Stock Code: 603609 Stock Abbreviation (English): Wellhope
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd.
2018 Annual Report
April 2019
Important StatementsI. The Board of Directors, Supervisory Board, Directors, Supervisors and SeniorManagement of Liaoning Wellhope hereby warrant that there are no false representations,misleading statements or material omissions in this annual report, jointly and severallyaccept full responsibility for the truthfulness, accuracy and completeness of the contentsof this report.II. All the Board Directors attended the board meeting.III. Jiangsu SuyaJincheng CPA LLP has issued the auditor's report with an unqualifiedopinion for the Company.IV. The Company's Chairman Jin Weidong and the Director of internal audit ZhangWenliang warrant the truthfulness, accuracy and completeness of the informationpresented in the financial statements in this annual report.V. The profit distribution plan for the reporting period has been deliberated by the Boardof Directors.The 2018 profit distribution plan will be: based on the total share capital on the equityregistration date when the 2018 annual profit distribution will be implemented, theCompany will distribute cash dividends of RMB 1.8 yuan per 10 shares (tax included) to allshareholders, totalling RMB 166,014,791.28 yuan. This profit distribution plan has beendeliberated and approved by the Board of Directors, pending submission to theShareholders' Meeting.VI. Risk Statement of Forward-looking StatementsThe forward-looking descriptions in this report in terms of plans, development strategiesand other information cannot be deemed the Company's commitment to investors. Pleasebeware of the investment risks.VII. There has been no occurrence of the Company's non-business capital being occupiedby controlling shareholders and their related parties.VIII. There has been no occurrence of the Company violating its decision-making procedurewhile providing external guarantees.IX. Material Risk WarningThe Company describes possible risks in detail in this report. Please refer to "PossibleRisks" in Section IV "Business Operations Analysis".X. This annual report has been issued in both Chinese and English versions. In case there isany discrepancy or inconsistency between the two versions, the Chinese version shallprevail. The disclosed Chinese version of 2018 Annual Report can be obtained at:
www.sse.com.cn.
Contents
Section I Glossary ...... 4
Section II Company Profile and Key Financial Information ...... 5
Section III Business Overview ...... 8
Section IV Business Operations Analysis ...... 25
Section V Important Disclosures ...... 74
Section VI Changes in Common Shares and Shareholder Information ...... 92
Section VII Preference Share ...... 95
Section VIII Directors, Supervisors, Senior Management and Employees ...... 96
Section IX Corporate Governance ...... 105
Section X Corporate Bond ...... 107
Section XI Financial Statements ...... 108
Section XII Reference ...... 239
Section I GlossaryI. Glossary
| CSRC | refers to | China Securities Regulatory Commission |
| SSE | refers to | Shanghai Stock Exchange |
| Wellhope, Liaoning Wellhope, the Company | refers to | Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. |
| Reporting Period | refers to | January 1st, 2018-December 31st, 2018 |
| De Heus | refers to | De Heus Mauritius Ltd., established in Port Louis, Mauritius, one of the shareholders of Wellhope |
| Royal De Heus | refers to | Koninklijke De Heus B.V., the parent company of De Heus Mauritius Ltd., the biggest feed company in the Netherlands |
| Heli Investment | refers to | Shenyang Wellhope Heli Investment Ltd., one of the shareholders of Wellhope |
| Company Constitution | refers to | The Constitution of Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. |
| Shareholders' Meeting | refers to | The Shareholders' Meeting of Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. |
| Board of Directors | refers to | The Board of Directors of Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. |
| Supervisory Board | refers to | The Supervisory Board of Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. |
| Corporate Law | refers to | The Corporate Law of the People's Republic of China |
| Securities Law | refers to | The Securities Law of the People's Republic of China |
| Premix | refers to | Also known as additive premix, it is a well-proportioned mixture prepared by two or more than two kinds of feed additives and carrier or diluents according to appropriate proportion. It is a general name for compound premix, microelement premix and vitamin premix. |
| Concentrate Feed | refers to | It is a well-proportioned mixture consisted of protein feed, mineral feed and feed additives according to appropriate proportion, it can be made into compound feed by mixing with energy feed in a specified proportion. |
| Compound Feed | refers to | Based on the nutritional needs of animals, more feed raw materials and feed additives are industrially processed according to feed formula, it can be directly used for feeding animals. |
Section II Company Profile and Key Financial InformationI. Company Information
| Company Name(English) | Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. |
| Abbreviation(English) | Wellhope |
| Company Name(Chinese) | 辽宁禾丰牧业股份有限公司 |
| Abbreviation(Chinese) | 禾丰牧业 |
| Legal Representative | Jin Weidong |
II. Contact Person
| Secretary of the Board | Representative of Securities Affairs | |
| Name | Zhao Xin | Yang Guolai |
| Address | No. 169, Huishan Street, Shenbei New District, Shenyang, Liaoning, P. R. of China | No. 169, Huishan Street, Shenbei New District, Shenyang, Liaoning, P. R. of China |
| Tel | 024-88082015 | 024-88080789 |
| Fax | 024-88082333 | 024-88082333 |
| hfmy@wellhope.co | hfmy@wellhope.co |
III. Basic Information of the Company
| Registered Address | No. 169, Huishan Street, Shenbei New District, Shenyang, Liaoning, P. R. of China |
| Postal Code | 110164 |
| Office Address | No. 169, Huishan Street, Shenbei New District, Shenyang, Liaoning, P. R. of China |
| Postal Code | 110164 |
| Company Website | www.wellhope-ag.com |
| hfmy@wellhope.co |
IV. Place where the Annual Report is prepared
| Media Designated by the Company for Disclosing Information | China Securities Journal,Shanghai Securities News ,Securities Times |
| Website Designated by the CSRC for Publishing the Annual Report | www.sse.com.cn |
| Place where the Company prepares its Annual Report | Securities Department of the Company |
V. Stock Information
| Stock Information | |||
| Stock Type | Stock Exchange for Listing | Stock Abbreviation | Stock Code |
| A Share | Shanghai Stock Exchange | Wellhope(禾丰牧业) | 603609 |
VI. Other Information
| Accounting Firm ( Local) | Name | Jiangsu SuyaJincheng CPA LLP |
| Office Address | 21st-23rd F, Central International Plaza, No.105-6 North Zhongshan Road, Nanjing, Jiangsu Province, China | |
| Name of Signatory CPA | Zhou Jiawen, Wang Jin |
VII. Key Accounting Data and Financial Performance Indicators in the Latest Three Years
1. Key Accounting Data
Unit: yuan Currency: RMB
| Item | 2018 | 2017 | Year-on-Year Change % | 2016 |
| Operating revenue | 15,750,798,120.67 | 13,695,843,458.67 | 15.00 | 11,870,578,122.31 |
| Net profit attributable to the shareholders of the Company | 551,928,618.35 | 471,024,473.92 | 17.18 | 426,978,443.55 |
| Net profit attributable to the shareholders of the Company deducting non-recurring gains and losses | 542,459,604.74 | 389,607,877.28 | 39.23 | 399,573,783.81 |
| Net cash flow from operating activities | 501,404,915.59 | 611,390,370.75 | -17.99 | 204,935,490.07 |
| As at the end of 2018 | As at the end of 2017 | Year-on-Year Change % | As at the end of 2016 | |
| Net assets attributable to the shareholders of the Company | 3,851,915,758.64 | 3,390,304,242.88 | 13.62 | 3,006,170,941.93 |
| Total assets | 6,930,694,562.43 | 5,985,861,995.54 | 15.78 | 5,169,472,910.89 |
2. Key Financial Performance Indicators
| Item | 2018 | 2017 | Year-on-Year Change % | 2016 |
| Basic earnings per share (yuan per share) | 0.66 | 0.57 | 15.79 | 0.51 |
| Diluted earnings per share (yuan per share) | 0.66 | 0.57 | 15.79 | 0.51 |
| Basic earnings per share deducting non-recurring gains and losses (yuan per share) | 0.65 | 0.47 | 38.30 | 0.48 |
| Weighted average return on equity (%) | 15.30 | 14.72 | Increased 0.58 percentage points | 15.10 |
| Weighted average return on equity deducting non-recurring gains and losses (%) | 15.04 | 12.17 | Increased 2.87 percentage points | 14.13 |
VIII. Key Financial Figures by Quarters in 2018
Unit: yuan Currency: RMB
| Item | Q1 | Q2 | Q3 | Q4 |
| Operating revenue | 3,129,332,297.72 | 3,720,883,404.77 | 4,628,867,760.81 | 4,271,714,657.37 |
| Net profit attributable to the shareholders of the Company | 91,763,985.23 | 72,595,125.48 | 240,912,462.24 | 146,657,045.40 |
| Net profit attributable to the shareholders of the Company deducting non-recurring gains and losses | 88,331,450.07 | 69,215,522.62 | 240,718,433.43 | 144,194,198.62 |
| Net cash flow from operating activities | -144,835,288.11 | 435,094,312.29 | -11,963,321.16 | 223,109,212.57 |
IX. Non-Recurring Gains and Losses
Unit: yuan Currency: RMB
| Item | 2018 | 2017 | 2016 |
| Gains or losses on disposal of non-current assets | -3,713,387.32 | 60,743,353.24 | 16,686,943.30 |
| Government grants charged to current gains or losses (excl. the government grants that are closely related to the Company's ordinary course of business and gained constantly at fixed quotas or amounts as per certain standards based on the state polices) | 19,471,241.10 | 34,132,205.99 | 25,071,552.60 |
| Gains or losses on debt restructuring | -1,147,367.47 | ||
| Gain or loss on fair value changes in trading financial assets and liabilities, and investment income from disposal of trading financial assets and liabilities as well as available-for-sale financial assets (excl. the effective portion of hedges that arise in the Company's ordinary course of business) | 2,821,414.45 | -181,164.67 | -5,945,010.13 |
| Non-operating income and expense other than those described above | -3,208,527.84 | -1,240,061.60 | -1,351,740.60 |
| Non-controlling interests effects | -590,792.81 | -4,164,352.40 | -2,681,266.97 |
| Income tax effects | -4,163,566.50 | -7,873,383.92 | -4,375,818.46 |
| Total | 9,469,013.61 | 81,416,596.64 | 27,404,659.74 |
X. Item Measured at Fair Value
Unit: yuan Currency: RMB
| Item | Opening Balance | Closing Balance | Change | Effects on Current Profit |
| Derivative financial assets | 971,380.80 | 2,042,527.60 | 1,071,146.80 | -369,580.00 |
| Total | 971,380.80 | 2,042,527.60 | 1,071,146.80 | -369,580.00 |
Section III Business OverviewI. Principal Business, Operation Model and Current Situation of the Industry in the
Reporting Period1. Principal business and operation modelPrincipal business of Wellhope(hereinafter referred to as "the Company") primarilyconsists of feed production and sale, feed raw materials trade, integrated broiler business,pig raising business and related business. All the operating segments run under the overallstrategy, and carry out operation activities in their respective business areas in an orderlymanner.A. Feed and feed raw materials tradeThe Company manufactures and sells animal feed for swine, poultry, ruminant, aquaticand fur-farmed animals, which are categorized into premix, concentrate and compoundfeed. Driven by the principle of “constantly working on new products, never following thebeaten path”, it always designs tailor-made products for animals in different growth stages.Since 2006, the Company has entered a strategic cooperation with Royal De Heus, a Dutchcompany also a global player in animal nutrition, which is active in over 75 countries.Supported by De Heus' worldwide resources, advanced know-how and centurial businesspractices, whilst relying on self-owned data-based nutrition evaluation system that derivesfrom years of researches on nutrition and raw materials, the Company is committed tosupplying feed products centered on the needs of local markets and customers, to offeringfarmers integrated services in terms of animal raising, disease prevention and control aswell as operation management, helping them to achieve the best economic benefits.The subsidiary trade companies mainly trade in feed raw materials in terms of fish meal,soybean meal and co-products of corn, also engage in feed additives including amino acid,antioxidant, mold inhibitors and vitamin. In addition, the trade companies are the salesagents of animal health products such as vaccines and veterinary medicine produced byglobal strategic suppliers.Based on tremendous strength in technology, research and development (hereinafterreferred to as "R&D"), seasoned talents and brand influence, the Company has created an
operation model of integrating science and technology, manufacture and trade for feedand feed raw materials trade businesses, serving customers and local markets throughresources sharing, synergetic development and combined action. At present, theCompany's feed products cover the markets in 29 provinces and regions across China, ithas also built feed plants in Nepal, Indonesia and the Philippines, etc. Meanwhile, its tradebusiness distributes in Northeast China, Northern China, Eastern China, Southwest China,Guangdong Province and other regions, feed products and raw materials have also beenexported to Nepal, Mongolia and other countries.B. Integrated broiler businessThe Company's broiler integrated chain covers more than 30 holding and associatedcompanies, which are mainly located in the provinces of Liaoning, Hebei, Henan, Jilin andShandong, etc. It has established three business units in terms of broiler raising, raw meatprocessing and further processing, which contains breeding, hatching, feed producing,commercial broiler raising, slaughtering and processing of raw meat, further processing ofprepared and cooked food. The integrated operation can effectively ensure the productionand supply of all operating segments, and facilitate the Company to control food safetyacross the entire chain. Meanwhile, through standardized management and streamlineoperation, the Company consolidates the controls of bio-safety, drug residue andin-process hygiene to achieve traceable food safety.
? Broiler raising unit: This unit covers breeder raising, day old chick hatching andcommercial broiler rearing. The Company formulates scientific and reasonable feedingprograms, light programs and disease prevention system to provide qualified eggs for thehatching farms; meanwhile, it has established thorough management system in the
hatching process, introduced intelligent facilities that are available for hatching in batches,also equipped high-efficient and energy-saving hatcher and environment control systemfor supplying healthy day old chicks. Entering commercial broiler sector, the Companymainly raises broiler by self-owned farms and contract(out-sourcing) farms under thepattern of unifying nine aspects, including unified site selection and planning, unifiedconstruction standards, unified day old chicks supply, unified disease prevention, unifiedfeed supply, unified medicine supply, unified technological guidance, unified testing andunified slaughtering and processing. Guided by scientific raising standards, all the farmsapply three tiers cage system, and automate all the processes from feed intake, watertemperature to moisture control, etc., meanwhile, the farms combine crop planting withanimal raising to reduce manure pollution and to promote resource recycling. The deliverybody weight of commercial broiler can reach over 2.8 kg, and the European productionindex (shortened as EPI in the following parts) can realize 380, which receive widerecognition from the cooperative farms.?Raw meat processing unit: The Company has 15 holding and associated slaughteringentities, which are equipped with state-of-the-art production lines with an annualslaughtering capacity of 550 million broilers. Driven by all-in and all-out inspection andquarantine, every single entity has established a total quality guarantee system andtraceability system to monitor all the processes. Meanwhile, the Company constantlystrengthens and improves slaughtering and processing techniques by ways of systematicpre-job training and skill promotion training as well as conducting "6S" management (i.e.,Seiri, Seiton, Seiketsu, Shitsuke, Standard, Safety), making the killing-out percentage standout among the companies with similar scale. The Company mainly supplies fresh andcold-storage broiler parts products, which are sold to meat processing companies,supermarkets and chain fast-food stores, major clients include Shineway Group, JinluoGroup, Yurun Group, RT-MART, McDonalds, KFC, Yoshinoya, Wallace, Dili Fresh Food,catering companies and other local fresh food markets, etc., as well as sold to otherregions such as Hong Kong, Macao, and countries in terms of Mongolia and Bahrain.?Further processing unit: The Company uses high-quality chicken supplied by self-ownedslaughtering entities as raw materials, at present it supplies over 100 kinds of products,which are sold to supermarkets and cooked food shops. Under the backdrop of continuous
expansion of consumer demand, the Company expands its exporting business of cookedfood to the markets of Japan and Korea.C. Pig raising businessThe Company has entered pig raising business by self-built farms and co-invested farmsthat are primarily located in the provinces of Liaoning, Henan, Hebei, Heilongjiang andAnhui. In 2019, the first stage of 500,000 heads' pig project located in Fushun city ofLiaoning Province was completed and came into operation in April, and the project inGongzhuling city of Jilin Province will be finished at the end of 2019 and come into service.The Company raises breeder by self-owned farms, and rears finisher by self-owned farmstogether with contract(out-sourcing) family farms, following the pattern of "unifying fiveaspects" in terms of unified pig house standard, unified piglet supply, unified feed supply,unified feeding management and unified repurchase of commercial piglet. Among theCompany's pig projects, Lingyuan breeder farm is a designated trial farm of the nationalpig industry system, and the pig project located in Henan Province, raises sows by its ownfarms, also buys piglets for contract farms, which provides effective supports for pig feedbusiness of regional companies.In compliance with the principle of moderate scale for every single farm along with thesite planning of multi-point layout, the Company strictly controls bio-safety and adheres tothe concept of environmental-friendly animal husbandry to protect environment bydisposing manure in the natural method. Fushun pig project, operated in 2019, was jointlydesigned by famous pig raising experts and Architectural Design and Research Institute ofTsinghua University CO. LTD., setting its sights on becoming a first-rate modern pigbreeding farm. Relying on high-level technique and first-class facilities, specially designedbio-safety program as well as introducing high-quality Landrace and Yorkshire to ensurethe gene of grandparent stock, it is committed to supplying pure parent stock with clearfamily tree and providing better commercial piglet and finisher. Meanwhile, the Companyhelps farmers in surrounding areas to increase their incomes by offering them contracts tofatten pig, contributing to the economy development of local rural areas, whilst basing onscientific environmental protection technology, the farms combine crop planting withanimal husbandry to achieve eco-friendly and recyclable agriculture.
D. Related businessRelated business is a beneficial supplement for the whole chain of animal husbandry,mainly produces and sells animal medicine and smart livestock and poultry rearingfacilities. Related products have been sold to Canada, Nepal, Indonesia, Thailand, thePhilippines, Ethiopia, Mongolia, etc., and maintained stable markets in Nepal, Indonesia,Ethiopia, Mongolia, etc.2. Development stage and cyclical characteristics of relevant industriesA. Feed industryChina's feed industry dates back to the 1970s and has undergone over 40 years ofdevelopment, at present it has formed a relatively complete industrial system supportedby feed manufacturing industry, raw material industry, feed additives industry, feedmachinery industry, feed scientific research and education, quality and safety testing andsupervision system. Feed industry in China has developed in a fast momentum along withthe expansion of poultry and aquaculture industry, looking back in 1992, China becamethe world's second largest feed producer, and rose to the top in 2011, thereafter its feedproduction broke through 200 million tonnes in 2015, and entering 2018, China’s feedproduction took up about 17% of the world's (data source: Alltech 2019 Global FeedReport), ranking the first in global feed production for eight consecutive years.The rapid development of feed industry has led to constant expanding of feed capacity andincreasing market competition, making small and medium-size feed producers that arelack of advanced technology and professional management have been gradually weededout of the market. Whilst on the contrast, benefiting from industry consolidation and theadvantage of scale, large companies have continually expanded their capacity by mergersand building new plants, which have further improved the consolidation of feed industry,and gradually steered this industry to large-scale and intensive operation. Since 2008,China's feed industry has witnessed a downward trend in the number of feed producers,and according to the “13
th
Five-Year Plan”, the number of feed producers in 2020 will bereduced to over 3000, while the companies with 1 million tonnes' capacity will be risen to60, which will contribute towards 60% of the nation's feed capacity, indicating that theconsolidation of feed industry will be further improved.
From a long-term perspective, feed industry, as the upstream of animal raising, does notshow obvious cyclical characteristics. However, the fluctuations in the inventories ofanimal raising industry will affect the demand of feed products to some extent, thus,different categories of animal feed have different cyclical characteristics respectively.B. White feather broiler industrya. Cyclical characteristics of the industryWhite feather broiler raising is a typical industry with cyclical fluctuations. Supply anddemand relationship and the market price follow certain characteristics in the cyclicalchange.In a short-term view, changes in white feather broiler price within a year mainly showseasonal fluctuations. Chinese New Year, National Day and Mid-Autumn Festival, are peakseasons of chicken consumption, the market price mainly starts to rise in fluctuationduring those periods, reaches to the peak in the festival days, then slumps and falls to thebottom about two months later. Moreover, the price of commercial day old chickfluctuates with the price of broiler, which further imposes influence on the price of parentstock.In a mid-and-long term view, the constraints in terms of broiler's production cycle,unreasonable decision caused by the "Herd Effect", capital strength and constructionperiod can lead to the adjustment of broiler supply lagging behind--when broiler pricefluctuates, the supply side often adjusts restocking for next production cycle according tocurrent market price and profit margin, which results in a conversion of supply anddemand in next cycle, and the market price flows to the reverse direction, moves in cycles,forming a "Cobweb model".b. Development stage of the industryChina started to introduce white feather broiler in 1986, since then this industry hasexperienced over 30 years' development, and now China has become one of the world'skey producers of white feather broiler. During the past three decades, this industry hasundergone three phases, including blooming supply and demand, industry's woes andstrong recovery.Broiler products were mostly exported abroad at the very beginning, but along with the
spring up of fast-food driven by the leading stores like KFC and McDonalds, China'sfast-food industry has replaced export to be the biggest demand side. During threedecades prior to 2012, the supply and demand sides in China's broiler industry expandedsimultaneously, presenting prosperities in both supply and demand. However, after 2013,this industry fell into a sluggish period in the following five years due to the oversupplycaused by introducing a large number of grandparent stock and the panic of consumptionaffected by bird-flu. Coming to 2015 till 2018, the introduction of grandparent stock keptat a low level, the statistics of China Animal Husbandry Association indicated that, Chinaintroduced 1.5416 million sets grandparent stock in 2013, but in 2018 only 750,000 sets,less than 50% of that in 2013. As the source of supply of white feather broilers, the leveland duration of deficiency of grandparent stock decides where the broiler cycle can turnup to. Entering 2018, the influence of shortage of grandparent stock had transferred to theterminal market, the shrinking supply led to a quick growth of broiler price. At the sametime, this industry was witnessing a strong recovery supported by the alternativeconsumption that triggered by African swine fever and some positive factors such as therevival of fast-food industry, etc.China's white feather broiler industry has entered the "fast lane" with a brighter future.Firstly, regarding raising efficiency, the gene of white feather broiler decides that it growsfast with a short production cycle. Besides genetic advantage, standardized andmodernized raising system also greatly improves the efficiency. Secondly, regardingproduction cost, feed conversion ratio of white feather broiler is much lower than that ofpig or cattle, and chicken is the cheapest source of protein. Low cost decides low price,thus further ensures strong consumer demand. At last, regarding nutritional value, whitefeather broiler wins the favor of consumers around the world due to its nutritionaladvantage of high protein, low fat and cholesterol. The study results of OECD (Organizationfor Economic Cooperation and Development) and FAO (Food and Agriculture Organization)note that, chicken is now playing an important role as the first supplier of meat protein,accounting for 28.15% of the world's meat consumption. In 2017, average Americanperson consumed 41.7kg of chicken per year, 18kg in EU, but in China, only consumed10.3kg per year, showing a gap comparing with the world's average level (11.7kg), so agreat potential can be seen in China's white feather broiler industry.
To conclude, in the view of the cyclical character of broiler industry, the shrinkage ofsupply and the expansion of demand can lead to prosperity in this industry. Now a stronghistoric cycle has been coming, this industry will show a largely upper rise in the futurealong with continuous displaying of the advantages of white feather broiler and thereleasing of development potential.C. Pig industrya. Cyclical characteristics of the industrySimilar to white feather broiler industry, the fluctuations of pig raising industry also fit forthe "cobweb model", which present a strong characteristic of cyclical fluctuations ofsupply and price.One pig production cycle includes gilt rearing, gestation, farrowing, growing and fattening,which will take about 18 months. During this period, the supply of pig cannot be adjustedpromptly according to market circumstances, the increase or decrease of supply is oftenlagging behind. When some market factors change, the balance of supply and demand inpig market will be broken and the market price will change. Pig farms/farmers alwaysadjust restocking according to current price and profit margin. However, because of thelong production cycle, effects of supply adjustment can be presented in the nextproduction cycle. Moreover, restrictions of unreasonable judgment, construction periodand capital strength can further intensify the lag-behind in pig supply adjustment, whichmake the reversal of supply-demand and market price take place in the next productioncycle. Constantly reversed changes in supply-demand relationship and market price formcyclical fluctuations, and the "cobweb model" can explain the mechanism of thefluctuations in a more realistic way.
b. Development stage of the industryInfluenced by consumers' diet habits, historic culture and feeding conditions of pig, meatconsumption in China has been dominated by pork for a long time. Up to now, China is stillthe world's largest pork producer.Before implementing the policy of reform and opening-up, food rationing was conducted,there was a large shortage in the supply of pig in China, and such circumstance was finallyalleviated after carrying out this policy along with the upward economy. In 1985, Chinaopened the field of pig purchasing and selling, and driven by the "Shopping BasketProgram", pig raising industry developed quickly within the following two decades.According to the data from National Bureau of Statistics, China's pork production from1985 to 2006 soared to 46.5034 million tonnes from 16.5480 million tonnes, whichbasically satisfied the demand of pork, and after 2007, the supply of pig continued toincrease, and pork was no longer in short supply. Affected by many factors, the supply anddemand relationship of pig and market price started to present cyclical fluctuations inaccordance with the "cobweb model".However, the defects of traditionally extensive pig raising started to be shown despite thequick development, including low production efficiency, high feeding cost, unstableearnings and pressures on food safety and environment, all of these had become rigidrestrictions for the continued development of the industry. Meanwhile, the incident offloating pigs in Huangpu River in March 2013 pushed this industry into controversy, makingthe structural adjustment, industrial transformation and upgrading become extremelyurgent. Under the backdrop of decreasing agricultural land, increasing labor cost andstricter policy restrictions, the intensive production and standardized raising had becomethe mainstream.In 2018, the adjustment of pig raising industry had achieved initial success, it had entereda right track of “saving resource” and “standardizing environmental protection”. However,the sudden outbreak of African swine fever (referred to as ASF below) added new changes.ASF broke out in August 2018 and spread over 20 regions in half a year, which undoubtedlyfurther put downward pressure on the decline stage of pig cycle and disrupted the stablepig industry.On one hand, ASF speeded up the decline in pig supply, making the pig cycle bottom out in
advance, meanwhile, culling a large number of pigs overturned the balance of supply anddemand again, resulting in an upcoming shortage in pork, there would be a strongrebound in pork price. It can be predicted that before the intervention of government, thepork price will soar in a future time and the pig price will hit a new historical height.On the other hand, the government has issued relevant policies in response to ASF, such asimposed restrictions on long-distance distribution and transportation of pig and relatedproducts. Thereby, the original consolidated market has been fragmented into regionalmarkets, whilst slaughtering and processing as well as transportation system will also facebold changes.Overall, ASF has brought great impacts on pig raising industry, but what can’t be denied isthat it will also bring historic opportunities, i.e., the rising pork price can benefit thosecompanies that have already entered pig raising business, especially those extra largeplayers that have newly completed projects and targeted preventing and controllingmeasures against ASF will be the biggest winners. At the same time, circulating withcold-chain will also face new opportunities, and it is ripe for pig raising players steppinginto slaughtering and processing businesses. A new era that integrates pig raising withslaughtering and processing will be coming.II. Core Competitiveness Analysis within the Reporting Period
Core competitiveness of the Company lies in a highly educated, experienced, loyal andstable management team, rationally planned and steady-development based corporatestrategy, increasingly matured and competitive integrated operation model, systematic,scientific and continuously innovative technology system, development-oriented andstrongly rooted corporate culture.1. Highly educated, experienced, loyal and stable management teamThe highly educated senior managers of the Company have professional background ofover 20-year's experiences in feed and animal husbandry industries as well as businessmanagement. They are pioneers and developers of the Company, who are committed toinsisting entrepreneurship, acquiring new knowledge and keeping pace with the era overthe years. The seven founders of the Company always hold together and fight together,they are praised as "seven noble partners” in the industry, the high solidarity of the
start-up shareholders has become the Company's most significant core competitiveness,whilst “Unity is Power” is also one part of the core culture. Almost all the middle andsenior managers are internally selected and cultivated by the Company, they have deepunderstanding and recognition of the corporate culture and operation model, they havestrong sense of ownership, full sense of mission and responsibility, devoting themselves tothe sustainable development of the Company. Within over 20 years, the managementteam has maintained high stability, almost no chief director or above level manager leavesthe Company, in regard of over 100 general managers, besides those who are adjusted dueto substandard performance, also few of them quit the job. Meanwhile, newly promotedmembers born in the 1980s and 1990s are selected from key talents' cultivation programs,such as “Seedling Plan” and “Sunflower Program”, they love the Company, highly recognizethe corporate culture, become the backbone force of the management team. As a reward,the Company offers core members equity incentive policies in different ways, moreover, italso pays high attention to continuous learning and ability improvement of thesemanagers, provides them with different training programs, including ExecutiveDevelopment Program, Leadership Training Camp, etc., which are conducted strict trainingand appraisal rules. Whilst it also organizes those managers to study from some leadingcompanies at home and abroad to broaden their horizons and make further progress. Themain reason that causes the failure of some domestic companies is attributable to“unstable and disunited management team”, in contrast, the highly educated, loyal andstable management team is one of the core competitiveness of Wellhope, making theCompany having faith in future and moving forward.2. Rationally planned and steady-development based corporate strategyBased on comprehensive understanding of domestic and overseas political, economic andindustrial trends, the Company always pays attention to its sustainable development andrisk control, and focuses on its operation quality and the investment return of newprojects. Driven by a stable and conscientious investment attitude, the Company alwaysrationalizes its business distribution, develops step by step instead of investing andexpanding businesses recklessly, always maintains the rationality and safety of industrialstructures and avoids all kinds of risks regarding business operation.
Rationally planned and steady-development-based corporate strategy reflects in thefollowing aspects:
The Company has primarily formed an industrial chain with high competitiveness andcapability of risk prevention and control in the fields of raw material trade, feedmanufacturing and selling, animal raising, slaughtering and further processing, which canimprove its competitiveness, enable all business divisions to connect closely, reduce thecost of intermediate links, improve profit margin and greatly mitigate the risks of singleoperation.Instead of rapidly covering nationwide markets supported by the success of feed businessin Northeast regions and integrated broiler business, the Company, with rich experiencesin market expanding, insists on exploring new markets basing on overall analysis andinvestigations, step by step entering the markets in Northeast, Northern China, Henan,Shandong and other areas. It moves forward steadily and purses asset-light operation,always focuses on overall operation quality and returns on investment, following theprinciple of “making existing businesses stronger, accumulating business practices, laying asolid foundation, seeking for the dominate position gradually”.The sales volume and growth rate of all feed categories in terms of pig, poultry, ruminantand aquatic products are relatively balanced and each has its advantages. While constantlypromoting integrated broiler business, the Company has entered pig raising business, andplans to take 5 to 8 years to craft an operation model driven by two complementaryengines in terms of integrated broiler and integrated pig businesses. Such business layout,with high risk resistance, will not lead the Company to a rather high fluctuation due to abig blow or a downturn suffered by one of the business.In 2018, the Company conducted "SWOT” analysis regarding itself on a scientific andprudent basis, finally confirmed its development goals for recent three years and next tenyears, and formed a development strategy from 2019 to 2021, i.e.: "To steadily improveexisting core businesses, to vigorously develop emerging strategic businesses and activelycultivate potential businesses. In the following three years, to further echelon the talentsteam, to unremittingly innovate technology and marketing pattern, information resources,investment and financing platform, to deeply expand international business centered onSoutheast Asia, forming an operation model with "leading-edge quality and efficiency"
that can create synergies and reduce costs among all business divisions and providecustomers and related parties (shareholders, employees, suppliers, society) products andservices with brand influence, to become an enterprise with leading-edge quality andefficiency across agriculture, animal husbandry and food industries as well as a supplier ofrelevant services". The Company will proactively carry out all the work under overallstrategies with unity and cohesion, so as to achieve the goals.3. Increasingly matured and competitive integrated operation modelAnimal husbandry industry and feed industry are experiencing big transformations andchanges, feed producers gradually withdraw the leadership in the industrial chain, whilstfarms and large-scale integrated groups will take the dominated position in the future. Onone hand, following the trends of markets and changes of customers, the Company hasimplemented significant measures to improve its feed market share and overallprofitability, including constantly developing new products, adjusting marketing strategyand consolidating administrative departments. On the other hand, as early as 10 years ago,the Company had planned to move into integrated broiler business, nowadays thisbusiness has developed from small to large scale, from joint venture to individual soleproprietorship, from fragmented parts to closely connected integration, which make theCompany have explored a relatively matured and competitive integrated operation model.Relatively complete integrated chain: The Company is responsible for breeding, feed R&Das well as production, providing instructions of environment and small climate in thehouse, and monitoring all the processes relating to broiler raising. Meanwhile, theCompany repurchases commercial broilers for its slaughterhouses and processes raw meat,prepared and cooked food, making all the processes of the integrated chain controllable.Modern model of self-owned farms together with large contract farms: The Company haschanged its broiler raising model from “self-owned farms and family farms” to “self-ownedfarms together with large contact farms”, wining the priority by strategic layouts andjudgments of the industry. Relying on the strength of R&D, the Company's feed conversionratio ranks at the first class in the industry, whilst benefiting from high standard of farmbuilding and application of three tiers cage system, the design of ventilation andenvironment control also reaches higher level, hence, the Company has realized efficiencyand cost leadership supported by high-standard raising and fine management conducted
in the slaughtering process.Fine management conducted in the integrated chain: Driven by the principle of savingenergy, reducing emission, protecting environment and providing healthy products, theCompany has established stringent production access standards for the integrated chain.And now, it is forging a data sharing and collaboration platform for green manufacturing ofwhite feather broiler chain, aiming at consolidating logistics, information flow and capitalflow. Meanwhile, the Company is committed to promoting the fine management in theintegrated chain, also conducting strict benchmarking management and tracing feedbackby monthly meeting, field inspection and big data sharing. Ten years' dedicated researchesand consecutive improvements enable the Company to achieve significant progress in theoperation efficiency and cost control regarding broiler raising, feed production andslaughtering, etc., thus the competitive integrated operation model has become one of thecore competitiveness of the Company. By summarizing and extracting the practices relatedto the chain, standards can be formed and will be easy to be copied and promotedelsewhere.Integrated operation shows a new development direction for enterprises in agricultureand animal husbandry industry, at present many of them are searching their ownexperiences in this field. Wellhope has operated broiler integration for ten years, richoperation practices and the management team composed of dedicated experts serves asthe core competitiveness of integrated broiler business.4. Systematic, scientific and continuously innovative R&D systemAs a technology and innovation driven corporation, the Company strictly follows itsmission described as "Using advanced technology, excellent service, and outstandingproducts to promote the development of China’s animal husbandry industry, saveresources, protect the environment, provide food security and benefit the society", itsR&D team, driven by market-oriented and customer-oriented principles and the goals of“safe product, stable quality, tailor-made nutrition and powering business performance”,has always been dedicated to constantly innovating know-how and working on newproducts.The Company's R&D system applies vertical management in regard of nutritionist, productmanager, formulator, field technician, quality controller, laboratory technician and other
related positions. Guiding by over 100 highly educated and seasoned experts, it hascreated a management system of R&D and results' application, which starts from studyingon demands of customers, trends of industry, to research and development of products,analysis of production demands, to transformation of achievements. Regarding technology,the Company has received certain awards and recognitions from national and local level,such as National-Recognized Enterprise Technology Center, National and Local JointEngineering Research Center for Researching and Developing New Biological Feed and ItsApplication, Wellhope Feed Engineering Technology Research Center of Liaoning Province,etc. Moreover, by combining De Heus’ global resources, leading-edge technology andcenturial business practices with the Company’s more than 20 years of researches onnutrition and raw materials, it has built a precisely data-based nutrition evaluation system,and also constantly improved its product lines, innovated databases application and animalgrowth model to continuously maintain and strengthen its product competence. Amongthe progresses, the Company has made pioneering explorations and breakthroughs in feedtechnology regarding "safety and high quality", "tailor-made nutrition and high efficiency","antibiotic-free and environmental protection”, etc.Furthermore, the Company's well-equipped testing center is one of the national keylaboratories certified by CNAS (China National Accreditation Service for ConformityAssessment). By virtue of up-to-date equipment and facilities, the testing center has beencapable of detecting melamine and other banned additives very early, and at present itstest results can be recognized by 41 countries and 55 authorities. The Company isdedicated to guaranteeing the quality of products from micro to macro, putting theconcept of safe production into every step, and it has established self-owned raw materialdatabase and also shares data resources of the Dutch partner, striving to get lower costprice of raw materials and achieving best price quality ratio relying on raw material datawhich calculates energy dynamics by regression equation, and on precise formulation ofnutrition in accordance with production performance and feed intake.In 2018, in response to African swine fever, the Company rapidly developed new feedproducts with high immune nutrition and worked out effective solutions for diseaseprevention. In view of fast growing beef cattle and mutton sheep markets, the Companyformulated rapid fattening program for beef cattle and total mixed ration program for
mutton sheep; it also improved and adjusted the crushing strength for broiler feed, thecontrol of PDI and the coating technology for liquid raw materials. In the aspect of layerfeed, it independently researched and developed biological fermentation technologyfurther improved the efficiency of feed utilization. Whilst the launching of functional feedfor strengthening the liver and intestinal tract of aquatic animals has significantlyenhanced the immunity function of animals and lowered the incidence of diseases, whichwas favored by customers. Moreover, in 2018, the Company, as a representative of China'sfeed enterprises, participated in formulating two community standards (i.e. Standard ofCompound Feed for Layer and Broiler, Standard of Compound Feed for Piglet and Finisher)organized by China Feed Industry Association, the product named "Mrs. Pig" was awardedas one of China's top ten classic sow feed brands. In regard of antibiotic alternatives, theCompany has designed more than 40 combinations of formula, which laid a technicalfoundation for producing lower-antibiotic diet for piglets. Up to now, the Company has setup more than 70 scientific research projects, developed more than 10 kinds of newproducts and new technologies average per year, now it totally possesses 40 patents forinvention, 2 prizes of national science and technology progress and nearly 20 awards atministerial and provincial level. Just in 2018, the Company was authorized and submitted17 patents for invention.Based on continuous improvement of feed technology and raising programs, the Companyhas constantly improved its technology relating to integrated broiler business, the deliverybody weight of broiler can reach over 2.8kg with a livability of 95% and Europeanproduction index of over 380. Those indexes which directly show slaughtering technologyand management ability, such as per capita daily slaughtering numbers and killing-outpercentage, have stepped to the first-class level in the industry.5. Development-oriented and strongly rooted corporate cultureAfter years of development, the Company has created corporate values featured by leadingits business development and being understood and recognized by all employees. In 2018,while conducting SWOT analysis during Performance Excellence Management project, theCompany's corporate culture was put forward as the firstly important advantage by all staff.The core culture, represented by Wellhope Vision, which is mainly described as "Alwaysput customers’ needs first and constantly work on new products, never follow the beatenpath, always conduct business honestly, always aim to provide value to our society and to
maintain sustained growth through technology, innovation, and creative work”, and byWellhope Mission, which is primarily described as "Save resources, protect theenvironment, provide food security and benefit the society", plays the role of drivenprinciples for management and the source power for ensuring the Company's sustainabledevelopment. Whilst the subculture, originated from the core culture, is the specificconcept and strategy which guides management and business operation, includingTechnology Strategy, i.e. --No Technology, No Success, only producing reasonable andhigh-quality product, Marketing Strategy, i.e. --The best way to expand our business issupporting our customers growing business, providing customers not only products, butalso solutions to problems, Quality Principle, i.e.--Never use unqualified raw material,Never use non-standard equipment, Never allow substandard operation, Never produceunqualified products, Never ignore unsatisfied customers, Never tolerate imperfect service,HR Policy, i.e.--Providing a fair, just, and merit-based environment for rewarding employees,continuously searching for talents and creating development space for employees, alwaysbeing dedicated to employee’s professional growth and helping them build a blessed life,Code of Conduct for Managers, i.e.--Exercising strict self-discipline, acting with integrity &honest; separating personal and corporate business, sharing achievement, showingkindness to everyone. These cultures have been constantly improved, publicized andpracticed over the years, also promoted by the managers via leading by examplethemselves, together they make the corporate culture root in employees' blood, whichconstantly guide the thoughts and show the desired behaviors for all staff. In the first halfof 2018, along with deeper reforms and for adapting to the changes of internal andexternal business environments, the Company has further summarized and refined itscorporate culture, confirmed the core values as “Integrity, Responsibility and Win-win”and the management culture as “Innovation, High-efficiency and Self-discipline”. Entering2019, the Company will continually take different ways for enhancing its cultureincorporating into daily practice, promote its corporate culture to play a greater role inpushing forward the Company's development.
Section IV Business Operations AnalysisI. Overview
In 2018, the government gave impetus on the ongoing deleveraging, the China-US tradefriction caused fluctuations in the price of feed raw materials, and the widely spreadingAfrican swine fever led to depressed pig price, the Company faced up to the dynamicmarket and maintained sustained and steady development, the key financial figuresrealized stable growth.1. Business highlightDuring the reporting period, total operating revenue of the Company realized RMB 15.75billion yuan, the net profit attributable to the shareholders of the Company reached RMB552 million yuan, and the net profit attributable to the shareholders deductingnon-recurring gains and losses reached RMB 542 million yuan, achieving a year-on-yeargrowth rate of 15.00%, 17.18% and 39.23% respectively. From 2013 to 2018, theoperating revenue and net profit have continuously grown with the CAGR of 13% and 26%,the profitability enhanced further.
CAGR(13-18)
13%CAGR(13-18)
26%
2. Driving factors of performance growthFeed business and integrated broiler business are the two largest contributors towards theCompany's overall business performance.During 2018, white feather broiler market was prosperous, the Company pressed on at thisgood opportunity, its integrated broiler business division accelerated layout and furtherimproved internal operations and profitability, realized a vigorous growth.The Company's feed business division, another contributor, constantly pushed forwardtransformation and upgrading, adjusted the structures of customer, product portfolio andpersonnel for facing market waves, the sales revenue and sales volume realized theyear-on-year growth rate of 9.24% and 6.83% respectively, ruminant feed of whichcontributed towards 17.13%(prior year 14.35%) of total sales volume with a growth rate of27.54%, aquatic feed and poultry feed recorded volume growth of 12.44% and 15.00%respectively.In the whole year, the Company continued to deepen internal reforms and implementedcertain measures to further activate the potential of staff team, including separating thesales departments and administrative departments, innovating marketing model,benchmarking, etc., meanwhile, the enhanced fine management promoted the Company'speriod cost ratio decreased from prior 5.55% to current 4.98%.3. Business reviewFeed and integrated broiler businesses, as the Company's core divisions, created a big partof the final profit in 2018. Feed business contributed to 46.36% of total sales revenue withan income of RMB 7.299 billion yuan, integrated broiler business contributed towards29.64% with an income of RMB 4.666 billion yuan, raw materials trade and otherbusinesses contributed to 24.00% and the income amounted to RMB 3.778 billion yuan.During the reporting period, the income from investment reached RMB 286 million yuanand realized a growth rate of 67.15%, which mainly derived from associated companies ofintegrated broiler business.? Feed businessIn the reporting period, the Company's holding and associated companies totally
manufactured 4.24 million tonnes feed with a year-on-year growth rate of 10.82%, thecompanies included in the consolidated financial statements sold 2.35 million tonnes feed,increased by 6.83%. Detailed information for feed presented in categories list as follows:
| Item | 2018 Sales volume (10,000tonnes) | 2017 Sales volume (10,000tonnes) | Year-on-Year Change | Contribution to total sales volume |
| Pig feed | 84.41 | 92.57 | -8.81% | 35.89% |
| Poultry feed | 93.38 | 81.20 | 15.00% | 39.70% |
| Ruminant feed | 40.29 | 31.59 | 27.54% | 17.13% |
| Aquatic feed | 14.64 | 13.02 | 12.44% | 6.22% |
| Other feed | 2.49 | 1.80 | 38.33% | 1.06% |
| Total | 235.21 | 220.18 | 6.83% | 100.00% |
Explain: Total feed sales volume in the table belongs to the companies included in theconsolidated financial statements.The sales volume of pig feed declined at the first time since the Company going public,which was constrained by the declining demand of pig feed affected by African swine fever.After the outbreak of African swine fever, the Company immediately organized a workgroup fighting with the disease, researched on specific solutions to control disease and tomitigate bio-security risks, providing assistance for farmers. The R&D center timelydeveloped new products with high immune nutrition to improve pig immunity and highyield.Meanwhile, the sales volume of ruminant and aquatic feed recorded new growth in 2018.Regarding dairy cattle feed, its sales volume increased by 27.08% on a year-on-year base.In the market situation where many dairy farming companies lost money and theinventories of dairy cattle reduced in 2018, based on the technology of "305-day 10 tons’Milk Program", the Company implemented highly efficient feeding program and designedrelevant products for dairy cattle, which were highly recognized by the customers.Regarding beef cattle feed, the sales volume increased by 33.76%, supported by thefeeding programs in terms of fattening technology and TMR diet (Total Mixed Rations) andspecially designed products, and got positive response from the market. Regarding aquaticfeed, its sales volume recorded a growth rate of 12.44%, driven by constant researches andinnovations in raising mode and feeding programs, such as the newly designed “1-2-3”management model for freshwater crayfish.
? Integrated broiler businessRelying on years of business practices, the Company's integrated broiler business hasrealized a leap-forward development from obscurity to over 30 holding and associatedcompanies, becoming one of the main white feather broiler suppliers in China.The value chain of Wellhope broiler integration
The Company raises broiler mainly by cooperating with out-sourcing farms via contract.Relying on scientific nutrition program, proven feeding technology and systematic trainingservice, the average body weight of delivery broilers can reach over 5.6 jin, and theaverage livability can realize over 95%. In the reporting period, its holding and associatedcompanies totally raised 310 million broilers with a year-on-year growth rate of 12.73%.While improving internal operation, the Company also further automated itsslaughterhouses to make further improvement on production efficiency and productquality. In the reporting period, its holding and associated companies totally slaughtered455 million broilers with a year-on-year growth rate of 16.07%, increased by 200%compared with 2014, and totally produced 1.13 million tonnes of meat products with agrowth rate of 18.70%.In 2018, the number of broilers raised by the Company's self-owned farms and contractfarms contributed to 68% of its total slaughtering numbers, its internal supply of broilerhas been gradually approaching the demand of slaughtering, which has further enhancedthe synergies among the whole chain.? Feed raw materials trade business:
In 2018, the Company's raw materials trade business realized a steady-state growth in itssales revenue at 3.275 billion yuan, increased by 11.60%, which was linked to the Companyactively expanded new markets in the South and refined product portfolio and customerstructure, also strengthened internal operation and IT application. However, the China-US
trade friction brought an adverse impact on soybean meal, resulting in a decline in thecomprehensive gross margin of the raw materials trade business.? Pig raising businessAt present, the Company has stepped into pig raising business by self-building farms orpartnering with practiced partners, its pig projects are mainly located in Liaoning, Jilin,Heilongjiang, Henan, Hebei and Anhui provinces, of which, the first-stage of the newlybuilt pig project in Fushun city with a planning of providing 500,000 heads of pig has beenoperated in April 2019, and the project in Gongzhuling city will be launched by the end of2019.4. Other workA. Launching management improvement project based on excellent performance mode
The Company launched a management improvement project based on excellentperformance mode in June 2018.Performance excellence mode is an effective method and tool for an organization'scomprehensive performance management, which is widely recognized internationally. Itscore is to strengthen the organization's awareness of customer satisfaction and innovativeactivities, and pursue excellent business performance. The purpose for the Companyintroducing this project is to continuously create value for customers, employees andother relevant parties, improve its overall performance and promote a sustainabledevelopment. By conducting this project, the Company has redefined its mission, vision,core values and long-term goals, also formulated the strategic plans in the next threeyears, whilst further optimized organizational structure, functional responsibilities, revisedKPI index system, all of these laid a good foundation for realizing the goals in 2019 and inthe future.B. Completing non-public offering new stock
The application materials of the Company's non-public offering new stock were acceptedby the CSRC on May 3rd, 2018, and finally received the approval on October 29th, 2018(No. 1742 CSRC Approval [2018]). Afterwards, the Company completed related work inApril 2019, totally raised funds of 778 million yuan, which would be mainly invested in pig
raising and broiler business. Moreover, the Company will make further efforts to build acapital operation platform, accumulate experiences and expand financing channels. In thefuture, it will be not ruled out that utilizing the ways of convertible bond, corporate bond,acquisition and reorganization to support its long-term development.C. Initiating restricted stock incentive program
The Company put forward the restricted stock incentive program in November 2018 whichgranted 372 key managers with 14.575 million restricted shares, by doing this, the interestsof shareholders, the Company and the core team could be effectively connected, whichwould promote the sustainable development of the Company. Following people-orientedprinciple, it will promote more diversified incentive programs in the future, attract andretain talents to realize its goals rapidly.D. Fully accelerating IT application
In 2018, the Company was comprehensively accelerating its IT application in groupmanagement and control, business collaboration, marketing management, R&Dinnovation, etc., building a mixed cloud-based system architecture on the basis of HUAWEIcloud serving. The Company has completed IT application schemes for related sectors ofintegrated broiler business, including breeder raising, day old chick hatching, feedproduction and commercial broiler raising, also for the supply chain to finance of rawmaterials trade business, forging a group controlled ERP system which integrates businessand finance.II. Operations Analysis
As at December 31st, 2018, the Company's total assets recorded RMB 6.93 billion yuan,the net assets attributable to the shareholders of the Company reached RMB 3.85 billionyuan, increased by 15.78% and 13.62% respectively compared with the end of prior year,meanwhile, its total operating revenue realized RMB 15.75 billion yuan, and the net profitattributable to the shareholders of the Company reached RMB 552 million yuan, recordedthe growth rate of 15.00% and 17.18% respectively.
