HUBEI SANONDA CO., LTD. INTERIM REPORT 2009

Short Form of the Stock: 000553 (200553) Stock Code: Sanonda A (B)

August 2009

Important Notes 1. The Board of Directors, the Supervisory Committee as well as directors, supervisors and senior management of Sanonda Co., Ltd. (hereinafter referred to as the Company) hereby confirm that there was no false information or misleading statement or significant omission in this report, and will accept, individually and collectively, the responsibilities for the authenticity, accuracy and completeness of the contents of this report. 2. All directors attended the Board meeting. 3. Mr. Li Zuorong, person in charge of the Company, Mr. He Xuesong, person in charge of accounting work and accounting organization, hereby confirm that the Financial Report of Interim Report 2009 is true and complete. 4. This report has been prepared in Chinese and English version respectively. In the event of difference in interpretation between the two versions, the Chinese report shall prevail. 5. Financial Report in Interim Report 2009 was not audited.

Content I. Company Profile------1 II. Changes in Shares and Particulars about Share Capital------3 III. Particulars about Directors, Supervisors and Senior Executives------5 IV. Report of the Board of Directors------6 V. Significant Events------8 VI. Financial Report (Un-audited) ------15 VII. Documents Available for Reference------59

I. Company Profile (I) Basic information 1. Legal name of the Company In Chinese: 湖北沙隆达股份有限公司 Abbr. in Chinese: 沙隆达 In English: HUBEI SANONDA CO., LTD. Abbr. in English: SANONDA 2. Stock Exchange Listed With: Short Form of the Stock: Sanonda A, Sanonda B Stock Code: 000553, 200553 3. Registered Address: No. 93, Beijing East Road, , Hubei Office Address: No. 93, Beijing East Road, Jingzhou, Hubei Post Code: 434001 Website of the Company: http://www.sanonda.cn E-mail of the Company: sld@.com.cn 4. Legal Representative: Li Zuorong 5. Secretary of the Board of Directors: Li Zhongxi Contact Tel: 0716-8208632 Fax: 0716-8321099 E-mail: [email protected] Contact Address: No. 93, Beijing East Road, Jingzhou, Hubei Securities Affairs Representative: Liang Jiqin Tel: 0716-8208232 Fax: 0716-8321099 E-mail: [email protected] Contact Address: No. 93, Beijing East Road, Jingzhou, Hubei 6. Newspaper for Disclosing the Information Chosen by the Company: China Securities Journal, Securities Times and Ta Kung Pao Internet Web Site Designated by CSRC for Publishing the Interim Report of Company: http://www.cninfo.com.cn The Place Where the Interim Report is Prepared and Placed: Office of the Company 7. Other Relevant Information of the Company Initial registration date: Nov. 30, 1993 Initial registration organization: Hebei Province Administration Bureau for Industry and Commerce Registration code of corporate business license: QGEZ Zi No.: 002523 Registration code of taxation: 421001706962287 Certified Public Accountants engaged by the Company: Name: Vocation International Certified Public Accountants Co., Ltd. Office Address: Room 208, Building B of Huatong Mansion, No. 19, Chegongzhuang West Road Yi, Haidian , Beijing, PRC

(II) Main financial data and indices

Unit: RMB Yuan At the end of the At the end of last Increase/decrease compared

report period year with the end of last year (%) Total assets 2,337,437,595.55 2,049,481,852.69 14.05% Owners’ equity attributable to shareholders of list 1,112,883,918.38 1,098,558,871.77 1.30% companies Share capital 593,923,220.00 593,923,220.00 0.00% Net asset per share attributable to shareholders of list 1.87 1.85 1.08% companies (Yuan/share) In the report period The same period Increase/decrease

(from Jan. to Jun.) of last year year-on-year (%) Operating revenue 985,283,990.84 1,252,546,727.94 -21.34% Operating profit 58,673,360.32 105,058,807.83 -44.15% Total profit 60,297,608.06 104,201,646.60 -42.13% Net profit attributable to shareholders of listed companies 44,124,619.58 77,284,465.57 -42.91% Net profit attributable to shareholders of listed companies 44,241,366.89 78,141,626.80 -43.38% after deducting non-recurring gains and losses Basic earnings per share (Yuan/share) 0.0743 0.1301 -42.89% Diluted earnings per share (Yuan/share) 0.0743 0.1301 -42.89% Net return on equity (%) 3.96% 7.79% -3.83% Net cash flow from operating activities 59,930,108.90 110,826,976.74 -45.92% Net cash flow from operating activities per share 0.10 0.19 -47.37% (Yuan/share)

Attached: items of non-recurring gains and losses

Items Amount Note (if applicable) Gains and losses on the disposal of non-current assets 3,771,756.19 Government subsidies recorded into current profit and loss (excluding government subsidies with close relationship with the Company’s business and rationed 2,196,656.32 government grants in line with the united standard) Other non-operating incomes and expenses except the above -707,508.45 Other items being in compliance with definition of non-recurring gains and losses -4,660,000.00 Impact on income tax -150,226.02 Impact on minority interests -567,425.35 Total -116,747.31 -

II. Changes in Share Capital and Particulars about Share Capital (I) Statement on changes in share Unit: share Subsequent to the Prior to the change Increase/decrease (+, - ) change Number Proporti Issuance of Bonus Capitalizatio Other Subtotal Number Proporti

on new shares n of reserved on fund I. Shares subject to trading 122,226,014 20.58% 3,900 3,900 122,229,914 20.58% moratorium 1. Shares held by state 2. Shares held by 118,887,202 20.02% 118,887,202 20.02% state-owned corporations 3. Shares held by other 3,300,000 0.56% 3,300,000 0.56% domestic investors Including: Shares held by domestic non-state-owned 3,300,000 0.56% 3,300,000 0.56% corporations Shares held by domestic

natural person 4. Shares held by overseas

investors Including: Shares held by

overseas corporations Shares held by overseas

natural person 5. Shares held by senior 38,812 0.01% 3,900 3,900 42,712 0.01% management II. Shares not subject to 471,697,206 79.42% -3,900 -3,900 471,693,306 79.42% trading moratorium 1. RMB ordinary shares 241,697,206 40.70% -3,900 -3,900 241,693,306 40.70% 2. Domestically listed 230,000,000 38.73% 230,000,000 38.73% foreign shares 3. Overseas listed foreign

shares 4. Others III. Total number of shares 593,923,220 100.00% 593,923,220100.00%

(II) Number of shareholders and shares held by them Unit: Share Total number of shareholders 111,270 (Including 83,287 ones of A-share) Particulars about shares held by the top ten shareholders Proportion Total number Shares subject to Shares pledged Name of shareholder Nature of shareholders (%) of shares held trading moratorium held or frozen SANONDA GROUP CORPORATION State-owned corporation 20.02% 118,887,202 118,887,202 0 Domestic non-state-owned HAITONG SECURITIES CO., LTD 1.01% 5,999,920 0 0 corporation STATE-OWNED ASSETS ADMINISTRATION BUREAU OF State shares 0.76% 4,489,266 0 0

JINGZHOU Domestic non-state-owned UNION RURAL CREDIT 0.42% 2,500,000 2,500,000 0 corporation COOPERATION China Construction Bank-CITIC Domestic non-state-owned 0.41% 2,461,909 0 0 Bonus Selected stock securities fund corporation Dongguan Tenglan Shoes’ Materials Domestic non-state-owned 0.40% 2,368,375 0 0 Trading Co., Ltd corporation HUANG ZHI MING Domestic natural person 0.39% 2,328,700 0 0 NORGES BANK Foreign corporation 0.22% 1,301,210 0 0 CAI HONG YANG Domestic natural person 0.21% 1,253,900 0 0 YE JING Domestic natural person 0.19% 1,137,200 0 0 Particulars about the top ten shareholders holding share not subject to moratorium Shares not subject to trading Name of shareholders Type of shares moratorium HAITONG SECURITIES CO., LTD 5,999,920 RMB ordinary shares STATE-OWNED ASSETS ADMINISTRATION BUREAU OF 4,489,266 RMB ordinary shares QICHUN COUNTY China Construction Bank-CITIC Bonus Selected stock securities 2,461,909 RMB ordinary shares fund Dongguan Tenglan Shoes’ Materials Trading Co., Ltd 2,368,375 RMB ordinary shares HUANG ZHI MING 2,328,700 RMB ordinary shares NORGES BANK 1,301,210 Domestically listed foreign share CAI HONG YANG 1,253,900 Domestically listed foreign share YE JING 1,137,200 RMB ordinary shares WANG GONG LIN 1,020,000 Domestically listed foreign share DENG HUAI YU 923,600 Domestically listed foreign share Explanation on associated relationship The Company is not aware of whether there is any associated relationship among the above top ten among the top ten shareholders or shareholders and whether there is any action-in-concert among them. acting-in-concert

(III) Number of shares held by the top ten shareholders subject to moratorium and trading moratorium Unit: Share Name of shareholders Number of Date on Number of holding shares shares subject to which shares additional shares No. Trading moratorium subject to trading trading can be listed can be listed for moratorium moratorium for trading trading No trading or transferring within 36 months from Sanonda Group 1 118,887,202 3 Aug. 2009 0 the first trading day of A shares after the share Corporation merger reform proposal was implemented Jingzhou Shashi No trading or transferring within 36 months from 2 District Union Rural 2,50,000 3 Aug. 2009 0 the first trading day of A shares after the share Credit Cooperation merger reform proposal was implemented 3 Jingzhou Sanonda 800，000 3 Aug. 2009 0 No trading or transferring within 36 months from

Advertising Co., Ltd. the first trading day of A shares after the share merger reform proposal was implemented Note: As the disclose date of this report, the Company was handling relevant procedures of releasing trading moratorium. Shares held by the above shareholders will be listed for trade when the relevant procedure is completed. (IV) Controlling shareholders and actual controller of the Company remained unchanged in the report period

III. Particulars about Directors, Supervisors and Senior Executives (I) Changes in shares held by directors, supervisors and senior executives (II) Additional Decreased Including Number of Shares held Shares held shares held at shares held at shares subject option held Reason for Name Title at the at the the report the report to trading at the change year-begin period-end period period moratorium period-end Purchase from Li Zuorong Chairman of the Board 5,490 5,200 0 10,690 8,017 0 the secondary market Liu Xingping Director 32840 0 0 32840 24630 0 He Fuchun Director & GM 4880 0 0 4880 3660 0 Deng Guobin Director & Vice GM 4880 0 0 4880 3660 0 Zhang Chairman of the 3660 0 0 3660 2745 0 Jianguo Supervisory Committee

(III) Particulars about rengagement and dismission of directors, supervisors and senior executives On 10 Feb. 2009, the Company held the 17th Meeting of the 5th Board of Directors and engaged Xie Chengli as Assistant to the General Manager.

IV. Report of the Board of Directors (I) Overall status of operating activities During the report period, influenced by global financial crisis, domestic and international economic environment was changeful and demand of pesticide market was weak. Product sales of the Company were unprosperous, and price declined by a large margin. Facing various difficulties in production and operation, the Company adopted a series of measures to actively reply to disadvantage brought by financial crisis: The Company roundly executed fine management, improved quality of products and reduced producing cost; enhanced sales management, adjusted market strategy reasonably, seized market, made effort to enlarge export volume and ensure production equipment operating stably; was acquaint with trends of chemical industry market, arranged purchase reasonably and effectively reduced purchase cost; continued to push construction of new project and enlarged project and actively started to tackle key problems in technology; faithfully enhanced management on

accounts receivable and inventories and prevented operating risks. In the first half year of 2009, the Company realized operating income amounting to RMB 985 million, with a decrease of 21.34% year-on-year; export for foreign change amounting to USD 58.47 million, down by 18.14% year-on-year; total profit amounting to RMB 60.298 million, with a decrease of 41.13% year-on-year.

(II) Scope and operation of the main business 1. Scope of main business: production and sale of pesticides and chemical products 2. Main business classified according to industries or products Unit: RMB’0000 Yuan Main business classified according to industries Increase/decrease Increase/decrease Increase/decrease Operating Operating Gross profit of operating of operating of gross profit Industry or products income cost ratio (%) income compared income compared ratio compared with last year (%) with last year (%) with last year (%) New chemical materials and 574.74 318.39 44.60% -23.37% -47.37% 25.27% special chemical products Petro-chemical industrial and 3,189.77 2,254.22 29.33% -8.72% -25.42% 15.82% refined chemical products Agrochemical like fertilize, 90,415.94 74,778.69 17.29% -22.60% -17.16% -5.44% pesticide, etc Total 94,180.45 77,351.2917.87% -22.21% -17.62% -4.57% 3. Main business classified according to regions Unit: RMB’0000 Yuan Regions Operating income Increase/decrease of operating income compared with the last year (%) Domestic 54,104.00 -21.19% Overseas 40,076.00 -23.54% Total 94,180.00 -22.21% 4. Analysis on financial status Items Balance at the period-end Balance at the period-begin Change ratio Accounts receivable 16,606 8,268 100.85% Accounts paid in advance 9,317 1,592 485.31% Construction in progress 9,986 3,712 169.00% Short-term borrowings 32,869 18,700 75.77% Long-term borrowings 47,556 29,756 59.82% Note: ① Accounts receivable increased 100.85% over the period-end, mainly because the export increased and settlement term was immature; ② Accounts paid in advance increased 485.31% over the period-end, because accounts for engineering paid in advance increased; ③ Construction in progress increased 169% over the period-end, because investment in engineering project increased; ④ Short-term borrowings increased 75.77% over the period-end, because production capital and demand for investment on project increased;

⑤ Long-term borrowings increased 59.82% over the period-end, because loan for construction of combined heat and power generation and extension on project of annual 20,000 tons glyphosate increased. (III) Explanation on significant changes on profit components and profit capability of main business In the report period, the main business and its structure remained unchanged, mainly included the chemical pesticide, chlor-alkali chemical engineering etc. Profitability declined because influenced by global financial crisis, domestic and international demand of pesticide market was weak, product sales of the Company were unprosperous, and price dropped obviously. Otherwise, cost of raw material of chemical industry products such as emulsion splitter decreased by a large margin compared with the same period of last year, and gross profit ratio rose greatly; however, the small amount influenced little. (IV) Other business influenced the net profit significantly In the report period, the net profit realized of the Company came from the main business and not influenced by other business. (V) Problems and difficulties of operation During the report period, influenced by global financial crisis, domestic and international demand of pesticide market was bearish, and supply of goods was abundant, and dealers were waiting. Product sales was not swimmingly and export was severe. Large decline of product price and frequent fluctuation of price of raw material brought difficulties to the Company. In the second half year, in order to realize operating plan made at the year-begin, the Company will do the following work: firstly, the company will adopt effective measures and faithfully enhanced sales; secondly, the Company will continue to push fine and precious management and energy saving and expense reducing; thirdly, the company will further enhance technology innovation and management on construction of project; fourthly, the Company will enhance control of every expenditure (VI) Investment 1. In the report period, there was no raised proceeds occurred or raised proceeds occurred in previous periods but continued to the report period. 2. Investment projects of non-raised proceeds in the report period: Name of projects Amount revolved Progress Income of project Expended construction of paraquat 1,931 38.72% Expanding and improvement of acephate 2,076 103.78% As scheduled The 2nd phase of glyphosate 2,448 31.59% combined heat and power generation 745 In preparation Formaldehyde project 1316 In preparation Total 8,516 - (VII) Forecast on operating performance from the year-begin to the end of the next period The Company forecast that net profit the year-begin to the end of the next period will decline during 50% to 100%, which is mainly because influenced by financial crisis,

pesticide market was bearish, product sales was not swimmingly and price of main products dropped by a large margin.

Ⅴ. SIGNIFICANT EVENTS (Ⅰ) Corporate governance In the report period, the Company kept perfecting its corporate governance structure, formulating and improving the internal management rules and regulating its operation according to the requirements of the Company Law, Securities Law, Code of Corporate Governance for Listed Companies and other relevant laws and regulations.

In the first half of 2009, according to the Basic Standards for Enterprise Internal Control issued by CSRC and other relevant authorities, the Company further improved its internal control system and effectively regulated its internal operation. In order to strengthen its control and management over the subsidiaries, the Company formulated the Rules for Managing Holding Subsidiaries to ensure clear powers and responsibilities among and regulated operation of the shareholders’ general meetings, boards of directors, board of supervisors and manager teams of the Company and its holding subsidiaries. Meanwhile, the Company strengthened its management of the relationship with investors by conducting timely communication with investors by email and telephone, adopting a serious attitude towards information disclosure and ensuring the factuality, accuracy, completeness and timeliness of the information disclosed.

(Ⅱ) Profit distribution and its implementation in report period On 8 May 2009, the proposal on profit distribution and turning capital surplus to share capital for the year 2008 was reviewed and approved at the 2008 Annual Shareholders’ General Meeting of the Company. According to the proposal, the Company would, based on the Company’s total shares of 593,923,220 shares as at the end of 2008, distribute a cash dividend of RMB 0.5 (tax included) per 10 shares to all shareholders. A total of RMB 29,696,161 was expected to be distributed and no capital surplus would be transferred to share capital. On 5 Jun. 2009, the public notice on the implementation of profit distribution for the year 2008 was disclosed. As disclosed in the public notice, for A share, the date of record was 11 Jun. 2009, the ex-dividend date was 12 Jun. 2009 and the date of entering account was 12 Jun. 2009; for B share, the last trading date was 11 Jun. 2009, the ex-dividend date was 12 Jun. 2009, the record date was 16 Jun. 2009 and the date of entering account was 16 Jun. 2009. And the Company distributed the cash dividend to A-share holders and B-share holders respectively on 12 Jun. and 16Jun. 2009.

For the report period, the Company will not conduct profit distribution or capitalization of capital reserves.

(Ⅲ) There existed no significant lawsuits or arbitrations in the report period, or those

carried down from the previous years.

(Ⅳ) Transactions of assets in report period 1. Asset acquisition Unit: RMB’0000 Whether Net profit Whether or not contributed to Net profit or not the Relation the Company contributed to ownershi creditor’ with from the date of the Company p of the s rights transactio Transaction purchase to the from year-begin Whether assets and n party party or Asset Date of Transaction end of report to period-end a related Pricing involved liabilities (applicabl ultimate acquired acquisition price period (applicable to transactio principle have involved e to controller (applicable to mergers of n or not been have related mergers of enterprises completel been transactio enterprises not under the same y complet ns) under the same control) transferre ely control) d transferr ed 49% equity of Jingzhou Insight Sanonda Market Non-relat Finechem Aifusi 28 Jun. 2009 573.00 0.00 82.00 No Yes Yes price ed party Co., Ltd. Chemical Industry Co., Ltd.

