沙隆达Ｂ：2018年半年度报告（英文版）

Hubei Sanonda Co., Ltd. Semi-Annual Report 2018

HUBEI SANONDA CO., LTD.SEMI-ANNUAL REPORT 2018

Adama Agricultural Solutions Ltd., one of the world's leading crop protection companies, and HubeiSanonda Co., Ltd. have combined, creating the only integrated, publicly traded Global-China crop protectioncompany.

At ADAMA, we strive to Create Simplicity in Agriculture - offering farmers effective products and servicesthat simplify their lives and help them grow. With one of the most comprehensive and diversified portfoliosof differentiated, quality products, our 6,600 strong team reaches farmers in over 100 countries, providingthem with solutions to control weeds, insects and disease, and improve their yields.

Please see key additional information and further details included in the Annex.

August 2018

Hubei Sanonda Co., Ltd. Semi-Annual Report 2018

Section I Important Notice, Table of Contents and Definitions

The Company’s Board of Directors, Board of Supervisors, directors, supervisors and seniormanagers confirm that the content of the Report is true, accurate and complete and contains no falsestatement, misleading representation or material omissions, and assume joint and several legalliability arising therefrom.Chen Lichtenstein, the person in charge of the Company as well as its legal representative, andAviram Lahav, the person in charge of the accounting function (Chief Financial Officer), herebystate and ensure the truthfulness, accuracy and completeness of the Financial Report.All the Company’s directors attended the board meeting for the review of this Report.The forward looking information described in this Report, such as future plans, developmentstrategy etc., does not constitute, in any manner whatsoever, a material commitment of theCompany to investors. Investors and other relevant people should be sufficiently mindful ofinvestment risks as well as the difference between plans, forecasts and commitments.The Company has described its possible risks in “X Risks Facing the Company andCountermeasures” under Section IV herein.For the Reporting Period, the Company does not plan to distribute cash dividends or bonus shares orconvert capital reserve into share capital.This Report and its Abstract have been prepared in both Chinese and English. Should there be anydiscrepancies between the two versions, the Chinese version shall prevail.

Hubei Sanonda Co., Ltd. Semi-Annual Report 2018

Table of Contents

Section I Important Notice, Table of Contents and Definitions ...... 2

Section II Corporate Profile and Financial Results ...... 5

Section III Business Profile ...... 8

Section IV Performance Discussion and Analysis ...... 10

Section V Significant Events ...... 26

Section VI Change in Shares and Shareholders ...... 34

Section VII Preference Shares ...... 40

Section VIII Directors, Supervisors and Senior Management ...... 41

Section IX Corporate Bonds ...... 42

Section X Financial Report ...... 43

Section XI Documents Available for Reference ...... 158

Hubei Sanonda Co., Ltd. Semi-Annual Report 2018

Definitions

Term DefinitionCompany, the Company Hubei Sanonda Co., Ltd.

Adama Solutions

Adama Agricultural Solutions Ltd., a wholly-

Company, incorporated in Israel according to its lawsBoard of Directors/Board The Board of Directors of the CompanyBoard of Supervisors The Board of Supervisors of the CompanyGroup, the Group The Company and its subsidiariesCSRC China Securities Regulatory CommissionSZSE Shenzhen Stock ExchangeReporting Period, this period January 1, 2018 - June 30, 2018ChemChina China National Chemical Co., Ltd.

CNAC

China National Agrochemical Co., Ltd.

owned subsidiary of the, the controlling shareholder of the

Company, a wholly-owned subsidiary of ChemChina

Hubei Sanonda Co., Ltd. Semi-Annual Report 2018

Section II Corporate Profile and Financial Results

I Corporate Information

Stock name Sanonda A, Sanonda B Stock code 000553, 200553Stock exchange Shenzhen Stock ExchangeCompany name in Chinese 湖北沙隆达股份有限公司Abbr. 沙隆达Company name in English Hubei Sanonda Co., Ltd.Abbr. SANONDALegal representative Chen Lichtenstein

II Contact Information

Board Secretary Securities Affairs RepresentativeName Li Zhongxi Liang JiqinAddress No. 93, Beijing East Road, Jingzhou, Hubei No. 93, Beijing East Road, Jingzhou, HubeiTel. 0716-8208632 0716-8208232Fax [phone]E-mail [e-mail] [e-mail]

III Other Information

1. Ways to Contact the CompanyIndicate by tick mark whether any changes occurred to the registered address, office address and their postal codes,

website address and email address of the Company during the Reporting Period.□ Applicable √ Not applicableNo changes occurred to the said information during the Reporting Period, which can be found in the 2017 AnnualReport.

2. Information Disclosure Media and Place where this Report is KeptIndicate by tick mark whether any changes occurred to the information disclosure media and the place where this

Report is kept during the Reporting Period.

Hubei Sanonda Co., Ltd. Semi-Annual Report 2018

□ Applicable √ Not applicableThe newspapers designated by the Company for information disclosure, the website designated by the CSRC forthe publication of this Report and the location where this Report is kept did not change during the ReportingPeriod. The said information can be found in the 2017 Annual Report.

IV Main Accounting Data and Financial Indexes

Indicate by tick mark whether the Company needs to retroactively adjust or restate any of its accounting data.√Yes □ NoReason for retrospective adjustment or restatement: Business combination under common control.

Reporting Period

Same period of last year +/- (%)Before adjustment

After adjustment

After adjustment

Operating revenues (RMB’000) 13,026,258 1,465,703 12,770,064 2.01%

Company (RMB’000) 2,362,781 169,191 1,316,994 79.41%

Net profit attributable to shareholders of theNet profit attributable to shareholders of the

Company excluding non-recurring

Net profit attributable to shareholders of the
	profit and

loss (RMB’000)

790,296 167,054 167,054 373.08%Net cash flow from

(RMB’000) 779,518 221,244 2,249,146 -65.34%Basic EPS (RMB/share) 0.9658 0.2849 0.5624 71.73%Diluted EPS (RMB/share) N/A N/A N/AWeighted average return on net assets %11.65 8.09% 7.62% 4.03%

End of Reporting

Period

End of last year +/- (%)Before adjustment

operating activities

After adjustment

After adjustment

Total assets (RMB’000) 41,577,798 39,613,922

39,685,756

(Note 1)

4.77%Net assets

attributable to shareholders of the

Company (RMB’000)

21,543,425 18,778,013

18,849,847

(Note 1)

14.29%Note 1:

The amounts specified are 2018 opening balance amounts rather than 2017 closing balance amounts. As of January 1, 2018, theCompany began to adopt the revised Accounting Standards for Business Enterprises (“ASBE”) regarding financial instruments andrevenue, promulgated by Ministry of Finance in 2017. According to the transitional requirements of relevant revised ASBEs, theopening balances of total assets and net assets attributable to the shareholders of the Company have been adjusted. The total assetsand net assets attributable to the shareholders of the Company as at December 31, 2017 were RMB’000 39,613,922 and RMB’000

18,778,013, respectively.

Hubei Sanonda Co., Ltd. Semi-Annual Report 2018

V Differences in Accounting Data under Domestic and Foreign Accounting Standards

1. Differences in Net Profit and Net Assets Disclosed in Financial Reports Prepared under Chinese andInternational Accounting Standards□ Applicable √ Not applicableNo such differences for the Reporting Period.

2. Differences in Net Profit and Net Assets Disclosed in Financial Reports Prepared under Chinese andForeign Accounting Standards□ Applicable √ Not applicableNo such differences for the Reporting Period.

3. Reason for accounting data differences under Chinese and Foreign Accounting Standards□ Applicable √ Not applicable

VI Non-Recurring Profit/Loss

√ Applicable □ Not applicable

Unit: RMB’000Item Reporting Period NoteGains/losses on the disposal of non-

offset part of asset impairment provisions)

1,997,170

Divestment in Europe and US,due to the Syngenta Transaction.

current assets (including the

Government grants recognized through profit or loss (excluding

government grants closely related to business of the Company

government grants closely related to business of the Companyand given at a fixed quota or amount in accordance with

government’s uniform standards)

10,787

Recovery or reversal of provision for bad debts which is asse

and given at a fixed quota or amount in accordance withssed

individually during the years

13,249Other non-operating income and expenses other than the above (787)

Less: Income tax effects 447,934NCI (after tax) -Total 1,572,485

Explanation of why the Company classified an item as non-recurring profit/loss according to the definition in theExplanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to thePublic - Non-Recurring Profit and Loss, or reclassified any non-recurring profit/loss item given as an example inthe said explanatory announcement to recurrent profit/loss□ Applicable √ Not applicableNo such cases in the Reporting Period.

Hubei Sanonda Co., Ltd. Semi-Annual Report 2018

Section III Business Profile

I Main Business of the Company during the Reporting Period

Is the Company subject to any disclosure requirements for special industries?No.

The Company is a corporation incorporated in the People's Republic of China.The Group engages in the development, manufacturing and marketing of off-patent crop protection products, andis one of the leading companies in the world in this field. The Group supplies solutions to farmers inapproximately 100 countries across the globe, through approximately 60 subsidiary companies throughout theworld.

The Group is the world’s leading off-patent crop protection solutions company (by sales), and is ranked sixth inthe world among all companies engaged in the field of crop protection. The Group's business model integratesend-customer access, regulatory expertise, and global R&D and production capabilities, thereby providing theGroup with a significant competitive edge and allowing it to launch new and differentiated products that cater tofarmers’ needs in key markets worldwide.

Adama-Sanonda combination - The combination of Adama Solutions and the Company was successfullycompleted, whereby on July 4, 2017, the entire share capital of Adama Solutions was transferred from CNAC tothe Company, in return for the issuance of new shares in the Company to CNAC and their registration for trade onthe SZSE which was completed on August 2, 2017 (together the “Combined Company”; the “CombinationTransaction”). Subsequently, the Company is consolidating Adama Solutions’ financial statements as of the thirdquarter 2017.

The Group's primary operations are focused on Europe, North America, Latin America, Asia-Pacific and the India,Middle-East and Africa region. In total, the Group sells its products in approximately 100 countries worldwide.The Group is focused on the development, manufacturing and marketing of off-patent crop protection products(which are mainly herbicides, fungicides and insecticides designed to protect agricultural and other crops), andutilizes its expertise for the development and adaptation of similar products for non-agricultural purposes(Consumer and Professional Solutions).

In addition, the Group leverages its core capabilities in the agricultural and chemical fields and operates in severalother non-agricultural areas, none of which, individually, is material for the Group. These activities includeprimarily, (a) the manufacture and marketing of dietary supplements, food colors, texture and flavor enhancers,and food fortification ingredients; (b) fragrance products for the perfume, cosmetics, body care and detergentsindustries; (c) the manufacture of industrial products and (d) other non-material activities.

Trends, events and key developments in the Group's macro-economic environment may have a material impact onits business results and development. The effects of these factors may differ depending on geographic region anddifferent products of the Group. Since the Group maintains a broad product portfolio and since it is active in manygeographic regions, the aggregate effect of these factors in any given year and the course thereof is not uniformand may sometimes even be mitigated by counterbalancing influences. The activities and results of the Group isfurther subject to, and affected by, certain global, localized and other factors, such as demographic changes;economic growth and rising standards of living; agricultural commodity prices; significant fluctuations in raw

Hubei Sanonda Co., Ltd. Semi-Annual Report 2018

material costs and global energy prices; development of new crop protection technologies; patent expiry andgrowth in volumes of off-patent products; the agricultural market and severe weather conditions; regulatorychanges; government policies; world ports and monetary policy and the financial market.Please see key additional information and further details included in the Annex.

II Significant Changes in Main Assets

1. Significant Changes in Main Assets

Main assets Explanations regarding significant changeStock rights/Equity assets No significant changes

Fixed assets No significant changesIntangible assets Portfolio of products acquired from Syngenta.Construction in progress / On-

construction projects

No significant changesTrade receivables Seasonal increase

goingFinancial assets at fair value through

profit or loss

Additional investmentDerivative financial assets Revaluation of derivatives

Bills receivable Mainly endorsed to suppliersPrepayments Mainly due to payment timingOther receivables Mainly decrease in subordinated note in respect of securitization transactionAssets held for sale Divestment transaction completed

2. Main Assets Overseas√ Applicable □ Not applicable

Specificcontents ofthe assets

Reason

Scale of the

assets(RMB’000)

Financial assets at fair value through

Location

Operation

mode

Controlmeasures to

guaranteesafety of the

assets

P/L of the

assets(RMB’000)

overseas

Proportion ofassets out of

assets out of

the net assets

(%)

Significantimpairment

risk?Equity

investment in

AdamaSolutions

Acquiredthrough major

assetsrestructuring.

18,097,813

Israel andglobally

CropProtection

CorporateGovernance

2,114,843

84% NoOther

explanations

See item I above regarding the completion of the Combination Transaction in July 2017.

III Core Competitiveness Analysis

Is the Company subject to any disclosure requirements for special industries?No.No significant changes occurred to the core competitiveness of the Company in the Reporting Period.

Hubei Sanonda Co., Ltd. Semi-Annual Report 2018

Section IV Performance Discussion and Analysis

I Overview

Please see key additional information and further details included in the Annex.

Financial HighlightsRevenues. The increase in revenues was driven by robust volume growth. Especially strong performance wasrecorded in the Americas, China and the India, Middle East and Africa region. In Europe, revenues over thehalf-year grew slightly, with a recovery in the second quarter after a delayed start to the season in the firstquarter. In addition to the volume growth, improved demand conditions facilitated a stronger pricingenvironment, allowing the passing on of some of the impact of the constrained supply and higher procurementcosts.

Gross profit. The increase in gross profit reflects the strong volume growth of a better product mix, as well ashigher prices, which were partially offset by the increased procurement costs of raw materials andintermediates.

Operating expenses. The increase in Sales and Marketing expenses resulted primarily from an increase insales-related personnel marketing and product development teams in growing geographies and an increase inother variable expenses as a result of the increase in sales volumes. The increase in R&D, General andAdministrative expenses resulted primarily from increased spend on strategic research and developmentprojects. In addition to these factors, part of the increase in total operating expenses stemmed from the impactof the strengthening of most currencies against the US dollar, mainly in the first quarter.

Financial expenses and investment income. The increase in financial expenses and investment income in thehalf-year period was primarily due to the adoption of a new accounting standard which classifies part ofinterest income on sales as revenue, partially offset by foreign exchange income related to balance sheetpositions.

Tax expenses. The higher tax expenses stem from increased profits accrued at the Group’s selling entitiesworldwide, as well as the non-cash impact of the devaluation of the Brazilian Real, which resulted in a lowervalue of local currency-denominated tax assets. Notably, the comparatively low tax expenses recorded in thefirst half of last year reflected a benefit from the utilization of tax loss carryforwards in the first quarter of 2017.

Working capital. Higher working capital served to accommodate the higher sales growth momentum.Inventories were higher due to significant product preparation in advance of the season in the southernhemisphere, as well as the higher procurement costs. Receivables were higher due to the strong sales growth,partially offset by an increase in payables.

Cash Flow. Notwithstanding the stronger growth momentum requiring increased inventories in advance ofthe season, due to the continued implementation of advanced supply chain alignment, the Group maintains itsinventory days at their historically low levels. Additionally, continued tight control of credit allowed the

Hubei Sanonda Co., Ltd. Semi-Annual Report 2018

receivable days of the Group to be at record best mid-year levels. This working capital discipline facilitatedthe generation of strong operating cash flow, while accommodating the significant sales growth.Additions to assets includes investments in product registrations and other intangible and fixed assets,including the transfer of products in Europe from Syngenta in the first quarter of 2018. Proceeds from disposalof assets includes the divestment of certain products in Europe in the first quarter of 2018 in connection withthe approval of the European Commission for ChemChina’s acquisition of Syngenta, while in 2017 similarlyincludes one-time proceeds resulting from the sale of non-core assets.Leverage: The significantly reduced balance sheet net debt at the end of June puts the Group’s netdebt/EBITDA ratio at 0.7x, compared to 1.2x at the same time last year.

II Analysis of Main Business

See details on the relevant contents of “I. Overview” of “Performance Discussion and Analysis”.

Year-on-year changes of main financial data:

Unit: RMB’000

Reporting Period/Closing Balance

Same period of last year/

Opening Balance

+/-% Reason for changeFinancial assets at fair

value through profit orloss

32,693 23,000 42.14%

Additional investmentDerivative financial

assets

940,225 455,153 106.57%

Revaluation of derivatives

Bills receivable 88,285 180,030 (50.96%)

Mainly endorsed tosuppliersAccounts receivables 6,614,644 5,085,911 30.06% Mainly due to seasonality

Prepayments 286,942 202,111 41.97%

Mainly due to paymenttiming

Other receivables 707,725 1,029,557 (31.26%)

Mainly decrease insubordinated note inrespect of securitizationtransaction

Assets held for sale - 403,297 (100%)

Divestment transactioncompleted

Intangible assets 5,895,824 4,036,588 46.06%

Mainly purchase ofintangible from SyngentaAG

Short term loans 384,482 2,280,912 (83.14%)

Repayment of short termloansDerivative financialliabilities

1,209,687 789,050 53.31%

Revaluation of derivatives

Bills payable 144,991 311,557 (53.46%) Cheques paidTaxes payable 595,224 431,275 38.01%

Mainly due to increase incorporate income tax dueto increase in taxableprofitDividend payables 154,383 250 61,653.20% Dividend to shareholders

Other payables 1,991,600 1,375,993 44.74%

Mainly increase inliability in respect ofsecuritization transactionand liabilities for

Hubei Sanonda Co., Ltd. Semi-Annual Report 2018

Reporting Period/Closing Balance

Same period of last year/

Opening Balance

+/-% Reason for change

discountsLong-term loans 320,382 514,320 (37.71%)

Mainly due to repaymentof loansProvision 113,041 163,913 (31.04%)

Decrease in provision inrespect of contingencies

Deferred tax liability 471,942 224,613 110.11%

Mainly due to utilizationof losses carry forwarddue to gain from disposalof intangible assets.

Other comprehensiveincome

401,339 (104,080) (485.61%)

Mainly due to revaluationof hedge transactions andtranslation effect offoreign operationsSpecial reserves 14,259 9,349 52.52%

Additions to safetyproduction costRetained earnings 5,500,544 3,307,924 66.28% Mainly net profitFinancing Expense 330,018 911,916 (63.81%)

Mainly exchange ratedifferences

Income tax expenses 727,264 142,257 411.23%

Mainly due to gain fromdisposal of intangibleassets and devaluation ofthe Brazilian Real whichresulted in a decrease inthe local tax assetsreducedOperating income 13,026,258 12,770,064 2.01%Cost of goods sales 8,571,417 8,179,694 4.79%Selling and Distributionexpenses

2,223,934 2,122,890

4.76%

General andadministrative expenses

637,129 559,398

13.90%

Net cash flows fromoperating activities

779,518 2,249,146 (65.34%)

Includes mainly anincrease in workingcapital, due to an increase

in inventory due tosignificant productpreparation in advance ofthe season in the southernhemisphere, as well as thehigher pr

ocurement costs.

Net cash flows used ininvesting activities

(264,623) (484,293) (45%)

Reduction in netinvestment due toproceeds from disposal of

intangible assets.Net cash flows used infinancing activities

(2,356,158) (966,091) 144% Cash repayment of loans

ocurement costs.

Net increase (decrease)in cash and cashequivalents

(1,842,878) 703,907 (361.81%)

See explanations above

regarding cash flow

Major changes to the profit structure or sources of the Company in the Reporting Period:

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

Hubei Sanonda Co., Ltd. Semi-Annual Report 2018

Breakdown of main business:

Unit: RMB’000

Operatingrevenues

Cost of goods

sold

Gross margin (%)

YoYincrease/decreaseof the operating

revenues

YoYincrease/decrease

of the cost of

goods sold

YoYincrease/decrease

of the gross

marginClassified by industriesIndustry ofmanufacturing chemicalraw materials andchemical products

13,026,258

8,571,417 34.20% 2.01% 4.79% -2.95%Classified by products

Agro 12,132,725

7,899,306 34.89% 2.29% 5.22% -2.66%Classified by regions

-- -- -- -- -- -- --

III Analysis of Non-Core Business

√ Applicable □ Not applicableUnit:RMB’000

Amount

Proportion in total

profit

Reasons Whether sustainedInvestment income 147,053 5% -- No

Gain/loss from changeof Fair Value

-243,376 -8% -- NoImpairment of asset 43,880 1% -- NoNon-operating income

1,997,170 64.63%

Divestment in Europe due to

the Syngenta Transaction

NoNon-operating loss 29,004 0.94% -- No

IV Analysis of Assets and Liabilities

1. Significant Changes in Asset Composition

Unit: RMB’000

End of Reporting Period

End of same period of last

year

Change inpercentage

(%)

Reason for significant change

Amount

As a

percentage of

total assets

(%)

Amount

As a

percentage of

percentage of

total assets

(%)

on hand

6,049,530 14.55% 4,544,474 12.09% 2.46% no significant changeAccountsreceivable

6,614,644 15.91% 6,436,524 17.12% -1.21% no significant changeInventories 8,274,820 19.90% 7,344,645 19.53% 0.37% no significant changeInvestmentproperties

4,251 0.01% 4,565 0.01% 0.00% no significant change

Cash at bank andLong term equity

investment

119251 0.29 0.27% 0.02% no significant changeFixed assets 6,150,140 14.79% 6,480,834 17.24% -2.45% no significant change

Hubei Sanonda Co., Ltd. Semi-Annual Report 2018

End of Reporting Period

End of same period of last

year

Change inpercentage

(%)

Reason for significant change

Amount

As a

total assets

(%)

Amount

As a

percentage of

percentage of

total assets

(%)Construction inprogress

871,046 2.09% 587,248 1.56% 0.53% no significant changeIntangible assets

5,895,824 14.18% 4,349,139 11.57% 2.61% no significant changeGoodwill 3,939,153 9.47% 3,987,019 10.60% -1.13% no significant changeDeferred taxassets

623,619 1.50% 708,345 1.88% -0.38% no significant changeShort term loans

384,482 0.92% 537,567 1.43% -0.51% no significant changeAccountspayables

4,221,331 10.15% 3,745,730 9.96% 0.19% no significant changeEmployee

benefits payable

766,690 1.84% 986,126 2.62% -0.78% no significant changeLong-term loans

320,382 0.77% 492,644 1.31% -0.54% no significant changeDebenturespayable

7,548,581 18.16% 8,026,553 21.35% -3.19% no significant change

2. Assets and Liabilities Measured at Fair Value√ Applicable □ Not applicable

Unit: RMB’000Item

Openingbalance

Profit/loss on

fair valuechanges in the

Reporting

Period

Cumulative fair

value changes

charged to

equity

Impairmentprovided in the

Reporting

Period

Purchased inthe Reporting

Period

Sold in theReporting

Period

Cumulative fair

Closingbalance

Financial assetsFinancial assetsmeasured at fairvalue throughprofit or loss(excludingderivativefinancial assets)

23,000 -2,877 -309 - 64,969 -52,090 32,693Derivative

financial assets(including longterm)

455,153 43,621 335,385 - - 128,503 962,662Other equity

investments

91,090 - -64 - - - 91,154Total financial

assets

569,243 40,744 335,012 - 64,969 76,413 1,086,509Other

Total of above 569,307 40,744 335,012 - 64,969 76,413 1,086,509Financialliabilities

789,050 431,600 - - - - 1,220,650

Significant changes in the measurement attributes of the main assets in the Reporting Period□ Yes √ No

Hubei Sanonda Co., Ltd. Semi-Annual Report 2018

3. Restricted Asset Rights as of End of the Reporting PeriodAt the end of this Reporting Period, restricted assets included RMB 28.150 million - restricted cash, most of

which is as guarantee for bank acceptance bills ; RMB 6.134 million - fixed assets, as mortgage for loans; andRMB 130.128 million - other non-current assets, mainly as guarantee for asset securitization and law suits.

V Investments Made

1. Overall Condition of the Total Investments Made√Applicable □ Not applicable

Investment during the Reporting

Period (RMB’000)

Investment during the Same Period

Last Year (RMB’000)

+/-% YoY

27,502,6830 +100%

2. Significant Equity Investments Made in the Reporting Period□ Applicable √ Not applicable3. Significant Non-Equity Investments Ongoing in the Reporting Period□ Applicable √ Not applicable4. Financial Investments(1) Securities Investments□ Applicable √ Not applicable

No such cases in the Reporting Period.

Hubei Sanonda Co., Ltd. Semi-Annual Report 2018

(2) Investments in Derivative Financial Instruments√ Applicable □ Not applicable Unit: RMB’000

The party thatoperates theinvestment

Relationwith theCompany

Related

partytransaction

or not?

Type Initial

investment

amount

Starting date

Expiring

date

Investmentamount atbeginning of the

period

Amountpurchasedduring thereporting

period

Amount sold

during thereporting

period

Impairmentaccrued (if

any)

Investmentamount at endof the period

Percentage ofinvestment amount

divided by net asset

at end of the period

Gain/lossduring thereporting

periodBanks No No Option

52,274 24/04/2018

24/12/2018

52,274 6,409,987 -1,228,530

No 5,233,731 24.31% -3,711Banks No No Forwards

15,911,923

03/04/2018

30/10/2018

15,911,923 21,092,696 -24,582,737

No 12,421,882 50.70% -367,360Total 15,964,197

-- -- 15,964,197 27,502,683 -25,811,267

17,655,613 82.01% -371,071Source of fund for the investment InternalLitigation-related situations (if applicable) N/ADate of disclosure of Board approval (if any) December 30, 2017

Date of disclosure of Shareholders’ approval (if any)

N/A

Risk and control analysis for the reporting period(including but not limited to market risk, liquidityrisk, credit risk, operational risk, legal risk, etc.)

The aforesaid refers to short term hedging currency transactions made with banks.The Group’s transactions are not traded in the market. The t

ransactions are between the applicable company in the Group and the applicable bank until the

expiration date of the transaction, therefore no market risk is involved.Regarding credit and liquidity risk, the Group is working with large and substantial banks only and with some of them the Group has ISDA agreements.As to operational risk, the Group is working with approved software for all transactions.No legal risk is involved.The controls taken in order to further reduce said risks are:

? The relevant subsidiaries have specific guidelines, under the Group’s policy, which were approved by the subsidiaries' Financial S

ransactions are between the applicable company in the Group and the applicable bank until thetatements

Committee of the Board, which specifies, inter alia, the hedging policy, the persons that have

	tatements
the authorization to deal with hedging, the tools, ranges

etc. The only subsidiary that has hedging positions in the Group in the period was Adama Solutions and its subsidiaries.

? The relevant subsidiaries apply local SOX audits that audit the working proce

quarterly audit.

? The controllers of the relevant subsidiaries are involved and monitor the hedging accounting treatment.

Every 2-3 years the internal audit of the relevant subsidiaries department is auditing the entire procedure.

Hubei Sanonda Co., Ltd. Semi-Annual Report 2018

Market price or fair value change of investmentsduring the reporting period.Specific methodology and assumptions should bedisclosed in the analysis of fair value of theinvestments

The aforesaid refers to short term hedging currency transactions made by the relevant subsidiary with banks.Segregation of duties as follows:

For the fair value evaluation, the relevant subsidiary is using external experts. The relevant subsidiary hedges

simple (options and forwards) for up to 1.5 years. Therefore, the valuation is straightforward, and the exchange rates are provided by

currencies only; the relevant transactions arethe accounting department

of the relevant subsidiary and all other parameters are provided by the external experts.

the accounting departmentExplanation for any significant changes in accounting

policies and principles, compared with last reportingperiod

N/AIndependent Directors’ opinion on the investment in

derivative financial instruments and related riskcontrols

The derivative investments carried by the Company are for hedging and avoiding the risk of market fluctuations. The investments respond to the Company’

Explanation for any significant changes in accountings

routine business demands and are in accordance with the relevant laws and regulations

s. Additionally, the Company has adopted Currency Risk Hedging Policy to

strengthen the risk management and control which benefit the Company’s ability to protect against

. Additionally, the Company has adopted Currency Risk Hedging Policy tomarket risk. The derivative investments do not harm the

interests of the Company and its shareholders.

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

VI Sale of Major Assets and Equity Interests

1. Sale of Major Assets□ Applicable √ Not applicable

No such cases in the Reporting Period.

The Company successfully concluded and executed the transfer and divestment process relating to ChemChina’sacquisition of Syngenta mentioned in Item VI in Section IV (Performance Discussion and Analysis) of the 2017Annual Report (the “Syngenta Transaction”), with effective integration of the product portfolio transferred fromSyngenta as well as the simultaneous transition of divested products, ensuring continuity of supply, maintenanceof quality and minimal disruption to customers.

2. Sale of Major Equity Interests□ Applicable √ Not applicable

VII Main Controlled and Joint Stock Companies

√ Applicable □ Not applicableList of the stock-participating companies influencing over 10% of the net profits on the major subsidiaries and theCompany

Unit: RMB’000Name Type

Main services

capital

Registered

Totalassets

Operatingrevenues

Net assets

Operating

profit

Net profit

AdamaSolutions

Subsidiary

Development,manufacturing andmarketing of agrochemicals,intermediatematerials for otherindustries, food additivesand synthetic aromaticproducts, mainly for export

720,085 33,891,178

14,823,296

11,783,305

2,926,319 2,235,906

Subsidiaries acquired or disposed during the Reporting Period□ Applicable √ Not applicable

VIII Structured Entities Controlled by the Company

□ Applicable √ Not applicable

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

IX Performance Forecast for January-September 2018

Warning of possible loss or considerable YoY change in the accumulative net profit made during theperiod-beginning to the end of the next reporting period, as well as the reasons:

□ Applicable √ Not applicable

X Risks Facing the Company and Countermeasures

The Group believes that it is exposed to several major risk factors, resulting from its economic environment, theindustry and the Group's unique characteristics, as follows (the order below does not indicate priority):

Exchange rate fluctuationsAlthough the Company reports its consolidated financial statements in RMB, the Company’s material subsidiaryAdama Solution reports its consolidated financial statements in US dollars, which is its functional currency, whileits operations, sales and purchases of raw materials are carried out in various currencies. Therefore, fluctuations inexchange rates impact the Company’s results. In the Company's assessment, the Group's most significantexposures are to the Euro, the Israeli Shekel and the Brazilian Real. The Company has lesser exposures to othercurrencies. The strengthening of the US dollar against other currencies in which the Company operates reducesthe amount of the sales reported in dollar terms, and vice versa.On an annual perspective, approximately 33% of Adama Solutions' sales are to the European market and thereforethe impact of long-term trends on the Euro may affect the Company's results and profitability.Measuring currency exposure from foreign currency exchange rate fluctuations against assets, including inventoryof finished products in countries of sale, liabilities and cash flow denominated in foreign currencies are doneconstantly. High volatility of the exchange rates of these currencies could increase the costs of transactions tohedge against currency exposure, thereby increasing the Company's financing costs.Adama Solutions uses commonly accepted financial instruments to hedge most of its substantial net balance sheetexposure to any particular currency. Nonetheless, since as part of these operations Adama Solutions hedgesagainst most of its balance sheet exposure and against only part of its economic exposure, exchange rate volatilitymight impact Adama Solutions’ results and profitability. Adama Solutions has hedged most of its balance sheetexposure for the first six months of 2018 as it is on the date of publication of this reportIn addition, as the Company’s product sales depend directly on the cyclical nature of the agricultural seasons,therefore the Company’s income and its exposure to the various currencies is not evenly distributed over the year.Countries in the northern hemisphere have similar agricultural seasons and therefore, in these countries, thehighest sales are usually during the first half of the calendar year. During this period, the Company is mostexposed to the Euro, the Polish Zloty and the British Pound. In the southern hemisphere, the seasons are oppositeand most of the local sales are carried out during the second half of the year. During these months, most of theCompany's exposure pertains to the Brazilian Real. The Company has more sales in markets in the northernhemisphere and therefore, the Company's sales volume during the first half of the year is higher than the salesvolume during the second half of the year.Exposure to Interest rate, Israel CPI and NIS exchange rate fluctuationsThe main portion of the debentures issued by Adama Solutions, material subsidiary of the Company, is linked tothe Israel Consumer Price Index (CPI) and therefore an increase in the CPI might lead to a significant increase inits financing expenses. As of the date of approval of the financial statements, Adama Solutions hedged most of itsexposure to this risk on an ongoing basis, through CPI hedging transactions.Adama Solutions is exposed to changes in the US dollar LIBOR interest rate as Adama Solutions has

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

dollar-denominated liabilities, which bear variable LIBOR interest. Adama Solutions prepares a quarterlysummary of its exposure to changes in the LIBOR interest rate and periodically examines hedging the variableinterest rate by converting it to a fixed rate. As of the date of approval of the financial statements, AdamaSolutions has not carried out hedging for such exposure, since US dollar interest rates have been relatively stable.