1. Analysis of primary businessA. Analysis of changes of income and cash flow
Unit: yuan Currency: RMB
| Item | 2018 | 2017 | Change % |
| Operating revenue | 15,750,798,120.67 | 13,695,843,458.67 | 15.00 |
| Operating costs | 14,421,297,677.40 | 12,521,474,992.06 | 15.17 |
| Sales expenses | 420,646,753.59 | 411,506,654.06 | 2.22 |
| Administrative expenses | 227,941,858.19 | 225,935,973.80 | 0.89 |
| R&D expenses | 61,100,349.28 | 61,953,095.44 | -1.38 |
| Financial expenses | 74,900,937.42 | 60,854,400.51 | 23.08 |
| Net cash flow from operating activities | 501,404,915.59 | 611,390,370.75 | -17.99 |
| Net cash flow from investing activities | -509,731,536.62 | -626,407,536.20 | not applicable |
| Net cash flow from financing activities | 166,992,723.63 | 49,874,197.61 | 234.83 |
B. Analysis of revenue and costDuring the reporting period, the Company achieved an operating revenue of RMB 15.75billion yuan with a growth rate of 15.00%, which was mainly driven by the increased salesrevenue contributed by feed, broiler integration and raw materials trade businesses; theoperating cost recorded RMB 14.42 billion yuan with a growth rate of 15.17%, mainly dueto the increase in sales volume and sales revenuea. Primary business analyzed by industries, product classification and regions
Unit: yuan Currency: RMB
| Analyzed by Industries | ||||||
| Industry | Operating revenue | Operating cost | Gross profit margin % | YoY change of revenue % | YoY change of cost % | YoY change of gross profit margin % |
| Feed | 7,298,588,998.60 | 6,421,709,202.87 | 12.01 | 9.24 | 10.20 | decreased 0.77 percentage points |
| Slaughtering and Processing | 3,959,758,111.87 | 3,763,477,475.32 | 4.96 | 35.45 | 33.52 | increased 1.38 percentage points |
| Raw Materials Trade | 3,274,653,471.59 | 3,156,964,005.28 | 3.59 | 11.60 | 11.96 | decreased 0.31 percentage points |
| Broiler and Swine Raising | 824,110,257.04 | 734,652,491.45 | 10.86 | -2.15 | -7.34 | increased 4.99 percentage points |
| Related Businesses | 385,681,935.32 | 338,541,596.12 | 12.22 | 34.92 | 40.28 | decreased 3.35 percentage points |
| Analyzed by Product Categories | ||||||
| Product | Operating revenue | Operating cost | Gross profit margin % | YoY change of revenue % | YoY change of cost % | YoY change of gross profit margin % |
| Feed | 7,298,588,998.60 | 6,421,709,202.87 | 12.01 | 9.24 | 10.20 | decreased 0.77 percentage points |
| Slaughtering and Processing | 3,959,758,111.87 | 3,763,477,475.32 | 4.96 | 35.45 | 33.52 | increased 1.38 percentage points |
| Raw Materials Trade | 3,274,653,471.59 | 3,156,964,005.28 | 3.59 | 11.60 | 11.96 | decreased 0.31 percentage points |
| Broiler Raising | 824,110,257.04 | 734,652,491.45 | 10.86 | -2.15 | -7.34 | increased 4.99 percentage points |
| Related Businesses | 385,681,935.32 | 338,541,596.12 | 12.22 | 34.92 | 40.28 | decreased 3.35 percentage points |
| Analyzed by Regions | ||||||
| Region | Operating revenue | Operating cost | Gross profit margin % | YoY change of revenue % | YoY change of cost % | YoY change of gross profit margin % |
| East China | 1,760,092,653.81 | 1,629,974,853.65 | 7.39 | 8.58 | 10.15 | decreased 1.32 percentage points |
| North China | 2,690,525,934.06 | 2,500,449,362.49 | 7.06 | 33.21 | 37.14 | decreased 2.66 percentage points |
| Northeast China | 7,982,004,866.87 | 7,228,357,359.98 | 9.44 | 11.83 | 10.68 | increased 0.94 percentage points |
| Central and South China | 1,878,558,077.93 | 1,716,503,951.19 | 8.63 | 11.14 | 7.93 | increased 2.72 percentage points |
| Southwest China | 626,988,915.54 | 612,092,141.17 | 2.38 | 35.40 | 39.37 | decreased 2.78 percentage points |
| Northwest China | 571,510,540.26 | 495,449,511.69 | 13.31 | 6.78 | 8.78 | decreased 1.59 percentage points |
| Oversea | 233,111,785.95 | 232,517,590.87 | 0.25 | 16.54 | 28.81 | decreased 9.50 percentage points |
Notes:
--Analyzed by different industries and product classification:
During 2018, the prosperous white feather broiler market promoted the increased price ofthe Company's broiler product, and its broiler business layout and structure has beenimproved to be more rational, as well as the slaughtering business was enhanced further,realizing a revenue growth of 35.45%. In the meantime, the Company pushed forward thetransformation and upgrading of its feed business, further optimized product mix, drivingthe feed volume and revenue to increase by 6.83% and 9.24% respectively.--Analyzed by geographical region:
During the reporting period, the Company's operating revenue in North China increased by33.21%, which was mainly supported by: the Company adjusted the sales market ofchicken products, and pushed forward the layout in these areas, meanwhile, the operatingrevenue in southwest China increased by 35.40%, which was mainly owning to: theCompany started to sell soybean meal in southwest China; whilst the rate of gross marginin foreign countries decreased by 9.5 percentage points, primarily because the Companyneeded to confirm orders one month in advance, and the rate of gross margin of itsexported chicken products sharply dropped due to the fluctuation of the price of chickenmeat in the international market.b. Analysis of sales volume
| Product | Production volume (10,000 tonnes) | Sales volume (10,000 tonne s) | Inventory (10,000 tonnes) | YoY change of production volume % | YoY change of sales volume % | YoY change of inventory % |
| Feed | 234.89 | 235.21 | 3.32 | 6.59 | 6.83 | -8.79 |
c. Analysis of cost
Unit: yuan Currency: RMB
| By Industry | Item | 2018 | % of total costs | 2017 | % of total costs | YoY change of cost % |
| Feed | raw material | 6,119,294,900.03 | 95.63 | 5,613,478,574.01 | 95.66 | 9.01 |
| Feed | labor cost | 71,606,347.71 | 1.12 | 60,647,231.68 | 1.03 | 18.07 |
| Feed | depreciation | 79,320,489.62 | 1.24 | 71,198,471.38 | 1.21 | 11.41 |
| Feed | energy (electricity, coal, steam) | 63,975,504.94 | 1.00 | 56,039,982.04 | 0.95 | 14.16 |
| Feed | other manufacturing expenses(excl. energy and depreciation) | 64,591,463.96 | 1.01 | 66,975,309.18 | 1.14 | -3.56 |
| Feed | total production cost | 6,398,788,706.26 | 100.00 | 5,868,339,568.29 | 100.00 | 9.04 |
| Slaughtering | raw material | 3,617,303,605.51 | 92.42 | 2,540,116,008.71 | 90.22 | 42.41 |
| Slaughtering | labor cost | 189,652,695.41 | 4.85 | 167,526,748.62 | 5.95 | 13.21 |
| Slaughtering | depreciation | 19,934,651.59 | 0.51 | 15,177,387.11 | 0.54 | 31.34 |
| Slaughtering | energy (electricity, coal, steam) | 36,825,872.82 | 0.94 | 37,198,676.48 | 1.32 | -1.00 |
| Slaughtering | other manufacturing expenses(excl. energy and depreciation) | 50,422,203.90 | 1.29 | 55,484,073.31 | 1.97 | -9.12 |
| Slaughtering | total production cost | 3,914,139,029.23 | 100.00 | 2,815,502,894.23 | 100.00 | 39.02 |
| By Product | Item | 2018 | % of total costs | 2017 | % of total costs | YoY change of cost % |
| Feed | raw material | 6,119,294,900.03 | 95.63 | 5,613,478,574.01 | 95.66 | 9.01 |
| Feed | labor cost | 71,606,347.71 | 1.12 | 60,647,231.68 | 1.03 | 18.07 |
| Feed | depreciation | 79,320,489.62 | 1.24 | 71,198,471.38 | 1.21 | 11.41 |
| Feed | energy (electricity, coal, steam) | 63,975,504.94 | 1.00 | 56,039,982.04 | 0.95 | 14.16 |
| Feed | other manufacturing expenses(excl. energy and depreciation) | 64,591,463.96 | 1.01 | 66,975,309.18 | 1.14 | -3.56 |
| Feed | total production cost | 6,398,788,706.26 | 100.00 | 5,868,339,568.29 | 100.00 | 9.04 |
| Slaughtering | raw material | 3,617,303,605.51 | 92.42 | 2,540,116,008.71 | 90.22 | 42.41 |
| Slaughtering | labor cost | 189,652,695.41 | 4.85 | 167,526,748.62 | 5.95 | 13.21 |
| Slaughtering | depreciation | 19,934,651.59 | 0.51 | 15,177,387.11 | 0.54 | 31.34 |
| Slaughtering | energy (electricity, coal, steam) | 36,825,872.82 | 0.94 | 37,198,676.48 | 1.32 | -1.00 |
| Slaughtering | other manufacturing expenses(excl. energy and depreciation) | 50,422,203.90 | 1.29 | 55,484,073.31 | 1.97 | -9.12 |
| Slaughtering | total production cost | 3,914,139,029.23 | 100.00 | 2,815,502,894.23 | 100.00 | 39.02 |
Note:
In 2018, the production cost of the Company's slaughtering and processing business
increased by 39.02%, mainly due to the blooming market of white feather broiler, whilstthe price of raw materials (delivery broiler) increased, the slaughtering capacity of broilercontinued to increase simultaneously.d. Top 5 customers and suppliersThe sales revenue of top 5 customers reached 646.37 million yuan, contributing towards4.11% of the Company's total sales revenue, of which, the sales revenue relating sellingproducts to the related parties reached 403.44 million yuan, accounting for 2.56% of thetotal annual sales.The purchase orders of top 5 suppliers reached 2.34 billion yuan, accounting for 17.41% ofthe Company's purchase orders during the Period, of which, the orders relating purchasingproducts from the related parties reached 165.11 million yuan, accounting for 1.23% ofthe total purchase orders.Other Explanation:
Top 5 Customers
| Customer | Business type | Sales revenue(unit:10,000yuan) | % of total operating revenue |
| Customer 1 | Delivery broiler | 15,895.14 | 1.01 |
| Customer 2 | Feed raw material | 14,504.00 | 0.92 |
| Customer 3 | Delivery broiler | 12,728.23 | 0.81 |
| Customer 4 | Feed | 11,564.53 | 0.73 |
| Customer 5 | Delivery broiler | 9,945.16 | 0.63 |
| Total | 64,637.07 | 4.10 |
Top 5 Suppliers
| Supplier | Business type | Purchase Amount(unit:10,000yuan) | % of total Purchase Amount |
| Supplier 1 | Raw material | 152,970.42 | 11.36 |
| Supplier 2 | Raw material | 29,591.66 | 2.20 |
| Supplier 3 | Raw material | 18,377.57 | 1.36 |
| Supplier 4 | Raw material | 16,943.60 | 1.26 |
| Supplier 5 | Delivery broiler | 16,511.39 | 1.23 |
| Total | 234,394.64 | 17.41 |
C. Expense
Unit: yuan Currency: RMB
| Item | 2018 | 2017 | Change % |
| Sales expense | 420,646,753.59 | 411,506,654.06 | 2.22% |
| Administrative expense | 227,941,858.19 | 225,935,973.80 | 0.89% |
| R&D expense | 61,100,349.28 | 61,953,095.44 | -1.38% |
| Financial expense | 74,900,937.42 | 60,854,400.51 | 23.08% |
| Total | 784,589,898.48 | 760,250,123.81 | 3.20% |
D. R&D Input
Unit: yuan Currency: RMB
| R&D expenditure | 61,100,349.28 |
| Capitalized R&D expenditure | 0 |
| Total R&D expenditure | 61,100,349.28 |
| % of total operating revenue | 0.39 |
| R&D headcount | 162 |
| % of the Company's headcount | 3.37 |
R&D input“Constantly Working on New Products, Never Following the Beaten Path” has laid afoundation for Wellhope's R&D philosophy. At present, the Company has established ordesignated more than 10 R&D bases for conducting related trials of pig, layer, broiler,ruminant and aquatic feed, and whilst it has built a sound technology achievementtransformation system. In 2018, the Company carried out nearly 100 trials for verifyingfeed products totally invested 61.1003 million yuan, accounting for 0.39% of the operatingrevenue.During the reporting period, the work relating to R&D has been further deepened andrefined. Meanwhile, the Company, as an influential representative of China's feedenterprises, participated in formulating two community standards, i.e. Formula feeds forLayers and Broilers, and Formula feeds for starter and growing-finishing pigs organized byChina Feed Industry Association, which have been implemented on November 1st, 2018,both of two standards have had a huge impact on the feed industry. Moreover, theCompany’s applied for the project "nutrition standard and processing technologyspecification of antibiotic-free feed for layers", which has been approved as the localstandard of Liaoning province, the project " R&D and promotion of key technologies of pigfeed series with low-nitrogen emission", won the first prize of Liaoning animal husbandryscience and technology contribution award. The “research of anti-weaning stress andenvironmental protection of piglet creep feed” was supported by Shenyang science andtechnology planning project. As one of the participating units, the Company’s "R&D andapplication of new products of biological feed additives" won the first prize of Chinaindustry-university-research cooperation innovation achievement award. In 2018, theCompany was authorized and submitted 17 patents for invention, including "a total mixed
pellet diet for fattening mutton sheep and its process", "a kind of microbial feed additiveand its production method", "broiler compound premix and its production method", “acompound premix for lactation sow and its production method”, etc.Basing on the target of product safety, quality stability, accurate nutrition and poweringbusiness performance, the Company always focuses on independent innovation and seeksinnovative inspiration from the market demands and development trend, continuouslyaccumulates the strengths of technology and product. The R&D work in 2018 shown asfollows:
a. Swine feed product:
Basing on applying net energy system, environment-friendly and energy-savingformulating technology with low-nitrogen and low-phosphorus, the Company hasdeveloped a plasma-free creep feed and high cost-effective nursery feed, and upgradedthe growing-fattening products and the feed used in the pre-weaning and post-weaningperiods. It has also designed nearly 40 different combinations of formulation in the field ofantibiotic alternative, which realized satisfied progress and laid a foundation for furtherreducing the antibiotic used in piglet feed. Meanwhile, the Company has obtained clearapplication results and comparative data on the use of raw materials in piglets feed at thestage of pre-30kg body weight, which played a decisive role in stabilizing piglets feedproducts and reducing costs. In addition, the researches on functional dietary fiber used inDanbred sows have been at the domestic leading level, and the Company has developed30-32% sows concentrate feed and compound feed with highly rich fiber. In the secondhalf of 2018, the African swine fever broke out in China, the Company rapidly planed anddesigned high-immunological nursery and sow feed products.b. Broiler feed product:
Integrated broiler business has been increased substantially in 2018, making relevant feedtechnology being constantly facing challenges brought by changes in raising model,wide-span region, seasonal changes and different value-added range of broiler partsproducts. The Company's technical team conducted in-depth researches and investigationsin the local farms, carefully studied the effects of feed and raising management onproduction performance and economic benefit. A lot of R&D and innovation work have
been carried out to promote and support the development of integrated broiler business.For example, the feed product model of granular powder, the control of grinding size andPDI, the study of post-coating technique for liquid raw materials, the technology ofcontrolling microbial contamination through feed processing, the technology of earlydiagnosis of digestive tract health, the precise application of broiler raw material database,and several technologies for improving the weight of gizzard.c. Layer feed productThe Company has made full advantage of protein sources and co-product resources toreduce the use of corn and soybean meal, whilst optimized production parameters andinclusion levels to achieve higher production performance and lower costs as well asincrease competitiveness of related products. Depending on evaluating the practical use ofcereal co-products and corn produced in different year, it has relocated metabolic energyvalue, updated databases and provided scientific basis for purchasing materials anddesigning ration. Moreover, it has developed low cost formula of low total phosphorus toeffectively reduce the amount of calcium phosphate use, whilst assessed layer premixesand provided solutions for products further improvement. It also rationally used functionalproducts to improve intestinal health and immune function in laying hens to increaseeggshell quality and color, extending the laying period. Independent R&D of biologicalfermentation technology, which has been widely used in the Company’s feed product,could improve intestinal health, disease resistance and anti-stress ability, increase feedconversion ratio, whilst by developing new products to extend the egg shelf life andquality.d. Ruminant feed productThe Company has built several research farms and conducted field experiments for beefcattle and finishing lambs. With the research support, the technical team, includingnutritionists, formulators and product managers, carried out a series of products verifyingtests and put forward certain market-orientated products which could improve thecarcass quality and slaughtering rate, meanwhile, it also put forward the feeding programsto shorten the fattening period of beef cattle and implemented the total mixed ration forfinishing lambs, which promoted the fast progress in feeding and realizing better profit for
farmers.e. Aquatic feed productThe goal for R&D in aquatic feed is to develop more stable, efficient, and highly safe feedfor maintaining the health of aquatic animals, and finally ensuring the food safety. Thetechnologies include, researching and evaluating protein-saving and amino acid balancingtechnology to realize low protein diets and fish meal replacement, utilizing bio-enzymeappropriable for aquatic animals to achieve low nitrogen, low phosphorus and reducepollution emission, moreover, relying on functional additives such as biological activepeptide and the technology of protecting intestinal tract and liver to guarantee the healthof aquatic animals. Furthermore, the Company also put forward some managementprograms for raising aquatic animals in 2018, including the “1-2-3” management model forfreshwater crayfish, highly efficient management model for river crab, etc., which hasimproved dietary efficiency and growth rate, some special commercial feed for carp, loach,channel catfish, crayfish, pacific white shrimp have been proved to be more competitiveand more popular with high quality and cost price. The functional feed productsrepresented by "Stronger Liver and Intestine" can enhance the immunity function andpromote the health of cultured animals, with lower incidence of diseases and highereconomic value.E. Cash flow
Unit: yuan Currency: RMB
| Item | 2018 | 2017 | Change % |
| Cash inflow of operating activities | 16,387,473,689.22 | 14,379,421,212.36 | 13.96% |
| Cash outflow of operating activities | 15,886,068,773.63 | 13,768,030,841.61 | 15.38% |
| Net cash flow from operating activities | 501,404,915.59 | 611,390,370.75 | -17.99% |
| Cash inflow of investing activities | 61,627,106.73 | 72,034,325.33 | -14.45% |
| Cash outflow of investing activities | 571,358,643.35 | 698,441,861.53 | -18.20% |
| Net cash flow from investing activities | -509,731,536.62 | -626,407,536.20 | Not applicable |
| Cash inflow of financing activities | 1,818,096,102.83 | 1,634,364,154.53 | 11.24% |
| Cash outflow of financing activities | 1,651,103,379.20 | 1,584,489,956.92 | 4.20% |
| Net cash flow from financing activities | 166,992,723.63 | 49,874,197.61 | 234.83% |
| Net cash flow | 148,523,982.16 | 33,366,297.35 | 345.13% |
2. Assets and liabilities
Unit: yuan Currency: RMB
| Item | Closing balance of 2018 | % of total assets | Closing balance of 2017 | % of total assets | YoY change % | Note |
| Derivative financial assets | 2,042,527.60 | 0.03 | 971,380.80 | 0.02 | 110.27 | increase of the position of derivative financial assets |
| Prepayments | 185,899,348.53 | 2.68 | 266,224,330.51 | 4.45 | -30.17 | decrease of the prepayments for raw materials |
| Long-term equity investment | 1,354,820,455.99 | 19.55 | 1,022,372,386.20 | 17.08 | 32.52 | increase of new investments and additional investments in associated companies, the number of associates accounting by equity method increased |
| Construction in progress | 255,719,188.30 | 3.69 | 122,640,897.91 | 2.05 | 108.51 | increase of newly built pig farms |
| Productive biological assets | 30,484,794.88 | 0.44 | 19,281,856.15 | 0.32 | 58.10 | increase of purchasing parent stock |
| Other non-current assets | 197,497,688.18 | 2.85 | 32,362,984.62 | 0.54 | 510.26 | increase of prepayments for land and long-term assets |
| Other payables | 309,537,195.12 | 4.47 | 201,709,649.48 | 3.37 | 53.46 | increase of the obligation of repurchasing the restricted incentive stock |
| Non-current liabilities due within one year | 32,999,999.96 | 0.48 | 20,000,000.00 | 0.33 | 65.00 | increase of long-term payables due within one year |
| Long-term loans | 118,500,000.00 | 1.71 | 20,300,000.00 | 0.34 | 483.74 | increase of long-term bank Loans |
| Long-term payables | 23,345,833.38 | 0.34 | 0.00 | 0.00 | - | the subsidiary conducted financial lease and need to pay for the leased equipment |
3. Analyses of agriculture, forestry, animal husbandry and fishery industries relating to
business operationsA. Fundamental state of industry and the Companya. Industrial policies and their impacts on the Company(a) Industrial policies? "No.1 Document issued by the CPC Central Committee" formulates the strategy for
rural revitalizationOn January 2, 2018, the Central Committee of the Communist Party of China (CPC) andState Council issued the Opinions of the Central Committee of the Communist Party ofChina and State Council on the Implementation of the Rural Revitalization Strategy ("No.1Document issued by the CPC Central Committee" of 2018). As stated in the document,"Implementing the strategy of revitalizing the rural areas is a major decision and planmade at the 19th CPC National Congress, a major historical task for securing a decisivevictory in building a moderately prosperous society in all respects and moving on to all-outefforts to build a great modern socialist country as well as a general principle for the workrelated to agriculture, rural areas and farmers in the new era. Compared with the "No.1Document" issued in the past few years, the Document of 2018 is not a specific guidancefor a subdivided segment of the industry, but a comprehensive coverage of the politicalconstruction, economic construction, cultural construction, social construction, ecologicalcivilization construction and other aspects in rural areas. Meanwhile, the Document is notlimited to the tactical guidance in the stage, but makes a long-term plan for the work inthe coming decades from strategic level.Agriculture in China has always been regarded as the foundation of the national economy.The release of the “No.1 Document in 2018” has once again clarified the significantimportance of the work related to agriculture, farmers, and rural areas, and a series offollow-up policies also provided good opportunities for key agricultural and animalhusbandry enterprises.? The new edition of Hygienic Standard for Feed was officially launchedApproved by the General Administration of Quality Supervision, Inspection and Quarantine
of China and the Standardization Administration, the revised Hygienic Standard for Feedwas officially promulgated and implemented on May 1st, 2018.The revised new edition mainly focuses on the following aspects: First, it added the itemson pollutants. The item on the control of toxic and hazardous substances has beenexpanded to 24 branches in 5 categories, including 164 technical indicators, which containinorganic pollutants, natural plant toxins, mycotoxins, organochlorine pollutants andmicroorganisms, 80% of which meet the world's most stringent EU standards. Second, thestandard expanded the types of applicable feed categories, comprehensively covering feedraw materials, premix, concentrated feed, concentrate supplement and compound feed.Third, it refined the limitation of quantitative value of each item in different feed rawmaterials, different animal categories and feed products designed for different growthstages, more than 100 limitations of quantitative values were modified or supplemented.Fourth, it added and modified the detection methods of some items in combination withthe progress in detection technology.The newly edited Hygienic Standard for Feed, as a mandatory national standard, adheresto the "most stringent standards" requirements, so as to ensure the safety of animal foodand consumer health from the source.? Comprehensive promotion of reducing the use of veterinary antibioticOn April 20th, 2018, the Ministry of Agriculture of China released two documents, Noticeof Ministry of Agriculture and Rural Affairs of China on the Pilot Program for Reducing theUse of Veterinary Antibiotic and the Plan of Pilot Program. According to the plans, the pilotprogram for reducing the use of veterinary antibiotic during animal raising phase shouldtry to carried out within three years, while related reduction model should be promotedand reduce the use of antimicrobial drug feed additives to achieve "zero growth" in theantibiotic, and the problems of drug residue for livestock and antimicrobial resistanceshould be effectively controlled.It can be predicted that in the next few years, the progress of reducing the use of antibioticin the feed industry will be comprehensively promoted. It has become a new challenge forfeed companies to seize the commanding heights of "reducing antibiotic" and"antibiotic-free".
? Promulgation and implementation of Environmental Protection Tax LawFrom January 1st, 2018, Environmental Protection Tax Law of China officially came intoeffect, imposing environmental protection tax on pollution emission of large-scalelivestock and poultry farms. According to the law, the farms with more than 50 heads ofcow, 500 heads of pig or 5,000 broilers (ducks) would be required to pay tax forenvironmental protectionOther than previous administrative regulations, department rules or local regulations, theEnvironmental Protection Tax Law, like the Environmental Protection Law, is enacted andpromulgated by the Standing Committee of the National People's Congress, which is at theforefront of China's legal system with supreme legal authority. The enactment andpromulgation of the Law indicates the government's commitment to environmentalregulation, while it is the practice of green development concept at the legal level, and hasgreat significance for promoting the construction of social ecological civilization andeconomic green development.(b) The impacts of industry policies on the Company and its responseIn 2018, the supply-side structural reform of China's agriculture and animal husbandryindustry was carried out in an orderly manner, and solid steps were taken in structuraladjustment, quality and efficiency improvement. In this context, the government and themarket have also put forward new standards and requirements for agriculture and animalhusbandry industry, bringing both challenges and opportunities.◆The top-level design of Rural Revitalization Plan provides key players of the industry ahistoric opportunityOn one hand, the successful implementation of rural revitalization strategy needs todepend on the enforcement of governmental departments and workable measures ofvarious policies. On the other hand, it is also necessary for the key players in agricultureand animal husbandry industry to make full use of their rich social resources and businesspractices to drive the development of the industry. Strategic layout of rural revitalizationprovides a good opportunity for their business expanding.◆Increasingly stringent standards for health and environmental protection make the
industry continuing to consolidateIn 2018, the new edition of Hygienical Standard for Feed and the Environmental ProtectionTax Law were officially implemented, and the pilot program of "reducing the use ofantibiotic" was launched, indicating that the health and environmental protectionmanagement of Chinese animal husbandry industry has entered a more rigorous newstage. This will further accelerate the consolidation in animal husbandry industry, thesmaller, unqualified and polluting players will be driven out of the market or seek supportfrom larger players, making key players' advantages in scale, technology, brand, capital andservice being further highlighted.In the face of new policies, the Company has formulated a series of strategic guidelinesand business plans, as detailed in the "Company Development Strategy" and "BusinessPlan" sections below.b. The position of the Company in the industry, competitive advantages and
disadvantages--The position of the Company in the industryThe Company has won many honors and titles including “Excellent National AgriculturalIndustrialization Leading Enterprise”, “National Accreditation of Enterprise TechnologyCenter”, “Vice President of China Feed Industry Association”, “Well-known Trademark ofChina”, “High Technology Enterprise”, etc. In 2016, the Company was rated as "Top TenLeading Feed Enterprises in China" by China Feed Industry Association. From 2015 to 2017,the Company had been listed in China’s Fortune 500 List for three consecutive years, onlyfive agricultural and animal husbandry enterprises were selected in 2017. From 2016 to2017, the Company had been listed in the "Top 100 Light Industry Enterprises of China" fortwo consecutive years.In the brand value evaluation results of Liaoning Province in 2018, the Company hasbecome the highest score winner among more than 100 enterprises from nine industriesby its brand strength value of 961. It is in the first-class level of the industry, and someindexes are far beyond the others within the industry, it has the brand value of RMB 1.16billion.
Furthermore, the Company is the largest agricultural and animal husbandry enterprise inthe Northeast China, which has a high brand influence in the North & Northwest China,Shandong Province and other places. In 2017 and 2018, the Company slaughtered 392million and 455 million of white feather broilers respectively (including holding andassociated companies), ranking the first echelon of China's white feather broiler industry.? Competitive advantages:
(a) Advantage of talentsTalents are the most valuable wealth and core competitiveness of the Company, and theresource of talents has become one of the Company's strong competitive advantages.The comprehensive strength of the Company's talents team is at the forefront of theindustry. The management team led by the co-founders has high academic qualificationand professional background, also a deep understanding and recognition of corporateculture and management mode. They are united and stable, always fighting in the frontline of markets with a strong cohesion. 70 percent of the general managers and abovelevel managers of the subsidiaries have bachelor degree or above, and more thanone-third of the young managers selected from the "Sunflower Program", which is one ofthe Company's most important talents reserve programs, receive masters degree or above.Meanwhile, its strong R&D team ensures the leading-edge technology and products. It alsohas a team of young and professional marketing and technical supporting experts whohave systematic and professional knowledge and practice regarding farm management,which is the guarantee for the implementation of the Company's marketing strategy.The Company's talents advantage stems from the advanced human resources policy. Interms of talents introduction, the Company always adheres to the principle ofhigh-standard recruitment and upholds the core culture of "knowledge is power, unity ispower". In terms of talents training, it formulates dual-channel training system accordingto its strategic goals and staff development need, providing a targeted platform for helpingthe staff to grow. In terms of talents incentive, the Company continuously improves andoptimizes the remuneration policy, and implements merit-based principle of remuneration,it also conducts separate performance appraisal system for the sales team andadministrative departments so as to keep the team dynamic. At the same time, the
Company adheres to the principle of "sharing bumper harvest", shares its developmentachievements with employees in various ways, such as holding shares of subsidiaries andelasticity welfare. In 2018, the Company carried out the restricted stock incentive program,which 372 core talents and key position talents participated. Through this program, theinterests of Company, shareholders and key-employees are combined together to ensurethe sustainable and stable development of the Company and ultimately achieve a win-winsituation for all.(b) Advantage of industrial layoutThe Company's advantage of industrial layout centers on the structure and geographicallocation.In terms of industrial structure, the Company has primarily formed a value chain with highcompetitiveness and risk control in fields of raw material trade, feed, animal raising,slaughtering, food further processing, which can improve the overall competitiveness,enable all business divisions to connect closely, enhance profit margin and greatly reducethe risks of single operation. Through the integrated management of the industrial chain,the product quality can be also better managed, and the safety of products can be ensuredby applying internal management and traceability system, which ultimately meet therequirements of consumers for food safety.In terms of geographical location, the Company's headquarters is located in Shenyang ofLiaoning Province, with more than 130 holding and associated companies located in over20 provincial regions across China. These companies can quickly respond to new marketsituation and policy environment, which form industry linkage with regional advantages. Inaddition, the Company actively responds to "the Belt and Road Initiative" to vigorouslyexpand international markets by building plants in Nepal, the Philippines, Indonesia,Russia, etc., and now it is well on its way to exploring new markets abroad.(c) Advantage of R&DRegarding to R&D team, the Company has a technical team composed of more than 100masters, doctors, professors and senior experts who have profound theories, they applycutting-edge technologies to practice and conduct field-work in different farms. Relying onrich formulating experiences, leading database application technology and high level
animal growth model and other advantages, the Company has established a technologicalinnovation system to continuously provide safe and high-quality products for the society,and offer first-class customized nutrition for the farms, which effectively enhance theadded value of the products and farms' economic benefit.Regarding to R&D achievements, the Company has over 70 kinds of scientific researchprograms, and each year it launches 10 new products and technologies. Now it has 40patents invention, and has received 2 prizes of National Science and Technology ProgressAwards and near 20 ministerial and provincial-level technology awards. In addition, theCompany has also realized significant breakthrough and achieved good benefits in broilerraising technology and farm operation program, especially in the implementation of threetiers cage system, which drives the livability, average body weight, feed conversion ratioand other core indicators of broiler standing in the forefront of domestic industry andbeing recognized by cooperative farmers. In terms of know-how and managementprograms for large-scale farms, the minimum ventilation technology for cage-fed broilers,automatic control of house environment, ventilation and backwashing of drinking watersystem, weekly body weight, disease prevention & immunization, as well as the use andcontrol of medicines, etc., have also reached the first-class level in China.Regarding to technical cooperation, the Company cooperated with Royal De Heus in 2006,a century-old Dutch company. By combining De Heus’ strengths with its own researches onnutrition and raw materials, the Company has formed a data-based nutrition evaluationsystem, continuously launched efficient and innovative solutions centered on the needs oflocal market and customers, among which it has made pioneering explorations andbreakthroughs in "safety and high quality", "precision and efficiency" and "antibiotics-freefor environmental protection" and other aspects.(d) Advantage of product qualityThe quality control team of the Company has established an excellent control system forraw materials by strict acceptance standards and high level testing technology. Whilst allthe staff strictly implement the Standard of Feed Quality and Safety Management issuedby the Ministry of Agriculture of China, and combine the ISO9001, ISO22000 andISO-IEC17025 quality and food safety management systems to improve the standardized
process from purchasing to production, quality control then to sales, all of them are alwaysdedicated to ensuring the safety and high quality of products.The R&D testing center, equipped with high-level testing equipment and facilities with 15laboratories in terms of physicochemical testing room, microorganism testing room, etc., isone of the first testing centers capable of detecting melamine and other banned additives.Moreover, the testing center has been certified by CNAS as the key laboratory of the state,making its testing and calibration results being recognized by 41 countries and 55authoritative institutions. In 2018, it won the first prize in the evaluation of testingtechnology of peer enterprises in Liaoning Province. Through comparison with SGS, YiliGroup, Yihaikerry Group and other upstream and downstream enterprises and third-partyenterprises, the testing results of the Company have won recognitions.(e) Advantage of brandThe Company has always been paying great attention to brand building. The trademark"Wellhope" has been awarded many honors, such as Liaoning famous-brand product,Liaoning famous brand, China’s well-known trademark, China’s top 500 most valuablebrand, the most influential brand in animal husbandry, and trusted product in China feedindustry. In addition to the "Wellhope" brand, the Company also adopts the operationmode of multi-brand, which can not only cover the target market at multiple levels, butalso provide customers with more choices. The cross-coverage of main and auxiliarybrands has played a positive role in promoting the sales volume of the Company. As acorporate brand, Wellhope has become one of the most advantaged brands, which iswidely trusted and favored by its partners, customers and suppliers. Whilst as an employerbrand, Wellhope has been recognized and loved by its employees and favored by jobseekers. On December 11st, 2018, the Company won the honorary title of "National modelenterprise of harmonious labor relations" initiated by the Ministry of Human Resourcesand Social Security of China. Meanwhile, on December 18th, 2018, it was selected as oneof the "Top 10 best employers of 2018 in Shenyang" from more than 30,000 enterprises inthe "Best employer awards ceremony of 2018 in China" organized by zhaopin.com.
(f) Advantage of cost◆Feed raw materialThe Company is located in the Northeast of China, the major corn producing area featuredby "high unit weight, low toxin and little moisture", which is conducive to guarantee itsproduct quality and effectively reduce the purchasing cost of energy raw materials.Therefore, even with the same purchasing price, the Company can maintain the qualityadvantage of energy raw materials. In addition, the Company's headquarters hasestablished an excellent purchasing management system: Firstly, the Company hasestablished strategic partnership with many top domestic and foreign raw materialsuppliers, the purchasing mode of the Company is classified into three levels, includingheadquarters centralized purchasing, inter-regional price comparison purchasing and localpurchasing, which can strategically decrease the purchasing cost. Secondly, the Companycombines raw material trading business with purchasing management, its professionalpurchasing team has a long term view of raw material prices and availability, makes greatefforts to reduce the purchasing cost by ways of conducting real-time tracking on themarket, unified management of different varieties and buying on future markets, etc.Thirdly, the purchasing team cooperates closely with the R&D team to further optimize thepurchasing cost through re-formulating the feed, such as changing the composition of thefeed to use cheaper alternative raw materials while achieving the same results. Fourthly,the Company works closely together with Royal De Heus experts, the two sides have set upa sharing channel to timely share the market trends and predict prices in regard of rawmaterials and additives, etc., meanwhile, the two parties may carry out joint purchasingcooperation after import channels of raw materials can be broadened in the future, thusgreatly enhancing the overall bargaining power.◆Integrated broiler businessThe Company has always been committed to improving the production standards of eachpart in the value chain of integrated broiler business by ways of constantly innovating thepractical operation technology and management mode, optimizing the production andoperation indicators, and enhancing staff's working efficiency to indirectly reduce the
overall operating costs. On the demand side, the Company has high market recognitionand a large downstream customer base, which is conducive to the efficient release of itsproduction capacity. On the supply side, the Company maintains stable capacity utilizationrate, which has been at a high level for the past three years. Therefore, the marginal costand average cost of integrated broiler business remain at a low level supported byconducting fine production management and high capacity utilization rate. In 2018, theintegrated broiler business division continued to expand business and upgrade theequipment in the slaughterhouses, which further improved the automation andintelligence level, and significantly enhanced the slaughtering efficiency, guaranteed theproduct quality and reduced the production cost.? Competitive disadvantages:
In recent years, due to the change of the market structure and competition mode as wellas the development strategy, the Company is accelerating the layout in new fields, newregions and new projects. This process is complex and changeable with great uncertainty,and poses new challenges to the Company.c. Company business model, upstream & downstream circumstances? Upstream & downstream circumstances(a) Upstream industryThe upstream raw materials relating to feed business cover corn, soybean meal, fish meal,cotton meal, rapeseed meal, amino acid, vitamin, etc., whilst the upstream products ofintegrated broiler business are mainly parent stock.As for corn in 2018, China's corn planting structure was adjusted and the effect ofdestocking was remarkable. Meanwhile, the consumption of further processed productsincreased, and along with the impact of China-US trade friction, the corn price presentedupward trend with fluctuations. In the first half year, corn price rose at first then fell down,and in the second half year, the expectation of sharp decline of production in China’smajor corn producing areas promoted the higher corn price, meanwhile, due to theChina-US trade friction, the bullish sentiment in the corn market has determined that itwas difficult for the corn price to fall in the later period.As for soybean meal, the main trends of the market in 2018 can be divided into two
phases. In the first stage, the core factor was the reduction of soybean in Argentina, but itdid not bring a significant increase of the soybean price under the backdrop of abundantsoybean supplement in the United States and Brazil. In the second stage, the China-UStrade relationship became the core factor. Affected by the trade friction, China's soybeanimports dropped at the first time within the past 7 years, according to data released by theGeneral Administration of Customs, the total soybean imports in 2018 decreased by 7.9percent on a year-on-year base. News of trade frictions between China and the UnitedStates continued to upset market expectations, triggering wild fluctuations in soybeanmeal price.As for fish meal, the price came off early highs. At the beginning of 2018, the fish mealmarket continued the heat of the end of the prior year. After October 2017, thenationwide fish meal inventory was less than 60,000 tonnes, the shortage of inventory andthe delayed arrival of goods led to the supply fell short of demand, making the priceremaining high for a period. Coming to April, the arrival of new season's fish meal broughtdramatically increased supplies, and along with the impact of African swine fever ondownstream demand, the price of fish meal fell sharply. Until the end of 2018, the markethas been in the basic situation of oversupply.As for other feed raw materials, China-US trade friction caused a sharp decline in soybeanimports, other alternative demands of miscellaneous meals such as rapeseed meal andcotton meal increased significantly. Overall, the international situation was conducive tothe domestic meals market, together with gradually improved consolidation of feedadditives industry, a relatively rigid demand leads to the strengthening of market pricetransmission mechanism.As for broiler, China remained a low introduction of grandparent stock in 2018. Accordingto the statistics of China Animal Husbandry Association, the number of introducing(updating) grandparent stock in 2013 reached 1,541,600 sets, while in 2018 only 750,000sets, which was less than 50% of that in 2013. Due to the tightening introduction ofgrandparent and the obvious reduction of forced molting, the inventory of parent stockshows a downward trend, and the prices of parent day old chicks and commercial day oldchicks are expected to keep rising, China's white feather broiler industry may continue atight supply situation in 2019.
(b) Downstream industryFeed industry is the front end of the industry chain of animal husbandry, and itsdownstream connects the animal raising industry, slaughtering industry and the terminalconsumption of meat products. The Company primarily manufactures pig, poultry andruminant feeds, so the feed business demand of the Company is greatly influenced by themarket of pig, layer, broiler, ruminant animal and the terminal consumption structure.As for pig raising business, this industry was hit by "price drop" and ASF in 2018. In the firsthalf of the year, the price showed a downward trend due to the large inventory of pig. Inthe second half of the year, ASF spread to more than 20 provincial-level administrativeregions, which increased the downward pressure on the industry. ASF accelerated theprogress of cutting overcapacity, and a large number of pig were culled which resulted in ahuge gap in the supply of pork. The pig price cycle will be strongly rebounded afterbottoming.As for layer market, the government has set strict restrictions on food safety, andenvironmental protection has stepped into new normal phase. Relevant policies issued bythe government on pollution prevention and animal raising area adjustment constrainedthe capacity of layer. Moreover, influenced by ASF, the alternative consumption of egg hasincreased, making the egg price in 2018 at a high level. Overall, the layer market wasbooming in 2018.As for broiler market, white feather broiler was introduced to China in 1986, after morethan 30 years of development, China has become one of the world's leading producers ofwhite feather broiler. But from 2015 to 2018, the introduction of white feather broiler hasbeen lower for four consecutive years, which led to the tight supply of parent andcommercial day old chicks. Moreover, on the demand side, the spread of ASF caused a bigshortage of pork, so the consumption of white feather broiler as the alternativeskyrocketed. Overall, under the dual effects of sharp contraction at the supply side andmoderate expansion at the demand side, the white feather broiler industry has alreadyushered in a historic strong period with an expectable prospect.As for ruminant market, China is a big producer of beef and mutton. With continuouslyimproved consumption level of residents, especially the changes in the dining table of
urban residents, beef and mutton consumptions have risen significantly. From thebeginning of August 2018, ASF spread in many regions in China, some consumersabandoned pork and switched to other meat, which has increased domestic consumptionof beef and mutton. The National Bureau of Statistics showed that, at the end of 2018,China's beef price index rose by 6.0% on a year-on-year base, and the lamb price indexrose by 11.9%. Overall, the increases of beef and mutton consumption have become anirresistible trend, and the tight supply will not change fundamentally in the short term.As for terminal consumption, the structure of meat consumption has been graduallychanging, presenting rapidly growing proportion of beef and chicken. According tostatistics from the US Department of Agriculture, in 1987, the per capita consumption ratioof pork, beef and chicken in China were 88.81%, 3.71% and 7.48% of the total of threetypes of meat, pork consumption was close to 90%. Coming into 2018, these figureschanged to be 73.60%, 11.22% and 15.18%, pork consumption showed a downward trend.Compared with pork, beef consumption presented a small base but an obvious trend ofgrowth, and chicken also showed a large increase.In general, due to ASF resulted in a huge gap in the supply of pork, the pig cycle isexpected to bottom out in advance and the alternative broiler and ruminant market will beleaping forward. Moreover, along with the popularization of the concept of healthy dietand due to the high fat content of pork, chicken and beef consumption will continue to beincreased, and the change in the structure of meat consumption will become the generaltrend.d. Primary technologyRelying on the advantages of independent research strength and combination ofindustry-university-research cooperation, the Company constantly pursues technologicalinnovation in various fields. According to the circumstances of feed market and rawmaterials, as well as customer-based demands, the Company has integrated its know-howand product superiority with the advanced nutrition technology and service philosophy ofits strategic partner Royal De Heus, refined its technology and reformulated feed products,the primary technology includes:
(a) Low protein diet: The resources of protein raw materials are difficult to satisfy theneeds of livestock production in China, and heavily dependent on imports. The demand onprotein as for poultry and pig is essentially amino acids. In the past, only the diets withhigher crude protein could meet the needs of different amino acids for livestock andpoultry. By way of studying on the characteristics of digestion and absorption of animals atdifferent physiological stages and the nutritional needs of amino acids, the Company hasestablished an ideal amino acid model, which combines with the application of industrialsynthetic amino acids, so as to reduce the crude protein in the diet, save food resources,mitigate environmental pollution, and meet the needs of pig and poultry for maintainingthe demand on nutrition.(b) Exploring of antibiotic-free feed and reducing the use of antibiotic in the farm:
Consumers pay great attention to the food safety, and China is now steering to thepost-antibiotic era from the antibiotic era. Supported by raw materials' selection, qualitycontrol, crushing process, the use of phytase and the functional additives, the Companyensures the feed products can provide stable, balanced and highly digestible nutrition,which keep animal health and increase the immunity and anti-stress ability. Meanwhile,the Company guides the farmers continuously improving bio-safety, field management andfeeding program, trying to produce antibiotic-free feed and reduce antibiotics throughoutthe raising process.(c) Sow diet with functional dietary fiber: By adding a variety of non-fermentable dietaryfiber and supplementing cationic salts as well as electrolysis vitamins in the diet of sows,the Company increases the proportion of dietary fiber and adjusts the electrolyte balance,so as to stimulate the intestinal tract movement, improve the health of gastrointestinaltract of sows, which can solve the constipation problem, enhance the satiety of pregnantsows, reduce stereotyped behaviors and relieve the farrowing stress. The most importancepart is that, by improving the postpartum appetite, increasing the feed intake of lactatingsows, it can stimulate the milk production, and sequentially improve sows’ reproductiveperformance, reduce the raising costs eventually in order to increase economic benefits.The effect of this technology has been proved and it is at the leading edge in this researcharea.
(d) Establishing broiler nutrition-based database: Broiler raising is mainly concentratedin the central and northeast regions of China, which are featured by wide-span andobvious seasonal variation. In addition, affected by the short feeding cycle, high raisingdensity, especially ventilation, temperature and lighting management which can directlyimpact on the mortality and morbidity, as well as the market demands on raw meat whichneed to provide large gizzard (muscular stomach), high-quality breast and sized legs, theCompany has established a nutritional requirement database for broilers, developeddifferent types and combinations of feed and feeding program, and formulated thenutritional requirement of broilers under different external conditions, in order to meetthe needs of the market and customers under different conditions, and to improve thefeed conversion ratio, reduce the mortality rate, and promote the growth potential.Meanwhile, as the increasing exports of meat products bringing higher requirements onantibiotic-free or lower antibiotic, the Company has conducted more stringent controlover the use of medicine added to feed, which is stricter than national standards. Raisingbroilers by fine nutrition and lower antibiotics can decrease the costs, reduce wastedischarge and environmental pollution.(e) Broiler feeding management: The Company carefully studies on the impacts of feedand raising process on production performance and efficiency. After years of explorationsand accumulated practices, the Company's broiler feeding management and technologylevel, especially the application of three tiers cage system, have made significantbreakthroughs and good benefits. The core indicators of commercial broilers, such aslivability, average body weight and feed-meat ratio, have been in the forefront of thedomestic industry and widely recognized by cooperative farms. Key technologies andmanagement of large-scale raising, such as minimum ventilation technology for cagedbroilers, automatic control of raising environment, ventilation and small windows,automatic backwash of waterline system, weekly gained weight, disease prevention andcontrol, immunization, drug use and control have also reached the first-class level in China.Whilst, its independently designed ventilation mode and solar energy utilizationtechnology can simplify ventilation and heat preservation, reduce electricity consumption,save coal and mitigate air pollution.
(f) Functional feed for strengthening the liver and intestinal tract of aquatic animals:
The primary metabolic, immune and digestive organs of aquatic animals include livers andintestinal tracts, which play an important role in maintaining the health. The Company hasselected variety of functional additives, which are beneficial to protect and repair liver andintestine, along with using immune enhancers such as bioactive peptides, plant essentialoil, probiotics and immune polysaccharide, it can improve immunity for reducingmorbidity of animals and finally increase the economic benefits of aquaculture.(g) The “1-2-3” management model for freshwater crayfish: Farmers are easy to neglectwintertime and springtime during crayfish culture. In these periods, the short of feedsource and the slow ingestion of crayfish can make many troubles to crayfish because ofthe low water temperature in pond. Also, some mistakes exist in aquaculturemanagement in these periods, such as selecting low grade feed or even no feeding andneglecting water quality management. As for this, the Company has developed specialfeed named “Kai Kou Bao” for juvenile and subadult crayfish, which has higher nutrition,stronger attractivity and better digestibility. Meanwhile, it also has developed a series ofwater adjusting products and biological fermentation products in order to satisfy thewater quality in the low-temperature period. The use of these products can benefit toimprove the water quality, fertilize the cultured water, and provide more natural food,and finally contribute to the economic benefits.(h) The 305-day 10 tons’ milk program: According to the nutrient requirements and thekey management points at each stage of dairy cattle, a full series of products have beendeveloped for calves, heifers, lactating cattle, dry cattle and close up cattle, which canimprove the feed intake and the weaning weight for calves. Moreover, the Company paysmore attention to the growth of heifers in terms of height, length and udder, the age offirst insemination can be around 12.5 and 13.5 months. In the period of dry and close up,the nutrients have been scientifically offered to increase the dry matter intake and reducethe incidence of metabolism disease after calving. Whilst for lactating period, the nitrogenand energy have been well balanced in the compound for lactating cattle to improve therumen environment and to increase milk yield. In addition, the Company also provides thecustomers farm management practice and nutrition program of 305-day 10 tons’ milk.
(i) Feeding program for beef cattle and lambs: Basing on the nutrients requirement andphysiological characters of beef cattle, the Company constantly formulates the feedingprograms and technical solutions for different stage to improve the finishing performance,also launches related products based on rumen regulation techniques. Whilst according tothe nutrients requirement of finishing lambs, the total mixed ration diet has designed toincrease the dry matter intake and minimize the feed waste, which can help to achieve theprecise feeding and the balance of nutrients.(j) Precise and dynamic feed formulation technology and high-temperature pelletingtechnology: The Company has carried out active academic and technical communicationswith China Agricultural University as for the dynamic database of feed raw materials,which provide big data support for reducing formula cost and improving preciseformulation. The high-temperature pelleting technology can reduce the risk of microbialpollution, but it has different degree of loss of temperature-sensitive nutrients. As for this,the Company is organizing research on countermeasures to improve productcompetitiveness and the bio-safety level of broiler and pig feed.B. Production and sales circumstancea. Production and sales modeThe Company carries out the system of "purchasing-producing-selling”, it implements themode of producing feed products by orders, and conducts the sales mode of selling oncommission and direct selling. Regarding small and medium farms, they buy feed from thedealers, and the large-scale farms buy the products directly from the Company.Where a co-production mode with farmers (applicable)The Company raised broilers by self-owned farms and contract farms. Regarding thecontract farms, the Company signs contracts with the farmers to clear and definite therights and obligations for each party, and it conducts centralized management for thesefarms by unified site selection and layout, unified supply of DOCs, unified diseaseprevention and disinfection, unified supply of feed, unified supply of animal healthproducts, unified technical guidance, unified detection and unified slaughtering andprocessing. In the reporting period, the broilers raised by the contract farms meet therepurchasing standards required by the Company, no breach of contract.
b. Main products distribution and selling
| Main Product | Channel | Sales volume (10,000 tons) | Sales revenue (10,000 yuan) | Sales cost(10,000 yuan) | YoY change of sales volume % | YoY change of sales revenue % | YoY change of sales cost % |
| Feed | direct selling | 99.61 | 311,346.00 | 272,486.14 | 11.07 | 12.62 | 12.72 |
| Feed | selling on commission | 135.60 | 418,512.90 | 369,684.78 | 3.91 | 6.86 | 8.42 |
Where adopts the mode of selling on commissionAs at the end of the reporting period, the Company had nearly 10,000 dealers of feedproducts, which mainly adopt the mode of prepayment before delivery and deliveringproducts after receiving the payment.The Company provided the price list of each category to the dealers, and the settlementprice of products should be determined according to the Company's sales plan and salescontract. During the reporting period, there was no violation of the agreement by dealerssuch as fleeing goods.Regarding the customers with lower than 50 tonnes of delivered products per year, shallbe divided as smaller individual customer. These customers buy feed from the dealers, andthey can be gained by visiting the companies, product demonstration, new productspromotion, training organized by dealers and animal raising technology seminar, as well asthe "one-to-many" sales mode.Driven by the Company's brand influence, good product reputation and all-round trackingand guidance service provided by the technical supporting team, the customercomposition is relatively stable, the payment settlement mainly adopts the method ofprepayment before delivery and delivery after receiving the payment, which has small riskof receivables collection.In 2018, small-scale customers contributed to 6.41% of the Company's total sales revenuewith 468 million yuan, bringing a small impact on operation.
C. Information of the Company divided by industry segments
Unit: 10,000 yuan Currency: RMB
| Main products | Number of raising (10,000 broilers) | Number of sales (10,000 broilers) | Sales revenue | Sales cost | Gross profit margin % | Number of delivery (10,000 broilers) | Inventory (10,000 broilers) |
| White feather broiler | 6,541 | 6,128 | 151,539.56 | 131,135.80 | 13.46 | 6,128 | 859 |
Note: Above sales revenue and sales cost are unconsolidated and offset.
Unit: 10,000 yuan Currency: RMB
| Feed | Volume | Payment | Average Price/ton |
| self-produced | 292,413 tons | 78,052.04 | 2,669.24 |
| externally purchased | 4,724 tons | 1,291.34 | 2,733.57 |
4. Investment analysisAs at December 31st, 2018, the balance of the Company's long-term equity investmentreached RMB 1.355 billion yuan, increasing by 2.52% compared with the end of prior year.For details, please refer to “VII--Notes to the Items of Consolidated Financial Statements,part 9--long-term equity investment in the consolidated financial statements”.
5. Main holding and associated companies
Unit: 10,000yuan
| Company | Core business | Registered capital | Total assets | Net assets | Net profit |
| Shenyang Wellhope Feed | Feed manufacturing and selling | 550.00 | 11,716.40 | 10,171.83 | 1,604.81 |
| Liaoning Expert Trading | Feed raw materials and selling | 5,000.00 | 33,579.92 | 21,142.49 | 1,707.32 |
| Beijing Sanyuan Wellhope Agri-Tech | Feed manufacturing and selling | 1,000.00 | 20,772.68 | 18,561.51 | 824.21 |
| Shenyang Wellhope Agri-Tech | Feed manufacturing and selling | 8,210.00 | 13,421.25 | 11,388.99 | 685.81 |
| Xi’an Wellhope Feed Sci-Tech | Feed manufacturing and selling | 500.00 | 12,101.73 | 9,829.94 | 2,151.73 |
| Dandong Wellhope Chengsan Agri-Tech | Broiler raising and feed | 8,000.00 | 42,578.68 | 27,585.22 | 15,152.36 |
| Dalian Chengsan Animal Husbandry | Broiler raising and feed | 1,008.61 | 63,052.63 | 45,905.58 | 11,737.74 |
| Tai’an Jiuguhe Agriculture | Broiler raising and feed | 1,060.00 | 31,457.04 | 15,578.88 | 9,745.58 |
| Anshan Jiuguhe Food | Broiler slaughtering, processing and selling | 4,320.00 | 52,935.70 | 24,224.95 | 6,930.31 |
| Linghai Jiuguhe Food | Broiler raising and feed | 1,755.00 | 18,381.40 | 8,930.98 | 4,103.73 |
| Huluodao Jiuguhe Feed | Broiler raising and feed | 1,085.00 | 13,894.06 | 6,591.69 | 4,507.09 |
| Huluodao Jiuguhe Food | Broiler slaughtering, processing and selling | 7,370.00 | 24,381.95 | 15,230.53 | 4,249.58 |
Unit: 10,000yuan
| The impact of the net profit of subsidiary or the investment income from associated company on the net profit of the Company reaching 10% or above | |||||||
| Company | Core business | Registered capital | Total assets | Net assets | Net profit | Operating revenue | Operating profit |
| Beipiao Hongfa Food | Feed, parent stock, day old chick, broiler raising and slaughtering | 3,000.00 | 94,176.28 | 71,992.27 | 23,163.85 | 258,736.96 | 23,370.82 |
| Dalian Heyuan Agri-Tech | Feed, parent stock, day old chick, broiler raising | 10,000.00 | 69,211.00 | 30,468.68 | 14,523.16 | 144,818.66 | 14,688.33 |
Note: Above financial figures belong to the single subsidiary, excluding the data of the subsidiaries within consolidated scope of abovecompanies.