2. Sale of assets Unit: RMB’0000 Whether Whether or not or not the ownershi creditor’ Relation Net profit p of the s rights with contributed by Gains/ Whether a assets and transaction the sold asset losses Transaction Transaction related Pricing involved liabilities party Asset sold Date of sale to the from party price transaction principle have involved (applicable Company from selling the or not been have to related year-begin to asset complet been transaction date of sale ely complet s) transferr ely ed transferr ed Hubei 48% equity of 6 Jun. 2009 288.00 0.00 144.00 No Market Yes Yes Non-relate

Tianyang Jingzhou price d party Technology Tianyang Co., Ltd. Huibao Precise Chemical Co., Ltd. held by the Company

(Ⅴ) Significant related transactions in report period 1. Transactions of purchase and sale Proportion in total amount of Relation with Transaction Type of transaction Name of related party the Company’s related party amount same kind of transactions A. Related transactions arising from purchasing goods and receiving labor service China Industrial and Purchase of raw Under the same Agricultural Chemical 21,914,775.00 3.86% materials ultimate controller Corp. Purchase of raw Sanonda Group Corp. Parent company 64,428,155.10 11.34% materials Purchase of packaging Jingzhou Fude Foods Under the same 1,413,846.61 0.25% materials General Factory parent company Purchase of packaging Sanonda Advertising Co., Under the same 2,489,959.85 0.44% materials Ltd. parent company Purchase of raw Jingzhou Hengxiang Under the same 11,509,623.40 2.03% materials Materials Trading Co., Ltd. parent company Purchase of packaging Jingzhou Dali Industrial Joint venture 4,726,520.00 0.83% materials Co., Ltd. company B. Related transactions arising from selling goods and rendering labor service Sale of pesticides and Jingzhou Hengxiang Under the same 129,701.56 0.01% chemical products Materials Trading Co., Ltd. parent company Associated Sale of chemical Hubei Jingzhou Huaxiang company of the 13,976,014.87 1.48% products Chemical Co., Ltd. parent company Jiangsu Anbang Under the same Sale of pesticides 1,224,210.00 0.13% Electrochemical Co., Ltd. ultimate controller C. Other related transactions Payment of guarantee Sanonda Group Corp. Parent company 4,660,000.00 100% fee

Note 1: When recognizing a related party, the Company based the recognition on the premise of control, joint control or significant influence, and followed the principle of substance over form.

Note 2: The guarantee fee in the item of other related transactions was paid by the Company to its parent company—Sanonda Group Corp.—due to the fact that the latter provided loan guarantees for the Company.

2. Guarantees between the Company and related parties ① A mutual-guarantee agreement was signed between the Company and Guangxi Hechi Chemicals Co., Ltd. (hereinafter referred to as “Hechi Chemicals”, which, together with the Company, belonged to China National Chemicals Corporation and were controlled by the same ultimate controller). According to the agreement, the Company provided a joint-liability guarantee for a loan of fixed assets amounting to RMB 100,000,000 borrowed by Hechi Chemicals from Hechi Branch of Agricultural Bank of China, while Hechi Chemicals also provided for the Company joint-liability guarantees for a maximum loan of RMB 60,000,000 from Jingzhou Shashi Sub-branch of Industrial and Commercial Bank of China and a maximum loan of RMB 40,000,000 from Branch of Bank of Communications.

② Other guarantees provided by related parties besides the aforesaid guarantees Guarantee amount at Units providing period-end Type of Banks Term of guarantee guarantees (Unit: guarantee RMB million) Jingzhou Shashi Guarantee for Sanonda Group Sub-branch of 20 Jan. 2009-19 working 15 Corporation Industrial and Jan. 2010 capital Commercial Bank borrowings Jingzhou Shashi Guarantee for Sanonda Group Sub-branch of 25 Mar. 2009-23 working 25 Corporation Industrial and Mar. 2010 capital Commercial Bank borrowings Guarantee for Jingzhou Sanwan Sanonda Group 20 Mar. 2008-19 working Sub-branch of China 25 Corporation Mar. 2011 capital Construction Bank borrowings Guarantee for Jingzhou Sanwan Sanonda Group 18 Feb. 2008-17 working Sub-branch of China 30 Corporation Feb. 2011 capital Construction Bank borrowings Guarantee for China Industrial Import & Export 18 May 2009-18 working and Agricultural 50 Bank of China May 2011 capital Chemical Corp. borrowings China National Jingzhou Sanwan 3 Feb. 2008-2 Feb. Guarantee for 97.56 Chemicals Corp. Sub-branch of China 2013 project

Construction Bank borrowings

Jingzhou Sanwan Guarantee for China National 29 Aug. 2008-28 Sub-branch of China 100 project Chemicals Corp. Aug. 2013 Construction Bank borrowings Jingzhou Sanwan Guarantee for China National 10 Feb. 2009-9 Feb. Sub-branch of China 100 project Chemicals Corp. 2014 Construction Bank borrowings Sanonda Group Wuhan Branch of Guarantee for 21 Apr. 2008-21 Corporation Industrial Bank 100 project Apr. 2013 borrowings Guarantee for China National Shenzhen Ping An 29 Apr. 2009-29 79 project Chemicals Corp. Bank Apr. 2012 borrowings

3. Balance of guarantees between the Company and its related parties Proportion in total Relation with Accounting Balance at amount of Related party related party item period-end the accounting item Jingzhou Hengxiang Under the same Accounts 2,119,921.84 1.66% Materials Trading Co., Ltd. parent company payable China Industrial and Parent company Accounts 264,775.00 0.21% Agricultural Chemical Corp. payable Jingzhou Dali Industrial Co., Joint venture Accounts 652,891.84 0.51% Ltd. company payable Jingzhou Fude Foods Under the same Accounts 378,516.50 0.30% General Factory parent company payable Under the same Accounts Jingzhou Hengxiang parent company received in 440,491.50 0.46% Materials Trading Co., Ltd. advance Hubei Jingzhou Huaxiang Associated Accounts Chemicals Co., Ltd. company of the received in 397,123.01 0.41% parent company advance Jiangsu Anbang Under the same Accounts Electrochemical Co., Ltd. ultimate controller received in 199,290.00 0.21% advance

(Ⅵ) Important contracts and their implementation in report period 1. In the report period, there existed no such significant transaction conducted by the Company as holding in trust, contracting or leasing the assets of other companies or vice versa. Nor were there such transactions carried down from the previous periods.

2. Guarantees provided by the Company in report period Unit: RMB’0000 Guarantees provided by the Company for external parties (excluding those for subsidiaries) Whether or not the Date of occurrence execution Name of the (date when the Amount of Type of Term of of the Whether a guarantee guaranteed party agreement was guarantee guarantee guarantee guarantee for related parties signed) had been accomplish ed Guangxi Hechi Joint-liabilit Chemicals Co., 12 Jan. 2008 10,000.00 5 years No Yes y guarantee Ltd. Total amount of guarantee incurred in 10,000.00 report period Total guarantee balance at period-end 10,000.00 (A) Guarantees provided by the Company for subsidiaries Total amount of guarantees for 25,900.00 subsidiaries in report period Total balance of guarantees for 25,900.00 subsidiaries at period-end (B) Total amount of guarantees provided by the Company (including those for subsidiaries) Total guarantee amount (A+B) 35,900.00 Proportion of total guarantee amount in 32.26% the Company’s net assets Including: Amount of guarantees provided for shareholders, actual controller and 10,000.00 their related parties (C) Amount of loan guarantees directly or indirectly provided for parties with 25,200.00 asset-liability ratio over 70% (D) Amount of total guarantee amount 0.00 exceeding 50% of net assets (E) Total amount of the three kinds of 35,200.00 guarantees above（C+D+E） Explanation on the possibility of taking All the guarantees provided by the Company for its subsidiaries were on joint liability concerning the undue joint-liability ones, with a mutual guarantee of RMB 100 million for a guarantees related party of the Company—Guangxi Hechi Chemicals Co., Ltd..

3. In the report period, the Company did not entrust others with financial affairs. And there existed no such matters carried down from the previous periods.

(Ⅶ) Implementation of commitments made In the report period, the Company or shareholders holding over 5% shares of the Company did not make any other commitment except for the commitment concerning the share merger reform. And there were no such commitments carried down from the previous periods to the report period. Commitments made by the originally non-tradable share holders in the share merger reform, as well as their implementation: Particulars about Name of shareholder Commitments made implementation (1) No trading or transferring of the The commitments Company’s shares held by Sanonda Group Corporation would be conducted through had been Shenzhen Stock Exchange within 36 months implemented by the since the first trading date after the implementation of the share merger reform; disclosure date of Sanonda Group Corp. (2) Sanonda Group Corp. would put forward this report. and vote for the proposal on the Company’s turning capital surplus to share capital (to increase 10 shares for each 10 shares) at the Company’s 2006 Annual Shareholders’ General Meeting. No trading or transferring of the Company’s The commitments shares held by Jingzhou Shashi Union Rural Credit Cooperation would be conducted had been Jingzhou Shashi Union through Shenzhen Stock Exchange within 36 implemented by the months since the first trading date after the Rural Credit Cooperation implementation of the share merger reform. disclosure date of this report.

No trading or transferring of the Company’s The commitments shares held by Jingzhou Sanonda Advertising Co., Ltd. would be conducted through had been Jingzhou Sanonda Shenzhen Stock Exchange within 36 months implemented by the since the first trading date after the Advertising Co., Ltd. implementation of the share merger reform. disclosure date of this report.

(Ⅷ) Securities investment Proportion in total Initial Shares held Short securities Serial Securities Stock investment at Book value at Gains/ losses in form of investment No. variety code amount period-end period-end report period stock at (RMB) (share) period-end (%) Shuanghu 1 Stock 000717 an 495,000.00 495,000 6,380,528.32 100.00% 2,196,656.32 Science

and Technolog y Other securities investment held at 0.00 - 0.00 0.00% 0.00 period-end Gains/ losses from selling securities - - - - 0.00 investment in report period Total 495,000.00 - 6,380,528.32 100% 2,196,656.32

()Ⅸ Field visits, interviews and written inquiries received in report period Time of Main discussion and materials Place of reception Way of reception Visitor reception provided Recent particulars about the The meeting room of production and operation of the 29 May 2009 Field visit Guoxin Securities the Company Company, as well as the development of its main products

(Ⅹ) Punishment on the Company, its directors, supervisors, senior management staff, shareholders and actual controller, as well as relevant rectification In the report period, none of the Company, its directors, supervisors, senior management staff, shareholders and actual controller received investigations, administrative punishment, and criticism by circular or open criticism from CSRC or police authorities.

(Ⅺ) Special explanation and independent opinion of impendent directors on capital occupation by the Company’s related parties and external guarantees provided by the Company The independent directors of the Company were of the opinion that there existed no non-operational capital occupation by the Company’s main shareholder or other related parties in the report period. And the particulars about the progress of the mutual guarantee between the Company and Guangxi Hechi Chemicals Co., Ltd. were disclosed on China Securities Journal, Securities Times, Ta Kung Pao and http://www.cninfo.com.cn dated 22 Feb. 2008. The decision-making procedures of the Company’s external guarantees were legal, reasonable and fair, with no harm done to the interests of the Company and its shareholders, especially the minority interests.

(Ⅻ) Analysis and explanation on other significant matters, as well as their influence and relevant solutions The Company was not involved in other significant matters in the report period.

(ⅩⅢ) Index for information disclosed in report period Date of Newspaper for Website for Public notice disclosure disclosure disclosure Public Notice on Correction 20 Jan. 2009 China Securities Journal, www.cninfo.com.cn

of Earnings Estimate Securities Times and Ta Kung Pao Public Notice on the 17th China Securities Journal, www.cninfo.com.cn Meeting of the 5th Board of 12 Feb. 2009 Securities Times and Ta Directors Kung Pao Public Notice on China Securities Journal, www.cninfo.com.cn Preliminary Earnings Securities Times and Ta 19 Feb. 2009 Estimate and Relevant Kung Pao Clarification Public Notice on Routine China Securities Journal, www.cninfo.com.cn Related Transactions, Public Securities Times and Ta Notice on Joint Investment, Kung Pao Public Notice on Related Transaction Concerning Purchasing Land from 26 Feb. 2009 Controlling Shareholder, Public Notice on Convening the 1st Provisional Shareholders’ General Meeting in 2009, etc. Public Notice on China Securities Journal, www.cninfo.com.cn Resolutions of the 1st Securities Times and Ta 17 Mar. 2009 Provisional Shareholders’ Kung Pao General Meeting in 2009 Public Notice on China Securities Journal, www.cninfo.com.cn Resolutions Made at the 18th Securities Times and Ta Meeting of the 5th Board of Kung Pao Directors, 2008 Annual Report, Public Notice on 10 Apr. 2009 Related Transaction, Public Notice on Providing Guarantee for Holding Subsidiary, etc. Public Notice on China Securities Journal, www.cninfo.com.cn Resolutions Made at the 11th Securities Times and Ta 10 Apr. 2009 Meeting of the 5th Board of Kung Pao Supervisors Public Notice on 16 Apr. 2009 China Securities Journal, www.cninfo.com.cn

Resolutions Made at the 19th Securities Times and Ta Meeting of the 5th Board of Kung Pao Directors, First Quarterly Report 2009 and Public Notice on Convening 2008 Annual Shareholders’ General Meeting, etc. Public Notice on Adding China Securities Journal, www.cninfo.com.cn Provisional Proposals for Securities Times and Ta 30 Apr. 2009 2008 Annual Shareholders’ Kung Pao General Meeting Public Notice on China Securities Journal, www.cninfo.com.cn Resolutions Made at 2008 Securities Times and Ta 9 May 2009 Annual Shareholders’ Kung Pao General Meeting Public Notice on China Securities Journal, www.cninfo.com.cn Resolutions Made at Securities Times and Ta Provisional Meeting of the Kung Pao 5th Board of Directors, and 9 May 2009 Public Notice on Profit Distribution for the Year 2008

Ⅵ. FINANCIAL REPORT (UN-AUDITED) (Ⅰ) Accounting statements Balance Sheet Prepared by: Hubei Sanonda Co., Ltd. 30 Jun. 2009 Unit: (RMB) Yuan Amount at period-end Amount at year-begin Items Consolidation Parent company Consolidation Parent company Current assets: Monetary funds 657,073,854.90 567,032,361.49 562,832,319.76 490,154,426.30 Settlement reserves Lendings to banks and other financial institutions Transactional financial 6,380,528.32 6,380,528.32 4,183,872.00 4,183,872.00 assets Notes receivable 31,076,998.65 22,354,332.65 8,620,358.99 6,982,848.99 Accounts receivable 166,055,997.57 48,323,022.16 82,676,725.12 7,589,321.37 Accounts paid in advance 93,172,132.93 91,961,073.42 15,918,504.32 11,598,028.21 Premium receivable Reinsurance accounts receivable Reinsurance contract reserve receivables Interest receivable Dividend receivable Other accounts receivable 16,118,055.36 108,035,641.95 15,914,988.01 117,681,311.43 Financial assets purchased under agreement to resell Inventories 295,140,525.96 201,256,314.14 346,551,634.75 233,367,834.29 Non-current assets due within 1 year Other current assets Total current assets 1,265,018,093.69 1,045,343,274.13 1,036,698,402.95 871,557,642.59 Non-current assets: Loans granted and advances Financial assets available for sale Held-to-maturity investment Long-term accounts receivable Long-term equity 11,378,382.63 88,092,025.27 12,818,382.63 73,932,025.27 investment

Investment real estate 5,233,808.50 5,233,808.50 5,356,412.50 5,356,412.50 Fixed assets 752,522,740.75 694,239,178.50 781,010,440.01 730,043,892.69 Construction in progress 99,858,912.88 92,013,350.21 37,121,583.37 31,539,313.21 Engineering materials 27,115.85 7,580.83 Disposal of fixed assets 32,394.82 Productive biological assets Oil-and-gas assets Intangible assets 185,724,977.31 137,724,200.98 158,813,608.07 115,835,981.98 Development expenses Goodwill Long-term deferred 14,273.21 expenses Deferred income tax assets 17,641,169.12 14,049,527.17 17,641,169.12 14,049,527.17 Other non-current assets Total non-current assets 1,072,419,501.86 1,031,352,090.63 1,012,783,449.74 970,757,152.82 Total assets 2,337,437,595.55 2,076,695,364.76 2,049,481,852.69 1,842,314,795.41 Current liabilities: Short-term borrowings 328,689,992.33 255,000,000.00 187,000,000.00 170,000,000.00 Borrowings from central bank Deposits and due to placements with banks and other financial institutions Borrowings to banks and other financial institutions Transactional financial liabilities Notes payable 29,080,000.00 20,000,000.00 19,040,000.00 15,000,000.00 Accounts payable 127,469,251.48 86,124,310.42 102,784,556.06 66,963,994.66 Accounts received in 96,487,213.23 34,281,569.80 112,330,681.17 30,364,281.48 advance Financial assets sold under agreement to repurchase Handing charges and commission payable Payroll payable 19,201,342.34 10,514,639.33 25,448,279.39 14,813,333.63 Taxes payable 11,827,909.86 21,812,569.03 51,639,246.20 54,951,662.72 Interest payable 328,050.00 Dividend payable 1,470,532.37 1,470,532.37 Other accounts payable 63,345,218.34 17,376,621.06 43,139,725.39 16,757,176.12 Reinsurance accounts payable

Insurance contract reserves Payment for vicariously traded securities Payment for vicariously sold securities Non-current liabilities due 30,000,000.00 30,000,000.00 70,000,000.00 70,000,000.00 within 1 year Other current liabilities Total current liabilities 707,899,509.95 476,580,242.01 611,382,488.21 438,850,448.61 Non-current liabilities: Long-term borrowings 475,560,000.00 475,560,000.00 297,560,000.00 297,560,000.00 Debentures payable Long-term payables 9,840,000.00 9,840,000.00 9,840,000.00 9,840,000.00 Special payables 2,761,170.00 2,761,170.00 Estimated liabilities Deferred income tax liabilities Other non-current 11,549,512.89 6,990,000.00 11,549,512.89 6,990,000.00 liabilities Total non-current liabilities 499,710,682.89 492,390,000.00 321,710,682.89 314,390,000.00 Total liabilities 1,207,610,192.84 968,970,242.01 933,093,171.10 753,240,448.61 Owner’s equity (or shareholder’s equity): Paid-in capital (or share 593,923,220.00 593,923,220.00 593,923,220.00 593,923,220.00 capital) Capital surplus 271,719,841.74 268,447,075.77 271,719,841.74 268,447,075.77 Less: treasury stock Special reserves 16,364,992.87 16,364,992.87 16,364,992.87 16,364,992.87 Earned surplus 73,514,866.46 73,514,866.46 73,514,866.46 73,514,866.46 General risk provision Retained earnings 157,360,997.31 155,474,967.65 143,035,950.70 136,824,191.70 Foreign exchange difference Total owners’ equity attributable to parent 1,112,883,918.38 1,107,725,122.75 1,098,558,871.77 1,089,074,346.80 company Minority interests 16,943,484.33 17,829,809.82 Total owners’ equity 1,129,827,402.71 1,107,725,122.75 1,116,388,681.59 1,089,074,346.80 Total liabilities and owners’ 2,337,437,595.55 2,076,695,364.76 2,049,481,852.69 1,842,314,795.41 equity

Income Statement

Prepared by: Hubei Sanonda Co., Ltd. Jan.-Jun. 2009 Unit: (RMB) Yuan Amount of current period Amount of last period Items Consolidation Parent company Consolidation Parent company Ⅰ. Total operation revenue 985,283,990.84 705,509,417.65 1,252,546,727.94 883,883,071.30 Including: Sales 985,283,990.84 705,509,417.65 1,252,546,727.94 883,883,071.30 Interest income Premium income Handling charges and commission income Ⅱ. Total operation cost 930,247,286.84 657,640,802.04 1,150,841,068.49 788,166,399.97 Including: Cost of sales 810,536,655.99 577,862,532.97 972,751,275.69 661,215,874.47 Interest expenses Handling charges and commission expenses Payments on surrenders Claim expenses-net Provision for insurance contract-net Policyholder dividends Amortized reinsurance expenditures Business taxes and 500,904.05 15,768.03 1,551,914.48 846,504.19 surcharges Selling expenses 39,341,923.32 23,491,390.74 58,255,764.11 40,142,355.17 Administrative 46,739,882.33 28,194,258.22 71,309,708.58 46,760,810.78 expenses Financial expenses 27,537,885.61 25,336,610.79 32,829,856.93 27,013,742.26 Asset impairment 5,590,035.54 2,740,241.29 14,142,548.70 12,187,113.10 loss Add: gains/ losses from changes in fair value (“-” for 2,196,656.32 2,196,656.32 losses) Gains/ losses from 1,440,000.00 11,831,698.11 3,353,148.38 18,763,825.07 investment (“-” for losses) Including: gains/ losses from investment in affiliated enterprises and joint ventures Gains/ losses from foreign exchange difference (“-” for losses)

