periods with its amortization period exceeding 1 year, which shall berecognized based on the actual costs and amortized by using the average method within the

expected benefit period.23. Long-term Assets ImpairmentIn terms of PP&E, construction in progress, intangible assets with limited service life, theinvestment property measured based on the cost mode, the long-term equity investment intosubsidiaries, joint ventures and cooperative enterprises and other non-current non-financial assets,the Company shall judge whether there exists any sign of impairment on the balance sheet date. Ifexists, the recoverable amount shall be estimated and the impairment test shall be conducted. ForGoodwill, the intangible assets with uncertain service life and the intangible assets are notavailable for use, whether there is any sign of impairment, the impairment test shall be carried outevery year.If the impairment test results indicate that the recoverable amount is less than the carrying value,corresponding impairment allowance shall be calculated and withdrawn according to thedifference and included in the impairment losses. The recoverable amount shall be the highervalue between the net amount of the assets’ fair value minus relevant disposal expenses and thepresent value of the estimated future cash flow. The assets’ fair value shall be determinedaccording to the price stated in the sales agreement for fair transactions; if there is no such salesagreement, but there is an active market, the fair value shall be subject to the offer of the assets’buyer; if there is no such sales agreement, nor an active market, the assets’ fair value shall beestimated based on the available best information. Relevant disposal expenses shall include legalexpenses, related taxes, transportation expenses and direct expenses incurred before the assetsachieve the expected usable status. The present value of the assets’ estimated future cash flowshall be determined according to the expected future cash flow resulting from its continuous usageand final disposal and the amount discounted based on an appropriate discount rate. The assetsimpairment provisions shall be calculated and determined based on each single asset; if it isdifficult to estimate the recoverable amount of such single asset, the recoverable amount of theassets group can be determined, and the assets group shall be the minimum assets group that canindependently produce corresponding cash flow.When the impairment test is conducted for the Goodwill separately listed in financial statements,the carrying value of Goodwill shall be amortized to the asset group or the asset group portfoliothat is expected to benefit from the synergistic effect of the business combination. If theimpairment test results indicate that the recoverable amount is less than the carrying value,corresponding impairment losses shall be recognized. However, the impairment losses shall firstlyoffset and be amortized to the carrying value of such Goodwill, and then offset the carrying valueof other assets other than Goodwill based on corresponding proportions.When the above assets impairment losses are recognized, the part of amount that is recovered shallnot be reversed.24. Employee CompensationEmployee Compensation refers to various forms of remuneration or compensation given by theCompany to obtain services provided by employees or to terminate labor relations. Employeecompensation includes short-term compensation, post-employment benefits, dismissal benefits,and other long-term employee benefits.(1) Accounting Treatment Method for Short-term CompensationShort-term compensation mainly includes wages, bonuses, allowances and subsidies, staff welfarefees, medical insurance premiums, maternity insurance premiums, industrial injury insurancepremiums, housing accumulation funds, trade union funds, staff education funds, andnon-monetary benefits. The Group will provide employees with various forms of remunerationand other related expenses during the accounting period in which the employees provide services

to the Group, including wages, bonuses, allowances, subsidies and staff welfare payments foremployees, and medical insurance, pension insurance premiums, unemployment insurancepremiums, industrial injury insurance premiums, maternity insurance premiums and other socialinsurance premiums paid for employees. However, housing accumulation funds, employeeeducation funds, trade union funds, non-monetary benefits etc. shall be recognized as liabilitiesand included in current profits or losses or related asset costs. Non-monetary benefits aremeasured at fair value.(2) Accounting Treatment Method for Post-employment BenefitsPost-employment benefits refer to various forms of remuneration and benefits provided toemployees after they have retired or terminated the labor relation with the Company in order toobtain services from them, except short-term compensation and dismissal benefits. The Companyclassifies post-employment benefit plans into the defined contribution plan and the defined benefitplan.The defined contribution plan: After the Group has paid fixed fees to an independent fund, theGroup shall no longer assume further payment obligation for the post-employment benefit plan,including the basic endowment insurance and the unemployment insurance etc.. During theaccounting period in which the employees work for the Group, the payments made for the definedcontribution plan shall be recognized as liabilities and included in current profits or losses orrelated asset costs.The defined benefit plan refers to the post-employment benefit plan other than the definedcontribution plan.(3) Accounting Treatment Method for Dismissal BenefitsDismissal Benefits refer to the compensation given to the employees for the termination of thelabor relation before the labor contract expires or for the purpose of encouraging the employees tovoluntarily accept such dismissal. When the Company provides corresponding dismissal benefitsto the employees, the employee compensation liabilities resulting from such dismissal benefitsshall be recognized on the earlier date between the following two dates and included in currentprofits or losses:

(I) the day when the Company cannot unilaterally withdraw the dismissal benefits due to thetermination of labor relation or the redundancy.(II) the day when the Company recognizes various costs related to the restructuring of the paymentof dismissal benefits.(4) Accounting Treatment Method for Other Long-term Employee BenefitsOther long-term employee benefits refer to all employee compensations other than short-termcompensation, post-employment benefits and dismissal benefits, including long-term compensatedabsences, long-term disability benefits, and long-term profit sharing plans etc.. For otherlong-term employee benefits provided by the Group to its employees, the Group will recognize thelong-term profit sharing given to the employees as the liability during the accounting period inwhich the employees provide services to the Group, which shall be included in current profits orlosses or related asset costs. Those unfinished payments within 12 months after the end of theannual reporting period shall be recognized as long-term employee compensation payable.25. ProvisionsIf the contingency-related obligation is the current obligation assumed by the Group, theperformance of such obligation is likely to result in the outflow of economic benefits from the

Group, and the related amount can be measured reliably, the Group shall recognize a provision.The Company’s provisions shall be initially measured based on the best estimate of all neededexpenses for fulfilling current obligations. If it will exert great impact on the time value ofcurrency, the best estimate shall be determined after the discounting of relevant future cashoutflows. While determining the best estimate, the Company shall take various factors intoconsideration including the risks related to contingent events, the uncertainty and the time value ofcurrency. If all needed expenses exist within a continuous range (or interval), and the possibilitiesfor various results are identical within such range, the best estimate shall be determined accordingto the intermediate value; in other cases, the best estimate shall be respectively determined asfollows:

-- if the contingent events involves any single item, the best estimate shall be determined based onthe amount of the highest possibility in being incurred;-- if the contingent events involve various items, the best estimate shall be calculated according tovarious possible results and relevant probabilities.The Group shall double check the carrying value of provisions on the balance sheet date, andadjust such carrying value according to the current best estimate.26. Revenue(1) Revenue from selling commodities shall be recognized when all requirements are met asfollows:

a. main risks and returns related to the property in the goods are transferred to the buyer;b. the continuing control right usually linked with the property is not retained, the valid controlover the sold goods is not executed;c. the received amount can be reliably measured;d. relevant economic benefits are likely to flow in the Company;e. relevant costs incurred or estimated can be reliably measured.To be specific, The Group will deliver the product to the purchaser in accordance with the termsof the contract or the agreement, and the purchaser will confirm the such delivery. Then, thecorresponding revenue shall be recognized. The purchaser has the right to sell and use the producton its own after receiving it and shall bear the risk of price fluctuations or any damage to theproduct.(2) Revenue from service rendering shall be recognized when the following requirements are met:

a. the received amount can be reliably measured;b. relevant economic benefits are very likely to flow in the Group;c. the completion status can be reliably defined;d. costs incurred and estimated during the transaction can be reliably measured.The rendering of service that commences and finishes during the same accounting year shall berecognized as revenue when such service rendering finishes.(3) Revenue from the transfer of the assets usage right shall be recognized when the following

requirements are met:

a. relevant economic benefits are very likely to flow into the Group;b. the received amount can be reliably measured.27. Government SubsidiesWhen various requirements related to the government subsidy are met and the government subsidycan be acquired, the Group shall recognize such government subsidy. However,(1) When the government subsidy is the monetary assets, it shall be measured based on thereceived amount or the amount receivable; if the government subsidy is the non-monetary assets,it shall be measured based on the fair value; if the fair value cannot be reliably obtained, it shall bemeasured based on the nominal amount.(2) The assets-related government subsidy shall be recognized as the deferred income, distributedaveragely within the assets’ service life and included in current profits or losses. However, thegovernment subsidy measured at the nominal amount shall be directly included in current profitsand losses. The income-related government subsidy that will be applied to compensate relevantexpenses or losses during subsequent periods shall be recognized as the deferred income, andincluded in current profits or losses during the period when relevant expenses are recognized; ifapplied to compensate relevant expenses or losses incurred, it shall be directly included in currentprofits or losses.If no object is specified in the government subsidy document, the judgment basis for the Group toclassify the government subsidy into the assets-related government subsidy and the income-relatedgovernment subsidy shall be: the government subsidy applied to purchase, construct and form thelong-term assets by other means shall be classified as the assets-related government subsidy; if itis difficult to be classified, it shall be regarded as the assets-related government subsidy as awhole.(3) The government subsidy related to the Group’s daily operations shall be included in otherincome or applied to write down relevant costs according to the nature of the economic transaction;otherwise, it shall be included in non-operating gain and loss.(4) When the recognized government subsidy is required to return, corresponding accountingtreatments shall be carried out according to the following provisions: when the book value ofrelevant assets is offset upon initially recognized, the book value shall be adjusted; when relevantdeferred incomes exist, the book value of such deferred incomes shall be offset, and the excessshall be included in the current profits or losses; in other cases, it shall be directly included in thecurrent profits or losses.(5) Fiscal Discount: If the government financial department directly grants the discounted interestto the Group, corresponding discounted interest shall be applied to offset relevant borrowing costs.28. Share-based Payments(1) Types of Share-based PaymentsThe Group’s share-based payments are equity-settled share-based payments. Specific equityinstruments include restricted stocks and stock options issued by companies that allow holders topurchase a fixed amount of ordinary shares of the Company at a fixed price.(2) Determination Method for the Fair Value of Equity Instruments

Share-based payment settled in the form of equity for obtaining the service rendered by employeesshall be measured based on the fair value of the equity instrument awarded to employees. If thereis an active market, it shall be determined according to the quoted price in the active market;otherwise, it shall be determined by using the valuation techniques, including reference to familiarsituations and the price adopted by various parties in recent market transactions, reference to thecurrent fair value of other financial instruments of the same nature, the discount cash flow methodand the option pricing model etc..(3) Basis for Determining the Best Estimate of Executable Equity InstrumentsOn each balance sheet date within the waiting period, the Group shall revise the number of equityinstruments that are expected to be exercised based on follow-up information such as the changein the number of employees with vesting rights and the completion of performance indicators, inwhich basis, expenses to be apportioned in each period shall be recognized. On the day ofexecution, the expected number of executable equity instruments shall be consistent with theactual number of executable equity instruments.(4) Accounting Treatments Related to the Implementation of Share-based Payment Plana. Accounting Treatment on the day of awardingFor the equity incentive plan granted to employees by the Group for restricted stocks, the Groupshall recognize capital stock and capital reserve (share capital premium) on the grant date based onthe subscription money received from employees, and at the same time, the Group shall confirmthe liabilities for the repurchase obligation based on the total repurchase amount, which shall beincluded in treasury stocks, and listed in the balance sheet as an allowance item for shareholders’equity.For the equity incentive plan granted to employees by the Group for stock options, the Group shallnot conduct any accounting treatment on the day of awarding.b. Accounting Treatment within the Waiting PeriodIf the equity-settled share-based payment is exchanged for employee-supplied services, and it canonly be executed or unlocked when services are completed during the waiting period or when therequired performance conditions are met, on each balance sheet date within the waiting period,based on the best estimate of the number of the executable or unlocking equity instruments,services obtained during this period shall be included in relevant costs or expenses according tothe fair value on the day when such equity instruments are awarded to the employees, andcorresponding capital reserves shall also be adjusted. For equity incentive plans that have beenrevoked due to the failure in meeting corresponding vesting conditions within the waiting period,the Group shall write back various expenses related to the share-based payment previouslyrecognized.Restricted shares issued by the Group shall participate in profit distribution and the part belongingto cash dividends can be revoked. For the holders of future restricted stocks that are expected to beunlocked, the Group’s cash dividends allocated to holders of restricted stocks shall be treated asprofit distributions. For those who are expected not to unlock restricted stocks in the future, theGroup’s cash dividends allocated to holders of restricted stocks shall be applied to offset relatedliabilities. If any subsequent information indicates that the number of restricted stocks that cannotbe unlocked is different from the previous estimate, it shall be treated as a change in accountingestimates.c. Accounting Treatment on the day of execution or unlockingWhen restricted stocks are regarded as the equity instrument for share-based payment, the Groupshall repurchase and cancel the stocks that have not met relevant restricted stocks unlocking

requirements. When the treasury stocks are canceled, the capital stock shall be reduced based onthe total par value of the canceled stocks, and portion of the costs of treasury stocks exceeding thetotal par value shall be applied to respectively offset the capital reserve (stock premium), theearned surplus and the undistributed profit; if the costs of treasury stocks are less than the total parvalue, corresponding capital reserve (stock premium) shall increase for the portion below the totalpar value. When the treasury stocks are transferred, the capital reserve (stock premium) shallaccordingly increase for the portion of the transfer income higher than the costs of treasury shares;the portion below the costs of treasury stocks shall be respectively applied to write down thecapital reserve (stock premium), surplus reserves, and undistributed profits. For stocks that are notrequired to be repurchased and meet relevant restrictive stock unlocking conditions, the Groupshall write down corresponding liabilities according to the carrying value of the liabilitiescorresponding to the unlocked shares, and write down the treasury stocks according to the carryingvalue of the treasury stocks corresponding to the unlocked shares. If there is any difference, thecapital reserve (stock premium) shall be adjusted.When stock options are regarded as the equity instrument for share-based payment, the Groupshall include that in the shareholders’ equity based on the subscription money paid by theemployees while executing their rights. Meanwhile, the capital reserve recognized within thewaiting period shall be transferred into the stock premium.29. Lease(1) Accounting treatments for operating leasea. Rent-in Assets under operating leaseThe rent expenses of the rent-in assets under operating lease shall be recognized as relevant assetscosts or expenses by using the straight-line method within the lease term.b. Rent-out Assets under operating leaseFor the rent-out fixed assets under operating lease other than the trading real estate (See Note III.15), corresponding depreciation and corresponding impairment provisions shall be respectivelycalculated and withdrawn according to applicable depreciation policies stated in Note III. 16(2)and applicable accounting policies stated in Note III. 23. The rental income under operating leaseshall be recognized as Earnings by using the straight-line method within the lease term. The initialdirect expenses of larger amount resulting from the rent-out assets under operating lease shall becapitalized, and included in current profits or losses by stages within the lease term by adoptingthe same basis prevailing in recognizing the rental income; if the amount is smaller, they shall bedirectly included in current profits or losses.(2) Accounting treatments for financial leasea.Rent-in assets under financial lease: Rented assets under financial assets: On the leasecommencement date, the Company shall regard the lower value between the fair value of theleasing assets and the current value of the minimum lease payment as the entry value of the rentedassets, the minimum lease payment the entry value of the long-term accounts payable, and thedifference the unrecognized financing expenses. Initial direct expenses shall be included in thevalue of the rent-in assets. Unrecognized financial expenses within the lease term shall becalculated and recognized as the current financial expenses by using the effective interest method.The Group shall calculate and withdraw corresponding leasing assets depreciation by adopting thesame depreciation policies with that for its self-owned fixed assets.b.Rent-out assets under financial lease: On the lease commencement day, the Group shall regardthe sum of the minimum lease amount and the initial direct expenses as the entry value of thefinancial lease receivables, and the unguaranteed residual value shall also be recorded; the

difference between the sum of the minimum lease amount, the initial direct expenses and theunguaranteed residual value and the present value shall be recognized the unrealized financingincome which shall be calculated and recognized as the current financing income within the leaseterm by using the effective interest method.30. Income Tax(1) Accounting Treatments for Income TaxThe accounting treatment of income tax shall be conducted by using the balance sheet debtmethod. On the balance sheet date, the Group shall recognize the deferred income tax assets andcorresponding deferred income tax income based on the calculation results of deductibletemporary differences and applicable income tax rates; deferred income tax liabilities andcorresponding deferred income tax expenses shall also be recognized according to the calculationresults of taxable temporary differences and applicable income tax rates.(2) Basis for Recognizing the Deferred Income Tax AssetsThe Group shall recognize the deferred income tax assets generated from the deductible temporarydifferences within the limit of the taxable income that is very likely to be obtained for offsettingthe deductible temporary differences. However, the deferred income tax assets generated from theinitial recognition of the assets or liabilities during various transactions possessing the followingfeatures shall not be recognized:

a.such transactions involve no business combination;b.such transactions will neither influence the accounting profit, nor the taxable income (or thedeductible losses).(3) Basis for Recognizing the deferred income tax liabilitiesExcept the deferred income tax liabilities generated by the following transactions, the Group shallrecognize all deferred income tax liabilities generated from the taxable temporary difference:

a.the initial recognition of Goodwill;b.the initial recognition of assets or liabilities resulting from the various transactions possessingthe following features:

① such transactions involve no business combination;② such transactions will neither influence the accounting profit, nor the taxable income (or thedeductible losses).For the taxable temporary differences related to the investment made by subsidiaries, jointventures and cooperative enterprises, the Group shall recognize corresponding deferred incometax liabilities. However, the exceptional situations are shown as follows:

a.the investing Company is able to control the restitution time of such temporary difference;b.it is very likely not to be restituted in the foreseeable future.31. Division InformationThe Group determines its operating divisions based on its internal organizational structure,

management requirements and internal reporting system, and determines reporting divisions anddiscloses information of divisions on the basis of such operating divisions.Operating divisions refer to the component unit meeting the following requirements within theGroup: (1) the component unit is able to generate corresponding income and expenses in dailyoperating activities; (2) the Group’s management is able to regularly assess the operating unit’soperating performance and decide on corresponding resources allocation and performanceassessment; (3) the Group is able to acquire various accounting information related to thecomponent unit, including the financial situation, the operating results and the cash flow etc.. Twoor more than two operating divisions can be consolidated into one operating division if they havesimilar economic characteristics and relevant requirements are met.The Group’s businesses are mainly the manufacturing and selling of feed products, and themanagement shall regard such businesses as an integral whole for comprehensive managementand operating results evaluation. Therefore, the Group has not reported the information ofdivisions.32. Other Critical Accounting Policies and EstimatesNone.33. Changes in Critical Accounting Policies and Estimates(1) Changes in Critical Accounting PoliciesThe Ministry of Finance issued on 15 June 2018 the "Notice on Revision and Issuance of theFormat of General Corporate Financial Statements for 2018" (关于修订印发2018年度一般企业财务报表格式的通知) Cai Kuai [2018] No. 15, combining certain balance sheet items andsplitting certain income statement items; and issued on 7 September 2018 the “InterpretationsRegarding the Format of General Corporate Financial Statements for 2018" (关于2018年度一般企业财务报表格式有关问题的解读), asking for adjustments to the comparative data of thecomparable periods.The Company has prepared its financial statements as per the said latest requirements on theformat of the corporate financial statements. Where any financial statement item is changed, thecomparative figure of the comparable period is also adjusted accordingly as per the AccountingStandards for Enterprises No. 30 – Presentation of Financial Statements (企业会计准则第30号——财务报表列报) and other applicable rules.The following table presents the effects of the above-mentioned accounting policy changes on theconsolidated financial statement items and amounts as at 31 December 2017 (or of the year thenended):

Item affectedBefore the adjustmjentAfter the adjustmentAfter the adjustment
Notes receivable19,209,112.07-19,209,112.07-
Accounts receivable760,285,344.09-760,285,344.09-
Notes and accounts receivable-779,494,456.16779,494,456.16
Interest receivable1,802,621.51-1,802,621.51-
Dividends receivable---
Other receivables360,198,872.961,802,621.51362,001,494.47
Notes payable---
Accounts payable1,228,192,300.58-1,228,192,300.58-
Notes and accounts payable-1,228,192,300.581,228,192,300.58
Interest payable5,188,104.75-5,188,104.75-
Dividends payable8,880,810.40-8,880,810.40-
Other payables550,146,036.6814,068,915.15564,214,951.83
Administrative expense1,047,237,762.73-253,923,095.49793,314,667.24
Research and development expenditure-253,923,095.49253,923,095.49
Other income41,395,359.881,259,316.2642,654,676.14
Non-operating gain28,416,521.26-1,259,316.2627,157,205.00

The following table presents the effects of the above-mentioned accounting policy changes on theparent company’s financial statement items and amounts as at 31 December 2017 (or of the yearthen ended):

Item affectedBefore the adjustmjentAfter the adjustmentAfter the adjustment
Interest receivable964,410.93-964,410.93-
Dividends receivable35,271,940.95-35,271,940.95-
Other receivables5,186,480,721.3936,236,351.885,222,717,073.27
Notes payable---
Accounts payable3,841,782.78-3,841,782.78-
Notes and accounts payable-3,841,782.783,841,782.78
Interest payable4,568,756.23-4,568,756.23-
Dividends payable3,841,961.69-3,841,961.69-
Other payables2,192,507,455.768,410,717.922,200,918,173.68
Administrative expense316,375,501.94- 85,463,563.72230,911,938.22
Research and development expenditure-85,463,563.7285,463,563.72
Other income14,689,716.12603,237.1615,292,953.28
Non-operating gain8,993,035.99-603,237.168,389,798.83

Apart from the above-mentioned changes in accounting policies, there was no other change inaccounting policies of the Company in the year.(2) Change in significant accounting estimatesIn the year, there was no change in the major accounting estimates of the Company.

IV Taxation

1. Main tax categories and rates

CategoryTax baseTax rate
Value added tax (VAT)Sales revenue or taxable incomeExemption for feed products (note 1) and agricultural products (note 2); and 3% (note 3), 5%, 6%, 7%, 10% (notes 4 and 5), 11%, 16% (note 5) or 17% of sales revenue for others.
City maintenance and construction taxTurnover tax payable1%, 5% or 7% of turnover tax payable
Educational surchargeTurnover tax payable3% of turnover tax payable
Corporate income taxTaxable incomeSee “2. Corporate Income Tax” below

Note 1: As per the Document CS [2001] No. 121 jointly issued by the Ministry of Finance and the StateAdministration of Taxation, the Company and its subsidiaries are exempted from VAT on their feed products,which has been filed with the competent tax authorities.Note 2: As the Interim Regulation of People’s Republic of China on Value-Added Tax says “agricultural producersare exempted from value-added tax on the self-produced agricultural products they sell” in its item 16, theCompany and its subsidiaries are exempted from VAT on the self-produced agricultural products they sell, whichhas been filed with the competent tax authorities.Note 3: According to the Notice of Ministry of Finance and State Administration of Taxation on Policy ofStreamlining and Combination of Value-Added Tax Levy Rates (CS [2014] No. 57), subsidiaries of the CompanyQingyuan Haibei, Sichuan Hailinger and Shijiazhuang Weike qualify for a simple 3% VAT levy rate on their salesrevenue, and VAT on other taxable revenue is subject to applicable tax rates.Note 4: In accordance with the VAT regulation of the Socialist Republic of Vietnam, feed and feed-relatedindustries are exempted from VAT starting from 2016. The freezer rental revenue of Sheng Long Bio Tech, asubsidiary incorporated by the Company in Vietnam, is subject to a 10% VAT.Note 5: In accordance with the Notice of the Ministry of Finance and the State Administration of Taxation onAdjusting Value-Added Tax Rates, the tax rates of 17% and 11% applicable to the Group’s VAT taxable sale orimport of goods shall be adjusted to 16% and 10%, respectively, starting from 1 May 2018.

2. Corporate Income TaxThe corporate income tax rates for the Company and its major subsidiaries are listed in the tablebelow:

Full nameAbbr.Corporate income tax rateRemark
Guangdong Haid Group Co., LimitedHaid Group25%
Guangzhou Runchuan Investment Co., Ltd.Guangzhou Runchuan25%
Guangzhou Yitun Pig Industry Investment Co., Ltd.Guangzhou Yitun25%
Enping Fengwo Agriculture and Animal Husbandry Co., Ltd.Enping Fengwo12.50% or free of income taxNote 2 and note 3
Yangxi Fengwo Ecological Agriculture Co., Ltd.Yangxi FengwoFree of income taxNote 2
Yangjiang Yangdong Fengwo Agriculture and Animal Husbandry Co., Ltd.Yangdong FengwoFree of income taxNote 2
Enping Yitun Ecological Agriculture Co., Ltd.Enping YitunFree of income taxNote 2
Gaozhou Sanhe Animal Husbandry Co., Ltd.Gaozhou SanheFree of income taxNote 2
Yingde Yitun Ecological Agriculture Co., Ltd.Yingde YitunFree of income taxNote 2
Hunan Yitun Ecological Agriculture Co., Ltd.Hunan YitunFree of income taxNote 2
Hengyang Jisheng Agriculture and Animal Husbandry Development Co., Ltd.Hengyang JishengFree of income taxNote 2
Yueyang Yitun Agriculture and Animal Husbandry Co., Ltd.Yueyang YitunFree of income taxNote 2
Sihui Yitun Ecological Agriculture Co., Ltd.Sihui YitunFree of income taxNote 2
Guigang Qintang Yitun Ecological Agriculture Co., Ltd.Qintang YitunFree of income taxNote 2
Pingnan Yitun Ecological Agriculture Co., Ltd.Pingnan YitunFree of income taxNote 2
Pingguo Yitun Ecological Agriculture Co., Ltd.Pingguo YitunFree of income taxNote 2
Guiping Yitun Ecological Agriculture Co., Ltd.Guiping YitunFree of income taxNote 2
Hengyang Yitun Ecological Agriculture Co., Ltd.Hengyang YitunFree of income taxNote 2
Hengshan Yitun Ecological Agriculture Co., Ltd.Hengshan YitunFree of income taxNote 2
Full nameAbbr.Corporate income tax rateRemark
Guigang Gangbei Yitun Ecological Agriculture Co., Ltd.Gangbei YitunFree of income taxNote 2
Duyun Yitun Ecological Agriculture Co., Ltd.Duyun YitunFree of income taxNote 2
Rongjiang Yitun Ecological Agriculture Co., Ltd.Rongjiang YitunFree of income taxNote 2
Binyang Yitun Ecological Agriculture Co., Ltd.Binyang YitunFree of income taxNote 2
Yicheng Yitun Ecological Agriculture Co., Ltd.Yicheng YitunFree of income taxNote 2
Zixing Yitun Ecological Agriculture Co., Ltd.Zixing YitunFree of income taxNote 2
Changing Yitun Ecological Agriculture Co., Ltd.Changning YitunFree of income taxNote 2
Guigang Donghuang Farming Co., Ltd.Guigang DonghuangFree of income taxNote 2
Shaoguan Zhenjiang Yitun Ecological Agriculture Co., Ltd.Zhenjiang YitunFree of income taxNote 2
Shandong Yitun Ecological Agriculture Co., Ltd.Shandong YitunFree of income taxNote 2
Yantai Zhizhuren Animal Husbandry Co., Ltd.Yantai ZhizhurenFree of income taxNote 2
Laizhou Zhizhuren Animal Husbandry Co., Ltd.Laizhou ZhizhurenFree of income taxNote 2
Qinzhou Yitun Ecological Agriculture Co., Ltd.Qinzhou YitunFree of income taxNote 2
Feicheng Heruifeng Agricultural Science and Technology Co., Ltd.Feicheng HeruifengFree of income taxNote 2
Weifang Xuheng Agricultural Science and Technology Co., Ltd.Weifang XuhengFree of income taxNote 2
Linyi Yitun Ecological Agriculture Co., Ltd.Linyi YitunFree of income taxNote 2
Zoucheng Mulian Zhongxing Ecological Agriculture Technology Co., Ltd.Zoucheng Mulian ZhongxingFree of income taxNote 2
Jianong (Lianyungang) Husbandry Technology Co., Ltd.Jianong LianyungangFree of income taxNote 2
Full nameAbbr.Corporate income tax rateRemark
Guiding Yitun Ecological Agriculture Co., Ltd.Guiding YitunFree of income taxNote 2
Binyang Heji Yitun Ecological Agriculture Co., Ltd.Binyang Heji YitunFree of income taxNote 2
Shaoyang Yitun Ecological Agriculture Co., Ltd.Shaoyang YitunFree of income taxNote 2
Guangzhou Haiwei Feed Co., Ltd.Guangzhou Haiwei15%Note 1
Guangzhou Rongchuan Feed Co., Ltd.Guangzhou Rongchuan25%
Foshan Haihang Feed Co., Ltd.Foshan Haihang25%
Maoming Haihang Feed Co., Ltd.Maoming Haihang25%
Guangzhou Dachuan Feed Co., Ltd.Guangzhou Dachuan15%Note 1 and note 21
Hubei Haid Feed Co., Ltd.Hubei Haid25%
Guangdong Hinter Biotechnology Group Co., Ltd.Guangdong Hinter15%Note 1
Guangzhou Haishengyuan Biotechnology Co., Ltd.Guangzhou Haishengyuan25%
Guangzhou Mutai Feed Technology Co., Ltd.Guangzhou Mutai25%
Guangzhou Haiyiyuan Biotechnology Co., Ltd.Guangzhou Haiyiyuan25%
Shaanxi Haid Agriculture and Animal Husbandry Co., Ltd.Shaanxi HaidFree of income taxNote 2
Lanzhou Haid Feed Co., Ltd.Lanzhou Haid25%
Yangling Haid Feed Co., Ltd.Yangling Haid15%Note 7
Gansu Haid Feed Co., Ltd.Gansu Haid25%
Weinan Haid Feed Co., Ltd.Weinan Haid25%
Hunan Haid Bio-Feed Co., Ltd.Hunan Haid25%
Guangzhou Haihe Feed Co., Ltd.Guangzhou Haihe25%
Full nameAbbr.Corporate income tax rateRemark
Liaocheng Haixin Enterprise Management Consulting Co., Ltd.Liaocheng Haixin25%
Zoucheng Haiyue Enterprise Management Consulting Co., Ltd.Zoucheng Haiyue25%
Yinan Haiyue Biotechnology Co., Ltd.Yinan Haiyue25%
Anyang Haiyue Feed Technology Co., Ltd.Anyang Haiyue20%Note 18
Foshan Haipu Feed Co., Ltd.Foshan Haipu25%
Qingyuan Haibei Biotechnology Co., Ltd.Qingyuan Haibei15%Note 1
Qingyuan Hailong Biotechnology Co., Ltd.Qingyuan Hailong25%
Zhanjiang Haid Feed Co., Ltd.Zhanjiang Haid25%
Jiangmen Haid Feed Co., Ltd.Jiangmen Haid15%Note 1
Chengdu Haid Biotechnology Co., Ltd.Chengdu Haid15%Note 7
Taizhou Haid Bio-Feed Co., Ltd.Taizhou Haid25% or 12.50%Note 3
Jingzhou Haid Feed Co., Ltd.Jingzhou Haid25%
Ezhou Haid Feed Co., Ltd.Ezhou Haid25%
Dongguan Haid Feed Co., Ltd.Dongguan Haid25%
Fujian Haid Feed Co., Ltd.Fujian Haid25%
Zhejiang Haid Feed Co., Ltd.Zhejiang Haid25%
Shaoxing Haid Biotechnology Co., Ltd.Shaoxing Haid25%
Guangxi Haid Feed Co., Ltd.Guangxi Haid25%
Kinghill Holdings Pte.Ltd.Kinghill Holdings17%Note 12
Kinghill Pte.Ltd.Kinghill Pte.17%Note 12
Kinghill Resources Pte.Ltd.Kinghill Resources17%Note 12
Kinghill Agri Pte.Ltd.Kinghill Agri17%Note 12
Full nameAbbr.Corporate income tax rateRemark
Pt.Haida Agriculture IndonesiaHaida Indonesia25%Note 20
Pt.Haida Surabaya TradingHaida Surabaya25%Note 20
Jiangxi Haid Feed Co., Ltd.Jiangxi Haid25%
Guangzhou Haid Feed Co., Ltd.Guangzhou Haid25%
Guangdong Hisenor Group Co., Ltd.Guangdong Hisenor12.50%Note 3
Zhanjiang Hisenor Marine Biotechnology Co., Ltd.Zhanjiang Hisenor12.50%Note 3
Hainan Hisenor Marine Biotechnology Co., Ltd.Hainan Hisenor15% or 12.50%Note 3
Rongcheng Rongchuan Biotechnology Co., Ltd.Rongcheng Rongchuan25%
Rongcheng Yandunjiao Fish Meal Co., Ltd.Rongcheng Yandunjiao25% or free of income taxNote 4
Fujian Haidsun Feed Co., Ltd.Fujian Haidsun25% or free of income taxNote 5
Pucheng Haidsun Feed Co., Ltd.Pucheng Haidsun25% or free of income taxNote 5
Xinjiang Xiyu Haihua Resources Co., Ltd.Xiyu Haihua25%
Guangzhou Youju Feed Trading Co., Ltd.Guangzhou Youju25%
Jinzhou Zhengyuan Grains Trading Co., Ltd.Jinzhou Zhengyuan25%
Yingkou Fengmu Agricultural Development Co., Ltd.Yingkou Fengmu25%
Guangzhou Haiyou Trade Co., Ltd.Guangzhou Haiyou25%
Alaer Ruiliheng Biological Protein Co., Ltd.Alaer RuilihengFree of income taxNote 19
Ningbo Fengmu Agricultural Development Co., Ltd.Ningbo Fengmu25%
Maoming Hailong Feed Co., Ltd.Maoming Hailong25%
Nanchang Haid Biotechnology Co., Ltd.Nanchang Haid25%
Zhuhai Rongchuan Feed Co., Ltd.Zhuhai Rongchuan15%Note 1
Full nameAbbr.Corporate income tax rateRemark
Jieyang Haid Feed Co., Ltd.Jieyang Haid25%
Foshan Sanshuifanling Feed Co., Ltd.Sanshuifanling25%
Dalian Haid Rongchuan Trading Co., Ltd.Dalian Rongchuan25%
Haid International Group LimitedHaid InternationalFree of income tax or 8.25%Note 22
China Haida Feed Group (HK) LimitedHaida HK16.50%Note 9
Rickworth Investments LimitedRickworthFree of income taxNote 8
Hong Kong Longreat Trading Co., LimitedHong Kong Longreat16.50%Note 9
Haid Feed Company LimitedDong Nai HaidFree of income taxNote 10
Dancl LimitedDancl16.50%Note 9
Panasia Trading Resources LimitedPanasia TradingFree of income taxNote 8
Sheng Long International Ltd.Sheng Long InternationalFree of income taxNote 8
Sheng Long Bio-Tech International Co.,LtdSheng Long Bio-Tech10% or 20%Note 10
Long Sheng International Co.,LtdLong Sheng International10%Note 10
Hisenor International LimitedHisenor InternationalFree of income taxNote 8
Hisenor Viet Nam Aquatic Breeding Co.,LtdHisenor Viet NamFree of income taxNote 10
Kembang Subur International Ltd.Kembang Subur InternationalNote 11
Namduong Vietnam Aquatic Hatchery Co.,Ltd.Namduong VietnamFree of income taxNote 10
Sheng Long Bio Tech(M)SDN.BHD.Sheng Long24%Note 11
Full nameAbbr.Corporate income tax rateRemark
Malaysia
Sheng Long Aqua Technology(M)SDN.BHD.Sheng Long Aqua Malaysia24%Note 11
Nano South LimitedNanoFree of income taxNote 8
Oceanic Forward Ventures LimitedOceanicFree of income taxNote 8
Power Spring Investments LimitedPower SpringFree of income taxNote 8
Link Tide LimitedLinkFree of income taxNote 8
Changzhou Haid Bio-Feed Co., Ltd.Changzhou Haid25% or 12.50%Note 3
Hainan Haiwei Feed Co., Ltd.Hainan Haiwei25%
Tianjin Haid Feed Co., Ltd.Tianjin Haid25%
Jiangmen A&T Xinhui Feed Co., Ltd.A&T Xinhui25%
Tianmen Haid Feed Co., Ltd.Tianmen Haid25%
Zhuhai Hailong Biotechnology Co., Ltd.Zhuhai Hailong15%Note 1
Yangjiang Haid Feed Co., Ltd.Yangjiang Haid25%
Guigang Haid Feed Co., Ltd.Guigang Haid25%
Yiyang Haid Feed Co., Ltd.Yiyang Haid25%
Nantong Haid Biotechnology Co., Ltd.Nantong Haid25%
Yunnan Haid Biotechnology Co., Ltd.Yunnan Haid15%Note 1
Guangzhou Hailong Feed Co., Ltd.Guangzhou Hailong25%
Zhaoqing Haid Feed Co., Ltd.Zhaoqing Haid25%
Wuhan Aquaera Biotechnology Co., Ltd.Wuhan Aquaera25%
Shenzhen Longreat Trading Co., Ltd.Shenzhen Longreat25%
Lanking Pte.Ltd.Lanking17%Note 12
Haid Lanking International Trading, Inc.Lanking AmericaNote 13
Lanking Nemo(Sg) Pte.Ltd.Lanking Nemo17%Note 12
Full nameAbbr.Corporate income tax rateRemark
Sheng Long Bio-Tech (India) Private LimitedSheng Long India25%Note 14
Lanking Rickworth Pte.Ltd.Lanking Rickworth17%Note 12
Lanking Nano PTE.LTD.Lanking Nano17%Note 12
Hai Duong Haid Company LimitedHai Duong HaidFree of income taxNote 10
Hai Dai Company LimitedHai Dai Company LimitedFree of income taxNote 10
Vinh Long Hai Dai Co.,LtdVinh Long Hai DaiFree of income taxNote 10
Hunan Dongting Haid Feed Co., Ltd.Dongting Haid25%
Zhangzhou Haid Feed Co., Ltd.Zhangzhou Haid25%
Anhui Haid Feed Co., Ltd.Anhui Haid25%
Xiangtan Haid Feed Co., Ltd.Xiangtan Haid25%
Guangzhou Changsheng Logistics Co., Ltd.Changsheng Logistics25%
Guangzhou Cangyouliang Trading Co., Ltd.Guangzhou Cangyouliang25%
Guangzhou Zhongcangsheng Commercial & Trading Co., Ltd.Guangzhou Zhongcangsheng25%
Guangzhou Danong Enterprise Management Co., Ltd.Guangzhou Danong25%
Dingtao Hairong Livestock Farming Service Specialized CooperativeDingtao HairongFree of income taxNote 15
Chengnan Development Zone Hairong Livestock Farming Service Specialized CooperativeChengnan Hairong25% or free of income taxNote 16
Guigang Hairong Farming Service Specialized CooperativeGuigang Hairong25% or free of income taxNote 16
Full nameAbbr.Corporate income tax rateRemark
Zhangzhou Longwen Hairong Farming Service Specialized CooperativeZhangzhou HairongFree of income taxNote 15
Changzhou Hairong Aqua Farming Service Specialized CooperativeChangzhou Hairong25%
Guangzhou Haifengchang Enterprise Management Co., Ltd.Guangzhou Haifengchang25%
Wuhan Zeyi Investment Co., Ltd.Wuhan Zeyi25%
Shandong Haiding Agriculture and Animal Husbandry Co., Ltd.Shandong Haiding25%
Suixian Yuliang Haiding Feed Co., Ltd.Suixian Haiding25%
Yuncheng Haiding Hongda Feed Co., Ltd.Yuncheng Haiding25%
Heze Development Zone Haiding Commercial & Trading Co., Ltd.Heze Haiding Commercial & Trading25%
Dingtao Haiding Feed Co., Ltd.Dingtao Haiding25%
Liaocheng Haiding Feed Co., Ltd.Liaocheng Haiding25%
Shanxian Zhongyi Haiding Feed Co., Ltd.Shanxian Haiding25%
Xinxiang Haiding Feed Co., Ltd.Xinxiang Haiding25%
Xinxiang Hairuida Feed Co., Ltd.Xinxiang Hairuida25%
Heze Haiding Feed Technology Co., Ltd.Heze Haiding Feed15%Note 1
Jining Haiding Feed Co., Ltd.Jining Haiding25%
Feixian Hairuida Feed Co., Ltd.Feixian Hairuida25%
Yinan Haiding Feed Co., Ltd.Yinan Haiding25%
Liaocheng Haiding Food Co., Ltd.Liaocheng Food25%
Qufu Haiding Commercial & Trading Co., Ltd.Qufu Haiding25%
Full nameAbbr.Corporate income tax rateRemark
Tengzhou Fengcheng Feed Co., Ltd.Tengzhou Fengcheng20%Note 18
Binzhou Haiding Feed Co., Ltd.Binzhou Haiding25%
Jining Fengcheng Feed Co., Ltd.Jining Fengcheng25%
Dong’e Dingxin Farming Service Co., Ltd.Dong’e DingxinFree of income taxNote 2
Heze Haiding Ecological Farming Co., Ltd.Heze Haiding FarmingFree of income taxNote 2
Xishui Haid Feed Co., Ltd.Xishui Haid25%
Yancheng Haid Bio-Feed Co., Ltd.Yancheng Haid25%
Honghu Haid Feed Co., Ltd.Honghu Haid25%
Kaifeng Haid Feed Co., Ltd.Kaifeng Haid25%
Guangzhou Heshengtang Biotechnology Co., Ltd.Guangzhou Heshengtang Biotechnology25%
Guangzhou Heshengtang Veterinary Pharmaceutical Co., Ltd.Guangzhou Heshengtang Pharmaceutical25%
Guangdong Haid Livestock Veterinary Research Institute Co., Ltd.Haid Livestock Veterinary Research Institute25%
Henan Haihe Agriculture and Animal Husbandry Technology Co., Ltd.Henai Haihe25%
Xuchang Haihe Feed Co., Ltd.Xuchang Haihe25%
Anyang Haihe Agriculture and Animal Husbandry Technology Co., Ltd.Anyang Haihe25%
Jiyuan Haihe Jinyu Feed Co., Ltd.Jiyuan Haihe25%
Full nameAbbr.Corporate income tax rateRemark
Suqian Haid Feed Co., Ltd.Suqian Haid25%
Huaihua Haid Feed Co., Ltd.Huaihua Haid25%
Guangzhou Meinong Investment Management Co., Ltd.Guangzhou Meinong25%
Haid (Ecuador) Feed Cia.LtdaHaid Ecuador22%Note 17
Guangdong Hairuite Pet Nitribution Technology Co., Ltd.Guangdong Hairuite25%
Guangzhou Haijian Investment Co., Ltd.Guangzhou Haijian25%
Foshan Nanhai Bairong Aquatic Farming Co., Ltd.Nanhai Bairong12.50%Note 3
Zhaoqing Bairong Aquatic Farming Co., Ltd.Zhaoqing Bairong12.50%Note 3
Qingyuan Bairong Aquatic Farming Co., Ltd.Qingyuan Bairong12.50%Note 3
Yangxin Bairong Aquatic Farming Co., Ltd.Yangxin Bairong12.50%Note 3
Jingzhou Bairong Aquatic Farming Co., Ltd.Jingzhou Bairong12.50%Note 3
Hunan Innovation Biotechnology LimitedHunan Innovation15%Note 1
Guangzhou Haishengke Investment Co., Ltd.Guangzhou Haishengke25%
Sichuan Hailinger Biopharmaceutical Co., Ltd.Sichuan Hailinger25%
Sanming Haid Feed Co., Ltd.Sanming Haid25%
Qingyuan Haid Biotechnology Co., Ltd.Qingyuan Haid25%
Qingyuan Hainong Agriculture and Animal Husbandry Co., Ltd.Qingyuan HainongFree of income taxNote 2
Xuancheng Haid Biotechnology Co., Ltd.Xuancheng Haid25%
Guangdong Shunde Haid Biotechnology Co., Ltd.Shunde Haid25%
Jiaxing Haid Yongwang Bio-Feed Co., Ltd.Jiaxing Haid25%
Shijiazhuang Weike Biotechnology Co., Ltd.Shijiazhuang Weike15%Note 1
Full nameAbbr.Corporate income tax rateRemark
Chongqing Haid Feed Co., Ltd.Chongqing Haid25%
Shenyang Haid Feed Co., Ltd.Shenyang Haid25%
Jiangsu Haihe Agriculture and Animal Husbandry Co., Ltd.Jiangsu Haihe25%
Xuzhou Haihe Feed Co., Ltd.Xuzhou Haihe25%
Lianyungang Haihe Feed Co., Ltd.Lianyungang Haihe25%
Xuzhou Haid Hexin Feed Co., Ltd.Xuzhou Haid25%
Anshan Dachuan Feed Technology Co., Ltd.Anshan Dachuan25%
Guangzhou Haiyuan Factoring Co., Ltd.Guangzhou Haiyuan Factoring25%
Heze Dingtao Hairong Farming Specialized Cooperative AssociationHeze Hairong25%
Haid Pet Care Co., Ltd.Haid Pet25%
Haid Pet Care (Weihai) Co., Ltd.Weihai Pet25%
Qujing Zhihai Feed Co., Ltd.Qujing Zhihai25%
Dali Haiwang Feed Co., Ltd.Dali Haiwang25%
Yibin Zhihai Feed Co., Ltd.Yibin Zhihai25%
Guiyang Haid Zhihai Feed Co., Ltd.Guiyang Zhihai25%
Yichang Zhihai Feed Co., Ltd.Yichang Zhihai25%
Meishan Haid Zhihai Feed Co., Ltd.Meishan Zhihai25%
Ganzhou Haid Biotechnology Co., Ltd.Ganzhou Haid25%
Foshan Haid Hangbiao Feed Co., Ltd.Foshan Haid25%
Guangzhou Zecan Investment Management Co., Ltd.Guangzhou Zecan25%
Guangzhou Punong Investment Management Co., Ltd.Guangzhou Punong25%
Full nameAbbr.Corporate income tax rateRemark
Shandong Fengying Food Co., Ltd.Shandong Fengying25%
Jiaxiang Haiying Food Co., Ltd.Jiaxiang HaiyingFree of income taxNote 6
Linxi County Haiying Food Co., Ltd.Linxi HaiyingFree of income taxNote 6
Guangzhou Yuannong Investment Management Co., Ltd.Guangzhou Yuannong25%
Guangdong Haid Poverty Alleviation Investment Development Co., Ltd.Guangdong Haid Poverty Alleviation25%
Liyang Jiuhe Feed Co., Ltd.Liyang Jiuhe25%
Shaoguan Haid Biotechnology Co., Ltd.Shaoguan Haid25%
Shandong Daxin Group Co., Ltd.Shandong Daxin25%
Qingdao Daxin Feed Co., Ltd.Qingdao Daxin25%
Qingdao Huaxin Feed Co., Ltd.Qingdao Huaxin25%
Weifang Daxin Feed Co., Ltd.Weifang Daxin25%
Yantai Daxin Feed Co., Ltd.Yantai Daxin25%
Linyi Yihe Feed Co., Ltd.Linyi Yihe25%
Jiangsu Daxin Feed Co., Ltd.Jiangsu Daxin25%
Shandong Daxin Agriculture and Animal Husbandry Technology Co., Ltd.Shandong Daxin Agriculture and Animal Husbandry25%
Qingdao Zhizhuxia Pig Farming Services Co., Ltd.Qingdao Zhizhuxia25%
Liaocheng Daxin Feed Co., Ltd.Liaocheng Daxin25%
Huanan Hailong Feed Co., Ltd.Huanan Hailong25%
Hunan Jinhuilong Agriculture and Animal Husbandry Development Co., Ltd.Hunan Jinhuilong25%
Yueyang Jinhuilong Biotechnology Co., Ltd.Yueyang Jinhuilong25%
Full nameAbbr.Corporate income tax rateRemark
Jiaozuo Jinhuilong Biotechnology Co., Ltd.Jiaozuo Jinhuilong25%
Jiangsu Jinhuilong Biotechnology Co., Ltd.Jiangsu Jinhuilong25%
Shijiazhuang Huilong Feed Co., Ltd.Shijiazhuang Huilong25%
Handan Huilong Feed Co., Ltd.Handan Huilong25%
Fuzhou Haid Feed Co., Ltd.Fuzhou Haid25%
Zhaoqing Gaoyao Haid Biotechnology Co., Ltd.Gaoyao Haid25%
Nanning Haid Biological Technology Co., Ltd.Nanning Haid25%
Ganzhou Hailong Feed Co., Ltd.Ganzhou Hailong25%
Yancheng Dachuan Feed Co., Ltd.Yancheng Dachuan25%
Guangdong Mutai Biological Technology Co., Ltd.Guangdong Mutai25%
Guangzhou Haiyuan Micro-Credit Co., Ltd.Guangzhou Haiyuan Micro-Credit25%
Guangdong Haid Biological Technology Co., Ltd.Guangdong Haid Biological Technology25%
Jiangmen Rongchuan Feed Co., Ltd.Jiangmen Rongchuan25%
Chongqing Zhihai Feed Co., Ltd.Chongqing Zhihai25%
Meizhou Haid Biological Technology Co., Ltd.Meizhou Haid25%
Yicheng Haid Biological Technology Co., Ltd.Yicheng Haid25%
Heshan Ronghai Feed Co., Ltd.Heshan Ronghai25%
Hexian Haid Biologicla Technology Co., Ltd.Hexian Haid25%