III. Perspectives on the Company's Future Development
1. Industry structure and trendChina has always attached great importance to agriculture, in recent years, along withcontinuous changes in international trade, resources and environment, technicalconditions, industrial structure, policies and regulations, agriculture has also steppedtowards a new phase. The "No.1 Document issued by the CPC Central Committee" of 2017put forward the idea of deepening supply-side structural reform of agriculture, the "No.1Document" of 2018 completed the top-level design of the rural revitalization strategy,whilst the "No.1 Document" of 2019 further pointed out that under the complicatedsituation of increasing downward pressure on the economy and profound changes in theexternal environment, it had a special importance to do a good job related to “agriculture,farmers, and rural areas”. Under the background of continuous deepening of supply-sidereform and gradual transformation and upgrading of the industry, animal husbandryindustry has also ushered in new opportunities under numerous challenges.A. Increasingly improved industry consolidationAlong with the fierce competition taking place in the feed industry, extra large companiesconstantly expand businesses, medium and large feed producers start to seek businessopportunities, whilst small producers are gradually squeezed out of the market. Regardingto large companies, they utilize their advantages in technology, cost, brand, managementand capital to continuously improve their total factor productivity and rapidly expandproduction scale and seize market shares through mergers and building new plants, thosesmall and medium feed producers have gradually been weeded out in increasingly fiercecompetition due to their lower technical level, higher comprehensive costs, weaker brandreputation, insufficient management ability and enormous financial pressure. Thecontinuous deepening of supply-side structural reform and constant transformation andupgrading of the industry will continually weed out unqualified players, which will lead toincreasing improvement of industry consolidation.B. Continuously extended industrial chainAnimal husbandry industry is consisted of feed production, animal health product,livestock and poultry raising, slaughtering and processing, etc., whilst its upstream is
connected to the planting industry, and downstream serves the farm and sideline foodprocessing industry, these connected industries constitute an organic whole. Along withweeding out unqualified players, large scale animal husbandry companies are continuouslyexpanding markets. Due to the needs of risk control, profit growth and food safety, thoseextra large players gradually integrate resources during their mergers and acquisitions, alsoexpand lengthways for extending to the whole industrial chain and establishing a strongcompetitive edge and anti-risk capability. Impacted by development trend of “integratedindustrial chain”, occupying the entire chain has become the development theme ofanimal husbandry industry.C. Constantly strengthened environment protection promoting the concept of greendevelopment being practicedIn recent years, China has put forward a series of environment protection regulations, suchas the revision of the Environment Protection Law, the promulgation of the EnvironmentProtection Tax Law, and the release of the Regulations on Pollution Prevention of ScaleRaising of Livestock and Poultry and the Action Plan for Pollution Prevention of theAgricultural and Rural Pollution, etc. The successive launches of relevant policies havedemonstrated China's determination for increasing environment protection supervision onthe animal husbandry industry, and local governments have also issued certain newregulations in regard of farm removal, ban of raising and restriction of farms, which willfurther weed out unqualified players and make the animal husbandry industry facing thesituation of re-shuffling.D. Great concern of food safety promoting the start-up of reducing the use ofveterinary antibioticOn April 20th, 2018, the Ministry of Agriculture released two documents in terms of Noticeof Ministry of Agriculture and Rural Affairs on the Pilot Program for Reducing the Use ofVeterinary Antibiotic and the Plan of Pilot Program, which pointed out that, the pilotprogram for reducing the use of veterinary antibiotic during animal raising should bestrived to be implemented within three years, whilst related reduction model should bepromoted and decrease the use of feed additives of antimicrobial drug to achieve "zerogrowth" in using veterinary antibiotic, and the problems of drug residues and antimicrobial
resistance should be effectively controlled. It can be predicted that, in the next few years,the progress of reducing the use of veterinary antibiotic in the feed industry will becomprehensively promoted. It has become a new challenge for feed enterprises to seizethe commanding heights of "reducing antibiotics" and "antibiotic-free".E. African Swine Fever driving bio-safety to become a key factorDisease has always been one of the major risks faced by animal husbandry industry. InChina, ASF was first discovered in August 2018, and spread to more than 20provincial-level administrative regions in the next six months. In response to the ASF, thegovernment has successively issued a series of policies, and significant changes have takenplace in pig industrial pattern. Long-distance transportation of pig has been restricted,whilst the original consolidated market has been divided into regional markets.Slaughter-process and logistics systems will also undergo major changes, the timing ofestablishing slaughter-process projects for companies engaged in livestock raising industryis gradually ripe. The era of integrating animal raising and slaughter-process business maybe fully started. In addition, although ASF has driven some small back yard farms out ofthe market, this does not mean that China's large scale farms have advantages incontrolling ASF. On the contrary, the bio-safety measures of large scale farms in China arenot mature compared with overseas’, whilst compared with those back yard farms, largefarms also have the characteristics of "more heads of pig", "more people" and "frequenteconomic activities", it is difficult for large farms to control once the disease outbreak.Therefore, ASF has become an obstruction for promoting large scale raising in China, whichwill force China’s pig raising industry must complete the transformation of"modernization" at first before being "large scale", whilst the boost of "large scale" ispremised on ‘thorough bio-safety measures and veterinary services’. Due to theimprovement of bio-safety measures and veterinary services are restricted by "capitalstrength" and "construction period", for a long period of time, small back yard farms willrely on their "less investment", "small scale", "low cost" and "flexible response" tomaintain their tenacious vitality.
F. Gradually changed consumption structure supporting an encouraging prospect ofwhite feather broiler industryAccording to statistics from the USDA, the per capita consumption ratio of pork, beef andchicken in China were 88.81%, 3.71% and 7.48% in 1987 of the totals of three types ofmeat, and the pork consumption was close to 90%. Coming into 2018, these figureschanged to 73.60%, 11.22% and 15.18%, the pork consumption showed a downward trend,but still huge. Compared with pork, beef consumption presented a small base but anobvious trend of growth, and chicken also showed a large increase. With thepopularization of the concept of healthy diet, the proportion of chicken and beefconsumption will continue to increase, especially for chicken, its nutritional characteristicsof high-protein, low-fat, and low-cholesterol have been increasingly favored by Chineseresidents. Moreover, in terms of growth rate and raising cost, etc., white feather broilerhas greater advantages than pig and cattle. Under the dual effects of sharp contraction atthe supply side and moderate expansion at the demand side, the white feather broilerindustry has already ushered in a historic strong cycle, showing an encouraging prospect.2. Development strategy of the CompanyThe long-term development goal of the Company is to become one of the world's topagricultural and animal husbandry enterprises, whilst in the next three years, it will bestriving to become an enterprise with leading-edge quality and efficiency acrossagriculture, animal husbandry and food industries and a supplier of relevant service. In2018, the Company further clarified its development strategy for the next three years, i.e.,upholding the core value characterized by "integrity, responsibility and win-win’, insistingthe operation culture featured by ‘innovation, efficiency and self-discipline", giving fullplay to the advantages of regional position and coverage effect of the brand, business scaleand customer relationships, steadily improving present core businesses (feed & trade),developing emerging strategic businesses (broiler integration & pig raising), and activelycultivate potential businesses (international business & food), meanwhile, furtherecheloning the talents team, unremittingly innovating technology and marketing pattern,information resources, investment and financing platform, deeply expanding internationalbusiness centered on Southeast Asia, and crafting an operation model with leading-edgequality and efficiency that can create synergies and reduce costs among all business
divisions, whilst providing customers and related parties (shareholders, employees,suppliers, society) products and services with brand influence, becoming an enterprisewith leading-edge quality and efficiency across agriculture.Following the business strategy of developing industrial chain and vertical integration, theCompany will continuously increase investment in the integrated broiler business, optimizeits industrial structure and conduct lean management in internal operation, furtherimprove safety and added value of terminal broiler products, whilst it will give greatimpetus to raw meat and cooked food businesses, achieve the goal in ten years that “everyChinese person eats one Wellhope broiler every year". Regarding to pig business, theCompany will proactively design the distribution of pig raising business, gradually realizeregional covering and leading position by taking related advantages, such as geographiclocation, highly professional personnel. The Company plans to take 5 to 8 years creating anoperation model which is driven by two complementary engines in terms of integratedbroiler business and integrated pig business. Regarding to feed business, it will continue toexplore new markets through the transformation and upgrading of feed plants, increasemarket shares and sales volume of single plant, conduct lean management to continuouslyreduce costs and expenses, whilst improve the operating efficiency and profitability. Fortrade and related businesses, it will seize the opportunities such as animal raising scaleexpanding, the advancement of raising technology and upgrading of bio-safety system,conduct precisely marketing and improve services, pursuing a synergetic developmentwith the main business and multi-win. The Company will also deepen, improve, thoroughlyexploit the existing overseas markets.A. Talents leadership strategy: The Company will give full play to the existing advantagesof corporate culture, employer brand and human resource management, continuouslyoptimize organizational structure and improve management system, strengthen talentechelon construction, enhance performance appraisal management and remunerationincentive mechanism, meanwhile, it will reinforce the recruitment of outstanding talentsfor integrated business, promote all policies being tilted towards excellent talents, makemore excellent and high-potential talents can move to the management stage, continue tocultivate required talent resources to the organization.
B. Technology innovation strategy: The Company will strengthen the reserve of keytechnical talents, improve R&D management and evaluation system, as well as establish aneffective incentive mechanism. Meanwhile, it will make great efforts to provide integratedsolutions for customers by virtue of precise nutrition, strict quality control and innovativeservices. It will also enhance R&D expenditures in the field of broiler integration and pigraising, promote independent innovation and further exchange know-how and animalraising with Royal De Heus to ensure the leading-edge product competitiveness.C. Corporate culture strategy: The Company will utilize the unique advantages of itscorporate culture in corporate value orientation, behavioral traction and brandimage-building, continuously improve strategic planning for corporate culture and itsmanagement functions, strengthen cultural publicizing and appraisal of implementationfor core managers, and optimize promoting channels and further improve the ways ofpublicizing corporate culture, creating cohesive and highly recognized values and codes ofconduct whilst forging a uniquely competitive enterprise and brand image.D. Informatization strategy: The Company will allow fully play to the rich experience ofinformatization-based operation and maintenance in the feed business, help to strengthencore business and emerging strategic business, and further deepen the informatizationlevel of feed business, rapidly promote the IT application of broiler integration and tradebusiness, improve big data platform and training system to avoid security risks, and createan information resource management platform which will promote the Company's finemanagement , provide date for decision-making and expedite operating efficiency.3. Business plan in 20192019 is the first year for the Company conducting strategic changing and transformation, itwill leverage the strengths of culture, talents, market and brand that have beenaccumulated over the years. While continuing to develop feed and raw materials tradebusinesses, the Company will reinvest in integrated broiler business and promote itsin-depth management, whilst accelerate the distribution and operation of pig raisingbusiness, taking 5 to 8 years to craft an operation model driven by two complementaryengines: integrated broiler and integrated pig businesses, focusing on achieving themanagement strength of "leading-edge quality and efficiency" that creates synergies and
reduces costs among all business, becoming an top-notch enterprise with leading-edgequality and efficiency across agriculture, animal husbandry and food industries as well as amanufacturer of safe and high-quality meat product.A. Integrated broiler businessIn 2019, the Company will seize the opportunities arising from consolidated industry andits transformation and upgrading, further improve the production capacity and scalethrough in-depth management and mergers and acquisitions, whilst accelerate the pace ofbroiler raising and cooked food business, moreover, great efforts will be made to increasethe volume of broiler feed, promote slaughtering business and moderately expand thehatching business, so as to further improve the chain structure, and gradually enable thecapacity of broiler raising can fully meet the slaughtering needs. It will strive to achieve thegoal of raising 390 million broilers and slaughtering over 500 million in 2019(holding andassociated companies together).Furthermore, it will continue to strengthen lean management, adhere to benchmarkingmanagement to continuously improve internal management, and also attach greatimportance to boost raising technology, bio-safety system building, etc., meanwhile, alongwith centering on product innovation, quality safety and marketing expansion, it will try torealize promotions in the sales of fresh raw meat, prepared and cooked food, as well asexported products. Moreover, it will continuously pursue safety and efficiencyimprovement in broiler raising unit, chase quality and structure improvement inslaughtering and processing unit, whilst strive to achieve further improvement in scale andquality for further processing unit.Relying on the opportunities provided by the industry and market and self-ownedadvantages, Wellhope will unswervingly expand, maximize and refine integrated broilerbusiness, partnering towards the goal of taking 10 years for slaughtering 1 billion whitefeather broilers and providing each Chinese person with one Wellhope broiler per year.B. Feed and raw material trade businessIn response to ASF, the Company will continuously develop market-oriented feed products,increase sales of high-value products, continuously improve and innovate customer servicesystems, help customers to tide over the difficulties. While stabilizing pig feed, the
Company will seize the opportunity of structure adjustment of meat product, give full playto its brand advantage of ruminant feed, strengthen the marketing efforts of the ruminantand aquatic feed, further enhance product competitiveness and customer service quality,as well as strive to achieve a large percentage increase in ruminant and aquatic feed.Furthermore, in 2019, the Company will continuously deepen internal reform, separatethe sales system and administration system of feed business, innovate incentive policies,continue to reduce production costs and period expense rate, and strengthen personnelmanagement to ensure that the overall operation system is more efficient andcompetitive.C. Pig raising businessBased on the practices accumulated from 2017 to 2018, the Company has further clarifiedthe strategy of entering pig raising business with firm confidence. In 2019, whilecontinuing to operate existing pig projects, the Company will give great efforts to newlystarted 500,000 heads pig project in Fushun city, and the pig farm in Gongzhuling city.Meanwhile, it will actively seek for cooperation and acquisition opportunities regarding pigraising and slaughtering, further strengthen professional talents team building andbio-safety management for pig farms, especially focus on pig farm and farmers' diseaseprevention as well as the operation cost management for pig farms. Along with carryingforward newly built projects, the capacity of pig raising will be gradually released, theCompany's holding and associated companies will try to achieve the goal of providing300,000 heads of pig in 2019 (without considering the uncertainties caused by ASF).D. Key points of transformation and management in 2019◇ Safety is the first priority.◇Uphold the driven rules for operation management: "Code of conduct of managers","Strict management regarding three aspects" (strict intracompany management, strictperformance appraisal, and strict self-discipline).◇ Continue to promote excellent performance management, deepen the reform, andcomplete business transformation and upgrading.◇ Focus on talents echelon building.
◇ Fully conduct lean management, gradually achieve leading-edge quality and efficiency.◇ Enhance the management of financing and risk control, ensure the healthy andsustainable development.◇ Implement brand strategy, enhance the core competitiveness.◇ Speed up IT application, provide data for supporting decision-making.4. Possible risksA. Risks of fluctuations in raw material pricesMost costs of the feed business come from raw materials. The production changes inproducing areas, import policies, storage and subsidies, exchange rate fluctuations,logistics costs and other factors may trigger fluctuations in the raw material market, whichwill affect the Company's feed business costs and gross profit margins. With deepenedinternationalization of the trade of agricultural products in recent years, thesupply-demand relationship and trading price of raw materials have been affected bymarket conditions such as spot and futures at home and abroad, and the price trend hasbecome more complex followed by increasingly fierce fluctuations, which further increasesthe difficulties of the Company’s cost management. In addition, the changes in China-UStrade relations, international political and economic environment and other factors havealso made the purchase price of raw materials more variable.Solutions:
(a) The Company has established strategic partnerships with many top domestic andforeign raw material suppliers, and strategically reduced purchasing costs throughthree-level purchasing mode in terms of headquarters’ centralized purchasing, regions’price compare purchasing and local departments’ purchasing of different varieties.(b) The Company combines its raw material trading business with purchasing management,i.e., the professional and practical raw materials’ purchasing team conducts targetedforward-looking researches and real-time tracking on the market, makes great efforts toreduce the purchasing price, such as uniformly managing different varieties, adopting spotpurchasing and futures together.
(c) The purchasing team works closely with the R&D team to complement each other'sadvantages, further optimize the purchasing cost by way of re-formulating the feeds i.e.,changing the composition of the feed to use cheaper alternative raw materials whileachieving the same results, which can further optimize purchasing costs.(d) The Company and Royal De Heus have set up an information sharing channel, whichmakes the two sides can timely share the market trends, such as raw materials, additives,etc. In addition, the two sides may carry out joint purchasing cooperation in the future,which will greatly enhance the overall bargaining power.B. Risks of fluctuations in livestock and poultry pricesAnimal husbandry industry is a typical cyclical industry, and the hysteretic nature of theadjustment of supply causes the prices fluctuating periodically. At present, China's animalhusbandry industry is still dominated by back yard farms and small-scale farms, these farmowners show the character of non-rational decision-making, especially an obvious “herdeffect”, which further aggravates the cyclical fluctuations in the market price.Solutions:
(a) The Company's integrated broiler business has established an industrial chain, whichcan make the price fluctuations of all businesses can be fully counteracted, and thenreduce the risks of price fluctuations of the whole chain.(b) Since launching the integrated broiler business, the Company has always beencommitted to improving the production standards and management of each sector,reducing overall operating costs by optimizing the production and operation indicators andimproving per capita efficiency. The advantage of its operating costs can mitigate thenegative impacts on the Company when the industry is downward, and improve theoverall profitability when the industry is booming.C. Risks of serious animal diseaseFeed and animal raising are the Company's two main businesses. Disease outbreak is oneof the main risks faced by animal raising companies. Once a disease happens, it will causepanic in the market, which will reduce the demands, then lessen the production of thecompanies, decrease incomes and increase costs. Whilst, the feed industry mainly serves
downstream animal raising industry, the downstream market will directly affect theperformance of feed business. As an unpredictable emergency, an explosive disease willundoubtedly have a strong impact on the Company's operations.Solutions:
(a) Rationally optimize the industrial distribution and structural layout, disperse possiblerisks by the simplest and direct way.(b) Improve the prevention and control technology of major epidemics, complete the earlywarning system and strive to control epidemics effectively before spreading.(c) Set an emergency command system for major epidemics to minimize losses when theyoccur.(d) Strengthen analysis and research capabilities for major epidemics, enhance animal’simmunity from the perspective of animal nutrition and veterinary services.D. Risks of the industrial pattern adjustment caused by environmental protectionpoliciesChina has put forward some environmental protection regulations in recent years, such asEnvironmental Protection Tax Law, etc., which show the government's determination toincrease environmental protection supervision in animal husbandry industry, whilst thelocal governments have also issued certain new regulations. It can be seen that thecontinuously strengthening environmental protection is the trend of the industry also anunavoidable reality, which will further weed out unqualified players and make the industryfacing the situation of re -shuffling.Solutions:
During the start-up period, the Company had input "Save Resources, Committed toEnvironmental Protection" as part of its Vision. For more than 20 years, the Company hasalways taken saving resources and protecting the environment as its important missions.(a) Regarding to raising and slaughtering, in the face of increasingly strict environmentalprotection requirements, the Company have comprehensively identified environmentalrisk points, and formulated emergency plan for environmental emergencies so as tomaintain the stable operation. For the key pollutant discharge plants, the Company has
developed a complete self-monitoring program, which can find problems to repair,eliminate hidden dangers in a timely manner, it also continuously increases investment inenvironmental protection, such as personnel and funds, to ensure these plants alwayscomplying with national standards.(b) Regarding to feed production, the Company has always implemented nationalenvironmental protection standards with the most rigorous attitude, established completeprevention and control measures for waste gas, noise, wastewater, solid waste and otherpollution generated during the production process. It uses environmental-friendly rawmaterials and additives in feed formulations and also continuously develops safe andenvironment-friendly daily ration to reduce the emissions of heavy metals, nitrogen andphosphorus.E. Risks of exchange rate fluctuationsThe Company's international business started early and developed rapidly. The exchangerate fluctuations have released great influence on raw material purchasing, product exportand overseas investment, presenting as follows: First, international development has madethe global purchasing of raw materials becoming normally, therefore, the risks of exchangerate fluctuations are particularly evident in the raw materials which are based on overseasupply. Secondly, the Company’s export business of broiler products is growing rapidlywith customers from many countries and regions around the world, and the exchange ratefluctuations are inevitably caused by the settlements of multiple currencies. Finally, due tothe large overseas investment and overseas operations, the cross-border capitaltransactions and settlements will also be affected by exchange rate fluctuations.Solutions:
(a) Closely focus and study on the dynamic international foreign exchange market,enhance the awareness of preventing foreign exchange risk, and improve the research andforecasting capabilities of the foreign exchange market.(b) Improve the bargaining power in foreign trade transaction by enhancing thecompetitiveness of products, and use RMB for settlement, reduce the exchange rate risksby adding insured value clause and the exchange rate risk allocation clause in the contract.
(c) Make full use of foreign exchange forwards, swaps and options (combination) andother instruments to maintain the exchange rate for foreign exchange exposure.(d) According to specific conditions of different countries, based on the principle of "usingforeign currencies in foreign trade", reasonably match the income and debts to control theexchange rate risks.F. Risks of food safetyIn recent years, there have been some food safety incidents in China, which affectedconsumers' confidence in food safety. China has continuously improved the legislation onfood safety and food sources, conducted forceful measures on handling food violations.Once the food safety incident is triggered by poor quality supervision, it will directlydamage the interests of consumers and cause panic, which may greatly impact thedownstream demand and affect the brand and performance of the enterprises.Solutions:
(a) Regarding to feed business, the Company has established a three-level qualitymanagement mechanism and testing system which consists of headquarters, regions andlocal departments, adopted ISO 9001, ISO 22000, ISO-IEC 17025 and other internationalstandards, thoroughly implemented a series of quality standards to realize the wholeprocess control of the products and established the traceability system. The Companyworks hard to popularize near-infrared detection technology, improves detection efficiencyand shares data in time, by doing this, it can quickly realize risk warning and monitor heavymetals, harmful microorganisms and mycotoxins, providing an important guarantee for thefeed products. In addition, by drawing on the experiences of European antibiotic-free feed,and basing on current situation in China, the Company has realized some progresses inantibiotic alternatives, at present, the feed products for finisher, sow, layer at laying period,broiler, ruminant and aquatic can realize antibiotic-free technology.(b) Regarding to integrated broiler business, its industrial chain can fully control theforefront part of the supply of "material, medicine, day old chick" and production andsales process. Through unified operation model, standardized management and streamlineoperation, it can integrate bio-safety, drug residue control and hygiene managementduring the whole production processing to achieve food safety traceability.
Section V Important DisclosuresI. Common Stock Profit Distribution or Capital Reserve Converted into Share Capital1. Cash dividendThe Company has established a sustainable, stable and scientific return system forinvestors basing on considering the Company’s long-term and sustainable development,actual situation, current profit and future perspective of performance, shareholders’willing, external financing circumstances, etc.The Company made Three-Year’s Shareholder Dividend Return Plan (2017-2019) in 2017,and at least every three years it will review the dividend return plan, and basing on theopinions of shareholders (especially non-controlling shareholders), independent directorsand supervisory board directors, the Company will evaluate the ongoing profit distributionpolicy and make necessary modification.During the reporting period, the Company conducted profit distribution for 2017 in April2018: based on the total share capital on December 31st, 2017 as 831,176,469 shares, itdistributed cash dividends of RMB 1.00 yuan per 10 shares (tax included), totalling83,117,646.90 yuan.The Company's 2018 profit distribution plan will be: based on the total share capital on theequity registration date when the 2018 annual profit distribution will be implemented, itwill distribute cash dividends of RMB 1.8 yuan per 10 shares (tax included) to allshareholders, totalling RMB 166,014,791.28 yuan. This profit distribution plan will besubmitted to the Shareholders' Meeting.2. Plan or scheme of common stock profit distribution or capital reserve converted intoshare capital in the latest three years
Unit: yuan Currency:RMB
| Year | Dividend per 10 shares (yuan, tax included) | Amount of cash dividends (tax included) | The net profit attributable to the common shareholders of the Company in the year of distributing cash dividend | Percentage of net profit attributable to the common shareholders of the Company in the consolidated statements % |
| 2018 | 1.80 | 166,014,791.28 | 551,928,618.35 | 30.08 |
| 2017 | 1.00 | 83,117,646.90 | 471,024,473.92 | 17.65 |
| 2016 | 1.00 | 83,117,646.90 | 426,978,443.55 | 19.47 |
II. Execution of Commitment
| Background of making commitment | Type of commitment | Commitment party | Content | Date of making commitment and validity | Whether there is a time limit | Whether performs strictly |
| Commitment relating to IPO | Handling horizontal competition | Nature person shareholders holding more than 5% of the shares | I warrant and commit that I will not directly or indirectly develop, operate or assist in the operation or participate in or engage in any activity that is competitive with the business of Liaoning Wellhope, if Liaoning Wellhope will increase any business scope after the date of signing this commitment, I promise to give up the business. | March 2nd,2011, long-term valid | yes | yes |
| Handling related party transaction | Legal person shareholders holding more than 5% of the shares-Heli Investment | Our company warrants and commits that our company will not directly or indirectly develop, operate or assist in the operation or participate in or engage in any activity that is competitive with the business of Liaoning Wellhope, if Liaoning Wellhope will increase any business scope after the date of signing this commitment, our company promises to give up the business. | March 2nd,2011, long-term valid | yes | yes | |
| Restriction of selling shares | Jin Weidong, Wang Fengjiu, Shao Caimei, Wang Zhongtao, Ding Yunfeng | When selling shares within two years after the expiration of the lock-up period, the selling price shall not be lower than the offering price. After going public, if the closing price of the Company's stock of 20 consecutive trading days within 6 months is lower than the offering price, or the closing price in the end of 6 months later is lower than the offering price, the above lock-up period shall be automatically extended for 6 months. (if the Company conducts ex-right, ex-dividend for reasons of distributing cash dividend, capital reserve converted into share capital, issuing new shares, etc., the price of selling stock and closing price shall be conducted ex-right and ex-dividend in accordance with relevant provisions of China Securities Regulatory Commission and Shanghai Stock Exchange.) | April 2nd, 2014, within two years after the expiration of the lock-up period | yes | yes | |
| Restriction of selling shares | Jin Weidong, Wang Fengjiu, Shao Caimei, Wang Zhongtao, Ding Yunfeng | After IPO, if I plan to selling shares after the expiration of the lock-up period, I will announce the selling plan prior to 3 trading days before selling shares. Specific arrangement will be as follows: 1. the number of selling shares: if selling shares within 2 years after the expiration of the lock-up, the number of selling shares will be no more than 5 million shares, if the Company will conduct placing, capital reserve converted into share capital, etc., which will change the share capital, the number of selling shares shall make corresponding adjustment; 2. Way of selling shares: the shares shall be sold through the centralized bidding trading system | April 2nd, 2014, within two years after the expiration of the lock-up period | yes | yes |
| and block trading system of Shanghai Stock Exchange. If the total number of unrestricted shares planned to be sold within the next month is expected to exceed 1% of the total number of shares, the shares shall be transferred through the blocking trading system. 3. Selling price: if selling shares within 2 years after the expiration of the lock-up, the selling price shall be not lower than the IPO price (if the Company conducts ex-right, ex-dividend for reasons of distributing cash dividend, capital reserve converted into share capital, issuing new shares, etc., the price of selling stock or buying stock shall be conducted ex-right and ex-dividend in accordance with relevant provisions of China Securities Regulatory Commission and Shanghai Stock Exchange) 4. Time limit of selling shares: the time limit of selling shares shall be within six months from the date of announcing the selling plan. After the expiration of time limit, if intending to continue to sell shares, shall perform the announcement of selling shares again in accordance with the above arrangement. If above commitments cannot be fulfilled, the proceeds from selling shares shall belong to the Company and shall be paid to the designated account of the Company within 5 days of receiving such income. | ||||||
| Other | Jin Weidong, Wang Fengjiu, Shao Caimei, Wang Zhongtao, Ding Yunfeng | The controlling shareholder Jin Weidong and persons acting in concert with him undertake that there are no false records, misleading statements or material omissions in the prospectus of IPO and its summary, and shall bear individual and joint legal liabilities for its authenticity, accuracy and completeness. | long-term valid | yes | yes | |
| Other | Liaoning Wellhope | The Company undertakes that there are no false records, misleading statements or material omissions in the prospectus of IPO and its abstract, and it shall bear individual and joint legal liabilities for its authenticity, accuracy and completeness. | long-term valid | yes | yes | |
| Commitment relating to re-Financing | Dividend | Liaoning Wellhope | Liaoning Wellhope Three-Year’s Shareholder Dividend Return Plan (2017-2019) | December 15th, 2017, three years | yes | yes |
III. Changes in Accounting Policies and Estimates made by the Company1. The Company prepared the financial statements for 2018 in accordance with theNotice of the Ministry of Finance on the Revision and Issuance of the Format of GeneralCorporate Financial Statements for 2018 (No. 15 [2018] of the Ministry of Finance) and itsinterpretation as well as the requirements of Accounting Standards for BusinessEnterprises, such accounting policy change adopts the retroactive adjustment method.2. The Ministry of Finance in 2017 promulgated the No. 9 Interpretation of AccountingStandards for Business Enterprises - Accounting Treatment for the Net Loss of Investmentunder the Equity Method, No. 10 Interpretation - Depreciation Method which Bases onthe Income Generated by Fixed Assets, No. 11 Interpretation - Amortization Methodwhich Bases on the Income Generated by Intangible Assets, No. 12 Interpretation-Whether the key management service provider and receiver is related party.The Company has implemented above interpretations from January 1st, 2018, which hadno impact on the Company's financial figures at the beginning of period.The changes in accounting policies will not affect the Company's total assets, totalliabilities, net assets and net profits in the consolidated financial statements in 2018 andbefore the change.IV. Accounting Firm Engaged by the Company
Unit: 10,000 yuan Currency: RMB
| Accounting Firm ( Local) | Jiangsu SuyaJincheng CPA LLP |
| Payment | 110 |
| Length of Service | 8 years |
| Name | Payment | |
| Accounting Firm of Internal Control | Jiangsu SuyaJincheng CPA LLP | 35 |
| Accounting Firm ( Local) | Name | Jiangsu SuyaJincheng CPA LLP |
| Office Address | 21st-23rd F, Central International Plaza, No.105-6 North Zhongshan Road, Nanjing, Jiangsu Province, China | |
| Name of Signed CPA | Zhou Jiawen, Wang Jin |
The Company did not change the accounting firm during the reporting period.
V. Major litigation and Arbitration Matters
NonVI. Statement of the Integrity of the Company, its Controlling Shareholders and Actual
Controller during the Reporting Period
During the reporting period, there is no occurrence of the Company's controlling
shareholders and actual controller failing to perform the effective judgment of the court,
needing to pay a large amount of unliquidated debt due.VII. Employee’s Equity Incentive Plan, Stock Ownership Plan or Other Incentive
Measures and related Impacts
| Overview | Query URLs |
| On November 21st, 2018, the Company held the 7th meeting of the 6th Session of Board of Directors, deliberating and approving 2018 Restricted Stock Incentive Plan (draft) and its Summary, and on January 9th, 2019, the Company finished the registration of restricted stock. | For details, please refer to The Announcement of Granting Result of Liaoning Wellhope 2018 Restricted Stock Incentive Plan issued by the Company on the website of Shanghai Stock Exchange "www.sse.com.cn" on January 11st, 2019. (Announcement No. 2019-001) |
VIII. Significant Related Party Transaction
Related transactions related to Day-to-Day OperationsMatters do not disclose in the Company's extraordinary announcement
Unit: 10,000 yuan Currency: RMB
| Related Party | Relationship | Transaction Type | Transaction Content | Pricing Principle | Transaction Amount | Settlement Mode |
| Suizhong Rehen Fishery | Associated company | Purchasing goods | Feed raw materials | Comparable uncontrolled price | 406.33 | Transfer of account |
| Anshan Jiuguhe Food | Associated company | Purchasing goods | Poultry product | Comparable uncontrolled price | 1,060.76 | Transfer of account |
| Dalian Chengsan Animal Husbandry | Associated company | Purchasing goods | Delivery broiler | Comparable uncontrolled price | 16,511.39 | Transfer of account |
| Huludao Jiuguhe Food | Associated company | Purchasing goods | Poultry product | Comparable uncontrolled price | 543.53 | Transfer of account |
| Schippers(Beijing) | Associated company | Purchasing goods | Other | Comparable uncontrolled price | 42.82 | Transfer of account |
| Guangzhou Yikun Trading | Associated company | Purchasing goods | Feed raw materials | Comparable uncontrolled price | 618.88 | Transfer of account |
| Zhangjiakou Jiahe Agriculture and Animal Husbandry | Associated company | Purchasing goods | Piglet | Comparable uncontrolled price | 592.82 | Transfer of account |
| Tai’an Jiuguhe Agriculture | Associated company | Purchasing goods | Feed | Comparable uncontrolled price | 1,242.99 | Transfer of account |
| Linghai Jiuguhe Feed | Associated company | Purchasing goods | Other | Comparable uncontrolled price | 63.86 | Transfer of account |
| Gongzhuling Corn Purchasing and Storing | Associated company | Purchasing goods | Feed raw materials | Comparable uncontrolled price | 97.08 | Transfer of account |
| Nepal Wellhope Agri-tech Pvt. Ltd. | Joint venture | Selling goods | Feed | Comparable uncontrolled price | 19.96 | Transfer of account |
| Linghai Jiuguhe Feed | Associated company | Selling goods | Feed raw materials | Comparable uncontrolled price | 3,787.82 | Transfer of account |
| Tai’an Jiuguhe Agriculture | Associated company | Selling goods | Feed raw materials | Comparable uncontrolled price | 6,839.00 | Transfer of account |
| Anshan Jiuguhe Food | Associated company | Selling goods | Delivery broiler | Comparable uncontrolled price | 15,895.14 | Transfer of account |
| Qingdao Shenfeng Agri-Tech | Associated company | Selling goods | Feed raw materials | Comparable uncontrolled price | 1,835.97 | Transfer of account | |
| Beipiao Hongfa Food | Associated company | Selling goods | Feed raw materials | Comparable uncontrolled price | 726.01 | Transfer of account | |
| Huludao Jiuguhe Food | Associated company | Selling goods | Feed | Comparable uncontrolled price | 1,373.63 | Transfer of account | |
| Dandong Wellhope Chengsan Agri-Tech | Associated company | Selling goods | Feed raw materials | Comparable uncontrolled price | 1,082.08 | Transfer of account | |
| Suizhong Rehen Fishery | Associated company | Selling goods | Feed | Comparable uncontrolled price | 11.17 | Transfer of account | |
| Schippers(Beijing) | Associated company | Selling goods | Other | Comparable uncontrolled price | 88.74 | Transfer of account | |
| Zhangjiakou Jiahe Agriculture and Animal Husbandry | Associated company | Selling goods | Feed | Comparable uncontrolled price | 2,305.99 | Transfer of account | |
| Guangzhou Yikun Trading | Associated company | Selling goods | Feed raw materials | Comparable uncontrolled price | 14,504.00 | Transfer of account | |
| Jinzhou Jiufeng Food | Associated company | Selling goods | Delivery broiler | Comparable uncontrolled price | 521.16 | Transfer of account | |
| Anshan Fengsheng Food | Associated company | Selling goods | Delivery broiler | Comparable uncontrolled price | 9,945.16 | Transfer of account | |
| Dalian Chengsan Animal Husbandry | Associated company | Selling goods | Feed raw materials | Comparable uncontrolled price | 1,033.76 | Transfer of account | |
| Tailai Jiahe Agriculture and Animal Husbandry | Associated company | Selling goods | Feed | Comparable uncontrolled price | 4,186.32 | Transfer of account | |
| Total | / | 85,336.37 | / | ||||
| Wholesale sales return | non | ||||||
| Interpretation of related party transaction | The Company and its associated companies know each other better, and have maintained long-term cooperation relationships, which can strengthen the trust of products produced by partners, reduce transaction cost, improve working efficiency and avoid trading disputes. Purchasing raw materials from related parties can ensure the quality. Moreover, by participating in the management and exerting influence on related companies can help them to maintain a long-term and stable supply, also help them reduce the marketing pressure. The purpose of conducting related party transactions is to satisfy the needs of the Company's production and operation, the purchasing or selling price is determined according to the market price of similar products. Such transactions do not violate relevant laws, Company Constitution, etc., and do not damage the rights and interests of shareholders. | ||||||
IX. Circumstance of Social Responsibilities
1. Anti-poverty project of the Listed CompanyA. Targeted poverty alleviationThe Company actively responds to the planning and requirements of the Party CentralCommittee and governments at all levels for targeted poverty alleviation, diving by theprinciple of the Company’s Mission—Providing Service to the Society, and taking "targetedpoverty alleviation " as anti-poverty strategy, it formulates poverty alleviation programsand work plans regarding to agricultural industry to facilitate targeted poverty alleviation.At the same time, the Company also actively assists to education and public welfareestablishments to expand the scope and connotation of poverty alleviation work.B. Overview of targeted poverty alleviationLankao meat duck integration project was invested by the Company as the targetedpoverty alleviation project in response to the call of Lankao County Party Committee andcounty government. Since 2014, Lankao County has built a total of 1,053 back yard duckhouses and 58 duck farms, which used unified management in terms of unified supply ofday old duckling, feed, medicine, technical service and repurchasing to ensure food safety.The farmers do not need to prepare working capital.The Company also provides farmers with a unified veterinary drug subsidy of 0.5 yuan perduck, coal subsidy of 0.2-0.5 yuan per duck in winter and cooling subsidy of 0.3-0.5 yuan insummer and other policies, above-mentioned matters have been clearly stated in thecontract. In 2018, the Company signed 2,774 contracts with 1,387 farmers, andrepurchased 15.416 million meat ducks, with a total subsidy of 8.476 million yuan. Thefarmers realized good benefits, the average profit of farmers could reach 4 yuan per duck,achieving a bumper harvest in 2018.C. Figures of targeted poverty alleviation
Unit: 10,000 yuan, Currency: RMB
| Index | Details |
| 1. Overall | |
| of which: funds for poverty alleviation | 847.60 |
| 2. In details | |
| Type of targeted poverty alleviation | Targeted poverty alleviation for agriculture |
| a. The number of targeted poverty alleviation project | 1 |
| b. Investment amount | 847.60 |
D. Follow-up targeted poverty alleviationThe Company will continuously focus on poverty alleviation projects for agriculturalindustries, supporting poverty by training farmers, providing job opportunities andincreasing income of farmers, it will also increase the technical service, and improvefarmers’ technology level to ensure the success of farming, achieve a win-win situation.2. Social responsibilitiesAnimal husbandry is a fundamental industry that drives farmers to become richer, it is alsoa great industry that makes people living a happier life. There are 5 animal husbandryproducts in the “Vegetable Basket Project” among chickens, fish, meat, eggs, milk,vegetables and fruits. This industry is a basic guarantee for providing hygienic andnutritious animal foods and holding important missions and responsibilities. At thestart-up period, the Company wrote and announced its Vision and Mission to inside andoutside the industry, indicating and admonishing all employees about the Company'ssocial responsibilities and missions during its development process. Over the years, theCompany has been strictly fulfilling its commitment and practicing the corporate culture.In 2018, the Company further refined its core values characterized by "Integrity,Responsibility, Win-win", once again stressed the importance of its responsibilities.A. Responsibilities to society and industry? Practice of Wellhope Mission. The Company has taken “Using advanced technology,excellent service, and outstanding products to promote the development of China’s animalhusbandry industry, save resources, protect the environment, provide food security andbenefit the society” as its mission and ultimate goal since its establishment.Saving resources: China needs to use only 7% of the world's land to feed 22% of theworld's population. In response to increasing shortage of natural resources, the Companycontinues to develop new products like low-protein daily ration and biological feed, whichare committed to saving resources and saving food. In terms of raising technology, theCompany helps farmers to improve their raising concept and technology level so as tocontinuously achieve high efficiency and benefit, whilst the Company also applies relevantenergy-saving technologies to improve resource utilization, for example, its originalventilation mode and solar energy utilization technology, can simplify ventilation and heat
preservation, reduce electricity consumption and save coal. In terms of broilerslaughtering, the Company equips high-efficient facilities and continuously improves itstechnology, meanwhile, through fine management, it improves slaughtering techniquelevel and achieves efficient killing-out percentage and energy saving.Environment Protection: Because animal husbandry has certain pollution to theenvironment, the Company utilizes various ways such as technological innovation andequipment investment to protect the environment. In terms of technical innovation, itapplies environment-friendly raw materials and additives in feed formulations, andcontinuously develops safe and environment-friendly daily ration to reduce emissions ofheavy metals, nitrogen and phosphorus. In terms of animal raising and slaughtering, theCompany automates production lines and continuously improves the design, recycleswastes and uses the combination of planting and animal raising to realize environmentalprotection.Food Safety: The Company's R&D testing center is equipped with advanced testingequipment that comes from all over the world. Through strict quality control management,raw materials and feed products are checked at all levels to ensure the safety of feedproducts. For the broiler business, the Company takes all aspects of controlling of thesupply of "material, medicine, day old chick" as well as production and sales process fromthe source. Relying on unified operation model, standardized management and streamlineoperation, the Company integrates bio-safety, drug residue control and processing hygieneto achieve traceable food safety.? Honesty Driven Company. In the course of development, the Company has alwaysconducted business driven by the principle of honesty and trustworthiness, observing thelaws and compliance management, always keeps its words to employees, customers,suppliers, partners and shareholders. The Company strictly implements the regulationsissued by China Securities Regulatory Commission, Shanghai Stock Exchange, its CompanyConstitution and other internal systems, also actively adapts to the changes in regulatorypolicies, and continuously improves its corporate governance and the effectiveness ofinformation disclosure. In 2018, the Company honestly and normatively disclosed 66temporary announcements and 4 periodic reports in the designated media, which trulyand comprehensively displayed its profit status, core businesses, development plans, and
effectively transmitted its information to the investors, it had no violations on informationdisclosure. The Company's annual information disclosure work in 2017 received the A-levelevaluation from Shanghai Stock Exchange. Entering 2019, it will continue to carry out theprinciples of honesty driven, protect the legitimate rights and interests of investors, andgive play to the social responsibilities of listed company.? Public Charity. The Company has always persisted in the principle of contributing to itsmotherland by operating excellent businesses and giving back to the society. Over theyears, the Company has donated to disaster areas, disabled aid projects and relatededucational institutions directly or through the Red Cross. In recent years, the Companyhas continued to work with a supplier, participating in the donation activities on the WorldEgg Day, caring about poor primary school students' healthy growth through donatinghigh-quality and nutritional eggs. Moreover, the Company provides awards and bursarysupports to many college students in China, also gives them holiday internshipopportunities and organizes summer camps. In 2018, the Company donated nearly RMB 1million of education funds and scholarships to Nanjing Agricultural University, ShenyangAgricultural University, Gansu Agricultural University and other universities. The subsidiarycompanies also actively participated in charitable activities organized by local governments.Many managers of the Company also devoted themselves to public charity in differentforms.? Employment Promotion. According to the Company's development needs, it carriesout social and campus recruitment every year, creating job opportunities for the society. In2018, the Company recruited more than 300 undergraduates, masters and doctoralstudents from 28 universities across China, and provided systematic training to help themgrow rapidly.B. Responsibilities to employees and shareholdersa. The Company has always pursued sharing results and achieved win-win and multi-winwith employees, customers, partners and shareholders. Since going public, it hasimplemented stable returns for investors, and made Three-Year’s Shareholder DividendReturn Plan (2017-2019) in 2017, to guarantee shareholders’ rights and interests. Whilstthe Company’s 2018 profit distribution plan will be: based on the total share capital on the
equity registration date when the 2018 annual profit distribution will be implemented, theCompany will distribute cash dividends of RMB 1.8 yuan per 10 shares (tax included) to allshareholders, totalling RMB 166,014,791.28 yuan. This profit distribution plan has beendeliberated and approved by the Board of Directors, pending submission to theShareholders' Meeting. After the implementation, the Company will totally distribute cashdividends of 332 million yuan from 2016 to 2018, accounting for 22.91% of the net profitattributable to the shareholders of the Company.b. Driven by the principle of "sharing bumper harvest", the Company shares itsachievements with employees in various ways, such as holding shares of subsidiaries andflexible welfare. In 2018, the Company implemented Restricted Stock Incentive Programfor granting 372 key managers in key positions restricted stock, which effectively combinedthe interests of shareholders, the Company and the core team to promote the sustainabledevelopment of the Company and realize sharing of results.c. In strict accordance with national laws and regulations, the Company provides socialsecurity for employees. On this basis, it provides commercial insurance to employees andbenefits their family members, and it also expands welfare guarantee through internalresource sharing, pilot flexible benefits, and commendation awards to improve employees’happiness index. In the meantime, the Company continues to build three-level trainingsystem, fully develops and uses Wellhope E-Learning College and external resourcechannels to provide more time-sensitive and adaptable courses to promote the growthand value enhancement of employees. In the aspect of career development, the Companyhas created an “H-type” dual-channel development plan for employees. Each employeecan choose a management route or a technical route according to competence and futureplanning. The Company targets at making great efforts to help employees to achieve theircareer development.d. The internal public welfare organization -- “Wings of Love” foundation, established in2007, continues to play the role of caring for employees. It gives certain rewards to theemployee’s children who are admitted to the universities, encouraging them to study hardand encouraging the employees to train talents for the country and society., whilst itprovides financial assistance to the families of employees suffered difficulties, helpingthem to tide over hard time, now the Company has donated nearly RMB 4 million yuan.
Moreover, every year the Company organizes different forms of cultural activities tocontinuously enrich the work and life of employees. On December 11st, 2018, theCompany won the honorary title of “National Model Enterprise with Harmonious LaborRelations” initiated by China’s Ministry of Human Resources and Social Security, and in"2018 China Best Employers Awards Ceremony" hosted by Zhaopin.com on December18th, 2018, the Company stood out among more than 30,000 enterprises and won the"2018 Top 10 Best Employers of Shenyang".C. Responsibilities to customersDriven by the concept of making progress together with customers, the Company isdedicated to providing excellent products to customers, whilst it is constantly improvingand innovating customer service systems to help customers to grow and progress. TheCompany has developed a series of professional training programs, specializedmanagement programs of farm environment and data management systems, etc. By waysof "five-meeting model" (new product recommendation meeting, dealer promotionmeeting, product trial analysis meeting, animal raising technology seminar, dealer'straining), “three on-site model” (on-site visit, on-site diagnosis, on-site plan design), experthotline, etc., the Company helps dealers and farmers to improve their operation conceptand raising technology to get better economic results. In 2018, ASF raged, which causedheavy losses to pig raising, the Company responded quickly, provided the farmers (farms)with newly developed products, online counseling and solutions to fight against thedisease, it also promoted pig insurance and raising insurance. Moreover, the Companyheld live trainings of “Face up to ASF, Healthy Raising”, and invited domestic and foreignexperts to analyze ASF and explain countermeasures from various aspects in order to helpcustomers to prevent ASF and control losses. The highest number of online audiencesreached 200,000. Moreover, its ruminant feed subsidiaries promoted custody business forcattle farms, whilst its integrated broiler business division provided contract farms withcomplete feeding and management solutions, to support customers growing business.3. Environmental protection policyA. Information of pollution dischargePuyang Wellhope Food Co., Ltd. (hereinafter referred to as "Puyang Wellhope"), a holding
subsidiary of the Company, has been listed as key sewage & gas waste emission unit ofPuyang City. Dalian Zhongjia Wellhope Food Co., Ltd. (hereinafter referred to as "ZhongjiaFood"), a holding subsidiary of the Company, has been listed as key sewage & gas wasteemission unit of Wafangdian City. Kaifeng Wellhope Meat Food Co., Ltd. (hereinafterreferred to as "Kaifeng Wellhope"), a holding subsidiary of the Company, has been listed askey sewage waste emission unit of Kaifeng City. Shenyang Huakang Meat Poultry Co., Ltd.(hereinafter referred to as "Shenyang Huakang"), a holding subsidiary of the Company, hasbeen listed as key sewage waste emission unit of Shenyang City. Details are presented asfollows:
Puyang Wellhope: the main pollutants include gas waste and water waste, among whichwater waste mainly contains COD, ammonia nitrogen, total phosphorus, pH, suspendedsolids, biochemical oxygen requirement, animal and vegetable oil, total coliform group andtotal nitrogen. The gas waste mainly contains SO2, nitric oxide and particulate matter.Emission method: 1 sewage treatment waste water emission outlet, distributed in thesoutheast corner of the building of the sewage monitoring base station;1gas wasteexhaust outlet, distributed in the boiler room in the northeast corner of the plant site.Puyang Wellhope strictly implements emission standards for industrial "three wastes". Theemission of waste water is subject to the three-level standards in the Discharge Standardof Water Pollutants for Meat Packing Industry (GB 13457-1992), emission permit(9141092367412881xt001p), and the indirect emission limit value in the water inflowagreement of Nanle County sewage treatment Co., Ltd. (COD≤400mg/L, NH3-N≤35mg/L,total phosphorus≤2.5mg/L, BOD≤180mg/L, suspended solids≤220mg/L, totalnitrogen≤40mg/L, pH value of 6-9). The gas waste emission is subject to the concentrationlimit of Emission Standard of Air Pollutants for Coal-Burning Oil-Burning Gas-Fired Boiler(GB 13271-2014) and emission permit (9141092367412881xt001p) requirements, that is,the emission concentration of SO
shall be ≤50mg/Nm
, the emission concentration ofparticulate shall be ≤20mg/Nm
and emission concentration of NOX shall be ≤150mg /Nm?. Total emission of main pollutants under the pollutant emission permit is as follows:
COD 15.58 tons/year and ammonia nitrogen 2.95 tons/year. During the reporting period,the total emission of Puyang Wellhope was controlled within the permitted scope, and the"three wastes" treatment met the standard requirements without exceeding the standard.
Kaifeng Wellhope: the main pollutant is water waste, which mainly contains COD,ammonia nitrogen, total phosphorus, pH, suspended solids, biochemical oxygenrequirements, animal and vegetable oil, total coliform group and total nitrogen. Emissionmethod: 1 sewage treatment waste water emission outlet, distributed in the southeast ofthe factory. Kaifeng Wellhope strictly implements emission standards for industrial "threewastes". The emission of waste water is subject to the second-level standard in theDischarge Standard of Water Pollutants for Meat Processing Industry (GB 13457-1992),emission permit (91410212MA4057G88A001R) and the sewage emission limit in the GHPYZI No. 2501 Environmental evaluation criteria (COD≤100mg/L, NH3-N≤20mg/L, BOD≤40/L,suspended solids≤100mg/L, pH value of 6-8.5, coliform numbers≤10000). Total emission ofmain pollutants under the pollutant emission permit: COD 3.60 tons/year, ammonianitrogen 0.79 tons/year. During the reporting period, the total emission of KaifengWellhope was controlled within the permitted scope, and the "three wastes" treatmentmet the standard requirements without exceeding the standard.Zhongjia Food: the main pollutants include gas waste and water waste, among whichwater waste mainly contains COD, ammonia nitrogen, total phosphorus, pH, suspendedsolids and total nitrogen. The gas waste mainly contains SO2, nitric oxide and particulatematter. Emission method: 1 sewage treatment waste water emission outlet, distributed inthe west of the southern end of the new sewage treatment workshop; 1 gas waste exhaustoutlet, distributed on the roof of the boiler room. Zhongjia Food strictly implementsemission standards for industrial "three wastes", DB 21/1627-2008 Liaoning ProvincialStandard-Comprehensive Sewage Emission Standard (COD≤50mg/L, NH3-N≤8mg/L, totalphosphorus≤0.5mg/L, suspended solids≤20mg/L, total nitrogen≤15mg/L, pH value of 6-9).The gas waste emission is subject to gas boiler emission concentration limit of EmissionStandard of Air Pollutants for Coal-Burning Oil-Burning Gas-Fired Boiler (GB 13271-2014).During the reporting period, the total emission of Zhongjia Food was controlled within thepermitted scope, and the "three wastes" treatment met the standard requirementswithout exceeding the standard.Shenyang Huakang: the main pollutant is water waste, which mainly contains COD,ammonia nitrogen, pH and suspended solids. Emission method: 1 sewage treatment wastewater emission outlet, distributed in then northeast of the sewage treatment station.
Shenyang Huakang strictly implements the emission standards for industrial "threewastes". The emission of waste water is subject to the first-level standard in the DischargeStandard of Water Pollutants for Meat Processing Industry (GB 13457-1992), emissionpermit DB 21/1627-2008 Liaoning Provincial Standard-Comprehensive Sewage EmissionStandard (COD≤50mg/L, NH3-N≤8mg/L, total phosphorus≤0.5mg/L, suspendedsolids≤20mg/L, pH value of 6-9). The gas waste emission is subject to gas boiler emissionconcentration limit of Emission Standard of Air Pollutants for Coal-Burning Oil-BurningGas-Fired Boiler (GB 13271-2014) (SO
emission concentration ≤200mg/Nm3, particulatematter concentration ≤20mg/Nm3, NOX emission concentration ≤200mg/Nm3). Duringthe reporting period, the total emission of Shenyang Huakang was controlled within thepermitted scope, and the "three wastes" treatment met the standard requirementswithout exceeding the standard.B. Circumstance of building and operating pollution control facilitiesPuyang Wellhope:
1). Sewage treatment: Puyang Wellhope has 2000T/D sewage treatment station, whichadopts the treatment process of "pretreatment plus oil separation plus A2O plusdisinfection" to treat the wastewater. Its environmental protection facilities are runningnormally, and the pollutant emission indexes all meet the third-level standards in theDischarge Standard of Water Pollutants for Meat Processing Industry (GB 13457-1992), theemission permit (YHXKNo. 2015-001 of Puyang City) and the indirect emission limit valuein the water inflow agreement of Nanle County sewage treatment Co., Ltd.2). Waste gas treatment: the gas generated by the waste water pool of the sewagetreatment station is collected and purified by activated carbon adsorption and thendischarged through the 15m-high chimney in accordance with related standard; thetraditional coal-fired boilers are replaced by gas-fired boilers, and all kinds of pollutantsmeet the gas boiler emission concentration limit of the Emission Standard of Air Pollutantsfor Coal-Burning Oil-Burning Gas-Fired Boiler(GB 13271-2014)and emission permit(YHXKNo. 2015-001 of Puyang City) requirements with the 8-meter high chimney for reachingthe emission standard, which has been fundamentally effectively treated.
Kaifeng Wellhope:
Sewage treatment: Kaifeng Wellhope has 1700T/D sewage treatment station, which adoptsthe treatment process of "air floatation plus A2O" to treat the wastewater. Itsenvironmental protection facilities are running normally, and the pollutant emissionindexes all meet the second-level standards in the Discharge Standard of Water Pollutantsfor Meat Packing Industry (GB 13457-1992), the emission permit (CertificateNo.:91410212MA4057G88A001R) and the sewage emission limit in the GHPY ZI No. 2501Environmental evaluation criteria.Dalian Zhongjia:
1). Sewage treatment: Zhongjia Food has a 1200T/D sewage treatment station, whichadopts the treatment process of "mechanical barrier - oil separator - regulation pool -hydrolysis pool - contact oxidation pool - sedimentation pool - sand filter" to treat thewastewater and achieve DB 21/1627-2008 Liaoning Provincial Standard - ComprehensiveSewage Emission Standard.2). Waste gas treatment: the smoke and dust generated by 4T coal-fired boilers used forproduction is de-dusted by wet method and de-sulphurized by magnesium oxide. All kindsof pollutants meet the gas boiler emission concentration limit of the Emission Standard ofAir Pollutants for Coal-Burning Oil-Burning Gas-Fired Boiler (GB 13271-2014).Shenyang Huakang:
Sewage treatment: Shenyang Huakang has a 720T/D sewage treatment station, whichadopts the treatment process of "pretreatment plus oil separation plus A2O plusdisinfection" to treat the wastewater. Its environmental protection facilities are runningnormally, and the pollutant emission indexes have reached the first-level standard in theDischarge Standard of Water Pollutants for Meat Packing Industry (GB 13457-1992).C. Environmental impact assessment of construction projects and other administrativepermits for environmental protectionDuring the reporting period, all the construction projects of the Company met therequirements of environmental impact assessment and other environmental protectionadministrative licenses. The Company has strictly implemented the "three simultaneous"
environmental protection system.D. Emergency plan for environmental emergenciesAccording to the requirements of environmental protection authorities and relevant lawsand regulations, each production unit of the Company has identified the site with potentialenvironmental risk and formulated the emergent plans of environmental pollution incident;meanwhile, related companies conducted emergency exercises, improved self-helpcapability, and continued to identify the hidden danger to ensure normal operations.