Ⅲ. Operation profit (“-” for 58,673,360.32 61,896,970.04 105,058,807.83 114,480,496.40 losses) Add: non-business income 2,659,803.07 103,229.34 152,871.45 62,667.78 Less: non-business 1,035,555.33 863,633.53 1,010,032.68 758,151.98 expenses Including: losses from disposal of non-current assets Ⅳ. Total profit (“-” for 60,297,608.06 61,136,565.85 104,201,646.60 113,785,012.20 losses) Less: income tax expenses 15,073,885.85 12,686,216.93 26,050,411.66 24,608,295.46 Ⅴ. Net profit (“-” for losses) 45,223,722.21 48,450,348.92 78,151,234.94 89,176,716.74 Attributable to owners 44,124,619.58 48,450,348.92 77,284,465.57 89,176,716.74 of parent company Minority interest 1,099,102.63 866,769.37 Ⅵ. Earnings per share (Ⅰ) Basic earnings per 0.0743 0.1301 share (Ⅱ) Diluted earnings 0.0743 0.1301 per share

Cash Flow Statement Prepared by: Hubei Sanonda Co., Ltd. Jan.-Jun. 2009 Unit: (RMB) Yuan Amount of current period Amount of last period Items Consolidation Parent company Consolidation Parent company Ⅰ. Cash flows from operating activities Cash received from sales of goods and rendering 815,640,461.00 629,911,544.57 1,059,487,101.35 740,564,728.98 of labor services Net increase of deposits from customers and due from banks and other financial institutions Net increase of loans from the central bank Net increase of funds borrowed from other financial institutions Cash received from premium of original insurance contracts Net cash received from reinsurance business

Net increase of savings of policy holders and investment fund Net increase of disposal of transactional financial assets Cash received from interest, handling charges and commissions Net increase of borrowings from banks and other financial institutions Net cash increase of buy-back business Tax refunds received 7,466,937.10 4,313,672.06 12,384,932.80 8,522,824.72 Other cash received relating to operating 22,779,215.89 27,375,736.82 46,727,763.50 27,656,478.25 activities Subtotal of cash inflows from operating 845,886,613.99 661,600,953.45 1,118,599,797.65 776,744,031.95 activities Cash paid for purchase of commodities and 584,292,545.59 419,080,706.47 827,342,034.01 580,708,884.15 reception of service Net increase of customer borrowings and advances Net increase of funds deposited in the central bank and amount due from banks Cash for paying claims of the original insurance contract Cash paid for interest, handling charges and commissions Cash paid for policy dividends Cash paid to and on 54,889,480.84 34,881,129.75 48,719,232.74 24,585,559.48 behalf of employees Various taxes paid 76,265,886.56 62,340,271.73 45,274,141.48 29,694,265.82 Other cash paid relating 70,508,592.10 49,750,063.78 86,437,412.68 49,902,178.07 to operating activities Subtotal of cash 785,956,505.09 566,052,171.73 1,007,772,820.91 684,890,887.52

outflows from operating activities Net cash flows 59,930,108.90 95,548,781.72 110,826,976.74 91,853,144.43 from operating activities Ⅱ. Cash flows from investment activities: Cash received from 3,036,457.50 3,036,457.50 9,588,046.41 24,997,725.07 disposal of investments Investment income 487,500.00 Net cash received from disposal of fixed assets, 3,569,562.00 29,853.00 350,300.00 350,300.00 intangible assets and other long-term assets Net cash received from disposal of subsidiaries and other operation units Other cash received relating to investment 120,168.76 87,561.13 activities Subtotal of cash inflows from investment 6,726,188.26 3,153,871.63 9,938,346.41 25,835,525.07 activities Cash paid to acquire fixed assets, intangible assets 201,634,779.90 176,882,084.58 215,218,485.75 215,057,222.75 and other long-term assets Cash paid for 15,600,000.00 investment Net increase of pledged loans Net cash paid by subsidiaries and other operating units Other cash paid relating 1,661,895.27 1,462,536.37 to other investment activities Subtotal of cash outflows from investment 203,296,675.17 193,944,620.95 215,218,485.75 215,057,222.75 activities Net cash flows -196,570,486.91 -190,790,749.32 -205,280,139.34 -189,221,697.68 from investment activities Ⅲ.Cash flows from financing activities Cash received from 4,900,000.00 capital contribution Of which: cash received 4,900,000.00

from capital contribution to subsidiaries by minority shareholders Cash received from 605,945,661.86 435,000,000.00 746,048,736.51 508,560,000.00 borrowings Cash received from issuance of bonds Other cash received relating to financing 3,722,549.10 3,431,828.17 3,384,396.70 2,701,560.54 activities Subtotal of cash inflows from financing 614,568,210.96 438,431,828.17 749,433,133.21 511,261,560.54 activities Cash paid to repay loans 324,899,516.48 212,000,000.00 407,117,872.22 180,000,000.00 Cash paid for interest expenses and distribution of 52,299,175.23 48,720,492.40 20,159,627.94 18,458,550.60 dividends or profit Of which: stock dividends and profits paid to 1,154,633.12 minority shareholders by subsidiaries Other cash paid relating 6,487,606.10 5,591,432.98 4,769,743.36 3,339,988.22 to financing activities Subtotal of cash outflows from financing 383,686,297.81 266,311,925.38 432,047,243.52 201,798,538.82 activities Net cash flows 230,881,913.15 172,119,902.79 317,385,889.69 309,463,021.72 from financing activities Ⅳ. Effect of foreign exchange changes on cash and cash equivalents Ⅴ. Net increase of cash and 94,241,535.14 76,877,935.19 222,932,727.09 212,094,468.47 cash equivalents Plus: beginning balance 562,832,319.76 490,154,426.30 452,405,704.33 384,695,931.50 of cash and cash equivalents Ⅵ. Closing balance of cash 657,073,854.90 567,032,361.49 675,338,431.42 596,790,399.97 and cash equivalents

Consolidated Statement of Changes in Owners’ Equity Prepared by: Hubei Sanonda Co., Ltd. For the first half of 2009 Unit: (RMB) Yuan Amount of current period Amount of last year Owners’ equity attributable to parent company Owners’ equity attributable to parent company Paid-in Paid-in Total Total Items capital Less: Surplus General Minority capital Less: Surplus General Minority Capital Special Retaine owners’ Capital Special Retaine owners’ (or treasury public risk Others interests (or treasury public risk Others interests reserve reserve d profits equity reserve reserve d profits equity share stock reserve reserve share stock reserve reserve capital) capital) 1,116,38 593,923 271,719 16,364, 73,514, 143,035 17,829, 593,923 271,719 57,285, -7,943,8 23,086, 938,071 I. balance at the end of last year 8,681.5 ,220.00 ,841.74 992.87 866.46 ,950.70 809.82 ,220.00 ,841.74 245.67 21.74 736.33 ,222.00 9 Add: change of accounting policy Correction of errors in previous period Others 1,116,38 II. balance at the beginning of 593,923 271,719 16,364, 73,514, 143,035 17,829, 593,923 271,719 57,285, -7,943,8 23,086, 938,071 8,681.5 this year ,220.00 ,841.74 992.87 866.46 ,950.70 809.82 ,220.00 ,841.74 245.67 21.74 736.33 ,222.00 9 III. Increase/ decrease of 14,325, -886,32 13,438, 77,284, -1,591,7 75,692, amount in this year (“-” means 046.61 5.49 721.12 465.57 00.09 765.48 decrease) 44,124, 1,099,1 45,223, 77,284, 866,769 78,151, (I) Net profit 619.58 02.63 722.21 465.57 .37 234.94 (II)Gain/loss listed to owners’

equity directly 1. Net amount of changes in fair value of financial assets available for sale 2. Effect of changes in other owners’ equity of invested units under equity method 3. Effect of income tax concerning items listed to owners’ equity 4. Others 44,124, 1,099,1 45,223, 77,284, 866,769 78,151, Subtotal of (I)and (II) 619.58 02.63 722.21 465.57 .37 234.94 (III) Capital input and 1,960,0 1,960,0 -2,458,4 -2,458,4 reduction of owners 00.00 00.00 69.46 69.46 1,960,0 1,960,0 1. Capital input of owners 00.00 00.00 2. Amount of stock payment included in owners’ equity -2,458,4 -2,458,4 3．Others 69.46 69.46 -29,799, -3,945,4 -33,745, (IV) Profit distribution 572.97 28.12 001.09 1．Withdrawing surplus public reserve

2. Withdrawing general risk reserve 3．Distribution to owners -29,799, -3,945,4 -33,745,

(shareholders) 572.97 28.12 001.09 4．Others (V) Internal carrying forward of owners’ equity 1. New increase of capital (share capital) from capital reserves 2．New increase of capital (share capital) from surplus reserves 3. Surplus reserves make up losses 4. Others 1,129,8 1,013,7 IV. Balance at the end of this 593,923 271,719 16,364, 73,514, 157,360 16,943, 593,923 271,719 57,285, 69,340, 21,495, 27,402. 63,987. period ,220.00 ,841.74 992.87 866.46 ,997.31 484.33 ,220.00 ,841.74 245.67 643.83 036.24 71 48

Statement of Changes in Owners’ Equity of Parent Company Prepared by: Hubei Sanonda Co., Ltd. For the first half of 2009 Unit: (RMB) Yuan Amount of current period Amount of last year Paid-in Paid-in Less: Surplus Less: Surplus Items capital (or Capital Special Retained Total owners’ capital (or Capital Special Retained Total owners’ treasury public treasury public share reserve reserve profit equity share reserve reserve profit equity stock reserve stock reserve capital) capital) 593,923,220 268,447,075 16,364,992. 73,514,866. 136,824,191 1,089,074,34 593,923,220 268,447,075 57,285,245. -27,490,764 892,164,776. I. balance at the end of last year .00 .77 87 46 .70 6.80 .00 .77 67 .62 82 Add: change of accounting policy Correction of errors in previous period Others II. balance at the beginning of 593,923,220 268,447,075 16,364,992. 73,514,866. 136,824,191 1,089,074,34 593,923,220 268,447,075 57,285,245. -27,490,764 892,164,776. this year .00 .77 87 46 .70 6.80 .00 .77 67 .62 82 III. Increase/ decrease of 18,650,775. 18,650,775.9 89,176,716. 89,176,716.7 amount in this year (“-” means 95 5 74 4 decrease) 48,450,348. 48,450,348.9 89,176,716. 89,176,716.7 (I) Net profit 92 2 74 4 (II)Gain/loss listed to owners’ equity directly 1. Net amount of changes in fair value of financial assets available for sale

2. Effect of changes in other owners’ equity of invested units under equity method 3. Effect of income tax concerning items listed to owners’ equity 4. Others 48,450,348. 48,450,348.9 89,176,716. 89,176,716.7 Subtotal of (I)and (II) 92 2 74 4 (III) Capital input and reduction of owners 1. Capital input of owners 2. Amount of stock payment included in owners’ equity 3．Others -29,799,572 -29,799,572. (IV) Profit distribution .97 97 1．Withdrawing surplus public reserve 2. Distribution to owners -29,799,572 -29,799,572.

(shareholders) .97 97 3．Others (V) Internal carrying forward of owners’ equity 1. New increase of capital

(share capital) from capital reserves 2．New increase of capital (share capital) from surplus reserves 3. Surplus reserves make up losses 4. Others IV. Balance at the end of this 593,923,220 268,447,075 16,364,992. 73,514,866. 155,474,967 1,107,725,12 593,923,220 268,447,075 57,285,245. 61,685,952. 981,341,493. period .00 .77 87 46 .65 2.75 .00 .77 67 12 56

Hubei Sanonda Co., Ltd. Notes to the Financial Statement For the First Six Months of 2009

(All amounts in RMB Yuan unless otherwise stated)

I. Company profiles The former Hubei Sanonda Co., Ltd. (hereinafter referred to "Company" or "the Company") is state operated Hubei Sha City Pesticides Factory, which was set up in 1958. In Aug. 1992, as approved by Hubei Commission for Economic System Reformation, the original enterprise was reorganized as Hubei Sanonda Co., Ltd., which turned into the first pioneer large state-operated industry enterprise in Hubei Province. On 8 Sep. 1992, on the basis of reorganization of the former enterprise, the Company was established formally. As approved by People's Government of Hubei Province and reviewed by CSRC, 30,000,000 RMB ordinary public shares ("A shares") of the Company have been issued since Oct. to 30 Nov. 1993. On 3 Dec. 1993, shares of the Company have been listed on Shenzhen Stock Exchange. As approved by Securities Committee of the State Council with "ZF(1997) No. 23", its domestically listed foreign ordinary public shares ("B shares") amounting to 100,000,000 shares have been issued at the par value of RMB 1 per share on 29 Apr. 1997 to 5 May 1997, such shares have been listed on the Shenzhen Stock Exchange on 15 May 1997, and over-allotment option of 15,000,000 shares have been exercised since 15 May to 21 May 1997. The proposal on transferring capital reserve into share capital has been examined and approved at the Shareholders' General Meeting 2006 held in May 2007, which transferred capital reserve into share capital at the rate of 10 for 10, and has been implemented in July 2007. After transferring, the total share capital was RMB 593,920,000. The addresses of the registered office and principal place of business of the Company are No. 93, Beijing East Road, Jingzhou, Hubei. Legal representative is Li Zuorong. Share abbreviations are Sanonda A and Sanonda B with stock code of 000530 and 200530 respectively. Parent company of the Company is Sanonda Group Corporation, as well as ChemChina Agrochemical Corporation as final parent company. Main pesticide products include orthene, paraquate, glyphosate, trichlorphon, DDVP, omethoate, triazophos, imidacloprid and carbofuran. Main chemical products include spermine, liquid caustic soda, liquefied chlorine gas and hydrochloric acid. The Company has self-operated import & export right. The Company has passed ISO9002 Quality System Certification and ISO14001 Environment Management System Certification. II. Statement for complying with the accounting standard for business enterprise The financial statements of the Company are prepared based on the following preparation basis, which are in compliance with the requirements of the accounting standard for business enterprise and reflect the Company’s financial status, operating

results and cash flows in true and complete. III. Preparation basis of financial statement With sustaining operation as a postulate premise, the Company prepared the financial statement in accordance with the below-mentioned important accounting policies and accounting estimate and actual transaction events, as well as the provisions related to accounting standard for enterprise business promulgated by the Ministry of Finance on 15 Feb. 2006 and Application Guidelines. IV. Major accounting policies and accounting estimates 1. Fiscal period The Company’s fiscal year is from Jan. 1 to Dec. 31 the Gregorian calendar. 2. Bookkeeping base currency The Company adopts as a bookkeeping base currency. 3. Financial statement items that measurement attributes changed and measurement attributes adopted in the reporting period Measurement attributes adopted by the Company shall include historical cost, replacement cost, net realizable value, present value and fair value. The Company shall make accounting recognition, measurement and report by adopting accrual basis. Historical cost shall be used for measurement of financial statement items except that such items as tradable financial assets, financial assets available for sales, business merger not under the same control, nonmonetary assets exchange with commercial purpose, debts reorganization, nonmonetary assets invested by investors shall be measured by adopting fair value. 4. Recognition standard for cash equivalents In cash flow statement, cash defines cash on hand and any deposit that can be used for cover, while cash equivalents are short-term (usually due within 3 months since the day of purchase) and high circulating investments, which are easily convertible into known amount of cash and whose risks in change of value are minimal. 5. Accounting methods for foreign currency (1) As for a foreign currency transaction, the Company shall convert the amount in a foreign currency into amount in its bookkeeping base currency at the middle price of market exchange rate published by the People’s Bank of China on the day the transaction is occurred. Of which, as for such transactions as foreign exchange or involving in foreign exchange, the Company shall converted into amount in the bookkeeping base currency at actual exchange rate the transaction is occurred. (2) The Company shall, on the balance sheet date, converted the account balance of foreign currency monetary assets and liabilities into amount in its bookkeeping base currency at the middle price of market exchange rate published by the People’s Bank of

China on the balance sheet date. The balance arising from the difference between amount in the bookkeeping base currency converted at exchange rate on the balance sheet date and amount in the original bookkeeping base currency shall be recorded into the exchange gains and losses. Of which, the exchange gains and losses arising from foreign currency loans related to acquisition of fixed assets shall be treated at the principle of capitalization of borrowing costs, other balance of exchange shall be measured into the financial expense of the current period. (3) The Company shall, on the balance sheet date, convert the foreign currency nonmonetary items measured at the historical cost into amount in its bookkeeping base currency at the middle price of market exchange rate published by the People’s Bank of China on the day the transaction is occurred, not changing its original bookkeeping base currency. Where the foreign nonmonetary items measured at the fair value shall be converted into amount in its bookkeeping base currency at the middle price of market exchange rate published by the People’s Bank of China on the day the fair value is recognized, the exchange gains and losses arising therefrom shall be recorded into the current period gains and losses as gains and losses on change in fair value. 6. Financial assets and financial liabilities (1) Classification of Financial assets and financial liabilities Financial assets shall be classified into the following four categories when they are initially recognized: (a) the financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period, including transactional financial assets and the financial assets which are measured at their fair values and of which the variation is included in the current profits and losses; (b) the investments which will be held to their maturity; (c) loans and the account receivables; and (d)financial assets available for sale. Financial liabilities shall be classified into the following two categories when they are initially recognized:(a) the financial liabilities which are measured at their fair values and of which the variation is included in the current profits and losses, including transactional financial liabilities and the designated financial liabilities which are measured at their fair values and of which the variation is included in the current profits and losses; and (b) other financial liabilities. (2) Recognition of financial assets and financial liabilities and measurement methods When the Company becomes a party to a financial instrument, it shall recognize a financial asset or financial liability. The financial assets and financial liabilities initially recognized by the Company shall be measured at their fair values. For the financial assets and liabilities measured at their fair values and of which the variation is recorded into the profits and losses of the current period, the transaction expenses thereof shall be directly recorded into the profits and losses of the current period; for other categories of financial assets and financial liabilities, the transaction expenses thereof shall be included into the initially recognized amount.