Note 1: The Company’s subsidiaries Guangzhou Haiwei, Guangzhou Dachuan, Jiangmen Haid,Guangdong Hinter, Qingyuan Haibei, Zhuhai Rongchuan, Zhuhai Hailong, Yunnan Haid, HezeHaiding Feed, Hunan Innovation and Shijiazhuang Weike were recognized as high-techenterprises by their respective provincial departments of science and technology, departments of

finance, offices of the State Administration of Taxation or local taxation bureaus for an effectiveperiod of three years. As such, they were subject to a corporate income tax rate of 15% in 2018.Note 2: The Company’s subsidiaries Enping Fengwo, Yangxi Fengwo, Yangdong Fengwo, EnpingYitun, Gaozhou Sanhe, Yingde Yitun, Hunan Yitun, Hengyang Jisheng, Yueyang Yitun, SihuiYitun, Qintang Yitun, Pingnan Yitun, Pingguo Yitun, Guiping Yitun, Hengyang Yitun, HengshanYitun, Gangbei Yitun, Duyun Yitun, Rongjiang Yitun, Binyang Yitun, Yicheng Yitun, Zixing Yitun,Changning Yitun, Guigang Donghuang, Yantai Zhizhuren, Laizhou Zhizhuren, Zhenjiang Yitun,Shandong Yitun, Qinzhou Yitun, Feicheng Heruifeng, Weifang Xuheng, Linyi Yitun, ZouchengMulian Zhongxing, Jianong Lianyungang, Guiding Yituan, Binyang Heji Yituan, Shaoyang Yitun,Shaaxi Haid, Dong’e Dingxin, Heze Haiding Farming and Qingyuan Hainong enjoyed incomefrom livestock and poultry farming free of corporate income tax as per the Corporate Income TaxLaw of the People’s Republic of China and the Regulation on the Implementation of the CorporateIncome Tax Law of the People’s Republic of China.Note 3: The Company’s subsidiaries Guangdong Hisenor, Zhanjiang Hisenor, Hainan Hisenor(recognized as a high-tech enterprise by the provincial department of science and technology,department of finance, office of the State Administration of Taxation or local taxation bureau),Yangxin Bairong, Jingzhou Bairong, Qingyuan Bairong, Nanhai Bairong, Zhaoqing Bairong,Enping Fengwo, Taizhou Haid and Changzhou Haid were subject to a corporate income tax rate ofhalf of 25% on their income from marine and/or inland aquaculture according to item 27 of theCorporate Income Tax Law of the People’s Republic of China and item 86 of the Regulation onthe Implementation of the Corporate Income Tax Law of the People’s Republic of China. TheCompany’s subsidiaries Taizhou Haid and Changzhou Haid were subject to half the corporateincome tax on their income from agriculture, forestry, animal husbandry or fishery as per item 27,sub-item 1 of the Corporate Income Tax Law of the People’s Republic of China, as well as to acorporate tax rate of 25% on other income.Note 4: The Company’s subsidiary Rongcheng Yandunjiao was exempted from corporate incometax on fish and shrimp meal income for these products were primarily processed agriculturalproducts as stated in the Notice of the Ministry of Finance and State Administration of Taxation onAnnouncing the Scope of Primary Processing of Agricultural Products Covered by PreferentialPolicies on Corporate Income Tax (for Trial Implementation) (CS [2008] No. 149, as well as wassubject to a corporate income tax of 25% on other income.Note 5: The Company’s subsidiaries Fujian Haidsun and Pucheng Haidsun were exempted fromcorporate income tax on chicken meal income for this product was a primarily processedagricultural product as stated in the Notice of the Ministry of Finance and State Administration ofTaxation on Announcing the Scope of Primary Processing of Agricultural Products Covered byPreferential Policies on Corporate Income Tax (for Trial Implementation) (CS [2008] No. 149, aswell as were subject to a corporate income tax of 25% on other income.Note 6: The Company’s subsidiaries Jiaxiang Haiying and Linxi Haiying were exempted fromcorporate income tax on their income from selling slaughtered and cut poultry and rabbits forthese products were primarily processed agricultural products as stated in the Notice of theMinistry of Finance and State Administration of Taxation on Announcing the Scope of PrimaryProcessing of Agricultural Products Covered by Preferential Policies on Corporate Income Tax(for Trial Implementation) (CS [2008] No. 149, as well as were subject to a corporate income taxof 25% on other income.Note 7: The Company’s subsidiaries Chengdu Haid and Yangling Haid are enjoying a preferentialcorporate income tax rate of 15% for the period from 2013 to 2020 and the period from 2018 to2020, respectively, as enterprises involved in the Western China Development program inaccordance with the Notice of the Ministry of Finance, the General Administration of Customs andthe State Administration of Taxation on Tax Policy Issues concerning Further Implementing theWestern China Development Strategy (CS [2011] No. 58) and the Announcement of the StateAdministration of Taxation on Issues Concerning Corporate Income Tax Related with Enhancing

the Western China Development Strategy (no. 12 in 2012).Note 8: Registered in the British Virgin Islands, the Company’s subsidiaries Rickworth, PanasiaTrading, Sheng Long International, Hisenor International, Nano, Oceanic, Power Spring and Linkare exempted from corporate income tax according to the local tax law.Note 9: Registered in Hong Kong, the Company’s subsidiaries Haida HK, Hong Kong Longreatand Dancl are subject to a profit tax rate of 16.50% according to the local tax law.Note 10: The Company’s subsidiaries Sheng Long Bio-Tech, Long Sheng International, HisenorVietnam, Dong Nai Haid, Hai Duong Haid, Hai Dai Company Limited, Namduong Vietnam andVinh Long Hai Dai are registered in Vietnam. Sheng Long Bio-Tech and Long Sheng Internationalwas subject to a preferential corporate income tax rate of 10% in 2018 for making newinvestments in the local poor areas; Hisenor Vietnam has been exempted from corporate incometax since 2015, which means it did not have to pay such tax in 2018; Dong Nai Haid is enjoying apreferential policy that exempts it from corporate income tax for two years starting from the yearit makes profit and grants it a halved corporate income tax rate in the subsequent four years, whichmeans it did not have to pay such tax in 2018; Hai Duong Haid is enjoying a preferential policythat exempts it from corporate income tax for two years starting from the year it obtains revenueand grants it a halved corporate income tax rate in the subsequent four years, which means it didnot have to pay such tax in 2018; and Hai Dai Company Limited, Namduong Vietnam and VinhLong Hai Dai were exempted from corporate income tax as per the local tax law, which meansthey did not have to pay such tax in 2018.Note 11: Registered in Malaysia, the Company’s subsidiaries Sheng Long Malaysia, KembangSubur International and Sheng Long Aqua Malaysia were subject to a corporate income tax rate of24% as per the local tax law. And Kembang Subur International could choose to pay its corporateincome tax at either 3% of the taxable income or a fixed amount of MYR20,000.00(approximately USD5,200).Note 12: Registered in Singapore, the Company’s subsidiaries Lanking, Lanking Nemo, LankingRickworth, Lanking Nano, Kinghill Holdings, Kinghill Pte., Kinghill Resources and Kinghill Agriwere subject to a corporate income tax rate of 17% as per the local tax law.Note 13: Registered in the U.S., the Company’s subsidiary Lanking America is subject to variabletax rates according to the country’s federal taxation system. For 2018, the subsidiary needed not topay the federal corporate income tax due to loss and only needed to pay the minimum tax ofUSD800 of California (8.84% of the taxable income for the corporate income tax required byCalifornia).Note 14: Registered in India, the Company’s subsidiary Sheng Long India was subject to acorporate income tax rate of 25% as per the local tax law.Note 15: The Company’s subsidiaries Dingtao Hairong and Zhangzhou Hairong were exemptedfrom corporate income tax in 2018 on their income from agriculture, forestry, animal husbandry orfishery as per item 27, sub-item 1 of the Corporate Income Tax Law of the People’s Republic ofChina.Note 16: The Company’s subsidiaries Chengnan Hairong and Guigang Hairong were exemptedfrom corporate income tax in 2018 on their income from agriculture, forestry, animal husbandry orfishery and subject to a corporate income tax rate of 25% on other income as per item 27, sub-item1 of the Corporate Income Tax Law of the People’s Republic of China.Note 17: Registered in Ecuador, the Company’s subsidiary Haid Ecuador was exempted fromcorporate income tax in 2018 as a new investment program as per the production promotion lawnewly promulgated by Ecuador’s government.

Note 18: The Company’s subsidiaries Anyang Haiyue and Tengzhou Fengcheng were subject to acorporate income tax rate of 20% on a 50% taxable income for they belonged to small low-profitenterprises with lower than RMB1 million (inclusive) of yearly taxable income as per the Noticeof the Ministry of Finance and the State Administration of Taxation on Further Expanding theScope of Preferential Income Tax Policies Regarding Small Low-Profit Enterprises (CS〔2018〕No. 77).Note 19: The Company’s subsidiary Xinjiang Ruiliheng was exempted from corporate income taxon income from cottonseed oil, cottonseed meal, boll hull, cotton linter, Chinese honeylocust fruitand grey cotton for these products were primarily processed agricultural products as stated in theNotice of the Ministry of Finance and State Administration of Taxation on Announcing the Scopeof Primary Processing of Agricultural Products Covered by Preferential Policies on CorporateIncome Tax (for Trial Implementation) (CS [2008] No. 149), as well as were subject to a corporateincome tax of 25% on other income.Note 20: Registered in Indonesia, the Company’s subsidiaries Haida Indonesia and HaidaSurabaya were subject to a corporate income tax rate of 25% as per the local tax law.Note 21: The Company’s subsidiary Guangzhou Panyu Dachuan Feed Co., Ltd. has changed itsname to “Guangzhou Dachuan Feed Co., Ltd.” in May 2018.Note 22: Registered in the British Virgin Islands, the Company’s subsidiary Haid International wasexempted from corporate income tax according to the local tax law. Meanwhile, as a Hong Kongtaxable resident enterprise with its business premises in the city, Haid International was subject toa halved income tax rate of 8.25% on its treasury center business in 2018.

V Notes to Key Items in Consolidated Financial Statements

1. Monetary Assets

Item31 December 201831 December 2017
Cash on hand3,458,157.234,118,236.03
Cash at bank1,637,357,730.011,313,924,748.67
Other cash balances94,593,951.3474,003,455.63
Total1,735,409,838.581,392,046,440.33
Including: Cash abroad331,878,873.97282,322,002.27

Note: For information about the restricted amounts among the closing monetary assets, see note 5, “58. Assets withRestricted Ownership or Use Rights” herein.

2. Financial Assets Measured at Fair Value

Item31 December 201831 December 2017
Trading financial assets49,672,592.739,601,140.00
Item31 December 201831 December 2017
Including: Derivative financial assets49,672,592.739,601,140.00
Total49,672,592.739,601,140.00

Notes: (1) There were no such financial assets measured at fair value as restrictively realizable as of the end of theReporting Period.(2) Derivative financial assets were the fair value of futures, swap, option and forward contracts.

3. Notes and Accounts Receivable

Item31 December 201831 December 2017
Notes receivable10,509,311.3619,209,112.07
Accounts receivable1,096,136,255.70760,285,344.09
Total1,106,645,567.06779,494,456.16

(1) Notes Receivable

1)Notes Receivable by Category

Item31 December 201831 December 2017
Bank acceptance notes8,096,644.8214,470,002.00
Usance letters of credit2,412,666.544,739,110.07
Total10,509,311.3619,209,112.07

2) The Group had no notes receivable in pledge as of the end of the Reporting Period.3) As of the end of the Reporting Period, the Group’s notes receivable that were not mature but had been endorsedto other parties, or that had been discounted are as follows:

ItemDerecognizedRecognized
Bank acceptance notes46,700,000.00-
Total46,700,000.00-

4) As of the end of the Reporting Period, the Group had no notes that were reclassified into accounts receivable

due to note drawers not performing their obligations.

(2) Accounts Receivable

1) Accounts Receivable by Category

Category31 December 2018
Gross amountAllowance for doubtful accountsCarrying value
AmountPercentage (%)AmountAllowance ratio (%)
Accounts receivable with amounts that were individually significant and for which the allowance for doubtful accounts was provided on the individual basis46,902,225.223.8140,331,971.7985.996,570,253.43
Groups of accounts receivable from external parties for which the allowance for doubtful accounts was not provided on the individual basis1,026,676,499.2083.4771,543,945.626.97955,132,553.58
Accounts receivable with amounts that were not individually significant but for which the allowance for doubtful accounts was provided on the individual basis23,167,342.431.8820,025,726.6886.443,141,615.75
Accounts receivable in factoring133,291,200.9510.841,999,368.011.50131,291,832.94
Total1,230,037,267.80100.00133,901,012.1010.891,096,136,255.70
Category31 December 2017
Gross amountAllowance for doubtful accountsCarrying value
AmountPercentage (%)AmountAllowance ratio (%)
Accounts receivable with amounts that were individually significant and for which the allowance for doubtful accounts was provided on the individual basis29,082,343.423.3623,993,406.9082.505,088,936.52
Groups of accounts receivable from external parties for which the allowance for doubtful accounts was not provided on the individual basis706,586,058.6281.7554,908,664.257.77651,677,394.37
Accounts receivable with amounts that were not individually significant but for which the allowance for doubtful accounts was provided on the individual basis25,715,249.012.9723,651,235.8191.972,064,013.20
Accounts receivable in factoring103,000,000.0011.921,545,000.001.50101,455,000.00
Total864,383,651.05100.00104,098,306.9612.04760,285,344.09

① Among the groups of accounts receivable from external parties for which the allowance for doubtful accountswas not provided on the individual basis, the accounts receivable for which the allowance for doubtful accountswas provided on the aging basis are as follows:

Category31 December 2018
Gross amountAllowance for doubtful accounts
AmountPercentage (%)AmountAllowance ratio (%)
Within 1 year939,037,801.3691.4746,889,234.285.00
1 to 2 years43,681,424.834.254,368,142.4810.00
2 to 3 years14,500,114.201.413,625,028.5525.00
3 to 4 years11,616,923.271.134,646,769.3140.00
4 to 5 years9,709,107.560.953,883,643.0240.00
Category31 December 2018
Gross amountAllowance for doubtful accounts
AmountPercentage (%)AmountAllowance ratio (%)
Over 5 years8,131,127.980.798,131,127.98100.00
Total1,026,676,499.20100.0071,543,945.62——

② The accounts receivable in factoring for which the allowance for doubtful accounts was provided on the creditrisk grouping basis are as follows:

Category31 December 2018
Gross amountAllowance for doubtful accounts
AmountPercentage (%)AmountAllowance ratio (%)
Normal133,291,200.95100.001,999,368.011.50
Total133,291,200.95100.001,999,368.011.50

③ As of the end of the Reporting Period, the accounts receivable with amounts that were individually significantand for which the allowance for doubtful accounts was provided on the individual basis are as follows:

Accounts receivableGross amountAllowance for doubtful accountsRatio of allowance for doubtful accountsReason for providing allowance for doubtful accounts
Customer A13,617,374.0610,893,899.2480.00Expected to be partially recoverable
Customer B7,413,325.817,413,325.81100.00Expected to be unrecoverable
Customer C5,540,546.524,432,437.2280.00Expected to be partially recoverable
Customer D4,801,489.194,801,489.19100.00Expected to be unrecoverable
Customer E2,077,712.341,246,627.4060.00Expected to be
Accounts receivableGross amountAllowance for doubtful accountsRatio of allowance for doubtful accountsReason for providing allowance for doubtful accounts
partially recoverable
Customer F1,973,741.001,973,741.00100.00Expected to be unrecoverable
Customer G1,950,094.641,950,094.64100.00Expected to be unrecoverable
Customer H1,924,818.00384,963.6020.00Expected to be partially recoverable
Customer I1,838,649.871,470,919.9080.00Expected to be partially recoverable
Customer J1,817,600.901,817,600.90100.00Expected to be unrecoverable
Customer K1,670,777.351,670,777.35100.00Expected to be unrecoverable
Customer L1,250,064.541,250,064.54100.00Expected to be unrecoverable
Customer M1,026,031.001,026,031.00100.00Expected to be unrecoverable
Total46,902,225.2240,331,971.7985.99——

(2) Allowances for Doubtful Accounts Made and Reversed in Current PeriodFor the Current Period, the allowance made for doubtful accounts amounted to RMB 42,006,719.10 and therecovered or reversed amount was RMB 2,576,517.56.(3) Accounts Receivable Actually Written off for Current Period

ItemAmount written off
ItemAmount written off
Payments due from customers9,347,707.45
Total9,347,707.45

Important accounts receivable written off are as follows:

Party involvedNature of account receivableAmount written offReason for writing offWriting off procedure performedAccount receivable arising from a related-party transaction
Customer NPayment for goods1,199,562.00Expectedly unrecoverable with an account age of 4-5 yearsConcrete evidence for irrecoverability was obtained and internal approval was given for the write offNo
Customer OPayment for goods1,145,058.38Expectedly unrecoverable with an account age of 4-5 yearsConcrete evidence for irrecoverability was obtained and internal approval was given for the write offNo
Total——2,344,620.38——————

(4) Accounts Receivable from Top Five Debtors with Largest Closing BalanceThe total accounts receivable from the top five debtors with the largest closing balance amounted to RMB201,274,740.35, accounting for 16.36% of the Group’s total closing balance of accounts receivable, with the totalcorresponding closing balance of the allowance for doubtful accounts being RMB 5,468,237.01.(5) No accounts receivable were derecognized due to transfer of financial assets in the Current Period.(6) There were no such cases in the Current Period where the Group had transferred an account receivable butcontinued to be involved in the assets or liabilities associated with that account receivable.

4. Prepayments

(1) Prepayments by Aging

Aging31 December 201831 December 2017
AmountPercentage (%)AmountPercentage (%)
Within 1 year423,040,576.5499.57744,308,048.3999.94
Aging31 December 201831 December 2017
AmountPercentage (%)AmountPercentage (%)
1 to 2 years1,678,650.890.40224,679.080.03
2 to 3 years39,566.690.0193,462.330.01
3 to 5 years91,228.500.02109,532.770.02
Total424,850,022.62100.00744,735,722.57100.00

Note: Prepayments over 1 year were mainly unsettled prepayments to suppliers.(2) Top Five Parties with the Group’s Largest PrepaymentsThe total prepayments to the top five parties with the Group’s largest closing prepayment balances amounted toRMB 94,482,374.15, accounting for 22.24% of the closing balance of the Group’s total prepayments, which wereall prepayments for inventories.

5. Other Receivables

Item31 December 201831 December 2017
Interest receivable1,794,497.121,802,621.51
Dividends receivable--
Other receivables500,421,076.13360,198,872.96
Total502,215,573.25362,001,494.47

(1) Interest Receivable

Item31 December 201831 December 2017
Interest receivable on investments in bank’s wealth management products8,630.13964,410.93
Interest receivable on bank deposits1,129,419.75828,640.58
Item31 December 201831 December 2017
Interest receivable in factoring639,862.539,570.00
Interest receivable on loans16,584.71-
Total1,794,497.121,802,621.51

(2) Dividends Receivable

There were no dividends receivable during the reporting period.