Business operations in emerging marketsThe Group conducts business – mainly product sales and raw material procurement – inter alia, in emerging

markets such as Latin America (particularly in Brazil, the largest country market in which the Group operates),Eastern Europe, South East Asia and Africa. The Group's activity in emerging markets is exposed to risks typicalof those markets, including: political and regulatory instability; volatile exchange rates; economic and fiscalinstability and frequent revisions of economic legislation; relatively high inflation and interest rates; terrorism orwar; restrictions on import and trade; differing business cultures; uncertainty as to the ability to enforcecontractual and intellectual property rights; foreign currency controls; governmental price controls; restrictions onthe withdrawal of money from the country; barter deals and potential entry of international competitors andaccelerated consolidation by large-scale competitors in these markets. Developments in these regions may have asignificant effect on the Group's operations. Distress to the economies of these markets could impair the ability ofthe Group's customers to purchase its products or the ability to market them at international market prices, as wellas harm the Group's ability to collect customer debts, in a way that could have a significant adverse effect on theGroup's operating results.The Group’s operations in multiple regions allows for the diversification of such risks and for the reduction of itsdependency on particular economies. In addition, changes in registration requirements or customers' preferencesin developed countries, which may limit the use of raw materials purchased from emerging economies, mayrequire redeployment by the Group's procurement organization, which might negatively affect its profitability fora certain period.Operating in a competitive marketThe crop protection industry is highly competitive. Currently, approximately 60% of the industry's global marketis shared by four leading Originator Companies, which are based in Europe or North America, these beingDowDuPont, Bayer (now including Monsanto), BASF and Syngenta, which develop, manufacture and marketboth patent-protected as well as off-patent products. The Group competes with the original products with the aimof maintaining and increasing its market share.The Originator Companies possess resources enabling them to compete aggressively, in the short-to-medium term,on price and profit margins, so as to protect their market share. Loss of market share or inability to acquireadditional market share from the Originator Companies can affect the Group's position in the market andadversely affect its financial results. For details regarding the Group’s competitive advantages see section III -subsection III of the 2017 annual report of the Company.Similarly, the Group also competes in the more decentralized off-patent market, with other off-patent companiesand smaller-scale Originator Companies, which have significantly grown in number in recent years and arematerially changing the face of the crop protection products industry, the majority of whom have not yet deployedglobal distribution networks, and are only active locally. These companies price their products aggressively and attimes have lower profit margins than the Group, which may harm the Group's sales and product prices. TheGroup's ability to maintain its revenues and profitability from a specific product in the long term is affected by thenumber of companies producing and selling comparable off-patent products and the time of their entrance to therelevant market.Any delay in developing or obtaining registrations for products and/or delayed penetration into markets and/orgrowth of competitors that focus on off-patent active ingredients (whether by the expansion of their productportfolio, granting registrations to other manufacturers (including manufacturers in China and India) to operate inadditional markets, transforming their distribution network to a global scale or increasing the competition for

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

distribution access), and/or difficulty in purchasing low cost raw materials, may harm the Group’s sales in thissector, affect its global position and lead to price erosion.

Decline in scope of agricultural activities; exceptional changes in weather conditionsThe scope of agricultural activities may be negatively affected by many exogenous factors, such as extremeweather conditions, natural disasters, a significant decrease in agricultural commodity prices, government policiesand the economic condition of farmers. A decline in the scope of agricultural activities would cause a decline inthe demand for the Group’s products, erosion of its prices and collection difficulties, which may have a significantadverse effect on the Group's results. Extreme weather conditions as well as damages caused by nature have animpact on the demand for the Group's products. The Group believes that, should a number of such bad seasonsoccur in succession, without favorable seasons in the interim, its results may sustain significant harm.Environmental, health and safety legislation, standards, regulation and exposureMany aspects of the Group's operations are strictly regulated, including in relation to production and trading, andparticularly in relation to the storage, treatment, manufacturing, transport, usage and disposal of its products, theiringredients and byproducts, some of which are considered hazardous. The Group's activities involve hazardousmaterials. Defective storage or handling of hazardous materials may cause harm to human life or to theenvironment in which the Group operates. The regulatory requirements regarding the environment, health andsafety could, inter alia, include soil and groundwater clean-up requirements; as well as restrictions on the volumeand type of emissions the Group is permitted to release into the air, water and soil.The regulatory requirements applicable to the Group vary from product to product and from market to market, andtend to become stricter with time. In recent years, both government authorities and environmental protectionorganizations have been applying increasing pressure, including through investigations and indictments as well asincreasingly stricter legislative proposals and class action suits related to companies and products that maypotentially pollute the environment. Compliance with the foregoing legislative and regulatory requirements andprotection against such legal actions requires the Group to spend considerable financial resources (both in terms ofsubstantial ongoing costs and in terms of material one-time investments) as well as human resources in order tomeet mandatory environmental standards. In some instances, this may result in delaying the introduction ofproducts into new markets or in adverse effects on the Group’s profitability. In addition, the toughening, materialalteration or revocation of environmental licenses or permits, or their stipulations, or the inability to obtain suchlicenses and permits, may significantly affect the Group's ability to operate its production facilities, which in turnmay have a material adverse effect on the financial and business results of the Group. The Group may be requiredto bear significant civil liability (including due to class actions) or criminal liability (including high penaltiesand/or high compensation payments and/or costs of environmental monitoring and rehabilitation), resulting fromviolation of environmental, health and safety regulations, while some of the existing legislation may imposeobligations on the Group for strict liability, regardless of proof of negligence or malice.While the Group invests material sums in adapting its facilities and in constructing special facilities in accordancewith environmental requirements, it is currently unable to assess with any certainty whether these investments(current and future) and their outcomes may satisfy or meet future requirements, should these be significantlyincreased or adjusted. In addition, the Group is unable to predict with any certainty the extent of future costs andinvestments it may incur so as to meet the requirements of the environmental authorities in Israel or in othercountries in which it operates since, inter alia, the Group is unable to estimate the extent of potential pollutions,their length, the extent of the measures required to be taken by the Group in handling them, the division ofresponsibility among other parties and the amounts recoverable from third parties.Furthermore, the Group may be the target of bodily injury claims and property damage claims caused by exposureto hazardous materials, which are predominantly covered under the Group’s insurance policies.

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

Legislative, standard and regulatory changes in product registrationThe majority of the substances and products marketed by the Group require registration at various stages of theirdevelopment, production, import, utilization and marketing, and are also subject to strict regulatory supervision bythe regulatory authorities in each country. Compliance with the registration requirements, that vary from countryto country and which are becoming more stringent with time, involves significant time and costs and rigorouscompliance with individual registration requirements for each product. Noncompliance with these regulatoryrequirements might materially adversely affect the scope of the Group’s expenses, cost structure and profitmargins, as well as penetration of its products in the relevant market, and may even lead to suspension of sales ofthe relevant product, and recall of those products already sold, or to legal action. Moreover, to the extent newregulatory requirements are imposed on existing registered products (requiring additional investment or leading tothe existing registration's revocation) and/or the Group is required to compensate another company for its use ofthe latter's product registration data, these might amount to significant sums, considerably increasing the Group'scosts and adversely affecting its results and reputation.Additionally, the Group believes that, in countries where it maintains a competitive advantage, any toughening ofregistration requirements may actually increase this advantage, since this will make it difficult for its competitorsto penetrate the same market, whereas in countries in which the Group possesses a small market share, if any,such toughening may make further penetration of the Group's products into that market more difficult.Product liabilityProduct and producer liability present a risk factor to the Group. Regardless of their prospects or actual results,product liability lawsuits might involve considerable costs as well as tarnish the Group's reputation, thusimpacting its profits. The Group has third-party and defective product liability insurance cover. However, there isno certainty that the scope of insurance cover is sufficient. Any future product liability lawsuit or series oflawsuits could materially affect the Group’s operations and results, should the Group lose the lawsuit or should itsinsurance cover not suffice or apply in a particular instance. In addition, while currently the Group has notencountered any difficulty renewing such insurance policy, it is possible that it will encounter future difficulties inrenewing an insurance policy for third party liability and defective products on terms acceptable to the Group.Successful market penetration and product diversificationThe Group’s growth and profit margins are affected, inter alia, by the extent of its success in developingdifferentiated products and obtaining registrations for them, so as to enable it to gain market share at the expenseof its competitors. Usually, being the first to launch a certain off-patent product affords the Group continuingadvantage, even after other competitors penetrate the same market. Thus, the Group's revenues and profit marginsfrom a certain product could be materially affected by its ability to launch such product ahead of the launch of acomparable product by its competitors.Should new products fail to meet registration requirements in the different countries or should it take a long periodof time to obtain such registrations, the Group's ability to successfully introduce a new product to the market inquestion in the future would be affected, since entry into the market prior to other competitors is important forsuccessful market penetration. Furthermore, successful market penetration involves, inter alia, productdiversification in order to suit each market's changing needs. Therefore, if the Group fails to adapt its product mixby developing new products and obtaining the required regulatory approvals, its future ability to penetrate thatmarket and to maintain its existing market share could be affected. Failure to introduce new products to givenmarkets and meet Group objectives (given the considerable time and resources invested in their development andregistration) might affect the sales of the product in question in the relevant market, the Group’s results andmargins.Intellectual property rights of the Group and of third partiesThe Group's ability to develop off-patent products is dependent, inter alia, on its ability to oppose patents of an

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

Originator Company or other third parties, or to develop products that do not otherwise infringe intellectualproperty rights in a manner that may involve significant legal and other costs. Originator Companies tend tovigorously defend their products and may attempt to delay the launch of competing off-patent products byregistering patents on slightly different versions of products for which the original patent protection is about toexpire or has expired, with the aim of competing against the off-patent versions of the original product. TheOriginator Companies may also change the branding and marketing method of their products. Such actions mayincrease the Group's costs and the risk it entails, and harm or even prevent its ability to launch new products.The Group is also exposed to legal claims that its products or production processes infringe on third-partyintellectual property rights. Such claims may involve time, costs, substantial damages and management resources,impair the value of the Group's brands and its sales and adversely affect its results. As of the date of approval ofthe financial statements, such lawsuits that were concluded involved non-material amounts.Furthermore, the Group protects its brands and trade secrets with patents, trademarks and other methods ofintellectual property protection, however these protective means may not be sufficient for safeguarding itsintellectual property. Any unlawful or other unauthorized use of the Group's intellectual property rights couldadversely affect the value of its intellectual property and goodwill. In addition, the Group may be required to takelegal action involving financial costs and resources to safeguard its intellectual property rights.Fluctuations in raw material inputs and prices, and in costs of goods soldSignificant percentage of the cost of the Groups’ sales derives from raw material costs. Hence, significantincreases or decreases in raw material costs affect the cost of goods sold, which is generally seen a number ofmonths following such cost fluctuation. Most of the Group's raw materials are distant derivatives of oil prices, andtherefore extreme increases or decreases in oil prices may affect the costs of raw materials, even if only partiallyor indirectly.To reduce exposure to fluctuations in the prices of raw materials, the Group customarily engages in long-termpurchase contracts for key raw materials, wherever possible. Similarly, the Group acts to adjust its sales prices, ifpossible, to reflect the changes in the costs of raw materials.As of the date of approval of the financial statements, the Group has not engaged in any hedging transactionsagainst increases in oil prices and other raw material costs.Exposure due to recent developments in the genetically modified seeds marketAny further significant development in the market of genetically modified seeds for agricultural crops, includingas a result of regulatory changes in certain countries currently prohibiting the use of genetically modified seeds,and/or any significant increases in the sales of genetically modified seeds or crop protection products of whichgenetically modified crops are designed to be tolerant, such as Glyphosate and/or other existing or new cropprotection products that are developed (substituting traditional products), will affect demand for crop protectionproducts, requiring the Group to respond by adapting its product portfolio to the new demand structure.Consequently, to the extent that the Group fails to adapt its product mix accordingly, this may reduce demand forits products, erode their sales price and necessarily affect the Group’s results and market share.Operational risksThe Group’s operations, including its manufacturing activities, rely, inter alia, on computer systems. The Groupcontinually invests in upgrading and protecting these systems. Any unexpected failure of these systems, as well asthe integration of new systems, could involve substantial costs and adversely affect the Group's operations untilcompletion of the repair or integration. The potential occurrence of a substantial failure that cannot be repairedwithin a reasonable time frame may also affect the Group's operations and its results. Currently, the Group has aproperty and loss-of-profit insurance policy.

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

Raw material supply and/or shipping and port services disruptionsLack of raw materials or other inputs utilized in the manufacture of Group products may prevent the Group fromsupplying its products or significantly increase production costs. Moreover, the Group imports raw materials to itsproduction facilities in Israel and/or outside Israel, from where it exports the products to its subsidiaries aroundthe world for formulation and/or commercialization purposes. Disruptions in the supply of raw materials fromregular suppliers may adversely affect operations until an alternative supplier is engaged. If any of the Group'ssuppliers are unable to supply raw materials for a prolonged period, including due to ongoing disruptions and/orprolonged strikes and/or infrastructure defects in the operating of a relevant port, and the Group is unable toengage with an alternative supplier at similar terms and in accordance with product registration requirements, thismay adversely affect the Group's results, significantly affect its ability to obtain raw materials in general, or obtainthem at reasonable prices, as well as limit its ability to supply products and/or meet customer supply deadlines.These might negatively affect the Group, its finances and operating results. In order to reduce this risk, it is theGroup's practice to occasionally adjust the volume of its product inventories and at times utilize air freight.Failed mergers and acquisitions; difficulties in integrating acquired operationsThe Group's strategy includes growth through mergers, acquisitions, investments and collaborations designed, in acalculated manner, to expand its product portfolio and deepen its presence in certain geographical markets.Growth through mergers and acquisitions requires assimilation of acquired operations and their effectiveintegration in the Group, including realization of certain forecasts, profitability, market conditions andcompetition.Failure to successfully implement the above and/or non-realization of the said forecasts may result in notachieving the additional value forecasted, losing customers, exposure to unexpected liabilities, reduced value ofthe intangible assets included in the merger or acquisition as well as the loss of professional and skilled humanresources.Production concentration in limited plantsA large portion of the Group’s production operations is concentrated in a small number of locations. Naturaldisasters, hostilities, labor disputes, substantial operational malfunction or any other material damage mightsignificantly affect Group operations, as a result of the difficulty, the time and investment required for relocatingthe production operation or any other activity.International taxationMost of the Group’s sales are global, through its consolidated subsidiaries worldwide. These individual companiesare assessed in accordance with the tax laws effective in each respective location. The Group’s effective tax ratecould be significantly affected by different classification or attribution of the profits arising from the share ofvalue earned of the companies in the Group in the various countries, as will be recognized in each tax jurisdiction;changes in the characteristics (including regarding the location of control and management) of these companies;changes in the breakdown of the Group's profits into regions where differing tax rates apply; changes in statutorytax rates and other legislative changes; changes in assessment of the Group's deferred tax assets or deferred taxliabilities; changes in determining the areas in which the Group is taxed; and potential changes in the Group'sorganizational structure.Changes in tax regulations and the manner of their implementation, including with regard to the implementationof BEPS (Base Erosion and Profit Shifting), may lead to a substantial increase in the Group's applicable tax ratesand have a material adverse effect on its financial state, results and cash flows.The Group’s Financial Statements do not include a material provision for exposure for international taxation, asstated above, based on professional counsel it has received.

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

Risks arising from the Group’s debtThe Group finances its business operations by means of its own equity and loans from external sources (primarilydebentures issued by Adama Solutions and bank credit). The Group's main source for servicing the debt and itsoperating expenses is by means of the profits from the Group companies’ operations. Restrictions applying to theGroup companies regarding distribution of dividends to the Group, or the tax rate applicable on these dividends,may affect the Group's ability to finance its operations and service its debt.In addition, the Group's funding agreements and documents require it to meet certain Financial Covenants. Failureto meet these covenants due to an exogenous event or non-materialization of Group forecasts, and insofar as thefinancing parties refuse to extend or update these Financial Covenants as per the Group’s capabilities, may leadthe financing parties to demand the immediate payment of these liabilities (or part thereof).Exposure to customer credit risksThe Group’s sales to customers usually involve customer credit as is customary in each market. A portion of thesecredit lines are insured, while the remainder is exposed to risk, particularly during economic slowdowns in therelevant markets. The Group’s aggregate credit, however, is diversified among many customers in multiplecountries, mitigating this risk. In addition, in certain regions, particularly in South America, credit days areparticularly long (compared to those extended to customers in regions such as Europe), and on occasion, inter alia,owing to agricultural seasons or economic downturns in those countries, the Group may encounter difficulties incollection of customer debts, with the collection period being extended over several years.Generally, such issues arise more often in developing countries where the Group is less familiar with its customers,the collaterals are of doubtful value and the insurance cover of these customers is likely to be limited. Creditdefault by any of the customers may negatively impact the Group's cash flow and financial results.The Group’s working capital and cash flow needsSimilar to other companies operating in the crop protection industry, the Group has substantial cash flow andworking capital requirements in the ordinary course of operations. In view of the Group's growth and consideringits primary growth regions, the Group’s broad product portfolio and its investments in manufacturinginfrastructures, the Group has significant financing and investment needs. The Group acts continually to improvethe state and management of its working capital. While currently the Group is in compliance with all its financialcovenants, significant deterioration of its operating results may in the future lead it to fail to comply with itsfinancial covenants and fail to meet its financial needs. As a result, the Group's ability to meet its goals andgrowth plans, and its ability to meet its financial obligations, may be harmed.

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

Section V Significant Events

I Annual and Special Meetings of Shareholders Convened during the Reporting Period

1. Meetings of Shareholders Convened during the Reporting Period

Meeting Type

Investor

Convened date Disclosure date

participation ratio

Index to disclosed

information

st

InterimShareholdersMeeting in 2018

Interim ShareholdersMeeting

74.06% March 19, 2018 March 20, 2018

Announcement of the

st

InterimShareholders Meeting

in 2018(AnnouncementNumber:2018-11).

Disclosed at thewebsite CNINFO

www.cninfo.com.cn

2017 AnnualShareholdersMeeting

Annual ShareholdersMeeting

82.09% June 28, 2018 June 29, 2018

Announcement of the

Annual Shareholders

Meeting(AnnouncementNumber:2018-35).

Disclosed at thewebsite CNINFO

www.cninfo.com.cn

2. Special Meetings of Shareholders Convened at Request of Preference Shareholders with Resumed VotingRights□ Applicable √ Not applicable

II Proposal for Profit Distribution and Converting Capital Reserve into Share Capital for theReporting Period

□ Applicable √ Not applicableFor the Reporting Period, the Company does not plan to distribute cash dividends or bonus shares or convertcapital reserve into share capital.

III Commitments completed by the Company, the shareholders, the actual controllers, thepurchasers, or the other related parties during the reporting period and those which shouldbe completed but failed during the reporting period

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

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

IV Engagement and Disengagement of CPA Firm

Has the semi-annual financial report been audited?□Yes √ NoThis Semi-Annual Report is unaudited.

V Explanations Given by Board of Directors and Board of Supervisors Regarding “ModifiedAuditor’s Report” Issued by CPA Firm for the Reporting Period

□ Applicable √ Not applicable

VI Explanations Given by Board of Directors Regarding “Modified Auditor’s Report” Issuedfor Last Year

□ Applicable √ Not applicable

VII Bankruptcy and Restructuring

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

VIII Litigation and Arbitration Matters

Significant litigations or arbitrations:

□ Applicable √ Not applicableNo such cases in the Reporting Period.Other litigations or arbitrations:

□ Applicable √ Not applicableNo substantial litigation or arbitrations in the Reporting Period.

IX Punishments and Rectifications

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

X Integrity of the Company, its controlling shareholders and actual controller

□ Applicable √ Not applicable

XI Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures forEmployees

□ Applicable √ Not applicable

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

To the date of the Report, the Company does not have stock incentive plans, ESOP or other staff incentives. Itshall be noted, that the Company’s subsidiary approved in December 2017 and granted long-term cash rewards toexecutive officers and employees, which is based on the performance of the Company's shares (phantom cashincentives).

XII Significant Related Transactions

1. Related Transactions Relevant to Routine Operations□Applicable √ Not applicable

(1) There are no significant related-party transactions during the reporting period.(2) Item XII of Section X “Financial Statements” has set out the related parties and the related-party transactions

of the Company.2. Related Transactions Regarding Purchase or Sales of Assets or Equity Interests□ Applicable √ Not applicable

The Company was not involved in any related-party transactions arising from asset acquisition or sale during theReporting Period.

3. Related Transactions Regarding Joint Investments in Third Parties□ Applicable √ Not applicable

The Company was not involved in any significant related-party transaction with joint investments during theReporting Period.

4. Credits and Liabilities with Related Parties√ Applicable □ Not applicable

Whether exist non-operating credits and liabilities with related parties or not?□ Yes √ NoThe Company was not involved in any non-operating credit and liability with related parties in the ReportingPeriod.

5. Other significant related-party transactions√Applicable □Not applicable

The 2017 Annual Shareholders Meeting approved the expected related-party transactions in the ordinary businesscourse of the Company in 2018. Please refer to Item XII of Section X “Financial Statements” for details of therelated-party transactions in the ordinary business course.The website to disclose the interim announcements on significant related-party transactions:

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

XIII. Utilization of the Company’s capital by the controlling shareholder or its related partiesfor non-operating purposes

□ Applicable √ Not applicableThe Company was not involved in the non-operating utilization of funds by the controlling shareholder and otherrelated parties during the Reporting Period.

XIV. Significant Contracts and Execution

1. Entrustment, Contracting and Leasing(1) Entrustment□ Applicable √ Not applicable

No such cases in the Reporting Period.(2) Contracting□ Applicable √ Not applicable

No such cases in the Reporting Period.(3) Leasing□Applicable√ Not applicable

No significant leasing in the Reporting Period.2. Significant Guarantees□Applicable √Not applicable

The Company did not provide any significant guarantee during the reporting period.3. Other Significant Contracts□ Applicable √ Not applicable

No such cases in the Reporting Period.

Name of the interim announcement

Disclosure date of the interim

announcement

Website to disclose the interim

announcementAnnouncement on Expected Related-

the Ordinary Course of Business in 2018

June 8, 2018 www.cninfo.com.cn

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

XV. Social Responsibilities

1. Information on the Environmental Situation

Is the Company listed as key polluting entities by environmental protection agencies?Yes

name

Mainpollutantsandspecialpollutants

Company

Way ofemission

Numberof

emission

points

Layout ofemissionpoints

Concentration

emission

Pollution standardsapplied

Total amountemitted/discharged

Totalamountapproved

Exceeding

limit

Sanonda

Exceeding

COD Continuous

dischargepoint

Within limit

Centralized

ComprehensiveStandard onDischarge of WasteWater(GB8978-1996) ，COD<100mg/L

137.85 391.3 No

Sanonda

A

mmonia

nitrogen

mmonia

Continuous

Centralized

dischargepoint

Within limit

Centralized

ComprehensiveStandard onDischarge of WasteWater(GB8978-1996),Ammonianitrogen<15mg/L

13.91 50 No

Sanonda

NOx Continuous

Powerplant

Within limit

Standard on AirPollution of PowerPlant（GB13223-2011）NOx <200mg/m3

205.91 564.7 No

Sanonda

SO2 Continuous

Powerplant

Within limit

Standard on AirPollution of PowerPlant（GB13223-2011）SO2<200mg/m3

171.12 380 No

Sanonda

Fume anddust

Continuous

Powerplant

Within limit

Standard on AirPollution of PowerPlant（GB13223-2011）Fume anddust<30mg/m3

25.3 80 No

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

(1) Development and Operation of Environmental Facilities① Development and Operation of Waste Water FacilitiesThe Company has a waste water treatment facility whose capacity is designed at 12,400 tons per day. The wastewater facility is running well and COD (chemical oxygen demand) and ammonia nitrogen concentration aftertreatment meet the standards.② Development and Operation of Waste Gas FacilitiesThe treatment facility for the Company’s coal-based power plant is running well. SO

, NOxand dust in the waist

gas after treatment meet the standards.③ The Company discloses production and pollution information according the Interim Measures onEnvironmental Information Disclosure and transfers information of main waste water and air pollutants to theprovincial information platform on a daily basis.

(2) EIA of construction projects and other environmental administrative permitsNo.

(3) Contingency plan of environmental accidentsThe contingency plan is developed with a purpose of implementing a precautionary approach for environmentalsafety, ensuring quick response to potential environmental emergencies and carrying out rescue in awell-organized way according to pre-made rescue plan.① Composition of the command team② Emergency response

㈠ Alarm and Telecommunication㈡ Field Rescue③ Relief and Rescue of Environmental Pollution Accidents

㈠ Pollutants and Main Sources㈡ Cause Analysis of Environmental Pollution㈢ Relief and Rescue Measures㈣ Handling and Precautionary Measures of Environmental Pollution Accidents④ Supporting Measures

㈠ Supply support㈡ System support⑤ Training and Exercises

(4) Environment self-monitoring planThe Company developed the 2018 Environment Self-Monitoring Plan according to relevant governmentrequirements, to enhance environmental management, understand emissions and discharge of pollutants of theCompany, evaluate their impact on the surrounding environment, enhance management of pollutants dischargeand emissions in the process of production, be subject to supervision of environmental agencies and provide basisto pollution prevention and control.① Monitored IndicatorsWaste water: COD, NH

-N, PH, SS, BOD (Biochemical Oxygen Demand), Petroleum, TP, Volatile Phenol.

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

Air Pollutant: SO

, NOX, Dust.

Noise: Noise by site border② FrequencyBoiler emission and waste water discharged from the centralized point: continuous auto monitoringManual sampling: SS, BOD, Petroleum, TP, Volatile Phenol, once a month.Noise: once a quarter.

(5) Other environmental information that should be disclosedNo.

(6) Other related information on environmental protectionNo.

2. Perform the social responsibility of targeted poverty alleviation(1) Targeted Poverty Alleviation PlanningThe Company actively implements targeted poverty alleviation according to relevant instructions from Jingzhou

Leading Group on Poverty Alleviation.

(2) Half-year Overview

During the reporting period, the employees of the Company visited 20 households below the poverty line inSanzhou village and gave 300 RMB to each family.(3) Performance of Targeted Poverty Alleviation

Indicator

Measurement

unit

Number/ProgressI. General condition —— ——

Of which: 1. Capital RMB'0,000 0.6II. Itemized investment —— ——

1. Out of poverty by industrial development —— ——Of which: 1.1 type of industrial development out of poverty ——1.2 number of industrial development out of poverty Unit

1.3 investment amount of industrial development out ofpoverty

RMB'0,000

1.4 the number of people out of poverty who were helped toestablish card for archives

Number

2. Out of poverty by transferring employment —— ——

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

Indicator

Measurement

unit

Number/Progress3. Out of poverty by relocating —— ——

4. Out of poverty by education —— ——5. Out of poverty by improving health —— ——6. Out of poverty by protecting ecological environment —— ——7. Subsidy for the poorest —— ——8. Social poverty alleviation RMB'0,000 0.69. Other items —— ——III. Received awards(contents and rank) —— ——

(4) Follow-up PlanThe Company will continue to steadily promote poverty alleviation with one-on-one subject following

instructions of Jingzhou disciplinary Committee and Leading Group on Poverty Alleviation.

XVI. Other Significant Events

□ Applicable √ Not applicableNote that the Company completed the non-public offering to raise matching funds. The listing date ofnewly-issued shares is January 17, 2018. For details, please see the announcements disclosed on the website of

www.cninfo.com.cn on July 7, 2017 and January 16, 2018.

XVII. Significant Events of Subsidiaries

□ Applicable √ Not applicablePlease refer to the Syngenta Transaction, mentioned in Section IV 6. above.

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

Section VI Share Changes and Shareholders’ Profile

I. Changes in shares

1. Changes in shares

Unit: share

Before this change Increase/decrease (+, -) After the changeAmount Proportion

Issuance ofnew shares

Bonusshare

Capitalizat

ion ofpublicreserve

fund

Other

Subtotal Amount Proportion

I. Shares subject totradingMoratorium(Restricted Shares)

1,930,596,116

82.44%

104,697,982

-5,344

104,692,638

2,035,288,754

83.19%

1. State’s shares -- -- -- -- -- -- -- -- --2. State-owned

legal person’sshares

1,930,570,241

82.44%

67,114,092

67,114,092

1,997,684,333

81.65%

3. Shares held by

other domesticinvestors

25,875 0.00% 37,583,890

-5,344

37,578,546

37,604,421

1.54%Among which:

(1) Shares held bydomestic legalperson;

37,583,890

37,583,890

37,583,890

1.54%(2) Shares held by

domestic naturalperson

25,875 0.00% -5,344

-5,344 20,531 0.00%II. Shares not subject

to trading moratorium

411,259,484

17.56%

5,344

5,344 411,264,828

16.81%

Ordinary sharesdenominated in RMB

244,210,143

10.43%

5,344

5,344 244,215,487

9.98%Domestically listed

foreign shares

167,049,341

7.13% 167,049,341

6.83%III. Total of shares 2,341,855,600

100.00%

104,697,982

104,697,982

2,446,553,582

100.00%

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

Reasons for changes in share√ Applicable □ Not applicableThe listing date of the newly-issued 104,697,982 shares in the non-public offering under which the Companyraised is January 17, 2018. The total amount of the shares of the Company listed is 2,446,553,582.

Approval of share changes√ Applicable □ Not applicableOn September 13, 2016, the Company held the 15th meeting of the 7th session of the BOD, on which proposalsrelated to share issuance for assets purchase and supporting funds raising and connected transactions, and proposalon the buyback and cancellation of B shares from Adama Celsius B.V. were approved.On January 9, 2017, the Company held the 17th meeting of the 7th session of the BOD, on which the Report (draft)on the share issuance to purchase assets, the raising of supporting funds and the connected transactions wasconsidered and adopted.On February 24, 2017, the Company held the 18th meeting of the 7th session of the BOD, on which the proposalson the Plan and the Report (draft & revision) on the share issuance to purchase assets, the raising of supportingfunds and the connected transactions were considered and adopted.On March 27, 2017, the Company held the first interim shareholders meeting of 2017, on which the proposal onthe Report (draft & revision) on the share issuance to purchase assets, the raising of supporting funds and theconnected transactions, and the proposal on the buyback and cancellation of the B shares were considered andadopted.On May 12, 2017, the Company held the 7th interim meeting of the 7th session of the BOD, on which theproposals on the Plan and the Report (draft & revision) on the share issuance to purchase assets, the raising ofsupporting funds and the connected transactions were considered and adopted.On July 3, 2017, the Company received the Approval on Issuing Shares by Hubei Sanonda Co., Ltd. to ChinaNational Agrochemical Corporation for Acquiring Assets and Raising Supporting Funds (CSRC license No.[2017]1096).

The registered status for the change in shares√Applicable □ Not applicableThe Shenzhen Branch of China Securities Depository and Clearing Corporation Limited accepted the registrationapplication of the issuance of shares to certain investors on January 4, 2018, and issued an AcceptanceConfirmation Letter on Share Registration Application. The Company has completed the registration of theadditional 104,697,982 shares issued for private placement.

Influence of share changes towards financial indexes in the latest year and latest period such as basic EPS anddiluted EPS, and net assets per share belonging to shareholder with ordinary share□ Applicable √ Not applicable

Other contents that the Company thinks necessary or is asked by securities regulators to be disclosed□ Applicable √ Not applicable

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

2. Changes in Restricted Shares√ Applicable □ Not applicable

Shareholder

Restrictedshares at the

beginning ofthe reporting

period

the reporting

Restricted

sharesreleasedduring thereporting

period

Restricted sharesincreased during

the reporting

period

Restricted sharesat the end of thereporting period

Reason forrestricting

Released dateChina Structural Reform

Fund Co., Ltd.

0 0 33,557,046 33,557,046

Committed not to

trade

Jan 16, 2019Industrial Bank Co., Ltd,

Mixed SecuritiesInvestment Fund, XingquanNew Vision Investment

0 0 4,026,800 4,026,800

Committed not toCommitted not to

trade

Jan 16, 2019Industrial Bank Co., Ltd,

Mixed SecuritiesInvestment Fund,Aegon-Industrial TrendInvestment (LOF)

0 0 8,053,736 8,053,736

Committed not toCommitted not to

trade

Jan 16, 2019

CCB Principal-ICBC-AvicTrust, Trust Plan of PooledFunds of CCB PrincipalPrivate PlacementInvestment, Tianqi (2016)No. 293 of Avic Trust

0 0 12,885,906 12,885,906

Committed not toCommitted not to

trade

Jan 16, 2019

Caitong Fund XiangyunNo.2 Asset ManagementPlan

0 0 536,912 536,912

Committed not toCommitted not to

trade

Jan 16, 2019Caitong Fund Fuchun

Chuangyi PrivatePlacement No.3 AssetManagement Plan

0 4,697,986 4,697,986

Committed not toCommitted not to

trade

Jan 16, 2019Penghua Fund-CCB-China

Life Insurance, PrivatePlacement Portfolio ofPenghua

Committed not toFund Management

	Fund Management
Co., Ltd Entrusted by China

Life Insurance (Group)Company

0 0 4,697,990 4,697,990

trade

Jan 16, 2019

Penghua Fund-PinganBank—Huarun ShenguotouTrust-Huren Single Trust

0 0 2,684,560 2,684,560

Committed not toCommitted not to

trade

Jan 16, 2019China Cinda Asset

Management Co., Ltd.