The Company shall make subsequent measurement on its financial assets according to their fair values, and may not deduct the transaction expenses that may occur when it disposes of the said financial asset in the future. However, those under the following circumstances shall be excluded: (a) The investments held until their maturity, loans and accounts receivable shall be measured on the basis of the post-amortization costs by adopting the actual interest rate method; (b) The equity instrument investments for which there is no quotation in the active market and whose fair value cannot be measured reliably, and the derivative financial assets which are connected with the said equity instrument and must be settled by delivering the said equity instrument shall be measured on the basis of their costs. The Company shall make subsequent measurement on its financial liabilities on the basis of the post-amortization costs by adopting the actual interest rate method, with the exception of those under the following circumstances: (a) For the financial liabilities measured at their fair values and of which the variation is recorded into the profits and losses of the current period, they shall be measured at their fair values, and none of the transaction expenses may be deducted, which may occur when the financial liabilities are settled in the future; (b) For the derivative financial liabilities, which are connected to the equity instrument for which there is no quotation in the active market and whose fair value cannot be reliably measured, and which must be settled by delivering the equity instrument, they shall be measured on the basis of their costs; (c) For the financial guarantee contracts which are not designated as a financial liability measured at its fair value and the variation thereof is recorded into the profits and losses of the current period, and for the commitments to grant loans which are not designated to be measured at the fair value and of which the variation is recorded into the profits and losses of the current period and which will enjoy an interest rate lower than that of the market, a subsequent measurement shall be made after they are initially recognized according to the higher one of the following: i. the amount as determined according to the best estimate of the necessary expenses for the performance of the current obligation.; or ii. the surplus after accumulative amortization as determined according to the effective interest method is subtracted from the initially recognized amount. (3) Recognition of transfer of financial assets Where the Company has transferred nearly all of the risks and rewards related to the ownership of the financial asset to the transferee, it shall stop recognizing the financial asset. If it retained nearly all of the risks and rewards related to the ownership of the financial asset, it shall continue to recognize transferred financial assets, and the consideration received shall be recognized as a financial liabilities. Where the Company does not transfer or retain nearly all of the risks and rewards related to the ownership of a financial asset, it shall deal with it according to the circumstances as follows, respectively: (a) If it gives up its control over the financial asset, it shall stop recognizing the financial asset;

(b) If it does not give up its control over the financial asset, it shall, according to the extent of its continuous involvement in the transferred financial asset, recognize the related financial asset and recognize the relevant liability accordingly. If the transfer of an entire financial asset satisfies the conditions for stopping recognition, the difference between the amounts of the following two items shall be recorded in the profits and losses of the current period: (a)The book value of the transferred financial asset; (b) The sum of consideration received from the transfer, and the accumulative amount of the changes of the fair value originally recorded in the owner's equities. If the transfer of partial financial asset satisfies the conditions to stop the recognition, the entire book value of the transferred financial asset shall, between the portion whose recognition has been stopped and the portion whose recognition has not been stopped, be apportioned according to their respective relative fair value, and the difference between the amounts of the following two items shall be included into the profits and losses of the current period: (a) The book value of the portion whose recognition has been stopped; (b) The sum of consideration of the portion whose recognition has been stopped, and the portion of the accumulative amount of the changes in the fair value originally recorded in the owner's equities which are corresponding to the portion whose recognition has been stopped. (4) Determination of the fair value of main financial assets and financial liabilities As for the financial assets or financial liabilities for which there is an active market, the quoted prices in the active market shall be used to determine the fair values thereof. Where there is no active market for a financial instrument, the enterprise concerned shall adopt value appraisal techniques (including the prices adopted by the parties, who are familiar with the condition, in the latest market transaction upon their own free will, the current fair value obtained by referring to other financial instruments of the same essential nature, the cash flow capitalization method and the option pricing model, etc.) to determine its fair value. As for the financial assets initially obtained or produced at source and the financial liabilities assumed, the fair value thereof shall be determined on the basis of the transaction price of the market. (5) Impairment test of financial assets and withdrawal method of impairment provision The Company shall carry out an impairment test, on the balance sheet day, on the carrying amount of the financial assets other than those measured at their fair values and of which the variation is recorded into the profits and losses of the current period. An impairment test shall be made on the financial assets with significant single amounts. With regard to the financial assets with insignificant single amounts, an independent impairment test may be included in a combination of financial assets with similar credit risk features so as to carry out an impairment-related test. Where, upon independent test,

the financial asset (including those financial assets with significant single amounts and those with insignificant amounts) has not been impaired, it shall be included in a combination of financial assets with similar risk features so as to conduct another impairment test. As for a financial asset measured on the basis of post-amortization costs, where there is any objective evidence proving that such financial asset has been impaired, a loss on impairment shall be made in the light of the balance between the book value and the current value of the predicted future cash flow. Where there is a very small gap between the predicted future cash flow of a short-term account receivable item and the current value thereof, the predicted future cash flow is not required to be capitalized when determining the relevant impairment-related losses. Where an equity instrument investment for which there is no quoted price in the active market and whose fair value cannot be reliably measured, or a derivative financial asset which is connected with the equity instrument and which must be settled by delivering the equity instrument, suffers from any impairment, the gap between the carrying amount of the equity instrument investment or the derivative financial asset and the current value of the future cash flow of similar financial assets capitalized according to the returns ratio of the market at the same time shall be recognized as impairment-related losses. Where the fair value of financial assets available for sales has decrease by a big margin and the expected downward trend belongs to non-transient, the losses on impairment shall be recognized, and the accumulative losses on the fair value of the owner’s equity which was directly included shall be transferred out and recorded into the impairment-related losses. 7. Measurement of bad debts for accounts receivable (1) Recognition of bad debts: the accounts receivable can not be recalled in line with the legal liquidation procedure because debtor has a great bankruptcy and insolvency; or the accounts receivable indeed can not be recalled because debtor is cancelled without leaving any property or there is no person to undertake the obligation; or accounts receivable can not be recalled where the debtor failed to perform obligation overdue and there are conclusive evidences which make it clear hat the accounts receivable can not be recalled. (2) Allowance method shall be adopted by the company in the computation of the bad debts. (3) Withdrawal method of provision for bad debt and proportion: An independent impairment test shall be carried out on the accounts receivable with significant single amounts (the balance over RMB 5 million), and the losses on impairment shall be made on the basis of the balance between the current values of the predicted future cash flow lower than book value so as to withdraw provision for bad debts. The financial assets with insignificant single amounts shall be divided into several combinations in the light of aging, and then the losses on impairment shall be made on the basis of a certain proportion of ending balance of accounts receivable combination so as to withdraw provision for bad debts. The Company shall withdraw the provision for bad debts at a proportion of 5% of ending balance of accounts receivable for every aging and 100% of

accounts receivable for aging with 5 years or over. Where there are conclusive evidences which make it clear hat the accounts receivable can not be recalled, the Company shall, in accordance with administration authority, make a loss on bad debts after approval of the Shareholders’ General Meeting or the Board of Directors, so as to write off the provision for bad debts withdrawn. 8. Measurement of inventories (1) The inventories of the Company include raw materials, goods in process, merchandise on hand, consigned processing materials, goods in transit, packaging materials, low value consumables, etc. (2) The inventories shall be initially measured in light of their cost. On the date of balance sheet, the inventories shall be measured whichever is lower in accordance with the cost and the net realizable value. (3) Physical inventory at fixed periods shall be taken under perpetual inventory system. (4) A bulk chemicals raw materials, good in process and finished products shall be priced at actual cost, while cost of sending out inventories shall be carried forward at the weighted average method. Auxiliary material and packaging materials shall be priced at actual cost and be measured by adopting planned cost; the difference between the actual cost and planned cost shall be recorded into materials cost variance when measurement, which materials cost variance allocable thereto shall be calculated based on materials cost difference rate at the end of month, and the planned cost of sending out materials shall be adjusted as actual cost. Low value consumables shall be recoded at actual cost and be amortized by employing the one-off write-off method when claiming. (5) On the date of balance sheet, the inventories shall be measured whichever is lower in accordance with the cost and the net realizable value. If the cost of inventories is higher than the net realizable value, the provision for the loss on decline in value of inventories shall be made and be included in the current profits and losses. If the factors causing any write-down of the inventories have disappeared, the amount of write-down shall be resumed and be reversed from the provision for the loss on decline in value of inventories that has been made. The reverse amount shall be included in the current profits and losses. The net realizable value refers to in the daily business activity the amount after deducting the estimated cost of completion, estimated sale expense and relevant taxes from the estimated sale price of inventories. 9. Measurement of investment real estates Investment real estates of the Company include the right to use any land which has already been rented; the right to use any land which is held and prepared for transfer after appreciation; and the right to use any building which has already been rented. Investment real estates shall be recognized when it meets the following requirements simultaneously: (a) the Company can get rental income related to the investment real estates or incremental return, and (b) the cost of the investment real estates can be reliably measured. The initial measurement shall be made at its actual cost when purchase or building.

The Company shall make a follow-up measurement to the investment real estates by employing the cost pattern on the date of the balance sheet. An accrual depreciation or amortization shall be made for the investment real estates in the light of the accounting policies of fixed assets and intangible assets. When the company has well –established evidence to indicate that the purpose of the real estate has changed, such as begins to be used for its own, it shall convert the investment real estate to other assets or vise versa. Measurement of impairment provision for investment real estates: on the balance sheet data, the Company shall make inspection to the investment real estates item by item; where there is any sign of impairment of the investment real estates, the recoverable amount shall be estimated in the light of the individual investment real estate item; with regard to the balance between recoverable amount lower than its book value, its provision for impairment of the investment real estate shall be withdrawn. The provision for impairment of the investment real estate shall be recognized on the basis of the balance between the book value of individual investment real estate item higher than its recoverable amount. Once any impairment provision of the investment real estate is recognized, it shall not be switched back in the future accounting periods. 10. Measurement of Fixed assets (1) The term "fixed assets" refers to the tangible assets that simultaneously possess the features as follows: (a) They are held for the sake of producing commodities, rendering labor service, renting or business management; and (b) Their useful life is in excess of one fiscal year. No fixed asset may be recognized unless it simultaneously meets the conditions as follows: (a) The economic benefits pertinent to the fixed asset are likely to flow into the enterprise; and (b) The cost of the fixed asset can be measured reliably. The initial measurement of a fixed asset shall be made at its cost. (2) Depreciation of fixed assets: The Company shall make depreciation for all its fixed assets. However, the fixed assets that have been fully depreciated but are still in use and the land that is separately measured and included shall be excluded. The term "depreciable amount" refers to the amount of deducting its expected net salvage value from the original price of the fixed asset to be depreciated. For a fixed asset, the provision for depreciation has been made, it shall deduct the accumulative amount of the provision for impairment of the depreciated fixed asset that has been already made shall be deducted. The "expected net salvage value" refers to the expected amount that an enterprise may obtain from the current disposal of a fixed asset after deducting the expected disposal expenses at the expiration of its expected useful life. Depreciation of fixed assets shall be made by adopting the straight-line method. categories, expected useful life, expected residual ratio and yearly depreciation:

Depreciation yearly Expected residual Categories life depreciation ratio

House & buildings 24 years 4.00% 4%

Special equipment 9 years 10.89% 2%

General-purpose equipment 18 years 5.33% 4%

Transportation vehicles 9 years 10.89% 2%

Productive fixed assets has a large amount under the production environment with a certain chemical corrosion, as a result, the residual value is the smaller. (3) Measurement of provision for fixed asset impairment: on the balance sheet data, the Company shall make inspection to the fixed assets item by item; where there is any sign of impairment of the fixed assets, the recoverable amount shall be estimated in the light of the individual fixed assets item; with regard to the balance between recoverable amount lower than its book value, its provision for the fixed assets impairment shall be withdrawn. The provision for fixed assets impairment shall be recognized on the basis of the balance between the book value of individual fixed assets item higher than its recoverable amount. Once any impairment provision of the fixed assets is recognized, it shall not be switched back in the future accounting periods. 11. Measurement of construction in progress (1) Construction in progress of the Company includes self-operating project and construction contracted. (2) Initial measurement of the construction in progress: Cost of the construction in progress shall be recognized at its actual expenses incurred. Where interest on borrowing related to the construction in progress occurred before the fixed assets reached estimated usable status, it shall be capitalized. (3) Time point of construction in progress being carried forward as fixed assets shall be recognized at the time point that the construction reaches estimated usable status. (4) Measurement of provision for impairment of construction in progress: on the balance sheet data, the Company shall make inspection to the construction in progress item by item; where there is any sign of impairment of the construction in progress, the recoverable amount shall be estimated; with regard to the balance between recoverable amount lower than its book value, its provision for the construction in progress impairment shall be withdrawn. The provision for impairment of construction in progress shall be recognized on the basis of the balance between the book value of individual construction in progress item higher than its recoverable amount. Once any impairment provision of the construction in progress is recognized, it shall not be switched back in the future accounting periods. 12. Confirmation and measurement of intangible assets (1) Initial Measurement of intangible assets

The intangible assets are initially measured according to its actual cost when acquired. (2) Classification criteria for research expenditures and development expenditures of the Company’s internal research and development projects The expenditures for the Company’s internal research and development projects are classified into research expenditures and development expenditures for separate handling. The research expenditures refer to the Company’s expenses for the creative and planned investigations to acquire and understand new scientific or technological knowledge. The Company’s research expenditures for its internal research and development projects are recorded into the profit or loss for the current period. The development expenditures refer to the Company’s expenses for the application of research achievement and other knowledge to a certain plan or design, prior to the commercial production or use, so as to produce any new material, device or product, or substantially improved material, device and product. And the development expenditures are confirmed as intangible assets when they satisfied the following conditions simultaneously: 1) It is technically feasible to finish the intangible assets for use or sale; 2) It is intended to finish and use or sell the intangible assets; 3) The usefulness of methods for intangible assets to generate economic benefits is proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or that there is a potential market for the intangible assets itself or that the intangible assets will be used internally; 4) It is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other resources; and 5) The development expenditures of the intangible assets can be reliably measured. Any other expenditure that the Company can not identify their belonging to research expenditures or development expenditures are recorded as management expenditures into the profit or loss for the current period. (3) Subsequent measurement of intangible assets ① Estimate of the service life of intangible assets As for the intangible assets that are possessed or controlled by the Company and that are derived from any contractual right or other statutory rights, their service lives do not exceed the term of the contractual right or other statutory rights; Where the contractual right or other statutory rights continue due to their renewal after expiration and it is proved that the Company does not need to pay a high cost for the renewal, the renewed period is included in the service life of the intangible assets; where the service lives of the intangible assets are not stipulated in contracts or by law, they are determined by the Company’s previous experience or professional opinions from relevant experts. After adoption of the aforesaid methods, if it is still unable to forecast the period when the intangible asset can bring economic benefits to the Company, it is regarded by the Company as an intangible assets with uncertain service life.

② Check on the service life of intangible assets The Company checks the service life of intangible assets on the balance sheet date. Where there are evidences to prove that the service life of an intangible asset is different from before, the service life of the intangible asset will be changed and treated according to accounting estimate; where there are evidences to prove that the intangible assets with uncertain service life have limited service lives, they will be estimated of their service lives, and be treated according to the handling principles for intangible assets with uncertain service life. ③ Amortization of intangible assets with limited service lives The Company’s intangible assets with limited service lives are amortized on a straight-line basis within their expected service lives beginning from the month of their acquisition. ④ Subsequent measurement of intangible assets with uncertain service lives Based on the relevant information available, if the service life of an intangible asset can not be reasonably estimated, the Company recognizes the intangible asset as an intangible asset with an uncertain service life. The intangible assets with uncertain service lives will not be amortized during the holding period, but the Company will conduct testing in every accounting period for the devaluation of intangible assets with uncertain service lives. (4) Withdrawal method of reserve for intangible assets impairment At the period-end, the Company checks its intangible assets item by item. Where there is a sign of asset impairment, the Company estimates the recoverable amount according to the single intangible asset. Where the recoverable amount of the asset is less than its book value, the book value is written down as the recoverable amount. The written-down amount is recognized as assets impairment loss, and the corresponding impairment reserve is withdrawn. Upon the recognition of the reserve for intangible assets impairment, it is not to be reversed in the following accounting periods. 13. Long-term Equity Investments Recognition and Measurement (1) The initial measurement of long-term equity investment: the initial cost of the long-term equity investment, which is acquired by different means, shall be ascertained in the following ways:

○1 As for the long-term equity investment acquired by merger of enterprises under the same control, the share of the book value of the owner’s equity of the merged enterprise, on the date of merger, is regarded as the initial cost of the long-term equity investment. The difference between the initial cost of the long-term equity investment and the payment in cash, non-cash assets transferred as well as the book value of the debts borne by the merging party, or the total face value of marketable securities issued shall be accounted into capital reserve; If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted.

○2 As for the long-term equity investment acquired by the merger under different control, the merger costs ascertained is regarded as the initial cost of the long-term equity investment. If the merger cost is larger than the fair value difference of the purchased party’s net identifiable assets, it will be recorded as goodwill in the consolidated financial statement; if the merger cost is smaller than the fair value difference of the purchased party’s net identifiable assets, it will be accounted into current profits and losses.

○3 Beside the aforesaid long-term equity investment acquired by enterprises merger, with regard to the long-term investment acquired by payment in cash, non-monetary assets paid, or marketable securities issued, its fair value shall be regarded as the initial cost of the long-term equity investment; the initial cost of a long-term equity investment obtained by debt rephrasing will be the fair value of shares owned after debt-for-equity swap; as for long-term equity investment invested by investors, the valued ascertained in the investment contract or agreement shall be regarded as the initial cost, but if the value ascertained in the investment contract or agreement was not fair, the fair value of investment equity would be regarded as the initial cost. The cash profit included in the actual payment or consideration, which has been announced yet not drew, shall be independently calculated as account receivables. (2) Subsequent Measurement of Long-term Equity Investments: for a long-term equity investment for which there is no offer in the active market and of which the fair value cannot be reliably measured, if the Company has not joint control or significant influence over the subsidiaries or the invested entities, the cost method shall be employed in the measurement; if the Company has joint control or significant influence over the invested entities, the equity method shall be employed. The term “joint control” refers to the control over an economic activity in accordance with the contracts and agreements. Following situations shall be considered to decide whether it is joint control:

○1 No cooperative party can singly control the production and operation activities of the joint venture.

○2 Decisions involving basic business activities of the joint venture require consensus among the cooperative parties.

○3 The cooperative parties can appoint one cooperative party by contract or agreement to conduct management over daily operation of the joint venture, but the appointed cooperative party shall exercise its administrative power within the scope of finance and business policy, which has been agreed by all cooperative parties. The term “significant influences” refers to the power to participate in making decisions on the financial and operating policies of the invested entities, but not to control or do joint control together with other parties over the formulation of these policies. As for the Company, holding directly or indirectly through subsidiaries more than 20% but less than 50% voting shares is regarded as having significant influence over the invested entities, except for the situations where there is specific evidence proving it can not

participate the decision making in operation and production of the invested entities, and thus cannot exert significant influence. It’s generally considered by the Company that those entities which hold less than 20% voting shares of the invested entities have no significant influence over the invested entities except for the following situations:

○1 Having representative(s) in the Board of Directors or other similar authority of the invested entities.

○2 Participating in the process of formulating policies in the invested entities, including the formulation of dividend distribution policy etc.

○3 Having important transactions with the invested entities.

○4 Dispatching management personnel to the invested entities.

○5 Providing key technology materials to the invested entities. (3) Impairment for long-term equity investment: if there are signals for impairment, withdrawal in single items shall be conducted based on the difference between the receivable amount and the book value, so as to ascertain impairment losses. Once ascertained, the impairment for long-term equity investment will not be returned in the coming accounting period. 14. Recognition and Measurement of Borrowing Cost (1) The Range of Borrowing Costs The Company’s borrowing costs include interest on borrowings, amortization of discounts or premiums on borrowings, ancillary expenses, and exchange balance incurred by foreign currency borrowings etc.. (2) The Ascertain Principle of Borrowing Costs Where the borrowing costs incurred to the Company can be directly attributable to the construction or production of assets eligible for capitalization, it shall be capitalized and recorded into the costs of relevant assets. Other borrowing costs shall be recognized as expenses on the basis of the actual amount incurred, and shall be recorded into the current profits and losses. (3) The Ascertain of Capitalization Period of Borrowing Costs

○1 The Ascertain of Beginning Capitalization If the asset disbursements or the borrowing costs have already incurred, and the construction or production activities which are necessary to prepare the asset for its intended use or sale have already started, the capitalization of borrowing costs begins.

○2 The Ascertain of Suspending Capitalization Where the construction or production of asset eligible for capitalization is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of

the borrowing costs shall be suspended. The borrowing costs incurred during such period shall be recognized as expenses, and shall be recorded into the profits and losses of the current period, till the construction or production of the asset restarts. If the interruption is a necessary step for making the qualified asset under acquisition and construction or production ready for the intended use or sale, the capitalization of the borrowing costs shall continue.

