Guangdong Haid Group Co., Limited

2020 Annual Report

Stock Code: 002311

Date of Approval for Publication: 17 April 2021

Section I. Important Notes, Table of Contents and Definitions

The board of directors (the "Board"), the supervisory committee, the directors, the supervisors and the senior management of Guangdong Haid Group Co., Limited (the "Company") hereby warrant the truthfulness, accuracy and completeness of the information presented in this report, guarantee that there are no misrepresentations, misleading statements or material omissions contained in this annual report, and are individually and collectively responsible for the authenticity, accuracy and completeness of the information contained in this report.

Mr. Hua Xue, head of the Company, and Mr. Shaolin Yang, head in charge of accounting work and head of the accounting department (Accounting Officer), declare that they warrant the truthfulness, accuracy and completeness of the financial statements in the annual report.

All directors were present in person at the Board meeting to consider and approve this annual report.

The Report contains forward-looking statements such as future plans, which do not constitute any specific undertakings by the Group to its investors. Investors are advised to pay attention to investment risks.

Risk Warning:

1. Risk of Periodical Fluctuations in the Feed Industry due to Abnormal Weather and Epidemic Diseases during Animal Production

The feed industry mainly serves the downstream animal feeding industry. The abnormal changes in natural elements such as precipitation and typhoon may lead to fluctuations of the inventory of livestock or aquatic products and even the large-scale outbreak of animal diseases. This thus affects the demand for feed and likely causes the risk of periodic and regional fluctuations of the latter. With the environmental changes and the expansion of animal production industry, animal epidemic diseases may also occur occasionally. For instance, the African swine fever virus broke out across China in August 2018; and PRRSV-mediated pig disease, shrimp-relevant EMS epidemic disease and poultry-relevant “H7N9” disease all occurred recently. The outbreak of animal diseases will directly inhibit the scale of animal production and reduce the demand for feed in the short term; major animal epidemic diseases may dampen the demand from end-consumers, leading to a downturn of the animal production industry, and further affect the feed demand, giving rise to adverse effects on the production and operation of feed enterprises.

Risk management methods: (1) The Company is currently fully deploying factories and developing local markets in major areas in Southern China, Central China, Eastern China and Northern China and overseas markets in Southeast Asia, etc. and the expansion of regional distribution can effectively cope 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, goose feed and other livestock feed and fish feed, shrimp feed and other aquatic feed. With a variety of products and a well-balanced structure, it can effectively mitigate the risk of single breed species and has strong comprehensive risk-relieve capability.

2. Risk of Drastic Price Fluctuations of Major Raw Materials

The feed ingredients mainly consist of various kinds of staple agricultural products such as corn and soybeans (soybean meal). In recent years, the domestic and international markets of agricultural product have been closely linked. Changes in the planting area and harvest of crops in major grain-producing countries, purchasing and storage and subsidy policies, import and export policies, political conflicts between countries, international trade relations, fluctuations in logistics capacity and conditions of shipping, exchange rates, and 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 the strengthening of the internationalization in trade of agricultural products, the factors for changes in the prices of agricultural products have become more complex and the price fluctuations have therefore increased. If the Company fails to understand the changes in the trade of feed raw materials in a timely manner and promptly implement strategic management and risk control of procurement, the Company may face the risk of rising procurement costs.

Risk management methods: (1) The Company divides raw material into different categories and implements a combination of centralized procurement of staple category and local procurement of regional varieties, which not only guarantees the advantages of large-scale raw material procurement, but also obtains localization advantages from rapid response in respect of regional procurement; (2) The Company continuously invests in the construction of the raw material procurement research system. The team of the professional raw material information research department is relatively mature. It conducts strategic procurement through the real-time tracking, research and judgment of the domestic and foreign bulk raw material market trends, and implements position risk management for bulk raw materials through futures hedging, raw materials trade and other tools to effectively control procurement risks; (3) The Company has accumulated extensive experience in research and development of animal nutrition and feed formulation technologies, and has research and development team composed of nearly 2,000 employees. Large amounts of funds are invested on research and development each year, focusing on animal nutrition requirements, feed formulation technology, animal farming and genetic improvement, comprehensive investigation on healthy animal farming strategies, and other research areas. The Company has a profound understanding of animal nutritional requirements and higher level of expertise in comprehensive utilization of raw materials. Therefore, in case of raw material price fluctuations, it can quickly adjust the formula to control the reasonable feed nutrient level and formula costs.

3. Risk of Structural, Regional and Scale Adjustment to Farming Industry under Environmental Protection Regulations and Policies

In recent years,the State has introduced a series of environmentalprotectionlawsand regulationsincluding the newEnvironmentalProtection Law(环保法),the Regulations on Prevention and Control of Pollution fromLarge-ScaleProduction ofLivestock 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), theGuiding Opinions on Adjusting the Layout of Pig Production in the SouthernWater Network Region (关于促进南方水网地区生猪养殖布局调整优化的指导意见), and the antibiotic ban, which stipulate the pollution prevention andcontrolofanimalproduction industry,and especially limitthe production scalein the regions ofkey water sources and its surrounding areas.According to theregulations and policies ofthe centralgovernment,banned areasand restrictedareas have been set up throughout the country,and pig farms in the bannedareas in the southern water network area are gradually relocating. Theimplementation of environmental protection policies will speed up thewithdrawalof private pig farming farmers, reduce the backward productioncapacity failing to meet environmentalprotection standards and with a smallscale,and enable large - scale farmers to continuously expand their productioncapacity and improve the farming scale and structure; In addition, theestablishmentofbanned areas and restricted areas willenforce adjustments tothe pig production capacity in allplacesacrossthe country.The adjustmentstothe scale composition ofpig production and the relocation ofpig production areawillcertainly have a profound impact on the existing capacity layout,marketshare,pricing power and business modelof the feed industry.The impact ofenforced environmental protection policies on the pig growing and feedindustriesputsexisting competitive companiesin the marketatrisk ofreshuffle.

Risk management methods: (1) The Company continually improves its capability to serve farmers. In addition to feed products, the Company is also engaged in the industrial chain of animal healthcare products, vaccines and finance and has a strong tie 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 feed and pelleted fish feed can be shared. The Company can rapidly shift the production layout and make adjustments to adapt to the changes in the industry by adjusting the production capacity in all places. (3) The Company adopts multiple models to speed up the production layout in areas with rich resources and large environmental carrying capacity, and to obtain the market share of new animal farming areas. (4) The Company continues to increase R&D investment, and its research results in key technologies of microbial fermented feed and feed antibiotic substitutes have been effectively applied to foster the advancement and development of the industry.

4. Risk of Exchange Rate Fluctuations

The global procurement of raw materials has become the norm. The scale of overseas investment and overseas operations of the Company is also rapidly expanding. The scale of cross-border fund settlement and the stock of overseas assets have grown substantially, involving the currency types of various related countries. Currency exchange rate fluctuations are subject to different influence factors, and exchange rate fluctuations in any currency may have a certain impact on the settlement cost and asset value of the region.

Risk management methods: (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 settlement currencies, and strives to achieve relatively balanced regional fund inflow and outflow through structural arrangements of financing sources and financing types; (2) The expansion of two-way fluctuations in the RMB exchange rate has become the new normal. The Company further enhances its awareness of foreign exchange risk management, and arranges settlement models based on the procurement and sales strategies and cycle characteristics of import and export operations. And forward foreign exchange settlement and sale, swaps, foreign exchange options and other financial instruments are flexibly used to lock the exchange rate risks, control procurement and sales costs, and control the possible risk resulted from exchange rate fluctuations.

The proposed profit distribution plan of the Company was considered and passed by the Board: on the basis of the total number of shares on the date of record minus the repurchased shares when the plan is implemented in the future, the Company will distribute cash dividend of RMB 3.2 (tax inclusive) and 0 bonus share (tax inclusive) for every 10 existing shares held by all shareholders without capitalization of capital reserve.

This report has been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese version shall prevail. The complete published Chinese 2020 Annual Report is available at http://www.cninfo.com.cn/new/disclosure/detail?stockCode=002311&announcementId=1209723720&orgId=9900009032&announcementTime=2021-04-20.

Table of Contents

Definitions

Section II. Company Profile and Key Financial Indicators

I. Company profile

II. Contact persons and contact methods

III. Information disclosure and places for inspection

IV. Change in registration

V. Other relevant information

CPAs engaged by the Company

Sponsors engaged by the Company to continuously perform its supervisory function during the reporting period

√ Applicable □ Not applicable

Financial 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

Whether the lower of the net profit for the year attributable to shareholders of the parent company before and after deducting the non-recurring gain or loss was negative for the last three accounting years, and the latest independent auditor’s report indicated that there was uncertainty about the Company’s ability to continue as a going concern

□ Yes √ No

Whether the lower of the net profit for the year attributable to shareholders of the parent company before and after deducting the non-recurring gain or loss was negative

□ Yes √ No

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

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

□ Applicable √ Not applicable

There was no difference between the net profit and net assets disclosed in accordance with international accounting standards and China accounting standards in the financial report during the reporting period.

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

□ Applicable √ Not applicable

There was no difference between the net profit and net assets disclosed in accordance with overseas accounting standards and China accounting standards in the financial report during the reporting period.

VIII. Key Financial Indicators by Quarter

Unit: RMB

Whether the above indicators or their aggregated amounts have any material difference with the respective amounts as disclosed in the quarterly report or interim report

□ Yes √ No

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

√ Applicable □ Not applicable

Unit: RMB

Notes for the Company’s non-recurring gain or loss items as defined in the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No.1 - Non-recurring Gain or Loss (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-recurring gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No.1 - Non-recurring Gain or Loss (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 applicable

No non-recurring gain or loss items as defined or illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No.1 - Non-recurring Gain or Loss (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

(I) Principal operations, main products and business models of the Company during the reporting period

The Company develops industrial chains with the aim of providing overall solutions to animal farming. It has created a vertically integrated aquaculture business, and its livestock & poultry industry chain is being built steadily. The Company's principal products include high-quality animal seedlings, feeds, animal healthcare products, and pig farming. The Company’s businesses cover the research and development（R&D）, design, production, sales, service and related activities for various products. Specifically, the Company's products include feeds for chickens, ducks, geese, pigs, fishes, shrimps and crabs, farmed species such as pig, shrimp, fish fry and chickens, as well as chemical and biological products, veterinary medicine, vaccines and other products needed for the production of livestock, poultry and aquatic animals.

1. Principal operations and products

(1) Provision of feeds, seedlings and animal healthcare products for animal farming

Feed business is the core foundation of the Company. With a deep understanding of the critical points of production, the Company has developed its aquatic seedlings and animal healthcare business into key segments that facilitate the growth of the feed business -- thanks to over a decade of relentless efforts. In the feed sector, the Company has gathered a wide range of customer resources over the past two decades. It provides customers with high-quality animal seedlings with high demands in the market and cost-effective feed products, and its farming technical services spur the development of vaccines, veterinary medicines, biological products and other animal healthcare products, providing comprehensive solutions to help farmers achieve success. Therefore, the Company enables customers to achieve sustainable animal farming while implementing better control over the cost and gaining competitive advantages in respect of end products.

(2) Extended development of animal farming and product processing

Based on the successful development of feeds, seedlings and animal healthcare products, the Company has extended its core competitive edges in animal farming, and therefore in recent years, has commenced efforts to develop animal farming and food processing business. In livestock & poultry business, the Company currently focuses on pig farming and is steadily expanding into pig and poultry slaughtering. In aquaculture, it uses its high-quality seedlings, feeds and animal healthcare products to farm and process speciality aquatic products such as fishes and prawns. As the R&D investment in aquatic products yields results, the Company plans to involve in the farming and processing of high-quality fishes and shrimps.

2. Major business models

The Company started up from the feed business. Its rich customer resource helps deeply understand and explore customer needs. This results in a continually expanded profile of products and service to the customer, which gradually extends from feed to high tech areas with increased value-added products, such as animal seedlings, veterinary medicines and vaccine products. The scale of production and sales of high value-added products has gradually expanded and resulted in a greater proportion in income structure year by year. In recent years, through the extension of the industrial chain, the Company has further attempted to enter into areas of farming and food processing. The business model has been developed and extended in an orderly manner with various industrial segments interactively supporting and developing each other.

(1) Feeds, seedlings and animal healthcare products

In particular, for the feed business which has the largest scale, the business management is mainly carried out with the business model of centralized procurement of raw materials, distribution of production layout, sales of products accompanied 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 materials. Such operations can achieve better procurement cost advantages and risk control, because of being closer to the market, convenient in logistics and rich in resources. Currently, the Company had feed factories distributed in nearly 100 cities in China and Southeast Asia; Distribution together with direct sales is the Company's main sales model. Focusing on localized marketing, the Company has fully established distribution channels to efficiently solve farmers' capital and transportation needs. Through service stations established in main production areas, the technical service teams directly visit farmers to provide professional services for farming and have achieved functional complementation and collaboration with sales organization and management 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 the Company to provide services and constitute a package of integrated solutions for farmers.

The business models for seedlings and animal healthcare products reflect the distinctive features of research and development with technology as the guide, differentiated products as the carrier, and service support as the main promotion strategy. Seedlings and animal healthcare products demand a long period of investment in research and development. Technology accumulation needs better predictability and market insight, and strong originality of products. To provide better service support, it is necessary to invest in long term and to build service teams with advanced technology, knowledge, and experience. Therefore, a multi-tiered research and development system has been chosen for the business management model, supplemented by a production base that has a relatively high starting point for investment and a marketing strategy with a more aggressive power.

(2) Animal farming and processing business

The Company's pig farming segment is in its early stage of development, which adopts both the "self-breeding + farming community" model and "Company + family farm" model. The "self-breeding + farming community" model means that seedlings are introduced and bred to create a farming system of grandparent - parent - commercial pig, under which reproduction is separated from breeding to ensure that the farming process is safe and controllable. The "Company + family farms" model means that the Company provides family farmers with necessary products for farming, such as seedlings, feeds, and vaccines, and reaches agreement with them on the main technical requirements for farming, while the farmers are directly responsible for animal rearing and transfer the products to the Company for sales.

The Company is also a new player in the aquatic animal farming and processing sector, and its primary aquatic products are fishes, prawns and other specialty products. With its strengths in high-quality seedlings, feeds, animal healthcare and technologies, the Company is capable of standardized large-scale farming, supplying sustainable, healthy, traceable aquatic products (processed products) to large catering enterprises and fresh food platforms.

The Company has set up specialized function departments including research institute, procurement center, financial center, operation and development center, marketing center, process and information management center, human resource center and Haid College at its headquarters, and set up multiple regional/business divisions according to regions or business categories. Each professional center aims at acquiring technical and management leadership in its field and provides technical and management standards as well as integrated and professional management and service support for large regions/business divisions and various branches and subsidiaries. All regional/business divisions build management platforms, give full play to the collaboration mechanism for R&D, procurement, production and management, strengthen the ability to swiftly respond to the market, fully explore market potential, and enhance refined management efficiency of all business sectors.

(II) Development stage and periodic characteristics of and position of the Company in the industries where the Company operated during the reporting period

1. Industry development stage

Driven by consumption upgrade, increasing awareness of food safety, technological innovation, introduction of more stringent environmental protection regulations, and pandemics, China's farming industry has entered the stage of industrialized, large-scale, intensive and intelligent development. However, due to resources, technologies, land and other objective factors, the large-scale development level varies product from product. In particular, poultry farming is at the highest level of industrialized, large-scale and intensive development, followed by pig farming, whereas aquatic products and cattle & sheep are in their early development stage. With the intensification development of the farming industry as well as the improvement of farming techniques, sectors such as feeds and animal healthcare products are moving towards increasingly intensive development, and industry integration is accelerating. Specially:

China's feed industry began its development in the 1980s. After more than 40 years of development, the total volume of feed production in China has continuously ranked the top in the world in recent years. The national feed output grew in 2020. According to the Overview of the Development of the National Feed Industry in 2020 (《2020年全国饲料工业发展概况》) released jointly by the Ministry of Agriculture and Rural Affairs and the China Feed Industry Association, China's total output of feeds exceeded 250 million tons in 2020, representing a year-on-year increase of 10.4%, including pig feeds of 89.225 million tons (up 16.4%), poultry feeds of 125.277 million tons (up 8.17%), and aquatic feeds of 21.23 million tons (down 3.6%). The level of industry concentration continued to rise. In 2020, China has 33 feed enterprise groups with an annual feed output of more than 1 million tons, accounting for 54.6% of the country's total output. It is expected that the numbers of players will drop further as the industry consolidation continues. Superior enterprises will make good use of the opportunity of industry consolidation and their scale advantages to extend the industrial chain or develop diversified businesses through mergers and acquisitions as well as construction of new production capacities. Confronted with the development 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 high-quality seedlings for farmed species, especially aquatic seedlings, are currently under-supplied. There are fewer new strains with proprietary intellectual property right, and the production capacity is small. It is far from meeting the demands of the animal farming industry to upgrade and progress. In a longer period, there will be pressure in respect of achieving research and development progress and increasing production supply capacity.

The market demand of animal healthcare products has grown rapidly. In particular, with the uprising of consumption, the upgrading of farming species has significantly increased the demand for health, safety, and green farming. The concept of prevention over treatment has been increasingly accepted by a wide range of farmers. The help of reasonable animal healthcare product investment for farming is mainly reflected in the direct effects of a reduced disease risk, improved health and safety-added values of products, controllable farming costs, and improved farming efficiency, as well as a number of extended effects including reduced labor intensity and improved industrial chain extension capability. In the future, the capacity of the animal healthcare industry will see a greater room for further development on the basis of the current situation, and dominant enterprises will cash in major market development opportunities.

The pig farming business is rapidly moving towards large -scale, intensive, and factory-oriented development. The outbreak of African swine fever (ASF) in 2018 the COVID-19 pandemic in 2020 have accelerated consolidation in the industry. Small-scale farmers and private farmers quickly withdraw from the market, while large companies are expected to expand their farming size rapidly amid the pandemic by virtue of their superiority in investments, technology and the epidemic prevention and control system. Thus, large family farms with strong epidemic prevention capacity are expected to become the key players other than large enterprises.

China's aquatic product industry is dominated by farming and supplemented by fishing. In recent years, the summer fishing moratorium policy has expanded the farming of aquatic products at a faster pace. With the adoption of intelligent and automatic technologies, farming capacity has been enhanced rapidly, and large-scale farming will accelerate the growth of aquaculture business. With the rising consumption, the development of the catering industry and the increasing awareness of food safety, the demand for reliable, safe and high-quality aquatic animal protein is steadily growing. The change in consumption structure will drive the supply of high-end aquatic products. Farming enterprises with high-quality seedlings and strong technical and financial strengths are poised to become leaders in the field of aquaculture. The market space will be much broader amid the continuous technological innovation in the sector.

2. Periodic characteristics of the industry

The cycle of the animal production industry is mainly determined by the supply end (feeding capacity). The cycle of feed, animal healthcare products, seedlings and other industries follow the same cycle.

China is a country with a large population. Residents have a huge food consumption demand which remains relatively 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 animal production 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 will increase, 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 is greater than the consumer demand, the terminal price of the farmed species will fall, resulting in farming loss and sluggish 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-grade feed products, the enthusiasm of feed feeding, the sensitivity of feed product prices, and the effective transfer of feed raw material price fluctuations, etc., the cyclical factors of the feed industry, including seedlings and animal healthcare, offset each other, with a limited impact on feed products. The feed industry features a weak cycle.

3. Position of the Company in the industries in which the Company operates

The Company is a large integrated enterprise.

For feed business, although the industrial concentration is increasing, the sector remains decentralized. In 2020, the Company sold 14.66 million tons of feed, accounting for approximately 5.80% of China's total feed output. It ranked second among all Chinese feed producers, with an increased market share, but there is still much room for improvement. The Company's aquatic feed ranks at the forefront of the domestic industry due to its technological and scale leadership; and the livestock and poultry feed ranks among the top ten in the industry and in a leading position in technology and industry scale in the regional market. The Company ranks among the top ten feed enterprises in the world in terms of production and sales scale.

The Company has been gradually expanding feed, seedlings and animal healthcare markets in Vietnam, India, Indonesia, Ecuador, etc.

The Company's high-quality fish and shrimp fry, and animal healthcare products for aquatic species are playing a leading role in the industry in respect of technology and market shares.

The Company is recognized as a Key National Leading Enterprise for Industrialization of Agriculture, a State-Level Enterprise Technology Center, and is among the top 500 Chinese companies, the top 500 Chinese manufacturing companies, the top 500 privately-held companies in China, the 2020 Fortune China 500, and China's Agricultural Flagship Enterprise in 2020.

II. Material Changes of Major Assets

1. Material Changes of Major Assets

2. Major Assets Overseas

□ Applicable √ Not applicable

III. Analysis of Core Competitiveness

The Company's products and services are centered on the needs of the animal production industry. Its core competitiveness is represented by the capability of creating values for customers while carrying out the mission of changing rural China. Specifically, its core competitive edges include a diversified and complete product configuration, outstanding single product advantage, comprehensive farming technology service capabilities, industrial layout and the ability to organize the development of the industrial chain-related links, the lean management capability, and an attractive system of talent incentive and development.

1. Diverse and complete product configurations to provide farmers with complete products and solutions covering the whole production process

Centering on the animal farming chain, after many years of technological investment, transformation of research and development achievements, product accumulation, production layout, etc., the Company's product configuration has reached a relatively diversified and complete state and covered the whole process of animal farming including feed, functional feed, seedlings, drugs, vaccines, biological products, etc. and it is still under further development. With respect to feed products, the Company is one of the few feed producers in China that can produce feed for fish, shrimps, pigs, meat poultry and egg poultry. And it is fairly competitive in all the product categories, with a large market share all in major markets. Product configuration capability requires strong insights into customer demands, R&D capability, results conversion capability, investment in construction of production facilities, processing organization capability, marketing promotion capability, and technical service capability.

The Company has rich technical research reserves and an R&D team composed of more than 2,000 employees. It annually invests a considerable amount in R&D, with expertise in multi-disciplinary fields of animal nutrition, veterinary medicine, animal farming and genetic improvement, animal farming strategy optimization, bioengineering, biochemistry and machinery. The fast transformation of R&D outcomes, and rapid implementation of investment supporting strategies contribute to the Company's strong product configuration capability.

For example, for feed formulations, the Company, through more than 20 years of accumulation in continuous research and development, has established a huge database of animal nutrition requirements and reserved a variety of raw material formula technologies. Thousands of sets of comparative experimental results are added to the database of core nutritional needs of animals and raw materials utilization to convert technologies into productivity. Therefore, the Company has a strong capacity in terms of organization and continuous optimization of product formulas and adaptation to changes. To quickly adjust the formula when the raw material prices fluctuate can achieve cost competitive advantages.

The Company has teams for technical services and marketing with a deep understanding of its technologies and products, who visit farms or farming sites to know the actual farming situation in a timely manner. Therefore, the Company has detailed data sources for terminal consumption habits, animal growth performance after feed utilization, epidemic disease prevention, animal farming strategy and animal farming needs, and can accurately grasp the demands of farmers and precisely propose technical requirements on product design to support full concentration of the Company's technical resources on customer's core needs.

The Company provides farmers with comprehensive farming solutions covering seedlings, farming technologies, disease prevention, farming model, health and environmental protection solutions. Meanwhile, business development lays a more solid foundation for R&D and technological innovation that pave the way for the further development of the industry.

2. Clear and excellent product performance is the Company's most important competitive advantage

For all series of products, the Company is dedicated to creating product superiority that is significantly ahead of its competitors and has invested heavily in the explicit expression of product performance.

Despite of a high price, high-end products have the obvious advantage of ultimate pursuit of animal survival rate, growth efficiency and have a prominent brand effect. On the basis of ensuring leading production efficiency, middle-end products are close to the competitors' product pricing and are pursuing outstanding cost competitiveness. Therefore, in light of the industry’s overall good farming benefits, the Company’s customers, with the support of integrated products, can obtain significantly higher returns than other farmers; in the event that the industry’s farming benefits decline and even the entire industry suffers losses, the Company’s customers can suffer less or even no loss.

The manifestation of product power requires the support of various internal professional capabilities of the Company: the research and development capabilities of animal nutrition and raw material utilization, product formula technology capability, raw material value procurement capability, efficient internal operation capability are all indispensable. For example, in respect of support of purchase capacity, the Company’s procurement team has outstanding professional capabilities. The team is young and specialized, and it performs division of labor according to subdivided raw material categories. The wide industry perspective and a large amount of information acquisition and analysis ensure tracking, research, and judgment of the market trends of bulk raw materials at home and abroad in a real time and utilization of futures instruments for hedging of bulk raw materials to effectively control the purchase price risk and position risk. The prominent purchase capability can identify numerous raw material purchase opportunities, making cost advantages for feed products and trade of raw materials possible. The Company is the first company to successfully achieve centralized purchase in the industry. It has clear advantages in respect of large-scale purchases. Besides, it is sophisticated in the combined application 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, the business sharing system and other management software, the Company has a strong information-based system, and internal operations are streamlined, standardized, and data-based. The role of data-based operation 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. The platform-based management mechanism enables swift allocation of production, R&D, procurement and personnel resources to respond to the market and match the market and customer needs in a more flexible, fast and efficient fashion. Efficient operation capacity underpins effective organization of specialized production of all kinds of products.

3. The comprehensive animal farming technical service system is an important initiative for the Company to coordinate product chain, create value for customers and continuously acquire new customers and improve customer royalty

In 2006, the Company took the lead in the industry to provide comprehensive technical services to farmers, and positioned the Company as a service-oriented enterprise providing animal farming solutions to farmers. The Company provides farmers with full-process product and technical service support including "seedlings - stocking mode - environmental control – animal epidemic prevention - feed - market information – finance support" to ensure that farmers can use the most advanced farming technology to ensure farmers’ growing success and profitability. The Company has a technical service team composed of nearly 8,000 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 can simultaneously provide technical services for tens of thousands of farmers. The Company's relatively complete service system in the industry can give full play to its product strengths and provides a full range of technical services for farming, which can effectively amplify the benefits for customers, thereby boosting customer royalty.

The Company started farming technical services by aquaculture services. After over a decade of efforts to build professional teams and platforms, the Company's process and concept of farming technical service system have penetrated all aspects of products, technologies, R&D, market and operation, significantly driving the growth of the aquatic animal feeds and animal healthcare products. Besides, the process and concept have been gradually applied to poultry and pig farming. In recent years, the Company has achieved remarkable results in boosting the development of livestock and poultry business by setting up livestock and poultry service stations.

The comprehensive animal farming technical services have become an important brand label of the Company and an important means to create value for customers, obtain customers and boost customer royalty.

4. The Company's existing industrial layout advantage supports the Company to quickly organize the comprehensive development of multiple links in the industrial chain, reserve of new businesses in order, and the increasingly prominent industrial comprehensive advantages.

The Company's feed products include a full range of feed products for livestock, poultry and aquatic feeds. The product line is complete and the product mix features endow the company with a strong anti-risk capability. Different kinds of feed products have different technical contents, different gross profit margins, and different market characteristics and operational risks. The Company's product mix makes it possible for the Company to obtain higher gross profit margins than the industry's general level, and to better control the market operational risks caused by animal epidemic diseases and imbalance of supply and demand and ensures the Company's stable revenue from sales of feed products and maintain a rapid growth much higher than that of the industry.

Over the years, the Company has orderly developed high-quality aquatic animal seedlings, aquatic animal healthcare products, livestock and poultry vaccines, veterinary drugs, animal healthcare products for livestock and poultry, pig farming and other businesses. The core technologies in industrial chain have gradually gained advantages in terms of technology, industrial layout and industrial collaboration, thus fostering more new business growth points and profit growth points for the Company and laying a solid foundation for the Company to further amplify the multiplier effects of the industrial chain and create comparative competitive advantages.

5. Continuously building excellent operation management team and lean management capability to promote sustainability

The Company has a hard-working, dedicated, professional management team with a consistent philosophy. Most of the members of the team are graduated from agricultural institutions of higher learning and have a strong technical background. The management has a profound and comprehensive understanding of the feed industry and has accumulated extensive 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 feed industry and the Company's ever-increasing operational management requirements in terms of academic background, 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+″ model have also constantly impacted the industry. To promote the transformation and innovation of the industry and create corporate mechanism and culture, i.e. the collective learning capacity that can quickly respond to changes enabling the Company to continuously create value for customers, is the foundation for the Company to gain sustainable competitive advantages.

From producing aquafeed premixture to manufacturing compound feeds for various aquatic species including freshwater fish, marine fish, and shrimps, from having leading advantages in aquatic feeds at the beginning to gradually having apparent advantages extended to feed for livestock and poultry, from simple feed production operation to provision of comprehensive services including seedlings, animal healthcare and animal farming technical 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 of development from scratch to become stronger and larger and to rank the forefront of the industry, relying on the collective learning ability of the Company’s management and all employees. Affected by this culture and benefits from this capacity, the Company keeps learning and growing.

6. The sound talent training system and effective incentive mechanism promote the sustained and stable development of the Company

The Company continues to foster an organizational climate where talent training is valued. Haid College and the Human Resources Center have built a training system covering the whole career of employees, all businesses of the Company and all positions. A learning ecosystem that combines popular education and elite training has been established and standardized. In addition, the Company provides skill training programs appropriate to the development of employees at all levels with a view to quickly nurturing more internal professionals. With the Company's continuous business development and further expansion of business network, many young professionals who are young, enthusiastic, energetic, and have new ideas in this new era have become the mainstay of the Company's middle management and core technology teams. Through school-enterprise cooperation and industry-education integration programs, the Company recruits a large number of outstanding graduates every year, who compose a talent reserve that supports sustainable corporate development. China Vocational Education Group of Modern Fishery and Rural Revitalization College, established by the Company, have encouraged many farmers to participate in the cultivation of technical and industrial talents. The internal and external talent development systems can generate professionals for the Company and empower industry development, thus promoting the progress of the industry as a whole.

Since its listing, the Company has implemented equity incentive plans and employee stock ownership plans for core management members and core technical experts at many levels. It has put in place a mechanism of long-term and short-term incentives and constraints under which the interests of the management members and core technical experts are consistent with the interests of all shareholders. Performance targets are set and linked to incentives to ensure the accomplishment of the Company's development strategies and business objectives so that the Company can maintain sustained and stable growth.

Section IV. Discussion and Analysis of Operations

I. Overview

(I) Industry situation

The outbreak of the COVID-19 pandemic in 2020 had a significant impact on the food and beverage consumption of Chinese people. As the pandemic has been under control, the Chinese economy has managed to recover, but the overall consumption remains in the doldrums. The international trade relations in the context of the geopolitical landscape became increasingly complex, and the agro-product prices went up sharply and fluctuated considerably. COVID-19 created uncertainties as to the development of the traditional real economy, which, coupled with the low food consumption and rising agro-product prices as well as the resurgence of ASF, brought many difficulties to feed and farming sectors. Tremendous changes took place in the industry development landscape.

Pig farming and feed sectors. Hog in stock continued to increase steadily. In 2020, 527.04 million pigs were produced and 406.5 million pigs were in stock, which recovered to 76% and 95% of 2018's levels, respectively, according to the Statistical Communiqué on 2020 National Economic and Social Development (《2020年国民经济和社会发展统计公报》) released by the National Bureau of Statistics of the PRC. Pig prices fluctuated at high levels throughout the year, and farming was very lucrative. Thanks to the steady growth of pig in stock and a low base over the last year, China's total output of pig feed for the whole year was 89.225 million tons, an increase of 16.4% over the same period last year, indicating a return to about 90% of the levels before the outbreak of ASF in 2018 and 2017. Driven by the high profitability of pig farming, traditional large-scale pig feed enterprises shifted their focus to pig farming business, while reducing or even stopping investment in the pig feed sector. Small pig feed enterprises were in a worsening situation as they faced difficulties in material procurement (supply and cost control) and were not recognized in terms of biological prevention and control capabilities. Against the backdrop of the outbreak of ASF, the competitive landscape of the pig feed sector underwent profound changes, and there was a market reshuffle.

Poultry farming and feed sectors. Poultry farming was stuck in a long-term downturn cycle. In the first half of 2020, as the COVID-19 pandemic affected consumption, especially live poultry consumption, live poultry prices fell to the bottom. In the second half, due to the gradual increase in pork supply, the consumption share taken by others was recovered. As a result, the poultry farming sector (yellow chickens and meat ducks) remained loss-making from the end of 2019 to the end of 2020. China's total poultry feed output for the whole year was 125.277 million tons, up 8.17% over year on year. Although the sales volume increased from the prior year, poultry feed sector faced pressure from the ongoing loss-making situation and a sharp rise in raw material prices, remaining subdued. The poultry farming and feed sectors fell from their highs in 2019 to the bottom, with many SMEs and large enterprises struggling to survive, or shutting down, or managing to achieve a business transformation.

Aquaculture and feed sectors. The aquaculture sector was at a low level before a rise, achieving good profitability throughout the year. In the first half of 2020, in the wake of the COVID-19 pandemic, the "Xinfadi" incident, and floods in some regions, the seedling, circulation and consumption of aquatic products were all considerably affected. Especially, in recent years, as crayfish and bullfrog are popular among Chinese consumers, the demand for aquatic products has more than halved; thus, the farming and feed sectors have all suffered heavy losses. However, due to the drop in the deployment of aquatic seedlings in the first half of the year, the supply of aquatic products remained tight in the second half of the year. Therefore, the prices of aquatic products were better in the second half, generating good profits. Furthermore, the decrease in aquatic products in stock resulted in weak demand for aquatic feeds. The total domestic aquatic feed output in China for the whole year was 21.236 million tons, down 3.6% year on year. The decline in feed demand further intensified market competition, with many enterprises recording a drop in sales volume and profits.

On the one hand, these were attributable to COVID-19, low consumption, a big climb in raw material prices, intensifying competition and other operating uncertainties. On the other hand, many SMEs in the feed sector shut down in the middle of the year, as a result of the industry-wide technological progress, enhanced management, expansion of economies of scale, accelerating efforts to industrialize agriculture, and the introduction of more stringent policies. Consequently, industry consolidation increased faster.

(II) Review of the Company's businesses

During the reporting period, the Company, in adherence to the principle of creating value for customers, continued its efforts to build value chains with the aim of providing better customer services, and comprehensively upgraded its services. It increased R&D investment and market research on raw materials, optimized product structure, and enhanced product competitiveness. It built an efficient platform-based management model to offer customers the best cost-effective products and services in a more flexible and efficient way. The Company carried out Harvest Operation and Thunder Operation. Internally, it created a climate where all employees strove for excellence, conducted benchmarking management, enhanced product competitiveness; externally, it constantly expanded market shares and built more competitive edges over competitors. During the reporting period, the Company continued to enhance its product competitiveness and brand competitiveness, with growth in all the business segments of feeds, animal healthcare products, seedlings and farming. It recorded operating income of RMB 60,323.8624 million, an increase of 26.70% over the last year. The net profit for the year attributable to the shareholders of the parent company stood at RMB 2,522.7304 million, up 53.01% year on year. Thus, the Company's competitive advantages have been further strengthened.

1. A sound farming service system was built, focusing on feeds, seedlings and animal healthcare products

The Company has forged strong synergy among feeds, seedlings and animal healthcare products to increase the benefits from farming services. High-quality seedlings and animal healthcare products based on services have created a strong driver for feed sales. At the same time, competitive feed products have become the driving force and key source of customers for seedlings and animal healthcare products. Feeds, seedlings and healthcare products have become the three key business segments that underpin the sustainable development of the Company.

(1) Feed business

During the reporting period, despite all the difficulties and operating uncertainties, the Company, in adherence to the principle of creating values for customers, managed to sell feed of 14.66 million tons (excluding 540,000 tons of self-use feed for farming business), a steady and rapid increase of 19.33% year on year, and the gross profit margin was 10.32%, down by 0.52 percentage point from the prior year (if adjustment to recognized income and cost under accounting standards in the year is excluded, the gross profit margin rose by 0.11 percentage point year on year under the same statistical standard as last year).

The sales volume of poultry feed expanded by 20%yearon year,and the gross profitmargin declined by 0.86percentage pointyear on year.To respond to the substantialincrease in the agro-productprices,the Companyleveraged itstechnicalstrengthsto adjustproductformulasin time to mitigate therelevantimpactand controlfeedcosts.In the meanwhile,the Company actively acquired customers as large-scale farming companies,providingthemwith customized and personalized solutions and products in line with their farming conditions, marketpositioning and demands.TheCompany also joined handswith large-scale farming companiesto achievewin-winoutcomes through industrial chain cooperation. During the reporting period, the Company, based on itsaquaculture service systemthathas been continuously refined formany years,established livestock &poultryfarming service stationsin key marketsto provide farmerswith animalhealthcare solutions,vaccine productsandother related services, helping themenhance their farming value. On the basis of high-quality products,developmentofbig customersand farming services,theCompany'ssalesvolume grewconsiderably;especially,inthe core poultry feed markets -- South China and North China -- the Company's market share expandedsignificantly.In the newly developed poultry feed market--SoutheastAsia,the salesvolumemore than doubled.Besides,the Company's poultry feed profitability was higherthan thatofthe industry,with evidentcompetitiveedges.

The sales volume of pig feed rose by 37%yearon year,and the gross profitmargin was up by 0.94 percentagepointcompared to lastyear.These indicated thatthe Company achieved rapid breakthroughsin pig feed business,with record-high gross profitmargin.As forproductcompetitiveness,the Company builtmore than 30 pig feedtestsitesacross China,which have a numberofdoctorsand mastersspecializing in the developmentofnewpigfeed products.Thus,the Company enhanced itsability to commercialize and apply R&Dachievements.Accordingto the nutritionalneeds of each process ofpig production,health improvementand otherneeds,the Companycontinued to rolloutmore pig feed products to betterimprove disease resistance,uniformity,growth rate andbirth rate ofpigs.The rolloutand promotion ofhigh-end productsand comprehensive technicalservice methodssuch asanti-ASFfurtherexpanded the Company'spig feed marketinfluence and enhanced competitiveness.Sowfeed,creep feed,concentrate and suckling pig feed continued to be high cost-effective,furtheroptimizing theproductstructure.In particular,the developmentofthe northern marketwasaccelerated fully,with sales volumeclose to two timeshigherthan thatbefore ASF(2018),and someproductswereexceptionally popularamong localcustomers.In thecontextofepidemic prevention,theCompany,by leveraging digitalmeansfortransformation oftechnicalservices,developed the online and offline service modelof "Internet+Services".Itoffered farmersonline training and answered their questions through live streaming, video, WeChat official accounts,communities and other newmedia means. The training programs covered such topics as farming modelimprovement &plan optimization, disease prevention and control, farming fund planning and arrangement,marketconditions,and marketforecastand analysis.Furthermore,on the basisofthe on-site testing and servicesof offline livestock &poultry farming service stations,the Company provided technicalservices covering theentire farming process.These programs helped farmersenhance their profitability as wellas disease preventionand controlcapacity.Theoptimization and improvementofthepig feed productstructure,successfuldevelopmentof the northern marketand the establishmentof the service systemalldemonstrated the greatenhancementofCompany's capacities in R&D,resource allocation,production,service and operation ofpig feed products.TheCompany'sproductcompetitivenessand brand recognition have been fully acknowledged by themarket,and thereisstillhuge roomforgrowth in the pig feed marketoftheCompany in thenextfewyears.

The salesvolumeof aquatic feed roseby 10%yearon year,and the grossprofitmargin wason parwith the prioryear.Due to the COVID-19 pandemic in the first half of the year,the transportation and seedling of aquaticproducts were affected.The seedling season was missed,leading to a decline in seedling volume.The principalfarming areas ofordinary aquatic products (fourcommon fishes and othertraditionalaquatic products)were inCentralChina,with HubeiProvince as one of the key areas.Affected by COVID-19,the seedling of aquaticproductsin Hubeidropped significantly,and thefeed demand forthewhole yearreduced substantially.Also,someareas in CentralChina were hard hitby floods in the middle ofthe year,directly leading to a 9%drop in theCompany's annualsales volume ofaquatic feed.The aquatic feed profitin CentralChina was under pressure.Besides,crayfish feed in CentralChinawasalso severely impacted by thedecline in consumption,with aflatsalesvolume and adecline in profit.Othervarietiesand regionsregistered notably good marketperformance.Driven bythe Company's feeds,seedlings and animalhealthcare products,the sales volumes ofshrimp and crab feed andhigh-grade floating fish feed allclimbed,with the annualsalesvolumeofshrimp and crab feed (including crayfishfeed in CentralChina)by 25%.In particular,the annualsalesvolume ofshrimp and crab feed in EastChina maderecorded a record-high increase ofmore than 50%yearon year,farabove the marketaverage.The productioncapacity ofhigh-grade floating fish feed (fish,sea bass,etc.)somewhatexpanded,and the products maintainedhighly competitive,with the annualsalesvolumerising more than 30%overlastyear.Especially,theannualsalesof California perch feed wentup by more than 60%.The Company's structure ofaquatic feeds was optimizednotably,with shrimp and crab feed and high-grade floating fish feed accounting for47%ofaquatic feeds.Thegross profit margin of aquatic products for the whole year was flat, and the gross profit per ton achievedyear-on-yeargrowth,despitetheoverallpoorperformanceoforiginalaquatic feeds.