0 0 33,557,046 33,557,046

Committed not toCommitted not to

trade

Jan 16, 2019Liu Zhiming 21,375 5,344 0 16,031

Committed not toLocked shares for

former senior

executive

25% release onthe first tradingday of every year

Locked shares for

Total 21,375 5,344 104,697,982 104,714,013 -- --

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

II. Issuance and Listing of Securities

The listing date of the newly-issued 104,697,982 shares in the non-public offering under which the Companyraised is January 17, 2018. The total amount of the shares of the Company listed is 2,446,553,582.

√ Applicable □Not applicable

Name ofstock andderivativesecurities

Issuedate

Issueprice (orinterestrate)

Number ofissue

Dateoflisting

Number ofpermitted listedtransactions

Date ofterminationof thetransaction

Index of disclosure Disclosure

dateStock

Sanonda A Jan

4,2018

RMB14.9per share

104,697,982

Jan17,2018

104,697,982 -- Announcement of

Sanonada onImplementation ofMAR project andListing of NewShares

www.cninfo.com.cn

Jan 16,

2018

Description of the issue of securities in the reporting periodDuring the reporting period, the Company issued 104,697,982 shares to investors as a part of the material assetsrestructuring project. The listing date for such shares is Jan 17, 2018. Such shares shall be prohibited from transferin whatever form within 12 months after date of listing.

III. Total Number of Shareholders and Their Shareholdings

Unit: shareTotal number of common shareholders

at the end of the Reporting Period

48,361(the number of ordinary A share

shareholders is 32,348;the number of B share shareholders is

16,013)

Total number of preferredshareholders that had resumed theirvoting right at the end of theReporting Period (if any)

Shareholding of common shareholders holding more than 5% shares or the top 10 shareholders

Name of shareholder

Nature ofshareholder

Holding

percentage

(%)

Number ofshares held

percentage

Increase /decrease of

sharesduringReporting

Period

Number ofrestrictedshares held

Number ofshares heldnot subject to

tradingmoratorium

Pledged orfrozen shares

Status

Status

Number

Co., Ltd.

State-

China National Agrochemical

owned

legal person

74.02%

1,810,883,039

-

1,810,883,039

0 - -

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

Jingzhou Sanonda Holding Co.,
Ltd.

State-

	owned
legal person

4.89% 119,687,202

-119,687,202

- -

China Cinda Asset Management
Co., Ltd.

State-

	owned
legal person

1.37% 33,557,046

33,557,046

33,557,046

0 - -China Structural Reform Fund

Co., Ltd.

Co., Ltd.

State-

	owned
legal person

1.37% 33,557,046

33,557,046

33,557,046

0 - -CCB Principal-ICBC-

Avic

	Avic
Trust, Trust Plan of Pooled
Funds of CCB Principal Private
Placement Investment, Tianqi
(2016) No. 293 of Avic Trust

Others 0.53% 12,885,906

12,885,906

12,885,906

0 - -

Portfolio No.118 of National

Portfolio No.118 of National
Social Security Fund

Others 0.39% 9,504,717 500,000 0 9,504,717 - -

Industrial Bank Co., Ltd, Mixed

Securities Investment Fund,

Aegon-

	Industrial Trend
Investment (LOF)

Others 0.33% 8,053,736 8,053,736

8,053,736 0

- -

Portfolio No.412 of National
Social Security Fund

Others 0.20% 4,878,812 4,878,812

0 4,878,812

SECURITIES(HONGKONG)

GUOTAI JUNANLIMITED

LIMITED

Foreignlegal person

0.20% 4,838,647312,402

4,838,647

- -Penghua Fund-CCB-

China Life

Insurance,

				China Life
	Private Placement
Portfolio of Penghua Fund
Management Co., Ltd Entrusted
by China Life Insurance
(Group) Company

Others 0.19% 4,697,9904,697,990

4,697,990

- -

due

Strategic investors or the general legal personto the placement of new shares become

the top 10 shareholders (if any) (note 3)

Not applicable

to the placement of new shares becomeExplanation on associated relationship or/and

persons

Jingzhou Sanonda

Explanation on associated relationship or/andHoldings Co., Ltd. and CNAC are related parties, and are

acting-in-

Holdings Co., Ltd. and CNAC are related parties, and areconcert parties as prescribed in the Administrative Methods for Acquisition

of Listed Companies. Sanonda Holding is a wholly-

concert parties as prescribed in the Administrative Methods for Acquisitioncontrolled subsidiary of CNAC. It

is unknown whether the other shareholders are related parties or acting-in-

controlled subsidiary of CNAC. Itconcert

concertparties as prescribed in the Administrative Methods for Acquisition of Listed

Companies.Particulars about shares held by top 10 common shareholders not subject to trading moratorium

Name of shareholder

Number of shares held not subject to trading

moratorium at the end of the Period

Type of shareType of share Number

parties as prescribed in the Administrative Methods for Acquisition of Listed

Portfolio No.118 of National Social SecurityFund

9,504,717 RMB ordinary share 9,504,717

Portfolio No.412 of National Social SecurityFund

4,878,812 RMB ordinary share 4,878,812

GUOTAI JUNANSECURITIES(HONGKONG) LIMITED

4,838,647

Domestically listedforeign share

4,838,647

Qichun County State-

owned Assets

Administration

4,169,266 RMB ordinary share 4,169,266

owned Assets

Portfolio No.503 of National Social SecurityFund

2,999,750 RMB ordinary share 2,999,750

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

Agricultural Bank of China Limited - CSI500 Exchange Traded Fund

2,973,962 RMB ordinary share 2,973,962

Wu Feng 2,646,437 RMB ordinary share 2,646,437

Aegon-Industrial Fund – Industrial Bank– Aegon-Industrial – Asset ManagementPlan for Stock Dividend of SpecifiedCustomers

2,637,517 RMB ordinary share 2,637,517

Xie Qingjun 2,500,000

Domestically listedforeign share

2,500,000

Aegon-Industrial Fund –

Agricultural Bank

of China – China Pacific Life Insurance –Entrusted Investment by Private PlacementStrategic Product (Assured Amount Bonus)

2,493,609 RMB ordinary share 2,493,609

Agricultural Bank

Explanation on associated relationship among

the

Explanation on associated relationship amongtop ten shareholders of tradable share not

subject to trading moratorium

top ten shareholders of tradable share not, as well as

, as well asamong the top ten shareholders of tradable

share not subject to

among the top ten shareholders of tradabletrading moratorium and

top ten shareholders,

trading moratorium andor explanation on

acting-in-concert

Qichun County Administration of State-

or explanation onOwned Assets held shares of the Company on

Owned Assets held shares of the Company onbehalf of the government. It is unknown whether the other shareholders are related

parties or acting-in-

behalf of the government. It is unknown whether the other shareholders are relatedconcert parties as prescribed in the Administrative Methods for

Acquisition of Listed CompaniesParticular about shareholder participate in the

securities lending and borrowing business (ifany) (note 4)

Shareholder Wu Feng held 775,726 shares of the Company through a credit collateralsecurities trading account and held 1,870,711 shares of the Company through acommon securities account, who thus held 2,646,437 shares of the Company in total.

concert parties as prescribed in the Administrative Methods for

Did any top 10 common shareholders or the top 10 common shareholders not subject to trading moratorium of theCompany carry out a promissory buy-back in the Reporting Period?□ Yes √ NoThe top 10 common shareholders or the top 10 common shareholders not subject to trading moratorium of theCompany had not carried out any agreed buy-back in the Reporting Period.

IV. Change of the Controlling Shareholder or the Actual Controller

Change of the controlling shareholder in the Reporting Period□ Applicable √ Not applicableThere was no change of the controlling shareholder of the Company in the Reporting Period.

Change of the actual controller in the Reporting Period□ Applicable √ Not applicableThere was no change of the actual controller of the Company in the Reporting Period.

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

Section VII Preference Shares

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

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

Section VIII Directors, Supervisors and Senior Management

I Changes in Shareholdings of Directors, Supervisors and Senior Management

□ Applicable √ Not applicableNo such cases in the Reporting Period. For details, see Annual Report 2017.

II Changes in Directors, Supervisors and Senior Management

√ Applicable □ Not applicable

On July 25, 2018, the Board of Directors of the Company received a notice from director Ren Jianxin informing theCompany of his resignation due to his retirement. On July 26, 2018, the 6th meeting of the 8th session of the Board ofDirectors approved the nomination of Mr. Ning Gaoning to be a director of the Board of Director as proposed byCNAC.

Name Office title Type of change

Date ReasonFu Liping Supervisor Demission March 19, 2018 Expiration of the term of officeDing Shaojun Supervisor Demission March 19, 2018 Expiration of the term of officeDong Chunji Supervisor Demission March 19, 2018 Expiration of the term of officeXu Yan Supervisor Demission March 19, 2018 Expiration of the term of officeLi Dejun Supervisor In Office March 19, 2018 Nominated by the Board of SupervisorsGuo Zhi Supervisor In Office March 19, 2018 Nominated by the Board of Supervisors

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

Section IX Corporate Bonds

Are there any corporate bonds publicly offered and listed on the stock exchange, which were undue before theapproval date of this Report or were due but could not be redeemed in full?No

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

Section X Financial Report

I. Audit report

Was the half-year report audited?□ Yes √ NoThe half-year report was not audited.

II. Financial Statements

Notes to the financial statements are presented in RMB’000.

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

HUBEI SANONDA CO., LTD.

(Expressed in RMB '000)Consolidated Balance Sheet

Notes

June 30, 2018

January 1, 2018

Current assets

Current assets
Cash at bank and on hand					V	.1

6,049,530

										7,868,858
Financial assets at fair	value through profit or loss			V	.2

32,693

									23,000
Derivative financial assets			V	.3

940,225

									455,153
Bills receivables			V	4

88,285

									180,030
Accounts receivable			V	5

6,614,644

									5,0	85	,	911
Prepayments			V	6

286,942

									202,111
Other receivables			V	7

707,725

									1,	029	,	557
Inventories			V	.8

8,274,820

									7,488,238
Assets held for sale			V	9

-

												403,297
Non	-	current assets due within one year			V	.1	9

46

Other current assets

V

10

548,960

614,925

Total current assets

23,543,870

23,351,126

Non

current assets

Long

-

term receivables

V.11

146,399

										192,968
Long	-	term equity investments			V.12

119,251

										102,383
Other	equity investment	s			V.13

91,154

											91			090
Investment properties								4,251				4,408
Fixed assets					V.14

6,150,140

								6,141,490
Construction in progress			V.15

871,046

								803,421
Intangible assets			V.16

5,895,824

											4,036,588
Goodwill					V.17			3,939,153			3,890,097
Deferred tax assets					V.18

623,619

870

518

Other non

-

current assets

V.19

193,091

201,667

Total non-current assets

18,033,928

16,334,630

Total assets

41,577,798

39,685,756

The notes on pages 13 to 115 form part of these financial statements.

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

HUBEI SANONDA CO., LTD.

(Expressed in RMB '000)Consolidated Balance Sheet (continued)

Notes

June 30, 2018

January 1, 2018

Current liabilities

Current liabilities

Short

term loans

V

.20

384,482

									2,280,912
Derivative financial liabilities			V	.21

1,209,687

									789,050
Bills payable			V	.22

144,991

									311,557
Accounts payable			V	.23

4,221,331

									3,906,481
Advances from customers			V	.24

169,950

									226,711
Employee benefits payable			V	.25

766,690

									995,637
Taxes payable			V	.26

595,224

									431,275
Interest payable			V	.27

43,245

									46,491
Dividends payable			V	41

154,383

									250
Other payables			V	.28

1,991,600

												1,375,993
Non	-	current liabilities due within	one year			V	.29

487,951

448,504

Other current liabilities

V

.30

528,978

482,583

Total current liabilities

10,698,512

11,295,444

Non

current liabilities

Long

-

term loans

V.

31

320,382

								514,320
Debentures payable			V.32

7,548,581

															7,777,410
Long	-	term payables									23,4	90				24,203
Long	-	term employee benefits payable					V	.33

631,479

									610,714
Provisions			V	.34

113,041

									163,913
Deferred income			V	.35

44,212

											-
Deferred tax liabilities			V	.18			471,942			224,613

Other non

-

current liabilities

V

.36

182,734

225,292

Total non

-

current liabilities

9,335,861

9,540,465

Total liabilities

20,034,373

20,835,909

Shareholders' capital

Share capital			V.3	7

2,446,554

									2,446,554
Capital reserve			V	.38

12,972,906

									12,982,277
Other comprehensive income			V	.39

401,339

(

104,080

)

Special reserve

14,259

9,349

Surplus reserve

V

.40

207,823

207,823

Retained earnings

V

.41

5,500,544

3,307,924

Total shareholders’ equity

21,543,425

18,849,847

Total liabilities and shareholders

’

equity

41,577,798

39,685,756

Chen LichtensteinLegal representative

Aviram Lahav

	Chief of accounting work & Chief of
	accounting organ

These financial statements were approved by the Board of Directors of the Company on August 27, 2018.

Hubei Sanonda Co., Ltd. SemiAnnual Report 2018

HUBEI SANONDA CO., LTD.

(Expressed in RMB '000)Balance Sheet

Notes

June 30, 2018

January 1, 2018

Current assets
Cash at bank and on hand												X	I	V	.1						1,789,722										1,868,603
Bills receivable																								45,079								146,525
Accounts receivable												X	I	V	.2								942,706									850,034
Prepayments																								14,238									24,019
Other		receivables																							2,535									1,140
Inventories																							163,155									177,402
Other current assets																											566							1,406

Total current assets

2,958,001

3,069,129

Non

Non			-	current assets
Long				-	term equity investments																	X	I	V	.3			15,939,826									15,939,826
Other equity investment															s																	80,11		9						80,11		9
Investment properties																																	4,251								4,408
Fixed assets																													1,199,768									1,262,330
Construction in progress																															127,228									81,993
Intangible assets																															206,517								183,920
Deferred tax assets																																31,831								26,89		2
Other non						-	current assets																									12,934								11,000

Total non	-	current assets					17,6	02	,4	74			17,	590		488

Total assets																						20,56				0	,4		75			20,	659			617
Current liabilities
Short			-	term loans																					20,000									70,000
Bills payable																								105,000										23,000
Accounts payable																								238,400									234,615
Advances from customers																									10,699									63,904
Employee benefits payable																									28,881									30,491
Taxes payable																									54,879									19,301
Interest payable																												257								105
Dividends payable																								154,383												250
Other payables																								139,541									482,503
Non			current liabilities due within one year																					152,000									126,590

Total current liabilities

904,040

1,050,759

Non	-	current liabilities
Long		-	term loans																-				72,000
Long		-	term employee benefits payable															90,443					93,025
Provisions																		15,671					15,671
Other non				current liabilities													171,770					171,770

Total non			-	current liabilities								2	77	,8		84				352,466
Total liabilities											1,1		81	,	924				1,403,225

Shareholders					’	equity
Share capital																		V	.37					2,446,554							2,446,554
Capital reserve																							15,413,663							15,423,034
Other comprehensive income																											50,230						50,62	1
Special reserve																											13,711						10,040
Surplus reserve																										207,823						207,823
Retained earnings																								1,246,570							1,	118,320
Total			shareholders						’	equity													19,378,551							19,256,39				2

Total liabilities and shareholders	’	equity					20,5	60	,4	75			20,659,61	7

(Expressed in RMB '000)Consolidated Income Statement

Six months ended June 30Notes 2018

2017

Restated

I. Total operating income

13,026,258

12,770,064

Including: Operating income

V.

42

13,026,258

12,770,064

Less: Total operating costs

11,857,951

11,862,383

			Including:		Cost of sales
											V.42			8,571,417				8,179,694
						Taxes and surcharges					V.43				51,573				41,229

						Selling and Distribution expenses							V.44			2,223,934						2,122,890
						General and administrative expenses							V.45				637	,	129				5	59	,	398
						Financial expenses, net							V.46

330,018

															911,916
						Impairment losses, net			V.47			43,880				47,256

Add:

			Gains (loss) from changes in fair value						V.48			(24		3	376			)			222,276
			Investment income	, net					V.49				14			053						269,449

Including:

Income from investment

							in associates and joint ventures

12,758

												2,086
			Gain from disposal of assets			V.	50

1,997,170

57,758

II. Operating profit

									3,069,15		4			1,457,164
Add:		Non	-	operating income						29,004

10,348

Less:		Non	-	operating expenses
							V.5	1

8,113

8,261

III. Total profit

								3,090,045			1,459,251
Less: Income tax expense
			V.	5	2

727,264

142,257

IV. Net profit

2,362,781

1,316,994

(1) Classified by nature of operations

			(1.1).	Continuing operations					2,362,781			1,316,994

(2) Classified by ownership

(2.1). Shareholders of the Company

2,362,781

1,316,994

V. Other comprehensive income, net of tax

V.39

V.39

505,419

(586,01

5

)

Other comprehensive income, net of tax

attributable to shareholders of the Company

505,419

(586,01

5

)

(1)

Items that will not be reclassified to profit or loss:

11,106

(6,457)

(1.1)

R

e

-

measurement of defined benefit plan

liability

11,106

(6,457)

(2)

Items

that were or will be reclassified to

profit or loss

494,313

(579,558)

(2.1)

Effective portion of gains or loss of cash flow hedge

293,473

				(353,	198	)

(2.2)

Translation differences of foreign financial statements

200,840

(226,360)

VI. Total comprehensive income for the year attributable to:

2,868,200

730,979

Shareholders of the Company								730,979
					2,868,200

VII. Earnings per share

(1) Basic earnings per share (Yuan/share)					XI	II	(2)

0.9658

									0.5624
(2) Diluted earnings per	share (Yuan/share)					N/A			N/A

(Expressed in RMB '000)Income Statement

Six months ended June 30

Notes

2018

2017

I. Operating income

X

I

V

.4

1,666,573

1,442,065

Less:

Operating cost

X

I

V

.4

1,169,757

1,120,773

Taxes

and surcharges

21,211

8,566

Selling and Distribution expenses

69,533

														42,425
			General		and	administrative expenses					88,107			54,470

Financial expenses

(income)

, net

(20,437)

12,192

Impairment losses

3,978

8,051

Add:

Loss

from changes in fair value, net

-

(206)

Investment income (loss)

-

-

Including: Income (expense) from investment

in associates and joint ventures

-

-

Loss

from disposal of assets

-

(410)

II. Operating Profit

334,424

						194,972
Add:

Non

-

operating income

				3,271
Less:

Non

-

operating expenses

III. Total profit

335,276

						197,576
Less:

Income tax expense

52,893

49,763

IV. Net profit

282,383

147,813

Continuing operations

Continuing operations

282,383

147,813

Discontinued operations

-

-

V. Other comprehensive income, net of tax(391)

-

(1)

Item that will not be reclassified to profit or loss

(391)

(1.1)

R

e

-

measurement of defined benefit plan

liability

(391)

-

(2) Item that may be reclassified to profit or loss -

-

VI. Total comprehensive income for the year

281,992

147,813

(Expressed in RMB '000)Consolidated Cash Flow Statement

Six months ended June 30Notes 2018

2017

Restated

I. Cash flows from operating activities:

Cash received from sale of goods and rendering of services

11,967,687

12,106,889

Refund of taxes and surcharges

15,282

27,392

Cash received relating to other operating activities

V

.54(1)

260,796

571,398

Sub

-

total of cash

inflows from operating activities

12,243,765

12,705,679

Cash paid

for goods and services

8,171,959

7,407,112

Cash paid

to and on behalf of employees

1,720,446

1,498,465

Payments of taxes and surcharges

216,103

188,899

Cash paid relating to

other operating activities

V

.54(2)

1,355,739

1,362,057

Sub

-

total of cash outflows from operating activities

11,464,247

10,456,533

Net cash flows from operating activities

V

.55(1)(a)

779,518

2,249,146

II. Cash flows from investing activities:

Cash received from disposal of investments

9,792

20,544

Net cash received from disposal of fixed assets, intangible assets
and other long	-	term assets

2,412,977

93,522

	Net cash received from disposal of subsidiaries or other business
		units

-

100

,139

Cash received relating to other investing activities

V

.54(3)

31,767

Sub

-

total of cash inflows from investing activities

2,422,826

245,972

Cash paid to acquire fixed assets, intangible assets and

other long

-

term assets

2,678,117

723,024

Net cash paid

to acquire subsidiaries or other business units

9,332

-

Cash paid relating to

acquisition of investments

-

7,241

Sub

-

total of cash outflows from investing activities

2,687,449

730,265

Net cash flows used in investing activities

(264,623)

(484,293)

III. Cash flows from financing activities:

Cash received

from

loans

-

105,000

Cash received from other financing activities

V

.54(4)

-

7,800

Sub

-

total of cash inflows from financing activities

-

112,800

Cash

r

epayments of

loans

2,048,383

624,679

Cash

payment

for dividends, profit distributions and interest

276,486

347,392

Including: Dividends paid to

non

-

controlling

interest

16,028

32,509

Cash

paid relating to other financing activities

V

.54(5)

31,289

106,820

Sub

-

total of cash outflows from financing activities

2,356,158

1,078,891

Net cash flows used in financing activities

(2,356,158)

(966,091)

IV. Effects of foreign exchange rate changes on cash and cashequivalents

(1,615)

(94,855)

V. Net increase (decrease) in cash and cash equivalent

V.

55

(1)(b)

(1,842,878)

703,907

Add:

Cash and cash equivalents at the beginning of the

period

7,864,258

3,833,747

VI. Cash and cash equivalents at the end of the period

V.

55

(2)

6,021,380

4,537,654

(Expressed in RMB '000)Cash Flow Statement

Six months ended June 30

Notes2018

2017

I.

I.

Cash flows from operating activities:

Cash received from sale of goods and

rendering of services

1,289,145

									597,839
	Refund of taxes and surcharges

										2,884
	Cash received relating to other operating activities			XIV.5(1)

15,192

3,487

Sub

-

total of cash inflows from operating activities

1,304,503

604,210

Cash paid for goods and services

587,656

										448,790
	Cash paid	to and on behalf of employees				91,839					93,886

Payments of taxes and surcharges

57,171

42,282

Cash paid relating to other operating activities

XIV.5(2)

86,182

60,775

Sub

-

total of cash outflows

from operating activities

XIV.6

822,848

645,733

Net cash flows from (used in) operating activities481,655

(41,523)

II. Cash flows from investing activities:

Cash paid to acquire fixed assets, intangible assets and other long-

				term
	assets

48,465

50,423

Sub

-

total of cash outflows from investing activities

48,465

50,423

Net cash flows used in investing activities(48,465)

(50,423)

III.Cash flows from financing activities:

Cash received from

loans

-

55,000

Cash received

relating to

other financing activities

XIV.5(3)

-

7,800

Sub

-

total of cash inflows

from financing activities

-

62,800

Cash

r

epayments of

loans

96,590

52,500

Cash

payment

for dividends, profit distributions or interest

4,767

8,498

Cash paid relating to other financing activities

XIV.5(4)

424,313

106,820

Sub

-

total of cash outflows from financing activities

525,670

167,818

Net cash used in financing activities(525,670)

(105,018)

IV. Effects of foreign exchange rate changes on cash and cash

equivalents

(9,951)

(15)

V. Net increase (decrease) in cash and cash equivalents (102,431)

			(	196,979	)

Add:

Cash and cash equivalents at the beginning of the

period

XIV.6

1,864,003

249,740

VI. Cash and cash equivalents at the end of the

period

X

I

V.6

1,761,572

52,761

(Expressed in RMB '000)

Consolidated Statement of Changes in Shareholders’ Equity

For the six months ended June 30, 2018

Attributable to shareholders of the Company

Share capital

Capitalreserve

Othercomprehensive

income

Specialreserve

Surplusreserve

Retainedearnings Total

I. Balance at December 31, 2017 2,446,554

12,982,277

(154,701)

9,349

207,823

3,286,711

18,778,013

Add: Changes in accounting

policies

policies

*

-

-

50,621

-

-

21,213

71,834

II. Balance at January 1, 2018 2,446,554

12,982,277

(104,080)

9,349

207,823

3,307,924

18,849,847

III. Changes in equity for the period -

(9,371)

505,419

4,910

-

2,192,620

2,693,578

1.

Total comprehensive income

-

-

505,419

-

-

2,362,781

2,868,200

2.

Owner

’

s contributions and reduction

-

(9,371)

-

-

-

-

(9,371)

2.1

	Others

(9,371)

-

-

-

-

(9,371)

3.

Appropriation of profits

-

-

-

-

-

(170,161)

(170,161)

3.1

Dividend to Shareholders

-

-

-

(154,133)

(154,133)

3.2 Distribution to non-controlling

interest

-

-

-

-

-

(16,028)

(16,028)

4.

Special reserve

-

-

-

4,910

-

-

4,910

4.1

Transfer to special reserve

-

-

-

6,644

-

-

6,644

4.2 Amount utilized -

-

-

(1,734)

-

-

(1,734)

IV. Balance at June 30, 2018 2,446,554

12,972,906

401,339

14,259

207,823

5,500,544

21,543,425

*See Note III 30(1).

(Expressed in RMB '000)

Consolidated Statement of Changes in Shareholders’ Equity

For the six months ended June 30, 2017

Attributable to shareholders of the Company

Share capital

Capitalreserve

Treasury

shares

Othercomprehensive

income

Specialreserve

Surplusreserve

Retainedearnings Total

I. Balance at December 31, 2016

593,923

263

,064

-

-

19

862

190,

699

937,510

2,005,058

Add: Business combination under

common control

-

13,397,765

(359,431)

1,027,107

-

-

847,295

14,912,736

II. Balance at January 1, 2017

593,923

13,660,82

9

(359,431)

1,027,107

19,862

190,

699

1,784,805

16,917,794

III. Changes in equity for the period (Restated)

		-			-			-			(586,015)			1,058			-			1,284,485			699,528
1.

		Total comprehensive income			-			-			-			(586,015)			-			-			1,316,994			730,979
2.

Appropriation of profits

-

-

-

-

-

-

(32,509)

(32,509)

		2.1		D	ividend		to non	-	controlling interest				-			-			-			-			-			-			(32,509)			(32,509)
3.

	Special reserve										-			-			-			-				1,058			-			-				1,058
	3.1		Transfer to special reserve								-			-			-			-				4,180			-			-				4,180
	3.2		Amount utilized								-			-			-			-			(3,122)				-			-			(3,122)

III. Balance at June 30, 2017

593,923

13,660,829

(359,431)

441,092

20,920

190,699

3,069,290

17,617,322

(Expressed in RMB '000)

Statement of Changes in Shareholders’ Equity

For the six months ended June 30, 2018

Attributable to shareholders of the Company

Share

capital

Capital

reserve

Othercomprehe

nsive

income

Special

reserve

Surplus

reserve

Retained

																		earnings						Total
I.		Balance at December 31, 2017			2,446,	554			15,423,034		-					10,040		207,823		1,110,	649				19,198,100

Add: Changes in accounting policies*-

-

50,621

-

-

7,671

58,292

II.		Balance at January 1, 201	8						2,446,	554			15,423,034						50,621				10,040			207,823				1,1		18		320			19,	256	,	392
III. Changes in equity for the			period											(	9,371							(391)				3,671			-				128,250							122		159
1.

				Total comprehensive income																			-							-					(391)				-					-							282,383						281				,	992
2.				Owner						s contributions and reduction																		(	9,371																								-						(	9,371
					2.	1			Others																				9,371																															9,371
3.			Appropriation of profits																																														(	154,133							(	154,133
			3.	1				D		ividend			to Shareholders																																					154,133								154,133
4.				Special reserve																																		3,671																					3,671
				4.1				Transfer to special reserve																														5,215																					5,215

4.2 Amount utilized -

-

-

(1,544)

-

-

(1,544)

IV.

Balance at June 30, 2018 2,446,554

15,413,663

50,230

13,711

207,823

1,246,570

19,378,551

*Please refer to Note III 30(1).

For the six months ended June 30, 2017

Attributable

to shareholders of the Company

Share

capital

Capital

reserve

Special

reserve

Surplus

reserve

Retained

earnings

Total

I. Balance at January 1, 2017

																				593,923				263,800			14,893				190,699			956,	529			2,019,					844
II.				Changes in equity for the							period										-							1,058						147,813					148,871
1.				Total comprehensive income																														147,813					147,813
2				Special reserve																								1,058														1,058
			2.1			Transfer to special reserve																						4,180														4,180
			2.2			Amount utilized																					3,122													(	3,122

III. Balance at June 30, 2017593,923

263,800

15,951

190,699

1,104,342

2,168,715

(Expressed in RMB '000)

Notes to the Financial Statements

I BASIC CORPORATE INFORMATION

Hubei Sanonda CO., Ltd (the “Company”) is a company limited by shares established in China with its head office located in HubeiJingzhou.During July 2017 a major assets restructuring was successfully completed, with the acquisition of Adama Agricultural Solutions Ltd(hereinafter: "Solutions"), a wholly-owned subsidiary of China National Agrochemical Corporation Limited (hereinafter: "CNAC").

On July 4, 2017 the entire share capital of Solutions was transferred from CNAC to the Company, in return for the issuance of1,810,883,039 new shares of the Company to CNAC and their registration for trade on the Shenzhen Stock Exchange (which wascompleted on August 2, 2017).

Following the completion of the major assets restructuring, Solutions became a wholly owned subsidiary of the Company. Thecombination was considered as a business combination under common control.

The Company's parent company is CNAC, and the ultimate holding company is China National Chemical Corporation (hereinafter -“ChemChina”).

On December 2017, a non-publicly offered 104,697,982 ordinary shares (A-share) at nominal value of RMB 1 per share to the specificinvestors. On December 27

th

, 2017, the Company received proceeds of 1,531,920 thousand RMB, net of the issuing cost of 28,080thousand RMB. The listing date of the newly-issued 104,697,982 shares was January 17, 2018.

The principal activities of the Company and its subsidiaries (together referred to as the “Group”) are engaged in development,manufacturing and marketing of agrochemicals, intermediate materials for other industries, food additives and synthetic aromaticproducts, mainly for export. For information about the subsidiaries of the Company, refer to Note VII.

The Company’s and consolidated financial statements had been approved by the Board of Directors of the Company on August 27, 2018.Details of the scope of consolidated financial statements are set out in Note VII "Interest in other entities", whereas the changes of thescope of consolidation are set out in Note VI "Changes of the scope of consolidation".

(Expressed in RMB '000)

Notes to the Financial Statements

II BASIS OF PREPARATION

1. Basis of preparationThe Group has adopted the Accounting Standards for Business Enterprises issued by the Ministry of Finance (the "MoF"). In addition,

the Group has disclosed relevant financial information in these financial statements in accordance with Information Disclosure andPresentation Rules for Companies Offering Securities to the Public No. 15－General Provisions on Financial Reporting (revised byChina Securities Regulatory Commission (hereinafter "CSRC”) in 2014).

2. Accrual basis and measurement principleThe Group has adopted the accrual basis of accounting. Except for certain financial instruments which are measured at fair value,

deferred tax assets and liabilities, assets and liabilities relating to employee benefits, provisions and investments in associated companiesand joint ventures, the Group adopts the historical cost as the principle of measurement in the financial statements. Where assets areimpaired, provisions for asset impairment are made in accordance with relevant requirements.

In the historical cost measurement, assets obtained shall be measured at the amount of cash or cash equivalents or fair value of theconsideration paid. Liabilities shall be measured at the actual amount of cash or assets received, or the contractual amount in a presentobligation, or the prospective amount of cash or cash equivalents paid to discharge the liabilities.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing market participantsin an arm’s length transaction at the measurement date. Fair value measured and disclosed in the financial statements are determined onthis basis whether it is observable or estimated by valuation techniques.

The following table provides an analysis, grouped into Levels 1 to 3 based on the degree to which the fair value input is observable andsignificant to the fair value measurement as a whole:

Level 1 - based on quoted prices (unadjusted) in active markets;Level 2 - based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable,either directly or indirectly;Level 3 - based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

3. Going concernThe financial statements have been prepared on the going concern basis.

The Group has performed an assessment of the going concern for the following 12 month from 30 June 2018 and have not identified anysignificant doubtful matter or event on the going concern, as such the financial statement have been prepared on the going concern basis.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

1. Statement of complianceThese financial statements are in compliance with the Accounting Standards for Business Enterprises to truly and completely reflect

consolidated and the Company's financial position as at 30 June 2018 and consolidated and the Company's operating results and cashflows for the six months then ended.

2. Accounting period

The Group has adopted the calendar year as its accounting year, i.e. from 1 January to 31 December.

3. Business cycle

The company takes the period from the acquisition of assets for processing to their realisation in cash or cash equivalents as a normaloperating cycle. The operating cycle for the company is 12 months.

4. Reporting currency

The Company and its domestic subsidiaries choose Renminbi (hereinafter "RMB") as their functional currency. Functional currencies ofoverseas subsidiaries are determined on the basis of the principal economic environment in which the overseas subsidiaries operate. Thefunctional currency of the overseas subsidiaries is mainly the United States Dollar (hereinafter "USD"). The presentation currency ofthese financial statements is Renminbi.