(3) Other Receivables

1) Other Receivables by Category

Category31 December 2018
Gross amountAllowance for doubtful accountsCarrying value
AmountPercentage (%)AmountAllowance ratio (%)
Other receivables with amounts that were individually significant and for which the allowance for doubtful accounts was provided on the individual basis58,320,027.8010.1649,796,172.6285.388,523,855.18
Other receivables for which the allowance for doubtful accounts was provided on the group basis
Groups of other receivables from external parties for which the allowance for doubtful accounts was not provided on the individual basis375,822,856.4865.5021,415,319.535.70354,407,536.95
Groups of futures margin137,489,684.0023.96--137,489,684.00
Subtotal of groups of other receivables513,312,540.4889.4621,415,319.534.17491,897,220.95
Other receivables with amounts that were not individually significant but for which the allowance for doubtful accounts was provided on the individual basis2,177,686.570.382,177,686.57100.00-
Total573,810,254.85100.0073,389,178.7212.79500,421,076.13
Category31 December 2017
Gross amountAllowance for doubtful accountsCarrying value
AmountPercentage (%)AmountAllowance ratio (%)
Other receivables with amounts that were individually significant and for which the allowance for doubtful accounts was provided on the individual basis54,801,880.2013.2538,546,710.0370.3416,255,170.17
Other receivables for which the allowance for doubtful accounts was provided on the group basis
Groups of other receivables from external parties for which the allowance for doubtful accounts was not provided on the individual basis207,183,657.9150.0712,350,350.435.96194,833,307.48
Groups of futures margin148,506,418.9035.89--148,506,418.90
Subtotal of groups of other receivables355,690,076.8185.9612,350,350.433.47343,339,726.38
Other receivables with amounts that were not individually significant but for which the allowance for doubtful accounts was provided on the individual basis3,281,913.650.792,677,937.2481.60603,976.41
Total413,773,870.66100.0053,574,997.7012.95360,198,872.96

① Among the groups of other receivables, the other receivables for which the allowance for doubtful accounts wasprovided on the aging basis are as follows:

Category31 December 2018
Gross amountAllowance for doubtful accounts
AmountPercentage (%)AmountAllowance ratio (%)
Within 1 year356,648,663.8294.8917,833,832.015.00
1 to 2 years14,501,812.253.861,450,181.2310.00
2 to 3 years1,829,831.100.49457,457.7725.00
3 to 4 years1,499,593.990.40599,837.6040.00
4 to 5 years448,240.670.12179,296.2740.00
Over 5 years894,714.650.24894,714.65100.00
Total375,822,856.48100.0021,415,319.53——

② Other receivables with amounts that were individually significant and for which the allowance for doubtfulaccounts was provided on the individual basis as of the end of the Reporting Period are as follows:

Other receivables (by party)Gross amountAllowance for doubtful accountsRatio of allowance for doubtful accountsReason for providing allowance for doubtful accounts
Party A50,393,343.3541,869,488.1783.09Expected to be partially recoverable
Party B2,420,900.002,420,900.00100.00Expected to be unrecoverable
Party C1,825,758.091,825,758.09100.00Expected to be unrecoverable
Party D1,611,878.761,611,878.76100.00Expected to be
Other receivables (by party)Gross amountAllowance for doubtful accountsRatio of allowance for doubtful accountsReason for providing allowance for doubtful accounts
unrecoverable
Party E1,068,147.601,068,147.60100.00Expected to be unrecoverable
Party F1,000,000.001,000,000.00100.00Expected to be unrecoverable
Total58,320,027.8049,796,172.6285.38——

2) Allowance for Doubtful Other Receivables Provided and Reversed for Current PeriodFor the Current Period, the allowance provided for doubtful other receivables amounted to RMB 20,708,101.99,and the recovered or reversed amount was RMB 890,317.01.3) Other Receivables Actually Written off for Current Period

ItemAmount written off
Security deposits20,892.00
Accounts with external parties5,043.36
Total25,935.36

Note: The other receivables written off were unrecoverable security deposits and accounts with external parties,none of which arose from a related-party transaction.4) Other Receivables by Nature

Nature of account31 December 201831 December 2017
Security deposits24,890,874.2331,172,021.02
Futures margin137,489,684.00148,576,968.90
Petty cash10,547,818.2312,253,362.15
Accounts with external parties390,943,782.87207,980,414.39
Nature of account31 December 201831 December 2017
Insurance compensation3,812,976.267,193,343.83
Social security advances4,194,568.632,486,960.00
Government subsidies receivable-2,160,000.00
Other1,930,550.631,950,800.37
Total573,810,254.85413,773,870.66

5) Other Receivables from Top Five Debtors with Largest Closing Balances

PartyNature of accountClosing balanceAccount ageAs % of total other receivables as of 31 December 2018Closing allowance
Party AFutures margin65,374,400.00Within 1 year11.39-
Party BAccount with external party50,393,343.351-5 years or thereafter8.7841,869,488.17
Party CFutures margin36,578,500.00Within 1 year6.37-
Party DFutures margin23,517,900.00Within 1 year4.10-
Party ESecurity deposits6,371,100.00Within 1 year1.11318,555.00
Total——182,235,243.35——31.7542,188,043.17

6) There were no other receivables associated with government subsidies as of the period-end.7) No other receivables were derecognized due to transfer of financial assets in the Current Period.

6. Inventories

(1) Inventories by Category

Item31 December 201831 December 2017
Gross amountValuation allowanceCarrying valueGross amountValuation allowanceCarrying value
Raw materials3,353,061,829.98-3,353,061,829.982,403,862,712.77-2,403,862,712.77
Unfinished7,947,441.99-7,947,441.993,739,698.34-3,739,698.3
Item31 December 201831 December 2017
Gross amountValuation allowanceCarrying valueGross amountValuation allowanceCarrying value
goods4
Finished goods1,162,208,168.16754,254.681,161,453,913.48762,037,045.92208,457.38761,828,588.54
Consumable living assets321,316,946.72-321,316,946.72214,417,292.54-214,417,292.54
Total4,844,534,386.85754,254.684,843,780,132.173,384,056,749.57208,457.383,383,848,292.19

(2) Inventory Valuation Allowance

Inventory category31 December 2017Increase in Current PeriodDecrease in Current Period31 December 2018
New valuation allowanceOtherReversedWritten off
Finished goods208,457.38754,254.68--208,457.38754,254.68
Total208,457.38754,254.68--208,457.38754,254.68

(3) There were no capitalized borrowing costs among the closing balance of inventories.

7. Current Portion of Non-Current Assets

Item31 December 201831 December 2017
Amount receivable by installments for subcontracting903,000.00-
Total903,000.00-

8. Other Current Assets

Item31 December 201831 December 2017
Rental expense15,926,558.2715,453,347.16
Item31 December 201831 December 2017
Insurance expense2,081,319.14400,119.59
Miscellaneous prepaid expense5,888,370.472,719,407.40
Input tax to be deducted and approved114,057,676.0680,307,591.49
Overpaid taxes and charges46,563,412.6613,816,231.05
Wealth management products (note 1)430,000,000.00100,000,000.00
Loans and advances to customers (note 2)7,948,950.00-
Factoring fees3,794,989.52-
Other2,489,934.472,279,989.82
Total628,751,210.59214,976,686.51

Note 1: As of 31 December 2018, wealth management products of RMB 430,000,000.00 included in other currentassets were Bank of Communications-Win to Fortune Current Structured Deposits (price-structured) pegged to thethree-month Shibor, which were withdrawable on demand, as well as principal- and minimum income-guaranteed.Note 2: Schedules of the current portion of loans and advances to customers:

(1) Loans and advances to customers by way of guarantee:

Item31 December 201831 December 2017
Secured loans8,070,000.00-
Less: Allowance for loss121,050.00-
Total7,948,950.00-

(2) Overdue loans and advances to customers:

Category31 December 2018
Gross amountAllowance
AmountPercentage (%)AmountAllowance ratio (%)
Normal8,070,000.00100.00121,050.001.50
Total8,070,000.00100.00121,050.001.50

9. Loans and Advances to Customers

(1) Loans and advances to customers by way of guarantee:

Item31 December 201831 December 2017
Secured loans160,000.00-
Less: Allowance for loss2,400.00-
Total157,600.00-

(2) Overdue loans and advances to customers:

Category31 December 2018
Gross amountAllowance
AmountPercentage (%)AmountAllowance ratio (%)
Normal160,000.00100.002,400.001.50
Total160,000.00100.002,400.001.50

10. Available-for-Sale Financial Assets

(1) General Information about Available-for-Sale Financial Assets

Item31 December 201831 December 2017
Gross amountImpairment allowanceCarrying valueGross amountImpairment allowanceCarrying value
Available-for-sale equity instruments:337,976,300.0014,554,950.00323,421,350.00298,276,300.0014,554,950.00283,721,350.00
Measured at fair value------
Measured at cost337,976,300.0014,554,950.00323,421,350.00298,276,300.0014,554,950.00283,721,350.00
Total337,976,300.0014,554,950.00323,421,350.00298,276,300.0014,554,950.00283,721,350.00

(2) There were no available-for-sale financial assets measured at fair value during the Reporting Period.(3) Closing Available-for-Sale Financial Assets Measured at Cost

InvesteeGross amountImpairment allowanceThe Group’s interest in investeeCash dividends received in Current Period
31 December 2017Increase in Current PeriodDecrease in Current Period31 December 201831 December 2017Increase in Current PeriodDecrease in Current Period31 December 2018
Liaoning Yikang Biological Co., Ltd.44,376,300.00--44,376,300.0014,554,950.00--14,554,950.003.4783%-
InvesteeGross amountImpairment allowanceThe Group’s interest in investeeCash dividends received in Current Period
31 December 2017Increase in Current PeriodDecrease in Current Period31 December 201831 December 2017Increase in Current PeriodDecrease in Current Period31 December 2018
Guangdong Aerocity Holding Co., Ltd.140,000,000.00--140,000,000.00----14.00%3,503,676.97
Guangdong GF Hulian Micro-Loan Co., Ltd.82,500,000.00--82,500,000.00----16.50%-
Shandong Runfengyuan Agriculture and Animal Husbandry Technology Co., Ltd.1,200,000.00-1,200,000.00-------
CITIC Agriculture Fund Management Co., Ltd. (note 1)2,500,000.002,500,000.00-5,000,000.00----4.50%378,900.20
Chengtong CITIC Agriculture Investment Fund (L.P.) (note 2)27,000,000.0027,400,000.00-54,400,000.00----2.53%-
Langfang Mudao Feed Technology Co., Ltd.700,000.00--700,000.00----10.00%-
Bangpu Breeding Technology Co., Ltd.-5,000,000.00-5,000,000.00----16.00%-
Guangdong Guyue Technology Co., Ltd.-6,000,000.00-6,000,000.00----12.00%-
Total298,276,300.0040,900,000.001,200,000.00337,976,300.0014,554,950.00--14,554,950.00——3,882,577.17

Note 1: The Group’s interest in the investee decreased in the Current Period primarily due to the investee’s introduction of new shareholder.Note 2: CITIC Modern Agriculture Investment Fund (L.P.) changed its name on 20 November 2018 to “Chengtong CITIC Agriculture Investment Fund (L.P.)”. And the Group’s interest in the

investee decreased in the Current Period primarily due to the investee’s introduction of new shareholder.(4) There were no changes in impairment allowances for available-for-sale financial assets in the Reporting Period.

11. Long-Term Receivables

Item31 December 201831 December 2017
Gross amountAllowanceCarrying valueGross amountAllowanceCarrying value
Security deposits15,268,129.52-15,268,129.5210,531,182.97-10,531,182.97
Amounts receivable by installments for subcontracting3,612,000.00-3,612,000.00---
Less: Unrealized financing income458,000.00-458,000.00---
Less: Current portion of non-current assets903,000.00-903,000.00---
Total17,519,129.52-17,519,129.5210,531,182.97-10,531,182.97

Note: The closing long-term receivables primarily consisted of amount receivable by installments for subcontracting, as well as security deposits for land rental and consumption of electricity.

12. Long-Term Equity Investments

Investee31 December 2017Changes in Current Period31 December 2018Impairment allowance as of 31 December 2018
Increase in investmentDecrease in investmentInvestment income/loss recognized using equity methodAdjustments of other comprehensive incomeOther changes in equityCash dividends or profits declaredImpairment allowanceOther
Foshan Haihang Xingfa Agriculture and Animal Husbandry Development Co., Ltd.2,643,665.38--3,352,020.25-----5,995,685.63-
Guizhou Fuhai Chemicals Co, Ltd.17,947,374.70--1,415,674.66-----19,363,049.36-
Qingdao Nongken Beidahuang Trade Development Co., Ltd.11,963,468.03--1,292,332.83-----13,255,800.86-
Total32,554,508.11--6,060,027.74-----38,614,535.85-

Notes: (1) All the investees in the table above are associates of the Company.(2) During the Reporting Period, none of the long-term equity investments saw the recoverable amount lower than the carrying value, and thus no impairment allowance was made for thelong-term equity investments.

13. Investment Property

(1) Investment Property Measured at Cost

ItemHouses and buildingsTotal
I Gross amount
1. 31 December 201784,779,317.6784,779,317.67
2. Increase in Current Period1,470,818.611,470,818.61
(1) Reclassified from property, plant and equipment1,470,818.611,470,818.61
3. Decrease in Current Period34,213,387.3234,213,387.32
(1) Disposed--
(2) Reclassified to property, plant and equipment34,213,387.3234,213,387.32
4. 31 December 201852,036,748.9652,036,748.96
II Accumulated depreciation and amortization
1. 31 December 20176,469,632.806,469,632.80
2. Increase in Current Period2,372,182.312,372,182.31
(1) Depreciation or amortization2,168,927.172,168,927.17
(2) Reclassified from property, plant and equipment203,255.14203,255.14
3. Decrease in Current Period3,202,222.793,202,222.79
(1) Disposed--
(2) Reclassified to property, plant and equipment3,202,222.793,202,222.79
4. 31 December 20185,639,592.325,639,592.32
III Impairment allowance
1. 31 December 2017--
2. Increase in Current Period--
(1) Allowance made--
3. Decrease in Current Period--
ItemHouses and buildingsTotal
(1) Disposed--
(2) Other--
4. 31 December 2018--
IV Carrying value
1. Closing carrying value46,397,156.6446,397,156.64
2. Opening carrying value78,309,684.8778,309,684.87

(2) There was no investment property measured at fair value during the Reporting Period.(3) The carrying value of the investment property with unfinished ownership certificates was RMB 22,088,702.42.Currently, the ownership certificates are being handled.

14. Property, Plant and Equipment

Item31 December 201831 December 2017
Property, plant and equipment4,549,514,866.423,760,863,514.36
Disposal of property, plant and equipment5,965,967.35-
Total4,555,480,833.773,760,863,514.36

(1) General Information about Property, Plant and Equipment

ItemHouses and buildingsMachinery and equipmentMotor vehiclesElectronic equipmentOther equipmentTotal
I Gross amount
1. 31 December 20172,757,724,529.542,476,584,012.03173,021,486.30181,864,565.39113,038,926.255,702,233,519.51
2. Increase in Current Period481,323,090.97661,154,334.6135,823,158.2051,581,422.3120,484,022.991,250,366,029.08
(1) Purchased41,217,316.6669,323,326.0227,765,743.5327,509,102.0710,020,799.91175,836,288.19
(2) Reclassified from construction in progress332,667,080.62525,214,207.407,858,156.4524,841,619.1011,572,908.54902,153,972.11
(3) Increase from business68,345,257.9966,481,147.601,244,993.361,281,222.16809,760.35138,162,381.46
ItemHouses and buildingsMachinery and equipmentMotor vehiclesElectronic equipmentOther equipmentTotal
combinations
(4) Reclassified from other assets4,880,048.38135,653.59-1,045,735.14-2,050,521.02-1,919,445.81-
(5) Reclassified from investment property34,213,387.32----34,213,387.32
3. Decrease in Current Period19,306,304.7945,182,335.3610,396,953.435,315,563.947,663,394.4187,864,551.93
(1) Disposed or retired17,835,486.1838,307,249.0610,190,974.755,207,109.967,107,580.5578,648,400.50
(2) Decrease caused by sale of subsidiaries-6,875,086.30205,978.68108,453.9837,925.247,227,444.20
(3) Reclassified into investment property and for renovation1,470,818.61---517,888.621,988,707.23
4. 31 December 20183,219,741,315.723,092,556,011.28198,447,691.07228,130,423.76125,859,554.836,864,734,996.66
II Accumulated depreciation
1. 31 December 2017637,982,286.761,016,374,152.22101,583,881.88111,904,126.4572,835,220.731,940,679,668.04
2. Increase in Current Period114,122,366.33253,481,769.7520,640,990.5430,918,316.3311,400,035.19430,563,478.14
(1) Depreciation103,880,742.77242,146,253.3221,290,177.3331,165,667.6412,689,455.11411,172,296.17
(2) Increase caused by business3,958,450.8410,906,928.40252,788.95685,142.05385,648.9416,188,959.18
ItemHouses and buildingsMachinery and equipmentMotor vehiclesElectronic equipmentOther equipmentTotal
combinations
(3) Reclassified from investment property3,202,222.79----3,202,222.79
(4) Reclassified from other assets3,080,949.93428,588.03-901,975.74-932,493.36-1,675,068.86-
3. Decrease in Current Period8,179,935.5227,975,203.669,048,788.604,920,327.216,881,012.1357,005,267.12
(1) Disposed or retired7,976,680.3824,750,750.858,877,670.944,828,018.276,664,464.1753,097,584.61
(2) Decrease caused by sale of subsidiaries-3,224,452.81171,117.6692,308.9429,265.393,517,144.80
(3) Reclassified into investment property or for renovation203,255.14---187,282.57390,537.71
4. 31 December 2018743,924,717.571,241,880,718.31113,176,083.82137,902,115.5777,354,243.792,314,237,879.06
III Impairment allowance
1. 31 December 2017690,337.11----690,337.11
2. Increase in Current Period-291,914.07---291,914.07
(1) Increase caused by business combinations-291,914.07---291,914.07
ItemHouses and buildingsMachinery and equipmentMotor vehiclesElectronic equipmentOther equipmentTotal
3. Decrease in Current Period------
4. 31 December 2018690,337.11291,914.07---982,251.18
IV Carrying value
1. Closing carrying value2,475,126,261.041,850,383,378.9085,271,607.2590,228,308.1948,505,311.044,549,514,866.42
2. Opening carrying value2,119,051,905.671,460,209,859.8171,437,604.4269,960,438.9440,203,705.523,760,863,514.36