(2) Animal healthcare products

During the reporting period, the Company registered sales revenue of animal healthcare products of RMB 665 million, an increase of 15.78% year on year and a gross profit margin of 51%. The Company comprehensively enhanced the professionalism of aquatic animal healthcare services through tool upgrading, service deepening and product innovation and created a new high-tech service platform called Aquatic Epoch Service Station. By referring to the advanced technologies of human medicine and veterinary medicine, intelligent monitoring, the Company applied professional testing and accurate diagnosis and treatment to the aquaculture sector and effectively commercialized its R&D achievements made over the years. It built a "Tertiary A Hospital" for the aquatic farming sector, which includes testing, diagnosis, prevention, treatment and training -- a comprehensive service platform that integrates industry products and leading technologies. During the reporting period, the Company's aquatic animal healthcare products were considerably affected by the decline in crayfish farming, with the annual sales revenue up by 9.24% year on year, representing a deceleration. Drawing upon the practices in development of aquatic services, the Company commenced the construction of livestock & poultry service stations with professional veterinarians and service engineers, with the aim of making them service-oriented suppliers of livestock & poultry farming services. They will provide a wide range of products of seedlings, medicine and devices for farming to quickly apply and commercialize advanced products and technologies of the Company. Thus, the Company's service system will be more comprehensive, professional, accurate and efficient.

(3) Seedling business

During the reporting period, the Company's revenue from seedling business amounted to RMB 586 million, an increase of 66% over the last year, with a gross profit margin of 53%. Seedlings are the basis of farming and the foundation of developing farming sector. Guided by the principle of "driving agricultural development with technologies and giving priority to developing improved varieties", the Company has forged synergy between its seedling business and animal healthcare products, which plays a vital role in giving full play to the advantages of the Company's industrial chains. The Company's seedlings primarily include fish fry and shrimp fry. In terms of fish fry, the Company has built five R&D bases and more than 20 production bases. Through more than 10 years of R&D efforts, the Company has achieved fruitful results in the selection, improvement, reproduction and large-scale development of improved varieties. The Company is able to supply California perch fry all year round. It has addressed the off-season supply problem, greatly improving the farming efficiency and advancing industrial progress as well as feed sales growth. Thanks to years of R&D, the Company has created and adopted a controllable, standardized production and management model for shrimp seedlings, covering breeding, propagation and reproduction, especially in the breeding of white shrimp. Its self-breeding varieties have clear advantages and have been recognized by farmers. During the reporting period, the sales revenue of shrimp seedlings grew by 68% year on year, and the gross profit margin climbed by more than 8 percentage points. The Company is committed to rendering green, healthy, high-quality and high-yield aquatic seedlings to customers. Its further strengthening and investment in production, study, research, education, reproduction and promotion will provide a more solid foundation for the development of its industrial chains.

2. The industrial chains of farming and processing businesses were extended on the basis of enhancing core competitiveness

(1) Pig farming business registered revenue of RMB 3,794 million, up 175.46% year on year, with a gross profit margin of 30%. The annual hog output was nearly 1 million. During the reporting period, resurgences of ASF took place in some areas, and anti-ASF became a new normal. Through nearly two years of efforts, the Company has built a pig farming team with professional technologies, veterinary technologies and environmental treatment technologies, as well as good anti-ASF methods. Operationally, pig farming and production, veterinary medicine, breeding, nutrition, cost control and other systems have been basically put in place, leading to a substantial rise in the survival rate of pigs. The Company will continue to build a modern, technology-based and intensive pig farming model. With the continuous construction of independent pig farms, the cost of pig farming of the Company will be better controlled in the future.

(2) The poultry industry chain generated revenue of RMB 1,805 million, representing an increase of 81.27% over the same period last year. The scale of the poultry industry chain is still small at present. During the reporting period, the poultry farming sector was in the doldrums, and the Company's poultry industry chain suffered a slight loss. The Company's poultry industry chain includes poultry farming and meat poultry slaughtering, which are extended businesses on the basis of the principal businesses and are in their early development stage. As the Company gains a better understanding of the market and terminal, the poultry industry chain, feeds and animal healthcare products will support mutually in development, so that the Company can better understand the industry in exploring the development of the industrial chain and more effectively leverage its competitive edges of the industrial chain.

(3) As for the aquaculture business, the Company carried out special aquaculture business during the reporting period, which is still in its early development stage. By leveraging its advantages in special aquatic feeds, seedlings and technical services established for many years, and in-depth research and understanding of the market, the Company will be able to go further in the development of special aquatic industry chain.

3. Trade business

During the reporting period, the Company recorded revenue from raw materials trade of RMB 4,405 million, down 15.28% year on year. During the reporting period, the agro-product prices fluctuated dramatically, with the prices of major feed raw materials such as corn and soybean meal on a continuous rise. The Company gave priority to ensuring its own production demand during the procurement of agro-products, resulting in a decline in raw materials trade.

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 operating income

Unit: RMB

Other 120,941,429.64 0.20% 112,676,656.41 0.24% 7.33%

Note: Sales of agricultural products include sales of seedlings, pigs, poultry and aquatic products.

(2) Industries, products or regions accounting for over 10% of operating income or operating profit of the Company

√ Applicable □ Not applicable

Unit: RMB

prior year Increase/decrease

e of operating

of gross profit

of operating

income as

margin as

costs

Gross profit

compared to the

compared to the

Operating income Operating costs

as compared to

corresponding

corresponding

the

period of the

period of the

corresponding

prior year

period of the

Under the circumstances that the statistics specification for the Company’s principal operations data experienced adjustment in the reporting period, the principal operations data upon adjustment of the statistics specification at the end of the reporting period in the latest year

□ Applicable √ Not applicable

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

√ Yes □ No

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 product

Unit: RMB

By product

Unit: RMB

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

√ Yes □ No

During the year, the scope of consolidation included 389 subsidiaries. For details, please refer to the Note "VII. Interests in Other Entities" in Section XII “Financial Report". The scope of consolidation of the Company in this year increased by 78 and reduced by 6 as compared with the last year. For details, please refer to the Note "VI. Change in Consolidation Scope" in Section XII "Financial Report".

(7) Significant change in or adjustment of the businesses, products or services of the Company during the reporting period

□ Applicable √ Not applicable

(8) Sales to major customers and major suppliers

Sales to major customers of the Company

Information on top 5 customers of the Company

Other explanation of major customers

√ Applicable □ Not applicable

The top five customers of the Company are mainly customers of the trade business. The top five customers have no related relationship with the Company. The Company’s directors, supervisors, senior management, core technical personnel, shareholders holding more than 5% of shares, actual controller and other related parties do not have direct or indirect interest in the major customers. The top five customers accounted for 2.45% of total annual sales. The Company’s sales revenue does not depend on single or top five customers.

Major suppliers of the Company

Information on top 5 suppliers of the Company

Other explanation of major suppliers

√ Applicable □ Not applicable

The top five suppliers of the Company have no related relationship with the Company. The Company’s directors, supervisors, senior management, core technical personnel, shareholders holding more than 5% of shares, actual controller and other related parties do not have direct or indirect interest in the major suppliers. The top five suppliers accounted for 11.96% of total annual purchases. The Company’s purchases do not depend on single or top five suppliers.

3. Expenses

Unit: RMB

4. Research and development investments

√ Applicable □ Not applicable

R&D provides the basis for the survival of the Company while continuous increase in R&D spending serves as the basis for the sustainable development of the Company. During the reporting period, the Company spent RMB491 million on R&D (including R&D expenses and development costs), up by 14.63% year on year. By focusing on breeding/nutrition/health/farming and food, the Company built an industrial leading R&D system for the whole industrial chain. While raising the spending on application technology, the Company focused on strengthening the building of technology platforms for various business modules on the industrial chain and formed a three-level R&D system covering from the research in platform technology and the development of application technology to the application of system solutions. The Company’s R&D team currently comprises more than 2,100 members, including nearly 500 holding PhD and Master’s Degree (The whole Group has a total of 1,084 employees holding PhD Degree and Master’s Degree), providing adequate HR foundation for the improvement of the Company’s R&D system.

During the reporting period, the Company continued to make R&D investment for all the industry chains, and adopted a three-tier R&D system while focusing on strengthening the first- and second-tier R&D platforms, thus ensuring the sustainable output and rapid commercialization of technological achievements. The first-tier R&D platform mainly focuses on basic and forward-looking research on the development prospects of the industry with a view to gathering strengths for the Company's continuous technological innovation, the second-level R&D platform concentrates on addressing common market issues to continuously enhance product competitiveness; the third-level R&D platform aims to help farmers address the problems that they encounter during farming. The basic research has constantly improved the Company's databases with core competitiveness, such as "Animal Nutrition and Feed Formula Database", "Microbial Strain Database", and "Molecular Genetics and Breeding Database". At the same time, the Company has conducted more in-depth, forward-looking research to produce technology reserves for areas with higher added value, such as breeding, vaccines and animal healthcare products, as well as more and more comprehensive varieties, e.g., aquatic products, poultry, and pig diseases in relation to the vaccine field. In addition, in view of the prominent common problems faced by the feed sector in 2020, like full antibiotic ban, accurate nutrition, shortage of raw material resources, mismatch between formula and process/ technology, the Company has done technical research and made breakthroughs in related fields, thus further enhancing the independent innovation capacity and market competitiveness.

In terms of industry-education-research collaboration, the Company has conducted various forms of such collaboration with more than 50 domestic and foreign colleges and research institutes. The collaboration modes include jointly building industry-education-research collaboration bases, academicians’ workstations and key laboratories. The Company actively carried out horizontal projects, took part in government projects, and joined forces to solve key, common, prospective and emergency problems facing the sector. During the reporting period, the Company undertook and was involved in 26 ongoing government projects in total, including eight state-level, eight provincial, seven municipal and three district-level projects. During the reporting period, the Company actively supplied talents to the industry and other enterprises through the "Enterprise Postdoctoral Research Workstation in Panyu Energy-Saving Science & Technology Park". It has recruited and nurtured 41 postdoctoral talents in collaboration with Ocean University of China, Institute of Hydrobiology, Chinese Academy of Sciences, Sun Yat-sen University, among other universities and research institutes.

In 2020, with the implementation of the full antibiotic ban, the Company leveraged its technology reserves built up over years and creatively integrated internal and external resources to make breakthroughs and layouts in feed technology, farming management, environmental control, biological control, and other areas. It addressed piglet diarrhea and chicken coccidiosis that arose after antibiotic ban, ensuring success in the comprehensive promotion of antibiotic-free feeds and market stability. Therefore, the Company won the trust of farmers. The company will continue active actions to pursue green and healthy farming using antibiotic-free feeds and driven by technological innovations, to foster the sustainable development of the farming sector. The Company aims to make breakthroughs in key technologies in the biosynthesis of antibiotic-free feeds, provide systematic solutions for substitutes of feed containing antibiotics, and demonstrate and promote solutions to propel industrial progress and development.

Research and development investments of the Company

Reasons for significant change in total research and development investments as % of operating income

□ Applicable √ Not applicable

Reasons for significant change in capitalization rate of research and development investments and explanations thereon

□ Applicable √ Not applicable

5. Cash flows

Unit: RMB

Explanation on main effects of material changes

√ Applicable □ Not applicable

1. Net cash flows from operating activities decreased by 85.06% as compared to the corresponding period of the prior year mainly due to the increase in expenditures and prepayments with respect to raw materials at the end of the period as a result of the rising prices of raw materials.

2. Net cash flows from investing activities decreased by 104.09% as compared to the corresponding period of the prior year mainly due to the expansion of the Company's scale and the increase in fixed asset investments.

3. Net cash flows from financing activities increased by 369.83% as compared to the corresponding period of the prior year mainly due to the issuance of convertible corporate bonds and the increase in bank loans.

Explanation on main reasons leading to the material difference between net cash flows from operating activities during the reporting period and net profit for the year

√ Applicable □ Not applicable

During the reporting period, the net cash flows from operating activities of the Company amounted to RMB 485.2592 million, which was RMB 2,364.5519 million less than the net profit of RMB 2,849.8111 million. The difference was mainly due to the increase in expenditures and prepayments with respect to raw materials at the end of the period as a result of the rising prices of agricultural commodities.

III. Analysis of Non-Principal Operations

□ Applicable √ Not applicable

IV. Analysis of Assets and Liabilities

1. Material changes of asset items

The Company adopted the new accounting standard governing revenue in 2020 for the first time, and adjusted the relevant financial statement items at the beginning of the year of adoption

Applicable

Unit: RMB

2. Assets and liabilities measured at fair value

√ Applicable □ Not applicable

Unit: RMB

Note: Others include bank’s wealth management products and non-current financial assets measured at fair value.

Contents of other changes

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 66.2911 million, which were mainly land reclamation deposits, letter of credit deposits, deposits for customs duties and loan deposits.

V. Analysis of Investments

1. Overview

√ Applicable □ Not applicable

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 investments

(1) Securities investments

□ Applicable √ Not applicable

The Company did not make any securities investment in the reporting period.

(2) Derivatives investments

√ Applicable □ Not applicable

Unit: RMB’0,000

5. Use of raised funds

√ Applicable □Not applicable

(1) Overall use of raised funds

√ Applicable □Not applicable

Unit: RMB’0,000

Raised

Total raised funds

Year for fund-raising

Method of fund-raising

funds

that

have

Upon the approval of the China Securities Regulatory Commission (hereinafter referred to as "CSRC") through the issuance of the Approval on the Public Offering of Convertible Corporate Bonds by Guangdong Haid Group Co., Limited (《关于核准广东海大集团股份有限公司公开发行可转换公司债券的批复》) (Zheng Jian Xu Ke [2020] No. 205), the Company was allowed to issue convertible corporate bonds with a total face value of RMB 2,830 million to the public. Actually, the Company issued 28.3 million convertible corporate bonds with a face value of RMB 100 each to the public, and raised RMB 2,830 million of funds in total. After deducting the fees related to the issuance, the actual net raised funds was RMB 2,810,854,200. The availability of the above-mentioned raised funds has been verified by Grant Thornton China (Special General Partnership), which issued the Capital Verification Report (《验资报告》) (Grant Thornton Yan Zi [2020] No. 440ZC0065) on 26 March 2020.

On 18 April 2020, the Proposal on Replacing Self-raised Funds That Has Been Invested in Fund-raising Investment Projects with the Raised Funds (《关于以募集资金置换预先已投入募集资金投资项目的自筹资金的议案》) on the Ninth Meeting of the Fifth Board of Directors. The Company replaced the self-raised funds that had been invested with the raised funds of RMB 393,920,200. The interval between this replacement with raised funds and the arrival of raised funds is shorter than six months.

As at the end of 2020, the Company used RMB 925,480,900 of raised funds, accrued RMB 9,986,100 of interest income (with banks' handling fees deducted), temporarily replenished RMB 1,365 million of working capital with idle raised funds, and carried out cash management with an amount of RMB 250 million with idle raised funds. The balance of its special account for raised fund deposit was RMB 280,359,500.

(2) Committed projects of raised funds

√ Applicable □Not applicable

Unit: RMB’0,000

feasibility

(3) Altered projects of raised funds

□ Applicable √ Not applicable

There were no altered projects of raised funds by the Company during the reporting period.

VI. Disposal of Material Assets and Equity Interest

1. Disposal of material assets

□ Applicable √ Not applicable

The 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 applicable

Major subsidiaries and investees accounting for over 10% of the net income of the Company

Unit: RMB’0,000

Acquisition and disposal of subsidiaries during the reporting period

√ Applicable □ Not applicable

Description of major subsidiaries and investees

Guangdong Hinter Biotechnology Group Co., Ltd. is mainly engaged in feed premixture which are mainly sold to other internal branches and subsidiaries of the Company and other feed companies in the industry. The gross profit of the product is higher than that of the Company's compound feed products. During the reporting period, its operating income and profit were good and recorded a net profit of RMB 430 million (including internal and external sales).

VIII. Structured Entities Controlled by the Company

□ Applicable √ Not applicable

IX. Outlook on the Future Development of the Company

(I) Industry development and trend

The period covered by the 14th Five-Year Plan (2021-2025) will be the first five years in which China embarks on a new journey to build the nation into a modern socialist country in all respects. The Opinions of the CPC Central Committee and the State Council on Comprehensively Promoting Rural Revitalization and Accelerating Modernization of Agriculture and Rural Areas (hereinafter the "Opinions on Rural Revitalization") (《关于全面推进乡村振兴加快农业农村现代化的意见》) states that it is necessary to "enhance the ability to supply and guarantee grain and important agro-products" and "expedite the building of a modern farming system". The farming sector will move faster towards standardized, industrialized, large-scale, intelligent and capital-intensive development, and the feed sector will enter a stage of fast integration. Industry giants will enjoy bigger advantages and positions in the international market.

1. Structural development of the feed sector

During the 13th Five-Year Plan period from 2016 to 2020, China's total feed output grew by 21%, and the industry experienced sustained growth. With the industrialized and large-scale development of the farming sector, the feed application rate will rise to continuously drive the growth of total feed output. The continuous rise in per capita disposable income, consumption upgrade, further urbanization and the change of consumption behaviors will push up the demand for high-quality, characteristic and high-end meat products; the consumption of aquatic products, beef and mutton will increase notably; the consumption of poultry and eggs will be stable; pork consumption will decline. As a result, many feed varieties will undergo structural adjustments.

2. The industry integration will continue, and some companies will notably enhance their international competitiveness

The growth of total feed output will slow down, and the competition among companies will be fierce. Due to many factors, such as the epidemics and diseases, heightening awareness of food safety, pressure from self-sufficiency in food, and uncertainties as to international trade, more and more SMEs in the industry will shut down, presenting more opportunities for enterprises with great strengths in capital, management, technologies and talents to integrate the market. Leading enterprises will expand rapidly into emerging markets such as Southeast Asia, Northeast Asia, and Africa, which will significantly enhance their international competitiveness.

3. It is more apprent for technology to drive industry progress

In the differentiation and integrated development of the feed industry, technology has played an increasingly important role in the industrial competition. The global agricultural products are becoming more and more closely related. Weather conditions and uncertainties in international trade relations in certain regions will cause large fluctuations in the prices of agricultural products. Animal nutrition requirements, feed formula adjustments, and raw material substitution technologies are the core fields of feed technology competition. For other technologies, vigorous development of biological feed technology, continuous increase in the types and the continuous expansion of functions of feed microbes, enzyme preparations, etc. have shown tremendous potentials in promoting the replacement of feed antibiotics and efficient utilization of feed resources, and will become new threshold of competition in the industry.

4. Seedlings and animal healthcare industries will rapidly grow in longer periods due to technological advancement and farming upgrades.

The Opinions on Rural Revitalization (《乡村振兴意见》) states that China will "further key scientific and technological projects in agricultural biological breeding" and "intensify efforts to build improved variety breeding & reproduction system to foster the integrated breeding, reproduction and promotion of improved varieties." Focusing on the development of the farming industry, 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. Product demand will grow rapidly. As for aquaculture, with the upgrading of the farming sector and the introduction of national access requirements for aquaculture seedling inspection and quarantine, the seedling sector will undergo industry integration and a reshuffle. The demand for high-quality brand seedlings recognized by the government will grow fast, and the value of aquatic seedlings in the farming chain will become increasingly evident, including production/anti-disease/farming and other production and profit-making processes. As the aquatic varieties and structure are upgraded, the profitability of conventional varieties and their models will move downward. The consumption of famous, special and excellent varieties will stimulate the upgrading of varieties and models. The steady rise in the number of large-scale farming bases and the extension of back-end circulation and processing will cause regional or single-variety industry chain model covering breeding, reproduction, farming and processing to take shape.

5. The farming sector will move faster towards large-scale, industrialized, intelligent and capital-intensive development

Factors such as limited land, food safety, technological advancement and an increase in the proportion of young employees will accelerate the efforts to make the farming sector industrialized, large-scale, intelligent and capita-oriented. For the poultry farming, the large-scale development threshold has been rising. Pig farming is moving fast towards large-scale development in the aftermath of the impact of ASF. The large-scale development level of aquaculture is also improving. Ruminant animal farming is still in its early stage of large-scale operation. The farming sector does not have sufficient funding in general, and listed farming companies with outstanding performance are expanding their business network. Large real estate and technology companies are taking advantage of strengths to enter the farming sector. While bringing capital, manpower, technologies and management techniques to the sector, excellent enterprises will make farming automated, data-driven and intelligent to promote the intelligent and industrialized development of the sector.

6. The development of the industrial chain will be more comprehensive and in-depth

The demand for food green and safety will foster the establishment of food traceability system and agricultural standardization system. Large and excellent enterprises with great strengths in technology, talent and capital will gradually improve the industrial chain layout, have the ability to control all business processes, including seedlings, farming, feeds, animal healthcare products, slaughtering, transportation, and food processing, and further prompt the industrial chain layout of large-scale excellent enterprises to be more efficient and in-depth. In the meanwhile, the increasing awareness of food safety will spur professional exchanges among large-sized enterprises in the production processes of the industry, ensuring that every production process is safe, controllable and traceable, while boosting aggregation of industrial chain operations and accelerating industry integration.

(II) Prospects for the future development of the Company

The Company's development strategy is to become a leading high-tech farming and animal husbandry company with sustainable development capability in China. The Company's development is based on "creating value for customers". Centering around the upstream and downstream sectors of the animal farming business, the Company focuses on links including seedling, animal healthcare, feed, animal farming, slaughtering and food processing. With a complete industrial chain that leads the way in the industry, the Company will provide farmers with comprehensive solutions, including feed, seedling, animal healthcare products and farming technology services, and meet other needs of farmers and distributors for financial services, etc. to effectively enhance the profitability of the farmers and distributors and realize the win-win development of the Company and its customers. Also, the Company intends to promote rural revitalization through its "10 + 100 + 1000 + 10,000 Project" to accomplish the sacred mission of changing rural China.

The basic strategy for the development of the Company's industrial chain is to scale up on the basis of specialization and to extend the industrial chain based on core competitiveness. The Company will focus on feed products 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 in the entire industry chain, and build its comprehensive core competitiveness in the industrial chain.

(III) Possible risks and countermeasures

1. Risk of Periodical Fluctuations in the Feed Industry due to Abnormal Weather and Epidemic Diseases during Animal Production

The feed industry mainly serves the downstream animal feeding industry. The abnormal changes in natural elements such as precipitation and typhoon may lead to fluctuations of the inventory of livestock or aquatic products and even the large-scale outbreak of animal diseases. This thus affects the demand for feed and likely causes the risk of periodic and regional fluctuations of the latter. With the environmental changes and the expansion of animal production industry, animal epidemic diseases may also occur occasionally. For instance, the African swine fever virus broke out across China in August 2018; and PRRSV-mediated pig disease, shrimp-relevant EMS epidemic disease and poultry-relevant “H7N9” disease all occurred recently. The outbreak of animal diseases will directly inhibit the scale of animal production and reduce the demand for feed in the short term; major animal epidemic diseases may dampen the demand from end-consumers, leading to a downturn of the animal production industry, and further affect the feed demand, giving rise to adverse effects on the production and operation of feed enterprises.

Risk management methods: (1) The Company is currently fully deploying factories and developing local markets in major areas in Southern China, Central China, Eastern China and Northern China and overseas markets in Southeast Asia, etc. and the expansion of regional distribution can effectively cope 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, goose feed and other livestock feed and fish feed, shrimp feed and other aquatic feed. With a variety of products and a well-balanced structure, it can effectively mitigate the risk of single breed species and has strong comprehensive risk-relieve capability.

2. Risk of Drastic Price Fluctuations of Major Raw Materials

The feed ingredients mainly consist of various kinds of staple agricultural products such as corn and soybeans (soybean meal). In recent years, the domestic and international markets of agricultural product have been closely linked. Changes in the planting area and harvest of crops in major grain-producing countries, purchasing and storage and subsidy policies, import and export policies, political conflicts between countries, international trade relations, fluctuations in logistics capacity and conditions of shipping, exchange rates, and 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 the strengthening of the internationalization in trade of agricultural products, the factors for changes in the prices of agricultural products have become more complex and the price fluctuations have therefore increased. If the Company fails to understand the changes in the trade of feed raw materials in a timely manner and promptly implement strategic management and risk control of procurement, the Company may face the risk of rising procurement costs.

Risk management methods: (1) The Company divides raw material into different categories and implements a combination of centralized procurement of staple category and local procurement of regional varieties, which not only guarantees the advantages of large-scale raw material procurement, but also obtains localization advantages from rapid response in respect of regional procurement; (2) The Company continuously invests in the construction of the raw material procurement research system. The team of the professional raw material information research department is relatively mature. It conducts strategic procurement through the real-time tracking, research and judgment of the domestic and foreign bulk raw material market trends, and implements position risk management for bulk raw materials through futures hedging, raw materials trade and other tools to effectively control procurement risks; (3) The Company has accumulated extensive experience in research and development of animal nutrition and feed formulation technologies, and has research and development team composed of nearly 2,000 employees. Large amounts of funds are invested on research and development each year, focusing on animal nutrition requirements, feed formulation technology, animal farming and genetic improvement, comprehensive investigation on healthy animal farming strategies, and other research areas. The Company has a profound understanding of animal nutritional requirements and higher level of expertise in comprehensive utilization of raw materials. Therefore, in case of raw material price fluctuations, it can quickly adjust the formula to control the reasonable feed nutrient level and formula costs.

3. Risk of Structural, Regional and Scale Adjustment to Farming Industry under Environmental Protection Regulations and Policies

In recent years, the State has introduced a series of environmental protection laws and regulations including the new Environmental Protection Law (环保法), the Regulations on Prevention and Control of Pollution from Large-Scale Production of Livestock and Poultry (畜禽规模养殖污染防治条例), Action Plan for Prevention and Treatment of Water Pollution (水污染防治行动计划), the Guiding Opinions on Adjusting the Layout of Pig Production in the Southern Water Network Region (关于促进南方水网地区生猪养殖布局调整优化的指导意见), and the antibiotic ban, which stipulate the pollution prevention and control of animal production industry, and especially limit the production scale in the regions of key water sources and its surrounding areas. According to the regulations and policies of the central government, banned areas and restricted areas have been set up throughout the country, and pig farms in the banned areas in the southern water network area are gradually relocating. The implementation of environmental protection policies will speed up the withdrawal of private pig farming farmers, reduce the backward production capacity failing to meet environmental protection standards and with a small scale, and enable large -scale farmers to continuously expand their production capacity and improve the farming scale and structure; In addition, the establishment of banned areas 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 certainly have a profound impact on the existing capacity layout, market share, pricing power and business model of the feed industry. The impact of enforced environmental protection policies on the pig growing and feed industries puts existing competitive companies in the market at risk of reshuffle.

Risk management methods: (1) The Company continually improves its capability to serve farmers. In addition to feed products, the Company is also engaged in the industrial chain of animal healthcare products, vaccines and finance and has a strong tie 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 feed and pelleted fish feed can be shared. The Company can rapidly shift the production layout and make adjustments to adapt to the changes in the industry by adjusting the production capacity in all places. (3) The Company adopts multiple models to speed up the production layout in areas with rich resources and large environmental carrying capacity, and to obtain the market share of new animal farming areas. (4) The Company continues to increase R&D investment, and its research results in key technologies of microbial fermented feed and feed antibiotic substitutes have been effectively applied to foster the advancement and development of the industry.

4. Risk of Exchange Rate Fluctuations

The global procurement of raw materials has become the norm. The scale of overseas investment and overseas operations of the Company is also rapidly expanding. The scale of cross-border fund settlement and the stock of overseas assets have grown substantially, involving the currency types of various related countries. Currency exchange rate fluctuations are subject to different influence factors, and exchange rate fluctuations in any currency may have a certain impact on the settlement cost and asset value of the region.

Risk management methods: (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 settlement currencies, and strives to achieve relatively balanced regional fund inflow and outflow through structural arrangements of financing sources and financing types; (2) The expansion of two-way fluctuations in the RMB exchange rate has become the new normal. The Company further enhances its awareness of foreign exchange risk management, and arranges settlement models based on the procurement and sales strategies and cycle characteristics of import and export operations. And forward foreign exchange settlement and sale, swaps, foreign exchange options and other financial instruments are flexibly used to lock the exchange rate risks, control procurement and sales costs, and control the possible risk resulted from exchange rate fluctuations.

X. Reception of Research Investigations, Communications and Interviews

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

√ Applicable □ Not applicable

Section V. Material Matters

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

Formulation, implementation or adjustment of profit distribution policy for ordinary shares, especially the cash dividend during the reporting period

√ Applicable □ Not applicable

According to the Proposal on 2019 Profit Distribution Plan (《关于2019年度利润分配预案的议案》) as considered and approved at the 2019 Annual General Meeting convened on 11 May 2020, the distribution plan is as follows: Based on "the total number of shares on the date of record when the plan is implemented in the future", a cash dividend of RMB 3.50 (tax inclusive) was to be paid for every 10 shares. On 20 May 2020, dividend distribution was completed.

The Company’s profit distribution policy, dividend distribution policy, dividend standards, and dividend ratios are well-defined and clear. Independent directors have duly performed their duties and functions. Minority shareholders have the opportunity to fully express their views and concern, which is in line with the Articles of Association and the requirements of the consideration procedures. The conditions and procedures for the adjustment or change of the profit distribution policy are compliant and transparent, and the legal rights and interests of small and medium investors are fully protected.

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

1. 2018 annual dividend distribution plan of the Company

Based on the Company’s total share capital of 1,580,870,934 shares, a cash dividend of RMB 3.00 (tax inclusive) per 10 shares was distributed and total cash dividend distributed amounted to RMB 474,261,280.20. The retained earnings were carried forward to the following year.

2. 2019 annual dividend distribution plan of the Company

Based on the Company’s total share capital of 1,580,357,494 shares, a cash dividend of RMB 3.50 (tax inclusive) per 10 shares was distributed and total cash dividend distributed amounted to RMB 553,125,122.90. The retained earnings were carried forward to the following year.

3. 2020 annual dividend distribution plan of the Company

The Company proposed to distribute RMB 3.20 (tax inclusive) per 10 shares based on "the total number of shares exclusive of the repurchased shares (the number of shares eligible for profit distribution) on the date of record 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 2020. The retained earnings 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

Note: According to the 2020 profit distribution plan of the Company as considered and approved at the Seventeenth Meeting of the Fifth Board of Directors: The Company proposed to distribute RMB 3.20 (tax inclusive) per 10 shares based on "the total number of shares exclusive of the repurchased shares (the number of shares eligible for profit distribution) on the date of record 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 2020. The retained earnings will be carried forward to the following year. According to the Company's total share capital of 1,661,210,751 shares as at 17 April 2021, the Company's 2020 annual cash dividend is expected to be RMB 531,587,440.32.

The Company made a profit and had positive retained profit available for ordinary shareholders of parent company during the reporting period without cash dividend for ordinary shares being proposed

□ Applicable √ Not applicable

II. Proposals on Profit Distribution and Capitalization of Capital Reserve during the Reporting Period

√ Applicable □ Not applicable

For profit distribution of companies which are in the growth period 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 Grant Thornton China (Special General Partnership), the Company (parent company) achieved a net profit of RMB 42,550,966.91 and made provision for statutory surplus reserves of RMB 4,255,096.69 (10% of the net profit), without allocation to discretionary revenue reserve in 2020. As at 31 December 2020, the profit available for distribution to shareholders amounted to RMB 2,553,545,708.11.

Based on the good operating conditions and profitability in 2020, as well as the Company's business scale and future growth, the legitimate demands of investors and continuous return to shareholders, the Company formulated the 2020 annual profit distribution plan as follows: The Company proposed to distribute RMB 3.20 (tax inclusive) per 10 shares based on "the total number of shares exclusive of the repurchased shares (the number of shares eligible for profit distribution) on the date of record 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 2020. The retained earnings will be carried forward to the following year.

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 (2019-2021) (《未来三年（2019-2021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 2020 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.

This proposal will be submitted to the 2020 Annual General Meeting for final approval.

III. Performance of Undertakings

1. Undertakings made by parties involved in undertakings including the Company’s actual controller, shareholders, related parties, acquirers and the Company during the reporting period or prior periods but subsisting to the end of the reporting period

√ Applicable □Not applicable

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

√ Applicable □ Not applicable

http://www.cni

nfo.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 undertaking party”), 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 on the net profit (i.e., net profit attributable to shareholders of the parent company, before or after the non-recurring gain or loss, whichever is lower; the case is the same below) to be realized in four full accounting years from 2017 to 2020:

(1) Daxin Group will achieve a net profit of not less than RMB 50 million in 2017, the accumulated net profit of not less than RMB 105 million in 2017 and 2018, the accumulated net profit of not less than RMB 165 million in 2017 to 2019, and the accumulated net profit of not less than RMB 230 million in 2017 to 2020.

(2) If the accumulated net profit for the current year fails to reach the committed amount, the undertaking party shall pay the Company compensation = (accumulated net profit for the current year - actual accumulated net profit of the current year) / total committed amount of RMB 230 million * total transaction amount of RMB 298,776,000 – net compensation paid by the undertaking party to the Company. The accumulated compensation amount is limited to the total transaction price of the underlying assets. If the actual accumulated net profit for any year during the results undertaking period is not less than the accumulated net profit undertaken, the Company 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 the secondary market within 6 months after receipt of the second installment of payment for equity transfer with an amount of RMB 60 million. After Daxin Group’s fulfillment of the annual results goals for 2017 and 2018 or payment of sufficient compensation in case of non-fulfillment of the goals, the undertaking party may release the lock-up for 50% of the above-mentioned shares additionally purchased; After Daxin Group’s fulfillment of the annual 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.

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 Shandong Daxin 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), the 2019 Audit Report of Shandong Daxin Group Co., Ltd. (山东大信集团有限公司2019年度审计报告) (Grant Thornton Shen Zi (2020) No. 440FC0812)， as well as the 2020 Audit Report of Shandong Daxin Group Co., Ltd. (山东大信集团有限公司2020年度审计报告) (Grant Thornton Shen Zi (2021) No. 440C010291) issued by the Guangzhou branch of Grant Thornton China (Special General Partnership), Daxin Group's 2017-2020 audited net profit attributable to shareholders of the parent company was RMB 251.4587 million and the net profit attributable to the shareholders of the parent company after excluding non-recurring gain or loss was RMB 234.6336 million. Therefore, Daxin Group has fulfilled the 2017-2020 earnings undertaking.

According to the aforesaid earnings undertaking, the compensation of RMB 17.8767 million payable by the undertaking party for failing to fulfill the 2017-2019 earnings undertaking was deducted from the fifth installment of payment for equity transfer. As the undertaking party has fulfilled the 2017-2020 earnings undertaking, according to the way of payment of the earnings compensation as agreed upon by the Company and the undertaking party, the aforesaid deducted compensation of RMB 17.8767 million shall be added to the sixth installment of payment for equity transfer.

The completion of performance commitment and its influence on goodwill impairment test

As Daxin Group has fulfilled the earnings undertaking, there was no need to make goodwill impairment reserves at the end of the reporting period for the goodwill formed by the acquisition of Daxin Group.

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

□ Applicable √ Not applicable

There was no appropriation of funds of the Company by the controlling shareholder and its related parties for non-operating purposes during 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 Accounting Methods as Compared to the Financial Report for the Prior Year

√ Applicable □ Not applicable

For the changes in accounting policies and accounting estimates as compared to the financial report for the prior year, please refer to Note III, 38 in Part XII “Financial Report”.

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

□ Applicable √ Not applicable

During 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 to the Financial Report for the Prior Year

√ Applicable □ Not applicable

During the year, the scope of consolidation included 389 subsidiaries. For details, please refer to the Note "VII. Interests in Other Entities" in Section XII “Financial Report". The scope of consolidation of the Company in this year increased by 78 and reduced by 6 as compared with the last year. For details, please refer to the Note "VI. Change in Consolidation Scope" in Section XII "Financial Report".

IX. Engagement or Dismissal of Accounting Firm

Current accounting firm engaged

Whether to appoint another accounting firm during the current period

√ Yes □ No

Particulars on recruitment of accounting firms, financial consultants or sponsors for internal control and auditing purposes

□ Applicable √ Not applicable

X. Delisting Upon Publication of Annual Report

□ Applicable √ Not applicable

XI. Matters Related to Bankruptcy and Reorganisation

□ Applicable √ Not applicable

There was no matter related to bankruptcy and reorganisation during the reporting period.

XII. Material Litigation and Arbitration

□ Applicable √ Not applicable

During the reporting period, the Company was not involved in any material litigation and arbitration.

XIII. Punishment and Rectification

□ Applicable √ Not applicable

There was no punishment and rectification of the Company during the reporting period.

XIV. Credibility of the Company, Its Controlling Shareholder and Actual Controller

□ Applicable √ Not applicable

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

√ Applicable □ Not applicable

(I) 2016 Restricted Share Incentive Plan

1. Decision-making procedures and approval

(1) On 15 February 2017, the Company convened the First Extraordinary General Meeting of 2017 to consider and approve the 2016 Restricted Share Incentive Plan of Guangdong Haid Group Co., Limited (Revised) (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 "2016 Restricted Share Incentive Plan") and the Proposal Regarding Authorisation of the Board of Directors at the General 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 which the Company was approved to issue no more than 46 million restricted shares to awardees by way of private placement of which 41,601,300 shares would be first granted to 1,484 awardees at the grant price of RMB 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 Board of Directors to consider and approve the Proposal on Adjustment to the Number of Interests under the 2016 Restricted Share Incentive Plan of the 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 of awardees of the first grant was changed from 1,484 into 1,373 and the restricted shares not granted yet were adjusted from 41,601,300 shares to 40,283,200 shares. The Proposal on Grant of Restricted Shares to Incentive Targets under the 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限制性股票的议案》) was also considered and approved at the aforesaid meeting, pursuant to which the Company was approved to grant 40,283,200 shares to 1,373 awardees for the first time with 13 March 2017 as the first grant date and the grant price of RMB 7.48 per share. On 20 March 2017, the Company completed the registration of grant of all the above-mentioned restricted shares.

(3) On 8 December 2017, the Company convened the Eleventh Meeting of the Fourth Board of Directors to consider and approve the Proposal Regarding the Grant of Reserved Restricted Shares to Awardees under the 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 reserved restricted shares to 399 awardees with the grant price of RMB 10.44 per share and 8 December 2017 as the grant date. Upon audit and confirmation by the Shenzhen Stock Exchange and Shenzhen Branch of China Securities Depository and Clearing Corporation Limited, the Company completed the registration for grant of reserved restricted shares to 360 awardees. 4,308,000 reserved restricted shares were granted and the listing date of the restricted shares would be 24 January 2018.

2. Implementation during the reporting period

(1) The third unlocking period of the first grant and the second unlocking period of the reserve grant of the 2016 Restricted Share Incentive Plan

On 18 April 2020, the Company convened the Ninth Meeting of the Fifth Board of Directors to consider and approve the Proposal on the Satisfaction of the Unlocking Conditions of the Restricted Share Incentive Plan (《关于股权激励计划符合解锁条件的议案》). The Board was of the view that the unlocking conditions had been satisfied for the third unlocking period of the first grant and for the second unlocking period of the reserve grant under the 2016 Restricted Share Incentive Plan (Revised) (《2016年限制性股票激励计划（修订稿）》) and thus approved the awardees to unlock the relevant shares as prescribed. In the third unlocking period of the first grant, the number of restricted shares available for listing and trading was 10,950,083; and in the second unlocking period of the reserve grant, the number of restricted shares available for listing and trading was 1,130,610.