5. Business combinations

(1) Business combinations involving enterprises under common control

A business combination involving enterprises under common control is a business combination in which all of the combining enterprisesare ultimately controlled by the same party or parties both before and after the combination, and that control is not transitory. Assets andliabilities obtained shall be measured at their respective carrying amounts as recorded by the combining entities at the date of thecombination. The difference between the carrying amount of the net assets obtained and the carrying amount of the consideration paid forthe combination is adjusted to the share premium in capital reserve. If the share premium is not sufficient to absorb the difference, anyexcess shall be adjusted against retained earnings. Costs that are directly attributable to the combination are charged to profit or loss inthe period in which they are incurred.

During July 2017 a major assets restructuring was successfully completed, with the acquisition of Solutions, a wholly-owned subsidiaryof CNAC. On July 4, 2017 the entire share capital of Solutions was transferred from CNAC to the Company, in return for the issuance of1,810,883,039 new shares of the Company to CNAC and their registration for trade on the Shenzhen Stock Exchange which wascompleted on August 2, 2017.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

5. Business combination (cont’d)

Following the completion of the major assets restructuring, Solutions became a wholly owned subsidiary of the Company. Thecombination was considered as a business combination under common control. Therefore, the comparative financial information for thesix month ended June 30, 2017 was restated so that the profit or loss, cash flow and equity movement, notes and additional information,includes the information of the consolidated information, in accordance with the Accounting Standards for Business Enterprises.

(2) Business combinations not involving enterprises under common control and goodwill.

A business combination not involving enterprises under common control is a business combination in which all of the combiningenterprises are not ultimately controlled by the same party or parties before and after the combination.

The costs of business combination are the fair value of the assets paid, liabilities incurred or assumed and equity instruments issued bythe acquirer for the purpose of achieving the control rights over the acquiree.

The intermediary costs such as audit, legal services and assessment consulting costs and other related management costs that are directlyattributable to the combination by the acquirer are charged to profit or loss in the period in which they are incurred. Direct capitalissuance costs incurred in respect of equity instruments or liabilities issued pursuant to the business combination should be charged to therespect equity instruments or liabilities upon initial recognition of the underlying equity instruments or liabilities.

The acquiree’s identifiable assets, liabilities and contingent liabilities acquired by the acquirer in a business combination, that meet therecognition criteria shall be measured at fair value at the acquisition date. Where the cost of combination exceeds the acquirer’s interestin the fair value of the acquiree’s identifiable net assets, the difference is treated as an asset and recognized as goodwill, which ismeasured at cost on initial recognition. Where the cost of combination is less than the acquirer’s interest in the fair value of theacquiree’s identifiable net assets, the remaining difference is recognized immediately in profit or loss for the current year.

The goodwill raised because of the business combination should be separately disclosed in the consolidated financial statement andmeasured by the initial amount less any accumulative impairment provision.

6. Basis for preparation of consolidated financial statements

The scope of consolidation in consolidated financial statements is determined on the basis of control. Control is achieved when theCompany has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has theability to use its power to affect its returns.

For a subsidiary disposed of by the Group, the operating results and cash flows before the date of disposal (the date when control is lost)are included in consolidated income statement and consolidated statement of cash flows.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

6. Basis for preparation of consolidated financial statements (cont’d)

For a subsidiary acquired through a business combination not involving enterprises under common control, the operating results and cashflows from the acquisition date (the date when control is obtained) are included in consolidated income statement and consolidatedstatement of cash flows.

For a subsidiary acquired through a business combination involving enterprises under common control, it will be fully consolidated intoconsolidated financial statements from the date on which the subsidiary was ultimately under common control by the same party orparties.

The significant accounting policies and accounting years adopted by the subsidiaries are determined based on the uniform accountingpolicies and accounting years set out by the Company. For those subsidiaries acquired through business combinations not involvingenterprises under common control, the identifiable assets and liabilities recorded in the financial statements of the acquired subsidiariesshould be adjusted based on the fair value determined at the acquisition date.

All significant intra-group balances, transactions and unrealized profits are eliminated on consolidation.

The portion of subsidiaries' equity that is not attributable to the Company is treated as non-controlling interests and presented as"non-controlling interests" in the shareholders’ equity in consolidated balance sheet. The portion of net profits or losses of subsidiariesfor the period attributable to non-controlling interests is presented as "non-controlling interests" in consolidated income statement belowthe "net profit" line item. Total comprehensive income attributable to non-controlling shareholders is presented separately in the consolidatedincome statement below the total comprehensive income line item.

When the amount of loss for the period attributable to the non-controlling shareholders of a subsidiary exceeds the non-controllingshareholders' portion of the opening balance of owners' equity of the subsidiary, the excess amount is still allocated againstnon-controlling interests.Acquisition of non-controlling interests or disposal of equity interest in a subsidiary that does not result in theloss of control over the subsidiary is accounted for as equity transactions. The carrying amounts of the Company's interests andnon-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. The difference between the amountby which the non-controlling interests are adjusted and the fair value of the consideration paid or received is adjusted to capital reserveunder owners' equity. If the capital reserve is not sufficient to absorb the difference, the excess is adjusted against retained earnings.Other comprehensive income attributed to the non-controlling interest is reattributed to the shareholders of the company.

A put option issued by the Group to holders of non-controlling interests that is settled in cash or other financial instrument is recognizedas a liability at the present value of the exercise price. The Group’s share of a subsidiary’s profits includes the share of the holders of thenon-controlling interests to which the Group issued a put option.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

6. Basis for preparation of consolidated financial statements (cont’d)When the Group loses control over a subsidiary due to disposal of certain equity interest or other reasons, any retained interest is

re-measured at its fair value at the date when control is lost. The difference between (i) the aggregate of the consideration received ondisposal and the fair value of any retained interest and (ii) the share of the former subsidiary's net assets cumulatively calculated from theacquisition date according to the original proportion of ownership interest is recognized as investment income in the period in whichcontrol is lost. Other comprehensive income associated with the disposed subsidiary is reclassified to investment income in the period inwhich control is lost.

7. Classification and accounting methods of joint arrangement

Joint arrangement involves by two or more parties jointly control. Joint control is the contractually agreed sharing of control over aneconomic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimousconsent of the parties sharing control (the ventures).

The Group makes the classification of the joint arrangements according to the rights and obligations in the joint arrangements to eitherjoint operations or joint ventures.A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of thejoint arrangement. Joint ventures are accounted for using the equity method.

8. Cash and cash equivalents

Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash equivalents are the Group's short-term, highlyliquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes invalue.

9. Translation of transactions and financial statements denominated in foreign currencies

(1) Transactions denominated in foreign currencies

On initial recognition, foreign currency transactions are translated into functional currency using the spot exchange rate prevailing at thedate of transaction.

At the balance sheet date, foreign currency monetary items are translated into functional currency using the spot exchange rates at thebalance sheet date. Exchange differences arising from the differences between the spot exchange rates prevailing at the balance sheet dateand those on initial recognition or at the previous balance sheet date are recognized in profit or loss for the period, except that (i)exchange differences related to a specific-purpose borrowing denominated in foreign currency that qualify for capitalization arecapitalized as part of the cost of the qualifying asset during the capitalization period. (ii) exchange differences related to hedginginstruments for the purpose of hedging against foreign currency risks are accounted for using hedge accounting.

When preparing financial statements involving foreign operations, if there is any foreign currency monetary items which in substanceforms part of the net investment in the foreign operations, exchange differences arising from the changes of foreign currency should berecorded as other comprehensive income, and will be reclassified to profit or loss upon disposal of the foreign operations.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

9. Translation of transactions and financial statements denominated in foreign currencies (cont’d)

(1) Transactions denominated in foreign currencies (cont’d)

Foreign currency non-monetary items measured at historical cost are translated to the amounts in functional currency at the spotexchange rates on the dates of the transactions and the amounts in functional currency remain unchanged.

(2) Translation of financial statements denominated in foreign currency

For the purpose of preparing consolidated financial statements, financial statements of a foreign operation are translated from the foreigncurrency into RMB using the following method: assets and liabilities on the balance sheet are translated at the spot exchange rateprevailing at the balance sheet date; shareholders' equity items except for retained earnings are translated at the spot exchange rates at thedates on which such items arose; all items in the income statement as well as items reflecting the distribution of profits are translated ataverage rate or at the spot exchange rates on the dates of the transactions; the opening balance of retained earnings is the translatedclosing balance of the previous year's retained earnings; the closing balance of retained earnings is calculated and presented on the basisof each translated income statement and profit distribution item. The difference between the translated assets and the aggregate ofliabilities and shareholders' equity items is recorded as other comprehensive income. Cash Flows arising from transaction in foreigncurrency and the cash flows of a foreign subsidiary are translated at the spot exchange rate on the date of the cash flow, the effect ofexchange rate changes on the cash and cash equivalents is regarded as a reconciling item and present separately in the statement “effectof foreign exchange rate changes on the cash and cash equivalents".

The opening balances and the comparative figures of prior year are presented at the translated amounts in the prior year's financialstatements.

On disposal of the Group's entire equity interest in a foreign operation, or upon a loss of control over a foreign operation due to disposalof certain equity interest in it or other reasons, the Group transfers the accumulated translation differences, which are attributable to theowners' equity of the Company and presented under other comprehensive income to profit or loss in the period in which the disposaloccurs.

In case of a disposal or other reason that does not result in the Group losing control over a foreign operation, the proportionate share ofaccumulated translation differences are re-attributed to non-controlling interests and are not recognized in profit and loss. For partialdisposals of equity interest in foreign operations which are associates or joint ventures, the proportionate share of the accumulatedtranslation differences are reclassified to profit or loss.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

10. Financial instruments

The Group recognises a financial asset or a financial liability when it becomes a party to the contractual provisions of the instrument. Atinitial recognition, the Group measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial assetor financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of thefinancial asset or financial liability. At initial recognition, an entity shall measure trade receivables at their transaction price if the tradereceivables do not contain a significant financing component.

10.1 Classification and measurement of financial assets

After initial recognition, an entity shall measure a financial asset at: (a) amortised cost; (b) fair value through other comprehensiveincome (“FVTOCI”); or (c) fair value through profit or loss (“FVTPL”).

10.1.1 Financial assets at amortised cost

A financial asset is measured at amortised cost if both of the following conditions are met:

(a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows;and (b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal andinterest on the principal amount outstanding.

Such financial assets are subsequently measured at amortised cost, using effective interest method. Gains or losses upon impairment andderecognition are recignised in profit or loss.

10.1.1.1 Effective interest method and amortised cost

Effective interest method represents the method for calculating the amortized costs and interest income or expense of each period inaccordance with the effective interest rate of financial assets or financial liabilities (inclusive of a set of financial assets or financialliabilities). Effective interest rate represents the rate that discounts the future cash flow over the expected subsisting period or shorterperiod, if appropriate, of the financial asset or financial liability to the current carrying value of such financial asset or financial liability.

When calculating the effective interest rate, the Group will consider the anticipated future cash flow (not considering the future creditloss) on the basis of all contract clauses of financial assets or financial liabilities, as well as consider all kinds of charges, transaction feesand discount or premium paid forming an integral part of the effective interest rate paid or received between both parties of financialasset or financial liability contract.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

10. Financial instruments (cont’d)

10.1 Classification and measurement of financial assets (cont’d)

10.1.2 Financial assets at FVTPL

Financial assets at FVTPL are either those that are classified as financial assets at FVTPL or designated as financial assets at FVTPL.

A financial asset is measured at FVTPL unless it is measured at amortised cost or at FVTOCI.

The Group may, at initial recognition, irrevocably designate a financial asset as measured at FVTPL if doing so eliminates orsignificantly reduces a measurement or recognition inconsistency (sometimes referred to as an ‘accounting mismatch’) that wouldotherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases.

A gain or loss on a financial asset that is measured at FVTPL is recognised in profit or loss unless it is part of a hedging relationship.Dividends are recognised in profit or loss.

10.1.3 Designated financial assets at FVTOCI

At initial recognition, the Group can makes an irrevocable election to designate to FVTOCI an investment in an equity instrument that isheld for trading.

With the designation, a gain or loss from the financial asset is recognised in other comprehensive income. When the financial asset isderecognised the cumulative gain or loss previously recognised in other comprehensive income, is reclassified to retained earnings.

10.2 Impairment of financial assets

The Group recognises a loss allowance for expected credit losses on a financial asset that is measured at amortised cost.

The Group always measures the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do notcontain a significant financing component.

For financial assets other than trade receivables, the Group measure the loss allowance for that financial instrument at an amount equal to12-month expected credit losses or lifetime expected credit losses. At each balance sheet date, if the credit risk on that financialinstrument has increased significantly since initial recognition, the Group measures the loss allowance for a financial instrument at anamount equal to the lifetime expected credit losses. The Group recognises in profit or loss, as an impairment gain or loss, the amount ofexpected credit losses (or reversal) that is required to adjust the loss allowance to the amount that is required to be recognized.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

10. Financial instruments (cont’d)

10.2 Impairment of financial assets (cont’d)

10.2.1 Significant increases in credit risk

At each balance sheet date, the Group assesses whether the credit risk on a financial instrument has increased significantly since initialrecognition.

The Group mainly considers the following list of information in assessing changes in credit risk:

(a) significant changes in internal price indicators of credit risk as a result of a change in credit risk since inception.(b) significant changes in external market indicators of credit risk for a particular financial instrument or similar financial

instruments with the same expected life.(c) a significant change in the debtors’s ability to meet its debt obligations.(d) an actual or expected significant change in the operating results of the receivable.(e) significant increases in credit risk on other financial instruments of the same debtor.(f) an actual or expected significant adverse change in the regulatory, economic, or technological environment of the receivable.(g) significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit

enhancements, which are expected to reduce the debtor’s economic incentive to make scheduled contractual payments or tootherwise have an effect on the probability of a default occurring.(h) significant changes that are expected to reduce the receivable’s economic incentive to make scheduled contractual payments.(i) significant changes in the expected performance and behaviour of the receivable.(j) past due information.

The Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financialinstrument is determined to have low credit risk at the reporting date.

10.2.2 Credit-impaired financial asset

A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of thatfinancial asset have occurred. Evidence that a financial asset is credit-impaired include observable data about the following events:

(a) significant financial difficulty of the issuer or the receivable;(b) a breach of contract, such as a default or past due event;(c) the lender(s) of the receivable, for economic or contractual reasons relating to the receivable’s financial difficulty, having

granted to the receivable a concession(s) that the lender(s) would not otherwise consider;(d) it is becoming probable that the receivable will enter bankruptcy or other financial reorganisation;

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

10. Financial instruments (cont’d)

10.2 Impairment of financial assets (cont’d)

10.2.3 Recognition of expected credit losses

For the purpose of determining significant increases in credit risk and recognising a loss allowance on a collective basis, financialinstruments are grouped on the basis of shared credit risk. Examples of shared credit risk characteristics may include, but are not limitedto, the:

(a) instrument type; (b) credit risk ratings; (c) collateral type; (d) industry; (e) geographical location of the debtor; and (f) the value ofcollateral relative to the financial asset if it has an impact on the probability of a default occurring.

Expected credit losses of financial instruemnts are determined as the present value of the difference between: (a) the contractual cashflows that are due to an entity under the contract; and (b) the cash flows that the entity expects to receive.

For a financial asset that is credit-impaired at the reporting date, an entity shall measure the expected credit losses as the differencebetween the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the financial asset’s originaleffective interest rate. Any adjustment is recognised in profit or loss as an impairment gain or loss.The Group measures expected credit losses of a financial instrument in a way that reflects:

(a) an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;(b) the time value of money; and(c) reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, currentconditions and forecasts of future economic conditions.

10.2.4 Written-off of financial assets

The Group directly reduces the gross carrying amount of a financial asset when the entity has no reasonable expectations of recovering afinancial asset in its entirety or a portion thereof. A write-off constitutes a derecognition event.10.3 Transfer of financial asset

The Group derecognizes a financial asset if one of the following conditions is satisfied: (i) the contractual rights to the cash flows fromthe financial asset expire; or (ii) the financial asset has been transferred and substantially all the risks and rewards of ownership of thefinancial asset is transferred to the transferee; or (iii) although the financial asset has been transferred, the Group neither transfers norretains substantially all the risks and rewards of ownership of the financial asset but has not retained control of the financial asset.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

10. Financial instruments (cont’d)

10.3 Transfer of financial asset (cont’d)

If the Group neither transfers nor retains substantially all the risks and rewards of ownership of a financial asset, and it retains control ofthe financial asset, it recognizes the financial asset to the extent of its continuing involvement in the transferred financial asset andrecognizes an associated liability. The extent of the Group’s continuing involvement in the transferred asset is the extent to which it isexposed to changes in the value of the transferred asset.

When the company is dercognizing a financial asset in its entirety, except for equity instrument designated to FVTOCI, the differencebetween (i) the carrying amount of the financial asset transferred; and (ii) the sum of the consideration received from the transfer isrecognized in profit or loss.

10.4 Classification and measurement of financial liabilities

Based on the economic substance rather than the form of legal contracts, along with the definition of financial liabilities and equityinstruments, the Group shall classify the financial instruments or its components as financial liability or equity instrument at initialrecognition.

On initial recognition, financial liabilities are classified into financial liabilities at fair value through profit or loss and other financialliabilities.

Other financial liabilities are subsequently measured at amortized cost by using effective interest method. Gain or loss arising fromderecognition or amortization is recognized in current profit or loss.

10.5 Derecognition of financial liabilities

Financial liabilities are derecognized in full or in part only when the present obligation is discharged in full or in part. An agreemententered into force between the Group (debtor) and a creditor to replace the original financial liabilities with new financial liabilities withsubstantially different terms, derecognize the original financial liabilities as well as recognize the new financial liabilities. When financialliabilities is derecognized in full or in part, the difference between the carrying amount of the financial liabilities derecognized and theconsideration paid (including transferred non-cash assets or new financial liability) is recognized in profit or loss for the current period.

10.6 Derivatives

Derivative financial instruments include forward exchange contracts, currency swaps and foreign exchange options, etc. Derivatives areinitially measured at fair value at the date when the derivative contracts are entered into and are subsequently re-measured at fair value.The resulting gain or loss is recognized in profit or loss unless the derivative is designated and highly effective as a hedging instrument,in which case the timing of the recognition in profit or loss depends on the nature of the hedge relationship (Note III 29).

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

10. Financial instruments (cont’d)

10.7 Offsetting financial assets and financial liabilities

Financial assets and financial liabilities shall be presented separately in the balance sheet and shall not be offset, except for circumstanceswhere the Group has a legal right that is currently enforceable to offset the recognized financial assets and financial liabilities, andintends either to settle on a net basis, or to realize the financial asset and settle the financial liability simultaneously, a financial asset anda financial liability shall be offset and the net amount is presented in the balance sheet.

10.8 Equity instruments

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

When the Company repurchases its own shares, those shares are treated as treasury shares. All expenditures relating to the repurchase arerecorded in the cost of the treasury shares, with the transaction entering into the share capital. Treasury shares are excluded from profitdistributions and are stated as a deduction under shareholders’ equity in the balance sheet.

11. Receivables

Receivables are assessed for impairment on an individual basis and/or on a collective group basis as follows:

Lifetime or 12-month expected credit losses in respect of a receivable is calculated based on the assessment of whether the credit riskon a receivable has increased significantly since initial recognition. Impairment losses are recognised in profit or loss. For accountreceivables, the Group always measure the loss allowance at an amount equal to lifetime expected credit losses.

(1) Receivables individually significant for which provision for impairment is assessed individually

Basis or monetary criteria for determining an

individually significant

receivable

A receivable with an amount greater than RMB 125 millionMethod of provisioning for bad and doubtful debts for

receivables that are assessed individually

Determined mostly according to familiarity with the customer, its quality and

the

collateral amount the customer provides.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

11. Receivables (cont’d)

(2) Receivables for which provision for impairment is assessed collectively

The assessment is made collectively for account receivables, where receivables share similar credit risk characteristics based ongeographical location, using the expected credit losses model including inter-alia aging analysis, historical loss experiences adjusted bythe observable factors reflecting current and expected future economic conditions.

The ratio of the collective provision for non-overdue account receivables is between 0%-5%.

For overdue account receivables, the expected credit losses assessment is as follows:

Aging

Ratio of the provision for accounts receivable (%)

Overdue u

p to 60 days

3

-

5

Overdue b

etween 60 and 180 days

10

Overdue m

ore than 180 days

40

Legal

100

(3) Other individually not significant receivables but individually tested for impairment:

Reasons for making individual bad debt provision

There is objective evidence to demonstrate that the Group is not able to fullyrecover the receivables according to the original terms and conditions of the

receivables.

Method of provisioning for bad and doubtful debts for

receivables that are assessed individually

Determined mostly according to familiarity with the customer, its quality and

the collateral amount the

customer provides.

12. Inventories

(1) Categories of inventories and initial measurement

The Group's inventories mainly include raw materials, work in progress, semi-finished goods, finished goods and reusable materials.Reusable materials include low-value consumables, packaging materials and other materials, which can be used repeatedly but do notmeet the definition of fixed assets.

Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase, costs of conversion and other expendituresincurred in bringing the inventories to their present location and condition including direct labor costs and an appropriate allocation ofproduction overheads.

(2) Valuation method of inventories upon delivery

The actual cost of inventories upon delivery is calculated using the weighted average method.

(3) Basis for determining net realizable value of inventories and provision methods for decline in value of inventories

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

12. Inventories (cont’d)

At the balance sheet date, inventories are measured at the lower of cost and net realizable value. If the net realizable value is below thecost of inventories, a provision for decline in value of inventories is made. Net realizable value is the estimated selling price in theordinary course of business less the estimated costs of completion, the estimated costs necessary to make the sale and relevant taxes.

After the provision for decline in value of inventories is made, if the circumstances that previously caused inventories to be written downbelow cost no longer exist so that the net realizable value of inventories is higher than their carrying amount, the original provision fordecline in value is reversed and the reversal is included in profit or loss for the period.

(4) The perpetual inventory system is maintained for stock system.

13. Assets held for Sale

When the Group realizes the carrying value of a non-current asset or a disposal group through sale instead of continuing operation, suchasset is classified as an asset held for sale.

All the following conditions should be met for the non-current asset or disposal group to be classified as held for sale: (1) ready to besold in current condition, based on similar transactions or common practices; (2) the sale is more than likely to happen, i.e. the Group hasapproved the sale in a resolution and obtained a certain purchase commitment, and the sale will be closed within one year.

The Group measures the assets held for sales at the lower of book value and fair value less the cost of the sale. If the carrying value ishigher than the fair value less the cost of the sale, the difference is recognized as asset impairment loss. If the fair value of the asset heldfor sale recovered subsequent to the balance sheet date, the recovery is recognized, limited to the original carrying amount of the asset,and relevant asset impairment loss is reversed.

Asset held for sale is not depreciated or amortized.

14. Long-term equity investments

Long-term equity investments include investments in subsidiaries, joint ventures and associates.

Subsidiaries are the companies that are controlled by the Company. Associates are the companies over which the Group has significantinfluence. Joint ventures are joint arrangements over which the Group has joint control along with other investors and has rights to thenet assets of the joint arrangement.

The Company accounts for the investment in subsidiaries at historical cost in the Company's financial statements. Investments inassociates and joint ventures are accounted for under equity method.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

14. Long-term equity investments (cont’d)

(1) Determination of investment cost

For a long-term equity investment acquired through a business combination involving enterprises under common control, the investmentcost of the long-term equity investment is the share of the carrying amount of the shareholders' equity of the acquiree attributable to theultimate controlling party at the date of combination. For a long-term equity investment acquired through business combination notinvolving enterprises under common control, the investment cost of the long-term equity investment is the cost of acquisition. For abusiness combination not involving enterprises under common control achieved in stages that involves multiple exchange transactions,the initial investment cost is carried at the aggregate of the carrying amount of the acquirer’s previously held equity interest in theacquiree and the new investment cost incurred on the acquisition date.

Regarding the long-term equity investment acquired otherwise than through a business combination, if the long-term equity investment isacquired by cash, the historical cost is determined based on the amount of cash paid and payable; if the long-term equity investment isacquired through the issuance of equity instruments, the historical cost is determined based on the fair value of the equity instrumentsissued.

(2) Subsequent measurement and recognition of profit or loss

If the long-term equity investment is accounted for at cost, it should be measured at historical cost less accumulated impairment losses.Dividend declared by the investee should be accounted for as investment income.

Under the equity method, where the initial investment cost of a long-term equity investment exceeds the Group’s share of the fair valueof the investee’s identifiable net assets at the time of acquisition, no adjustment is made to the initial investment cost. Where the initialinvestment cost is less than the Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, thedifference is recognized in profit or loss for the period, and the cost of the long-term equity investment is adjusted accordingly.

Under the equity method, the Group recognizes its share of the net profit or loss and other comprehensive income of the investee for theperiod as investment income or loss and other comprehensive income for the period. The Group recognizes its share of the investee’s netprofit or loss based on the fair value of the investee’s individual separately identifiable assets, etc. at the acquisition date after makingappropriate adjustments to be confirmed with the Group's accounting policies and accounting period. The Group discontinuesrecognizing its share of net losses of the investee after the carrying amount of the long-term equity investment together with anylong-term interests that in substance form part of its net investment in the investee is reduced to zero. If the Group has incurredobligations to assume additional losses of the investee, a provision is recognized according to the expected obligation, and recorded asinvestment loss for the period.

(3) Basis for determining control, joint control and significant influence over investee

Control is achieved when the Company has power over the investee; is exposed, or has rights, to variable returns from its involvementwith the investee; and has the ability to use its power to affect its returns.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

14. Long-term equity investments (cont’d)

(3) Basis for determining control, joint control and significant influence over investee (cont’d)

Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial andoperating policy decisions relating to the activity require the unanimous consent of the parties sharing control.

Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or jointcontrol over those policies.

When determining whether an investing enterprise is able to exercise control or significant influence over an investee, the effect ofpotential voting rights of the investee (for example, warrants and convertible debts) held by the investing enterprises or other parties thatare currently exercisable or convertible shall be considered.

(4) Methods of impairment assessment and determining the provision for impairment loss

If the recoverable amounts of the investments to subsidiaries, joint ventures and associates are less than their carrying amounts, animpairment loss should be recognized to reduce the carrying amounts to the recoverable amounts (Note III 21).

(5) The disposal of long-term equity investment

On disposal of a long term equity investment, the difference between the proceeds actually received and receivable and the carryingamount is recognized in profit or loss for the period.

15. Investment properties

Investment property refers to real estate held to earn rentals or for capital appreciation, or both, including leased land use rights, land userights held and provided for transferring after appreciation and leased constructions, etc.

Investment property is initially measured at cost. Subsequent expenditures related to an investment property shall be included in cost ofinvestment property only when the economic benefits associated with the asset will likely flow to the Group and its cost can be measuredreliably. All other subsequent expenditures on investment property shall be included in profit or loss for the current period when incurred.

The Group adopts cost method for subsequent measurement of investment property, which is depreciated or amortized using the samepolicy as that for buildings and land use rights.

When an investment property is sold, transferred, retired or damaged, the amount of proceeds on disposal of the property net of thecarrying amount and related taxes and surcharges is recognized in profit or loss for the current period.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

16. Fixed assets

(1) Recognition criteria for fixed assets

Fixed assets include buildings and structures, machinery and equipment, transportation vehicles, office equipment and others.

Fixed assets are tangible assets that are held for use in the production or supply of goods or for administrative purposes, and have usefullives of more than one accounting year. A fixed asset is recognized only when it is probable that economic benefits associated with theasset will flow to the Group and the cost of the asset can be reliably measured. Purchased or constructed fixed assets are initiallymeasured at cost.

Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and if it is probable that economic benefitsassociated with the asset will flow to the Group and the subsequent expenditures can be measured reliably. Other subsequentexpenditures are recognized in profit or loss in the period in which they are incurred.

(2) Depreciation of each category of fixed assets

Fixed asset is depreciated based on the cost of the fixed asset recognized less expected net residual value over its useful life using thestraight-line method since the month subsequent to the one in which it is ready for intended use. Depreciation is calculated based on thecarrying amount of the fixed asset after impairment over the estimated remaining useful life of the asset.

The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation method applied at least once ateach financial year-end, and account for any change as a change in an accounting estimate.

The estimated useful life, estimated net residual value and annual depreciation rate of each category of fixed assets are as follows:

Category Depreciation

Useful life

(years)

Residual

value(%)

Annualdepreciation rate

(%)

Buildings

the straight

-

line method

15

-

50

0

-

4

1.9

-

6.7

Machinery and equipment					the straight	-	line method			3	-	22			0	-	4			4.4	-	33.3
Office and other equipment					the straight	-	line method			3	-	17			0	-	4			5.6	-	33.3

Motor vehicles

the straight

-

line method

5

-

9

0

-

2

10.9

-

20.0

(3) Other explanations

If a fixed asset is upon disposal or no future economic benefits are expected to be generated from its use or disposal, the fixed asset isderecognized. When a fixed asset is sold, transferred, retired or damaged, the amount of any proceeds on disposal of the asset net of thecarrying amount and related taxes is recognized in profit or loss for the period.The difference between recoverable amounts of the fixed assets under the carrying amount is referred to as impairment loss (Note III 21).

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

17. Construction in progress

Construction in progress is measured at its actual costs. The actual costs include various construction, installation costs, borrowing costscapitalized and other expenditures incurred until such time as the relevant assets are completed and ready for its intended use. When theasset concerned is ready for its intended use, the cost of the asset is transferred to fixed assets and depreciated starting from the followingmonth.

The difference between recoverable amounts of the construction in progress under the carrying amount is referred to as impairment loss(Note III 21).

18. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying asset are capitalized when expendituresfor such asset and borrowing costs are incurred and activities relating to the acquisition, construction or production of the asset that arenecessary to prepare the asset for its intended use or sale have commenced. Capitalization of borrowing costs ceases when the qualifyingasset being acquired, constructed or produced becomes ready for its intended use or sale. Borrowing costs incurred subsequently shouldbe charged to profit or loss. Capitalization of borrowing costs is suspended during periods in which the acquisition, construction orproduction of a qualifying asset is suspended abnormally and when the suspension is for a continuous period of more than 3 months.Capitalization is suspended until the acquisition, construction or production of the asset is resumed.

Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be capitalized is the actual interest expensesincurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used on the assetor any investment income on the temporary investment of those funds.

Where funds are borrowed under general-purpose borrowings, the Group determines the amount of interest to be capitalized on suchborrowings by applying a capitalization rate to the weighted average of the excess of cumulative expenditures on the asset over theamounts of specific-purpose borrowings. The capitalization rate is the weighted average of the interest rates applicable to thegeneral-purpose borrowings.

During the capitalization period, exchange differences on foreign currency specific-purpose borrowing are fully capitalized whereasexchange differences on foreign currency general-purpose borrowing is charged to profit or loss.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

19. Intangible assets

(1) Valuation methods, service life, impairment test

The Group’s intangible assets include product registration assets, Intangible assets upon purchase of products, marketing rights and rightsto use trademarks, land use rights and software. Intangible assets are stated at the balance sheet at cost less accumulated amortization andimpairment losses.

When an intangible asset with a finite useful life is available for use, its original cost less any accumulated impairment losses isamortized over its estimated useful life using the straight-line method. An intangible asset with an indefinite useful life is not amortized.

For an intangible asset with a finite useful life, the Group reviews the useful life and amortization method at the end of the year, andmakes adjustments when necessary.

The respective amortization periods for such intangible assets are as follows:

Item

Amortization period

(

years)

Land use rights

49

-

50 years

Product registration									8		years
Intangible assets upon purchase			d	products					1	-	20 years				(Mainly 7	-	11, 20)

Marketing rights and

Rights to use trademarks

4

-

10 years

Software

3

-

5 years

The difference between recoverable amounts of the intangible assets under the carrying amount is referred to as impairment loss (III 21).

(2) Research and development expenditure

Internal research and development project expenditures were classified into research expenditures and development expendituresdepending on its nature and the greater uncertainty whether the research activities becoming to intangible assets.

Expenditure during the research phase is recognized as an expense in the period in which it is incurred. Expenditure during thedevelopment phase that meets all of the following conditions at the same time is recognized as intangible asset:

- It is technically feasible to complete the intangible asset so that it will be available for use or sale;- The Group has the intention to complete the intangible asset and use or sell it;- The Group can demonstrate the ways in which the intangible asset will generate economic benefits;- The availability of adequate technical, financial and other resources to complete the development and the

ability to use or sell the intangible asset;- The expenditure attributable to the intangible asset during its development phase can be reliably measured.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

19. Intangible assets (cont’d)

(2) Research and development expenditure (cont’d)

Expenditures that do not meet all of the above conditions are recognized in profit or loss when incurred. If the expenditures cannot bedistinguished between the research phase and development phase, the Group recognizes all of them in profit or loss for the period.Expenditures that have previously been recognized in the profit or loss would not be recognized as an asset in subsequent years. Thoseexpenditures capitalized during the development stage are recognized as development costs incurred and will be transferred to intangibleasset when the underlying project is ready for an intended use.