○3 The Ascertain of Ceasing Capitalization When the asset eligible for capitalization under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs shall be ceased. The borrowing costs incurred after the asset eligible for capitalization under acquisition and construction or production is ready for the intended use or sale shall be recognized as expenses at the incurred amount when they are incurred, and shall be recorded into the profits and losses of the current period. (4) The Ascertain of the To-Be-Capitalized Amount of Borrowing Costs

○1 The Ascertain of the To-Be-Capitalized Amount of Borrowing Interests During the period of capitalization, the to-be-capitalized amount of interests (including the amortization of discounts or premiums) in each accounting period shall be determined according to the following provisions: A: As for specifically borrowed loans for the acquisition and construction or production of assets eligible for capitalization, the to-be-capitalized amount of interests shall be determined in light of the actual cost incurred of the specially borrowed loan at the present period minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment. B: Where a general borrowing is used for the acquisition and construction or production of assets eligible for capitalization, the Company shall calculate and determine the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate shall be calculated and determined in light of the weighted average interest rate of the general borrowing. C: Where there is any discount or premium, the amount of discounts or premiums that shall be amortized during each accounting period shall be determined by the real interest rate method, and an adjustment shall be made to the amount of interests in each period. D: During the period of capitalization, the amount of interest capitalized during each accounting period shall not exceed the amount of interest actually incurred by the relevant borrowings in the current period.

○2 The Ascertain of the To-Be-Capitalized Amount of Ancillary Expense A: For the ancillary expense incurred to a specifically borrowed loan, those incurred before a qualified asset under acquisition , construction or production is ready for the

intended use or sale shall be capitalized at the incurred amount when they are incurred, and shall be recorded into the costs of the asset eligible for capitalization; those incurred after a qualified asset under acquisition and construction or production is ready for the intended use or sale shall be recognized as expenses on the basis of the incurred amount when they are incurred, and shall be recorded into the profits and losses of the current period. B: The ancillary expenses arising from a general borrowing shall be recognized as expenses at their incurred amount when they are incurred, and shall be recorded into the profits and losses of the current period.

○3 The Ascertain of the To-Be-Capitalized Amount of Exchange Balance During the period of capitalization, the exchange balance on foreign currency borrowings shall be capitalized and shall be recorded into the cost of assets eligible for capitalization. 15. Recognition and measurement of employee compensation (1) The employee compensation includes: wages, bonuses, allowances and subsidies for the employees; welfare benefits for the employees; endowment insurance, medical insurance, unemployment insurance, work injury insurance, maternity insurance and other social insurances; housing accumulation fund; labor union expenditure and employee education expenses; non-monetary welfare; compensations for the cancellation of the labor relationship with the employees; and other relevant expenditures of services offered by the employees. (2) During the accounting period of an employee’s providing services to the Company, the employee compensation payable is recognized as liabilities. Except for the compensations for the cancellation of the labor relationship with the employee, the employee compensations are recorded, according to the beneficiaries of the services offered by the employee, respectively as costs of fixed assets, costs of intangible assets, product costs and service costs. Other employee compensations are directly included in the profit or loss for the current period. 16. Recognition and measurement of government subsidy The government subsidies pertinent to incomes are treated respectively in accordance with the circumstances as follows: 1) Those subsidies used for compensating the related future expenses or losses of the Company are recognized as deferred income and are included in the current profits and losses during the period when the relevant expenses are recognized; or 2) Those subsidies used for compensating the related expenses or losses incurred to the Company are directly included in the current profits and losses. The government subsidies pertinent to assets are recognized as deferred income, equally distributed within the useful lives of the relevant assets, and included in the current profits and losses. But the government subsidies measured at their nominal amount are directly included in the current profits and losses.

17. Recognition and measurement of projected liabilities (1) The obligation pertinent to a contingency is recognized as projected liabilities when the following conditions are satisfied simultaneously: ① That obligation is a current obligation of the Company; ② It is likely to cause any economic benefit to flow out of the Company as a result of performance of the obligation; and ③ The amount of the obligation can be measured in a reliable way. (2) Projected liabilities are initially measured in accordance with the best estimate of the necessary expenses for the performance of the relevant current obligation. If there is a sequent range for the necessary expenses and if all the outcomes within this range are equally likely to occur, the best estimate is determined in accordance with the middle estimate within the range. In other cases, the best estimate is conducted in accordance with the following situations, respectively: ① if the contingencies concern one single item, it is determined in the light of the most likely outcome. ② if the contingencies concern two or more items, the best estimate is calculated and determined in accordance with all possible outcomes and the relevant probabilities. 18. Recognition and measurement of revenues (1) Recognition standards for revenues from selling goods Revenues from selling goods are recognized when the following conditions are met simultaneously: 1) the significant risks and rewards of ownership of the goods have been transferred to the buyer by the Company; 2) the Company retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; 3) the relevant amount of revenues can be measured in a reliable way; 4) the relevant economic benefits may flow into the Company; and 5) the relevant costs incurred or to be incurred can be measured in a reliable way. (2) Recognition standards of revenues from providing labor services ① Recognition standards of revenues from providing labor services on the condition that the Company can reliably estimate the outcome of a transaction concerning the labor services it provides If the Company can, on the date of the balance sheet, reliably estimate the outcome of a transaction concerning the labor services it provides, it recognizes the revenues from providing services employing the percentage-of-completion method. And the outcome of a transaction concerning the providing of labor services can be measured in a reliable way when the following conditions are met simultaneously: 1) the amount of revenues can be measured in a reliable way; 2) the relevant economic benefits are likely to flow

into the Company; 3) the schedule of completion under the transaction can be confirmed in a reliable way; and 4) the costs incurred or to be incurred in the transaction can be measured in a reliable way. ② Recognition standards of revenues from providing labor services on the condition that the Company can not reliably estimate the outcome of a transaction concerning the labor services it provides If the Company can not, on the date of the balance sheet, measure the result of a transaction concerning the providing of labor services in a reliable way, it is to be conducted in accordance with the following circumstances, respectively: A. If the cost of labor services incurred is expected to be fully compensated, the revenues from providing labor services are recognized in accordance with the amount received or expected to be received, and the cost of labor services incurred is carried forward; B. If the cost of labor services incurred is expected to be partially compensated, the revenues from providing labor services are recognized in accordance with the compensated amount, and the cost of labor services incurred is carried forward; C. If the cost of labor services incurred is expected to be fully uncompensated, the cost incurred is included in the current profits and losses, and no revenue from the providing of labor services may be recognized. ③ Method of determining the stage of completion when employing the percentage-of-completion method The stage of completion is determined according to the proportion of the costs incurred against the estimated total costs. 19. Recognition and measurement of income tax The Company adopts the balance sheet approach in its income tax accounting. Where there is any deductible temporary difference between the book value of assets and liabilities and the tax base, the Company recognizes the deferred income tax assets arising from the deductible temporary difference, to the extent of the amount of the taxable income which it is most likely to obtain and which can be deducted from the deductible temporary difference. Where there is any taxable temporary difference between the book value of assets and liabilities and the tax base, the Company recognizes the deferred income tax liabilities arising from the taxable temporary difference. At the end of the period, the book value of deferred income tax assets is reexamined. If it is unlikely to obtain sufficient taxable income to offset the benefit of the deferred income tax assets, the book value of the deferred income tax assets shall be written down. When it is probable to obtain sufficient taxable income, such written-down amount shall be subsequently reversed.

V. Business merger and consolidated financial statement (I) Business merger There is no need to disclose the financial information related to the business merger. (II) Consolidated financial statement 1. Recognition principle of consolidation scope The consolidation scope of consolidated financial statements shall be determined on the basis of control. The term “control” refers to the power of the Company to govern the financial and operating policies of investee entity so as to obtain benefits from its business activities. To determine whether or not it is able to control the investee entity, one shall take into account the investee entity’s current convertible corporate bonds and current executable warrants held by the Company, as well as other potential factors relating to the voting rights. Where the Company holds half or more of the capital with voting rights of an investee entity, or holds less than 50% of the capital with voting rights of an invetee entity but owns the actual control right, such investee entities included in the consolidation scope of consolidated financial statements. 2. Preparation of consolidated financial statement In accordance with the provision stipulated in Accounting Standard for Business Enterprise No. 33 – Consolidated Financial Statements, the consolidated financial statements shall, on the basis of the financial statements of the parent company and its subsidiaries included in the consolidation scope and other relevant information, be prepared by the parent company after the long term equity investments in the subsidiaries are adjusted through the equity method, and after equity capital investment of parent company and quota held by parent company in owner’s equity of subsidiaries, internal significant transactions and internal current within the Company are offset. 3. Minority interests of important subsidiaries Name of subsidiaries Minority interest as at 30 Jun. 2009

Sanonda Zhengzhou Pesticide Co., Ltd. 6,346,902.65

Hubei Sanonda Foreign Trading Co., Ltd. 1,674,621.44

Hubei Sanonda Agrochemical Co., Ltd. 254,961.49

Jingzhou Sanonda Aifusi Chemical Industry Co., Ltd. -369,803.39

Sanonda (Jingzhou) Pesticide & Chemical Co., Ltd. 50,814.33

Jingzhou Longhua Petrochemicals Co., Ltd. 4,177,166.96

Jingzhou Lingxiang Chemical Industry co., Ltd. 4,808,820.85

Total 16,943,484.33

4. Subsidiaries of the Company

Proportion Proportion of Registered Actual of shares voting rights Name of subsidiaries Registration place Business Nature capital investment held by the enjoyed by the Company Company

Production of chemical products and Sanonda Zhengzhou Pesticide Co., 57 Chengdong South such pesticide as 40,000,000 38,558,619.32 70.00% 70.00% Ltd. Road, Zhengzhou omethoate and sodium hydrate Production of Sanonda (Jingzhou) Pesticide & 10 Xihuan Road, pesticide and 30,000,000 26,500,000.00 88.33% 88.33% Chemical Co., Ltd. Jingzhou District intermediate Import and export of Hubei Sanonda Foreign Trading 1 Beijing East Road, pesticide and 10,000,000 9,000,000.00 90.00% 90.00% Co., Ltd. Jingzhou intermediate Hubei Sanonda Tianmen 179 Gudu Av., Zaoshi, Production and sale of 30,000,000 15,745,023.32 100.00% 100.00% Agrochemical Co., Ltd. Tianmen pesticide Jingzhou Longhua Petrochemicals 95 Beijing East Road, Production and sale of 5,000,000 3,250,000.00 65.00% 65.00% Co., Ltd. Jingzhou chemical products R&D, development, Jingzhou Sanonda Aifusi Chemical 93 Beijing East Road, production and sale of 6,000,000 3,060,000.00 100.00% 100.00% Industry Co., Ltd. Jingzhou fine chemical products R&D, Production and Nongji Road, Jingzhou sale of product of Jingzhou Lingxiang Chemical Development Zone chemical industry 10,000,000 5,100,000.00 51.00% 51.00% Industry co., Ltd. Shashi Farm, Yaowan (excluding dangerous Branch product of chemical industry)

5. Original subsidiaries that no longer be included in the consolidation scope of the Company Reason why this company is no Registration Registered Proportion of Proportion of longer included No. Name Business nature place capital shareholding voting right in the consolidation scope

1 Hubei Fengyuan T1, Linjiang 40,000,000 Production of fine 55% 55% Completion of

Chemical Co., Road, Shashi chemicals liquidation products Ltd. District Note: This company did not be included into the consolidation scope in the last year. After finishing liquidation, the said company was no longer included into the consolidation scope.

6. Subsidiaries that have been disposed Year-begin to 2008 Disposal day disposal day No. Name Total Total Total Total Total Total Total equities Total equities assets liabilities assets liabilities income profit Hubei Fengyuan 1 Chemical Co., Ltd. 28,091.00 40,960,877.79 -40,932,786.79 12,032.36 40,987,020.83 -40,974,988.47 -42,201.68

7. New subsidiary company included into the consolidation scope in the reporting period In the reporting period, new subsidiary company included into the consolidation scope is Jingzhou Lingxiang Chemical Industry Co., Ltd. with the registered capital of RMB 10 million, whose registered office is situated at Nongji Road, Jingzhou Development Zone Shashi Farm Yaowan Branch. This company is mainly engaged in R&D, Production and sale of product of chemical industry (excluding dangerous product of chemical industry), and production of formaldehyde. Its 51% equities are held by the Company, while the rest 49% equities are held by Sanonda Group Corporation. At present, the said company is under preconstruction, and is expected to start operation by the end of 2009.

VI. Tax 1. Income tax Income tax shall be paid in light of the taxable amount of income and tax rate applicable to the current period. Income tax rate is 25%. 2. VAT (1) Sales tax of VAT for pesticides that is produced by the Company, shall be measured at tax rate of 13%, such pesticides include orthene, paraquate, glyphosate, chlorofos, DDVP, omethoate, triazophos and imidacloprid, ect.. (2) Sales tax of VAT for chemical products shall be accounted at tax rate of 17%, such chemical products include spermine, liquid caustic soda, liquefied chlorine gas and

hydrochloric acid. (3) VAT for export products shall be recorded in light of the policy of “Tax exemption, deduction and return”. 3. Business tax Business tax shall be paid at 5% of turnover. 4. City maintenance construction tax City maintenance construction tax shall be paid at 7% or 5% of turnover tax payable of the current period. 5. Extra charges for education Extra charges for education shall be paid at 3% of turnover tax payable of the current period. 6. Housing property tax Housing property tax shall be paid at 1.2% of balance after deducting 10-30% of original value of property in lump. If there is property rental, housing property tax shall be paid at 12% of property rental.

VII. Explanation on change in accounting policies and accounting estimates and correction of prior-period accounting errors 1. Change in accounting policies The Company’s accounting policies remained unchanged in the reporting period. 2. Change in accounting estimates The Company’s accounting estimates remained unchanged in the reporting period. 3. Correction of previous accounting errors No correction of previous accounting errors incurred in the reporting period.

VIII. Notes to the consolidated financial statement Remark: The beginning of period (opening) refers to 1 Jan. 2009, the end of period (ending) refers to 30 Jun. 2009; the last period refers to Jan. to Jun. 2008, the current period refers to Jan. to Jun. 2009. 1. Monetary fund (1) Listing by categories

Items Closing balance Opening balance

Amount in Amount Amount in Amount Rate of Rate of original converted into original converted into exchange exchange currency RMB currency RMB

Cash 9,062.81 5,191.39

Of which: RMB 9,062.81 1.00 9,062.81 5,191.39 1.00 5,191.39

Bank deposit 638,214,243.67 555,786,579.95

Of which: RMB 624,897,987.08 1.00 624,897,987.08 542,442,781.65 1.00 542,442,781.65

USD 1,954,165.91 6.8143 13,316,256.59 1,952,497.59 6.8346 13,343,798.30

Other monetary 18,850,548.42 7,040,548.42 fund

Of which: RMB 18,850,548.42 1.00 18,850,548.42 7,040,548.42 1.00 7,040,548.42

Total 657,073,854.90 562,832,319.76

Note: With regard to monetary fund of the Company, there are no any payment mortgaged or frozen that there exists restrictions on the realization, or any payment deposited abroad or existing potential risk of recycling. 2. Tradable financial assets Items Closing fair value Opening fair value Investment of tradable equity 6,380,528.32 4,183,872.00 instrument

Total 6,380,528.32 4,183,872.00 Note: With regard to the above-mentioned tradable financial assets, there exist no materials restrictions on the realization.

3. Notes receivable

Type of notes Closing balance Opening balance

Bank acceptance bill 31,076,998.65 8,556,358.99

Trade acceptance draft 64,000.00

Total 31,076,998.65 8,620,358.99

4. Accounts receivable (1) Listing by aging

Closing balance Opening balance

Aging Provision for Provision for Balance Proportion Proportion Balance Proportion Proportion bad debts bad debts

Within 1 year 172,090,666.55 8,607,088.50 (including 1 84.96% 5.00% 83,343,000.31 72.30% 4,196,608.55 5.04%

Closing balance Opening balance

Aging Provision for Provision for Balance Proportion Proportion Balance Proportion Proportion bad debts bad debts year)

1-2 years (including 2 9,737,928.90 8,806,234.23 years) 4.81% 90.43% 10,934,295.00 9.49% 8,397,093.21 76.80% 2-3 years (including 3 1,603,733.42 423,183.01 years) 0.79% 26.39% 5,066,362.40 4.39% 4,782,573.37 94.40% 3-4 years (including 4 4,510,851.84 4,380,162.59 years) 2.23% 97.10% 1,362,152.14 1.18% 789,196.35 57.94% 4-5 years (including 5 1,069,474.71 739,989.52 years) 0.53% 69.19% 156,776.09 0.14% 20,389.34 13.01%

Over 5 years 13,542,537.86 6.69% 13,542,537.86 100.00% 14,414,129.66 12.50% 14,414,129.66 100.00%

Total 202,555,193.28 100.00% 36,499,195.71 18.02% 115,276,715.60 100.00% 32,599,990.48 28.28%

(2) Listing by categories

Closing balance Opening balance

Category Withdrawal Provision for Withdrawal Provision for Amount Proportion Amount Proportion proportion bad debts proportion bad debts Significant single 72,312,573.44 35.70% 15.34% 11,096,269.53 41,258,458.00 35.79% 23.13% 9,543,563.76 amounts Insignificant single amounts but 5,960,095.43 2.94% 100.00% 5,960,095.43 5,960,095.43 5.17% 100.00% 5,960,095.43 with significant credit risk Other 124,282,524.41 61.36% 15.64% 19,442,830.75 68,058,162.17 59.04% 25.12% 17,096,331.29 insignificant

Total 202,555,193.28 100.00% 18.02% 36,499,195.71 115,276,715.60 100.00% 28.28% 32,599,990.48 Note 1: With regard to the withdrawal proportion of bad debts of accounts receivable with significant accounts, please refer to the following No. (4) as below: Note 2: Accounts receivable with insignificant single amounts but with significant credit risk is accounts receivable with larger recoverable risk recognized in accordance with

collection work of the Company to debtors and daily businesses occurred, and credit of debtors.

(3) Amount in original currency of accounts receivable listed in foreign currency and conversion rate Currency Amount Conversion rate

US dollar 14,502,499.09 6.8143

(4) Explanation on withdrawing provision for bad debts of accounts receivable with significant single amounts Withdra Ending book Amount of wal Items Reason balance bad debts proportio n

Business-as-usual, withdrawn Bayer in light of withdrawal policies 23,673,440.99 1,183,672.05 5.00% of bad debt provision

Business-as-usual, withdrawn Chongqing Ziguang Chemical in light of withdrawal policies Industry Co., Ltd. 19,976,400.00 998,820.00 5.00% of bad debt provision Business-as-usual, withdrawn India UNITED PHOSPHORUS in light of withdrawal policies LIMITED 9,713,369.83 485,668.49 5.00% of bad debt provision bankruptcy petition filed, Mexico TEKCHEM Corp. off-chance recoverability, 7,874,358.80 7,874,358.80 100.00% withdrawn in full Business-as-usual, withdrawn Indonesia Zhengda Company in light of withdrawal policies 5,885,359.02 294,267.95 5.00% of bad debt provision Business-as-usual, withdrawn India MEGHMANI in light of withdrawal policies 5,189,644.80 259,482.24 5.00% of bad debt provision

Total 72,312,573.44 11,096,269.53

(5) At the end of period, the top five accounts receivable totaled RMB 67,122,928.64, including RMB 59,248,569.84 within one years and RMB 7,874,358.8 over one to two years, taking up33.14% of total accounts receivable. (6) No amount due from shareholders who hold 5% or more of the voting rights of the

Company is included in the accounts receivable. (7) There exists no payment received from related parties in the accounts receivable.