(2) Repurchase for cancellation for the 2016 Restricted Share Incentive Plan

On 18 April 2020, the Company convened the Ninth Meeting of the Fifth Board of Directors to consider and approve 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》). Due to the resignation, decease caused by illness, etc. of 15 awardees in the first grant of restricted shares and 7 awardees in the reserve grant, the Company was agreed to repurchase and cancel 115,597 restricted shares in the first grant and 52,710 restricted shares in the reserve grant that had been granted to the aforesaid awardees but had not yet reached the unlocking conditions. On 19 June 2019, the Company completed the repurchase for cancellation of the above-mentioned restricted shares. The Proposal Regarding Repurchase of Certain Restricted Shares for Cancellation was then considered and approved at the 2019 Annual General Meeting. On 4 June 2020, the Company convened the Tenth Meeting of the Fifth Board of Directors to consider and 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》). Due to the implementation of the Company’s 2019 annual equity distribution, the Company was approved to adjust the repurchase price of the first granted restricted shares under the 2016 Restricted Share Incentive Plan (Revised) (《2016年限制性股票激励计划（修订稿）》) to RMB 6.28 per share, and adjust the repurchase price of the reserved restricted shares to RMB 9.54 per share. On 19 June 2020, as confirmed by the Shenzhen branch of China Securities Depository and Clearing Corporation Limited, the Company completed the repurchase for cancellation of the above-mentioned restricted shares.

On 26 October 2020, the Company convened the Twelfth Meeting of the Fifth Board of Directors to consider and approve 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》). Due to the resignation, voluntary waiver, unprofessional conduct, damaging the Company’s interests, etc. of 30 awardees in the first grant and 16 awardees in the reserve grant, the Company was approved to repurchase for cancellation the 219,690 restricted shares in the first grant and the 43,360 restricted shares in the reserve grant of the above-mentioned awardees which had been granted but failed to satisfy the unlocking conditions. On 30 December 2020, as confirmed by the Shenzhen branch of China Securities Depository and Clearing Corporation Limited, the Company completed the repurchase for cancellation of the above-mentioned restricted shares.

3. Awardees' exercise of interests during the reporting period and interests accumulatively granted but not yet exercised as at the end of the reporting period

In summary, during the reporting period, due to implementation of the 2016 Restricted Share Incentive Plan (Revised) (2016年限制性股票激励计划（修订稿）), the Company repurchased a total of 431,357 restricted shares for cancellation. As at the end of the reporting period, the Company had granted a total of 12,189,090 restricted shares which had not been unlocked.

(II) Explanations for other circumstances due to the implementation of the 2016 Restricted Share Incentive Plan (2016年限制性股票激励计划) during the reporting period

1. Explanation on changes in share capital caused by implementation of the 2016 Restricted Share Incentive Plan (Revised) (2016年限制性股票激励计划（修订稿）).

During the reporting period, the total shares of the Company decreased by 431,357 shares in total due to repurchase of restricted shares for cancellation.

2. Accounting treatment method for option incentive and effects of equity incentive cost on the results of the Company

According to relevant provisions under the Accounting Standards for Business Enterprises No. 11 - Share-based Payment (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 to the latest available information of 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 the current period in the relevant costs or expenses and capital reserve at fair value of the restricted shares/exercise options on the grant date.

The implementation of the above equity incentive plan will not have a significant impact on the Company's financial position and operating results during the reporting period and in the future.

(III) Employee Stock Ownership Plan for Core Team

1. On 15 February 2017, the Proposal Regarding the Employee Stock Ownership Plan for Core Team of Guangdong 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 of Guangdong 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 and regulations. As such, the Employee Stock Ownership Plan would permanently exist and be launched each year unless determination as determined by the Stock Ownership Plan Management Committee and consideration and approval by the Board and general meeting; and the Company would formulate specific plans under the Employee Stock Ownership Plan. It was agreed to set special funds of RMB12 million as the capital source for the First Plan of the Employee Stock Ownership Plan (hereinafter referred to as the “First Plan of the Stock Ownership Plan”). As at 21 March 2017, under the First Plan of the Stock Ownership Plan, "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 from the secondary market. On 29 December 2017, the vesting of the first vesting period of the above-mentioned purchased shares was completed, with 40% of these shares, i.e. 288,075 shares, being vested. On 28 December 2018, the vesting of the second vesting period of the above-mentioned purchased shares was completed, with 30% of these shares, i.e. 216,056 shares, being vested. On 31 December 2019, the vesting of the third vesting period of the above-mentioned purchased shares was completed, with 30% of these shares, i.e. 216,056 shares, being vested. As of 31 December 2019, the total 720,187 shares under the First Plan of the Stock Ownership Plan had been vested, with the vesting particulars in line with the First Plan of the Stock Ownership Plan. On 31 December 2019, the lockup period for the First Plan of the Stock Ownership Plan expired and the unlocking conditions had been satisfied. Therefore, starting from 31 December 2019, all the 720,187 shares under the First Plan of the Stock Ownership Plan have been allowed for trading.

As of 18 June 2020, shares held under the First Plan of the Stock Ownership Plan had been sold out by way of centralized bidding, marking the completion of the implementation and the early termination of the First Stock Ownership Plan. During the reporting period, no change occurred to the holders of the First Plan of the Stock Ownership Plan and their holdings.

2. On 14 May 2018, the Proposal Regarding the Second Plan of the Employee Stock Ownership Plan for Core Team 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 Stock Ownership Plan”) was approved at the 2017 Annual General Meeting. As such, the Company was approved to implement the Second Plan of the Employee Stock Ownership Plan. A special fund of RMB38,511,460.57 would be established and the related employees would raise no more than RMB50,000,000. As of 11 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 the Second Plan of the Stock Ownership Plan, of which 1,908,436 shares were purchased with the special fund. On 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. On 31 December 2019, the second vesting of the said shares purchased with the special fund was completed, with 30% of these shares, i.e. 572,531 shares, being vested. On 31 December 2020, the third vesting of the said shares purchased with the special fund was completed, with 30% of these shares, i.e. 572,531 shares, being vested. The 2,477,750 shares purchased with the employees’ self-raised capital were vested according to their payment percentage, including a total of 1,585,760 shares to directors and senior management (Ms. Li Tian, Mr. Qi Cheng, Mr. Xueqiao Qian, Mr. Shaolin Yang, Mr. Zhijian Huang, Mr. Guoxiang Liu, Mr. Xiewu Jiang, Mr. Guocheng Mi, and Mr. Zhongzhu Chen) and a total of 891,990 shares to other core employees. As of 31 December 2020, the total 4,386,186 shares under the Second Plan of the Stock Ownership Plan had been vested, with the vesting particulars in line with the Second Plan of the Stock Ownership Plan. On 31 December 2020, the lockup period for the Second Plan of the Stock Ownership Plan expired and the unlocking conditions had been satisfied. Therefore, starting from 31 December 2020, all the 4,386,186 shares under the Second Plan of the Stock Ownership Plan have been allowed for trading.

As of the end of the reporting period, 4,386,186 shares were held under the Second Plan of the Stock Ownership Plan, accounting for 0.264% of the then total share capital. During the reporting period, no change occurred to the holders of the Second Plan of the Stock Ownership Plan and their holdings.

3. On 6 May 2019, the Proposal Regarding the Third Plan of the Employee Stock Ownership Plan for Core Team of Guangdong Haid Group Co., Limited and Its Summary (《广东海大集团股份有限公司核心团队员工持股计划之三期计划》及其摘要的议案》) (hereinafter referred to as the “Third Plan of the Stock Ownership Plan”) was approved at the 2018 Annual General Meeting. As such, the Company was approved to implement the Third Plan of the Employee Stock Ownership Plan. A special fund of RMB30,180,630.23 would be established as the capital source. As of 4 November 2019, the "GF Yuanchi • Haid Core Employee Stock Ownership Plan No. 3 Single Asset Management Program” (广发原驰•海大核心员工持股计划3号单一资产管理计划) purchased 888,500 shares of the Company’s stock from the secondary market for the Third Plan of the Stock Ownership Plan. On 31 December 2019, the vesting of the first vesting period of the above-mentioned purchased shares was completed, with 40% of these shares, i.e. 355,400 shares, being vested. On 31 December 2020, the vesting of the second vesting period of the above-mentioned purchased shares was completed, with 30% of these shares, i.e. 266,559 shares, being vested.

As of the end of the reporting period, 888,500 shares were held under the Third Plan of the Stock Ownership Plan, accounting for 0.053% of the then total share capital. During the reporting period, no change occurred to the holders of the Third Plan of the Stock Ownership Plan and their holdings.

XVI. Significant Related Party Transactions

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

√ Applicable □ Not applicable

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

□ Applicable √ Not applicable

There was no related party transaction of the Company in connection with purchase or sale of assets or equity interest during the reporting period.

3. Related party transactions connected to joint external investment

□ Applicable √ Not applicable

There 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 applicable

There were no related creditors’ rights and debts of the Company during the reporting period.

5. Other significant related party transactions

√ Applicable □ Not applicable

The Proposal on External Investment and Related Party Transactions (《关于对外投资暨关联交易的议案》) was reviewed and approved on the Eleventh Meeting of the Fifth Board of Directors on 25 July 2020 and the First Extraordinary General Meeting of 2020 on 14 August 2020. It was approved that the wholly-owned subsidiary of the Company could transfer 33.47% of the fund share of Guangzhou Hengjuchang Venture Investment Partnership (Limited Partnership) held by Guangzhou Haihao Investment Co., Ltd., the controlling shareholder of the Company, with its own capital of RMB 1,011,100, and assume the remaining capital contribution of RMB 669 million from Guangzhou Haihao Investment Co., Ltd. in the Partnership Agreement of Guangzhou Hengjuchang Venture Investment Partnership (Limited Partnership) (《广州市恒聚昌创业投资合伙企业（有限合伙）之合伙协议》) and all the rights and obligations under the Partnership Agreement. As at 16 April 2021, the transfer of the above-mentioned share has been completed and registered for business change.

XVII. Material Contracts and Implementation

1. Custody, contracting and leasing

(1) Custody

□ Applicable √ Not applicable

There was no custody of the Company during the reporting period.

(2) Contracting

□ Applicable √ Not applicable

There was no contracting of the Company during the reporting period.

(3) Leasing

□ Applicable √ Not applicable

There was no leasing of the Company during the reporting period.

2. Significant guarantees

√ Applicable □ Not applicable

(1) Guarantees

Unit: RMB’0,000

4,957.9

Notes:

1. The guarantee amounts provided by subsidiaries for external parties are calculated according to the equity-holding percentages of the Company in those subsidiaries.

2. The foreign-currency guarantees in the table above are converted at the middle rate of exchange at the end of the reporting period.

(2) External guarantees against the rules and regulations

□ Applicable √ Not applicable

There 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 applicable

Entrusted wealth management during the reporting period

Unit: RMB’0,000

Particulars of high risk wealth management products with individual significant amount or low security, poor liquidity, and non-principal guaranteed

□ Applicable √ Not applicable

Unable to recover the principal of entrusted wealth management or other circumstances that may result in impairment

□ Applicable √ Not applicable

(2) Entrusted loans

√ Applicable □ Not applicable

Overview of entrusted loans during the reporting period

Unit: RMB’0,000

Particulars of high risk wealth entrusted loans with individual significant amount or low security, poor liquidity, and non-principal guaranteed

□ Applicable √ Not applicable

Unable to recover the principal of entrusted loans or other circumstances that may result in impairment

□ Applicable √ Not applicable

4. Material contracts in day-to-day operations

□ Applicable √ Not applicable

5. Other material contracts

□ Applicable √ Not applicable

The Company did not have any other material contract during the reporting period.

XVIII. Fulfillment of Social Responsibility

1. Fulfillment of social responsibility

Please refer to the “Haid Group: Social Responsibility Report 2020” (《海大集团：2020年度社会责任报告》) disclosed by the Company on the media designated for information disclosure.

2. Performance of social responsibility for targeted poverty alleviation

(1) Plan for targeted poverty alleviation

The Company actively responds to the national call for poverty alleviation and rural revitalization, adheres to the corporate mission of "prospering agriculture with science and technology, changing rural China", gives full play to its guidance and radiation role as an industrial leader, implements the industrial poverty alleviation model featuring "five elements of empowerment", and adopts the five major elements, namely industrial chain, service, product, model and technology, to empower underprivileged households. At the same time, the Company makes continuous efforts to targeted poverty alleviation and educational poverty alleviation, and makes contributions to help farmers become rich, activate the rural economy and promote agricultural transformation. In recent years, the Company has planned modern agricultural projects in many national and provincial poverty-stricken counties, helping local farmers get rid of poverty and become rich.

(2) Summary of targeted poverty alleviation in the year

During the reporting period, the Company actively promoted the implementation of poverty alleviation projects. 1. Proactively carrying out poverty alleviation projects through industrial development

The Company gave full play to the advantages of the whole industrial chain and built "seven pillars", including industrial parks, technical service stations, engineers, industrial leaders for rural revitalization, seedlings, think tanks and finance, so as to achieve strong intellectual support.

During the reporting period, the Company donated RMB 10 million on the Guangdong Poverty Alleviation Day as well as the Bijie City Assistance Event to truly help poverty-stricken villages and households develop characteristic local industries, achieve the goal of poverty relief and transform "blood transfusion" into "blood creation". Haid Group fully fulfilled its social responsibilities and contributed positive energy to targeted poverty alleviation.

The Company has successfully helped more than 200 households get rid of poverty and increase their income by adopting the "enterprise + family farm" poultry husbandry and rearing model in nearly 30 villages, including Xialan Village of Shihuipu Town, Babao Village of Shigutang Town and Xilian Village of Xiniu Town in Yingde, Qingyuan.

The Company has set up an aquaculture company in Baidunzi Village, Shawo Town, Jingtai County, Gansu Province, to help local farmers engage in aquaculture on the saline and alkaline land. Four zones, including two aquatic seeding farms, a fishery center and an industrial demonstration area, were established, which have greatly promoted the sustainable development of aquaculture on the saline and alkaline land and provided a new development drive for targeted poverty alleviation and the development of beautiful villages.

During the reporting period, the Company won several national awards and honors for targeted poverty alleviation, such as advanced private enterprise in the National "Ten Thousand Enterprises Helping Ten Thousand Villages" campaign for targeted poverty alleviation, and the annual model enterprise award for targeted poverty alleviation.

Its targeted poverty alleviation cases were selected and incorporated in the Enterprise Examples of China's Poverty Alleviation (《中国扶贫的企业样本》).

2. Actively carrying out charitable projects for educational poverty alleviation

In June 2020, the Ministry of Agriculture and Rural Affairs issued the Notice of the General Office of the Ministry of Agriculture and Rural Affairs on the Cultivation of High-Quality Farmers in 2020 (《农业农村部办公厅关于做好2020年高素质农民培育工作的通知》), which required in-depth implementation of the three-year campaign to improve the quality and efficiency of education and training on farmers. The Company fully responded to the call and cooperated with Nanfang Daily Media Group to jointly launch the "10 + 100 + 1000 + 10,000 Project", a charitable education project for one million new professional farmers. In the future five years, training programs for new professional farmers will be carried out. Particularly, 10 new agricultural industrial parks will be built; 100 strong industrial towns of rural revitalization will be developed; 1,000 technical service stations for rural revitalization will be set up; 10,000 service engineers for rural revitalization will be trained; 10,000 industrial leaders for rural revitalization will be incubated. By doing so, we will ultimately achieve the goal of cultivating one million new professional farmers and stimulating the output value of RMB 100 billion.

Since 2016, the Company has persisted in carrying out public benefit activities themed by "prospering farmers and supporting education" and paid continuous attention to underprivileged children in rural areas. During the reporting period, the Company carried out the "Agriculture Revitalization and Education Assistance" charitable activity at Dangjiu Primary School in Pingjiang Town, Rongjiang County, Guizhou Province, and actively encouraged employees to participate in the "Agriculture Revitalization and Education Assistance" event. More than RMB 20,000 of funds were donated to provide living supplies, and study articles and equipment for underprivileged students. By doing so, the Company insisted on the combination of poverty alleviation, wisdom development and nurture of ambition.

3. Proactively participating in social poverty alleviation activities

During the reporting period, the Company continued to implement the poverty alleviation planning of the national, provincial and municipal governments, and keep an eye on those in need. The Company donated to poverty alleviation funds, helped targeted poor families, and donated to the government’s poverty alleviation programs. It donated money and supplies to poverty-stricken areas in Guangxi Province, Fujian Province, Guizhou, etc., which were used to help alleviate poverty, improve education, improve the living environment, purchase social insurance, etc.

During the reporting period, the Company carried out the "1,000 Pigs to 1,000 Villages" event on its own initiative during the Farmers' Harvest Festival. 1,144 pigs were delivered to 1,144 administrative villages under the jurisdiction of Guangzhou Municipality to support villagers in need, including low-income villagers, extremely-poor households, left-behind elderly persons, elderly persons of no family, children in hardship, and poor and severely disabled persons.

(3) Subsequent targeted poverty alleviation plan

In the future, the Company will continue to actively respond to the call of China, closely combine the national poverty alleviation strategy with its strategic development with policies as the orientation and the industry as the foundation, and further consolidate the achievements of poverty alleviation. The Company will facilitate rural revitalization, transform from "blood transfusion" to "blood creation", gradually improve the endogenous driving force of poverty-stricken areas, continuously enhance the accuracy and sustainability of assistance, consolidate and scale up the achievements of poverty alleviation, 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 authority √ Yes □ No

Construction and operation of pollution prevention and control facilities

During the reporting period, the Company arranged different pollution prevention and control equipment for different processes. Details are presented as follows:

(1) Combustion waste gas treatment: Circumstances permitted, low nitrogen natural gas boilers were arranged; in areas where the natural gas pipeline network could not be arranged, high-quality and qualified fuels were adopted as required; and cloth bag dust collectors and desulfurization and denitrification devices were installed to ensure the waste gas treatment satisfies relevant standards.

(2) Process waste gas treatment: In view of process waste gas treatment, the cyclone + bag filter and other equipment were prepared to treat dusty waste gas; for the process involving relatively large odor, superimposed spraying equipment or biological deodorization equipment were added to further remove dust and odor.

(3) Production wastewater treatment: Since the wastewater was mainly farming wastewater, solid-liquid separation + cover lagoon anaerobic + two-stage AO + Fenton treatment process were adopted for the wastewater treatment process.

2. The Company paid more attention to the harmless treatment of animal husbandry, and the back-end facilities was equipped with fermenters to achieve harmless and resource-based treatment.

3. The pollution prevention and control equipment arranged by the Company was under effective operation. The concentration and total volume of pollutant discharge were within the scope of the discharge permit.

Environmental impact assessment and other environmental protection administrative licensing of construction projects

All the aforementioned feed factories prepared environmental impact reports before project implementation and submitted to the environmental authority for review and approval in accordance with the requirements of environmental laws and regulations. They commenced project construction after obtaining the approval and carried 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 impact assessment in accordance with laws and obtained the pollutant discharge permit.

Emergency plan for emergent environmental incidents

In accordance with the requirements in the Management Measures of Haid Group for Safety and Environmental Protection Emergency Preparation and Response (《海大集团安全环保应急准备和响应管理办法》), the Company has established a top-down organizational structure for emergency response and allocated personnel and resources to enhance the response to risks and events of different degrees, and strengthen the collaboration between various departments. At the same time, all branches and subsidiaries have formulated contingency plans for environmental protection in accordance with the requirements of local environmental protection authorities and have carried out drills under the contingency plans.

Self-monitoring program for environment

The Company has formulated environmental self-monitoring plans in accordance with the requirements of local environmental protection authorities and contacted qualified monitoring units to conduct self-monitoring on a regular basis. Besides, it disclosed relevant information or filed with local environmental protection authorities as required. All self-monitoring activities were in compliance with the requirements of the environmental protection evaluation and emission standards.

Other environmental information that should be disclosed

None

Other information on environmental protection

None

XIX. Other Matters of Significance

□ Applicable √ Not applicable

The 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

Reasons for share changes:

√ Applicable □ Not applicable

1. Based on the shareholdings of the Company’s directors, supervisors and senior management in the Company at the end of last year, their tradable shares were recalculated at the beginning of the current year, resulting in changes in their shares in lockup.

2. Certain restricted shares were repurchased and cancelled under the 2016 Restricted Share Incentive Plan (Revised) (《2016年限制性股票激励计划（修订稿）》).

(1) 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, been dismissed or failed in their individual performance appraisals of 2019, among others, the Company repurchased and cancelled a total of 168,307 restricted shares that had been granted to the said awardees but failed to meet the unlocking conditions. On 19 June 2020, the Company completed the repurchase and cancellation of the said restricted shares. As such, the Company’s total shares decreased by 168,307 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, signed a waiver on the corresponding restricted share incentives, damaged the Company’s interests, among others, the Company repurchased and cancelled a total of 263,050.00 restricted shares that had been granted to the said awardees but failed to meet the unlocking conditions. On 31 December 2020, the Company completed the repurchase and cancellation of the said restricted shares. As such, the Company’s total shares decreased by 263,050.00 shares.

3. Restricted shares were unlocked under the restricted share incentive plan

On 8 May 2020, as the unlocking conditions had been satisfied for the third unlocking period of the first grant and for the second unlocking period of the reserve grant under the 2016 Restricted Share Incentive Plan (Revised) (《2016年限制性股票激励计划（修订稿）》), a total of 12,080,693 restricted shares were unlocked, including 10,950,083 restricted shares in the first grant and 1,130,610 restricted shares in the reserve grant.

4. “Haid Convertible Bonds” were converted to shares.

“Haid Convertible Bonds” were allowed to be converted to shares starting from 25 September 2020. As of 22 December 2020, 81,284,614 new shares were converted from “Haid Convertible Bonds”, increasing the Company’s total shares by 81,284,614 shares.

After all the changes above, the Company’s total shares have changed from 1,580,357,494 shares to 1,661,210,751 shares.

Approval of share changes:

√ Applicable □ Not applicable

1. On 18 April 2020, the Company convened the Ninth Meeting of the Fifth Board of Directors to consider and approve 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》). Due to the resignation, decease caused by illness, etc. of 15 awardees in the first grant of restricted shares and 7 awardees in the reserve grant, the Company was agreed to repurchase and cancel 115,597 restricted shares in the first grant and 52,710 restricted shares in the reserve grant that had been granted to the aforesaid awardees but had not yet reached the unlocking conditions. 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》) was considered and approved at the 2019 Annual General Meeting.

2. On 26 October 2020, the Company convened the Twelfth Meeting of the Fifth Board of Directors to consider and approve 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》). Due to the resignation, voluntary waiver, unprofessional conduct, damaging the Company’s interests, etc. of 30 awardees in the first grant and 16 awardees in the reserve grant, the Company was approved to repurchase for cancellation the 219,690 restricted shares in the first grant and the 43,360 restricted shares in the reserve grant of the above-mentioned awardees which had been granted but failed to satisfy the unlocking conditions. 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》) was considered and approved at the Second Extraordinary General Meeting of 2020.

3. With SZSE's consent in the document "SZS [2020] No. 279", the Company's convertible corporate bonds of RMB 2,830 million have been listed on SZSE for trading since 16 April 2020. The convertible corporate bonds in this offering can be converted to shares in the Company starting from 25 September 2020. And the convertible corporate bonds were officially delisted on 31 December 2020.

Transfer of share ownership:

□ Applicable √ Not applicable

Implementation progress of any share repurchase

√ Applicable □Not applicable

On 26 October 2020, the Proposal on the Plan for Share Repurchase (《关于回购公司股份方案的议案》) was reviewed and approved on the Twelfth Meeting of the Fifth Board of Directors of the Company. It was approved that the Company could repurchase its shares with not less than RMB 300 million and not more than RMB 600 million of its own funds at a maximum repurchase price of RMB 70 per share. The implementation period of the repurchase should not exceed 12 months from the date when the Board of Directors reviewed and approved the plan for share repurchase. On 4 March 2020, the Proposal on Adjusting the Plan for Share Repurchase (《关于调整回购股份方案的议案》) was reviewed and approved on the Sixteenth Meeting of the Fifth Board of Directors. The following adjustment to the share repurchase plan of the Company was approved: The Company could repurchase its shares with not less than RMB 400 million and not more than RMB 800 million of its own funds at a maximum repurchase price of RMB 90 per share. Other terms of the share repurchase plan remained unchanged.

The Company conducted the repurchase through a securities account for repurchase by means of call auction for the first time on 25 November 2020, and released the Announcement on the First Repurchase of the Company's Shares (《关于首次回购公司股份的公告》) on 26 November 2020.

During the reporting period, the Company repurchased 1,438,596 shares by means of call auction, accounting for 0.09% of its total share capital. The highest transaction price was RMB 61.12 per share and the lowest transaction price was RMB 54.63 per share. The total transaction amount was RMB 83,929,094.77 (excluding transaction expenses).

On 6 April 2021, the Proposal on Terminating the Plan for Share Repurchase (《关于终止回购公司股份方案的议案》) was reviewed and approved on the Seventeenth Meeting of the Fifth Board of Directors. From the first share repurchase date on 25 November 2020 to the disclosure date for this announcement, the Company repurchased a total of 11,466,690 shares by means of call auction and transaction, accounting for 0.69% of the total share capital of the Company. The highest transaction price was RMB 76.00 per share and the lowest transaction price was RMB 54.63 per share. The total transaction amount was RMB 791,371,488.37 (excluding transaction expenses), accounting for 197.84% of the lower limit of RMB 400 million and 98.92% of the upper limit of RMB 800 million of the total amount specified in the share repurchase plan. The Company terminated this share repurchase plan.

Implementation progress of any reduction of the repurchased shares through centralized bidding:

□ Applicable √ Not applicable

Effects of share changes on the basic earnings per share, diluted earnings per share, equity per share attributable to the ordinary shareholders of the parent company and other financial indicators of the prior year and the prior period, respectively:

√ Applicable □ Not applicable

See “VI. Major accounting data and financial indicators” in Section II.

Other 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 applicable

Unit: share

II Issuance and Listing of Securities

1. Securities (Exclusive of Preferred Shares) issued in reporting period

√ Applicable □Not applicable

Index to disclosed information Disclo

Issuance date

sure

date

Other derivative securities

Information on the issuance of securities (excluding preferred shares) during the reporting period

Upon the approval of the China Securities Regulatory Commission (hereinafter referred to as "CSRC") through the issuance of the Approval on the Public Offering of Convertible Corporate Bonds by Guangdong Haid Group Co., Limited (《关于核准广东海大集团股份有限公司公开发行可转换公司债券的批复》) (Zheng Jian Xu Ke [2020] No. 205), on 19 March 2020, the Company issued 28.3 million convertible corporate bonds with a face value of RMB 100 each to the public, with a total amount of RMB 2,830 million and a term of six years.

With SZSE's consent in the document "SZS [2020] No. 279", the Company's convertible corporate bonds of RMB 2,830 million have been listed on SZSE for trading since 16 April 2020, with the abbreviation of "Haid Convertible Bonds" and the bond code of "128102".

The closing price of the Company's stock (stock code: 002311.SZ) was not lower than 120% (inclusive) of the current conversion price of "Haid Convertible Bonds" of RMB 34.74/share (i.e. RMB 41.69/share) for at least fifteen trading days out of thirty consecutive trading days from 25 September 2020 to 13 November 2020, which had triggered the conditional redemption terms stipulated in the Prospectus for the Public Offering of Convertible Corporate Bonds of Guangdong Haid Group Co., Limited (《广东海大集团股份有限公司公开发行可转换公司债券募集说明书》) (hereinafter referred to as the "Prospectus"). On 16 November 2020, the Proposal on Early Redemption of "Haid Convertible Bonds" (《关于提前赎回“海大转债”的议案》) was reviewed and approved on the Thirteenth Meeting of the Fifth Board of Directors and the Eleventh Meeting of the Fifth Supervisory Committee of the Company. The Company decided to exercise the conditional redemption right for "Haid Convertible Bonds" and redeem all the "Haid Convertible Bonds" that had not been converted to shares at the price of the face value of the bonds plus the accrued interest for the current period.

On 23 December 2020, the redemption date of "Haid Convertible Bonds", the trading and conversion of "Haid Convertible Bonds" into shares were terminated. The Company has fully redeemed the "Haid Convertible Bonds" registered with China Securities Depository and Clearing Corporation Limited Shenzhen Branch as at the closing time of the redemption registration date (22 December 2020). On 31 December 2020, "Haid Convertible Bonds" issued by the Company were officially delisted from the Shenzhen Stock Exchange.

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

√ Applicable □Not applicable

(1) Conversion of convertible corporate bonds into shares

In accordance with the relevant laws and regulations as well as stipulations in the Prospectus (《募集说明书》), the conversion period of "Haid Convertible Bonds" is from the first trading day (25 September 2020) after six months from the final issuance date of convertible bonds (25 March 2020) to the maturity date of convertible bonds (18 March 2026, or postpone the date in case of a holiday). From 25 September 2020 to the redemption date of "Haid Convertible Bonds" (23 December 2020), the face value of "Haid Convertible Bonds" reduced by RMB 2,823,906,100 due to conversion, and the bonds were converted into 81,284,614 shares accumulatively. After the conversion, the total share capital of the Company increased by 81,284,614 shares

(2) Implementation of equity incentive plan

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, deceased due to illness, among others, the Company repurchased and cancelled a total of 168,307 restricted shares that had been granted to the said awardees but failed to meet the unlocking conditions. On 21 April 2020, the Company disclosed the Announcement 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. 2020-028) and publicized the capital decrease matter for 45 days. As of 8 June 2020, the Company had paid a total of RMB 1,228,802.56 for share repurchases, thus reducing the share capital by RMB 168,307.00 and the capital reserve by RMB 1,060,495.56. The said matter was verified by Grant Thornton China (Special General Partnership), which issued the Capital Verification Report ZTYZ (2020) No. 440ZC00167 (致同验字(2020)第440ZC00167号《验资报告》). On 19 June 2020, 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 168,307 shares.

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, voluntarily signed a waiver on the corresponding restricted share incentives, committed unprofessional conduct, damaged the Company’s interests, among others, the Company repurchased and cancelled a total of 263,050 restricted shares that had been granted to the said awardees but failed to meet the unlocking conditions. On 27 October 2020, the Company disclosed the Announcement 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. 2020-095) and publicized the capital decrease matter for 45 days. As of 11 December 2020, the Company had paid a total of RMB 1,793,307.60 for share repurchases, thus reducing the share capital by RMB 263,050.00 and the capital reserve by RMB 1,530,257.60. The said matter was verified by Grant Thornton China (Special General Partnership), which issued the Capital Verification Report ZTYZ (2020) No. 440C001012 (致同验字（2020）第440C001012号《验资报告》). On 30 December 2020, 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 263,050 shares.

The above changes in the Company’s total shares did not result in the change of the Company’s actual controller.

3. Existing Staff-Held Shares

□ Applicable √ Not applicable

III Shareholders and Actual Controller

1. Shareholders and Their Shareholdings at Period-End

Unit: share

0 8) 0

prior to

rights at period-end (if any) (see note 8)

prior to

disclosure of

disclosure of

this Report (if

this Report

any) (see note

Indicate by tick mark whether any of the top 10 ordinary shareholders or the top 10 non-restricted ordinary shareholders of the Company conducted any promissory repo during the Reporting Period.

□ Yea √ No

No such cases in the Reporting Period.

2. Controlling Shareholder

Nature of controlling shareholder: Controlled by a natural person

Type of controlling shareholder: Juridical person

Change of the controlling shareholder during the Reporting Period:

□ Applicable √ Not applicable

No such cases in the Reporting Period.

3. Actual Controller

Nature of actual controller: Domestic natural person

Type of actual controller: Natural person

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 Other Commitment Makers under Restricted Sales Condition

□ Applicable √ Not applicable

Section VII. Preferred Shares

□ Applicable √ Not applicable

No preferred shares in the Reporting Period.

Section VIII. Convertible Corporate Bonds

√ Applicable □ Not applicable

I Previous Price Adjustments for Conversion of Bonds into Shares

On 19 March 2020, the Company issued convertible corporate bonds with a total face value of RMB 2,830 million (bond code: 128102, bond abbreviation: "Haid Convertible Bonds") to the public. The initial conversion price was RMB 35.09 per share.

On 19 May 2020, the Company carried out the 2019 annual equity distribution and distributed cash dividends of RMB 3.50 (including tax) for every 10 shares. Meanwhile, the conversion price of the Company's convertible bonds was adjusted from RMB 35.09 per share to RMB 34.74 per share, with the adjusted conversion price coming into force from 20 May 2020.

II Cumulative Conversion of Bonds into Shares

√ Applicable □ Not applicable

III Information on Top Ten Convertible Bond Holders

On 31 December 2020, "Haid Convertible Bonds" were officially delisted from the Shenzhen Stock Exchange. There was no convertible bond holder.

IV Significant Changes in Profitability, Assets and Credit Standing of Guarantors

□ Applicable √ Not applicable

V The Company's Liabilities as at the End of the Reporting Period, Credit Standing Changes and Cash Arrangements for Debt Repayment For the Coming Year

1. Shanghai Brilliance Credit Rating & Investors Service Co., Ltd. issued the Follow-up Rating Report on Convertible Corporate Bonds Publicly Issued by Guangdong Haid Group Co., Limited (《广东海大集团股份有限公司公开发行可转换公司债券跟踪评级报告》) on June 18, 2020. The Company's corporate credit rating was AA+, with a "Stable" outlook. The credit rating of Haid Convertible Bonds was AA+. These follow-up rating results remain same as the results of the previous rating. For details of the above follow-up credit rating report, please refer to www.cninfo.com.cn.

The closing price of the Company's stock was not lower than 120% (inclusive) of the current conversion price of "Haid Convertible Bonds" of RMB 34.74/share (i.e. RMB 41.69/share) for at least fifteen trading days out of thirty consecutive trading days from 25 September 2020 to 13 November 2020, which had triggered the conditional redemption terms stipulated in the Prospectus for the Public Offering of Convertible Corporate Bonds of Guangdong Haid Group Co., Limited (《广东海大集团股份有限公司公开发行可转换公司债券募集说明书》). On 16 November 2020, the Proposal on Early Redemption of "Haid Convertible Bonds" (《关于提前赎回“海大转债”的议案》) was reviewed and approved on the Thirteenth Meeting of the Fifth Board of Directors and the Eleventh Meeting of the Fifth Supervisory Committee of the Company. The Company decided to exercise the conditional redemption right for "Haid Convertible Bonds" and redeem all the "Haid Convertible Bonds" that had not been converted to shares at the price of the face value of the bonds plus the accrued interest for the current period (RMB 100.15 per piece). On 23 December 2020, the Company fully redeemed 60,939 pieces of "Haid Convertible Bonds" that had not been converted into shares. On 31 December 2020, "Haid Convertible Bonds" were officially delisted from the Shenzhen Stock Exchange.

Section IX. Directors, Supervisors, Senior Management and Staff

I Change in Shareholdings of Directors, Supervisors and Senior Management

Notes:

1. Based on the shareholdings of the Company’s directors, supervisors and senior management in the Company at the end of last year, their tradable shares were recalculated at the beginning of the current year, resulting in changes in their shares in lockup.

2. Ms. Jing Wang and Ms. Jia Chen had resigned before their tenures expired on 16 November 2020, and Mr. Hua Wang and Ms. Yongfang Mu have been appointed as the new supervisors.

3. The opening shareholding of Supervisor Ms. Yongfang Mu is based on her shareholding when she was appointed as the Supervisor.

4. Director Ms. Li Tian has resigned before her tenure expired on 18 January 2021.

5. Mr. Xueqiao Qian was appointed as a Director on 3 February 2021.

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 is an engineer. He graduated from College of Fisheries of Huazhong Agricultural University in 1992 with a major in special aquaculture; in 1995, he obtained the master’s degree in zoology from School of Life Sciences of Sun Yat-Sen University. As one of the founders of the Company, he now serves as the Chairman of the Board and President (General Manager) of the Company, as well as an Executive Director of the Company’s controlling shareholder Guangzhou Haihao Investment Co., Ltd. He was/is the Executive Vice President of China Feed Industry Association (CFIA), Chairman of China Vocational Education Group of Modern Fishery, Vice Chairman of China Association of Young Rural Entrepreneurial Leaders (CAYREL), Chairman of Guangdong Hi-tech Enterprise Association (GDHTEA), Vice Chairman of Guangdong Agricultural Science and Technology Innovation Alliance, Vice President of Guangdong Feed Industry Association, Vice Chairman of Guangdong Antibiotic-Free Feed Industry Alliance, Vice President of Guangdong Fisheries Association, Vice Chairman of Guangdong Association of Young Scientists (GDAYS), Executive Vice Chairman of Guangdong Shaanxi Chamber of Commerce, the NPC Member of the 14th National Congress of the Communist Party of Guangzhou, 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, President of Guangzhou Association of Agricultural Leading Enterprises, and Honorary Chairman of Guangzhou Feed Profession Association (GZFPA). Meanwhile, he is recognized as “Leading Entrepreneur in China’s Feed Industry” by the Ministry of Agriculture, and “Top 30 Excellent Entrepreneurs in China” by China Feed Industry Association (CFIA). Mr. Hua Xue holds 39.75% equity interests in the Company's controlling shareholder Guangzhou Haihao Investment Co., Ltd. and is the actual controller of the Company.

(2) Li Tian

Ms. Li Tian is a Chinese Certified Public Accountant and Certified Tax Accountant. 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. From 1993 to 1996, she was engaged in financial work at Guangdong Reclamation Yanling Building Co., Ltd.. From 1996 to 2001, she worked for Guangzhou Lingnan Certified Public Accountants and Guangdong Kangyuan Certified Public Accountants in succession. In January 2004, she joined the Company and successively served as Chief Financial Officer, Board Secretary, Vice General Manager and Director. She resigned before her tenure expired on 18 January 2021.

(3) Yingzhuo Xu

Mr. Yingzhuo Xu is one of the founders of the Company, and he now serves as the Company’s Vice Chairman of the Board. He holds a bachelor’s degree and is a livestock specialist. He also holds a master’s degree in business administration from HEC Paris. From 1991 to 1997, he worked for Guangdong Academy of Agricultural Sciences in technology research and promotion with respect to feed for the animal husbandry industry. He served as a Vice President and Director of the Company starting from 1998 before being a Vice Chairman of the Board of the Company. Mr. Yingzhuo Xu holds 27% equity interests in Guangzhou Haihao Investment Co., Ltd., the Company's controlling shareholder.

(4) Qi Cheng

Mr. Qi Cheng graduated from the major of Automation of Huazhong University of Science and Technology in 2002; studied the major of World Economy in Sun Yat-sen University from 2005 to 2008 and obtained the Master’s degree; studied EMBA in CEIBS from 2013 to 2015 and obtained MBA. From 2002 to 2010, he served as Process Engineer, Operation Manager, Supply Chain Manager and Director of Technology in Guangzhou Procter & Gamble Co., Ltd.; from 2010 to 2017, he served as Operation Director of East Asia-Pacific Region and Global Supply Chain Director in Essel Propack Co., Ltd.. Joining the Company in March 2017, he currently serves as a Director, an Executive Vice President (Vice General Manager) and the General Manager of the South China Region of the Company.

(5) Jianfang Gui

Dr. Jianfang Gui has obtained PhD and is a doctoral supervisor, academician of the Chinese Academy of Sciences and of The World Academy of Sciences. He graduated from the major of Cytobiology of Wuhan University and obtained the Bachelor’s degree in January 1982; obtained the Master’s degree in Genetics from Wuhan University in December 1984 and joined in Institute of Hydrobiology, Chinese Academy of Sciences in the same year and has since worked there. In 1995, he obtained the Doctor’s degree of science from Institute of Hydrobiology, Chinese Academy of Sciences. From 1991 to 1994, he paid work visits and conducted postdoctoral research in Medical College of Ohio and US San Diego. From 1995, he served as Researcher and Doctoral Supervisor in Institute of Hydrobiology, Chinese Academy of Sciences. He served as Executive Deputy Director and Director of Hydrobiology from 1999 to 2007, Director of State Key Laboratory of Freshwater Ecology and Biotechnology from 2001 to 2011, and Independent Director of the 1st and 2nd sessions of the Board of the Company from 2007 to 2013. Currently he serves as a research fellow of the Institute of Hydrabiology, Chinese Academy of Sciences, a Vice President of China Society of Fisheries, and an Independent Director of the Company.