20. Goodwill

The initial cost of goodwill represents the excess of cost of acquisition over the acquirer’s interest in the fair value of the identifiable netassets of the acquiree under a business combination not involving enterprises under common control.

Goodwill is not amortised and is stated in the balance sheet at cost less accumulated impairment losses (see Note III 21). On disposal ofan asset group

or a set of asset groups, any attributable goodwill is written off and included in the calculation of the profit or loss ondisposal.

21. Impairment of long-term assets

The Company assesses at each balance sheet date whether there is any indication that the fixed assets, construction in progress, intangibleassets with finite useful lives, investment properties measured at historical cost, investments in subsidiaries, joint ventures and associatesmay be impaired. If there is any indication that such assets may be impaired, recoverable amounts are estimated for such assets. Therecoverable amount of an asset is the higher of its fair value less costs to sell and the present value of the future cash flow estimated to bederived from the asset. The Group estimates the recoverable amount on an individual basis. If it is not possible to estimate therecoverable amount of the individual asset, the Group determines the recoverable amount of the asset group to which the asset belongs.Identification of an asset group is based on whether major cash inflows generated by the asset group are largely independent of the cashinflows from other assets or asset groups.

Goodwill arising from a business combination is tested for impairment at least at each year end, irrespective of whether there is anyindication that the asset may be impaired. For the purpose of impairment testing, the carrying amount of goodwill acquired in a businesscombination is allocated from the acquisition date on a reasonable basis to each of the related asset groups; if it is impossible to allocateto the related asset groups, it is allocated to each of the related set of asset groups. Each of the related asset groups or set of asset groupsis an asset group or set of asset group that is able to benefit from the synergies of the business combination and shall not be larger than areportable segment determined by the Group. If the carrying amount of the asset group or set of asset groups is higher than itsrecoverable amount, the amount of the impairment loss first reduced by the carrying amount of the goodwill allocated to the asset groupor set of asset groups, and then the carrying amount of other assets (other than the goodwill) within the asset group or set of asset groups,pro rata based on the carrying amount of each asset.

Once the impairment loss of such assets is recognized, it will not be reversed in subsequent periods.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

22. Employee benefits

(1) Short-term employee benefits

Employee wages or salaries, bonuses, social security contributions, measured on a non-discounted basis, and the expense is recordedwhen the related service is provided. A provision for short-term employee benefits in respect of cash bonuses is recognized in the amountexpected to be paid where the Group has a current legal or constructive obligation to pay the said amount for services provided by theemployee in the past and the amount can be estimated reliably.

(2) Post-employment benefits

Post-employment benefits are classified into defined contribution plans and defined benefit plans.

A defined contribution plan is a post-employment benefit plan under which the Group pays contributions to a separate entity and has nolegal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized as anexpense in profit or loss in the periods during which related services are rendered by employees.

Defined benefit plans of the Group are post-employment benefit plans other than defined contribution plans. In accordance with theprojected unit credit method, the Group measures the obligations under defined benefit plans using unbiased and mutually compatibleactuarial assumptions to estimate related demographic variables and financial variables, and discount obligations under the definedbenefit plans to determine the present value of the defined benefit liability. The discount rate used is the yield on the reporting date onhighly-rated corporate debentures denominated in the same currency, that have maturity dates approximating the terms of the Group’sobligation.

The Group attributes benefit obligations under a defined benefit plan to periods of service provided by respective employees. Servicecost and interest expense on the defined benefit liability are charged to profit or loss and remeasurements of the defined benefit liability

are recognised in other comprehensive income.

)3(Termination benefits

When the Group terminates the employment with employees or provides compensation under an offer to encourage employees to accept

voluntary redundancy, a provision is recognised with a corresponding expense in profit or loss at the earlier of the following dates:

- When the Group cannot unilaterally withdraw the offer of termination benefits because of an employee termination plan or a

curtailment proposal.- When the Group has a formal detailed restructuring plan involving the payment of termination benefits and has raised a valid

expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main featuresto those affected by it.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

22. Employee benefits (cont’d)

)3(Termination benefits (cont’d)

If the benefits are payable more than 12 months after the end of the reporting period, they are discounted to their present value. Thediscount rate used is the yield on the reporting date on highly-rated corporate debentures denominated in the same currency, that havematurity dates approximating the terms of the Group’s obligation.

(4) Other long-term employee benefits

The Group’s net obligation for long-term employee benefits, which are not attributable to post-employment benefit plans, is for theamount of the future benefit to which employees are entitled for services that were provided during the current and prior periods.

The amount of these benefits is discounted to its present value and the fair value of the assets related to these obligations is deductedtherefrom. The discount rate used is the yield on the reporting date on highly-rated corporate debentures denominated in the samecurrency, that have maturity dates approximating the terms of the Group’s obligation.

23. Provisions

Provisions are recognized when the Group has a present obligation related to a contingency, it is probable that an outflow of economicbenefits will be required to settle the obligation, and the amount of the obligation can be measured reliably.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the settlementdate, taking into account factors pertaining to a contingency such as the risks, uncertainties and time value of money. Where the effect ofthe time value of money is material, the amount of the provision is determined by discounting the related future cash outflows. Theincrease in the provision due to passage of time is recognized as interest expense.

If all or part of the provision settlements is reimbursed by third parties, when the realization of income is virtually certain, then therelated asset should be recognized. However, the amount of related asset recognized should not be exceeding the respective provisionamount.

At the balance sheet date, the amount of provision should be re-assessed to reflect the best estimation then.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

24. Share-based payment

Share-based payment refers to the transaction in order to aquire the service offered by the employees or other parties that grants equityinstruments or liabilities on the basis of the equity instruments. Share-based payment classified into equity-settled share-based paymentand cash-settled share-based payment.

Cash-settled share-based paymentThe cash-settled share-based payment should be measured according to the fair value of the liabilities recognized based on the shares orother equity instrument undertaken by the Company. For cash-settled share-based payment made in return for the rendering of employeeservices that cannot be exercised until the services are fully provided during the vesting period or specified performance targets are met,on each balance sheet date within the vesting period, the services acquired in the current period shall, based on the best estimate of thenumber of exercisable instruments, be recognized in relevant expenses and the corresponding liabilities at the fair value of the liabilityincurred by the Company.

On each balance sheet date and the settlement date before the settlement of the relevant liabilities, the Company should re-measure thefair value of the liabilities and the changes should be included in the current period profit or loss.

25. Revenue

Revenue of the Group is mainly from sale of goods.

The Group recognises revenue when transferring goods to a customer, at the amount of the transaction price. An asset is transferred whenthe customer obtains control of that asset. Transaction price is the amount of consideration to which an entity expects to be entitled inexchange for transferring goods to a customer, excluding amounts collected on behalf of third parties.

Significant financing component

For a contract with a significant financing component, the Group recognise revenue at an amount that reflects the price that a customerwould have paid for the goods if the customer had paid cash for those goods when they transfer to the customer. The difference betweenthe amount of consideration and the cash selling price of the goods, is amortized in the contract period with the effective interest rate.The Group does not adjust the amount of consideration for the effects of a significant financing component if the Group expects, atcontract inception, that the period between when the entity transfers a good to a customer and when the customer pays for that good willbe one year or less.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

25. Revenue (cont’d)

Sale with a right of return

For sale with a right if return, the Group recognizd revenue at the amount of consideration to which the Group expects to be entitled (ieexcluding the products expected to be returned). For any amounts received (or receivable) for which an entity does not expect to beentitled, the entity shall not recognise revenue when it transfers products to customers but shall recognise those amounts received (orreceivable) as a refund liability. An asset recognised for the Group’s right to recover products from a customer on settling a refundliability shall initially be measured by reference to the former carrying amount of the product less any expected costs to recover thoseproducts.

26. Government grants

Government grants are transfer of monetary assets and non-monetary assets from the government to the Group at no consideration,including tax returns, financial subsidies and so on. A government grant is recognized only when the Group can comply with theconditions attaching to the grant and the Group will receive the grant.

If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or receivable. If a governmentgrant is in the form of a non-monetary asset, it is measured at fair value. If the fair value cannot be reliably determined, it is measured ata nominal amount. A government grant measured at a nominal amount is recognized immediately in profit or loss for the period.

(1) The basis of judgment and accounting method of the government grants related to assets

Government grants obtained for acquiring long-term assets are government grants related to assets.A government grant related to an asset is offset with the cost of the relevant asset.

(2) The basis of judgment and accounting method of the government grants related to income

For a government grant related to income, if the grant is a compensation for related expenses or losses to be incurred in subsequentperiods, the grant is recognized as deferred income, and recognized in profit or loss over the periods in which the related costs arerecognized. If the grant is a compensation for related expenses or losses already incurred, the grant is recognized immediately in profit orloss for the period.

Government grants related to the Group’s normal course of business are offset with related costs and expenses. Government grantsrelated that are irrelevant with the Groups’s normal course of business are included in non-operating gains.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

27. Deferred tax assets/deferred tax liabilities

The income tax expenses include current income tax and deferred income tax.

(1) Current income tax

At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods are measured at the amount expectedto be paid (or recovered) according to the requirements of tax laws.

(2) Deferred tax assets and deferred tax liabilities

Temporary differences are differences between the carrying amounts of certain assets or liabilities and their tax base.

All taxable temporary differences are recognized as related deferred tax liabilities. Deferred tax assets are recognized to the extent that itis probable that future taxable profits will be available against which the deductible losses and tax credits can be utilized.

For deductible losses and tax credits that can be carried forward, deferred tax assets are recognized to the extent that it is probable thatfuture taxable profits will be available against which the deductible losses and tax credits can be utilized. However, for deductibletemporary differences associated with the initial recognition of goodwill and the initial recognition of an asset or liability arising from atransaction (not a business combination) that affects neither the accounting profit nor taxable profits (or deductible losses) at the time oftransaction, no deferred tax asset or liability is recognized.

At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates, according to tax laws, that are expected to applyin the period in which the asset is realized or the liability is settled.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, andinterests in joint ventures, except where the Group is able to control the timing of the reversal of the temporary difference and it isprobable that the temporary difference will not reverse in the foreseeable future.

The Group may be required to pay additional tax in case of distribution of dividends by the Group companies. This additional tax was notincluded in the financial statements, since the policy of the Group is not to distribute in the foreseeable future a dividend which creates asignificant additional tax liability.

Except for those current income tax and deferred tax charged to comprehensive income or shareholders’ equity in respect of transactionsor events which have been directly recognized in other comprehensive income or shareholders’ equity, and deferred tax recognized on

business combinations, all other current income tax and deferred tax items are charged to profit or loss in the current period.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

27. Deferred tax assets/deferred tax liabilities (cont’d)

At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it is no longer probable that sufficienttaxable profits will be available in the future to allow the benefit of deferred tax assets to be utilized. Such reduction is reversed when itbecomes probable that sufficient taxable profits will be available.

(3) Offset of income taxWhen the Group has a legal right to settle on a net basis and intends either to settle on a net basis or to realize the assets and settle theliabilities simultaneously, current tax assets and current tax liabilities are offset and presented on a net basis.

When the Group has a legal right to settle current tax assets and liabilities on a net basis, and deferred tax assets and deferred taxliabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities whichintend either to settle current tax assets and liabilities on a net basis or to realize the assets and liabilities simultaneously, in each futureperiod in which significant amounts of deferred tax assets or liabilities are expected to be reversed, deferred tax assets and deferred taxliabilities are offset and presented on a net basis.

28. Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to thelessee. All other leases are classified as operating leases.

(1) The Group as lessee under operating leases

Operating lease payments are recognized on a straight-line basis over the term of the relevant lease, and are either included in the cost ofrelated asset or charged to profit or loss for the period. Initial direct costs incurred are charged to profit or loss for the period.

(2) The Group as lessor under operating leases

Rental income from operating leases is recognized in profit or loss on a straight-line basis over the term of the relevant lease. Initialdirect costs with more than an insignificant amount are capitalized when incurred, and are recognized in profit or loss on the same basisas rental income over the lease term. Other initial direct costs with an insignificant amount are charged to profit or loss in the period inwhich they are incurred.

(3) The Group as lessee under finance leases

At the commencement of the lease term, the Group records the leased asset at an amount equal to the lower of the fair value of the leasedasset and the present value of the minimum lease payments at the inception of the lease, and recognizes a long-term payable at an amountequal to the minimum lease payments. The difference between the recorded amounts is deferred. Besides, initial direct costs that areattributable to the leased item incurred during the process of negotiating and securing the lease agreement are also added to the amountrecognized for the leased asset.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

28. Leases (cont’d)

(4) The Group as lessee under finance leases

The deferred expense are recognized as financial expenses in profit or loss using the effective interest method over the lease term.Contingent rents are credited to profit or loss in the period in which they are actually incurred. The net amount of minimum leasepayments less deferred expense is separated into long-term liabilities and the portion of long-term liabilities due within one year forpresentation.

29. Other significant accounting policies and accounting estimates

29.1 Hedging

The Group uses derivative financial instruments to hedge its risks related to foreign currency and inflation risks and derivatives that arenot used for hedging.

Hedge accountingOn the commencement date of the accounting hedge, the Group formally documents the relationship between the hedging instrument andhedged item, including the Group’s risk management objectives and strategy in executing the hedge transaction, together with themethods that will be used by the Group to assess the effectiveness of the hedging relationship.

The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedge isexpected to be effective in offsetting the changes in the fair value of cash flows that can be attributed to the hedged risk during the periodfor which the hedge is designated.

An effective hedge exsists when all of the below conditions are met:

? There is an economic relationship between the hedged item and the hedging instrument? the effect of credit risk does not dominate the value changes that result from that economic relationship? the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item

that the entity actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge thatquantity of hedged item.

With respect to a cash-flow hedge, a forecasted transaction that constitutes a hedged item must be highly probable and must give rise toexposure to changes in cash flows that could ultimately affect profit or loss.

Measurement of derivative financial instrumentsDerivative financial instruments are recognized initially at fair value; attributable transaction costs are recognized in profit or loss asincurred.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

29. Other significant accounting policies and accounting estimates (cont’d)

29.1 Hedging (cont’d)

Cash-flow hedgesSubsequent to the initial recognition, changes in the fair value of derivatives used to hedge cash flows are recognized through othercomprehensive income directly in a hedging reserve, with respect to the part of the hedge that is effective. Regarding the portion of thehedge that is not effective, the changes in fair value are recognized in profit and loss. The amount accumulated in the hedging reserve isreclassified to profit and loss in the period in which the hedged cash flows impact profit or loss and is presented in the same line item inthe statement of income as the hedged item.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, the hedgeaccounting is discontinued. The cumulative gain or loss previously recognized in a hedging reserve through other comprehensive incomeremains in the reserve until the forecasted transaction occurs or is no longer expected to occur. If the forecasted transaction is no longerexpected to occur, the cumulative gain or loss in respect of the hedging instrument in the hedging reserve is reclassified to profit or loss.

Economic hedgeHedge accounting is not applied with respect to derivative instruments used to economically hedge financial assets and liabilitiesdenominated in foreign currency or CPI linked. Changes in the fair value of such derivatives are recognized in profit or loss as financingincome or expenses.

Derivatives that are not used for hedgingChanges in the fair value of derivatives that are not used for hedging are recognized in profit or loss as financing income or expenses.

29.2. Securitization of assets

Details of the securitization of asset agreements and accounting policy are set out in Note V.5 Account receivables

29.3. Segment reporting

Reportable segments are identified based on operating segments which are determined based on the structure of the Group’s internalorganisation, management requirements and internal reporting system.

Two or more operating segments may be aggregated into a single operating segment if the segments have similar economiccharacteristics and are same or similar in respect of the nature of each product and service, the nature of production processes, the type orclass of customers for the products and services, the methods used to distribute the products or provide the services, and the nature of theregulatory environment.

29.4. Profit distributions to shareholders

Dividends which are approved after the balance sheet date are not recognised as a liability at the balance sheet date but are disclosed inthe notes separately.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

30. Changes in significant accounting policies and accounting estimates

(1) Changes in significant accounting policies

The contents and reasons for the changes of accounting policiesh Process for

management

approval

The Group began to adopt the following revised Accounting Standards for BusinessEnterprises (“ASBE”) promulgated by Ministry of Finance from January 1, 2018:

“Revised ASBE 22 - Financial Instruments Recognition and Measurement”, “RevisedASBE 23 - Transfer of Financial Assets”, “Revised ASBE 24 - Hedging”, “RevisedASBE 37 - Presentation and Disclosures of Financial insturments” (“new financialinstrument standards”), and “Revised ASBE 14 - Revenue” (“new revenue standard”),promulgated on 2017.

Financial Instruments

According to new financial instrument standards, financial assets are classified as oneof the following three categories: financial assets measured at amortized cost, financialassets measured at fair value through other comprehensive income (FVTOCI), andfinancial assets measured at fair value through profit and loss (FVTPL), based on the“business model” and “contractual cash flow characteristics”. The categories of loansand receivables, held-to-maturity investments and available-for-sale financial assets inthe old financial instrument standards are cancelled. Equity investments are normallyclassified as financial assets at FVTPL, while it is permitted to irrevocably designatenon-trading equity investments as financial assets at FVTOCI, and cumulative gain orloss previously recognised in other comprehensive income should not be classified toprofit or loss upon derecognition.

Impairment requirements in new financial instrument standards are applied to financialassets at amortised cost and FVTOCI, based on the “expected credit loss method”. Thenew impairment model requires a three-stage model, to recognize 12-month or lifetimeexpected credit losses, depending on whether credit risk on a financial instrument hasincreased significantly since initial recognition. An entity shall always measure the lossallowance at an amount equal to lifetime expected credit losses for trade receivablesthat do not have a significant financing component.

Revenue

New revenue standards introduced the 5-step approach, and provides more guidancesfor special transactions and events. Refer to Note III.25 for details of the Group’srevenue recognition and measurement.

According to the new standards, opening balances should be adjusted for accumulatedimpact, with regards to retained earnings and other relevant accounts, with no

adjustments for comparative information.

The change in theaccounting policy wasapproved by the boardof directors meeting in2018.4.26.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

31. Changes in significant accounting policies and accounting estimates (cont’d)

(1) Changes in significant accounting policies (cont’d)

Note 1: Transfer from loans and receivables to fair value

According to the Standard, the classification of financial assets that constitute debt instruments is generally based on the businessmodel in which a financial asset is managed and its contractual cash flow characteristics. Trade receivables that are included in thesecuritization transaction for which consideration has not yet been received, are measured at fair value through profit or loss.As a result of the implementation of the Standard, as at January 1, 2018, the balance of other receivables decreased by 8,279

thousand RMB with a corresponding decrease in retained earnings.

Note 2: Transfer from available-for-sale financial assets to other equity investments

As at January 1, 2018, available-for-sale financial assets were designated as financial assets at FVTOCI and reclassified to otherequity investments. Such equity investments are not expected to be sold within the foreseeable future.

Since those equity investments are not quoted in an active market, according to old financial instrument standards, the investmentswere measured at cost.

Commencing January 1, 2018, such equity investments are measured at FVTOCI. Impairment loss recognised in prior periods ofRMB 11,991 was reclassified from retained earnings to OCI, the investments were revaluated through OCI in the amount of RMB71,546 and the deferred tax assets decreased by RMB 8,934. The OCI was increased by net amount of RMB 50,621.

Note 3: Expected credit loss

Commencing from January 1, 2018, the Group recognise credit loss impairment in accordance with new financial instrumentstandards.

The Standard includes a new model for the recognition of expected credit loss ('expected credit loss’ model) for financial assets thatare not measured at fair value through profit or loss. As a result of the implementation of the Standard, as of January 1, 2018, theprovision for impairment of trade receivables increased by RMB 42,345, the deferred tax assets increased by RMB 12,277 with a

corresponding decrease of RMB 30,068 in retained earnings.

Note 4: Significant financing component in revenue recognition

In assessing whether a contract contains a significant financing component, the Group examines, among other things, the expectedlength of time between the date on which the Group transfers the goods to the customer and the date on which the customer paysfor the goods less than one year. In cases where the difference is one year or less, the Group applies the practical relief prescribed inthe Standard and does not separate the significant financing component.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

32. Changes in significant accounting policies and accounting estimates (cont’d)

(1) Changes in significant accounting policies (cont’d)

Note 4: Significant financing component in revenue recognition (cont’d)

As a result of the implementation of the Standard, as of January 1, 2018, the balance of trade receivables increased by RMB 71,406

and deferred tax assets decreased by RMB 23,837, with a corresponding increase of RMB 47,569 in retained earnings.

Summary of impacts to assets, liabilities and owners’ equity from adoption of new revenue standards and new financial instrumentstandards, as at January 1, 2018:

Items

December 31,

2017

Impact fromadoption of newrevenue standards

Impact fromadoption of newfinancial instrument

standards

standards

January 1,

2018

Accounts receivable

5,056,850

71,406

(42,345)

5,085,911

Other receivable

1,037,836

-

(8,279)

1,029,557

Available for sale

financial assets

19,544

-

(19,544

)

Other equity

investments

-

91

,

090

91

090

Deferred tax assets

891,012

(23,837)

3,343

870

518

Total impact toassets

39,613,922

47,569

24,265

39,685,756

Othercomprehensive

income

(

154,701

)

-

50,621

(104

,

080)

Retained earnings

3,286,711

47,569

(26,356)

3,307,924

Total impact toshareholders’equity

18,778,013

47,569

24,265

18,849,847

(2) Changes in significant accounting estimates

There are no significant changes in accounting estimates in the reporting period.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

32. Significant accounting estimates and judgments

The preparation of the financial statements requires management to make estimates and assumptions that affect the application ofaccounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.Estimates as well as underlying assumptions and uncertainties involved are reviewed on an ongoing basis. Revisions to accountingestimates are recognised in the period in which the estimate is revised and in any future periods affected.

Notes V.33, Note IX and Note XII contain information about the assumptions and their risk factors relating to post-employment benefits– defined benefit plans, fair value of financial instruments and share-based payments. Other key sources of estimation uncertainty are asfollows:

32.1 Impairment of trade receivables

As described in Note III.11, trade receivables are reviewed at each balance sheet date to determine whether credit risk on a receivable hasincreased significantly since initial recognition, lifetime expected losses is accrued for impairment provision. Evidence of impairmentincludes observable data that comes to the attention of the Group about loss events such as a significant decline in the solvency of anindividual debtor or the portfolio of debtors, and significant changes in the financial condition that have an adverse effect on the debtor. Ifthere is objective evidence of a recovery in the value of receivables which can be related objectively to an event occurring after theimpairment was recognised, the previously recognised impairment loss is reversed.

32.2 Provision for impairment of inventories

As described in Note III.12, the net realisable value of inventories is under management’s regular review, and as a result, provision forimpairment of inventories is recognised for the excess of inventories’ carrying amounts over their net realisable value. When makingestimates of net realisable value, the Group takes into consideration the use of inventories held on hand and other information availableto form the underlying assumptions, including the inventories’ market prices and the Group’s historical operating costs. The actual sellingprice, the costs of completion and the costs necessary to make the sale and relevant taxes may vary based on the changes in marketconditions and product saleability, manufacturing technology and the actual use of the inventories, resulting in the changes in provisionfor impairment of inventories. The net profit or loss may then be affected in the period when the impairment of inventories is adjusted.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

32. Significant accounting estimates and judgments (cont’d)

32.3 Impairment of assets other than inventories and financial assets

As described in Note III.21, assets other than inventories and financial assets are reviewed at each balance sheet date to determinewhether the carrying amount exceeds the recoverable amount of the assets. If any such indication exists, an impairment loss isrecognised.

The recoverable amount of an asset (or an asset group) is the greater of its fair value less costs to sell and its present value of expectedfuture cash flows. Since a market price of the asset (or the asset group) cannot be obtained reliably, the fair value of the asset cannot beestimated reliably, the recoverable amount is calculated based on the present value of estimated future cash flows. In assessing thepresent value of estimated future cash flows, significant judgements are exercised over the asset’s production, selling price, relatedoperating expenses and discount rate to calculate the present value. All relevant materials which can be obtained are used for estimationof the recoverable amount, including the estimation of the production, selling price and related operating expenses based on reasonableand supportable assumptions.

32.4 Depreciation and amortisation of assets such as fixed assets and intangible assets

As described in Note III.16 and 19, assets such as fixed assets and intangible assets are depreciated and amortised over their useful livesafter taking into account residual value. The estimated useful lives of the assets are regularly reviewed to determine the depreciation andamortisation costs charged in each reporting period. The useful lives of the assets are determined based on historical experience ofsimilar assets and the estimated technical changes. If there have been significant changes in the factors used to determine the depreciationor amortisation, the rate of depreciation or amortisation is revised prospectively.

32.5 Income taxes and deferred income tax

The Company and Group companies are assessed for income tax purposes in a large number of jurisdictions and, therefore, Companymanagement is required to use considerable judgment in determining the total provision for taxes and attribution of income.

When assessing whether there will be sufficient future taxable profits available against which the deductible temporary differences can beutilised, the Group recognises deferred tax assets to the extent that it is probable that future taxable profits will be available against whichthe deductible temporary differences can be utilised, using tax rates that would apply in the period when the asset would be utilised. Indetermining the amount of deferred tax assets, the Group makes reasonable judgements and estimates about the timing and amount oftaxable profits to be utilised in the following periods, and of the tax rates applicable in the future according to the existing tax policiesand other relevant regulations. If the actual timing and amount of future taxable profits or the actual applicable tax rates differ from theestimates made by management, the differences affect the amount of tax expenses.

(Expressed in RMB '000)

Notes to the Financial Statements

III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)

32. Significant accounting estimates and judgments (cont’d)

32.6 Contingent liabilities

When assessing the possible outcomes of legal claims filed against the Company and its investee companies, the company positions arebased on the opinions of their legal advisors. These assessments by the legal advisors are based on their professional judgment,considering the stage of the proceedings and the legal experience accumulated regarding the various matters. Since the results of theclaims will be determined by the courts, the outcomes could be different from the assessments.

In addition to the said claims, the Group is exposed to unasserted claims, inter alia, where there is doubt as to interpretation of theagreement and/or legal provision and/or the manner of their implementation. This exposure is brought to the Company’s attention inseveral ways, among others, by means of contacts made to Company personnel. In assessing the risk deriving from the unasserted claims,the Company relies on internal assessments by the parties dealing with these matters and by management, who weigh assessment of theprospects of a claim being filed, and the chances of its success, if filed. The assessment is based on experience gained with respect to thefiling of claims and the analysis of the details of each claim. By their nature, in view of the preliminary stage of the clarification of thelegal claim, the actual outcome could be different from the assessment made before the claim was filed.

32.7 Employee benefits

The Group’s liabilities for long-term post-employment and other benefits are calculated according to the estimated future amount of thebenefit to which the employee will be entitled in consideration for his services during the current period and prior periods. The benefit isstated at present value net of the fair value of the plan’s assets, based on actuarial assumptions. Changes in the actuarial assumptionscould lead to material changes in the book value of the liabilities and in the operating results.

32.8 Derivative financial instruments

The Group enters into transactions in derivative financial instruments for the purpose of hedging risks related to foreign currency andinflationary risks. The derivatives are recorded at their fair value. The fair value of derivative financial instruments is based on quotesfrom financial institutions. The reasonableness of the quotes is examined by discounting the future cash flows, based on the terms andlength of the period to maturity of each contract, while using market interest rates of a similar instrument as of the measurement date.Changes in the assumptions and the calculation model could lead to material changes in the fair value of the assets and liabilities and inthe results.

(Expressed in RMB '000)

Notes to the Financial Statements

IV TAXATION

1. Main types of taxes and corresponding tax rates:

The income tax rate in China to the Company is 25%. The subsidiaries outside of China are assessed based on the tax laws in the countryof their residence.Set forth below are the tax rates outside China relevant to the subsidiaries with significant sales to third party:

Name

of

subsidiary

Location

2018

ADAMA agriculture solutions Ltd

.

Israel

23.0%

ADAMA Makhteshim

Israel

7.5%

ADAMA Agan

Israel

16.0%

ADAMA Brasil S/A

Brazil

34.0%

ADAMA of North America Inc.

U.S.

24.7%

ADAMA India Private Ltd

India

34.6%

ADAMA Deutschland GmbH

Germany

32.5%

Control Solutions Inc.

U.S.

24.0%

Adama Australia Pty Ltd

Australia

30.0%

ADAMA France

S.A.S

France

32.2%

ADAMA Andina B.V. Sucursal Colombia

Colombia

34.0%

ADAMA Italia S.R.L.

Italy

27.9%

Alligare Inc.

U.S.

27.5%

The VAT rate of the Group's subsidiaries is in the range between 2.5% to 27%.

A. Benefits from Hi-Tech Certificate

The Company, was jointly approved as new and high-tech enterprise, by the Hubei Provincial Department of Science andTechnology, Department of Finance of Hubei Province, Hubei Provincial Office of the State Administration of Taxation and HubeiLocal Taxation Bureau, and the applicable income tax rate from 2017 to 2019 is 15%.

B. Benefits under the Law for the Encouragement of Capital Investments

Industrial enterprises of subsidiaries in Israel were granted “Approved Enterprise” or “Beneficiary Enterprise” status under the IsraeliLaw for the Encouragement of Capital Investments, 1959. Part of the income deriving from the “Approved Enterprise” or“Beneficiary Enterprise” during the benefit period is subject to tax at the rate of up to 25% (the total benefit period is seven years andin certain circumstances up to ten years, but may not exceed 14 years from the date of the Letter of Approval and 12 years from thedate the “Approved Enterprise” commenced operations or not more than 12 years from the election year for a “BeneficiaryEnterprise”).

Other industrial enterprises of subsidiaries in Israel are entitled to a tax exemption for periods of between two and six years and a taxrate of up to 25% for the remainder of the benefits period. Should a dividend be distributed from the tax-exempt income, thesubsidiaries will be liable for tax on the income from which the dividend was distributed at a rate of 25%.

(Expressed in RMB '000)

Notes to the Financial Statements

IV. Taxation (cont'd)

2. Tax preferential

The aforementioned benefits are conditional upon compliance with certain conditions specified in the Law, related Regulations andthe Letters of Approval, in accordance with which the investments in the Approved Enterprises were made. Failure to meet theseconditions may lead to cancellation of the benefits, in whole or in part, and to repayment of any benefits already received, togetherwith interest. Management believes that the companies are in compliance with these conditions.C. Amendment to the Law for the Encouragement of Capital Investments, 1959.On December 29, 2010 the Israeli parliament approved the Economic Policy Law for 2011-2012, which includes an amendment tothe Law for the Encouragement of Capital Investments – 1959 (hereinafter – “the Amendment”). The Amendment is effective fromJanuary 1, 2011 and its provisions apply to preferred income derived or accrued in 2011 and thereafter by a preferred company, perthe definition of these terms in the Amendment. Companies can choose not to be included in the scope of the amendment to theEncouragement Law and to stay in the scope of the law before its amendment until the end of the benefits period of itsapproved/beneficiary enterprise.As of the date of the report, all subsidiaries in Israel adopted the amendment and the deferred taxes were calculated accordingly.he Amendment provides that only companies in Development Area A will be entitled to the grants track. Further, they will be entitledto receive benefits both under this track and under the tax benefits track at the same time. In addition, the existing tax benefit trackswere eliminated (the tax exempt track, the “Ireland” track and the “Strategic” track) and two new tax tracks were introduced in theirplace, a preferred enterprise and a special preferred enterprise, which mainly provide a uniform and reduced tax rate for all thecompany’s income entitled to benefits.On August 5, 2013 the Israeli Parliament passed the Law for Changes in National Priorities (Legislative Amendments for AchievingBudget Objectives in the Years 2013 and 2014) – 2013, which cancelled the planned tax reduction so that as from the 2014 tax yearthe tax rate on preferred income will be 9% for Development Area A and 16% for the rest of the country.On December 22, 2016, the Israeli Parliament passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the years 2017 and 2018) – 2016, by which, inter alia, preferred enterprise in Development Area A, will be subject totax rate of 7.5% instead of 9% effective from January 1, 2017 and thereafter (the tax rate applicable to preferred enterprises located inother areas remains at 16%)The amendment further determined that no tax shall apply to dividend distributed out of preferred income to shareholder who isIsrael resident company. On dividend distributed out of preferred income to a single shareholder or a foreign resident subject todouble taxation treaties, tax of 20% shall apply.D. Benefits under the Law for the Encouragement of Industry (Taxes), 1969

Under the Israeli Law for the Encouragement of Industry (Taxes) 1969, the Company is an Industrial Holding Company and some ofthe subsidiaries in Israel are “Industrial Companies”. The main benefit under this law is the filing of consolidated income tax returns(the Company files a consolidated income tax return with Adama Makhteshim) and amortization of know-how over 8 years.