Section VI Changes in Common Shares and Shareholder InformationI. Changes in Common Shares
During the reporting period, the total number of common share and the structure of sharecapital of the Company did not change.II. Shareholders and Actual Controller
1. The number of shareholders
| Total number of common shareholder as at December 31st, 2018 | 22,583 |
| Total number of common shareholder at the end of March 2019 | 25,118 |
2. Top ten shareholders and top ten shareholders holding unrestricted shares as at theend of the reporting period
Unit: share
| Shareholding of top ten shareholders | |||||||
| Name of shareholder | Changes | Total shares held at the period-end | % | Restricted shares held | Pledged or Frozen | Nature of shareholder | |
| Status | Shares | ||||||
| Jin Weidong | 146,487,381 | 17.62 | Pledged | 53,430,000 | Domestic natural person | ||
| Ding Yunfeng | 80,398,500 | 9.67 | Pledged | 8,930,000 | Domestic natural person | ||
| DE HEUS MAURITIUS | 80,007,352 | 9.63 | Foreign legal person | ||||
| Shao Caimei | 2,648,800 | 54,559,878 | 6.56 | Pledged | 16,900,000 | Domestic natural person | |
| Wang Fengjiu | 50,084,602 | 6.03 | Pledged | 10,945,000 | Domestic natural person | ||
| Zhang Tiesheng | 48,360,000 | 5.82 | Pledged | 6,970,000 | Domestic natural person | ||
| Shenyang Wellhope Heli Investment Co., Ltd. | 48,360,000 | 5.82 | Domestic non-State- owned legal person | ||||
| Wang Zhongtao | 47,151,000 | 5.67 | Pledged | 8,220,000 | Domestic natural person | ||
| Gao Junsong | -767,005 | 15,132,184 | 1.82 | Pledged | 8,570,000 | Domestic natural person | |
| Wang Zhenyong | 9,800,000 | 1.18 | Pledged | 1,420,000 | Domestic natural person | ||
| Top ten shareholders holding unrestricted shares | |||
| Name of shareholder | Unrestricted shares held | Shares by type | |
| Type | Shares | ||
| Jin Weidong | 146,487,381 | RMB common stock | 146,487,381 |
| Ding Yunfeng | 80,398,500 | RMB common stock | 80,398,500 |
| DE HEUS MAURITIUS | 80,007,352 | RMB common stock | 80,007,352 |
| Shao Caimei | 54,559,878 | RMB common stock | 54,559,878 |
| Wang Fengjiu | 50,084,602 | RMB common stock | 50,084,602 |
| Zhang Tiesheng | 48,360,000 | RMB common stock | 48,360,000 |
| Shenyang Wellhope Heli Investment Co., Ltd. | 48,360,000 | RMB common stock | 48,360,000 |
| Wang Zhongtao | 47,151,000 | RMB common stock | 47,151,000 |
| Gao Junsong | 15,132,184 | RMB common stock | 15,132,184 |
| Wang Zhenyong | 9,800,000 | RMB common stock | 9,800,000 |
| Relationship of above shareholders or statement made by the parties acting in concert | 1. Jin Weidong, Ding Yunfeng, Wang Fengjiu, Shao Caimei and Wang Zhongtao act in concert; 2. Jin Weidong is the actual controller of Shenyang Heli Investment Co., Ltd. 3. No relation or concerted action is found among other shareholders. | ||
III. Controlling Shareholder and Actual Controller
1. Controlling shareholderNatural person
| Name | Jin Weidong |
| Nationality | China |
| Whether acquire the right of abode in other countries or regions | No |
| Major occupation and position | Chairman of Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. |
Note: As at the end of the reporting period, Jin Weidong directly held 146,487,381 sharesof the Company, accounting for 17.62% of the total equity, and Jin Weidong totally
controlled 51.38% of the Company's voting rights through controlling Shenyang HeliInvestment which had 5.82% of the Company's voting rights, and through signing theAgreement of Acting in Concert with Ding Yunfeng(9.67%), Wang Fengjiu(6.03%), ShaoCaimei(6.56%) and Wang Zhongtao(5.67%) who totally controlled 27.93% of theCompany's voting rights. Jin Weidong is the actual controller of the Company.2. Actual controllerNatural person
| Name | Jin Weidong |
| Nationality | China |
| Whether acquire the right of abode in other countries or regions | No |
| Major occupation and position | Chairman of Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. |
| Domestic and foreign listed companies once held by the actual controller in the past 10 years | Non |
Note: As at the end of the reporting period, Jin Weidong directly held 146,487,381 sharesof the Company, accounting for 17.62% of the total equity, and Jin Weidong totallycontrolled 51.38% of the Company's voting rights through controlling Shenyang HeliInvestment which had 5.82% of the Company's voting rights, and through signing theAgreement of Acting in Concert with Ding Yunfeng(9.67%), Wang Fengjiu(6.03%), ShaoCaimei(6.56%) and Wang Zhongtao(5.67%), who totally controlled 27.93% of theCompany's voting rights. Jin Weidong is the actual controller of the Company.
Section VII Preference ShareNot Applicable
Section VIII Directors, Supervisors, Senior Management and EmployeesI. Changes in Shareholdings and Remuneration
1. Changes in shareholdings and remuneration of incumbent and outgoing directors, supervisors and senior management during thereporting period
| Name | Office title | Gender | Age | Start of tenure | End of tenure | Opening shareholding (shares) | Closing shareholding (shares) | Changes in shareholding (shares) | Reason of Change | Pre-tax remuneration paid by the Company (10,000 yuan) | Whether obtain remuneration from related parties of the Company |
| Jin Weidong | Chairman | male | 56 | Feb. 3, 2015 | Feb. 1, 2021 | 146,487,381 | 146,487,381 | 55.12 | no | ||
| Ding Yunfeng | Director and President | male | 56 | Feb. 3, 2015 | Feb. 1, 2021 | 80,398,500 | 80,398,500 | 53.00 | no | ||
| Wang Fengjiu | Vice President | male | 50 | Feb. 3, 2015 | Feb. 1, 2021 | 50,084,602 | 50,084,602 | 43.58 | no | ||
| Shao Caimei | Director and Chief Technical Officer | female | 53 | Feb. 3, 2015 | Feb. 1, 2021 | 51,911,078 | 54,559,878 | 2,648,800 | buying shares in the secondary market | 50.38 | no |
| Wang Zhongtao | Chairman of the Supervisory Board | male | 55 | Feb. 3, 2015 | Feb. 1, 2021 | 47,151,000 | 47,151,000 | 50.00 | no | ||
| Wang Zhenyong | Vice President | male | 53 | Feb. 3, 2015 | Feb. 1, 2021 | 9,800,000 | 9,800,000 | 50.00 | no | ||
| Gao Quanli | Vice President | male | 53 | Feb. 3, 2015 | Feb. 2, 2018 | 4,613,550 | 4,583,550 | -30,000 | selling shares in the secondary market | 50.37 | no |
| Zhang Wenliang | Director and Chief Financial Officer | male | 59 | Feb. 3, 2015 | Feb. 1, 2021 | 8,565,100 | 8,565,100 | 39.60 | no | ||
| Wang Xueqiang | Vice President | male | 52 | Feb. 3, 2015 | Feb. 2, 2018 | 9,380,000 | 9,380,000 | 50.00 | no | ||
| Sun Lige | Vice President | male | 48 | Mar. 28,2016 | Feb. 2, 2018 | 9,551,250 | 9,531,250 | -20,000 | selling shares in the secondary market | 50.00 | no |
| Zhao Xin | Director, Board Secretary, Chief HR Officer | female | 47 | Feb. 3, 2015 | Feb. 1, 2021 | 8,353,242 | 4,470,160 | -3,883,082 | equity division | 50.00 | no |
| Di Guo | Vice President | male | 49 | Feb. 3, 2015 | Feb. 2, 2018 | 5,108,219 | 5,108,219 | 50.00 | no |
| Qiu Jiahui | Vice President | male | 47 | Feb. 3, 2015 | Feb. 1, 2021 | 50.00 | no | ||||
| Zhang Shuyi | Independent Director | male | 55 | Feb. 3, 2015 | Feb. 2, 2018 | 0.50 | no | ||||
| Hu Jianmin | Independent Director | male | 60 | Feb. 3, 2015 | Feb. 1, 2021 | 6.00 | no | ||||
| Liu Huan | Independent Director | male | 64 | Feb. 3, 2015 | Feb. 1, 2021 | 6.00 | no | ||||
| Wang Zhe | Independent Director | female | 39 | Feb. 2, 2018 | Feb. 1, 2021 | 5.50 | no | ||||
| Jacobus Johannes de Heus | Director | male | 50 | Feb. 3, 2015 | Feb. 1, 2021 | no | |||||
| Marcus Leonardus van der Kwaak | Supervisor | male | 50 | Feb. 3, 2015 | Feb. 1, 2021 | no | |||||
| Yuan Minger | Supervisor | female | 49 | Feb. 3, 2015 | Feb. 1, 2021 | 14.04 | no | ||||
| Li Jun | Supervisor | male | 47 | Apr. 27,2016 | Feb. 1, 2021 | 28.00 | no | ||||
| Wei Yanjin | Supervisor | male | 61 | Jul. 20, 2016 | Mar. 26,2019 | 7.00 | no | ||||
| total | 431,403,922 | 430,119,640 | -1,284,282 | / | 709.09 | / |
| Name | Work experience |
| Jin Weidong | Male, born in 1963, master's degree, the core founder of Liaoning Wellhope, Chairman of the Board, also holds the posts of President of Liaoning Feed Industry Association, member of Liaoning Province Standing Committee of the Chinese People's Political Consultative Conference, Vice President of China Feed Industry Association, Vice President of China Animal Husbandry Industry Association, Doctoral Advisor of Shenyang Agricultural University, Guest Professor of Remin University of China, Ocean University of China and Northeast Agricultural University, etc. |
| Ding Yunfeng | Male, born in 1963, bachelor's degree, one of the founders of Liaoning Wellhope, now holds the posts of board director and President. |
| Wang Fengjiu | Male, born in 1969, master's degree, one of the founders of Liaoning Wellhope, now holds the post of Vice President. |
| Shao Caimei | Female, born in 1966, Ph.D., one of the founders of Liaoning Wellhope, the board director and CTO, also holds the posts of standing director of Animal Nutrition Branch of Chinese Association of Animal Science and Veterinary Medicine, member of Chinese Feed Industrial Standardization Technical Committee, etc. |
| Wang Zhongtao | Male, born in 1964, master's degree, one of the founders of Liaoning Wellhope, now holds the post of Chairman of the supervisory board. |
| Wang Zhenyong | Male, born in 1966, Ph.D., joined Liaoning Wellhope in 1996, now holds the post of Vice President, taking charge of international business. |
| Gao Quanli | Male, born in 1966, bachelor's degree, joined Liaoning Wellhope in 1996, now takes charge of feed business in regions of Central, East, North and Northwest China. |
| Zhang Wenliang | Male, born in 1960, master's degree, joined Liaoning Wellhope in 1996, now holds the posts of board director and CFO. |
| Wang Xueqiang | Male, born in 1967, bachelor's degree, joined Liaoning Wellhope in 1995, now takes charge of feed business in Liaoning province. |
| Sun Lige | Male, born in 1971, bachelor's degree, joined Liaoning Wellhope in 1997, now takes charge of purchasing business. |
| Zhao Xin | Female, born in 1972, bachelor's degree, joined Liaoning Wellhope in 1995, now holds the posts of board director, board secretary, CHO. |
| Di Guo | Male, born in 1972, master's degree, joined Liaoning Wellhope in 1996, now takes charge of feed business in Jilin and Heilongjiang provinces. |
| Qiu Jiahui | Male, born in 1972, bachelor's degree, joined Liaoning Wellhope in 2000, now holds the post of Vice President, taking charge of broiler integration business division. |
| Zhang Shuyi | Male, born in 1964, Ph.D., Dean of School of Animal Husbandry and Veterinarian of Shenyang Agricultural University. |
| Hu Jianmin | Male, born in 1959, Ph.D., professor of School of Animal Husbandry and Veterinarian of Shenyang Agricultural University, independent director of Liaoning Wellhope. |
| Liu Huan | Male, born in 1955, Chinese nationality, CPA, professor of School of Tax Administration of Central University of Finance and Economics, independent director of Liaoning Wellhope. |
| Jacobus Johannes de Heus | Male, born in 1969, the Dutch nationality, master's degree, CEO of Royal De Heus, board director of Liaoning Wellhope. |
| Marcus Leonardus van der Kwaak | Male, born in 1969, the Dutch nationality, master's degree, CFO of Royal De Heus, supervisor of Liaoning Wellhope. |
| Yuan Minger | Female, born in 1970, bachelor's degree, supervisory board director and audit manager of Liaoning Wellhope. |
| Li Jun | Male, born in 1972, master's degree, joined Liaoning Wellhope in 2004, now holds the posts of supervisory board director and director of raw material trade business division and general manager of Liaoning Expert Trading Co., Ltd. |
| Wei Yanjin | Male, born in 1958, master's degree, joined Liaoning Wellhope in 2001, now holds the posts of supervisory board director and President of related business division. |
| Wang Zhe | Female, born in 1980, Ph.D., professor and doctoral advisor of School of Animal Husbandry and Veterinarian of Shenyang Agricultural University, independent director of Liaoning Wellhope. |
II. Posts Held by Incumbent and Outgoing Directors, Supervisors and Senior Management during the Reporting Period
1. Post held in the shareholding entity
| Name | Shareholding entity | Post | Start of tenure | End of tenure |
| Wei Yanjin | Shenyang Wellhope Heli Investment Co., Ltd. | executive director | 2011 |
2. Post held in other entity
| Name | Other entity | Post | Start of tenure | End of tenure |
| Zhang Shuyi | Shenyang Agricultural University | dean of School of Animal Husbandry and Veterinarian | 2018 | |
| Zhang Shuyi | Wuxi Kezhigan Science and Technology Ltd. | executive director | 2012 | |
| Hu Jianmin | Shenyang Agricultural University | professor | 2000 | |
| Hu Jianmin | Liaoning-Shenyang Agricultural Wellhope Bio-Tech Co., Ltd. | board director | 2016 | |
| Liu Huan | School of Tax Administration of Central University of Finance and Economics | deputy dean and professor | 2010 | |
| Jacobus Johannes de Heus | Royal De Heus | CEO | 2002 | |
| Marcus Leonardus van der Kwaak | Royal De Heus | CFO | 2001 | |
| Jin Weidong | Beijing BOYAR Agriculture and Animal Husbandry Technology Co., Ltd. | supervisor | 2010 | |
| Note | above posts are relevant, main posts, but not all. | |||
III. Remuneration of Directors, Supervisors and Senior Management
| Decision-making procedure for remuneration | According to the Company's performance appraisal management, related regulations and the stipulations of the Remuneration and Performance Appraisal Committee of the Board of Directors. |
| Basis for determining remuneration | According to the remuneration level in the industry, the Company's business performance, job responsibilities, etc., and in accordance with the work plan made by the Board of Directors at the beginning of the year, in combination with the personal work performance and other qualitative and quantitative indicators. |
| Actual payment | Paying in accordance with the annual performance of the Company, the work performance of senior managers and management ability, etc. |
| Total remuneration during the reporting period | Totally paid 7.09 million yuan to board directors, supervisory board directors and senior managers. |
IV. Changes of Directors, Supervisors and Senior Management
| Name | Office title | Change | Reason |
| Gao Quanli | vice president | outgoing | expiration of tenure |
| Wang Xueqiang | vice president | outgoing | expiration of tenure |
| Sun Lige | vice president | outgoing | expiration of tenure |
| Di Guo | vice president | outgoing | expiration of tenure |
| Zhang Shuyi | independent director | outgoing | expiration of tenure |
| Wang Zhe | independent director | new electing | new electing |
V. Employees of the Parent Company and Major Subsidiaries
1. Headcount
| Full time employee of parent company | 259 |
| Full time employee of major subsidiaries | 4,553 |
| Total full time employees | 4,812 |
| The number of retired employees whose expenses are borne by the parent company and its major subsidiaries | 15 |
| Functions | |
| Function | Employees |
| Production | 1,504 |
| Sales | 2,015 |
| R&D and Technology | 621 |
| Finance | 320 |
| Administration | 352 |
| Total | 4,812 |
| Educational backgrounds | |
| Educational background | Employees |
| Master's degree and above | 346 |
| Bachelor's degree | 1,820 |
| Junior college | 1,580 |
| Below junior college | 1,066 |
| Total | 4,812 |
2. Remuneration policyThe Company has continuously improved its remuneration and performance managementsystem in order to effectively absorb and retain talents and promote its sustainabledevelopment. Driven by fair and merit-based principle, it connects employee's incomelevels with the Company's business progress and its goal of business performance, whilst italso considers related factors such as the country's macro economy, industry situation,market competition, etc., to ensure that its remuneration policy is competitive to theoutside and fair to the inside.Meanwhile, the Company adopts three-level-management in terms of headquarters,business divisions (regions) and local subsidiaries. Targeted and differentiatedremuneration incentives have been adopted for different types of employees, whilst theremuneration structure has been mainly divided into regular salary and floated salary pluslong-term incentive plan, the floated part of which is linked to the Company's businessperformance and individual's performance. The remuneration system for different types of
employee has differences, which enhance the enthusiasm of employees and guarantee thefairness.Moreover, the Company focuses on the incentive program for excellent employees. In2018, it implemented the restricted stock incentive plan, which granted 372 key talents inkey positions restricted stocks and signed Letter of Responsibility with them. In addition, italso adopts various methods such as holding shares of subsidiaries, flexible benefits, andpromotion training to ensure that core talents can grow rapidly on a larger platform andpower the Company's business progress.Besides strictly abiding by the national laws and regulations, which provides basicguarantees for employees, like five social insurances and one housing fund, etc., theCompany provides commercial insurance welfare to employees and benefits their familymembers. It also provides employees with necessary welfare protection through internalresource sharing, completing welfare system and pilot flexible benefits to improveemployees' happiness index.3. Training planContinuously cultivating talents and always devoting to the employees’ valueenhancement is part of the Company's human resources policy. Therefore, the Company'sHR system formulates annual training plan to cultivate required talents and better serve tothe development strategy.First, utilizing the opportunity of "Excellent Performance Management Project", itvigorously organized trainings relating to this project, covering around 100 middle andsenior managers. Since starting the project in early June to the end of the year, theCompany organized 9 times of group counseling and discussion, 9 times of face-to-facetraining, and 12 times of task analysis combining actual work, subsequently the Companyhas determined its strategy, goal, vision and core values, three-year strategic plan, divisionof labor and functions, and preliminarily determined the KPI of each business division andbusiness units, making the concept of excellent performance being understood andaccepted by more managers. In addition to the visible results of its output, managementthinking, logic concepts, tools and methods have been integrated into daily managementand routine work, which promoted the management ability.
Second, it tried new ways of training projects. Through the network platform, the activitynamed “Wellhope Best Answerer”, which lasted for 5 days with 1,194 participants whoanswered 140,312 questions that covered various aspects of industry and professionalskills, the Company promoted its employees learning actively, it also utilized the OAplatform “Cloud-Hub” to realize online operation and control of onboarding training,which could timely and effectively track the learning dynamics of new staff, design thelearning content in a more personalized way. The promotion of new tools, new platformsand new methods boosted its training system more efficient and promoted the employeesimproving competency and contributing to the business performance.Third, it fully developed and used Wellhope E-Learning College and external resources toprovide employees with more time-sensitive and more adaptable courses and learningresources. For example, the Company used the "Cloud-Hub" to regularly promote coursesand to monthly select and evaluate high-quality courses, it also recommended “WeeklyLesson”, each year it develops 30 new courses, invites some external training organizations,and selects key personnel to go aboard for study, which can help employees to expandtheir horizons, broaden their thinking and keep pace with the times.Fourth, it continuously strengthened three-level-training management system, clarifiedthe work of headquarters, business divisions, subsidiaries, business units and functionaldepartments, especially strengthened the detailing and collaboration in the fields ofonboarding training, job skill training, business unit’s manager training, etc. In 2018, theCompany held the “Seedling Plan” training camp for more than 130 new graduates. In thecoming year, the Company will further build its training system for leading the employeesgrowing and maintaining talents advantage in the fierce market competition, thereforecontinuously make progress and keep stable and healthy development.Fifth, it continued to develop the training programs for business divisions and functionaldepartments according to market changes and management needs, strengthened thetraining management and implementation, as well as supervised and guided the trainingsorganized by themselves, for example, the information resource planning (IRP) projectorganized by the IT center, ASF training for salesman and technical supporting expertsorganized by the sales system, market analysis and new materials knowledge trainingorganized by the purchasing system in response to the fluctuated markets, low-nitrogen
diet ration technology training organized by technical system, etc. Through varioustrainings, the Company can continuously improve the skills and horizons of the employees,as well as management ability and work improvement.4. Labor outsourcing
| The total number of working hours | 2,068,736 |
| Total amount of remuneration paid for outsourcing | 38,418,259.15 |
Section IX Corporate Governance
I. Overview of Corporate Governance
In accordance with the Corporation Law, the Securities Law and other laws andregulations issued by the CSRC, the Company has gradually built its corporate governancemechanism, continuously improved corporate governance structure and insisted standardoperation, whilst it has formulated relevant rules of procedure and working system, alsoestablished a relatively complete internal control system, which has strengthened theprotection of non-controlling interests. Meanwhile, the Company has fulfilled itsobligation of information disclosure in a true, accurate, timely and complete manner instrict accordance with relevant provisions, so as to ensure that all shareholders have fairaccess to information.In 2018, the Company held 3 times of shareholders' meetings, 9 times of board meetingsand 8 times of supervisory board meetings. Approved by the shareholders' meeting, theCompany has completed the general election of the board of directors and supervisoryboard directors, which re-elected Chairman of the board, member of special committeesand business management team. Meanwhile, the first Extraordinary Shareholders'Meeting of the Company in 2018 deliberated and approved the proposal of amending theCompany Constitution and the Rules of Procedure of the Shareholders' Meeting, which hasfurther improved the corporate governance structure. The Company complies with therequirements of relevant documents of regulatory authorities in major governanceaspects.
II. Shareholders' Meeting Convened during the Reporting Period
| Meeting | Date | Query URLs of Resolution | Disclosing Date of Resolution |
| 2018 Fist Extraordinary Shareholders' Meeting | Feb. 2nd, 2018 | www.sse.com.cn | Feb. 3rd, 2018 |
| 2017 Annual Shareholders' Meeting | Apr. 12th, 2018 | www.sse.com.cn | Apr. 13rd, 2018 |
| 2018 Second Extraordinary Shareholders' Meeting | Dec. 7th, 2018 | www.sse.com.cn | Dec.8th, 2018 |
Explanation:
During the reporting period, the Company held 3 times of shareholders' meeting, whichdeliberated 2017 Annual Report, profit distribution plan, restricted stock incentive plan,etc. The convening, holding, voting and other related procedures of the shareholders'meeting complied with laws and regulations, Company Constitution, Rules of Procedure ofthe Shareholders' Meeting and other relevant provisions, ensured all shareholders,especially non-controlling shareholders enjoying equal status and fully exercising theirrights.
III. Performance of Duties of the Board Director
| Name | Independent director or not | Attendance of Board Meeting | Shareholders' Meeting | |||||
| Number of attended board meetings in 2018 | Physical presence | Via Tele- communi | Via proxy | Number of absence | Whether continually fail to physically attend the meeting two times | Number of attended shareholders' meeting | ||
| Jin Weidong | no | 9 | 9 | 4 | 0 | 0 | no | 2 |
| Ding Yunfeng | no | 9 | 9 | 4 | 0 | 0 | no | 2 |
| Jacobus Johannes de Heus | no | 9 | 9 | 8 | 0 | 0 | no | 0 |
| Shao Caimei | no | 9 | 9 | 7 | 0 | 0 | no | 1 |
| Zhang Wenliang | no | 9 | 9 | 8 | 0 | 0 | no | 0 |
| Zhao Xin | no | 9 | 9 | 3 | 0 | 0 | no | 3 |
| Hu Jianmin | yes | 9 | 9 | 3 | 0 | 0 | no | 2 |
| Liu Huan | yes | 9 | 9 | 9 | 0 | 0 | no | 0 |
| Zhang Shuyi | yes | 1 | 1 | 0 | 0 | 0 | no | 1 |
| Wang Zhe | yes | 8 | 8 | 3 | 0 | 0 | no | 2 |
| Number of board meetings in 2018 | 9 |
| of which: number of assembling together at the place | 0 |
| Number of holding meeting by telecommunication | 3 |
| Number of holding meeting by assembling together at the place and telecommunication | 6 |
IV. During the Reporting Period, the Circumstance of Establishing and Implementing
Performance Appraisal System and Incentive Mechanism relating to Senior ManagementThe remuneration of senior management is composed of basic salary and performancesalary, the basic salary shall be paid monthly, and the performance salary will be
determined according to the performance appraisal result and the Company's annualoperating status
V. Whether Disclosing Self-evaluation Report of the Internal Control
The Company will disclose the evaluation report of its internal control at the same time asthe 2018 Annual Report. Details please refer to the website of Shanghai Stock Exchange(http://www.sse.com.cn).
VI. Explanation of Audit Report for Internal Control
Jiangsu SuyaJincheng CPA LLP issued the Audit Report of Internal Control, holding that theCompany has maintained effective internal control over financial reporting in all majoraspects on December 31st, 2018 in accordance with relevant regulations. Details pleaserefer to the website of Shanghai Stock Exchange (http://www.sse.com.cn).
Section X Corporate BondNot applicable
Section XI Financial StatementsI. Audit Report
Audit ReportSuya Audit No. [2019]449To all the shareholders of Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd.,1. OpinionWe have audited the financial statements of Liaoning Wellhope Agri-Tech Joint Stock Co.,Ltd. (hereinafter referred to as "the Company"), which comprise the statement of financialposition as at December 31st, 2018, and the income statement, statement of changes inequity and cash flow statement for the year then ended, and notes to the financialstatements.In our opinion, the financial statements give a true and fair view of the financial positionof the Company as at December 31st, 2018, and of its operating performance and cashflow for the year then ended, and have been properly prepared in compliance with theAccounting Standards for Business Enterprises ("the ASBE").2. Basis for OpinionWe conducted our audits in accordance with China's CPA Auditing Standards. Ourresponsibilities under those standards are further described in the "Auditor’sResponsibilities for the Audit of the Financial Statements" section of our report. We areindependent of the Company in accordance with China CPA's Code of Ethics forProfessional Accountants ("the Code"), and we have fulfilled our other ethicalresponsibilities in accordance with the Code. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.3. Key Audit MattersKey audit matters are those matters that, in our professional judgment, were of mostsignificance in our audit of the financial statements in the current period. These matterswere addressed in the context of our audit of the financial statements as a whole, and informing our opinion thereon, and we do not provide a separate opinion on these matters.
| A. Assessing bad debt provisions for accounts receivable | |
| Please refer to following No. V "Important Accounting Policies and Accounting Estimates" part 10--"Accounts Receivable", and No. VII “Notes to the Items of Consolidated Financial Statements” part 3-- “Accounts Receivable” | |
| Key audit matters | How our audit addressed the key audit matter |
| The Company's accounts receivable as at December 31st, 2018 reached RMB 499.3962 million yuan, and the bad debt reserve reached RMB 101.5045 million yuan. The balance of accounts receivable was significant and the assessment of bad-debt provisions involved the judgment of the management, thus we took it as the key audit matter for us. | Our audit procedures mainly include: ?We tested the design of the internal control and its operational effectiveness regarding the impairment test of accounts receivable. ?We obtained the aging schedule of the accounts receivable at the end of the period, and checked the accuracy of the age of accounts receivable by reviewing relevant records such as accounting vouchers and invoices. ?We conducted comprehensive review for the bad debt provisions of accounts receivable of age grouping, and rechecked and calculated the corresponding withdrawing proportion. ?Regarding the overdue accounts receivable, we confirmed with the management to understand the information of the principal debtors and their assessment on the collectability of these accounts. We sought the information related to the debtors or the development situation of their business industries via open channels to identify whether there are some circumstances that affect the assessment results of the bad debt provisions of the accounts receivable. ?We selected samples and implemented the external confirmation procedure for the significant accounts receivable, and checked the confirmation result with the amount recorded by the Company. ?By comparing the information disclosed by other listed companies, we evaluated the overall rationality regarding the percentage of bad debt provisions accounting for the balance of the Company's accounts receivable. |
| B. The return on long-term equity investment recognized by the equity method. | |
| Please refer to following No. V "Important Accounting Policies and Accounting Estimates" part 13--“Long-term Equity Investment”, and No. VII “Notes to the Items of Consolidated Financial Statements” part 42—“Income from investment” | |
| Key audit matters | How our audit addressed the key audit matter |
| The return on long-term equity investment calculated by the equity method in the current period reached RMB 281.1847 million yuan, which had a great impact on current gains and losses, thus we took it as the key audit matter for us. | Our audit procedures mainly include: ?We reviewed and evaluated the Company's internal control regarding the return on long-term equity investment measured by the equity method. ?We obtained related investee companies' constitution, investment agreements and other documents for determining whether the Company had a significant effect on related investee companies and whether the accounting method was correct. ?We obtained related investee companies' audit reports and financial statements for reviewing whether the income from investment calculated by the Company's equity method was accurate. ?Regarding the investee company with large investment income under the equity method, we reviewed the |
4. Other InformationThe management of the Company is responsible for the other information. The otherinformation comprises information covered by the Company's 2018 Annual Report, butexcludes the financial statements and our auditor's report thereon.Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.In connection with our audit of the financial statements, our responsibility is to read theother information and, in doing so, consider whether the other information is materiallyinconsistent with the financial statements or our knowledge obtained during the audit orotherwise appears to be materially misstated.If, based on the work we have executed, we confirm that there is a material misstatementin the other information, we are required to report the fact. We have nothing to report inthis regard.5. Responsibilities of the Management and Those Charged with Governance for FinancialStatementsThe management of the Company is responsible for preparing the financial statementsthat give a fair view in accordance with the ASBE, and for designing, executing andmaintaining requisite internal control to enable the preparation of the financialstatements that are free from material misstatement, whether due to fraud or error.In preparing the financial statements, the management is responsible for assessing theCompany’s ability to continue as a going concern, disclosing, as applicable, matters relatedto going concern and using the going concern basis of accounting unless the managementeither intends to liquidate the Company or to cease operation, or has no realisticalternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financialreporting process.6. Auditor’s Responsibilities for the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the financial statementsas a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinion. Reasonable assurance is a high level ofassurance, but is not a guarantee that an audit conducted in accordance with the auditingstandards will always detect a material misstatement when it exists. Misstatements canarise 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 onthe basis of these financial statements.As part of an audit in accordance with the auditing standards, we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
A. Identify and assess the risks of material misstatement of the financial statements,whether due to fraud or error, design and perform audit procedures responsive to thoserisks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error, as fraud may involve collusion, forgery,intentional omissions, misrepresentations, or the override of internal control.B. Obtain an understanding of the internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances.C. Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the management.D. Conclude on the appropriateness of the management’s use of the going concern basisof accounting and, based on the obtained audit evidence, whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company’sability to continue as a going concern. If we conclude that a material uncertainty exists,we are required by the auditing standards to draw the statements users’ attention in ourauditor’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 auditevidence obtained up to the date of our auditor’s report. However, future events orconditions may cause the Company to cease to continue as a going concern.E. Evaluate the overall presentation, structure and content of the financial statements,including the disclosures, and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.F. Obtain sufficient and appropriate audit evidence regarding the financial information ofrelated entities or business activities within the Company to express an opinion on itsfinancial statements. We are responsible for guiding, overseeing and performing the auditof the Company, and solely responsible for our audit opinion.We communicate with those charged with governance regarding, among other matters,the planned scope and timetable of the audit and significant audit findings, including anynoteworthy deficiencies in the internal control that we identify during our audit.We also provide those charged with governance with a statement to declaring that wehave complied with the professional ethics related to independence, and communicatewith the governance on all relationships and other matters that may reasonably beconsidered to affect our independence, as well as the relevant precautions.From the matters communicated with those charged with governance, we determinewhich matters are the most important for the audit of the current financial statements andthus constitute the key audit matters. We describe these matters in the audit report,unless laws and regulations prohibit the public disclosure of these matters, or in rare cases,if it is reasonably expected that the negative consequences of communicating a matter inthe audit report will outweigh the benefits in terms of the public interest, we determinethat the matter should not be communicated in the audit report.
Jiangsu SuyaJincheng CPA LLP CPA: Zhou Jiawen(Project Partner)CPA: Wang Jin
China Nanjing April 25th, 2019
II. Financial Statements
Consolidated Balance Sheet
Dec. 31st, 2018Liaoning Wellhope Unit: yuan Currency: RMB
| Item | Dec. 31st, 2018 | Jan. 1st, 2018 |
| Current Assets: | ||
| Monetary assets | 928,902,753.06 | 748,944,362.80 |
| Derivative financial assets | 2,042,527.60 | 971,380.80 |
| Notes receivable and accounts receivable | 411,503,456.67 | 356,948,201.45 |
| including: Notes receivable | 13,611,778.44 | 5,010,660.00 |
| Accounts receivable | 397,891,678.23 | 351,937,541.45 |
| Prepayments | 185,899,348.53 | 266,224,330.51 |
| Other receivables | 98,997,213.04 | 99,240,703.92 |
| including: Interest receivable | ||
| Dividends receivable | 5,481,783.34 | 8,214,127.94 |
| Inventory | 1,410,869,192.26 | 1,218,001,011.96 |
| Other current assets | 118,636,045.77 | 105,903,041.75 |
| Total current assets | 3,156,850,536.93 | 2,796,233,033.19 |
| Non-current assets: | ||
| Available-for-sale financial assets | 3,680,000.00 | 3,340,000.00 |
| Long-term equity investment | 1,354,820,455.99 | 1,022,372,386.20 |
| Fixed assets | 1,516,702,438.29 | 1,537,692,913.05 |
| Construction in progress | 255,719,188.30 | 122,640,897.91 |
| Productive biological assets | 30,484,794.88 | 19,281,856.15 |
| Intangible assets | 206,387,940.29 | 209,911,332.82 |
| Goodwill | 290,425.67 | 290,425.67 |
| Long-term prepaid expenses | 177,903,367.82 | 205,261,029.88 |
| Deferred income tax assets | 30,357,726.08 | 36,475,136.05 |
| Other non-current assets | 197,497,688.18 | 32,362,984.62 |
| Total non-current assets | 3,773,844,025.50 | 3,189,628,962.35 |
| Total Assets | 6,930,694,562.43 | 5,985,861,995.54 |
| Consolidated Balance Sheet(continue) | Unit: yuan Currency: RMB | |
| Item | Dec. 31st, 2018 | Jan. 1st, 2018 |
| Current liabilities: | ||
| Short-term borrowings | 1,347,690,168.49 | 1,191,240,000.00 |
| Notes payable and accounts payable | 572,729,779.31 | 524,321,952.83 |
| Advance receipt | 161,173,916.67 | 181,035,916.81 |
| Payroll payable | 49,731,930.35 | 41,249,493.29 |
| Tax payable | 28,744,792.72 | 40,336,595.39 |
| Other payables | 309,537,195.12 | 201,709,649.48 |
| including: Interest payable | 1,784,257.05 | 2,870,840.28 |
| Dividends payable | 526,000.00 | 1,470,000.00 |
| Non-current liabilities due within one year | 32,999,999.96 | 20,000,000.00 |
| Total current liabilities | 2,502,607,782.62 | 2,199,893,607.80 |
| Non-current Liabilities: | ||
| Long-term borrowings | 118,500,000.00 | 20,300,000.00 |
| Long-term account payable | 23,345,833.38 | |
| Deferred income | 20,252,967.41 | 19,404,060.24 |
| Total Non-current liabilities | 162,098,800.79 | 39,704,060.24 |
| Total Liabilities | 2,664,706,583.41 | 2,239,597,668.04 |
| Owners' equity (or shareholders' equity): | ||
| Paid-up capital (or share capital) | 845,751,469.00 | 831,176,469.00 |
| Capital reserves | 153,824,536.37 | 103,593,300.06 |
| deduct: Treasury stock | 70,688,750.00 | |
| Other comprehensive income | -1,316,942.00 | |
| Surplus reserves | 272,882,920.19 | 232,486,459.89 |
| Undistributed profits | 2,651,462,525.08 | 2,223,048,013.93 |
| Total Equity attributable to the owners of parent company | 3,851,915,758.64 | 3,390,304,242.88 |
| Non-controlling interests | 414,072,220.38 | 355,960,084.62 |
| Total owners' equity (or shareholders' equity) | 4,265,987,979.02 | 3,746,264,327.50 |
| Total liabilities and owners' equity (or shareholders' equity) | 6,930,694,562.43 | 5,985,861,995.54 |
Consolidated Balance Sheet of Parent Company
Dec. 31st, 2018
Unit: yuan Currency :RMB
| Item | Dec. 31st, 2018 | Jan. 1st, 2018 |
| Current assets ： | ||
| Monetary assets | 750,589,871.09 | 534,204,880.04 |
| Derivative financial assets | 2,042,527.60 | 971,380.80 |
| Notes receivable and accounts receivable | 16,033,809.05 | 22,133,097.07 |
| including: Notes receivable | ||
| Accounts receivable | 16,033,809.05 | 22,133,097.07 |
| Prepayments | 2,278,798.85 | 4,694,018.23 |
| Other receivables | 869,671,230.01 | 1,114,239,707.67 |
| including: Interest receivable | ||
| Dividends receivable | 15,225,270.58 | 8,214,127.94 |
| Inventory | 41,986,504.36 | 48,911,388.79 |
| Total current assets | 1,682,602,740.96 | 1,725,154,472.60 |
| Non-current assets: | ||
| Available-for-sale financial assets | 3,000,000.00 | 2,660,000.00 |
| Long-term equity investment | 3,285,783,087.96 | 2,402,244,010.42 |
| Fixed assets | 73,509,615.43 | 80,858,510.66 |
| Construction in progress | 56,425,656.79 | 38,621,063.26 |
| Intangible assets | 16,169,866.87 | 13,960,464.95 |
| Long-term prepaid expenses | 854,845.30 | 955,852.90 |
| Deferred income tax assets | 9,060,127.91 | 6,241,701.57 |
| Total non-current assets | 3,444,803,200.26 | 2,545,541,603.76 |
| Total assets | 5,127,405,941.22 | 4,270,696,076.36 |
| Current liabilities: | ||
| Short-term borrowings | 1,075,000,000.00 | 1,000,000,000.00 |
| Notes payable and accounts payable | 7,636,692.77 | 8,645,001.89 |
| Advance receipt | 2,690,153.80 | 2,851,074.45 |
| Payroll payable | 2,749,116.65 | 2,195,656.76 |
| Tax payable | 4,166,334.74 | 5,392,657.62 |
| Other payables | 1,026,382,418.43 | 662,369,470.90 |
| including: Interest payable | 1,601,798.61 | 2,624,340.28 |
| Dividends payable | ||
| Non-current liabilities due within one year | 20,000,000.00 | 20,000,000.00 |
| Total current liabilities | 2,138,624,716.39 | 1,701,453,861.62 |
| Non-current liabilities: | ||
| Long-term borrowings | 118,000,000.00 | 20,000,000.00 |
| Deferred income | 7,425,000.00 | 7,425,000.00 |
| Total non-current liabilities | 125,425,000.00 | 27,425,000.00 |
| Total liabilities | 2,264,049,716.39 | 1,728,878,861.62 |
| Owners' equity(or shareholders' equity): | ||
| Paid-up capital (or share capital) | 845,751,469.00 | 831,176,469.00 |
| Capital reserves | 160,705,065.92 | 102,593,326.35 |
| deduct: Treasury stock | 70,688,750.00 | |
| Other Comprehensive income | -1,305,935.62 | |
| Surplus reserves | 272,882,920.19 | 232,486,459.89 |
| Undistributed profits | 1,656,011,455.34 | 1,375,560,959.50 |
| Total owners' equity | 2,863,356,224.83 | 2,541,817,214.74 |
| Total liabilities and owners' equity (or shareholders' equity) | 5,127,405,941.22 | 4,270,696,076.36 |
Consolidated Income Statement
January-December, 2018
| Liaoning Wellhope | Unit: yuan Currency: RMB | |
| Item | 2018 | 2017 |
| 1. Total operating revenue | 15,750,798,120.67 | 13,695,843,458.67 |
| 2. Total operating costs | 15,354,766,727.04 | 13,338,238,708.02 |
| including: Operating costs | 14,421,297,677.40 | 12,521,474,992.06 |
| Taxes and surtaxes | 24,850,909.29 | 24,868,043.29 |
| Selling expenses | 420,646,753.59 | 411,506,654.06 |
| Administrative expenses | 227,941,858.19 | 225,935,973.80 |
| R&D expenses | 61,100,349.28 | 61,953,095.44 |
| Financial expenses | 74,900,937.42 | 60,854,400.51 |
| including: Interest expenses | 66,635,982.41 | 64,240,983.00 |
| Interest income | 4,414,083.01 | 4,594,760.63 |
| Impairment losses on assets | 124,028,241.87 | 31,645,548.86 |
| add: Other income | 14,165,463.22 | 34,675,966.99 |
| Income from investment | 286,014,954.24 | 171,116,996.23 |
| including: Income from investments in associated companies and joint ventures | 281,184,722.32 | 108,860,200.54 |
| Gain from changes in fair value | -369,580.00 | -263,470.00 |
| Gain from assets disposal | -5,252,624.79 | -1,331,137.12 |
| 3. Operating profit | 690,589,606.30 | 561,803,106.75 |
| add: Non-operating income | 10,354,127.19 | 22,538,686.90 |
| deduct: Non-operating expenditure | 9,404,244.62 | 3,062,409.50 |
| 4. Pretax profit | 691,539,488.87 | 581,279,384.15 |
| deduct: Income tax expense | 86,850,335.00 | 81,324,570.84 |
| 5. Net profit | 604,689,153.87 | 499,954,813.31 |
| Net Profit from Continuing Operations | 604,689,153.87 | 499,954,813.31 |
| Net profit attributable to the shareholders of parent company | 551,928,618.35 | 471,024,473.92 |
| Non-controlling interests income | 52,760,535.52 | 28,930,339.39 |
| 6. Other comprehensive income, net of tax | -1,325,947.22 | |
| Attributable to owners of parent company | -1,316,942.00 | |
| a. Other comprehensive income that cannot be reclassified into gains or losses | ||
| b. Other comprehensive income that will be reclassified into the gains or | -1,316,942.00 | |
| losses | ||
| (a) Other comprehensive income that can be transferred in gains or losses under the equity method | -1,305,935.62 | |
| (b) Exchange differences on translation of foreign currency financial statements | -11,006.38 | |
| Attributable to non-controlling interests | -9,005.22 | |
| 7. Total comprehensive income | 603,363,206.65 | 499,954,813.31 |
| Attributable to the owners of parent company | 550,611,676.35 | 471,024,473.92 |
| Attributable to non-controlling interests | 52,751,530.30 | 28,930,339.39 |
| 8. EPS | ||
| (1) Basic earnings per share (yuan per share) | 0.66 | 0.57 |
| (2) Diluted earnings per share (yuan per share) | 0.66 | 0.57 |
Consolidated Income Statement of Parent Company
January-December, 2018
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| 1. Total operating revenue | 623,566,267.53 | 659,619,444.51 |
| deduct: Operating cost | 415,589,730.95 | 445,898,726.95 |
| Taxes and surtaxes | 1,514,878.36 | 1,642,806.10 |
| Selling expenses | 14,708,404.12 | 13,296,649.77 |
| Administrative expenses | 26,911,250.47 | 23,260,545.45 |
| R&D expenses | 24,141,364.43 | 28,012,929.33 |
| Financial expenses | 22,370,584.84 | 19,706,245.34 |
| including: Interest expenses | 49,300,111.55 | 50,420,335.67 |
| Interest income | 27,053,420.01 | 31,287,658.84 |
| Impairment losses on assets | 30,418,264.45 | 23,817,308.88 |
| add: Other income | 4,850,607.00 | 4,447,503.67 |
| Income from Investment | 321,116,524.32 | 226,927,334.76 |
| including: Income from investments in associated companies and joint ventures | 283,297,787.16 | 107,327,562.72 |
| Gain from changes in fair value | -369,580.00 | -263,470.00 |
| Gain from assets disposal | 44,633.35 | |
| 2. Operating profit | 413,509,341.23 | 335,140,234.47 |
| add: Non-operating income | 3,827,456.11 | 5,308,387.85 |
| deduct: Non-operating expenditure | 705,058.28 | 231,521.00 |
| 3. Pretax profit | 416,631,739.06 | 340,217,101.32 |
| deduct: Income tax expense | 12,667,136.02 | 15,572,329.79 |
| 4. Net profit | 403,964,603.04 | 324,644,771.53 |
| Net profit from continuing operations | 403,964,603.04 | 324,644,771.53 |
| 5. Other comprehensive income, net of tax | -1,305,935.62 | |
| a. Other comprehensive income that cannot be reclassified into gains or losses | ||
| b. Other comprehensive income that will be reclassified into gains or losses | -1,305,935.62 | |
| (a) Other comprehensive income that can be transferred in gains or losses under the equity method | -1,305,935.62 | |
| 6. Total comprehensive income | 402,658,667.42 | 324,644,771.53 |
Consolidated Statement of Cash Flow
January-December, 2018Liaoning Wellhope Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| 1. Cash flow from operating activities | ||
| Cash received by selling goods, providing labor services | 16,234,878,306.02 | 14,202,097,842.61 |
| Tax refunds | 25,981,833.91 | 17,826,449.30 |
| Cash received from other activities related to operating | 126,613,549.29 | 159,496,920.45 |
| Sub-total of cash inflow of operating activities | 16,387,473,689.22 | 14,379,421,212.36 |
| Cash paid for goods purchase and labor services | 14,693,894,419.34 | 12,690,331,070.19 |
| Cash paid to and for employee | 575,676,082.13 | 535,069,021.45 |
| Tax payments | 131,636,206.28 | 117,432,952.41 |
| Cash paid to other activities related to operating | 484,862,065.88 | 425,197,797.56 |
| Sub-total of cash outflow of operating activities | 15,886,068,773.63 | 13,768,030,841.61 |
| Net cash flow from operating activities | 501,404,915.59 | 611,390,370.75 |
| 2. Cash flow from investing activities | ||
| Cash received from disinvestment | 28,502,239.82 | 27,166,162.82 |
| Cash received from return on investment | 18,281,844.61 | 24,032,937.86 |
| Net cash received from disposal of fixed assets, intangible assets and other long-lived assets | 11,789,308.39 | 131,119.94 |
| Net cash received from disposal of subsidiaries and other business units | 3,053,713.91 | 5,464,048.04 |
| Cash received from other activities related to investment | 15,240,056.67 | |
| Sub-total of cash inflow of investing activities | 61,627,106.73 | 72,034,325.33 |
| Cash paid for acquiring and building fixed assets, intangible assets and other long-lived assets | 427,473,918.37 | 466,394,339.41 |
| Cash paid for investments | 143,884,724.98 | 231,139,288.98 |
| Net cash paid for acquiring subsidiaries and other business units | 908,233.14 | |
| Cash paid to other activities related to investment | ||
| Sub-total of cash outflow of investing activities | 571,358,643.35 | 698,441,861.53 |
| Net cash flow from investing activities | -509,731,536.62 | -626,407,536.20 |
| 3. Cash flow from financing activities | ||
| Cash received by absorbing investments | 96,474,856.62 | 24,064,154.53 |
| including: Capital contributed by non-controlling interests to subsidiaries | 25,786,106.62 | 24,064,154.53 |
| Cash received from borrowings | 1,680,490,000.00 | 1,610,300,000.00 |
| Cash received from other activities related to | 41,131,246.21 |
| financing | ||
| Sub-total of cash inflow of financing activities | 1,818,096,102.83 | 1,634,364,154.53 |
| Repayments of borrowings | 1,469,954,166.66 | 1,420,000,000.00 |
| Cash paid for distributing dividends, profits, or paid for interests | 155,249,212.54 | 151,273,956.92 |
| including: Dividends or profits paid by subsidiaries to non-controlling interests | 4,409,000.00 | 4,619,507.55 |
| Cash paid to other activities related to financing activities | 25,900,000.00 | 13,216,000.00 |
| Sub-total of cash outflow of financing activities | 1,651,103,379.20 | 1,584,489,956.92 |
| Net cash flow from financing activities | 166,992,723.63 | 49,874,197.61 |
| 4. Effect of foreign exchange rate fluctuations on cash and cash equivalents | -10,142,120.44 | -1,490,734.81 |
| 5. Net increase in cash and cash equivalents | 148,523,982.16 | 33,366,297.35 |
| add: Opening balance of cash and cash equivalents | 740,680,891.81 | 707,314,594.46 |
| 6. Closing balance of cash and cash equivalents | 889,204,873.97 | 740,680,891.81 |
Consolidated Statement of Cash Flow of Parent Company
January-December, 2018
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| 1. Cash flow from operating activities | ||
| Cash received by selling goods, providing labor services | 617,488,886.12 | 662,432,618.16 |
| Cash received from other activities related to operating | 536,969,369.05 | 766,899,692.90 |
| Sub-total of cash inflow of operating activities | 1,154,458,255.17 | 1,429,332,311.06 |
| Cash paid for goods purchase and labor services | 402,821,941.75 | 439,118,031.87 |
| Cash paid to and for employee | 25,121,026.30 | 20,839,121.00 |
| Tax payments | 17,800,791.44 | 18,129,343.68 |
| Cash paid to other activities related to operating | 422,473,394.25 | 599,635,805.09 |
| Sub-total of cash outflow of operating activities | 868,217,153.74 | 1,077,722,301.64 |
| Net cash flow from operating activities | 286,241,101.43 | 351,610,009.42 |
| 2. Cash flow from investing activities | ||
| Cash received from disinvestment | 37,848,161.29 | 27,394,362.82 |
| Cash received from return on investment | 53,246,572.37 | 106,677,814.68 |
| Net cash received from disposal of fixed assets, intangible assets and other long-lived assets | 68,603.12 | |
| Cash received from other activities related to investment | 9,540,056.67 | |
| Sub-total of cash inflow of investing activities | 91,094,733.66 | 143,680,837.29 |
| Cash paid for acquiring and building fixed assets, intangible assets and other long-lived assets | 19,033,211.74 | 41,019,979.46 |
| Cash paid for investments | 253,599,265.53 | 347,880,476.19 |
| Sub-total of cash outflow of investing activities | 272,632,477.27 | 388,900,455.65 |
| Net cash flow from investing activities | -181,537,743.61 | -245,219,618.36 |
| 3. Cash flow from financing activities | ||
| Cash received by absorbing investments | 70,688,750.00 | |
| Cash received from borrowings | 1,450,000,000.00 | 1,160,000,000.00 |
| Sub-total of cash inflow of financing activities | 1,520,688,750.00 | 1,160,000,000.00 |
| Repayments of borrowings | 1,277,000,000.00 | 1,110,000,000.00 |
| Cash paid for distributing dividends, profits, or paid for interests | 133,440,300.12 | 132,608,048.55 |
| Sub-total of cash outflow of financing activities | 1,410,440,300.12 | 1,242,608,048.55 |
| Net cash flow from financing activities | 110,248,449.88 | -82,608,048.55 |
| 4. Effect of foreign exchange rate fluctuations on cash and cash equivalents | -1,343.50 | -275.98 |
| 5. Net increase in cash and cash equivalents | 214,950,464.20 | 23,782,066.53 |
| add: Opening balance of cash and cash equivalents | 525,941,409.05 | 502,159,342.52 |
| 6. Closing balance of cash and cash equivalents | 740,891,873.25 | 525,941,409.05 |
Change Statement of Owner's Equity
January-December, 2018
Unit: yuan Currency: RMB
| Item | 2018 | |||||||
| Equity Attributable to the Owners of Parent Company | Non-controlling Interests | Total Owners' Equity | ||||||
| Share Capital | Capital Reserve | Deduct: Treasury Stock | Other Comprehensive Income | Surplus Reserve | Undistributed Profits | |||
| 1. Closing balance of prior period | 831,176,469.00 | 103,593,300.06 | 232,486,459.89 | 2,223,048,013.93 | 355,960,084.62 | 3,746,264,327.50 | ||
| 2. Opening balance of current period | 831,176,469.00 | 103,593,300.06 | 232,486,459.89 | 2,223,048,013.93 | 355,960,084.62 | 3,746,264,327.50 | ||
| 3. Changes of current period | 14,575,000.00 | 50,231,236.31 | 70,688,750.00 | -1,316,942.00 | 40,396,460.30 | 428,414,511.15 | 58,112,135.76 | 519,723,651.52 |
| A. Total comprehensive income | -1,316,942.00 | 551,928,618.35 | 52,751,530.30 | 603,363,206.65 | ||||
| B. Capital contributed and reduced by owners | 14,575,000.00 | 50,231,236.31 | 70,688,750.00 | 8,825,605.46 | 2,943,091.77 | |||
| a. Common stock invested by owners | 14,575,000.00 | 56,113,750.00 | 70,688,750.00 | 25,786,106.62 | 25,786,106.62 | |||
| b. Amount of share-based payment included in the owner's equity | 1,997,989.57 | 1,997,989.57 | ||||||
| 4. Other | -7,880,503.26 | -16,960,501.16 | -24,841,004.42 | |||||
| C. Profit distribution | 40,396,460.30 | -123,514,107.20 | -3,465,000.00 | -86,582,646.90 | ||||
| a. Appropriation of surplus reserves | 40,396,460.30 | -40,396,460.30 | ||||||
| b. Extraction of general risk provisions | ||||||||
| c. Profit distributed to owners (or shareholders) | -83,117,646.90 | -3,465,000.00 | -86,582,646.90 | |||||
| 4. Closing balance of current period | 845,751,469.00 | 153,824,536.37 | 70,688,750.00 | -1,316,942.00 | 272,882,920.19 | 2,651,462,525.08 | 414,072,220.38 | 4,265,987,979.02 |
| Item | 2017 | |||||||
| Equity Attributable to the Owners of Parent Company | Non-controlling Interests | Total Owners' Equity | ||||||
| Share Capital | Capital Reserve | Deduct: Treasury Stock | Other Comprehensive Income | Surplus Reserve | Undistributed Profits | |||
| 1. Closing balance of prior period | 831,176,469.00 | 107,366,826.13 | 200,021,982.74 | 1,867,605,664.06 | 314,988,438.39 | 3,321,159,380.32 | ||
| 2. Opening balance of current period | 831,176,469.00 | 107,366,826.13 | 200,021,982.74 | 1,867,605,664.06 | 314,988,438.39 | 3,321,159,380.32 | ||
| 3. Changes of current period | -3,773,526.07 | 32,464,477.15 | 355,442,349.87 | 40,971,646.23 | 425,104,947.18 | |||
| A. Total comprehensive income | 471,024,473.92 | 28,930,339.39 | 499,954,813.31 | |||||
| B. Capital contributed and reduced by owners | -3,773,526.07 | 18,130,814.39 | 14,357,288.32 | |||||
| a. Common stock invested by owners | 24,064,154.53 | 24,064,154.53 | ||||||
| b. Amount of share-based payment included in the owner's equity | ||||||||
| 4. Other | -3,773,526.07 | -5,933,340.14 | -9,706,866.21 | |||||
| C. Profit distribution | 32,464,477.15 | -115,582,124.05 | -6,089,507.55 | -89,207,154.45 | ||||
| a. Appropriation of surplus reserves | 32,464,477.15 | -32,464,477.15 | ||||||
| b. Extraction of general risk provisions | ||||||||
| c. Profit distributed to owners (or shareholders) | -83,117,646.90 | -6,089,507.55 | -89,207,154.45 | |||||
| 4. Closing balance of current period | 831,176,469.00 | 103,593,300.06 | 232,486,459.89 | 2,223,048,013.93 | 355,960,084.62 | 3,746,264,327.50 | ||
Change Statement of Owner's Equity of Parent Company
January-December, 2018
Unit: yuan Currency: RMB
| Item | 2018 | ||||||
| Share Capital | Capital Reserve | Deduct: Treasury Stock | Other Comprehensive Income | Surplus Reserve | Undistributed Profits | Total Owners' Equity | |
| 1. Closing balance of prior period | 831,176,469.00 | 102,593,326.35 | 232,486,459.89 | 1,375,560,959.50 | 2,541,817,214.74 | ||
| 2. Opening balance of current period | 831,176,469.00 | 102,593,326.35 | 232,486,459.89 | 1,375,560,959.50 | 2,541,817,214.74 | ||
| 3. Changes of current period | 14,575,000.00 | 58,111,739.57 | 70,688,750.00 | -1,305,935.62 | 40,396,460.30 | 280,450,495.84 | 321,539,010.09 |
| A. Total comprehensive income | -1,305,935.62 | 403,964,603.04 | 402,658,667.42 | ||||
| B. Capital contributed and reduced by owners | 14,575,000.00 | 58,111,739.57 | 70,688,750.00 | 1,997,989.57 | |||
| a. Common stock invested by owners | 14,575,000.00 | 56,113,750.00 | 70,688,750.00 | ||||
| b. Amount of share-based payment that included in the owner's equity | 1,997,989.57 | 1,997,989.57 | |||||
| C. Profit distribution | 40,396,460.30 | -123,514,107.20 | -83,117,646.90 | ||||
| a. Appropriation of surplus reserves | 40,396,460.30 | -40,396,460.30 | |||||
| b. Profit distributed to owners (or shareholders) | -83,117,646.90 | ||||||
| c. Other | -83,117,646.90 | ||||||
| 4. Closing balance of current period | 845,751,469.00 | 160,705,065.92 | 70,688,750.00 | -1,305,935.62 | 272,882,920.19 | 1,656,011,455.34 | 2,863,356,224.83 |
| Item | 2017 | ||||||
| Share Capital | Capital Reserve | Deduct: Treasury Stock | Other Comprehensive Income | Surplus Reserve | Undistributed Profits | Total Owners' Equity | |
| 1. Closing balance of prior period | 831,176,469.00 | 102,593,326.35 | 200,021,982.74 | 1,170,842,881.06 | 2,304,634,659.15 | ||
| 2. Opening balance of current period | 831,176,469.00 | 102,593,326.35 | 200,021,982.74 | 1,170,842,881.06 | 2,304,634,659.15 | ||
| 3. Changes of current period | 32,464,477.15 | 204,718,078.44 | 237,182,555.59 | ||||
| A. Total comprehensive income | 324,644,771.53 | 324,644,771.53 | |||||
| B. Profit distribution | 32,464,477.15 | -119,926,693.09 | -87,462,215.94 | ||||
| a. Appropriation of surplus reserves | 32,464,477.15 | -32,464,477.15 | |||||
| b. Profit distributed to owners (or shareholders) | -83,117,646.90 | -83,117,646.90 | |||||
| c．Other | -4,344,569.04 | -4,344,569.04 | |||||
| 4. Closing balance of current period | 831,176,469.00 | 102,593,326.35 | 232,486,459.89 | 1,375,560,959.50 | 2,541,817,214.74 | ||
III. Basic Information of the Company
1. Overview of the CompanyApproved by the People's Government of Liaoning Province, Liaoning Wellhope Agri-TechJoint Stock Co., Ltd. (hereinafter referred to as the Company) is a limited liability companyfounded by 23 natural persons, including Jin Weidong, Ding Yunfeng, etc., which wasregistered in Liaoning Province Administrative Bureau of Industry and Commerce onMarch 27th, 2003. The headquarters of the Company is located in Shenyang, currently itholds the business license with the number of 9121000074712989XU and the registeredcapital of RMB 845.7515 million yuan, registered address (headquarters address): No. 169,Huishan Street, Shenbei New District, Shenyang, Liaoning Province. Its legal representativeis Jin Weidong.The Company's business scope covers feed and feed additives processing, production,marketing; grain purchasing (self-use); sales of feed raw materials; poultry and livestockraising, seawater and freshwater aquaculture; agricultural and sideline productsprocessing; ordinary road freight (regarding the business activities which need to beapproved by the law, shall be approved by relevant authorities).The financial statements have been approved to be disclosed by the Company's 9th boardmeeting of the 6th Session of Board of Directors on April 25th, 2019.2. Scope of the Consolidated Financial StatementsThe scope of the Company's consolidated financial statements is determined on the basisof control, all the controlled subsidiaries are included in the scope of the consolidatedfinancial statements.The changes in the scope of the consolidated financial statements are shown in the tablebelow:
A. The subsidiaries which are newly included in the consolidation scope in the currentperiod
| Company | Way of Obtaining |
| Chongqing Wellhope Agri-Tech | Invested |
| Russia Wellhope Agri-Tech | Invested |
| Dahong Agriculture and Animal Husbandry Sci-Tech | Invested |
B. The subsidiaries which are excluded from the consolidation scope in the current period
| Company | Reason of Excluding from the Consolidation Scope |
| Panjin Wellhope Jiuguhe Food | cancelled |
| Wuwei Wellhope Feed | transferred |
| Hancheng Wellhope Feed | cancelled |
| Jingzhou Wellhope Feed | cancelled |
| Yangling Wellhope Agri-Tech | cancelled |
| Xi'an Mico Monkey E-Commerce | transferred |
| Liaoning Shennong Wellhope Bio-Tech | transferred |
IV. Basis of Preparing Financial Statements
1. Basis of preparingThe Company, on the basis of going concern operation, confirms and measures inaccordance with the transactions and events actually occurred and according to theAccounting Standards for Business Enterprises -- Basic Standards and various specificaccounting standards and other relevant provisions, and prepares financial statements onthis basis.2. Going concernThe Company has the ability of going concern within at least 12 months since the end ofthe reporting period, and there are no major issues affecting the ability of going concern.V. Important Accounting Policies and Accounting Estimates
The following important accounting policies and accounting estimates of the Company areformulated in accordance with the Accounting Standards for Business Enterprises. Thebusiness not mentioned is subject to relevant accounting policies in Accounting Standardsfor Business Enterprises.