(6) Jianguo He

Dr. Jianguo He has obtained PhD and is a professor, winner of “The National Science Fund for Distinguished Young Scholars” and Chief Scientist of the State Shrimp and Crab Industry Technology System. He graduated from the major of Zoology of Sun Yat-sen University and obtained the Doctor’s degree of science in 1990. He has been working in Sun Yat-sen University since 1991. He served as Deputy Director of College of Life Sciences, Sun Yat-sen University from 2000 to 2008, and Director of College of Marine Science, Sun Yat-sen University from 2008 to 2018. His current positions include Professor of Sun Yat-sen University, Director of State Key Laboratory of Pest Control and Resource Utilization, Member of Fisheries Advisory Committee of MARA, Deputy Director of Aquacultural Disease Control Expert Commission of MARA, President of Guangdong Zoological Society, Vice President of Chinese Crustacean Society, Head of China-ASEAN Center for Joint Research and Promotion of Marine Aquaculture Technology and Independent Director of the Company.

(7) Yunguo Liu

Dr. Yunguo Liu has obtained the Doctor’s degree in management (accounting) from Xiamen University. His current positions and titles include Professor of Accounting and Doctoral Supervisor in Sun Yat-sen Business School (SYSBS), Director of Sun Yat-sen University Cost and Management Accounting Research Center, Director of School of Accountancy in Xinhua College of Sun Yat-sen University (a private college), Member of Management Accounting Professional Committee of Chinese Accounting Society, Executive Director of Cost Research Society of China, a management, accounting and consultancy expert of the Ministry of Finance, Leading Talent in Accountancy (Phase I) under the Ministry of Finance, Third Batch of Shortlisted Candidates for Special Support Program of the Development of State Leading Talents in Accountancy under the Ministry of Finance, Shortlisted Candidate (2019) for the Development of Accounting Celebrities under the Ministry of Finance, Member of CGMA North Asian 100 Think Tank Leaders, and Member of IMA China Academic Consultation Commission. He is currently Independent Director of the Company, Shenzhen Heungkong Holding Co., Ltd. (600162.SH), Guangdong Daya Smart Kitchen Appliances Co., Ltd. (837009.OC) and Changwei Information Technology Development Co., Ltd..

2. Supervisors

(1) Zhenxiong Qi

Dr. Zhenxiong Qi is a doctoral degree holder and senior engineer. He successively participated in a key program of National Natural Science Foundation of China, the National Key Technologies R & D Program of China during the 8th Five-Year Plan Period, National Climb—B Plan, and programs of the Shandong and Guangdong Provincial Natural Science Funds. Meanwhile, he has also published many research papers, applied for multiple invention patents and been granted a State Technological Invention Award (Second Prize). Since he joined the Company, he has been mainly engaged in researches on animal nutrition and feed, aquatic farming and disease control. He has years of experience in product development, grass-root farming and technology promotion. He is now the Chairman of the Company’s Supervisory Committee. Mr. Zhenxiong Qi holds 0.1% equity interests in the Company’s controlling shareholder Guangzhou Haihao Investment Co., Ltd..

(2) Hua Wang

Mr. Hua Wang, Chinese Han nationality, is a member of the CPC, an economist and a political mentor. Hua Wang majored in politics and administration and graduated from Southwest Jiaotong University in 2009. He obtained a professional master's degree in political theory from Wuhan University in 2011. Hua Wang worked for China Tunnel Construction Co. Ltd. Guangdong from July 2011 to March 2017, and worked for Guangdong Cinda Real Estate Co., Ltd. from June 2017 to March 2019. He joined Guangdong Haid Group Co., Limited in April 2019, and currently serves as the Senior Manager of the Group's Secretary Office.

(3) Yongfang Mu

Ms. Yongfang Mu, Chinese Han nationality, is an intermediate accountant. Yongfang Mu graduated from Henan University of Economics and Law in June 2012, majoring in accounting. She joined Guangdong Haid Group Co., Limited in July 2012 and has held positions related to cost accounting, budget management and financial management for the Company. She currently serves as Financial Director of the Company.

3. Senior Management

(1) Guoxiang Liu

Mr. Guoxiang Liu is an assistant research fellow. He graduated from the Aquaculture Department of Huazhong Agricultural University in 1992, majoring in special aquaculture professionalism. He is now a Vice President (Vice General Manager) and the Central China General Manager of the Company, in addition to being the Vice Chairman of Hubei Province Feed Industry Association. Mr. Guoxiang Liu holds 1.5% equity interests in the Company’s controlling shareholder Guangzhou Haihao Investment Co., Ltd..

(2) Xueqiao Qian

Dr. Xueqiao Qian, Chinese Han nationality, is an Associate Professor and has obtained the doctorate degree from the Institute of Hydrobiology, Chinese Academy of Science. He successively presided over or participated in the Hubei Provincial Natural Science Fund Project -- Development and Utilization of Feather Proteins in Fishery Feeds, the development projects of the State Key Laboratory of Freshwater Ecology and Biotechnology -- Effects of Nutrition Levels and Nutritional History on Fish’s Growth and Activities, Research on the Feeding Behavior and Chemical Sensation of Allogynogenetic Crucian Carp, and Studies on the Utilization of Plant Protein by Main Cultured Freshwater Fish, the NSFC Project -- Studies on the Comparative Nutritional Energetics 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 20 papers, of which, three papers were published in international publications and included in SCI. He joined the Company in 2004 and is mainly engaged in the aquatic animal nutrition and feed research and the development of new feed additives. Now, he is a Vice President (Vice General Manager) and the Chief Engineer of the Company.

(3) Shaolin Yang

Mr. Shaolin Yang has obtained the master’s degree. Graduated from Sun Yat-sen University with a major in Business Administration, he is also a senior accountant, certified public accountant, and certified tax accountant, and has been selected and listed into the expert database of the high-tech enterprises of Department of Science and Technology of Guangdong Province. From December 2008 to April 2012, he served 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 Management Accountants (GAMA) and an off-campus tutor for master candidates in accounting of Sun Yat-sen Business School. In April 2012, he joined the Company and is currently the Company’s Vice President (Vice General Manager) and CFO.

(4) Xiewu Jiang

Mr. Xiewu Jiang is an aquacultural engineer. He graduated from the major of Special Aquaculture of College of Fisheries, Huazhong Agricultural University in 1992. Subsequently, he studied in the postgraduate program of Aquatic Animal Nutrition of Sun Yat-sen University and EMBA of South China University of Technology. Currently, he serves as Vice President (Deputy General Manager) of the Company and General Manager of Aquacultural Breeding/Premix BU. His other positions include Director of Guangdong Feed Industry Association, Vice President of Guangdong Marine Fishery Association, Director of Guangzhou Municipal Agricultural Leading Enterprises Association and Vice President of Zhanjiang Shrimp Breed Society. Mr. Xiewu Jiang holds 4.5% equity interests in the Company’s controlling shareholder Guangzhou Haihao Investment Co., Ltd..

(5) Guocheng Mi

Mr. Guocheng Mi graduated from the major of Freshwater Fishery of Southwest Agricultural University. He joined in the Company in 2010 and currently serves as a Vice President (Vice General Manager) and the General Manager of the Pig Farming BU of the Company.

(6) Zhongzhu Chen

Mr. Zhongzhu holds an MBA degree for senior management personnel from Xiamen University. He joined in the Company in 2004 and currently serves as a Vice President (Vice General Manager) and the General Manager of the Shrimp Feed BU of the Company.

(7) Mingzhong Chen

Mr. Mingzhong Chen graduated from MBA of Hong Kong Baptist University. His past titles include Deputy to Zhuhai Municipal People’s Congress and Member of Shaowu Municipal CPPCC and current social titles include Vice President of Guangzhou Municipal Agricultural Leading Enterprises Association, Vice President of the Standing Committee of Panyu District Federation of Industry and Commerce of Guangzhou, Vice President of the three federations of Guangzhou (including Guangzhou Industrial Economy Federation) and Executive Vice President of Nancun General Chamber of Commerce of Panyu District, Guangzhou. He has won a number of honors and titles, such as “Excellent Entrepreneur for Caring for Employees in Panyu District, Guangzhou”. He joined in the Company in 2004 and served as the head for project investment and preparations and Director of Purchase. He currently serves as a Vice President (Vice General Manager) of the Company and is responsible for public relations, brand image and promotion of the Company.

(4) Zhijian Huang

Mr. Zhijian Huang is an accountant and a bachelor’s degree holder. He joined the Company in 2004 and is now a Vice President (Vice General Manager) and the Board Secretary of the Company.

Posts concurrently held in shareholding entities:

√ Applicable □ Not applicable

Posts held concurrently in other entities:

√ Applicable □ Not applicable

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

□ Applicable √ Not applicable

IV Remuneration of Directors, Supervisors and Senior Management

Decision-making procedure, determination basis and actual payments of remuneration for directors, supervisors and senior management:

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

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

Unit: RMB’0,000

Notes:

1. As Hua Wang and Yongfang Mu were elected as supervisors of the Fifth Supervisory Committee at the Second Extraordinary General Meeting of 2020 and the Tenth Meeting of the Fifth Supervisory Committee, the remuneration data of theirs in the table above are for the period from November 2020 to December 2020. Jing Wang and Jia Chen quit as members of the Fifth Supervisory Committee before their tenures expired in November 2020. Therefore, the remuneration data of theirs are for the period from January 2020 to October 2020.

2. The remuneration data of others are for the whole year of 2020.

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

□ Applicable √ Not applicable

V Employees

1. Numbers, Functions and Educational Backgrounds of Employees

2. Employee Remuneration Policy

While strictly abiding by the Labor Law (《劳动法》), the Labor Contract Law (《劳动合同法》) and other national and local related laws, regulations, department rules and regulatory documents, the Company implements the following principles according to the characteristics of the industry and the Company’s operations: persist in the principle of labor-based distribution combining duties, power and interests; implement the principle of linking income levels with the Company’s performance and work goals; implement the principle of integrating individual remuneration with the Company’s long-term interests to ensure sustained and sound growth in main business, prevent short-term behaviors and promote the Company’s sustained operations and development; stick to the principle of linking remuneration with performance appraisal with equal emphasis on incentive and restraint; give comprehensive consideration to market changes and market remuneration levels. The Company has established a reasonable post and remuneration system to provide employees with competitive salaries in the industry, link performance with remuneration, align employees’ and the Company’s interests, enhance staff awareness for team work and give full play to every employee’s enthusiasm and creativity.

3. Employee Training Plans

The Company always emphasizes the development of human resources and talents with a firm belief that staff development is an important power and resource for the Company’s continuous development. The Company has established an extensive talent cultivation system covering new employees, key personnel, managers, assistant general managers/vice general managers and the general manager, possesses an excellent course development system and a systematic internal trainer development system and carries out broad-based and precise talent development through famous trainer courses, outdoor training, behavior learning, coach tutoring, online broadcasting, online learning and other channels. The Company has also established a self-inspection mechanism covering “talent development mechanism, talent development platform operation and plan implementation, talent assessment and talent management self-inspection reports”.

Haid College, the Company’s functional department for talent development, carries out elite training and inclusive education based on the Group’s strategies and business practice, so as to solve key problems for the organization development. While actively creating opportunities for employees to improve their abilities and qualities, Haid College actively responds to the national rural revitalization strategy. It has established the Haid Rural Revitalization Education Institute and the Rural Revitalization Industrial Center to facilitate the training of one million new professional farmers. With the Group's rapid development in 2020, cadre training has been fully commenced, and resource platforms gradually came into being. As a result, a strong learning atmosphere has been gradually formed in the organization. The talent training program for middle-level and grassroots management cadres, which is a combination of online and offline activities, was launched by Haid College in cooperation with regional/business divisions. Haid College provides courses, operational plans, evaluation standards and supporting guidance, while regional/business divisions are in charge of specific implementation. Transformation of learning results is completed through annual key tasks. The team coaching capability of managers is developed through tutorial guidance. Online and offline course learning and transformation are guided by Drucker's thoughts and theories in the Eight Essential Management Skills (《八项基本管理技能》) and the Executives and Organizations (《经理人与组织》). Employees' abilities are improved through actual work tasks. Rapid mass empowerment is conducted to satisfy the Group's need of cadre training. Relevant tasks have been orderly advanced at each center and regional/business division. In order to provide development paths in personal capability enhancement and job training for the Group's employees, the study roadmaps of 27 positions in 11 professional lines at 71 levels have been completed, covering lines such as quality control, production, human resources and procurement. The Second Talent Development Annual Conference provided solid support for the development of an organizational atmosphere for talent training and the operation of the talent training system. The constant overseas talent training has laid a foundation for the learning journey without boundaries.

Haid College continues to explore new models of talent development. To make its training more targeted and diverse, the College has made full use of network, video and other forms and developed its own online learning platform Haiwei (《海味》). The objectives of the platform include enhancing organizational learning abilities, improving the overall work competence of employees, and effectively communicating organizational experience. As of the end of 2020, the platform had covered all major specialty lines, including QC, finance, HR, plant and purchase, with administrators of functional centers, regions/business units, branches and subsidiaries organizing their employees to study online, and administrators of specialty lines organizing their employees to enhance their specialty skills. The online platform Haiwei has fully covered the Group's staff, with an annual online rate of 71.71%, a total annual online time of 626,896.82 hours, a total learning time of 326,183.49 hours, a per capita online time of 33.81 hours for online trainees, and a per capita learning time of 17.6 hours for online trainees. 2,343 high-quality courses have been introduced; 1,694 professional courses have been internally studied. Online classes on crayfish farming technology, aquatic new service engineers and shrimp farming for aquatic jobs are offered. Besides, online classes on general skills, such as etiquette, Cantonese teaching, mind mapping, PPT mastery, PPT presentation, Internet marketing, creative copywriting, copywriting skills, EXCEL, emotion management, workplace influence and 365-day training mastery, are available. More than 4,000 people have been covered. By combining the introduction of select external courses and the continuous development of internal courses and integrating on-site and online training, the College makes learning more efficiently, enables staff to improve their work skills and comprehensive competence, and achieves win-win results including both improvement to individual professional abilities and sustainable development of the Company.

4. Labor Outsourcing

□ Applicable √ Not applicable

Section X. Corporate Governance

I Overview

1. The Establishment of the Company System

From the Company’s listing to the end of the reporting period, the Company has formulated and strictly implemented various systems, including the Articles of Association (《公司章程》), the Rules of Procedure of the General Meeting (《股东大会议事规则》), the Rules of Procedure of the Board of Directors (《董事会议事规则》), the Working System of the Special Committee of the Board of Directors (《董事会专门委员会工作制度》), the Rules of Procedure of the Supervisory Committee (《监事会议事规则》), the Independent Director System (《独立董事制度》), the Working Rules of General Manager (《总经理工作细则》), the Code of Conduct of Directors, the Supervisors and Senior Management (《董监高行为守则》), the Working System of the Board Secretary (《董事会秘书工作制度》), the Related Party and Related Party Transaction Management System (《关联方和关联交易管理制度》), the Special Reserve and Use Management System of Raised Funds (《募集资金专项存储及使用管理制度》), the Management Policy for Shares held by Directors, Supervisors and Senior Management in the Company and Related Changes (《董监高所持本公司股份及其变动管理办法》), the Management Measures for the External Provision of Financial Assistance (《对外提供财务资助管理办法》), the Controlled Subsidiary Management System (《控股子公司管理制度》), the Management System for Information Insider Registration (《内幕信息知情人登记管理制度》), the Accountability System for Major Errors in Information Disclosure in Annual Reports (《年报信息披露重大差错责任追究制度》), the Futures Management System (《期货管理制度》), the Working Rules for Annual Reports by the Audit Committee (《审计委员会年报工作规程》), the Investment Decision-Making Management System (《投资决策管理制度》), the Investor Relations Management System (《投资者关系管理制度》), the External Information User Management System (《外部信息使用人管理制度》), the Information Disclosure System (《信息披露制度》), the Internal Reporting System for Substantial Information (《重大信息内部报告制度》), the Dividend Management System (《分红管理制度》), the Information Disclosure Management System for Debt Financing Instruments in the Inter-bank Bond Market (《银行间债券市场债务融资工具信息披露管理制度》), the Investor Complaints Management System (《投资者投诉管理制度》), the Management Policies for the Implementation and Appraisal of the 2016 Restricted Share Incentive Plan (《2016年限制性股票激励计划实施考核管理办法》), the Foreign Exchange Hedging Management System (《外汇套期保值业务管理制度》), the Complaint and Complainant Protection System (《投诉举报及投诉举报人保护制度》), the Management System for Securities Investments and Derivatives Trading (《证券投资与衍生品交易管理制度》), etc., and the established sound internal control system in order to continuously improve the Company’s governance structure and enhance the Company’s governance level.

2. Shareholders and General Meeting

During the reporting period, the Company strictly adhered to applicable laws and regulations such as the Company Law (《公司法》), the Rules of the General Meeting of Listed Companies (《上市公司股东大会规则》), the Articles of Association (《公司章程》), and the Rules of Procedure of the General Meeting (《股东大会议事规则》), as well as the Company’s internal control rules, and standardized the convening, holding and voting procedures of the General Meeting to ensure that all shareholders could be equal, and fully exercise their rights. In addition, as witnessed by the hired lawyers, the legitimacy of the meeting’s convening, holding and voting procedures could be guaranteed, and relevant legitimate rights and interests of the Company and its shareholders could be secured as well. In 2020, three general meetings were convened and held by the Board in total; the convening, holding and voting procedures of such meetings were witnessed by the lawyers and all were legal and valid.

3. Directors and the Board of Directors

Strictly in accordance with the Company Law (《公司法》), the Articles of Association (《公司章程》), the Rules of Procedure of the Board of Directors (《董事会议事规则》) and the Independent Director System (《独立董事制度》), the Company has elected and appointed various directors, and such election and appointment procedures are open, fair and just. Besides, the composition and number of directors meet relevant legal and regulatory requirements. The members for the Company’s Fifth Board of Directors are all nominated, approved and elected by the Board of Directors 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 their qualifications are in accordance with the Guidance Opinions on the Establishment of Independent Director System in Listed Companies (《关于在上市公司建立独立董事制度的指导意见》).

All directors of the Company have performed their duties in strict compliance with relevant laws, regulations, and regulatory documents, attended all board meetings and carried out related works in a serious and responsible manner, and firmly conformed to any statement and commitment made by directors. However, independent directors have full right to know about the Company’s major issues and can issue independent opinions on major issues without being influenced.

The Board of Directors has established the Audit Committee, the Remuneration and Appraisal committee, the Strategy Committee and the Nomination Committee. Each committee can exercise its functions in accordance with its work rules and make due contributions to the standardization of corporate governance. In the meantime, the Board of Directors is able to carry out its work in strict accordance with relevant laws and regulations. All directors of the Company are honest and trustworthy, diligent and responsible, attend corresponding board meetings and general meetings with a serious attitude, actively participate in relevant training, and are familiar with relevant laws and regulations.

4. Supervisors and the Supervisory Committee

The Company has strictly observed the Company Law (《公司法》), the Articles of Association (《公司章程》), and other relevant regulations to appoint supervisors. The Fifth Supervisory Committee consists of three supervisors, including two shareholder supervisors and one employee supervisor. The number and composition of the Supervisory Committee meet relevant requirements stipulated in applicable laws and regulations. However, the shareholder representative supervisors are elected by adopting the cumulative voting system, and the employee supervisors are elected and appointed by means of the employees’ assembly in the form of secret ballot. The number of supervisors that served as directors or senior management personnel of the Company in recent two years does not exceed one half of the total number of supervisors of the Company, and the number of supervisors nominated by a single 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 the Rules of Procedure of the Supervisory Committee (《监事会议事规则》), effectively supervise and inspect the Company’s major issues, related party transactions, the legality and compliance of duties performed by the Company’s directors and senior management, and maintain legitimate rights and interests of the Company and its shareholders.

5. Internal Audit System

The Company has established the complete internal audit system and set up the internal audit department in charge of the effective internal supervision of the Company’s daily operations.

6. Stakeholders

The Company fully respects and safeguards legitimate rights and interests of relevant stakeholders, realizes the coordinated balance of interests of the society, shareholders, the Company, and employees etc., sincerely treats suppliers and customers, earnestly cultivates every employee, develops the mutual benefit and win-win cooperation with relevant stakeholders, and jointly promotes the Company’s sustained, healthy and rapid development.

7. Information Disclosure and Transparency

Pursuant to relevant laws and regulations, as well as the Company’s Information Disclosure System (《信息披露制度》) and Investor Relations Management System (《投资者关系管理制度》), the Company has disclosed corresponding information in a true, accurate, complete and timely 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 investor relations management, and the Securities Department serves as the executive department for information disclosure and investor relations management. The Company pays special attention to communicate with investors and will strengthen communication with investors by various means such as telephone, e-mail, and investor relations interactive platform etc.

8. Investor Relations Management

The Company has always attached great importance to the management of investor relations, carried out related works in accordance with the Investor Relations Management System (《投资者关系管理制度》) and other systems, implemented the investor relations 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 fully guaranteed the investors’ right to know.

The corporate governance is a systematic and long-term project that requires continuous improvement. After the Company is successfully listed, it is willing to accept supervisions from all parties, adhere to the scientific outlook on development, constantly improve the corporate governance system, and strengthen the implementation of various laws and regulations to promote the healthy development of the Company and enhance the overall competitiveness.

9. Insider Information Management

According to the Company Law (《公司法》), the Securities Law (《证券法》), the Administrative Methods for Information Disclosure of Listed Companies (《上市公司信息披露管理办法》), the Stock Listing Rules of Shenzhen Stock Exchange (《深圳证券交易所股票上市规则》), the Guidelines of the Shenzhen Stock Exchange for the Standard Operation of Listed Companies (《深圳证券交易所上市公司规范运作指引》), the Regulations on the Establishment of Insiders Registration and Management System by Listed Companies (《关于上市公司建立内幕信息知情人登记管理制度的规定》) and other relevant laws, regulations, and the Articles of Association (《公司章程》), the Company has established the Management System for Information Insider Registration (《内幕信息知情人登记管理制度》). The Company properly carried out corresponding information insider registration and reporting works strictly according to relevant requirements and systems, and recorded and revealed the list of all information insiders and relevant reports, communications, formulation, resolutions and disclosures before any information was disclosed. During the Reporting Period, the Company notified all directors, supervisors, senior management and relevant information insiders that they were not allowed to buy and sell the Company’s shares within the window period by means of SMS and e-mail 30 days before the disclosure of regular reports and 10 days before the disclosure of earnings forecasts and Preliminary Earnings Estimate, and conducted an internal audit on the buying and selling of the Company’s shares and convertible corporate bonds by directors, supervisors, senior management and relevant information insiders. During the reporting period, no information insider was ever involved in the illegal buying and selling of the Company’s shares and convertible corporate bonds, and no relevant personnel was suspected of being involved in insider trading and 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 the governance of listed companies.

□ Yes √ No

No such incompliance.

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

The Company has independent and complete businesses and independent management capabilities. It is completely independent from the controlling shareholder in terms of business, personnel, assets, organization, and finance. The controlling shareholder exercises its rights and assumes corresponding obligations in accordance with the law, and does not affect the personnel appointment or dismissal of the listed Company, nor restricted the duty fulfillment of the directors, supervisors, senior management or other personnel of the listed Company by means other than exercising shareholder's rights specified in laws and regulations. There is no direct or indirect interference with the Company’s decision-making and business operation beyond the authority of the general meeting. Meanwhile, the Company’s Board of Directors, Supervisory Committee, and various internal functional departments are capable of independent operations. There is no competition against the Company in the business scope, business nature, customers and product substitutability. As of the 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.

III Horizontal Competition

□ Applicable √ Not applicable

IV Annual and Extraordinary General Meetings Convened during the Reporting Period

1. General Meetings Convened during the Reporting Period

2. Extraordinary General Meetings Convened at Request of Preferred Shareholders with Resumed Voting Rights

□ 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

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

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 √ No

No 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 □ No

Suggestions of independent directors adopted or not adopted by the Company:

During the reporting period, the Company’s independent directors performed their duties in strict accordance with the Company Law (《公司法》), the Code of Corporate Governance for Listed Companies in China (《上市公司治理准则》), the Guidelines of the Shenzhen Stock Exchange for the Standard Operation of Listed Companies (《深圳证券交易所上市公司规范运作指引》), the Directive on Establishment of Independent Director System in Listed Companies (《关于在上市公司建立独立董事制度的指导意见》), the Independent Director System (《独立董事制度》) and other applicable laws and regulations, as well as the Company’s Articles of Association (《公司章程》). Upon an in-depth knowledge about the Company’s production and operation status obtained through attending the Company’s board meetings and general meetings, as well as through on-site supervision, the independent directors carefully exercised their voting rights and effectively performed their duties. The independent directors issued independent, just opinions on the Company’s continuing related-party transactions, profit distribution, 2019 Annual Internal Control Self-Assessment Report (《公司2019年度内部控制自我评价报告》), provision of guarantees for external parties, repurchase and cancellation of certain restricted shares, reappointment of the CPA firm, listing and advance redemption of convertible corporate bonds, and other matters arising during the reporting period. All the independent directors’ suggestions and opinion were accepted 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 the Board of Directors in the Reporting Period

1. Performance of Duties by the Audit Committee under the Board of Directors

The Audit Committee under the Fifth Board of Directors convened a total of six meetings during the reporting period, at which the Company’s periodic reports, the related party transactions, the matter concerning the occupation of the Company’s funds by its controlling shareholder or other related parties, changes to the accounting policies, the work report of the internal audit department, etc. were reviewed, the person-in-charge of internal audit was nominated, as well as the independent auditor for the convertible corporate bonds project and for the annual financial statements was appointed. The Audit Committee also communicated with the external auditors on the audit of the 2019 annual financial statements and the 2020 annual financial statements and urged the audit progress. As such, the Audit Committee has faithfully fulfilled its supervision and examination duties.

2. Performance of Duties by the Remuneration and Appraisal Committee under the Board of Directors

The Remuneration and Appraisal Committee under the Fifth Board of Directors convened four meetings during the reporting period to improve the post and remuneration systems, as well as to push forward the implementation of the core team stock ownership plan and the repurchase and cancellation of restricted shares.

3. Performance of Duties by the Nomination Committee under the Board of Directors

The Nomination Committee under the Fifth Board of Directors convened two meetings during the reporting period to review the core management candidates and offer advice.

4. Performance of Duties by the Strategy Committee under the Board of Directors

The Strategy Committee under the Fifth Board of Directors convened three meetings during the reporting period to discuss and offer advice on the production capacity planning, the application for issuance of medium-term notes and super short-term financing bonds, etc.

VII Performance of Duties by the Supervisory Committee

Indicate by tick mark whether the Supervisory Committee found any risk to the Company during its supervision in the reporting period.

□ Yes √ No

The Supervisory Committee raised no objections in the reporting period.

VIII Appraisal of and Incentive for Senior Management

1. Appraisal of Senior Management

The Company has put in place a senior management selection, appraisal, incentive and restrictive system. All appointed by and being responsible to the Board of Directors, senior management shoulders the operating indicators set by the Board of Directors. The Remuneration and Appraisal Committee under the Board is responsible for a year-end appraisal of senior management’s service ability, performance of duties and fulfillment of objectives, among others. And then the committee formulates a remuneration plan for the Board’s review. During the reporting period, the Company duly restricted its senior management as per the applicable laws and regulations by strengthening the connection between performance appraisal and remuneration and incentives, aligning remuneration with appraisal results, and achieving differentiation in remuneration and incentives.

2. Incentive for Senior Management

For details, see “Part V Significant Events”, “XV Implementation of Equity Incentive Plans, Employee Stock Ownership Plans or Other Employee Incentive Measures” herein.

IX Internal Control Assessment Report

1. Material Internal Control Deficiencies Identified for the Reporting Period

□ Yes √ No

2. Internal Control Self-Assessment Report

0

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

Not applicable

Section XI. Corporate Bonds

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

Section XII. Financial Statements

Independent Auditors Report

To the Shareholders of Guangdong Haid Group Co., Limited,

I. Opinion

We have audited the financial statements of Guangdong Haid Group Co., Limited (the “Company”), which comprise the consolidated balance sheet as at December 31, 2020, and the consolidated income statement, consolidated statement of changes in shareholders’ equity and consolidated statement of cash flows for the year then ended, and the notes to the consolidated financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2020, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Accounting Standards for Business Enterprises.

II. Basis for Opinion

We conducted our audit in accordance with China Standards on Auditing. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statement section of our report. We are independent of the Company in accordance with the Code of Ethics for Chinese Certified Public Accountant (the “Ethics Code”) together with the ethical requirements that are relevant to our audit of the financial statements, and we fulfilled our other ethical responsibilities in accordance with these requirements and the Ethics Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

III. Key audit matters

The key audit matters are those matters that, in our professional judgment, are of most significance in our audit of the financial statements of the current period. These matters are addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

(I) Revenue Recognition

Please refer to Note III. 29 and Note V. 49 in the Notes to the Financial Statements for the disclosure of revenue recognition.

1. Description

Haid Group is mainly engaged in feed production and sales. In 2020, the Company’s operating revenue was RMB60,323.86 million. We identified revenue recognition as a key audit matter because operating revenue is one of the Company’s key performance indicators, there is an inherent risk that management may manipulating the timing of revenue recognition to achieve specific goals or expectations

2. How Our Audit Addressed the Key Audit Matter

(1) We understood and evaluated the design effectiveness of internal controls related to revenue recognition. We tested the operation effectiveness of key internal controls.

(2) We carried out a spot check on significant sales contracts to analyze whether the identification of performance obligations, the allocation of transaction prices and the determination on when the transfer of control of the related goods or services are in line with the business model of the Company and complied with the accounting standards for business enterprises;

(3) We performed analytical procedures to access the reasonableness of changes in revenue and gross margin; examined the monthly average sales price of the Company’s major products, and compared it with the data in the prior period;

(4) We obtained the archival information of the new significant customers, searched their relevant information through public channels and conducted assessment on whether they were related parties of the Company.

(5) To test the authenticity and completeness of revenue, we inspected the supporting documents related to revenue recognition, including extracting sales statements to review the related sales contracts, delivery notes, bills of lading, weighing notes, bank receipts, and monthly customer sales statements. We verified and analyzed the sales data in the Company’s logistics system and financial system.

(6) To evaluate the accuracy and completeness of revenue, we performed confirmation procedures on revenue.

(7) We performed revenue cut-off testing as of the balance sheet date in conjunction with inventory observation procedures to evaluate whether revenue was recognized in the appropriate period.

(II) Expected Credit Losses on Accounts Receivable

Please refer to Note III. 10 (6) and Note V. 4 in the Notes to the Financial Statements for the disclosure of expected credit losses on accounts receivable.

1. Description

As of December 31, 2020, the balance of the Company’s accounts receivable was RMB1,067.30 million, including provision of bad and doubtful debts of RMB141.65 million. The Company’s management assessed the expected credit losses on accounts receivable individually and collectively based on the consideration of past events, current situations and predictions of future economic conditions. Except for accounts receivable with provision of bad and doubtful debts made individually, the management classified the accounts receivable into corresponding portfolios based on similar credit risk characteristics. For accounts receivable classified into portfolios, the management prepared comparison table of the accounts receivable aging and expected credit loss rate based on the historical credit losses in conjunction with the current situation and predictions of future economic conditions, and calculated the expected credit losses.

We identified expected credit losses on accounts receivable as a key audit matter because the Company involved significant accounting estimate and judgment in making the expected credit losses on accounts receivable, and the impact was significant.

2. How Our Audit Addressed the Key Audit Matter

1) We understood and evaluated the design effectiveness of internal controls related to expected credit losses on accounts receivable. We tested the operation effectiveness of key internal controls.

2) For accounts receivable that measure expected credit losses based on portfolio of credit risk characteristics, we evaluated the appropriateness of portfolio classification, reviewed the appropriateness of the historical losses rate and prospective adjustment calculated based on the migration rate model, reviewed if the expected credit losses was adequate.

3) We selected samples based on the distribution of accounts receivable as at balance sheet date and the revenue in the current year to perform confirmation procedure on accounts receivable. We compared the confirmation result against the Company’s book records.

4) For accounts receivables with significant balance as at balance sheet date or long aged, we selected samples to examine customers’ operation situation, historical payment records and subsequent payment after the balance sheet date.

(III) Inventory Provision

Please refer to Note III. 12 and Note V.7 in the Notes to the Financial Statements for disclosure of inventory provision.

1. Description

As of December 31, 2020, the balance of the Company’s inventory was RMB7,255.35 million, which accounted for 26.36% of the total assets, with an inventory provision of RMB9.63 million. The Company measured its inventories at the lower of cost and net realizable value. Net realizable value is the estimated selling price less the estimated costs to completion, estimated selling expenses and relevant tax expenses. The Company used the conclusive evidence obtained as the basis, in conjunction with the consideration of the purpose of holding the inventories and the impact of subsequent events after the balance sheet date to determine the net realizable value. We identified inventory provision as a key audit matter because the inventory balance was significant as at December 31, 2020 and it involved management’s significant judgment in determining the net realizable value.

2. How Our Audit Addressed the Key Audit Matter

1) We understood, evaluated and tested the design and operation effectiveness of internal controls related to inventory.

2) We performed inventory observation procedures to inspect the inventory quantity and condition.

3) We obtained the inventory provision calculation schedule, tested for inventory provision and analyzed if the inventory provision was adequate.

4) We obtained the inventory list as at December 31, 2020. We performed analytical review on inventories with long aging in conjunction with the inventory condition and evaluated the appropriateness of inventory provision.

5) For inventory provision accrued in prior year, we inspected its movement in the current period.

6) For products with available open market price, we selected samples to perform independent research and compared the open market price with the Company’s estimated sales price. For products without available open market price, we compared the Company’s estimated sales price against their latest actual sales price or actual sales price in the subsequent period or actual sales price of similar products, to evaluate if the inventory provision was adequate.

IV. Other Information

The Company’s management is responsible for the other information. The other information comprises all of the information included in the Company’s 2020 Annual Report 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 do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement 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 Statements

The Company’s management is responsible for the preparation of the financial statements that give a fair view in accordance with the Accounting Standards for Business Enterprises, and for designing, implementing and maintaining such internal control as the management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the management either intends to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for Audit of Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with China Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with CAS, we exercise professional judgment and maintain 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 those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher 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 design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management.

(4) Concluded on the appropriateness of the management’s use of the going concern basis 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 the Company’s ability to continue as a going concern. If we concluded that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, further events or conditions may cause the Company to cease to continue as a going concern.

(5) Evaluate the overall presentation, structure and content of the financial statements, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicated with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identified during our audit.

We also provided those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicated with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that are of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Consolidated and Company Balance Sheet

As at December 31, 2020

Prepared by: Guangdong Haid Group Co., Limited

Expressed in RMB

Legal representative: Hua Xue Person in charge of accounting function: Shaolin Yang Person in charge of accounting department: Shaolin Yang

Consolidated and Company Income Statement

For the year ended December 31, 2020

Prepared by: Guangdong Haid Group Co., Limited

Expressed in RMB

Legal representative: Hua Xue Person in charge of accounting function: Shaolin Yang Person in charge of accounting department: Shaolin Yang

Consolidated and Company Cash Flow Statement

For the year ended December 31, 2020

Prepared by: Guangdong Haid Group Co., Limited

Expressed in RMB

Legal representative: Hua Xue Person in charge of accounting function: Shaolin Yang Person in charge of accounting department: Shaolin Yang

Consolidated Statement of Changes in Shareholders' Equity

For the year ended December 31, 2020

Prepared by: Guangdong Haid Group Co., Limited

Expressed in RMB

Consolidated Statement of Changes in Shareholders' Equity (continued)

Legal representative: Hua Xue Person in charge of accounting function: Shaolin Yang Person in charge of accounting department: Shaolin Yang

Company Statement of Changes in Shareholders' Equity

For the year ended December 31, 2020

Prepared by: Guangdong Haid Group Co., Limited

Expressed in RMB

Legal representative: Hua Xue Person in charge of accounting function: Shaolin Yang Person in charge of accounting department: Shaolin Yang

Company Statement of Changes in Shareholders' Equity(continued)

Legal representative: Hua Xue Person in charge of accounting function: Shaolin Yang Person in charge of accounting department: Shaolin Yang

Notes to the Financial Statements

I. Company Profile

1．Company’s Information

Guangdong Haid Group Co., Limited (formerly known as “Guangdong Haid Industrial Co., Ltd.” or “Guangdong Haid Group Limited”, and hereinafter referred to as the “Company”) is a share limited company registered in Guangdong Province, which was incorporated with joint investments from natural persons Hua Xue, Yingzhuo Xu, Lili Tan, Qiang Luo and Xiewu Jiang. The Company was registered with the Guangdong Province Administration for Industry and Commerce on January 8, 2004. It has obtained the business license issued by the Guangdong Province Administration for Industry and Commerce with a unified social credit code 914400007578948436. The Company’s headquarter and register address is located at Room 701, Block 2, No. 42, Wanbo 4th Road, Nancun Town, Panyu District, Guangzhou, Guangdong Province.

On May 17, 2007, Guangdong Haid Group Limited changed into Guangdong Haid Group Co., Limited as a whole with a base day of December 31, 2006 in accordance with the approval “Reply on Approval of the Change of Guangdong Haid Group Limited to Foreign-Invested Limited Liability Company (SZP [2007] No. 905) issued by the Ministry of Commerce of the People’s Republic of China.The Company went public on the Shenzhen Stock Exchange in November 2009.

As of December 31, 2020, the total share capital of the Company was 1,661,210,751 shares, of which 14,710,177 shares were restricted shares, accounted for 0.89% of the total shares, and 1,646,500,574 shares were non-restricted shares, accounted for 99.11% of the total shares.

The Company and its subsidiaries (hereinafter referred to as the “Group”) operates in the feed industry, the main products include aquatic and livestock feed, high-quality aquatic animal seedlings, animal health products, biological products, pig breeding and so on, covering all business chain such as research and development, design, production, sales and service of various products.

The financial statements and notes have been approved by the 18th meeting of the fifth Board of Directors of the Company on April 17, 2021.

2. Scope of Consolidated Financial Statements

A total of 389 subsidiaries were included in the scope of the consolidated financial statements of the current year. 78 entities were added into and 6 entities were removed from the consolidation scope for the current year when compared to prior year. For further information, please refer to the disclosures in Note VI. Changes in Consolidation Scope and Note VII. Interests in Other Entities

II. Basis of Preparation

The financial statements are prepared in accordance with the Accounting Standards for Business Enterprises and corresponding application guidance, interpretations and other related provisions issued by the Ministry of Finance (collectively, "Accounting Standards for Business Enterprises"). In addition, the Group also disclosed the relevant financial information in accordance with the Explanatory Announcement No. 15 on Information Disclosure for Companies Offering Their Securities to the Public—General Requirements for Financial Reporting (2014 version) issued by the China Securities Regulatory Commission.

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

The Group adopts the accrual basis of accounting. The financial statements are prepared under the historical cost except for certain financial instruments. Non-current assets held-for-sale are measured at the lower of the amount of the fair value less estimated costs and the book value when it was recognized as held-for-sale. If the assets were impaired, a provision for impairment shall be provided in accordance with the relevant regulations.

III. Significant Accounting Policies and Accounting Estimates

The Group determines revenue recognition policy according to the characteristics of its production and operation and relevant requirements in Accounting Standards for Business Enterprises. For more information on the accounting policies, please refer to Note III. 29.

1. Representation of Compliance with Accounting Standards for Business Enterprises

The financial statements have been prepared in accordance with the requirements of Accounting Standards for Business Enterprises. These financial statements have truly and completely presented the consolidated financial position and financial position of the Company as at December 31, 2020 and their operating results and cashflows for the year ended December 31, 2020.

2. Accounting Period

The Group the caldendar year as its accounting period, i.e. from January 1 to December 31. 3. Operating Cycle

The operating cycle of the Group is 12 months.

4. Functional currency

The Company and its domestic subsidiaries use Renminbi (“RMB”) as their functional currency. The overseas subsidiaires of the Company determine their functional currency according to the primary economic environment where they operate. The financial statements of the Group have been prepared in RMB.