(Expressed in RMB '000)

Notes to the Financial Statements

V. Notes to the consolidated financial statements

1. Cash at Bank and On Hand

June 30 January 1

2018 2018

Cash on hand

Cash on hand										1,065					2,267
Deposits in banks								6,020,315					7,861,991

Other cash at bank 28,150 4,600

6,049,530 7,868,858

Including cash and bank placed outside China							3		931	,947				5,580,592

As at 30 June 2018, restricted cash and bank balances was 28,150 thousand RMB (as at January 1, 2018:

4,600 thousand RMB) mainly including deposits that guarantee bank acceptance drafts.

2. Financial Assets at Fair Value through Profit or Loss

June 30 January 1

2018 2018

Financial assets held for trading

Financial assets held for trading

Debt instruments

13,610

14,225

Other

19,083 8,775

32,693 23,000

3. Derivative financial assets

June 30 January 1

2018 2018

Economic hedge

Economic hedge

849,346

449,553

Hedge accounting derivatives 90,879 5,600

940,225 455,153

(Expressed in RMB '000)

Notes to the Financial Statements

4. Bills Receivable

(1) Bills receivable by category

June 30 January 1

2018 2018

Post

-

dated checks receivable

10,335

19,969

Bank acceptance

draft

77,950 160,061

88,285 180,030

All bills receivables are due within one year.

(2) Bills receivable which had endorsed by the Company

June 30

2018

Bank acceptance

Bank acceptance

draft

211,682

211,682

5. Accounts Receivable

(1) Accounts receivable by category

June

3

0, 2018

Book value

Provision for bad and

doubtful debts

Amount

Percentage

(%)

Amount

Percentage

(%)

Carrying

amount

Account receivables assessed

collectively

collectively

for impairment

6,

459,562

92

93,425

1

6,366,137

Account receivables assessed

individually for impairment

553,412

8

304,905

5

5

248,507

7,012,974

100

398,330

6

6,614,644

January 1, 2018

Book value

Provision for bad and

doubtful debts

Amount

Percentage

		(%)

Amount

Percentage

			(%)

Carrying

amount

Account receivables assessed

collectively

collectively

for impairment

4,

935,888

90

104,712

2

4,831,176

Account receivables assessed

individually for impairment

578,799

10

324,064

5

6

254,735

5,

514,687

100

428,776

8

5,

085,911

(Expressed in RMB '000)

Notes to the Financial Statements

5. Accounts Receivable (cont’d)

(2) Addition, written-back and written-off of provision for bad and doubtful debts during the years:

Six monthsended ended

June 30

2018

Balance as of January 1,

428,776

Addition during

the year,

28,367

W

rite back during the year

(

22,742

)

Write

-

off during

the year

(

1,986

)

Exchange rate effect

(34,085)

Balance as of

Balance as of

June

3

0,

398,330

(3) Five largest accounts receivable by debtor at June 30, 2018:

June

June

3

0

, 201

8

Closing balance

As a percentage of

total accounts

receivable (%)

Provision for bad debts

at the end of the year

Party

A

119,105

2

-

Party

B

116,465

2

5,823

Party

C

81,060

1

-

Party

D

75,661

1

-

Party

E

75,2901 -

Total

467,581

5,823

(4) Derecognition of accounts receivable due to transfer of financial assets

Certain subsidiaries of the group entered into a securitization transaction with Rabobank International for sale of tradereceivables (hereinafter – “the Securitization Program” and/or “the Securitization Transaction”).

Pursuant to the Securitization Program, the companies will sell their trade receivables debts, in various different currencies, to aforeign company that was set up for this purpose and that is not owned by the Adama Agricultural Solutions Group (hereinafter– “the Acquiring Company”). Acquisition of the trade receivables by the Acquiring Company is financed by a U.S. company,Nieuw Amsterdam Receivables Corporation for the Rabobank International Group.

The trade receivables included as part of the Securitization Transaction are trade receivables that meet the criteria provided inthe agreement.

Every year the credit facility is re approved in accordance with the Securitization Program. As at the date of the report, theSecuritization Agreement was approved up to July 31, 2018. Subsequent to the report date, the Securitization Agreement wasextended up to July 31, 2019.

(Expressed in RMB '000)

Notes to the Financial Statements

5. Accounts Receivable (cont’d)

(4) Derecognition of accounts receivable due to transfer of financial assets (cont’d)

The maximum scope of the securitization is adjusted for the seasonal changes in the scope of the Company’s activities, asfollows: during the months March through June the maximum scope of the securitization is $350 million, during the monthsJuly through September the maximum scope of the securitization is $300 million and during the months October throughFebruary the maximum scope of the securitization is $250 million. The proceeds received from those customers whose debtswere sold are used for acquisition of new trade receivables.

The price at which the trade receivables debts are sold is the amount of the debt sold less a discount calculated based on,among other things, the expected length of the period between the date of sale of the trade receivable and its anticipatedrepayment date. In the month following acquisition of the debt, the Acquiring Company pays in cash most of the debt while theremainder is recorded as a subordinated note that is paid after collection of the debt sold. If the customer does not pay its debton the anticipated repayment date, the Company bears interest up to the earlier of the date on which the debt is actually repaidor the date on which the Acquiring Company is indemnified by the insurance company (the actual costs are not significant andare not expected to be significant).

The Acquiring Company bears 90% of the credit risk in respect of the customers whose debts were sold and will not have aright of recourse to the Company in respect of the amounts paid in cash, except regarding debts with respect to which acommercial dispute arises between the companies and their customers, that is, a dispute the source of which is a claim ofnon-fulfillment of an obligation of the seller in the supply agreement covering the product, such as: a failure to supply thecorrect product, a defect in the product, delinquency in the supply date, and the like.

The Acquiring Company appointed a policy manager who will manage for it the credit risk involved with the trade receivablessold, including an undertaking with an insurance company.

Pursuant to the Receivables Servicing Agreement, the Group companies handle collection of the trade receivables as part of theSecuritization Transaction for the benefit of the Acquiring Company.

As part of the agreement, the subsidiary committed to comply with certain financial covenants, mainly the ratio of the liabilitiesto equity and profit ratios. As of June 30, 2018 the subsidiary was in compliance with the financial covenants.

The accounting treatment of sale of the trade receivables included as part of the Securitization Program is:

The Company is not controlling the Acquiring Company, therefore is not consolidated the Acquiring Company in its financialstatements.

The Company continues to recognize the trade receivables included in the Securitization Program based on the extent of itscontinuing involvement therein.

In respect of the part of the trade receivables included in the securitization Program with respect to which cash proceeds werenot yet received, however regarding which the Company has transferred the credit risk, a subordinated note is recorded.

The loss from sale of the trade receivables is recorded at the time of sale in the statement of income in the “financing expenses”category.

(Expressed in RMB '000)

Notes to the Financial Statements

5. Accounts Receivable (cont’d)

(4) Derecognition of accounts receivable due to transfer of financial assets (cont'd)

In the fourth quarter of 2016, a subsidiary in Brazil (hereinafter - “the subsidiary”) entered into a 3 years securitizationtransaction with Rabobank Brazil for sale of trade receivables. Under the agreement, the subsidiary will sell its tradereceivables to a securitization structure (hereinafter - “the entity”) that was formed for this purpose where the subsidiary hassubordinate rights of 5% of the entity's capital.

The maximum securitization scope amounts to BRL 200 million (as of June 30, 2018 - 343 million RMB).

On the date of the sale of the trade receivables, the entity pays the full amount which is the debt amount sold net of discountcalculated, among others, over the expected length of the period between the date of sale of the customer receivable and itsanticipated repayment date.

The entity bears 90% of the credit risk in respect of the customers whose debts were sold such that the entity has the right ofrecourse of 10% of the unpaid amount. The subsidiary should make a pledged deposit equal to the amount the entity’s right ofrecourse.

The subsidiary handles the collection of receivables included in the securitization for the entity.

The subsidiary does not control the entity and therefore the entity is not consolidated in the group's financial statements.

The subsidiary continues to recognize the trade receivables sold to the entity based on the extent of its continuing involvementtherein (10% right of recourse) and also recognizes an associated liability in the same amount.

The loss from the sale of the trade receivables is recorded at the time of sale in the statement of income in the “financingexpenses” category.

June 30

January 1

2018

2018

Accounts receivables derecognized

2,451,986

2,513,554

Continuing involvement

217,177

227,887

Subordinated note in respect of trade receivables					273,861			575			865
Liability in respect of trade receivables					242,962				37,957

Six months ended June 30

2018 2017

Restated

Loss in respect of sale of trade receivables

Loss in respect of sale of trade receivables

32,186 30,739

32,186 30,739

(Expressed in RMB '000)

Notes to the Financial Statements

6. Prepayments

(1) The ageing analysis of prepayments is as follows:

June 30

January 1

2018

2018

Amount

Percentage

Amount

Percentage

Within			1 year (inclusive)									267,654					94				193,322					96
Over 1 year but within 2 years (inclusive)													14,907					5				4	,404				2
Over 2 years but within 3 years (inclusive)														3,421				1				3,	600				2

Over 3 years

-

-

286,942

202,111

(2) Total of five largest prepayments by debtor at the end of the period:

7. Other Receivables

(1) Other receivables by category

June 30, 2018

Book value

Provision for bad and

doubtful debts

Amount

Percentage

		(%)

Amount

Percentage

			(%)

Carrying

amount

Account receivables assessed

collectively

collectively

for impairment

70

5,728

99

149

-

702,579

Account receivables assessed

individually for impairment

7,848

1

5,

702

73

2,146

		713,576			100			5,851			1			707,725

January 1, 2018

Book value

Provision for bad and

doubtful debts

Amount

Percentage

		(%)

Amount

Percentage

			(%)

Carrying

amount

Account receivables assessed

collectively

collectively

for impairment

basis

1,

027,087

99

77

-

1,

027,010

Account receivables assessed

individually for impairment

7,849

1

5,3

02

68

2,547

		1,034,936			100			5,379			1			1,029,557

Amount

Percentage of

						prepayments		(%)
June 30, 2018			103,179						36

(Expressed in RMB '000)

Notes to the Financial Statements

7. Other Receivables (cont'd)

(2) Addition, recovery or reversal and written-off of provision for bad and doubtful debts during the years:

Six monthsended June 30

2018

Balance as of January 1,

Balance as of January 1,

5,379

Addition during		the year							472
Written back during the year

Write

-

off during

the year

-

Exchange rate effect

-

Balance as of

Balance as of

June

3

0,

5,851

(3) Other receivables by nature

June 30

January 1

2018

2018

Trade receivables as part of securitization

transactions not yet eliminated					217,177			227,887
Subordinated note in respect of trade receivables					273,861			575	865

Financial institutions

31,938

60,742

Other

190,600

170,442

Sub

total

713,576

1,

034

936

Provision for doubtful debts

other receivables

(5,851)

(5,379)

707,725

1,029,557

Financial institutions represent deposits made by the company with regard to derivativestransactions.

(4) Total of five largest other receivables by debtor at the end of the period:

The total five largest other receivables includes the subordinated note in respect of tradereceivables.

Amount

Percentage of

other receivables

June 30, 2018

June 30, 2018

405,803

57

(Expressed in RMB '000)

Notes to the Financial Statements

8. Inventories

(1) Inventories by category:

June 30, 2018

Book value

Provision for impairment

of inventories

Carrying amount

Raw materials

2,984,847

8,842

2,976,005

Work in progress					416,129				788				415,341
Finished goods				4,796,740				163,701				4,633,039

Others

257,918

7,483

250,435

8,455,634

180,814

8,274,820

January 1, 2018

Book value

Provision for impairment

of inventories

Carrying amount

Raw materials				2,272,637				11,545				2,261,092
Work in progress					522,668				417				522,251

Finished goods

4,623,078

149,252

4,473,826

Others

238,355

7,286

231,069

7,656,738

168,500

7,488,238

(2) Provision for impairment of inventories:

For the six monthes ended June 30, 2018

January 1,

2018

Provision

Reversal or

write-off

Other

June 30,

2018

Raw material				11,545			2,767			(	5,411	)			(59)			8,842

Work in progress

417

1,064

(

693

-

788

Finished goods

149,252

43,652

(

31,111

1,908

163,701

Others

7,286

)350(

7,483

168,500

47,935

)37,565(

1,944

180,814

(Expressed in RMB '000)

Notes to the Financial Statements

9. Assets held for sale

Item

January 1, 2018

Decrease

Currencytranslationadjustment June 30, 2018

Intangible assets – registrationand Intangilbe assets on

purchased products

403,297

(392

,

403)

10,894

-

The assets held for sales were divested on March 2018, for further information see Note V.16 Intangible assets.

10. Other Current Assets

June 30 January 1

2018 2018

Deductible VAT

Deductible VAT

							449,313					477,117
Current tax assets								60,681					90,350

Others

38,966 47,458

548,960 614,925

11. Long-Term Receivables

June 30 January 1

2018 2018

Long term account receivables from sale of goods

Long term account receivables from sale of goods

146,399 192,968

(Expressed in RMB '000)

Notes to the Financial Statements

12. Long-Term Equity Investments

(1) Long-term equity investments by category:

June 30 January 1

2018 2018

Investments in joint ventures

Investments in joint ventures

80,

913

64,523

Investments in associates

38,338 37,860

119,251 102,383

(2) Movements of long-term equity investments for the six months ended June 30, 2018 are as

follows:

Balance atJanuary 1,2018

Investmentpresented asliability as atJanuary 1,2018

Netbalance atJanuary 1,2018

Investmentincome(loss)

Translationdifferencesof foreignoperations Other

Balanceat June30, 2018

Joint ventures

Company A

54,362

-

54,362

12,394

(1,217)

3,748

69,287

Company B

Company B

6,247

-

6,247

-

7,133

Company D

Company D

3,914

-

3,914

-

-

4,036

Company F

*

Company F

-

(7,652)

(7,652)

(413)

8,297

Sub

-

total

64,523

(7,652)

56,871

12,758

(761)

12,045

80,913

Associates

Company E

37,860

-

37,860

-

-

38,338

Sub

total

37,860

-

37,860

-

-

38,338

102,383

(7,652)

94,731

12,758

(283)

12,045

119,251

* Negev Aroma (Ramat Hovav) Ltd. (hereinafter "Negev Aroma"), a joint venture accounted for using the equity method, waspresented as a liability in 2017 due to the group's obligation to support Negev Aroma.

13. Other equity investments

June 30 January 1

2018 2018

Other equity investments

Other equity investments

91,154 91,090

(Expressed in RMB '000)

Notes to the Financial Statements

14. Fixed assets

Buildings

Land &

equipment

Machinery &

Motorvehicles

Office &

otherequipment

Office &

Total

Cost
Balance as at							January	1, 201	8						2,473,955								11,126,188							100,180								293,399								13,993,722
Purchases																19,054								105,806								2,917							11,624								139,	401
Transfer from construction in progress																34,011								104,366									-							2,656							141,033
Disposals																	(885)								(9,283)						(8,919)								3,840		)						22,927			)
Currency translation adjustment																	7,	694						107,769								1,237								1,954							118,6		54

Balance as at June 30, 2018				2,	533,829					11,434,8	46					95,415					305,793					14,369,8	83

Accumulated depreciation

Balance as at		January		1, 201	8					(1,089,200)								(6,290,024)								(53,061)							(220,477)								(7,652,762)
Charge for the year											(42,530)								(250,305)								(5,898)							(13,373)								(312,106)
Disposals													885								6,946							7,347								3,643								18,821
Currency translation adjustment												(8,017)								(63,024)								(530)							(1,069)								(72,640)

Balance as at June 30, 2018				(1,138,862)					(6,596,407)					(52,142)					(231,276)					(8,018,6	87	)

Provision for impairment

Balance as at				January		1, 201	8					(19,151)							(180,077)							-					(242)							(199,470)
Charge for the year														-						(121)						-					(299)									(420)
Disposals														-							6					-							-								6
Currency translation adjustment													(205)							(952)						-						(15)							(1,172)
Balance as at June 30, 2018												(19,356)							(181,144)							-					(556)							(201,056)

Carrying amounts

As at June 30, 2018

		1,375,611					4,657,295					43,273					73,961					6,150,140

As at January 1, 2018

		1,365,604					4,656,087					47,119					72,680					6,141,490

*The land is located outside of china, owned by some of the group subsidiaries outside of china and reported as fixedassets.

(Expressed in RMB '000)

Notes to the Financial Statements

15. Construction in Progress

(1) Construction in progress

June 30 January 1

2018 2018Book value

Provision for

impairment

Carrying amount

Book value

Provision for

impairment

Carrying amount

871,046			-			871,046			803,421			-			803,421

(2) Details and Movements of major construction projects in progress during the six months ended June 30, 2018

Budget

Balance atJanuary 1,2018

Additionsduring theyear

Transfer tofixed assets

Currencytranslationdifferences

Balance atJune 30,2018

Percentage ofactual cost tobudget (%)

Projectprogress(%)

Source offunds

Project A				359,659			302,821			24,825			-			379			328,025			91			91			Internal finance

Project B

177,067

125,738

15,535

-

2,195

143,468

81

81

Internal finance

Project C

1,509,420

50,693

27,441

-

-

78,134

5

5

Internal finance

and bank loan

Project D

41,704

34,011

6,991

-

702

41,704

100

100

Internal finance

(Expressed in RMB '000)

Notes to the Financial Statements

16. Intangible Assets

(1) Intangible Assets

(1) The subsidiaries, wholly-controlled by the Company, signed several agreements with Aventis and Syngenta A.G and Bayer Crop Science A.G in 2001, 2002, 2017 and 2018, for the acquisition of intellectual

property rights, trademarks, brand name, technological know-how, information on customers and suppliers of materials and distribution rights in the field of agrochemicals.(2) Part of the land in Israel has not yet been registered in the name of the Group companies at the Land Registry Office, mostly due to registration procedures or technical problems.

Productregistration

Intangible assets

on PurchasedProducts

(1)

Software

Marketing rightsand trademarks Land use rights

(2)

Others Total

Cost
Balance as at									January							1, 201					8						8,	955			414						1,	986			,	450							559,576									472,190									326,521									352,126										12,652,277
Purchases																												185,846									1,966,144													32,638																		25,100								116,712											2,326,440
Currency translation adjustment																												111,061											96,911												7,636									4,441										487								8,1		7	3							228,7			09
Disposal																												35			503							80			253									(2,305)								(32,396)											(206)											13							(150,65				0
Balance as at									June				3	0		, 201		8									9,216,818										3,969,252												597,545									444,235									351,902									477,0				2	4					15,056,7					7	6
Accumulated amortization
Balance as at									January							1, 201					8					(5,889,539)										(1,520,132)												(365,732)									(400,535)										(61,242)								(227,331)											(8,464,511)
Charge for the year																											(370,897)										(126,162)												(28,930)									(10,119)									(3,065)									(18,103)											(557,276)
Currency translation adjustment																												(84,890)										(19,211)												(4,806)									(4,098)										(153)								(3,483)										(116,641)
Disposal																													22,582										74,484												1,446								32,396											206									(13)									131,101
Balance as at									June				3	0		201		8								(6,322,744)										(1,591,021)												(398,022)									(382,356)										6	4,254)							(248,930)											(9,007,327)
Provision for impairment
Balance as at									January							1, 201					8							(70,230)										(48,876)																													(32,072)																				(151,178)
Charge for the year																																																			(134)										(51)																	(726)												(911)
Currency					translation adjustment																									(885)										(616)												(5)										(2)																	(28)										(1,536)
Balance as at									June				3	0		, 201		8										(71,115)										(49,492)													(139)										(53)						(32,072)											(754)									(153,625)
Carrying amount
As at			June				0		, 201		8																2,822,959										2,328,739												199,384										61,826								255,576									227,3				4	0						5,895,8				2	4
As at			January 1							, 201				8													2,	995			645							417,442											193,844										71,655								233,207									124,795											4,036,588

(Expressed in RMB '000 )

Notes to the Financial Statements

16. Intangible Assets (cont’d)

(2) Additional information

As part of the development of its business and in order to obtain the necessary regulatory approvals to CNAC from the ChinaNational Chemical Corporation group (hereinafter- “CC”) for the acquisition of Syngenta AG ("Syngenta"), the Company agreedwith CC and Syngenta to sell several of its products against receiving products with similar characteristics and economic value fromSyngenta, including Syngenta's bearing of all expenses and taxes the Company will be required to pay.

Accordingly, during 2017, the Company received certain products and rights from Syngenta in the United States, against the sale of anumber of the Company's products to Amvac Chemical Corporation for the purpose of obtaining approval from the US Authority(FTC). The proceeds received for the sold products and the cost of the acquired properties in the US are not material.

On March 16, 2018, the transaction for the sale of the Company's registrations assets in certain European countries to NufarmLimited was completed, while the Company retained its right to continue to sell these products in other countries outside andsometimes also within Europe, in addition to signing supply and formulation agreements for a period of two years. The considerationreceived from Nufarm for the sale of the assets and for the supply and formulation agreements amounted to 2,511 million RMB(including deferred income of 93 million RMB). The capital gain generated from the sale amounted to 1,998 million RMB. The taxexpenses in respect of the capital gain amounted to approximately 442 million RMB.

Concurrent with the sale of said assets in Europe, the transaction for the acquisition of certain registration and marketing rights inEurope from Syngenta by the Company was completed. The cost of purchased intangible assets amounted to 2,072 million RMB.As a result of these transactions, the addition to intangible assets amounted to 2,137 million RMB that was recorded under intangibleassets.

Approximately 2,025 million RMB in respect of acquisition of registration assets and marketing rights are recorded as assets in thepurchase of products and is amortized over the economic life of the assets, ranging from 1 to 14 years (mainly between 7 and 11years).

An amount of approximately 112 million RMB was recorded as non-competitive and is amortized over the non-competition periodwhich is five years or over the economic life of the related assets if it is less than 5 years.The valuation model used to allocate the consideration to the acquired assets is Discounted Cash Flow (DCF).

(Expressed in RMB '000 )

Notes to the Financial Statements

17. Goodwill

The Group identified two cash generating units ("CGU”), Crop Protection (Agro) and Other (Non Agro) units. Operations areallocated into either one of the two cash generating units according to their business.At the end of the year, or more frequently whether indicators for impairment exists, the Group estimates the recoverable amount ofAgro and Non Agro units, which are the cash generating units of the Group that contain goodwill.As at the reporting period, there were no indicators for impairment. The fair value of the cash generating units to which the goodwillrelates exceeds its carrying amount.

Balance at

January

1, 201

8

Changesduring the

period

Currencytranslation

adjustment

Balance at

June

3

0

, 201

8

Book value

3,890,097

-

49,056

3,939,153

Impairment provision

-

-

-

-

Carrying amount					3,890,097					-					49,056					3,939,153

18. Deferred Tax Assets and Deferred Tax Liabilities

(1) Deferred tax assets without taking into consideration of the offsetting of balances within the

same tax jurisdiction

June 30

January 1

2018

2018

Deductibletemporary

differences

Deferred tax

assets

Deductibletemporary

differences

Deferred tax

assets

Deferred tax assets

Deferred tax assets

			in respect of
inventories					1,435,611			365,428					1,372,337			353,544

Deferred tax assets in respect of employee

benefits

799,927

104,213

863,820

114,255

Deferred tax assets in respect of carry forward

losses					655,998				43,001					2,363,524			462,184
Other	deferred tax asset				911,869			278,208						1,210,681			321	,	112

3,803,405

790,850

5,810,362

1,

251

095

(Expressed in RMB '000 )

Notes to the Financial Statements

18. Deferred tax assets and Deferred Tax Liabilities (cont’d)

(2) Deferred tax liabilities without taking into consideration of the offsetting of balances within the

same tax jurisdiction

June 30

January 1

2018

2018

Taxabletemporary

differences

Deferred tax

liabilities

Taxabletemporary

differences

Deferred tax

liabilities

Deferred tax liabilities

Deferred tax liabilities

Deferred tax liabilities in respect of

fixed assets and intangible assets

4,043,564

639,173

3,800,871

605,190

4,043,564

639,173

3,800,871

605,190

(3) Deferred tax assets and deferred tax liabilities presented on a net basis after offsetting

June 30

January 1

2018

2018

The offset amount

of deferred tax

assets and

liabilities

Deferred tax

assets orliabilities after

offset

The offsetamount ofdeferred tax

assets and

liabilities

Deferred tax

assets orliabilities after

offset

Presented as:

Deferred tax

assets

167,231

623,619

380,577

870,518

Deferred tax liabilities

167,231

471,942

380,577

224,613

(4) Details of unrecognised deferred tax assets

June 30 January 1

2018 2018

Deductible temporary differences

Deductible temporary differences

45,936

10,018

Deductible

losses

carry forward

101,309 96,041

147,245 106,059

(Expressed in RMB '000 )

Notes to the Financial Statements

18. Deferred tax assets and Deferred Tax Liabilities (cont’d)

(5) Expiration of deductible tax losses carry forward for unrecognised deferred tax assets

June 30 January 1

2018 2018

2018

2018

- -

201

9

- -

2020

19,803 19,831

202

1

14,161 35,737

202

2

5,670

18,008

After 202

2

61,675 22,465

101,309 96,041

(6) Unrecognised deferred tax liabilities

When calculating the deferred taxes, taxes that would have applied in the event of realizing investments in subsidiaries were nottaken into account since it is the Company’s intention to hold these investments and not realize them.

Deferred tax assets in respect of losses carried forward for tax purposes as of January 1, 2018 are mainly in respect ofsubsidiaries in Israel. Deferred tax assets were recognized because future taxable income was expected against which theunutilized tax losses could be utilized, mainly due to capital gain from the closing of the transaction for selling certain products inEurope during the first quarter of 2018, as described in Note 16 Intangible Assets, or up to the balance of deferred tax liability.

19. Other Non-Current Assets

June 30 January 1

2018 2018

Assets related to securitization

Assets related to securitization

transactions

62,123

88,832

Judicial deposits

49,823

50,150

Call option in respect of business combination

12,876

13,545

Advances

in respect of non current assets

13,463

11,196

Long term loan

7,450

7,606

Others

47,402 30,384

Sub total

193,137

201,713

Due within one year

(46)

(46)

193,091 201,667

(Expressed in RMB '000 )

Notes to the Financial Statements

20. Short-Term Loans

Short-term loans by category:

June 30 January 1

2018 2018

Guaranteed loans

Guaranteed loans

20,000

70,000

Unsecured loans

364,482 2,210,912

384,482 2,280,912

Details of the guarantees are set out in note X.(5) Related parties and related party transactions.

21. Derivative financial liabilities

June 30 January 1

2018 2018

Economic hedge

1,152,625

485,530Hedge accounting derivatives

57,062 303,520

1,209,687 789,050

22. Bills Payable

June 30 January 1

2018 2018

Post

Post

-

dated checks payables

39,991

288,557

Note Payables draft

105,000 23,000

144,991 311,557

All of the above bills payable are due within one year and none are overdue.

23. Accounts Payable

June 30 January 1

2018 2018

Within 1 year (including 1 year)

Within 1 year (including 1 year)

4,209,592

3,892,238

1-2 years (including 2 years)

5,970 8,1902-3 years (including 3 years)

788

1,176Over 3 years

4,981 4,877

4,221,331 3,906,481

(Expressed in RMB '000 )

Notes to the Financial Statements

24. Advances from customers

June 30 January 1

2018 2018

Within 1 year

Within 1 year

(including 1 year)

167,338 224,3501-2 years (including 2 years)

483 3512-3 years (including 3 years)

123

Over 3 years

2,006 1,705

169,950 226,711

25. Employee Benefits Payable

June 30

January 1

2018

2018

Short			term employee benefits								432,396				572,037
Post	-	employment benefits			-	defined contribution plans						21,008				20,367
Other benefits				within one year							272,521				263,362

725,925

855,766

Current maturities

40,765

139,871

766,690

995,637

26. Taxes Payable

June 30 January 1

2018 2018

VAT

VAT

193,852

153,328

Corporate income tax

381,589

250,046

Others

19,783 27,901

595,224 431,275

27. Interest Payable

June 30 January 1

2018 2018

Accrued interest in respect of debenture

Accrued interest in respect of debenture

32,190

33,174

Accrued interest in respect of bank loans

2,996

3,346

Accrued interest in respect of other liabilities

8,059 9,971

43,245 46,491

As at 30 June 2018, the Group did not have any overdue interest.

(Expressed in RMB '000 )

Notes to the Financial Statements

28. Other Payables

June 30 January 1

2018 2018

Liabilities for discounts

Liabilities for discounts

722,447

503,362

Accrued expenses

617,284

534,437

Payables in respect of

intangible assets

151,183

176,378

Financial institutions

107,804

20,838

Liability in respect of investment in equity

-

accounted investee company

-

7,652

Liability in respect of securitizations transactions

242,962

37,957

Others payables

149,920 95,369

1,991,600 1,375,993

As at 30 June 2018, the Group did not have any significant overdue other payables.

29. Non-Current Liabilities Due Within One Year

Non-current liabilities due within one year by category are as follows:

June 30 January 1

2018 2018

Long

Long

-

term loans due within one year

440,160

447,779

Long

-

term payables due within one year

542

725

Long

-

term deferred income due within one year

47,249 -

487,951 448,504

30. Other Current Liabilities

June 30 January 1

2018 2018

Put options to holders of non

Put options to holders of non

controlling interests

349,575

285,329

Provision in respect of returns

128,905

161,643

Provision in respect of claims

27,512

18,714

Deferred income

22,602

16,505

Others

384 392

528,978 482,583

(Expressed in RMB '000 )

Notes to the Financial Statements

31. Long-Term Loans

Long-term loans by category

June

3

0

January 1

201

8

Annual range

2018

Annual range

Long term loans
Loan secured by tangible assets other than
monetary assets						913					5.5%							1,294					5.5%

Guaranteed loans					152,000						4.5%									198,590						4.75%
Unsecured loans					607,629					5.05	%		6.80		%					762,215					4.22		%		6.06%

Toal l

Toal l

ong term loans

760,542

962,099

Less: Long term loans due within 1 year			(440,160)

(447,779)

Total l

ong term loans, net

320,382

514,320

For the maturity analysis, see note VIII (c)

The long-term loans were mortgaged by fixed assets with carrying amounts of 6,134 thousand RMB as at June 30

th

, 2018. Details

of the guarantees are set out in note X (5) Related parties and related party transactions.

32. Debentures Payable

June 30 January 1

2018 2018

Debentures Series B

Debentures Series B

7,548,581 7,777,410

Total Debentures payable

7,548,581 7,777,410

Due within one year

--

Debentures payable, ne

7,548,581 7,777,410

June 30

2018

First year (current maturities)

First year (current maturities)

-

Second year

-

Third year					444,034
Fourth year					444,034

Fifth year and thereafter

6,660,513

7,548,581

(Expressed in RMB '000 )

Notes to the Financial Statements

32. Debentures Payable (Cont'd)

Movements of debentures payable:

For the six months ended June 30, 2018

Facevalue in

RMB

Face

value NIS

Issuance

date

Maturity period

Issuance

amount

Balance atJanuary 1,

201

8

Issuanceduring the

period

Amortization

of discounts

or premium

CPI andexchange

rate effect

Repayment

during the

period

Currencytranslation

adjustment

adjustment

Balance at

June

3

0

, 201

8

Debentures Series B				2,673,640			1,650,000			4.12.2006			November 2020	-	2036			3,043,742			3,531,088			-			108			(143,484)			-			38,992			3,426,704

Debentures	Series B			843,846				513,527			16.1.2012					November 2020	-	2036				842,579		1,027,019		-					4,230			(41,988)			-					11,493			1,000,754
Debentures Series B				995,516				600,000				7.1.2013				November 2020	-	2036			1,120,339			1,295,327							1,892			(52,690)								14,359			1,258,888

Debentures Series B

832,778

533,330

1.2.2015

November 2020

-

2036

1,047,439

1,233,624

-

(1,179)

(50,187)

-

13,573

1,195,831

Debentures Series B

418,172

266,665

1

-

6.2015

November 2020

-

2036

556,941

690,352

-

(3,370)

(28,069)

-

7,491

666,404

7,777,410

-

1,681

(316,418)

-

85,908

7,548,581

Series B debentures, in the amount of NIS 3,563.5 million par value, are linked to the CPI and bear interest at the base annual rate of 5.15%. The debenture principal is to be repaid in 17 equal payments inthe years 2020 through 2036.