5. Prepayment (1) Listing by aging

Closing balance Opening balance

Aging Provision Provision Withdrawal Withdrawal Balance Proportion for bad Balance Proportion for bad proportion proportion debts debts

Within 1 year (including1 year) 92,332,993.38 97.69% 1,207,740.76 1.31% 14,772,848.90 85.63% 1,110,045.41 7.51%

1-2 years

(including 2 years) 412,380.22 0.44% 15,981.95 3.88% 422,769.89 2.45% 12,800.23 3.03% 2-3 years (including 3 years) 203,271.72 0.22% 1,824.30 0.90% 249,306.27 1.45% 12,230.95 4.91% 3-4 years (including 4 years) 1,325,847.76 1.40% 66,059.06 4.98% 1,342,957.71 7.78% 66,547.89 4.96% 4-5 years (including 5 years) 198,574.66 0.21% 9,328.74 4.70% 349,732.66 2.03% 17,486.63 5.00%

Over 5 years 40,105.13 0.04% 40,105.13 100.00% 114,440.63 0.66% 114,440.63 100.00%

Total 94,513,172.87 100.00% 1,341,039.94 1.42% 17,252,056.06 100.00% 1,333,551.74 7.73%

(2) Listing by categories

Closing balance Opening balance

Provision Provision Type Withdrawal Withdrawal Amount Proportion for bad Amount Proportion for bad proportion proportion debts debts Significant single amounts 58,400,425.37 61.79% Insignificant single amounts but with

Closing balance Opening balance

Provision Provision Type Withdrawal Withdrawal Amount Proportion for bad Amount Proportion for bad proportion proportion debts debts significant credit risk Other insignificant 36,112,747.50 38.21% 3.71% 1,341,039.94 17,252,056.06 100.00% 7.73% 1,333,551.74

Total 94,513,172.87 100.00% 1.42% 1,341,039.94 17,252,056.06 100.00% 7.73% 1,333,551.74

(3) No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the prepayment.

(4) Closing prepayment increased by 77,261,116.81 compared with opening amount, which caused by payment for equipment prepaid in advance due to increase of projects.

6. Other receivables (1) Listing by aging

Closing balance Opening balance

Aging Provision Provision Withdrawal Withdrawal Balance Proportion for bad Balance Proportion for bad proportion proportion debts debts

Within 1 year (including1 year) 6,945,664.00 29.66% 1,332,861.41 19.19% 10,128,450.50 45.77% 246,835.27 2.44%

1-2 years (including 2 years) 6,014,519.12 25.68% 79,466.44 1.32% 1,625,533.87 7.35% 81,359.14 5.01% 2-3 years (including 3 years) 2,912,203.73 12.44% 154,940.61 5.32% 2,845,333.73 12.86% 155,397.11 5.46% 3-4 years (including 4 years) 884,428.90 3.78% 56,400.35 6.38% 949,028.90 4.29% 134,300.35 14.15% 4-5 years (including 5 years) 1,154,112.12 4.93% 169,203.70 14.66% 1,100,881.77 4.97% 116,348.89 10.57%

Over 5 years 5,505,767.63 23.51% 5,505,767.63 100.00% 5,480,397.98 24.76% 5,480,397.98 100.00%

Closing balance Opening balance

Aging Provision Provision Withdrawal Withdrawal Balance Proportion for bad Balance Proportion for bad proportion proportion debts debts

Total 23,416,695.50 100.00% 7,298,640.14 31.17% 22,129,626.75 100.00% 6,214,638.74 28.08%

(2) Listing by categories

Closing balance Opening balance

Provision Provision Type Withdrawal Withdrawal Amount Proportion for bad Amount Proportion for bad proportion proportion debts debts Significant single amounts Insignificant single amounts but with significant credit risk

Other insignificant 23,416,695.50 100.00% 31.17% 7,298,640.14 22,129,626.75 100.00% 28.08% 6,214,638.74

Total 23,416,695.50 100.00% 31.17% 7,298,640.14 22,129,626.75 100.00% 28.08% 6,214,638.74

(3) At the end of period, the top five other receivables totaled RMB 12,332,461.30, taking up 52.67% of total other receivable. (4) No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the other receivables. (5) There exists no payment received from related parties in the other receivables.

7. Inventory (1) Inventories Items Closing balance Increase for the Decrease for the Opening balance current period current period

Raw material 69,008,143.01 509,533,455.71 523,946,868.66 54,594,730.06

Goods in process 46,306,846.87 1,297,718,204.48 1,304,020,679.91 40,004,371.44

Merchandise on hand 276,939,864.59 866,037,617.52 935,728,298.67 207,249,183.44

Low-value 694,546.07 429,424.22 492,533.81 631,436.48

consumption goods

Packaging material 3,885,055.41 58,256,424.09 58,123,033.13 4,018,446.37

Consigned processing materials 8,872.00 0.00 8,872.00

Goods in transit 7,111,022.02 6,363,684.79 10,298,369.05 3,176,337.76

Total 403,954,349.97 2,738,338,810.81 2,832,618,655.23 309,674,505.55

(2) Provision for falling price of inventory

Withdrawal Decrease for the current period Opening for the Closing Items Switching balance current Writing-off Total balance back period

Raw material 7,761,198.30 6,496,855.59 6,496,855.59 1,264,342.71

Merchandise on 49,359,382.37 hand 1,009,167.62 37,381,047.66 37,381,047.66 12,987,502.33

Packaging 282,134.55 material 282,134.55

Total 57,402,715.22 1,009,167.62 43,877,903.25 43,877,903.25 14,533,979.59

8. Long-term equity investment (1) Listing by accounting method Cash Increase Decrease Initial Opening Ending dividends for the for the Investee entities investment carrying carrying received for current current amount amount amount the current period period period

Calculation at cost method:

1. Jingzhou City Commercial Bank Co., Ltd 20,000,000.00 20,000,000.00 20,000,000.00

2. Jingzhou Tianyang Huibao Precision Chemicals Co., Ltd 1,440,000.00 1,440,000.00 1,440,000.00

3. Jingzhou Dali Industrial Co., Ltd 1,674,600.00 1,674,600.00 1,674,600.00

4.Hubei Shendian Co., Ltd. 564,000.00 564,000.00 564,000.00

5. Wangda Industrial Holding Co., Ltd 550,000.00 550,000.00 550,000.00

Cash Increase Decrease Initial Opening Ending dividends for the for the Investee entities investment carrying carrying received for current current amount amount amount the current period period period

6. Guangxi Zhongding Holding Co., Ltd 580,800.00 580,800.00 580,800.00

Total 24,809,400.00 24,809,400.00 1,440,000.00 23,369,400.00 Note: During the reporting period, the Company transferred 48% equities of Jingzhou Tianyang Huibao Fine Chemical Industrial Co., Ltd. to other shareholders, no longer holding these equities.

(2) Provision for impairment of long-term investment

Investee entities Closing balance Opening balance

Jingzhou City Commercial Bank Co., Ltd 11,991,017.37 11,991,017.37

Total 11,991,017.37 11,991,017.37

9. Investment real estates Increase for Decrease for Opening Closing Items the current the current balance balance period period

I. Original price 6,010,000.00 6,010,000.00

House and building 6,010,000.00 6,010,000.00

II. Accumulative depreciation and amortization 653,587.50 122,604.00 776,191.50

House and building 653,587.50 122,604.00 776,191.50

III. Accumulative provision for impairment of investment real estates

House and building

IV. Total carrying value of investment real estate 5,356,412.50 5,233,808.50

House and building 5,356,412.50 5,233,808.50 Note: Investment real estate of the Company is Hubei Building for hiring, which it is located in Shenzhen. Relevant property certification is in process.。

10. Fixed assets (1) Category of fixed assets Increase for Decrease for Opening Items the current the current Closing balance balance period period

I. Total original price 1,257,958,181.21 19,076,287.11 29,394,237.40 1,247,640,230.92

Including: House and building 332,295,134.86 442,141.46 -44,004.79 332,781,281.11

General equipment 89,417,132.96 1,002,499.37 88,414,633.59

Special equipment 823,944,900.43 17,026,462.18 28,176,722.82 812,794,639.79

Transportation vehicle 12,301,012.96 1,607,683.47 259,020.00 13,649,676.43

II. Total accumulative depreciation 442,109,945.71 45,544,393.45 23,689,841.65 463,964,497.51

Including: House and building 106,763,516.08 6,486,523.53 5,453.48 113,244,586.13

General equipment 59,906,388.25 1,557,160.01 945,915.64 60,517,632.62

Special equipment 267,985,397.98 37,309,017.28 22,479,452.53 282,814,962.73

Transportation vehicle 7,454,643.40 191,692.63 259,020.00 7,387,316.03

III. Total accumulative amount of provision for impairment of fixed assets 34,837,795.49 3,684,802.83 31,152,992.66

Including: House and building 7,458,177.74 7,458,177.74

General equipment 3,962,381.16 3,962,381.16

Special equipment 23,417,236.59 3,684,802.83 19,732,433.76

Transportation vehicle -

IV. Total carrying value of fixed assets 781,010,440.01 752,522,740.75

Including: House and building 218,073,441.04 212,078,517.24

General equipment 25,548,363.55 23,934,619.81

Special equipment 532,542,265.86 510,247,243.30

Transportation vehicle 4,846,369.56 6,262,360.40

(2) Idle fixed assets

Accumulative Provision for Type of fixed assets Original price Net value depreciation impairment

House and building 21,469,016.79 14,484,544.76 6,367,459.11 617,012.92

Accumulative Provision for Type of fixed assets Original price Net value depreciation impairment

General equipment 9,428,495.99 4,644,242.42 3,962,381.16 821,872.41

Special equipment 39,488,617.44 18,733,569.67 17,821,812.00 2,933,235.77

Total 70,386,130.22 37,862,356.85 28,151,652.27 4,372,121.10 (3) Closing amount of fixed assets decreased by 3.65% compared with the opening amount, which was because the Company disposed the part of fixed assets.

11. Construction in progress (1) Original price of construction in progress Decrease for the current Opening carrying balance period Amount

Name of Budgeted transferred Of which: project amount into fixed Amount capitalization assets in the of interest Increase for the reporting Other current period period decrease

Extension and reformation of 40000-ton spermine 29,886,000.00 860,243.35 5,521,592.36

Extension of the 4th phase of sewage disposal 13,040,000.00 400,000.00 895,141.89

Extension and reformation of paraquat 49,880,000.00 5,507,966.09 56,420.75 13,806,304.74

Extension 20,000,000.00 9,428,247.83 10,175.84 11,327,472.49

2nd phase of glyphosate 77,500,000.00 8,523,681.58 15,954,895.20

Denitration by freezing 9,455,000.00 1,220,148.48 3,597,138.60

Reformation of compressed air station 1,105,958.47 670,680.13

Lipid dimethyl phosphite 3,488,099.96 14,170.38

Nes carbofuran project 517,604.98 Removal project 2,054,898.50 323,573.00 Combined production of heat and electricity 490,000,000, 7,446,442.32 4,472,473. Other projects 4,532,339.11 0.00 7,652,392.18 0.00 78 4,472,473. Total —— 37,639,188.35 66,596.59 67,209,803.29 0.00 78

Con.: Closing carrying balance

Of which: Proportion of input Resource of capital Amount capitalization in budgets Name of projects of interest

Extension and Bank loans reformation of 40000-ton spermine 6,381,835.71 82,036.98 119%

Extension of the 4th Bank loans phase of sewage disposal 1,295,141.89 33,475.89 103.16%

Extension and Bank loans reformation of paraquat 19,314,270.83 357,737.66 38.72%

Extension 20,755,720.32 465,253.73 Bank loans 103.78%

2nd phase of Bank loans glyphosate 24,478,576.78 383,236.54 31.59%

Denitration by Bank loans freezing 4,817,287.08 72,719.66 50.95%

Reformation of Bank loans compressed air station 1,776,638.60 36,909.70 Lipid dimethyl Bank loans phosphite 3,502,270.34

Nes carbofuran project 517,604.98 Self-raised Removal project 2,378,471.50 Self-raised Combined production of heat and electricity 7,446,442.32 Bank loans 1.52%

Other projects 7,712,257.51 102,210.74

Total 100,376,517.86 1,533,580.90 —— ——

(2) Provision of impairment of construction in progress Withdrawal for Opening Decrease for the Items the current Closing balance Reason balance current period period

Nes carbofuran 517,604.98 517,604.98 project

Total 517,604.98 517,604.98

(3) The construction in progress of the Company shall be capitalized at the capitalization rate of 5.76%.

12. Intangible assets Decrease for Opening Increase for the Closing Items the current balance current period balance period

I. Total original price 224,181,378.53 28,594,900.00 252,776,278.53

1. Non-patent technology 7,503,700.00 7,503,700.00

2. Land use right 216,677,678.53 28,594,900.00 245,272,578.53

II. Total accumulative amortization 33,295,676.93 1,683,530.76 34,979,207.69

1. Non-patent technology 3,275,525.67 290,934.96 3,566,460.63

2. Land use right 30,020,151.26 1,392,595.80 31,412,747.06

III. Total accumulative amount of impairment provision of intangible assets 32,072,093.53 32,072,093.53

1. Non-patent technology -

Decrease for Opening Increase for the Closing Items the current balance current period balance period

2. Land use right 32,072,093.53 32,072,093.53

IV. Total carrying value of intangible assets 158,813,608.07 185,724,977.31

1. Non-patent technology 4,228,174.33 3,937,239.37

2. Land use right 154,585,433.74 181,787,737.94

13. Deferred income tax assets and deferred income tax liabilities

Corresponding Corresponding Closing Opening Items temporary temporary balance balance difference difference

Deferred income tax assets 17,641,169.12 70,564,676.47 17,641,169.12 70,564,676.47

1. Provision for bad debts 4,158,194.45 16,632,777.80 4,158,194.45 16,632,777.80 2. Provision for impairment of 29,631.68 118,526.72 29,631.68 118,526.72 fixed assets

3 Provision for devaluation of 12,696,875.75 50,787,502.99 12,696,875.75 50,787,502.99 inventories

4. Change in fair value of 756,467.24 3,025,868.96 756,467.24 3,025,868.96 tradable financial assets

14. Provision for assets impairment

Increase for the current period Decrease for the current period

Opening Closing Increase Items Switching balance Withdrawal for other Total Writing-off Total balance back reasons

Provision for bad debts 40,148,180.96 4,580,867.92 4,580,867.92 -409,826.91 -409,826.91 45,138,875.79

Provision for falling price of inventory 57,402,715.22 1,009,167.62 1,009,167.62 43,877,903.25 - 43,877,903.25 14,533,979.59

Provision for impairment of long-term 11,991,017.37 11,991,017.37

equity investment

Provision for impairment of fixed assets 34,837,795.49 3,684,802.83 3,684,802.83 31,152,992.66

Provision for impairment of construction in progress 517,604.98 517,604.98

Provision for impairment of intangible assets 32,072,093.53 32,072,093.53

Total 176,969,407.55 5,590,035.54 43,877,903.25 3,274,975.92 47,152,879.17 135,406,563.92 Note: The provision for falling price of inventory that is switched back in the reporting period arose from reductive amount of provision for falling price of inventory due to that selling price of products and price of chemical raw material climbed over the beginning of year.

15. Short-term loans (1) Category of loans

Type Closing balance Opening balance

Credit loan

Mortgage loan 131,000,000.00 91,000,000.00

Guaranteed loan 145,000,000.00 96,000,000.00

Secured borrowings 52,689,992.33

Total 328,689,992.33 187,000,000.00 Note: Mortgage loan is outward documentary bills handled by Sanonda Foreign Trading Co., Ltd., the shareholding subsidiary of the Company. The Company has no matured short-term loan unredeemed.

(2) Mortgage loan and guaranteed loan

Units Amount Way Guarantor (object of pledge) Industrial and Commercial Bank of China, Jingzhou Shashi Subbranch 10,000,000.00 Mortgage loan 69 production lines Industrial and Commercial Guaranteed loan Bank of China, Jingzhou Shashi Subbranch 15,000,000.00 Sanonda Group Co., Ltd. Industrial and Commercial Guaranteed loan Bank of China, Jingzhou Shashi Subbranch 25,000,000.00 Sanonda Group Co., Ltd.

China Construction Bank Mortgage loan House and land Jingzhou Sanwan Subbranch 45,000,000.00

China Construction Bank Mortgage loan House and land Jingzhou Sanwan Subbranch 40,000,000.00

China Construction Bank Mortgage loan House and land Jingzhou Sanwan Subbranch 30,000,000.00 Bank of China Tianmen Mortgage loan Properties, equipment and land Subbranch 3,000,000.00 Bank of China Tianmen Mortgage loan Properties, equipment and land Subbranch 3,000,000.00 Bank of China Tianmen Guaranteed loan Subbranch 7,000,000.00 Hubei Sanonda Co., Ltd. Import and Export Bank of China National Agrochemical Guaranteed loan China 50,000,000.00 Corporation Communication Bank Wuhan Guangxi Hechi Chemical Industry Guaranteed loan Branch 40,000,000.00 Co., Ltd.

Zhengzhou Rural Guaranteed loan Zhengzhou Xiangyang Rural Credit Credit Cooperatives 8,000,000.00 Cooperatives 276,000,000.00 Total Total

16. Notes payable

Type Closing balance Opening balance

Bank acceptance bill 29,080,000.00 19,040,000.00

Trade acceptance draft

Total 29,080,000.00 19,040,000.00

17. Accounts payable

(1) Listing by aging

Closing balance Opening balance Aging Amount Proportion Amount Proportion

Within 1 year (including 1 year) 122,071,479.83 95.77% 89,268,439.22 86.85%

1-2 years (including 2 years) 2,126,006.01 1.67% 3,873,516.82 3.77%

2-3 years (including 3 years) 1,242,540.43 0.97% 2,594,736.36 2.52%

Over 3 years 2,029,225.21 1.59% 7,047,863.66 6.86%

Total 127,469,251.48 100.00% 102,784,556.06 100.00%

(2) There is no large item in the accounts payable with aging over 1 year. (3) Amount of RMB 264,775.00 due from shareholders who hold 5% or more of the voting rights of the Company is included in the accounts payable. (4) In the accounts payable, the payment owed to the related parties is RMB 3,416,105.18.

18. Advance from customers (1) Listing by aging

Closing balance Opening balance Aging Amount Proportion Amount Proportion

Within 1 year (including 1 year) 88,483,874.85 91.71% 104,525,367.22 93.05%

1-2 years (including 2 years) 4,675,689.11 4.85% 4,546,918.16 4.05%

2-3 years (including 3 years) 298,465.69 0.31% 300,613.54 0.27%

Over 3 years 3,029,183.58 3.14% 2,957,782.25 2.63%

Total 96,487,213.23 100.00% 112,330,681.17 100.00%

(2) There is no large item in the advance from customers with aging over 1 year. (3) Amount in original currency of advance from customers listed in foreign currency and conversion exchange rate

Currency Amount Conversion exchange rate

US dollar 32,440.00 6.8143

(4) No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the advance from customers.

(5) In the advance from customers, the payment owed to the related parties is RMB

1,036,904.51.