5. Accounting Treatment for Business Combination Involving Entities under Common Control and not under Common Control

(1) Business combinations involving entities under common control

For a business combination involving entities under common control, the assets acquired and liabilities assumed are measured based on their carrying amounts in the consolidated financial statements of the ultimate controlling party at the combination date, except for adjustments due to different accounting policies. The difference between the carrying amount of the net assets acquired and the consideration paid for the combination is adjusted against share premium in the capital reserve (share capital premium), with any excess adjusted against retained earnings.

For a business combination involving entities under common control achieved in stages that involves multiple exchange transactions

In the separate financial statements, the initial investment cost is the combining party’s share of the carrying amount of the net assets of the combined party in the consolidated financial statements of the ultimate controlling party at combination date. The difference between initial investment cost, and the total of investment carrying amount prior to combination date and additional investment cost at the combination date is adjusted to capital reserve (share premium). Any excess is adjusted to retained earnings.

In the consolidated financial statements, the assets acquired and liabilities assumed are measured based on their carrying amounts in the consolidated financial statements of the ultimate controlling party at the combination date, except for adjustments due to different accounting policies; the difference between the sum of the carrying amount of the investment before combination and the carrying amount of new consideration paid at the combination date, and the carrying amount of the net asset acquired in the combination, is adjusted against capital reserve (share premium), with any excess adjusted against retained earnings. The long-term equity investment of the combining party before acquiring the control, the profit or loss, other comprehensive income and other changes in the owner’s equity recognized from the later of the initial acquisition date of the equity and the date when the combining party and the combined party under common ultimate control party to the combination date, shall be offset against the opening retained earnings and profit or loss for the current period in the comparative statement.

(2) Business combinations involving entities not under common control

For business combinations involving entities not under common control, the consideration costs are the fair values of the assets paid, the liabilities incurred or assumed and the equity instruments issued by the acquirer in exchange for control over the acquiree on the acquisition date. At the acquisition date, the acquired assets, liabilities and contingent liabilities of the acquiree are measured at their fair value.

Where the combination cost exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference is recognized as goodwill, and subsequently measured based on its cost less accumulated impairment provisions. Where the combination cost is less than the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference is recognized in profit or loss for the current period after reassessment.

For a business combination involving entities not under common control and achieved in stages that involves multiple exchange transactions

In the individual financial statements, the initial investment cost is the sum of the book value of the equity investment held by the purchased party before the purchase date and the new investment cost on the purchase date. The equity investment is recognized as other comprehensive income by using equity method, this part of other comprehensive income is not adjusted in the purchase date, when disposal this investment, using the same basis as the investee directly dispose of related assets or liabilities for accounting treatment; equity recognized due to changes in the other equity of the investee (other than the changes in net profit and loss, other comprehensive income and profit distribution), is transferred to the gain or loss in the disposal period when this investment is disposed. If the equity investment held before the purchase date is measured at fair value, the cumulative change in fair value that was originally included in other comprehensive income is transferred to profit or loss in the current period when the cost method is used.

In the separate financial statements, the initial investment cost is the total of the carrying amount of previously-held equity investment and the additional investment cost at the acquisition date. When the previously-held equity investment which was recognized under the equity method before the acquisition date, any other comprehensive income previously recognized is not adjusted on acquisition date. When the investment is disposed, the previous recognized amount in the other comprehensive income is recognized on the same basis as would be required if the investee had directly disposed the related assets or liabilities. For the changes of the investee’s other owners’ equity which have recognized in the owner’s equity except for net profit or loss, other comprehensive income and profit distribution are transferred to profit or loss for the current period when disposing the investment. When the previously-held equity investment which was measured at fair value before the acquisition date, the accumulated changes in fair value included in other comprehensive income is transferred to profit or loss for the current period upon commencement of the cost method.

In the consolidated financial statements, the cost of business combination is the total of the consideration paid at the acquisition date and the fair value of equity investment of the acquiree held prior to the acquisition date. The cost of equity investment of the acquiree held prior to the acquisition date shall be re-measured at the fair value at the acquisition date, the difference between the fair value and par value shall be recognized as profit or loss for the current period. Other comprehensive income and changes of other owners’ equity from the equity interest held in the acquiree prior to the acquisition date shall be transferred to profit or loss for the current period, except for other comprehensive income arising from the movement of net liabilities or assets in the investee’s re-measurement of defined benefit plan.

(3) The accounting treatment of transaction costs in business combination

The overhead for the business combination, including the expenses for auditing, legal services, appraisal and advisory, and other related administrative expenses, are recognized in profit or loss for the current period when incurred. The transaction costs of equity or debt securities issued as the consideration of business combination are included in the initial recognition amount of the equity or debt securities.

6. Consolidated Financial Statements

(1) Scope of consolidated financial statements

The scope of consolidated financial statements is based on control. Control exists when the Company has power over the investee; exposure, or rights to variable returns from its involvement with the investee and has the ability to affect its returns through its power over the investee. A subsidiary is an entity that is controlled by the Company (including entity, a portion of an investee as a deemed separate component, and structured entity controlled by the entity).

(2) Basis of preparation of consolidated financial statements

The consolidated financial statements are prepared by the Company based on the financial statements of the Company and its subsidiaries and other relevant information. When preparing the consolidated financial statements, the accounting policies and accounting periods of the subsidiaries shall be consistent with those established by the Company. All significant intra-company balances and transactions shall be eliminated.

Where a subsidiary or business was acquired during the reporting period, through a business combination involving entities under common control, the financial statements of the subsidiary are included in the consolidated financial statements as if the combination had occurred at the date that the ultimate controlling party first obtained control.

Where a subsidiary or business was acquired during the reporting period, through a business combination involving entities not under common control, its revenue, expenses and profit from the acquisition date to the end of the reporting period are included in the consolidated income statement and its cash flows are included in the consolidated cash flow statement.

The non-controlling interests of the subsidiary that is not attributable to the Group are presented separately in the shareholders’ equity section within the consolidated balance sheet. Net profit or loss attributable to non-controlling shareholders is presented separately as non-controlling interests below the line item “net profit” within the consolidated income statement. When the amount of loss for the current period attributable to the non-controlling shareholders of a subsidiary exceeds the non-controlling shareholders’ share of the opening owners’ equity of the subsidiary, the excess is still allocated against the non-controlling interests.

(3) Acquire shares from minority shareholders of subsidiary

Where the Group acquires a non-controlling interest from a subsidiary’s non-controlling shareholders or disposes of a portion of an interest in a subsidiary without a change in control, the difference between the proportion interests of the subsidiary’s net assets being acquired or disposed and the amount of the consideration paid or received is adjusted to the capital reserve (share premium) in the consolidated balance sheet, with any excess adjusted to retained earnings.

(4) Disposal of subsidiaries

When the Group loses control over a subsidiary due to partial disposal of equity investment or other reasons, the remaining equity interests is re-measured at its fair value at the date when the control is lost. A gain or loss is the total of consideration received from the disposal of equity investment and the remaining equity investment at its fair value, deducted the total of the subsidiary’s net asset and goodwill which calculated in proportion based on the orginal shareholding percentage since the acquisition date. Any resulting gain or loss is recognized as investment income for the current period.

Except for the other comprehensive income arose from the movement of net liabilities or net assets driven by investee’s remeasurement on defined benefit plan, other comprehensive income related to the original equity investment in subsidiaries is transferred to profit or loss for the current period when the Group loses control of the subsidiary.

(5) The treatment of disposing equity investment by stages until the control is lost

The Company considers the arrangements of multiple transactions by disposing equity investment by stages until the control is lost as a single transaction when the terms, conditions and economic impact of each transaction meet one or more of the following situations:

① The transactions are entered into at the same time or in contemplation of each other;

② The transactions are considered as a single transaction to achive an overall commercial effect;

③ The occurrence of one transaction dependent on the occurrence of at least one other transaction;

④ A transaction is not economically justified when considered on its own, but it is economically justified when considered together with other transactions.

In the separate financial statements, for multiple transactions by disposing equity investment by stages until the control is lost that not qualified as a single transaction, the carrying amount of long-term equity investments related to each transaction of disposal of equity is derecognized, the difference between the consideration received and the carrying amount of disposed long-term equity investments is recognized as investment income. For those arrangements qualified as a single transaction, the carrying amount of long-term equity investments related to each transaction of disposal of equity is derecognized, the difference between the consideration received and the carrying amount of disposed long-term equity investments is recognized as other comprehensive income, and finally recognized in profit or loss for the current period on the date when the control is lost.

In the consolidated financial statements, when the Company disposal of investments step by step through multiple transactions until loss of control, the evaluation of remaining share and accounting for the disposal of equity gain or loss can refer to the aforementioned "treatment of loss of control of the subsidiary". Before the loss of control, the difference between the price of each disposal and the corresponding share of the net asset book value of the subsidiary since the purchase date corresponding to the disposal of the investment shall be treated as follows:

In the consolidated financial statements, plese refer to the above “disposal of subsidiaries” for the measurement of remaining equity and accounting treatment for profit or loss of disposing equity investment by stages until the control is lost. The difference between each consideration received and the share of the subsidiary’s net assets since acquisition date relevant to disposing investment until the control is lost:

① is recognized in other comprehensive income if the arrangements are regarded as a single transaction. Other comprehensive income is transferred to profit or loss for the current period until the control is lost.

② is recognized in capital reserve (share premium) as an equity transaction if the arrangements are not regarded as a single transaction. Capital reserve is not transferred to profit or loss for the current period when the control is lost.

7. Joint Arrangement Classification and Accounting Treatment for Joint Operation

A joint arrangement is an arrangement of which two or more parties have joint control. The Company classifies joint arrangements into joint operations and joint ventures.

(1) Joint operations

A joint operation is a joint arrangement whereby the Group has rights to the assets, and obligations for the liabilities, relating to the arrangement.

The Group recognizes the following items relating to its interest in a joint operation, and account for them in accordance with relevant accounting standards:

A. its solely-held assets, and its share of any assets held jointly;

B. its solely-assumed liabilities, and its share of any liabilities assumed jointly;

C. its revenue from the sale of its share of the output arising from the joint operation;

D. its share of the revenue from the sale of the output by the joint operation;

E. its solely-incurred expenses, and its share of any expenses incurred jointly.

(2) Joint ventures

A joint venture is a joint arrangement whereby the Group has rights to the net assets of the arrangement.

The Group adopts equity method of long-term equity investment to account for its investment in joint venture.

8. Cash and Cash Equivalents

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

9. Foreign Currency Transactions and Translation of Foreign Currency Financial Statements

(1) Foreign currency transactions

Foreign currency transactions are translated to the functional currency of the Group at the spot exchange rates or approximate spot exchange rates (usually, it refers to the central parity rate published by the People’s Bank of China) on the dates of the transactions.

Monetary items denominated in foreign currencies are translated to Renminbi at the spot exchange rate at the balance sheet date. The resulting exchange differences between the spot exchange rate at balance sheet date and the spot exchange rate at initial recognition or at the previous balance sheet date are recognized in profit or loss. Non-monetary items that are measured at historical cost in foreign currencies are translated to Renminbi using the exchange rate at the transaction date. Non-monetary items that are measured at fair value in foreign currencies are translated using the exchange rate at the date when the fair value is determined. The resulting exchange differences are recognized in profit or loss.

(2) Translation of foreign currency financial statements

When translating the foreign currency financial statements of overseas subsidiaries, assets and liabilities of foreign operation are translated to Renminbi at the spot exchange rate at the balance sheet date. Equity items, except for retained earnings, are translated to Renminbi at the spot exchange rates at the transaction dates.

Income and expenses of foreign operation are translated to Renminbi at the approximate exchange rates determined under a systematic and rational method at the transaction dates.

Items of cash flow statement are translated to Renminbi at the spot exchange rates at the cash flow occurrence dates. Effect of foreign exchange rate changes on cash and cash equivalents is presented separately as Effect of foreign exchange rate changes on cash and cash equivalents in the cash flow statement.

The resulting translation differences are recognized in other comprehensive income in shareholders’ equity in the balance sheet.

When the control on foreign operation is lost due to disposal, the translation differences accumulated in shareholders’ equity attributable to the foreign operation as presented under shareholders’ equity in the balance sheet are transferred to profit or loss for the current period entirely or partially based on the disposed portion.

10. Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or an equity instrument of another entity.

(1) Recognition and derecognition of financial instruments

A financial asset or a financial liability is recognized when the Group becomes a party to the contractual provisions of a financial instrument.

If one of the following criteria is met, a financial asset is derecognized:

A. The contractual rights to receive the cash flows from the financial asset are terminated;

B. The financial asset has been transferred, and is in accordance with the following conditions for derecognition.

A financial liability is derecognized entirely or partially when its contractual obligation is ceased entirely or partially. If the Group (borrower) enters into an agreement with the lender to replace the existing financial liability with a new assumed financial liability, and contractual terms are different in substance, the existing financial liability is derecognized while a new financial liability is recognized.

Coventionally traded financial assets are recognized and derecognized at the transaction date. (2) Classification and measurement of financial assets

The Group classifies financial assets into three categories at initial recognition according to the business model in which a financial asset is managed and its contractual cash flow characteristics: financial assets measured at amortized cost, financial assets measured at fair value through other comprehensive income and financial assets measured at fair value through profit or loss.

Financial assets measured at amortized cost

The Group classifies financial assets that meet the following conditions and are not designated as financial assets measured at fair value through profit or loss, as financial assets measured at amortized cost:

The objective for the business model in which the financial asset is managed, is to collect the contractual cash flows;

The contract terms of the financial asset stipulate that the cash flow generated on a specific date is only for the payment of principal and interest on the outstanding principal.

The effective interest method is adopted to measure such financial assets at amortized cost after initial recognition. Gains or losses arising from financial assets measured at amortized cost and are not part of any hedging relationship are recognized in profit or loss when they are derecognized, amortized according tothe effective interest method or recognized for impairment.

Financial assets measured at fair value through other comprehensive income

The Group classifies financial assets that meet the following conditions and are not designated as financial asset measured at fair value through profit or loss, as financial assets measured at fair value through other comprehensive income:

The objectives for the business model in which the financial asset is managed, are to collect the contractual cash flows and to sell the financial asset;

The contract terms of the financial asset stipulate that the cash flow generated on a specific date is only for the payment of principal and interest on the outstanding principal.

Such financial assets are subsequently measured at fair value after intial recognition. Interest calculated by using effective interest method, impairment losses or gains, and exchange gains and losses are recognized in the profit or loss for the current period, while other gains or losses are recongized in other comprehensive income. When they are derecognized, the accumulated gains or losses in the other comprehensive income are transferred to profit or loss for the current period.

Financial assets measured at fair value through profit or loss

All financial assets not classified as measured at amortized cost or financial assets measured at fair value through other comprehensive income as described above, the Group classifies them as financial assets measured at fair value through profit or loss. On initial recognition, the Group may irrevocably designate a financial assets otherwise meets the requirements to be measured at amortized cost or at fair value through other comprehensive income as at financial assets measured at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

These financial assets are subsequently measured at fair value. Gains or losses (including interest and dividend income) are recognized in profit or loss for the current period, unless the financial asset is part of a hedging relationship.

The business model for managing financial assets refers to how the Group manages financial assets to generate cash flows. The business model determines whether the cash flows will result from collecting contractual cash flows, selling financial assets, or both. The Group determines the business model for managing financial assets according toobjective facts and based on the specific business objectives for mananging the financial assets determined by the key management personnel.

The Group evaluates the contractual cash flow characteristics of financial assets to determine whether the contractual cash flow generated by the relevant financial assets on a specific date is only the payment for principal and interest on the outstanding principal. Principal is defined as the fair value of the financial asset at initial recognition. Interest is defined as consideration for the time value of money and for the credit risk associated with the outstanding principal during a particular period of time and for other basic lending risks and costs, as well as profits. The Group also assesses whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.

Only when the Group changes the business model for managing financial assets, all relevant affected financial assets are reclassified on the first day of the first reporting period after the business model is changed, otherwise the financial assets cannot be reclassified after initial recognition.

Financial assets are measured at fair value at initial recognition. The relevant transaction cost for financial assets measured at fair value through profit or loss is recognized in profit or loss for the current period, while the transaction cost for other financial asssets is included in their initial cost. The Group recognizes the expected consideration that the Group is entitled to as the initial cost for accounts receivable arising from the sale of products or render of services and/or do not contain or consider significant financing components.

(3) Classification and measurement of financial liabilities

The Group classifies financial liabilities into different categories at initial recognition: financial liabilities measured at fair value through profit or loss and financial liabilities measured at amortized cost. The relevant transaction cost is included in intial cost for financial liabilities other than those classified as financial liabilities measured at fair value through profit or loss.

Financial liabilities measured at fair value through profit or loss

Financial liabilities measured at fair value through profit or loss include held-for-trading financial liabilities and financial liabilities designated as financial liabilities measured at fair value through profit or loss at initial recognition. Such financial liabilities are subsequently measured at fair value. Gain or losses arising from change in fair value, and any dividend and interest expenses related to such financial liabilities are recognized in profit or loss for the current period.

Financial liabilities measured at amortized cost

Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Gains or losses arising from derecognition or amortization are recognized in profit or loss for the current period.

Financial guarantee contract

Financial guarantee contract is not a financial liability designated as financial liabilities measured at fair value through profit or loss. It is initially measured at fair value, and subsequently measured at the higher of the loss allowance of provisions determined by the expected credit loss model, and the balance of the intial recongnized amount deducts the accumulated amortization.

Distinction between financial liabilities and equity instruments

A financial liability is recognized if one of the following conditions is satisfied:

A. a contractual obligation to deliver cash or another financial asset to another entity;

B. a contractual obligation to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavorable to the Group;

C. a non-derivative contract that will or may be settled in the Group’s own equity instruments and the Group is obliged to deliver a variable number of the Group’s own equity instruments;

D. a derivative contract that will or may be settled in the Group’s own equity instruments, except for a derivative contract that is settled by the exchange of a fixed number of the Group’s own equity instruments for a fixed amount of cash or other financial assets.

An equity instrument is a contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

If the Group does not have an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation, the obligation meets the definition of a financial liability.

If a financial instrument will or may be settled by the Group’s own equity instruments, classification of the instrument depends on whether the Group’s own equity instruments work as the replacement of cash or other financial instrument, or represent the investor’s residual interest in the Group’s assets after deducting all its liabilities. In the former case, the instrument is classified as a financial liability; in the latter case, the instrument is classified as an equity instrument.

(4) Derivative financial instruments and embedded derivative instruments

The Group’s derivative financial insturments included forward exchange contract, currency exchange rate swap agreement, interest rate swap agreement and foreign currency option contract, etc. Derivative financial instruments are initially measured at fair value of the date a derivative contract entered into and subsequently measured at their fair value. Derivative financial instruments with positive fair value are recognized as assets while those with negative fair value are recognized as liabilities. Any gains or losses arising from changes in fair value which do not meet the requirements of hedge accounting are directly recognized in profit or loss for the current period.

For hybrid instruments with embedded derivatives, the relevant requirements for financial asset classification are applicable to the entire hybrid instruments if the master contracts are financial assets. If the master contract is not a financial assets and such hybrid instrument is not designated as measured at fair value through profit or loss, the economic features and risks of the embedded derivative are not closely related to the master contract, and a similar instrument with the same terms as the embedded derivative would meet the definition of a derivative, then he embedded derivative is separated from hybrid instrument and considered as a individual derivative. If the embedded derivative is unable to measure separately either at acquisition or subsequently at balance sheet date, the entire hybrid instrument is designated as a financial asset or financial liability measured at fair value through profit or loss.

(5) Fair value of financial instruments

For the recognition of fair value of financial assets and financial liabilities, please refer to Note III. 11.

(6) Impairment of financial assets

The Group makes provisions of impairment and recognizes impairment losses based on expected credit loss for the following items:

Financial assets measured at amortized cost

Receivables and debt investments measured at fair value through other comprehensive income; Contract assets as defined in the Accounting Standards for Business Enterprises No. 14 - Revenue;

Lease receivables

Financial guarantee contract (except for those measured at fair value through profit and loss, the transfer of financial assets does not meet the conditions for derecognition or continue to involve in the transferred financial assets)

Measurement of expected credit losses

Expected credit loss is the weighted average of credit losses of financial instruments with the risk of default. Credit loss is the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).

The Company calculates the probability-weighted amount of the present value of the difference between the contractual cash flow receivables and the expected cash inflow, and recognizes as the expected credit loss, based on reasonable and reliable information on past events, current status and future economic conditions, and weighted by the risk of default.

The Group measures the expected credit losses of financial instruments at different stages separately. The financial instrument is at the first stage when there is no significant increase in credit risk since initial recognition. The Group measures the loss allowance according to the expected credit losses in the next 12 months. The financial instrument is at the second stage when there is significant increase in credit risk since initial recognition and credit loss is not yet occurred. The Group then measures the loss allowance according to expected credit losses over the expected life of a financial instrument. The financial instrument is at the third stage when there is significant increase in credit risk since initial recognition and credit loss is occurred. The Group then measures the loss allowance according to expected credit losses over the expected life of a financial instrument.

For financial instrument that has low credit risk at the balance sheet date, the Group assumes there is no significant increase in its credit risk since initial recognition. The Group measures the loss allowance according to the expected credit losses in the next 12 months.

Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument. Expected credit losses in the next 12 months are the portion of expected losses that result from default events that are possible within the 12 months after the balance sheet date (or a shorter period if the expected life of the instrument is less than 12 months).

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

For the financial instruments at the first and second stage as well as financial instruments that have low credit risk, the Group calculates the interest income based on the book value without loss allowance deducted and effective interest rate. While for the financial instruments at the third stage, the Group calculates the interest income based on the amortized cost of the book value less loss allowance and effective interest rate.

Notes receivable, accounts receivable

For notes receivable and accounts receivable, regardless of whether they involve significant financing components, the Group always measures the loss allowance at an amount equal to lifetime expected credit losses.

The Group classifies the notes receivable and accounts receivable into different groups according to the credit risk characteristics when the expected credit loss information of a single financial assets cannot be assessed at a reasonable cost. Expected credit losses are calculated based on groups. The basis of determination is as below: A. Notes receivable

Group 1 of notes receivable: Bank acceptance notes

Group 2 of notes receivable: Commercial acceptance notes

Group 3 of notes receivable: Usance letters of credit

B. Accounts receivable

Group 1 of accounts receivable: Accounts receivable due from feed related customers

Group 2 of accounts receivable: Accounts receivable due from related parties within the scope of consolidation

Group 3 of accounts receivable: Accounts receivable due from raw materials customers

For notes receivable classified into groups, the Group calculates the expected credit losses through the exposure to risk of default and the lifetime expected credit loss rate, based on the historical credit loss experience, in conjunction with the current situation and predictions of future economic conditions.

For accounts receivable classified into groups, the Group prepares the credit loss matrix on the aging of accounts receivable/days of overdue and lifetime expected credit loss rates based on the Group’s historical credit loss experience, in conjunction with the current situation and predictions of future economic conditions. The Group then uses the matrix to calculate the expected credit losses.

Other receivables

The Group classifed other receivables into groups based on credit risk characteristics. Expected credit losses are calculated based on groups. The basis of determination is as below:

Group 1 of other receivables: Security deposits

Group 2 of other receivables: Futures margin

Group 3 of other receivables: Receivables due from external parties

Group 4 of other receivables: Performance compensation

Group 5 of other receivables: Petty cash

Group 6 of other receivables: Other receivables due from related parties within the scope of consolidation Group 7 of other receivables: Others

For other receivables that are divided into portfolios, the Group calculates the expected credit loss through the default risk exposure and the expected credit loss rate within the next 12 months or the entire duration.

For other receivables classified into groups, the Group calculates the expected credit losses through the exposure to risk of default, and expected credit loss rate within the next 12 months or lifetime expected credit loss rate.

Loans and advances to customers

For loans and advances to customer, the Group calculates the expected credit loss through the exposure to risk of default, and expected credit loss rate within the next 12 months or lifetime expected credit loss rate.

Long-term receivables

The Group's long-term receivables include financial lease receivables, security deposit receivables, receivables for subcontracting due by installment, etc.

The Group classifed financial lease receivables, security deposit receivables and receivables for subcontracting due by installment into groups based on credit risk characteristics. Expected credit losses are calculated based on groups. The basis of determination is as below:

A. Finance lease receivables

Group 1 of finance leases: Receivable due from related parties within the scope of consolidation.

Group 2 of finance leases: Receivable due from other customers

B. Other long-term receivables

Group 1 of long-term receivables: Security deposit receivables

Group 2 of long-term receivables: Receivables for subcontracting due by installments

Group 3 of long-term receivables: Other receivables

For receivables for subcontracting due by installment and security deposit receivables, the Group calculates the expected credit losses through the exposure to risk of default and the lifetime expected credit loss rate, based on the historical credit loss experience, in conjunction with the current situation and predictions of future economic conditions.

For other receivables classified into groups, except for receivables for subcontracting due by installment receivables and security deposit receivables, the Group calculates the expected credit losses through the exposure to risk of default, and expected credit loss rate within the next 12 months or lifetime expected credit loss rate.

Debt investments and other debt investments

For debt investments and other debt investments, the Group calculates the expected credit losses according to the nature of the investment, counterparty and various types of risk exposures, the exposure to risk of default and the expected credit loss rates for the next 12 months or lifetime expected credit loss rate.

Assessment of significant increase in credit risk

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

When determining whether the credit risk has increased significantly since initial recognition, the Group considers the reasonable and supportable information that is available without undue cost or effort, including forward-looking information. In particular, the following information is taken into account:

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

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

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

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

Depending on the nature of the financial instruments, the Group assesses whether there is a significant increase in credit risk either on an individual basis or a collective basis. When the Group is assessed on a collective basis, the financial instruments are classified into groups based on shared credit risk characteristics, such as past due status and credit risk ratings.

Credit-impaired financial assets

At each balance sheet date, the Group assesses whether financial assets measured at amortized cost and debt investments measured at fair value through other comprehensive income are credit-impaired. A financial asset is credit-impaired when one or more events that have adverse impact on the expected future cash flows of financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable information:

Significant financial difficulty of the borrower or issuer;

A breach of contract, such as default or overdue in interest or principal payments;

For economic or contractual reasons relating to the borrower’s financial difficulty, the Group having granted to the borrower a concessions that would not otherwise consider;

It is probable that the borrower will enter into bankruptcy or other financial restructuring;

The disappearance of an active market for that financial asset because of issuer’s or borrower’s financial

difficulties.

Presentation of allowance for expected credit losses

The Group remeasures the expected credit losses at each balance sheet date to reflect changes in the financial instrument’s credit risk since initial recognition. Any increase or reversal of expected credit losses shall be recognized as an impairment gain or loss in profit or loss for the current period. The Group recognizes an impairment gain or loss for financial assets measured at amortized cost with a corresponding adjustment to their carrying amount through a loss allowance account. While the Group recognizes a loss allowance in other comprehensive income for debt investments that are measured at fair value through other comprehensive income and does not adjust their carrying amount.

Write-off

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

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

(7) Transfer of financial assets

Transfer of financial assets is the transfer or delivery of financial assets to another party (the transferee) other than the issuer of financial assets.

A financial asset is derecognized if the Group transfers substantially all the risks and rewards of ownership of the financial asset to the transferee. A financial asset is not derecognized if the Group retains substantially all the risks and rewards of ownership of the financial asset to the transferee.

The Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, the accounting treatments are as following: if control over the financial assets is surrendered, the Group derecognizes the financial assets and recognize any assets and liabilities arose; if the Group retains the control of the financial assets, financial assets to the extent of the continuing involvement in the transferred financial assets by the Group and any relating liability are recognized.

(8) Offset between financial assets and financial liabilities

When the Group has the legal right to offset the recognized financial assets and financial liabilities, and the legal rights is enforceable, and the Group plans to settle by net amount or realize the financial assets and pay off the financial liabilities, the amount after being offset is presented in the balance sheet. Otherwise, financial assets and financial liabilities are presented separately in the balance Sheet and not allowed to offset against each other.

11. Fair Value Measurement

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

The Group measures related assets or liabilities at fair value assuming the assets or liabilities are transferred in an orderly transaction in their principal market; In the absence of a principal market, the Group assumes that the transaction is occured in the most advantageous market for the underlying asset or liabilitiy. Principal market (or the most advantageous market) is the market that the Group can normally enter into a transaction at the measurement date. The Group adopts the assumptions that would be used by market participants in achieving the maximized economic benefit when pricing the assets or liabilities.

For financial assets or financial liabilities that have an active market, the Group uses the quoted prices in the active market as their fair value. Otherwise, the Group uses valuation technique to determine their fair value.

Fair value measurement of a non-financial asset considers market participants’ ability to generate economic benefits by using the asset in its best way or ability to sell the asset to another market participant who is able to generate economic benefits by using the asset in its best way.

The Group uses valuation techniques that are appropriate in the current circumstances and for which sufficient data and other information are available. The Group uses the relevant observable inputs in preference and only use unobservable input when the observable inputs are unavailable or impractical to obtain.

For assets and liabilities measured or disclosed at fair value in the financial statements, their level of fair value are determined according to the significant lowest level input to the entire fair value measurement: Level 1 inputs are the unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date ; Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly; Level 3 inputs are unobservable inputs for the assets or liabilities.

At the balance sheet date, the Group revalues assets and liabilities being measured at fair value continuously in the financial statements to determine whether any change within the levels of fair value is occurred.

12. Inventories

(1) Classification

Inventories include raw materials, finished goods, work in progress, consumptive biological assets and consigned processing material, etc.

(2) Measurement method of cost of inventories

Inventories are initially measured at cost. Raw materials and finished goods are calculated by using weighted average method, for the measurement and amortization of consumptive biological assets, please refer to Note III. 19.

(3) Basis for determining the net realizable value and method for provision for the decline in value of inventories Net realizable value is the estimated selling price less the estimated costs to completion, estimated selling expenses and relevant tax expenses. The Group used the conclusive evidence obtained as the basis, in conjunction with the consideration of the purpose of holding the inventories and the impact of subsequent events after the balance sheet date to determine the net realizable value.

Any excess of the cost over the net realizable value at the balance sheet date is recognized as a provision for the decline in value of inventories. The Group generally recognizes the provision for decline in value of inventories by single inventory item. If the previous factors caused the decline in value of inventoiesy have disappeared at the balance sheet date, the previously recognized provision for decline in value of inventories is reversed.

(4) Inventory count system

The Group maintains a perpetual inventory system.

13. Assets Held for Sale and Discontinued Operations

(1) Classification and measurement of non-current assets or disposal groups held-for-sale

The Group classifies a non-current asset or disposal group as held-for-sale when the carrying amount of the non-current asset or disposal group will be recovered through a sale transaction (including an exchange transaction of non-monetary assets with commercial substance) other than through continuous use.

The non-current assets mentioned above do not include investment properties subsequently measured by fair value model, biological assets measured at fair value less selling costs, assets arising from employee benefits, financial assets, deferred tax assets and contractual rights under insurance contracts.

The disposal group is a group of assets to be disposed of, by sale or otherwise, together as a whole in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction. Under certain circumstances, the disposal group includes goodwill acquired in a business combination.

A non-current asset or disposal group is classified as held-for-sale when all the following criteria are met: the non-current asset or disposal group is available for immediate sale in its present condition according to the customary practices of selling such asset or disposal group in similar transactions; the sale is highly probable to occur, that is, the Group has made a resolution on a sale plan and entered into a legally binding purchase agreement with other parties, and the sale is expected to be completed within one year. When the Group is committed to a sale plan involving loss of control of a subsidiary and the classification criteria for held-for-sale are met, the Group classifies the entire investment to subsidiary as held-for-sale in the separate financial statements, and classifies all the assets and liabilities of that subsidiary as held-for-sale in the consolidated financial statements, regardless of whether the Group retains any non-controlling interest in the subsidiary after the sale.

Non-current assets or disposal groups held-for-sale are initially and subsequently measured at the lower of carrying amount and fair value less selling cost. Any excess of the carrying amount over the fair value less selling cost is recognized as an impairment loss. The impairment loss recognized for a disposal group is adjusted to the carrying amount of goodwill allocated to the disposal group first, and then adjusted the carrying amount of other non-current assets on pro rata basis in proportion to the carrying amount of each non-current asset in the disposal group.

The Group recognizes a gain for any subsequent increase in fair value less selling cost of an asset in profit or loss for the current period, to the extent of the cumulative impairment loss that has been recognized after classified as held-for-sale. The reduced carrying amount of goodwill cannot be reversed.

The Group is no longer depreciated or amortized the non-current assets and assets in the disposal group once they have been classified as held-for-sale. The Group continue to recognize the interests and other expenses attributable to the liabilities of a disposal group classified as held-for-sale. If an entire or partial investment in an associate or a joint venture is classified as held-for-sale, the held-for-sale portion is no longer measured by the equity method while equity method is continue applied for the retain portion (which is not classified as held-for-sale). When the Group can no longer exercise significant influence over an associate or a joint venture due to the sale transaction, the use of equity method shall be suspended.

When an asset or disposal group is classified as held-for-sale, but no longer satisfies the recognition criteria for held-for-sale non-current assets subsequently, the Group ceases to classify it as held-for-sale, and measure it at the lower of:

① its carrying amount of the asset or disposal group before it was classifying as held-for-sale, and adjusted for any depreciation, amortization or impairment as if it has not being classified as held-for-sale; ② its recoverable amount.

(2) Discontinued operations

Discontinued operation is a component that either has been disposed or classified as held-for-sale by the Group if it is separately identifiable and satisfies one of the following conditions:

② It represents a separate major line of business or a separate geographical area of operations;

③ It is part of a single co-ordinated plan to dispose of a separate major line of business or a separate geographical area of operations;

③ It is a subsidiary acquired for the purpose of resale.

(3) Presentation

The Group presents a non-current asset classified as held-for-sale and the assets of a disposal group classified as held-for-sale as Assets held-for-sale in the balance sheet. While the liabilities of a disposal group classified as held-for-sale is presented as Liabilities held-for-sale in the balance sheet.

The Group separately presents profit or loss from discontinued operations and profit or loss from continuing operations in the income statement. Impairment loss and reversal amount and any disposal gain or loss of a non-current asset or disposal group classified as held-for-sale that does not meet the definition of a discontinued operation is included in profit or loss from continuing operations. Any gain or loss from continuing operation of discontinued operations, including impairment loss and reversal amount, and gain or loss on disposal is included in profit or loss from discontinued operations.

A disposal group which is planned to cease operation rather than for sale, and meets the criteria of a part of discontinued operation, the Group presents it as discontinued operation from the date of ceassation.

Where an operation is classified as discontinued in the current period, the information previously presented as profit or loss from continuing operations in the comparable period is reclassified to profit or loss from discontinued operations in the income statement for the current period. If the Group ceases to classify a discontinued operation as held-for-sale, the information previously presented as discontinued operations in the comparable period is reclassified to profit or loss from continuing operations.

14. Long-term Equity Investments

Long-term equity investments include equity investments in subsidiaries, joint ventures and associates. When the Group can exercise significant influence over the investee, the investee is its associate.

(1) Recognition of initial investment cost

Long-term equity investments arising from business combination: the initial cost of a long-term equity investment acquired through a business combination involving entities under common control is the Group’s share of the carrying amount of the subsidiary’s equity in the consolidated financial statements of the ultimate controlling party at the combination date. For a long-term equity investment obtained through a business combination not involving entities under common control, the initial cost is the combination cost.

For a long-term equity investment acquired other than through a business combination: a long-term equity investment acquired other than through a business combination is initially recognized at the amount of cash paid if the Group acquires the investment by cash, or at the fair value of the equity securities issued if an investment is acquired by issuing equity securities.

(2) Subsequent measurement and recognition of profit or loss

Investment in subsidiaries is measured by the cost method, unless the investment meets the conditions for held-for-sale while an investment in associates and joint ventures is measured by the equity method.

For a long-term equity investment which is subsequently measured by the cost method, except for cash dividends or profit distributions declared but not yet distributed that have been included in the price or consideration paid in obtaining the investments, the Group recognizes its share of the cash dividends or profit distributions declared by the investee as investment income for the current period.

For a long-term equity investment which is subsequently measured by the equity method, no adjustment is made to the initial investment cost if the initial cost of a long-term equity investment exceeds the Group’s interest in the fair value of the investee’s identifiable net assets. If the initial investment cost is less than the Group’s interest in the fair value of the investee’s identifiable net assets, the difference is recognized in profit or loss for the current period and the carrying amount of the long-term equity investment is adjusted accordingly.

Under the equity method, the Group recognizes its share of the investee’s net profit or loss as well as its share of the investee’s other comprehensive income, as investment income or losses and other comprehensive income, respectively. The carrying amount of the investment is also adjusted accordingly. The carrying amount of the investment is reduced by the portion of any cash dividends or profit distributions decalred by the investee that is attributable to the Group. Changes in the Group’s share of the investee’s owners’ equity, other than those arising from the investee’s net profit or loss, other comprehensive income or profit distribution, is recognized in the Group’s capital reserve (other capital reserve), and the carrying amount of the long-term equity investment is adjusted accordingly. The Group recognizes its share of the investee’s net profits or losses based on the fair values of the investee’s individual separately identifiable assets at the time of acquisition, after making appropriate adjustments thereto in conformity with the accounting policies and accounting periods of the Group.

When the Company becomes capable of exercising joint control or significant influence (but not control) over an investee due to additional investment or other reasons, the Group uses the fair value of the previously-held equity investment, together with additional investment cost, as the initial investment cost under the equity method on conversion date. The difference between the fair value and carrying amount of the previously-held equity, and the accumulated changes in fair value included in other comprehensive income, shall be transferred to profit or loss for the current period upon commencement of the equity method.

When the Group can no longer exercise joint control of or significant influence over an investee due to partial disposal of the equity investment or other reasons, the remaining equity investment shall be accounting for using Accounting Standard for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments. The difference between the fair value and the carrying amount of the remaining equity investment shall be recognized in profit or loss for the current period at the date when the joint control or significant influence is lost. Any other comprehensive income previously recognized under the equity method shall be treated on the same basis as would have been required if the Group had directly disposed of the related assets or liabilities for the current period upon discontinuation of the equity method. Other movement of owners’ equity related to original equity investment is transferred to profit or loss for the current period.

When the Group can no longer exercise control over an investee due to partial disposal of the equity investment or other reasons, and able to exercise joint control of or significant influence over an investee with the remaining equity after disposal, the remaining equity is adjusted by equity method as would have been applied from the date of acquisition. When the Group cannot exercise joint control of or significant influence over an investee with the remaining equity after disposal, the difference between the fair value and the carrying amount of the remaining equity investment shall be recognized in profit or loss for the current period at the date when the control is lost in accordance with Accounting Standard for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments.

When the Group can no longer exercise control over an investee due to new capital injection by other investors, and the Group can exercise joint control of or significant influence over an investee, the Group recognizes its share of the investee’s newly added net assets based on the new shareholding percentage. The difference between its new share of the investee’s newly added net assets and the reduction in the shareholding percentage of the original long-term equity investment is recognized in profit or loss for the current period. The long-term equity investment is adjusted accordingly to the new shareholding percentage by the equity method as it would have been used from the date of acquisition.

Unrealized profits or losses resulting from transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group’s interest in the associates or joint ventures. The Group recognized them as investment income or loss. Any losses resulting from transactions between the Group and the investee, which are attributable to impairment loss shall not be eliminated.

(3) Criteria for determining the existence of joint control or significant influence over an investee

Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. When assessing whether a joint control is existed, the Group considers whether the arrangement is controlled by all participants or a group of participants collectively. The Group also considers whether strategic decisions relating to the investee’s relevant activities require the unanimous consent of all participant parties that sharing of control. All participants or a group of participants are considered to control the arrangement collectively if they must act together to determine the activities related to an arrangement. If there are two or more groups of participants that can control an arrangement collectively, joint control is not exist. Protective rights are not taken into consideration when assessing whether a joint control is existed.

Significant influence is the power to participate in the financial and operating policy decisions of an investee but does not have control or joint control over those policies. When determining whether the Group can exercise significant influence over an investee, it considers the impact of direct or indirect voting rights held by the Group as well as the assumption of the current exercisable potential rights held by the Group or other parties have been converted into investee’s equity, including the impact of convertible warrants, share options and convertible bonds.