(Expressed in RMB '000 )

Notes to the Financial Statements

33. Long-Term Employee Benefits Payable

June 30

January 1

2018

2018

Total present value of obligation

513,090

530,333

Less: fair value of plan's assets

(90,687)

(97,614)

Post-employment benefits -Net liability arising from defined benefit plan

422,403

432,719

Termination benefits

112,533

138,948

Share based payment (See note XII)

102,332

55,260

Other long-term employee benefits

34,976

123,658

Total long-term employee benefits, net

672,244

750,585

Including: Long-term employee benefits payable due within one year

40,765

139,871

631,479

610,714

(1) Movement in the net liability and assets in respect of defined benefit plans early

retirement and their components

Defined benefitobligation and early

retirement

Fair value of plan

assets

Total

2018 2017 2018 2017 2018 2017

Restated Restated Restated

	Balance as of January 1,															669,281						620,286					97,614					131,005					571,667						489,281
	Expense/income recognized
		in profit and loss:
	Current service cost																10,928						11,310						-					-				10,928						11,310
	Past service cost																	(757)						-					-					-					(757)							-
	Interest costs																10,078						10,663					1,490					2,149						8,588						8,514
	Settlements																		-			(50,212)							-			(40,114)								-			(10,098)
	Changes in exchange rates															(26,394)							53,681				(4,783)						8,762				(21,611)							44,919

Actuarial gain/losses due to early

retirement				(366)			(854)			-			-			(366)			(854)

Included in other

comprehensive income:

Actuarial gain/losses as a result of

changes in actuarial assumptions

(13,723)

7,072

(1,643)

(242)

(12,080)

7,314

Foreign currency translationdifferences in respect of foreign

operations								6,242			(16,085)				925			(2,510)				5,317			(13,575)
Additional movements:
Benefits paid							(29,666)				(40,249)			(6,145)				(4,761)			(23,521)				(35,488)

Contributions paid by the Group -

-

3,229

4,536

(3,229)

(4,536)

Balance as at June 30, 625,623

595,612

90,687

98,825

534,936

496,787

(Expressed in RMB '000 )

Notes to the Financial Statements

33. Long-Term Employee Benefits Payable (cont'd)

Post-employment benefit plans – defined benefit plan and early retirement

(2) Actuarial assumptions and sensitivity analysis

The principal actuarial assumptions at the reporting date for defined benefit plan

June 30

January 1

2018

2018

Discount rate (%)*

1.1-4.5%

1.1%-4.5%

*According to the demographic and the benefit components

The assumptions regarding the future mortality rate are based on published statistical data and acceptable mortality rates.

Possible reasonable changes as of the date of the report in the discount rate, assuming the other assumptions remainunchanged, would have affected the defined benefit obligation as follows:

As of June 30, 2018

Increase of 1%

Decrease of 1%

Discount rate(41,123)

50,404

34. Provisions

June 30

January 1

2018

2018

Reasons

Liabilities in respect of
contingencies				74,814			124,882

Obligations of pending litigations, where anoutflow of resources had been reliably

estimated

Other

38,227

39,031

113,041

163,913

35. Deferred income

Balance atJanuary 1,2018

Additions

Decrease

Currentmaturities

Balance atJune 30, 2018

Long term deferred income

-

93,153

(

1,692

(47,249)

44,212

-

93,153

(

1,692

(47,249)

44,212

*See Note V. 16(2).

(Expressed in RMB '000 )

Notes to the Financial Statements

36. Other Non-Current Liabilities

June 30 January 1

2018 2018

Long term loans

Long term loans

-

others

171,770

171,770

Long term

transactions in derivatives

10,964

13

Put options to holders of non

-

control

ling interests

- 53,509

182,734 225,292

37. Share Capital

Balance at

January 1, 201

8

Issuance of

new shares

Cancellations of

shares

Balance at

June

3

0

, 201

8

Share capital

2,446,554

-

-

2,446,554

In December 2017, non-publicly offered 104,697,982 ordinary shares (A-share) at nominal value of RMB 1 per share to specificinvestors. The Company received proceeds of 1,531,920 thousand RMB, net of the issuing cost of 28,080 thousand RMB onDecember 27, 2017. The listing date of the newly-issued 104,697,982 shares was January 17, 2018. The total amount of the

shares of the Company is 2,446,553,582.

38. Capital Reserve

Balance atJanuary 1, 2018

Additionsduring theyear

Reductionsduring theyear

Balance atJune 30, 2018

Share premiums			12,973,782					-					(9,371)					12,9	64	,	411

Other capital reserves

8,495

-

-

8,495

12,982,277

-

(9,371)

12,

972

906

(Expressed in RMB '000 )

Notes to the Financial Statements

39. Other Comprehensive Income

Attributable to shareolders of the Company

January 1, 2018

Before tax

amount

Less: transfer

to profit or

loss

Less:

Income tax

expenses

Net –of-tax

amount

June 30, 2018

Items that will not be reclassifiedto profit or loss

Re-measurement of changes inliabilities under defined benefit

plans

(10,862)

12,080

-

974

11,106

244

Fair value changes in other equity

investments

50,621

-

-

-

-

50,621

Items that may be reclassified toprofit or loss

Effective portion of gain or loss of

cash flow hedge

(260,95

0

)

72,586

(262,799)

41,912

293,473

32,523

Translation difference of foreign

financial statements

117,111

200,840

-

-

200,840

317,951

(104,080)

285,506

(262,799)

42,886

505,419

401,339

(Expressed in RMB '000)

Notes to the Financial Statements

40. Surplus reserves

Balance atJanuary 1, 2018

Additionsduring theperiod

Reductionsduring theperiod

Balance atJune 30, 2018

Statutory surplus reserve			204,009					-					-					204,009

Discretional surplus reserve

3,814

-

-

3,814

207,823

-

-

207,823

41. Retained Earnings

2018

2017

Retained earnings at December 31 of preceding year						3,2	86	,711					937,510

Opening balance adjustment (Note 1)

21,21

3

847,295

Retained earnings as at January 1,

		3,307,924

													1,784,805
Net profits for the	period		attributable to shareholders of the Company					2,362,781					1,	316	994

Dividends to non

-

controlling Interest

(16,028)

(32,509)

Dividend to the shareholders of the company

(Note 2)

(154,133)

-

Retained

earnings as at

June 30,

		5,500,544

		3,	069	290

Note 1: The opening balance in current period was adjusted for RMB 21,213 thousands due to adoption of revised CASs for

financial instruments and revenue see Note III 30(1). The opening balance in prior period was adjusted for RMB847,295 thousands due to a business combination under common control.

Note 2: On March, 27, 2018, after obtaining the approval of the second meeting of the company's 8th

Board of Directors, the Company declared RMB 0.63 (including tax) per 10 shares as cashdividend to all shareholders, resulting in a total cash dividend of 154,133 thousand RMB(including tax), and zero shares as share dividend, as well as no reserve transferred to equitycapital. The proposal was approved by the Company’s shareholders at the 2017 annual generalmeeting held on June 28, 2018.

42. Operating Income and Cost of Sale

Six months ended June 30

201

8

2017

(Restated)

Income

Cost of sales

Income

Cost of sales

Principal

activities

13,000,909

8,553,494

12,

752

,

443

8,

163

543

Other

businesses

25,349 17,923

17,621 16,151

13,026,258 8,571,417

12,770,064 8,179,694

(Expressed in RMB '000)

Notes to the Financial Statements

43. Taxes and Surcharges

Six months ended

June 30

2018 2017

Restated

Tax on turnover

17,620

13,819

Others

33,953 27,410

51,573 41,229

44. Selling and Distribution Expenses

Six months ended

June 30

2018 2017

Restated

Salaries and related expense

Salaries and related expense

734,813

681,720

Delivery and Commissions costs

354,115

357,625

Advertising and sales promotion

156,329

150,608

Depreciation and amortization

541,154

502,029

Registration

48,757

47,170

Insurance

34,252

41,323

Professional services

32,447

35,964

Royalties

13,185

14,840

Others

308,882 291,611

2,223,934 2,122,890

45. General and Administrative Expenses

Six months ended

June 30

2018 2017

Restated

Salaries

Salaries

and related expenses

318,466

298,373

Depreciation

and amortization

36,553

36

,703

Professional services

83,339

70,660

Office rent, maintenance and expenses

37,514

33,933

IT systems

33,560

31,077

Other

127,697 88,652

637,129 559,398

(Expressed in RMB '000)

Notes to the Financial Statements

46. Financial Expenses, net

Six months ended June 30

2018 2017

Restated

Interest expenses on debentures and loans

Interest expenses on debentures and loans

288,408 358,317

Interest income from customers, banks and others

(41,219)

(129,587)

Loss in respect of sale of trade receivables

32,186 30,739Interest expense in respect of defined benefit obligation and early retirement,

net

8,588 8,514

Revaluation of put option, net

8,027

(2,857)

CPI expense in respect of debentures

64,891

56,668

Exchange rate differences, net

(31,251)

583,822

Other expenses

388 6,300

330,018 911,916

47. Impairment Losses

Six months ended June 30

2018 2017

Restated

Inventories

Inventories

36,214

15,721

Trade and other receivable

s

6,097

31,535

Fixed assets

Intangible assets

Other

238 -

43,880 47,256

48. Gains (losses) from Changes in Fair Value

Six months ended June 30

2018 2017

Restated

Gain (loss) from changes in fair value of derivative financial

instruments

instruments

(242,567)

229,039

Others

(809) )6,763(

(243,376) 222,276

(Expressed in RMB '000)

Notes to the Financial Statements

49. Investment Income

Six months ended June 30

2018 2017

Restated

Investment income from disposal of derivatives

Investment income from disposal of derivatives

134,295

278,733

Income

from long

-

term equity investments accounted for using the equity method

12,758

2,086

L

oss from disposal of long

-

term equity investment

- )11,370(

147,053 269,449

50. Gain from Disposal of Assets

Six months ended June 30Included in

2018 2017 non-recurring items

Restated

Gain from disposal of intangible assets

1,997,096

58,293

1,997,706

Gain (loss) from disposal of fixed assets

74 (535) 74

1,997,170 57,758

See note 16.

51. Non-Operating Expenses

Six

months ended June 30

Included in

2018

2017

non-recurring items

Restated

Donation expenses

4,267

5,264

4,267

Other

3,846

2,997

3,846

8,113

8,261

(Expressed in RMB '000)

Notes to the Financial Statements

52. Income Tax Expenses

Six months ended June 30

2018 2017

Restated

Current year

301,718

257,282

Adjustments for previous years, net

(13,831)

(

12,731

Deferred tax expenses (income)

439,377 )102,294(

727,264 142,257

(1) Reconciliation between income tax expense and accounting profit is as follows:

Six months

ended June 30

2018

Profit before taxes

3,090,045

Company's main tax rate

Company's main tax rate

25%

Tax calculated according to the main tax rate

Tax calculated according to the main tax rate					772,511
Tax benefits from Approved Enterprises
					(59,124)

Difference between measurement basis of income for financial

statement and for tax purposes

82,208

Taxable income and temporary differences at other tax rate					(84,860)
Taxes in respect of prior years
					(13,831)

Utilization of tax losses from prior years for which deferred taxes were not created

(4,545)

Temporary			differences and losses in the report year for which deferred taxes were not created					11,484
Non	-	deductible expenses and other differences
								25,709

Neutralization of tax calculated in respect of the Company’s share in results of equity accounted

investees					(3,186)
Effect of change in tax rate in respect of deferred taxes
						725

Creation and reversal of deferred taxes for tax losses and temporary differences from previous

years

Income tax expenses

Income tax expenses

727,264

53. Other comprehensive income

Details of the Other comprehensive income are set out in Note V.5 (39)

(Expressed in RMB '000)

Notes to the Financial Statements

54. Notes to items in the cash flow statements

(1) Other cash received relevant to operating activities

Six months ended June 30

2018 2017

Restated

Financial institutions

Financial institutions

135,686 427

Derivatives transactions

-

378,35

8

Interest income

24,209

156,289

D

eferred income

96,946

Others

3,955 36,324

Total cash received relevant

to operating activities

260,796 571,398

(2) Other cash paid relevant to operating activities

Six months ended June 30

2018 2017

Restated

Transportation and Commissions

342,353

324,023

Advertising and sales promotion

150,284

127,283

Professional services

133,685

106,294

Derivatives transactions

128,503 -

Registration

54,057

46,475

Financial institutions

23,511 122,179

Insurance

20,217

20,630

Others

503,129 615,173

Total cash paid relevant to operating activities

1,355,739 1,362,057

(3) Other cash received relevant to investment activities

Six months ended June 30

2018 2017

Restated

Investment grant

Investment grant

-

28,705

Other

57 3,062

Total cash received relevant to investments activities

57 31,767

(Expressed in RMB '000)

Notes to the Financial Statements

54. Notes to items in the cash flow statements (cont'd)

(4) Other cash received relevant to financing activities

Six months ended June 30

2018 2017

Restated

Other

Other

- 7,800

Total cash received relevant to financing activities

- 7,800

(5) Other cash paid relevant to financing activities

Six months ended June 30

2018 2017

Restated

Financing deposit

Financing deposit

-

100,000

R

e

stricted cash

28,150

6

,820

Other

3,139 -

Total cash paid relevant to financing activities

31,289 106,820

55. Supplementary Information on Cash Flow Statement

(1) Supplementary information on Cash Flow Statement

a. Reconciliation of net profit to cash flows from operating activities:

Six months ended June 30

2018

2017

Restated

Net profit					2,362,781						1,316,994
Add: Impairment provisions for assets						43,880						47,256

Depreciation of fixed assets					312,106					346,102
Amortization of intangible asset					557,276					516,658

Gains on disposal of fixed assets, intangible assets, and other long-term

assets, net					(1,997,170)							(57,758)
Losses (gains) on changes in fair value						243,376					(222,276)

Financial expenses (income)

(78,474)

1,092,678

Losses arising from investments					(147,053)						(269,449)
Decrease (increase) in deferred tax assets						233,849					(102,293)

Increase (decrease) in deferred tax liabilities						205,528					(290)
Decrease (increase) in inventories, net					(801,625)						6,883

Decrease in operating receivables

(1,126,210)

(1,034,228)

Increase (decrease) in operating payables					926,606						608,869
Others						44,648

Net cash flow from operating activities

779,51

8

2,249,146

(Expressed in RMB '000)

Notes to the Financial Statements

55. Supplementary Information on Cash Flow Statement (Cont’d)

(1) Supplementary information on Cash Flow Statement (Cont’d)

Six months ended June 30

2018 2017

Restated

b.

b.

Net

increase in cash and cash equivalents

Closing balance of cash		and cash equivalents			6,021,380				4,537,654

Less: Opening balance of cash

and cash equivalents

(7,864,258)

(3,833,747)

Net increase in cash and cash equivalents(1,842,878)

703,907

(2) Details of cash and cash equivalents

June 30,

January 1,

2018

2018

Cash at bank and on hand

Including: Cash on hand						1,	065						2,267
Bank deposits available on demand without restrictions					6,020,315							7,861,991

Cash and cash

equivalents as of June 30

6,021,380

7,864,258

56. Assets with Restricted Ownership or Right of Use

June 30

Reason

2018

Cash

28,150

Pledged

Fixed assets							6,134			Mortgaged
Other non	current assets					130,128				Guarantees

164,412

( Expressed in RMB '000)

Notes to the Financial Statements

57. Foreign currencies denominated items

(1) Foreign currencies denominated items:

As at June 30, 2018

Foreign currency at

the end of the year Exchange rate

RMB at the end of the

yearCash and bank balances

USD								31,450			6.6166				208,093
EUR								83,021			7.7135				640,381
BRL							287,234				1.7160				492,897
ILS								57,710			1.8128				104,615
PLN								97,363			1.7673				172,065
Other															357,911
Total														1,975,962

Financial liabilities at fair value

through profit or loss

BRL																			10,595				1.7160					18,182
Total																												18,182
Accounts and Bills receivable
USD																			68,474				6.6166				453,065
EUR																		106,831					7.7135				824,038
BRL																		333,288					1.7160				571,926
PLN																		107,471					1.7673				189,929
RON																		179,840					1.6528				297,238
CAD																			55,780				5.0050				279,181
HUF																	7,050,654						0.0235				165,395
TRY																		104,185					1.4508				151,150
Other																											632,468
Total																										3,564,3				90
Other receivables
EUR																			46,596				7.7135				359,415
BRL																			54,695				1.7160					93,858
ILS																			38,879				1.8128					70,478
Other																											114,863
Total																											638,614
Other current assets
EUR																				931			7.7135						7,179
BRL																			41,404				1.7160					71,049
ILS																		123,735					1.8128				224,303
RMB																			19,770				1.0000					19,770
ARS																			60,989				0.2293					13,98			8
Other																												37,039
Total																											373,328
Long				-	term receivables
BRL																			85,313				1.7160				146,399
Total																											146,399
Other non								-	current assets
BRL																			66,212				1.7160				113,620
Other																												15,052
Total																											128,672
Short				-		term loans
UAH																		250,995					0.2526					63,413
TRY																			65,063				1.4508					94,392
Other																													4,70		5
Total																											162,510

( Expressed in RMB '000)

Notes to the Financial Statements

57. Foreign currencies denominated items (Cont’d )

(1) Foreign currencies denominated items: (Cont’d )

As at June 30, 2018

Foreign currency at

the end of the year Exchange rate

RMB at the end of the

yearAccounts payable and Bills

payable

USD									7,521			6.6166				49,763
EUR								58,255				7.7135			449,353
BRL								35,396				1.7160				60,740
ILS							180,208					1.8128			326,675
Other																92,976
Total															979,507

Advances from customers

BRL				65,548			1.7160			112,482
Total										112,482

Interest payable

ILS CPI											17,757					1.8128				32,190
Total																				32,190
Other payables
USD												1,349				6.6166					8,926
EUR											51,776					7.7135			399,371
BRL											53,079					1.7160				91,084
ILS											46,6		09			1.8128				84,49			2
PLN											21,427					1.7673				37,867
CAD												8,307				5.0050				41,579
CHF												4,993				6.6661				33,281
Other																				75,489
Total																			772,0			89

Other current liabilities

EUR												3,768				7.7135			29,067
ILS											14,272					1.8128			25,871
Other																			18,082
Total																			73,020
Long				term loan
BRL													297			1.7160					509
Other																					543
Total																				1,052

Debentures payable

ILS CPI											4,164,121				1.8128			7,548,581
Total																		7,548,581
Other non					-	current liabilities
BRL												9,026			1.7160				15,489
Total																			15,489

( Expressed in RMB '000)

Notes to the Financial Statements

57. Foreign currencies denominated items (Cont’d )

(2) Major foreign operations

Name of theSubsidiary

Registration &Principal place

of business

Business

nature

Functional

currency

The basis of selectingfunctional currency

ADAMA France

S.A.S

FRANCE Distribution USD

The main currency that represent the

principal economic environment

ADAMA Brasil S/A BRAZIL

Manufacturing;Distribution;

Registration;

USD

The main currency that represent theprincipal economic environment

ADAMA Deutschland

GmbH

GERMANY

Distribution;

Registration

USD

The main currency that represent the

principal economic environment

ADAMA India Private

Ltd.

INDIA Manufacturing INR

The main currency that represent the

principal economic environment

Makhteshim Agan ofNorth America, Inc.

UNITED STATES

Manufacturing;Distribution;

Registration;

USD

The main currency that represent theprincipal economic environment

Control Solutions Inc.

UNITED STATES

Manufacturing;Distribution;

		Registration;

USD

The main currency that represent theprincipal economic environment

ADAMA Agan Ltd. ISRAEL Manufacturing USD

The main currency that represent the

principal economic environment

ADAMA Makhteshim

Ltd.

ISRAEL Manufacturing USD

The main currency that represent the

principal economic environment

ADAMA Australia

Pty Limited

AUSTRALIA Distribution AUD

The main currency that represent the

principal economic environment

ADAM Italia SRL ITALY DistributionUSD

The main currency that represent the

principal economic

environment

ADAMA Northern

Europe B.V.

NETHERLANDS

DistributionUSD

The main currency that represent theprincipal economic environment

Alligare LLC

UNITEDSTATES

Manufacturing;Distribution;

Registration;

USD

The main currency that represent theprincipal economic environment

VI . Changes in consolidation Scope

There was no change in the consolidation scope during the reporting period.

(Expressed in RMB '000)

Notes to the Financial Statements

VII . Interests in Other Entities

1. Interests in subsidiaries

(1) Composition of the largest subsidiaries of the Group in respect of assets and operating income

Name of the Subsidiary

Registration &Principal place of

businessBusiness nature

Direct

Indirect

Method ofobtaining the

subsidiary

ADAMA France S.A.S

ADAMA France S.A.S

FRANCE

Distribution

100%

Established

ADAMA Brasil S/A BRAZIL

Manufacturing;Distribution;

Registration;

100%

PurchasedADAMA Deutschland GmbH GERMANY

Distribution;

Registration

100%

Established

ADAMA India Private Ltd.

INDIA

Manufacturing

100%

Established

Makhteshim Agan of NorthAmerica, Inc.

UNITEDSTATES

Manufacturing;Distribution;

Registration;

100%

EstablishedControl Solutions Inc.

UNITEDSTATES

Manufacturing;Distribution;

Registration;

67%

Purchased

ADAMA Agan Ltd.

ISRAEL

Manufacturing

100%

Restructure

ADAMA Makhteshim Ltd.

ISRAEL

Manufacturing

100%

Restructure

ADAMA Australia Pty

Limited

AUSTRALIA Distribution

100%

Purchased

ADAM Italia SRL

ITALY

Distribution

100%

Established

ADAMA Northern Europe

B.V.

NETHERLANDS

Distribution

55%

PurchasedAlligare LLC

UNITEDSTATES

Manufacturing;Distribution;

Registration;

Registration;

80%

Purchased

(Expressed in RMB '000)

Notes to the Financial Statements

VII . Interests in Other Entities (Cont’d)

2. Interests in joint ventures or associates

June 30

January 1

2018

2018

Joint ventures
mmaterial joint ventures					80,913					56,871

	Associates

I

mmaterial associates

38,338

37,860

119,251

94,731

June 30, 2018 and six months

then ended

June 30, 2017 and six months

then ended

Joint ventures:

Joint ventures:
Total carrying amount					80,913			62,555

The Group's share of the following items:
Net profit					12,758			2,3	67

Total comprehensive income					12,758			2,367

Associates:

Total carrying amount						38,338			39,346
The	Group's share of the following items:

Net profit

-

(281)

Total comprehensive income

-

(281)

VIII. Risk Related to Financial Instruments

A. General

The Group has extensive international operations, and, therefore, it is exposed to credit risks, liquidity risks and market risks(including currency risk, interest risk and other price risk). In order to reduce the exposure to these risks, the Group usesfinancial derivatives instruments, including forward transactions, swaps and options (hereinafter – “derivatives”).Transactions in derivatives are undertaken with major financial and, therefore, in the opinion of Group Management the creditrisk in respect thereof is low.

This note provides information on the Group’s exposure to each of the above risks, the Group’s objectives, policies andprocesses regarding the measurement and management of the risk. Additional quantitative disclosure is included throughout theconsolidated financial statements.

The Board of Directors has overall responsibility for establishing and monitoring the framework of the Group's riskmanagement policy. The Finance Committee is responsible for establishing and monitoring the Group's actual risk managementpolicy. The Chief Financial Officer reports to the Finance Committee on a regular basis regarding these risks.

(Expressed in RMB '000)

Notes to the Financial Statements

VIII. Risk Related to Financial Instruments (Cont’d)

A. General (Cont’d)

The Group’s risk management policy are established to identify and analyze the risks facing the Group, to set appropriate risklimits and controls and monitoring the risks and adherence to limits. The policy and methods for managing the risks arereviewed regularly, in order to reflect changes in market conditions and the Group's activities. The Group, through training, andmanagement standards and procedures, aims to develop a disciplined and constructive control environment in which all theemployees understand their roles and obligations.B. Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet itscontractual obligations, and derives mainly from account receivables and other receivables as well as from cash and deposits infinancial institutions.

Accounts and other receivables

The Group’s revenues are derived from a large number of widely dispersed customers in many countries. Customers includemulti-national companies and manufacturing companies, as well as distributors, agriculturists, agents and agrochemicalmanufacturers who purchase the products either as finished goods or as intermediate products for their own requirements.The Company entered into an agreement for the sale of trade receivables in a securitization transaction, for details see note V.5(4).

In April 2018, a two-year agreement with an international insurance company was renewed. The amount of the insurancecoverage was fixed at $150 million cumulative per year. The indemnification is limited to about 90% of the debt.

The Group’s exposure to credit risk is influenced mainly by the personal characterization of each customer, and by thedemographic characterization of the customer’s base, including the risk of insolvency of the industry and geographic region inwhich the customer operates. No single customer accounted for greater than 5% of total accounts receivable.

Company management has prescribed a credit policy, whereby the Company performs current ongoing credit evaluations ofexisting and new customers, and every new customer is examined thoroughly regarding the quality of his credit, beforeoffering him the Group’s customary shipping and payment terms. The examination made by the Group includes an outsidecredit rating, if any, and in many cases, receipt of documents from an insurance company. A credit limit is prescribed for eachcustomer, setting the maximum outstanding amount of the accounts receivable balance. These limits are examined annually.Customers that do not meet the Group’s criteria for credit quality may do business with the Group on the basis of a prepaymentor against furnishing of appropriate collateral.

Most of the Group’s customers have been doing business with it for many years. In monitoring customer credit risk, thecustomers were grouped according to a characterization of their credit, based on geographical location, industry, aging ofreceivables, maturity, and existence of past financial difficulties. Customers defined as “high risk” are classified to therestricted customer list and are supervised by management. In certain countries, mainly, Brazil, customers are required toprovide property collaterals (such as agricultural lands and equipment) against execution of the sales, the value of which isexamined on a current ongoing basis by the Company. In these countries, in a case of a doubtful debt, the Company records aprovision for the amount of the debt less the value of the collaterals provided and acts to realize the collaterals.

(Expressed in RMB '000)

Notes to the Financial Statements

VIII . Risk Related to Financial Instruments (cont’d)

B. Credit risk (cont’d)

The Group closely monitors the economic situation in Eastern Europe and South America where necessary it operates to limitits exposure to customers in countries having significantly unstable economies.

The Group recognizes an impairment provision, which reflects its assessment regarding the credit risk of account receivables,other receivables and investments on a lifetime expected credit loss basis. See also notes III.10 and III.11.

Cash and deposits in banks

The Company holds cash and deposits in banks with a high credit rating. These banks are also required to comply with capitaladequacy or maintain a level of security based on different situations.

Guarantees

The Company’s policy is to provide financial guarantees only to investee companies.

Aging of receivables and allowance for doubtful accountsPresented below is the aging of the past due trade receivables:

June 30

2018

Past due by less than 90 days			466,592

Past due by more than 90 days

544,385

			1,010,977

C. Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligation when they come due. TheGroup's approach to managing its liquidity risk is to assure, to the extent possible, an adequate degree of liquidity for meetingits obligations timely, under ordinary conditions and under pressure conditions, without sustaining unwanted losses or hurtingits reputation.

The cash-flow forecast is determined both at the level of the various entities as well as of the consolidated level. The Companyexamines the current forecasts of its liquidity requirements in order to ascertain that there is sufficient cash for the operatingneeds, including the amounts required in order to comply with the financial liabilities, while taking strict care that at all timesthere will be unused credit frameworks so that the Company will not exceed the credit frameworks granted to it and thefinancial covenants with which it is required to comply with. These forecasts take into consideration matters such as theCompany’s plans to use debt for financing its activities, compliance with required financial covenants, compliance with certainliquidity ratios and compliance with external requirements such as laws or regulation.

The surplus cash held by the Group companies, which is not required for financing the current ongoing operations, is investedin short-term interest-bearing investment channels.

(Expressed in RMB '000)

Notes to the Financial Statements

VIII. Risk Related to Financial Instruments (cont’d)

(1) Presented below are the contractual maturities of the financial liabilities at undiscounted amounts, including

estimated interest payments:

As at June 30, 2018

First year

Second

year

Third-Fourth

year

Fifth year

andabove

Contractual

Cash flow

CarryingamountNon-derivative

financial liabilities

financial liabilities

Short	-	term loans					395,910			-					-					-					395,910			384,482
Bills payable							144,991																		144,991			144,991

Accounts payables

4,221,331

-

-

-

4,221,331

4,221,331

Other payables				1,991,600				-					-					-					1,991,600				1,991,600
Dividend payable					154,383																			154,383				154,383

Other current liabilities			349,575				-						-						-						349,575				349,575
Debentures payable (a)			392,073			392,073					1,633,672					9,311,998					11,729,816				7,548,581

Long

-

term loans (a)

483,261

206,879

143,097

-

833,237

760,542

Long

-

term payable (a)

1,605

1,784

3,356

26

375

33,120

24,031

Other non-current

liabilities				2,061			2,061			32,751			148,295			185,168			171,770

Derivative financial

liabilities

Foreign currency

derivatives

1,209,632

10,964

-

-

1,220,596

1,220,596

CPI/shekel forward

transactions					55			-					-					-					55			55

9,346,477

613,761

1,812,876

9,486,668

21,259,782

16,971,937

(a) Including related Non current liabilities due within one year and interest payables.

(Expressed in RMB '000)

Notes to the Financial Statements

VIII . Risk Related to Financial Instruments (cont’d)

(2) Interest rate risks

The Group has exposure to changes in the variable interest rate. The Group has different assets and liabilities indifferent countries which bear interest according to the economic environment in each country. Most of the loans,other than the debentures, bear Dollar Libor interest. As a result, most of the variable interest exposure of those loansis to the Libor interest. Due to market conditions, the variable interest rates on cash are relatively low.The Company prepares a quarterly summary of exposure to a change in the Libor interest rate. As at the approvaldate of the financial statements, the Company had not hedged this exposure.

(A) Type of interest

The interest rate profile of the Group’s interest-bearing financial instruments was as follows:

June 30

2018

Fixed

-

rate instruments

–

unlinked to the CPI

Financial assets

Cash at banks

421,735

Other non	-	current assets						8	357

Financial liabilities
Short	-	term loans							341,348

Long

-

term loans

152,913

Long

-

term payables

17,832

Other non-current liabilities

171,770

(253,771)

Fixed

Fixed

-

rate instruments

–

linked to the CPI

Financial liabilities

Debentures payable

7,584,581

7,584,581

(Expressed in RMB '000)

Notes to the Financial Statements

VIII . Risk Related to Financial Instruments (cont’d)

(A) Type of interest (Cont’d)

June

3

0

201

8

Variable-rate instruments

Financial assets

Cash at banks

536,296

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss

32,693

Other non

Other non

-

current assets

48,857

Financial liabilities

Short

-

term loans

43,134

Long

Long

-

term loans

607,629

(32,917)

(B) Sensitivity analysis regarding variable-interest instruments

A change of 5% in the interest rates on the reporting date would increase or reduce equity and profit or lossby the amounts presented below. This analysis assumes that all the remaining variables, among othersexchange rates, remained fixed.

Profit or loss EquityIncrease in

interest

Decrease in

interest

Increase in

interest

Decrease in

interest

As at June 30, 2018

1,262

(1,278)

1,262

(1,278)

D. Market risks

Market risk is the risk that changes in market prices, such as foreign exchange rates, CPI, interest rates and prices of capitalinstruments, will affect the Group’s revenues or the value of its holdings in its financial instruments. The objective of marketrisk management is to manage and monitor the exposure to market risks within acceptable parameters, while optimizing thereturn.

During the ordinary course of business, the Group purchases and sells derivatives and assumes financial liabilities for thepurpose of managing market risks.

(Expressed in RMB '000)

Notes to the Financial Statements

VIII. Risk Related to Financial Instruments (cont’d)

(1) CPI and foreign currency risks

Currency risk

The Group is exposed to currency risk from its sales, purchases, expenses and loans denominated in currencies that differ fromthe Group’s functional currency. The main exposure is in Euro, Brazilian real, USD and in NIS. In addition, there are smallerexposures to various currencies such as the British pound, Polish zloty, Australian dollar, Indian rupee, Argentine peso,Canadian dollar, South African Rand, Ukraine Hryunia, Turkish lira and Chinese Renminbi.

The Group uses foreign currency derivatives – forward transactions and currency options – in order to hedge the cash flowsrisk, which derive from existing monetary assets and liabilities and anticipated sales and purchases, which may be affected byexchange rate fluctuations.

The Group hedged a part of the estimated currency exposure to anticipate sales and purchases for the subsequent year.Likewise, the Group hedges most of its monetary assets and liabilities denominated in a non-USD currency. The Group usesforeign currency derivatives to hedge its currency risk, mostly with maturity dates of less than one year from the reporting date.

The wholly-owened subsidiary debentures are linked to the NIS-CPI and, therefore, an increase in the NIS-CPI, as well aschanges in the NIS exchange rate, could cause significant exposure with respect to the subsidiary functional currency – the U.S.dollar. As of the approval date of the financial statements, the subsidiary had hedged most of its exposure deriving fromissuance of the debentures, in options and forward contracts.

(A) The Group’s exposure to NIS-CPI and foreign currency risk, except in respect of derivative

financial instruments is as follows:

June 30, 2018

Total Assets

Total liabilities

Denominated in or linked to the Dollar

1,111,720

1,120,955

In Euro

1,903,875

913,713

In Brazilian real

1,507,931

287,960

CPI-linked NIS

-

7,580,7

71

In New Israeli Shekel

445,872

437,040

Denominated in or linked to other foreign currency

3,185,293

480,000

Total8,154,691

10,820,439

(Expressed in RMB '000)

Notes to the Financial Statements

VIII. Risk Related to Financial Instruments (cont’d)

(B) The exposure to CPI and foreign currency risk in respect of derivatives is as follows:

June 30, 2018Currency/

linkage

receivable

Currency/

linkagepayable

Averageexpiration

date

USDthousandsPar value

RMBthousandsPar value

Fair value

Forward foreigncurrency

USD

USD

EUR

2019/02/15

610,531

4,039,642

(164,455)

contracts and calloptions

USD

PLN

2018/10/10

54,182

358,504

	39,154

USD

BRL

2018/08/22

220,471

1,455,963

77,290

USD

GBP

2018/11/16

20,396

134,953

8,934

USD

ZAR

2018/07/24

15,850

104,870

12,704

ILS

USD

2018/12/07

1,270,284

8,404,963

(390,208)

USD

Others

477,091

3,156,717

127,372

CPI forward

contracts

contracts

CPI

ILS

2018/12/17

698,630

4,622,556

31,221

(C) Sensitivity analysis

The appreciation or depreciation of the Dollar against the following currencies as of June 30, 2018 and the increase or decreasein the CPI would increase or decrease the equity and profit or loss by the amounts presented below. This analysis assumes thatall the remaining variables, among others interest rates, remains constant.