19. Payroll payable

Opening Increase for the Payment for the Closing Items balance current period current period balance

I. Wages, bonuses, allowance and subsidies for the employees 9,070,060.00 30,007,989.22 35,396,049.22 3,682,000.00

II. Welfare expenses for the employees 4,451,202.40 3,301,356.40 1,149,846.00

III. Social insurances 3,294,020.73 10,499,248.32 12,693,920.83 1,099,348.22

Of which: 1. Medical insurance 244,914.68 801,343.68 1,686,145.72 -639,887.36

2. Endowment insurance 2,147,553.00 8,128,040.90 9,281,155.41 994,438.49

3. Annuity fund

4. Unemployment insurance 746,510.90 839,118.98 933,099.65 652,530.23

5. Work injury insurance 123,957.00 626,362.82 675,768.50 74,551.32

6. Maternity insurance 31,085.15 99,382.24 112,751.85 17,715.54

IV. Housing accumulation fund 421,245.26 2,769,760.94 2,454,225.83 736,780.37

V. Labor union expenditure 230,236.20 376,848.17 477,854.23 129,230.14

VI. Employee education expenses 63,097.88 17,680.41 36,260.00 44,518.29

VII. Non-monetary welfare

VIII. Compensations for the cancellation of the labor relationship with the employees 12,369,619.32 38,060.00 48,060.00 12,359,619.32

IX. Other

Of which: Cash-settled share-based payment

Total 25,448,279.39 48,160,789.46 54,407,726.51 19,201,342.34

20. Taxes and dues payable

Tax Closing balance Opening balance

1. Corporate income tax 22,685,447.77 45,380,948.30

2. VAT -15,612,641.96 -2,782,326.42

3. Business tax 23,226.13 69,421.92

Tax Closing balance Opening balance

4. Tax on resources 29,439.05 74,593.09

5. Land holding tax 990,914.36 1,339,950.80

6. Housing property tax 360,165.95 601,266.84

7. Vehicle and vessel usage tax

8. Tax for municipal maintenance and construction 3,366,821.64 3,849,718.34

9. Educational expenses 20,322.21 2,139,110.87

10. Individual income tax calculation and filing 87,357.41 490,171.90

11. Other -123,142.70 476,390.56

Total 11,827,909.86 51,639,246.20

21. Other payables (1) Listing by aging

Closing balance Opening balance Aging Amount Proportion Amount Proportion

Within 1 year (including 1 year) 45,055,170.79 71.13% 23,342,968.92 54.11%

1-2 years (including 2 years) 7,822,674.40 12.35% 14,284,383.32 33.11%

2-3 years (including 3 years) 6,454,454.90 10.19% 1,499,454.90 3.48%

Over 3 years 4,012,918.25 6.33% 4,012,918.25 9.30%

Total 63,345,218.34 100.00% 43,139,725.39 100.00%

(2) No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the other payables.

(3) There is no large item in the other payables with aging over 1 year.

22. Non-current liabilities due within one year

(1) Listing by category

Category Closing balance Opening balance

Long-term loan due within one year 30,000,000.00 70,000,000.00

Total 30,000,000.00 70,000,000.00

(2) Long-term loan due within one year

Category of loan Closing balance Opening balance

Mortgage loan 30,000,000.00 70,000,000.00

Guaranteed loan

Total 30,000,000.00 70,000,000.00

(3) Mortgage loan

Units Amount Way Object of pledge

Industrial and Commercial Bank of China, 30,000,000.00 Mortgage Machinery equipment Jingzhou Shashi Subbranch

Total 30,000,000.00

23. Long-term loan (1) Listing by category

Category of loan Currency Closing balance Opening balance

Mortgage loan RMB

Guaranteed loan RMB 476,560,000.00 297,560,000.00

Total 476,560,000.00 297,560,000.00

(2) Guaranteed loan

Units Amount Way Guarantor

China Construction Bank Jingzhou Guaranteed loan China National Chemical Sanwan Subbranch 97,560,000.00 Corporation (ChemChina)

China Construction Bank Jingzhou Guaranteed loan China National Chemical Sanwan Subbranch 100,000,000.00 Corporation (ChemChina) China National Chemical Industrial Bank Wuhan Branch Guaranteed loan 100,000,000.00 Corporation (ChemChina)

China Construction Bank Jingzhou Guaranteed loan Sanwan Subbranch 100,000,000.00 Sanonda Group Co., Ltd. China National Chemical Shenzhen Ping An Bank Guaranteed loan 78,000,000.00 Corporation (ChemChina)

Total 475,560,000.00

(3) The closing long-term loan increased by 59.82% compared with the opening amount, which caused by projects loan borrowed by the Company from bank for purpose of construction of combined production of heat and electricity project and of glyphosate extension project with an annual production of 20000 tons.

24. Long-term payables

Category Closing balance Opening balance

Special loan for environmental protection of Jingzhou Financial 2,000,000.00 2,000,000.00 Bureau

Loan for glyphosate project 490,000.00 490,000.00

Fund used in pollution treatment of Environmental Protection Bureau of 200,000.00 200,000.00 Hubei Province

Loan for cooperation project of Guangzhou Research & Design 160,000.00 160,000.00 Institute of Chemical Industry

Loan for riskiest pesticide transfer 6,990,000.00 6,990,000.00 project of Jingzhou Financial Bureau

Total 9,840,000.00 9,840,000.00

25. Special payable Increase for the Decrease for the Category Opening balance Closing balance current period current period

Appropriation of fenoxycarb 2,400,000.00 2,400,000.00 project Fund used in treatment of 361,170.00 361,170.00 environmental protection Total 2,761,170.00 2,761,170.00

26. Other non-current liabilities

Items Closing balance Opening balance

Subsidy of treasury bonds financed 6,990,000.00 6,990,000.00 projects (riskiest pesticide alternate

projects）

Appropriation of fenoxycarb project 4,559,512.89 4,559,512.89 Total 11,549,512.89 11,549,512.89

27. Share capital Opening balance Increase Decrease Closing balance for the for the Items Investment Investment Ratio current current Ratio amount amount period period

I. Shares subject to trading moratorium 122,234,072.00 20.58% 122,234,072.00 20.58%

1. Shares held by the State

2. Shares held by state-owned corporation 118,887,202.00 20.02% 118,887,202.00 20.02%

3. Shares held by other domestic investors 3,346,870.00 0.56% 3,346,870.00 0.56%

Of which: Shares held by domestic corporation 3,300,000.00 0.55% 3,300,000.00 0.55%

Shares held by domestic natural person 46,870.00 0.01% 46,870.00 0.01%

4. Shares held by other foreign investors

Of which: Shares held by foreign corporation

Shares held by foreign natural person

II. Shares not subject to trading moratorium 471,689,148.00 79.42% 471,689,148.00 79.42%

1. Renminbi common shares 241,689,148.00 40.69% 241,689,148.00 40.69%

2. Domestically listed foreign shares 230,000,000.00 38.73% 230,000,000.00 38.73%

3. Overseas listed foreign shares

4. Other

Opening balance Increase Decrease Closing balance for the for the Items Investment Investment Ratio current current Ratio amount amount period period

Total shares 593,923,220.00 100.00% 593,923,220.00 100.00%

28. Capital reserve Increase for Decrease for Reasons Opening Items the current the current Closing balance balance period period

Capital (share) premium 264,195,844.61 264,195,844.61

Other 7,523,997.13 7,523,997.13

Total 271,719,841.74 271,719,841.74

29. Special reserves

Increase for Decrease for Reasons Opening Closing Items the current the current balance balance period period

Special reserves 16,364,992.87 16,364,992.87

Total 16,364,992.87 16,364,992.87

30. Surplus reserve

Increase for Decrease for Reasons Opening Closing Items the current the current balance balance period period

Statutory surplus 69,699,780.81 69,699,780.81 reserve

Discretionary 3,815,085.65 3,815,085.65 surplus reserve

Total 73,514,866.46 73,514,866.46

31. Retained profit

Items Jan. – Jun. 2009 Jan. – Jun. 2008

Balance as at 31 Dec. 2008 143,035,950.70 -7,943,821.74

Items Jan. – Jun. 2009 Jan. – Jun. 2008

Add: Change in accounting policies

Previous accounting errors

Balance as at 1 Jan. 2009 143,035,950.70 -7,943,821.74

Increase for the current period 44,124,619.58 77,284,465.57

① Net profit for the current period 44,124,619.58 77,284,465.57

② Other

Decrease for the current period 29,799,572.97

① Appropriating statutory surplus reserve

② Appropriating discretionary surplus reserve

③ Appropriating reserve funds

④ Appropriating enterprise development funds

⑤ Distributing profit 29,799,572.97

⑥ Other

Closing balance 157,360,997.31 69,340,643.83

31. Operating revenue (1) Operating income and operating cost

Operating income Operating cost

Amount occurred for Amount occurred Amount occurred Amount occurred Items the current period in the last period for the current in the last period period

Main operation 941,804,531.22 1,210,675,338.66 773,512,937.14 938,964,764.41

Other 43,479,459.62 41,871,389.28 37,023,718.85 33,786,511.28

Total 985,283,990.84 1,252,546,727.94 810,536,655.99 972,751,275.69

(2) Income from main operation

Income from main operation Cost of main operation Profit from main operation

Amount Amount Amount Amount Amount Amount Category of main occurred for occurred in the occurred for occurred in occurred for occurred in business and products the current last period the current the last period the current the last period period period period

Income from main operation Cost of main operation Profit from main operation

Amount Amount Amount Amount Amount Amount Category of main occurred for occurred in the occurred for occurred in occurred for occurred in business and products the current last period the current the last period the current the last period period period period

New Chemical Material and Specialty Chemicals 5,747,391.55 7,500,116.19 3,183,876.80 6,050,111.41 2,563,514.75 1,450,004.78 petrochemical and refining and chemical products 31,897,705.52 34,946,171.40 22,542,164.88 30,223,883.05 9,355,540.64 4,722,288.35

Agrochemical such as fertilizer and pesticides 904,159,434.15 1,168,229,051.07 747,786,895.46 902,690,769.95 156,372,538.69 265,538,281.12

Total 941,804,531.22 1,210,675,338.66 773,512,937.14 938,964,764.41 168,291,594.08 271,710,574.25

(3) Sales revenue from the top five clients of the Company is RMB 279,591,909.36 in total, accounting for 29.69% of total sales revenue.

33. Business taxes and surcharges

Items Standard Amount occurred for Amount occurred in the current period the last period

Business tax 5% of turnover 120,583.48 208,871.79

Tax on resources RMB 2/ton for liquid salt and RMB 12/ton for solid salt 443.52 4,376.16

Tax for municipal 7% or 5% of turnover tax maintenance and construction 252,098.97 902,866.22

Educational surtax 3% of turnover tax 108,042.27 397,033.85

Other 19,735.81 38,766.46

Total 500,904.05 1,551,914.48

34. Financial expense

Items Amount occurred for the Amount occurred in the last current period period

Interest expense 21,466,709.34 17,402,955.76

Items Amount occurred for the Amount occurred in the last current period period

Less: interest income 3,639,286.97 3,207,020.31

Exchange loss 163,274.63 2,542,056.55

Less: exchange gain 190,857.90 1,027,785.24

Other 9,738,046.51 17,119,650.17

Total 27,537,885.61 32,829,856.93

35. Loss on assets impairment

Amount occurred for the Amount occurred in the last Items current period period

Loss on bad debts 4,580,867.92 12,574,393.76

Loss on falling price of inventory 1,009,167.62

Loss on impairment of long-term equity investment -10,000.00

Loss on impairment of fixed assets 1578154.94

Total 5,590,035.54 14,142,548.70

36. Income from change in fair value

Amount occurred for the Amount occurred in the last Item current period period

Change in fair value of tradable financial assets 2,196,656.32

Total 2,196,656.32

37. Investment income

Amount occurred for the Amount occurred in the last Resource current period period

Income from disposal of long-term equity investment calculated by cost method 1,440,000.00 3,234,000.00

Income from tradable financial assets 119,148.38

Total 1,440,000.00 3,353,148.38

Note: There exists no major limitation to repatriation of investment income.

38. Non-operating income

Amount occurred for the Amount occurred in the last Item current period period

1. Subtotal of gains from disposal of non-current assets 2,331,756.19 61,157.02

Of which: gains from disposal of fixed assets 2,331,756.19 61,157.02

2. Other 328,046.88 91,714.43

Total 2,659,803.07 152,871.45

39. Non-operating expense

Amount occurred for the current Amount occurred in the last Item period period

1. Total of loss on disposal of non-current 122,294.11 assets

Of which: Loss on disposal of fixed assets 122,294.11

2. Expense of common welfare donation 861,000.00

3. Extraordinary Losses 14,038.00 847.07

5. Other 1,021,517.33 25,891.50

Total 1,035,555.33 1,010,032.68

40. Income tax expense

Amount occurred for the current Amount occurred in the last Item period period

Income tax expense 15,073,885.85 26,050,411.66

Of which: Income tax of the current period 15,073,885.85 26,050,411.66

Deferred income tax

41. Net transferring net profit into cash flows of operating activities Item Jan. – Jun. 2009 Jan. – Jun. 2008

Net profit 45,223,722.21 78,151,234.94

Item Jan. – Jun. 2009 Jan. – Jun. 2008

Plus: Provision for assets impairment 5,590,035.54 14,142,548.70

Depreciation of fixed assets, of oil-gas assets, of productive biological assets 45,544,393.45 28,787,248.90

Amortization of intangible assets 1,683,530.76 2,145,350.80

Amortization of long-term deferred expense 14,273.21 48,820.02

Loss on disposal of fixed assets, intangible assets and other long-term assets (income is listed as “-”) -2,331,756.19 61,137.09

Loss on retirement of fixed assets (income is listed as “-”)

Losses on change in fair value （income is listed as “-”） -2,196,656.32

Financial expense（income is listed as “-”） 27,537,885.61 32,829,856.93

Investment losses（income is listed as “-”） -1,440,000.00 -3,353,148.38

Decrease in deferred income tax assets（increase is listed as “-”）

Increase in deferred income tax liabilities（decrease is listed as “-”）

Decrease of inventories (increase is listed as “-”) 51,411,108.79 -24,030,221.06

Decrease in operating receivables (increase is listed as “-”) -104,134,875.20 -116,032,347.25

Increase in operating payables (decrease is listed as “-”) -6,971,552.96 98,076,496.05

Other

Net cash flows arising from operating activities 59,930,108.90 110,826,976.74

II. Investing and financing activities that do not involving cash receipts and payment:

Conversion of debt into capital 0 0

Convertible bond due with one year 0 0

Fixed assets financed by finance leases 0 0

III. Net increase in cash and cash equivalents: 0

Cash at the end of period 657,073,854.90 675,338,431.42

Less: cash at the beginning of period 562,832,319.76 452,405,704.33

Add: cash equivalents at the end of period 0 0

Less: cash equivalent at the beginning of period 0 0 Net increase in cash and cash equivalents 94,241,535.14 222,932,727.09

42. Acquisition and disposal of subsidiaries and other operation units

Items Amount

Disposal of subsidiaries and other operation units:

1. Disposal of price of subsidiaries and other operation units:

2. Disposal of cash and cash equivalents received by subsidiaries and other operation units:

Less: Cash and cash equivalents held by subsidiaries and other operation units

3. Disposal of net cash received by subsidiaries and other operation units:

4. Disposal of net asset of subsidiaries -40,974,988.47

Current assets 12,032.36

Non-current assets

Current liabilities 40,987,020.83

Non-current liabilities

IX. Notes to the Financial Statement of Parent Company 1. Accounts receivable (1) Listing by aging

Closing balance Opening balance

Aging Provision for Provision for Balance Proportion Proportion Balance Proportion Proportion bad debts bad debts

Within 1 year (including1 year) 49,485,903.39 82.36% 2,487,569.33 5.03% 6,346,920.10 36.08% 297,842.42 4.69%

1-2 years (including 2 years) 202,361.05 0.34% 10,118.05 5.00% 1,109,217.15 6.30% 55,460.86 5.00% 2-3 years (including 3 years) 1,192,047.47 1.98% 59,602.37 5.00% 4,746,548.11 26.97% 4,679,125.66 98.58% 3-4 years (including 4 years) 4,044,369.11 6.73% 4,044,369.11 100.00% 1,163,748.76 6.61% 744,683.81 63.99%

Closing balance Opening balance

Aging Provision for Provision for Balance Proportion Proportion Balance Proportion Proportion bad debts bad debts

4-5 years (including 5 years) 933,174.51 1.55% 933174.51 100.00%

Over 5 years 4,229,744.25 7.04% 4,229,744.25 100.00% 4,229,744.25 24.04% 4,229,744.25 100.00%

Total 60,087,599.78 100.00% 11,764,577.62 19.58% 17,596,178.37 100.00% 10,006,857.00 56.87%

(2) Listing by categories

Closing balance Opening balance

Category Withdrawal Provision for Withdrawal Provision for Amount Proportion Amount Proportion proportion bad debts proportion bad debts Significant single amounts 19,976,400.00 33.25% 5.00% 998,820.00 Insignificant single amounts but with significant credit risk 5,078,592.01 8.45% 100.00% 5,078,592.01 5,078,592.01 28.86% 100.00% 5,078,592.01 Other insignificant 35,032,607.77 58.30% 16.23% 5,687,165.61 12,517,586.36 71.14% 39.37% 4,928,264.99

Total 60,087,599.78 100.00% 19.58% 11,764,577.62 17,596,178.37 100.00% 56.87% 10,006,857.00

(3) At the end of period, the top five accounts receivable totaled RMB 28,110,760.31, taking up 46.78% of total accounts receivable. (4) No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the accounts receivable. (5) There exists no payment received from related parties in the accounts receivable.

2. Other receivables

(1) Listing by aging

Closing balance Opening balance

Aging Provision Provision Withdrawal Withdrawal Balance Proportion for bad Balance Proportion for bad proportion proportion debts debts

Closing balance Opening balance

Aging Provision Provision Withdrawal Withdrawal Balance Proportion for bad Balance Proportion for bad proportion proportion debts debts

Within 1 year (including1 year) 84,368,537.44 71.67% 1,147,007.11 1.36% 87,444,716.22 71.67% 73,851.72 0.08%

1-2 years (including 2 years) 11,769,869.84 14.13% 38,896.42 0.33% 17,245,679.61 14.13% 33,946.42 0.20% 2-3 years (including 3 years) 3,406,437.73 2.79% 33,027.31 0.97% 3,410,437.73 2.79% 37,027.31 1.09% 3-4 years (including 4 years) 9,284,047.54 7.67% 74,870.00 0.81% 9,358,647.54 7.67% 78,600.00 0.84% 4-5 years (including 5 years) 547,290.30 0.40% 46,740.06 8.54% 489,085.60 0.40% 43,829.82 8.96%

Over 5 years 4,099,519.77 3.34% 4,099,519.77 100.00% 4,079,124.47 3.34% 4,079,124.47 100.00%

Total 113,475,702.62 100.00% 5,440,060.67 4.79% 122,027,691.17 100.00% 4,346,379.74 3.56%

(2) Listing by categories

Closing balance Opening balance

Provision Category Withdrawal Provision for Withdrawal Amount Proportion Amount Proportion for bad proportion bad debts proportion debts Significant single 113,559,042.42 93.06% amounts 107,956,299.08 95.14% Insignificant single amounts but with significant credit risk Other 8,468,648.75 6.94% 51.32% 4,346,379.74 insignificant 5,519,403.54 4.86% 98.56% 5,440,060.67

Closing balance Opening balance

Provision Category Withdrawal Provision for Withdrawal Amount Proportion Amount Proportion for bad proportion bad debts proportion debts

Total 113,475,702.62 100.00% 4.79% 5,440,060.67 122,027,691.17 100.00% 3.56% 4,346,379.74

(3) Other receivable with large amount

Contents Amount

Hubei Sanonda Foreign Trading Co., Ltd. 45,133,162.90

Jingzhou Lingxiang Chemical Industry Co., Ltd. 30,191,173.33

Sanonda (Jingzhou) Pesticide & Chemical Co., Ltd. 22,631,962.85

Sanonda Zhengzhou Pesticide Co., Ltd. 10,000,000.00

Shantou Biyue Plastic Co., Ltd. 3,125,000.00

(4) At the end of period, the top five accounts receivable totaled RMB 111,081,299.08, taking up 97.89% of total accounts receivable. (6) No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the other receivables. (7) Proportion of amount receivable from related parties in other receivables is 83.57%.