When the Group holds 20% (inclusive) or more but less than 50% of investee’s voting shares through its subsidiaries directly or indirectly, the Group has significant influence over the investee. Unless there is clear evidence indicated that the Group cannot participate in the production and business decisions of the investee, and therefore significant influence is not existed. When the Group holds 20% (exclusive) or less of the voting shares, the Group does not have significant influence over the investee. Unless there is clear evidence indicated that the Group can participate in the production and business decisions of the investee so as to form a significant influence.

(4) Equity investments held-for-sale

Accounting treatment for an entire or partial equity investment in an associate or a joint venture that is classified as held-for-sale, please refer to Note III. 13.

Any remaining equity investment that has not been classified as held-for-sale shall be measured by using the equity method.

When an equity investment in an associate or a joint venture that has been previously classified as held-for-sale no longer meets the criteria of held-for-sale, the equity method shall be adopted and retrospective adjustment is required from the date when it is classified as assets held-for-sale.

(5) Method of impairment testing and impairment provision

For impairment on investments in subsidiaries, associates and joint ventures, please refer to Note III. 22.

15. Investment Properties

Investment properties are properties held either to earn rental income or for capital appreciation or both. The Group’s investment properties include leased land use rights, land use right held and ready to transfer after appreciation and leased buildings.

The Group’s investment properties are initially measured at acquisition cost. They are depreciated or amortized in accordance with the relevant ruls of fixed assets or intangible assets.

For impairment on investment properties that are subsequently measured by the cost model, please refer to Note III. 22.

The balance of the disposal income from the sale, transfer, scrapping or damage of the investment real estate after deducting its book value and relevant taxes shall be recorded into the current profit and loss.

16. Fixed Assets

(1) Recognition of fixed assets

Fixed assets represent the tangible assets held by the Group for the use in production of goods, in supply of services, for rental or for administrative purposes with useful lives over one accounting year.

Fixed assets are only recognized when its related economic benefits is probable to flow to the Group and its cost can be reliably measured.

Fixed asset are initially measured at cost up on acquisition.

(2) Depreciation of fixed assets

The Group adopts the straight-line method for depreciation. Fixed asset begins to be depreciated when it is ready for its intended use, and stops being depreciated when it is derecognized or classified as non-current assets held for sale. Without considering the provision for impairment, the Group determines the annual depreciation rate of fixed assets according to the asset categories, estimated useful lives and estimated residual value of fixed as follows:

Note:

① For the immovable buildings on the leased land, they are depreciated over the shorter of the lease term of

land use right and the expected useful lives of the immovable buildings.s

② The Group purchased freehold lands in India and Ecuador. No depreciation is recognizes for these lands

because their estimated useful lives is uncertain. The Group tests for impairment on these lands every year.

For impaired fixed assets, depreciation rate is calculated based on the carrying amounts after deducting the provision for impairment.

(3) For the impairment on fixed assets, please refer to Note III. 22.

(4) Recognition, measurement and depreciation of fixed assets acquired under finance leases

Fixed assets leased by the Group are recognized as finance leases when they meet one or more of the following criteria:

① The ownership of leased assets is transferred to the Group by the end of the lease term.

② The Group has the option to purchase the leased asset at a price that is expected to be sufficiently lower than

the fair value at the date of the option becomes exercisable for it to be reasonably certain, at the inception of the lease, that the option will be exercised.

③ Even if the ownership of the assets is not transferred, the lease term covers for the most of the useful life of

the leased asset.

④ At the inception of lease, the present value of minimum lease payments amounts is substantially all of the fair

value of leased asset.

⑤ Leased assets are of a specialized nature that only the Group can use them without major modifications.

For fixed assets acquired under finance leases, the Group recognize their cost at the lower of the fair value of leased asset at the commencement of the lease term and the present value of minimum lease payment. The minimum lease payments are recorded as long-term payables. The difference between the carrying amount of the leased assets and the minimum lease payments is recognized as unrecognized financing charges. Initial direct costs such as handling charges, legal fees, travelling expenses and stamp duty attributable to the finance lease that are incurred by the Group are included in the carrying amount of the leased asset. Unrecognized finance charges are amortized by using the effective interest method over the lease term.

Depreciation is accounted for in accordance with the accounting policies of fixed assets. If there is reasonable certainty that the Group will obtain ownership of a leased asset at the end of the lease term, the leased asset is depreciated over its estimated useful life. Otherwise, the leased asset is depreciated over the shorter of the lease term and its estimated useful life.

(5) At the end of each year, the Group reivews the useful lives, estimated net residual values and depreciation methods of fixed assets

The Group adjusts the useful lives and estimated net residual values of fixed assets if they are different from the original estimated useful lives and net residual values.

(6) Overhaul costs

Overhaul costs occurred in regular inspection are recognized in the cost if there is undoubted evidence to confirm that this part meets the recognition criteria of fixed assets, otherwise, the overhaul costs are recognized in profit or loss for the current period. Fixed assets are depreciated during the period of regular overhaul.

17. Construction In Progress

Construction in progress is recognized based on the actual construction cost, including all expenditures incurred for construction projects, capitalized borrowing costs and any other costs directly attributable to bring the asset to working condition for its intended use.

Construction in progress is transferred to fixed asset when it is ready for its intended use.

For the impairment on construction in progress, please refer to Note III. 22.

18. Borrowing Costs

(1) Recognition of capitalizated borrowing costs

Borrowing costs inccured directly attributable to the acquisition, construction or production of a qualifying asset shall be capitalized as part of the cost of the asset. Other borrowing costs are expensed in profit or loss for the current period as incurred. The capitalization of borrowing costs shall commence only when the following criteria are met:

① asset expenditures have been incurred, including expenditures in the form of cash payment, transfer of non-cash assets or the assumption of interest-bearing liabilities;

② borrowing costs have been incurred;

③ acquisition, construction or production activities necessary for bring the asset to working conditions for its intended use or ready for sales have been commenced.

(2) Capitalization period of borrowing costs

Capitalization of borrowing costs ceases when qualifying the asset being acquired, constructed or produced becomes ready for its intended use, the borrowing costs incurred thereafter are recognized as expenses in profit or loss for the current period.

Capitalization of borrowing costs is suspended during periods in which the acquisition or construction of a qualifying asset is interrupted abnormally and the interruption is for a continuous period of more than 3 months. The borrowing costs incur during the normal interrupted period are continue to be captalized.

(3) Capitalization rate and calculation method of borrowing costs

For specific-purpose borrowings, the amount of interest to be capitalized is the actual interest expense incurred during the current period less any interest income earned from depositing the borrowed funds or any investment income on the temporary investment of those funds before being used on the asset. To the extent that the Group borrows funds generally and uses them for the acquisition and construction of a qualifying asset, the amount of borrowing costs eligible for capitalization is determined by applying a capitalization rate to the weighted average of the excess amounts of cumulative expenditure on the asset over the above amounts of specific borrowings. The capitalization rate is the weighted average of the interest rates applicable to the general-purpose borrowings.

During the capitalization period, exchange differences of specific-purpose borrowings in foreign currency are capitalized while the exchange differences of general-purpose borrowings in foreign currency are recognized in profit or loss for the current period.

19. Biological Assets

(1) Recognition criteria for biological assets

Biological assets are assets that composed of living animals and plants. Biological assets shall be recognized if they satisfy all of the following conditions:

① The entity owns or controls the biological asset due to past transactions or events;

② The economic benefits or potential service related to the biological asset are probable to flow into the entity; ③The cost of the biological asset can be measured reliably.

(2) Classification of biological assets

The Group’s biological assets include consumptive biological assets and productive biological assets.

① Consumptive biological assets

Consumptive biological assets are the biological assets held-for-sale or harvested as agricultural products in the future, including livestock for sale, etc. Consumptive biological assets are initially measured at cost. The cost of self-propagating or breeding comsumptive biological assets is the necessary expenditure incurred that can directly attributable to the asset before the asset is sold or stored in the warehouse, including capitalized borrowing costs. Subsequent expenditures after harvest such as management, protection and feeding expenses are recognized in the profit or loss for the current period.

When the consumptive biological assets are harvested or sold, the cost of goods sold is recognized based on the carrying amount using the weighted average method.

② Productive biological assets

Productive biological assets are the biological assets held for the purpose of producing agricultural products, providing services or leasing, including livestock production. Productive biological assets are initially measured at cost. The cost of productive biological asset by self-growing or propagating is the necessary expenditure directly attributable to the asset incurred before the asset reaches its intended production and operation purpose, including capitalized borrowing costs.

The subsequent expenditurse for managing, protecting and feeding the productive biological assets incurred after crown closure or reaching its intended objective of production and operation is recognized in profit or loss for the current period.

Productive biological assets are depreciated by straight-line method. Depreciation for each period is calculated and recognized based on the estimated useful lives less residual value of each type of biological assets.

At the end of each year, the Group reivews the useful lives, estimated net residual values and depreciation methods of productive bioglocal assets. If there is any change, it is treated as a change in accounting estimates.

The proceeds on disposal of productive biological asset for the sales, inventory loss, dead or damage less the carrying amount and related taxes are recognized in profit or loss for the current period.

(3) Impairment of biological assets

When the net realizable value of a consumptive biological asset is lower than its carrying amount, the difference is recognized as the impairment provision and the corresponding impairment loss is recognized in profit or loss for the current period. If the previous factors caused the decline in value of consumptive biological asset have disappeared at the balance sheet date, the previously recognized provision for decline in value of consumptive biological assets is reversed, to the extent of provision recognized in the past, the reversal amount is recognized in profit or loss for the current period.

For the impairment of productive biological assets, please refer to Note III. 22.

20. Intangible assets

Intangible assets include land use rights, patent rights, software use rights, trademarks, and non-patent, etc.

Intangible asset is initially measured cost and its useful life is determined at the time of acquisition. An intangible asset with a finite useful life is amortized by a method which can reflect the expected realization of economic benefits related to the asset since the intangible asset is available for use. When the expected realization of economic benefits cannot be reliably determined, intangible asset is amortized under straight-line method. An intangible asset with an indefinite useful life is not amortized.

At the end of each year, the Group reviews the useful life and amortization method of intangible assets with finite useful life. If there is any change, adjustment made to original estimates and it shall be treated as the change of accounting estimate.

On the balance sheet date, an intangible asset shall be derecognized in profit or loss for the current period when it is not expected to generate future economic benefits.

For the impairment of intangible assets, please refer to Note III. 22.

21. Research and development expenditure

Expenditure on an internal research and development project is classified into expenditure incurred during the research phase and expenditure incurred during the development phase.

Expenditures in the research phase is recognized in the profit or loss for the current period when incurred.

Expenditure in the development phase is capitalized only when the Group satisfies all of the following criteria: there is technical feasibility of completing the intangible asset so that it can be used or sold; has the intention to complete the intangible asset, and use or sell it; ways to generate economic benefits from the intangible asset, including the existence of a market for the output of the intangible asset or the intangible asset itself or, evidence of usefulness where it will be used internally; has sufficient technical, financial and other resources to complete the development of intangible assets as well as the ability to use or sell the intangible asset; the expenditure attributable to the intangible asset during its development phase can be measured reliably. If the development expenditure does not satisfied the above criteria, it is recognized as profit or loss for the current period.

The Group’s research and development projects will enter into the development phase when they meet the above criteria, technical and economic feasibility research is completed and granted the necessary approval of the project.

Capitalized expenditure on the development phase is presented as Development costs in the balance sheet and transferred to intangible assets when the project is reached its intended use.

22. Asset Impairment

The impairment of long-term equity investments in subsidiaries, associates and joint ventures, investment properties measured by the cost model, fixed assets, construction in progress, productive biological assets measured by the cost model, intangible assets, goodwill, etc. (excluding inventories, investment properties measured by the fair value model, deferred tax assets and financial assets) are determined as follows:

At the balance sheet date, the Group assesses whether there is any indication of impairment. If any indication exists, the Group will estimate the recoverable amount and test for impairment. For goodwill arising from a business combination, intangible assets with indefinite useful life and intangible assets that are not ready for use are tested for impairment annually, regardless of whether there is any indication of impairment.

The recoverable amount of an asset is the higher of its fair value less disposal costs and the present value of expected future cash flows. The Group estimates the recoverable amount based on each individual asset. If it is impossible to estimate the recoverable amount of each individual asset, the Group determines the recoverable amount for the asset group to which the asset belongs. An asset group is determined based on whether the main cash inflow generated by the asset group is independent of the cash inflow of other assets or asset groups.

An impairment loss is recognized in profit or loss when the recoverable amount of an asset is less than its carrying amount. A provision for impairment of the asset is recognized accordingly.

For the impairment test of goodwill, the carrying amount of goodwill arising from a business combination shall be allocated to the relevant asset groups by using a reasonable method from the date of acquisition. If the carrying amount of goodwill is unable to be allocated to the asset group, it shall be allocated to the relevant set of asset groups. Relevant asset group or set of asset groups is the asset group or group of asset groups, that is expected to benefit from the synergies of the combination and not greater than the reportable segment of the Group.

If any impairment indication exists in asset group or set of asset groups related to goodwill, the Group shall perform an impairment test for the asset group or set of asset groups which does not contain goodwill first, the recoverable amount is calculated and recognized the corresponding impairment losses. Then the Group shall perform an impairment test for the asset group or set of asset groups that contain goodwill by comparing its carrying amount and recoverable amount. If the recoverable amount is less than the carrying amount, impairment loss of goodwill is recognized.

Once an impairment loss is recognized, it cannot be reversed in a subsequent period. 23. Long-term deferred expenses

Long-term deferred expenses are measured at cost and amortized by using straight-line method over the expected beneficial period. If the Group cannot benefit from the long-term deferred in the future accounting period, the amortized cost shall be recognized in profit or loss for the current period.

24. Employee benefits

(1) Scope of employee benefits

Employee benefits refer to all forms of consideration or compensation given by the Group in exchange for service rendered by employees or for the termination of employment relationship. Employee benefits include short-term employee benefits, post-employment benefits, termination benefits and other long-term employee benefits. Benefits provided by the Group to the spouse, children, dependents, family members of deceased employees or other beneficiaries are also part of the employee benefits.

Employee benefits are separately presented as Employee benefits payable and Long-term employee benefits payable on the balance sheet based on the liquidity.

(2) Short-term employee benefits

Employee wages or salaries, bonuses, social insurance contributions such as medical insurance, work injury insurance, maternity insurance and housing fund, measured at the amount incurred at the applicable benchmarks and rates, are recognized as a liability as the employee provides services, with a corresponding charge to profit or loss or included in the cost of assets where appropriate. If the liability is not expected to be settled in full within 12 months after the end of the annual reporting period in which the employees render the related services, and has significant financial impact, the liability will be measured at the discounted value.

(3) Post-employment benefits

Post-employment benefit plan includes defined contribution plans and defined benefit plans. Defined contribution plans are post-employment benefit plans which an entity pays a fixed ount of fee to an independent fund and has no further payment obligation. Defined benefit plans are post-employment benefit plans other than defined contribution plans.

Defined contribution plans

Defined contribution plans include basic pension insurance, unemployment insurance, etc.

The contribution amount calculated according to the define contribution plan is recognized as a liability as the employee provides services, with a corresponding charge to profit or loss or included in the cost of assets where appropriate.

Defined benefit plans

For defined benefit plans, independent actuaries estimate the actuarial value at the balance sheet date to determine the cost of welfare by using the projected unit credit method. The Group recognizes the following components of employee benefits cost arising from defined benefit plan:

① service cost, comprising current service cost, past service cost and any gain or loss on settlement. Current service cost is the increase in the present value of the defined benefit plan obligation resulting from employee service in the current period. Past service cost is the increase or decrease in the present value of the defined benefit plan obligation for employee service in prior periods, resulting from a plan amendment.

② net interest on the net defined benefit plan liabilities or assets, including interest income on plan assets, interest cost on the defined benefit plan obligation and interest on the effect of the asset ceiling.

③ changes as a result of re-measurement of the net defined benefit liabilities or assets.

Item①and item②above should be recognized in profit or loss for the current period unless another accounting standard requires or permits the inclusion of the employee benefit costs in the cost of assets. Item③shall be recognized in other comprehensive income and shall not reclassified to profit or loss in a subsequent period. On termination of defined benefit plans, other comprehensive income previously recognized is transferred to retained earnings.

(4) Termination benefits

The Group provides termination benefits to employees, the employee liabilities arising from the termination benefits shall be recognized with a corresponding charge to profit or loss at the earlier of the following dates: when the Group cannot unilaterally withdraw the offer of termination benefits because of an employee termination plan or a curtailment proposal; when the Group recognizes the costs or expenses related to a restructuring plan involving the payment of termination benefits.

When the Group implements an internal retirement plan, the economic compensation before the formal retirement date is attributable to the termination benefits. The salaries and social insurance payment to be paid for the early-retired employee are recognized as one-off expense in profit or loss for the current period between the date when the employee stops rendering service and formal retirement. Economic compensation after the date of formal retirement (such as normal pension) shall be accounted for as post-employment benefits.

(5) Other long-term employee benefits

The Group provides other long-term employee benefits to the employees. For those satisfied the conditions for classifying as a defined contribution plan, they shall be accounted for in accordance with the requirements relating to defined contribution plan as described above. When the benefits satisfied the conditions for defined benefit plan, they shall be accounted for in accordance with the requirements relating to defined benefit plan described as above. The movement arising from the remeasurement of net liabilities or assets in the defined benefit plan shall be recognized in profit or loss for the current period or included in the cost of assets where appropriate.

25. Provisions

A provision is recognized for an obligation related to a contingency if all the following conditions are satisfied: (1) The Group has a present obligation;

(2) It is probable that an outflow of economic benefits will be required to settle the obligation;

(3) The amount of the obligation can be measured reliably.

A provision is initially measured at the best estimate of the expenditure required to settle the related present obligation and the relevant risk, uncertainty and time value of money shall be taken into consideration. Where the effect of the time value of money is significant, the best estimates are determined by discounting the expected future cash flows. The Group reviews the carrying amount of a provision at the balance sheet date and adjusts the carrying amount to the current best estimate.

If the entire or partial settlement related to the provision is expected to be compensated by a third party, and the compensated amount can be received certainly, the compensated amount is recognized as an asset. The recognized compensated amount shall not exceed the carrying amount of the provision.

26. Share-based Payment and Equity Instruments

(1) Types of share-based payment

The Group's share-based payment is classified into equity-settled share-based payment and cash-settled share-based payment.

(2) Recognition method of the fair value of equity instruments

If an active market exists for the equity instruments such as stock option granted by the Group, the fair value of the equity instrument shall be determined according to the quoted price in the active market. If an active market does not exist, the fair value of the equity instrument shall be determined by using the option pricing model. The Group considers the following factors when selecting the model: A) the exercise price of the option; B) the validity period of the option; C) current price of underlying stock; D) expected volatility of the stock price; E) expected dividend of the stock; F) risk-free interest rate within the validity period of the option.

(3) Basis for the best estimate of exercisable equity instruments

At each balance sheet date of the waiting period, the Group revises the number of equity instruments that will ultimately vest based on the best estimate of the latest number of eligible employees and other subsequent information. On vesting date, the number of expected vested equity instruments should be agreed with the actual number vested.

(4) Accounting treatments for the implementation, modification and termination of share-based payment plans

① Accounting treatment on the grant date

When the Group grants restricted shares to its employees under a share incentive plan, the Group shall recognize the share capital and capital reserve (share premium) on the grant date based on the subscription received from employees. The Group shall recognize the repurchase obligation based on the total repurchase amount as a liability, which shall be included in treasury stocks and presented as an allowance item for shareholders’ equity in the balance sheet.

No accounting treatment is required for stock option granted to the employees under a share incentive plan on the grant date.

② Accounting treatment during the waiting period

Equity-settled share-based payments of which vesting is conditional upon completion of services or fulfillment of performance conditions are measured by recognizing services rendered during the period in relevant costs or expenses and crediting the capital reserve accordingly at the fair value on the date of grant according to the best estimates conducted by the Group at each balance sheet date during the waiting period. If the share incentive plan is cancelled by forfeiture when the vesting conditions are not satisfied during the waiting period, the Group reverses the previously recognized relevant costs or expenses.

Restricted shares issued by the Group are eligible for profit distribution where cash dividends are cancellable. For the cash dividends allocated to the holders of restriced shares where their restricted shares are expected to be relieved in the future, the Group treats such cash dividends as profit distribution. For the cash dividends allocated to the holders of restriced shares where their restricted shares are expected not to be relieved in the future, the Group records the cash dividends against related liability. If any subsequent information indicates that the number of restricted shares that are expected not to be relieved in the future is different from the previous estimate, it shall be treated as a change in accounting estimates.

③ Accounting treatment on the vesting day or the day when the shares become unlock

When restricted stocks are regarded as the equity instrument for share-based payment, the Group shall repurchase and cancel those shares which did not meet the relevant requirement for unlocking. When the treasury stocks are cancelled, the share capital shall be reduced to the extent of the total par value of the treasury stocks cancelled. Where the cost of the treasury stocks cancelled exceeds the total par value, the excess is deducted from capital reserve (share premium), surplus reserve and retained earnings sequentially. If the cost of treasury stocks cancelled is less than the total par value, the difference is credited to the capital reserve (share premium). When the treasury stocks are transferred, any excess of proceeds above cost is recognized in capital reserve (share premium) while any shortall is deducted against capital reserve (share premium), surplus reserve and retained earnings sequentially. For restricted shares satisfied the unlock conditions where no repurchase is required, the Group reduced the corresponding liablities and treasury stocks by their carrying amount, any difference is adjusted to capital reserve (share premium).

When stock options are regarded as the equity instrument for share-based payment, the Group shall recognizes the subscription paid by the employees as share captial on the vesting date and the capital reserve recognized during the waiting period shall be transferred to share premium at the same time.

27. General risk provision

General risk provision refers to the provision for loan losses which has been deducted after calculating the potential risk estimate of a risky asset using the standard method, and is set aside from undistributed profits and used to partially cover the potential loss that has not been identified. Risk assets include loans, advances and other current assets held by subsidiaries engaged in financial business.

General risk provision is a provision that transferred from the undistributed profit to partially compensate any unidentified possible loss, after calculating the estimated potential risk of risk assets using the standard method and deducted the recognized loan impairment reserve. Risk assets include loans and advances to customers held by subsidiaries engaged in financial business, other receivables, etc.

28. Other Financial Instruments such as Preference shares, Perpetual Bonds

(1) Distinction between financial liabilities and equity instruments

The Group classifies the financial instrument or its components as a financial asset, financial liabilities or equity instruments at initial recognition, according to the contract terms of the financial instrument issued and its economic substance, not only in legal form, and in conjunction with the definition of financial assets, financial liabilities and equity instruments.

(2) Accounting treatment for preference shares, perpetual bonds

The Group initially recognizes and measures financial instrument in accordance with the standards of financial instrument. On the basis of the category of financial instrument issued, interest is accrued or dividends are paid at each balance sheet date according to the relevant accounting standards. For the financial instrument classified as equity instrument, the interest or dividend paid is treated as profit distribution of the Group, and the repurchase and cancellation of the financial instrument is treated as the movement in equity. For the financial instrument classified as financial liability, the interest or dividend paid is treated as borrowing cost, and gains or losses arising from the repurchase or redemption of financial instrument is recognized in profit or loss for the current period.

When the Group issues financial instrument, the relevant transaction costs such as handling charges and commission are recognized the intial amount of issued instrument if it is classified as debt instrument measured at amortized cost. The transaction costs are deducted against equity if it is classified as equity instrument.

29. Revenue

(1) General principle

The Group recognizes the revenue when it satisfied its performance obligation stated in the contract, that is, when the control of the good or service is transferred to the customer.

If the contract comprises two or more performance obligations, the Group allocates the transaction price to each performance obligation based on the proportion of sales price for the goods or service committed by each performance obligation at the commencement date of the contract. Revenue is recognized the allocated transaction for each performance obligation.

If one of the following conditions is satisfied, the Group satisfies its performance obligation over time; Otherwise, the performance obligation is satisfies at a point in time.

① The customer simultaneously receives and consumes the economic benefits provided by the Group's performance as the Group's performs its obligation;

② The Group’s performance produces good that the customer control as the good is created;

③ The Group’s performance produces goods without an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

For performance obligation satisfied over time, the Group shall recognize the revenue over time by measuring the progress toward complete satisfaction of that performance obligation. If the progress cannot be reasonably measured and the Group is expected to be compensated for the costs already incurred, revenue shall be recognized to the extent of the costs that have been incurred until the progress can be reasonably measured.

For performance obligation satisfied at a point in time, the Group recognizes revenue at the time when the control of good or service is transferred to the customer. The Group considers the following indications when determining whether the control of good or service is transferred to the customer:

① The Group has a present right to payment for good or service, i.e. the customer has a present payment

obligation for the good

② The Group has transferred the legal title of the good to the customer, i.e. the customer has the legal title.

③ The Group has transferred the physical good to the customer, i.e. the customer has physical possession.

④ The Group has transferred the significant risks and rewards of ownership of the good to the customer, i.e. the

customer hasthe signficant risks and rewards of ownership.

⑤ The customer has accepted the good.

⑥ Other indications that the customer has the control of the good.

Contract asset is recognized when the Group has the right to consideration in exchange for goods or services that the Group has transferred to ta customer (such right is conditional other than the passage of time). Impairment of contract assets is calculated based on the expected credit losses (please refer to Note III. 10 (6)). The Group presented the right to consideration is unconditional if only the passage of time is required before payment of that consideration is due, as accounts receivable.

Contract assets and contract liabilities under the same contract shall be presented as a net amount. The net amount is presented as Contract assets or Other non-current assets according to liquidilty if it has a debit balance. While the net amount is presented as Contract liabilities or Other non-current liabilities according to liquidilty if it has a credit balance.

(2) Specific method

The specific recognition method for the Group's sales of goods is as follows:

The Group recognizes the revenue when the customers collect the goods by door or the goods have been delivered to the designated location, and the customers accept the goods and obtain the control of goods.

For the sale of goods with sales return clauses, revenue recognition is limited to extent of cumulative recognized revenue that is unlikely to be materially reversed. The Group recognizes a liability according to the expected refund. The carrying amount of the returned goods less than the estimated cost to recover the goods (including the decline in value for the returned goods) is recognized as an asset at the same time.

30. Contract cost

Contract costs include the incremental costs of obtaining a contract and costs to fulfill a contract.

Incremental costs of obtaining a contract are the cost only incurred if the contract is obtained (i.e. commission). The Group expects to recover these costs and recognized as an asset of incremental costs of obtaining a contract. Other expenditures of obtaining a contract except for the incremental costs expected to be recovered, are recognized in profit or loss for the current period when incurred.

The Group recognizes the costs to fulfill a contract as an asset if the costs are incurred for fulfilling the performance obligation of the contract, do not fall within the scope of other accounting standards, such as inventory, and meet the following creteria:

① The costs directly related to a contract or an anticipated contract that can specifically identify, including direct

labor, direct matertials, manufacturing overheads (or similar expenses), costs explicitly chargeable to the customer and other costs incurred solely for the contract;

② The costs generage or enhance resources of Group that will be used in satisfying performance obligations in

the future.

③ The cost is expected to be recovered.

Assets recognized from costs of obtaining a contact and costs to fulfill a contract (hereinafter referred to as "assets related to contract cost") shall be amortized in the profit or loss for the current period on the same basis as revenue recognition of goods or services related to such assets. If the amortization period does not exceed one year, it is recognized in profit or loss for the current period when it occurs.

When the carrying amount of the assets related to the contract cost is greater than the difference between the following two items. The Group shall make provision for impairment of the excess amount and recognize as impairment loss:

① The remaining consideration that the Group is expected to be received as a result of the transfer of the goods

or services related to the asset;

② Costs probably incurred for transferring of the relevant goods or services

When the costs to fullfil the contract is recognized as assets with an amortization period less than one year or one normal business cycle at intial measurement, it is presented as Inventories. It is presented as Other non-current assets if the amortization period is over one year or one normal business cycle at initial measurement.

When the costs of obtaining a contact is recognized as assets with an amortization period less than one year or one normal business cycle at intial measurement, it is presented as Other current assets. It is presented as Other non-current assets if the amortization period is over one year or one normal business cycle at initial measurement. 31. Government grants

A government grant is recognized when there is reasonable assurance that the grant will be received and that the Group will comply with the conditions attaching to the grant.

If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or receivable. If a government grant is in the form of a transfer of a non-monetary asset, it is measured at fair value. If fair value cannot be reliably determined, it is measured at a nominal amount of RMB 1.

Government grants related to assets are grants whose primary condition is that the Group qualifying for them should purchase, construct or otherwise acquire long-term assets. Government grants related to income are grants other than those related to assets.

For government grants with unspecified purpose, the amount of grants used to form a long-term asset is regarded as government grants related to an asset, the remaining amount of grants is regarded as government grants related to income. If it is not possible to distinguish, the amount of grants is treated as government grants related to income.

A government grant related to an asset is offset against the carrying amount of the related asset, or recognized as deferred income and amortized to profit or loss over the useful life of the related asset on a reasonable and systematic manner. A grant that compensates the Group for expenses or losses already incurred is recognized in profit or loss or offset against related expenses directly. A grant that compensates the Group for expenses or losses to be incurred in the future is recognized as deferred income, and included in profit or loss or offset against related expenses in the periods in which the expenses or losses are recognized. Government grants measured at nominal amounts are directly recognized in the profit or loss for the current period. The Group applies the same method to the same or similar government grant.

A grant related to ordinary activities is recognized as other income or offset against related expenses based on the economic substance. A grant not related to ordinary activities is recognized as non-operating income.

For repayment of a government grant, if the government grant is offset against the carrying amount of the related asset at the time of recognition, the carrying amount of the related asset shall be adjusted. If there is related deferred income, the repayment is offset against the carrying amount of the deferred income, and any excess is recognized in profit or loss for the current period. Otherwise, the repayment is recognized immediately in profit or loss for the current period.

For the grant of interests on bank loan, the Group offset against the borrowing costs. 32. Deferred tax assets and deferred tax liabilities

Income tax comprises of current tax and deferred tax. Current tax and deferred tax are both recognised in current profit or loss except for the adjusted goodwill arising from business combination or the deferred tax related to the transactions or events directly included in the owner's equity.

Temporary differences arising from the difference between the carrying amount of an asset or liability and its tax base are recognized as deferred tax using the balance sheet liability method.

All the taxable temporary differences are recognized as deferred tax liabilities except for those incurred in the

following transactions:

(1) initial recognition of goodwill, or the initial recognition of an asset or liability in a transaction that is not a business combination and neither affects the accounting profit nor taxable profit;

(2) taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, and the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The Group recognizes a deferred tax asset for the deductible temporary differences, deductible losses and tax credits carried forward to subsequent periods, to the extent that it is probable that future taxable profits will be available against which deductible temporary differences, deductible losses and tax credits can be utilized, except for those incurred in the following transactions:

(1) a transaction that is not a business combination and neither affects the accounting profit nor taxable profit; (2) deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, the corresponding deferred tax asset is recognized when both of the following conditions are satisfied: it is probable that the temporary difference will reverse in the foreseeable future; and it is probable that taxable profits will be available in the future against which the temporary difference can be utilized.

At the balance sheet date, the Group measures the deferred tax assets and deferred tax liabilities according to the applicable tax rate during the period when the assets are expected to be recovered or the liabilities are settled, and reflect the income tax impact of the expected asset recovery or liability settlement method on the balance sheet date.

At the balance sheet date, the Company reviews the carrying amount of any deferred tax asset. If it is probable that sufficient taxable profits will not be available in future periods to allow the benefit of the deferred tax asset to be utilized, the carrying amount of the deferred tax asset is reduced. Any such reduction in amount is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

33. Operating lease and financial lease

A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of a leased asset to the lessee. An operating lease is a lease other than a finance lease.

(1) As a lessor

At the commencement of the lease term, the Group recognized the total of the minimum lease receipts determined at the inception of a lease and the initial direct costs as finance lease receivable, and recognized unguaranteed residual value at the same time. The difference between the total of minimum lease receipts, initial direct costs and unguaranteed residual value and their present value is recognized as unrecognized financing gains. Unrecognized financing gains are measured at amortized cost using the effective interest method over the lease term and recognized as financing charges for the current period.

Rental income derived from operating leases is recognized in profit or loss on a straight-line basis over the lease term. The initial direct costs incurred are recognized in profit or loss for the current period.

(2) As a lessee

When the Group acquires an asset under a finance lease, the carrying amount of asset is measured at the lower of the fair value of the leased asset and the present value of the minimum lease payments at the commencement of the lease term. The minimum lease payments are recorded as long-term payable. The difference between the carrying amount of the leased assets and the minimum lease payments is accounted for as unrecognized finance charges. Initial direct costs attributable to a finance lease that are incurred by the Group are included in the carrying amount of the leased asset. Unrecognized finance charges arising from a finance lease are recognized as finance charges for the current period using an effective interest method over the lease term. The Group depreciates leased assets in accordance with the depreciation policy for self-owned fixed assets.

Rental expenses derived from operating leases are recognized as cost of related asset or as expenses in profit or loss on a straight-line basis over the lease term. The initial direct costs incurred are recognized in profit or loss for the current period.

34. Repurchase shares

When the Group repurchase its own shares, those shares are treated as treasury stock before they are cancelled or transferred. All the expenditures relating to the repurchased shares are recorded as the cost of treasury stock. The consideration and transaction costs paid in share repurchase reduce the shareholders’ equity. No profit or loss is recognized when repurchasing, transferring or canceling the Group's shares.

When the treasury stock is transferred, the difference between the actual amount received and the carrying amount of treasury stock is recognized in capital reserve. Any excess is recognized in surplus reserve and retained earnings. When the treasury stock is cancelled, the share capital should be reduced to the extent of the total par value and the number of shares cancelled. The difference between the carrying amount and par value of the treasure stock cancelled is recognized in capital reserve. Any excess is recognized in surplus reserve and retained earnings.

35. Restricted stock

Under the share incentive plan, the Group grants restricted share to its employees, and the employees subscribe the share first. If the unlocking conditions specified in the share incentive plan are not met subsequently, the Group will repurchase the shares at the agreed price. When the procedures of the increase in capital completed such as registration in accordance with the relevant regulations, the Group recognizes the share capital and capital reserve (share premium) according to the subscription payment received from the employees on the date of grant. Treasury stock and other payables relating to the obligation of repurchase are recognized accordingly.

36. Hedge accounting

At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting, the risk management objective and its strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the Group will assess the effectiveness of the hedging instrument.

The Group assesses an ongoing basis to determine that the hedging instrument actually have been highly effective throughout the financial reporting periods for which they were designated. The hedge relationship is ceased if it is unsatisfactory. Hedging accounting should meet the following requirements for the effectiveness of hedging:

① There is an economic relationship between hedged items and hedging instruments.

② The impact of credit risk does not dominate in the change of value caused by the economic relationship

between hedged items and hedging instruments,

③ The hedging ratio of the hedging relationship should be equal to the ratio of the number of hedged items

actually hedged by the enterprise to the actual number of corresponding hedging instruments. It should not reflect the imbalance of the relative weight of the hedged item and the hedging instrument. This imbalance will cause the hedge to be invalid and may give accounting results that are inconsistent with objectives of the hedge accounting.

The Group ceases the use of hedge accounting if one of the following situation is exist:

① the hedging relationship is no longer meets the risk management objectives due to changes in risk management objectives

② The hedging instrument is expired, sold, the contract is terminated or has been exercised.

③ The economic relationship between the hedged item and the hedging instrument is no longer existed, or the impact of credit risk does not dominate in the change of value caused by the economic relationship between hedged items and hedging instruments,

④ The hedging relationship is no longer satisfied other conditions for using hedging accounting.

Fair value hedge

Fair value hedge refers to a hedge of the exposure to changes in fair value of a recognized asset or liability or an unrecognized firm commitment, or a component of any such item, that is attributable to a particular risk. This change in fair value would affect the Group’s profit or loss, or other comprehensive income.

Any gain or loss arising from fair value hedge is recognized in profit or loss for the current period. Gain or loss of hedged item arising from the exposure of risk is recognized in profit or loss for the current period, and adjusted the carrying amount of hedged items not measure at fair value accordingly.

If the hedged item is a financial instrument (or its component) measured at amortized cost, any adjustment to the carrying amount of the hedged item is amortized to profit or loss. The amortization is based on a recalculated effective interest rate at the date that amortization begins.

When unrecognized firm commitment is designated as a hedged item, the cumulative change in the fair value of the hedged item subsequent to its designation is recognized as an asset or a liability with a corresponding gain or loss recognized in profit or loss for the current period. When an asset is obtained or a liability is committed through the fulfillment of confirmed commitment, the intial amount of such asset or liability is adjusted according to the cumulative change in the fair value of recognized hedged item.

Cash flow hedging

Cash flow hedge refers to a hedge of exposure from cash flow changes. This variability in cash flows is attributable to a particular risk associated with a recognized asset or liability or a highly probably forecast transaction and can affect profit or loss.

The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized as cash flow hedging reserve in other comprehensive income. Any remaining gain or loss on the hedging instrument that is hedged ineffective is recognized in profit or loss for the current period.

For cash flow hedging, when the hedged item is an expected transaction, and a non-financial asset or non-financial liability arising from the expected transaction, or fair value hedge accounting is applicable to a commitment arising the expected transaction of non-financial assets or non-financial liability, the Group transfers the cash flow hedging reserve previously recognized in the other comprehensive income to the initial recognition amount of such asset or liability.

For cash flow hedges that do not fall into the above situations, the Group transfers cash flow hedging reserve previously recognized in the other comprehensive income to profit or loss for the period when the the profit or loss is impacted by the expected cash flow being hedged.

If the cash flow hedging reserve recognized in the other comprehensive income is a loss, the entire or part of the loss is not expect to be recovered in the future accounting period, the Group transfers the unrecovered portion from the other comprehensive income to profit or loss.

When the Group ceases the use of hedging accounting for cash flow hedges, the cumulative cash flow hedging reserve recognized in the other comprehensive income is retained if the hedged cash flow is expected to occur in the future. The cash flow hedging reserve is treated in accordance with the accounting policies of cash flow hedging mentioned above when the expected transaction has occurred. The cumulative cash flow hedging reserve recognized in the other comprehensive income is transferred to profit or loss for the current period if the hedged cash flow is not expected to be occurred in the future. If the hedged cash flow is no longer probable to be occurred in the future but it may still be expected to be occurred, the cumulative cash flow hedging reserve recognized in the other comprehensive income is retained until the expected transaction has occurred, it is then treated in accordance with the accounting policies of cash flow hedging mentioned above

37. Significant accounting estimates and judgments

The Group assesses the significant accounting estimates and key assumptions on an ongoing basis, based on the historical experience and other factors, including reasonable expectation of future events.

It is probable that the significant adjustment risk to the carrying amount of assets and liability in the next accounting period will arise from the following significant accounting judgments and key assumptions:

Measurement of expected credit losses on accounts receivable

The Group calculates the expected credit loss of accounts receivable through the default risk exposure of accounts receivable and the expected credit loss rate of accounts receivable. The Group determines the expected credit loss rate based on the probability and loss rate of default. When determining the expected credit loss rate, the Group uses internal historical credit loss experience and other data, and adjusts the historical data in conjuction with current conditions and forward-looking information. When considering forward-looking information, the indicators used by the Group include the risk of economic downturn, changes in the external market environment, technological environment and customer situation. The Group regularly monitors and reviews assumptions related to the calculation of expected credit losses.

Impairment of goodwill

The Group assesses the impairment of goodwill at least once a year. The Group shall evaluate the value in use for the cash-generating units to which goodwill has been allocated. When assessing the value in use, the Group requires to estimate the expected future cash flows from the cash-generating unit and select an appropriate discount rate to calculate the present value.

Deferred tax asset

To the extent that there is likely that there will be sufficient profits to offset losses, deferred tax assets should be recognized for all unutilized tax losses. The management requires using many judgments to estimate the time and amount of future taxable profits, in conjuction with tax planning strategies, to determine the amount of deferred tax assets that should be recognized.

38. Changes in significant accounting policies, accounting estimates

(1) Changes in significant accounting policies

New revenue standards

The Ministry of Finance issued the Accounting Standards for Business Enterprises No. 14 - Revenue (Revised)> in 2017 (hereinafter referred to as the "New Revenue Standards"). The Group adopted the New Revenue Standards from January 1, 2020 after the resolution of the second meeting of the Audit Committee of the Board of Directors in 2020. The relevant accounting policies have been revised.