June 30, 2018

Decrease of 5% Increase of 5%

Equity

Profit (loss)

Equity

Profit (loss)

New Israeli shekel

6,021

(1,346)

657

8,024

British pound

(354)

1,230

354

(1,230)

Euro

(106,949)

6,833

127,970

(

4,105

)

Brazilian real

(3,859)

14,222

3,859

(14,222)

Polish zloty

(2,403)

658

2,403

(658)

South African Rand

269

269

(269)

(269)

Chinese Yuan Renminbi

2,473

2,473

(2,473)

(2,473)

CPI-linked NIS

167,939

167,939

(167,939)

(167,939)

E. Cash flow hedge accounting

The table below presents the periods in which the cash flows associated with derivatives that are cash flow hedges are expectedto occur and impact the P&L:

June 30, 2 0 1 8Carrying

amount

Expectedcash flows

6 months

or less

6-12months

Second

yearForward contracts and options on exchange

rates:

40,752

40,752

(29,318)

63,210

6,861

(Expressed in RMB '000)

Notes to the Financial Statements

IX. Fair Value

The fair value of forward contracts on foreign currency is based on their listed market price, if available. In the absence of marketprices, the fair value is estimated based on the discounted difference between the stated forward price in the contract and thecurrent forward price for the residual period until redemption, using an appropriate interest rate.

The fair value of foreign currency options is based on bank quotes. The reasonableness of the quotes is evaluated throughdiscounting future cash flow estimates, based on the conditions and duration to maturity of each contract, using the marketinterest rates of a similar instrument at the measurement date and in accordance with the Black & Scholes model.

(1) Financial instruments measured at fair value for disclosure purposes only

The carrying amount of certain financial assets and liabilities, including cash at bank and on hand, bills and accounts receivable,other receivables, derivatives financial assets, short-term loans, bills accounts payable and other payables, are the same orproximate to their fair value.The following table details the carrying amount in the books and the fair value of groups of non-current financial instrumentspresented in the financial statements not in accordance with their fair values:

June 30, 2018

Carrying

Fair

amountvalue

Financial assets

Other non-current assets (a – Level 2) 56,135

59,103

Financial liabilities

Long-term loans and others (b – Level 2) 957,528

992,306

Debentures (c – Level 1) 7,584,581

9,426,908

(a) The fair value of the other non-current assets is based on a discounted future cash flows, using the acceptable interest

rate for similar investment having similar characteristics (Level 2).(b) The fair value of the long-term loans and others is based on a discounted future cash flows, using the acceptable

interest rate for similar loans having similar characteristics (Level 2).(c) The fair value of the debentures is based on stock exchange quotes (Level 1).

(2) The interest rates used determining fair value

The interest rates used to discount the estimate of anticipated cash flows are:

June 30, 2018

%

Brazilian real interest

8.46

8.46

-

11.39

U.S. dollar interest

2.66

-

4.00

Indian Rupee

6.69

-

8.22

(Expressed in RMB '000)

Notes to the Financial Statements

IX. Fair Value (cont’d)

(3) Fair value hierarchy of financial instruments measured at fair value

The table below presents an analysis of financial instruments measured at fair value. The various levels have been defined asfollows:

? Level 1: quoted prices (unadjusted) in active market for identical instrument.? Level 2: inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly.? Level 3: inputs that are not based on observable market data (unobservable inputs).

The Company’s forward contracts and options are carried at fair value and are evaluated by observable inputs and therefore areconcurrent with the definition of level 2.

June 30

2018

Forward contracts and options		used for hedging		the cash flow		(Level 2)			40,752

Forward contracts and options

used for

economic hedging

(Level 2)

(298,739)

Debt instruments		(Level 1)			13,610

Other equity investments (Level 2)				91,154

Other

(Level 2)

19,083

(134,140)

FinancialInstrument Fair valueForward contracts Fair value measured on the basis of discounting the difference between the stated forward

price in the contract and the current forward price for the residual period until redemptionusing an appropriate interest rates.

Foreign currency options			The fair		value is measured based on the Black	&	Scholes model.

(4) No transfer between any levels of the fair value fierarchy in the reporting period.

(5) No change in the valuation techniques in the reporting period.

(Expressed in RMB '000)

Notes to the Financial Statements

X. Related parties and related party transactions

1. Information on parent Company

Company

name

Registered

place

Business

nature

Registered capital

(Thousand)

Shareholdingpercentage (%)

Percentageof voting rights (%)

CNAC Beijing,

China

Productionand sales of

agrochemicals

CNY 3,338,220

78.91 78.91

The ultimate controller of the company is China National Chemical Corporation (hereinafter - “CC”).

2. Information on the subsidiaries of the Company

For information about the subsidiaries of the Company, refer to Note VII.1.

3. Information on joint ventures and associates of the Company

For information about the joint ventures and associates of the Company, refer to Note V.12. Other joint ventures andassociates that have related party transactions with the Group during the period or the previous period are as follows:

Name of entity					Relationship with the Company
Negev Aroma (Ramat Hovav) Ltd.					Joint venture of the Group

Alfa Agricultural Supplies S.

Joint venture of the Group

Innovaroma SA						Joint venture	of the Group
Agribul	Ltd.					Joint venture of the Group

(Expressed in RMB '000)

Notes to the Financial Statements

X. Related parties and related party transactions (cont’d)

4. Information on other related parties

Name of other related parties Related party relationship

China National Agrochemical Corporation

Parent company

(Direct holding)

Jingzhou Sanonda holdings co. LTD

Common control

Syngenta Crop Protection AG

Common control

Syngenta Supply AG

Common control

Syngenta Crop Protection LLC.

Common control

Syngenta France SAS

Common control

Syngenta

Canada INC

Common control

Syngenta Agro Sociedad Anonima

Common control

Syngenta

Prote??o de Cultivos Ltda.

Common control

Syngenta Czech s.r.o.

Common control

Syngenta

Espa?a

S.A.

Common control

Syngenta India Limited

Common control

Syngenta Agro AG

Common control

Syngenta Polska Sp. z o.o.

Common control

Syngenta Agro, S.A. DE C.V.

Common control

Syngenta Italia S.p.A.

Common control

Syngenta crop protection BV

Common control

Syngenta AGRO S.R.L.

Common control

Syngenta Crop Protection Lda.

Common control

Syngenta Crop Protection NV

Common control

Syngenta Nordics A.

S

.

Common control

Syngenta Tarim Sanayi ve Ticaret A.S.

Common control

Syngenta Agro GmbH Wien

Common control

Syngenta Agro GmbH Maintal

Common control

Syngenta Slovakia

S.R

.O.

Common control

Syngenta Hungary Kft.

Common control

Syngenta UK Ltd

Common control

Syngenta Ireland Ltd

Common control

China Bluestar Lehigh Engineering Corp.

Common control

Bluestar Silicones USA Corp.

Common control

Bluestar Lehigh Engineering Institute

Institute Co., Ltd

Common control

China Bluestar Chengrand

Common control

Bluestar (Beijing) Chemical Machinery Co., Ltd.

Common control

Beijing Grand AgroChem Co., Ltd.

Common control

Shandong Dacheng

International Trading co. LTD.

Common control

Shandong dacheng agricultural chemical co. LTD.

Common control

Shandong Dacheng Pesticide Co., Ltd.

Common control

Southwest Chemical Research and Design Institute Co., Ltd.

Common control

Jiangsu Anpon

Electrochemical Co., Ltd

Common control

Jiangsu Lianhai Testing Co., Ltd.

Common control

Jiamusi Black Dragon Pesticide Chemical Co., Ltd.

Common control

Anhui Kelihua Chemical Co., Ltd.

Common control

Anhui Research Institute of Chemical Industry

Common control

Haohua engineering co. LTD.

Common control

Shanghai branch of China blue lianhai design and research institute.

Common control

China National Chemical Information Center

Common control

Beijing guangyuan yiong chemical co. LTD.

Common

control

(Expressed in RMB '000)

Notes to the Financial Statements

X. Related parties and related party transactions (cont’d)

5. Transactions and balances with related parties

(1) Transactions with related parties

Summary of Purchase of goods/services received and fixed assets

Six months

ended

June

3

0

				201	8						201	7
										Restaed

Type of purchase

Related

p

arty

r

elationship

Purchase of goods/services received

Common control under

CC

858,609

		136	346

Joint venture

6,325

4,820

Purchase of fixed assets and otherassets

Common control under

CC

2,129,457

78,580

Summary of Sales of goods:

Sale of goods/ Service rendered

Common control under

CC

258,409

47,011

Joint venture

99,823

134,994

(2) Leases

The Group as lessor

						Six months				ended	June			3	0
							201	8				201			7

Restated

Type of leased assets

Lessee

Building and Structures

Common control under

CC

10

57

(3) Guarantee (as guarantee receiver)

Amount ofguaranteed

loan

Inception

date of

guaranty

guaranty

Maturity

date of

guaranty

Guarantycompleted

								(Y / N	)
As At	June		3	0	, 201	8

Common control under CC

303,000

20/02/2017

19/02/2020

Y

Parent

50,000

18/10/2017

18/10/2021

N

50,000

10/01/2017

10/01/2020

Y

300,000

20/11/2017

20/11/202

2

N

100,000

13/06/2018

12/06/202

2

N

Ultimate controller

200,000

25/09/2013

25/09/2020

N

160,000

27/05/2014

09/06/2021

N

150,000

30/09/2013

13/10/2020

N

(Expressed in RMB '000)

Notes to the Financial Statements

X. Related parties and related party transactions (cont’d)

5. Transactions and balances with related parties (cont'd)

(4) Remuneration of key management personnel and directors

Six months ended

June 30

2018

2017

Remuneration of key management personnel

24,999

850

(5) Receivables from and payables to related parties (including loans)

June 30 January 1

Receivable Items2018 2018

Bad debt

Provision

Bad debt

Provision

ItemsRelated Party Relationship

Trade receivables

Common control under CC

84,982

-

28,565

-

Joint venture

18,560

-

33,710

-

Other receivables

Common control under CC

14,731

-

22,780

-

Joint venture

602

-

-

-

Prepayments Common control under CC

117

-

12,357

-

Other non-currentassets

Joint venture

7,404

7,404

-

-

7,514

7,514

-

-

June 30

January 1

Payable Items

2018

2018

ItemsRelated Party Relationship

Trade payables

Common control under

CC

210,089

78,614

Joint venture

-

320

Other non-currentliabilities *

Common control under

CC

171,770

171,770

* The interest expense related to this liability recognized in the current period is 1,042 thousand RMB (amount

for prior period is 1,042 thousand RMB).

(Expressed in RMB '000)

Notes to the Financial Statements

X. Related parties and related party transactions (cont’d)

5. Transactions and balances with related parties (cont'd)

(6) Other related party transactions

The closing balance of bank deposit in ChemChina Finance Corporation was 226 thousand RMB (2017.12.31 – 155,700thousand RMB). Interest income of bank deposit in current period is 738 thousand RMB (amount for prior period is 0thousand RMB).

XI. Commitments and contingencies

Significant commitments

(1) Capital commitments

June 30

January 1

2018

2018

Investment in Fixed assets				653,409					590,043

(2) Operating lease commitments

The total future minimum lease payments under non-cancellable operating leases of fixed assets

June 30 January 1

2018

2018

	Within 1 year (including 1 year)							137,847					138,827
	1	-	2 years (including 2 years)					104,067					100,043

2

-

3 years (including 3

years)

78,765

69,263

Over 3 years

142,025

126,804

462,704 434,937

(Expressed in RMB '000)

Notes to the Financial Statements

XI. Commitments and contingencies (cont’d)

Commitments and Contingent Liabilities

On October 30, 2017, the 22nd meeting of the 7th session of Board of Directors of Hubei Sanonda Co., Ltd. (hereinafter referred to as

the “Company”) resolved to approve as a frame work decision, the Company’s engagement in annual liability insurance policies fordirectors, supervisors and senior officers of the Company. On November 15, 2017 the 4th interim Shareholders Meeting approved theabove resolution.

According to the Policy between the Company and Ping An Property & Casualty Insurance Company of China, Ltd., for one yearinsurance (from October 1st, 2017 to September 30, 2018), the liability limit is $50 million for any one Claim and in the annualaggregate and the actual premium is negligible.

Environmental protection

The manufacturing processes of the Company, and the products it produces and markets, entail environmental risks that impact theenvironment. The Company invests substantial resources in order to comply with the applicable environmental laws and attempts toprevent or minimize the environmental risks that could occur as a result of its activities. To the best of the Company’s knowledge, at thebalance sheet date, none of its applicable permits and licenses with respect to environmental issues have been revoked. The Company hasinsurance coverage for sudden, unexpected environmental contamination.

Claims against subsidiaries

In the ordinary course of business, legal claims were filed against subsidiaries, including lawsuits regarding claims for patentinfringement. Inter alia, from time to time, the Company, similar to other companies operating in the plant protection industry, is exposedto class actions for large amounts, which it must defend against while incurring considerable costs, even if these claims, from the start,have no basis. In the estimation of the Company’s management, based, inter alia, on opinions of its legal counsel regarding the prospectsof the proceedings, the financial statements include appropriate provisions where necessary to cover the exposure resulting from theclaims.

Various immaterial claims have been filed against Group companies in courts throughout the world, in immaterial amounts, for causes ofaction involving mainly employee-employer relations and various civil claims, for which the Company did not record a provision in thefinancial statements. Furthermore, claims were filed for product liability damages, for which Solutions has appropriate insurancecoverage, such that the Company’s exposure in respect thereof is limited to the amount its deductible requirement or the amount thereof

does not exceed the deductible amount.

(Expressed in RMB '000)

Notes to the Financial Statements

XII. Share-based Payments

(1) In December 2017, the remuneration committee and the Board of Directors (and the General Meeting with respect to the CEO) ofAdama solutions, a wholly-owned subsidiary, approved the allocation of 49,042,146 phantom warrants to officers and employees inaccordance with the long-term phantom compensation plan ("the Plan"). The allocation date is December 28, 2017.

The warrants will vest in four equal portions, where the first and second quarters are exercisable after one year, the third quarter after twoyears and the fourth quarter after three years from January 1, 2018. The warrants will be exercisable, in whole or in part, in accordancewith the terms of the plan, and subject to achieving financial targets as determined in the plan. The warrants may be exercised until theend of 2023.

Upon exercise of each warrant, the offeree will be entitled to receive cash payment equal to the difference between the base price asdetermined at the time of the grant and the closing price of one share of the company on the Shenzhen Stock Exchange, as it will be onthe exercise date up to the ceiling that was determined under the plan.

The fair value of the granted warrants as aforesaid was estimated using the binomial pricing model.

The cost of the benefit embodied in the warrants that were allocated as aforesaid, based on the fair value at the end of the reportingperiod, amounted to a total of 206 million RMB. The liability at the end of the reporting period was recorded according to the vestingperiod as determined in the plan, taking into account the extent of the service that the employees provided until that date.

Statement of share based payments in the year

Phantomwarrants

Total number of Phantom warrants granted in current peri

od

198,417

Total number of Phantom warrants exercised in current period						-
Total number of Phantom warrants forfeited in current period					679,585

Total number of Phanom warrents at the end of the period

48,560,977

The range of the exercise prices and the remainder of the contractual period for Phantom warrants outstanding at the

end of period

15.13 RMB

5.5 years

The parameters used in implementing the model are as follows:

Stock price (RMB)						15.81
Original	exercise increment (RMB)					15.13

Expected volatility

46.73%

Risk

free interest rate

3.45%

Economic value as of June 30, 2018 (in thousands RMB)

206,041

The methods for the determination of the fair value of liabilities arising from cash-settledshare-based payments

The binomial pricing model

Accumulated amount of liabilities arising from cash-settled share-based payments (in thousands

RMB)

102,332

Expenses arising from cash

-

settled share

-

based payments in current period (in thousands RMB)

44,648

(Expressed in RMB '000)

Notes to the Financial Statements

XIII. Other significant items

(1) Segment Reporting

The Company presents its segment reporting based on a format that is based on a breakdown by business segments:

? Crop Protection (Agro)

This is the main area of the Company’s operations and includes the manufacture and marketing of conventionalagrochemical products and operations in the seeds sector.

? Other (Non Agro)

This field of activity includes a large number of sub-fields, including: Lycopan (an oxidization retardant), aromaticproducts, and other chemicals. It combines all the Company’s activities not included in the agro-products segment.

Segment results reported to the chief operating decision maker include items directly attributable to a segment as well asitems that can be allocated on a reasonable basis. Unallocated items comprise mainly financing expenses, net, gains fromchanges in fair value, investment income and tax expenses.

All assets and liabilities that can be attributed to a specific segment were allocated accordingly. Attributed assets include:

accounts receivables, bills receivables, inventory, assets held for sale, fixed assets, construction in progress, intangibleassets, goodwill, non-current trade receivables and long term equity investments. Attributed liabilities include accountpayables, bill payables, liability in respect of long-term equity investee and deferred income. All other assets and liabilitieswhich are not attributable to a specific segment are presented as unallocated assets and liabilities.

(Expressed in RMB '000)

Notes to the Financial Statements

XIII. Other significant items (cont'd)

(1) Segment reporting (cont’d)

(1) Information regarding the results and assets and liabilities of each reportable segment is included below:

Crop Protection (Agro)

Other (Non Agro)

Elimination among

segments

Elimination among

Total

Six months ended June

Six months ended June

Six months ended June

Six months ended June

Six months ended June

201

8

201

7

201

8

201

7

201

8

201

7

201

8

201

7

Restated

Restated

Restated

Restated

Operating income from external customers																	12,132,725								11,860,787									893,533						909,277										-							-					13,026,258									12,770,064
Inter		segment operating income																				-							-								380					4,382						(380)						(4,382)														-							-
Interest in the					profit or loss of associates
and joint ventures																			12,394								5,819										364				(3,733)									-							-								12,758									2,086
Segment's results																		3,481,515								1,801,891									47,629						79,637									-							-						3,529,144									1,881,528
Financial expenses, net																																																															(330,018)									(911,916)
Gains from changes in fair value																																																															(243,376)										222,276
Investment income																																																																134,295									267,363
Profit/loss before tax																																																																3,090,045									1,459,251
Income tax expense																																																															(727,264)									(142,257)
Net profit																																																															2,362,781									1,316,994

Crop Protection (Agro

)

Other (Non Agro

)

Unallocated assets and
	liabilities						Total

June 30,

January

1,

June 30, January 1,

June 30,

January

1,

June 30, January 1,

201

8

2018

201

8

2018

201

8

2018

201

8

201

8

Total

assets

30,938,535

27,358,558

1,652,066

1,777,897

8,987,197

10,549,301

41,577,798

39,685,756

Total liabilities

4,214,113

4,027,089

196,420

198,600

15,623,840

16,610,220

20,034,373

20,835,909

(Expressed in RMB '000)

Notes to the Financial Statements

XIII. Other significant items (cont'd)

(1) Segment reporting (cont’d)

(2) Geographic information

The following tables sets out information about the geographical segments of the Group’s operating income based on the locationof customers (sales target) and the Group's non-current assets (including fixed assets, construction in progress, investmentproperties, intangible assets and goodwill). In the case of investment property, fixed assets and construction in progress, thegeographical location of the assets is based on its physical location. In case of intangible assets and goodwill, the geographical

location of the company which owns the assets.

Operating income from external

customers

Six months ended June 30

2018

2017

Restated

Europe					4,469,617					4,716,623
North America					2,589,664					2,482,507

Latin America

1,978,828

1,826,603

Asia Pacific					2,267,794					2,191,368
Africa, Middle East (including Israel) and India					1,720,355					1,552,963

13,026,258

12,770,064

Specified non

-

current

assets

June 30

January 1

201

8

2018

Europe

723,016

732,024

Latin America			2,053,806						1,030,652
North America				474,496						464,183

Asia Pacific						2,220,746						2,186,442
Africa, Middle East (including Israel) and India					11,535,894						10,592,839

17,007,958

15,006,140

(3) Dependency on major customers

No single customer's proportion of the total amount of sales is over 10%.

(Expressed in RMB '000)

Notes to the Financial Statements

XIII. Other significant items (cont'd)

(2) Calculation of basic earnings per share and Diluted earnings per share

Amount for the

current period

Amount for the

		prior period

Restated

Net profit for the current period attributable to shareholders of the

company

2,362,781

		1,316,994

Including: Net profit from continuing operations

2,362,781

1,316,994

Net profit for the current period attributable to ordinary shareholders

2,362,781

1,316,994

Thousands shares

Amount for the

current period

Amount for the

prior period

Restated

Number of ordinary shares outstanding at the beginning of the year

2,446,554

2,341,856

Add: weighted average number of ordinary shares issued during the

period

-

		-

Less: weighted average number of ordinary shares repurchased during

the

period

-

		-

Number of ordinary shares outstanding at the end of the period

2,446,554

2,341,856

On July 4, 2017 the entire share capital of Solutions was transferred from CNAC to the Company,in return for the issuance of 1,810,883,039 new shares of the Company to CNAC, which is abusiness combination under common control. According to “Preparation Rules for InformationDisclosure by Companies Offering Securities to the Public No. 9-Calculation and Disclosure ofReturn on net assets and Earnings per Share”, in a business combination involving enterprisesunder common control when calculating the basic earnings per share during the comparative period,the shares shall be treated as issued at the beginning of the comparative period.

Six monthsended June 30,

2018

Six monthsended June 30,

2017

RestatedCalculated based on net profit attributable to ordinaryshareholders

Basic earnings per share

0.9

658

0.56

24

Diluted earnings per share

N/A

N/A

Calculated based on net profit from continuing operationsattributable to ordinary shareholders:

Basic earnings per share				0.9	658			0.56		24
Diluted earnings per share					N/A				N/A

Calculated based on net profit from discontinued operationsattributable to ordinary shareholders:

Basic	earnings per share			N/A			N/A

Diluted earnings per share

N/A

N/A

(Expressed in RMB '000)

Notes to the Financial Statements

XIV. Notes to major items in the Company's financial statements

1. Cash at bank and on hand

June 30, 2018

January 1,

2018

Deposits in bank

1,761,572

1,864,003

Other cash at bank

28,150

4,600

Total

1,789,722

1,868,603

As at June 30, 2018, restricted cash and bank balances was 28,150 thousand (as at January 1, 2018): 4,600

thousand RMB) mainly including deposits that guarantee bank acceptance drafts.

2. Accounts receivable

(1) Accounts receivable classification disclosure

June 30, 2018

Book value

Provision for bad and

doubtful debts

Amount

Percentage

(%)

Amount

Percentage

(%)

Carrying

amount

Account receivables assessed

collectively for impairment

collectively for impairment

855,056

89

4,414

1

850,642

Account receivables assessed

individually for impairment

106,582

11

14,518

14

92,064

		961,638			100			18,932			2			942,706

January 1, 2018

Book value

Provision for bad and

doubtful debts

Amount

Percentage

		(%)

Amount

Percentage

			(%)

Carrying

amount

Account receivables assessed

collectively for impairment

collectively for impairment

830,914

96

1,879

-

829,035

Account receivables assessed

individually for impairment

35,209

4

14,210

13

20,999

		866,123			100			16,089			2			850,034

(Expressed in RMB '000)

Notes to the Financial Statements

XIV. Notes to major items in the Company's financial statements (cont'd)

2. Accounts receivable (Cont’d)

(2) Addition, written-back and written-off of provision for bad and doubtful debts during the years:

Six months ended

June 30,

2018

2018

Balance as of January 1,

16,089

Addition during the year, net					2,889
Write back during the year						(28)

Write

-

off during the year

(18)

Balance as of June 30

18,932

(3) Five largest accounts receivable by debtor:

Accounts receivable Closing balance

As a percentage of totalaccounts receivable (%)

Provision forbad debts at theend of the year

Party 1			583,244		61		-
Party 2			183,530		19

Party 3			89,047		9			-
Party 4			50,027		5		2,501

Party 5 5,842

Total911,690

2,793

3. Long-term equity investment

June 30, 2018

January 1, 2018Amountbalance

Impairment loss

Book value

Amount

balance

Impairment loss

Book value

Investment in
subsidiaries

15,939,826

- 15,939,826

15,939,826

- 15,939,826

Total

15,939,826

-

15,939,826

15,939,826

-

15,939,826

(Expressed in RMB '000)

Notes to the Financial Statements

XIV. Notes to major items in the Company's financial statements (cont'd)

3. Long-term equity investment (Cont’d)

(1) Investments in subsidiaries

January 1,

2018 Increase Decrease

June30,2018

CurrentprovisionImpairment

loss

BalanceprovisionImpairment

loss

Jingzhou

Hongxiang

Chemical Co.
Ltd.					37,620		-			-				37,620		-			-

Hubei Sanonda
	foreign trade
	co. Ltd.				11,993		-			-			11,993		-			-

ADAMA

AgriculturalSolutions

Ltd.

15,890,213

-

-

15,890,213

-

-

Total15,939,826

-

-

15,939,826

-

-

4. Operating income and operating costs

Six months ended june 30, 2018

Six months ended June 30,

2017

Operating

income

Operating

costs

Operating

income

Operating

costs

Main operations

1,585,485

1,096,095

1,325,666

1,005,632

Other operations81,088 73,662 116,399 115,141

Total1,666,573 1,169,757 1,442,065 1,120,773

5. Supplementary information to cash flow statement

(1) Other cash received relevant to operating activities

Six months ended

June 30, 2018

Six months ended

June 30, 2017

Interest income					13,035				544

Government subsidies

748

1,725

Other1,409 1,218

Total15,192 3,487

(Expressed in RMB '000)

Notes to the Financial Statements

XIV. Notes to major items in the Company's financial statements (cont'd)

5. Supplementary information to cash flow statement (cont’d)

(2) Other cash paid relevant to operating activities

Six months ended

June 30, 2018

Six months ended

June 30, 2017

Professional services							36,133						9,707
Transportation and Commissions							38,259					37,952

Other 11,790 13,116Total 86,182 60,775

(3) Other cash received relevant to financing activities

Six months ended

June 30, 2018

Six months ended

June 30, 2017

Other- 7,800

Total- 7,800

(4) Other cash paid relevant to financing activities:

Six months ended

June 30, 2018

Six months ended

June 30, 2017

Funding deposit														10	0	,000
Share repurchase (B shares)							393,02		5

Restricted

cash

28,150

6,820

Other 3,138 -Total 424,313 106,820

(Expressed in RMB '000)

Notes to the Financial Statements

XIV. Notes to major items in the Company's financial statements (cont'd)

6. Supplementary information to cash flow statement (cont'd)

Supplementary materials

Six months ended June 30

2018 2017

Net profit

282,383

147,813

Add:	Impairment provisions for assets								3,978				8,051
Depreciation of fixed assets								79,145				101,449

Amortization of intangible assets

2,503

2,575

Loss on disposal of fixed assets, intangible assets and other long-term assets

							410
Loss on discard of fixed assets				44

Loss

on change in

fair value

206

Financial	expenses (income)							(9,876)					8,277
Decrease (increase) in deferred tax assets								(4,870)				15,572

Decrease (increase) in inventory

13,343

(9,103)

Increase

(decrease)

in

operating

accounts receivable

15,037

(365,016)

Increase in

operating

payables

99,968

48,243

Net cash flows from operating activities481,655 (41,523)

2. Investing and financing activities that do not involving cash receipts

payment

- -

and

3. Net increase in cash and cash equivalents- -

Closing balance of cash		and cash equivalents				1,761,572				52,761

Less: Opening balance of cash and cash equivalents1,864,003 249,740

Net increase in cash and cash equivalents(102,431) (196,979)

7. Related parties and related parties transcations

(1) Information on parent Company

Company name

Registered place

Business nature

Registeredcapital(Thousand)

Shareholdingpercentage (%)

of voting rightsPercentage (%)

CNAC Beijing, China

Production and

sales ofagrochemicals

RMB3,338,220

Production and

78.91 78.91

The ultimate controller of the company is China National Chemical Corporation.

(2) Information on the subsidiaries of the Company

For information about the main subsidiaries of the Company, refer to Note VII.1.

(Expressed in RMB '000)

Notes to the Financial Statements

XIV. Notes to major items in the Company's financial statements (cont'd)

7. Related parties and related parties transcations (Cont’d)

(3) Transactions and balances with related parties

a. Transactions of goods and services

Related Party Relationship Six months ended June 30

2018

2017

Summary of Purchase of goods/services received

Summary of Purchase of goods/services received

:

Purchase of goods/services received Common control under CC

	7,846

			5,003

Subsidiary

114,174

97,561

Purchase of fixed assets and otherassets

Common control under CC

54,060

54,060

									2,759

Summary of Sales of goods:

Sale of goods					Subsidiary			473,846						303,242
Sale of fixed assets					Subsidiary				1,528						364

b. Leases

Six months ended June 30

Type of leased assets

Lessee

2018

2017

Building and Structures

Common control under CC

10

57

c. Guarantee (as a guarantee receiver)

Amount ofguaranteedloan

Inceptiondate ofguaranty

Maturitydate ofguaranty

Guarantycompleted(Y / N)As At June 30, 2018

Common control under CC

303,000

20/02/2017

19/02/2020

Y

Parent

300,000

20/11/2017

20/11/2022

N

50,000

18/10/2017

18/10/2021

N

50,000

10/01/2017

10/01/2020

Y

100,000

13/06/2018

12/06/2022

N

Ultimate controller

200,000

25/09/2013

25/09/2020

N

160,000

27/05/2014

09/06/2021

N

150,000

30/09/2013

13/10/2020

N

(Expressed in RMB '000)

Notes to the Financial Statements

XIV. Notes to major items in the Company's financial statements (cont'd)

7. Related parties and related parties transactions (Cont’d)

(3) Transactions and balances with related parties (Cont’d )

d. Receivables from and payables to related parties (including loans)

Receivable Items

Items

Related Party Relationship

June 30

January 1

201

8

2018

Bad debt

Provision

Bad debt

Provision

Tradereceivables

Subsidiary

855,820

-

793,330

793,330

-

Prepayments

Common control under

Common control under

CC

117

-

12,357

-

Payable Items

ItemsRelated Party Relationship June 30

January 1

2018

2018

Trade payables

Subsidiary

-

3,465

Common control under

CC

10,986

980

Other payables

Subsidiary

51,653

436,268

Other non-current liabilities*

Common control under

CC

171,770

171,770

* The interest expense related to this liability recognized in the current period is 1,042 thousand RMB (amount

for prior period is 1,042 thousand RMB).

e. Other related party transactions

The closing balance of bank deposit in ChemChina Finance Corporation was 20 thousand RMB (2017.12.31 –25,014 thousand RMB). Interest income of bank deposit in current period is 537 thousand RMB (amount forprior period is 0 thousand RMB).

XV. Supplementary information

(1) Extraordinary Gain and Loss

Six months ended

June 30, 2018

Disposal of non	-	current assets					1,997,170
Government grants recognized through profit or loss								10,787

Recovery or reversal of provision for bad debts which is assessed individually during the

years								13,249
Other non			-	operating income	and expenses besides items above				(787)

Tax effect

(447,934)

1,572,485

Note: Extraordinary gain and loss items listed above are presented in the amount before taxation

(2) Return on net assets and earnings per share (“EPS”)

The information of Return on net assets and EPS is in accordance with the Preparation Rules forInformation Disclosure by Companies Offering Securities to the Public No. 9 – Calculation andDisclosure of Return on net assets and Earnings per share (2010 Amendment) issued by ChinaSecurities Regulatory Commission

Profit during the reportingperiod

Weighted average rateof return on net assets

(%)

EPS

Basic EPS（RMB/share）

Diluted EPS（RMB/share）

Net profit attributable to ordinaryshareholders of the Company

11.65

0.9

0.9

658

N/A

N/A

Net profit after deduction ofextraordinary gains/lossesattributable to ordinary

shareholders of the Company

3.90

0.32

0.32

30

N/A

N/A

Section XI Documents Available for Reference

(I) Financial Statements carried with signatures and seals of Legal Representative and Accounting Principal;(II) In the Reporting Period, originals of all documents of the Company ever disclosed publicly in media designated by ChinaSecurities Regulatory Commission as well as the originals of all the public notices were deposited in the office of the Company.

Hubei Sanonda Co., Ltd.Legal Representative: Chen Lichtenstein

August 27, 2018