1. Declaration about compliance with Accounting Standards for Business EnterprisesThe financial statements prepared by the Company are in line with the requirements ofAccounting Standards for Business Enterprises, which truly and completely reflect theCompany's financial position, operating results, changes in owners' (shareholders') equity,cash flow and other relevant information during the reporting period.2. Accounting periodThe Financial Year of the Company starts from January 1st and ends on December 31st ofthe Gregorian calendar.3. Operating cycleThe Company takes a 12-month operating cycle.4. Bookkeeping base currencyRMB5. Accounting treatment methods for business combination under the same control or
the different control(1) Accounting treatment methods for business combination under the same controlThe Company adopts pooling of interest method to deal with the accounting of businesscombination, which is under the same control.On the date of combination, the assets and liabilities acquired by the Company in businesscombination under the same control shall be measured according to the book value ofassets and liabilities of the combining party in the consolidated financial statements of thefinal controlling party. The share of the book value of the owner's equity held by thecombining party, which is owned, by the final controlling party in the consolidatedstatement of the final controlling party is regarded as the initial investment cost oflong-term equity investment in the individual financial statements. The balance betweeninitial cost of investment of long-term equity investment and paid combining consideration(including paid cash, non-cash assets transferred, book value of occurred or assumed debtas well as the total face value of issued stocks), capital reserve (equity premium or capital
premium) shall be adjusted; If the balance of capital reserve (equity premium or capitalpremium) is not sufficient for offset, the surplus reserves and undistributed profit shall beoffset successively.(2) Accounting treatment methods for business combination under the different controlThe Company adopts acquisition method to deal with the accounting of businesscombination, which is under the different control.
① The identifiable assets, liabilities and contingent liabilities acquired in the business
combination under the different control are measured at fair value. Based on the fair valueof assets, liabilities incurred or assumed and issued equity securities paid out as thecombining consideration on the acquisition date, the balance between the fair value andthe book value of the Company is included into current gains and losses.
② Combined cost shall be confirmed according to the following conditions respectively:
(A) For the business combination realized by one-time transaction, the combined costsshall be confirmed by the sum of the fair values, on the acquisition date, of the assets paid,the liabilities occurred or assumed and the equity securities issued by the Company toobtain the control right on the acquiree and the contingent consideration complying withthe confirmation conditions. Combined cost is initial investment cost of such long-termequity investment.(B) For business combination realized step by step through multiple exchange transactions,the combined cost is the sum of the amount of equity investments held prior to theacquisition date that are re-measured at fair value on the acquisition date and theinvestment cost newly increased on the acquisition date. The long-term equity investmentin individual financial statements is the sum of the book value of the equity investmentheld before the acquisition date and the investment cost newly increased on theacquisition date. Exclude package deal.
③ The Company allocates the combined cost between the identifiable assets and
liabilities acquired on the acquisition date.(A) Where other assets other than intangible assets obtained from the Acquiree in thebusiness combination (not only finite to the assets which have been originally confirmed
by the Acquiree), the future economic benefits are expected to flow into the Company andthe fair values reliably measured, they shall be separately confirmed and measured at thefair values.(B) Where the fair value of the intangible assets of the Acquiree acquired by the Companyin business combination can be reliably measured, it shall be separately confirmed andmeasured at the fair value.(C) Where the acquiree's liabilities, other than contingent liabilities, acquired by theCompany in business combination, are expected to result in the outflow of economicbenefits from the Company and the fair value can be reliably measured, they shall beseparately confirmed and measured at the fair value.(D) Where the fair value of the contingent liabilities of the Acquiree acquired by theCompany in business combination can be reliably measured, they shall be separatelyconfirmed as liabilities and shall be measured at the fair values.(E) When the Company allocates the cost of business combination and confirms that it hasacquired identifiable assets and liabilities in the combination, it shall not consider thegoodwill and deferred income tax items that have been confirmed by the Acquiree beforethe combination.
④ Disposal of the balance of the business combination cost and the share of the fair value
of the identifiable net assets obtained from the Acquiree in the combination.(A) The balance between the business combination costs greater than the share of fairvalue of the identifiable net assets obtained from the Acquiree in the combination, shallbe confirmed as goodwill.(B) The balance between the business combination cost less than the share of fair value ofthe identifiable net assets obtained from the Acquiree in the combination shall bedisposed pursuant to the following provisions.(a) The measurement of the fair values of the identifiable assets, liabilities and contingentliabilities obtained from the Acquiree as well as the combination costs shall be reviewed;(b) After the review, if the combined costs are still less than the fair value share of theidentifiable net assets obtained from the Acquiree in the combination, the balance shall be
included into the current gains and losses.(3) Disposal of relevant expenses accrued due to business combination by the Company
① All direct related expenses accrued due to business combination of the Company
(including audit, legal service, assessment consultation and other agency expense andother relevant administrative expenses accrued due to business combination), shall beincluded into current gains and losses when accruing.
② The commission and service fee paid by the Company for issuing debt securities for the
merger of enterprise shall be included in the initial measurement amount of debtsecurities.(A) If the bond is issued at the discount or par value, the amount of discount will beincreased.(B) If the bond is issued at premium, the premium amount shall be reduced in this part ofexpenses.
③ The commission and service fee paid by the Company for issuing equity securities as
consideration for the business combination shall be included in the initial measurementamount of equity securities.(A) When equity securities are issued at the premium, the cost shall be deducted from thecapital reserve (equity premium).(B) When equity securities are issued at par value or at discount, the retained earningsshall be written off from the fee.6. Preparation methods for consolidated financial statements(1) Uniform accounting policy and accounting periodAll accounting policies and accounting period adopted by subsidiaries taking into theconsolidated financial statements shall be consistent with the Company. In case of anyinconsistency, adjustment according to the accounting policies and accounting period isnecessary when preparing combined financial statements.(2) Preparation methods for combined financial statementsBased on the financial statements of the Company and its subsidiaries, according to otherrelevant information, the parent company prepares consolidated financial statements after
adjusting the long-term equity investment in the subsidiaries according to the equitymethod to offset the impact of internal transactions among the Company and itssubsidiaries on the combined financial statements.(3) The reflection of excess deficit of subsidiaries in combined financial statementsIn the consolidated financial statements, if the current loss shared by the parent companyexceeds its share of the owner's equity of the subsidiary company at the beginning of theperiod, the rest of the reduction shall be attributed to the owner's equity of the parentcompany(undistributed profits). If the current loss shared by the non-controllingshareholders of the subsidiaries exceeds its share of the owner's equity of the subsidiarycompany at the beginning of the period, the balance shall continually offset thenon-controlling interests.(4) Disposal of increased or decreased number of subsidiary during the report period
①Disposal of increased number of subsidiary during the report period
(A) Disposal of increased number of subsidiary due to business combination under thesame control during the report periodDuring the report period, if the number of subsidiary increases due to businesscombination under the same control, the Company shall adjust the opening balance ofconsolidated balance sheet, take the income, expenses and profit of such subsidiary fromthe beginning to the end of combination into the consolidated income statement, and thecash flow of the subsidiary from the acquisition date to the end of the report period shallbe included in the consolidated cash flow statement.(B) Disposal of increased number of subsidiary due to business combination under thedifferent control during the report periodDuring the report period, if the number of subsidiary increases due to businesscombination under the different control, the Company shall not adjust the openingbalance of consolidated balance sheet, take the income, expenses and profit of suchsubsidiary from the acquisition date to the end of the report period into the consolidatedincome statement, and the cash flow of the subsidiary from the acquisition date to theend of the report period shall be included in the consolidated cash flow statement.
②Disposal of the subsidiary arrangement during the report period
Where the company disposes a subsidiary during the report period, the opening balanceof the consolidated balance sheet shall not be adjusted, take the income, expenses andprofit of such subsidiary from the beginning of the beginning to the disposal date into theconsolidated profit statement, and include the cash flow of such subsidiary into theconsolidated cash flow statement, and the cash flow of the subsidiary from the beginningto the disposal date shall be included in the consolidated cash flow statement.7. Confirmation standard of cash and cash equivalentsCash shall include cash on hand of the Company, as well as bank deposit and othermonetary funds which can be used for payment at any time.The investments with short term (generally refer to three months from the acquisitiondate), high liquidity, convenience to convert to known amount of cash and with low risk ofchange in value owned by Company shall be confirmed as cash equivalent.8. Foreign currency transactions and foreign currency statement translation(1) Accounting methods of foreign currency transactions
①Initial confirmation of foreign currency transaction
For foreign currency transactions, the Company shall convert the amount of foreigncurrency into the amount of the book-keeping base currency according to the spotexchange rate (intermediate price) announced by the People's Bank of China on the dateof the transaction. Of which, for foreign currency exchange or related transactions, theCompany shall convert according to the exchange rate on the date of the transaction.
②Adjustment or settlement of balance sheet date or settlement date
On the balance sheet date or settlement date, the Company shall dispose the foreigncurrency monetary items and foreign currency non-monetary items according to thefollowing methods:
(A) Accounting treatment principle for foreign currency monetary itemFor foreign currency monetary items, on the balance sheet date or settlement date, theCompany adopts spot exchange rate (intermediate price) for conversion on the balancesheet date or settlement date to adjust the amount of the accounting base currency of
foreign currency monetary items caused by exchange rate fluctuations, and treat them asexchange balances. Among them, the exchange balance between foreign currency loansrelated to the acquisition, construction or production of assets eligible for capitalization isincluded in the cost of assets eligible for capitalization. Other balance of exchange shall beincluded into current financial expense.(B) Accounting treatment principle for foreign currency non-monetary item(a) For the foreign non-monetary currency asset measured at historical cost, the Companyshall convert at spot rate (intermediate price) on transaction date with unchanging itsoriginal recording currency amount and without exchange balance.(b) For inventory measured at a lower cost between the cost and net realizable value, ifthe net realizable value is confirmed in foreign currency, the Company first converts thenet realizable value into the accounting standard currency, and then compares it with theinventory cost reflected by the accounting standard currency when determining the endvalue of the inventory.(c) For non-monetary items measured at fair values, if the fair value at the end of theperiod is reflected in foreign currency, the Company shall convert the foreign currency intothe amount of recording currency based on the spot exchange rate on the day when fairvalues are confirmed, then compare them with the original amount of recording currency,and the balance shall be treated as gains and losses from the changes in fair value andincluded into current gains and losses.(2) Accounting treatment methods for foreign currency statement translation
①The Company shall conduct translation of the financial statements of overseas
operations as the following methods:
(A) The asset and liability items in the balance sheets shall be translated at a spotexchange rate on the balance sheet date, among the equity items of owner, except for theitems as “undistributed profits”, other items shall be translated at the spot exchange rateat the time when they are incurred.(B) The income and expense items in the profit statements shall be c translated at the spotexchange rate of the transaction date, or at a spot exchange rate which is confirmed
through a systematic and rational method and which is approximate to the spot exchangerate on the transaction date.The balance in the financial statement of foreign currency translated by theabove-mentioned methods shall be listed in the owners’ equity item "OtherComprehensive Income" of consolidated balance sheet.
②The Company shall translate the financial statements of overseas operations in
hyperinflation economy according to the following methods:
(A) The Company shall restate the balance sheet items by utilizing the general price index,restate the items of the income statement by utilizing the variation of the general priceindex, and then translate them at the spot exchange rate on the recent balance sheetdate.(B) If an overseas business is no longer situated in the hyperinflationary economy, theCompany shall stop the restatement and shall translate the restated financial statementsat the price of the cessation date.
③When the Company disposes any overseas operation, shall translate the balance of
foreign currency financial statements related to the overseas business as shown belowunder the owner's equity items in the balance sheet, and the balance shall be transferredfrom the owner's equity items and disposed as current gains and losses; When theCompany disposes part of the overseas operations, shall calculate the balance according tothe proportion of the disposal of foreign currency financial statements, and dispose thebalance as the current gains and losses.9. Financial InstrumentsFinancial instruments include financial assets, financial liabilities and equity instruments.(1) Classification of financial instruments
①Classification of financial assets
According to business characteristics, investment strategies and risk managementrequirements, the Company divides the acquired financial assets into the following fourcategories: (A) Financial asset measured by fair value and the change of which is includedinto current gains and losses (B) Held-to-maturity investment; (C) Loans and accounts
receivable; (D) Available-for-sale financial assets.Financial assets measured by fair value and whose change is included into current gains orlosses include:(A) Transactional financial assets (B) Financial assets designated to bemeasured in light of fair value and the change of which is included into the current gainsand losses (C) The investor invests in the rights and interests of the subsidiary Companywhich is not included in the combined financial statements. (D) Equity investments held byventure capital institutions, mutual funds and similar entities, etc.Equity investments that have no control, joint control or significant impact on the investedentity can be divided into financial assets that are measured at fair value and whosevariation are included in current gains and losses or financial assets available for saleaccording to business characteristics, investment strategies and risk managementrequirements. In some special cases, equity investments divided into available-for-salefinancial assets can be accounted for by cost method.
②Classification of financial liabilities
According to business characteristics and risk management requirements, the Companydivides the financial liabilities into the following two categories: (A) The financial liabilitieswhich are measured at their fair values and of which the change is included in the currentgains and losses, including transactional financial liabilities and the designated financialliabilities which are measured at their fair values and of which the change is included inthe current gains and losses; (B) Other financial liabilities.(2) Confirmation basis and method of measurement of financial instruments
①Confirmation basis of financial instruments
When becoming one party of Financial Instrument Contract, the Company shall confirm afinancial asset or financial liability.
②Measurement method of financial instruments
(A) Financial assets or financial liabilities measured by the fair value and its change isincluded into the current gains and losses; taking the fair value as initial measurementamount when obtained, include the transaction costs into current gains and losses whenoccurred. The cash dividends declared but not yet paid or the bond interest that is due but
has not yet been paid in the actual payment are separately confirmed as dividendsreceivable or interest receivable. Cash dividends or bond interest earned during theholding period shall be confirmed as investment income. On the balance sheet date, itshall be measured according to the fair value and the variation in its fair value shall beincluded in the gains and losses of the current period. In sale of transactional financialassets, the investment income shall be confirmed according to the balance between theactual value received (dividends receivable and interest receivable shall be deducted) andthe book value of the transactional financial assets on the disposal day, and theaccumulated amount previously recorded in the variation in fair value shall be transferredto the investment income.(B) Held-to-maturity investment: The initial measurement amount shall be the sum of thefair value at the time of acquisition and the relevant transaction costs. The bond interestwhich has expired but has not been taken included in the actually paid price, shall beconfirmed as receivable interest separately. Interest income is calculated and confirmedbased on amortized cost and effective interest rate during the holding period and then isreckoned in the investment revenue. The effective interest rate shall be confirmed whenobtained, and it will remain unchanged within the estimated duration or appropriateshorter period. On the balance sheet date, shall measure as per amortized cost. Atdisposal, the balance between the price obtained (interest receivable shall be deducted ifany) and the book value of held-to-maturity investment is confirmed as investmentincome.(C) Loan and receivables: Loans and receivables mainly refer to loans issued by financialenterprises and receivables formed by enterprises by selling goods or providing laborservices, shall be measured at amortized cost by the effective interest method. Loansgranted by financial enterprises in accordance with current market conditions shall beinitially confirmed as the sum of the principal of the loans granted and related transactioncosts. The receivable credit rights formed by external sales of goods or services providedby the Company are usually taken the receivable price of the contract or agreement fromthe Buyer as the initially confirmed amount. Interest income confirmed during the holding
period of loan shall be calculated on the basis of the actual interest rate. The enterpriseshall include the price obtained and the balance between the loan and the book value ofreceivables into the current profit or loss when withdraws or disposes the loans andreceivables.(D) Available-for-sale financial assets: The sum of the fair value and related transactionexpenses are taken as the initially confirmed amount. In this type of assets, the equityinstrument investments for which there is no quotation in the active market and whosefair value cannot be measured reliably, and the derivative financial assets, which areconnected with the equity instrument and must be settled by delivering the equityinstrument shall be measured subsequently on the basis of their costs. The cash dividendsdeclared but not paid or the bond interest that is due but has not yet been paid in theactual payment are separately confirmed as dividends receivable or interest receivable.Cash dividends or bond interest earned during the holding period shall be included ininvestment earnings. On the balance sheet date, the financial assets available for sale shallbe measured at fair value, and the changes in fair value are included in othercomprehensive earnings. At disposal, the balance between the price obtained (dividendsreceivable and interest receivable shall be deducted if any) and the book value ofavailable-for-sale financial assets shall be included in investment earnings. Meanwhile, theamount corresponding to disposed portion of the cumulative variation in the fair valuepreviously included in other comprehensive earnings shall be transferred out and includedin investment earnings.(E) Other financial liabilities: With the sum of fair value at the time of occurrence andrelated transaction costs as the initial accounting amount, the interest costs are confirmedwith the actual interest rate method, and measured according to the amortized cost onthe balance sheet date.(3) Confirmation basis and measurement methods of financial assets transfer
①Confirmation conditions for termination of financial assets
When the Company transfers financial assets, if the Company has transferred nearly all ofthe risks and rewards related to the ownership of the financial asset to the transferee, it
shall stop the confirmation of the financial asset; If it retained nearly all of the risks andrewards related to the ownership of the financial assets, it shall not terminate theconfirmation of the financial assets.When judging whether the transfer of financial assets meets the above conditions forterminating the confirmation of financial assets, the Company shall adopt the substanceover form principle.
②The treatment of the financial asset transfer satisfying the termination confirmation
conditionThe Company classifies the transfer of financial assets into the overall transfer and partialtransfer of financial assets.(A) If the overall transfer of financial assets satisfies the conditions for terminationconfirmation, the Company shall include the balance between the consideration receivedas a result of the transfer and the book value of the transferred financial assets into thecurrent gains and losses, and transfer the cumulative amount of changes in fair value,which is directly included in other comprehensive gains (where the transferred financialassets are available for sale), into the current gains and losses.(B) If the partial transfer of financial assets satisfies the conditions for terminationconfirmation, the Company shall apportion the book value of the transferred financialassets between termination confirmation and non-termination in accordance with theirrespective relative fair values, and include the balance between the consideration ofconfirmation termination and the book value of confirmation termination of financialassets in the current gains and losses, while transferring the amount corresponding toconfirmation termination of the cumulative change in fair value originally directly recordedin other comprehensive income (involving transferable financial assets available for sale)into the current gains and losses.
③The treatment of the financial asset transfers unsatisfying the termination confirmation
conditionWhen the transfer of financial assets does not meet the confirmation terminationconditions, the financial assets shall remain confirmation, and the consideration received
shall be confirmed as financial liabilities.(4) Confirmation conditions for termination of financial liabilities
①If the whole or part of current obligations of the financial liabilities has been relieved,
the Company shall terminate the confirmation of the whole or part of financial liabilities;in case the Company signs agreement with creditor to replace the existing financialliabilities by undertaking new financial liabilities, and the new financial liabilities differfrom the existing financial liabilities substantially in terms of contractual terms, theconfirmation of existing financial liabilities shall be terminated and the new financialliabilities shall be confirmed.
②Where the Company makes substantial revisions to whole or part of the contractual
terms of the existing financial liabilities, it shall terminate the confirmation of the existingfinancial liabilities or part of it, and at the same time confirm the financial liability afterrevising the contractual terms as a new financial liability.
③Where financial liabilities have been fully or partially terminated for confirmation, the
balance between the book value terminated for confirmation and the consideration paid(including non-cash assets transferred or undertaken new financial liabilities) shall beincluded in current gains and losses.
④Where the Company repurchases partial financial liabilities, it shall distribute, on the
re-acquisition date, the entire book value of the financial liabilities shall be distributed inlight of the relative fair value of the part whose confirmation is continued and the partwhose confirmation has been terminated. The balance between the book value which isdistributed to the confirmation has been terminated and the considerations has paid(including the non-cash assets it has transferred out or the new financial liabilities it hasassumed) shall be included into the current gains and losses.(5) Confirmation method of the fair value of the financial instruments
① The fair value of financial asset or financial liability for which there is an active market
shall be confirmed according to the unjustified quoted price of the active market on themeasurement date.
②If there is no active market, the fair value shall be confirmed by the valuation
technology, and the specific principles and methods shall be in accordance with therelevant provisions of Accounting Standards for Enterprises No. 39 - Fair ValueMeasurement.(6) Impairment Accreditation criteria, Test Method and Withdrawing Method forImpairment provision of Financial Assets (excluding accounts receivable).The Company shall carry out an inspection on the book value of the financial assets(including single or a group of financial asset) other than those measured at their fairvalues and of which the change is into the current gains and losses on the balance sheetdate. Where there is any objective evidence proving that such financial asset has beenimpaired, the impairment loss shall be confirmed, and the impairment provision shall bewithdrawn.The objective evidence of impairment of financial assets includes serious financialdifficulties of the issuer or debtor, bankruptcy or financial restructuring of the debtor,failure of the financial assets trading in the active market due to major financial difficultiesof the issuer, and serious or non-temporary decline in the fair value of equity instrumentsinvestment.
①Impairment test method and withdrawing method of the provision for impairment of
the held-to-maturity investmentIf there is objective evidence indicating the impairment occurred in held-to-maturityinvestment on the balance sheet date, the Company shall calculate and confirm theimpairment losses according to the balance between its book value and the present valueof estimated future cash flows.(A) The single held-to-maturity investment with significant amount shall be carried outimpairment test separately, if there is objective evidence indicating that impairment hasoccurred, confirm the impairment loss according to the balance of the present value offuture cash flow lower than the book value, and withdraw impairment provision.(B) Non-significant held-to-maturity investment of single amount and significantheld-to-maturity investment of single amount without impairment after separate testing isdivided into several portfolios according to similar credit risk characteristics, and then the
impairment loss is calculated according to a certain proportion of balance of theseportfolios on the balance sheet date, and the impairment provision is calculated.
②Impairment test method and withdrawing method of the provision for impairment of
the available-for-sale financial assetsOn the balance sheet date, if there is objective evidence shows that the financial assetsavailable for sale have been impaired, the impairment provision shall be calculated andthe impairment loss shall be confirmed. When comprehensive judgment is madeaccording to the relevant factors that the decline of the fair value of the available-for-saleequity instruments investment is severe or non-temporary, it shows that theavailable-for-sale equity instruments investment is under impairment. Among which,“Severe decline” refers to the decline range of fair value exceeding 30% accumulatively;“Non-temporary decline” refers to the constant decline of fair value exceeding 12 months.When impairment provision is withdrawn on available-for-sale financial assets, the originalaccumulating losses included into other comprehensive profit and caused by drop of fairvalue shall be transferred out and included into current gains and losses. The accumulatinglosses that transferred out equals to the balance derived by deducting the recoveredprincipal, the amortized amount, the current fair value and the impairment loss that hasbeen originally included into the gains and losses from initial acquisition cost of theavailable-for-sale financial assets.After confirming the impairment losses, if there is objective evidence proving that its valuehas been restored, and it is objectively related to the matters occurred after confirmingthe losses, the originally confirmed impairment losses shall be reversed; the impairmentlosses of the investment of available-for-sale equity instrument are reversed andconfirmed as other comprehensive incomes, and that of the available-for-sale debtinstruments are included into current gains and losses.Where an equity instrument investment for which there is no quoted price in the activemarket and whose fair value cannot be reliably measured, or a derivative financial assetwhich is connected with the equity instrument and which must be settled by delivering theequity instrument, suffers from any impairment, the balance between book value of
financial asset and the current value of the future cash flow discounting of similar financialassets according to the rate of market return at that time shall be confirmed asimpairment losses and be included into the gains and losses of the current period. Once animpairment loss has been confirmed, it shall not be transferred back.(7) The held-to-maturity investments that are not yet due are reclassified to accountingtreatment methods of available-for-sale financial assetsWhere the Company has the intention of holding or the ability to make changes so that aninvestment is no longer suitable to be classified as held-to-maturity investment, theinvestment shall be reclassified by the Company as available-for-sale financial asset. TheCompany will sell or reclassify part of the held-to-maturity investment, which is not causedby independent events beyond the control of the Company that are not expected to recurand are difficult to reasonably predict. It will also reclassify the remaining part of suchinvestment into financial assets that can be sold.10. Accounts Receivable(1). Individual account receivable with significant amount and reserved for bad-debt
separately
| the judgment basis or amount standard for account receivable with amount that is individually significant, withdrawing bad debt provision individually | Receivables with an individual amount of RMB 500,000 yuan or above (including 500,000 yuan) |
| withdrawing method of bad debt provision of account receivable with amount that is individually significant, withdrawing bad debt provision individually | On the balance sheet date, the Company shall conduct a separate impairment test for individual account receivable with significant amount. If there is objective evidence, which proves that the impairment has occurred, it shall recognize the impairment loss and withdraw the bad debt reserve according to the difference between the present value of future cash flow and its book value. Where individual account receivable with significant amount has no impairment after testing, the bad debt reserve shall be calculated and drawn according to its closing balance in accordance with the aging portfolio. Objective evidence of impairment shall include the following: (1) The debtor has serious financial difficulties; (2) The debtor breaches the terms of the contract (such as the default or overdue payment of interest or principal, etc.); (3) By considering economic or legal reasons, make concessions to the debtor who has financial difficulties; (4) The debtor is likely to go bankrupt or carry out other debt restructuring. |
(2). Bad debt provision of accounts receivable is conducted according to credit risk
grouping
| age grouping | The individual account receivable with significant amount does not withdraw bad debt provision after single testing, adding the receivable which no longer has significant amount after deducting individual withdrawing of bad debt provision, shall take the age of receivables as a similar credit risk characteristics of portfolio. |
| risk-free grouping | The credit risks of receivables are classified according to the transaction objects and the nature of the receivables, and there is no default risk of the receivables. |
In the grouping, the aging analysis method is adopted to calculate and withdraw the baddebt reserve
| Age | Percentage of withdrawing bad debt provision of accounts receivable % | Percentage of withdrawing bad debt provision of other accounts receivable % |
| within 1 year(including 1 year) | 5 | 5 |
| 1-2 years | 10 | 10 |
| 2-3 years | 40 | 40 |
| over 3 years | 100 | 100 |
11. Inventory(1) Classification of inventoryThe Company's inventory is divided into raw materials, revolving materials (includingpackaging and low-value consumables), in process products, finished products (inventorygoods), expendable biological assets, commissioned processing materials and so on.(2) Valuation method for delivery of inventoryThe issued materials are calculated by weighted average method, and the issued goods arecalculated by weighted average method.(3) Confirmation basis of net realizable value of inventory and the withdrawal method forinventory falling price reserves
① Confirmation basis of net realizable value of inventory
(A) For merchandise inventory (or finished products) for sale including materials for directsale, during the normal production and operation, the net realizable value shall beconfirmed by the amount of estimated sales price of the inventory deducting theestimated selling expenses and related taxes and dues.
(B) The materials inventory need to be processed, during the normal process of productionand management, the estimated sale price of the finished products minus the estimatedcosts when finished the works, the estimated selling expenses and related tax payments,the net realizable value can be confirmed.(C) For the inventory hold to execute sale contract or labor contract, its net realizable valueshall be calculated based on the contract price; In case inventory quantity hold by theCompany is more than the order quantity of the sale contract, the net realizable value ofthe exceeding part inventory shall be calculated based on general sale price.(D) But for materials held for production, etc., if the net realizable value of finishedproducts made from the materials is higher than the cost, the materials shall still bemeasured based on the cost; If the decline of material prices indicates that the netrealizable value of finished products is lower than the cost, the materials can be measuredbased on net realizable value.
②Withdrawing method of inventory falling price reserves
The Company shall prepare for the reduction of inventory price according to the lowerprice between cost and net realizable value of a single inventory item. For thoseinventories with large number and low unit price, the falling price reserves for inventoryshall be withdrawn by the Company according to the categories.
(4) Inventory system
The Company shall adopt perpetual inventory system for the stock inventory and regularlyconduct physical inventory.(5) The amortization method for revolving materials
① The amortization method of low-value consumption goods:
The Company adopts fifty percent amortization method for ring mould and wooden pallets,and one-time amortization method for other low-value consumables.
② Amortization method of packing material
The Company shall conduct amortization by once write-off process in case of receivingpacking materials.
12. Available-for-sale Assets
(1) Available-for-sale
① Range of non-current assets and disposal group of available-for-sale assets
When the Company recovers its book value mainly by selling (including the exchange ofnon-monetary assets with commercial substance) rather than continuing to usenon-current asset or disposal group, it classifies the non-current asset or disposal group asholding for sale.Disposal group refers to a group of assets disposed of as a whole through sale or othermeans in transaction, and liabilities directly related to these assets transferred in thetransaction.
② Confirmation condition for non-current assets and disposal group of available-for-sale
assets(A) The Company shall classify the non-current assets and the disposal group that meetthe following conditions as available-for-sale assets:
According to the usual practice of selling such assets or disposal groups in similartransactions, they can be sold immediately in the current situation.(B) They are likely to be sold, that is, the Company has made a decision on sale plan andobtained definite purchase commitment, and the sale is expected to be completed withinone year. They can be sold with the approval of the relevant authority or regulatoryauthority of the Company.
③ Accounting treatment method and reporting for non-current assets and disposal group
of available-for-sale assets.The Company shall measure the book value of assets and liabilities in non-current assets ordisposal groups according to relevant accounting standards before dividing non-currentassets or disposal groups into available for sale assets for the first time.When the Company initially measures or recalculates non-current assets or disposalgroups held for sale on the balance sheet date, if its book value is higher than the netamount of fair value minus selling expenses, the book value is written down to the netamount of fair value minus selling expenses, and the amount written down is confirmed asthe loss of assets impairment, which is recorded in the current gains and losses, and the
provision for holding impairment of assets for sale is made. For the amount of loss ofimpairment of assets confirmed by the disposal group held for sale, we shall first offset thebook value of goodwill in the disposal group, and then offset proportionally the book valueaccording to the proportion of the book value of each non-current asset in the disposalgroup. There is no depreciation or amortization of non-current assets held for sale.The non-current assets held for sale or assets in disposal groups held for sale shall notoffset each other with the liabilities in the disposal group held for sale and shall be shownas current assets and current liabilities respectively.If the Company loses control of its subsidiary Company due to the sale of its investment insubsidiary Company or other reasons, no matter whether the enterprise retains part ofequity investment after the sale, when the investment in subsidiary Company to be soldmeets the conditions for the classification of categories held for sale, the investment insubsidiary Company will be divided into categories held for sale as a whole in theindividual financial statements of the parent Company , and all assets and liabilities ofsubsidiaries will be divided into categories held for sale in the combined financialstatements.
(2) Discontinuing operation
Termination of business refers to a separate component of Company that meets one of thefollowing conditions and has been disposed of or classified as category held for sale:
① The constituent part represents an independent principal business or a principal
business region;
② The constituent part is a part intended for disposal planning of a major independent
business or a main business region;
③ The constituent part is a subsidiary Company specially acquired for resale.
13. Long-term equity investment(1) Investment cost confirmation of long-term equity investment
① The confirmation of the initial investment cost of long-term equity investment formed
by business combination can be seen in the accounting treatment of business combinationunder the same control and under the different control in Note 5.
② Besides the long-term equity investment formed by business combination, the initial
investment cost of the long-term equity investment obtained by other means shall beconfirmed in accordance with the following provisions:
(A) For long-term equity investment acquired through paying cash, the acquisition priceactually paid shall be taken as the initial investment cost. The initial investment costincludes the expenses directly related to the long-term equity investment obtained, taxesand other necessary expenses.(B) The long-term equity investment obtained by issuing equity securities (equityinstruments) is regarded as its initial investment cost according to the fair value of equitysecurities (equity instruments) issued. If there is conclusive evidence that the fair value oflong-term equity investment obtained is more reliable than that of equity securities(equity instruments) issued, the initial investment cost is confirmed on the basis of the fairvalue of long-term equity investment invested by investors. If the fees directly related tothe issuance of equity securities (equity instruments), including service fees andcommissions, are reduced by the issuance premium, and if the premium is insufficient tobe reduced, the surplus reserve and undistributed profits are reduced in turn. Long-termequity investment obtained by issuing debt securities (debt instruments) shall be treatedby issuing equity securities (equity instruments).(C) For the long-term equity investment obtained through debt restructuring, theCompany takes the fair value of the shares enjoyed by the creditor's rights into equity asits initial investment cost.(D) For long-term equity investment acquired through non-monetary assets exchange, ifnon-monetary assets exchange is of commercial substance and fair value of convertedassets can be reliably measured. The Company confirms its initial investment cost on thebasis of fair value of converted assets, unless there is solid evidence that the fair value ofconverted assets is more reliable. If the above-mentioned conditions cannot be met, thebook value of swap-out assets and related payable taxes shall be taken as the initialinvestment cost of swap-in long-term equity investments.The expenses, taxes and other necessary expenses incurred by the Company directly
related to the acquisition of long-term equity investment are included in the initialinvestment cost of long-term equity investment.No matter how the Company acquires long-term equity investment, the cash dividends orprofits declared but not yet paid in actual payments or consideration shall be accountedfor separately as the dividend receivable and shall not constitute the cost of long-termequity investment.(2) The subsequent measurement and loss and profit confirmation method of long-termequity investment
① The long-term equity investment checked and calculated by cost method
(A) The Company shall adopt method to calculate the long-term equity investment can becontrolled by the invested unit, that is, investment in subsidiaries.(B) For long-term equity investment calculated by cost method, except for cash dividendsor profits which have been declared but not yet paid in the actual price or consideration atthe time of investment, the Company, regardless of whether it belongs to the net profitsrealized by the invested units before and after investment, shall recognize the investmentincome according to the cash dividends or profits declared by the invested units.
② The long-term equity investment checked and calculated by equity method
(A) A Company shall adopt the equity method to account for joint venture under the jointcontrol of the invested entity or joint venture with significant influence.(B) For long-term equity investment adopted equity method, if the initial investment costis more than the enjoyed share of net asset fair value identified by the invested units whenthe investment happens, the initial investment cost of the long-term equity interestinvestment shall not be adjusted; If the initial investment cost is less than the enjoyedshare of net asset fair value identified by the invested units when the investment happens,its balance shall be included into the current gains and losses and the initial investmentcost of the long-term equity investment shall be adjusted simultaneously.(C) After obtaining a long-term equity investment, the Company shall confirm theinvestment losses and profits and other comprehensive income respectively and adjust thebook value of the long-term equity investment in terms of the due owned or borne share
of the net gains or losses and other comprehensive income achieved by the invested unit.When confirming the net loss and profit of the invested unit that shall be owned or borne,confirmation shall be conducted for the net profit of the invested unit upon adjustmentbased on fair value of net identifiable assets of the invested unit when obtaining theinvestment. However, if the Company is unable to reasonably confirm the fair value of theidentifiable assets of the invested unit at the time of obtaining investment, the balancebetween the fair value of the identifiable assets of the invested unit at the time ofinvestment and book value is small or it is impossible to obtain relevant information of theinvested unit due to other reasons, the Company shall directly calculate and confirm theinvestment gains and losses on the basis of the net book gains and losses of the investedunit. The Company shall reduce correspondingly the book value of the long-term equityinvestment according to the deserved portion of assigning cash dividends or profitdeclared by the invested unit. As for other changes concerning owner's equity of theinvested unit besides net profit or loss, other comprehensive income and profitdistribution, the Company shall adjust the book value of the long-term equity investmentand include them into the owner's equity.When affirming the investment income generated by the investment of joint ventures, theCompany offsets the unrealized internal transaction income between the Company andthe joint venture which belongs to the Company according to the share-holding ratio, andaffirms the investment gains and losses. The internal transaction loss occurred betweenthe Company and invested unit belongs to assets impairment loss, which shall beconfirmed in full amount. The Company shall offset the unrealized internal transactiongains and losses between subsidiaries incorporated into combination and joint ventures inaccordance with the above-mentioned principles, and confirm the investment gains andlosses.When net deficiency of the invested entity that confirmed to be borne, it shall be disposedas the following orders: The book value of the long-term equity investment shall be offsetat first. If the book value of long-term equity investment is not enough to be offset, theinvestment losses shall be confirmed continuously according to the limit that the book
value of other long-term equity investments substantially constitutes the net investment inthe invested entity, to offset the book value of long-term receivables; After the processabove, if the Company still shall share extra duty according to investment contract or theagreement, confirm beforehand liabilities according to estimated duty that shall beundertaken and include it in the current investment loss. If the invested unit realizes to beprofitable in the following period, the Company shall process it in the sequence contrary tothe mentioned above after deducting the contribution of loss that hasn’t been confirmed,write down the book value that has been confirmed to be estimated liabilities, resumeother book values that constitute the long-term interest and long-term equity investmentof the invested unit in substance and meanwhile confirm investment income.(3) The basis confirmed to have joint control and significant influence on the investedentity
① The basis confirmed to have joint control on the invested entity
The joint control refers to the control jointly performed towards certain arrangement asper the related agreements, and the related activities thereof must be agreed by all theparticipants who share the control rights before making decisions. The relevant activitiesgenerally include sale and purchase of goods or labor services, management of financialassets, acquisition and disposal of asset, R&D activities and financing activities. Jointventure refers to the joint venture arrangement that the Company has the right to arrangethe net assets of the Company. The joint venture arrangement in which the joint ventureparty enjoys assets related to arrangement and bears relevant liabilities is cooperationrather than joint venture.
② The basis confirmed to have significant influence on the invested entity
The significant influence refers to having the power to participate in the formulation offinancial and operating policies of an enterprise, but cannot control or jointly control theformulation of these policies together with other parties. When the Company can exertsignificant influence on the invested unit, the invested unit is its joint venture.14. Fixed assets(1). Confirmation conditionsThe fixed assets refer to the tangible assets held for commodity production, rendering
service, lease or operation management with a service life of more than one accountingyear. The fixed assets are confirmed when the following conditions are met:
① The economic interests related to the fixed assets are likely to flow into the Company;② The costs of the fixed assets can be calculated reliably.
(2). Method of depreciation
| Item | Method of depreciation | Period of depreciation（year） | RM value rate | Yearly depreciation |
| office and buildings | straight-line service life depreciation | 10-40 | 3 | 2.43-9.70 |
| machinery equipment | straight-line depreciation | 10 | 3 | 9.70 |
| transportation equipment | straight-line depreciation | 4 | 3 | 24.25 |
| other equipment | straight-line depreciation | 5 | 3 | 19.40 |
(3). Confirmation basis, pricing and depreciation method of fixed assets under finance
lease
①Confirmation basis of fixed assets under finance lease
At the beginning of the lease period, the Company shall recognize the leased fixed assetsthat meet the financial lease criteria as the financial leased fixed assets.
② Pricing method of fixed assets under finance lease
At the beginning of the lease period, the Company shall regard the lower of the fair valueof leased assets and the present value of the minimum lease payment on the lease startdate and the initial direct expenses incurred as the accounting value of the financingleased assets, the lowest lease payment as the value of the long-term accounts payable,and the balance between the lower of the fair value of leased assets and the present valueof the minimum lease payment on the lease start date as the accounting value of thefinancing leased assets and the minimum rental payments as unconfirmed financing cost.Unconfirmed financial charges shall be amortized to each period in lease term according toeffective interest method.
③ Method for depreciation of fixed assets under finance lease
The Company shall adopt the depreciation policy consistent with owned fixed asset to
withdraw leasing asset depreciation. If it is reasonable to be certain that the lessee willobtain the ownership of the leasing asset when the lease term expires, the leasing assetshall be withdrawn depreciation within its service life. If it is not reasonable to be certainthat the lessee shall obtain the ownership of the leasing asset at the expiry of the leaseterm, the leasing asset shall be withdrawn depreciation within the shorter one betweenthe lease term and the service life of leasing asset.15. Construction in progress(1) Category of construction in processConstruction in process shall be calculated separately according to the approved projects(2) The standard and time point for construction in process carried down fixed assetsAll expenditures of the construction in progress that incurred before it reaches theestimated serviceable condition shall be regarded as entry value of the fixed assets. Theself-operating engineering shall be measured according to direct materials, direct wages,direct mechanical construction costs, etc.; Package project is measured according to thepayable project price; The borrowing expenses that meet the capitalization conditions andoccur before the project under borrowing reaches its intended usable state shall becapitalized and included in the cost of the project under construction.If the fixed assets have reached the intended usable state but have not yet completed thefinal accounts, the Company shall, from the date of reaching the intended usable state,determine its cost according to the project budget, cost or actual cost of the project, aswell as the estimated value, transfer it to the fixed assets, and calculate the depreciation ofthe fixed assets in accordance with the Company's fixed assets depreciation policy; Afterfinal account is completed, the Company shall adjust the original provisionally estimatedvalue according to actual cost, but not adjust the previously accrued amount ofdepreciation.16. Borrowing cost(1) Range of the borrowing costThe borrowing cost of the Company shall include interest on borrowings, amortization ofdiscount or premium, auxiliary expenses, and exchange balance incurred from foreign
currency borrowings.(2) Borrowing cost principleWhere the incurred borrowing cost of the Company can be directly attributable to theacquisition and construction or production of assets eligible for capitalization, it shall becapitalized and reckoned in the costs of relevant assets; Other borrowing costs shall beconfirmed as costs on the basis of the actual amount accrued, and shall be included intothe current gains and losses.The term "assets eligible for capitalization" shall refer to the fixed assets, investment realestate, inventories and other assets, of which the acquisition and construction orproduction may take quite a long time to get ready for its intended use or for sale.(3) Confirmation of the time period for capitalization of the borrowing cost
① Confirmation of the time point for capitalization of the borrowing cost
After assets expenditures and the borrowing expenses have happened, the necessaryacquisition and construction or production activities have already started in order to reachthe pre-confirmed usable or marketable state for the assets, the borrowing expenses canbegin capitalization. The asset expenses shall include the cash, transferred non-cash assetsor expenses that bearing debts paid for the acquisition and construction or production forassets eligible for capitalization
② Confirmation of the suspending time point for capitalization of the borrowing costs
If assets eligible for capitalization is interrupted abnormally during the course ofacquisition and construction or production, and the interruption lasts more than 3 months,the capitalization of borrowing costs shall be suspended. The borrowing costs occurredduring the interruption shall be confirmed as current gains or losses, until the acquisitionand construction or production activities of the asset restart, the capitalization ofborrowing costs shall be continued. If the interruption is a necessary step for making theacquired, built or produced assets which are eligible for capitalization reaching estimatedusable and marketable status, the capitalization of the borrowing costs shall be continued.
③ Confirmation of the suspending time point for capitalization of the borrowing costs
When the acquired, built or produced assets which are eligible for capitalization can reach
estimated usable and marketable state, shall stop capitalizing on borrowing costs; theborrowing costs incurred thereafter shall be confirmed as current gains and lossesaccording to the real amount.Where each part of the acquired, built or produced assets which are eligible forcapitalization is completed separately, and every single part is available to use or sellduring the continuing construction of other parts, and the acquisition and construction orproduction activities, which are necessary to make such part of asset reaching theestimated status of being available to use or sell, have already been completedsubstantially, shall stop capitalizing on the borrowing costs in relation to this part of asset.Where each part of the acquired, built or produced assets which are eligible forcapitalization is completed separately and but it cannot be available to use or sell till thewhole construction finishing, shall stop capitalizing on the borrowing costs when theassets can be completed entirely.(4) The confirmation of the amount of the capitalization of borrowing costs
① The confirmation of the amount of the capitalization of borrowing interests
During the capitalization period, the interests' capitalization amount (including theamortization of discounts or premiums) in each accounting period shall be confirmedaccording to the following provisions:
(A) As for special borrowing costs arising from the acquisition and construction orproduction of assets which are eligible for capitalization, the amount shall be confirmedbased on the interests cost of the special borrowings costs occurred actually in the currentperiod deducting the interests' income earned from depositing the unused borrowingcosts or the income from temporary investment.(B) If ordinary borrowings used for acquisition and construction or production of assetswhich are eligible for capitalization, the interests' amount of ordinary borrowings to becapitalized shall be confirmed by the weighted average of the asset expenditures forcumulative capital expenditure that exceed the capital expenditure of specific borrowingsto multiply the capitalization rate of ordinary borrowings. The capitalization rate isconfirmed by the calculation of the weighted average interest rate of general borrowing
costs.(C) If there is any discount or premium of the borrowings, the amount of discounts orpremiums amortized during each accounting period shall be confirmed by the effectiveinterest rate method, and an adjustment shall be made to the amount of interests in eachperiod.(D) Within period of the capitalization, the interest capitalization amount of eachaccounting period shall not exceed the amount of interest actually occurred to therelevant borrowings in the current period.