T he Group recognizesthe revenue when itsatisfied itsperformanceobligation stated in thecontract,thatis,whenthe controlofthe good orservice is transferred to the customer.The Group satisfies the performance obligationovertime when certain creteria are met,otherwise itsatisfies theperformance obligation ata pointin time.Ifthecontract comprises two or more performance obligations, the Group allocates the transaction price to eachperformance obligation based on the proportion of sales price for the goods or service committed by eachperformance obligation atthecommencementdateofthecontract.Revenueisrecognized theallocated transactionforeach performanceobligation.

The Group revised the relevant accounting policies in accordance with the specific provisions on specific matters or transactions under the New Revenue Standards.

When the Group has the right to consideration in exchange for goods or services that the Group has transferred to ta customer and such right is conditional other than the passage of time, the Group presents as contract assets. The Group presents its obligation to transfer goods for which the Group has received consideration from the customer in the balance sheet as contract liabilities.

The Group has recognized the cumulative effect of initial application as an adjustment to the opening balance of retained earnings and the amount of other relevant items in the financial statements at January 1, 2020, and comparative information has not been restated. The Group only adjusted the cumulative effect of contracts that were not completed before January 1, 2020 to the opening balance of retained earnings and the amount of other relevant items in the financial statements at January 1, 2020.

Details and reason for changes in accounting policies Affected financial statement line item

Affected amount

(January 1, 2020)

The Group adopted the New Revenue Standard and recognized the conditional right to consideration related to the sale of goods and provision of services as contract assets; reclassified the advances from customers related to the sale of goods and services to contract liabilities.

Advances from customers -1,548,283,455.21

Contract liabilities 1,539,648,813.53

Other current liabilities 8,634,641.68

Compared with the previous revenue standard, the impact on the related items in the financial statements for the year ended December 31, 2020 after the adoption of New Revenue Standards is as follows:

Affected balance sheet line items Affected amount

December 31, 2020

Advances from customers -1,905,798,347.24

Contract liabilities 1,889,338,880.88

Other current liabilities 16,459,466.36

Affected income statement line items Affected amount

For the year ended December 31, 2020

Operating costs 309,274,562.97

Selling and distribution expenses -309,274,562.97

(2) Changes in significant accounting estimates

There was no change in the Group’s significant accounting estimate during the reporting period.

(3) Impact of the adoption of New Revenue Standards on the relevant items in the financial statements as at January 1, 2020

Consolidated balance sheet

Company Balance Sheet

IV. Taxation

1. Main type of taxes and corresponding tax rates

Note 1: In accordance with document Caishui [2001] No. 121 jointly issued by the Ministry of Finance and the State Administration of Taxation, the Company and its subsidiaries are exempted from VAT on their feed products, which has been filed with the tax authority in charge.

Note 2: The Company and its subsidiaries are eligible for valued-added tax exemption when selling self-produced products in accordance with Article 16 “Agricultural producers are exempted from value-added tax when selling self-produced agricultural products” of the Interim Regulation of People’s Republic of China on Value-Added Tax.

Note 3: According to announcement 2020 No. 13 issued by the Ministry of Finance and State Taxation Administration, “Announcement of State Taxation Administration and the Ministry of Finance on the Policy of Supporting the Value-added Tax of Individual Industrial and Commercial Businesses Returning to Work>, VAT will be levied at a reduced rate of 1% for small-scale taxpayers during the epidemic period.

Note 4: According to the Notice of Ministry of Finance and State Taxation Administration on Policy of Streamlining and Combination of Value-Added Tax Levy Rates (Caishui [2014] No. 57), Qingyuan Haibei Biotechnology Co., Ltd. and Sichuan Hailinger Biopharmaceutical Co., Ltd., the subsidiaries of the Company are eligible for 3% simplified VAT levy rate on their sales revenue. VAT on other taxable revenue is subject to applicable tax rates.

Note 5: In accordance with the regulation of the Announcement of Related Policies on Further Reformation of Value-added Tax by the Ministry of Finance, State Taxation Administration and General Administration of Customs (Ministry of Finance, State Taxation Administration General Administration of Customs Announcement 2019 No. 39), the VAT rate changed to 13% and 9% since April 1, 2019 for those taxable sales that were formerly subject to 16% and 10%, respectively.

Note 6: In accordance with the VAT regulation of the Socialist Republic of Vietnam, feed and feed-related industries are exempted from VAT since 2016. The freezer rental revenue from SHENG LONG BIO-TECH INTERNATIONAL CO.,LTD, a company incorporated in Vietnam, is subject to VAT at 10%.

2. Corporate Income Tax

Note 1: The Company’s subsidiaries Jiangmen Haida, Guangdong Haiinte, Qingyuan Haibei, Zhuhai Rongchuan, Zhuhai Hailong, Yunnan Haida, Heze Haiding, Hunan Innovation, Shijiazhuang Weike, Shenyang Haida were recognized as high-tech enterprises by their respective provincial departments of science and technology, departments of finance, offices of the State Administration of Taxation or local taxation bureaus with an effective period of three years. Their applicable corporate income tax rate for 2020 is 15%.

Note 2: In accordance with Corporate Income Tax Law of the People’s Republic of China and the Regulation on the Implementation of the Corporate Income Tax Law of the People’s Republic of China, the income of the Company’s subsidiaries that is derived from livestock and poultry farming and veterinary service is exempt from corporate income tax

Note 3: 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 Ronghai, Nanhai Bairong, Zhaoqing Bairong, Enping Fengwo, Hunan Haid, Taizhou Haid, Changzhou Haid, Zhongshan Ronghai, Guangzhou Rongda, Zanjiang Haijingzhou, Jingtai Haijingzhou, Zhangzhou Haijingzhou, Linyi Bairong, Jiangmeng Ronghai, Zhaoqing Ronghai, Yongji Haijing Island, Yuncheng Haishengyuan, Yuncheng Haishengyuan, Nantong Haijing Island, Shanwei Haijing Island, Hainan Bairong, Zhaoqing Baishengyuan, Guangxi Ronghai, Hainan Haida Seed Industry, Yancheng Runchuan, subsidiaries of the Company were subject to 50% discount on corporate income tax rate of 25% on their income from marine and/or inland aquaculture in accordance with Article 27 of the Corporate Income Tax Law of the People’s Republic of China and Article 86 of the Regulation on the Implementation of the Corporate Income Tax Law of the People’s Republic of China. Other income is subject to corporate income tax rate at 25%.

Note 4: Rongcheng Yandunjiao, the subsidiary of the Company, manufactures fish powder and shrimp powder. Income from these primarily processed agricultural products is exempt from corporate income tax in accordance with Notice of the Ministry of Finance and State Administration of Taxation on Announcing the Scope of Primary Processing of Agricultural Products Covered by Preferential Policies on Corporate Income Tax (for Trial Implementation) (Caishui [2008] No. 149). Other income is subject to corporate income tax at 25%.

Note 5: Fujian Haidsun and Pucheng Haidsun, the subsidiaries of the Company, manufacture chicken powder. Income from the sales of these primarily processed agricultural products is exempt from corporate income tax in accordance with Notice of the Ministry of Finance and State Administration of Taxation on Announcing the Scope of Primary Processing of Agricultural Products Covered by Preferential Policies on Corporate Income Tax (for Trial Implementation) (Caishui [2008] No. 149). Other income is subject to corporate income tax at 25%.

Note 6: Jiaxiang Haiying, Linxi Haiying, Yiyuan Haiying, Zouping Haiying ,Binzhou Haiying, Zhongshan Yugezi, Qingyuan Haichuan, subsidiaries of the Company engaged in slaughtered and cut poultry. Income derived from the sales of these primarily processed agricultural products is exempt from corporate income tax in accordance with Notice of the Ministry of Finance and State Administration of Taxation on Announcing the Scope of Primary Processing of Agricultural Products Covered by Preferential Policies on Corporate Income Tax (for Trial Implementation) (Caishui [2008] No. 149). Other income is subject to corporate income tax at 25%.

Note 7: Chengdu Haid, Yangling Haid and Gansu Haid, the subsidiaries of the Company are enjoying a preferential corporate income tax rate of 15% for the period from 2013 to 2020, 2018 to 2020 and 2019 to 2020, respectively, in accordance with the Notice of the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation on Tax Policy Issues Concerning Further Implementing the Western China Development Strategy (Caishui [2011] No. 58) and the Announcement of the State Administration of Taxation on Issues Concerning Corporate Income Tax Related with Further Implementing the Western China Development Strategy (Announcement 2012 No.12)

Note 8: Rickworth, Panasia Trading, Sheng Long International, Hisenor International, Nano, Oceanic, Power Spring, and Link, subsidiaries of the Company, were registered in British Virgin Islands. These subsidiaries are exempted from corporate income tax according to the local tax law.

Note 9: Haida HK, Hong Kong Longreat and Dancl, subsidiaries of the Company, were registered in Hong Kong. They were subject to a profit tax rate of 16.50% according to Inland Revenue Ordinance in Hong Kong.

Note 10: Dong Nai Haid, Dong Nai Haid, Sheng Long Bio-Tech, Long Sheng, Hisenor Vietnam, Namduong Vietnam, Hai Duong, Hai Dai Company, Vinh Long Hai Dai and Vietnam Haibei, subsidiaries of the Company, are registered in Vietnam.

① Dong Nai Haid and Hai Duong are eligible for corporate income tax exemption for the first two year from the year in which the profit was generated for the first time by the company, then half for the subsequent four years in according to the preferential tax policy. Dong Nai Haid and Hai Duong Haid generated profits in 2019 for the first time. They were exempt from corporate income tax in 2020.

② Vinh Long Hai Dai is eligible for corporate income tax exemption for the first two year from the year in which the profit was generated for the first time by the company, then half for the subsequent four years in according to the preferential tax policy. Vinh Long Hai Dai generated its profits in 2020 for the first time. It was exempt from corporate income tax in 2020.

③ Vietnam Haibei is eligible for corporate income tax exemption for the first two year from the year in which the profit was generated for the first time by the company, then half for the subsequent four years in according to the preferential tax policy. Vietnam Haibei did not generate profit in 2020 and exempt for corporate income tax

④ In accordance with the preferential policies of the Vietnamese government on new investment and industries in difficult areas, Sheng Long Bio-Tech enjoyed a preferential corporate income tax rate at 10%, rental income for cold storage and sales of raw materials were subject to tax rate at 20%. Animal insurance is taxed at 17% with 50% reduction. Other income was subject to a tax rate at 20%.

⑤ In accordance with the preferential policies of the Vietnamese government on new investment in difficult areas, Long Sheng continued to enjoy a preferential tax rate (10% for feed output less than 27,000 ton while any excess is taxed at 20%).

⑥ Namduong Vietnam and Hisenor Vietnam were engaged in breeding of shrimp. They were exempted from corporate income tax in accordance with the Vietnamese tax law.

⑦ The corporate income tax rate for Hai Dai Company and Dong Nai Haid was 15% in accordance with the Vietnamese tax law.

Note 11: Sheng Long Malaysia, Kembang Subur International, Sheng Long Aquatic Malaysia and Golden international, subsidiaries of the Company, were registered in Malaysia and subject to a corporate income tax rate of 24% in accordance with the Malaysian tax law.

Note 12: Lanking, Lanking Nemo, Lanking Rickworth, Lanking Nano, Kinghill Holdings, Kinghill Pte., Kinghill Resources and Kinghill Agri, subsidiaries of the Company, were registered in Singapore and subject to a corporate income tax rate of 17% in accordance with the Singaporean tax law.

Note 13: Lanking America, a subsidiary of the Company registered in the U.S. It is subject to variable tax rates according to the U.S. federal taxation system. No federal corporate income tax was due since the company suffered a loss in 2020 while a minimum tax payment of USD800 of California was due in 2020 (corporate income tax in California is calculated by 8.84% of the taxable income).

Note 14: Sheng Long India, a subsidiary of the Company, registered in India and subject to a corporate income tax rate of 25% in accordance with the Indian tax law.

Note 15: Dingtao Hairong, Zhangzhou Hairong and Heze Hairong, subsidiaries of the Company, were exempted from corporate income tax in 2020. Their income from agriculture, forestry, animal husbandry and fishery were eligible for preferential tax policies on exemption or reduction of corporate income tax in accordance with Article 27.1 of the Corporate Income Tax Law of the People’s Republic of China.

Note 16: Chengnan Hairong and Guigang Hairong, subsidiaries of the Company were exempted from corporate income tax. Their income from agriculture, forestry, animal husbandry and fishery were eligible for preferential tax policies on exemption or reduction of corporate income tax in accordance with Article 27.1 of the Corporate Income Tax Law of the People’s Republic of China. Other income are subject to a corporate income tax rate at 20% base on preferential tax incentives for small profit-making enterprise (refer to Note.18).

Note 17: Haid Ecuador and HAIDMARINO Food, subsidiaries of the Company registered in Ecuador. According to Ecuador’s tax laws, enterprises begin to enjoy the tax exemption period for 12 years after issuing the first invoice. The tax rate after the tax exemption period is 25%. Haid Ecuador and HAIDMARINO Food were in the construction period in 2020 and exempted from corporate income tax.

Note 18: For Guangzhou Haishenyuan, Guangzhou Mutai, Guangzhou Profit Source, Weinan, Anyang Haiyue, Zoucheng Haiyue, Yinan Haiyue, Guangzhou Haiyou, Wuhan Shuijiyuan, Guangzhou warehouse, Chennan HaiRong, Guigang HaiRong, Jinan Fengcheng, Jining Fengchen, Linyi Hedong HaiDing, Qingzhou HaiDing, Qinggangfeng ChengBai, ChengWu Fengcheng, Xu Changhaihe, AnYangHai, Jiangsu Haihe, Lianyungang Haihe, AnShandachuan, Guiyang Zhihai, Foshan Haida, Guangzhou Yannong, Qingdao Spider-Man, Shijiazhuang Huilong, Handan Huilong, Huaian Huilong, Guangdong Haida Bio, Dali Haiwang, Yunnan Zhonggui, Guangzhou Haiqi, Guangzhou Chenzhao, the subsidiaries of the Company, the taxable income is reduced to 25% for the portion of the annual taxable income of a small low-profit enterprise that does not exceed RMB1 million and taxed at 20% for corporate income tax; the taxable income is reduced to 50% for the portion of the annual taxable income exceeding RMB1 million but not exceeding RMB3 million and taxed at 20% for corporate income tax in accordance with Announcement of the State Administration of Taxation on the Issues Concerning the Implementation of the Inclusive Income Tax Relief Policy for Small and Small Profit Enterprises (State Administration of Taxation Announcement 2019 No. 2) for the period from January 1, 2019 to December 31, 2021.

Note 19: Xinjiang Ruiliheng and Wujia Canal Tai Kun, the subsidiaries of the Company, manufacture cottonseed oil, cottonseed meal, boll hull, cotton linter, Chinese honeylocust fruit and grey cotton. Income from these primarily processed agricultural products is exempt from corporate income tax in accordance with Notice of the Ministry of Finance and State Administration of Taxation on Announcing the Scope of Primary Processing of Agricultural Products Covered by Preferential Policies on Corporate Income Tax (for Trial Implementation) (Caishui [2008] No. 149). Other income is subject to corporate income tax at 25%.

Note 20: Haida Indonesia, Haida Surabaya and Hisenor Indonesia, subsidiaries of the Company, were registered in Indonesia and subject to a corporate income tax rate of 22% in accordance with the Indonesian tax law.

Note 21: Haid International, a subsidiary of the Company registered in the British Virgin Islands, it is exempted from corporate income tax according to the local tax law. Meanwhile, it is considered as a tax resident enterprise in Hong Kong since it is operates and locates in Hong Kong. The treasury center business for Haid International was subject to income tax rate at 8.25% with 50% reduction in 2020.

Note 22: Haid Egypt, a subsidiary of the Company registered in Egypt and subject to a corporate income tax rate of 22.5% in accordance with the Egyptian tax law.

Note 23: Sanya FengMu, a subsidiary of the Company which was an encouraged industrial enterprises registered and substantially operated in Hainan Free Trade Port. The corporate income tax rate is reduced to 15% in accordance with Notice of the Ministry of Finance on Enterprise Income Tax Preferential Policies of Hainan Free Trade Port. (Caishui [2020] No. 31).

Note 24: Taiwan Shenglong, a subsidiary of the Company registered in Taiwan and subject to a corporate income tax rate of 20% in accordance with the Taiwanese tax law.

Note 25: In accordance with Notice of Guangxi Zhuang Autonomous Region Finance Department, State Administration of Taxation, Guangxi Zhuang Autonomous Region Taxation Bureau on Further Clarifying the Policy of Local Sharing of Enterprise Income Tax for Enterprises Producing and Operating Anti-epidemic Supplies (Guicaishui [2020] No. 3) and the Notice of Guangxi Zhuang Autonomous Region Finance Department, State Administration of Taxation Guangxi Zhuang Autonomous Region Taxation Bureau on Printing and Issuing Several Preferential Tax Policies of Further Supporting Enterprises to Return to Work and Production (Guicaishui [2020] No. 13), feed produced by enterprise was considered as the key materials for epidemic prevention and control, the local share of corporate income tax was exempted in 2020. Guigang Haida was subject to corporate income tax rate at 15%.

Note 26: Guam Xingyuan, a subsidiary of the Company registered in Guam of the United States of America and subject to a corporate income tax rate of 21% in accordance with the local tax laws of Guam of the United States of America.

Note 27: Pingguo Country Yigu Ecological Agriculture Co., Ltd, a subsidiary of the Company, changed its name to Pingguo Yigu City Ecological Agriculture Co., Ltd in July 2020.

Note 28: Guangzhou Zhongcangsheng Trading Co., Ltd, a subsidiary of the Company, changed its name to Guangzhou Zhongcangsheng Feed Co., Ltd in May 2020.

Note 29: Liaocheng Haiding Food Co., Ltd, a subsidiary of the Company, changed its name to Jinan Fengcheng Agriculture and Animal Husbandry Co., Ltd in October 2020.

Note 30: Linyi Bairong Aquaculture Co., Ltd, a subsidiary of the Company, changed its name to Shandong Bairong Aquatic Products Co., Ltd in April 2020.

Note 31: Hunan Jinhuilong Agriculture and Animal Husbandry Development Co., Ltd, a subsidiary of the Company, changed its name to Hunan Jinhuilong Technology Co., Ltd in June 2020.

V Notes to Key Items in Consolidated Financial Statements

1. Cash at bank and on hand

Item 2020.12.31 2019.12.31

Cash on hand 575,655.36 1,127,806.04

Cash in bank 1,768,691,707.88 1,788,428,202.67

Other monetary funds 287,204,269.51 60,179,904.13

Total 2,056,471,632.75 1,849,735,912.84

Including: Total overseas deposits 358,120,473.45 450,854,249.90

Note:

(1) Interest receivable included in cash in bank is RMB 3,912,754.59.

(2) For cash with restriction, please refer to Note V “66. Assets with restricted ownership or use right”. 2. Held-for-trading financial assets

Item 2020.12.31 2019.12.31

Held-for-trading financial assets 336,719,309.28 28,583,495.35

Including: Derivative financial assets 86,719,309.28 28,583,495.35

Bank financial products 250,000,000.00 -

Total 336,719,309.28 28,583,495.35

Note:

(1) There were no held-for-trading financial assets as restrictively realizable as of the end of the reporting

period.

(2) At the end of the current period, the derivative financial asset is the fair value of the futures business. 3. Notes receivables

Category As at 31/12/2020 As at 31/12/2019

Book value Provision for bad and doubtful debts

Book value Provision for bad and doubtful debts

Carrying amounts

Carrying

amounts

Bank acceptance bills

12,713,381.26 - 12,713,381.26 5,816,473.71 - 5,816,473.71

Usance letters of credit

5,120,370.58 - 5,120,370.58 4,905,927.61 - 4,905,927.61

Total 17,833,751.84 - 17,833,751.84 10,722,401.32 - 10,722,401.32

(1)The Group had no notes receivables in pledge as of the end of the reporting period.

(2)At the end of the reporting period, the Group does not have endorsed or discounted notes receivable that have not yet matured

(3)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.

(4)Category by provision for bad and doubtful debts approach

Category 2020.12.31

Book value Provision for bad and doubtful

debts Carrying

Amount Expected

amounts

Amount Percentage (%)

credit loss

percentage (%)

Assessed for

impairment individually

- - - - -

Assessed for

impairment collectively

17,833,751.84 100.00 - - 17,833,751.84

Including:

Bank acceptance

12,713,381.26 71.29 - - 12,713,381.26

bills

Usance letters of

5,120,370.58 28.71 - - 5,120,370.58

credit

Total 17,833,751.84 100.00 - - 17,833,751.84

(Continued)

Category 2019.12.31

Book value Provision for bad and doubtful

debts Carrying

Amount Expected

amounts

Amount Percentage (%)

credit loss

percentage (%)

Assessed for impairment individually

- - - - -

Assessed for impairment collectively

10,722,401.32 100.00 - - 10,722,401.32

Including:

Bank acceptance bills

5,816,473.71 54.25 - - 5,816,473.71

Usance letters of credit

4,905,927.61 45.75 - - 4,905,927.61

Total 10,722,401.32 100.00 - - 10,722,401.32

(5)Recognitions or recoveries or reversals of provision for bad and doubtful debts in current period

4. Accounts receivable

(1)Accounts receivable by aging

(2)Accounts receivable by the method of recognizing bad and doubtful debts

Provision for bad and doubtful debts which were recognized individually：

2020.12.31 2019.12.31

Book Value Provision for bad and doubtful debts

Book Value Provision for bad and doubtful debts

Expected Credit loss (%)

Name

Expected Credit loss (%)

Reason of provision

Reason of

provision

Customer E 2,134,757.09 1,414,917.13 66.28 Estimated to be unrecoverable

- - -

Remaining individual customers

41,001,988.19 38,388,390.95 93.63 Estimated to be unrecoverable

52,596,447.97 47,616,742.96 90.53 Estimated to be

unrecoverable

Total 67,574,375.63 64,143,642.54 94.92 / 71,004,746.63 66,025,041.62 92.99 /

Provision for bad and doubtful debts which were recognized collectively:

Recognized collectively item 1: Accounts receivable of feed and relevant customers

Recognized collectively item 2: Accounts receivable of material trade customers

(3)Recognitions or recoveries or reversals of provision for bad and doubtful debts in current period

Recoveries or reversals of important provision for bad and doubtful debts in current period are as follow:

(4)Accounts receivable actually written off in current period

Item Write-off amount

Important accounts receivable written off are as follow:

(5)The receivables by debtor with top five closing balance

The total accounts receivable from the top five debtors with the largest closing balance amounted to RMB 141,265,924.86, accounting for 11.69% of the total closing balance of accounts receivable, with the total corresponding closing balance of the provision for bad and doubtful debts being RMB 2,170,837.27.

(6)No accounts receivable was derecognized due to transfer of financial assets in current period.

(7)There were no such cases in current period where the Group had transferred an accounts receivable but continued to be involved in the assets or liabilities associated with that account receivable.

5. Prepayments

(1)Prepayments by aging

Note: Prepayments over 1 year were mainly unsettled prepayment to suppliers.

(2)The prepayments by debtor with top five closing balance

The total amount of prepayments by debtor with top five closing balance was RMB 1,044,805,112.02, accounting for 55.85% of the closing balance of total prepayments.

6. Other receivables

(1)Interest receivable

①Interests receivable by category

②Provision for bad and doubtful debts

(2)Dividends receivable

There was no dividends receivable in the Group at the end of current period.

(3)Other receivable

①Other receivable by aging

②Other receivable by nature

③Provision for bad and doubtful debts

Provision for bad and doubtful debts as of 31/12/2019

④ Recognitions or recoveries or reversals of provision for bad and doubtful debts in current period

Recognitions Recoveries or reversals

Write off Other changes

12/31/2019

31/12/2020

Other receivables

63,664,859.26 5,073,925.25 529,940.52 3,467,115.67 13,669.76 64,755,398.08

Total 63,664,859.26 5,073,925.25 529,940.52 3,467,115.67 13,669.76 64,755,398.08

There were no important recoveries or reversals of provision for bad and doubtful debts in current period.

⑤ Other receivables actually write-off

Item Write-off amount

Other receivables actually write-off 3,467,115.67

Among them, other important accounts receivable write-offs are as follows:

Nature of

Reason Approval procedures Arising from

Name of

Write off amount

accounts receivable

related party

debtor

transactions(Y/N)

Customer A Petty cash 1,611,878.76 Payment cannot be collected

Conclusive evidence for irrecoverability was obtained and internal approval was given

N

1,825,758.09 Payment cannot be collected

Conclusive evidence for irrecoverability was obtained and internal approval was given

Customer B Insurance compensation

N

Total 3,437,636.85

⑥ Other receivables with top five closing balance

Payment nature Book balance Aging Percentage of other receivables ending balance (%)

Provision for ba

Name of

d and

ddebtor

doubtful debts

Within 1 year

Customer C Security deposit 396,860,000.00

49.79 1,220,400.00

Customer D Futures margin 66,128,660.00 Within 1 year 8.30 -

Within 1 year

Customer E Futures margin 52,631,688.90

6.60 -

Accounts with

50,163,343.35 2-5 years and above

Customer F

6.29 45,373,343.35

external party

Customer G Futures margin 21,621,169.64 Within 1 year 2.71 -

Total -- 587,404,861.89 -- 73.69 46,593,743.35

⑦There were no other receivables associated with government subsidies as of the period-end.

⑧No other receivables were derecognized due to transfer of financial assets in current period.

⑨There were no such cases in current period where the Group had transferred the other receivables but continued to be involved in the assets or liabilities associated with that other receivables.

7. Inventories

(1)Inventories by category

Item As at 12/31/2020 As at 12/31/2019

(2)Provision for impairment of inventories

Provision for impairment of inventories (continued)

(3)There were no capitalized borrowing costs among the closing balance of inventories 8. Assets held-for-sale

Including: Intangible asset

- - - 23,951,257.04 3,148,319.68 20,802,937.36

Construction in progress

- - - 9,376,343.37 1,232,491.74 8,143,851.63

Total - - - 33,327,600.41 4,380,811.42 28,946,788.99

Note: In November 2019, the Group’s management resolved to sell the land use right and construction in progress to the third party due to the business adjustment. The land use right and construction in progress above proposed for sale are presented as non-current assets held-for-sale in the financial statements. The business was completed in August 2020.

(1)Provision for impairment of assets held-for-sale

Item As at 1/1/2020 Additions during the year

Write- back during the As at

12/31/2020

Reversals Sales

Non-currentassetsheld-for-sale 4,380,811.42 - - 4,380,811.42 -

Including: Intangible asset 3,148,319.68 - - 3,148,319.68 -

Construction in progress 1,232,491.74 - - 1,232,491.74 -

Total 4,380,811.42 - - 4,380,811.42 -

9. Non-current assets due within one year

Item As at 12/31/2020 As at 12/31/2019

Long-term receivable due within one year 2,457,622.86 903,000.00

Total 2,457,622.86 903,000.00

10. Other current assets

Item As at 12/31/2020 As at 12/31/2019

Rental expense 100,101,070.74 51,996,952.23

Insurance expense 4,523,272.43 3,055,795.56

Miscellaneous prepaid expense 17,205,335.40 12,264,104.51

Input VAT to be deducted and approved 88,656,028.78 95,597,765.09

Overpaid taxes and charges 22,531,258.74 14,045,826.90

Loans and advances to customers 428,423,628.90 481,129,986.87

Factoring receivables 53,196,566.67 31,526,605.54

Hedged items - procurement commitments and forex forwards

205,284,569.19 -

Others 5,286,755.60 2,279,989.82

Total 925,208,486.45 691,897,026.52

(1)Loans and advances to customers due within one year

①Category by method of guarantee

Item As at 12/31/2020 As at 12/31/2019

Secured loans 432,397,619.44 487,225,743.79

②Category by overdue

(2)Factoring receivables by overdue

11. Debt investments

(1)Provision for bad and doubtful debts

12. Loans and advances to customers

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

(2)Loans and advances to customers by overdue：

(3)Provision for impairment of loans

13. Long-term receivables

(1)Long-term receivables by nature

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

(2) There were no long-term receivables overdue in the Group.

(3) There were no long-term receivables derecognized in the Group in current period.

(4) There were no such cases in current period where the Group had transferred a long-term receivable but continued to be involved in the assets or liabilities associated with that long-term receivable.

14. Long-term equity investments

Note:

(1) All the investees above are all associated companies.

(2) During the reporting period, none of the long-term equity investments’ recoverable amount was lower than the carrying value, thus no provision for impairment of long-term equity investments was recognized.

15. Other non-current financial assets

16. Investment properties

(1)Investment properties without ownership certificates

17. Fixed assets

(1)Fixed assets

①Details of fixed assets

②Temporarily idle fixed assets

Item Cost Accumulated depreciation

Provision for impairment

Carrying amount

Note

House and building 6,211,311.26 3,488,826.43 - 2,722,484.83

Machinery equipment 7,365,278.97 6,204,227.58 - 1,161,051.39

Transportation equipment

3,002,465.00 2,143,181.16 - 859,283.84

Electronic equipment 613,801.01 495,634.07 - 118,166.94

Other 231,520.46 219,454.24 - 12,066.22

Total 17,424,376.70 12,551,323.48 - 4,873,053.22

③Fixed assets acquired under financial lease

Item Cost Accumulated depreciation

Provision for impairment

Carrying

amount

House and building 23,147,542.00 1,238,954.69 - 21,908,587.31 Machinery equipment 13,761,063.98 1,320,795.56 - 12,440,268.42 Transportation equipment 523,999.20 80,566.93 - 443,432.27 Electronic equipment 309,511.40 112,853.33 - 196,658.07 Other 312,722.31 57,317.66 - 255,404.65

Total 38,054,838.89 2,810,488.17 - 35,244,350.72

④There were no fixed assets leased out under operating leases in current period.

⑤Fixed assets without ownership certificates

Item Carrying amount Reason why certificates of ownership

are pending

House and building 597,614,839.30 No ownership certificates for rented buildings on

collective and state-owned land

House and building 696,951,789.40 In progress

(2)Fixed assets pending for disposal

Item As at 31/12/2020 As at 31/12/2019 Reasons for disposals

House and building - 5,965,842.35 They have already been scrapped Machinery equipment 117,198.52 666,282.21 They have already been scrapped Transportation equipment - 3,518.26 They have already been scrapped Electronic equipment 794.32 388.95 They have already been scrapped

Total 117,992.84 6,636,031.77

18. Construction in progress

Item As at 31/12/2020 As at 31/12/2019

Construction in progress 1,591,741,924.42 657,751,195.76 Construction materials - -

Total 1,591,741,924.42 657,751,195.76

(1)Construction in progress

①Construction in progress

②Movements of major construction in progress

Transfers to Investment real estate

Interest rate for capitalization in 2020 (%)

Other decreases

Transfers to other long-term assets

Including: interest capitalized in 2020

Transfers to intangible assets

As at 31/12/2020 Accumulated capitalized interest

Project As at 31/12/2019

Additions Transfers to fixed assets

Capital

source

Supporting

construction

19,384,268.98 59,420,998.75 27,706,825.06 25,478,405.95 - 9,247,903.64 - 16,372,133.08 - - - self-rais

for other projects

ed

Total 611,899,653.03 2,286,934,381.58 1,430,283,045.16 27,168,655.95 - 9,247,903.64 - 1,432,134,429.86 16,503,627.8

16,503,627.81 - -

1

Note:

There was no provision for impairment of construction in progress in the current period.

19. Productive biological assets

(1)Measured by cost

(2)There were no productive biological assets measured at fair value in current period.

20. Intangible assets

(1)Intangible assets

Note: The carrying amount of intangible assets arising from internal research and development is 10.18% of the total carrying amount of intangible assets at the period end. (2)Land use rights without ownership certificates

21. Development costs

22. Goodwill

(1)Book value of goodwill

Note 1: When acquiring the non-controlling interests of a subsidiary, the Company records goodwill at the amount by which the paid combination cost exceeds the Company’s share of the fair value of the acquiree’s identifiable net assets obtained in the combination.

The goodwill of RMB 50,000.00 on Guangzhou Runchuan: The Company acquired 10% shares in Guangzhou Runchuan at the cost of RMB 50,000.00 in September 2006, while the Company’s shares of the fair value of Guangzhou Runchuan’s identifiable net assets were RMB -29,095.34. Because the Company had borne all the loss of this subsidiary when it acquired 90% shares in Guangzhou Runchuan under common control in May 2004, the above acquisition cost of RMB 50,000.00 was recognized in goodwill.

The goodwill of RMB 578,247.88 on Taizhou Haid: When acquiring 25% shares in Taizhou Haid in September 2006, the Company recorded goodwill at RMB 578,247.88, the amount by which the acquisition cost exceeded the Company’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 10% non-controlling shares in Guangzhou Haihe on March 31, 2007, the Company recorded goodwill at RMB 76,663.70, the amount by which the acquisition 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 goodwill at 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 68% shares in Dongguan Haid from a non-related party on May 20, 2007, the Company recorded goodwill at the amount by which the investment cost 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 100% shares in Sanshuifanling from a non-related party in April 2010, the Company recorded goodwill at the amount by which the investment cost 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 60% shares in Sanshuifanling from a non-related party in May 2010, the Company recorded goodwill at the amount by 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 70% shares in Qingyuan Bairong from a non-related party in January 2010, the Company recorded goodwill at the amount by which the investment 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 Haid acquired 70% shares in Zhanjiang Hisenor (49% from the Company and 21% from non-controlling interests) in January 2010, the amount by which Guangzhou Haid’s investment cost of RMB 1,370,000.00 exceeded its share of the acquiree’s owners’ equity was recorded in goodwill.

The goodwill of RMB 40,995,879.10 on Panasia Trading: When the Company’s subsidiary Haid International acquired a stake in Panasia Trading in February 2012, the amount by which Haid International’s investment cost of USD15.80 million exceeded its share of the acquiree’s owners’ equity was recorded in goodwill, with the effects of the translation of the investee’s foreign-currency-denominated financial statements caused by exchange rate fluctuations after the acquisition.

The goodwill of RMB 5,285,470.71 on Hisenor Vietnam: When the Company’s subsidiary Hisenor International acquired shares in Hisenor Vietnam in June 2013, the amount by which Hisenor International’s investment cost of USD 1.14 million exceeded its share of the acquiree’s owners’ equity was recorded in goodwill, with the effects of the translation of the investee’s foreign-currency-denominated financial statements caused by exchange rate fluctuations after the acquisition.

The goodwill of RMB 8,838,854.56 on Kaifeng Haid: When acquiring shares in Kaifeng Haid in March 2013, the Company recorded goodwill at the amount by which the investment cost of RMB 12,382,353.63 exceeded the Company’s share of the acquiree’s owners’ equity.

The goodwill of RMB 127,116.22 on Guangzhou Heshengtang Pharmaceutical: When acquiring shares in Guangzhou Heshengtang Pharmaceutical in February 2013, the Company recorded goodwill at the amount by which the investment 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 shares in Haid Livestock Veterinary Research Institute in March 2013, the Company recorded goodwill at the amount by which 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 shares in Hunan Innovative in August 2015, the Company recorded goodwill at the amount by which the investment cost of RMB 1,000,000.00 exceeded the Company’s share of the acquiree’s owners’ equity.

The goodwill of RMB 76,410,471.64 on Sichuan Hailinger: When acquiring shares in Sichuan Hailinger in June 2015, the Company recorded goodwill at the amount by which the investment cost of RMB 107,200,000.00 exceeded the Company’s share of the acquiree’s owners’ equity.

The goodwill of RMB 8,312,415.28 on Jiaxing Haid: When acquiring shares in Jiaxing Haid in February 2016, the Company recorded goodwill at the amount by which the investment cost of RMB 14,400,000.00 exceeded the Company’s share of the acquiree’s owners’ equity.

The goodwill of RMB 33,087.10 on Rongcheng Yandunjiao: When acquiring shares in Rongcheng Yandunjiao in September 2016, the Company recorded goodwill at the amount by which the investment cost of RMB 18,308,000.00 exceeded the Company’s share of the acquiree’s owners’ equity obtained in the acquisition.

The goodwill of RMB 115,902,036.20 on Shandong Daxin: When acquiring shares in Shandong Daxin in December 2017, the Company recorded goodwill at the amount by which the investment cost of RMB 286,431,719.46 exceeded the Company’s share of the acquiree’s owners’ equity.

The goodwill of RMB 2,400,475.64 on Hunan Jinhuilong: When acquiring shares in Hunan Jinhuilong in December 2017, the Company recorded goodwill at the amount by which the investment cost of RMB 31,620,000.00 exceeded the Company’s share of the acquiree’s owners’ equity.

The goodwill of RMB 57,092,523.20 on Feicheng Heruifeng: When acquiring shares in Feicheng Heruifeng in June 2018, the Company recorded goodwill at the amount by which the investment cost of RMB 200,370,280.00 exceeded the Company’s share of the acquiree’s owners’ equity.

The goodwill of RMB 30,507,361.78 on Weifang Xuheng: When acquiring shares in Weifang Xuheng in June 2018, the Company recorded goodwill at the amount by which the investment cost of RMB 50,319,300.00 exceeded the Company’s share of the acquiree’s owners’ equity.

The goodwill of RMB 587,209.55 on Jianong Lianyungang: When acquiring shares in Jianong Lianyungang in August 2018, the Company recorded goodwill at the amount by which the investment cost of RMB 2.00 exceeded the Company’s share of the acquiree’s owners’ equity.

The goodwill of RMB 1,411,040.63 on Xinjiang Ruiliheng: When acquiring shares in Xinjiang Ruiliheng in October 2018, the Company recorded goodwill at the amount by which the investment cost of RMB 11,000,000.00 exceeded the Company’s share of the acquiree’s owners’ equity.

The goodwill of RMB 343,028.78 on Kembang Subur International: When acquiring shares in Kembang Subur International in November 2018, the Company recorded goodwill at the amount by which the investment cost of USD 112,150.00 exceeded the Company’s shares of the acquiree’s owners’ equity, with the effects of the translation of the investee’s foreign-currency-denominated financial statements caused by exchange rate fluctuations after the acquisition.

The goodwill of RMB 1,455,358.51 on Gaotang Huayu: When acquiring shares in Xinjiang Ruiliheng in August 2019, the Company recorded goodwill at the amount by which the investment cost of RMB 1,000,000.00 exceeded the Company’s share of the acquiree’s owners’ equity.

The goodwill of RMB9,620,427.34 on Zhongshan Yugezi : When the company’s subsidiary Guangzhou Ronghai acquired the equity of the Company in April 2020, the goodwill was generated by the difference of the investment amount of RMB 8,808,005.00 exceeded the share of Guangzhou Ronghai in the owner's equity of the company The goodwill of RMB 2,799,980.27 on Gaozhou Haiyuan : When the company’s subsidiary Guangzhou Yidu acquired the equity of the company in May 2020 , the goodwill was generated by the difference of the investment amount of RMB 12,800,000.00 exceeded the share of Guangzhou Yidu in the owner's equity of the company.

The goodwill of RMB 3,088,765.62 on Yunnan Zhonggui: When the company’s subsidiary Sichuan Haile acquired the equity of the company in September 2020, the goodwill was generated by the difference of the investment amount of RMB 4,000,000.00 exceeded the share of Sichuan Haile in the owner's equity of the company.

The goodwill of RMB 2,667,561.42 on Taiwan Shenglong: When Dingsheng International, a subsidiary of the company, acquired the equity of the company in September 2019, the goodwill was generated by the difference of the investment amount of US $9,850 exceeded the share of Dingsheng International in the owner's equity of the company, as well as the translation effect of foreign currency statements caused by exchange rate fluctuations after the investment. Dingsheng International was acquired by Pan-Asia Trading, a subsidiary of the Company, in July 2020.

The goodwill of RMB 220,674.27 on Qingdao Runguiyuan: When Shandong Daxin, a subsidiary of the company, acquired the equity of the company in October 2020 , the goodwill was generated by the difference of the investment amount of RMB 10,000,000.00 exceeded Shandong Daxin's share in the owner's equity of the company.

The goodwill of RMB 822,363.32 on Wujiaqu Taikun: When Guangzhou Haida, a subsidiary of the company, acquired the equity of the company in October 2020 , the goodwill was generated by the difference of the investment amount of RMB 40,000,000.00 exceeded the share of Guangzhou Haida in the owner's equity of the company.