(2) Temporarily Idle Property, Plant and Equipment

ItemGross amountAccumulated depreciationImpairment allowanceCarrying value
Machinery and equipment5,922,791.834,851,960.84-1,070,830.99
Motor vehicles319,812.75303,822.11-15,990.64
Electronic equipment394,720.26375,087.71-19,632.55
Total6,637,324.845,530,870.66-1,106,454.18

Fulltext of 2018 Annual Report of Guangdong HaidGroup Co., Limited

(3) Property, Plant and Equipment Held under Finance Leases

ItemGross amountAccumulated depreciationImpairment allowanceCarrying value
Houses and buildings21,619,695.172,547,563.95-19,072,131.22
Machinery and equipment22,867,913.348,099,983.30291,914.0714,476,015.97
Motor vehicles90,076.6090,076.60--
Electronic equipment4,301,542.591,407,605.84-2,893,936.75
Other equipment471,844.73362,457.54-109,387.19
Total49,351,072.4312,507,687.23291,914.0736,551,471.13

(4) The Group’s Property, Plant and Equipment Held by Other Parties under Operating Leases

ItemGross amountAccumulated depreciationImpairment allowanceCarrying value
Machinery and equipment394,594.5965,601.35-328,993.24
Total394,594.5965,601.35-328,993.24

(5) Property, Plant or Equipment with Unfinished Ownership Certificates

ItemCarrying valueReason for unfinished ownership certificate
Houses and buildings163,883,589.12No ownership certificates for rented buildings on collective and state-owned land
Houses and buildings564,889,663.69Being handled
Total728,773,252.81——

(6) Disposal of Property, Plant and Equipment

Item31 December 201831 December 2017
Houses and buildings5,965,967.35-

Fulltext of 2018 Annual Report of Guangdong HaidGroup Co., Limited

Total5,965,967.35-

15. Construction in Progress

(1) General Information about Construction in Progress

Item31 December 201831 December 2017
Supporting construction for feed projects398,983,721.05273,639,597.24
Supporting construction for farming projects236,412,637.7252,171,148.80
Supporting construction for animal health projects66,734,269.791,009,838.51
Supporting construction for other projects21,881,077.675,152,988.71
Total724,011,706.23331,973,573.26

(2) Changes in Key Construction in Progress in Current Period

Item31 December 2017Increase in Current PeriodReclassified into long-lived assetsOther decreases31 December 2018Accumulated capitalized interestIncluding: Capitalized interest in Current PeriodCapitalization rateFunding source
Supporting construction for feed projects268,062,969.14870,357,500.43748,959,642.62-389,460,826.95---Other
Item31 December 2017Increase in Current PeriodReclassified into long-lived assetsOther decreases31 December 2018Accumulated capitalized interestIncluding: Capitalized interest in Current PeriodCapitalization rateFunding source
Supporting construction for farming projects33,703,818.33254,896,250.1978,459,459.08-210,140,609.44---Other
Supporting construction for animal health projects123,282.0078,546,708.2113,622,359.02-65,047,631.19---Other
Supporting construction for other projects2,110,291.8566,000,970.4848,562,578.49-19,548,683.84---Other
Total304,000,361.321,269,801,429.31889,604,039.21-684,197,751.42---——

Note: There was no capitalized interest expense or foreign exchange losses on construction in progress in 2018.(3) The Group did not need to make any impairment allowance for construction in progress in the Reporting Period.

16. Productive Living Assets

(1) Productive Living Assets Measured at Cost

ItemAnimal husbandry-matureAquaculture-matureAnimal husbandry-immatureAquaculture-immatureTotal
I Gross amount
1. 31 December 201714,678,709.534,087,235.325,168,919.671,800,138.0825,735,002.60
2. Increase in Current Period55,387,854.0717,583,582.2557,771,988.2716,691,508.77147,434,933.36
(1) Purchased169,985.943,580,561.818,397,429.008,744,703.9520,892,680.70
(2) Self-cultivated25,905,240.0614,003,020.4437,770,286.217,946,804.8285,625,351.53
(3) Increase caused by business combinations29,312,628.07-11,604,273.06-40,916,901.13
3. Decrease in Current Period20,801,382.2914,598,648.4750,892,405.1314,899,981.97101,192,417.86
(1) Decrease caused by sale160,542.18666,679.5510,770,486.35-11,597,708.08
(2) Dead or scrapped20,640,840.1113,880,286.6814,216,678.72-48,737,805.51
(3) Reclassified into “mature” category--25,905,240.0614,003,020.4439,908,260.50
(4) Other decreases-51,682.24-896,961.53948,643.77
4. 31 December 201849,265,181.317,072,169.1012,048,502.813,591,664.8871,977,518.10
II Accumulated depreciation
1. 31 December 20176,968,574.971,644,580.89--8,613,155.86
2. Increase in16,504,770.5614,612,231.70--31,117,002.26
ItemAnimal husbandry-matureAquaculture-matureAnimal husbandry-immatureAquaculture-immatureTotal
Current Period
(1) Depreciation charged in Current Period9,387,224.2814,612,231.70--23,999,455.98
(2) Increase caused by business combinations7,117,546.28---7,117,546.28
3. Decrease in Current Period10,987,158.0713,593,989.26--24,581,147.33
(1) Decrease caused by sale32,108.44217,571.07--249,679.51
(2) Dead or scrapped10,955,049.6313,376,418.19--24,331,467.82
(3) Other decreases-----
4. 31 December 201812,486,187.462,662,823.33--15,149,010.79
III Impairment allowance
1. 31 December 2017-----
2. Increase in Current Period-----
(1) Impairment allowance made in Current Period-----
3. Decrease in Current Period-----
(1) Disposed-----
(2) Other decreases-----
4. 31 December-----
ItemAnimal husbandry-matureAquaculture-matureAnimal husbandry-immatureAquaculture-immatureTotal
2018
IV Carrying value
1. Closing carrying value36,778,993.854,409,345.7712,048,502.813,591,664.8856,828,507.31
2. Opening carrying value7,710,134.562,442,654.435,168,919.671,800,138.0817,121,846.74

(2) There were no productive living assets measured at fair value in the Reporting Period.

17. Intangible Assets

(1) General Information about Intangible Assets

ItemLand use rightsPatented technologiesSoftware use rights and trademark rightsNon-patented technologiesOther including marketing networkTotal
I Gross amount
1. 31 December 2017612,662,106.9728,214,553.97164,019,029.20174,384,522.2064,071,447.751,043,351,660.09
2. Increase in Current Period100,605,797.864,938,471.5229,680,984.623,512,937.15-138,738,191.15
(1) Purchased61,080,720.30-2,417,508.151,055,000.00-64,553,228.45
(2) Self-developed-2,938,471.52-2,457,937.15-5,396,408.67
(3) Increase caused by business combinations589,696.662,000,000.00---2,589,696.66
(4) Reclassified from construction in progress38,935,380.90-27,263,476.47--66,198,857.37
3. Decrease in Current Period-300,000.00462,770.59--762,770.59
(1) Disposed--462,770.59--462,770.59
(2) Decrease caused by sale of subsidiaries-300,000.00---300,000.00
4. 31 December 2018713,267,904.8332,853,025.49193,237,243.23177,897,459.3564,071,447.751,181,327,080.65
II Accumulated depreciation
ItemLand use rightsPatented technologiesSoftware use rights and trademark rightsNon-patented technologiesOther including marketing networkTotal
1. 31 December 201769,368,927.785,954,365.0034,860,229.6873,852,452.481,333,405.00185,369,379.94
2. Increase in Current Period15,430,786.081,835,536.8818,779,272.2812,941,766.536,948,270.0255,935,631.79
(1) Depreciation charged15,353,994.011,818,870.2118,779,272.2812,941,766.536,948,270.0255,842,173.05
(2) Increase caused by business combinations76,792.0716,666.67---93,458.74
3. Decrease in Current Period-300,000.00423,699.83--723,699.83
(1) Disposed--423,699.83--423,699.83
(2) Decrease caused by sale of subsidiaries-300,000.00---300,000.00
4. 31 December 201884,799,713.867,489,901.8853,215,802.1386,794,219.018,281,675.02240,581,311.90
III Impairment allowance
1. 31 December 2017---11,979,620.36-11,979,620.36
2. Increase in Current Period------
(1) Impairment allowance made------
3. Decrease in Current Period------
(1) Disposed------
4. 31 December 2018---11,979,620.36-11,979,620.36
IV Carrying value
ItemLand use rightsPatented technologiesSoftware use rights and trademark rightsNon-patented technologiesOther including marketing networkTotal
1. Closing carrying value628,468,190.9725,363,123.61140,021,441.1079,123,619.9855,789,772.73928,766,148.39
2. Opening carrying value543,293,179.1922,260,188.97129,158,799.5288,552,449.3662,738,042.75846,002,659.79

Note: As of the end of the Reporting Period, the intangible assets arising from the Company’s independent development accounted for 13.53% of the carrying balance of intangible assets.(2) The carrying value of the land use rights with unfinished ownership certificates was RMB 15,153,826.27. Currently, the ownership certificates are being handled.

18. R&D Expense

Item31 December 2017Increase in Current PeriodDecrease in Current Period31 December 2018
Recorded in current profit or lossRecognized in intangible assets
Development and application of feed formulation technology-157,557,781.61157,557,781.61--
Development and application of feed additives-71,704,016.8371,704,016.83--
Development of domestic animal selected farming technology-19,311,878.6619,311,878.66--
Development of animal healthcare products and healthy cultivation models6,936,387.9561,830,031.8660,593,643.565,396,408.672,776,367.58
Total6,936,387.95310,403,708.96309,167,320.665,396,408.672,776,367.58

19. Goodwill

(1) Gross Amounts of Goodwill

Name of investee or matter incurring goodwill31 December 2017Increased in Current PeriodDecrease in Current Period31 December 2018Remark
Incurred by business combinationsEffects of translation of foreign-currency-denominated financial statementsEffects of translation of foreign-currency-denominated financial statements
Guangzhou Runchuan50,000.00---50,000.00Note 1
Name of investee or matter incurring goodwill31 December 2017Increased in Current PeriodDecrease in Current Period31 December 2018Remark
Incurred by business combinationsEffects of translation of foreign-currency-denominated financial statementsEffects of translation of foreign-currency-denominated financial statements
Taizhou Haid578,247.88---578,247.88Note 1
Guangzhou Haihe76,663.70---76,663.70Note 1
Dongguan Haid2,831,241.61---2,831,241.61Note 2
Sanshuifanling4,841,934.68---4,841,934.68Note 2
Dalian Rongchuan32,178.11---32,178.11Note 2
Qingyuan Bairong1,218,130.86---1,218,130.86Note 2
Zhanjiang Hisenor4,100,845.79---4,100,845.79Note 2
Panasia Trading41,054,310.91-2,067,103.59-43,121,414.50Note 2
Hisenor Vietnam5,293,004.14-266,505.21-5,559,509.35Note 2
Kaifeng Haid8,838,854.56---8,838,854.56Note 2
Guangzhou Heshengtang127,116.22---127,116.22Note 2
Name of investee or matter incurring goodwill31 December 2017Increased in Current PeriodDecrease in Current Period31 December 2018Remark
Incurred by business combinationsEffects of translation of foreign-currency-denominated financial statementsEffects of translation of foreign-currency-denominated financial statements
Pharmaceutical
Haid Livestock Veterinary Research Institute5,809,578.76---5,809,578.76
Hunan Innovation19,210,769.76---19,210,769.76Note 2
Sichuan Hailinger76,410,471.64---76,410,471.64Note 2
Jiaxing Haid8,312,415.28---8,312,415.28Note 2
Rongcheng Yandunjiao33,087.10---33,087.10Note 2
Shandong Daxin115,902,036.20---115,902,036.20Note 2、Note 3
Hunan Jinhuilong2,400,475.64---2,400,475.64Note 2
Feicheng Heruifeng-57,092,523.20--57,092,523.20Note 2
Weifang Xuheng-30,507,361.78--30,507,361.78Note 2
Jianong Lianyungang-587,209.55--587,209.55Note 2
Name of investee or matter incurring goodwill31 December 2017Increased in Current PeriodDecrease in Current Period31 December 2018Remark
Incurred by business combinationsEffects of translation of foreign-currency-denominated financial statementsEffects of translation of foreign-currency-denominated financial statements
Xinjiang Ruiliheng-1,411,040.63--1,411,040.63Note 2
Kembang Subur International-346,652.39-3,623.61343,028.78Note 2
Total297,121,362.8489,944,787.552,333,608.803,623.61389,396,135.58

Note 1: When acquiring the non-controlling interests of a subsidiary, the Company records goodwill at the amountby which the paid combination cost exceeds the Company’s share of the fair value of the acquiree’s identifiable netassets obtained in the combination.The goodwill of RMB 50,000.00 on Guangzhou Runchuan: The Company acquired in September 2006 a 10%stake in Guangzhou Runchuan at a cost of RMB 50,000.00, while the Company’s share of the fair value ofGuangzhou Runchuan’s identifiable net assets was RMB -29,095.34. As the Company had borne all the loss of thissubsidiary when acquiring in May 2004 a 90% stake in Guangzhou Runchuan under common control, the saidacquisition cost of RMB 50,000.00 was recognized in goodwill.The goodwill of RMB 578,247.88 on Taizhou Haid: When acquiring in September 2006 a 25% stake in TaizhouHaid, the Company recorded goodwill at RMB 578,247.88, the amount by which the acquisition cost exceeded theCompany’s share of the fair value of Taizhou Haid’s identifiable net assets.The goodwill of RMB 76,663.70 on Guangzhou Haihe: When acquiring on March 31, 2007 a 10% non-controllingstake in Guangzhou Haihe, the Company recorded goodwill at RMB 76,663.70, the amount by which theacquisition cost exceeded the Company’s share of the fair value of Guangzhou Haihe’s identifiable net assets.Note 2: In a business combination involving enterprises not under common control, the Company records goodwillat the amount by which the paid combination cost exceeds the Company’s share of the acquiree’s owners’ equity.