② The confirmation of the amount of the capitalization of borrowing auxiliary expenses
(A) Article For the ancillary expense incurred to a specifically borrowings, those incurredbefore assets eligible for capitalization under acquisition, construction or production isready for the intended use or sale shall be capitalized at the incurred amount when theyare incurred, and shall be included into the costs of the asset eligible for capitalizationthose incurred after a qualified asset under acquisition and construction or production isready for the intended use or sale shall be confirmed as expenses on the basis of theincurred amount when they are incurred, and shall be recorded into the gains and lossesof the current period.(B) The auxiliary expenses arising from general borrowings shall be confirmed as expensesat the time of occurrence and shall be included into the gains and losses of the currentperiod.
③ The confirmation of the amount of the capitalization of the balance of exchange
During the period of capitalization, the exchange balance on foreign currency specificborrowings shall be capitalized, and shall be included in the cost of assets eligible forcapitalization.17. Biological assets(1) Classification of biological assetsBiological assets refer to live animals and plants. The Company's biological assets aredivided into expendable biological assets and productive biological assets.(2) Conformation conditions of biological assets
The Company shall confirm the biological assets that satisfy the following conditions at thesame time:
① The Company possesses or controls the biological asset as a result of past transaction
or matter;
② The economic benefits or service potential concerning this biological asset are likely to
flow into the Company;
③ The cost of the biological asset can be measured reliably.
(3) Depreciation of productive biological assetsThe Company shall depreciate the productive biological assets that meet projectedproduction and operation, and reasonably confirm their service life, estimated net residualvalue and depreciation method according to nature, usage and expected realization of theeconomic benefits involved.The type, life expectancy, anticipated net residual value and yearly depreciation of theCompany's productive biological assets are as follows:
| Type | Life expectancy (month) | Anticipated net residual value | Depreciation method |
| Parent Stock-Pig | 48 | 300.00 yuan per head | straight-line-method |
| Parent Stock(Broiler) | 10 | 25.00 yuan per broiler | units-of -production method |
The depreciation coefficient shall be calculated according to the empirical value of eggproduction during the service life of parent stock(broiler) and withdrawing depreciationaccording to the depreciation coefficient.The depreciation rate and depreciation amount of the productive biological assets whichhave been prepared for impairment are recalculated according to the book value,estimated net residual value and usable life of the productive biological assets.The Company reviews the service life, estimated net residual value and depreciationmethods of productive biological assets at regular intervals. If the expected number ofservice life or estimated net residual value is different from the original estimate, or ifthere is any significant change in the expected realization of the economic benefitsinvolved, it shall be treated as change in accounting estimate.
18. Intangible assets(1). Valuation methods, service life, and impairment test
①Initial measurement of intangible assets
(A) Initial measurement of outsourcing intangible assetsThe cost of outsourcing intangible assets, including acquisition price, relevant taxes anddues as well as other expenditures which is directly attributed to make intangible assets tothe estimated purpose. When the payment of purchased intangible assets price exceedingnormal credit conditions is delayed in payment, with financing nature in essence, theintangible assets cost shall be confirmed based on the present value of purchase price. Thebalance between the cost actually paid and the present value of the purchasing cost willbe included into the current gains and losses during the credit period except the part thatshall be capitalized.(B) Initial calculation for independently developed intangible assetsThe cost of self-developed intangible assets shall be confirmed according to the totalexpenditure incurred from meeting the capitalization conditions to reaching the intendedpurpose, and the expenditure already expended in the previous period shall not beadjusted.For the intangible assets researched and developed by the Company, the expenditureduring research stage shall be recorded into the current gains and losses as occurring; ifthe expenditures in development stage which don't meet the conditions of capitalizationshall be included into current gains and losses when it occurs. Those meeting the conditionof capitalization shall be confirmed as intangible assets. When the expenditures occurduring research or development stage cannot be distinguished, all the R&D expendituresoccurred shall be included into the current gains and losses.
②Subsequent measurement of intangible assets
The service life shall be analyzed and confirmed by the Company when obtaining theintangible assets. The intangible assets acquired by the Company include intangible assetswith finite service life and indefinite service life.(A) Subsequent calculation for intangible assets with finite service lifeFor intangible assets with limited service life, the Company will adopt the straight-line
method to amortize them in phases during their service life from the time they reach theirintended purpose, without reserving residual value. The amortization amount of intangibleassets shall be included into current gains and losses. If the economic benefits of anintangible asset are realized through product or other assets, the amortization amountshall be included into the cost of the relevant assets.The categories of intangible assets, estimated service life, estimated net residual value andannual amortization rate are listed as follows:
| Categories | Estimated service life(year) | Estimated net residual value % | Annual amortization rate % |
| land use rights | according to the useful life of land certificate | 0 | - |
| computer software and other | 5-10 | 0 | 10-20 |
The Company shall review the service life and the amortization method of intangibleassets with the finite service life on the balance sheet date.(B) The subsequent measurement for intangible assets with indefinite service lifeThe Company shall not amortize intangible assets with uncertain service life during theholding period.
③Estimate the service life of intangible assets
(A) The service life of the intangible asset derived from the contractual rights or otherstatutory rights shall be confirmed according to the limit not exceed the contractual rightsor other statutory rights; If when the contract rights or other statutory rights are due, theycan be extended because of renewal, and there is evidence that the Company does notneed to pay a large amount of cost to renew contract, then the renewal period shall beincluded into the service life.(B) If the service life is not stipulated in the contract or law, the Company shall confirm theperiod when intangible assets can bring economic benefits to the Company by employingrelevant experts for demonstration or comparing with those in the same industry andreferring to the Company's historical experience.(C) In accordance with the above method, if it is still unable to reasonably confirm thetime limit when the intangible assets can bring economic benefits for the Company, the
intangible assets shall be deemed as the intangible assets with uncertain service life.
④Treatment of land use right
(A) The land use right acquired by the Company is usually confirmed as intangible assets,but if the land use right is used to earn rent or capital appreciation, it will be convertedinto investment real estate.(B) If the Company develops and constructs buildings such as factory buildings, it shalltreat the relevant land use rights and buildings separately.(C) The price paid for the acquisition of land and buildings shall be allocated between thebuilding and the right to use the land. If they cannot be reasonably distributed, they shallbe confirmed as fixed assets.(2). Accounting policies of internal R&D expenditure
①The specific standard for the partition of the research stage and development stage of
the Company internal R&D projectAccording to the actual situation of R&D, the Company divides R&D projects into twostages: research stage and development stage.(A) Research stageResearch stage refers to the stage for ingenious and planned investigation, researchactivities so as to acquire and understand new scientific or technical knowledge, etc.(B) Development stageDevelopment stage refers to before the commercial manufacture or use, the stage for theapplication of research achievement and other knowledge to a certain plan or design toproduce new or substantial improved materials, devices or products, etc.The expenditure of the internal R&D projects at the research stage shall be included intocurrent gains and losses when incurred.
②The specific standards for expenditure at development stage which meet capitalization
The expenditure of the internal R&D projects at the development stage shall be confirmedas the intangible assets when meeting the following conditions simultaneously:
(A) Complete the intangible assets to make them feasible to be used or sold in technology;(B) Possess the intention to complete the intangible assets and use or sell them;
(C) The ways of intangible assets to generate economic benefits include the ability toprove the existence of the market where there are the products produced by theintangible assets or the existence of that of the intangible assets, and prove its usefulnessif intangible assets will be used internally;(D) There are sufficient technologies, financial resources and other resources supporting tocomplete the development of the intangible assets, and the Company is able to use or sellthe intangible assets;(E) Expenditures that belong to the development stage of the intangible assets can bemeasured reliably.19. Impairment of long-lived assetsThe impairment test shall be made to long-term equity investments, investment propertymeasured by using the cost model, fixed assets, projects under construction, intangibleassets with finite service life and other long-term assets with signs of impairment on thebalance sheet date. If the impairment test result is indicated that the recoverable amountof assets is lower than its book value, it is withdrawn impairment reserves in accordancewith the balance and calculated into the impairment loss. The recoverable amount shall bethe higher one of the net amount of the fair value of the assets deducted by the disposalexpenses and the present value of the expected future cash flow of the assets. Calculateand confirm the assets impairment reserves based on single asset; shall it be difficult toestimate the recoverable amount of single asset, the recoverable amount of the assetgroup shall be confirmed based on its belonging asset group. Asset group is the minimumasset portfolio that can generate cash inflow independently.Each year, the Company performs the impairment test on the goodwill and the intangibleassets with uncertain service life, no matter whether there are signs of impairment or not.When the Company conducts the impairment test on business reputation, as for the bookvalue of goodwill formed due to the business combination, it shall be amortized to relatedassets groups from the acquisition date according to the reasonable methods; The partthat is hard to be allocated to related assets groups shall be amortized to related combinedassets groups. When apportioning the book value of the goodwill to the relevant asset
groups or combinations of asset groups, it shall be apportioned on the basis of theproportion of the fair value of each asset group or combination of asset groups to the totalfair value of the relevant asset groups or combinations of asset groups. Where it is difficultto measure the fair value reliably, it shall be apportioned on the basis of the proportion ofthe carrying value of each asset group or combination of asset groups to the total carryingvalue of the relevant asset groups or combinations of asset groups. When making animpairment test on the relevant asset groups or combinations of asset groups includinggoodwill, if any evidence shows that the impairment of asset groups or combinations ofasset groups is possible, the Company first makes an impairment test on the asset groupsor combinations of asset groups not including goodwill, calculate the recoverable amount,compare it with the relevant carrying value and confirm the corresponding impairmentlosses. The Company makes an impairment test of the asset groups or combinations ofasset groups containing business reputation, and compares the book value of theserelevant asset groups or combinations of asset groups (including the book value ofgoodwill amortized thereto) and their recoverable amount. Where the recoverableamount of relevant assets or combinations of the asset groups is lower than the bookvalue thereof, the depreciation of the goodwill losses shall be confirmed.Once the impairment loss of above-mentioned asset is confirmed, it shall not be reversedin following accounting periods.20. Long-term prepaid expenses(1) Scope of long-term prepaid expenseThe long-term prepaid expense refers to an expense that has incurred but shall beamortized by the current period and subsequent periods with the time limit of more than1 year (exclusive), and includes improvement expenditures incurred in fixed assets by wayof operating lease.(2) Initial calculation for long-term prepaid expenseThe long-term prepaid expense received initial calculation based on the actual cost.(3) Amortization of long-term prepaid expenseLong-term prepaid expenses in benefit period will be of amortization average using the
straight-line method.21. Employee remuneration(1). The accounting treatment method of short-term remunerationShort-term remuneration refers to employee remuneration that needs to be paid in fullamount within 12 months after the end of annual report period that the employeeprovides related service, except for the remuneration given for labor relation removingwith the employee.Short-term remuneration includes: Employee salary, bonus, allowance and subsidy,employee welfare expenses, medical insurance premiums, industrial injury insurancepremium, birth insurance premium and other social insurance premiums, housingaccumulation fund, labor union expenditure and employee education expenditure,short-term compensated absence, short-term profit sharing plan, non-monetary welfareand other short-term remunerations.The Company shall confirm the actual short-term remuneration accrued as liabilities andinclude it into current gains and losses or related asset cost during the accounting periodof services provided by staff.(2). The accounting treatment method of post-employment welfareThe Company participates in the establishment of withdrawal plans, which include basicpension insurance premiums, unemployment insurance premiums and enterprise annuitypayments for employees in accordance with relevant regulations. The amount due fordeposit shall be confirmed as the debt of employee remuneration on the balance sheetdate in order to exchange for the service provided by employees during accounting period,and include into the current gains and losses or relevant asset cost.(3). Accounting treatment method of dismissal welfareDismissal welfare refers to the remuneration for the employee when the Companyterminates the labor relationship with the employee before the labor contract expires orwhen the Company encourages the employee to receive layoff voluntarily. If the Companyprovides dismissal welfare for staffs, the staff remuneration liability generating fromconfirming dismissal welfare on the earlier one of the following two dates shall beincluded into current gains and losses:
① When the Company cannot unilaterally withdraw the dismissal welfare provided by
labor relationship relief plan or reduction suggestion.
② When the Company confirms cost or expense relevant to the restructuring involved in
paying dismissal welfare.(4). Accounting treatment method of other long-term employee benefitsOther long-term employee welfare refers to other welfares of all employees other thanshort-term remuneration, welfare after demission and dismisses welfare. At the end ofreport period, staff remuneration cost generating from other permanent staff welfare shallbe confirmed to the following constituent parts:
① Cost to serve.② Net interest amount of net liabilities or net asset of other permanent staff welfares.③ The change generating from the recalculation of net liability or net asset of other
permanent staff welfares.In order to simplify the relevant accounting treatments, the total net amount of aboveitems is recorded into current gains and losses or relevant asset costs.22. Estimated Liabilities(1) Confirmation principles of estimated liabilitiesWhen the external guarantees, pending litigation or arbitration, product quality assurance,loss of contract, the obligation of restructuring matters or the relevant business meetthree of the following conditions, it shall be confirmed as estimated liabilities:
① That obligation is a current obligation undertaken by the Company;② It is likely to cause the economic benefit to flow out of the Company due to the
performance of the obligation;
③ The amount of the obligation can be measured reliably.
(2) Calculated method for estimated liabilitiesThe amount of the estimated liability is measured in accordance with the best estimate ofthe expenditure required for the contingency.
① If there is a sequent range for the necessary expenses and if all the outcomes within
this range are equally likely to occur, the best estimate shall be confirmed in accordance
with the middle estimate within the range.
② In other cases, the best estimate shall be disposed according to the following cases
respectively:
(A) If the contingencies involve a single item, it shall be confirmed according to the mostlikely outcome.(B) If the contingencies involve two or more items, the best estimate shall be calculatedand confirmed according to all possible outcomes and the relevant probabilities.23. Share-based paymentThe share-based payments shall consist of equity-settled share-based payments andcash-settled share-based payments.(1) Accounting treatment on the grant dateIn addition to share-based payments of the immediate vesting, regardless of equity-settledshare-based payment or cash-settled share-based payment, the Company shall not acceptaccounting treatment on the grant date.(2) Accounting treatment on each balance sheet date in the waiting periodIn the waiting period of each balance sheet date, services acquired in hiring employees orother parties shall be included in the cost, and the owner's equity or liabilities shall beconfirmed.As for share-based payments with market conditions, as long as employees meet all othernon-market conditions, the acquired service shall be confirmed. When the performanceconditions are non-market conditions, after the waiting period is fixed, if the subsequentinformation indicates that the estimation of feasible rights needs to be adjusted, theearlier estimate shall be modified.As for equity-settled share-based payment involving employees, according to fair value ofequity instruments in the grant date, it shall be included in cost and capital reserve (othercapital reserve), and its subsequent changes of fair value shall not be confirmed. As forcash-settled share-based payment involving employees, it shall be recounted according tofair value of equity instruments at each balance sheet date to recognize the cost andpayable employee remuneration.
On each balance sheet date within the waiting period, the Company shall make the bestestimates according to the newly obtained changes in exercisable right staff numbervariation and other follow-up information, and amend the number of equity instrumentsof expected exercisable right.According to the fair value of the above-mentioned equity instruments and the number ofequity instruments with predicted feasible rights, the cumulative cost and expense amountthat shall be confirmed up to the current period is calculated, with the cumulativeconfirmed amount in the previous period subtracted, as the cost and expense amount thatshall be confirmed in the current period.(3) Accounting Treatment on the Vesting Date
① As for equity-settled share-based payment, after vesting date, the confirmed cost and
the total owner equity shall no longer be adjusted. On the vesting date, the Company shallconfirm the share capital and share premium according to the exercise situation, and thecapital reserve (other capital reserve) in the waiting period shall be carried forward at thesame time.
② As for cash-settled share-based payment, after the vesting date, the Company shall no
longer confirm the cost, and changes in fair value of liabilities (staff remuneration) shall beincluded in current gains and losses (changes of profit or loss in fair value).(4) Accounting treatment for using repurchased share as incentive stock option for staffWhere the Company rewards its employees in the form of share repurchase, when itrepurchases shares, it shall treat all the expenditures of the share repurchase as stockshares, and make a record. On each balance sheet date during the waiting period,according to the fair value of equity instruments on the granting date, the obtained staffservices are included in the cost and expenses, and the capital reserve (other capitalreserve) is increased. When the employee's right to purchase shares of Company receivesthe price, the cost of the stocks in stock delivered to the employee and the accumulatedamount of capital reserve (other capital reserve) during the waiting period shall be resold,and the capital reserve (equity premium) shall be adjusted according to its balance.
24. RevenueThe revenues mainly consist of the income of selling goods, providing labor services, andtransferring the right to use assets. And the principles of income confirmation shall bedriven as below:
(1) Confirming principle of the revenue for selling goodsThe main risks and rewards of the property in the commodities have been transferred tothe acquiree by the Company; The Company retains neither continuing management rightrelated with the ownership nor effective control over the goods sold; The amount ofrevenue can be measured in a reliable way; The relevant economic interests may beflowed into the Company; When the relevant cost incurred or to incur can be measuredreliably, it shall be confirmed as the realization of product sales income. The Company'ssales revenue, mainly includes feed products, feed raw materials, poultry products andraising business. The revenue shall be confirmed after receipt of payment or completion ofcredit procedures and delivery of goods.(2) Confirming principle of the revenue for providing labor services
① Principle of confirmation of labor income is to provide labor transactions in the case of
reliable estimationOn the balance sheet date, when the labor service transaction results rendered can bereliably estimated, the Company shall confirm the revenue from providing labor service bythe percentage-of-completion method.When the amount of income can be reliably measured, the relevant economic benefitsmay flow into the Company, the completion schedule of the transaction can be reliablyconfirmed, and the costs that have occurred and will occur in the transaction can bereliably measured, the results of the labor transaction can be reliably estimated.
②Confirmation principle of labor income under the condition that provide labor
transactions in the case of unreliable estimationOn the balance sheet date, when the labor service transaction results provided by theCompany cannot be reliably measured, it shall confirm labor services income by thefollowing three kinds of condition.(A) If labor service cost incurred is estimated to be compensated in full amount, provision
of labor service income shall be confirmed according to the amount that has beenregained or can be regained by estimation and carry forward the labor service cost thathas accrued;(B) If the labor cost estimation that has occurred can be compensated partly, the laborrevenue shall be confirmed to provide as the labor cost amount that has occurred or canbe compensated, and the occurred labor cost will be carried over;(C) If the cost of labor services incurred is expected not to be compensated, the costincurred shall be included into current gains and losses (main business cost), and noincome from the provision of labor services will be confirmed.(3) Confirmation principles of transferring the right to use assetsWhen the trade-related economic interest is likely flow into this Company, and therelevant revenue that can be reliably calculated, the realization of the revenue fromtransferring the right to use assets shall be confirmed.25. Governmental grant(1) Category of governmental grantGovernment grant refers to the monetary assets or non-monetary assets that theCompany obtains from the government free of charge, including the government grantrelated to assets and income.The government grants pertinent to assets refer to the government assets that areobtained by enterprises used for purchase or construction, or forming the long-term assetsby other ways.The government grants related to earnings refer to the government grants besides thegovernment grants related to assets.(2) Confirmation principle and confirmation time-point of government grantConfirmation principle of government grant
①The Company can meet all attached conditions for governmental grant;
②The Company is able to receive governmental grant.Government grant may be confirmed on condition that it meets the above conditionssimultaneously.
(3) Measurement for government grant
① If the government grants belong to monetary assets, shall be calculated according to
the received or receivable amount.
② Non-monetary assets of government grants shall be measured by the fair value; if the
fair value cannot be obtained reliably, it shall be measured according to the nominalamount (the nominal amount is RMB 1).(4) Accounting treatment method for government grants
① The government grant related to assets shall, when acquired, be deducted with the
book value of the relevant assets or confirmed as deferred income. If it is confirmed asdeferred income, it shall be divided into gains and losses in stages according to areasonable and systematic method during the service life of the relevant assets. Thegovernmental grants calculated according to the nominal amount shall be directly includedin the current gains and losses.
② Government grant related to the incomes shall be disposed separately according to the
conditions:
(A) If the grants are used to compensate for related expenses or losses in the later periodof the Company, it shall be confirmed as deferred income and included in the current gainsand losses during confirmation of relevant expenses or loss(B) Those used for compensating the related expenses or losses have been incurred shallbe included in current gains and losses directly or relevant offset cost as obtaining.
③ If government grants that include both asset-related and revenue-related parts can be
distinguished, they are treated separately in different parts. If it is difficult to distinguish, itshall be wholly confirmed as government grants related to incomes.
④ Government grants related to the day-to-day operation of the Company shall be
accounted for as other benefits or deducted with relevant costs in accordance with thenature of its economic operations. Government grants unrelated to the daily activities ofenterprise are included in the income and expenditure of non-business activities. If thefinance allocates the discount funds directly to the Company, the Company will deduct therelevant borrowing costs from the corresponding discount.
⑤ If it is necessary to return governmental grants which have been confirmed, it shall be
disposed respectively according to the following conditions:
(A) If the book value of the relevant assets is deducted at the time of initial confirmation,the book value of the assets shall be adjusted.(B) If there is the deferred income concerned, the book balance of the deferred incomeshall be offset against, but the excessive part shall be included in the current gains andlosses.(C) In other circumstances, it shall be directly included in the gains and losses of thecurrent period.26. Deferred income tax assets/deferred income tax liabilitiesThe Company adopts the balance sheet debt method to calculate the income tax.(1) Confirmation of the deferred income tax assets and the deferred income tax liabilities
① When the Company obtains the assets or liabilities, it shall determine its tax basis. On
the balance sheet date, the Company analyses and compares the book value of assets andliabilities with their tax basis, and the book value of assets and liabilities with their taxbasis. If there is temporary balance between the book value of assets and liabilities andtheir tax basis, the Company shall recognize deferred income tax liabilities or deferredincome tax assets respectively for taxable temporary balance or deductible temporarybalance if the relevant temporary balance occurs in the current period and meets theconfirmation conditions. Tax assets.
② Confirmation basis of deferred income tax assets
(A) The Company shall confirm the deferred income tax assets arising from a deductibletemporary balance to the extent of the amount of the taxable income which it is likely toobtain and which can be deducted from the deductible temporary balance. The amount oftaxable income likely to be obtained in the future period includes the amount of taxableincome realized in normal production and operation activities in the future period, and theamount of taxable income increased due to the return of temporary balance of taxableincome during the period of deductible temporary balance.(B) As for any deductible losses and tax deduction that can be carried over to the next
years, the corresponding deferred income tax assets shall be confirmed to the extent thatthe amount of future taxable income to be offset for the deductible loss and tax to belikely obtained.(C) On the balance sheet date, the book value of deferred income tax assets shall bere-checked. If it is unlikely to obtain sufficient taxable income to deduct from the benefitof the deferred income tax asset, the carrying amount of the deferred income tax assetsshall be written down. The write-down amount shall be reversed when it is likely that thesufficient taxable income is available.
③ Confirmation basis of the deferred income tax liabilities
The Company shall confirm the current or past taxable temporary balance that shall bepaid but is not paid as deferred income tax liabilities. But it doesn’t include goodwill andtransaction formed by non- business combination and the temporary balance neitheraffects the accounting profit nor taxable income when transaction incurred.(2) Measurement for the deferred income tax assets and the deferred income tax liabilities
① On the balance sheet date, the deferred income tax assets and deferred income tax
liabilities shall be measured at the applicable tax rate of the period during which the assetsare expected to be recovered or the liabilities are expected to be settled.
② If the applicable tax rate varies, the deferred income tax assets and deferred income
tax liabilities which have been confirmed are re-measured, excluding the deferred incometax assets and deferred income tax liabilities arising from any transactions or eventsdirectly confirmed as the owners' equities, the amount affected by them shall be includedinto the income tax expenses of the current period during which the change occurs.
③ When measuring deferred income tax assets and deferred income tax liabilities, the
Company adopts tax rates and tax basis consistent with the expected way of recoveringassets or paying off debts.
④ The Company shall not discount any deferred income tax asset and deferred income
tax liability.
27. Lease(1). Accounting treatment method of operating leaseA tenant includes the rental payment of operation lease into the relevant cost of assets orcurrent gains and losses according to the straight-line method in each period of the leaseterm. The initial direct costs accrued to the Company shall be included into current gainsand losses. The contingent rental shall be included into the current gains and losses whenit is actually accrued.A lessor includes the assets subject to operating lease in relevant items of its balancesheets in light of the nature of the asset. The rent in operating lease shall be confirmed ascurrent gains and losses during each lease term according to straight-line method. Theinitial direct costs accrued to the Company shall be included into current gains and losses.The depreciation of fixed assets in the operation lease assets shall be withdrawn byadopting depreciation policy of similar asset; other operation lease assets shall beamortized adopting systematic and reasonable method. The contingent rental shall beincluded into gains and losses of the current period when it is actually accrued.(2). Accounting treatment methods of financial leaseAs tenant, on the commencement date of the lease term, the lower one between fairvalue of leased asset and present value of minimum lease payments as account recordvalue of leased asset, and regard the minimum lease payments as account record value oflong-term payables, and their balance shall be treated as the unconfirmed financing costs.The initial direct costs such as commissions, attorney's fees and traveling expenses, stampduties, etc. directly attributable to the leased item incurred during the process of leasenegotiating and signing the leasing agreement shall be included into the rent asset value.The unconfirmed financing costs shall be amortized during each lease term, and thecurrent financing costs shall be confirmed adopting effective interest method. Thecontingent rental shall be included into gains and losses of the current period when it isactually accrued.On the commencement date of the lease term, a lessor recognizes the sum of theminimum lease receipts on the lease commencement date and the initial direct costs asthe entry value in an account of the finance lease values receivable, and record the
un-guaranteed residual value at the same time. The balance between the sum of theminimum lease collection amount, the initial direct expenses and the non-guaranteedresidual value, and the sum of their present values shall be confirmed as the unrealizedfinancing income. The unrealized financing income shall be allocated to each period duringthe lease term. The lessor shall calculate and recognize the financing income at the currentperiod by adopting the effective interest rate method. The contingent rental shall beincluded into the gains and losses of the current period when it is actually accrued.28. Changes of important accounting policies and estimatesImportant accounting policies
| Content and reason for the changes of accounting policies | Note |
| according to the Notice of the Ministry of Finance on the Revision of General Financial Statement Format for Enterprises in 2018 issued on June 15th, 2018, the Company has made the following amendments to the items listed in the financial statements | See below |
The details of the affected items in the financial statements at the beginning of the currentperiod and prior period (December 31st, 2017/ Financial Year 2017) are as follows:
| Before adjustment | After adjustment | ||
| Item | Amount(yuan) | Item | Amount(yuan) |
| notes receivable | 5,010,660.00 | notes receivable and account receivable | 356,948,201.45 |
| account receivable | 351,937,541.45 | ||
| interest receivable | other receivables | 99,240,703.92 | |
| dividends receivable | 8,214,127.94 | ||
| other receivables | 91,026,575.98 | ||
| fixed assets | 1,537,692,913.05 | fixed assets | 1,537,692,913.05 |
| disposal of fixed assets | |||
| construction in progress | 122,640,897.91 | construction in progress | 122,640,897.91 |
| engineering material | |||
| notes payable | 24,553,300.00 | notes payable and accounts payable | 524,321,952.83 |
| accounts payable | 499,768,652.83 | ||
| interest payable | 2,870,840.28 | other payables | 201,709,649.48 |
| dividends payable | 1,470,000.00 | ||
| other payables | 197,368,809.20 | ||
| administration expense | 287,889,069.24 | administration expense | 225,935,973.80 |
| R&D expense | 61,953,095.44 | ||
VI. Tax
1. Categories of taxes and tax rate
| categories | taxation basis | tax rate |
| value-added tax | output VAT--deductable input VAT | 10%、11%、16%、17%( VAT on sales) |
| urban maintenance and construction tax | turnover tax payable | 1%、5%、7% |
| corporate income tax | income tax payable | 15%、20%、25% |
| extra charges of education funds | turnover tax payable | 3% |
| extra charges of local education funds | turnover tax payable | 2% |
2. Tax preferenceA. value-added taxIn accordance with the "Notice on the Exemption of Value-added Tax on Feed Products"(Finance and Taxation No. [2001] 121) and other documents, the sales of feed products ofthe Company and related subsidiaries are exempted from value-added tax.According to the regulation of No.32 Document issued by the Ministry of Finance andTaxation of China in 2018, from May 1st, 2018, the VAT taxable sales of taxpayers, whichwere subject to the original tax rates of 17% and 11%, should be adjusted to 16% and 10%respectively.B. corporate income taxThe Company and related subsidiaries, which are suitable to related government policies,such as receiving the certificates of High-Tech enterprise, the applicable corporate incometax rate will be 15% in the valid period.VII. Notes to the Items of Consolidated Financial Statements
1. Monetary capital
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| cash on hand | 253,687.16 | 3,225,842.47 |
| cash at bank | 888,951,186.81 | 737,455,049.34 |
| other monetary capital | 39,697,879.09 | 8,263,470.99 |
| total | 928,902,753.06 | 748,944,362.80 |
| including: the total amount of funds deposited abroad | 523,693.62 |
Other Note:
Letter of credit guarantee deposits of other monetary capital reached RMB 29,999,881.25yuan, futures margin reached RMB 9,697,997.84 yuan in the end of the period.2. Derivative financial assets
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| futures | 2,042,527.60 | 971,380.80 |
| total | 2,042,527.60 | 971,380.80 |
3. Notes receivable and accounts receivable
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| notes receivable | 13,611,778.44 | 5,010,660.00 |
| accounts receivable | 397,891,678.23 | 351,937,541.45 |
| total | 411,503,456.67 | 356,948,201.45 |
? Notes receivable
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| bank acceptance | 6,442,013.54 | 4,940,660.00 |
| commercial paper | 851,559.80 | 70,000.00 |
| international letter of credit | 6,318,205.10 | |
| total | 13,611,778.44 | 5,010,660.00 |
? Accounts receivablea. Category of accounts receivable
Unit: yuan Currency: RMB
| Category | Closing balance | Opening balance | ||||||||
| Book balance | Bad debt provision | Book value | Book balance | Bad debt provision | Book value | |||||
| Amount | Percentage % | Amount | Withdrawing percentage % | Amount | Percentage % | Amount | Withdrawing percentage % | |||
| the account receivable with amount that is individually significant, withdrawing bad debt provision individually | 35,402,027.84 | 7.09 | 32,693,068.50 | 92.35 | 2,708,959.34 | 1,014,506.01 | 0.25 | 1,014,506.01 | 100.00 | |
| withdrawing bad debt provision on the basis of credit risk grouping | 461,404,961.77 | 92.39 | 66,341,431.88 | 14.38 | 395,063,529.89 | 396,944,611.82 | 99.31 | 45,007,070.37 | 11.34 | 351,937,541.45 |
| the account receivable with amount that is not individually significant, but withdrawing bad debt provision individually | 2,589,233.48 | 0.52 | 2,470,044.48 | 95.40 | 119,189.00 | 1,749,714.57 | 0.44 | 1,749,714.57 | 100.00 | |
| total | 499,396,223.09 | / | 101,504,544.86 | / | 397,891,678.23 | 399,708,832.40 | / | 47,771,290.95 | / | 351,937,541.45 |
? The account receivable with amount that is individually significant, withdrawing bad
debt provision individually
Unit: yuan Currency: RMB
| Account receivable | Closing balance | |||
| Account receivable | Bad debt provision | Withdrawing percentage % | Withdrawing reason | |
| Customer 1 | 23,998,355.83 | 23,998,355.83 | 100.00 | uncollectible |
| Customer 2 | 4,734,285.00 | 4,734,285.00 | 100.00 | uncollectible |
| Customer 3 | 2,942,919.70 | 882,875.91 | 30.00 | according to the estimated losses |
| Customer 4 | 927,022.22 | 278,106.67 | 30.00 | according to the estimated losses |
| Customer 5 | 801,150.00 | 801,150.00 | 100.00 | uncollectible |
| Customer 6 | 691,950.00 | 691,950.00 | 100.00 | uncollectible |
| Customer 7 | 663,606.49 | 663,606.49 | 100.00 | uncollectible |
| Customer 8 | 642,738.60 | 642,738.60 | 100.00 | uncollectible |
| Total | 35,402,027.84 | 32,693,068.50 | / | / |
? Withdrawing bad debt provision according to the aging analysis method
Unit: yuan Currency: RMB
| Aging | Closing balance | ||
| Account receivable | Bad debt provision | Withdrawing percentage % | |
| within 1 year | 378,445,776.46 | 18,919,148.45 | 5.00 |
| 1-2 years | 31,166,657.41 | 3,116,665.76 | 10.00 |
| 2-3 years | 12,478,183.71 | 4,991,273.48 | 40.00 |
| over 3 years | 39,314,344.19 | 39,314,344.19 | 100.00 |
| total | 461,404,961.77 | 66,341,431.88 | 14.38 |
b. Bad debt provision of the current periodDuring the current period, withdrawing bad debt provision of 56,455,151.16yuan,takingback or recovering bad debts provisions of 470.20yuan.c. The actual write-off of accounts receivable in current period
Unit: yuan Currency: RMB
| Item | write-off amount of money |
| actual write-off of accounts receivable | 2,721,427.05 |
? of which, write-off important accounts receivable
Unit: yuan Currency: RMB
| Name | Nature | Write-off amount | Reason | Whether generated by related party transactions |
| Customer 1 | payment of goods | 1,373,549.24 | uncollectible long-term debt | no |
| total | / | 1,373,549.24 | / | / |
d. Top 5 accounts receivable
| Debtor | Relationship | Amount in arrears | Period of arrears | % of total accounts receivable | Bad debt provision |
| 1 | related party | 29,448,163.62 | within 1 year | 5.90 | 1,472,408.18 |
| 2 | non-related party | 23,998,355.83 | 1-2 years | 4.81 | 23,998,355.83 |
| 3 | non-related party | 17,245,437.57 | within 1 year | 3.45 | 862,271.88 |
| 4 | non-related party | 9,125,139.00 | within 1 year: 512,200.00yuan; 1-2 years: 354,260.00yuan; 2-3years: 2,029,958.00yuan; over 3years: 6,228,721.00yuan | 1.83 | 7,101,740.20 |
| 5 | non-related party | 9,017,017.78 | within 1 year | 1.81 | 450,850.89 |
| Total | 88,834,113.80 | 17.80 | 33,885,626.98 |
4. Prepayments? Aging
Unit: yuan Currency: RMB
| Aging | Closing balance | Opening balance | ||
| Amount | Percentage % | Amount | Percentage % | |
| within 1 year | 181,416,954.06 | 97.59 | 256,398,664.92 | 96.31 |
| 1-2 years | 4,482,394.47 | 2.41 | 9,825,665.59 | 3.69 |
| Total | 185,899,348.53 | 100.00 | 266,224,330.51 | 100.00 |
? Top 5 Prepayments
| Company | Relationship | Amount in arear | Reason of un-settlement | Description |
| 1 | non-related party | 10,622,876.93 | not yet been delivered | goods |
| 2 | non-related party | 9,275,184.45 | not yet been delivered | goods |
| 3 | non-related party | 7,417,368.44 | not yet been delivered | goods |
| 4 | non-related party | 7,275,500.00 | not yet been delivered | goods |
| 5 | related party | 7,200,000.00 | not yet been delivered | goods |
| Total | 41,790,929.82 |
5. Other receivables
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| interest receivable | ||
| dividends receivable | 5,481,783.34 | 8,214,127.94 |
| other receivables | 93,515,429.70 | 91,026,575.98 |
| Total | 98,997,213.04 | 99,240,703.92 |
a. Dividends receivable
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| dividend on shares from long-term investment under the cost method | 1,500,000.00 | |
| dividend on shares from long-term investment under the equity method | 5,481,783.34 | 6,714,127.94 |
| Total | 5,481,783.34 | 8,214,127.94 |
b. Other receivables
Unit: yuan Currency: RMB
| Category | Closing balance | Opening balance | ||||||||
| Book balance | Bad debt provision | Book value | Book balance | Bad debt provision | Book value | |||||
| Amount of money | Percentage % | Amount | Withdrawing percentage % | Amount | Percentage % | Amount | Withdrawing percentage % | |||
| other receivable with amount that is individually significant, withdrawing bad debt provision individually | 4,181,664.67 | 3.85 | 4,181,664.67 | 100.00 | ||||||
| withdrawing bad debt provision on the basis of credit risk grouping | 103,993,471.13 | 95.85 | 10,478,041.43 | 10.08 | 93,515,429.70 | 96,710,506.86 | 100.00 | 5,683,930.88 | 5.88 | 91,026,575.98 |
| other receivable with amount that is not individually significant, but withdrawing bad debt provision individually | 324,297.70 | 0.30 | 324,297.70 | 100.00 | ||||||
| Total | 108,499,433.50 | / | 14,984,003.80 | / | 93,515,429.70 | 96,710,506.86 | / | 5,683,930.88 | / | 91,026,575.98 |
? Other receivable with amount that is individually significant at period-end,
withdrawing bad debt provision individually
Unit: yuan Currency: RMB
| Closing balance | ||||
| Company | Other receivable | Bad debt provision | Withdrawing percentage % | Withdrawing reason |
| Company 1 | 2,014,874.40 | 2,014,874.40 | 100.00 | uncollectible |
| Company 2 | 927,562.18 | 927,562.18 | 100.00 | uncollectible |
| Company 3 | 700,000.00 | 700,000.00 | 100.00 | uncollectible |
| Company 4 | 539,228.09 | 539,228.09 | 100.00 | uncollectible |
| Total | 4,181,664.67 | 4,181,664.67 | / | / |
? Bad debt provision is calculated and withdrawn according to aging analysis method
Unit: yuan Currency: RMB
| Aging | Closing balance | ||
| Other receivable | Bad debt provision | Withdrawing Percentage % | |
| within 1 year | 27,791,996.42 | 1,389,599.81 | 5.00 |
| 1-2 years | 72,626,396.82 | 7,262,639.68 | 10.00 |
| 2-3 years | 2,915,459.91 | 1,166,183.96 | 40.00 |
| over 3 years | 659,617.98 | 659,617.98 | 100.00 |
| Total | 103,993,471.13 | 10,478,041.43 | 10.08 |
c. Nature of other receivableUnit:yuan Currency: RMB
| Nature | Closing book balance | Opening book balance |
| general operating receivables | 69,098,131.11 | 66,104,724.74 |
| deposit and security | 8,459,232.04 | 1,891,720.95 |
| export rebates receivable | 83,420.35 | 142,261.17 |
| receivable from disposal of long-lived assets | 2,386,850.00 | 100,000.00 |
| receivable from disposal of investment | 28,471,800.00 | 28,471,800.00 |
| Total | 108,499,433.50 | 96,710,506.86 |
d. Bad debt provision of the current periodDuring the current period, withdrawing bad debt provision of 9,763,541.22yuan, takingback or recovering bad debts provisions of 8,925.00yuan.e. The actual write-off of other receivable in current period
Unit: yuan Currency: RMB
| Item | Write-off amount of money |
| actual write-off amount | 454,543.30 |
f. Top 5 other receivables
Unit: yuan Currency: RMB
| Company | Nature | Closing balance | Aging | % of closing balance of other receivable | Closing balance of bad debt provision |
| 1 | temporary debit | 38,067,493.00 | 1-2 years | 35.09 | 3,806,749.30 |
| 2 | receivable from disposal of investment | 28,471,800.00 | 1-2 years | 26.24 | 2,847,180.00 |
| 3 | temporary debit | 5,000,000.00 | 1-2 years | 4.61 | 500,000.00 |
| 4 | guarantee deposit | 3,900,000.00 | less than 1 year | 3.59 | 195,000.00 |
| 5 | receivable from disposal of assets | 2,386,850.00 | less than 1 year | 2.20 | 119,342.50 |
| Total | / | 77,826,143.00 | / | 71.73 | 7,468,271.80 |
6. Inventorya. Category of inventory
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance | ||||
| Book balance | Falling price reserve | Book value | Book balance | Falling price reserve | Book value | |
| raw material | 597,791,390.18 | 2,023,583.41 | 595,767,806.77 | 562,428,180.20 | 1,329,982.10 | 561,098,198.10 |
| goods in process | 20,992,307.08 | 637,575.55 | 20,354,731.53 | 84,683,366.70 | 84,683,366.70 | |
| finished goods | 601,323,157.89 | 2,482,860.62 | 598,840,297.27 | 491,938,102.91 | 210,251.38 | 491,727,851.53 |
| consumptive biological assets | 180,062,002.46 | 6,188,094.69 | 173,873,907.77 | 56,751,401.07 | 56,751,401.07 | |
| low priced and easily worn articles | 10,842,865.30 | 10,842,865.30 | 9,743,492.07 | 9,743,492.07 | ||
| wrappage | 11,189,583.62 | 11,189,583.62 | 13,996,702.49 | 13,996,702.49 | ||
| Total | 1,422,201,306.53 | 11,332,114.27 | 1,410,869,192.26 | 1,219,541,245.44 | 1,540,233.48 | 1,218,001,011.96 |
b. Inventory falling price reserves
Unit: yuan Currency: RMB
| Item | Opening balance | Increased amount | Reduced amount | Closing balance |
| Withdrawing | Taking back or reselling | |||
| raw material | 1,329,982.10 | 693,601.31 | 2,023,583.41 | |
| goods in process | 637,575.55 | 637,575.55 | ||
| finished goods | 210,251.38 | 2,272,609.24 | 2,482,860.62 | |
| consumptive biological assets | 6,188,094.69 | 6,188,094.69 | ||
| Total | 1,540,233.48 | 9,791,880.79 | 11,332,114.27 |
7. Other current assets
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| available for deducting VAT and prepaid tax | 118,636,045.77 | 103,903,041.75 |
| other | 2,000,000.00 | |
| Total | 118,636,045.77 | 105,903,041.75 |
8. Available-for-sale financial assetsa. Circumstance
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance | ||||
| Book balance | Impairment provision | Book value | Book balance | Impairment provision | Book value | |
| available-for-sale debt instruments: | ||||||
| available-for-sale equity instruments: | 3,680,000.00 | 3,680,000.00 | 3,340,000.00 | 3,340,000.00 | ||
| measured at fair value | ||||||
| measured at cost | 3,680,000.00 | 3,680,000.00 | 3,340,000.00 | 3,340,000.00 | ||
| Total | 3,680,000.00 | 3,680,000.00 | 3,340,000.00 | 3,340,000.00 | ||
b. Available-for-sale financial assets measured at cost in the end of the period
Unit: yuan Currency: RMB
| Investee | Book balance | Shareholding of investee | Cash dividends in current period | |||
| Opening balance | Increase | Decrease | Closing balance | |||
| Beijing Haobang Artificial Insemination Service Co., Ltd. | 100,000.00 | 100,000.00 | 6.10 | 100,000.00 | ||
| Henan Shanghui Feed | 500,000.00 | 500,000.00 | 1.67 | |||
| China-Russia Friendship Association | 10,000.00 | 10,000.00 | 33.00 | |||
| Hengshui Hejia Agriculture and Animal Husbandry | 1,600,000.00 | 1,600,000.00 | 16.00 | |||
| Hengshui Jiarun Agriculture and Animal Husbandry | 1,050,000.00 | 1,050,000.00 | 15.00 | |||
| Shenyang Bonong Weite Animal Health | 80,000.00 | 80,000.00 | 10.00 | |||
| Xi'an Micro Monkey E-commerce | 340,000.00 | 340,000.00 | 10.00 | |||
| Total | 3,340,000.00 | 340,000.00 | 3,680,000.00 | / | 100,000.00 | |
9. Long-term equity investment
Unit: yuan Currency: RMB
| Investee | Opening balance | Changes in the current period | Closing balance | Closing balance of impairment provision | ||||
| Additional investment | Gains or losses on investments recognized under the equity method | Adjustment of other comprehensive income | Cash dividends or profits declared | Withdrawing impairment provision | ||||
| I. Joint Ventures | ||||||||
| Unphung Joint Venture Company | 4,167,616.44 | 4,167,616.44 | ||||||
| Nepal Wellhope Agri-tech Pvt. Ltd. | 7,501,575.10 | 7,501,575.10 | ||||||
| NEXUS WELL-HOPE AGRITECH INTERNATIONAL LIMITED | 6,150,602.09 | 6,150,602.09 | 17,900,000.00 | |||||
| subtotal | 17,819,793.63 | 6,150,602.09 | 11,669,191.54 | 17,900,000.00 | ||||
| II. Associates | ||||||||
| Qingdao Shenfeng | 17,112,831.00 | 1,756,652.64 | 3,000,000.00 | 15,869,483.64 | ||||
| Anshan Jiuguhe Food | 72,090,706.70 | 17,496.00 | 27,389,092.80 | 99,497,295.50 | ||||
| Tai’an Jiuguhe Agriculture | 24,224,527.39 | 30,618.00 | 40,475,117.38 | 64,730,262.77 | ||||
| Linghai Jiuguhe Feed | 18,731,645.36 | 1,000.00 | 15,205,070.45 | 33,937,715.81 | ||||
| Huludao Jiuguhe Food | 41,997,797.00 | 6,000.00 | 15,872,205.94 | 57,876,002.94 | ||||
| Dandong Wellhope Chengsan Food | 31,153,202.05 | 3,613,007.66 | 34,766,209.71 | |||||
| Dandong Wellhope Chengsan Agri-Tech | 24,865,722.20 | 30,304,710.67 | 55,170,432.87 | |||||
| Haicheng New Hongzunda Agri-Tech | 9,683,659.98 | 1,622,064.89 | 11,305,724.87 | |||||
| Beipiao Hongfa Food | 183,100,603.27 | 80,999,857.31 | 12,127,500.00 | 251,972,960.58 | ||||
| Jixi Haitai Food | ||||||||
| Beijing Dahong Hengfeng | 7,561,103.10 | 6,750,000.00 | 2,541,884.08 | 16,852,987.18 | ||||
| Tai'an Jiufeng Agri-Tech | 768,700.85 | 14,574.00 | -285,209.72 | 498,065.13 | ||||
| Schipper(Beijing) | 591,971.91 | 489,689.39 | 1,081,661.30 | |||||
| Shenyang Wenjie Bio-Tech | 11,982,371.23 | 74,654.86 | 12,057,026.09 | |||||
| Huludao Jiuguhe Feed | 7,987,004.96 | 3,000.00 | 17,058,407.88 | 25,048,412.84 | ||||
| Jinzhou Jiufeng Food | 27,183,550.40 | 11,000.00 | 2,807,077.05 | 30,001,627.45 | ||||
| Zhangjiakou Jiahe Agriculture and Animal Husbandry | 62,203,890.42 | -1,446,218.58 | 60,757,671.84 | |||||
| Tai'an Fengjiu Agri-Tech | 402,800.00 | 4,977,508.75 | 5,380,308.75 | |||||
| Anshan Fengsheng Food | 18,919,272.68 | 778,066.92 | 19,697,339.60 | |||||
| Dalian Chengsan Animal Husbandry | 198,477,782.15 | 53,290,054.28 | 251,767,836.43 | |||||
| Tailai Jiahe Agriculture and Animal Husbandry | 33,709,365.63 | -12,554,213.55 | 21,155,152.08 | |||||
| Gongzhuling Corn Purchasing and Storing | 65,890,431.04 | -4,469,304.17 | 61,421,126.87 | |||||
| Lankao Skyland Duck Meat | 32,789,431.19 | 3,744,152.62 | 36,533,583.81 | |||||
| Hainan Nongken Wenfeng Wenchang Chicken | 525,000.00 | -123,085.01 | 401,914.99 |
| Dunhua Wellhope Agri-Tech | 3,000,000.00 | 434,662.23 | 3,434,662.23 | |||||
| Dunhua Fengda Agriculture and Animal Husbandry | 3,000,000.00 | -1,085,107.10 | 1,914,892.90 | |||||
| PT KARKA NUTRI INDUSTRI. | 37,296,600.00 | 1,646,452.33 | -1,957,754.20 | 36,985,298.13 | ||||
| GOLDEN HARVESTA INC. | 60,000,000.00 | 42,281,336.16 | -1,139,942.87 | 686,589.74 | 101,827,983.03 | |||
| Guangrong Xinchuang | 15,090,561.00 | -2,584,730.01 | -34,771.16 | 12,471,059.83 | ||||
| Suizhong Rehen Fishery | 2,926,483.65 | 507,265.26 | 3,433,748.91 | |||||
| Dalian Wellhope Fish Meal | 4,823,481.30 | 510,212.44 | 5,333,693.74 | |||||
| Liaoning Petmate Bio-Tech | 3,310,685.56 | 2,000,000.00 | -281,855.57 | 5,028,829.99 | ||||
| Guangzhou Yikun Trading | 1,126,494.07 | -589,043.03 | 537,451.04 | |||||
| Guangzhou Pulihe Trading | 297,188.73 | -69,383.66 | 227,805.07 | |||||
| Jilin Hengfeng Animal Health Product | 714,000.00 | -529,083.36 | 184,916.64 | |||||
| Shenyang Wanli Sky Agriculture and Animal Husbandry | 1,020,851.71 | 2,657.86 | 1,023,509.57 | |||||
| Daqing Supply and Marketing Wellhope Agri-Tech | 2,725,237.04 | 241,373.28 | 2,966,610.32 | |||||
| subtotal | 1,004,552,592.57 | 73,847,385.16 | 281,184,722.34 | -1,305,935.62 | 15,127,500.00 | 1,343,151,264.45 | ||
| Total | 1,022,372,386.20 | 73,847,385.16 | 281,184,722.34 | -1,305,935.62 | 15,127,500.00 | 6,150,602.09 | 1,354,820,455.99 | 17,900,000.00 |
10. Fixed assets
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| fixed assets | 1,516,702,438.29 | 1,537,692,913.05 |
| disposal of fixed assets | ||
| Total | 1,516,702,438.29 | 1,537,692,913.05 |
? Circumstance of fixed assets
Unit: yuan Currency: RMB
| Item | Buildings and structures | Machinery equipment | Transportation equipment | Other equipment | Total |
| 1. original value | |||||
| A. opening balance | 1,221,370,753.80 | 884,156,477.32 | 94,574,605.36 | 61,142,437.70 | 2,261,244,274.18 |
| B. increased amount | 80,695,124.50 | 96,931,910.98 | 8,272,597.28 | 5,601,227.86 | 191,500,860.62 |
| a. purchased | 84,578,395.62 | 8,272,597.28 | 5,601,227.86 | 98,452,220.76 | |
| b. construction in progress transferred in | 80,695,124.50 | 12,353,515.36 | 93,048,639.86 | ||
| C. decreased amount | 12,424,070.02 | 15,216,836.84 | 5,162,912.93 | 2,839,306.73 | 35,643,126.52 |
| a. disposed or scrapped | 12,405,118.02 | 14,750,912.33 | 5,162,912.93 | 2,149,137.15 | 34,468,080.43 |
| b. business combination decreased | 18,952.00 | 465,924.51 | 690,169.58 | 1,175,046.09 | |
| D. closing balance | 1,289,641,808.28 | 965,871,551.46 | 97,684,289.71 | 63,904,358.83 | 2,417,102,008.28 |
| 2. accumulated depreciation | |||||
| A. opening balance | 255,235,335.89 | 353,926,916.62 | 71,796,352.54 | 39,198,912.79 | 720,157,517.84 |
| B. increased amount | 54,653,271.24 | 80,497,617.08 | 8,948,992.18 | 6,938,912.11 | 151,038,792.61 |
| a. withdrawing | 54,653,271.24 | 80,497,617.08 | 8,948,992.18 | 6,938,912.11 | 151,038,792.61 |
| C. decreased amount | 2,131,161.75 | 7,442,234.27 | 4,391,884.87 | 2,092,369.47 | 16,057,650.36 |
| a. disposed or scrapped | 2,114,131.14 | 7,205,718.15 | 4,391,884.87 | 1,977,477.06 | 15,689,211.22 |
| b. business combination decreased | 17,030.61 | 236,516.12 | 114,892.41 | 368,439.14 | |
| D. closing balance | 307,757,445.38 | 426,982,299.43 | 76,353,459.85 | 44,045,455.43 | 855,138,660.09 |
| 3. impairment provision | |||||
| A. opening balance | 2,739,514.01 | 580,583.41 | 73,745.87 | 3,393,843.29 | |
| B. increased amount | 26,756,559.34 | 15,004,259.49 | 99,538.65 | 6,709.13 | 41,867,066.61 |
| a. withdrawing | 26,756,559.34 | 15,004,259.49 | 99,538.65 | 6,709.13 | 41,867,066.61 |
| C. decreased |
| amount | |||||
| a. disposed or scrapped | |||||
| D. closing balance | 29,496,073.35 | 15,584,842.90 | 99,538.65 | 80,455.00 | 45,260,909.90 |
| 4. book value | |||||
| A. closing book value | 952,388,289.55 | 523,304,409.13 | 21,231,291.21 | 19,778,448.40 | 1,516,702,438.29 |
| B. opening book value | 963,395,903.90 | 529,648,977.29 | 22,778,252.82 | 21,869,779.04 | 1,537,692,913.05 |
11. Construction in progress
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| construction in progress | 255,719,188.30 | 122,640,897.91 |
| engineering material | ||
| Total | 255,719,188.30 | 122,640,897.91 |
a. Circumstance of construction in progress
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance | ||||
| Book balance | Impairment provision | Book value | Book balance | Impairment provision | Book value | |
| Dalian Heyuan-Dayao Hatching Farm | 14,698,247.50 | 14,698,247.50 | 11,150,720.50 | 11,150,720.50 | ||
| Jilin Hefeng-pig farm construction | 11,889,319.05 | 11,889,319.05 | 11,557,389.34 | 11,557,389.34 | ||
| Dalian Zhongjia -workshop renovation project | 18,742,578.01 | 18,742,578.01 | 7,022,657.55 | 7,022,657.55 | ||
| Wellhope- intelligent premix plant construction | 89,135,356.79 | 89,135,356.79 | 38,621,063.26 | 38,621,063.26 | ||
| Weifang Wellhope- plant, office construction | 22,417,652.39 | 22,417,652.39 | ||||
| Fushun Agriculture and Animal Husbandry-pig farm construction | 116,448,215.28 | 116,448,215.28 | 5,638,340.00 | 5,638,340.00 | ||
| Sheyang Wellhope Poultry-broiler raising project | 7,081,876.12 | 7,081,876.12 | ||||
| Other constructions | 4,805,471.67 | 4,805,471.67 | 19,151,198.75 | 19,151,198.75 | ||
| Total | 255,719,188.30 | 255,719,188.30 | 122,640,897.91 | 122,640,897.91 | ||
b. Changes of important constructions in progress in current period
Unit: yuan Currency: RMB
| Project | Budget | Opening balance | Increased amount | Amount transferred in fixed assets | Closing balance | Percentage of accumulated project input accunting for budget % | Progress % | Accumulated amount of capitalized interest | of which: amount of capitalized interest in current period | Capitalization rate of interest for the current period % | Source of funds |
| Dalian Heyuan-Dayao Hatching Farm | 50,000,000.00 | 11,150,720.50 | 3,547,527.00 | 14,698,247.50 | 29.40 | 30.00 | self-raised | ||||
| Jilin Hefeng-pig farm construction | 130,000,000.00 | 11,557,389.34 | 331,929.71 | 11,889,319.05 | 9.15 | 10.00 | self-raised | ||||
| Dalian Zhongjia -workshop renovation project | 40,000,000.00 | 7,022,657.55 | 27,337,518.79 | 15,617,598.33 | 18,742,578.01 | 85.90 | 85.00 | self-raised | |||
| Wellhope- intelligent premix plant construction | 100,000,000.00 | 38,621,063.26 | 50,514,293.53 | 89,135,356.79 | 89.14 | 95.00 | self-raised | ||||
| Weifang Wellhope- plant, office construction | 25,000,000.00 | 22,417,652.39 | -1,860,131.92 | 20,557,520.47 | 82.23 | 100.00 | self-raised | ||||
| Fushun Agriculture and Animal Husbandry-pig farm construction | 160,000,000.00 | 5,638,340.00 | 110,809,875.28 | 116,448,215.28 | 72.78 | 90.00 | self-raised | ||||
| Sheyang Wellhope broiler raising project | 13,000,000.00 | 7,081,876.12 | 5,796,233.67 | 12,878,109.79 | 99.06 | 100.00 | self-raised | ||||
| Total | 518,000,000.00 | 103,489,699.16 | 196,477,246.06 | 49,053,228.59 | 250,913,716.63 | / | / | / | / |
12. Productive biological asset? Productive biological assets using cost measurement model
Unit: yuan Currency: RMB
| Item | Animal husbandry | Total | |
| Parent stock(broiler) | Parent stock(pig) | ||
| 1. original value | |||
| A. opening balance | 20,717,818.79 | 3,165,003.86 | 23,882,822.65 |
| B. increased amount | 34,602,390.55 | 1,219,486.71 | 35,821,877.26 |
| a. externally purchased | 34,602,390.55 | 1,219,486.71 | 35,821,877.26 |
| C. decreased amount | 25,621,868.41 | 442,330.14 | 26,064,198.55 |
| a. disposed | 25,621,868.41 | 442,330.14 | 26,064,198.55 |
| D. closing balance | 29,698,340.93 | 3,942,160.43 | 33,640,501.36 |
| 2. accumulated depreciation | |||
| A. opening balance | 4,180,855.15 | 420,111.35 | 4,600,966.50 |
| B. increased amount | 15,023,051.95 | 752,370.02 | 15,775,421.97 |
| a. withdrawing | 15,023,051.95 | 752,370.02 | 15,775,421.97 |
| C. decreased amount | 17,028,824.06 | 191,857.93 | 17,220,681.99 |
| a. disposed | 17,028,824.06 | 191,857.93 | 17,220,681.99 |
| D. closing balance | 2,175,083.04 | 980,623.44 | 3,155,706.48 |
| 3. impairment provision | |||
| 4. book value | |||
| A. closing book value | 27,523,257.89 | 2,961,536.99 | 30,484,794.88 |
| B. opening book value | 16,536,963.64 | 2,744,892.51 | 19,281,856.15 |
13. Intangible assets
Unit: yuan Currency: RMB
| Item | Land use rights | Computer software and other | Total |
| 1. original value | |||
| A. opening balance | 240,238,664.76 | 7,942,666.70 | 248,181,331.46 |
| B. increased amount | 4,375,624.14 | 2,716,507.21 | 7,092,131.35 |
| a. purchased | 4,375,624.14 | 2,716,507.21 | 7,092,131.35 |
| C. decreased amount | 3,754,400.00 | 1,208,165.81 | 4,962,565.81 |
| a. disposed | 3,754,400.00 | 43,117.26 | 3,797,517.26 |
| b. decreased by business combination | 1,165,048.55 | 1,165,048.55 | |
| D. closing balance | 240,859,888.90 | 9,451,008.10 | 250,310,897.00 |
| 2. accumulated amortization | |||
| A. opening balance | 35,085,023.03 | 3,184,975.61 | 38,269,998.64 |
| B. increased amount | 5,020,742.86 | 934,973.93 | 5,955,716.79 |
| a. withdrawing | 5,020,742.86 | 934,973.93 | 5,955,716.79 |
| C. decreased amount | 250,293.20 | 52,465.52 | 302,758.72 |
| a. disposed | 250,293.20 | 42,756.78 | 293,049.98 |
| b. decreased by business combination | 9,708.74 | 9,708.74 | |
| D. closing balance | 39,855,472.69 | 4,067,484.02 | 43,922,956.71 |
| 3. impairment provision | |||
| 4. book value | |||
| A. closing book value | 201,004,416.21 | 5,383,524.08 | 206,387,940.29 |
| B. opening book value | 205,153,641.73 | 4,757,691.09 | 209,911,332.82 |
14. Goodwill? Original value of goodwill
Unit: yuan Currency: RMB
| Invested entity or matters forming goodwill | Opening balance | Increased amount | Decreased amount | Closing balance |
| Formed by business combination | Disposal | |||
| formed by business combination not under the same control | 290,425.67 | 290,425.67 | ||
| Total | 290,425.67 | 290,425.67 |
15. Long-term prepaid expenses
Unit: yuan Currency: RMB
| Item | Opening balance | Increased amount | Amortized amount | Other decreased amount | Closing balance |
| broiler cages | 157,550,962.21 | 7,111,343.09 | 33,258,055.69 | 131,404,249.61 | |
| land lease fee | 29,198,489.06 | 3,267,015.00 | 3,553,580.96 | 28,911,923.10 | |
| fixed assets improvement | 15,542,794.30 | 1,755,209.56 | 2,791,899.84 | 14,506,104.02 | |
| other | 2,968,784.31 | 2,658,249.48 | 2,047,221.55 | 498,721.15 | 3,081,091.09 |
| Total | 205,261,029.88 | 14,791,817.13 | 41,650,758.04 | 498,721.15 | 177,903,367.82 |
16. Deferred income tax assets/deferred income tax liabilitiesa. Deferred income tax assets that are not offset
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance | ||
| Deductible temporary difference | Deferred income tax assets | Deductable temporary difference | Deferred income tax assets | |
| provision for the impairment of assets | 123,490,892.94 | 24,192,802.11 | 65,292,755.35 | 12,744,307.64 |
| internal transaction unrealized profit | 24,135,874.13 | 4,740,032.12 | 29,320,452.83 | 5,886,599.44 |
| deductible losses | 68,718,144.98 | 16,691,453.47 | ||
| changes in fair value | 629,750.00 | 94,462.50 | 260,170.00 | 39,025.50 |
| deferred income | 8,291,717.40 | 1,330,429.35 | 7,425,000.00 | 1,113,750.00 |
| Total | 156,548,234.47 | 30,357,726.08 | 171,016,523.16 | 36,475,136.05 |
b. Unrecognized deferred income tax asset details
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| deductible temporary difference | 42,034,648.58 | |
| deductible losses | 200,765,735.60 | 104,517,476.96 |
| Total | 242,800,384.18 | 104,517,476.96 |
c. The deductible losses that were unrecognized as deferred income tax assets will be
due in the following years
Unit: yuan Currency: RMB
| Year | Closing balance | Opening balance | Note |
| 2019 | 30,849,456.75 | 24,934,700.09 | |
| 2020 | 25,063,480.88 | 22,385,864.80 | |
| 2021 | 43,093,813.02 | 27,219,543.49 | |
| 2022 | 41,661,829.48 | 29,977,368.58 | |
| 2023 | 51,299,045.25 | ||
| 2027 | 2,082,969.89 | ||
| 2028 | 6,715,140.33 | ||
| Total | 200,765,735.60 | 104,517,476.96 | / |
17. Other non-current assets
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| prepayments of long-lived assets | 102,807,235.63 | 32,362,984.62 |
| prepayments of broiler raising fees to contract farms | 94,690,452.55 | |
| Total | 197,497,688.18 | 32,362,984.62 |
18. Short-term borrowing
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| pledged loan | ||
| mortgage loan | ||
| guaranteed loan | 100,460,168.49 | 20,000,000.00 |
| credit loan | 1,247,230,000.00 | 1,171,240,000.00 |
| Total | 1,347,690,168.49 | 1,191,240,000.00 |
Note: The guaranteed loan is the bank loan guaranteed by the Company for its subsidiarycompany, Lingyuan Wellhope Agri-Tech; the pledged loan is the balance of import billadvance of Liaoning Expert Trading Company, one of the Company's subsidiaries.