3. Long-term equity investment (1) Listing by accounting method Decrease Cash dividend Initial Opening Increase for Closing for the received for Investee entities investment carrying the current carrying current the current amount amount period amount period period

Calculation at cost

method:

Investment in subsidiaries

1. Sanonda Zhengzhou Pesticide Co., Ltd. 38,558,619.32 38,558,619.32 38,558,619.32

2. Sanonda (Jingzhou) Pesticide & Chemical Co., Ltd. 24,500,000.00 24,500,000.00 2,000,000.00 26,500,000.00

Decrease Cash dividend Initial Opening Increase for Closing for the received for Investee entities investment carrying the current carrying current the current amount amount period amount period period

3. Hubei Sanonda Foreign Trading Co., Ltd. 9,000,000.00 9,000,000.00 9,000,000.00 10,391,698.11

4. Hubei Sanonda Tianmen Agrochemical Co., Ltd. 7,245,023.32 7,245,023.32 8,500,000.00 15,745,023.32

5. Jingzhou Longhua Petrochemicals Co., Ltd. 3,250,000.00 3,250,000.00 3,250,000.00 6. Jingzhou Lingxiang Chemical Industry Co., Ltd. 5,100,000.00 5,100,000.00 5,100,000.00

7. Jingzhou Sanonda Aifusi Chemical Industry Co., Ltd. 3,060,000.00 3,060,000.00 3,060,000.00

Other equity investment

1. Jingzhou Tianyang Huibao Precision Chemicals Co., Ltd 1,440,000.00 1,440,000.00 1,440,000.00

2. Jingzhou Dali Industrial Co., Ltd 1,674,600.00 1,674,600.00 1,674,600.00

3. Hubei Shendian Co., Ltd. 564,000.00 564,000.00 564,000.00

4. Wangda Industrial Holding Co., Ltd 550,000.00 550,000.00 550,000.00

5. Guangxi Zhongding Holding Co., Ltd 580,800.00 580,800.00 580,800.00

10. Jingzhou Commercial Bank 20,000,000.00 20,000,000.00 20,000,000.00

Total 115,523,042.64 110,423,042.64 15,600,000.00 1,440,000.00 124,583,042.64 10,391,698.11 Note: ① During the reporting period, the Company transferred 48% equities of Jingzhou Tianyang Huibao Fine Chemical Industrial Co., Ltd. to other shareholders, no longer holding these equities. ② In the reporting period, Hubei Sanonda Foreign Trading Co., Ltd., the shareholding

subsidiary of the Company acquired 49% equities of Jingzhou Sanonda Aifusi Chemical Industry Co., Ltd.. Therefore, the Company totally holds 100% equities of Jingzhou Sanonda Aifusi Chemical Industry Co., Ltd. ③ In the reporting period, in accordance with the relevant provision about access to existing enterprises and additional enterprises producing pesticide stipulated by the State, registered capital of the original enterprises producing pesticide has to reach to RMB 30 million since Oct. 2008, thus, the Company increased investment of RMB 2 million in Sanonda (Jingzhou) Pesticide Chemical Industry (the subsidiary of the Company), so that the registered capital increased to RMB 30 million, and the proportion of shares held by the Company went up to 88.33% from 87.5%. The Company increased investment of RMB 8.5 million in cash in Hubei Sanonda Tianmen Agrochemical Co., Ltd. (the subsidiary of the Company, its other shareholder Hubei Sanonda Foreign Trading Co., Ltd. invested RMB 1.5 million in it. The said company transferred public reserve and retained profit into capital amounting to RMB 12 million), so that the registered capital increased to RMB 30 million, and the proportion of shares held by the Company remained unchanged. ④ In the reporting period, the Company established Jingzhou Lingxiang Chemical Industry Co., Ltd. (hereinafter referred to as Jingzhou Lingxiang) together with Sanonda Group Corporation. Jingzhou Lingxiang whose registered capital is RMB 10 million is engaged in the production of formaldehyde. This company’s 51% equities are held by the Company, while the rest 49% equities are held by Sanonda Group Corporation. At present, the said company is under preconstruction, and is expected to start operation by the end of 2009.

(2) Provision for impairment of long-term investment

Investee entities Closing balance Opening balance

Sanonda (Jingzhou) Pesticide 24,500,000.00 24,500,000.00 & Chemical Co., Ltd.

Jingzhou Commercial Bank 11,991,017.37 11,991,017.37

Total 36,491,017.37 36,491,017.37

4. Operating income (1) Operating income and operating cost

Operating income Operating cost

Items Amount occurred Amount occurred Amount occurred Amount occurred for the current in the last period for the current in the last period

period period

Main operation 698,156,697.45 858,331,751.94 571,710,291.09 638,820,597.36

Other 7,352,720.20 25,551,319.36 6,152,241.88 22,395,277.11

Total 705,509,417.65 883,883,071.30 577,862,532.97 661,215,874.47

(2) Income from main operation

Income from main operation Cost of main operation Profit from main operation

Amount Amount Amount Amount Amount Amount Category of main occurred for occurred in occurred for occurred in occurred for occurred in business and products the current the last period the current the last period the current the last period period period period

Agrochemical such as fertilizer and pesticides 698,156,697.45 858,331,751.94 571,710,291.09 638,820,597.36 126,446,406.36 219,511,154.58

Total 698,156,697.45 858,331,751.94 571,710,291.09 638,820,597.36 126,446,406.36 219,511,154.58

(3) Sales revenue from the top five clients of the Company is RMB 587,646,281.85 in total, accounting for 35.28% of total sales revenue.

5. Investment income Actual amount for the Actual amount in the last Resource current period period

Income from long-term equity investment calculated by cost method 10,391,698.11 487,500.00

Income from disposal of long-term equity investment calculated 1,440,000.00 18,276,325.07

Total 11,831,698.11 18,763,825.07

X. Relationship of related parties and their transactions 1. Information related with parent company of the Company

Name of parent Registration place Character of business Registered capital Note companies

Production and Sanonda Group 93 Beijing East Road, operation of pesticide, 240,661,000.00 Parent company Corporation Jingzhou, Hubei chemicals products

Name of parent Registration place Character of business Registered capital Note companies

62 Northern Fourth Constructional China National Ring Road (West), engineering, mineral Parent company of Agrochemical 300,000,000.00 Haidian District, products, fertilizer, parent company Corporation Beijing chemical raw material

62 Northern Fourth Constructional China National Ring Road (West), engineering, mineral 8,897,497,037.78 Final controller Chemical Corporation Haidian District, products, fertilizer, Beijing chemical raw material

2. Shareholding proportion of the Company held by the parent companies and their voting right proportion

Opening Increase for the Decrease for the Items Closing amount amount current period current period

Shareholding proportion 20.02% 20.02%

Voting right proportion 20.02% 20.02%

3. Transaction of related parties (Unit: RMB Yuan) (1) Purchase and sale transactions

Proportion of Relationship of Transaction Type of transactions Name of enterprises transaction amount in related parties amount the same transactions Associated transaction of purchasing commodities and receiving labor service

China National Agrochemical Raw material procurement Same final controller 21,914,775.00 3.86% Corporation

Raw material procurement Sanonda Group Corporation Parent company 64,428,155.10 11.34%

Same parent Packaging procurement Jingzhou Fude Food General Factory 1,413,846.61 0.25% company Packaging procurement Sanonda Advertising Company Same parent 2,489,959.85 0.44%

Jingzhou Hengxiang Material Trade Same parent Raw material procurement 11,509,623.40 2.03% Co., Ltd. company

Packaging procurement Jingzhou Dali Industrial Co., Ltd Joint stock company 4,726,520.00 0.83% II. Associated transaction of selling commodities and providing labor service

Sales of pesticide and Jingzhou Hengxiang Material Trade Same parent 129,701.56 0.01% chemical products Co., Ltd company

Hubei Jingzhou Huaxiang Chemical Affiliated enterprise Sales of chemical products 13,976,014.87 1.48% Co., Ltd. of parent company Sales of pesticide products Jiangsu Anbang Electrical Company Same final controller 1,224,210.00 0.13%

Limited III. Other

Guarantee fee paid Sanonda Group Corporation Parent company 4,660,000.00 100%

Note 1: Taking control and joint control or significant influence as preconditions, the Company recognizes related parties in line with the principle of substance over form. Note 2: In other associated transactions, guarantee fee paid is that the Company paid security costs that parent company Sanonda Group Corporation provides the guarantees for the Company. (2) Guarantees between the Company and related parties ① The Mutual-guarantee Agreement is signed between the Company and Guangxi Hechi Chemicals Co., Ltd. (hereinafter referred to as “Hechi Chemicals”, it belongs to China National Chemicals Corporation, same as the Company, controlled by the same final controller), in which the Company provided a joint liability guarantee for loan for fixed assets of RMB 100 million borrowed by Hechi Chemical from Agricultural Bank of China Hechi Branch, while Hechi Chemical also provided a joint liability guarantee for maximum loans of 60 million borrowed by the Company from Industrial and Commercial Bank of China Jingzhou Branch Shashi Sub-branch and maximum loans of 40 million borrowed by the Company from Bank of Communications Wuhan Branch.

② Other guarantee by related parties otherwise the above-mentioned matters

Units Bank Guarantee Guaranty period Typer amount at the period-end Industrial and Guarantee for Sanonda Group Commercial Bank of 20 Jan. 2009- 15,000,000 borrowing of Corporation China, Jingzhou Shashi 19 Jan. 2010 Subbranch flow funds Industrial and Guarantee for Sanonda Group Commercial Bank of 25 Mar. 2009- 25,000,000 borrowing of Corporation China, Jingzhou Shashi 23 Mar. 2010 Subbranch flow funds

China Construction Bank Guarantee for Sanonda Group 20 Mar. 2008- Jingzhou Sanwan 25,000,000 borrowing of Corporation 19 Mar. 2011 Subbranch flow funds

China Construction Bank Guarantee for Sanonda Group 18 Feb. 2008- Jingzhou Sanwan 30,000,000 borrowing of Corporation 17 Mar. 2011 Subbranch flow funds

China National Guarantee for Import & Export Bank of 18 May. 2009- Agrochemical 50,000,000 borrowing of China 18 May. 2011 Corporation flow funds

China Construction Bank Guarantee for China National 3 Feb. 2008- Chemical Jingzhou Sanwan 97,560,000 borrowing of Corporation 2 Feb. 2011 Subbranch flow funds

China Construction Bank China National 29 Aug. 2008- Guarantee for Chemical Jingzhou Sanwan 100,000,000 Corporation 28 Aug. 2013 project loan Subbranch

China Construction Bank Guarantee for China National 10 Feb. 2009- Chemical Jingzhou Sanwan 100,000,000 borrowing of Corporation 9 Feb. 2011 Subbranch flow funds Sanonda Group Industrial Bank Wuhan 21 Apr. 2008- Guarantee for Corporation Branch 100,000,000 21 Apr. 2013 project loan

China National Guarantee for 29 Apr. 2009- Chemical Shenzhen Ping An Bank 79,000,000 borrowing of 29 Apr. 2012 Corporation flow funds

(3) Current balance of related parties Relationship of related Proportion in Closing Units parties Items total amount balance of project Jingzhou Hengxiang Material Advance 2,119,921.84 1.66% Trade Co., Ltd Same parent company receipts China National Agrochemical Advance 264,775.00 0.21% Corporation Parent company receipts Joint venture company Advance 652,891.84 0.51% Jingzhou Dali Industrial Co., Ltd receipts Jingzhou Fude Food General Advance 378,516.50 0.30% Factory Same parent company receipts Jingzhou Hengxiang Material Advances to 440,491.50 0.46% Trade Co., Ltd Same parent company suppliers Advances to Hubei Jingzhou Huaxiang Affiliated enterprise of suppliers 397,123.01 0.41% Chemical Co., Ltd. parent company Jiangsu Anbang Electrical Same final controller Advances to 199,290.00 0.21% Company Limited suppliers

XI. Share-based payment The Company has no information related with share-based payment to disclose in the

reporting period.

XII. Nonmonetary assets exchange The Company has no information related with nonmonetary assets exchange to disclose in the reporting period.

XIII. Debts restructuring For the reporting period, there was no debt restructuring that need to be disclosed.

XIV. Borrowing costs The capitalization borrowing costs is RMB 1,533,580.90during the reporting period at the capitalization rate of 5.76%

XV. Contingencies 1. Contingencies formed due from foreign guarantees

Current Overdue Guarantor Guarantee Total amount Way Type situation of amount guarantees

1. Guarantees for subsidiaries

The Hubei Sanonda Foreign Trading Joint liability Guarantee for loans USD5000000 Business-as-usual Company Co., Ltd. guarantee of trade financing

The Hubei Sanonda Foreign Trading Joint liability Guarantee for loans RMB50000000 Business-as-usual Company Co., Ltd. guarantee of trade financing

The Hubei Sanonda Foreign Trading Joint liability Guarantee for loans USD10000000 Business-as-usual Company Co., Ltd. guarantee of trade financing

The Hubei Sanonda Foreign Trading Joint liability Guarantee for loans RMB100000000 Business-as-usual Company Co., Ltd. guarantee of trade financing

The Hubei Sanonda Tianmen Joint liability Guarantee for RMB7000000 Business-as-usual Company Agrochemical Co., Ltd. guarantee current capital loans

2. Guarantees for other units

The Guangxi Hechi Chemicals Co., RMB Joint liability Guarantee for Business-as-usual Company Ltd 100,000,000 guarantee project loans Note: The guarantee provided for Hubei Sanonda Foreign Trading Co., Ltd. is that the Company provides maximum security of guaranty for its trade financing behaviors such as establishment of letter of credit and bill of exchange. 2. Other contingencies

The Company has no other information related with contingency to disclose in the reporting period.

XVI. Events after balance sheet date There were no events to disclose during the period from balance sheet date to date of approving to submit the financial report in the report period. XVII. Commitment The Company has no information related with commitment to disclose in the reporting period.

XVIII. Supplementary information 1. Return on equity (ROE) and earnings per share (EPS) (1) ROE and EPS

ROE EPS

Fully diluted Weighted average EPS-basic EPS-diluted Profit in the Amount Amount Amount Amount reporting period Amount Amount Amount Amount for the for the for the for the of last of last of last of last current current current current period period period period period period period period

Net profit attributable to common shareholders of the Company 3.96% 7.79% 3.99% 8.10% 0.0743 0.1301 0.0743 0.1301

Net profit attributable to common shareholders of the Company after deduction of non-recurring profit and loss 3.98% 7.88% 4.00% 8.19% 0.0745 0.1316 0.0745 0.1316

(2) Explanation on counting process Items Amount

Net profit attributable to common shareholders of the Company 44,124,619.58 Non-recurring gains and losses attributable to parent company -116,747.31 Net profit attributable to common shareholders of the Company after 44,241,366.89

Items Amount deduction of non-recurring profit and loss

Opening net assets attributable to common shareholders of the Company 1,098,558,871.77 Ending net assets attributable to common shareholders of the Company 1,112,883,918.38 Ending net assets attributable to common shareholders of the Company after dilution 1,112,883,918.38 Net assets attributable to common shareholders of the Company after weighted average 1,105,721,395.08 Number of shares 593,923,220.00

Formulas for computing various indexes are as follows: ① Fully diluted return on equity =P÷E Of which: P is the net profit belonging to common stockholders of the company or the net profit belonging to common stockholders of the company after deduction of non-recurring profit and loss；E is the closing net assets belonging to common stockholders of the company. ② Weighted average yield of net assets =P/(E0 ＋ NP÷2 ＋ Ei×Mi÷M0 － Ej×Mj÷M0±Ek×Mk÷M0) Of which: P is the net profit belonging to common stockholders of the company or net profit belonging to common stockholders of the company after deduction of non-recurring profit and loss；NP is the net profit belonging to common stockholders of the company; E0 is the opening net assets belonging to common shareholders of the company; Ei is the net assets newly added due to issuance of new shares or debt-to-equity swap during the report period and belonging to common shareholders of the company; Ej is the net assets decreased due to counter-purchase or cash bonus and belonging to common shareholders of the company; M0 is the number of months of the report period; Mi is the number of months from the month following the increase of net assets to the end of the report period; Mj is the number of months from the month following the decrease of net assets to the end of the report period; Ek is the change in net assets caused by other transactions or events; Mk is the number of months from the month following the change of net assets to the end of the report period. ③ Basic earnings per share=P÷S S= S0＋S1＋Si×Mi÷M0－Sj×Mj÷M0－Sk Of which: P is the net profit belonging to common stockholders of the company or net profit belonging to common stockholders of the company after deduction of non-recurring profit and loss; S is the weighted mean of the outstanding stock; S0 is the sum of shares at the beginning of the period; S1 is the number of shares increased due to conversion of accumulation funds to capital stock or distribution of stock dividends during the report period; Si is the number of shares increased due to issuance of new shares or debt-to-equity swap during the report period; Sj is the number of shares decreased due to counter-purchase during the report period; Sk is the number of shares

reduced within the report period; M0 is the number of months of the report period; Mi is the number of months from the month following the increase of net assets to the end of the report period; Mj is the number of months from the month following the decrease of net assets to the end of the report period. ④ Diluted earnings per share=[P+(Diluted potential common stock dividends confirmed as expenses － conversion charge)×(1-income tax rate)]/(S0 ＋ S1 ＋ Si×Mi÷M0 － Sj×Mj÷M0—Sk+ weighted mean of common stock increased by subscription warrants, stock options and convertible bonds ) Of which: P is the net profit belonging to common stockholders of the company or the net profit belonging to common stockholders of the company after deduction of non-recurring profit and loss. ⑤ The Company has no dilutional potential common share but possibly having dilution in the next period. ⑥ Number of common shares outstanding or number of potential common shares remained unchanged from the balance sheet date to reporting date of approval of the financial report.

2. Non-recurring gains and losses (1) Schedule of non-recurring gains and losses in the reporting period

Items Amount (1) Gains and losses on the disposal of non-current assets, including offset provision for assets impairment withdrawn 3,771,756.19

(2) Gains and losses on change in fair value from tradable financial assets and tradable financial liabilities, as well as investment income from disposal of tradable financial assets and tradable financial liabilities and financial assets available for sales except for effective hedging related with normal businesses of the Company 2,196,656.32

(3) Net amount of other non-operating incomes and expenses except the above items -707,508.45

(4) Items of gains and losses being in compliance with definition of non-recurring gains and losses -4,660,000.00

Subtotal 600,904.06

Less: Amount impact on income tax 150,226.02

Non-recurring gains and losses after deducting influence on income tax 450,678.04

Of which: Attributable to owners of parent company -116,747.31

Attributable to minority shareholders 567,425.35

(2) Explanation on non-recurring gains and losses in the reporting period ① As to gains and losses on disposal of non-current assets, the gains is RMB 2,331,756.19 arising from disposal of idle fixed assets and retirement of fixed assets by

the Company and its subsidiaries, as well as gains from disposal of long-term equity investment of RMB 1,440,000.00. ② Gains and losses on change in fair value of tradable financial assets arose from an income from stock investment by the Company in the reporting period. ③ Items of gains and losses being in compliance with definition of non-recurring gains and losses is that the Company paid security costs that parent company Sanonda Group Corporation provides the guarantees for the Company.

VII. Documents Available For Reference

I. Text of Interim Report 2009 and the Summary with signature of the Chairman of the Board of the Company. II. Accounting Statements carried with signatures and seals of Legal Representatives and Accounting Principal. III. The original copy of all company files and manuscript of public notices ever disclosed on China Securities Journal, Securities Times and Hong Kong Ta Kung Pao in the report period. IV. Place for reference: the office of the Company

Hubei Sanonda Co., Ltd. Chairman of the Baord: Li Zuorong Aug. 14, 2009