The goodwill of RMB 2,831,241.61 on Dongguan Haid: When acquiring on May 20, 2007 a 68% stake inDongguan Haid from a non-related party, the Company recorded goodwill at the amount by which the investmentcost of RMB 6,800,000.00 exceeded the Company’s share of the acquiree’s owners’ equity.The goodwill of RMB 4,841,934.68 on Sanshuifanling: When acquiring in April 2010 the 100% stake inSanshuifanling from a non-related party, the Company recorded goodwill at the amount by which the investmentcost of RMB 15,000,000.00 exceeded the Company’s share of the acquiree’s owners’ equity.The goodwill of RMB 32,178.11 on Dalian Rongchuan: When acquiring in May 2010 a 60% stake inSanshuifanling from a non-related party in a investment increase, the Company recorded goodwill at the amountby which the investment cost of RMB 30,000,000.00 exceeded the Company’s share of the acquiree’s owners’equity.The goodwill of RMB 1,218,130.86 on Qingyuan Bairong: When acquiring in February 2010 a 70% stake inQingyuan Bairong from a non-related party, the Company recorded goodwill at the amount by which theinvestment cost of RMB 1,500,000.00 exceeded the Company’s share of the acquiree’s owners’ equity.The goodwill of RMB 4,100,845.79 on Zhanjiang Hisenor: When the Company’s subsidiary Guangzhou Haidacquired in January 2010 a 70% stake in Zhanjiang Hisenor (49% from the Company and 21% fromnon-controlling interests), the amount by which Guangzhou Haid’s investment cost of RMB 1,370,000.00exceeded its share of the acquiree’s owners’ equity was recorded in goodwill.The goodwill of RMB 43,121,414.50 on Panasia Trading: When the Company’s subsidiary Haid Internationalacquired in February 2012 a stake in Panasia Trading, the amount by which Haid International’s investment cost ofUSD15.80 million exceeded its share of the acquiree’s owners’ equity was recorded in goodwill, with the effects ofthe translation of the investee’s foreign-currency-denominated financial statements caused by exchange ratefluctuations after the acquisition.The goodwill of RMB 5,559,509.35 on Hisenor Vietnam: When the Company’s subsidiary Hisenor Internationalacquired in June 2013 a stake in Hisenor Vietnam, the amount by which Hisenor International’s investment cost ofUSD 1.14 million exceeded its share of the acquiree’s owners’ equity was recorded in goodwill, with the effects ofthe translation of the investee’s foreign-currency-denominated financial statements caused by exchange ratefluctuations after the acquisition.The goodwill of RMB 8,838,854.56 on Kaifeng Haid: When acquiring in March 2013 a stake in Kaifeng Haid, the

Company recorded goodwill at the amount by which the investment cost of RMB 12,382,353.63 exceeded theCompany’s share of the acquiree’s owners’ equity.The goodwill of RMB 127,116.22 on Guangzhou Heshengtang Pharmaceutical: When acquiring in February 2013a stake in Guangzhou Heshengtang Pharmaceutical, the Company recorded goodwill at the amount by which theinvestment cost of RMB 2,330,000.00 exceeded the Company’s share of the acquiree’s owners’ equity.The goodwill of RMB 5,809,578.76 on Haid Livestock Veterinary Research Institute: When acquiring in March2013 a stake in Haid Livestock Veterinary Research Institute, the Company recorded goodwill at the amount bywhich the investment cost of RMB 50,500,000.00 exceeded the Company’s share of the acquiree’s owners’ equity.The goodwill of RMB 19,210,769.76 on Hunan Innovation: When acquiring in August 2015 a stake in HunanInnovative, the Company recorded goodwill at the amount by which the investment cost of RMB 1,000,000.00exceeded the Company’s share of the acquiree’s owners’ equity.The goodwill of RMB 76,410,471.64 on Sichuan Hailinger: When acquiring in June 2015 a stake in SichuanHailinger, the Company recorded goodwill at the amount by which the investment cost of RMB 107,200,000.00exceeded the Company’s share of the acquiree’s owners’ equity.The goodwill of RMB 8,312,415.28 on Jiaxing Haid: When acquiring in February 2016 a stake in Jiaxing Haid, theCompany recorded goodwill at the amount by which the investment cost of RMB 14,400,000.00 exceeded theCompany’s share of the acquiree’s owners’ equity.The goodwill of RMB 33,087.10 on Rongcheng Yandunjiao: When acquiring in September 2016 a stake inRongcheng Yandunjiao in an investment increase, the Company recorded goodwill at the amount by which theinvestment cost of RMB 18,308,000.00 exceeded the Company’s share of the acquiree’s owners’ equity obtained inthe acquisition.The goodwill of RMB 115,902,036.20 on Shandong Daxin: When acquiring in December 2017 a stake inShandong Daxin, the Company recorded goodwill at the amount by which the investment cost of RMB286,431,719.46 exceeded the Company’s share of the acquiree’s owners’ equity.The goodwill of RMB 2,400,475.64 on Hunan Jinhuilong: When acquiring in December 2017 a stake in HunanJinhuilong, the Company recorded goodwill at the amount by which the investment cost of RMB 31,620,000.00exceeded the Company’s share of the acquiree’s owners’ equity.

The goodwill of RMB 57,092,523.20 on Feicheng Heruifeng: When acquiring in June 2018 a stake in FeichengHeruifeng, the Company recorded goodwill at the amount by which the investment cost of RMB 200,370,280.00exceeded the Company’s share of the acquiree’s owners’ equity.The goodwill of RMB 30,507,361.78 on Weifang Xuheng: When acquiring in June 2018 a stake in WeifangXuheng, the Company recorded goodwill at the amount by which the investment cost of RMB 50,319,300.00exceeded the Company’s share of the acquiree’s owners’ equity.The goodwill of RMB 587,209.55 on Jianong Lianyungang: When acquiring in August 2018 a stake in JianongLianyungang, the Company recorded goodwill at the amount by which the investment cost of RMB 2.00 exceededthe Company’s share of the acquiree’s owners’ equity.The goodwill of RMB 1,411,040.63 on Xinjiang Ruiliheng: When acquiring in October 2018 a stake in XinjiangRuiliheng, the Company recorded goodwill at the amount by which the investment cost of RMB 11,000,000.00exceeded the Company’s share of the acquiree’s owners’ equity.The goodwill of RMB 343,028.78 on Kembang Subur International: When acquiring in November 2018 a stake inKembang Subur International, the Company recorded goodwill at the amount by which the investment cost ofUSD 112,150.00 exceeded the Company’s share of the acquiree’s owners’ equity, with the effects of the translationof the investee’s foreign-currency-denominated financial statements caused by exchange rate fluctuations after theacquisition.Note 3: Performance commitment regarding Shandong Daxin and performance results① Performance commitment:

According to the Equity Transfer Agreement entered into on 14 September 2017 between the Company as well asJianbing Liu, Haibo Yu, Yuqin Wang, Fei Xing, Xianlai Duan and Mingjun Yang, the transferors Jianbing Liu,Haibo Yu, Yuqin Wang, Xianlai Duan and Mingjun Yang undertook that the net income of Shandong Daxin shallnot be lower than RMB 50 million in 2017; that the total net income of Shandong Daxin shall not be lower thanRMB 105 million in 2017 and 2018; that the total net income of Shandong Daxin shall not be lower than RMB 165million in 2017, 2018 and 2019; and that the total net income of Shandong Daxin shall not be lower than RMB 230million in 2017, 2018, 2019 and 2020, otherwise they shall compensate the Company for the gap, with the total netcompensation amount subject to an upper limit of the total equity transaction price. Net income refers to theconsolidated net income attributable to owners of Shandong Daxin as the parent during the commitment period

(subject to the lower between the net income before or after non-operating gains and losses).② Performance results:

Abbr. of company nameYearPromised net income (RMB 0,000)Actual net income (RMB 0,000)Gap (RMB 0,000)Fulfillment ratio
Shandong Daxin2017 and 201810,500.0010,724.14224.14102.13%
20175,000.006,435.631,435.63128.71%

(2) Impairment Allowance for Goodwill

Name of investee or matter incurring goodwill31 December 2017Increase in Current PeriodDecrease in Current Period31 December 2018
Impairment allowance made for goodwillEffect of the translation of the investee’s foreign-currency-denominated financial statements
Hisenor Vietnam2,580,731.36-129,941.02-2,710,672.38
Hunan Innovation-4,038,440.41--4,038,440.41
Sichuan Hailinger-2,036,960.97--2,036,960.97
Total2,580,731.366,075,401.38129,941.02-8,786,073.76

The Group allocates goodwill to the relevant asset groups and calculates the receoverable amounts by discountingthe expected future cash flows based on the five-year estimates approved by the management (future cash flowsover five years are estimated based on an estimated perpetual annual growth rate). After discounting the futurecash flows at a pre-tax discount rate with the industry-specific risks of the asset groups (pre-tax discount rates of10.10%-14.77% for the calculation of recoverable amounts), the Group calculates the present value of the futurecash flows of the asset groups. As of 31 December 2018, according to the impairment measurement results, theGroup established impairment allowances for the goodwill of the Hunan Innovation and Sichuan Hailinger assetgroups at the amounts by which the present value of their future cash flows were lower than their carrying value.

20. Long-Term Prepaid Expense

Item31 December 2017Increase in Current PeriodAmortized in Current PeriodOther decreases31 December 2018
Rental expense130,984,906.2045,960,656.4825,543,455.673,942,500.00147,459,607.01
Forest restoration expense7,453,219.077,454,932.00431,113.46-14,477,037.61
Expense on obtaining operation rights of contracted assets28,015,787.34498,206.232,725,532.56-25,788,461.01
Improvement and decoration expense24,823,815.0825,747,015.1415,352,436.726,318.0135,212,075.49
Other4,223,281.365,002,357.931,018,747.32-8,206,891.97
Total195,501,009.0584,663,167.7845,071,285.733,948,818.01231,144,073.09

Note: “Other decreases” in the Current Period in the table above were primarily incurred by the sale of subsidiariesand the reclassification into long-term receivables.

21. Deferred Income Tax Assets and Liabilities

(1) Deferred Income Tax Assets without Taking into Consideration Offsetting of Balances

Item31 December 201831 December 2017
Deductible temporary differencesDeferred income tax assetsDeductible temporary differencesDeferred income tax assets
Allowance for asset impairments149,536,013.7829,943,107.0697,596,871.8221,137,030.20
Organization cost44,241,731.89893,075.476,932,082.50906,855.90
Depreciation of property,10,860,816.221,566,603.828,280,024.701,221,156.29
Item31 December 201831 December 2017
Deductible temporary differencesDeferred income tax assetsDeductible temporary differencesDeferred income tax assets
plant and equipment
Amortization of intangible assets1,476,831.03362,282.261,639,423.50409,855.88
Deductible losses982,742,152.20225,595,599.10537,427,663.93116,182,443.84
Accrued expense12,134,402.723,033,600.689,263,944.682,315,986.17
Unrealized internal sales income193,297,711.7242,951,995.56119,543,195.5225,752,227.06
Gain/Loss on changes in fair value46,271,790.0011,567,947.5018,219,496.364,554,874.09
Deferred income47,228,660.8310,801,737.8452,205,635.2212,258,449.24
Payroll payable81,089,627.3620,272,406.8450,938,718.9912,734,679.75
Profit sharing benefits64,891,859.1312,267,307.2772,463,249.4014,140,711.02
Equity incentive366,313,771.2091,578,442.80311,223,911.8977,805,977.97
Deductible advertising expense carryforwards2,215,067.59553,766.901,475,842.36368,960.59
Accrued sales discounts51,112,835.775,111,283.58--
Total2,053,413,271.44456,499,156.681,287,210,060.87289,789,208.00

(2) Deferred Income Tax Liabilities without Taking into Consideration Offsetting of Balances

Item31 December 201831 December 2017
Taxable temporary differencesDeferred income tax liabilitiesTaxable temporary differencesDeferred income tax liabilities
Gain/Loss on changes in49,672,592.7312,418,148.189,601,140.002,400,285.00
Item31 December 201831 December 2017
Taxable temporary differencesDeferred income tax liabilitiesTaxable temporary differencesDeferred income tax liabilities
fair value
Depreciation of property, plant and equipment132,776,496.9729,031,853.464,964,233.281,241,058.32
Amortization of intangible assets32,296,756.178,074,189.0428,770,616.587,192,654.15
Increase in value upon valuation214,707,267.4149,310,181.66237,643,687.2854,821,214.67
Total429,453,113.2898,834,372.34280,979,677.1465,655,212.14

(3) Unrecognized Deferred Income Tax Assets

Item31 December 201831 December 2017
Deductible losses1,571,559.09260,655.95
Asset impairment allowance76,287,092.4771,469,524.84
Total77,858,651.5671,730,180.79

Note: These deductible temporary differences and deductible losses were unrecognized as deferred income taxassets because it was uncertain whether sufficient taxable income could be obtained in the future.(4) Deductible losses that were unrecognized as deferred income tax assets would expire in the following years:

Year31 December 201831 December 2017
2018--
20199,846.3211,595.40
202013,707.8113,766.46
202111,365.2411,306.59
2022289,891.23223,987.50
20231,246,748.49-
Year31 December 201831 December 2017
Total1,571,559.09260,655.95

22. Other Non-Current Assets

Item31 December 201831 December 2017
Prepayments for equipment and engineering services233,983,903.9988,074,264.21
Prepayments for acquisition of other long-lived assets77,225,393.1937,832,649.91
Total311,209,297.18125,906,914.12

23. Short-Term Borrowings

(1) Short-Term Borrowings by Category

Item31 December 201831 December 2017
Unsecured borrowings2,714,591,832.882,301,398,763.70
Secured borrowings with a pledge of collateral1,363,034.81-
Discounted undue notes-2,500,000.00
Total2,715,954,867.692,303,898,763.70

(2) There were no overdue short-term borrowings as of the end of the Reporting Period.

24. Financial Liabilities Measured at Fair Value

Item31 December 201831 December 2017
Trading financial liabilities46,271,790.0018,771,309.55
Including: Derivative financial liabilities46,271,790.0018,771,309.55
Total46,271,790.0018,771,309.55

Note: Trading financial liabilities were futures at fair value.

25. Notes and Accounts Payable

(1) Notes Payable

There were no notes payable as at the end of the Reporting Period.

(2) Accounts Payable

1) Closing Balances

Item31 December 201831 December 2017
Accounts payable with aging below 1 year1,480,625,014.361,204,339,877.59
Accounts payable with aging over 1 year32,232,061.5823,852,422.99
Total1,512,857,075.941,228,192,300.58

2) Major Accounts Payable with Aging over 1 Year

Item31 December 2018Reason for unsettledness or carry-forward
Payable for engineering project6,877,401.34Settlement undue
Total6,877,401.34——

26. Advances from Customers

(1) Closing Balances

Item31 December 201831 December 2017
Advances from customers with aging below 1 year1,277,898,818.391,160,370,508.81
Advances from customers with aging over 1 year29,361,196.3127,018,957.86
Total1,307,260,014.701,187,389,466.67

(2) Major Advances from Customers with Aging over 1 Year

Item31 December 2018Reason for unsettledness or carry-forward
Item31 December 2018Reason for unsettledness or carry-forward
Advances on sales7,106,410.73Conditions for revenue recognition unmet
Total7,106,410.73——

27. Payroll Payable

(1) Payroll Payable by Category

Item31 December 2017Increase in Current PeriodDecrease in Current Period31 December 2018
1. Short-term employee compensation531,919,040.312,006,518,109.281,941,961,696.31596,475,453.28
2. Post-employment benefits-defined contribution plans134,832.2879,936,570.2979,996,619.1274,783.45
3. Dismissal benefits-2,118,140.962,068,140.9650,000.00
4. Current portion of other employee benefits----
Total532,053,872.592,088,572,820.532,024,026,456.39596,600,236.73

(2) Short-Term Employee Compensation

Item31 December 2017Increase in Current PeriodDecrease in Current Period31 December 2018
I Salaries, bonuses, allowances and subsidies407,459,734.851,751,924,618.941,692,711,707.95466,672,645.84
II Employee benefits1,947,862.4763,678,737.0762,429,642.963,196,956.58
III Social security contributions92,764.1845,456,479.6645,406,651.56142,592.28
Including: 1. Medical insurance80,739.7137,398,880.0237,355,822.86123,796.87
2. Work injury insurance6,198.493,816,450.713,816,918.085,731.12
Item31 December 2017Increase in Current PeriodDecrease in Current Period31 December 2018
3. Serious disease subsidies600.00918,854.07916,069.223,384.85
4. Maternity insurance5,225.983,322,294.863,317,841.409,679.44
IV Housing funds22,510.0012,839,255.8912,808,123.8953,642.00
V Labor union funds and employee education funds772,320.519,651,161.329,191,510.421,231,971.41
VI Short-term profit sharing plans83,112,387.7392,787,226.1780,902,598.9694,997,014.94
VII Key personnel stock ownership plans38,511,460.5730,180,630.2338,511,460.5730,180,630.23
Total531,919,040.312,006,518,109.281,941,961,696.31596,475,453.28

Note: As of the end of the Reporting Period, there were no arrears of employee compensation.(3) Defined Contribution Plans

Item31 December 2017Increase in Current PeriodDecrease in Current Period31 December 2018
1. Basic endowment insurance98,180.5877,314,614.4777,362,381.5250,413.53
2. Unemployment insurance36,651.702,621,955.822,634,237.6024,369.92
3. Enterprise annuity contributions----
Total134,832.2879,936,570.2979,996,619.1274,783.45

28. Taxes Payable

Item31 December 201831 December 2017
VAT5,543,427.857,950,971.04
City construction tax288,243.61500,803.40
Item31 December 201831 December 2017
Corporate income tax98,807,213.1253,998,750.66
Individual income tax4,245,340.113,120,644.57
Property tax4,448,626.285,446,033.15
Stamp tax1,837,340.801,460,810.62
Educational surcharges222,894.49372,130.09
Embankment fees35,634.6660,489.15
Land use tax2,714,156.212,951,955.90
Local funds21,418.3611,273.24
Disabled employment security fund47,764.01103,904.40
Environmental protection tax264,307.73-
Water resource tax65,522.50-
Tax withheld47,753.46-
Total118,589,643.1975,977,766.22

29. Other Payables

Item31 December 201831 December 2017
Interest payable25,144,934.165,188,104.75
Dividends payable6,250,397.108,880,810.40
Other payables430,306,647.66550,146,036.68
Total461,701,978.92564,214,951.83

(1) Interest Payable

Item31 December 201831 December 2017
Interest payable on short-term borrowings17,556,882.275,188,104.75
Interest payable on long-term borrowings7,588,051.89-
Total25,144,934.165,188,104.75

(2) Dividends Payable

Item31 December 201831 December 2017
Dividends payable to common shareholders-3,841,961.69
Dividends payable to non-controlling interests6,250,397.105,038,848.71
Total6,250,397.108,880,810.40

(3) Other Payables

1) Other Payables by Nature

Item31 December 201831 December 2017
Restricted stock repurchase commitments251,038,100.40302,540,781.00
Security deposits137,692,253.0187,096,539.05
Petty cash5,399,421.386,045,449.14
Land rents and payables for land use4,777,381.845,548,979.34
Payables for equity transfer5,000,000.00104,551,689.52
Current payables to external parties24,018,830.7438,206,867.99
Other2,380,660.296,155,730.64
Total430,306,647.66550,146,036.68