19. Notes payable and accounts payable
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| notes payable | 24,553,300.00 | |
| accounts payable | 572,729,779.31 | 499,768,652.83 |
| Total | 572,729,779.31 | 524,321,952.83 |
? Notes payable
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| commercial paper | ||
| bank acceptance | ||
| letter of credit | 24,553,300.00 | |
| Total | 24,553,300.00 |
? Accounts payable
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| accounts payable relating to purchasing goods and expenses | 541,799,353.46 | 479,134,295.09 |
| accounts payable relating to long-lived assets | 30,930,425.85 | 20,634,357.74 |
| Total | 572,729,779.31 | 499,768,652.83 |
20. Advance receipt
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| sales proceeds | 161,173,916.67 | 181,035,916.81 |
| Total | 161,173,916.67 | 181,035,916.81 |
21. Payroll payablea. Payroll payable list
Unit: yuan Currency: RMB
| Item | Opening balance | Increased amount | Decreased amount | Closing balance |
| 1. short-term benefits | 38,707,879.68 | 537,627,728.10 | 527,689,845.19 | 48,645,762.59 |
| 2. post-employeement benefits- defined contribution plan | 2,541,613.61 | 45,572,636.80 | 47,028,082.65 | 1,086,167.76 |
| 3. termination benefits | 958,154.29 | 958,154.29 | ||
| 4. other benefits due within one year | ||||
| Total | 41,249,493.29 | 584,158,519.19 | 575,676,082.13 | 49,731,930.35 |
b. Short-term benefits
Unit: yuan Currency: RMB
| Item | Opening balance | Increased amount | Decreased amount | Closing balance |
| 1. wages, bonuses, allowances and subsidies | 37,698,337.56 | 477,332,371.83 | 468,565,499.28 | 46,465,210.11 |
| 2. staff benefits expenses | 26,275,214.80 | 26,275,214.80 | ||
| 3. social insurance charges | 520,033.49 | 21,936,398.40 | 22,024,785.61 | 431,646.28 |
| including: medical insurance premiums | 359,093.72 | 18,549,540.19 | 18,536,979.45 | 371,654.46 |
| occupational injury insurance premium | 106,265.04 | 1,676,152.39 | 1,748,485.38 | 33,932.05 |
| birth insurance premium | 54,674.73 | 1,710,705.82 | 1,739,320.78 | 26,059.77 |
| 4. housing provident fund | 109,257.00 | 7,556,449.53 | 7,542,673.53 | 123,033.00 |
| 5. employee labor union dues, employee education expense | 380,251.63 | 3,258,618.30 | 3,265,648.68 | 373,221.25 |
| 6. short-term paid absences | ||||
| 7. short-term profit sharing plan | ||||
| 8. other short-term benefits | 1,268,675.24 | 16,023.29 | 1,252,651.95 | |
| Total | 38,707,879.68 | 537,627,728.10 | 527,689,845.19 | 48,645,762.59 |
c. Defined contribution plan
Unit: yuan Currency: RMB
| Item | Opening balance | Increased amount | Decreased amount | Closing balance |
| basic endowment insurance | 2,426,396.50 | 42,967,876.44 | 44,334,943.77 | 1,059,329.17 |
| unemployment insurance expense | 115,217.11 | 2,604,760.36 | 2,693,138.88 | 26,838.59 |
| enterprise annuity | ||||
| Total | 2,541,613.61 | 45,572,636.80 | 47,028,082.65 | 1,086,167.76 |
22. Tax payable
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| value-added tax | 799,254.04 | 1,217,397.59 |
| corporate income tax | 25,166,379.53 | 35,737,626.45 |
| individual income tax | 422,794.82 | 1,138,812.81 |
| city maintenance and construction tax | 107,516.70 | 77,797.35 |
| extra charges of education funds | 78,629.58 | 60,938.74 |
| house property tax | 669,396.33 | 677,589.57 |
| city and town land use tax | 1,088,230.44 | 964,990.19 |
| stamp tax | 322,623.83 | 418,704.78 |
| other | 89,967.45 | 42,737.91 |
| Total | 28,744,792.72 | 40,336,595.39 |
23. Other payables
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| interest payable | 1,784,257.05 | 2,870,840.28 |
| dividends payable | 526,000.00 | 1,470,000.00 |
| other payables | 307,226,938.07 | 197,368,809.20 |
| Total | 309,537,195.12 | 201,709,649.48 |
? Interest payable
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| interests on long-term loan that pay interests periodically and repay the principal due at maturity | 69,376.61 | 52,777.78 |
| interest payable of short-term borrowing | 1,714,880.44 | 2,818,062.50 |
| Total | 1,784,257.05 | 2,870,840.28 |
? Dividends payable
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| common stock dividends | 526,000.00 | 1,470,000.00 |
| Total | 526,000.00 | 1,470,000.00 |
? Other payablesa. Other payables by nature
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| operational payables relating to expenses and transactions | 138,332,488.07 | 94,888,809.20 |
| investment related payables | 98,205,700.00 | 102,480,000.00 |
| non-restricted stock repurchase obligations | 70,688,750.00 | |
| Total | 307,226,938.07 | 197,368,809.20 |
b. Important other payables with over 1 year aging
Unit: yuan Currency: RMB
| Item | Closing balance | Reason |
| Xinjiang Heyin Growth Equity Investment Partnership | 58,205,700.00 | Not up to the agreed payment date |
| Total | 58,205,700.00 | / |
24. Non-current liability due within 1 year
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| long-term borrowings due within 1 year | 20,000,000.00 | 20,000,000.00 |
| long-term payables due within 1 year | 12,999,999.96 | |
| Total | 32,999,999.96 | 20,000,000.00 |
25. Long-term loan
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| pledged loan | ||
| mortgage loan | ||
| guaranteed loan | ||
| credit loan | 118,500,000.00 | 20,300,000.00 |
| Total | 118,500,000.00 | 20,300,000.00 |
26. Long-term payable
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| long-term payable | 23,345,833.38 | |
| special payable | ||
| Total | 23,345,833.38 |
? Long-term payable by nature
Unit: yuan Currency: RMB
| Item | Opening balance | Closing balance |
| accrued financial lease outlay | 23,345,833.38 |
27. Deferred income
Unit: yuan Currency: RMB
| Item | Opening balance | Increased amount | Decreased amount | Closing balance | reason |
| government grant | 19,404,060.24 | 3,000,000.00 | 2,151,092.83 | 20,252,967.41 | |
| total | 19,404,060.24 | 3,000,000.00 | 2,151,092.83 | 20,252,967.41 | / |
Projects receiving government grants：
Unit: yuan Currency: RMB
| Liability item | Opening balance | Amount of newly increased grant | Included in the non- operating income | Included in other income | Closing balance | Related to assets/ related to income |
| grant for Lingyuan Wellhope 100,000 tons ruminant feed project | 4,500,000.00 | 500,000.00 | 4,000,000.00 | related to asset | ||
| grant for Lingyuan Wellhope corn purchasing and storage barn | 3,000,000.00 | 300,000.00 | 2,700,000.00 | related to asset | ||
| sci-tech grant for Changchun Wellhope feed R&D project | 1,779,060.24 | 912,342.83 | 866,717.41 | related to income | ||
| Shenyang city central industrial transformation and upgrading funds | 10,125,000.00 | 438,750.00 | 9,686,250.00 | related to asset | ||
| Lingyuan Wellhope 50,000 tons organic fertilizer project | 3,000,000.00 | 3,000,000.00 | related to asset | |||
| Total | 19,404,060.24 | 3,000,000.00 | 2,151,092.83 | 20,252,967.41 | / |
28. Share capital
Unit: yuan Currency: RMB
| Opening balance | Changes(increase/decrease) | Closing balance | ||
| Issuing new shares | Subtotal | |||
| Total shares | 831,176,469.00 | 14,575,000.00 | 14,575,000.00 | 845,751,469.00 |
Note: In December 2018, the Company issued 14.575 million restricted shares to 372natural persons at the price of 4.85 yuan per share, totally raising RMB 70,688,750.00yuan, including RMB 14.575 million yuan of share capital and RMB 56.1138 million yuan ofcapital reserve.
29. Capital reserve
Unit: yuan Currency: RMB
| Item | Opening balance | Increased amount | Decreased amount | Closing balance |
| capital premium (stock premium) | 99,261,843.96 | 56,113,750.00 | 7,880,503.26 | 147,495,090.70 |
| other capital reserves | 4,331,456.10 | 1,997,989.57 | 6,329,445.67 | |
| Total | 103,593,300.06 | 58,111,739.57 | 7,880,503.26 | 153,824,536.37 |
Note: The capital premium increased in current period due to issuing restricted shares,which increased RMB 56,113,750 yuan, the decreased amount of capital premium due tothe changes in the Company's equity share in its subsidiaries; the increase of other capitalreserves due to stock incentive plan executed by the Company, its recognized capitalreserve in current period.
30. Treasury stock
Unit: yuan Currency: RMB
| Item | Opening balance | Increased amount | Decreased amount | Closing balance |
| repurchase of restricted stock | 70,688,750.00 | 70,688,750.00 | ||
| Total | 70,688,750.00 | 70,688,750.00 |
31. Other comprehensive income
Unit: yuan Currency: RMB
| Item | Opening balance | Amount of current period | Closing balance | ||||
| Pre-tax amount | Deduct: amount that included in other comprehensive income in prior period and transferred in current gains or losses | Deduct: income tax expense | After-tax amount attributable to parent company | After-tax amount attributable to non-controlling interest | |||
| other comprehensive income that cannot be reclassified into gains or losses | |||||||
| other comprehensive income that will be reclassified into gains or losses | -1,325,947.22 | -1,316,942.00 | -9,005.22 | -1,316,942.00 | |||
| including: other comprehensive | -1,305,935.62 | -1,305,935.62 | -1,305,935.62 | ||||
| income that can be transferred in gains or losses under the equity method | |||||||
| converted difference of foreign currency financial statements | -20,011.60 | -11,006.38 | -9,005.22 | -11,006.38 | |||
| Total other comprehensive income | -1,325,947.22 | -1,316,942.00 | -9,005.22 | -1,316,942.00 |
32. Surplus reserve
Unit: yuan Currency: RMB
| Item | Opening balance | Increased amount | Decreased amount | Closing balance |
| statutory surplus reserve | 232,486,459.89 | 40,396,460.30 | 272,882,920.19 | |
| Total | 232,486,459.89 | 40,396,460.30 | 272,882,920.19 |
33. Undistributed profit
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| undistributed profit at the end of prior period before adjustment | 2,223,048,013.93 | 1,867,605,664.06 |
| adjust the total amount of undistributed profit at the beginning of current period | ||
| undistributed profit at the beginning of current period after adjustment | 2,223,048,013.93 | 1,867,605,664.06 |
| add: net profit attributable to the owners of the parent company in current period | 551,928,618.35 | 471,024,473.92 |
| deduct: appropriation of statutory surplus reserve | 40,396,460.30 | 32,464,477.15 |
| appropriation of discretionary surplus reserve | ||
| extraction of general risk provisions | ||
| common stock dividends payable | 83,117,646.90 | 83,117,646.90 |
| dividends of common stock transferred to capital | ||
| undistributed profit at the end of current period | 2,651,462,525.08 | 2,223,048,013.93 |
34. Operating revenue and operating cost
Unit: yuan Currency: RMB
| Item | 2018 | 2017 | ||
| operating revenue | operating cost | operating revenue | operating cost | |
| core businesses | 15,742,792,774.42 | 14,415,344,771.04 | 13,666,948,105.72 | 12,499,623,655.73 |
| other businesses | 8,005,346.25 | 5,952,906.36 | 28,895,352.95 | 21,851,336.33 |
| Total | 15,750,798,120.67 | 14,421,297,677.40 | 13,695,843,458.67 | 12,521,474,992.06 |
35. Taxes and surtaxes
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| city maintenance and construction tax | 940,097.90 | 928,068.01 |
| extra charges of education funds | 676,683.45 | 716,079.93 |
| house property tax | 6,978,501.15 | 7,198,198.73 |
| land use tax | 10,539,729.72 | 11,224,445.50 |
| vehicle and vessel use tax | 42,942.77 | 188,558.20 |
| stamp tax | 5,211,980.74 | 4,567,795.72 |
| environmental protection tax | 460,973.56 | 44,897.20 |
| Total | 24,850,909.29 | 24,868,043.29 |
36. Sales expenses
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| payroll | 162,608,694.49 | 150,135,672.01 |
| travelling expense | 105,628,967.15 | 107,316,673.52 |
| transportation and handling expense and vehicle expense | 81,816,784.59 | 84,350,851.96 |
| service fee | 15,601,209.62 | 13,617,003.46 |
| business entertainment expense | 15,315,493.59 | 14,067,947.63 |
| business advertising expense | 10,584,270.74 | 9,981,841.50 |
| lease expense | 5,970,164.05 | 5,065,660.80 |
| meeting expenditure | 4,100,827.77 | 5,008,857.71 |
| sales service charge | 2,780,212.04 | 3,690,800.64 |
| office and communication fee | 2,704,622.28 | 3,259,942.14 |
| subtotal of other item | 13,535,507.27 | 15,011,402.69 |
| Total | 420,646,753.59 | 411,506,654.06 |
37. Administration expense
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| payroll | 102,981,629.02 | 104,715,008.58 |
| depreciation | 35,198,583.05 | 35,471,714.50 |
| office and communication fee | 12,103,084.06 | 14,236,052.41 |
| travelling expense | 8,776,171.14 | 9,639,842.67 |
| repair charge | 5,451,152.88 | 8,308,731.47 |
| lease expense | 5,177,268.87 | 3,808,895.44 |
| amortization of intangible assets | 6,328,067.44 | 6,325,602.00 |
| business entertainment expense | 5,231,882.50 | 6,031,858.29 |
| water and electricity | 3,641,887.47 | 3,615,525.41 |
| service fee | 5,654,971.79 | 6,049,956.06 |
| heating fee | 4,116,865.94 | 3,224,752.80 |
| other | 33,280,294.03 | 24,508,034.17 |
| Total | 227,941,858.19 | 225,935,973.80 |
38. R&D expenditure
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| payroll | 20,252,008.67 | 17,410,840.97 |
| design testing fee | 28,296,665.97 | 33,764,313.78 |
| material and appliance charge | 5,253,593.05 | 2,380,269.20 |
| travel expense | 3,364,720.06 | 3,420,910.73 |
| depreciation and amortization charge | 3,094,972.99 | 4,853,526.06 |
| Subtotal of other item | 838,388.54 | 123,234.70 |
| Total | 61,100,349.28 | 61,953,095.44 |
39. Financial expense
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| interest expenditure | 66,635,982.41 | 64,240,983.00 |
| deduct: interest income | -4,414,083.01 | -4,594,760.63 |
| add: exchange loss | 9,638,461.65 | -995,270.32 |
| service charge | 3,040,576.37 | 2,203,448.46 |
| Total | 74,900,937.42 | 60,854,400.51 |
40. Impairment loss on assets
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| bad debt losses | 66,218,692.38 | 19,224,503.55 |
| inventory falling price losses | 9,791,880.79 | 671,647.40 |
| available-for-sale financial assets impairment losses | ||
| held-to-maturity investments impairment losses | ||
| long-term equity investments impairment losses | 6,150,602.09 | 11,749,397.91 |
| investment property impairment losses | ||
| fixed assets impairment losses | 41,867,066.61 | |
| Total | 124,028,241.87 | 31,645,548.86 |
41. Other income
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| government grant charged in | 14,165,463.22 | 34,675,966.99 |
| Total | 14,165,463.22 | 34,675,966.99 |
42. Return on investment
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| return on long-term equity investment measured by the equity method | 281,184,722.34 | 108,860,200.54 |
| income from disposal of long-term equity investment | 1,374,325.45 | 14,084,674.20 |
| income from disposal of financial assets which are measured at fair value and the changes included in current gains or losses | 3,190,994.43 | 82,305.33 |
| income from available-for-sale financial assets, etc. | 100,000.00 | 100,000.00 |
| after losing control, gains obtained from remeasuring residual | 164,912.02 | 11,891,683.97 |
| equity at fair value | ||
| other | 36,098,132.19 | |
| Total | 286,014,954.24 | 171,116,996.23 |
43. Income from changes in fair value
Unit: yuan Currency: RMB
| Source of income from changes in fair value | 2018 | 2017 |
| financial assets measured at fair value and the changes included in current gains or losses | -369,580.00 | -263,470.00 |
| including: income from the changes in fair value of derivative financial instruments | -369,580.00 | -263,470.00 |
| Total | -369,580.00 | -263,470.00 |
44. Income from assets disposal
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| gains or losses from disposal of fixed assets | -1,939,342.38 | -1,331,137.12 |
| gains or losses from disposal of construction in progress | -1,496,120.61 | |
| gains or losses from disposal of intangible assets | -1,817,161.80 | |
| Total | -5,252,624.79 | -1,331,137.12 |
45. Non-operating Income
Unit: yuan Currency: RMB
| Item | 2018 | 2017 | Amount included in current non-recurring gains and losses |
| Total gains or losses from disposal of non-current assets | 247,406.47 | 247,406.47 | |
| of which: gains or losses from disposal of fixed assets | 247,406.47 | 247,406.47 | |
| government grants | 5,305,777.88 | 20,716,339.00 | 5,305,777.88 |
| inventory profit gains | 351,193.28 | 525,812.25 | 351,193.28 |
| insurance indemnity income | 2,001,544.16 | 2,001,544.16 | |
| other | 2,448,205.40 | 1,296,535.65 | 2,448,205.40 |
| Total | 10,354,127.19 | 22,538,686.90 | 10,354,127.19 |
? Government grants included in current gains and losses
Unit: yuan Currency: RMB
| Item | 2018 | 2017 | Related to assets/related to earnings |
| foreign trade industry development special fund of Shenyang Finance Bureau | 2,011,900.00 | related to earnings | |
| Shenyang Mayor Quality Award | 500,000.00 | related to earnings | |
| Subtotal for other projects under 500,000 yuan | 2,793,877.88 | related to earnings | |
| Linzhang county small and medium-sized enterprises support funds | 816,339.00 | related to earnings | |
| 2016 Liaoning Science and Technology Award | 1,000,000.00 | related to earnings |
| Lankao County Science and Technology Award | 13,300,000.00 | related to earnings | |
| tax contribution grants of Shenbei New District | 5,000,000.00 | related to earnings | |
| commodity grain province reward funds of Jilin Province | 600,000.00 | related to earnings | |
| Total | 5,305,777.88 | 20,716,339.00 | / |
46. Non-operating expenditure
Unit: yuan Currency: RMB
| Item | 2018 | 2017 | Amount included in current non-recurring gains and losses |
| Total losses from disposal of non-current assets | 4,698,080.39 | 4,698,080.39 | |
| including: losses from disposal of fixed assets | 4,698,080.39 | 4,698,080.39 | |
| losses from debt restructuring | 1,147,367.47 | 1,147,367.47 | |
| external donations | 1,064,405.00 | 750,424.15 | 1,064,405.00 |
| abnormal loss | 590,640.65 | 1,213,232.32 | 590,640.65 |
| amercement outlay | 632,789.35 | 790,739.23 | 632,789.35 |
| other | 1,270,961.76 | 308,013.80 | 1,270,961.76 |
| Total | 9,404,244.62 | 3,062,409.50 | 9,404,244.62 |
47. Income tax expense
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| income tax expense | 80,735,273.83 | 91,056,507.61 |
| deferred income tax expense | 6,115,061.17 | -9,731,936.77 |
| Total | 86,850,335.00 | 81,324,570.84 |
? Adjustment procedure for accounting profit and income tax expense
Unit: yuan Currency: RMB
| Item | 2018 |
| Total profit | 691,539,488.87 |
| income tax expenses calculated at statutory/applicable tax rates | 103,730,923.33 |
| effects of subsidiaries that are subject to different tax rates | -11,184,460.11 |
| effects of adjusting the income tax on previous periods | 281,331.03 |
| effects of non-taxable income | -42,571,261.71 |
| effects of non-deductible costs, expenses and losses | 3,230,600.21 |
| the impact of using deductible losses of unrecognized deferred income tax assets of prior period | -1,199,210.09 |
| effects of deductible temporary difference or deductible loss of unrecognized deferred income tax assets of current period | 23,301,341.47 |
| calculation and deduction of R&D expenditure | -4,416,289.76 |
| effects of transferring back the deductible loss of recognized deferred income tax assets of prior period on the income tax expense | 15,677,360.63 |
| income tax expense | 86,850,335.00 |
48. Cash flow statementa. Cash received from other activities related to operating
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| government grants | 20,320,148.27 | 43,371,366.23 |
| interest income | 4,414,083.01 | 4,594,760.63 |
| subtotal of transactions and other | 101,879,318.01 | 111,530,793.59 |
| Total | 126,613,549.29 | 159,496,920.45 |
b. Cash paid to other activities related to operating
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| travelling expense | 114,405,138.29 | 116,956,516.19 |
| transportation and handling expense and vehicle expense | 81,816,784.59 | 78,316,811.20 |
| R&D expenditure | 37,753,367.62 | 40,423,338.01 |
| business entertainment expense | 20,547,376.09 | 20,099,805.92 |
| office and communication fee | 14,807,706.34 | 17,495,994.55 |
| Service fee | 21,256,181.41 | 19,666,959.52 |
| other operating expenses | 90,976,916.72 | 69,406,198.93 |
| transactions and other | 103,298,594.82 | 62,832,173.24 |
| Total | 484,862,065.88 | 425,197,797.56 |
c. Cash received from other activities related to investment
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| futures trading security deposit | 2,115,056.67 | |
| government grants related to assets | 13,125,000.00 | |
| finance products | ||
| Total | 15,240,056.67 |
d. Cash received from other activities related to financing
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| subsidiaries receive capital increase from non-controlling interests in advance | 40,000,000.00 | |
| cash received from disposal of subsidiaries' shareholdings | 1,131,246.21 | |
| Total | 41,131,246.21 |
e. Cash paid to other activities related to financing
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| cash paid to buying non-controlling interests of the subsidiary | 25,900,000.00 | 13,216,000.00 |
| Total | 25,900,000.00 | 13,216,000.00 |
49. Further information of cash flow statementa. Further information
Unit: yuan Currency: RMB
| Further information | 2018 | 2017 |
| 1. adjust net profit to cash flow from operating activities | ||
| Net profit | 604,689,153.87 | 499,954,813.31 |
| add: assets impairment provision | 124,028,241.87 | 31,645,548.86 |
| depreciation of fixed assets, depletion of oil and gas assets, depreciation of productive biological assets | 166,814,214.58 | 160,997,175.49 |
| amortization of intangible assets | 5,955,716.79 | 6,325,602.00 |
| amortization of long-term unamortized expense | 41,650,758.04 | 32,360,527.63 |
| losses on disposal of fixed assets, intangible assets and other long-term assets | 5,252,624.79 | 1,331,137.12 |
| losses on discarding of fixed assets | 4,450,673.92 | |
| losses due to changes in fair value | 369,580.00 | 263,470.00 |
| financial expense | 76,778,102.85 | 65,731,717.81 |
| investment losses | -286,014,954.24 | -171,116,996.23 |
| decrease of deferred income tax assets | 6,115,061.17 | -9,723,473.02 |
| increase of deferred income tax liabilities | -8,463.75 | |
| decrease of inventory | -202,815,701.27 | -77,705,967.25 |
| decrease of operating receivables | -168,481,074.50 | -116,287,839.01 |
| increase of operating receivables | 60,557,196.59 | 189,995,794.72 |
| other | 62,055,321.13 | -2,372,676.93 |
| net cash flow from operating activities | 501,404,915.59 | 611,390,370.75 |
| 2. major investing and financing activities that do not involve cash receipts and payments | ||
| 3. net changes in cash and cash equivalents | ||
| closing balance of cash | 889,204,873.97 | 740,680,891.81 |
| deduct: opening balance of cash | 740,680,891.81 | 707,314,594.46 |
| add: closing balance of cash equivalent | ||
| deduct: opening balance of cash equivalent | ||
| net increase in cash and cash equivalents | 148,523,982.16 | 33,366,297.35 |
b. Net cash received from disposal of subsidiaries in current period
Unit: yuan Currency: RMB
| Amount | |
| cash or cash equivalents received from disposal of subsidiaries during the current period | 3,072,000.00 |
| including: Wuwei Wellhope Feed | 12,000.00 |
| Xi'an Micro Monkey E-commerce | 3,060,000.00 |
| deduct: cash and cash equivalents held by the subsidiary on the date of losing control | 18,286.09 |
| including: Wuwei Wellhope Feed | 1,048.35 |
| Xi'an Micro Monkey E-commerce | 17,237.74 |
| add: cash or cash equivalents received in current period from disposal of subsidiaries during previous periods. | |
| including: Wuwei Wellhope Feed | |
| Xi'an Micro Monkey E-commerce | |
| net cash received from disposal of subsidiaries | 3,053,713.91 |
c. Cash and cash equivalents
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| 1. cash | 889,204,873.97 | 740,680,891.81 |
| including: cash on hand | 253,687.16 | 3,225,842.47 |
| bank deposits available for payment at any time | 888,951,186.81 | 737,455,049.34 |
| 2. cash equivalent | ||
| 3. closing balance of cash and cash equivalents | 889,204,873.97 | 740,680,891.81 |
50. Assets in which ownership or use rights are restricted
Unit: yuan Currency: RMB
| Item | Closing book value | Reason for restriction |
| monetary capital | 9,697,997.84 | futures margin |
| monetary capital | 29,999,881.25 | L/C guarantee deposit |
| Total | 39,697,879.09 | / |
51. Foreign currency monetary items
Unit: yuan
| Item | Foreign currency closing balance | Translating exchange rate | Closing balance translated into RMB |
| monetary capital | 4,025,773.21 | ||
| including: US dollar | 244,777.55 | 6.8632 | 1,679,957.28 |
| Euro | 10.56 | 7.8473 | 82.90 |
| Hong Kong dollar | 2,079,478.90 | 0.8762 | 1,822,039.41 |
| Ruble | 5,311,294.28 | 0.0986 | 523,693.62 |
| accounts receivable | 9,719,009.23 | ||
| including: US dollar | 49,072.00 | 6.8632 | 336,790.95 |
| Hong Kong dollar | 10,707,850.13 | 0.8762 | 9,382,218.28 |
| short-term borrowing | 80,460,168.49 | ||
| including: US dollar | 11,723,418.88 | 6.8632 | 80,460,168.49 |
| accounts payable | 479,251.69 | ||
| including: US dollar | 69,829.19 | 6.8632 | 479,251.69 |
52. Government grants
Unit: yuan Currency: RMB
| Category | Amount | Present item | Amount included in current gains and losses |
| grants for corn processing and storage | 2,595,900.00 | other income | 2,595,900.00 |
| grants for key technology project of safe, efficient and antibiotic-free piglet feed | 872,342.83 | other income | 872,342.83 |
| grants for development project of bacteriophage preparation for intestinal pathogenic bacteria | 1,000,000.00 | other income | 1,000,000.00 |
| R&D fund for 2016 granted by Guangzhou Sci-Tech Innovation Committee | 600,000.00 | other income | 600,000.00 |
| Shenyang Finance Bureau foreign trade industry development special fund | 2,011,900.00 | non-operating income | 2,011,900.00 |
| R&D fund for green and environmental-friendly sow feed | 650,000.00 | other income | 650,000.00 |
| Shenyang Mayor quality award | 500,000.00 | non-operating income | 500,000.00 |
| grants for the invention of an emulsified piglet pellet feed and preparation method | 500,000.00 | other income | 500,000.00 |
| research funds for the third batch of provincial level capital construction project in 2018 of Liaoning Province | 1,500,000.00 | other income | 1,500,000.00 |
| grants for newly approved construction of new science and technology innovation platforms | 2,000,000.00 | other income | 2,000,000.00 |
| subtotal for other grants under 500,000 yuan | 2,793,877.88 | non-operating income | 2,793,877.88 |
| subtotal for other grants under 500,000 yuan | 2,296,127.56 | other income | 2,296,127.56 |
| deferred income transferred in current period | 2,151,092.83 | other income | 2,151,092.83 |
| Total | 19,471,241.10 | / | 19,471,241.10 |
VIII. Change of consolidation scope
1. Disposal of subsidiary
Unit: yuan Currency: RMB
| Subsidiary | Disposal price | Percentage of disposed shareholding % | Disposal way | Date of losing control | The difference of the share of such subsidiary's net asset held by the Company in the consolidated financial statements which caused by disposal price and disposal of investment | Residual shareholding on the date of losing control % | Booking value of residual equity on the date of losing control | Fair value of residual equity on the date of losing control | Gains or losses from residual equity remeasured at fair value |
| Xi'an Micro Monkey E-commerce | 3,060,000.00 | 90 | transfer | 2018-3-31 | 1,484,208.17 | 10 | 175,087.98 | 340,000.00 | 164,912.02 |
| Wuwei Wellhope Feed | 12,000.00 | 60 | transfer | 2018-5-31 | -142,256.97 | ||||
| Liaoning Shennong Wellhope Bio-Tech | 60 | transfer | 2018-1-31 | 32,374.25 |
2. Change of consolidation scope caused by other reasonThe Company invested to set up Chongqing Wellhope Agri-Tech Company, holding 65.00%shares, established Russia Wellhope Agri-Tech Company, holding 55.00% shares.Chongqing Dahong Agricultural and Animal Husbandry Company, a subsidiary of theCompany, invested and established Chongqing Dahong Agriculture Sci-Tech Company,holding 100.00% shares, all these companies have been included in the consolidationscope in current period.
IX. Equity in other entities
1. Equity in subsidiariesa. Composition of the Company
| Subsidiary | Business site | Registered site | Business type | Shareholding % | Mode of acquisition | |
| Direct | Indirect | |||||
| Haicheng Xinzhongxin Wellhope Feed | Haicheng city | Haicheng city | production | 51.00 | investment | |
| Dalian Huakang Xinxin Food | Dalian city | Dalian city | production | 65.00 | investment | |
| Changchun Hengfeng Agriculture and Animal Husbandry | Changchun city | Changchun city | trading | 51.00 | investment | |
| Jinan Xinweita Trading | Jinan city | Jinan city | trading | 76.00 | investment | |
| Henan Wellhope Agri-Tech | Kaifeng city | Kaifeng city | production | 100.00 | investment | |
| Zhengzhou Wellhope Agri-Tech | Zhengzhou city | Zhengzhou city | production | 70.00 | investment | |
| Zhumadian Wellhope Agri-Tech | Zhumadian city | Zhumadian city | production | 90.00 | investment | |
| Jiaozuo Wellhope Feed | Jiaozuo city | Jiaozuo city | production | 98.30 | investment | |
| Nanyang Wellhope Feed | Nanyang city | Nanyang city | production | 70.00 | investment | |
| Kaifeng Meat Food | Kaifeng county | Kaifeng county | production | 100.00 | investment | |
| Zhangwu Wellhope Agriculture | Zhangwu county | Zhangwu county | production | 60.00 | investment | |
| Xifeng Qianyue Planting | Xifeng county | Xifeng county | production | 100.00 | investment | |
| Sanjiang Wellhope Agri-Tech | Jixian county | Jixian county | production | 100.00 | investment | |
| Jixian Expert Trading | Jixian county | Jixian county | trading | 100.00 | investment | |
| Gongzhuling Wellhope Agri-Tech | Gongzhuling city | Gongzhuling city | production | 100.00 | investment | |
| Shenyang Expert Trading | Shenyang city | Shenyang city | trading | 100.00 | investment | |
| Liaoning Skyland Livestock Equipment | Shenyang city | Shenyang city | production | 100.00 | investment | |
| Shenyang Wellhope Ruminant Feed | Shenyang city | Shenyang city | production | 100.00 | investment | |
| Shenyang Wellhope Extruded Feed | Shenyang city | Shenyang city | production | 100.00 | investment | |
| Shenyang Wellhope Aquatic Feed | Shenyang city | Shenyang city | production | 100.00 | investment | |
| Shenyang Jiahe Tianfeng Commerce and Trade | Shenyang city | Shenyang city | trading | 100.00 | investment | |
| Liaoning Wellhope Food | Beipiao city | Beipiao city | production | 60.00 | investment | |
| Haicheng Wellhope Agri-Tech | Haicheng city | Haicheng city | production | 100.00 | investment | |
| Tai'an Wellhope Feed | Tai'an county | Tai'an county | production | 100.00 | investment | |
| Lingyuan Wellhope Agri-Tech | Lingyuan city | Lingyuan city | production | 90.50 | investment | |
| Beijing Helai Sci-Tech | Beijing city | Beijing city | production | 100.00 | investment | |
| Beijing Wellhope Agri-Tech | Beijing city | Beijing city | trading | 100.00 | investment | |
| Beijing Sanyuan Wellhope Agri-Tech | Beijing city | Beijing city | production | 70.00 | investment | |
| Jilin Wellhope Agri-Tech | Jilin city | Jilin city | production | 100.00 | investment | |
| Jilin Hefeng Pig Breeding | Gongzhuling city | Gongzhuling city | production | 100.00 | investment | |
| Harbin Weierhao Trading | Harbin city | Harbin city | trading | 51.00 | investment | |
| Daqing Wellhope Bayi Nongda Animal Sci-Tech | Daqing city | Daqing city | production | 70.00 | investment | |
| Mudanjiang Wellhope Agri-Tech | Mudanjiang city | Mudanjiang city | production | 100.00 | investment | |
| Jinzhou Wellhope Agri-Tech | Jinzhou city | Jinzhou city | production | 100.00 | investment | |
| Gongzhuling Wellhope Ruminant Feed | Gongzhuling city | Gongzhuling city | production | 100.00 | investment | |
| Heilongjiang Wellhope Agri-Tech | Harbin city | Harbin city | production | 100.00 | investment | |
| Tangshan Wellhope Feed | Tangshan city | Tangshan city | production | 80.00 | investment | |
| Cangzhou Helai Sci-Tech | Cangzhou city | Cangzhou city | production | 70.00 | investment | |
| Xi'an Wellhope Feed Sci-Tech | Xi'an city | Xi'an city | production | 85.00 | investment | |
| Gansu Wellhope Agri-Tech | Wuwei city | Wuwei city | production | 100.00 | investment | |
| Jining Wellhope Agri-Tech | Jining city | Jining city | production | 70.00 | investment | |
| Shanghai Wellhope Feed | Shanghai city | Shanghai city | production | 65.00 | investment | |
| Shanghai Hehong Trading | Shanghai city | Shanghai city | trading | 32.00 | 42.00 | investment |
| Pinghu Wellhope Agri-Tech | Pinghu city | Pinghu city | production | 85.00 | investment | |
| Huai'an Wellhope Feed | Huai'an city | Huai'an city | production | 100.00 | investment | |
| Qingdao Wellhope Agri-Tech | Pingdu city | Pingdu city | trading | 95.00 | investment | |
| Guangzhou Xiangshun Livestock Equipment | Guangzhou city | Guangzhou city | production | 56.00 | investment | |
| Hainan Wellhope Agri-Tech | Chengmai county | Chengmai county | production | 100.00 | investment | |
| Fuyu Wellhope Agri-Tech | Fuyu city | Fuyu city | production | 97.00 | investment | |
| Fuyu Wellhope Taolaizhao Poultry Raising | Fuyu city | Fuyu city | production | 97.00 | investment | |
| Changchun Wellhope Feed | Nong'an county | Nong'an county | production | 98.00 | investment | |
| Changtu Wellhope Feed | Changtu county | Changtu county | production | 100.00 | investment | |
| Lankao Wellhope Agri-Tech | Lankao county | Lankao county | production | 100.00 | investment | |
| Tongliao Wellhope Tianyi Prataculture | Tongliao city | Tongliao city | production | 51.00 | investment |
| Liaoning Wellhope Purchasing & Trading | Shenyang city | Shenyang city | trading | 100.00 | investment | |
| Shenyang Wellhope Agri-Tech | Shenyang city | Shenyang city | production | 100.00 | investment | |
| Liaoning Expert Trading | Shenyang city | Shenyang city | trading | 100.00 | combined under the same control | |
| Shenyang Fengmei Bio-Tech | Shenyang city | Shenyang city | production | 100.00 | combined under the same control | |
| Shenyang Pufeng Commerce and Trade | Shenyang city | Shenyang city | trading | 100.00 | combined under the same control | |
| Shenyang Huawei Pharmaceutical | Shenyang city | Shenyang city | production | 51.00 | combined under the same control | |
| Liaoning Wellhope Agriculture and Animal Husbandry | Shenyang city | Shenyang city | production | 100.00 | Combined not under the same control | |
| Puyang Wellhope Food | Puyang city | Puyang city | production | 60.00 | Combined not under the same control | |
| Jingzhou Wellhope Agriculture and Animal Husbandry | Jingzhou city | Jingzhou city | trading | 86.00 | investment | |
| Dalian Heyuan Wellhope Agri-Tech | Dalian city | Dalian city | production | 51.00 | investment | |
| Shenyang Nongda Wellhope Feed | Shenyang city | Shenyang city | production | 100.00 | investment | |
| Dalian Wellhope Feed | Dalian city | Dalian city | production | 100.00 | investment | |
| Xingcheng Wellhope Feed | Xingcheng city | Xingcheng city | production | 100.00 | investment | |
| Yunnan Wellhope Feed | Kunming city | Kunming city | production | 96.00 | investment | |
| Liaoning Godaji E-commerce | Shenyang city | Shenyang city | trading | 100.00 | investment | |
| Anhui Wellhope Agri-Tech | Haozhou city | Haozhou city | production | 70.00 | investment | |
| Shanxi Wellhope Agri-Tech | Yuanping city | Yuanping city | production | 100.00 | investment | |
| Pingyuan Wellhope Food | Handan city | Handan city | production | 100.00 | investment | |
| Shenyang Huaweida Animal Health Product | Shenyang city | Shenyang city | trading | 75.00 | investment | |
| Dalian Zhongjia Food | Dalian city | Dalian city | production | 100.00 | Combined not under the same |
| control | ||||||
| Luohe Hongfeng Poultry | Luohe city | Luohe city | production | 51.00 | investment | |
| Wellhope Food(Shenyang) | Shenyang city | Shenyang city | production | 100.00 | investment | |
| Changchun Wellhope Food | Changchun city | Changchun city | production | 85.00 | investment | |
| Pingyuan Wellhope Agri-Tech | Handan city | Handan city | production | 100.00 | investment | |
| Puyang Wellhope Agri-Tech | Puyang city | Puyang city | production | 100.00 | investment | |
| Chongqing Dahong Agriculture and Animal Husbandry Equipment | Chongqing city | Chongqing city | production | 50.00 | Combined not under the same control | |
| Dalian Tianyicheng trading | Dalian city | Dalian city | trading | 50.00 | investment | |
| Beijing Brilliant Dragon Commerce and Trade | Beijing city | Beijing city | trading | 59.00 | investment | |
| Tangshan Hejia Agriculture and Animal Husbandry | Tangshan city | Tangshan city | production | 65.00 | investment | |
| Tangshan Wellhope Sci-Tech | Tangshan city | Tangshan city | production | 70.00 | Combined not under the same control | |
| Shenyang Huakang Xinxin Food | Shenyang city | Shenyang city | production | 95.00 | investment | |
| Weifang Wellhope New Hesheng Feed | Weifang city | Weifang city | production | 51.00 | investment | |
| Kaifeng Wellhope Meat Food | Kaifeng city | Kaifeng city | production | 100.00 | investment | |
| Shenyang Huakang Broiler | Shenyang city | Shenyang city | production | 95.00 | investment | |
| Kaifeng Wellhope Agriculture and Animal Husbandry | Kaifeng city | Kaifeng city | production | 100.00 | investment | |
| Fushun Wellhope Agriculture and Animal Husbandry | Fushun city | Fushun city | production | 100.00 | investment | |
| Shenyang Wellhope Polutry | Shenyang city | Shenyang city | production | 100.00 | investment | |
| Shenyang Huakang Agriculture and Animal Husbandry | Shenyang city y | Shenyang city y | production | 100.00 | investment | |
| Dehui Wellhope Agri-Tech | Dehui city | Dehui city | production | 100.00 | investment | |
| Shenyang Tianjingde Trading | Shenyang city | Shenyang city | trading | 80.00 | investment | |
| Chongqing Wellhope Agri-Tech | Chongqing city | production | 65.00 | investment | ||
| Dahong Agriculture and Animal Husbandry Technology Chongqing Branch | Chongqing city | production | 100.00 | investment | ||
| Russia Wellhope Agri-Tech | production | 55.00 | investment |
b. Important non-wholly owned subsidiary
Unit: yuan Currency: RMB
| Subsidiary | Shareholding of non-controlling interests | Gain or losses attributable to non-controlling interests | Declared dividends to non-controlling interests | Closing balance of non-controlling interests |
| Dalian Heyuan Agri-Tech | 49.00 | 67,984,614.02 | 171,654,722.91 | |
| Xi'an Wellhope Feed Sci-Tech | 15.00 | 3,227,595.95 | 14,736,063.38 | |
| Beijing Sanyuan Wellhope Agri-Tech | 30.00 | 2,472,622.85 | 55,637,846.25 | |
| Tangshan Wellhope Feed | 20.00 | -2,383,511.77 | 14,230,771.82 |
c. Financial figures of important non-wholly owned subsidiary
Unit: yuan Currency: RMB
| Subsidiary | Closing balance | Opening balance | |||||||||
| Current assets | Non-current assets | Total assets | Current liabilities | Non-current liabilities | Total liabilities | Current assets | Non-current assets | Total assets | Current liabilities | Non-current liabilities | |
| Dalian Heyuan Agri-Tech | 387,238,954.52 | 386,397,787.09 | 773,636,741.61 | 384,749,243.08 | 38,499,083.34 | 423,248,326.42 | 333,622,897.87 | 278,678,127.79 | 612,301,025.66 | 400,729,374.87 | 400,729,374.87 |
| Xi'an Wellhope Feed Sci-Tech | 77,754,831.17 | 43,262,494.18 | 121,017,325.35 | 22,717,956.94 | 22,717,956.94 | 64,845,837.88 | 44,844,378.30 | 109,690,216.18 | 32,967,099.95 | 32,967,099.95 | |
| Beijing Sanyuan Wellhope Agri-Tech | 180,774,234.54 | 26,952,555.35 | 207,726,789.89 | 22,111,712.84 | 22,111,712.84 | 174,171,349.68 | 29,453,731.23 | 203,625,080.91 | 26,407,669.59 | 26,407,669.59 | |
| Tangshan Wellhope Feed | 47,477,540.37 | 77,434,251.30 | 124,911,791.67 | 53,739,426.35 | 53,739,426.35 | 66,009,913.28 | 78,949,036.23 | 144,958,949.51 | 61,887,531.58 | 61,887,531.58 | |
| Subsidiary | 2018 | 2017 | ||||||
| operation revenue | Net profit | Total comprehensive income | Cash flow from operating activities | operation revenue | Net profit | Total comprehensive income | Cash flow from operating activities | |
| Dalian Heyuan Agri-Tech | 1,805,702,344.34 | 138,744,110.24 | 138,744,110.24 | 99,805,558.21 | 1,677,552,731.83 | 43,182,677.31 | 43,182,677.31 | 53,479,056.49 |
| Xi'an Wellhope Feed Sci-Tech | 387,215,020.67 | 21,517,306.35 | 21,517,306.35 | 27,803,030.51 | 342,506,270.08 | 24,841,161.78 | 24,841,161.78 | 21,895,014.85 |
| Beijing Sanyuan Wellhope Agri-Tech | 360,806,758.21 | 8,242,076.15 | 8,242,076.15 | 10,929,723.62 | 387,073,410.90 | 13,318,494.54 | 13,318,494.54 | 42,389,178.07 |
| Tangshan Wellhope Feed | 187,093,547.70 | -11,917,558.86 | -11,917,558.86 | 2,684,520.75 | 212,211,404.51 | 812,305.81 | 812,305.81 | 42,253,952.22 |
2. Transactions that change the share of owner's equity of the Company in subsidiarybut the Company still controls the subsidiarya. Circumstance of the change of owner's equityIn current period, the non-controlling shareholder of Lingyuan Wellhope Agri-Tech, HainanWellhope Agri-Tech, Yunnan Wellhope Feed, Liaoning Godaji E-commerce, HenanWellhope Agri-Tech, respectively transferred 15.50%, 20.00%, 37.80%, 10.00% and 30.00%of shareholdings to the Company.The Company respectively transferred 5.00% of shareholdings of Shenyang Huakang XinxinFood, Jingzhou Wellhope Agriculture, Shenyang Huakang Broiler and Changchun WellhopeFood, non-controlling shareholder of its subsidiaries-Daqing Wellhope Bayi Nongda AnimalSci-Tech and Nanyang Wellhope Feed, increased investment by 30.00% respectively.
b. The impact of the transaction on non-controlling interests and the equity attributable to the owners of parent company
Unit: yuan Currency: RMB
| Lingyuan Wellhope Agri-Tech | Hainan Wellhope Agri-Tech | Yunnan Wellhope Feed | Liaoning Godaji E-commerce | Henan Wellhope Agri-Tech | Shenyang Huakang Xinxin Food | Daqing Wellhope Bayi Nongda Animal Sci-Tech | Nanyang Wellhope Feed | Jingzhou Wellhope Agriculture | Shenyang Huakang Broiler | Changchun Wellhope Food | |
| cost of acquisition/disposal considerations | |||||||||||
| --cash | 12,400,000.00 | 2,000,000.00 | 1,890,000.00 | 1,000,000.00 | 8,610,000.00 | 100,000.00 | 4,800,000.00 | 3,000,000.00 | 2,528,571.00 | 100,000.00 | 500,000.00 |
| --fair value of a non-cash asset | |||||||||||
| total cost of acquisition/disposal considerations | 12,400,000.00 | 2,000,000.00 | 1,890,000.00 | 1,000,000.00 | 8,610,000.00 | 100,000.00 | 4,800,000.00 | 3,000,000.00 | 2,528,571.00 | 100,000.00 | 500,000.00 |
| deducting: share of net assets in the subsidiary calculated by gained or disposed shareholdings | 9,604,482.11 | -683,381.33 | 622,738.67 | 130,843.57 | 8,308,634.13 | 36,428.37 | 4,943,720.90 | 3,803,124.36 | 2,351,142.26 | -290,099.65 | 148,075.17 |
| balance | 2,795,517.89 | 2,683,381.33 | 1,267,261.33 | 869,156.43 | 301,365.87 | 63,571.63 | -143,720.90 | -803,124.36 | 177,428.74 | 390,099.65 | 351,924.83 |
| of which: adjust capital reserve | -2,795,517.89 | -2,683,381.33 | -1,267,261.33 | -869,156.43 | -301,365.87 | 63,571.63 | -143,720.90 | -803,124.36 | 177,428.74 | 390,099.65 | 351,924.83 |
3. Equity in joint ventures or associated companiesa. Important joint ventures or associated companies
Unit: yuan Currency: RMB
| Company name | Business site | Registered site | Business type | Shareholding % | Accounting treatment methods | |
| Direct | Indirect | |||||
| Beipiao Hongfa Food | Beipiao city | Beipiao city | production | 35.00 | equity method | |
| Anshan Jiuguhe Food | Tai'an county | Tai'an county | production | 41.55 | equity method | |
| Tai'an Jiuguhe Agriculture | Tai'an county | Tai'an county | production | 41.55 | equity method | |
| Dalian Chengsan Animal Husbandry | Dalian city | Dalian city | production | 20.00 | equity method | |
b. Financial figures of important joint ventures or associated companies
Unit: yuan Currency: RMB
| 2018 | 2017 | |||||||
| Beipiao Hongfa Food | Anshan Jiuguhe Food | Tai'an Jiuguhe Agriculture | Dalian Chengsan Animal Husbandry | Beipiao Hongfa Food | Anshan Jiuguhe Food | Tai'an Jiuguhe Agriculture | Dalian Chengsan Animal Husbandry | |
| current assets | 503,634,934.55 | 417,277,140.35 | 283,786,492.81 | 780,819,026.16 | 415,207,031.77 | 276,907,623.06 | 171,421,105.53 | 573,458,128.77 |
| non-current assets | 438,127,861.68 | 112,079,862.26 | 30,783,891.85 | 375,918,473.97 | 410,218,767.94 | 117,525,979.35 | 11,883,149.91 | 322,101,127.24 |
| Total assets | 941,762,796.23 | 529,357,002.61 | 314,570,384.66 | 1,156,737,500.13 | 825,425,799.71 | 394,433,602.41 | 183,304,255.44 | 895,559,256.01 |
| current liabilities | 174,740,051.73 | 274,529,095.54 | 157,969,045.26 | 353,316,814.51 | 250,891,563.15 | 219,833,080.23 | 126,830,248.13 | 399,036,298.21 |
| non-current liability | 47,100,000.00 | 12,578,401.85 | 812,500.00 | 16,328,633.74 | 51,600,000.00 | 9,784,091.71 | 1,091,000.00 | 16,365,790.09 |
| Total liability | 221,840,051.73 | 287,107,497.39 | 158,781,545.26 | 369,645,448.25 | 302,491,563.15 | 229,617,171.94 | 127,921,248.13 | 415,402,088.30 |
| non-controlling interests | 111,098,427.82 | 70,613,815.00 | ||||||
| equity attributable to shareholders of parent company | 719,922,744.50 | 242,249,505.22 | 155,788,839.40 | 675,993,624.06 | 522,934,236.56 | 164,816,430.47 | 55,383,007.31 | 409,543,352.71 |
| share of net assets calculated by shareholdings | 251,972,960.58 | 100,654,669.42 | 64,730,262.77 | 135,198,724.82 | 183,026,982.80 | 72,090,706.70 | 24,224,527.39 | 81,908,670.54 |
| --goodwill | 116,569,111.61 | 116,569,111.61 | ||||||
| --unrealized profit of internal transaction | -1,157,373.92 | |||||||
| --other | 73,620.47 | |||||||
| book value of equity investment in joint venture | 251,972,960.58 | 99,497,295.50 | 64,730,262.77 | 251,767,836.43 | 183,100,603.27 | 72,090,706.70 | 24,224,527.39 | 198,477,782.15 |
| operating revenue | 2,587,369,620.08 | 1,856,147,804.84 | 1,212,886,039.39 | 2,550,658,470.89 | 2,395,113,260.68 | 1,292,609,019.67 | 750,292,809.29 | 711,554,035.64 |
| net profit | 231,638,507.94 | 69,303,074.75 | 97,455,832.09 | 307,020,416.94 | 115,577,011.85 | 61,098,554.92 | 17,245,357.86 | 34,128,563.28 |
| other comprehensive income | ||||||||
| Total comprehensive income | 231,638,507.94 | 69,303,074.75 | 97,455,832.09 | 307,020,416.94 | 115,577,011.85 | 61,098,554.92 | 17,245,357.86 | 34,128,563.28 |
| dividends received from associated companies | 12,127,500.00 | 1,617,000.00 | 3,653,983.36 | |||||
c. Summarized financial information of unimportant joint ventures and associated
companies
Unit: yuan Currency: RMB
| 2018 | 2017 | |
| Joint venture: | ||
| Total book value of investment | 11,669,191.54 | 17,819,793.63 |
| Items calculated according to the shareholdings | ||
| --net profit | 4,007,001.33 | 6,281,680.08 |
| --other comprehensive income | -2,412,673.32 | 3,312,229.76 |
| --Total comprehensive income | 1,594,328.01 | 9,593,909.84 |
| Associated company: | ||
| Total book value of investment | 675,182,909.17 | 526,658,973.06 |
| Items calculated according to the shareholdings | ||
| --net profit | 81,585,071.51 | 28,427,900.87 |
| --other comprehensive income | -1,305,935.62 | |
| --Total comprehensive income | 80,279,135.89 | 35,963,125.56 |
Note: Unphung Joint Venture Company, Nepal Wellhope Agri-tech Pvt. Ltd., NEXUSWELL-HOPE AGRITECH INTERNATIONAL LIMITED use cost method.