The goodwill of RMB 4,773,160.36 on Guam Xingyuan: When the subsidiary of the company, Lankin Company, acquired the equity of the company in October 2020, the goodwill was generated by the difference of the investment amount of US $2,400,000.00 exceeded the share of Lankin Company in the owner's equity of the company, as well as the translation effect of foreign currency statements caused by exchange rate fluctuations after the investment.

The goodwill of RMB 1,999,796.32 on Hainan Zhuangmei: When the Company acquired the equity of Hainan Zhuangmei in November 2020 , the goodwill was generated by the difference of the investment amount of RMB 10,500,000.00 exceeded the share of the company in the owner's equity of Hainan Zhuangmei Company.

The goodwill of RMB 17,826,753.49 on Jiangxi Jiabo: When the Company acquired the equity of Jiangxi Jiabo in December 2020, the goodwill was generated by the difference of the investment amount of RMB 34,800,000.00 exceeded the share of the Company in the owner's equity of Jiangxi Jiabo Company.

Note 3: Performance commitment regarding Shandong Daxin and performance results

④ Performance commitment

According to the Equity Transfer Agreement entered into on September 14, 2017 between the Company as well as Jianbing 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 shall not be lower than RMB 50 million in 2017; that the aggregated net income of Shandong Daxin shall not be lower than RMB 105 million in 2017 and 2018; that the aggregated net income of Shandong Daxin shall not be lower than RMB 165 million in 2017, 2018 and 2019; and that the aggregated net income of Shandong Daxin shall not be lower than RMB 230 million in 2017, 2018, 2019 and 2020, otherwise they shall compensate the Company for the gap, with the total net compensation amount subject to an upper limit of the total equity transaction price. Net income refers to the consolidated net income attributable to owners of Shandong Daxin during the commitment period (the lower when deducting the non-operating gains and losses).

②Performance results

Year Promised net income (RMB 0,000)

Actual net income (RMB 0,000)

Abbreviation of company name

Gap (RMB 0,000)

Fulfillment

ratio

2017-2020 23,000.00 23,463.36 463.36 102.01%

2017-2019 16,500.00 15,123.84 -1,376.16 91.66%

Shandong Daxin

2017-2018 10,500.00 10,724.14 224.14 102.13%

2017 5,000.00 6,435.63 1,435.63 128.71%

According to the performance commitment of Shandong Daxin as of this year, the original equity transferor of Shandong Daxin should pay performance compensation of RMB 17.88 million to the Group.

(2)Provision for impairment of goodwill

As at 31/12/2019 Additions during the year

Decreases during the year

Name of investee or events from which goodwill arose

Provision Disposal Effect of

As at 31/12/2020

translation of

foreign

currency

statement

Note: The Group calculates the recoverable amounts by discounting the expected future cash flows, which was prepared by management based on the past performance and expectation for future market development. As of December 31, 2020, according to the impairment test results, the Group recognized provision for impairment of goodwill of RMB89, 515,589.72 (RMB 42,590,288.46 as of December 31, 2019).

23. Long-term deferred expenses

24. Deferred tax assets and deferred tax liabilities

(1)Deferred tax assets and deferred tax liabilities not offsetting

(2)Details of unrecognized deferred tax assets

(3)Expiration of deductible tax losses for unrecognized deferred tax assets

25. Other non-current assets

As at 31/12/2020 As at 31/12/2019

Item

Book balance Impairment provision

Book value Book balance Impairment provision

Book value

Prepayments for acquisition of other long-term assets

93,509,145.42 - 93,509,145.42 99,498,252.15 - 99,498,252.15

Other - - - 1,049.85 - 1,049.85

Total 373,627,286.70 - 373,627,286.70 265,676,908.84 - 265,676,908.84

26. Short-term loans

(1)Short-term loans by category

Item As at 31/12/2020 As at 31/12/2019

Unsecured loans 4,676,901,111.98 2,986,128,344.11 Pledged loans - 34,763,660.07 Guaranteed loan 49,034,130.71 - Mortgage loan / Guaranteed loan 10,013,342.47 -

Total 4,735,948,585.16 3,020,892,004.18

Note: Unsecured loans included guaranteed loans provided by inter-group members. (2)There were no overdue short-term loans as of the end of current period.

27. Held-for-trading financial liabilities

Item As at 31/12/2020 As at 31/12/2019

Held-for-trading financial liabilities 127,446,229.19 2,633,510.00

Including: Derivative financial liabilities

127,446,229.19 2,633,510.00

Total 127,446,229.19 2,633,510.00

28. Accounts payable

Item As at 31/12/2020 As at 31/12/2019

Accounts payable with aging within one year

1,990,164,665.15 1,883,388,667.22

Accounts payable with aging over one year

70,385,872.39 33,666,673.63

Total 2,060,550,537.54 1,917,055,340.85

Significant accounts payable with aging over one year

Item Ending balance Reason for unsettledness or

carry-forward

Payables for construction and equipment

16,209,792.44 工程未结算

Payables for land 4,200,820.91 未到结算期

Total 20,410,613.35 ——

29. Advances from customers

Item As at 31/12/2020 As at 31/12/2019

30. Contract liability

31. Employee benefits payable

(1)Short-term employee benefits

(2)Defined contribution plans

32. Taxes payable

33. Other payables

(1) Dividends payable

(2)Other payables

Significant other payables aging over 1 year

34. Non-current liabilities due within one year

(1)Long-term payables due within one year

35. Other current liabilities

36. Long-term loans

Item As at 31/12/2020 As at 31/12/2019

Unsecured loans 1,237,399,020.47 821,661,042.98

Subtotal 1,237,399,020.47 821,661,042.98

Less: long-term loans due within one year 75,994,320.47 -

Total 1,161,404,700.00 821,661,042.98

Note: Unsecured loans included guaranteed loans provided by inter-group members

37. Debentures payable

Item As at 31/12/2020 As at 31/12/2019

Convertible corporate bonds - Haid convertible bonds

- -

Total - -

(1)Changes in increase or decrease of debentures payable

Bond name Face value Issuing date Bond period Issuing value of

bond

Haid convertible bonds 2,830,000,000.00 3/19/2020 6 years 2,830,000,000.00

Total —— —— —— 2,830,000,000.00

Debentures payable (continued)

Provision for interest based on face value

Amortization of premiums or discounts

Repayment in current period

Bond name

As at 31/12/2019

Issue in current period

Other As at

31/12/2020

Haid convertible bonds

- 2,811,852,802.08 394,550,397.50 -327,397,902.50 6,181,755.23 2,872,823,541.85 -

Total - 2,811,852,802.08 394,550,397.50 -327,397,902.50 6,181,755.23 2,872,823,541.85 -

(2)Convertible bonds

According to issued by China Securities Regulatory Commission (CSRC [2020] No. 205), the Company publicly issued 28.30 million Convertible Corporate Bonds on March 19, 2020, with a face value of RMB100 per share and a total amount of RMB 2.83 million, with a bond period of six years.

The coupon interest rate of the convertible company bonds issued by the Company is 0.20% in the first year, 0.40% in the second year, 0.80% in the third year, 1.20% in the fourth year, 1.50% in the fifth year and 2.00% in the sixth year. The interest is paid annually. The principal and the interest of the last year will be returned at maturity. The Conversion Period commences on the first trading day (September 25, 2020) since 6 months after issuance date (March 25, 2020) and ends on the trading day prior to the maturity date of the Convertible Company Bonds (March 18, 2026, which may be postponed later in case of holidays) (inclusive March 18, 2026).Holders may apply for a share transfer during the conversion period.

The initial conversion price of the convertible bonds upon issuance is RMB 35.09 per share. After the Company implements the plan of paying a cash dividend of RMB 0.35 per share for 2019 on May 11, 2020, the initial conversion price of the convertible bonds is accordingly adjusted to RMB 34.74 per share.

The Company has fully redeemed the Haida Convertible Bonds registered in Shenzhen Branch of China Securities Registration and Clearing Corporation Limited on December 23, 2020 as of the close of the market on the redemption registration date (December 22, 2020) in accordance with the conditional redemption terms agreed in the .Since December 23, 2020, Haid Convertible Bonds will be stopped trading and share transfer. 38. Long-term payables

Item As at 31/12/2020 As at 31/12/2019

Long-term payables 36,320,489.48 85,596,111.44

Special payables - -

Total 36,320,489.48 85,596,111.44

(1)Long-term payables

Item As at 31/12/2020 As at 31/12/2019

Guarantee deposit 3,193,032.00 -

Obligations under equity transfers 65,592,900.00 109,682,249.52

Obligations under finance leases

85,230,343.66 73,731,910.96

Less: Unrecognized financing costs 51,284,415.66 48,979,717.80

Subtotal 102,731,860.00 134,434,442.68

Less: long-term payables due within

66,411,370.52 48,838,331.24

one year

Total 36,320,489.48 85,596,111.44

39. Long-term employee benefits payable

Item As at 31/12/2020 As at 31/12/2019

Post-employment benefits-net liabilities of defined

- -

benefit plans

Dismissal benefits - -

Long-term profit sharing plans 340,744,368.88 174,154,018.26

Subtotal 340,744,368.88 174,154,018.26

Less: Long-term employee benefits payable due within one year

195,853,423.59 108,075,234.01

Total 144,890,945.29 66,078,784.25

40. Deferred income

Item As at 31/12/2019 Additions during the year

Reductions during the year

As at 31/12/2020 Reason for deferral

Government grant

118,923,567.14 141,994,026.41 63,217,540.97 197,700,052.58 Receipt of government

grant

Rent income 1,462,947.92 9,357,253.21 6,186,803.27 4,633,397.86 Conditions for revenue

recognition

unmet

Total 120,386,515.06 151,351,279.62 69,404,344.24 202,333,450.44 ——

Note: For the government grant which was recognized as deferred income, refer to Note V. 69. Government grant. 41. Share capital (Unit: share)

Item As at 31/12/2019 Movements during the year (+, -) As at 31/12/2020

Shares as dividend converted from public reserves

New issuance Bonus issuance

Other Subtotal

Total shares

1,580,357,494.00 81,284,614.00 - - -431,357.00 80,853,257.00 1,661,210,751.00

Note: Changes in capital stock during this reporting period are the number of convertible corporate bonds issued by the Company in 2020 for share transfer, and the number of stock options in the equity incentive plan for

repurchase of vested but unlocked restricted stock shares due to employee resignation or termination of labor

contract relationship in 2020.

42. Other equity instruments

A statement of changes in preferred shares, perpetual bonds and other financial instruments outstanding at the end of the period：

Outstanding financial instrument As at 31/12/2019 Additions during the year Reductions during the year

As at

31/12/2020

Quantity Book value Quantity Book value Quantity Book

Quantity Book value

val

ue

Convertible bonds

- - 28,300,000.00 309,250,704.58 28,300,000.00 309,250,704.58 - -

Total - - 28,300,000.00 309,250,704.58 28,300,000.00 309,250,704.58 - -

43. Capital reserve

Item As at 31/12/2019 Additions during the year

Reductions during the year

As at 31/12/2020

Share premium(Note 1) 1,746,596,608.73 2,822,376,653.88 12,658,219.47 4,556,315,043.14

Other capital reserves(Note 2)

372,195,497.70 142,448,592.60 29,038,068.64 485,606,021.66

Total 2,118,792,106.43 2,964,825,246.48 41,696,288.11 5,041,921,064.80

Note 1: Reasons for the changes in share premium

① The increases in share premium in current period primarily consisted of unlocking of restricted stock since other capital reserves is transferred to share premium, the share of the net assets of the subsidiary shall be enjoyed by the minority shareholders if the sale price is greater than the transfer point or the share of the net assets of the subsidiary shall be enjoyed by the minority shareholders if the purchase price is less than the transfer point, as well as the premium generated by the current conversion of a convertible corporate bond.

② The decreases in share premium in current period were primarily incurred by the repurchase of restricted shares 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’s shares 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 current period primarily consisted of the share-based payments with equity instruments attributable to the parent company in the implementation of share option and restricted share incentives (refer to XI), and the deferred income tax assets on the amount by which the deductible amount in the exercise of share options under the equity incentive plan exceeded the recognized costs during the pending period being directly charged to other capital reserves.

② The decreases in other capital reserves in current period were primarily incurred by the reclassification into share premium due to the exercise of incentive share options and the unlocking of restricted shares.

44. Treasury stock

Item As at 31/12/2019 Additions during the year

Reductions during the year

As at 31/12/2020

Restricted stock repurchase commitments

172,540,566.20 84,029,816.25 91,220,049.80 165,350,332.65

Note:

① The increase in the current period is the Company repurchase the Company's shares in the stock incentive plan or the amount paid by the employee stock ownership plan in the current year.

②The decrease in current period was primarily incurred by equity distribution and the repurchase of restricted shares granted to employees but still in lockup due to the distribution of interest or employees’ resignation or the termination of the labor contracts with the employees.

45. Other comprehensive income

Movements during the year

Net-of-tax amount attributable to shareholders of the Company

Net-of-tax

Less: previously recognized amount transferred to profit or loss

Less: income tax expense

amount

Item As at 31/12/2019

As at

attributable

Before-tax amount

31/12/2020

to

non-control

ling

interests

I.Items that will not be reclassified to profit or loss

- - - - - - -

II.Items that may be reclassified to profit or loss

5,292,263.90 -111,562,601.99

-111,778,611.9

-

-

216,009.98 -106,486,348.07

7

Including: Translation differences arising from translation of foreign currency financial statements

5,292,263.90 -111,562,601.99

-111,778,611.9

-

-

216,009.98 -106,486,348.07

7

Total 5,292,263.90 -111,562,601.9

- - -111,778,611.9

216,009.98 -106,486,348.07

9

7

Note: Net-of-tax amount of other comprehensive income during the year 2020 is RMB -111,562,601.99, in which net-of-tax amount of other comprehensive income attributable to shareholders of the Company is RMB -111,778,611.97, and net-of-tax amount of other comprehensive income attributable to non-controlling interests is RMB216,009.98.

46．Surplus reserve

Item As at 31/12/2019 Additions during the year

Reductions during the year

As at 31/12/2020

Statutory surplus 634,407,803.71 4,255,096.69 - 638,662,900.40

Total 634,407,803.71 4,255,096.69 - 638,662,900.40

Note: Per the Company’s Articles of Association, 10% of its net income in 2020, i.e. RMB 4,255,096.69, was

appropriated to statutory surplus reserves.

47．General Risk Preparation

Item As at 31/12/2019 Additions during the year

Reductions during the year

As at 31/12/2020

General risk allowance - 7,814,011.67 - 7,814,011.67

48．Retained earnings

49．Operating income and operating cost

(1)Operating income and operating cost

(2)Operating income and operating cost by products

(3)Operating break down information

50．Taxes and surcharges

Note: For the criteria of taxes and surcharges accrued and paid, please refer to Note IV. Taxation 51．Selling and distribution expenses

52．General and administrative expenses

53．Research and development expenses

54．Financial expenses

55．Other income

Note: For the details of government grant, refer to Note X. 69. Government grant.

56．Investment income

57．Gains/ (losses) from changes in fair value

58．Credit losses ( "-" for losses )

59．Impairment losses ( "-" for losses )

60．Gains from assets disposal

61．Non-operating income

62．Non-operating expenses

63．Income tax expenses

(1) Details of income tax expenses

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

Item Year ended 31/12/2020 Year ended 31/12/2019

Effect of using the deductible temporary differences or deductible losses for which no deferred tax asset was recognized in previous

-8,794,630.89 -388,696.16

Effect of deductible temporary differences or deductible losses for

31,055,309.92 3,670,152.02

which no deferred tax asset was recognized this year

Effect of research and development expenses over-deduction -33,145,972.43 -31,765,552.95 Income tax expenses 434,503,577.10 304,514,610.16

64．Cash flow statement

(1) Cash received from other operating activities

Item Year ended 31/12/2020 Year ended 31/12/2019

Operating receivables and payables 430,071,365.41 585,240,127.90 Fiscal subsidies 199,595,690.02 104,810,902.32 Interest income of deposit 23,913,724.13 32,180,350.15 Other 17,324,948.37 20,803,343.77

Total 670,905,727.93 743,034,724.14

(2) Cash paid for other operating activities

Item Year ended 31/12/2020 Year ended 31/12/2019

Operating receivables and payables 677,762,677.97 298,141,321.18 Other expense 847,822,279.83 1,134,521,719.06

Total 1,525,584,957.80 1,432,663,040.24

(3) Cash received from other investing activities

Item Year ended 31/12/2020 Year ended 31/12/2019

Collection of deposit of long-term assets 200,000.00 -

Total 200,000.00 -

(4) Cash paid for other investing activities

Item Year ended 31/12/2020 Year ended 31/12/2019

Deposit of acquisitions of long-term assets 17,008,201.42 1,023,267.79

Total 17,008,201.42 1,023,267.79

(5) Cash received for other financing activities

Item Year ended 31/12/2020 Year ended 31/12/2019

Bills, loans, deposit of letter of credit 13,142,656.84 168,624.69 Receive loans from external correspondents 37,223,600.00 - Other 1,112.78 -

Total 50,367,369.62 168,624.69

(6)Cash paid for other financing activities

Item Year ended 31/12/2020 Year ended 31/12/2019

65．Supplementary information on cash flow statement

(1) Supplement to cash flow statement

(2) Net cash flows from acquisition of subsidiaries during the year

(3) Details of cash and cash equivalents

Item Year ended 31/12/2020 Year ended 31/12/2019

66．Assets with restricted ownership or use right

67．Monetary items in foreign currencies

(1) Monetary Items in foreign currencies

(2) Overseas business entities

68．Hedging

The qualitative and quantitative information of hedged items, related hedging instruments and hedged risks which were disclosed according to the hedging categories:

(1) Foreign currency forwards

As at December 31, 2020, the Group held the following foreign exchange forwards, which were designated as highly effective hedging instruments in 2020 to manage the foreign exchange exposure related to the expected foreign currency sales.

The Group evaluated the effectiveness of hedging by the comparison method of main terms. For the foreign currency forwards signed, whose terms were consistent with the terms of the expected transactions, and the group considered them highly effective. The main contents are as follow:

The Group reduced the exchange rate fluctuation risk of foreign currency borrowings and import purchase settlement through foreign exchange forward (for details, refer to Note VIII. 1. (3) Market risk).

(2) Commodity futures hedging

The Group mainly engages in the production and processing of feed products, and the main raw materials used in production are subject to the risk of price fluctuations. The Group uses derivative financial instruments (mainly commodity future contracts) to hedge part of the inventory and the unrecognized definite commitments related to the purchase of inventory, so as to avoid the risk that the Group assumes that the fair value of the inventory and the unrecognized definite commitments will fluctuate with the fluctuation of the market price of inventory. The main hedging arrangement is as followed:

commitments

69．Government grants

(1) Government grants recognized in deferred income, and subsequently measured using the gross presentation method

(2) Government grants recognized in deferred income, and subsequently measured using the net amount method

(3) Government grants recognized in profit and loss, and subsequently measured using the gross presentation method

Item Recognized in profit and loss for the year ended 31/12/2019

Recognized in profit and loss for the year ended 31/12/2020

Presentation item recognized in profit and loss

Related to asset/income

Government incentive

Other income

54,360.48 54,360.48

Related to asset

grants

Government incentive

2,000.00 - Non-operating income Related to income

grants

Total 51,360,583.55 99,595,317.97

(4)Government grants used net amount method to write-down related costs

Item Related cost write-down for the year ended 31/12/2019

Related cost write-down for the year ended 31/12/2020

Presentation item recognized in related costs

Related to asset/income

Financialdiscount 1,856,627.00 24,032,740.56 Financial expenses Related to incomeTotal 1,856,627.00 24,032,740.56

Ⅵ. Change in Consolidation Scope

1. Business Combinations Involving Entities Not under Common Control

(1) Business Combinations Involving Entities Not under Common Control Incurred in Current Period

(2) Combination Costs and Goodwill

Item Zhongshan Yugezi

Gaozhou Hiaiyuan

Ding Sheng International

Yunnan Zhonggui

Guam Xingyuan

Qingdao Runguiyuan

Tycoon Wujiaqu

Hainan Zhuangmei

Jiangxi Jiabo

Note: The fair value of the combination costs was determined by audited or appraised value which approved by both the acquirer and the acquiree. (3) Identifiable Assets and Liabilities of Acquirees at Acquisition Date

Fair value and carrying amount of identifiable assets and liabilities of acquirees at acquisition date are as follows:

Continued:

Qingdao Runguiyuan Tycoon Wujiaqu Hainan Zhuangmei Jiangxi Jiabo

Carrying value at acquisition date

Carrying value at acquisition date

Carrying value at acquisition date

Carrying value

Item

Fair value at acquisition date

Fair value at acquisition date

Fair value at acquisition date

Fair value at acquisition date

at acquisition

date

Net assets acquired 9,779,325.73 9,779,325.73 39,177,636.68 39,177,636.68 8,500,203.68 8,500,203.68 16,973,246.51 16,973,246.51 Note: The fair value of identifiable assets and liabilities was determined by audited or appraised value which approved by both the acquirer and the acquiree.

2. Business Combinations Involving Entitites under Common Control

No business combinations involving entities under common control occurred in current year. 3. Disposal of Subsidiaries

No disposal of subsidiaries occurred in current year.

4. Changes in the Scope of Consolidation Due to Other Reasons

(1) New Subsidiaries established in the Current Period

(2) Subsidiaries Deregistered in Current Period

VII. Interests in Other Entities

(I) Interests in Subsidiaries

1. Stucture of the Group

2. Significant Non-Wholly-Owned Subsidiaries

3. Key Financial Information of Significant Non-Wholly-Owned Subsidiaries

Continued (1)：

Continued (2)：

4. Transactions caused the change in Share of Owner’s Equity of Subsidiaries but control the Subsidiaries

(1) Changes in Share of Owner’s Equity of Subsidiaries

(2) Impact of Transactions on Non-Controlling Interests and Owner’s equity Attributable to the parent company

Continued:

(II) Interests in Associates

1. Summary of Financial Information of Insignificant Associates

VIII. Risks Management of Financial Instruments

The main financial instruments of the Group include cash at bank and on hand, , notes receivable, accounts receivable, other receivables, non-current assets due within one year, other current assets,entrusted loan issued and advances to customer, held-for-trading financial assets, debt investments, other non-current financial assets, long-term receivables, accounts payable, other receivables, short-term loans, held-for-trading liabilities and non-current liabilities due within one year, long-term loans, and long-term payables. Details of various financial instruments have been disclosed in the relevant notes. The risks associated with these financial instruments and the risk management policies adopted by the Group to reduce these risks are described below. The management of the Group manages and monitors these exposures to ensure that the above risks are controlled within a limited range.

1. Objectives and Policies of Risk Management

The Group’s goal in risk management is to achieve a proper balance between risk and return, and strive to reduce the adverse impact of any financial instrument risk on the company’s operations. Based on this risk management objective, the Group has established relevant risk management policies to identify and analyze the company’s risks, appropriately set corresponding acceptable risk levels and established the internal control procedures to monitor the Group’s risk level. In addition, the Group will regularly review these risk management policies and related internal control system to adapt to changes in market conditions or the company’s operating activities, and the Group’s internal audit department will regularly or randomly check whether the implementation of the internal control system complies with relevant risk management policies.

The Group's purpose in risk management is to achieve an appropriate balance between risk and return, minimize the negative impact of risk on the Group's operating performance. Based on the purpose of risk management, the basic strategy of the Group's risk management is to identify and analyze various kind of risks faced by the Group, set up an appropriate risk tolerance bottom line and design the internal control process to monitor the risk level. The Group reviews the risk management policy and relevant internal control system to adapt to the changes of market or operations regularly. The Group’s internal audit department also reviews regularly or randomly whether the performance of internal control system is complied with the risk management policy.

The major risks caused by the Group's financial instruments are credit risk, liquidity risk and market risk (including exchange rate risk, interest rate risk and commodity price risk).

The Board of Directors is responsible for planning and establishing the Group's risk management structure, formulating the Group's risk management policies and related guidelines, and supervising the implementation of risk management measures. The Group has formulated risk management policies to identify and analyze the risks faced by the Group. These risk management policies specify specific risks and cover many aspects such as management of market risk, credit risk and liquidity risk. The Group regularly assesses changes in the market environment and the Group’s operating activities to decide whether to update the risk management policies and systems. The internal audit department of the Group conducts regular verifications on risk management controls and procedures, and reports results to the audit committee of the Group.

The Group diversifies the risks of financial instruments through appropriate diversified investments and business portfolios, and reduces the risk of concentration in a single industry, specific region, or specific counterparty by formulating appropriate risk management policies.

1. Credit Risk

Credit risk refers to the risk that the counterparty fails to fulfill its contractual obligations, resulting in financial losses to the Group.

The Group manages credit risk on the basis of portfolio. Credit risk mainly arises from bank deposits, notes receivable, accounts receivable, other receivables, etc.

The Group's bank deposits are mainly deposited in financial institutions with reputation and high credit ratings. The Group expects that the credit risk of bank deposits is low.

With regard to notes receivable, accounts receivable, other receivables, loans and advances to customers, the Group establishes relevant policies to control credit risk exposure. The Group assesses the credit qualification of customers based on their financial status, credit records and other factors, such as current market conditions, and sets corresponding credit periods. The Group monitors the credit records of customers on a regular basis. For customers with poor credit records, the Group will issue reminders in writing, shorten the credit period or cancel the credit period, so as to ensure that the overall credit risk of the Group is within the controllable range.

The debtors of the Group are spread in different industry and geographic region. The Group continuously performs credit assessment on the debtors and purchase scredit guarantee insurance when necessary.

The Group’s maximum tolerated credit risk exposure is the book value of every financial asset on the balance sheet. The Group also faces credit risk for providing financial guarantee. Please refer to Note XII. 2.

Accounts receivable due from the top five customers of the Group account for 11.69% f total accounts receivable (2019: 9.37%); other receivables due from the top five customers of the Group account for 75.86% of total other receivables (2019: 39.95%).

2. Liquidity Risk

Liquidity risk is the risk that the Group is short of funds to deliver cash or other financial assets or meet other

settlement obligations.

Each subsidiary of the Group is responsible for cash flow forecast. The treasury department of the Group monitors the long-term and short-term capital requirements at the group level based on the cash flow forecasts of each subsidiary.

The Group coordinates the surplus funds within the group through the funding pool plan setup in the large financial institutions, and ensure that each member has sufficient cash reserves to meet the payment obligations due for settlement. In addition, the Group entered into financing credit agreements with main business banks to meet short-term and long-term funding requirements.

The Group raises working capital through funds generated from operating business, bank and other borrowings. As of December 31, 2020, the Group's unused bank loan amount was RMB 14,425.54 million (December 31, 2019: RMB 15,608.30 million).

3. Market Risk

Market risk of financial instrument is the risk of fluctuation in the fair value or future cash flow due to changes of market price, including interest rate risk, foreign exchange rate risk and other price risk.

Interest Rate Risk

Interest rate risk refers to the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market interest rates. Interest rate risk can arise from confirmed interest-bearing financial instruments and unrecognized financial instruments.

The Group's interest rate risk mainly arises from long-term and short term interest–bearing bank loans. Financial liabilities with floating interest rates causes interest rate risks in cash flow to the Group and Financial liabilities with fixed interest rates causes interest rate risks in fair value to the Group. The Group determines the proportion of fixed and floating interest rate contracts according to current market situation and maintain the appropriate mixture of the instruments with fixed and floating interest rate by regular review and monitoring.

For financial instrument held at balance sheet date with interest rate risk in fair value, the effect of net profit and shareholders’ equity in the above sensitivity analysis is assumed that interest rate changes at balance sheet date and the above financial instrument is remeasured at the new interest rate. For non-derivative financial instrument held at balance sheet date with floating interest rate and interest rate risk of cash flow, the effect of net profit and shareholders’ equity in the above sensitivity analysis is based on the calculation of estimated annual interest expenses or income by the changes in above interest rate. The analysis in last year is based on the same assumption and method.

ForeigneExchange rate risk

Foreign exchange rate risk is the risk of fluctuation of fair value or future cash flow of financial instrument due to the changes of foreign exchange rate. Foreign exchange rate risk can arise from financial instrument measured at foreign currency instead of reporting currency.

The Group’s principal business is operated in China and settled in RMB. However, there’s still foreign exchange rate risk of the recognized financial instruments recorded in foreign currency. The raw materials purchased and imported by the Group have achieved a certain scale, and there is an increase in the transactions amount of overseas subsidiaries of the Group overseas uses with other currencies other than RMB as their functional currency. Therefore, fluctuations in RMB exchange rate have exerted certain impact on the Group’s business operations.

As of December 31, 2020, the Group’s major monetary items in foreign currencies are financial assets and financial liabilities denominated in US dollar, Vietnamese dong, rupee, and ringgit (refer to Note V. 67 (1) Monetary items in foreign currencies for more details). Since other currencies are not use infrequently and the amount is relatively small, changes in their exchange rates has no significant impact on the business activities of the Group.

The Group closely monitors the scale of the Group’s foreign currency transactions and foreign currency assets and liabilities to minimiz its foreign exchange risks. Therefore, the Group enters into forward foreign exchange contracts or currency swap contracts to avoid foreign exchange risks when appropriate.

Other price risk

Other price risk is the fluctuation risk due to the changes of market prices besides foreign exchange risk and interest rate risk due to whether individual financial instrument or its issuer or all similar financial instruments traded in the market. It may be affected by the changes of the price of goods or equity instrument.

The Company upholds the basic principle of serving spot goods -- the spot procurement program, and regards risk control as the core principle. Meanwhile, it will adopt one or more than one arbitrage tool for hedging to avoid the commodity price risk and credit risk etc., and changes in the fair value or cash flow of the arbitrage tool are expected to offset all or part of the changes in the fair value or cash flow of the hedged item, in which way, the impact of price fluctuations in raw materials and commodities on production and operations can thus be mitigated.

IX. Disclosures of Fair Value

The level in which fair value measurement is categorized is determined by the level of the fair value hierarchy of the lowest level input that is significant to the entire fair value measurement. The levels are defined as follows: Level 1 inputs: unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 inputs: inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for the assets or liabilities.

Level 3 inputs: inputs that are unobservable for assets or liabilities.(unobservable input) 1. Items and Amount Measured at Fair Value

As at December 31, 2020, assets and liabilities measured at fair value based on the three levels above are shown as follows:

The Group recognizes transfers between different levels at the end of the current reporting period during which such transfers are made. During 2020, there were no transfers between different levels of the Group’s assets and liabilities.

The occurring of an event of transfers between different levels is determined as when transfers between levels. The Group's financial assets and financial liabilities measured at fair value do not transfer between the first level and second level, or into or out of the third level during the current period.

2. Information on Level 2 of Fair Value Measurement

3. Quantitative information on the unobservable inputs used in the fair value measurement that are significant and are reasonably available.

4. Fair values of assets and liabilities not measured at fair value

Financial assets and financial liabilities measured at amortized cost of the Group include: cash at bank and on hand, notes receivable, accounts receivable, other receivables, other current assets (including factoring receivables due within one year, and loans and advances to the customers due within one year), loans and advances to the customers , short-term loans, notes payable, accounts payable, other payables, long-term loans due within one year, long-term payables, long-term loans and debentures payable, etc.

There is no significant difference between the carrying amount of the financial instruments not measured at fair value and their fair value.

A XRelated Partiesand Related-Party Transactions

1. Parent company

Registered capital (RMB ten thousand)

Shareholding ratio in the Company (%) Percentage of

Name Place of registration Business nature

voting rights

in the

Company (%)

Investment,

Guangzhou Haihao Investment Co., Ltd. (hereinafter referred to as “Guangzhou Haihao”)

trading, import

Guangzhou, Guangdong

and export of

3,000.00 53.91 53.91

commodities and technologies

Guangzhou Haihao is the ultimate controlling party of the Company and established on September 27, 2006. Mr. Hua Xue holds a 39.75% of equity in Guangzhou Haihao, is the ultimate controller of the Company..

In the reporting period, change of the registered capital of the parent company is as follows:

(RMB ten thousand)

As at 31/12/2019 Addition Reduction As at 31/12/2020

3,000.00 - - 3,000.00

2. Information on the subsidiaries of the Company

For information on the subsidiaries of the Company, refer to Note VII.1.

3. Information on joint ventures and associates of the Company

Joint ventures and associates that have related party transactions with the Group during this year or previous year are as follows:

Name of joint ventures or associates Relationship with the Group

Foshan Haihang Xingfa Agriculture and Animal Husbandry Development Co., Ltd.

Associates, the Group holds 49% of equity

Guizhou Fuhai Chemicals Co, Ltd. Associates, the Group holds 45% of equity

Bangpu Seed Technology Co., Ltd Associates, the Group holds 20% of equity

4. Information on other related parties

Name Relationship with the Group

Luoding Xingfa Xingji Agriculture and Animal Husbandry Development Co., Ltd.

Subsidiary of Foshan Haihang Xingfa Agriculture and

Animal Husbandry Development Co., Ltd.

Yingzhuo Xu Director

5. Transactions with related parties

(1) Purchases/sales

① Purchase of goods/receiving of services

Related party Nature of transaction Year ended 31/12/2020

Year ended

31/12/2019

Guizhou Fuhai Chemicals Co., Ltd. Raw material 110,787,343.5 116,534,661.29

Bangpu Seed Technology Co., Ltd Consumptive biological assets

1,600,000.00 -

② Sales of goods/rendering of services

Related party Nature of transaction Year ended 31/12/2020

Year ended

31/12/2019

Foshan Haihang Xingfa Agriculture and Animal Husbandry Development Co., Ltd.

Feed and animal healthcare products

69,594,406.02 56,298,817.94

Luoding Xingfa Xingji Agriculture and Animal Husbandry Development Co., Ltd.

Feed and animal healthcare products

11,067,386.71 9,930,274.59

(2) Trust/contracting arrangement

No such transaction during the reporting period.

(3) Lease

① As the lessor

Lessee Type of assets leased

Lease income recognized in 2020

Lease income recognized

in 2019

Guangdong Haid Group Co.,

Office 51,428.52 51,428.52

Limited

Note: The price in the above lease with the related party was determined based on market prices upon mutual approval.

② As the lessee

No such transaction during the reporting period.

(4) Guarantee

No such transaction during the reporting period.

(5) Funding from related party

No such transaction during the reporting period.

(6) Transfer of assets and debt restructuring

No such transaction during the reporting period.

(7) Remuneration of key management personnel

The Group has 20 key management personnel in 2020 and 22 key management personnel in 2019. Information about remuneration is as follows:

(RMB ten thousand)

Year ended 31/12/2020 Year ended 31/12/2019

Item

Item Year ended 31/12/2020 Year ended 31/12/2019

Remuneration of key

2,781.32 2,025.66

management personnel

(8) Other related party transactions

No such transaction during the reporting period. 6. Receivables from and payables to related parties

(1) Receivables from related parties

Item

Accounts

receivable

Accounts

receivable

Prepayment

Prepayment

Other

(2) Payables to related parties

Item Related party 2020.12.31 2019.12.31

Accounts payable

Guizhou Fuhai Chemicals Co., Ltd. 10,794,908.23 4,105,427.37

Advances from

Foshan Haihang Xingfa Agriculture and Animal Husbandry Development Co., Ltd.

- 3,388,563.26

customers

Contract Liabilities

Foshan Haihang Xingfa Agriculture and Animal Husbandry Development Co., Ltd.

2,608.53 ——

Contract Liabilities

Luoding Xingfa Xingji Agriculture and Animal Husbandry Development Co., Ltd.

484,628.00 ——

Other payables Guizhou Fuhai Chemicals Co., Ltd. 150,000.00 - Other payables Yingzhuo Xu - 19,999.00

XI. Share-based Payments

1. Information on share-based payments

Total equity instruments granted by the Company during the year -

Total equity instruments exercised during the year 12,080,693.00

Total equity instruments forfeited in the current Period 376,037.00

Exercise price of outstanding share options a the end of the year and residual life of the share options contracts

N/A

(1) The repurchase price for the first phase of the

Restricted Share Incentive Plan in 2016 is

The price of other outstanding equity instruments at the end of the year and residual life of relevant contracts

RMB6.63/share, with a residual life of 14 months.

(2) The repurchase price for the Reserved

Restricted Share Incentive Plan in 2016 is

RMB9.89/share, with a residual life of 11 months.

2. Information on equity-settled share-based payments

Method to determine the fair value of equity instruments at grant dates

Using Black-Scholes option pricing model to calculate

fair value of the Company’s share options

3. Information on cash-settled share-based payments

No such event during the reporting period.

4. Information on modification and termination of share-based payments

XII. Commitments and Contingencies

1. Significant Commitments

As at December 31, 2020, there is no significant commitment to be disclosed.

2. Contingencies

Contingent liabilities arising from guarantee provided to other entities and related financial impacts. (1) As at December 31, 2020, the Group provided guarantees for the following loans:

As at December 31, 2020, there is no other contingency to be disclosed.

XIII. Post balance sheet events

1. Significant post balance sheet events

As at April 17, 2020, there is no such event to be disclosed.

2. Profit appropriations afterbalance sheet date

Profit distributions or dividends proposed According to the profit distribution plan approved by the Board of

Directors on April 17, 2021, it is planned to issue a cash dividend of

RMB 3.20 (including tax) for every 10 shares base on the total share

capital on the share registration date when the distribution plan is

implemented. The distribution plan will be implemented after approval

is granted in the general meeting of shareholders

Profit distributions or dividends approved and declared

N/A

3. Significant sales returns

As at April 17, 2021, there is no such event to be disclosed.

4. Other events after the balance sheet date

As at April 17, 2021, there is no such event to be disclosed.

XIV. Other Significant Events

1. Correction of Accounting Errors in Prior Periods

There was no significant correction of accounting errors in prior periods during the reporting period.

2. Significant Debt Restructuring

There was no significant debt restructuring during the reporting period.

3. Significant Asset Swap

There was no significant asset swap during the reporting period.

4. Transfer and Sales of significant assets

There was no such event during the reporting period.

5. Others

There was no other significant events to be disclosed during the reporting period.

XV. Notes to the Company’s financial statements

1. Other Receivables

Item 2020.12.31 2019.12.31

Interest receivables - - Dividend receivables - - Other receivables 10,705,830,242.22 6,904,805,047.57

Total 10,705,830,242.22 6,904,805,047.57

(1) Interest Receivables

There was no such item to be disclosed during the reporting period.

(2) Dividends Receivable

There was no such item to be disclosed during the reporting period.

(3) Other receivables

①Other receivables by aging

② Other receivables disclosed by nature

③Provision for bad and doubtful debts

Provision for bad and doubtful debts as of 31/12/2019:

④ Recoveries or reversals of provision for bad and doubtful debts in current period

There was no recoveries or reversals of provision for bad and doubtful debts in current period.

⑤ There were no written-off in other receivables druring current period.

⑥ Other receivables with top five debtors

⑦There were no other receivables associated with government subsidies as at December 31, 2020.

⑧No other receivables were derecognized due to transfer of financial assets during the current period.

⑨There were no such cases during current period where the Group had transferred an other receivables but continued to be involved in the assets or liabilities associated with that other receivables.

2. Long-Term Equity Investments

(1) Investment in Subsidiary

(2) Investment in Associate and joint ventures

3. Operating income and operating cost

4. Investment income

XVI Supplementary Information

1. Details of non-recurring gain or loss during the current period

2. Return on Equity (ROE) and Earnings per Share (EPS)

EPS

Net profit of Reporting Period Weighted average ROE (%)

Basic EPS Diluted EPS

Net profit attributable to ordinary shareholders of the Company

23.87 1.60 1.60

Net profit attributable to ordinary shareholders

of the Company after deducting the

23.27 1.56 1.55

non-recurring gain or loss

Section XIII. Documents Available for Reference

I. The 2020 Annual Report signed by the legal representative.

II. The financial statements signed and sealed by the legal representative, the Vice General Manager and the Chief Financial Officer.

III. The original copy of the Independent Auditor’s Report signed and sealed by the CPAs, as well as sealed by the CPA firm.

IV. The originals of all the Company’s announcements and documents which were disclosed during the Reporting Period on the Company’s designated newspapers for information disclosure, namely, China Securities Journal, Securities Times, Securities Daily and Shanghai Securities News.

V. All the said documents are available at the Securities Department of the Company.

Guangdong Haid Group Co., Limited

Legal representative: Hua Xue

17 April 2021