2) Major Other Receivables with Aging over 1 Year

Item31 December 2018Reason for unsettledness or carry-forward
Restricted stock repurchase commitments209,444,558.40Still in lockup period
Payables for equity transfer1,000,000.00Payment conditions unmet
Payables for land transfer1,330,000.00Land use certificate unfinished
Security deposits10,000,000.00Execution of contract unfinished
Item31 December 2018Reason for unsettledness or carry-forward
Cash pledge2,622,857.00Still within lease term
Total224,397,415.40——

30. Current Portion of Non-Current Liabilities

Item31 December 201831 December 2017
Current portion of long-term payables31,352,957.13-
Total31,352,957.13-

31. Other Current Liabilities

Item31 December 201831 December 2017
Utilities26,382,881.7119,034,872.40
Steam or other fuel or power charges10,399,718.096,509,377.34
Transportation and warehousing charges14,509,324.586,456,692.87
Office and meeting service charges10,291,181.087,168,209.59
Travel charges11,009,221.818,646,728.65
Rents802,469.201,647,217.25
Vehicle charges9,423,641.616,268,573.75
R&D charges979,622.791,388,471.60
Business promotion charges7,881,307.358,387,246.83
Maintenance charges1,594,468.191,774,221.99
Entrusted cultivation charges40,598,063.2922,576,060.90
Taxes to be written off18,822,783.1032,123.96
Other7,827,286.618,029,326.79
Item31 December 201831 December 2017
Total160,521,969.4197,919,123.92

32. Long-Term Borrowings

Item31 December 201831 December 2017
Unsecured borrowings1,842,910,000.00-
Total1,842,910,000.00-

33. Long-Term Payables

Item31 December 201831 December 2017
Payables for equity transfer111,716,800.00111,716,800.00
Payables for finance leases62,676,195.653,837,744.46
Less: Unrecognized financing costs27,417,108.7713,980,405.60
Less: Current portion of non-current liabilities31,352,957.13-
Total115,622,929.75101,574,138.86

34. Long-Term Payroll Payable

Item31 December 201831 December 2017
1. Post-employment benefits-net liabilities of defined benefit plans--
2. Dismissal benefits--
3. Long-term profit sharing plans64,891,859.1372,463,249.40
Total64,891,859.1372,463,249.40

35. Deferred Income

Item31 December 2017Increase in Current PeriodDecrease in Current Period31 December 2018Reason
Government subsidies72,910,480.7818,607,203.1024,712,613.0766,805,070.81Receipt of government subsidy
Rent income2,506,592.324,707,078.315,650,609.211,563,061.42Conditions for revenue recognition unmet
Total75,417,073.1023,314,281.4130,363,222.2868,368,132.23——

Items involving government subsidies:

Liability item31 December 2017Increase in Current PeriodAmount charged to non-operating income in Current PeriodAmount charged to other income in Current PeriodAmount offsetting costs and expenses in Current PeriodOther changes31 December 2018Associated with assets/income
Reward funds2,115,529.62--54,360.48--2,061,169.14Assets
Science and technology subsidies2,700,121.80971,900.00-802,762.11--2,869,259.69Assets
Science and technology subsidies15,817,504.634,944,100.00-14,356,484.91--6,405,119.72Income
Development support funds143,314.04--69,423.96--73,890.08Income
Development support funds1,417,014.16--359,439.94--1,057,574.22Assets
Production subsidies4,707,536.54--2,597,024.13--2,110,512.41Income
Production subsidies45,700,951.5812,441,203.10-6,060,825.59--52,081,329.09Assets
Liability item31 December 2017Increase in Current PeriodAmount charged to non-operating income in Current PeriodAmount charged to other income in Current PeriodAmount offsetting costs and expenses in Current PeriodOther changes31 December 2018Associated with assets/income
Other subsidies308,508.41250,000.00-412,291.95--146,216.46Income
Total72,910,480.7818,607,203.10-24,712,613.07--66,805,070.81——

36. Share Capital

Item31 December 2017Changes in Current Period31 December 2018
New issueShares as dividend converted from retained earningsShares as dividend converted from public reservesOtherSubtotal
Total shares1,575,237,054.007,825,950.00---1,851,920.005,974,030.001,581,211,084.00

Note: The changes in the total shares in the Reporting Period were incurred by the exercise of share options underequity incentive plans in 2018, the restricted shares newly subscribed for and the repurchase of restricted sharesgranted to employees but still in lockup due to the employees’ resignation or the termination of the labor contractswith the employees.

37. Capital Reserves

Item31 December 2017Increase in Current PeriodDecrease in Current Period31 December 2018
Share premium (note 1)1,655,767,910.3295,910,632.5818,776,314.001,732,902,228.90
Other capital reserves (note 2)193,517,929.09115,240,509.9430,882,485.71277,875,953.32
Total1,849,285,839.41211,151,142.5249,658,799.712,010,778,182.22

Note 1: Reasons for the changes in share premium:

① The increases in share premium in the Current Period primarily consisted of the portion by which the amountpaid to subscribe for restricted stock exceeded the par value, the premium arising from the exercise of incentiveshare options, the portion by which the payments for acquisition of equity interests in subsidiaries fromnon-controlling interests were lower than the Company’s shares of the subsidiaries’ net assets on the transfer days,and the portion by which the payments received for sale of equity interests in subsidiaries to non-controllinginterests exceeded the Company’s shares of the subsidiaries’ net assets on the transfer days.② The decreases in share premium in the Current Period were primarily incurred by the repurchase of restrictedshares granted to employees but still in lockup due to the employees’ resignation, and the portion by which the

payments for acquisition of equity interests in subsidiaries from non-controlling interests exceeded the Company’sshares of the subsidiaries’ net assets on the transfer days.Note 2: Reasons for the changes in other capital reserves:

① The increases in other capital reserves in the Current Period primarily consisted of the share-based paymentswith equity instruments attributable to the parent company in the implementation of share option and restrictedshare incentives (see item XI in the Notes to Consolidated Financial Statements herein), and the deferred incometax assets on the amount by which the deductible amount in the exercise of share options under the equity incentiveplan exceeded the recognized costs during the pending period being directly charged to other capital reserves.② The decreases in other capital reserves in the Current Period were primarily incurred by the reclassification intoshare premium due to the exercise of incentive share options and the unlocking of restricted shares.

38. Treasury Shares

Item31 December 2017Increase in Current PeriodDecrease in Current Period31 December 2018
Restricted stock repurchase commitments302,540,781.0044,975,520.0096,478,200.60251,038,100.40
Total302,540,781.0044,975,520.0096,478,200.60251,038,100.40

Note: The increase in the Current Period was primarily incurred by the payment of incentive awardees forsubscription of restricted shares. The decrease in the Current Period was primarily incurred by equity distributionand the repurchase of restricted shares granted to employees but still in lockup due to the employees’ resignation orthe termination of the labor contracts with the employees.

39. Other Comprehensive Income

Item31 December 2017Amount incurred in Current Period31 December 2018
Amount before income taxLess: Previous other comprehensive income reclassified into profit or lossLess: income tax expenseAttributable to the parent company, net of taxAttributable to non-controlling interests, net of tax
Item31 December 2017Amount incurred in Current Period31 December 2018
Amount before income taxLess: Previous other comprehensive income reclassified into profit or lossLess: income tax expenseAttributable to the parent company, net of taxAttributable to non-controlling interests, net of tax
1. Other comprehensive income that will not be reclassified to profit or loss-------
2. Other comprehensive income that may subsequently be reclassified to profit or loss-2,771,414.886,647,951.72--10,372,192.53-3,724,240.817,600,777.65
Including: Gain/Loss on changes in fair value of available-for-sale financial assets-------
Differences arising from translation of foreign currency-denominated financial statements-2,771,414.886,647,951.72--10,372,192.53-3,724,240.817,600,777.65
Other-------
Total-2,771,414.886,647,951.72--10,372,192.53-3,724,240.817,600,777.65

40. Surplus Reserves

Item31 December 2017Increase in Current PeriodDecrease in Current Period31 December 2018
Statutory surplus381,963,650.77136,767,076.29-518,730,727.06
Item31 December 2017Increase in Current PeriodDecrease in Current Period31 December 2018
reserves
Total381,963,650.77136,767,076.29-518,730,727.06

Note: As per the Company’s Articles of Association, 10% of its net income in 2018, i.e. RMB 136,767,076.29, wasappropriated to statutory surplus reserves.

41. Retained Earnings

ItemAmountAppropriation or allocation percentage
Retained earnings as of end of prior year before adjustments2,973,520,338.94
Total adjustments to opening retained earnings (“+” for increase and “-” for decrease)-
Opening retained earnings after adjustments2,973,520,338.94
Add: Net income attributable to shareholders of company in Current Period1,437,281,732.28
Less: Appropriation to statutory surplus reserves136,767,076.2910%
Dividends paid to common shareholders395,378,588.50
Closing retained earnings3,878,656,406.43

Note: On 14 May 2018, the Proposal on 2017 Annual Dividend Payout Plan (《关于2017年度利润分配预案的议案》) was reviewed and approved at the Company’s 2017 Annual General Meeting. As such, the Company wasagreed to distribute, based on its total shares of 1,581,514,354, a cash dividend of RMB 2.50 (tax inclusive) per 10shares to shareholders, with the total cash dividends amounting to RMB 395,378,588.50, and the remainingretained earnings would carry forward.

42. Sales Revenue and Cost of Sales

(1) Sales Revenue

Item20182017
Item20182017
Revenue from main operations42,063,586,048.6332,507,236,635.58
Revenue from other operations93,042,751.4849,397,491.80
Total42,156,628,800.1132,556,634,127.38

(2) Cost of sales

Item20182017
Cost of sales in main operations37,559,821,198.2728,954,504,657.47
Cost of sales in other operations55,764,986.5025,074,034.95
Total37,615,586,184.7728,979,578,692.42

(3) Sales Revenue and Cost of Sales by Operating Division

Operating division20182017
Sales revenueCost of salesSales revenueCost of sales
Feed industry40,415,026,750.3636,112,759,842.5231,350,326,470.8727,920,191,508.46
Farming industry1,741,602,049.751,502,826,342.251,206,307,656.511,059,387,183.96
Total42,156,628,800.1137,615,586,184.7732,556,634,127.3828,979,578,692.42

(4) Sales Revenue and Cost of Sales by Product Category

Product category20182017
Sales revenueCost of salesSales revenueCost of sales
Sales of feed34,965,196,221.2031,106,349,787.9626,534,947,550.9523,468,493,455.70
Sales of animal healthcare products473,324,165.98249,356,564.20395,033,183.99198,573,484.79
Sales of agricultural products1,741,602,049.751,502,826,342.251,206,307,656.511,059,387,183.96
Product category20182017
Sales revenueCost of salesSales revenueCost of sales
Trading business4,874,822,732.934,722,496,795.034,353,761,813.664,229,945,384.53
Others101,683,630.2534,556,695.3366,583,922.2723,179,183.44
Total42,156,628,800.1137,615,586,184.7732,556,634,127.3828,979,578,692.42

(5) Sales Revenue by Operating Segment

Operating segment20182017
Southern China25,268,338,101.6521,435,646,148.66
Eastern China5,944,635,932.644,541,380,412.75
Northern China13,048,253,974.376,882,406,834.60
Central China9,410,967,930.357,668,641,426.51
Overseas2,982,432,421.862,418,687,862.14
Combined offset-14,497,999,560.76-10,390,128,557.28
Total42,156,628,800.1132,556,634,127.38

Note: South China refers to the Guangdong, Guangxi and Hainan provinces; east China refers to the Jiangsu,Zhejiang and Fujian provinces, as well as the Shanghai Municipality; north China consists of the Henan, Hebei,Shandong, Liaoning, Shaanxi and Gansu provinces, the Tianjin Municipality and the Xinjiang Autonomous Region;central China comprises the Hunan, Hubei, Anhui, Jiangxi, Sichuan, Yunnan and Guizhou provinces, as well as theChongqing Municipality; and the overseas regions mean Hong Kong, Macau, Taiwan of China and overseasregions.

43. Taxes and Surcharges

Item20182017
City construction and maintenance tax2,266,665.903,417,218.48
Educational surcharge1,109,094.631,584,088.56
Local educational surcharge726,482.401,047,984.97
Item20182017
Stamp tax18,172,714.3515,155,505.04
Property tax17,112,520.0215,042,899.00
Land use tax11,395,616.429,735,043.52
Environmental protection tax1,131,182.13-
Other1,226,462.491,107,831.32
Total53,140,738.3447,090,570.89

44. Selling Expense

Item20182017
Employee compensation752,167,912.68625,609,147.47
Travel expense167,983,708.20119,348,019.26
Product transportation charges and port charges309,572,633.43206,628,792.38
Business promotion expense108,479,633.6378,844,829.50
Equity incentive expense7,253,250.438,434,859.06
Other32,469,320.3131,608,363.18
Total1,377,926,458.681,070,474,010.85

45. Administrative Expense

Item20182017
Employee compensation563,662,350.60464,443,020.74
Office expense239,934,995.42182,586,080.39
Travel expense54,985,035.3043,786,139.41
Training and consulting service charges39,831,493.6726,486,883.92
Item20182017
Equity incentive expense19,717,103.0721,751,625.04
Other48,981,574.3454,260,917.74
Total967,112,552.40793,314,667.24

46. R&D Expense

Item20182017
Employee compensation157,537,878.14122,398,700.42
Office expense38,834,784.4439,302,869.74
Material costs83,379,047.3667,922,663.42
Travel expense14,738,823.9410,844,792.73
Equity incentive expense5,236,488.935,553,776.59
Training and consulting service charges2,388,523.371,848,596.75
Expense on R&D entrusted to external parties5,122,159.734,651,146.18
Other1,929,614.751,400,549.66
Total309,167,320.66253,923,095.49

47. Financial Expenses

Item20182017
Interest expense189,458,281.8799,494,927.21
Less: Interest revenue32,211,787.1315,769,534.30
Add: Foreign exchange loss86,083,070.8018,739,296.75
Less: Foreign exchange income48,101,399.8735,766,435.90
Add: Unrecognized financing costs5,927,697.80133,704.89
Item20182017
Add: Handling charges17,896,467.4513,620,820.53
Total219,052,330.9280,452,779.18

48. Impairment Losses on Assets

Item20182017
Loss on doubtful accounts59,058,265.1228,036,701.96
Allowance for loss on loans123,450.00-
Inventory valuation allowance754,254.68208,457.38
Allowance for impairments of available-for-sale financial assets-14,554,950.00
Allowance for goodwill impairments6,075,401.382,668,846.38
Total66,011,371.1845,468,955.72

49. Gain/Loss on Changes in Fair Value

Source20182017
Financial assets at fair value through profit or loss40,071,452.73-15,528,350.00
Including: Gain/loss on changes in fair value of derivative financial instruments40,071,452.73-15,528,350.00
Financial liabilities measured at fair value-27,492,716.88-17,021,820.35
Total12,578,735.85-32,550,170.35

Note: Gain/Loss on changes in fair value primarily consisted of the floating gains and losses on futures, forwardsand currency swaps.

50. Return on Investment

Item20182017
Item20182017
Return on long-term equity investments under equity method6,349,268.046,307,278.32
Income from disposal of long-term equity investments-647,232.38-3,690,871.24
Income from disposal of financial assets measured at fair value125,317,041.78139,374,343.43
Income from holding available-for-sale financial assets3,882,577.173,970,851.71
Income from disposal of available-for-sale financial assets-175,206.74-73,004.67
Return on investments in wealth management instruments16,363,273.9828,765,121.46
Total151,089,721.85174,653,719.01

51. Gains on Assets Disposal

Item20182017
Income from disposal of property, plant and equipment193,042.361,002,000.14
Income from disposal of intangible assets-1,233,329.52
Income from disposal of productive living assets-126,881.073,801,741.37
Total66,161.296,037,071.03

52. Other Income

Source20182017
Governmental subsidies arising in the ordinary course of business54,838,316.9141,395,359.88
Source20182017
Other items arising in the ordinary course of business that should be charged directly to other income1,263,559.841,259,316.26
Total56,101,876.7542,654,676.14

53. Non-Operating Gain

(1) Details of Non-Operating Gain

Item20182017Amount charged to current non-operating gains and losses
Gain on disposal of non-current assets resulted from damage or obsolescence99,724.1143,677.6499,724.11
Government subsidies10,696,100.0017,363,929.8210,696,100.00
Penalty revenue1,072,650.38960,108.231,072,650.38
Debt repayment revenue3,011,470.014,802,980.683,011,470.01
Default revenue6,787,149.26580,050.616,787,149.26
Negative goodwill-122,148.00-
Insurance compensation3,734,824.21737,673.693,734,824.21
Other1,448,705.882,546,636.331,448,705.88
Total26,850,623.8527,157,205.0026,850,623.85

(2) Government Subsidies through Profit or Loss

SubsidyGrantorReason for grantingNature/TypeEffect on current profit/loss (yes/no)Special subsidy20182017Associated with assets/income
Governmental rewardsCompetent administrationRewardReward for engaging in industries encouraged and supported by the stateNoNo10,696,100.002,999,484.00Inc