X. Risks Related to Financial Instruments
The Company's main financial instruments include equity investment, borrowing, accountsreceivable and accounts payable. Detailed descriptions of various financial instruments canbe found in the relevant items in Note V. The Company manages and monitors these riskexposures to ensure to control the risks above in the limited scope.The Company's objective in risk management is to strike a balance between risks andreturn, minimize the negative impact of risk on the Company's operating results, andmaximize the benefits of shareholders and other equity investors. Based on this riskmanagement objective, the basic strategy of the Company’s risk management is to identifyand evaluate various risks of the Company, set up appropriate limit of risk tolerance,conduct risk management, and supervise various risks in a timely and reliable way tocontrol risks within the limited range.1. Market risksA. Interest rate riskThe Company's risk of cash flow changes in financial instruments due to the changes ininterest rates mainly related to floating-rate bank loans. The Company's policy is tomaintain the floating-rate of these loans.
B. Foreign exchange risksForeign exchange risk refers to the risk of loss caused by exchange rate movement. TheCompany's main business activities are settled in RMB, with a small amount of import andexport business, changes in exchange rate have little impact on the Company.2. Credit riskThe maximum credit risk exposure that may cause financial losses to the Company mainlycomes from financial assets loss caused by the other party of contract failed to performduty.In order to reduce credit risk, the Company constantly strengthens the risk managementawareness of accounts receivable, and only deals with confirmed and reputable thirdparties. In accordance with the Company's policies, it is necessary to conduct credit auditand approval, carefully confirm the credit limit, implement other monitoring proceduresand take necessary measures to recover overdue claims.The Company reviews the recoverability of receivables on the balance sheet date toensure adequate provision for bad debts against non-recoverable amounts. Therefore, themanagement of the Company believes that the credit risk taken by the Company has beengreatly decreased.3. Liquidity riskIn regard of managing liquidity risk, the Company monitors cash and cash equivalents, tosatisfy its operation demand, and to reduce the influence caused by cash flow fluctuation.The management of the Company supervises the usage circumstances of bank loans andensures the Company complying with the agreement of loan.XI. Disclosure of fair value
1. Fair value of assets and liabilities measured at fair value in the end of period
Unit: yuan Currency: RMB
| Item | Closing fair value | |||
| The first level of fair value measurement | The second level of fair value measurement | The third level of fair value measurement | Total | |
| continuous fair value measurement | ||||
| 1. financial assets measured at fair value and changes recorded into current gains or losses | 2,042,527.60 | 2,042,527.60 | ||
| A. trading financial assets | 2,042,527.60 | 2,042,527.60 | ||
| a. debt instrument investment | ||||
| b. equity instrument investment | ||||
| c. derivative financial assets | 2,042,527.60 | 2,042,527.60 | ||
| Total assets continuously measured at fair value | 2,042,527.60 | 2,042,527.60 |
2. The determination basis of market price of the item measured at fair value of the
sustainable and non-sustainable first level fair value measurementThe derivative financial assets of the Company are futures, which are measured by theunadjusted quoted price of the same assets or liabilities in the active market on thebalance sheet dateXII. Related party and transaction
1. Snapshot of parent companyJin Weidong is the actual controller of the Company.
2. Snapshot of joint ventures and associated companiesPlease check important joint ventures and associated companies.Circumstance of the joint ventures and associated companies, which had relatedtransactions with the Company in the period.
| Company | Relationship |
| Unphung Joint Venture Company | joint venture |
| Nepal Wellhope Agri-tech Pvt. Ltd. | joint venture |
| Anshan Fengsheng Food | associated company |
| Anshan Jiuguhe Food | associated company |
| Beipiao Hongfa Food | associated company |
| Dalian Chengsan Animal Husbandry | associated company |
| Dalian Wellhope Fish Meal | associated company |
| Daqing Supply and Marketing Wellhope Agri-Tech | associated company |
| Danhong Wellhope Chengsan Agri-Tech | associated company |
| Dunhua Wellhope Agri-Tech | associated company |
| Gongzhuling Corn Purchasing and Storing | associated company |
| Guangzhou Pulihe Trading | associated company |
| Guangzhou Yikun Trading | associated company |
| Haicheng New Hongzunda Agri-Tech | associated company |
| Huluodao Jiuguhe Food | associated company |
| Huluodao Jiuguhe Feed | associated company |
| Jinzhou Jiufeng Food | associated company |
| Lankao Skyland Feed | associated company |
| Lankao Skyland Duck | associated company |
| Linghai Jiuguhe Feed | associated company |
| Qingdao Shenfeng Agri-Tech | associated company |
| Shenyang Wenjie Bio-Tech | associated company |
| Schipper(Beijing) | associated company |
| Suizhong Rehen Fishery | associated company |
| Tai'an Fengjiu Agri-Tech | associated company |
| Tai'an Jiufeng Agri-Tech | associated company |
| Tai'an Jiuguhe Agriculture | associated company |
| Tailai Jiahe Agriculture and Animal Husbandry | associated company |
| Zhangjiakou Jiahe Agriculture and Animal Husbandry | associated company |
| Beijing Dahong Hengfeng Agri-Tech | associated company |
3. Snapshot of other related party
| Related party | Relationship |
| Ding Yunfeng | The Company's shareholder, board director, President, holds 9.67% shares |
| DE HEUS MAURITIUS | The Company's shareholder, holds 9.63% shares |
| Shao Caimei | The Company's shareholder, board director, CTO, holds 6.56% shares |
| Wang Fengjiu | The Company's shareholder, Vice President, holds 6.03% shares. |
| Shenyang Heli Investment | The Company's shareholder, holds 5.82% shares. |
| Wang Zhongtao | The Company's shareholder, Chairman of the Supervisory Board, holds 5.67% shares. |
4. Snapshot of related party transactiona. Purchasing and selling products, providing and accepting labor service
Unit: yuan Currency: RMB
| Relate party | Transaction | 2018 | 2017 |
| Suizhong Rehen Fishery | feed raw materials | 4,063,349.71 | 9,658,615.20 |
| Dalian Wellhope Fish Meal | feed raw materials | 89,540,418.85 | 70,262,704.90 |
| Anshan Jiuguhe Food | broiler product | 10,607,617.64 | 2,725,178.11 |
| Dalian Chengsan Animal Husbandry | delivery broiler | 165,113,902.72 | |
| Beipiao Hongfa Food | broiler product | 1,645,220.06 | |
| Huludao Jiuguhe Food | broiler product | 5,435,308.49 | 9,643,224.14 |
| Schipper(Beijing) | other | 428,182.58 | |
| Guangzhou Yikun Trade | feed raw materials | 6,188,772.00 | 11,300,153.00 |
| Guangzhou Pulihe Trade | feed raw materials | 1,638,896.86 | |
| Tai'an Fengjiu Agri-Tech | day old chick | 3,350,549.01 | 518,424.00 |
| Zhangjiakou Jiahe Agriculture and Animal Husbandry | piglet | 5,928,183.50 | 8,021,349.55 |
| Tai’an Jiuguhe Agriculture | feed | 12,429,921.60 | 2,797,279.00 |
| Haicheng New Hongzunda Agri-Tech | feed | 1,120,316.47 | 2,222,038.16 |
| Shenyang Wenjie Bio-Tech | other | 6,280,763.74 | 487,291.97 |
| Jinzhou Jiufeng Food | broiler product | 105,663.72 | |
| Daqing Supply and Marketing Wellhope Agri-Tech | feed raw materials | 8,880,812.73 | 3,960,123.42 |
| Linghai Jiuguhe Feed | other | 638,607.11 | |
| Gongzhuling Corn Purchasing and Storing | feed raw materials | 970,780.18 | |
| Total | 320,977,486.33 | 124,986,162.09 |
Selling products or providing labor service
Unit: yuan Currency: RMB
| Relate party | Transaction | 2018 | 2017 |
| Nepal Wellhope Agri-tech Pvt. Ltd. | feed | 199,620.44 | 140,200.00 |
| Linghai Jiuguhe Feed | feed raw materials | 37,878,202.08 | 18,279,127.86 |
| Tai’an Jiuguhe Agriculture | feed raw materials | 68,389,964.35 | 65,150,685.72 |
| Anshan Jiuguhe Food | broiler | 158,951,429.95 | 181,408,642.40 |
| Qingdao Shenfeng Agri-Tech | feed raw materials | 18,359,677.35 | 29,735,587.09 |
| Beipiao Hongfa Food | feed raw materials | 7,260,089.78 | 15,239,343.97 |
| Huludao Jiuguhe Food | feed | 13,736,255.76 | 18,128,055.18 |
| Haicheng New Hongzunda Agri-Tech | feed raw materials | 33,009,620.76 | 26,115,831.31 |
| Dandong Wellhope Chengsan Agri-Tech | feed raw materials | 10,820,771.04 | 3,105,240.54 |
| Tai'an Jiufeng Agri-Tech | feed raw materials | 1,924,877.65 | 739,912.58 |
| Huludao Jiuguhe Feed | feed raw materials | 25,481,359.12 | 21,502,965.81 |
| Suizhong Rehen Fishery | feed | 111,724.14 | 69,230.77 |
| Schipper(Beijing) | other product | 887,414.00 | 278,381.19 |
| Zhangjiakou Jiahe Agriculture and Animal Husbandry | feed | 23,059,889.84 | 22,201,793.92 |
| Dalian Wellhope Fish Meal | feed raw materials | 537,672.40 | |
| Guangzhou Yikun Trade | feed raw materials | 145,040,015.85 | 111,529,209.55 |
| Guangzhou Pulihe Trade | feed raw materials | 34,029,936.44 | |
| Jinzhou Jiufeng Food | broiler | 5,211,589.00 | 154,832.00 |
| Anshan Fengsheng Food | broiler | 99,451,627.68 | 1,389,732.21 |
| Dalian Chengsan Animal Husbandry | feed raw materials | 10,337,579.61 | 10,559,059.71 |
| Tailai Jiahe Agriculture and Animal Husbandry | feed | 41,863,178.67 | 4,449,716.24 |
| Daqing Supply and Marketing Wellhope Agri-Tech | feed raw materials | 29,511,060.56 | 4,144,887.00 |
| Lankao Skyland Duck | feed raw materials | 129,207.19 | |
| Lankao Skyland Feed | feed raw materials | 2,196,704.00 | |
| Dunhua Wellhope Agri-Tech | feed raw materials | 5,062,091.02 | |
| Total | 739,411,622.24 | 568,352,371.49 |
b. Related party guaranteeThe Company acted as guarantor
Unit: yuan Currency: RMB
| Guaranteed party | Amount of guarantee | Guarantee date | Guarantee maturity date | Whether the guarantee has been fulfilled |
| Lingyuan Wellhope Agri-Tech | 20,000,000.00 | May 29th, 2018 | May 24th, 2019 | no |
| Liaoning Expert Trading | 80,460,168.49 | no |
c. Borrowings to related party
Unit: yuan Currency: RMB
| Related party | Borrowings | Starting date | Due date | Note |
| Lankao Skyland Duck | 5,000,000.00 | Lankao Skyland Duck was formerly a wholly-owned subsidiary of the Company, the Company provided operating borrowings for it, thus forming receivable other. In December 2017, other shareholders of Lankao Skyland Duck increased investment in this company, making the shareholdings of the Company being below 50%, and Lankao Skyland Duck became an associated company of the Company. | ||
| Lankao Skyland Feed | 38,067,493.00 | Lankao Skyland Feed was formerly a wholly-owned subsidiary of the Company, the Company provided operating borrowings for it, thus forming receivable |
d. Remuneration for key management
Unit: 10,000yuan Currency: RMB
other.In December 2017, other shareholders of LankaoSkyland Feed increased investment in this company,making the shareholdings of the Company beingbelow 50%, and Lankao Skyland Feed became anassociated company of the Company.Item
| Item | 2018 | 2017 |
| remuneration for key management | 709.09 | 404.88 |
5. Related party receivables and payablesa. Receivables
Unit: yuan Currency: RMB
| Item | Related party | Closing balance | Opening balance | ||
| Book balance | Bad debt provision | Book balance | Bad debt provision | ||
| accounts receivable | Dandong Wellhope Chengsan Agri-Tech | 285,000.00 | 14,250.00 | 647,440.00 | 32,372.00 |
| accounts receivable | Anshan Jiuguhe Food | 29,448,163.62 | 1,472,408.18 | 13,548,841.72 | 677,442.09 |
| accounts receivable | Tai’an Jiuguhe Agriculture | 4,647,449.75 | 232,372.49 | ||
| accounts receivable | Zhangjiakou Jiahe Agriculture and Animal Husbandry | 4,185,015.26 | 209,250.76 | 3,871,269.00 | 193,563.45 |
| accounts receivable | Guangzhou Yikun Trade | 19,140,043.17 | 957,002.16 | ||
| accounts receivable | Qingdao Shenfeng Agri-Tech | 28,455.00 | 1,422.75 | ||
| accounts receivable | Linghai Jiuguhe Feed | 7,195.00 | 359.75 | ||
| accounts receivable | Huluodao Jiuguhe Feed | 200.00 | 10.00 | ||
| accounts receivable | Anshan Fengsheng Food | 6,876,402.60 | 343,820.13 | 1,389,732.21 | 69,486.61 |
| accounts receivable | Dalian Chengsan Animal Husbandry | 1,062,573.20 | 53,128.66 | 1,373,479.92 | 93,394.99 |
| accounts receivable | Tailai Jiahe Agriculture and Animal Husbandry | 69,020.56 | 3,451.03 | 3,769,536.24 | 188,476.81 |
| accounts receivable | Dunhua Wellhope Agri-Tech | 30,351.21 | 1,517.56 | ||
| accounts receivable | Guangzhou Yikun Trade | 3,492,893.69 | 174,644.68 | ||
| accounts receivable | Daqing Supply and Marketing Wellhope Agri-Tech | 711,060.56 | 35,553.03 | ||
| other receivable | Lankao Skyland Duck | 5,000,000.00 | 500,000.00 | 5,000,000.00 | 250,000.00 |
| other receivable | Lankao Skyland Feed | 38,067,493.00 | 3,806,749.30 | 39,330,793.00 | 1,966,539.65 |
| prepayment | Dalian Wellhope Fish Meal | 205,850.00 | 834,156.00 | ||
| prepayment | Huluodao Jiuguhe Food | 2,428,674.54 | |||
| prepayment | Suizhong Rehen Fishery | 7,200,000.20 | 2,709,300.20 | ||
| prepayment | Gongzhuling Corn Purchasing and Storing | 1,825,000.00 |
b. Payables
Unit: yuan Currency: RMB
| Item | Related party | Closing book balance | Opening book balance |
| accounts payable | Dalian Wellhope Fish Meal | 3,543,366.00 | 2,397,273.80 |
| accounts payable | Anshan Jiuguhe Food | 8,783,890.00 | |
| accounts payable | Tai’an Jiuguhe Agriculture | 6,143,639.40 | |
| accounts payable | Shenyang Wenjie Bio-Tech | 1,312,595.06 | |
| accounts payable | Gongzhuling Corn Purchasing and Storing | 313,608.00 | |
| accounts payable | Suizhong Rehen Fishery | 539,819.05 | |
| accounts payable | Dalian Chengsan Animal Husbandry | 10,604,874.78 | |
| advance receipt | Qingdao Shenfeng Agri-Tech | 147,000.00 | |
| advance receipt | Linghai Jiuguhe Feed | 324,450.00 | |
| advance receipt | Huludao Jiuguhe Feed | 53,613.00 | 463,500.00 |
| advance receipt | Nepal Wellhope Agri-tech Pvt. Ltd. | 38,700.00 | 38,700.00 |
| advance receipt | Tai’an Jiuguhe Agriculture | 1,502,000.00 | 1,240,565.00 |
| advance receipt | Beijing Dahong Hengfeng Agri-Tech | 810.00 | |
| advance receipt | Haicheng New Hongzunda Agri-Tech | 463,500.00 | |
| advance receipt | Tai'an Jiufeng Agri-Tech | 49,892.50 | |
| other payables | Nepal Wellhope Agri-tech Pvt. Ltd. | 2,999.41 | 2,999.41 |
| other payables | Unphung Joint Venture Company | 71,682.43 | 71,682.43 |
| other payables | Anshan Jiuguhe Food | 206,191.05 |
XIII. Share-based payment
1. Circumstance of share-based payment
Unit: share Currency: RMB
| Total amount of equity instrument granted by the Company during current period | 14,575,000 |
| Total amount of exercised equity instruments |
Note:
In accordance with the approved resolutions--Liaoning Wellhope 2018 Restricted StockIncentive Plan and Its Abstract (draft), Adjusting Related Items regarding to 2018 RestrictedStock Incentive Plan, the Company issued 14.575 million restricted shares to 372 keymanagers at the price of 4.85 yuan per share in 2018, increased RMB 14.575 million yuanof the registered capital.This incentive plan should be valid from the date of granting restricted shares to the datewhen all restricted shares could be removed trading restrictions or repurchased andwritten off by the Company, with a maximum period of no more than 48 months. The
restricted shares should not be transferred, used for guarantee or repaying debts beforeremoving the trading restrictions, and the shares and dividends obtained from therestricted shares due to the Company conducting capital reserve converted to share capital,distributing share dividends, etc., should be simultaneously locked according to theincentive plan. After the expiration of restricted period, the Company shall handle relatedmatters, such as removing trading restrictions, whilst the restricted shares held by theincentive objects who could not meet the conditions of removing restriction, should berepurchased and written off by the Company, relevant equity could not be deferred to thenext period.Arrangement of restricted shares:
| Arrangement of removing trading restrictions | Time of removing trading restrictions | Percentage of unrestricted shares |
| first unrestricted period | The first trading day after 12 months from the date of finishing the registration of granted shares to the last trading day within 24 months from the date of finishing the registration of granted shares | 30.00% |
| second unrestricted period | The first trading day after 24 months from the date of finishing the registration of granted shares to the last trading day within 36 months from the date of finishing the registration of granted shares | 30.00% |
| third unrestricted period | The first trading day after 36 months from the date of finishing the registration of granted shares to the last trading day within 48 months from the date of finishing the registration of granted shares | 40.00% |
2. Equity-settled share-based payment
Unit: yuan Currency: RMB
| confirmation method of fair value of equity instrument at the grant date | Closing price at the grant date |
| basis for determining the number of exercised equity instrument | It is expected that the exercise conditions can be met and the granted objects can exercise the equity |
| accumulated amount of equity-settled share-based payment which recorded into capital reserve | 1,997,989.57 |
| Total expense recognized by equity-settled share-based payment | 1,997,989.57 |
XIV. Commitment and contingency
1. Important commitmentImportant commitment to external, its nature and amount existed on the balance sheetdateAs at December 31st, 2018, the operating lease contracts that the Company had signed or
were ready to perform, were mainly the lease of operating site and buildings, as follows:
| Period | Lease payable(10,000 yuan) |
| the first year after the balance sheet date | 2,176.90 |
| the second year after the balance sheet date | 2,075.66 |
| the third year after the balance sheet date | 2,102.97 |
| after the third year after the balance sheet date | 13,778.18 |
2. ContingencyThe Company has no material contingencies that need to be disclosed.
XV. Events after the balance sheet date
1. Non-adjusting event
Unit: yuan Currency: RMB
| Event | Content | Impact on financial position and operating results |
| stock and bond issuing | On April 18th, 2019, in accordance with the approval, the Company non-public issued 76,552,927 RMB common shares at the price of 10.16 yuan per share, totally raised funds 768,926,185.57 yuan after deducting underwriting fees, which increased 76,552,927 yuan share capital and 692,373,258.57 yuan capital reserve. | - |
2. Circumstance of profit distribution
Unit: yuan Currency: RMB
| profit or dividend planned to be distributed | 166,014,791.28 |
| declared profit or dividend after deliberation and approval | 166,014,791.28 |
XVI. Notes to major items of the parent company's financial statements
1. Notes receivable and accounts receivable
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| notes receivable | ||
| accounts receivable | 16,033,809.05 | 22,133,097.07 |
| Total | 16,033,809.05 | 22,133,097.07 |
? Accounts receivablea. Category of accounts receivable
Unit: yuan Currency: RMB
| Category | Closing balance | Opening balance | ||||||||
| Book balance | Bad debt provision | Book value | Book balance | Bad debt provision | Book value | |||||
| Amount | Percentage% | Amount | Withdrawing % | Amount | Percentage% | Amount | Withdrawing % | |||
| the account receivable with amount that is individually significant, withdrawing bad debt provision individually | ||||||||||
| withdrawing bad debt provision on the basis of credit risk grouping | 45,176,203.73 | 100.00 | 29,142,394.68 | 64.51 | 16,033,809.05 | 39,141,624.03 | 100.00 | 17,008,526.96 | 43.45 | 22,133,097.07 |
| the account receivable with amount that is not individually significant, but withdrawing bad debt provision individually | ||||||||||
| Total | 45,176,203.73 | 100.00 | 29,142,394.68 | 64.51 | 16,033,809.05 | 39,141,624.03 | 100.00 | 17,008,526.96 | 43.45 | 22,133,097.07 |
Withdrawing bad debt provision according to the aging analysis method
Unit: yuan Currency: RMB
| Aging | Closing balance | ||
| Accounts receivable | Bad debt provision | % of withdrawing | |
| subtotal of within 1 year | 11,945,705.84 | 597,285.29 | 5.00 |
| 1 -2 year | 3,408,692.00 | 340,869.20 | 10.00 |
| 2-3 years | 2,291,182.00 | 916,472.80 | 40.00 |
| over 3 years | 27,287,767.39 | 27,287,767.39 | 100.00 |
| Total | 44,933,347.23 | 29,142,394.68 | 64.86 |
b. Bad debt provision of the current periodDuring the current period, withdrawing bad debt provision of RMB 12,133,867.72 yuan,taking back or recovering bad debts provisions of 0 yuan.c. Top 5 accounts receivable
| Debtor | Relationship | Amount in arrears | Year of arrears | percentage of total accounts receivable % | Bad debt provision |
| 1 | non-related party | 9,125,139.00 | within 1 year: 512,200.00yuan; 1-2 year: 354,260.00yuan; 2-3 years: 2,029,958.00 yuan; over 3 years: 6,228,721.00 yuan | 20.20 | 7,101,740.20 |
| 2 | non-related party | 7,351,644.00 | over 3 years | 16.27 | 7,351,644.00 |
| 3 | non-related party | 7,053,335.00 | over 3 years | 15.61 | 7,053,335.00 |
| 4 | non-related party | 3,176,909.25 | within 1 year: 2,476,139.25 yuan; 1-2 year:700,770.00 yuan | 7.03 | 193,883.96 |
| 5 | non-related party | 2,997,424.50 | within 1 year | 6.63 | 149,871.23 |
| Total | 29,704,451.75 | 65.74 | 21,850,474.39 |
2. Other receivable
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| interest receivable | ||
| dividends receivable | 15,225,270.58 | 8,214,127.94 |
| other receivable | 854,445,959.43 | 1,106,025,579.73 |
| Total | 869,671,230.01 | 1,114,239,707.67 |
a. Dividends receivable
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance |
| dividends from long-term investment under cost method | 9,743,487.24 | 1,500,000.00 |
| dividends from long-term investment under equity method | 5,481,783.34 | 6,714,127.94 |
| Total | 15,225,270.58 | 8,214,127.94 |
Other receivablea. Category of other receivable
Unit: yuan Currency: RMB
| Category | Closing balance | Opening balance | ||||||||
| Book balance | Bad debt provision | Book value | Book balance | Bad debt provision | Book value | |||||
| Amount | Percentage % | Amount | % of withdrawing | Amount | Percentage % | Amount | % of withdrawing | |||
| other receivable with amount that is individually significant, withdrawing bad debt provision individually | ||||||||||
| withdrawing bad debt provision on the basis of credit risk grouping | 861,813,069.64 | 100.00 | 7,367,110.21 | 0.85 | 854,445,959.43 | 1,109,824,476.25 | 100.00 | 3,798,896.52 | 0.34 | 1,106,025,579.73 |
| other receivable with amount that is not individually significant, but withdrawing bad debt provision individually | ||||||||||
| Total | 861,813,069.64 | 100.00 | 7,367,110.21 | 0.85 | 854,445,959.43 | 1,109,824,476.25 | 100.00 | 3,798,896.52 | 0.34 | 1,106,025,579.73 |
Withdrawing bad debt provision according to the aging analysis method
Unit: yuan Currency: RMB
| Aging | Closing balance | ||
| Other receivable | Bad debt provision | % of withdrawing | |
| subtotal of within 1 year | 932,764.96 | 46,638.25 | 5.00 |
| 1 -2 year | 71,332,173.00 | 7,133,217.30 | 10.00 |
| 2-3 years | 120,000.00 | 48,000.00 | 40.00 |
| over 3 years | 139,254.66 | 139,254.66 | 100.00 |
| Total | 72,524,192.62 | 7,367,110.21 | 10.16 |
b. Categorized by nature
Unit: yuan Currency: RMB
| Nature | Closing book balance | Opening book balance |
| operating receivable | 784,899.62 | 668,768.63 |
| cash pledge and guarantee deposit | 200,000.00 | 200,000.00 |
| related party- fund transfer | 832,356,370.02 | 1,080,483,907.62 |
| disposal of investment receivables | 28,471,800.00 | 28,471,800.00 |
| Total | 861,813,069.64 | 1,109,824,476.25 |
c. Bad debt provision of the current periodDuring the current period, withdrawing bad debt provision of RMB 12,133,794.64 yuan,taking back or recovering bad debts provisions of 0 yuan.
d. The actual write-off of receivable other in current period
Unit: yuan Currency: RMB
| Item | Write-off |
| actual write-off of receivable other | 8,565,580.95 |
Of which, write-off important other receivable
Unit: yuan Currency: RMB
| Company | Type | Amount of write-Off | Reason | Procedure of write-off | Whether the payment is generated by related party transactions |
| Jingzhou Wellhope Feed | account current | 8,144,060.95 | this subsidiary was cancelled | yes(wholly-owned subsidiary) | |
| Jiangsu Oriental Pearl Grain and Oil industry | account current | 421,520.00 | uncollectible long-term arrears | no | |
| Total | / | 8,565,580.95 | / | / | / |
e. Top 5 other receivables
Unit: yuan Currency: RMB
| Company | Type | Closing balance | Aging | % of closing balance of receivables other | Closing balance of bad debt provision |
| 1 | account current | 95,813,478.29 | within 1 year | 11.12 | |
| 2 | account current | 90,230,094.40 | within 1 year | 10.47 | |
| 3 | account current | 77,354,291.58 | within 1 year | 8.98 | |
| 4 | account current | 66,328,454.90 | within 1 year | 7.70 | |
| 5 | account current | 52,035,791.38 | within 1 year | 6.04 | |
| Total | / | 381,762,110.55 | / | 44.31 |
3. Long-term equity investment
Unit: yuan Currency: RMB
| Item | Closing balance | Opening balance | ||||
| Book balance | Impairment provision | Book value | Book balance | Impairment provision | Book value | |
| investments in subsidiaries | 1,956,908,795.47 | 1,956,908,795.47 | 1,405,216,852.54 | 1,405,216,852.54 | ||
| investments in associates and joint ventures | 1,346,774,292.49 | 17,900,000.00 | 1,328,874,292.49 | 1,008,776,555.79 | 11,749,397.91 | 997,027,157.88 |
| Total | 3,303,683,087.96 | 17,900,000.00 | 3,285,783,087.96 | 2,413,993,408.33 | 11,749,397.91 | 2,402,244,010.42 |
a. Investments in subsidiaries
Unit: yuan Currency: RMB
| Company | Opening balance | Increase in current period | Decrease in current period | Closing balance |
| Haicheng Wellhope Feed | 8,000,000.00 | 4,526,045.83 | 12,526,045.83 | |
| Tai'an Wellhope Feed | 21,000,000.00 | 12,004,797.91 | 33,004,797.91 | |
| Shenyang Wellhope Ruminant Feed | 5,500,000.00 | 54,147.92 | 5,554,147.92 | |
| Liaoning Wellhope Agriculture and Animal Husbandry | 47,115,974.95 | 47,115,974.95 | ||
| Shenyang Nongda Wellhope Feed | 44,128,263.98 | 103,265.19 | 44,231,529.17 | |
| Xingcheng Wellhope Feed | 82,392,638.39 | 131,351.20 | 82,523,989.59 | |
| Dalian Wellhope Feed | 42,006,984.38 | 116,319.78 | 42,123,304.16 | |
| Jinzhou Wellhope Feed | 10,000,000.00 | 7,021,247.92 | 17,021,247.92 | |
| Changtu Wellhope Feed | 3,000,000.00 | 3,000,000.00 | ||
| Shenyang Wellhope Extruded Feed | 20,000,000.00 | 13,003,427.08 | 33,003,427.08 | |
| Shenyang Wellhope Aquatic Feed | 15,000,000.00 | 23,304.17 | 15,023,304.17 | |
| Shenyang Wellhope Agri-Tech | 82,064,201.70 | 122,160.80 | 82,186,362.50 | |
| Shenyang Wellhope Poultry | 5,483.33 | 5,483.33 | ||
| Gongzhuling Wellhope Agri-Tech | 35,000,000.00 | 33,585.42 | 35,033,585.42 | |
| Jilin Wellhope Agri-Tech | 10,925,000.00 | 5,127,135.42 | 16,052,135.42 | |
| Gongzhuling Wellhope Ruminant Feed | 5,000,000.00 | 6,854.17 | 5,006,854.17 | |
| Sanjiang Wellhope Agri-Tech | 4,188,747.06 | 17,002,056.25 | 21,190,803.31 | |
| Mudanjiang Wellhope Agri-Tech | 4,252,381.29 | 19,002,741.67 | 23,255,122.96 | |
| Heilongjiang Wellhope Agri-Tech | 50,000,000.00 | 70,073,339.58 | 120,073,339.58 | |
| Beijing Helai Sci-Tech | 25,000,000.00 | 40,439.59 | 25,040,439.59 | |
| Beijing Wellhope | 5,000,000.00 | 5,000,000.00 |
| Agri-Tech | ||||
| Huai'an Wellhope Feed | 30,000,000.00 | 21,247.92 | 30,021,247.92 | |
| Gansu Wellhope Agri-Tech | 40,000,000.00 | 7,539.58 | 40,007,539.58 | |
| Henan Wellhope Agri-Tech | 14,000,000.00 | 38,649,754.16 | 52,649,754.16 | |
| Lankao Wellhope Agri-Tech | 10,000,000.00 | 33,006,854.17 | 43,006,854.17 | |
| Wuwei Wellhope Feed | 300,000.00 | 300,000.00 | ||
| Yangling Wellhope Agri-Tech | 5,000,000.00 | 5,000,000.00 | ||
| Jingzhou Wellhope Feed | 3,000,000.00 | 3,000,000.00 | ||
| Shenyang Huaweida Animal Health Product | 6,168.75 | 6,168.75 | ||
| Jilin Hefeng Pig Breeding | 15,000,000.00 | 15,000,000.00 | ||
| Shenyang Expert Trading | 15,000,000.00 | 15,000,000.00 | 30,000,000.00 | |
| Shenyang Jiahe Tianfeng Commerce and Trade | 10,000,000.00 | 12,337.50 | 10,012,337.50 | |
| Liaoning Expert Trading | 20,000,000.00 | 30,057,575.00 | 50,057,575.00 | |
| Shenyang Pufeng Commerce and Trade | 5,499,788.72 | 10,000,000.00 | 15,499,788.72 | |
| Liaoning Wellhope Purchasing & Trading | 10,000,000.00 | 20,022,618.75 | 30,022,618.75 | |
| Hainan Wellhope Agri-Tech | 8,000,000.00 | 17,000,000.00 | 25,000,000.00 | |
| Liaoning Skyland Livestock Equipment | 10,800,000.00 | 17,759,595.83 | 28,559,595.83 | |
| Shenyang Fengmei Bio-Tech | 20,123,973.51 | 30,158.34 | 20,154,131.85 | |
| Xi'an Micro Monkey E-commerce | 5,000,000.00 | 5,000,000.00 | ||
| Panjin Wellhope Food | 50,000,000.00 | 50,000,000.00 | ||
| Pingyuan Wellhope Food | 80,000,000.00 | 67,273,304.17 | 147,273,304.17 | |
| Pingyuan Wellhope Agri-Tech | 21,933.33 | 21,933.33 | ||
| Kaifeng Meat Food | 90,000,000.00 | 10,000,000.00 | 100,000,000.00 | |
| Wellhope Food(Shenyang) | 3,000,000.00 | 2,741.67 | 3,002,741.67 | |
| Liaoning Godaji E-commerce | 9,000,000.00 | 1,009,595.83 | 10,009,595.83 | |
| Lingyuan Wellhope Agri-Tech | 4,250,000.00 | 12,421,247.91 | 16,671,247.91 | |
| Haicheng Xinzhongxin Wellhope Feed | 5,892,898.56 | 8,910.42 | 5,901,808.98 | |
| Fuyu Wellhope Agri-Tech | 27,160,000.00 | 19,403,427.08 | 46,563,427.08 | |
| Changchun Wellhope Feed | 10,000,000.00 | 74,313,585.41 | 84,313,585.41 |
| Daqing Wellhope Bayi Nongda Animal Sci-Tech | 13,520,000.00 | 210,966.67 | 13,730,966.67 | |
| Beijing Sanyuan Wellhope Agri-Tech | 7,000,000.00 | 155,589.58 | 7,155,589.58 | |
| Tangshan Wellhope Feed | 40,000,000.00 | 18,506.25 | 40,018,506.25 | |
| Cangzhou Helai Sci-Tech | 3,500,000.00 | 10,281.25 | 3,510,281.25 | |
| Shanxi Wellhope Agri-Tech | 40,000,000.00 | 3,427.08 | 40,003,427.08 | |
| Tangshan Hejia Agriculture and Animal Husbandry | 3,250,000.00 | 3,260,966.67 | 6,510,966.67 | |
| Tangshan Wellhope Sci-Tech | 21,000,000.00 | 2,741.67 | 21,002,741.67 | |
| Shanghai Wellhope Feed | 1,950,000.00 | 30,158.34 | 1,980,158.34 | |
| Pinghu Wellhope Agri-Tech | 850,000.00 | 14,393.75 | 864,393.75 | |
| Anhui Wellhope Agri-Tech | 7,000,000.00 | 25,208,225.00 | 32,208,225.00 | |
| Xi'an Wellhope Feed | 4,250,000.00 | 58,945.83 | 4,308,945.83 | |
| Zhengzhou Wellhope Agri-Tech | 3,918,966.67 | 3,918,966.67 | ||
| Zhumadian Wellhope Agri-Tech | 9,006,854.17 | 9,006,854.17 | ||
| Nanyang Wellhope Feed | 11,039,039.89 | 11,039,039.89 | ||
| Jiaozuo Wellhope Feed | 49,154,797.92 | 49,154,797.92 | ||
| Jingzhou Wellhope Agri-Sci-Tech | 23,660,000.00 | 21,247.92 | 2,528,571.00 | 21,152,676.92 |
| Qingdao Wellhope Agri-Tech | 28,500,000.00 | 31,529.16 | 28,531,529.16 | |
| Jining Wellhope Agri-Tech | 19,600,000.00 | 9,595.83 | 19,609,595.83 | |
| Yunnan Wellhope Feed | 2,910,000.00 | 1,892,741.67 | 4,802,741.67 | |
| Fuyu Wellhope Taolaizhao Poultry Raising | 5,626,000.00 | 2,741.67 | 5,628,741.67 | |
| Harbin Weierhao Trading | 2,010,000.00 | 1,564,112.50 | 3,574,112.50 | |
| Changchun Hengfeng Agriculture and Animal Husbandry Equipment | 19,191.66 | 19,191.66 | ||
| Beijing Brilliant Dragon Commerce and Trade | 17,820.83 | 17,820.83 | ||
| Shanghai Hehong Trading | 960,000.00 | 18,506.25 | 978,506.25 | |
| Jinan Xinweita Trading | 13,708.33 | 13,708.33 | ||
| Zhangwu Wellhope Agriculture | 1,800,000.00 | 1,800,000.00 | ||
| Tongliao Wellhope Tianyi Prataculture | 10,200,000.00 | 10,200,000.00 | ||
| Chongqing Dahong | 9,595.83 | 9,595.83 |
| Agriculture and Animal Husbandry Equipment | ||||
| Guangzhou Xiangshun Equipment | 2,950,000.00 | 4,112.50 | 2,954,112.50 | |
| Dalian Huakang Xinxin Food | 10,400,000.00 | 104,868.75 | 10,504,868.75 | |
| Dalian Heyuan Agri-Tech | 51,000,000.00 | 56,889.58 | 51,056,889.58 | |
| Dalian Zhongjia Food | 15,764.58 | 15,764.58 | ||
| Shenyang Huakang Broiler | 1,800,000.00 | 27,416.67 | 100,000.00 | 1,727,416.67 |
| Shenyang Huakang Xinxin Food | 1,800,000.00 | 21,933.33 | 100,000.00 | 1,721,933.33 |
| Shenyang Huakang Agriculture and Animal Husbandry | 61,687.50 | 61,687.50 | ||
| Changchun Wellhope Food | 9,000,000.00 | 13,708.33 | 500,000.00 | 8,513,708.33 |
| Dehui Wellhope Agri-Tech | 4,112.50 | 4,112.50 | ||
| Weifang Wellhope New Hesheng Feed | 12,750,000.00 | 12,750,000.00 | ||
| Puyang Wellhope Food | 20,000,000.00 | 17,135.42 | 20,017,135.42 | |
| Luohe Hongfeng Poultry | 4,080,000.00 | 4,080,000.00 | ||
| Puyang Wellhope Agri-Tech | 4,112.50 | 4,112.50 | ||
| Kaifeng Wellhope Agriculture and Animal Husbandry | 4,112.50 | 4,112.50 | ||
| Liaoning Wellhope Food | 30,000,000.00 | 13,708.33 | 30,013,708.33 | |
| Hancheng Wellhope Feed | 3,250,000.00 | 3,250,000.00 | ||
| Russia Wellhope Agri-Tech | 1,000,000.00 | 1,000,000.00 | ||
| Total | 1,405,216,852.54 | 621,470,513.93 | 69,778,571.00 | 1,956,908,795.47 |
b. Investments in associates and joint ventures
Unit: yuan Currency: RMB
| Company | Opening balance | Increase or Decrease in Current Period | Closing balance | Closing balance of impairment provision | ||||
| Additional investment | Gains or losses on investments recognized under equity method | Adjustment of other comprehensive income | Declaring of paying cash dividend or profit | Withdrawing of impairment provision | ||||
| I. Joint Ventures | ||||||||
| Unphung Joint Venture Company | 4,167,616.44 | 4,167,616.44 | ||||||
| Nepal Wellhope Agri-tech Pvt. Ltd. | 7,501,575.10 | 7,501,575.10 | ||||||
| NEXUS WELL-HOPE AGRITECH INTERNATIONAL LIMITED | 6,150,602.09 | 6,150,602.09 | 17,900,000.00 | |||||
| subtotal | 17,819,793.63 | 6,150,602.09 | 11,669,191.54 | 17,900,000.00 | ||||
| II. Associates | ||||||||
| Qingdao Shenfeng | 17,112,831.00 | 1,756,652.64 | 3,000,000.00 | 15,869,483.64 | ||||
| Anshan Jiuguhe Food | 72,090,706.70 | 17,496.00 | 28,546,466.72 | 100,654,669.42 | ||||
| Tai’an Jiuguhe Agriculture | 24,224,527.39 | 30,618.00 | 40,475,117.38 | 64,730,262.77 | ||||
| Linghai Jiuguhe Feed | 18,731,645.36 | 1,000.00 | 15,205,070.45 | 33,937,715.81 | ||||
| Huludao Jiuguhe Food | 41,997,797.00 | 6,000.00 | 15,872,205.94 | 57,876,002.94 | ||||
| Dandong Wellhope Chengsan Food | 31,153,202.05 | 3,613,007.66 | 34,766,209.71 | |||||
| Dandong Wellhope Chengsan Agri-Tech | 24,865,722.20 | 30,304,710.67 | 55,170,432.87 | |||||
| Haicheng New Hongzunda Agri-Tech | 9,683,659.98 | 1,622,064.89 | 11,305,724.87 | |||||
| Beipiao Hongfa Food | 183,100,603.27 | 80,999,857.31 | 12,127,500.00 | 251,972,960.58 | ||||
| Jixi Haitai Food | ||||||||
| Beijing Dahong Hengfeng | 7,561,103.10 | 6,750,000.00 | 2,541,884.08 | 16,852,987.18 | ||||
| Tai'an Jiufeng Agri-Tech | 768,700.85 | 14,574.00 | -285,209.72 | 498,065.13 | ||||
| Schipper(Beijing) | 591,971.91 | 489,689.39 | 1,081,661.30 | |||||
| Shenyang Wenjie Bio-Tech | 11,982,371.23 | 74,654.86 | 12,057,026.09 | |||||
| Huluodao Jiuguhe Feed | 7,987,004.96 | 3,000.00 | 17,058,407.88 | 25,048,412.84 | ||||
| Jinzhou Jiufeng Food | 27,183,550.40 | 11,000.00 | 2,807,077.05 | 30,001,627.45 | ||||
| Zhangjiakou Jiahe Agriculture and Animal Husbandry | 62,203,890.42 | -1,446,218.58 | 60,757,671.84 | |||||
| Tai'an Fengjiu Agri-Tech | 402,800.00 | 4,977,508.75 | 5,380,308.75 | |||||
| Anshan Fengsheng Food | 18,919,272.68 | 1,525,901.04 | 20,445,173.72 | |||||
| Dalian Chengsan Animal Husbandry | 198,477,782.15 | 53,290,054.28 | 251,767,836.43 | |||||
| Tailai Jiahe Agriculture and Animal Husbandry | 33,709,365.63 | -12,554,213.55 | 21,155,152.08 | |||||
| Gongzhuling Corn Purchasing and Storing | 53,998,747.07 | -4,469,304.17 | 49,529,442.90 | |||||
| Lankao Skyland Duck Meat | 35,566,308.90 | 3,744,152.62 | 39,310,461.52 | |||||
| Hainan Nongken Wenfeng Wenchang Chicken | 525,000.00 | -123,085.01 | 401,914.99 | |||||
| Dunhua Wellhope Agri-Tech | 3,000,000.00 | 434,662.23 | 3,434,662.23 | |||||
| Dunhua Fengda Agriculture and Animal Husbandry | 3,000,000.00 | -1,085,107.10 | 1,914,892.90 | |||||
| PT KARKA NUTRI INDUSTRI. | 37,296,600.00 | 1,646,452.33 | -1,957,754.20 | 36,985,298.13 | ||||
| GOLDEN HARVESTA INC. | 60,000,000.00 | 42,281,336.16 | -1,139,942.87 | 686,589.74 | 101,827,983.03 | |||
| Guangrong Xinchuang | 15,090,561.00 | -2,584,730.01 | -34,771.16 | 12,471,059.83 | ||||
| subtotal | 979,207,364.25 | 71,133,385.16 | 283,297,787.16 | -1,305,935.62 | 15,127,500.00 | 1,317,205,100.95 | ||
| Total | 997,027,157.88 | 71,133,385.16 | 283,297,787.16 | -1,305,935.62 | 15,127,500.00 | 6,150,602.09 | 1,328,874,292.49 | 17,900,000.00 |
4. Sales revenue and cost
Unit: yuan Currency: RMB
| Item | 2018 | 2017 | ||
| Revenue | Cost | Revenue | Cost | |
| revenue from principal businesses | 622,265,592.28 | 414,962,519.59 | 658,334,951.24 | 445,186,050.69 |
| revenue from other businesses | 1,300,675.25 | 627,211.36 | 1,284,493.27 | 712,676.26 |
| Total | 623,566,267.53 | 415,589,730.95 | 659,619,444.51 | 445,898,726.95 |
5. Return on investment
Unit: yuan Currency: RMB
| Item | 2018 | 2017 |
| return on long-term equity investments under cost method | 46,691,821.24 | 63,828,074.99 |
| return on long-term equity investments under equity method | 283,297,787.16 | 107,327,562.72 |
| income from disposal of long-term equity investments | -12,064,078.53 | 4,940,137.84 |
| income from disposal of financial assets measured at fair value and recorded in current gains and losses | 3,190,994.45 | 82,305.33 |
| other | 50,749,253.88 | |
| Total | 321,116,524.32 | 226,927,334.76 |
XVII. Supplementary Information
1. Non-operating gains or losses in current period
Unit: yuan Currency: RMB
| Item | Amount | Note |
| gains or Losses from disposal of non-current assets | -3,713,387.32 | |
| government grants charged to current gains or losses(excl. the government grants which are closely related to the Company's ordinary course of business and gained constantly at fixed quotas or amounts as per certain standards based on the state polices) | 19,471,241.10 | |
| gains or losses from debt restructuring | -1,147,367.47 | |
| gain or loss on fair-value changes in trading financial assets and liabilities, and investment income from disposal of trading financial assets and liabilities as well as available-for-sale financial assets(excl. the effective portion of hedges that arise in the Company's ordinary course of business) | 2,821,414.45 | |
| non-operating income and expense other than those described above | -3,208,527.84 | |
| non-controlling interests effects | -4,163,566.50 | |
| income tax effects | -590,792.81 | |
| Total | 9,469,013.61 |
2. Return on equity and earnings per share
| Profit of reporting period | Weighted average ROE % | EPS | |
| Basic EPS | Diluted EPS | ||
| net profit attributable to common shareholders of the Company | 15.30 | 0.66 | 0.66 |
| net profit attributable to common shareholders of the Company after deducting non-recurring gains and losses | 15.04 | 0.65 | 0.65 |
Section XII Reference
| Reference file directory | Financial statements containing the signature and seal of the legal representative, the person in charge of the accounting work and the person in charge of the accounting department. |
| Reference file directory | The original audit report containing the seal of the accounting firm and the signature and seal of the CPA. |
| Reference file directory | During the reporting period, all the original documents and original announcements of the Company that have been publicly disclosed in the newspapers designated by the CSRC. |
Chairman of the Board of Directors: Jin WeidongThe submission date approved by the Board of Directors: April 29th, 2019